2009 Annual Report & Accounts

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CONTINENTAL REINSURANCE PLC Report on the Financial Statements We have audited the accompanying financial statements of Continental Reinsurance Plc, set out on pages 13 to 36, which comprise the balance sheet as at 31 December, 2009, the income statement, statement of cash flows for the year then ended, a summary of significant accounting policies, value added statement, financial summary and other explanatory information. Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with the Companies and Allied Matters Act, Cap C20, LFN 2004, the Insurance Act, Cap I17 LFN 2004 and the NAICOM Guidelines 2009, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on 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 about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ 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 auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Continental Reinsurance Plc as at 31 December, 2009, and of its financial performance and its cash flows for the year then ended; the company has kept proper books of account, which are in agreement with the balance sheet and income statement, in the manner required by the Companies and Allied Matters Act, Cap C20, LFN 2004, and, in accordance with the Statements of Accounting Standards issued by the Nigerian Accounting Standards Board.

Chartered Accountants Lagos, Nigeria 2 June, 2010 Member of Deloitte Touche Tohmatsu 2

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2009 The following are the statement of significant accounting policies which have been adopted by the company. 1.

Basis of accounting The financial statements are prepared under the historical cost convention. The Life business is accounted for on fund accounting basis while the Non-Life business is on annual accounting basis.

2.

Underwriting accounts and reinsurance funds .a

Gross Premium Income Recognition

Premium is recognised as income when offers from ceding companies are confirmed via credit notes. This comprises premiums generated on contracts entered into during the year as well as premiums and adjustments on contracts entered into in earlier years but confirmed in the current accounting year. All written premiums are recorded on underwriting year basis and a provision is made for unearned income as Reserve for Unexpired Risk for the portion of the premium relating to the current underwriting year that have not expired by the end of the accounting year. Earned Premium Income represents Gross Premium less change in reserve for Unexpired Premium during the year. .b

Retrocession

Retrocession premium represents the cost of outward reinsurance for the year. The retrocession programme is on underwriting year basis with appropriate reserves calculated using the same basis as the reserve for unexpired risks. Retrocession recoveries on claims are disclosed separately as an asset and charged against Gross Claims Incurred to arrive at the Net Claims Incurred. .c

Gross Claims

Gross claims represent claims and claims handling expenses paid to the ceding companies during the accounting year. Gross Claims incurred consist of gross claims net of changes in Reserve for Outstanding Claims (including IBNR) during the year. .d

Reserve for unexpired risks

The portion of the Non-Life gross written premium which has not yet expired by the end of the accounting year on a class by class risk earning profile basis is accounted for as Reserve for Unexpired Risks. 3

This is calculated as 45% of current underwriting year premium for all classes of business except Marine Hull which is 25%. .e

Reserve for outstanding claims

Reserve for Outstanding Claims represents provisions made to account for estimated cost of all claims and the related claims handling expenses incurred but not paid at the Balance Sheet date including the cost of claims incurred but not reported (IBNR) using best available information. The reserve which is based on historical experience is calculated at an amount not less than 35% of gross claims paid during the accounting year. 3.

Actuarial valuation of Life Fund Actuarial valuation of the life fund is carried out annually for purpose of determining the surplus or deficit at the end of the year. Surplus or deficit arising on valuation is reflected in the profit and loss account in the year in which this is carried out.

4.

Contingency Reserves Contingency reserves are done in accordance with the provisions of the Insurance Act, CAP I17 LFN 2004: a. For general business the contingency reserve is credited with the higher of an amount not less than 3% of the total premium or 20% of the net profits. b.For life business the contingency reserve is credited with the higher of an amount equal to 1% of the gross premium or 10% of the profits.

5.

Investments .a

Short term investments

Short term investments are held as placements and term deposits with banks and other financial institutions.They are stated at the lower of cost and market value.Interest receivable is accrued for and credited to the profit and loss account. .b

Long term investments bi

Quoted investments

Investments in quoted securities are held as long term and stated at market value. Gain between the cost and the market value is transferred to investment revaluation reserve. Diminution in the value of investments is also transferred to investment revaluation reserve to the extent of the balance in the reserve. Subsequent amounts are thereafter charged to the profit and loss account. bii

Unquoted investments 4

Unquoted investments are stated at cost.Provision is made when there is permanent diminution in value. 6. Investment properties Investment properties are investments in land and buildings that are not occupied substantially for use in the operations of the company. Investment properties are revalued every three years by external professional valuers and are not subject to periodic charges for depreciation. 7.

Fixed assets Fixed assets are stated at cost less accumulated depreciation.

8.

Depreciation Depreciation is provided using the straight-line method at rates calculated to write off the cost of the fixed assets over their estimated useful lives .The principal annual rates used for the purpose are: % Motor vehicles 25 Furniture and equipment 20 Computer equipment 20 Partitioning 10

9.

Debtors Debtors are stated after deducting provision made for specific debts considered doubtful of recovery.Full provision is made for balances outstanding for over 2 years.

10. Management expenses Certain management expenses, which relate directly to underwriting businesses are charged thereto, and are apportioned to the various classes of business in the proportion of the premium income of the current underwriting year. 11. Foreign currency balances a. Underwriting businesses from outside Nigeria denominated in foreign currencies are translated to Naira using the rates of exchange ruling at the time of the transaction. Other transactions denominated in foreign currencies are translated to Naira at the rates of exchange ruling at the time of the transaction. b. All assets and liabilities (except for underwriting businesses as stated in Note 11a above) existing in foreign currencies are converted to Naira at the rate of exchange ruling at the balance sheet date, and gains and losses are treated on the Foreign Exchange Reserve Account. 12.

Retirement Benefit Scheme

5

The company has a Gratuity Scheme for its employees managed by Trustees. The scheme is non-contributory and employees qualify for benefits after five years’ service. Provision for gratuity is made when it is determined that there is a shortfall in the assets funding the liabilities. The Company also has a contributory pension scheme in line with the Pension Reform Act, 2004. Contribution to the scheme is 7.5% of total emoluments (basic salary, housing and transport allowances) by both employer and employee. The company’s contribution each year is charged against income and is included in staff cost. 13. Taxation i.

Income tax

Income tax is provided at the company tax rate on the taxable income for the year. ii. Deferred taxation Deferred tax provision is made by the liability method and calculated at the current rate of taxation on the difference between the net book value of qualifying fixed assets and their corresponding tax written down value. 14. Provisions Provision is recognized when the Company has a present obligation, whether legal or constructive, as a result of past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in accordance with the Statement of Accounting Standard (SAS) 23. 15. Dividend Proposed dividend for the year is recognized as a liability only when declared and approved by shareholders at the Annual General Meeting.

6

CONTINENTAL REINSURANCE PLC BALANCE SHEET AS AT 31 DECEMBER 2009 Life N'000

Non-Life N'000

2009 N'000

2008 N'000

2 3 4

357,847 229,181

338,216 6,290,250 3,120,334

338,216 6,648,097 3,349,515

189,932 7,409,768 2,495,191

5 6 7 8 9

57,006 148,766 -

693,484 2,565,846 678,863 1,000,000 160,392

693,484 2,622,852 827,629 1,000,000 160,392

772,671 1,678,985 687,344 1,000,000 119,698

792,800

14,847,385

15,640,185

14,353,589

10 11 12 13 14 15

219,488 573,312 792,800

559,996 1,964,918 884,096 213,266 19,146 36,345 3,677,767

779,484 2,538,230 884,096 213,266 19,146 36,345 4,470,567

705,037 1,598,678 378,151 265,779 271,616 3,219,261

16 17 18 19 20 21 22

792,800

5,186,372 3,915,451 635,748 568,966 772,680 90,401 11,169,618 14,847,385

5,186,372 3,915,451 635,748 568,966 772,680 90,401 11,169,618 15,640,185

5,186,372 3,896,559 522,216 623,181 1,987 232,997 568,595 102,421 11,134,328 14,353,589

Note ASSETS Cash and bank balances Short term investments Reinsurance debtors Prepayments and other debit balances Long term investments Investment properties Statutory deposits Fixed assets Total assets LIABILITIES Creditors and accruals Insurance Funds Outstanding Claims Taxation Deferred taxation Dividend payable

CAPITAL AND RESERVES Share capital Share premium Revenue reserve General reserve fund Investments revaluation reserve Exchange equalisation reserve Contingency reserve Revaluation reserve Shareholders' funds

The financial statements on pages 2 to 26 were approved by the Board of Directors on 2 June, 2010 and signed on its behalf by:

Engr. S. A. Laguda (Chairman)

A. Adejumo (Managing Director)

} } } Directors } }

The accounting policies on pages 2 to 6 and the notes on pages 13 to 24 form part of these financial statements.

7

CONTINENTAL REINSURANCE PLC PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2009

Non-life revenue account

2009 N'000 763,427

2008 N'000 351,784

Life revenue account

103,646

22,000

Note

Investment and other income

25

1,179,408

1,462,188

Provision for doubtful balances

26

(914,725)

(1,138,667)

(151,941)

(139,819)

Administrative expenses Profit on ordinary activities before taxation

27

979,815

557,486

Taxation

13

(74,597)

(84,161)

905,218

473,325

Profit on ordinary activities after taxation Transfer to contingency reserve: - Non-life - Life

22 22

(195,069) (9,016)

(121,055) -

Profit for the year

18

701,133

352,270

522,216

688,583

(68,964)

-

(518,637)

(518,637)

635,748

522,216

Revenue reserve brought forward Transfer from Life Contingency Reserve

18a

Prior year dividend declared Revenue reserve carried forward Earnings per share - Basic (kobo)

9

The financial statements on pages 2 to 24 were approved by the Board of Directors on 19 March, 2009 and signed on its behalf by: } } } Directors } }

Engr. S. A. Laguda (Chairman)

A. Adejumo (Managing Director)

8

5

CONTINENTAL REINSURANCE PLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2009 2009 N'000

2008 N'000

6,813,083

4,013,670

Retrocession receipts in respect of claims Acquisition cost paid Retrocession premium paid

634,293 (1,907,518) (234,716)

163,123 (1,453,115) 157,460

Cash paid to and on behalf of employees Other operating income Claims paid Income tax paid

13

(1,184,993) 1,145,777 (3,613,310) (96,453)

(964,557) 969,547 (1,526,701) (107,744)

Net cash provided by operating activities

28

1,556,163

1,251,683

9

(100,350) (1,300,518) (250,285) 325,878 44,569 5,740

(106,563) (1,311,712) (90,000) 692,626 89,394 580

(1,274,966)

(725,675)

18,892 (753,908)

25,600 (267,602)

Net cash used in financing activities

(735,016)

(242,002)

Net (decrease)/increase in cash and cash equivalents

(453,819)

284,006

Cash and cash equivalents at the beginning of the year

8,321,610

8,037,604

7,867,791

8,321,610

Note Cash flows from operating activities Premium received from policy holders

Cash flows from investing activities Purchase of fixed assets Purchase of investments Investment properties Proceed on sale of investments Dividend received Proceed on sale of fixed assets

7

Net cash used in investing activities Cash flows from financing activities Share issue expenses refund Dividend paid

17 15

Cash and cash equivalents at the end of the year

29

9

NON-LIFE REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2009 Fire N'000 2,733,460

Accident N'000 1,329,892

Marine N'000 908,950

Liability N'000 706,261

Energy N'000 823,738

2009 Total N'000 6,502,301

727,439 (835,267) 2,625,632 (127,575) 2,498,057

256,890 (419,788) 1,166,994 (16,962) 1,150,032

168,770 (223,533) 854,187 (23,818) 830,369

178,122 (194,868) 689,515 689,515

42,866 (291,462) 575,142 (66,361) 508,781

1,374,087 (1,964,918) 5,911,470 (234,716) 5,676,754

722,794 (1,374,087) 3,383,870 (157,460) 3,226,410

1,540,291

563,095

270,927

150,046

1,633

2,525,992

1,080,434

539,102

197,083

94,824

52,516

571

884,096

378,151

Balance beginning of the year Claims incurred Retrocession recoveries

(180,717) 1,898,676 (634,293)

(92,739) 667,439 -

(50,499) 315,252 -

(53,598) 148,964 -

(598) 1,606 -

(378,151) 3,031,937 (634,293)

(205,324) 1,253,261 -

Net claims incurred Underwriting expenses: Acquisition and maintenance cost: - Commissions - Brokerage and charges Management expenses

1,264,383

667,439

315,252

148,964

1,606

2,397,644

1,253,261

784,902 53,415 318,873

374,097 30,859 155,139

225,210 19,974 106,034

76,318 39,092 82,389

149,580 3,707 96,094

1,610,107 147,047 758,529

1,022,950 121,765 476,650

2,421,573

1,227,534

666,470

346,763

250,987

4,913,327

2,874,626

76,484

(77,502)

163,899

342,752

257,794

763,427

351,784

Income Gross premium income Reserve for unexpired premium: Balance beginning of the year Balance end of the year Earned premium income Retrocession cost Net premium written Expenses Gross claims paid Reserve for outstanding claims: Balance end of the year

Transfer to profit and loss account

Notes

23 11.1

24

12

2008 Total N'000 4,035,163

LIFE BALANCE SHEET AS AT 31 DECEMBER 2009 Note

2009 N'000

3 4

357,847 229,181

36,498 588,341

5 6 7

57,006 148,766

5,231 687,344

792,800

1,317,414

10 12

219,488 573,312 792,800

298,257 224,591 522,848

19 22

-

623,181 68,964 102,421

-

794,566

792,800

1,317,414

ASSETS Short term investments Reinsurance debtors Prepayments and other debit balances Long term investments Investment properties Total assets LIABILITIES Creditors and accruals Insurance funds

RESERVES General reserve fund Contingency reserve Revaluation reserve Shareholders' funds

2008 N'000

The financial statements were approved by the Board of Directors on 2 June, 2010 and signed on its behalf by:

Engr. S.A. Laguda

A. Adejumo

} } } Directors } }

The accounting policies on pages 2 to 6 and the notes on pages 13 to 24 form part of these financial statements.

LIFE REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2009 Notes

Individual N'000

23

63,446

Income Premium Income Retrocessions

-

Net premium Investment Income

Expenses Commission Claims Other charges Management expenses Provision for premium debtors

25

26

Group N'000

2009 Total N'000

838,167

901,613

-

-

2008 Total N'000 1,240,133 (30,000)

63,446

838,167 44,928

901,613 44,928

1,210,133 43,037

63,446

883,095

946,541

1,253,170

71,934 12,314 2,890 13,321 -

225,477 569,059 37,791 175,978 77,555

297,411 581,373 40,681 189,299 77,555

308,400 446,267 1,197 117,769 55,412

100,459

1,085,860

1,186,319

929,045

-

(Deficit)\Excess of income over expenditure General Reserve fund Contingency reserve Transfer to profit and loss

(37,013) (15,999)

(202,765) (87,647)

(239,778) (103,646)

324,125 (249,252) (32,413) (22,000)

Transfer to Insurance Fund

(53,012)

(290,412)

(343,424)

20,460

12

NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 31 DECEMBER 2009 1.

The Company a.

Legal form Continental Reinsurance Plc was incorporated in 1985 as a professional reinsurance limited liability company under the Companies Act 1968 and obtained licence to transact non-life Reinsurance business on 10 December, 1986. It commenced business operation in January, 1987. The Company subsequently obtained licence to transact life reinsurance business in September, 1989 and commenced life reinsurance business in January 1990. In 1999, the Company was converted to a public limited liability company and on 30 May, 2007, its shares were listed on the Nigerian Stock Exchange. In January, 2005, the Company opened a business office in Douala Cameroun.

b.

2.

3.

Principal activities The Company was licensed to carry out both life and non-life reinsurance business. Life Non-Life N'000 N'000 Cash and bank balances Cash 705 Local bank balances 13,062 Foreign bank balances 324,449

4.

4.1

2008 N'000

705 13,062 324,449

425 34,530 154,977

-

338,216

338,216

189,932

357,847 357,847 357,847

5,483,855 154,444 1,477,337 56,092 7,171,728 (881,478) 6,290,250

5,841,702 154,444 1,477,337 56,092 7,529,575 (881,478) 6,648,097

6,255,085 63,405 1,727,337 85,851 8,131,678 (721,910) 7,409,768

Provision for doubtful investments At 1 January Charge for the year (Note 26)

-

721,910 159,568

721,910 159,568

58,092 663,818

At 31 December

-

881,478

881,478

721,910

Short term investment Bank placements- local Bank placements- Foreign Managed funds Other short term placements Provision for doubtful investments (note 3.1)

3.1

2009 N'000

The provisions in this account balance were principally as a result of the diminution in the value of quoted equities held with fund and stock managers on behalf of the company. Reinsurance debtors Due from ceding companies (Local) 468,613 3,611,701 4,080,314 2,657,404 Due from ceding companies (Foreign) 746,059 Due on retrocession 652,002 652,002 15,747 Premium reserves retained by ceding 10,625 10,625 19,970 companies 468,613 4,274,328 4,742,941 3,439,180 Provision for bad and doubtful debts (Note 4.1) (239,432) (1,153,994) (1,393,426) (943,989) 229,181 3,120,334 3,349,515 2,495,191 Provision for bad and doubtful debts At 1 January Charge for the year (Note 26)

165,037 74,395

778,952 375,042

943,989 449,437

458,341 485,648

At 31 December

239,432

1,153,994

1,393,426

943,989

13

Life N'000 5.

2009 N'000

2008 N'000

Prepayments and other debit balances Prepayments Interest receivable Staff loans and advances Staff share ownership trustee Due from subsidiaries Withholding tax recoverable Life business Deposit for shares (note 5.1) Retrocession unexpired risk (note 24) Branch development Others

Provision for other debtors (note 5.2)

5.1

Non-Life N'000

-

74,740 168,759 143,993 1,533 10,401 4,430 174,191 14,693

74,740 168,759 143,993 1,533 10,401 4,430 174,191 14,693

6,972 189,504 109,908 4,716 10,413 11,512 266,342 107,318

-

192,042

192,042

-

-

27,989

27,989

99,561 85,712

-

812,771

812,771

891,958

-

(119,287)

(119,287)

(119,287)

-

693,484

693,484

772,671

Deposit for shares This represents money paid for various public offers of companies and financial institutions for which the shares had not been alloted as at year end. However after year end, some of these funds have been refunded by the Registrars to the various issues.

5.2

6.

Life N'000

Non-Life N'000

2009 N'000

2008 N'000

Provision for doubtful balances At 1 January Charge for the year (Note 26)

-

119,287 -

119,287 -

95,006 24,281

At 31 December

-

119,287

119,287

119,287

5,231 (3,160) 2,071

1,108,858 (380,115) 728,743

1,114,089 (383,275) 730,814

2,248,364 (1,160,899) 1,087,465

-

1,857,051

1,857,051

562,811

54,935 54,935

1,998 1,859,049

54,935 1,998 1,913,984

48,657 1,998 613,466

54,935 57,006

(21,946) 1,837,103 2,565,846

(21,946) 1,892,038 2,622,852

(21,946) 591,520 1,678,985

Long term investments Quoted investments [at market value]: Quoted shares and debenture: Cost Diminution in market value Market value Unquoted investments [at cost]: Unquoted shares Foreign currencies commercial bonds (note 6.1) Investment in subsidiary Provision for doubtful investments (Note 6.2)

14

Long term investments (Cont'd) Foreign currencies commercial bonds These represent long term investments in life bonds with HSBC International and foreign mutual funds with Scottish Widow and J. P. Morgan. Life Non-Life 2009 2008 N'000 N'000 N'000 N'000 Provision for doubtful investments At 1 January 21,946 21,946 1,998 Charge for the year (note 26) 19,948 At 31 December Investment in properties - Life Valuation/cost Disposal during the year: - Cost - Revaluation reserve Transfer Additions in the year

-

21,946

21,946

21,946

687,344

-

687,344

597,344

(97,980) (12,020) (678,863) 250,285

-

(97,980) (12,020) 250,285

90,000

827,629

687,344

148,766

678,863 678,863

Three of the Company's land and buildings were revalued by Fola Oyekan & Associates, a professional firm of Estate Surveyors and Valuers on the basis of Open Market Value on 16 November, 2006 and a revaluation surplus of N102.421 million was incorporated into the books of the Company. During the year, the company disposed one of the buildings in exchange for another. The property was disposed for the sum of N145million in exchange for another in a different location at the value of N200million. Basis of valuation was carried out by Fola Oyekan & Associates (Estate Surveyors and Valuers). The relevant revaluation amount in the revaluation reserve on the disposed property was transferred to the profit and loss account in line with SAS 3(43). Statutory deposit This represents statutory deposit with Central Bank of Nigeria.

Fixed Assets

Cost At1January Additions Disposal

Freehold land N'000

Motor vehicles N'000

Furniture and equipment N'000

Office partitioning N'000

Computer equipment N'000

Total N'000

2,524 -

97,204 34,474 (13,807)

57,025 20,411 (13,387)

37,294 11,242 (3,272)

41,240 34,223 (22,170)

235,287 100,350 (52,636)

2,524

117,871

64,049

45,264

53,293

283,001

At31December Depreciation At1January Chargefortheyear Ondisposal At31December NetBookValue At31December,2009

-

53,460 27,600 (10,254) 70,806

30,503 11,500 (13,199) 28,804

5,761 4,526 (2,359) 7,928

25,865 10,659 (21,453) 15,071

115,589 54,285 (47,265) 122,609

2,524

47,065

35,245

37,336

38,222

160,392

At31December,2008

2,524

43,744

26,522

31,533

15,375

119,698

15

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2009 Life N'000 10.

11. .1

.2

2009 N'000

2008 N'000

Creditors: Amounts falling due within one year: Due to retrocessionaires Due to ceding companies Sundry creditors Rent received in advance Stale cheques Accrued expenses PAYE, NSITF & withholding tax Public offer fees Non-life business Staff gratuity scheme (note 30.iv) Due to susidiaries Information technology development levy (note 10.1)

10.1

Non-Life N'000

33,929 14,519 -

137,351 212,379 94,180 51,546

171,040 -

38,015 338

171,040 38,015 338

24,225 234,762 5,228 26,752 20,584 8,703 1,504 69,177 266,342 38,015 338

-

13,610

13,610

9,407

-

137,351 246,308 108,699 51,546 -

12,363 214 -

12,363 214

-

-

219,488

559,996

779,484

705,037

-

12,016 5,576 (8,185)

Information technology development levy At 1 January Based on profit for the year Payments during the year

-

9,407 9,777 (5,574)

9,407 9,777 (5,574)

At 31 December

-

13,610

13,610

9,407

The Nigerian Information Technology Development Agency [NITDA] Act was signed into law on 24 April, 2007. Section 12 [2a] of the Act stipulates that 'specified' companies contribute 1% of their profit before tax to the Nigerian Information Technology Development Agency. In line with the Act, the Company have provided for NITDA levy at the specified rate. 2009 2008 N'000 N'000 Insurance funds Non-Life Reserve for unearned premium At 1 January 1,374,087 722,794 Arising during the year 590,831 651,293 At 31 December 1,964,918 1,374,087 Life At 1 January Arising during the year Transfer from Life General Reserve (note 19) Transfer from Contingency reserve (note 22.2)

224,591 (343,424) 623,181 68,964

At 31 December

573,312 2,538,230

16

204,131 20,460 224,591 1,598,678

12.

Reserve for outstanding claims At 1 January Arising during the year

378,151 505,945

205,324 172,827

At 31 December

884,096

378,151

2009 N'000 13.

Taxation

13.1

Per profit and loss account: Income tax based on profit for the year Education tax Over provision in prior years

198,652 14,614 (157,815)

195,100 15,151 (117,922)

55,451 19,146

92,329 (8,168)

74,597

84,161

At 1 January Based on profit for the year Withholding tax credits Payments during the year

265,779 55,451 (11,511) (96,453)

281,194 92,329 (107,744)

At 31 December

213,266

265,779

Deferred tax (note 14)

13.2

2008 N'000

Per Balance Sheet:

The charge for taxation has been computed in accordance with the provisions of the Companies Income Tax Act, CAP C21 LFN 2004 and the Education Tax Act, CAP E4 LFN 2004 as ammended. 14.

Deferred taxation At 1 January Arising/(Release) during the year

19,146 19,146

At 31 December 15.

17.

-

Dividend payable At 1 January Prior year dividend (note 18) Payments

16.

8,168 (8,168)

At 31 December Share capital Authorised: 15,000,000,000 ordinary shares of 50k each Issued and fully paid: At 31 December Share premium At 1 January Share issue refund (note 17.1)

17

271,616 518,637 (753,908)

20,581 518,637 (267,602)

36,345

271,616

7,500,000

7,500,000

5,186,372

5,186,372

3,896,559 18,892

3,870,959 25,600

.1

3,915,451

At 31 December Share issue expenses refund

3,896,559

During the year the company got a refund on expenses incurred on the rights offer from one of the parties to the rights and public offer carried out in year 2007 on the bill submitted and paid. This has now been added back to the share premium, since it had been deducted from share premium as part of prior year's issue expenses.

2009 N'000 18.

Revenue reserve- Non-life At 1 January Prior year dividend (note 15) Transfer from Life contigency reserve (a) - (note 22.2) Transfer from profit and loss account

2008 N'000

522,216 (518,637) (68,964) 701,133 635,748

a.

688,583 (518,637) 352,270 522,216

In line with the directives of the National Insurance Commision (NAICOM), the amount previously held in the Life Contingency Reserve was transferred to the Revenue reserve Non-life as stated in the Insurance Act CAP 117 LFN 2004. In respect of the current year, the Directors proposed that a dividend of 5.5kobo per ordinary share will be paid to shareholders. This dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The gross dividend payable is N570,500,937.27.

19.

General Reserve Fund At 1 January Transfer to life insurance fund (note 11.2) At 31 December

20.

2009 N'000

2008 N'000

623,181 (623,181)

373,929 249,252

-

623,181

In line with the Insurance Act CAP I17 LFN 2004, the general reserve fund has been merged with the Life Insurance fund. Investment revaluation reserve - Non-life At 1 January 1,987 1,161,091 Arising during the year (1,987) (1,159,104) 1,987 - Life At 1 January 1,411 Arising during the year (1,795) (384) Charged to life revenue account 384 -

At 31 December

18

1,987

2009 N'000 21.

22.

1.

2.

23.

2008 N'000

Exchange equalisation reserve At 1 January Movement during the year

232,997 335,969

15,377 217,620

At 31 December Contingency reserve

568,966

232,997

The statutory contingency reserve has been computed in accordance with Section 21(1) of the Insurance Act, Cap I17 LFN 2004. The movements on the account are as follows: 2009 2008 N'000 N'000 Non-Life At 1 January Transfer from Profit and Loss account

499,631 195,069

378,576 121,055

At 31 December

694,700

499,631

Life At 1 January Transfer from Revenue account Transfer from Profit and Loss account Transfer from Non-life revenue reserve (note 18) Transfer to Life Insurance fund (note 11.2) At 31 December

68,964 9,016 68,964 (68,964) 77,980

36,551 32,413 68,964

772,680

568,595

823,738 2,733,460 1,329,892 908,950 706,261 6,502,301

104,963 2,067,175 745,575 593,555 523,895 4,035,163

63,446 838,167 901,613 7,403,914

118,088 1,122,045 1,240,133 5,275,296

Premium income Non-life - Energy - Fire - General accidents - Marine - Liability Life - Individual - Group

19

24 .

Retrocession cost 2009

2008

Reserve on Unexpire d N'000

Retrocessio n

Retrocessio n

Cost N'000

Cost N'000

104,380

127,575

100,532

54,296 13,878 19,488

66,361 16,962 23,818

24,575 32,353

426,75 8

192,042

234,716

157,460

Life N'000

NonLife N'000

2009 N'000

2008 N'000

-

44,569 33,990

44,569 33,990

89,394 445,704

29,273 15,655 -

893,430 30,919 174,418 369 1,713

922,703 30,919 190,073 369 1,713

882,286 47,565 26,840 580 590 12,266

44,928

1,179,408

1,224,336

1,505,225

74,395

159,568 375,042

159,568 449,437

663,818 485,648

-

-

-

24,281

3,160 -

380,115 -

383,275 -

384 19,948

77,555

914,725

992,280

1,194,079

24,073 128,701 7,500 (369) 54,285

16,048 34,483 7,500 (580) (590) 34,427

Paid in the Year N'000

Fire Energy Accident Marine

25 .

231,95 5 120,65 7 30,840 43,306

Investment and other income Dividend Profit on disposal of investment Interest on deposits and bank instruments Interest on statutory deposit Rental income Profit on disposal of fixed assets Exchange gain/loss Other income

26 .

Provision for doubtful balances Short term investments (note 3.1) Reinsurance debtors (note 4.1) Prepayment and other debit balances (note 5.3) Provision for diminution in quoted securities (note 6) Long term investments (note 6.2)

27 .

Profit on ordinary activities before taxation Profit on ordinary activities before taxation is arrived at after charging/(crediting): Directors' remuneration: - Fees - Other emoluments Auditors' remuneration Profit on disposal of fixed assets Exchange gain Depreciation

20

28.

Reconciliation of profit after tax to net cash provided by operating activities Profit after tax (Deficit)\Excess of income over expenditure - life Adjustment for non-cash items: Depreciation Provision for bad and doubtful balances Decrease in income tax payable Deferred taxation Changes in operating assets/liabilities: Reinsurance debtors Prepayments and other debit balances Creditors and accruals Dividend payable Actuarial surplus Provision for unexpired risks Provision for outstanding claims Profit on disposal of investments Profit on disposal of fixed assets Dividend received Net cash provided by operating activities

29.

i)

473,325 324,125

54,285 992,280 (52,513) 19,146

34,427 1,194,079 (23,600) 8,168

(1,303,761) 79,187 74,447 (235,271)

(1,262,010) 146,009 (180,778) 251,035

(103,646) 939,552 505,945 (33,990) (369)

(22,000) 671,754 172,827 (445,704) (580)

(44,569)

(89,394)

1,556,163

1,251,683

338,216 7,529,575

189,932 8,131,678

7,867,791

8,321,610

24,073 128,701

16,048 34,483

152,774

50,531

3,295 18,664

1,838 14,877

Cash and cash equivalents Cash and bank balances Short term investments

30.

905,218 (239,778)

Information regarding directors and employees Directors Emoluments paid to Directors include : - Fees - Other emoluments

Fees and other emoluments disclosed above (excluding pension contribution) include amount paid to: Chairman Highest paid director The number of directors excluding the chairman emoluments were in the following ranges were: N 4,000,001 Above

-

N 7,000,000 7,000,001

whose Number 1 2 3

21

Number 1 2 3

30. ii)

2009 Number

2008 Number

14 10 7 6 3 7 47

16 10 6 5 2 6 45

N'000

N'000

Information regarding directors and employees (Cont'd) Employees Employees remunerated at higher rates. The number of employees in receipt of emoluments within the following ranges were: N 500,001 1,000,001 1,500,001 2,000,001 2,500,001 3,000,001

iii)

&

N 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Above

Pension -

At 1 January Provision during the year Release to PFAs At 31 December iv)

14,964 (14,964)

599 11,200 (11,799)

-

-

Gratuity At 1 January

38,015

38,015

Provision during the year

10,105

Release to Con Re Trustees/PFAs

(10,105)

At 31 December

v)

38,015

38,015

No additional provision has been made in these financial statements as the Directors have determined and assessed that the asset available has covered the liabilities of the fund. Staff cost 296,222

Salaries and Allowances Staff pension

14,964

Staff gratuity The average number of persons employed during the year was as follows: Managerial and Senior Staff Junior Staff

22

207,129 11,200 -

10,105 321,291

218,329

Number

Number

45 2 47

43 2 45

31.

SEGMENT INFORMATION BY GEOGRAPHICAL DISTRIBUTION Below is the Non-Life revenue account by office segments. Nigeria N'000 Income Gross premium income Reserve for unearned premium at the beginning of the year Reserve for unearned premium at the end of the year

Cameroun N'000

2009 Total N'000

Kenya N'000

2008 Total N'000

4,471,750

1,623,313

407,238

6,502,301

4,035,163

1,026,298

347,789

-

1,374,087

722,794

(1,296,187)

(531,015)

(137,716)

(1,964,918)

(1,374,087)

Earned premium income Retrocession costs

4,201,861 (115,935)

1,440,087 (93,418)

269,522 (25,363)

5,911,470 (234,716)

3,383,870 (157,460)

Net premium written

4,085,927

1,346,669

244,158

5,676,754

3,226,410

2,258,822

260,398

6,772

2,525,992

1,080,434

790,587

91,139

2,370

884,096

378,151

(345,684)

(32,467)

-

(378,151)

(205,324)

Claims incurred Retrocession recoveries

2,703,725 (634,293)

319,070 -

9,142 -

3,031,937 (634,293)

1,253,261 -

Net claims incurred Underwriting expenses: Acquisition and maintenance cost Administrative expenses

2,069,432

319,070

9,142

2,397,644

1,253,261

1,206,586 611,041

433,242 80,863

117,326 66,625

1,757,154 758,529

1,144,715 476,650

3,887,059

833,175

193,093

4,913,327

2,874,626

198,868

513,494

51,065

763,427

351,784

15,640,185

-

-

15,640,185

14,353,589

54,285

-

-

54,285

34,427

91

83

60

87

80

Expenses Gross claims paid Reserve for outstanding claims at the end of the year Reserve for outstanding claims at the beginning of the year

Underwriting Profit Total assets employed Depreciation Net premium margin (%)

23

32. a)

Related Party Transactions Amount due from Directors The following facilities were due from the Managing Director/Chief Executive Officer [MD/CEO] and Deputy Managing Director [DMD] at the end of the year: MD/CEO

DMD N'000

Total 2009 N'000

Total 2008 N'000

N'000 Mortgage loan

1,371

1,702

3,073

5,130

Personal loan Car loan

8,408

4,551

12,959

11,549

6,000

2,125

8,125

2,625

-

1,500 -

1,500 -

2,250 4,186

9,878

25,657

25,740

Car refurbishment loan Staff land purchase loan

15,779

These loans were given in line with the conditions of service of the Directors. Under the terms of the mortgage loan, repayment is to be made over the mortgage period from 2004. For other loans, 100% repayment is through deductions from salaries plus cash payment of balance upon cessation of employment. All the facilities were performing at the balance sheet date. b)

Due from subsidiary The company has an outstanding sum of N10,401,435 (31 December 2008 N10,401,435) with CReStech Limited, a wholly-owned subsidiary. The transaction was in the ordinary course of business and is to be repaid according to the agreed terms and conditions. The financial statements of the company was not consolidated as there was no audited financial statements for the company since inception.

33.

Contingent Liabilities and Capital Commitment There were no contingent liabilities and capital commitment as at 31 December, 2009 (2008 - Nil).

34.

Comparative figures

In line with the provisions of the Insurance Act CAP I17 LFN 2004, Insurance Guidelines issued by the National Insurance Commission (NAICOM), and Statement of Accounting Standards, the prior year's balances on the Life's General Reserve Fund and Life Contingency Reserve have been adjusted in the current year’s financial statements in compliance with the National Insurance Commission (NAICOM) directives. Also, certain comparative figures have reclassified to reflect a more meaningful comparison.

24

STATEMENT OF VALUE ADDED FOR YEAR ENDED 31 DECEMBER 2009 2009 N'000 Net premium income Other income

%

2008 N'000

6,578,367 1,269,264

4,436,543 175,744

7,847,631

4,612,287

(5,563,045)

(3,700,719)

%

Claims, commision, charges and management expenses - local imported

(183,951)

(65,547)

2,100,635

100

846,021

100

321,291

15

218,329

26

55,451

3

92,329

11

9,777

-

5,576

-

Retained for growth and payment of dividend to shareholders: - Depreciation

54,285

3

20,336

2

- Deferred taxation

19,146

1

(8,168)

(1)

- Insurance funds

939,552

45

165,349

20

701,133

33

352,270

42

2,100,635

100

846,021

100

Applied as follows: To pay employees: - Salaries and pension cost To pay Government: - Income tax - Information technology levy

- Profit for the year

25

FINANCIAL SUMMARY for the year ended 31 December 2009 2009 N'000 338,216 6,648,097 3,349,515 693,484 2,622,852

2008 N'000 189,932 7,409,768 2,495,191 772,671 1,678,985

2007 N'000 45,619 7,933,893 1,719,212 942,961 1,873,055

2006 N'000 41,844 754,284 1,382,333 545,591 1,059,879

2005 N'000 140,584 627,569 1,039,233 282,957 401,533

Investment properties Statutory deposits Fixed assets Total assets

827,629 1,000,000 160,392 15,640,185

687,344 1,000,000 119,698 14,353,589

597,344 1,000,000 47,562 14,159,646

372,933 35,000 39,100 4,230,964

372,933 35,000 32,503 2,932,312

Liabilities Bank overdrafts Creditors and accruals Insurance funds Oustanding claims Taxation Deferred taxation Dividend

779,484 2,538,230 884,096 213,266 19,146 36,345

705,037 1,598,678 378,151 265,779 271,616

902,185 926,924 205,324 281,194 8,168 20,581

77,955 565,154 744,961 433,070 156,671 8,168 20,581

14,694 433,241 579,612 325,900 120,667 8,168 87,598

4,470,567

3,219,261

2,344,376

2,006,560

1,569,880

5,186,372 3,915,451 635,748 568,966 772,680 90,401

5,186,372 3,896,559 522,216 1,987 623,181 232,997 568,595 102,421

5,186,372 3,870,959 688,583 1,162,502 373,929 15,377 415,127 102,421

1,240,591 76,956 123,881 215,993 178,448 (10,661) 296,775 102,421

856,907 190,424 7,270 84,019 223,812 -

11,169,618

11,134,328

11,815,270

2,224,404

1,362,432

Assets Cash and bank balances Short term investments Reinsurance debtors Prepayments and other debit balances Long term investments

Share capital Reserve for bonus issue Share premium Revenue reserve Investments revaluation reserve General reserve fund Exchange equalisation reserve Contingency reserve Revaluation reserve Shareholders' funds

15,640,185

14,353,589

14,159,646

4,230,964

2,932,312

763,427 979,815

351,784 557,486

519,097 806,443

95,899 214,782

319,759 369,033

(74,597) 905,218 (204,085) -

(84,161) 473,325 (121,055) -

(129,757) 676,686 (111,984) -

(78,991) 135,791 (19,180) -

(114,900) 254,133 (54,711) (85,691)

701,133

352,270

564,702

116,611

113,731

Non-life underwriting profit Profit before taxation Taxation Profit after taxation Contigency reserve Proposed dividend Profit transferred to revenue reserve Earnings per share (basic) (Kobo) Dividend per share (Kobo) Net asset per share (Kobo)

9

5

108

107

-

-

7 5 114

5 90

15 10 79

Note: Earnings and dividend per share were computed on the profit for the year and on the number of issued and fully paid ordinary shares at the end of the year. Net assets per share were computed on the number of issued and fully paid ordinary shares at the end of the respective years.

27