2014
ANNUAL REPORT AND
FINANCIAL STATEMENTS
Voted 2014
General Insurer of
the Year
PROTECTING AND CREATING WEALTH
OUR PEOPLE AND CUSTOMERS HAVE SPOKEN
CROWNED KING OF THE FINANCIAL JUNGLE: THINK BUSINESS INSURANCE AWARDS 2014
General Insurer of the Year
1st Runner’s Up - Customer Service | 1st Runner’s Up - Risk Management
2nd Runner’s Up - Fraud Detection & Prevention Initiative
2nd Runner’s Up - Training
TABLE OF CONTENTS
Chairman's Statement
2-5
Corporate Information
6-8
Board of Directors
9 - 12
Management Team
13 - 16
Directors' Report
17 - 18
Corporate Governance Statement
19 - 24
Corporate Social Responsibility
25 - 26
Statement of Directors' Responsibilities
27 - 28
Report of Parent Company Consulting Actuary
29 - 30
Independent Auditor's Report
31 - 32
Financial Performance Highlights
33 - 34
Financial Statements
Consolidated Statement of Comprehensive Income
36
Consolidated Statement of Financial Position
37
Company Statement of Financial Position
38
Consolidated Statement of Changes in Equity
39
Company Statement of Changes in Equity
40
Consolidated Statement of Cash Flows
41
Notes to the Financial Statements
42 - 81
Appendices
Company Statement of Comprehensive Income
83
Consolidated Revenue Accounts
84
Company Revenue Accounts
85
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
1
CHAIRMAN’S STATEMENT

CHAIRMAN’S
STATEMENT
I am delighted to present the financial statements for ICEA LION General Insurance
Company Limited for the year ended 31st December 2014.
The year 2014 saw the Company maintain a profitable trend with continued growth being
achieved in market share, assets and profitability across the East African markets in
which the Group is represented.
THE ECONOMY
The economy grew by 5% in 2014 compared to 6% in 2013. This growth was supported
by increased government spending, low oil prices, increase in exports of goods and
services and relative stability of the Kenya Shilling against major currencies. Strong
growth in the building & construction, financial & insurance activities, whole sale & retail
trade, agricultural and manufacturing sectors at rates of 13%, 8%, 7%, 4% and 3%
respectively contributed significantly to the GDP growth during the year, as did growth in
the real estate and information & communication sectors albeit at slightly lesser rates.
Overall, the agricultural sector retained its traditional position as the largest share to
GDP at 27%, followed by manufacturing, wholesale & retail trade, real estate, financial &
insurance activities and construction sectors with shares of 10%, 8%, 8%, 7% and 5%
respectively. On the downside however, the hospitality sector continued to be negatively
affected by a decline in tourism manifest in the number of international visitor arrivals
which declined from 1.5 million in 2013 to 1.4 million in 2014. Factors that impacted
negatively on the tourism sector included security concerns, negative travel advisories
and fear of spread of Ebola across Africa.
Dr. C W Obura
Inflation remained relatively low due to strong monetary policy with Annual average
inflation increased from 6% in 2013 to 7% in 2014. The modest increase in the rate
of inflation was attributed to increases in the cost of several food and non-food items
which outweighed notable falls in the cost of electricity and petroleum products including
petrol, diesel and kerosene. Headline inflation on the other hand decreased to 6% in as
at December 2014 from 7% at December 2013. The exchange rate was relatively stable
in line with Central Bank of Kenya (CBK) targets with the Kenya Shilling depreciating by
1.5% against the US dollar, but appreciating by 2.8% against both the Pound Sterling
and the Euro to close the year at Kshs 90.60, Kshs 140.95 and Kshs 110.17 respectively.
The CBK adopted monetary policy measures in 2014 that contributed to the easing of
inflationary pressure, and retained the Central Bank Rate (CBR) at 8.5% throughout the
period in an effort to anchor inflationary expectations. Interest rates remained stable,
with the 91-day Treasury bill rate settling at 8.6% in December 2014.
All stock market indicators maintained the vibrant trend that started in mid-2013 but at
a slower pace. The total number of shares traded increased by 7.4 per cent to 8.1 billion
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
3
 HAIRMAN’S STATEMENT
C
a slower pace. The total number of shares traded increased by 7.4 per cent to Kshs 8.1
billion in 2014 compared to an increase of 39% recorded in 2013. The value of shares
traded recorded a growth of 39% from Kshs 156 billion in 2013 to Kshs 216 billion in
2014. The Nairobi Securities Exchange (NSE) 20 share index rose by 4% from 4,927
points in 2013 to 5,113 points in December 2014. The Nairobi All Share Index (NASI) on
the other hand closed at 162.9 points, 19% higher than the previous year’s 136.7 points.
Kenya’s economy is projected to grow by 5% in 2015. Inflation is expected to ease in
2015 supported by lower prices of oil and electricity. Improved external environment
and a sustained strong internal demand are likely to favour growths in many sectors of
the economy this year. The ratio of current account to GDP is expected to remain close
to the level of 2014. The Government’s fiscal policies in the 2015/16 national budget
will focus on re-orientation of expenditure from recurrent to development while private
sector investment is anticipated to remain vibrant. Other macroeconomic indicators
are expected to remain stable and supportive of growth in 2015. Investments in the
construction industry is likely to remain robust against a background of stable interest
rates coupled with the ongoing government infrastructural projects and the private
sector’s resilient participation especially in the real estate development.
THE INSURANCE INDUSTRY
As at 31st December 2014, the industry’s total gross written premiums grew to Kshs 157.8
billion from the Kshs 131.6 billion recorded in 2013, representing a growth of 20.4%.
Premium income reported under general business was Kshs 101.30 billion, up from Kshs
86.7 billion in 2013 and representing 64.2% of industry’s total gross premiums. Life
assurance business premium on the other hand amounted to Kshs 56.48 billion, up from
Kshs 44.3 billion in 2013 and representing 35.8% of industry’s total gross premiums.
Claims incurred under general insurance business were Kshs 41.89 billion in 2014,
representing a sharp increase of 25.3% (2013:13.6%) from Kshs 33.4 billion recorded in
2013. The industry loss ratio deteriorated to 59.7% in the year (2013:57.2%).
The increasing capitalization in the insurance industry saw common stock holders’ equity
grow significantly during the year. As at 31st December 2014, the shareholders’ funds
amounted to Kshs 122.54 billion representing a growth of 24.8% over Kshs 98.21 as at
the end of 2013. The shareholders’ funds comprised Kshs 31.1 billion in paid up capital,
Kshs 48.16 billion in retained earnings and Kshs 43.28 billion in other reserves.
The insurance industry asset base was Kshs 426.31 billion as at 31st December 2014,
which was a growth of 19% from Kshs 358 billion in 2013. Liabilities on the other hand
amounted to Kshs 303.8 billion during the same period. Insurers held a total of Kshs 352
billion (83%) of their assets in income generating investments as at the end of 2014.
Investments under general insurance business were Kshs 127.1 billion (36% of total
investments for the industry) against life assurance business investments of Kshs 225.7
billion (64% of total investments for the industry).
During the year, the Finance Act 2014 was passed. One of the major items passed
by the said Act was the re-introduction of the Capital Gains Tax, which had previously
been charged from the year 1975 until its suspension in 1985 in order to encourage
investment in the real estate sector as well as to spur growth in the stock market. The
tax, now charged at 5%, is applicable on gains, which will accrue to a company or an
individual in instances where property is sold, exchanged, conveyed or disposed of in any
manner. The reintroduction of this tax has serious ramifications for insurance companies
given the significant investments by insurers in the property and stock markets.
FINANCIAL PERFORMANCE
The Group
At the gross premium level, the Group had yet another successful year, significantly
growing its consolidated gross premium to Kshs 6.1 billion up from Kshs 5.4 billion
in the previous year. Investment and related income amounted to Kshs 801.8 million,
compared to Kshs 569.3 million realized in the previous year, bringing the Group’s
consolidated revenue for the year to over Kshs 6.9 billion up from Kshs 5.9 billion in the
previous year. The loss ratio for the Group was 51% in 2014, up from 47% recorded in
2013 and a reflection of the deteriorating claims experience that was manifest across the
market during the year.
The Group’s comprehensive pre-tax profit grew by 17% to close at Kshs 1.0 billion above
that for the year 2013 of Kshs 861 million on the back of prudent underwriting, effective
claims management and investment income management strategies by the Group. Total
assets grew by 11% to Kshs 11.8 billion up from Kshs 10.6 billion in 2013 on account
of the growth in assets and diverse investment strategies, while shareholders’ funds
increased by 17% to Kshs 3.7 billion up from Kshs 3.2 billion in 2013 supported by a
consistent growth in assets value and corporate profitability.
The Company
In terms of top line performance, the business grew by 15% in 2014 to take gross
premium income to Kshs 5.3 billion, up from Kshs 4.6 billion written in the previous
year. Overall loss ratio increased from 48% in 2013 to 52% in 2014 with total claims
incurred increasing by 31% from Kshs 1.2 billion in the previous year to Kshs 1.6 billion.
Ultimately, an underwriting profit of Kshs 301 million was realized which was slightly
below Kshs 373 million achieved in the previous year.
Investment income was Kshs 742 million, significantly up from Kshs 672 million earned
in the previous year as a result of improved market yields and growth in the investment
portfolio during the year.
Overall, profit before tax was Kshs 826.2 million, down from Kshs 872.6 million earned
4
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
 HAIRMAN’S STATEMENT
C
in the previous year. However, comprehensive income for the year was Kshs 936 million
compared to Kshs 870 million in 2013 owing to a marginally lower fair value gain on our
investment properties and lower market yields compared to the previous year. Both total
assets and shareholders’ funds grew by 10% from Kshs 9.7 billion in 2013 to Kshs 10.7
billion in 2014 and by 17% from Kshs 2.99 billion in 2013 to Kshs 3.5 billion in 2014
respectively.
Dividend
On the back of this strong performance, the Board of Directors is pleased to recommend
a dividend of Kshs 6.67 per share amounting to Kshs 200 million in respect of the
year ended 31st December 2014 (dividend in 2013 was similarly Kshs 6.67 per share
amounting to Kshs 200 million).
Subsidiary - ICEA LION General Insurance Company (Tanzania) Limited
Tanzania has had a strong and consistent economic growth in recent years and is
considered a rising investment hotspot. The real GDP for the year 2014 is yet to be
officially released, despite strong indications that it is averaging 7% compared to the
projected growth of 7%. The economy is expected to grow by 7% in 2015 and 7.3% in
2016.
The insurance industry market performance report for 2013 was released by TIRA in
December 2014. The report indicates that in 2013 the insurance industry grew by 17%
which was slightly lower than the rate of 18% recorded in 2012. It is expected that the
industry growth rate in 2014 remained consistent with that witnessed in the prior two
years, and that more or less the same growth rate will hold for 2015. As at December
2014, there were twenty nine (29) insurers and one reinsurer registered in Tanzania.
With these numbers in market, competition predictably remained quite stiff and fierce in
2014 and is expected to continue even more in 2015.
Our subsidiary, ICEA LION General Insurance (Tanzania) Limited contributed Tshs 16.7
billion (Kshs 835 million) to the Group’s gross written premium, up from Tshs 14.8
billion (Kshs 740 million) in the previous year. However, market conditions remained
unfavorable due to stiff competition, frequency and magnitude of claims. In spite of
a significant strengthening on all other key financial performance parameters, the
subsidiary however realized an underwriting loss of Tshs 629 million (Kshs 31.5 million)
down from an underwriting profit of Tshs 456.2 million (Kshs 22.8 million) in 2013, this
mainly as a result of a significant change in accounting policy during the year.
That notwithstanding, the company recorded an overall profit before tax of Tshs 416
million (Kshs 20.8 million) slightly down from the Tshs 685 million (Kshs 34.3 million)
recorded in the previous year on the back of continued good investment income
performance.
Total assets grew by 25% to close at Tshs 23.4 billion (Kshs 1,170 million) in 2014,
up from Tshs 18.8 billion (Kshs 940 million) in the previous year largely resulting from
increased investment activity as the business generated surplus investable funds.
OUTLOOK
The Company has performed commendably and retained its market share in spite of the
daunting challenges present in the highly competitive business environment. In spite
of the increasingly competitive environment in which the Company operates, we are
determined to remain at the frontier of performance excellence even as we continue
to deliver innovative products and superior services to its customers. During the year
under review, our quest for process excellence saw the augmentation of an electronic
documentation management system (EDMS) to our world class core IT systems which
has resulted in the creation a seamless and paperless office environment with the vital
attendant benefits of faster business process turnaround times and enhanced efficiencies
all round.
The Company’s relentless pursuit for business excellence and market leadership saw
it win the following key awards at the annual Think Business Awards for the Insurance
Industry: General Insurer of the Year; Winner - Customer Service; Winner – Risk
Management; Runners up – Fraud Detection & Prevention; Runners Up – Training. With
that welcome vindication, and with a firm resolve not to at all rest on our laurels, it
is our view the future is indeed bright for ICEA LION General and both the Board and
Management will continue to pursue strategies and policies that will help ensure that
we maintain our preeminence in the industry both locally and regionally this year and in
coming years.
APPRECIATION
I wish to conclude by thanking all our customers and intermediaries for their enduring
trust, support and loyalty to the ICEA LION Group,which indeed inspires our quest for
even greater performance as we go forward. We are equally grateful to our various
business associates and service providers for the invaluable support they continue to give
us in our various corporate activities.
Finally, I wish to thank my fellow directors for the role they continue to play, both on
the Board itself and on the various committees of the Board, in guiding the affairs of the
Company, and last but not least, the management and staff in all our business units for
their vital contribution during the year.
Dr. Chris W Obura
Chairman
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
5
CORPORATE INFORMATION
CORPORATE INFORMATION
MANAGEMENT - ICEA LION GENERAL INSURANCE COMPANY LIMITED ( KENYA)
DIRECTORS
Dr C W Obura
J P M Ndegwa
A S M Ndegwa
D N Ndegwa
J K Muiruri
J K Kimeu
D G M Hutchison*
S O Oluoch
Chairman
(Alternate - P K Mugambi)
(Alternate - E M Ndegwa)
*British
AUDIT, RISK & COMPLIANCE COMMITTEE
J K Muiruri
J P M Ndegwa
A S M Ndegwa
D G M Hutchison
J K Kimeu
Chairman
BOARD ICT COMMITTEE
D G M Hutchison
A S M Ndegwa
J K Muiruri
J K Kimeu
Chairman
FINANCE & INVESTMENT COMMITTEE
A S M Ndegwa
J K Kimeu
J K Muiruri
Chief Executive Officer
General Manager, Business Development & Marketing (joined on
1.01.2015)
C C Njoroge
Assistant General Manager, Special Projects
(retired on 31.01.2015)
S M Kagiri (Mrs)
Assistant General Manager, Business Development, Retail
P N Mukuria
Assistant General Manager, Business Development, Commercial
J K Onsongo
Assistant General Manager, Business Development, Commercial
J N Muiru (Mrs)
Assistant General Manager, Operations
M Otieno
Assistant General Manager, ICT (resigned in Dec 2014)
L N Matolo
Financial Controller
K Nyakeri
Internal Auditor
D M Ndegwah
Manager, Information Technology
L W Karanja (Mrs)
Manager, Underwriting
J N Njenga
Manager, Reinsurance and Risk Survey
E Musunzar
Business Development Manager, Retail
D N Kimaiyo (Mrs) Business Development Manager, Retail
J W Waithaka (Mrs) Manager, Claims
A S Abdo
Regional Manager, Coast
SHARED SERVICES
N K Munyi (Mrs)
M M Mahinda
D Maseke (Mrs)
R N Gitonga (Mrs)
General Manager, Finance & Strategy
General Manager, Human Resources & Administration
Manager, Risk and Compliance
Manager, Marketing and Communications
Chairman
ICEA LION GENERAL INSURANCE COMPANY LIMITED (TANZANIA)
NOMINATION & REMUNERATION COMMITTEE
J P M Ndegwa
A S M Ndegwa
J K Kimeu
J K Muiruri
S O Oluoch
A O Odhiambo
Chairman
K Ravinarayanan
M B Misiko
C G Kagima
A N Mendes
M Selemani
Chief Executive Officer
Assistant General Manager
Operations Manager
Chief Finance Officer
Claims Manager
SECRETARY
Kennedy M Ontiti
First Chartered Securities Limited
ICEA LION Centre, Chiromo Road
P.O. Box 30345 - 00100
Nairobi
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
7

CORPORATE
INFORMATION
REGISTERED OFFICE
BRANCHES
ICEA LION Centre
Riverside Park
Chiromo Road, Westlands
P.O. Box 30190 - 00100
Nairobi
Tel: 254 (0) 20 4449982-9
Mobile: 254 719071000
Email: info@icealion.com
NAIROBI BRANCHES:
SUBSIDIARIES - ICEA LION GENERAL INSURANCE COMPANY
LIMITED (TANZANIA)
ICEA LION General Insurance Company Limited (Tanzania)
Plot No. 331
Kambarage Road, Mikocheni ‘’A’’
P.O. Box 1948
Dar-es-Salaam
Tanzania
AUDITORS
PricewaterhouseCoopers
Certified Public Accountants (Kenya)
PwC Tower, Waiyaki Way/Chiromo Road
Westlands
P.O. Box 43963 – 00100
Nairobi
ADVOCATES
Kaplan and Stratton Advocates
Williamson House
4th Ngong Avenue
P.O. Box 40111, 00100
Nairobi
BANKERS
NIC Bank Limited
NIC House
P.O. Box 44599, 00100
Nairobi
Standard Chartered Bank Limited
Kenyatta Avenue Branch
P.O. Box 30003, 00100
Nairobi
CONSULTING ACTUARIES
Alexander Forbes Financial Services (E.A.) Limited
Landmark Plaza, 10th Floor
Argwings Kodhek Rd
P.O. Box 52439, 00200
Nairobi
8
ICEA Building, 15th Floor
Kenyatta Avenue
P.O. Box 30190 – 00100
Nairobi
Tel: 020 2750000
Ambank House
P.O. Box 46143 – 00100
Nairobi
Tel: 020 2226921
Unga House Branch
Unga House, Muthithi Road
P.O. Box 46143 – 00100
Nairobi
Tel: 020 3742094
Upperhill Branch
Williamson House, 7th Floor
4th Ngong Avenue
P.O. Box 30190 – 00100
Nairobi
Tel:020 2710400
Tulip House Branch
Mombasa Road
P.O. Box 46143 – 00100
Nairobi
Tel: 020 2492437/9
Karen Branch
Karen Office Park, Langata Rd
Acacia Block, 1st Floor
P.O. Box 30190 -00100
Nairobi
Tel: 0715567368
UPCOUNTRY BRANCHES:
Nakuru Branch
Seguton Building
1st Floor
P.O. Box 3066 – 20100
Nakuru
Mombasa Branch
Standard Chartered Building
2nd Floor
P.O. Box 90101 – 80100
Mombasa
Tel: 041 2224646-8
Eldoret Branch
Sakong House
P.O. Box 4807 – 30100
Eldoret
Tel: 053 2033237
Tel: 051 2211158
Nyeri Branch
Konahauthi Building
Kimathi Way
P.O. Box 1803 – 10100
Nyeri
Tel: 061 2032106
Kisumu Branch
Al Imran Plaza
Oginga Odinga Street
P.O. Box 3122 – 40100
Kisumu
Tel: 057 20202599
Nyali Branch
K K Building, 1st Floor
Links Road, Nyali
P.O. Box 90101-80100
Mombasa
Tel: 0701752748
Thika Branch
Zuri Centre, 4th Floor
Kenyatta Highway
P.O. Box 46143-00100
Nairobi.
Tel: 0719071000
Meru Branch
Tuskys Building
Mwendato Road
Tel: 0719071000
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
BOARD OF DIRECTORS

BOARD
OF DIRECTORS
Standing (left to right): K M Ontiti - Company Secretary | J P M Ndegwa - Director | A S M Ndegwa - Director | J K Kimeu - Director | P K Mugambi - Alternate Director
Seated (left to right): J K Muiruri - Director | S O Oluoch - Chief Executive Officer | Dr C W Obura - Chairman | D G M Hutchison - Director | E M Ndegwa - Director
10
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
BOARD OF DIRECTORS
S O Oluoch
A S M Ndegwa
Chief Executive Officer
Director
Dr. C W Obura
Chairman
J P M Ndegwa
E M Ndegwa
Director
Director
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
11

BOARD
OF DIRECTORS
J K Kimeu
P K Mugambi
Director
Alternate Director
J K Muiruri
Director
D G M Hutchison
K M Ontiti
Director
Company Secretary
12
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
MANAGEMENT TEAM
Shared Services

MANAGEMENT
TEAM
Steven O Oluoch
Alvin O Odhiambo
Chief Executive Officer
General Manager,
Business Development and Marketing
Susan M Kagiri
Peter N Mukuria
Micah M Mahinda
Assistant General Manager,
Business Development, Retail
Assistant General Manager,
Business Development, Commercial
General Manager,
Human Resources and Administration
14
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
Naomi K Munyi
General Manager,
Finance and Strategy
Shared Services
 ANAGEMENT TEAM
M
James K Onsongo
Jane N Muiru
Dorothy Maseke
Assistant General Manager,
Business Development, Commercial
Assistant General Manager,
Operations
Leonard N Matolo
Kevin Nyakeri
Nkatha Gitonga-Kinuthia
Financial Controller
Internal Auditor
Manager,
Marketing and Communications
Manager, Risk and Compliance
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
15

MANAGEMENT
TEAM
Dominic M Ndegwah
Lucy W Karanja
John N Njenga
Manager, Information Technology
Manager, Underwriting
Manager, Reinsurance and Risk
Survey
Evelyn Musunzar
Dorcas N Kimaiyo
Jane W Waithaka
Business Development Manager,
Retail
Business Development Manager,
Retail
Manager, Claims
16
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
DIRECTORS’ REPORT

DIRECTORS’
REPORT
The directors have the pleasure of presenting their 36th annual report to the members together with the audited financial statements of ICEA LION General Insurance Company
Limited (the “company”) and its subsidiary, for the year ended 31 December 2014 which show the group’s and the company’s state of affairs.
PRINCIPAL ACTIVITIES
The principal activity of the company and its subsidiary, ICEA LION General Insurance Company Limited (Tanzania), is the transaction of general insurance business.
GROUP RESULTS
2014
Ksh’ 000
Continuing operations
Income
Income Tax
Profit for the year from continuing operations
Discontinued operations
Profit for the year from discontinued operations
Profit for the year
Attributable to non-controlling interest
Profit attributable to equity holders of the parent company transferred to retained earnings
2013
Ksh’ 000
848,152
(248,534)
673,443
(241,728)
599,618
431,715
-
25,490
599,618
457,205
(7,709)
(12,969)
591,909
444,236
RESULTS AND DIVIDEND
Profit for the year of Ksh 591,909,000 (2013: Ksh 444,236,000) has been added to retained earnings. During the year, no interim dividend was declared (2013: Ksh Nil). The directors
recommend the approval of a final dividend of Ksh 200,000,000 (2013: Ksh 200,000,000).
DIRECTORS
The directors who held office during the year and to the date of this report are set out on page 7.
AUDITOR
PricewaterhouseCoopers were appointed auditors during the year and have expressed their willingness to continue in office in accordance with Section 159 (2) of the Companies Act.
BY ORDER OF THE BOARD
Secretary
18
27 March 2015
Nairobi
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
CORPORATE GOVERNANCE STATEMENT

CORPORATE
GOVERNANCE STATEMENT
ICEA LION General Insurance Company Limited subscribes to and fully embraces the
principles of good corporate governance. It is therefore committed to the objective of
achieving the highest standards possible, in terms of accountability, integrity, fairness,
responsibility and transparency. In pursuit of this objective, the Company has put in
place formal structures to support corporate governance. These structures are regularly
reviewed in order to strengthen and improve them.
The key features of the current corporate governance practices are as follows:
BOARD OF DIRECTORS
The Company’s Board is responsible for development of corporate governance practice
and ensuring compliance by all the Company’s organs. It does this through Board
Committees and by having in place business principles and practices, internal control
and risk management processes that seek to ensure preservation and growth of the
stakeholders’ value.
BOARD CHARTER AND WORK PLAN
The Board Charter contains provisions that ensure that the Board observes best practices
in corporate governance and details, among other things; the size, role and functions
of the Board; appointments, training, induction and tenure of directors and Board
performance evaluation and remuneration of directors. The work plan has a formal
schedule of matters specifically reserved for the Board’s attention to ensure it exercises
full control over all significant matters. It sets out the schedule of meetings of the Board
and its committees and the main business to be dealt with during those meetings.
Additional meetings are scheduled when need arises.
BOARD COMPOSITION AND APPOINTMENTS
The current Board of Directors consists of the Chief Executive Officer, and seven (7)
non-executive directors. The Board is composed of directors with a good mix of skills,
experience and competencies in the relevant fields of expertise. The directors have been
approved by the Insurance Regulatory Authority and meet the “fit and proper person
criteria” as required by the Authority. They have also filled in “fit and proper declaration
forms” in compliance with the “Guidelines on Suitability of Persons” released by the
Authority. Appointments to the Board are made after careful consideration.
BOARD MEETINGS AND INFORMATION FOR DIRECTORS
The Board meets at least three times a year on pre-set dates, to review and monitor the
implementation of strategies/business plans, review quarterly financial results, approve
financial reports and maintain an effective control over strategic, financial, operational
and compliance issues. Special meetings are arranged as necessary. In carrying out the
above responsibilities, the Board delegates its authority to the Chief Executive Officer to
20
oversee the day to day operations of the Company.
The notice of Board meetings is given in advance in accordance with the Company’s
Articles of Association and is distributed together with the agenda and board papers to
all the directors beforehand, covering regular business progress reports and discussion
papers on specific matters. The Company Secretary is always available to attend to
matters to do with the Board of Directors and Board Committees.
All reports from the Insurance Regulatory Authority, Kenya Revenue Authority, auditors,
actuaries and rating agencies are reviewed at Board meetings and appropriate action
taken.
The General Manager (Finance and Strategy) is usually in attendance at all regular
meetings of the Board and its committees to ensure that any necessary information is
readily available for appropriate decision-making.
ROLE OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER
The Chairman is responsible for managing the Board and providing strategic leadership
to the Company while the Chief Executive Officer is responsible to the Board for running
the business in accordance with instructions given by the Board. The Chief Executive
Officer directs the implementation of Board decisions and instructions and the general
management of the business with the assistance of the senior management team.
COMMITTEES OF THE BOARD
The Board has constituted several committees to assist it in discharging its responsibilities
and obligations more effectively without abdicating its responsibility for performance and
compliance.
The committees consist of at least two non-executive directors.Some members of the
executive management of the Company attend the meetings by invitation. They report
on their activities regularly to the Board.
The current committees are:
(a) Audit Risk and Compliance Committee
This committee is chaired by a non-executive director. There are 5 other non-executive
directors who sit in this committee. The First Chartered Securities Group Planning &
Projects Director, the Chief Executive Officer, General Manager (Finance and Strategy),
Financial Controller, Internal Audit Manager and Risk and Compliance Manager attend by
invitation.
Issues related to ethics and policy protection are dealt with by this committee although
the Board is in the process of reconstituting an appropriate committee to deal with this.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance

CORPORATE
GOVERNANCE STATEMENT (CONTINUED)
The committee meets three times a year and is responsible for ensuring that the systems
and controls, procedures and policies of the Company, as well as risk management
activities, are properly established, monitored and reported on. The committee meets
to review external auditors’ plans and reports, internal audit reports and any proposals/
reports that affect the Company’s internal control environment and corporate risk
management/exposure and compliance.
The Audit Risk and Compliance Committee is also responsible for monitoring and providing
effective supervision of the management’s financial reporting process to ensure accurate
and timely financial reporting. Additionally, the committee is responsible for ensuring
entrenchment of good corporate governance practices in the Company. This committee
is responsible to the Board.
of a process for evaluation of the performance of the Board, its committees and directors
as well as succession planning for directors and key members of executive management.
This committee is responsible to the Board. The following tables are summaries of the
attendance record of the directors at the full and the Board Committee meetings. A
record of attendance is kept by the Group Company Secretary. The record of attendance
at meetings is also noted in the minutes of the meetings.
Board of Directors
Date
21.03.2014
29.08.2014
21.11.2014
(b) Finance and Investments Committee
This committee is chaired by a non-executive director. Two other non-executive directors
also sit in this committee. The Chief Executive Officer, The First Chartered Securities
Group Planning & Projects Director, The General Manager (Finance and Strategy) and
Chief Executive Officer of ICEA LION Asset Management Ltd attend by invitation.
This committee meets regularly to review the financial and investment strategies,
approve or recommend to the Board for approval investment projects in accordance with
the Company’s investment policy, and review the performance of the investment portfolio
and monitor special projects.
Issues related to assets and liability management are dealt with by this committee.
(c) ICT Committee
Board Audit, Risk and Compliance Committee
Date
This committee is composed of four non-executive directors one of whom is chair. The
First Chartered Securities Group Information System Manager, the First Chartered
Securities Group Planning & Projects Director, the Chief Executive Officer, the General
Manager (Finance and Strategy),the Assistant General Manager (ICT) as well as the Risk
and Compliance Manager attend by invitation. This committee meets regularly to review
the ICT strategy including ICT security and Business Continuity Plans (BCP), approve or
recommend to the Board for approval of ICT projects and review recommendations on
the annual ICT budgets.
(d) Nominations and Remuneration Committee
11.03.2014
29.07.2014
31.10.2014
Board ICT Committee
Date
04.03.2014
25.06.2014
21.10.2014
The Nominations and Remuneration Committee is chaired by a non-executive director
and includes three other non-executive directors. The committee meets at least three
times a year or more frequently as required. This committee is responsible for making
recommendations to the Board on executive remuneration and incentive policies,
recruitment, retention and termination policies for senior management, remuneration
framework for directors, among others. The committee is also responsible for development
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
21

CORPORATE
GOVERNANCE STATEMENT (CONTINUED)
Board Finance and Investment Committee
Date
04.03.2014
17.06.2014
21.10.2014
Nomination and Remuneration Committee
Date
17.06.2014
21.10.2014
lines and well structured, regular training programs for staff. The latter are intended to
enable staff attain a clear appreciation of the business risk; the likely consequences of
not giving adequate attention to, or failure to properly manage risk; and of the universally
accepted and internally prescribed techniques of effectively managing risk.
The Company has established a fully-fledged risk management and compliance function,
headed by a senior officer. This position is the focal point of in-house risk management,
compliance monitoring and authentication, and related activities. This function has
coordinated the setup of the risk appetite by the Board of Directors which has been
cascaded to the senior management team. Regular risk assessment exercises are also
conducted by this function in a bid to integrate risk management into the business. In
2014, the Company was the 1st runner up under the Risk Management Category at the
Think Business Awards.
The Company has also put in place an independent internal audit function, headed by a
senior officer, which reviews the adequacy and effectiveness of the Company’s adherence
to its internal controls as well as reporting on strategies, policies and procedures.
The internal control systems are designed to manage rather than eliminate the risk of
failure to achieve business objectives and can provide only reasonable and not absolute
assurance against material financial misstatements or loss. The systems are designed to:
Attended

Not Attended X
PRINCIPAL OFFICER AND SENIOR MANAGEMENT
The Company in its commitment to strengthen efficiency and execution capability has
a strong management team in place as set on page 1 with the requisite qualifications
and experience in their respective fields. This team has been approved by the Authority
and meet the “fit and proper person criteria” as required by the Authority. They have
also filled in “fit and proper declaration forms” in compliance with the “Guidelines on
Suitability of Persons” released by the Authority.
SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT
Like every financial service institution, the Company is exposed to a variety of risks which
can have a negative impact. The Company has therefore put in place a strong integrated
risk management process in the daily business activities and strategic planning to ensure
sustainable value creation. The Company has strong corporate governance structures that
promote effective identification, monitoring and management of risk. These structures
include well developed and documented internal procedures, clearly defined reporting
22
•
•
•
•
•
•
Identify and manage business risks;
Identify and adopt best business practices;
Maintain compliance with appropriate legislation and internal policies and procedures;
Maintain proper accounting records;
Provide reliable financial information; and
Safeguard assets.
The Board satisfies itself that the internal control framework is operating effectively
through:
•
•
•
•
Having terms of reference for the Board and each of its committees;
A clear organizational structure with documented delegation of authority;
Defined procedures for the approval of major transactions;
Establishment and monitoring of the Internal Control framework by the management; and
• Review of the internal and external audit reports.
COMPLIANCE AND ANTI-MONEY LAUNDERING PROGRAM
The sustained success of the Company is based on trust, respect and the
responsible, integrity-enriched behaviour of all employees. With its compliance
and anti-money laundering program, the Company follows local and international
guidelines and standards for rules-compliant and values-based corporate leadership.
These include the Corporate Governance Guidelines and Anti-Money Laundering
Annual Report and Financial Statements 2014 - ICEA LION General Insurance

CORPORATE
GOVERNANCE STATEMENT (CONTINUED)
Guidelines by the Insurance Regulatory Authority (IRA), the Retirement Benefits Authority
(RBA), the UK Corporate Governance Code, the Organisation for Economic Co-operation
and Development (OECD) Principles on Corporate Governance, The King III Report, and
Financial Action Task Force (FATF) among others. By recognizing and supporting these
local and international principles, the Company manages the risk of violating legal and
regulatory provisions and requirements (compliance risks). This also means that our
customers benefit from the fact that sustainability and social responsibility are integrated
into corporate behaviour.
The standards for conduct established by the Company’s Code of Business Conduct
and Ethics serve to implement these guidelines and principles which are obligatory for
all employees. The Code of Conduct and other internal guidelines adopted on its basis
provide all employees with clear guidance on conduct that is in accordance with the
values of Company. They provide employees with practical guidelines for making their
own decisions and avoiding potential conflicts of interest. These guidelines also help
employees recognize when they are approaching a critical limit, such as the acceptance
of gifts or invitations from business partners. The Code of Business Conduct and Ethics
also forms the basis for guidelines and controls to ensure fair dealings with the Company’s
customers. In cases of doubt, the compliance department provides advice. The tasks of
the compliance team includes advising the business units on laws, provisions and other
regulations, the creation, implementation and monitoring of compliance with internal
guidelines and standards as well as regular training of employees on the rules which are
applicable to them.
A major component of the compliance program is a whistle-blower system that
allows employees to alert the compliance and audit departments confidentially about
irregularities. Employees who voice concerns about irregularities in good faith should
not fear retribution in any form, even if the charge later turns out to be unfounded.
To transmit the principles of the Code of Conduct and other compliance guidelines and
controls effectively, the Company has developed interactive training programs.
ACTUARIAL FUNCTION
The Company has set up an in-house actuarial function. This function evaluates and
provides advice to the insurer regarding, at a minimum, technical provisions, premium
and pricing activities, and compliance with related statutory and regulatory requirements.
The Company has further contracted the “Appointed Actuary” who is a Fellow of The
Actuarial Society of Kenya in compliance with the Actuarial Function guidelines released
by the Authority. The “Appointed Actuary” has been approved by the Authority and has
access to the Board to whom it periodically reports to. During the year, the appointed
actuary together with the in-house actuarial function generated the technical liabilities
that the company used in its audited financial statements. In addition, the team produced
the company Financial Condition Report (FCR).
CONFLICT OF INTEREST
The directors are required to act in the best interest of the Company at all times. It is the
Company’s policy to ensure that directors avoid putting themselves in positions whereby
their interests conflict with the Company’s interests. Any business transacted with the
directors or their companies must be at arm’s length.
The Board has adopted a policy, which also applies to management and staff, which
ensures that directors, management and staff disclose all possible conflict of interest
sources and are required to exclude themselves in decisions where conflict of interest
may arise.
DIRECTORS’ EMOLUMENTS
The aggregate amount of emoluments paid to directors for services rendered during the
financial year is disclosed in Note 42(c) to the financial statements for the year ended
31 December 2014.
RELATED PARTY TRANSACTIONS
There have been no materially significant related party transactions, pecuniary
transactions or relationships between the Company and its Directors or Management
except those disclosed in Note 42(a) to the financial statements for the year ended 31
December 2014.
COMPLIANCE WITH THE LAW
The Board is satisfied that the Company has, to the best of their knowledge, put in place
mechanisms to ensure compliance with all the applicable laws. To the knowledge of the
Board, no director, employee or agent of the Company acted or committed any indictable
offence in conducting the affairs of the Company nor been involved or been used as a
conduit for money laundering or any other activity in contravention with the relevant laws
CONDUCT OF BUSINESS AND PERFORMANCE REPORTING
The Company business is conducted in accordance with a carefully formulated strategy,
annual business plans and budgets which set out very clear objectives. Roles and
responsibilities have been clearly defined with approved authority being delegated.
Performance against the objectives is reviewed and discussed on a regular basis by
the management team. Management prepares a quarterly business review report which
is presented to the Board. Any issues arising are discussed. In this way, performance
trends, forecasts as well as actual performance against budget are closely monitored.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
23

CORPORATE
GOVERNANCE STATEMENT (CONTINUED)
DISCLOSURE OF INFORMATION AND RELATIONSHIP WITH THE
INSURANCE REGULATORY AUTHORITY
The Company shares information on its financial position and the risks to which it is subject
to. This information gives a well-rounded view of the Company and includes financial
position, performance, and corporate governance among others. This information is
shared with the Authority and other relevant stakeholders.
ACCOUNTABILITY, AUDIT AND SHAREHOLDER RELATIONS
The Board recognises its responsibility to present a balanced and understandable
assessment of the Company’s financial position and prospects. The Company’s financial
statements are prepared in accordance with International Financial Reporting Standards
(IFRS) and the requirements of the Companies Act and are audited in accordance with
International Auditing Standards. The directors recognise and have confirmed their
responsibility over the financial statements and have provided other information in this
annual report that they consider useful to shareholders and other stakeholders.
RESPONSIBILITY FOR STAFF WELFARE AND TRAINING
As part of its policy, the Company recognises the need for diversity, equal opportunities,
gender sensitivity and provision of a safe and conducive work environment for its
entire staff. The Company assists its staff to undertake continuous professional and
development training programmes to fulfil their potential. This process is appropriately
managed to align staff development with the Company’s strategic and business goals and
objectives, and is reinforced with appropriate remuneration and incentive systems. The
Company endeavours to offer superior working environment. During the year 2014, the
company won the top position in the insurance industry for the Best Company to work
for organised by Deloitte.
CORPORATE SOCIAL RESPONSIBILITY
The Company recognises its social responsibilities to improve societal well-being. To this
end it sponsors education of needy children, supports organisations that are involved in
the support of the needy and the disadvantaged members of the society as well as those
involved in environmental protection and conservation. This approach gives the Company
continuing good will and support to be able to deliver on our visions and mission.
Director
Director
27 March 2015
27 March 2015
24
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
CORPORATE SOCIAL RESPONSIBILITY

CORPORATE
SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) is an integral part of our corporate ethos and recognizes that good CSR embraces all aspects of sustainable development as we continue
to affect the communities in which our businesses operate. In 2014, the company supported CSR activities in the spheres of education, health and environment. Below are some
highlights from the activities we supported.
In 2015, we will seek to utilize our Corporate Social Investment initiatives as a strategic tool to ensure that we adhere to our Group’s corporate governance sustainability policy that
enhances the sustainability of social and natural environments. We will also wish to support a single and impactful cause that the Group can be associated with for posterity.
Staff members step out for children with diabetes
Our team support IRA’s Cerebral Palsy of Kenya Charity Walk
26
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
Our representatives are overjoyed at receiving a trophy
in commemoration of our support for diabetes
STATEMENT OF DIRECTORS’ RESPONSIBILITIES

STATEMENT
OF DIRECTORS’ RESPONSIBILITIES
The Companies Act, CAP 486, Laws of Kenya requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the
Group and the Company as at the end of the financial year and of the Group’s profit or loss for that year. It also requires the directors to ensure that the company maintains proper
accounting records that disclose, with reasonable accuracy, the financial position of the Group. The directors are also responsible for safeguarding the assets of the Group.
The directors accept responsibility for the preparation and fair presentation of the annual financial statements that are free from material misstatement whether due to fraud or
error. They also accept responsibility for:
(i) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements;
(ii) selecting and applying appropriate accounting policies; and
(iii) making accounting estimates and judgments that are reasonable in the circumstances.
The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Group and company as at 31 December 2014 and of
the Group’s profit/loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act.
Nothing has come to the attention of the directors to indicate that the Company and its subsidiaries will not remain a going concern for at least twelve months from the date of this
statement.
Approved by the board of directors on 27 March 2015 and signed on its behalf by:
Director
Director
28
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
REPORT OF THE PARENT COMPANY
CONSULTING ACTUARY

REPORT
OF THE PARENT COMPANY CONSULTING ACTUARY
I have conducted an actuarial valuation of the insurer’s insurance liabilities as at 31 December 2014.
The valuation was conducted in accordance with generally accepted actuarial principles and in accordance with the requirements of the Insurance Act Cap 487 of the Laws of Kenya.
Those principles require that prudent principles for future outgo under contracts, generally based upon the assumptions that current conditions will continue. Provision is therefore
not made for all possible contingencies.
In completing the actuarial valuation, I have relied upon the audited financial statements of the company.
In my opinion, the insurer’s insurance liabilities reserves of the company were adequate as at 31 December 2014.
Actuary
James I. O. Olubayi
Fellow of the Institute of Actuaries
27 March 2015
30
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
INDEPENDENT AUDITOR’S REPORT

INDEPENDENT
AUDITOR’S REPORT
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’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 audit opinion.
Opinion
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of ICEA LION
General Insurance Company Limited (the “Company”) and its subsidiaries (together,
the “Group”), as set out on pages 36 to 81. These financial statements comprise the
Consolidated and Company statement of financial position as at 31 December 2014
and the consolidated statement of comprehensive income, consolidated and Company
statement of changes in equity and the consolidated statement of cash flow for the
year then ended and a summary of significant accounting policies and other explanatory
notes.
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 the
requirements of the Companies Act, CAP 486, Laws of Kenya. This responsibility includes:
designing, implementing and maintaining internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
In our opinion the accompanying financial statements give a true and fair view of the
financial position of the Group and the Company as at 31 December 2014 and of the
Group’s financial performance and cash flows for the year then ended in accordance with
International Financial Reporting Standards and the Companies Act, CAP 486, Laws of
Kenya.
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 and statement of comprehensive
income is in agreement with the books of account.
The engagement partner responsible for the audit resulting in this independent auditors’
report is FCPA Richard Njoroge – P/No 1244
Auditor's responsibility
Our responsibility is to express an opinion of these financial statements based on our
audit. We conducted our audit in accordance with International Standards on Auditing.
Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance whether the financial statements are free from
material misstatement.
Certified Public Accountants
Nairobi, Kenya
30 March 2015
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
judgment, 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 controls relevant to the Company’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the
32
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
FINANCIAL PERFORMANCE HIGHLIGHTS

FINANCIAL
PERFORMANCE HIGHLIGHTS
Gross Written Premium
(Kshs Million)
Comprehensive Income Before Tax
(Kshs Million)
8,000
1,100
7,000
6,134
6,000
1,000
900
5,352
1,004
854
861
4,897
5,000
800
4,000
700
3,000
600
2,000
500
1,000
400
0
2012
2013
12,000
Total Assets
(Kshs Million)
11,000
10,625
2014
0
2012
4,000
Shareholders’ Funds
(Kshs Million)
3,500
3,189
11,829
9,928
10,000
3,000
9,000
2,500
8,000
2,000
7,000
1,500
6,000
1,000
5,000
500
0
2012
34
2013
2014
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
2013
2014
3,745
2,751
0
2012
2013
2014
FINANCIAL STATEMENTS

CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
2014
Ksh ’000
Restated 2013
Ksh ’000
5,778,630
(2,499,946)
5,035,797
(2,364,717)
3,278,684
2,671,080
439,626
790,449
11,445
348,861
568,052
1,215
4,520,204
3,589,208
(1,674,506)
(764,138)
(1,233,408)
(1,255,772)
(526,320)
(1,133,673)
(3,672,052)
(2,915,765)
848,152
673,443
10(a)
(248,534)
(241,728)
Profit for the year from continuing operations
11
599,618
431,715
Discontinued operations:
Profit for the year from discontinued operations
39
-
25,490
599,618
457,205
(8,334)
164,256
(5,614)
167,651
Other comprehensive income for the year, net of tax
155,922
162,037
Total comprehensive income for the year
755,540
619,242
591,909
7,709
599,618
444,236
12,969
457,205
725,712
29,828
581,397
37,845
Notes
Continuing operations:
Gross earned premiums
Less: Reinsurance premiums ceded
5
Net earned premiums
Commissions earned
Investment income
Foreign exchange gains
6
Total income
Claims incurred
Commissions incurred
Operating and other expenses
7
8
Total expenses
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income, net of tax; Items that may subsequently be classified to profit or loss
Exchange differences on translating net assets of foreign subsidiary
Change in fair value of available for sale equity instruments
Profit attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
Earnings per share (basic and diluted)
The notes on pages 42 to 81 are an integral part of these financial statements.
36
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
12
755,540
619,242
Ksh 19.73
Ksh 14.81
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes
ASSETS
Investment properties
Property and equipment
Intangible assets
Kenya motor insurance pool
Available-for-sale equity instruments
Receivables arising out of reinsurance arrangements
Receivables arising out of direct insurance arrangements
Reinsurers’ share of technical provisions and reserves
Deferred acquisition costs
Deferred merger acquisition costs
Other receivables
Current income tax
Government securities held to maturity
Government securities available for sale
Corporate bonds held to maturity
Deposits with financial institutions held to maturity
Deferred income tax
Cash and bank balances
14(a)
15(a)
16
19
20
21
22
23
24
10(d)
25(a)
25(b)
26
27
33(c)
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Ordinary shares
Revaluation reserve
Contingency reserve
Currency translation reserve
Retained earnings
Proposed dividends
29
30(a)
30(b)
30(c)
Non-controlling interests
LIABILITIES
Outstanding claims provision
Deferred income tax
Unearned premiums reserve
Payables arising from reinsurance arrangements
Deferred reinsurance commissions
Other payables
Current income tax
31
33(c)
34
35
36
10(d)
Total liabilities
Total equity and liabilities
2014
Ksh ’000
Restated 2013
Ksh ’000
2,355,000
184,078
22,243
83,041
1,069,605
542,601
656,279
2,436,833
278,281
185,000
139,978
19,606
2,504,453
507,725
282,990
513,596
12,140
36,017
2,167,500
83,995
9,175
75,423
567,363
478,904
567,540
2,312,789
337,490
277,500
70,043
619
2,327,256
294,017
291,576
622,123
13,171
128,292
11,829,466
10,624,776
600,000
518,853
49,090
(43,344)
2,274,499
200,000
600,000
381,589
42,106
(39,883)
1,899,574
200,000
3,599,098
145,577
3,744,675
3,073,386
115,749
3,189,135
4,021,395
479,042
2,611,868
547,708
176,640
248,138
-
3,946,663
426,449
2,268,282
435,575
159,855
189,001
9,816
8,084,791
7,435,641
11,829,466
10,624,776
The financial statements on pages 36 to 81 were approved by and authorised for issue by the board of directors on 27 March 2015 and were signed on its behalf by:
Director
Director
Principal officer
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
37

COMPANY
STATEMENT OF FINANCIAL POSITION
Notes
ASSETS
Investment properties
Property and equipment
Intangible assets
Investment in subsidiaries - at cost
Kenya motor insurance pool
Available-for-sale equity instruments
Receivables arising out of reinsurance arrangements
Receivables arising out of direct insurance arrangements
Reinsurers’ share of technical provisions and reserves
Deferred acquisition costs
Deferred merger acquisition costs
Other receivables
Current income tax
Due from subsidiary company
Government securities held to maturity
Government securities available for sale
Corporate bonds held to maturity
Deposits with financial institutions held to maturity
Cash and bank balances
14(b)
15(b)
16
18(a)
19
20
21
22
23
24
10(d)
25(a)
25(b)
26
27
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Revaluation reserve
Retained earnings
Proposed dividends
29
30(a)
Total equity
LIABILITIES
Outstanding claims provision
Deferred income tax
Unearned premiums reserve
Payables arising from reinsurance arrangements
Deferred reinsurance commissions
Other payables
Current income tax
31
33(c)
34
35
36
10(d)
Total liabilities
Total equity and liabilities
2014
Ksh ’000
Restated 2013
Ksh ’000
2,355,000
179,128
22,243
50,147
83,041
909,833
445,725
594,700
1,944,333
244,870
185,000
113,716
13,433
13,714
2,447,605
507,725
282,990
250,433
24,273
2,167,500
83,995
9,175
50,147
75,423
459,199
432,642
542,023
1,902,907
247,389
277,500
44,594
29,526
2,243,305
294,017
291,576
441,276
100,504
10,667,909
9,688,607
600,000
451,314
2,233,773
200,000
600,000
341,840
1,850,556
200,000
3,485,087
2,992,396
3,780,249
479,042
2,124,029
447,837
131,880
219,785
-
3,810,118
426,449
1,817,776
385,378
86,011
160,663
9,816
7,182,822
6,696,211
10,667,909
10,624,776
The financial statements on pages 36 to 81 were approved by and authorised for issue by the board of directors on 27 March 2015 and were signed on its behalf by:
Director
38
Director
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
Principal officer

CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Balance as at 1 January 2013
Share capital
Ksh ‘000
Available
for sale
reserve
Ksh ‘000
Contingency
reserve
Ksh ‘000
Currency
translation
reserve
Ksh ‘000
Retained
earnings
Ksh ‘000
Proposed
dividends
Ksh ‘000
Noncontrolling
interest
Ksh ‘000
Total
Ksh ‘000
600,000
241,249
36,536
(36,704)
1,651,382
180,000
78,325
2,750,788
Changes in equity 2013
Profit for the year
-
-
-
-
444,236
-
12,969
457,205
Other comprehensive income for the year
-
140,340
-
(3,179)
-
-
24,876
162,037
Transfer to contingency reserve
-
-
5,570
-
(5,570)
-
-
-
-
-
-
-
(474)
-
(421)
(895)
- 2012 final dividend paid
-
-
(180,000)
(200,000)
(180,000)
200,000
-
-
-
-
- 2013 proposed dividends
Transactions with owners
Withholding tax on issue of bonus shares
Dividends
-
Balance as at 31 December 2013
600,000
381,589
42,106
(39,883)
1,889,574
200,000
115,749
3,189,135
Balance as at 1 January 2014 (as previously reported)
600,000
381,589
42,106
(39,883)
1,983,598
200,000
115,749
3,283,159
Prior period adjustment (note 30(d))
Balance as at 1 January 2014 (Restated)
600,000
381,589
42,106
(39,883)
(94,024)
1,889,574
200,000
-
(94,024)
115,749
3,189,135
Changes in equity 2014
Profit for the year
-
-
-
-
591,909
-
7,709
599,618
Other comprehensive income for the year
-
137,264
-
(3,461)
-
-
22,119
155,922
Transfer to contingency reserve
-
-
6,984
(6,984)
-
-
-
- 2013 final dividend paid
-
-
-
-
-
(200,000)
-
(200,000)
- 2014 proposed dividends
-
-
-
-
(200,000)
200,000
-
-
2,274,499
200,000
Transactions with owners
Dividends
Balance as at 31 December 2014
600,000
518,853
49,090
(43,344)
145,577
3,744,675
The notes on pages 42 to 81 are an integral part of these financial statements.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
39

COMPANY
STATEMENT OF CHANGES IN EQUITY
Balance as at 1 January 2013
Share capital
Ksh ’000
Available for
sale reserve
Ksh ’000
Retained
earnings
Ksh ’000
Proposed
dividends
Ksh ’000
Total
Ksh ’000
600,000
344,142
1,410,888
180,000
2,535,030
Changes in equity 2013
Profit for the year
-
-
639,668
-
(2,302)
-
-
639,668
Other comprehensive income
Total comprehensive income for the year
-
(2,302)
639,668
-
637,366
- 2012 final dividend paid
-
-
-
(180,000)
(180,000)
- 2013 proposed dividend
-
-
(200,000)
200,000
-
Balance as at December 2013
600,000
341,840
1,850,556
200,000
2,992,396
Balance as at 1 January 2014
600,000
341,840
1,850,556
200,000
2,992,396
(2,302)
Transactions with owners
Dividends:
Changes in equity 2014
Profit for the year
-
-
-
109,474
583,217
-
-
Other comprehensive income
-
583,217
109,474
Total comprehensive income for the year
-
109,474
583,217
-
692,691
- 2013 final dividend paid
-
-
-
(200,000)
(200,000)
- 2014 proposed dividends
-
-
(200,000)
200,000
-
600,000
451,314
2,233,773
200,000
3,485,087
Transactions with owners
Dividends:
Balance as at 31 December 2014
The notes on pages 42 to 81 are an integral part of these financial statements.
40
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
CONSOLIDATED STATEMENT OF CASH FLOWS
2014
Ksh ’000
Restated 2013
Ksh ’000
40(a)
527,297
424,594
121,296
320,807
10(c)
(224,103)
(198,594)
727,788
243,509
(147,589)
(50,195)
1,500
1,016
(13,539)
1,160,000
Notes
Cash flows from operating activities
Cash generated from operations
Interest income
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property and equipment
15
Proceeds from sale of property and equipment
Purchase of intangible assets
16
Proceeds on disposal of available for sale investment - Karen Office Park
39
Purchase of government securities
(32,701)
(359,937)
40,272
Proceeds of sale of equity instruments available for sale
Purchase of equity instruments available for sale
20
Net movement in deposits maturing after 3 months
(374,608)
(63,343)
(1,030,25)
23,046
(80,723)
(61,178)
149,819
21,172
135,494
17,303
(765,875)
100,999
(200,000)
(180,000)
Net cash used in financing activities
(200,000)
(180,000)
Net (decrease)/increase in cash and cash equivalents
(238,087)
164,508
602,539
437,051
Rental income
Dividend income
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Dividends paid to shareholders of parent company
13
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on translation of foreign subsidiary balances
40(b)
Cash and cash equivalents at year end
(3,318)
980
361,134
602,539
The notes on pages 42 to 81 are an integral part of these financial statements.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
41

NOTES
TO THE FINANCIAL STATEMENTS
1 - GENERAL INFORMATION
ICEA LION General Insurance Company Limited (the “Company”) is in the transaction of general insurance business and is incorporated in Kenya under the Companies Act as a private
limited liability company. The Company is domiciled in Kenya and the address of its registered office is:
ICEA LION Centre
Chiromo Road
PO Box 30190,00100
Nairobi
For the Kenyan Companies Act reporting purposes, the balance sheet is presented by statement of financial position and the profit and loss account is presented by the statement
of comprehensive income.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied 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 have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The measurement basis applied is the historical cost basis,
except for investment properties, available for sale financial assets and financial assets and liabilities, which have been measured at fair value. The preparation of financial statements
in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the directors to exercise judgement in the process of applying the Company’s
accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed
in Note 3.
Changes in accounting policy and disclosures
(i) New and amended standards adopted by the Group
The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2014 and have a material impact on the Group:
Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting
financial assets and financial liabilities.
This amendment clarifies that the right of set-off must not be contingent on a future
event. It must also be legally enforceable for all counterparties in the normal course of
business, as well as in the event of default, insolvency or bankruptcy. The amendment
also considers settlement mechanisms. The amendment did not have a significant effect
on the Group financial statements.
Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount
disclosures for non-financial assets.
This amendment removed certain disclosures of the recoverable amount of CGUs which
had been included in IAS 36 by the issue of IFRS 13.
Amendment to IAS 39, ‘Financial instruments: Recognition and
measurement’ on the novation of derivatives and the continuation of
hedge accounting.
This amendment considers legislative changes to ‘over-the-counter’ derivatives and the
establishment of central counterparties. Under IAS 39 novation of derivatives to central
counterparties would result in discontinuance of hedge accounting. The amendment
provides relief from discontinuing hedge accounting when novation of a hedging
42
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
Changes in accounting policy and disclosures (continued) | (i) New and amended standards adopted by the Group (continued)
(a) Basis of preparation (continued)
instrument meets specified criteria. The Group has applied the amendment and there has
been no significant impact on the Group financial statements as a result.
IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if
that liability is within the scope of IAS 37 ‘Provisions’.
The interpretation addresses what the obligating event is that gives rise to pay a levy and
when a liability should be recognised. The Group is not currently subjected to significant
levies so the impact on the Group is not material.
Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 are not material to the Group.
(ii) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing
these financial statements. None of these is expected to have a significant effect on the financial statements of the Group, except the following as set out below:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement
and recognition of financial assets and financial liabilities.
The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS
39 that relates to the classification and measurement of financial instruments. IFRS
9 retains but simplifies the mixed measurement model and establishes three primary
measurement categories for financial assets: amortised cost, fair value through OCI
and fair value through P&L. The basis of classification depends on the entity’s business
model and the contractual cash flow characteristics of the financial asset. Investments
in equity instruments are required to be measured at fair value through profit or loss
with the irrevocable option at inception to present changes in fair value in OCI not
recycling. There is now a new expected credit losses model that replaces the incurred
loss impairment model used in IAS 39. For financial liabilities there were no changes
to classification and measurement except for the recognition of changes in own credit
risk in other comprehensive income, for liabilities designated at fair value through
profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing
the bright line hedge effectiveness tests. It requires an economic relationship between
the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as
the one management actually use for risk management purposes. Contemporaneous
documentation is still required but is different to that currently prepared under IAS 39.
The standard is effective for accounting periods beginning on or after 1 January 2018.
Early adoption is permitted. The Group is yet to assess IFRS 9’s full impact.
IFRS 15, ‘Revenue from contracts with customers’ deals with revenue
recognition and establishes principles for reporting useful information
to users of financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from an entity’s contracts
with customers. Revenue is recognised when a customer obtains control of
a good or service and thus has the ability to direct the use and obtain the
benefits from the good or service.
The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related
interpretations. The standard is effective for annual periods beginning on or after 1
January 2017 and earlier application is permitted. The Group is assessing the impact of
IFRS 15.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
43
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
(b) Basis of consolidation
a deficit balance.
The consolidated financial statements incorporate the financial statements of the
company and the entities controlled by the Company and its subsidiaries. Control is
achieved when the company:
When necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with the Group’s accounting policies. All intragroup
assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
• Has power over the investee
• Is exposed, or has rights, to variable returns from its involvement with the investee;
and
The consolidated financial statements incorporate the financial statements of the
company and its subsidiary ICEA LION General Insurance Company (Tanzania) Limited
made up to 31 December.
• Has the ability to use its power to affect its returns
ii) Investment in subsidiary companies
The Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control listed
above.
When the Company has less than a majority of the voting rights of an investee, it has
power over the investee when the voting rights are sufficient to give it the practical ability
to direct the relevant activities of the investee unilaterally. The Company considers all
relevant facts and circumstances in assessing whether or not the Company’s voting rights
in an investee are sufficient to give it power, including:
• The size of the Company’s holding of voting relative to the size and dispersion of
holdings of other vote holders;
• Potential voting rights held by the company, other vote holders or other parties;
• Rights arising from other contractual arrangements; and
• Any additional facts and circumstances that indicate that the company has, or does
not have, the current ability to direct the relevant activities at the time that decisions
need to be made, including voting patterns at previous shareholders meetings
i) Subsidiaries
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary
and ceases when the Company loses control of the subsidiary. Specifically, income and
expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated statement of profit or loss and other comprehensive income from the date
the company gains control until the date when the Company ceases control of the
subsidiary. Profit or loss and each component of other comprehensive income are
attributed to the owners of the company and to the non-controlling interests. Total
comprehensive income of subsidiaries is attributed to the owners of the Company and
to the non-controlling interests even if this results in the non-controlling interest having
44
In the separate financial statements, investments in subsidiaries are either accounted for
at cost or where fair value can be reliably determined, at their fair values. Investment
in equity instruments that do not have a quoted market price in an active market and
whose fair value cannot be reliably determined are measured at cost.
Investments accounted for at cost are restated to the lower of their carrying amounts and
their net recoverable amounts, when classified as held for sale. Investments accounted
for at fair value are not restated even if they are classified as held for sale.
(c) Kenya Motor Insurance Pool
The Kenya Motor Insurance Pool balances represent the group’s share of the surplus and
net assets of the pool. Results of the company’s share of the two Kenya Motor Insurance
Pools are accounted for in profit or loss in accordance with the Pool’s accounting year
which runs from October of the previous year to September of the current year. As a
result, the Pool’s results for the 4th quarter of the group’s accounting year are accounted
for in the subsequent year.
(d) Income recognition
Premium income is recognised on assumption of risks, and includes estimates of premiums
due but not yet received, less unearned premiums. Unearned premiums represent the
proportion of the premiums written in periods up to the accounting date which relate
to the unexpired terms of policies in force at the end of each reporting period, and are
calculated using the 365th basis for all classes of business.
Commissions receivable are recognised as income in the period in which they are earned.
To achieve this a proportion of reinsurance commissions receivable is deferred and
recognised as income over the period of the policy. Investment income is stated net of
investment expenses. Interest income for all interest bearing financial instruments is
recognised using the effective interest rate method. Dividends income on available for
sale equities is recognised as income in the period in which the right to receive payment
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
(d)
Income recognition (continued)
is established. Rental income is recognised as income in the period in which it is earned.
Results of the company’s share of the two Kenya Motor Insurance Pools are accounted for
in profit or loss in accordance with the Pool’s accounting year which runs from October
of the previous year to September of the current year. As a result, the Pool’s results for
the 4th quarter of the Group’s accounting year are accounted for in the subsequent year.
(e) Reinsurance
The Group assumes and cedes reinsurance in the normal course of business, with
retention limits varying by line of business. Premiums on reinsurance assumed are
recognised as income in the same manner as they would be if the reinsurance were
considered direct business. Premiums ceded and claims reimbursed are presented on
a gross basis in the consolidated statement of comprehensive income and statement of
financial position as appropriate.
Reinsurance assets represent balances due from reinsurance companies. Amounts
recoverable from reinsurers are estimated in a manner consistent with the outstanding
claims provision or settled claims associated with the reinsurer’s policies and are in
accordance with the related reinsurance contract.
Impairment occurs when there is objective evidence as a result of an event that occurred
after initial recognition of the reinsurance asset that the group may not receive all
outstanding amounts due under the terms of the contract and the event has a reliably
measurable impact on the amounts that the group will receive from the reinsurer. The
impairment loss is recognized in the statement of comprehensive income.
Ceded reinsurance arrangements do not relieve the group from its obligations to
policyholders. The group also assumes reinsurance risk in the normal course of business
for life insurance and non-life insurance contracts where applicable. Premiums and claims
on assumed reinsurance are recognised as revenue or expenses in the same manner as
they would be if the reinsurance were considered direct business, taking into account the
product classification of the reinsured business. Reinsurance liabilities represent balances
due to reinsurance companies. Amounts payable are estimated in a manner consistent
with the related reinsurance contract.
Reinsurance assets or liabilities are derecognized when the contractual rights are
extinguished or expire or when the contract is transferred to another party.
(f) Commissions payable and deferred acquisition costs
A proportion of commissions payable is deferred and amortised over the period in which
the related premium is earned. Deferred acquisition costs represent a proportion of
commissions payable and other acquisition costs that relate to the unexpired term of the
policies that are in force at the year end.
(g) Customer contracts
Payments made by the Company to acquire an Insurance portfolio are capitalised as an
intangible asset and amortized over a period of 5 years.
(h) Claims incurred
Claims incurred comprise claims paid in the year and changes in the provision for
outstanding claims. Claims paid represent all payments made during the year, whether
arising from events during that or earlier years. Outstanding claims provisions represent
the estimated ultimate cost of settling all claims arising from incidents occurring prior
to the end of each reporting period, but not settled at that date. Outstanding claims
provisions 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”) at the end of each reporting period based on the group’s experience but subject
to the minimum percentage set by the Commissioner of Insurance. Outstanding claims
are not discounted.
(i) General insurance contract liabilities
General insurance contract liabilities are recognised when contracts are entered into and
premiums are charged. These liabilities are known as the outstanding claims provision,
which are based on the estimated ultimate cost of all claims incurred but not settled at
the end of each reporting period, whether reported or not, together with related claims
handling costs and reduction for the expected value of salvage and other recoveries.
Delays can be experienced in the notification and settlement of certain types of claims
and therefore the ultimate cost of this category of claims cannot be known with certainty
at the end of each reporting period. The liability is calculated at the reporting date using
a range of standard actuarial claim projection techniques, based on empirical data and
current assumptions that may include a margin for adverse deviation. The liability is not
discounted for the time value of money. No provision for equalisation or catastrophe
reserves is recognised. The liabilities are derecognised when the contract expires, is
discharged or is cancelled.
The provision for unearned premiums represents premiums received for risks that have
not yet expired. Generally the reserve is released over the term of the contract at which
time it is recognised as premium income.
(j) Foreign currency translation
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 Kenya
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
45
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
Foreign currency translation (continued)
(j)
(i) Functional and presentation currency (continued)
Shillings rounded to the nearest thousand (“Ksh”), which is the Group’s presentation
currency.
ii) Transactions and balances
In preparing the financial statements of individual entities in the group, transactions in
foreign currencies during the year are recorded at rates ruling at the transaction dates.
Assets and liabilities at the end of each reporting period which are expressed in foreign
currencies are translated at rates ruling at that date. The resulting differences are dealt
with in the statement of comprehensive income in the year in which they arise.
The individual financial statements of each group entity are presented in the currency of
the primary economic environment in which the entity operates. For the purpose of the
consolidated financial statements, the results and financial position of each group entity
are expressed in Kenya shillings, which is the functional currency of the company and the
presentation currency for the consolidated financial statements.
For the purpose of presenting consolidated financial statements, the assets and liabilities
of the group’s foreign operations are translated to Kenya shillings using exchange rates
prevailing at the end of each reporting period. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates fluctuated significantly
during that period, in which case the exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are classified as equity and recognised
in other comprehensive income and accumulated in equity under the groups’ currency
translation reserve. Such differences are recognised in profit or loss in the period in which
the foreign operation is disposed of.
(k) Retirement benefit obligations
The group operates two defined contribution pension schemes for its employees. The
assets of these schemes are held in separate trustee administered funds. The schemes
are funded by contributions from both the employees and the employer. Contributions
are determined by the rules of the schemes.
The group also contributes to the statutory defined contribution pension schemes, the
National Social Security Fund (NSSF) in Kenya and Tanzania. Contributions to these
schemes are determined by local statute. The group’s obligations to retirement benefits
schemes are charged to the statement of comprehensive income as they fall due. There
is no further obligation to the group.
profit or loss except when it relates to items recognised in other comprehensive income,
in which case it is also recognised in other comprehensive income, or to items recognised
directly in equity, in which case it is also recognised directly in equity.
i) Current tax
Current income tax is the amount of income tax payable on the taxable profit for the year,
and any adjustment to tax payable in respect of prior years, determined in accordance
with the Kenyan Income Tax Act.
ii) Deferred income tax
Deferred income tax is provided in full on all temporary differences except those arising
on the initial recognition of an asset or liability, other than a business combination,
that at the time of the transaction affects neither the accounting nor taxable profit or
loss. Deferred income tax is determined using the liability method on all temporary
differences arising between the tax bases of assets and liabilities and their carrying
values for financial reporting purposes, using tax rates and laws enacted or substantively
enacted at the balance sheet date and expected to apply when the related deferred
income tax asset is realised or the deferred tax liability is settled. Deferred income tax
assets are recognised only to the extent that it is probable that future taxable profits will
be available against which temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising
from investments in subsidiaries, associates and joint arrangements, except for deferred
income tax liability 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. Generally the group is unable to control the reversal of the
temporary difference for associates unless there is an agreement in place that gives the
group the ability to control the reversal of the temporary difference not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising
from investments in subsidiaries, associates and joint arrangements only to the extent
that it is probable the temporary difference will reverse in the future and there is sufficient
taxable profit available against which the temporary difference can be utilised.
(l) Income taxes
Recognised and unrecognised deferred tax assets are reassessed at the end of each
reporting period and, if appropriate, the recognised amount is adjusted to reflect the
extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Income tax expense is the aggregate amount charged/ (credited) in respect of current
tax and deferred tax in determining the profit or loss for the year. Tax is recognised in the
Deferred income tax assets and liabilities are offset when there is a legally enforceable
right to offset current income tax assets against current income tax liabilities and when
46
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)

(l) Income taxes (continued)
(ii) Deferred income tax (continued)
the deferred income taxes assets and liabilities relate to income taxes levied by the same
taxation authority on the same entity.
(m) Investment properties
Investment properties comprise land and buildings and parts of buildings held to earn
rentals and/or for capital appreciation. Investments include property interests held under
operating leases. Investment properties are carried at fair value, representing market
value determined by external independent valuers. Changes in their carrying amount
between the statement of financial position dates are accounted for through profit or
loss.
On disposal of an investment property, the difference between the net disposal proceeds
and the carrying amount is charged or credited to profit or loss.
(n) Dividends payable
Dividends payable on ordinary shares are charged to equity in the period in which they
are declared. Dividends declared after the reporting date are not recognised as liabilities
at the end of each reporting period.
Proposed dividends are shown as a separate component of equity.
(o) Property and equipment
All property and equipment are initially recorded at cost. Buildings are subsequently
carried at their revalued amounts based on annual valuations by external independent
valuers, less accumulated depreciation. The last revaluation was carried out as at 31
December 2014. All other property and equipment are stated at historical cost less
accumulated depreciation and less any accumulated impairment losses.
Increases in the carrying value of buildings arising on revaluation are credited to the
revaluation reserve. Decreases that offset previous increases of the same asset are
charged against the revaluation reserves; all other decreases are charged to the
statement of comprehensive income.
Depreciation
Depreciation is calculated on the straight line basis to write down the cost of each asset,
or the revalued amount, to its residual value over its estimated useful life at the following
rates:
Buildings: 4%
Furniture, fixtures and fittings and office equipment: 12.5% - 20%
Motor vehicles: 25%
Computer equipment: 30%
Property and equipment is periodically reviewed for impairment. Where the carrying
amount of an asset is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount. The impairment loss is recognised in the statement
of comprehensive income. Gains and losses on disposal of property and equipment are
determined by reference to their carrying amounts. On disposal of revalued assets,
amounts in the revaluation reserves relating to that asset are transferred to retained
earnings.
(p) Intangible assets
Intangible assets comprise of computer software costs which are stated at cost less
accumulated amortisation and any impairment losses. Amortisation is calculated to write
off the cost of computer software on a straight line basis over its estimated useful life of
3 years.
(q) Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to a company within the group as a
lessee. All other leases are classified as operating leases. Payments to acquire leasehold
interest in land are treated as prepaid operating lease rentals and amortised over the
term of the lease.
i) The group as lessor
Rental income from operating leases is recognised on the straight-line basis over the
term of the relevant lease.
ii) The group as lessee
Rentals payable under operating leases are charged to income on the straight-line basis
over the term of the relevant lease.
(r) Financial instruments
A financial asset or liability is recognised when the group becomes party to the contractual
provisions of the instrument.
Financial assets - Classification
The group classifies its financial assets into the following categories: financial assets at
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
47
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
Financial instruments (continued)
(r)
Financial assets - Classification (continued)
fair value through profit or loss, loans and receivables, held-to-maturity financial assets
and available-for-sale financial assets. The classification adopted for a particular financial
asset depends on the purpose for which the asset was acquired. Management determines
the classification of its financial asset at initial recognition and re-evaluates this at every
reporting date.
i) Insurance receivables
Insurance receivables are recognised when due and measured on initial recognition at the
fair value of the consideration received or receivable. Subsequent to initial recognition,
insurance receivables are measured at amortised cost, using the effective interest rate
method. The carrying value of insurance receivables is reviewedfor impairment whenever
events or circumstances indicate that the carrying amount may not be recoverable, with
the impairment loss recognized in the profit or loss.
ii) Loans and receivables
Loans and receivables are non-derivative financial assets with measurable or determinable
payments that are not quoted in an active market. Receivables arising from insurance and
reinsurance contracts are also classified in this category and are reviewed for impairment
as part of the impairment review of loans and receivables.
iii) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this
category or not classified in any of the other categories. They are included in non-current
assets unless the investment matures or management intends to dispose of it within 12
months of the end of the reporting period.
iv) Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Group’s management has the positive intention
and ability to hold to maturity, other than:
• those that the Group upon initial recognition designates as at fair value through
profit or loss;
• those that the Group designates as available for sale; and
• those that meet the definition of loans and receivables
Interest on held-to-maturity investments are included in the consolidated statement
of profit or loss and are reported as ‘Interest and similar income’. In the case of an
impairment, it is been reported as a deduction from the carrying value of the investment
48
and recognised in the consolidated statement of profit or loss as ‘Net gains/(losses) on
investment securities’. Held-to-maturity investments are corporate bonds.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the
date on which the group commits to purchase or sell the asset. Investments are initially
recognised at fair value plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction costs are expensed in the statement
of profit or loss. Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or have been transferred and the group has
transferred substantially all risks and rewards of ownership. Available-for-sale financial
assets and financial assets at fair value through profit or loss are subsequently carried
at fair value. Loans and receivables are subsequently carried at amortised cost using the
effective interest method.
Gains or losses arising from changes in the fair value of the financial assets at fair
value through profit or loss’ category are presented in the statement of profit or loss
within other (losses)/gains – net’ in the period in which they arise. Dividend income from
financial assets at fair value through profit or loss is recognised in the statement of profit
or loss as part of other income when the group’s right to receive payments is established.
Changes in the fair value of monetary and non-monetary securities classified as available
for sale are recognised in other comprehensive income. When securities classified
as available for sale are sold or impaired, the accumulated fair value adjustments
recognised in equity are included in the statement of profit or loss as ‘gains and losses
from investment securities’. Interest on available-for-sale securities calculated using
the effective interest method is recognised in the statement of profit or loss as part of
other income. Dividends on available-for-sale equity instruments are recognised in the
statement of profit or loss as part of other income when the group’s right to receive
payments is established.
Determination of fair value
For financial instruments traded in active markets, the determination of fair values of
financial assets and financial liabilities is based on 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. This includes listed equity securities and quoted
debt instruments on major exchange (NSE). The quoted market price used for financial
assets held by the group is the current bid price.
A financial instrument is regarded as quoted in an active market if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry, pricing service
or regulatory agency, and those prices represent actual and regularly occurring market
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
Determination of fair value (continued)
(r) Financial instruments (continued)
transactions on an arm’s length basis. If the above criteria are not met, the market
is regarded as being inactive. For example a market is inactive when there is a wide
bid-offer spread or significant increase in the bid-offer spread or there are few recent
transactions.
For all other financial instruments, fair value is determined using valuation techniques.
In these techniques, fair values are estimated from observable data in respect of similar
financial instruments, using models to estimate the present value of expected future cash
flows or other valuation techniques, using inputs existing at the dates of the statement
of financial position. Fair values are categorised into three levels in a fair value hierarchy
based on the degree to which the inputs to the measurement are observable and the
significance of the inputs to the fair value measurement in its entirety:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted)
in active markets for identical assets or liabilities.
i) De-recognition of financial assets
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.
ii) Classification as debt or equity
Debt and equity instruments issued by the Group are classified as either financial
liabilities or as equity in accordance with the substance of the contractual arrangements
and the definitions of a financial liability and an equity instrument.
(s) Financial liabilities and equity instruments
i) Equity instruments
• Level 2 fair value measurements are those derived from inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
An equity instrument is any contract that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Equity instruments issued by the Group are
recognised at the proceeds received, net of direct issue costs.
• Level 3 fair value measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
ii) Financial liabilities
Transfers between levels of the fair value hierarchy are recognised by the company at the
end of the reporting period during which the change occurred.
Reclassification of financial assets
Financial assets other than loans and receivables are permitted to be reclassified out
of the held-for-trading category only in rare circumstances arising from a single event
that is unusual and highly unlikely to recur in the near-term. In addition, the Group
may choose to reclassify financial assets that would meet the definition of loans and
receivables out of the held-for-trading or available-for-sale categories if the Group has
the intention and ability to hold these financial assets for the foreseeable future or until
maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes
the new cost or amortised cost as applicable, and no reversals of fair value gains or losses
recorded before reclassification date are subsequently made. Effective interest rates for
financial assets reclassified to loans and receivables and held-to-maturity categories are
determined at the reclassification date. Further increases in estimates of cash flows
adjust effective interest rates prospectively.
Financial liabilities are classified as other financial liabilities. Other financial liabilities
are subsequently measured at amortised cost using the effective interest method. The
effective interest method is a method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash payments (including all fees
and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to the net carrying amount on
initial recognition.
iii) De-recognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations
are discharged, cancelled or they expire. The difference between the carrying amount of
the financial liability derecognised and the consideration paid and payable is recognised
in profit or loss.
(t) Cash and cash equivalents
For the purposes of the consolidated cash flow statement, cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
49
NOTES TO THE FINANCIAL STATEMENTS (continued)
2 - Summary of Significant Accounting Policies (continued)
(u) Impairment of non-financial assets
At each end of the reporting period, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss
and the impairment loss is recognised in the statement of comprehensive income. Where
it is not possible to estimate the recoverable amount of an individual asset, the group
estimates the recoverable amount of the cash generating unit to which the asset belongs.
(v) Share capital
Ordinary shares are recognised at par value and classified as 'share capital' in equity.
Any amounts received over and above the par value of the shares issued are classified
as 'share premium' in equity. Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net of tax, from the
proceeds. Shares are classified as equity when there is no obligation to transfer cash or
other assets.
3 - CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINITY
In the process of applying the entity’s accounting policies, the directors are required to
make judgements, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to
be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if
the revision only affects that period or in the period of the revision and future periods if
the revision affects both current and future periods.
The following are the critical judgements and key assumptions concerning the future and
other sources of estimation uncertainty that directors have made in applying the group’s
accounting policies:
(a) The ultimate liability arising from claims made under insurance
contracts
The main assumption underlying techniques applied in the estimation of this liability is
that a company’s past claims experience can be used to project future claims development
and hence ultimate claims costs. As such, these methods extrapolate the development
of paid and incurred losses, average costs per claim and claim numbers based on the
50
observed development of earlier years and expected loss ratios. Historical claims
development is mainly analysed by accident years. Additional qualitative judgment is
used to assess the extent to which past trends may not apply in future, (for example to
reflect one-off occurrences, changes in external or market factors such as public attitudes
to claiming, economic conditions, levels of claims inflation, judicial decisions and
legislation, as well as internal factors such as portfolio mix, policy conditions and claims
handling procedures) in order to arrive at the estimated ultimate cost of claims that
present the likely outcome from the range of possible outcomes, taking account of all
the uncertainties involved. A margin for adverse deviation may also be included in the
liability valuation.
(b) Held -to-maturity financial assets
The group follows the guidance of IAS 39 on classifying non-derivative financial assets
with fixed or determinable payments and fixed maturity as held-to-maturity. This
classification requires significant judgment. In making this judgment, the group evaluates
its intention and ability to hold such assets to maturity. If the group fails to hold these
financial assets to maturity other than for the specific circumstances – for example,
selling an insignificant amount close to maturity – it will be required to reclassify the
entire class as available-for-sale. The assets would therefore be measured at fair value
not amortised cost.
(c) Receivables
Critical estimates are made by the directors in determining the recoverable amount of
receivables and valuation of investment property.
(d) Valuation of investment properties
Estimates are made in determining valuations of investment properties. The group
management uses experts in determination of the values to adopt.
4 - RISK MANAGEMENT
(a) Governance framework
The primary objective of the group’s risk and financial management framework is to
protect the group’s shareholders from events that hinder the sustainable achievement of
financial performance objectives, including failing to exploit opportunities. Management
recognises the critical importance of having efficient and effective risk management
systems in place. The group has a clear organisational structure with documented
delegated authorities and responsibilities from the board of directors to management.
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
(b) Management of Insurance and financial risk
• Having a business acceptance criteria which is reviewed from time to time based on
the experience and other developments; and
The group’s activities expose it to a variety of risks. The group classifies the various risks
it is exposed to into insurance risk and financial risk. Financial risks include credit risk,
liquidity risk and market risk which includes the effect of changes in equity market prices,
foreign currency exchange rates and interest rates. The group’s overall risk management
programme focuses on the unpredictability of financial markets, identification and
management of risks. It 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. The group has put in place investment policies which help
manage liquidity and seek to maximise return within an acceptable level of interest rate
risk.
• Having a mechanism of identifying, quantifying and accumulating exposures to contain them within the set underwriting limits.
Reinsurance planning
Reinsurance purchases are reviewed annually to verify that the levels of protection being
sought reflect developments in exposure and risk appetite of the group. The basis of
these purchases is underpinned by the group’s experience, financial modelling by and
exposure of the reinsurance broker. The reinsurance is placed with providers who meet
the group’s counter party security requirements.
(i) Insurance risk
Claims reserving
Insurance risk in the group arises from:
The group’s reserving policy is guided by the prudence concept. Estimates are made
of the estimated cost of settling a claim based on the best available information on
registration of a claim, and this is updated as and when additional information is obtained
and annual reviews done to ensure that the reserves are adequate. Management is
regularly provided with claims settlement reports to inform on the reserving performance.
(a) Fluctuations in the timing, frequency and severity of claims and claims settlements
relative to expectations;
(b) Unexpected claims arising from a single source;
Short-term insurance contracts
(c) Inaccurate pricing of risks or inappropriate underwriting of risks when underwritten;
(d) Inadequate reinsurance protection or other risk transfer techniques; and
(e) Inadequate reserves
(a), (b) and (c) can be classified as the core insurance risk, (d) relates to reinsurance
planning, while (e) is about reserving.
Core insurance risk
This risk is managed through:
• Diversification across a large portfolio of insurance contracts;
• Careful selection guided by a conservative underwriting philosophy;
• Continuous monitoring of the business performance per class and per client and
corrective action taken as deemed appropriate;
• A minimum of one review of each policy at renewal to determine whether the risk remains within the acceptable criteria;
The Group principally issues the following types of general insurance contracts: Aviation,
engineering, fire, liability, marine, motor, personal accident, theft workmen compensation
and various miscellaneous general risk classes. The risks under these policies usually
cover twelve months duration. These risks on these contracts do not vary significantly
in relation to the location of the risk insured by the Group, type of risk insured and
by industry. The risk exposure is mitigated by diversification across a large portfolio
of insurance contracts and geographical areas. The variability of risks is improved by
careful selection and implementation of underwriting strategies, which are designed to
ensure that risks are diversified in terms of type of risk and level of insured benefits.
This is largely achieved through diversification across industry sectors and geography.
Furthermore, strict claim review policies to assess all new and ongoing claims, regular
detailed review of claims handling procedures and frequent investigation of possible
fraudulent claims are all policies and procedures put in place to reduce the risk exposure
of the Group.
The Group further enforces a policy of actively managing and promptly pursuing claims,
in order to reduce its exposure to unpredictable future developments that can negatively
impact the business. Inflation risk is mitigated by taking expected inflation into account
when estimating insurance contract liabilities. The Group has also limited its exposure by
imposing maximum claim amounts on certain contracts as well as the use of reinsurance
arrangements in order to limit exposure to catastrophic events (e.g. earthquakes and
flood damage).
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
51
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
Management of Insurance and financial risk (continued)
(b)
(i) Insurance risk (continued) | Short-term insurance contracts (continued)
The purpose of these underwriting and reinsurance strategies is to limit exposure to catastrophes based on the Group’s risk appetite as decided by management. The Board of
Directors may decide to increase or decrease the maximum tolerances based on market conditions and other factors.
The table below sets out the concentration of general insurance contract liabilities by type of contract:
GROUP
31 December 2014
Motor
Fire
Engineering
Marine
Aviation
Accident and other miscellaneous classes
Agriculture
31 December 2013
Motor
Fire
Engineering
Marine
Aviation
Accident and other miscellaneous classes
Agriculture
COMPANY
31 December 2014
Motor
Fire
Engineering
Marine
Aviation
Accident and other miscellaneous classes
Agriculture
31 December 2013
Motor
Fire
Engineering
Marine
Aviation
Accident and other miscellaneous classes
Agriculture
52
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
Gross Liabilities
Ksh ‘000
Reinsurance
Share
Ksh ’000
Net Liabilities
Ksh ’000
1,932,540
486,822
225,469
193,209
100,416
1,076,965
5,974
)229,768(
(325,967)
(189,527)
(107,926)
(88,745)
(238,496)
(2,815)
1,702,772
160,855
35,942
85,283
11,671
838,469
3,159
4,021,395
1,183,244
2,838,151
1,688,004
722,278
123,693
187,701
199,468
1,022,553
2,966
(223,089)
(579,687)
)89,387(
(77,699)
(186,592)
(187,247)
(263)
1,464,915
142,591
34,306
110,002
12,876
835,306
2,703
3,946,663
(1,343,964)
2,602,699
1,853,268
472,123
136,257
175,145
100,416
1,037,066
5,974
)212,567(
(317,750)
(104,804)
(92,973)
(88,745)
(235,641)
(2,815)
1,640,701
154,373
31,453
82,172
11,671
801,425
3,159
3,780,249
1,055,295
2,724,954
1,620,493
705,217
110,505
167,718
199,468
1,003,751
2,966
(202,384)
(569,928)
(85,831)
(76,535)
(186,592)
(181,772)
(263)
1,418,109
135,289
24,674
91,183
12,876
821,979
2,703
3,810,118
1,303,305
2,506,813
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
(b) Management of Insurance and financial risk (continued)
(i)
Insurance risk (continued) | Short-term insurance contracts (continued)
The geographical concentration of the Group’s general insurance contract liabilities is disclosed below. The disclosure is based on the countries where the business is written.
Gross Liabilities
Ksh ‘000
Reinsurance
Share
Ksh ’000
Net Liabilities
Ksh ’000
Kenya
Tanzania
3,780,249
241,146
(1,055,295)
(127,949)
2,724,954
113,197
Total
4,021,395
(1,183,244)
2,838,151
Kenya
Tanzania
3,810,118
136,545
(1,303,305)
(40,659)
2,506,813
95,886
Total
3,946,663
(1,343,964)
2,602,699
31 December 2014
31 December 2013
Key assumptions
The principal assumption underlying the liability estimates is that the Group’s future claims development will follow a similar pattern to past claims development experience. This
includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgements are
used to assess the extent to which past trends may not apply in the future, for example: once–off occurrence; changes in market factors such as public attitude to claiming: economic
conditions: as well as internal factors such as portfolio mix, policy conditions and claims handling procedures.
Judgement is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. Other key circumstances affecting
the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign currency rates.
Sensitivities
The general insurance claim liabilities are sensitive to the key assumptions that follow. It has not been possible to quantify the sensitivity of certain assumptions such as legislative
changes or uncertainty in the estimation process.
The following analysis is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities
and profit before tax.
The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions
had to be changed on an individual basis. It should be noted that movements in these assumptions are non–linear.
31 December 2014
Average claim processing cost
31 December 2013
Average claim processing cost
Changes
in Assumptions
Impact on
Gross Liabilities
Ksh’ 000
Impact on
Net Liabilities
Ksh’ 000
Impact on Profit
before Tax
Ksh’ 000
+18%
12,209
-
12,209
+10%
10,347
-
10,347
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
53
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
Management of Insurance and financial risk (continued)
(b)
(i) Insurance risk (continued) | Sensitivities (continued)
The uncertainty about the amount and timing of claims payments is typically resolved within one year and the claims development history is generally short, its reduction has no
significant impact on the gross liabilities and profit before tax. The method used for deriving sensitivity information and significant assumptions did not change from the previous
period.
ii) Financial risk
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:
interest rate risks, equity price risk and foreign exchange currency risk. The sensitivity analyses presented below are based on a change in one assumption while holding all other
assumptions constant:
(i) Foreign exchange currency risk
Foreign exchange currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The group’s
financial assets are primarily denominated in the same currencies as its insurance contract liabilities, which mitigate the foreign currency exchange rate risk. The currency risk is also
effectively managed by ensuring that the transactions between the group and other parties are designated in the functional currencies of the individual group companies.
At 31 December 2014, if the Kenya shilling had weakened/strengthened by 5% against the US dollar with all other variables held constant, the profit before tax for the year would
have been Ksh 572,229 (2013: Ksh 388,394) higher/lower, mainly as a result of US dollar denominated deposits with financial institutions in Kenya and in Tanzania.
(ii) Interest rate risk
The group is exposed to the risk that the level of interest income and in effect the cash flows will fluctuate due to changes in market interest rates. To manage this, the group ensures
that the investment maturity profiles are well spread. An increase/decrease of 5 percentage points in interest yields would result in an increase/(decrease) in profit before tax for
the year by Ksh 20,076,332 (2013: Ksh 16,099,500).
(iii) Equity price risk
Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest
rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments
traded in the market.
The group is exposed to equity securities price risk as a result of its holdings in equity investments which are listed and traded on the Nairobi Securities Exchange and on the Dares-Salaam Stock Exchange which are classified as available for sale financial assets. Exposure to equity price risk in aggregate is monitored in order to ensure compliance with the
relevant regulatory limits for solvency purposes.
The group has a defined investment policy which sets limits on the group’s exposure to equity securities both in aggregate terms and by category/share. This policy of diversification
is used to manage the group’s price risk arising from its investments in equity securities.
At 31 December 2014, if equity market indices had increased/decreased by 5%, with all other variables held constant, other comprehensive income for the year would increase/
decrease by Ksh 53,480,250 (2013: Ksh 28,368,150).
54
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
(b) Management of Insurance and financial risk (continued)
(ii)
Financial risk (continued)
(b) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss to the group by failing to discharge a contractual obligation. The following policies and
procedures are in place to mitigate the group’s exposure to credit risk:
• Net exposure limits are set for each counterparty or group of counterparties i.e. limits are set for investments and cash deposits, and minimum credit ratings for investments that may be held
• Reinsurance is placed with counterparties that have a good credit rating
• Ongoing monitoring by the management credit committee
The exposure to individual counterparties is also managed through other mechanisms, such as the right of offset where counterparties are both debtors and creditors of the group.
Management information reported to the directors include details of provisions for impairment on receivables and subsequent write offs. Exposures to individual policyholders and
groups of policyholders are collected within the ongoing monitoring of the controls associated with regulatory solvency. The table below shows the carrying amounts of financial
assets bearing credit risk.
GROUP
31 December 2014
Receivable arising out of direct insurance arrangements
Provision for doubtful debts
Receivable arising out of reinsurance arrangements
Government securities held to maturity
Government securities available for sale
Corporate bonds held to maturity
Deposits with financial institutions held to maturity
Other receivables - rent receivable
Cash and bank balances
Fully performing
Ksh ‘000
Past due but
not impaired
Ksh ‘000
Impaired
Ksh ’000
Total
Ksh ’000
445,673
-
210,606
-
235,067
(235,067)
891,346
(235,067)
445,673
210,606
-
656,279
560,769
2,504,453
507,725
282,990
513,596
94,939
36,017
-
(18,168)
-
542,601
2,504.453
507,725
282,990
513,596
94,939
36,017
4,946,162
210,606
(18,168)
5,138,600
381,998
-
185,542
-
210,993
(210,993)
778,533
(210,993)
381,998
185,542
-
567,540
478,904
2,327,256
294,017
291,576
622,123
38,600
128,292
-
-
478,904
2,327,256
294,017
291,576
622,123
38,600
128,292
4,562,766
185,542
-
4,748,308
31 December 2013
Receivable arising out of direct insurance arrangements
Provision for doubtful debts
Receivable arising out of reinsurance arrangements
Government securities held to maturity
Government securities available for sale
Corporate bonds held to maturity
Deposits with financial institutions held to maturity
Other receivables - rent receivable
Cash and bank balances
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
55
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)

(b) Management of Insurance and financial risk (continued)
(ii) Financial risk (continued) | (b) Credit risk (continued)
COMPANY
31 December 2014
Receivable arising out of direct insurance arrangements
Provision for doubtful debts
Receivable arising out of reinsurance arrangements
Government securities held to maturity
Government securities available for sale
Corporate bonds held to maturity
Deposits with financial institutions held to maturity
Other receivables - rent receivable
Cash and bank balances
31 December 2013
Receivable arising out of direct insurance arrangements
Provision for doubtful debts
Receivable arising out of reinsurance arrangements
Government securities held to maturity
Government securities available for sale
Corporate bonds held to maturity
Deposits with financial institutions held to maturity
Other receivables - rent receivable
Cash and bank balances
Fully performing
Ksh ‘000
Past due but not
impaired
Ksh ‘000
Impaired
Ksh ’000
Total
Ksh ’000
414,884
-
179,817
-
235,067
(235,067)
829,767
(235,067)
414,884
179,817
-
594,700
463,893
2,447,605
507,725
282,990
250,433
90,202
24,273
-
(18,168)
-
445,725
2,447,605
507,725
282,990
250,433
90,202
24,273
4,482,005
179,817
(18,168)
4,643,654
368,978
-
173,045
-
210,993
(210,993)
753,016
(210,993)
368,978
173,045
-
542,023
432,642
2,243,305
294,017
291,576
441,276
34,357
100,504
-
-
432,642
2,243,305
294,017
291,576
441,276
34,357
100,504
4,206,655
173,045
-
4,379,700
The debt that is past due and not impaired continues to be paid. The finance department is actively following this debt.
(c) Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has developed and put in place an appropriate liquidity risk management framework for
the management of the group’s short, medium and long-term funding and liquidity management requirements. The group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The table on the following page analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of each reporting period to the
contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts, as
the impact of discounting is not significant.
56
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
(b) Management of Insurance and financial risk (continued)
(ii)
Financial risk (continued) | (b) Liquidity risk (continued)
GROUP
At 31 December 2014
Outstanding claims provision
Payables arising from reinsurance arrangements
Other payables
At 31 December 2013
Outstanding claims provision
Payables arising from reinsurance arrangements
Other payables
COMPANY
At 31 December 2014
Outstanding claims provision
Payables arising from reinsurance arrangements
Other payables
At 31 December 2013
Outstanding claims provision
Payables arising from reinsurance arrangements
Other payables
0 - 1 Year
Ksh ‘000
Over 1 Year
Ksh ’000
Total
Ksh ’000
4,021,395
547,708
248,138
-
4,021,395
547,708
248,138
4,817,241
-
4,817,241
3,946,663
435,575
189,001
-
3,946,663
435,575
189,001
4,571,239
-
4,571,239
3,780,249
447.837
219,785
-
3,780,249
447,837
4,447,871
-
4,447,871
3,810,118
385,378
160,663
-
3,810,118
385,378
160,663
4,356,159
-
4,356,159
219,785
(d) Fair value hierarchy
The table on the following page analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
• 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 table on the following page presents the company's financial assets and liabilities measured at fair value at 31 December 2014 and 31 December 2013
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
57
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
Management of Insurance and financial risk (continued)
(b)
(ii) Financial risk (continued) | (d) Fair value heirarchy (continued)
31 December 2014
Available for sale
- Equity instruments
- Government bonds
Total
31 December 2013
Available for sale
- Equity instruments
- Government bonds
Level 1
Ksh ‘000
Level 2
Ksh ‘000
Level 3
Ksh ‘000
Total
Ksh ‘000
1,069,605
507,725
-
-
1,069,605
507,725
1,577,330
-
-
1,577,330
567,363
294,017
-
-
567,363
294,017
-
-
861,380
861,380
Total
There were no transfers between levels 1 and 2 during the year.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. 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 primarily Nairobi Securities Exchange (“NSE”) equity investments and government bonds classified as available for sale.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to
fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
• Quoted market prices or dealer quotes for similar instruments.
• The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.
• The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value.
Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.
There was no movement in level 3 during the year.
(iii) Capital risk management
The Group has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:
• Allocation of capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders.
• Aligning the profile of assets and liabilities taking account of risks inherent in the business.
58
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
4 - Risk Management (continued)
(b) Management of Insurance and financial risk (continued)
(iii)
Capital risk management (continued)
• Maintaining financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders.
• Maintaining strong credit ratings and healthy capital ratios in order to support its business objectives and maximize shareholders value.
The operations of the group are also subject to regulatory requirements within the jurisdictions in which it operates. Such regulations not only prescribe approval and monitoring
of activities, but also impose certain restrictive provisions (e.g. capital adequacy) to minimize the risk of default and insolvency on the part of the insurance companies to meet
unforeseen liabilities as these arise.
The group has met all of these requirements throughout the financial year.
The Kenyan and Tanzania Insurance Acts require each insurance company to hold the minimum level of paid up capital as follows:
Kenya
Ksh ‘000
Tanzania
Ksh ‘000
450,000
300,000
150,000
Composite insurance companies
General insurance companies
Long-term insurance companies
N/A
58,600
58,600
Both companies are in compliance with the capital requirements as at 31 December 2014.
The solvency margin of the Company as at 31 December 2014 and 2013 is illustrated below:
Kenya
2014
Ksh ‘000
Admitted assets
Admitted liabilities
Margin
Required margin
9,598,076
7,182,822
2,415,254
463,228
Tanzania
2013
Ksh ‘000
9,096,437
6,696,211
2,400,226
378,500
2014
Ksh ‘000
2013
Ksh ‘000
1,163,841
915,684
248,157
28,575
986,227
765,470
220,757
22,161
2014
Ksh ‘000
2013
Ksh ‘000
2,007,853
1,056,944
1,173,535
652,178
204,378
242,874
440,868
1,548,851
839,433
1,167,032
666,176
204,677
234,448
375,180
5 - GROSS EARNED PREMIUMS
Motor
Fire
Aviation and Marine
Other
Theft
Personal accident
Engineering
Total
5,778,630
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
5,035,797
59
NOTES TO THE FINANCIAL STATEMENTS (continued)
6 - INVESTMENT INCOME
Fair value gains on investment properties (note 14(a))
Interest on deposits with financial institutions
Rental income from investment properties
Interest on government securities
Dividends receivable on equity instruments
Other interest income
Gain on disposal of equity instruments
2014
Ksh ‘000
2013
Ksh ‘000
187,500
66,198
149,819
302,841
21,712
55,555
6,824
92,876
55,389
135,494
211,232
17,303
54,186
1,572
790,449
568,052
2014
Ksh ‘000
2013
Ksh ‘000
7 - CLAIMS INCURRED
Gross claims incurred
Less: amounts recoverable from reinsurers
Net claims incurred
2,135,746
(461,240)
1,936,541
(680,769)
1,674,506
1,255,772
8 - OPERATING AND OTHER EXPENSES
Employee benefit expense (note 9)
Impairment charge for doubtful premiums receivable
Depreciation (note 15(a))
Operating lease rentals
Rebranding and marketing
Repairs and maintenance
Other expenses
Auditors’ remuneration, inclusive of VAT
Directors’ emoluments
- fees for services as directors
- other emoluments
Amortisation of prepaid operating lease rentals (note 17)
Amortisation of deferred merger acquisition cost (note 23)
Amortisation of intangible assets (note 16)
Interest payable to a related party
2014
Ksh ‘000
Restated 2013
Ksh ‘000
555,733
42,241
46,194
76,912
36,033
318,117
5,228
502,096
15,426
28,323
43,953
17,322
39,807
323,644
6,545
6,259
33,666
92,500
20,525
1,233,408
60
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
4
6,021
4 7,769
25
92,500
7,956
2,286
1,133,673
NOTES TO THE FINANCIAL STATEMENTS (continued)
9 - EMPLOYEE BENEFIT EXPENSES
Salaries and benefits
Defined contribution retirement schemes
- Group pension fund
- National Social Security fund
2014
Ksh ‘000
Restated 2013
Ksh ‘000
515,017
466,326
35,861
4,855
31,085
4,685
555,733
502,096
10 - INCOME TAX EXPENSE
(a) Tax expense
GROUP
COMPANY
2014
Ksh ‘000
2013
Ksh ‘000
2014
Ksh ‘000
2013
Ksh ‘000
201,238
200,670
196,368
191,977
45,891
7,410
(6,005)
27,081
13,977
-
45,183
7,410
(6,005)
26,936
13,977
-
Current income tax expense
Deferred income tax charge (note 33(b))
- Current year charge
- Prior year under provision
- Prior year over provision - current tax
47,296
41,058
46,588
40,913
248,534
241,728
242,956
232,890
b) Reconciliation of tax expense to expected tax based on accounting profit
The group’s income tax expense is computed in accordance with income tax rules applicable to general insurance companies.
GROUP
Profit before income tax
Tax calculated at a tax rate of 30% (2013: 30%)
Tax effect of:
- Income not subject to tax
- Expenses not deductible for tax purposes
COMPANY
2014
Ksh ‘000
2013
Ksh ‘000
2014
Ksh ‘000
2013
Ksh ‘000
848,152
673,443
826,172
872,558
254,446
202,033
247,852
261,767
(37,971)
30,654
(38,463)
64,181
(37,971)
31,670
(76,736)
33,882
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
61
NOTES TO THE FINANCIAL STATEMENTS (continued)
10 - Income Tax Expense (continued)
(b) Reconciliation of tax expense to expexted tax based on accounting profit (continued)
- Prior year deferred income tax under provision
- Prior year over provision - current tax
Income tax expense
7,410
(6,005)
13,977
-
7,410
(6,005)
13,977
-
248,534
241,728
242,956
232,890
c) Tax payable movement
COMPANY
GROUP
At 1 January
Current taxation expense
Prior year over provision/adjustments
Tax paid
Exchange differences
At 31 December
2014
Ksh ‘000
2013
Ksh ‘000
2014
Ksh ‘000
9,197
201,238
(6,005)
(224,103)
67
26,994
200,670
(19,999)
(198,594)
126
9,816
196,368
(6,005)
(213,612)
-
12,979
191,977
(195,140)
-
(13,433)
9,816
(13,433)
-
9,816
(13,433)
9,816
(19,606)
9,197
2013
Ksh ‘000
d) Analysed as follows:
Current tax recoverable
Current tax payable
(19,606)
(19,606)
(619)
9,816
9,197
11 - PROFIT FOR THE YEAR
A profit of Ksh 583,217,000 (2013: Ksh 639,668,000) has been dealt with in the books of the company, ICEA LION General Insurance Company Limited.
12 - EARNINGS PER SHARE
Basic earnings per share have been calculated by dividing the profit for the year attributable to equity holders of the parent company by the number of ordinary shares in issue at
the end of the reporting period.
Profit attributable to ordinary shareholders (Ksh ’000)
Number of ordinary shares for basic earnings per share
Basic and diluted earnings per share (Ksh)
2014
Ksh ‘000
Restated 2013
Ksh ‘000
591,909
30,000
444,236
30,000
19.73
14.81
There were no potentially dilutive shares outstanding at 31 December 2014 or 31 December 2013. Diluted earnings per share are therefore the same as basic earnings per share.
62
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
13 - DIVIDENDS
No interim dividend has been declared in the year (2013 -Nil).
At the annual general meeting scheduled for 27 March 2015, a final dividend in respect of 2014 of Ksh 6.67 per share amounting to Ksh 200,000,000 is to be proposed by the
directors. The final proposed dividend for the year is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these financial
statements.
The total dividend for the year ended 31 December 2014 will therefore be Ksh 6.67 per share (2013: Ksh 6.67 per share) amounting to a total of Ksh 200,000,000 (2013: Ksh
200,000,000).
The dividend is payable subject to, where applicable, deduction of withholding tax as required under the Kenya Income Tax Act.
14 - INVESTMENT PROPERTIES
a) GROUP
At 1 January
Fair value gain
Disposal (note 39)
Transfer from property and equipment (note 15(a))
Transfer from prepaid operating lease rentals (note 17)
At 31 December
2014
Ksh ‘000
2013
Ksh ‘000
2,167,500
187,500
-
3,148,571
92,876
(1,160,000)
84,250
1,803
2,355,000
2,167,500
2,167,500
187,500
-
1,988,571
92,876
84,250
1,803
2,355,000
2,167,500
b) COMPANY
At 1 January
Fair value gain
Transfer from property and equipment (note 15(a))
Transfer from prepaid operating lease rentals (note 17)
At 31 December
The investment properties were last revalued at 31 December 2014 by Lloyd Masika Limited, independent valuers on the basis of open market value for existing use.
Rental income arising from investment properties during the year amounted to Ksh 149,819,122 (2013: Ksh 160,985,463). Expenses relating to investment property amounted to
Ksh 44,721,108 (2013: Ksh 45,079,931).
The table on the next page analyses the non-financial assets carried at fair value, by valuation method. The different levels have been defined as follows:
• 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).
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
63
NOTES TO THE FINANCIAL STATEMENTS (continued)
14 - Investment Properties (continued)
GROUP AND COMPANY
At 31 December 2014
Investment property
Level 1
Ksh ‘000
Level 2
Ksh ‘000
-
2,355,000
At 31 December 2013
Investment property
-
Level 3
Ksh ‘000
2,167,500
Total
Ksh ‘000
-
2,355,000
-
2,167,500
Valuation technique used to derive level 2 fair values
Level 2 fair value of land and building has been valued on the basis of highest best use that is Market Value for existing use. Leasehold considerations and tenancies have been
reflected in the valuation.
15 - PROPERTY & EQUIPMENT
a) GROUP
Cost or valuation
At 1 January 2013
Additions
Disposal of Karen Office Park
Disposals
Transfer to investment properties
Exchange difference on translation
Leasehold
building
Ksh ‘000
Motor vehicles
Ksh ‘000
Computer
Furniture fittings
Work in progress
equipment & office equipment
Ksh ‘000
Ksh ‘000
Ksh ‘000
88,571
(88,571)
-
64,512
18,757
(8,545)
(163)
74,575
5,773
(40)
123,049
8,318
(10,219)
(95)
136
17,347
-
Total
Ksh ‘000
350,707
50,195
(10,219)
(8,640)
(88,571)
(67)
At 31 December 2013
-
74,561
80,308
121,189
17,347
293,405
At 1 January 2014
Additions
Disposals
Transfer to furniture & fittings
Exchange difference on translation
-
74,561
11,835
(9,526)
(384)
80,308
17,129
(164)
(103)
121,189
118,625
(287)
17,347
(358)
17,347
(17,347)
-
293,405
147,589
(9,977)
(845)
At 31 December 2014
-
76,486
97,170
256,516
-
430,172
4,321
(4,321)
-
59,147
9,121
(8,545)
(16)
65,259
5,702
(2)
73,637
9,179
(22)
(4,051)
1
-
198,043
28,323
(8,567)
(4,321)
(4,051)
(17)
-
59,707
70,959
78,744
-
Depreciation
At 1 January 2013
Charge for the year
Eliminated on disposal
Transfer to investment properties
Eliminated on discontinued operation
Exchange difference on translation
At 31 December 2013
64
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
209,410
NOTES TO THE FINANCIAL STATEMENTS (continued)
 - Property & Equipment (continued)
15
Leasehold
building
Ksh ‘000
Motor vehicles
Ksh ‘000
Computer
Furniture fittings
Work in progress
equipment & office equipment
Ksh ‘000
Ksh
‘000
Ksh ‘000
Total
Ksh ‘000
At 1 January 2014
Charge for the year
Reclassification of software licence
Elimination on disposal
Exchange difference on translation
-
59,707
8,380
(9,400)
(511)
70,959
9,086
892
(164)
(124)
78,744
28,728
(87)
(116)
-
209,410
46,194
892
(9,651)
(751)
At 31 December 2014
-
58,176
80,649
107,269
-
At 31 December 2014
-
18,310
16,521
149,247
-
184,078
At 31 December 2013
-
14,854
9,349
42,445
17,347
83,995
246,094
Net Book Value
The long leasehold building was revalued at 31 December 2014 by Lloyd Masika Limited, independent valuers on the basis of open market value for existing use. On the basis of
open market value for existing use. Fully depreciated assets at 31 December 2014 amounted to Ksh 168,558,771 (2013 – Ksh 161,669,745). The normal annual depreciation on
these assets would have been Ksh 37,772,886 (2013 – Ksh 30,595,659). If the property and equipment was stated at the historical cost basis the net book value would be Ksh
188,700,151 (2013 – Ksh 89,971,000).
a) COMPANY
Cost or valuation
At 1 January 2013
Additions
Portfolio transfer
Disposals
Transfer to investment properties
Leasehold
building
Ksh ‘000
88,571
(88,571)
At 31 December 2013
-
At 1 January 2014
Additions
Disposals
Transfer to furniture & fittings
-
At 31 December 2014
-
Depreciation
At 1 January 2013
Charge for the year
Portfolio transfer
Disposals
Eliminate on revaluation
At 31 December 2013
4,321
(4,321)
-
Motor vehicles
Ksh ‘000
Computer
Furniture fittings
Work in progress
equipment & office equipment
Ksh ‘000
Ksh
‘000
Ksh ‘000
Total
Ksh ‘000
48,980
18,757
(8,544)
-
70,770
4,623
-
107,513
6,714
-
17,347
-
315,834
47,441
(8,544)
(88,571)
59,193
75,393
114,227
17,347
266,160
75,393
16,540
(164)
-
114,227
117,445
(276)
17,347
17,347
(17,347)
266,160
145,401
(9,572)
-
59,193
11,416
(9,132)
61,477
91,769
248,743
-
401,989
44,339
8,453
(8,544)
-
61,934
5,372
-
66,164
8,539
-
-
172,437
26,684
(8,544)
(4,321)
44,248
67,306
74,703
-
186,257
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
65
NOTES TO THE FINANCIAL STATEMENTS (continued)
 - Property & Equipment (continued)
15
Leasehold
building
Ksh ‘000
Motor vehicles
Ksh ‘000
Computer
Furniture fittings
Work in progress
equipment & office equipment
Ksh ‘000
Ksh
‘000
Ksh ‘000
Total
Ksh ‘000
At 1 January 2014
Charge for the year
Reclassification of software licence
Disposals
-
44,248
8,306
(9,019)
67,306
8,750
892
(164)
74,703
27,915
(76)
-
186,257
44,971
892
(9,259)
At 31 December 2014
-
43,535
76,784
102,542
-
222,861
-
179,128
Net book Value
At 31 December 2014
-
17,942
14,985
146,201
At 31 December 2013
-
14,945
8,087
39,524
17,347
79,904
The long leasehold building was revaluedat 31 December 2014 by Lloyd Masika Limited, independent valuers on the basis of open market value for existing use.
Fully depreciated assets at 31 December 2014 amounted to Ksh 147,906,954 (2013 – Ksh 143,513,878). The notional annual depreciation on these assets would have been Ksh
33,746,572 (2013 – Ksh 26,466,024).
If the property and equipment were stated at the historical cost basis the net book value would be Ksh 188,700,151 (2013 – Ksh 79,904,000).
16 - INTANGIBLE ASSETS – COMPUTER SOFTWARE
GROUP AND COMPANY
2014
Ksh ‘000
2013
Ksh ‘000
Cost
At 1 January
Additions
43,403
32,701
29,864
13,539
76,104
43,403
34,228
(892)
20,525
26,272
7,956
At 31 December
53,861
34,228
Net book Value
22,243
9,175
At 31 December
Depreciation
At 1 January
Reclassification of software licence
Charge for the year
66
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
17 - PREPAID OPERATING LEASE RENTALS – LEASEHOLD LAND
2014
Ksh ‘000
GROUP AND COMPANY
Cost
At 1 January and 31 December
Transfer to investment properties(note 14)
-
Amortisation
At 1 January
Charge for the year
Transfer to investment properties (note 14)
-
2013
Ksh ‘000
2,349
(2,349)
521
25
(546)
At 31 December
-
-
Net book Value
-
-
18 - INVESTMENT IN SUBSIDIARIES
(a) At Cost
ICEA LION General Insurance Company (Tanzania) Limited
Beneficial
ownership
Country of
incorporation
53%
Tanzania
2014
Ksh ‘000
2013
Ksh ‘000
50,147
50,147
The principal activity of ICEA LION General Insurance Company (Tanzania) Limited is the underwriting of the general insurance business. All subsidiary undertakings are included in
the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held.
The parent company further does not have any shareholdings in the preference shares of subsidiary undertakings included in the group.
The total non-controlling interest for the period is, which is wholly attributed to ICEA LION General Insurance Company (Tanzania) Limited.
Set out below is the summarised financial information for the subsidiary whose non-controlling interest is material to the group:
ICEA LION General Insurance Company (Tanzania) Limited
Summarised statement of financial position
Current
Total assets
Total liabilities
Net assets
2014
Ksh ‘000
2013
Ksh ‘000
1,230,008
915,517
1,011,744
765,470
314,491
246,274
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
67
NOTES TO THE FINANCIAL STATEMENTS (continued)
- Investment in Subsidiaries (continued)
18
(a) At Cost (continued)
Summarised statement of comprehensive income
Gross earned premiums
830,748
705,812
Underwriting loss
(37,457)
(2,061)
Profit before income tax
Income tax expense
Other comprehensive income
21,980
(5,578)
54,782
36,431
( 8,838)
53,918
Total comprehensive income
71,184
81,511
29,828
37,845
50,046
(51,524)
18,060
(116,054)
Net decrease in cash and cash equivalents
(1,478)
(97,994)
Cash and cash equivalents at beginning of year
Exchange (loss)/gains on cash and cash equivalents
90,154
(3,726)
190,138
(1,990)
Cash and cash equivalents at end of year
86,428
90,154
Total comprehensive income allocated to non-controlling interests
Summarised cash flows
Net cash generated from operating activities
Net cash (used in)/generated from investing activities
b) At Fair Value
Beneficial
Ownership
Country of
Incorporation
2014
Ksh ’000
2013
Ksh ’000
100%
Kenya
-
-
At 1 January
Reclassified from investment property (note 14)
Acquired from Karen Office Park
Fair value gain
Disposal (note 39)
-
1,160,000
(1,160,000)
At 31 December
-
-
COMPANY
Karen Office Park Limited
Movement in fair value of subsidiary
68
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
19 - KENYA MOTOR INSURANCE POOL
This represents the group’s share of the net assets of the pool. This balance is recoverable from the pool through a refund of the amount due upon discontinuation of the pool as well
as a share of investment income generated by the pool’s investments annually. The movement in the amount due is shown below:
GROUP AND COMPANY
At 1 January
Net increase in the group’s share of net assets of the pool
At 31 December
2014
Ksh ’000
2013
Ksh ’000
75,423
7,618
72,926
2,497
83,041
75,423
20 - AVAILABLE FOR SALE QUOTED EQUITY INSTRUMENTS
GROUP
At 1 January
Additions
Disposals
Fair value gains
Exchange difference on translation
At 31 December
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
567,363
374,608
(33,448)
164,256
(3,174)
340,530
80,723
(21,474)
167,651
(67)
459,199
374,608
(33,448)
109,474
-
286,589
80,351
(21,474)
113,733
-
1,069,605
567,363
909,833
459,199
21 - REINSURERS' SHARE OF TECHNICAL PROVISIONS AND RESERVES
GROUP
Reinsurer’s share of
- unearned premiums
- outstanding claims (note 32)
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
1,253,589
1,183,244
968,825
1,343,964
889,038
1,055,295
599,602
1,303,305
2,436,833
2,312,789
1,944,333
1,902,907
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
69
NOTES TO THE FINANCIAL STATEMENTS (continued)

22 - DEFERRED ACQUISITION COSTS
GROUP
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
At 1 January
(Decrease)/increase in the year
337,490
(59,209)
282,671
54,819
247,389
(2,519)
208,509
38,880
At 31 December
278,281
337,490
244,870
247,389
2014
Ksh ’000
2013
Ksh ’000
At 1 January
Additions
Amortised during the year
277,500
(92,500)
370,000
(92,500)
At 31 December
185,000
277,500
23 - DEFERRED MERGER ACQUISITION COSTS - GROUP AND COMPANY
24 - OTHER RECEIVABLES
GROUP
Staff receivables
Sundry receivables
Prepayments
70
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
40,469
54,470
45,039
26,006
12,594
31,443
38,990
51,212
23,514
25,252
9,105
10,237
139,978
70,043
113,716
44,594

NOTES
TO THE FINANCIAL STATEMENTS (continued)
25 (a) GOVERNMENT SECURITIES HELD TO MATURITY
GROUP
Treasury bills and bond maturity
- Within 3 months
- Within 4 to 12 months
- Within 1 to 5 years
- Over 5 years
COMPANY
2014
Ksh ’000
Restated
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
23,740
4,728
411,525
2,064,460
24,608
213,349
2,089,299
4,728
378,416
2,064,461
24,609
130,005
2,088,691
2,504,453
2,327,256
2,447,605
2,243,305
507,725
294,017
507,725
294,017
282,990
291,576
282,990
291,576
301,377
212,219
474,247
147,876
250,433
-
411,881
29,395
513,596
622,123
250,433
441,276
(b) GOVERNMENT SECURITIES AVAILABLE FOR SALE
- Over 5 years
26 - CORPORATE BONDS HELD TO MATURITY
Corporate bonds maturing:
- Within 1 to 10 years
27 - DEPOSITS WITH FINANCIAL INSTITUTIONS HELD TO MATURITY
Deposits maturing:
- Within 3 months
- Beyond 3 months
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
71

NOTES
TO THE FINANCIAL STATEMENTS (continued)
28 - WEIGHTED AVERAGE EFFECTIVE INTEREST RATES
The following table summarises the weighted average effective interest rates realised during the year on interest-bearing investments:
GROUP
Government securities
Corporate bonds
Deposits with financial institutions
COMPANY
2014
%
2013
%
2014
%
2013
%
13.1
12.1
11.6
12.6
11.8
12.8
11.1
12.1
11.7
11.0
11.8
11.9
Number of
shares
Ksh ’000
Ordinary
shares
Ksh ’000
30,000
600,000
29 - SHARE CAPITAL : GROUP AND COMPANY
The following table summarises the weighted average effective interest rates realised during the year on interest-bearing investments:
Balance at 1 January 2013, 31 December 2013 and 31 December 2014
The total authorised number of ordinary shares is 30,000,000 with a par value of Ksh 20 per share. All issued shares are fully paid.
30 - RESERVES
(a) Available for sale revaluation reserve
The revaluation reserve represents the surplus or deficit on the revaluation of available for sale equity instruments as well as surplus on revaluation of leasehold buildings (included
within property and equipment), net of deferred tax. This reserve is not distributable.
(b) Contingency reserve
The contingency reserve relates to the Company’s subsidiary, ICEA LION General Insurance Company (Tanzania) Limited. According to Tanzania Insurance Act 2009, a contingency
reserve is required to be maintained. This reserve shall not be less than 3% of the net premium written or 20% of net profit, whichever is the greater. The reserve shall accumulate
until it reaches the minimum paid up share capital of the company or 50% of the net earned premiums, whichever is greater. This reserve is not distributable.
72
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
30 - Reserves (continued)
(c) Currency translation reserve
For consolidation purposes, the statement of financial position of the subsidiary, ICEA LION General Insurance Company (Tanzania) Limited, is translated into Kenya Shillings at year
end rate of exchange, while the statement of other comprehensive income is translated into Kenya Shillings at the average rate of exchange for the year. The resulting translation
differences are dealt with through other comprehensive income and accumulated in equity under the group’s currency translation reserve. This reserve is not distributable.
(d) Prior period adjustment
In the course of preparing the consolidated financial statements, management identified an error in the consolidation adjustments of Ksh 94,024,000 in prior year consolidated
financial statements. The error had overstated retained earnings and investment in government securities. The impact which is restricted to the year ended 31 December 2013 has
been corrected by reducing retained earnings and government securities held to maturity by Ksh 94,024,000.
31 - OUTSTANDING CLAIMS PROVISION
GROUP
At 1 January
Claims incurred and claim handling expenses
Payment for claims and claims handling expenses
Exchange difference on translation
At 31 December
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
3,946,663
2,135,746
(2,056,661)
(4,353)
3,781,148
1,936,523
(1,768,7960
(2,212)
3,810,118
1,938,411
(1,968,280)
-
3,604,039
1,877,536
(1,671,457)
-
4,021,395
3,946,663
3,780,249
3,810,118
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
73
NOTES TO THE FINANCIAL STATEMENTS (continued)
32 - MOVEMENTS IN INSURANCE LIABILITIES AND REINSURANCE ASSETS
Gross outstanding
claims provision
Ksh ‘000
Reinsurance
share
Ksh ’000
Net
Ksh ’000
3,527,345
419,318
(1,238,371)
(105,593)
2,288,974
313,725
3,946,663
(1,343,964)
2,602,699
(2,056,661)
620,014
(1,436,647)
1,137,959
997,787
(376,878)
(82,416)
761,081
915,371
4,021,395
(1,183,244)
2,838,151
3,493,941
527,454
(1,037,276)
(145,968)
2,456,665
381,486
4,021,395
(1,183,244)
2,838,151
2013
At 1 January 2013
Notified claims
Incurred but not reported
3,329,204
451,944
(971,877)
(144,605)
2,357,327
307,339
Total at beginning of year
3,781,148
(1,116,482)
2,664,666
(1,768,796)
440,396
(1,328,400)
1,261,212
675,311
(2,212)
(622,089)
(45,789)
-
639,123
629,522
(2,212)
3,946,663
(1,343,964)
2,602,699
3,527,345
419,318
(1,238,371)
(105,593)
2,288,974
313,275
3,946,663
(1,343,964)
2,602,699
2014
At 1 January 2014
Notified claims
Incurred but not reported
Total at beginning of year
Claims paid in year
Increase in liabilities:
- Arising from current year claims
- Arising from prior year claims
Total at end of year
Notified claims
Incurred but not reported
Total at end of year
Claims paid in year
Increase in liabilities:
- Arising from current year claims
- Arising from prior year claims
Exchange difference on translation
Total at end of year
Notified claims
Incurred but not reported
Total at end of year
74
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
33 - DEFERRED INCOME TAX
Deferred taxation is calculated, on all temporary differences under the liability method using the income tax rates of 30% applicable in both Kenya and Tanzania.
GROUP
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
505,990
30
449,740
30
505,990
30
449,740
30
506,020
449,770
506,020
449,770
(5,292)
(33,826)
(4,720)
(31,722)
)4,552(
(22,426)
)3,742(
(19,579)
(39,118)
(36,492)
(26,978)
(23,321)
466,902
413,278
479,042
426,449
413,278
330,605
426,449
385,536
45,891
7,410
323
-
27,081
13,977
251
41,364
45,183
7,410
-
26,936
13,977
-
466,902
413,278
479,042
426,449
Deferred taxation assets
Deferred taxation liabilities
(12,140)
479,042
(13,171)
426,449
479,042
426,449
At 31 December
466,902
413,278
479,042
426,449
(a) The deferred income tax liability is attributable to the following items:
Deferred tax liability:
Revaluation surplus - Investment properties at 30%
Unrealised exchange loss
Deferred tax assets:
Excess depreciation over capital allowances
Provisions
Net deferred tax liability
(b) Movement in deferred tax income liability is as follows:
At 1 January
Income statement (credit)/charge
- current year (note 10(a))
- prior year under provision (note 10(a))
Other comprehensive income - current year
Exchange difference on translation
Disposal of subsidiary (note 39)
At 31 December
(c) Analysis of the year end balance is as follows:
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
75
NOTES TO THE FINANCIAL STATEMENTS (continued)
34 - UNEARNED PREMIUMS RESERVE
GROUP
Gross
Ksh ‘000
Reinsurance
Ksh ‘000
Net
Ksh ‘000
2,268,282
343,586
(968,825)
(284,764)
1,299,457
58,822
2,611,868
(1,253,589)
1,358,279
1,955,059
313,223
(927,442)
)41,383(
1,027,617
271,840
2,268,282
(968,825)
1,299,457
Gross
Ksh ‘000
Reinsurance
Ksh ‘000
Net
Ksh ‘000
1,817,776
306,253
(599,602)
(289,436)
1,218,174
16,817
2,124,029
(889,038)
1,234,991
1,584,249
233,527
(626,575)
(26,973)
957,674
260,500
1,817,776
(599,602)
1,218,174
2014
At 1 January 2014
Increase in the year
At 31 December 2014
2013
At 1 January 2013
Increase in the year
At 31 December 2013
COMPANY
2014
At 1 January 2014
Increase in the year
At 31 December 2014
2013
At 1 January 2013
Increase in the year
At 31 December 2013
35 - DEFERRED REINSURANCE COMMISSIONS
GROUP
At 1 January
Increase/(decrease) in the year
At 31 December
76
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
159,855
16,785
158,385
1,470
86,011
45,869
98,212
(12,201)
176,640
159,855
131,880
86,011
NOTES TO THE FINANCIAL STATEMENTS (continued)
36 - OTHER PAYABLES
Accrued expenses
Other liabilities
Due to related parties (note 42(b))
193,188
28,780
26,170
140,403
30,105
18,493
167,168
26,447
26,170
116,242
25,928
18,493
248,138
189,001
219,785
160,633
37 - CAPITAL COMMITMENTS
GROUP
Approved CAPEX:
Property and equipment
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
71,771
76,741
71,771
76,741
38 - CONTINGENT LIABILITIES
The group operates in the insurance industry and is subject to legal proceedings in the normal course of business. While it is not practicable to forecast or determine the final results
of all pending or threatened legal proceedings, management does not believe that such proceedings (including outstanding litigation) will have a material effect on its results and
financial position of the group. However provisions for claims have been made as far as management believe the claim will be paid.
39 - BUSINESS REORGANISATION
The company sold its investments in Karen Office Park Limited to a related company, First Chartered Securities Limited on 28 June 2013 under a group reorganization initiative.
Further disclosures of the sale of business, under IFRS 5 requirements are provided below:
2014
Ksh ’000
2013
Ksh ’000
Rental income
Less: Operating expenses
-
42,398
(4,912)
Profit before income tax
Income tax expense
-
37,486
-
(11,996)
Profit after tax
-
25,490
Reclassification on disposal of available for sale investment to profit and loss
-
116,035
DISCONTINUING OPERATIONS
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
77
NOTES TO THE FINANCIAL STATEMENTS (continued)
39 - Business Reorganisation (continued)
The analysis of assets and liabilities, together “disposal group” sold to First Chartered Securities Limited and the consideration received in respect of the transfer are detailed below:
2014
Ksh ’000
2013
Ksh ’000
-
1,160,000
4,680
41,364
68,660
29,262
41,467
16,735
Total assets
-
1,362,168
Liabilities
Shareholders’ loans
Other payables
Tax payable
-
732,032
19,537
11,312
Total liabilities
-
762,881
Net assets transferred out as at
-
599,287
Carrying value of the financial asset transferred out
Consideration on transfer
-
1,160,000
(1,160,000)
Gain on disposal of available for sale investment
-
-
Assets
Investment property
Equipment
Deferred taxation
VAT recoverable
Other receivables
Fixed deposits held to maturity
Cash and bank balances
78
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
NOTES TO THE FINANCIAL STATEMENTS (continued)
40 - NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOW
(a) Cash generated operations
Reconciliation of profit before tax to cash (used in)/ generated from operations;
Profit before income tax
Adjustments for:
Depreciation (note 15(a))
Amortisation of deferred merger acquisition cost
Gain on disposal of equity instruments available for sale
Gain on sale of property and equipment
Amortisation of prepaid operating lease rentals (note 17)
Amortisation of intagibe assets (note 16)
Fair value gains on investment properties
Rental income
Dividend income
Interest income
Changes in working capital:
- Kenya motor insurance pool receivable
- receivables arising out of reinsurance arrangements
- receivables arising out of direct insurance arrangements
- reinsurers share of technical provisions and reserves
- deferred acquisition costs
- other receivables
- related party balances
- outstanding claims provisions
- unearned premiums reserves
- payables arising from reinsurance arrangements
- deferred reinsurance commissions
- other payables
Cash generated from /(used in) operations
(b) Analysis of cash and cash equivalents
Cash and bank balances
Government securities maturing within 3 months (note 25)
Deposits with financial institutions maturing within 3 months (note 27)
2014
Ksh ’000
2013
Ksh ’000
848,152
673,443
46,194
92,500
(6,824)
(1,174)
20,525
(187,500)
(149,819)
(21,712)
(424,594)
28,323
92,500
(1,572)
(943)
7,956
(92,876)
(135,494)
(17,303)
(320,807)
(7,618)
(63,697)
(88,739)
(124,044)
59,209
(69,935)
74,732
343,586
112,133
16,785
59,137
(2,497)
(59,710)
(73,546)
(268,865)
(54,819)
126,596
(138,520)
165,515
313,223
5,200
1,470
(126,003)
527,297
121,296
36,017
23,740
301,377
128,292
474,247
361,134
602,539
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
79
NOTES TO THE FINANCIAL STATEMENTS (continued)
41 - OPERATING LEASE COMMITMENTS
The group as a lessor
Rental income earned during the year was Ksh 149,819,122 (2013 – Ksh 160, 985,463). At the end of each reporting period, the group had contracted with tenants for the following
future lease rentals receivable:
Within one year
In the second to sixth years inclusive
2014
Ksh ’000
2013
Ksh ’000
166,313
692,370
150,509
626,579
858,683
777,088
Leases are negotiated for an average term of 2 years for residential properties and 6 years for commercial properties 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 group as a lessee
The future minimum lease payments under operating leases are as follows:
Within one year
In the second year
80
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
2014
Ksh ’000
2013
Ksh ’000
72,926
80,219
53,532
58,885
153,145
112,417
NOTES TO THE FINANCIAL STATEMENTS (continued)
42 - RELATED PARTIES
The company is controlled by First Chartered Securities Limited, a company incorporated and domiciled in Kenya, which is the immediate parent company. The ultimate holding
company is Asset Managers Limited. There are several other companies, which are related to ICEA LION General Insurance Company Limited through common shareholdings or
common directorships.
In the normal course of business, insurance policies are sold to related parties. Transactions with related parties during the year and related outstanding balances are disclosed below:
GROUP
COMPANY
2014
Ksh ’000
2013
Ksh ’000
2014
Ksh ’000
2013
Ksh ’000
(a) Transactions with related parties
Premiums received net of commissions (FCS Group Companies)
Premiums paid net of commissions
Management fees - earned
Management fees - expense (ICEA LION Tanzania)
25,314
23,396
3,140
24,093
47,070
2,833
25,314
23,396
5,964
3,140
24,093
47,070
6,046
2,833
(b) Balances with related parties
Deposits with financial institutions (NIC Bank)
Bank balances (NIC Bank)
Interest receivable (NIC Bank)
Amounts due from a subsidiary
Premiums receivable from related parties (NAS Holdings Limited)
47,672
34,415
1,789
139
52,946
116,991
1,399
21,055
540
23,814
40
13,714
139
36,834
89,203
390
29,526
21,055
(31,813)
290
128
588
4,637
(26,463)
(1,206)
28
148
9,000
-
(31,813)
290
128
588
4,637
(26,463)
(1,206)
28
148
9,000
-
(26,170)
(18,493)
(26,170)
(18,493)
6,375
37,032
6,131
62,747
2,490
33,666
2,470
57,043
43,407
68,878
36,156
59,513
141,969
120,064
106,446
75,217
Due from/(to) related company:
ICEA LION Life Assurance
ICEA LION Asset Management
ICEA LION Trustee Services Ltd.
ICEA Uganda
Karen Office Park
Williamson Development Ltd.
(c) Key management and directors’ remuneration
Directors’ fees
Other remuneration
Key management remuneration
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
81
APPENDICES

APPENDIX
I - COMPANY STATEMENT OF COMPREHENSIVE INCOME
2014
Ksh ’000
2013
Ksh ’000
4,947,882
(1,859,694)
4,329,987
(1,806,651)
3,088,188
2,523,336
315,761
724,996
15,403
2,059
-
295,596
539,240
17,046
116,035
4,146,407
3,491,253
(1,601,537)
(629,826)
(1,088,871)
(1,221,400)
(487,599)
(909,696)
826,173
872,558
(242,956)
(232,890)
583,217
639,668
109,474
-
113,733
(116,035)
109,474
(2,302)
-
-
Other comprehensive (loss)/income for the year net of tax
109,474
(2,302)
Total comprehensive income for the year
692,691
637,366
Gross premiums earned
Less: Reinsurance premiums ceded
Net earned premiums
Commissions earned
Investment income
Other income
Foreign exchange gains
Reclassification on disposal of available for sale investment to profit and loss
Net income
Claims incurred
Commissions incurred
Operating and other expenses
Profit before taxation
Tax expense
Profit for the year
Other comprehensive income
Items that may subsequently be classified to profit or loss
Gain on revaluation of equity instruments available for sale
Reclassification on disposal of available for sale investment to profit and loss
Items that will not be reclassified to profit or loss
Surplus on revaluation of leasehold buildings
Tax relating to components of comprehensive income
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
83

APPENDIX
II - CONSOLIDATED REVENUE ACCOUNTS
Class of insurance business
Gross premiums written
Change in gross unearned premiums
Aviation
Ksh’000
Engineering
Ksh’000
897,827
595,825
Fire
Domestic
Ksh’000
131,238
Fire
Industrial
Ksh’000
992,383
Liability
Ksh’000
146,444
Marine
Ksh’000
282,051
Motor
Private
Ksh’000
1,099,589
Motor
Comm
Ksh’000
984,994
Personal
Accident
Ksh’000
247,562
Theft
Ksh’000
209,350
Workmen’s
Comp
Ksh’000
335,349
Miscellaneous
Ksh’000
Medical
Ksh’000
150,975
60,294
2014
Total
Ksh’000
2013
Total
Ksh’000
6,133,881
5,352,134
8,064
154,957
7,538
59,138
25,172
(1,721)
59,186
17,544
4,688
4,972
12,484
(2,520)
5,749
355,251
316,337
Gross premiums earned
889,763
440,868
123,700
933,245
121,272
283,772
1,040,403
967,450
242,874
204,378
322,865
153,495
54,545
5,778,630
5,035,797
Less: reinsurance premiums ceded
875,356
407,640
25,243
719,739
94,862
131,050
36,534
42,422
85,708
20,434
7,664
6,269
47,025
2,499,946
2,364,717
Net premiums earned
14,407
33,228
98,457
213,506
26,410
152,722 1,003,869
925,028
157,166
183,944
315,201
147,226
7,520
Gross claims paid
Change in gross outstanding claims
Less: Reinsurance recoveries
Net claims incurred
Commissions earned
3,278,684 2,671,080
59,666
102,257
25,837
383,034
13,994
50,992
538,757
421,292
112,114
88,220
127,969
131,756
772
2,056,660
(99,052)
102,775
1,468
(236,515)
58,829
5,994
125,921
120,406
56,850
2,717
(47,627)
(8,769)
(3,911)
79,086
1,768,796
167,745
(39,386)
205,032
27,305
146,519
72,823
56,986
664,678
541,698
168,964
90,937
80,342
122,987
(3,139)
2,135,746
1,936,541
(39,702)
168,858
489
44,410
50,688
44,400
14,744
61,978
84,779
1,624
3,098
25,084
790
461,240
680,769
316
36,174
26,816
102,109
22,135
12,586
649,934
479,720
84,185
89,313
77,244
97,903
(3,929)
1,674,506 1,255,772
(60,957)
(88,661)
(5,166)
(194,367)
(17,765)
(37,148)
7,570
(3,817)
(22,816)
(3,472)
690
-
(13,717)
(439,626)
(348,861)
Commissions incurred
52,029
74,230
22,646
179,541
19,159
41,736
102,204
126,532
41,839
27,633
57,498
15,201
3,890
764,138
526,320
Expenses of management
13,173
25,772
43,310
61,956
17,369
40,829
345,593
212,539
36,581
48,934
120,691
32,006
13,637
1,012,390
863,153
4,245
11,341
60,790
47,130
18,763
45,417
455,367
335,254
55,604
73,095
178,879
47,207
3,810
Underwriting (loss)/profit - 2014
9,846
(14,287)
10,851
64,267
(14,488)
94,719 (101,432)
110,054
17,377
21,536
59,078
2,116
7,639
267,276
- 2013
19,509
29,507
15,907
18,697
(8,175)
9,027
(53,631)
146,222
95,167
6,412
34,031
48,843
13,180
-
374,696
Loss ratio
2
109
27
48
84
8
65
52
54
49
25
66
(52)
51
47
Commissions ratio
6
12
17
18
13
15
9
13
17
13
17
10
6
12
10
Expense ratio
1
4
33
6
12
14
31
22
15
23
36
21
23
17
16
32
143
89
70
155
38
110
88
89
88
81
99
(2)
92
86
Total expenses and commissions
1,336,902 1,040,612
Key ratios :
Combined ratio
84
%
Annual Report and Financial Statements 2014 - ICEA LION General Insurance

APPENDIX
III - COMPANY REVENUE ACCOUNTS
Class of insurance business
Gross premiums written
Aviation
Ksh’000
Engineering
Ksh’000
Fire
Domestic
Ksh’000
Fire
Industrial
Ksh’000
Liability
Ksh’000
Marine
Ksh’000
Motor
Private
Ksh’000
Motor
Comm
Ksh’000
Personal
Accident
Ksh’000
Theft
Ksh’000
Workmen’s
Comp
Ksh’000
Miscellaneous
Ksh’000
Medical
Ksh’000
2014
Total
Ksh’000
2013
Total
Ksh’000
4,563,514
787,804
264,832
123,765
862,132
134,217
258,448
969,251
910,256
237,472
172,579
329,052
150,975
53,352
5,254,135
7,674
159,001
7,579
56,830
25,397
(3,227)
18,652
13,446
5,039
2,709
11,586
(2,520)
4,087
306,253
233,527
Gross premiums earned
780,130
105,831
116,816
805,302
108,820
261,675
950,599
896,810
232,433
169,870
317,466
153,495
49,265
4,947,882
4,329,987
Less: reinsurance premiums ceded
771,039
80,857
22,755
612,132
85,642
113,579
12,460
18,391
82,764
5,207
6,400
6,269
42,199
1,859,694
1,806,651
9,091
24,974
93,431
193,170
23,178
148,096
938,139
878,419
149,669
164,663
311,066
147,226
7,066
Change in gross unearned premiums
Net premiums earned
Gross claims paid
Change in gross outstanding claims
Less: Reinsurance recoveries
Net claims incurred
Commissions earned
3,088,188 2,523,336
59,666
93,215
20,856
371,128
11,567
47,545
504,139
407,622
109,863
82,642
127,508
131,756
772
1,968,279
1,671,457
(99,052)
25,752
2,271
(235,364)
69,444
7,427
114,211
118,564
38,807
(9,477)
(47,389)
(8,769)
(6,294)
(29,869)
206,080
(39,386)
118,967
23,127
135,764
81,011
54,972
618,350
526,186
148,670
73,165
80,119
122,987
(5,522)
1,938,410
1,877,537
(39,702)
81,822
210
36,462
53,783
29,500
6,942
56,283
83,401
(759)
3,051
25,084
796
336,873
656,137
316
37,145
22,916
99,302
27,228
25,472
611,408
469,903
65,269
73,924
77,068
97,903
(6,318)
1,601,537 1,211,400
(46,219)
(29,918)
(4,897)
(162,447)
(15,991)
(34,474)
10,663
139
(21,000)
(377)
868
-
(12,108)
(315,761)
(295,596)
Commissions incurred
40,534
20,919
21,053
150,493
16,896
38,493
89,203
114,676
40,151
22,441
56,689
15,201
3,077
629,826
487,599
Expenses of management
12,660
22,589
39,522
54,286
15,538
37,628
268,917
179,300
35,417
43,438
118,346
32,006
12,427
872,074
737,081
6,975
13,590
55,678
42,322
16,443
41,647
368,783
294,115
54,568
65,502
175,903
47,207
3,396
1,186,139
929,083
Underwriting (loss)/profit - 2014
1,800
(25,761)
14,836
51,536
(20,493)
80,977
(42,052)
114,401
29,832
25,237
58,095
2,116
9,988
300,512
- 2013
17,100
19,531
18,157
(1,603)
(2,407)
28,368
(24,456)
154,321
70,648
(5,098)
33,855
48,829
15,257
-
372,853
Loss ratio
3
149
25
51
117
17
65
53
44
45
25
66
(89)
52
48
Commissions ratio
5
8
17
17
13
15
9
13
17
13
17
10
6
12
11
2
9
32
6
12
15
28
20
15
25
36
21
23
17
16
80
203
94
73
188
45
104
87
80
85
81
99
(41)
90
85
Total expenses and commissions
Key ratios :
Expense ratio
Combined ratio
%
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
85

NOTES
86
Annual Report and Financial Statements 2014 - ICEA LION General Insurance

NOTES
Annual Report and Financial Statements 2014 - ICEA LION General Insurance
87

NOTES
88
Annual Report and Financial Statements 2014 - ICEA LION General Insurance