var textForPages = ["ANNUAL REPORT AND2017FINANCIAL STATEMENTS                                             Insuring                                             Happiness","","ANNUAL REPORT                                                                                                                                                                                                                                               AND FINANCIAL                                                                                                                                                                                                                                               STATEMENTS                                                                                                                                                                                                                                               2017TABLE OFCONTENTS									Corporate Information										 4Chairmans Statement											 10-12CEO’s Statement 											 14-15Corporate Governance Statement									 16-17Directors’ Report											 18Statement of Directors’ Responsibilities								 19Report of the Consulting Actuary									 20Independent Auditors’ Report									 21-23Corporate Social Responsiblity									 28-29Financial Statements:	Statement of Comprehensive Income								 32Statement of Financial Position									 33Statement of Changes in Equity									 34Statement of Cash Flows										 35Accounting Policies 											 36-45Notes to the Financial Statements									 48-71Supplementary Information:Revenue Account											 72                                                                                                                                                                             1","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  What is happiness?  Happiness comes easily when you know that you and  your loved ones are covered form life’s uncertainties.   APA, Insuring Happiness  2","ANNUAL REPORT                                                                                                                                                                                                       AND FINANCIAL                                                                                                                                                                                                       STATEMENTS                                                                                                                                                                                                       2017                        Vision        We put smiles on the faces of                our stakeholders.                       MissionWe are the region’s most respected group       creating and protecting wealth.                                                                                                                                                  3","ANNUAANLNURAEL PREOPORRTT                                                  BANKERS AND FAINNDAFINNACNICAIALL                                                                           Commercial Bank of Africa Limited      STATSETAMTEEMNENTTSS                                                 P.O. Box 30437-00100                  20201177                                                 Nairobi  CORPORATE                                                                CONSULTING ACTUARIES  INFORMATION                                                                           Giles T Waugh, FASSA, FIA    DIRECTORS                                                              Independent Actuarial Consultant                                                                           +27 11 646 0199/ +27 83 680 7990      R M Ashley*	      D M Ndonye					                                                      REGISTERED OFFICE      A K M Shah				      P J Shah                                                             Apollo Centre,      S M Shah                                                             07 Ring Road Parklands, Westlands      R Schnarwiler**				                                                  P.O. Box 30389 - 00100      J N Gitoho	                                                          Tel: +254 (0) 20 364 1000      P M K Shah*					                                                     Nairobi      *British, **Swiss                                                                           HUGHES BUILDING,    COMPANY SECRETARY                                                                           Kenyatta Avenue      P H Shah                                                             P.O. Box 30389 - 00100      Certified Public Secretary (Kenya)                                   Tel: +254 (0) 20 364 1042			      P.O. Box 30094 - 00100, Nairobi                                      Nairobi    SENIOR MANAGEMENT                                                      APOLLO HOUSE      Catherine Karimi - Chief Executive Officer                           Moi Avenue      Daniel Mugo - Chief Finance Officer                                  P.O. Box 81821 - 80100      Jane Watiki - Head of Operations                                     Tel: +254 (0) 41 227506      Bernard Kinyanjui - Head of Corporate Business                       Mombasa      Stephen Muiga - Business Development Manager - Alternative Channels      James Njagi - Business Development Manager - Pensions      Mark Mumo - Business Development Manager - Group Life      Benedicto Makena - National Sales Manager    AUDITOR      PricewaterhouseCoopers      Certified Public Accountants (Kenya)      PwC Tower, Waiyaki Way, Chiromo Road      P.O. Box 43969- 00100      Nairobi	4","AANNNNUAUL ARELPORRET PORT                                  AANNDDFINFAINNCAIANL CIAL                                  SSTTAATETMEEMNTES NTS                                  22001717GROUPSTRUCTURE                                  APA Insurance                                      (Uganda)           (Property Management)                                                 5","ANNUAL REPORT           2  3 AND FINANCIAL      STATEMENTS                  2017 BDOIRAERDCOTOF RS1456","ANNUAL REPORT    AND FINANCIAL    STATEMENTS    20176789  1. Ashok Shah - Director    2. SM Shah - Director    3. Richard Ashley - Chairman    4. James Gitoho - Director    5. Daniel Ndonye - Director    6. P J Shah - Director    7. Reto Schnarwiler- Director    8. Piyush Shah - Director    9. Pratul Shah - Company Secretary    7","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  MANAGEMENT TEAM       1             234         56  1. BERNARD KINYANJUI - Head of Corporate Business  2. JACKIE TONUI - Group Head of Corporate Communications  3. JULIANA NGULI - Group Head of Human Resources  4. JANE WATIKI - Head of Operations  5. JAMES NYAKOMITTA - Group Chief Information Officer  6. DANIEL MUGO - Chief Finance Officer8","ANNUAL REPORT                                                                                               AND FINANCIAL                                                                                               STATEMENTS                                                                                               20177                                          9   8                                                                                           12  1310                                                    117. MARK MUMO - Business Development Manager - Group Life8. BENEDICTO MAKENA - National Sales Manager9. STEPHEN MUIGA - Business Development Manager - Alternative Channels10. CATHERINE KARIMI - Chief Executive Officer11. JUDITH BOGONKO – Group Head of Customer Service12. JAMES NJAGI - Business Development Manager - Pensions13. CHRIS NGALA – Group Head of Internal Audit                                                                                                   9","ANNUAANLNURAEL PREOPORRTT AND FAINNDAFINNACNICAIALL      STATSETAMTEEMNENTTSS                  20201177 CHAIRMAN’S                                                      In 2017 particularly the political environment regarding STATEMENT                                                       elections affected growth as a wait and see mode was set                                                                 for local and foreign investors. Insurers also struggled to                                       Richard M Ashley          expand coverage among a large informal economy and                                       Chairman                  income-sensitive population.                                                                 Inflation stood at 7.98% for the year, an increase from 6.31%On behalf of the Board of Directors, I am pleased to             in 2016. The Government’s upper projection of 7.5% was             present the Company’s Annual Report and Financial   passed due to the factors outlined above. The Government             Statements for the year ended 31 December 2017.     intervened on food inflation through application of price                                                                 ceiling on maize flour when it averaged 13.5% with a high   Economy & Business Environment Overview                       of 21.5 % in May 2017, but generally, overall inflation is still                                                                 below the sub Saharan average which stands at 9.5 % and    The International Monetary Fund has raised its estimate for  the East African average at 9.9%. By the close of the year    global economic growth in 2017 and 2018, citing stronger     inflation dropped to 4.5% which was a positive move.    expansion in the first half of the year in the Eurozone,     The Kenyan shilling remained stable, depreciating by 0.65%    Japan and some emerging markets. The IMF said the pickup     in 2017 with the average exchange rate at KShs. 103.42,    in activity that started in the second half of 2016 “gained  compared to 101.49 in 2016. The average foreign exchange    further momentum” in the first half of 2017.                 reserve stood at USD 7,657 million. The Monetary Policy    On the domestic front, the World Bank downgraded             Committee benchmark was maintained at an interest rate    Kenya’s estimated GDP growth to 4.9% for 2017 from a         of 10% and despite the drought and the elections, other    5.5% estimated at the beginning of the year. This is a 90    macroeconomic indicators remained stable. This has    basis points drop from a 5.8% growth recorded in 2016. The   assisted to anchor inflation within the Government target,    expected deceleration in growth is attributed to declining   sustain macroeconomic stability as well as stabilize the    economic activity driven by poor weather in most parts of    exchange rates.    the country with the resultant drought adversely affecting   The 91 Day Treasury bills averaged 8.4% in 2017 from 8.6%    crops and livestock; low credit growth in the private        in 2016. Banks’ average lending rates stood at 13.67 %    sector following the enactment of the interest rate cap in   and deposit rates at 7.46% due to interest rate capping.    September 2016.                                              Private sector growth declined from 4.1% in 2016 to 2.4%10                                                               in 2017, mainly due to reduced credit in agriculture, trade,                                                                 transport, finance & insurance and private households.                                                                 The debt portfolio in Kenya grew by 19.4%, riding on a 23.9%                                                                 growth in external debt, while domestic debt grew 15%.                                                                 External debts accounted for at least 51.44% of the total                                                                 debt while domestic debt was at 48.66%. In the external                                                                 debt portfolio, multi-lateral debt accounted for 35.6%,                                                                 bilateral debt at 33.6% and commercial banks at 29.8%.                                                                 At the end of the year, T-bills accounted for 31.9% of the                                                                 total domestic debt while T-Bonds accounted for 68.1 %.                                                                 Banking institutions held the majority of the government                                                                 debt at 54.6%, pension funds at 27.5%, parastatals at 6.9%                                                                 and insurance companies at 6.4%. Kenya’s debt to GDP ratio                                                                 increased from 42.1% five years ago to 56.4% in 2017.                                                                 The Insurance sector has seen some mergers and acquisitions                                                                 in addition to several global brands entering the market in                                                                 recent years. This is definitely propelled by the industry                                                                 potential in light of the paltry penetration levels. The                                                                 Insurance Regulatory Authority (IRA) celebrated its 10th                                                                 anniversary with widespread publicity aimed at educating                                                                 the public on the necessity of insurance and their rights. We                                                                 believe that for penetration levels to leapfrog, then, there                                                                 is need for collaborated efforts with all the stakeholders                                                                 and implant the idea through the curriculum.                                                                 The IRA has also extended the compliance with Risk Based                                                                 Capital requirements to June 2020 from earlier directives                                                                 to comply by June 2018. This has become as a short term                                                                 relief to many players as it gives room for shareholders                                                                 to reorganise compliance before the due date. The                                                                 implementation of the Risk Based Capital is expected to                                                                 cure some of the highlighted industry and business risks                                                                 through mergers and acquisitions.","CHAIRMAN’S STATEMENT (continued)                                                                                                                                    AANNNNUAUL ARELPORRET PORT                                                                                                                                                                    AANNDDFINFAINNCAIANL CIALEconomy & Business Environment Overview                                                                                                                             SSTTAATETMEEMNTES NTS(continued)                                                                                                                                                         22001717Additionally, the Regulator has issued a number of other      2017 Performance Reviewoperational and management guideline to streamline theindustry towards better management and protection of the      In 2017, we recorded gross premium income of KShs.stakeholders. Our board and management remain vigilant        907Million compared to KShs 725Million in 2016 for thetowards ensuring that the Company is always compliant with    ordinary life and group life insurance lines registering anall the relevant guidelines and regulatory requirements.      impressive growth of 25%. The total revenue including theOn the heels of the three insurance guidelines enacted in     DAP contribution was KShs 1.492 Million (2016: KSh 1.2232017 on Capital Adequacy, Valuation of Technical Provisions,  Million), translating to an overall 22% year on year growth.and Investments Management, IRA has introduced four           The pension line recorded a 17% growth in contributionsnew regulations aimed at operationalizing some of the         from KShs 498 Million in 2016 to KShs 585 Million.sections of the Insurance Act. These regulations are on       The total comprehensive loss stood at KShs 26 Million, (2016:Micro insurance, Takaful, Bancassurance and Group Wide        loss of KShs 83 Million) attributed to better investmentssupervisions and are currently being reviewed by the          experience and tight cost controls during the year. Thestakeholders.                                                 total asset base grew by 18% to stand at KShs 4.68BillionWith more than 50 registered underwriters, the Kenyan         at end of December 2017, up from 3.98 Billion in 2016.insurance market continues to be fraught with unhealthy       Our deposit administration fund maintained a steady growthcompetition leading to undercutting, high levels of           of 20% and surpassed the KSh 3B mark to stand at KShsfraudulent claims, fragmented approach to common              3.12 Billion at end of the year, up from KShs 2.60 Billion inindustry issues and inadequate capacity to underwrite         2016. In consultation with our Statutory Actuary, the Boardspecialised risks like oil & gas and some of the mega         of Directors has approved a reversionary bonus of 4% on theinfrastructure projects                                       “with profit individual life policies” and interest of 9.50%,The motor private class continues to erode the industry       (2016: 7.00%) on deposit administration schemes andprofitability performance with recurring huge underwriting    individual pension plans funds. This was primary occasionedlosses due to unhealthy pricing. The Association of Kenya     better performance of investment income and availableInsurers has finally implemented the long awaited Integrated  for sale investments during the year. The board continuesMotor Insurance Data System (IMIDS) that permits data         to support management new initiatives geared towardssharing and collaboration.                                    improving business efficiency and improving returns to all                                                              stakeholders and we believe that we are on the right trackDirector Appointment                                          and directions.                                                              The Company continues to enjoy the benefits of our fullyAt the beginning of the year 2018, shareholders appointed     integrated life management system that has enabled theMr. Piyush Shah as a member of the Board. Piyush joins the    business to fully automate its operations. The key benefitsAPA family with wealth of experience and the board has        derived from the new system include efficient and moreexpressed confidence in bringing value and diversity within   effective service delivery to our clients and producersthe board. I therefore request the board members and          through self-service client and agent portals. The systemother stakeholders to join me in welcoming Mr. Shah on        is enabling us to fully exploit the opportunities presentedboard and looking forward to fruitful contributions.          in the alternative distribution channels of bancassurance,                                                              mobile platforms and other digital strategies. Through                                                              this service differentiation initiative, we continuously                                                              benchmark our service delivery to the best practices                                                              worldwide which is bearing returns in form of increased                                                              business volume.    We always put our      customers first,that’s why the judges        picked us first                                                              11","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    CHAIRMAN’S STATEMENT (continued)    2017 performance review (continued)                              The implementation of IFRS9 requires insurance companies                                                                     to make full provisions of receivables therefore affecting    As a business we continue to put emphasis on best                the bottom line/profitability of the companies. This calls for    underwriting, claims settlement and management practices.        insurance companies to review their credit policy in order to    Our commitment and success in these initiatives were best        comply with this regulation.    demonstrated and acknowledged on fourth consecutive year         However in 2018, with a wide array of innovative local    by the Industry through the representative body AKI which        insurance market leaders, the Kenyan insurance landscape    awarded us the winner on Group Life Best Loss Ratio, and         has the potential for a sizable expansion of domestic    2nd Runners Up Group Life Company of the Year Award for          market penetration. The country also presents a solid base    2017. Additionally, and in line with our growth initiatives,     for reaching other African markets, which bodes well for    the business continue to improve in all lines and this was       drawing further interest from investors. Kenya plays a role in    acknowledged through an award of 2nd Runners Up - Most           the African Insurance Organization (AIO) and the interaction    Improved Company Award 2017. We will continue to champion        should spur growth in the lager East African market and    these best values within our business practices.                 beyond. With more focus on customer service as a key growth                                                                     factor, 2018 should give a better outcome. Most insurance    Outlook                                                          companies have in the last one or two years realized they                                                                     need to have more focus on the different selling channels and    The 2017 elections were concluded and national peace             so most companies now have a Bancassurance department    maintained. With political uncertainty now diminished and        for example. This should lead to a more focused tailor    a resumption of normal economic activities, we expect a          made approach to innovation of products and subsequent    better 2018.                                                     distribution.    There has been a growing awareness that insurance cannot    maintain the status quo with the rapid change of technology.     Acknowledgement    More and more underwriters have recently taken to digital    marketing with the consciousness that millennials who are        My appreciation to the policy holders, intermediaries and    the majority cannot be served any other way. A number of         our business partners for their support. I wish to thank the    insurance companies have developed innovative products to        management and staff for their commitment, loyalty and    meet the demanding technological shift for the customers.        dedication in driving the Company forward. Finally, I wish    Digital innovation has therefore taken center stage and a        to thank my fellow Directors and record my appreciation for    number of products are now being distributed through mobile      their continued support and considered advice.    apps or on online portals.. We expect this trend to continue    shaping the insurance business into the future, and hopefully    this will help shade off its predominantly conservative image    as it embraces change    The introduction of the risk based capital adequacy supervision  Richard M Ashley    by the insurance regulator, as opposed to the traditional        Chairman    margin of solvency will continue to impact the insurance         15 March 2018    landscape. Different insurers can now hold different levels    of capital depending on their business profiles. There have    been shifts in the market with mergers and realignments as    this comes on the backdrop of the requirement to clearly    separate Long Term business and General Business.12","ANNUAL REPORT                         AND FINANCIAL                         STATEMENTS                         2017APA HOSICARE COVERGood health is a blessing. But for those times whenyour health fails you, we have APA Hosicare. It makessure you continue earning your daily wages in caseyou get hospitalised. With APA Hosicare, you canconcentrate on getting better and living a healthierhappier life.APA, Insuring Happiness  13","ANNUAANLNURAEL PREOPORRTT AND FAINNDAFINNACNICAIALL      STATSETAMTEEMNENTTSS                  20201177 CSTEAOT’SEMENT                                                      The regulator continues to support the industry in                                                                     addressing the challenges facing it. This support has                                            Catherine Karimi         inspired confidence in the market. The fraud unit led by IRA                                            Chief Executive Officer  is a measure to address the fraud challenges. The regulator                                                                     has also continued to offer consumer education and Agents Iam pleased to present the CEO’s report for APA Life                training through the ESOP programmes conducted by IRA      Assurance Ltd for the year ended 31 December 2017.             in various counties throughout the year. These initiatives                                                                     increases awareness and understanding of insurance that is   Insurance Industry                                                key to improved penetration.                                                                     Recent changes in regulatory framework will continue to    The Kenyan Insurance market continues to face numerous           have an impact on the industry landscape going forward.    challenges as well as changes in the bid to address the          The introduction of the risk based capital adequacy    challenges. Despite 2017 being a very economically               supervision by the insurance regulator allow different    challenging year, the insurance industry registered an           insurers to hold different levels of capital depending on    average growth of 6.6% in gross written premium with Life        their risk profiles.    Business registering a higher growth of 13.6% compared to        The implementation of IFRS9, taking effect from January    General Business growth of 2.5%.                                 2018, requires insurance companies to make full provisions14                                                                   of receivables and investments with risk elements. This                                                                     will impact the bottom line (profitability) of companies                                                                     and levels of their capital positions.                                                                     The Economy                                                                     The impact of the 2017 election in the second half of                                                                     the year coupled with a global economic recession have                                                                     brought about a financial and economic slump of a severity                                                                     that has not been experienced since the 2007-2008 post-                                                                     election violence.                                                                     The World Bank scaled down the Kenya economy estimated                                                                     GDP growth for 2017 from 5.5% projected at the beginning                                                                     of the year to 4.9%, the insurance industry was also not                                                                     immuned to this unfavorable trends blowing across the                                                                     country. The Kenyan insurance industry which had grown                                                                     by CAGR of 15% over the past 5 years saw its growth come                                                                     down to 3% during the year.                                                                     The drought like weather conditions in many parts of                                                                     the country and the poor availability of credit from the                                                                     banking sector coupled with the run up to and aftermath of                                                                     a bitterly contested presidential election had its inevitable                                                                     fall out on the economy.                                                                     2017 Business Performance                                                                     Our company’s performance was mixed in this challenging                                                                     environment. The key highlights are listed below.                                                                     • 	 Gross premium income was KShs 907M (2016: 725M)                                                                         registering a positive growth of 25% of the previous                                                                         year.                                                                     • 	 Profit for the year stood at negative KShs 26M (2016:                                                                         Negative KSh83M)                                                                     • 	 Total Assets surpassed KSh 4B to stand at KShs 4.7B                                                                         (2016: KShs3.9).                                                                     • 	 Managed funds (Deposit Administration fund) grew by                                                                         19.76% to close at Kshs 3.115B up from KShs 2.6B the                                                                         previous year                                                                     • 	 Capital Adequacy Ratio was 106% (2016: 86%)                                                                     • 	 Solvency Ratio stood at 127% (2016: 109%)","AANNNNUAUL ARELPORRET PORT                                                                                                 AANNDDFINFAINNCAIANL CIAL                                                                                                 SSTTAATETMEEMNTES NTS                                                                                                 22001717CEO’S STATEMENT (continued)                                     Trainings are conducted through our APA academy, external                                                                facilitators and the newly launched Swiss Re e-learning2017 Business Performance (continued)                           portal.We saw an improved profitability level coming from              Corporate Social Responsibilitybetter costs management and efficient utilization ofavailable resources despite high costs on management and        At APA we understand that we have a responsibility to ourdistribution of our young individual life business which is     society and we have made Corporate Social Responsibilitylargely at its development stage.                               (CSR) an integral part of our business culture. To underlineThe pension fund grew as a result of increased new business     our deep commitment to making a difference in people’sin this line. This growth is backed by the superior customer    lives, we are guided by an existing policy and we commitservice to our customers and partners.                          to a substantial budgetary allocation each year to CSR                                                                initiatives. Our objective remains to support sustainableInitiatives                                                     projects that uplift the standards living for communities                                                                that we partner with for support.We continue to leverage on our new IT system to improveefficiency in our processes and offer superior services to      Outlookour customers. With the system now fully stabilized it’seffectively supporting the growing individual life business.    Having weathered the storms of 2017 successfully, toppedWe are also leveraging on the clients and intermediary          off with a rapprochement between the two bitter politicalportals inbuilt in the system to scale up services and          rivals the nation now looks forward with optimism tointeraction with our customers and agents. Going forward,       2018.we will launch a full-fledged digital strategy in 2018 focusedon enhancing customer experience which includes providing       The government has loosened its purse strings andconvenience as a value in our insurance package.                infrastructure spending is expected to receive a big boost.On the marketing front we have given an added emphasis          Investors who had adopted a wait and watch policy haveto push retail products and tap this segment of the market      started to pump in money in various projects in the privatewhich is where the growth potential for the future lies, the    sector. The outlook of the Kenyan economy going forwardcorporate section having reached saturation.                    appears to be bullish for the near term. The government’sTo this end we have come up with products focusing on           big 4 initiatives will not only give a fillip to the economy butindividual and family cover cross selling combined solutions    also open up opportunities for the insurance sector in thefor life and general and targeting both micro and non-micro     affordable housing and health care initiatives.markets. Through our newly developed micro life productdubbed ‘Kinga Dhabiti’ we are offering an array of life         The insurance industry is going to be severely affected in theinsurance covers through a single policy and at a cost as       medium term though not negatively, by two developments.low as KShs 20 per day.                                         First implementation of risk based capital requirementWe have hosted an APA awards night in Nairobi and Mombasa       which was expected to be implemented in 2018 but has nowto recognize and honour our top performing intermediaries       been deferred to 2020. We were keenly looking forward toin various categories this has elicited a very positive         this since it will not only put an end to the current levelsresponse. Going forward this will be a regular feature of our   of reckless undercutting of premium rates but will alsoevent calendar and we intend to replicate this in Central,      lead to mergers and acquisitions and open up a windowWestern and Eastern regions.                                    of opportunity for us. Secondly the proposed adoption of                                                                IFRS 17 with effect from 1st January 2021 will bring inAchievements, Recognition and Awards                            radical changes from the current recognition of profits and                                                                reporting system.APA participated in the 2017 Annual Think Business InsuranceAwards whose objective is to encourage innovation and           Appreciationexcellence in the Insurance sector by recognizing, awardingand celebrating exemplary performers and successes of           The contributions of APA’s various stakeholders have ensuredthe sector. APA won eleven awards out of the eighteen           that continued strong performance is achieved. These arecategories, scooping five overall winners’ positions,           none other than our business partners, intermediaries andthree 1st runners up positions and three 2nd runners up         customers. I would like to thank you for your continuedpositions.                                                      support and loyalty, which have been instrumental inAPA Life was feted as the best in claims settlement amongst     reinforcing APA’s position as the financial services providerthe Life Insurance Companies.                                   to reckon with in the Kenyan insurance market.In 2017, we also participated in the Association of KenyaInsurers Group Life Best Practice Awards in which APA Life      I would like to appreciate with thanks the board ofwon three awards; scooped Winner in Best Loss Ratio Award       directors for giving me the opportunity to lead this greatand 2nd runners up in both Group Life Company of the Year       company. I also thank all our staff across the country whoAward and Most Improved Company Award.                          continue to show dedication and provide superior serviceIn a service industry like ours, a company is as good as its    to our customers. I would also like to acknowledge withpeople. We at APA firmly adhere to this philosophy and to       appreciation my colleagues in the management and thethis end our company makes a considerable investment            Board directors for their diligence, guidance and supportevery year on training and development of our staff.            that has ensured that we achieved great results during the                                                                year.                                                                Catherine Karimi                                                  15                                                                Chief Executive Officer                                                                15 March 2018","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  CORPORATE  GOVERNANCE STATEMENT    FOR THE YEAR ENDED 31 DECEMBER 2017    Introduction:     Good corporate governance is key to the integrity of corporations, financial institutions and markets and is central to the     health of our economies and their stability. Corporate governance plays a leading role in determining how corporations and     their boards and management are directed, controlled and held to account. Corporate governance therefore encompasses     the systems, practices and procedures by which an individual corporation regulates itself in order to remain competitive,     ethical, sustainable and fair.     The board of APA Life Assurance Limited follows principles of openness, integrity and accountability in its stewardship of the     Company’s affairs. It recognizes the developing nature of corporate governance and assesses the Company’s compliance     with generally accepted corporate governance practice on a regular basis. The role of the board is to ensure compliance     by focusing on and providing the Company’s overall strategic direction and policy-making as well as performance review     through accountability and ensuring appropriate monitoring and supervision. The board is also responsible for the overall     system of internal control and for reviewing its effectiveness. The controls are designed to safeguard the Company’s     assets and also ensure the reliability of financial information. A senior management team, comprising directors and senior     managers meet regularly to consider issues of operational and strategic importance to the Company.     Below are the key features of the existing corporate governance practices within APA Life Assurance Limited:    1	 Board of directors     The board of directors consists of seven non-executive directors of whom three directors are independent. All of the directors     have been appointed in accordance with the provisions of the Insurance Act and the Corporate Governance Guidelines issued     by the Insurance Regulatory Authority. The Chairman of the board is an independent non-executive director. The Board is     responsible for setting the direction of the Company through the establishment of strategic objectives, key policies and the     approval of budgets. It monitors the implementation of strategies and policies through a structured approach to reporting     by executive management and consequent accountability.     The directors are actively involved in and bring strong independent judgment on board deliberations and discussions.     These directors have a wide range of knowledge and experience of local and international markets that is applied to the     formulation of strategic objectives and decision making.     All directors have access to the advice and services of the company secretary who also sits in every committee and board     meetings and are entitled to obtain independent professional advice on Company affairs at the Company’s expense.    2	 Committees of the Board     The Board has constituted various Board Committees. The board and committees draws on the expertise of consultants,     experts and service providers as may be required from time to time.     Each Board Committee has a Charter which contains provisions relating to their powers, membership and duties.     The Board Committees are as follows:     •	 Investment Committee     •	 Audit & Risk Committee     •	 Information Communication Technology Committee and;     •	 Remuneration Committee16","ANNUAL REPORT                                                 AND FINANCIAL                                                 STATEMENTS                                                 2017CORPORATEGOVERNANCE STATEMENT (continued)FOR THE YEAR ENDED 31 DECEMBER 2017 (continued)3	 Internal controlThe Company has implemented and maintains internal controls designed to provide reasonable assurance as to the integrityand reliability of the financial statements and to adequately safeguard and maintain accountability of the Company’s assets.Such controls are based on established policies and procedures and are implemented by trained personnel with appropriatesegregation of duties. The effectiveness of the system of internal controls is monitored regularly through operationalmeetings.4	 Related party transactionsThe related party transactions with the Company during the year ended 31 December 2017 are detailed under note 31 ofthe annual report and financial statements. The remuneration for directors consists of fees and sitting allowances for theirservices in connection with the committee and board meetings.5	 Social and environmental responsibilitiesThe board is conscious of the Company’s social and environmental responsibilities. Particular attention is given to projectswith a long term positive impact to the society and the environment. These include provision of clean drinking water andsponsorship of children education. The Company encourages staff to participate and actively support their various causes.6	 Going concernThe directors have made an assessment of the Company’s ability to continue as a going concern and are satisfied that theCompany has the resources to continue in business for the foreseeable future. Therefore the financial statements continueto be prepared on the going concern basis.Richard Ashley  Ashok ShahChairman        Director	15 March 2018   15 March 2018                                                                                                                              17","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  DIRECTORS’ REPORT    FOR THE YEAR ENDED 31 DECEMBER 2017    The directors submit their report together with the audited financial statements for the year ended    31 December 2017, which disclose the state of affairs of APA Life Assurance Limited (the “Company”).    Business review    The principal activity of the Company is the transaction of long term assurance business.    Results                             Long-term   Shareholders’                                  2017        2016                                          business             funds                               Total       Total     (Loss) / profit before income tax     Shs’000                                             Shs’000     Shs’000                                                            Shs’000                                                                                                           (12,990)                                        (86,505)    26,803                                     (59,702)    Income tax credit /(expense)        (6,643)     - (6,643)                                              (2,180)    (Loss) / profit for the year        (93,148)    26,803                                     (66,345)    (15,170)    Other comprehensive income/ (loss)   36,888     3,307                                      40,195      (67,482)    Total comprehensive (loss) /income  (56,260)    30,110                                     (26,150)    (82,652)    Dividend    The net loss for the year amounting to Kshs 26,150,000 (2016: Shs 82,652,000) has been deducted from retained    earnings. The directors do not recommend payment of dividends (2016: Nil).    Directors    The directors who held office during the year and to the date of this report are set out on page 4.    Disclosure to auditors    The directors confirm that with respect to each director at the time of approval of this report: there was, as far    as each director is aware, no relevant audit information of which the Company’s auditor is unaware; and each    director had taken all steps that ought to have been taken as a director so as to be aware of any relevant audit    information and to establish that the Company’s auditor is aware of that information.    Terms of appointment of auditors    PricewaterhouseCoopers continue in office in accordance with the Company’s Articles of Association and Section    719 of the Kenyan Companies Act, 2015.    		    The directors monitor the effectiveness, objectivity and independence of the auditor. This responsibility in-    cludes the approval of the audit engagement contract and the associated fees on behalf of the shareholders.    By order of the board    Company Secretary    15th March 201818","ANNUAL REPORT                                                                                                                                                                                                                                         AND FINANCIAL                                                                                                                                                                                                                                         STATEMENTS                                                                                                                                                                                                                                         2017STATEMENT OF DIRECTORS’RESPONSIBILITYFOR THE YEAR ENDED 31 DECEMBER 2017The Kenyan Companies Act 2015 requires the directors to prepare financial statements for each financial year which givea true and fair view of the financial position of the Company at the end of the financial year and its profit or loss for theyear then ended. The directors are responsible for ensuring that the Company keeps proper accounting records that aresufficient to show and explain the transactions of the Company; disclose with reasonable accuracy at any time the finan-cial position of the Company; and that enables them to prepare financial statements of the Company that comply with pre-scribed financial reporting standards and the requirements of the Kenyan Companies Act 2015. They are also responsiblefor safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud andother irregularities.The directors accept responsibility for the preparation and presentation of these financial statements in accordance withInternational Financial Reporting Standards and in the manner required by the Kenyan Companies Act 2015. They alsoaccept responsibility for:i.	 Designing, implementing and maintaining internal control as they determine necessary to enable the preparation of 		 financial statements that are free from material misstatements, whether due to fraud or error;ii.	 Selecting suitable accounting policies and then apply them consistently; andiii.	 Making judgements and accounting estimates that are reasonable in the circumstancesIn preparing the financial statements, the directors have assessed the Company’s ability to continue as a going concernand disclosed, as applicable, matters relating to the use of going concern basis of preparation of the financial statements.Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for atleast the next twelve months from the date of this statement.The directors acknowledge that the independent audit of the financial statements does not relieve them of theirresponsibility.Approved by the Board of Directors 15 March 2018 and signed on its behalf by:Daniel Ndonye  Ashok ShahDirector       Director	                                                                               19","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  REPORT OF THE  CONSULTING ACTUARY    FOR THE YEAR ENDED 31 DECEMBER 2017     I have conducted an actuarial valuation of the insurer’s insurance liabilities as at 31 December 2017.     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 2017.     Giles T Waugh, FASSA, FIA     Independent Actuarial Consultant     15 March 201820","ANNUAL REPORT                                                                                                                                                                                                                                           AND FINANCIAL                                                                                                                                                                                                                                           STATEMENTS                                                                                                                                                                                                                                           2017INDEPENDENT AUDITOR’S REPORT TO THESHAREHOLDERS OF APA LIFE ASSURANCE LIMITEDFOR THE YEAR ENDED 31 DECEMBER 2017Report on audit of the financial statementsOpinionWe have audited the accompanying financial statements of APA Life Assurance Limited (the “Company”), set out on pages 32to 71 which comprise the statement of financial position as at 31 December 2017, the statement of comprehensive income,statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accountingpolicies and other explanatory notes.In our opinion, the financial statements give a true and fair view of the financial position of APA Life Assurance Limited at 31December 2017, and of its financial performance and cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards and the requirements of the Kenyan Companies Act, 2015.Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under thosestandards are further described in the Auditor’s responsibilities for the audit of the financial statements section of ourreport.We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code ofEthics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of thefinancial statements in Kenya, and we have fulfilled our ethical responsibilities in accordance with these requirements andthe IESBA Code.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financialstatements of the current period. These matters were addressed in the context of our audit of the Company financialstatements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.	                                                                                                                                                                          21","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  INDEPENDENT AUDITOR’S REPORT TO THE  SHAREHOLDERS OF APA LIFE ASSURANCE LIMITED    FOR THE YEAR ENDED 31 DECEMBER 2017 (continued)    Key audit matter	                                              How our audit addressed the key audit matter    Valuation of policy holder liabilities    The estimation of long term policy holder liabilities was con- Our testing approach included the following proce-    sidered to be a matter of most significance to the audit as: dures with the assistance of our internal actuarial                                                                                         specialists:    Significant judgement is involved in determining the liability Validating the accuracy of the data used by the actu-    because of the inherent uncertainty of future liabilities.     ary by tracing the policyholder valuation input data,                                                                   such as premiums, claims and expense data used in                                                                   the valuation model back to information contained in                                                                   the administration and accounting systems.    Certain assumptions are made in the estimation of this lia- Considering the methodology and assumptions used    bility including mortality rates, expenses, interest rate, and by the appointed actuary to compute the policy hold-    lapses. Qualitative judgment is used to assess the extent to er liabilities and assessing the valuation methods used    which past trends may not apply in future, (for example to against generally accepted actuarial practice and the    reflect one-off occurrences, changes in external or market Insurance Regulatory Authority (IRA) guidelines on    factors as well as internal factors such as portfolio mix, policy valuation of technical liabilities.    conditions and claims underwriting) in order to arrive at the    estimated actuarial liability that presents the likely outcome Comparing that the policy holder liabilities reported    from the range of possible outcomes                            in the financial statements were consistent with the                                                                   results of the independent actuarial valuation.    Other information    The directors are responsible for the other information. The other information comprises the information included in    the annual report but does not include the financial statements and our auditor’s report thereon. Our opinion on the    financial statements does not cover the other information and we do not express any form of assurance conclusion    thereon.    In connection with our audit of the financial statements, our responsibility is to read the other information identified    above and, in doing so, consider whether the other information is materially inconsistent with the financial statements    or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have    performed on the other information, we conclude that there is a material misstatement of this other information, we    are required to report that fact. We have nothing to report in this regard.    Responsibility of the directors for the financial statements    The directors are responsible for the preparation and fair presentation of the financial statements in accordance with    International Financial Reporting Standards and the requirements of the Kenyan Companies Act, 2015 and for such in-    ternal control as the directors determine is necessary to enable the preparation of financial statements that are free    from material misstatement, whether due to fraud or error.    In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a    going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of account-    ing unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative    but to do so.22","ANNUAL REPORT                                                                                                                                                                                                                                           AND FINANCIAL                                                                                                                                                                                                                                           STATEMENTS                                                                                                                                                                                                                                           2017INDEPENDENT AUDITOR’S REPORT TO THESHAREHOLDERS OF APA LIFE ASSURANCE LIMITEDFOR THE YEAR ENDED 31 DECEMBER 2017 (continued)Auditor’s responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assuranceis a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a ma-terial misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individuallyor in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis ofthese financial statements.As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticismthroughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whetherdue to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suf-ficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresen-tations, or the override of internal control.Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclo-sures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that maycast significant doubt on the ability to continue as a going concern. If we conclude that a material uncertainty exists, weare required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such dis-closures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whetherthe financial statements represent the underlying transactions and events in a manner that achieves fair presentation.We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and signifi-cant audit findings, including any significant deficiencies in internal control that we identify during our audit.From the matters communicated with the directors, we determine those matters that were of most significance in the auditof the financial statements of the current period and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circum-stances, we determine that a matter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of such communication.Report on other matters prescribed by the Kenyan Companies Act, 2015In our opinion the information given in the report of the directors on page 18 is consistent with the financial statements. Theengagement partner responsible for the audit resulting in this independent auditor’s report is CPA Richard Njoroge – Practis-ing Certificate No. 1244.Certified Public AccountantsNairobi15 March 2018                                                                                                                                                                          23","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    APA Life Term Assurance    Life is your most valuable asset. With APA Life Term    security for loans. This means that it allows you    invest in what makes you happy so you can create a    better life for you and your loves ones.     APA, Insuring Happiness24","ANNUAL REPORT                                                                                                                                                                                                                                 AND FINANCIAL                                                                                                                                                                                                                                 STATEMENTS                                                                                                                                                                                                                                 2017Akiba HalisiFinancial security is one of the things we all wishfor. It makes us happy to know that our money is inorder. When you save for tomorrow, you are keepingyou and your loved ones' futures safe.APA, Insuring Happiness                                                                                                                                                                    25","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  201726","ANNUAL REPORT                                                                                                                                                                      AND FINANCIAL                                                                                                                                                                      STATEMENTS                                                                                                                                                                      2017ACTS OF KINDNESSBRING HAPPINESSThere is no life without water. The fact is only 3% of the earth’s water is fresh andmore than 1.1 billion people lack access to clean water. This is the reasonAPA takes water conservation very seriously. We have built several dams all overKenya to help the local communities improve their quality of life and happiness.                                                                                                                             27","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  CREOSRPPOONRSAITBEILSITOYCIAL    Ashok Shah - Apollo Group CEO pumping    water from one of the finished wells.    Overview                                                        The group’s corporate social responsibility programs focus                                                                    on four key pillars:    At APA APOLLO we understand that we have a responsibility       1. Sustainable clean water supply to communities    to our society and we have made Corporate Social                2. Empowering the youth    Responsibility (CSR) an integral part of our business culture.  3. Education and health activities    To underline our deep commitment to making a difference         4. Environment conservation.    in people’s lives, we are guided by an existing policy and    we commit to a reasonable budgetary allocation each year        Water conservation    to CSR initiatives.    We play a role in connecting people with each other, with       APA Apollo Foundation is the umbrella Trust that is funded by    other communities and key community services. The               APA/Apollo Group and contributes towards the construction    operation of our services touches on all members of the         of sand dams. The Trust has been in existence since 2006    community with the potential to impact positively on their      and has constructed 17 sand dams in arid and semi-arid    quality of life. We also operate from a significant number      areas of Kenya (Machakos, Makueni and Kajiado).    of properties and have responsibility to those living and       The strategic goal is to enhance food security for all in    working nearby as well as being a significant employer;         society by providing communities in semi-arid areas,    directly employing over 400 staff.                              accessibility to reliable water supply. This is achieved by    Our relationships with the local communities we serve are       the construction of sand dams on dry river beds to harness    therefore very important to us and are an essential part in     the water that only flows during rainy seasons. The water is    the growth of our business. When developing our products        retained in the sand that is deposited behind the dam. An    and processes, we have a role to play in improving services     artisan well with a hand pump is provided for easy access    for the community as a whole and not just our individual        by the community. The natural filtration through the sand    customers.                                                      gives clean drinking water that is used both for agriculture    Our objective remains to support sustainable projects that      and household.    uplift the standards of communities that we partner with    for support.28","CORPORATE SOCIAL RESPONSIBILITY                                                                                                                                     ANNUAL REPORT(continued)                                                                                                                                                         AND FINANCIAL                                                                                                                                                                    STATEMENTS                                                                                                                                                                    2017                                                               The RYSA football team participates in the Nairobi County                                                               league which is under the Football Kenya Federation.                                                               Overall the team is in sixth place in a league of 13 teams.                                                               In addition, APA organizes tournaments for the team in                                                               order to boost and continue to nurture the soccer talents                                                               and positively engage the youth in Mji wa Huruma and                                                               Githongoro villages.Staff at a treeplanting exerciseWith over 5,500 households that required water, the            Environment conservationcommunities partnered with APA staff members and theUtooni Development Organization; a non-government              Our commitment to protecting and conserving theorganisation that specializes in the construction of sand      environment is core to our business and it is our objectivedams and built the three dams that will support these          to plant and maintain at least 1,500 trees every year. Inhouseholds in the long term.                                   partnership with Egerton University, we have created theSome of the key objectives that this project has met           Ngongogeri Park and every year we plant 1,500 seedlingsinclude:                                                       with our staff and Egerton students. We are also key• Enhancing water security for all in the society              partners and sponsors in the annual ‘Run for Mau’ marathon• Increasing accessibility to clean water                      whose main objective is to conserve the mau forest.• Increase in food supply                                      Through the APA Apollo Foundation sand dam projects, we• Reducing commuting for long distance to fetch water for      ask the benefiting communities to plant trees along the                                                               river beds to help curb soil erosion, provide food as well  women and the children                                       as beautifying the landscape. A minimum of 10 trees are• Ensuring that the community at large is able to participate  allocated for planting and maintenance to each household                                                               that benefits from the sand dam.  in other income generating activities as long hours spent    We have also partnered with “Friends of Karura” and  in fetching water have been reduced                          “Greenline Project” to plant trees in both the Karura                                                               forest and Nairobi National park in an effort to curb urbanYouth initiative programmes                                   encroachement.(i) APA / APOLLO bursary fund                                 Environment conservation has also been embraced at                                                               departmental level by the APA staff through the annualThe APA bursary scheme was created to educate the top          departmental CSR activities.achieving boy and girl from Cheleta Primary School andhailing from Githongoro slums in the outskirts of Runda.                  Mina Shah - presenting a cheque toThe bursary fund is currently in its 11th year and has 12                 Vice Chancellor of Egerton Universitystudents in the bursary program whilst 14 have benefitedover the years.                                                                                                                                 29Cheleta School’s overall performance has greatly improvedsince the bursary program was introduced with the meanscore rising to above 50%. This is due to competitionamongst the pupils. The bursary caters for the secondaryeducation tuition, necessary personal effects and also thenon funded university tuition.(ii) Recreation through sportsAPA promotes sporting activities by supporting the RundaYouth Sports Association (RYSA) football team. Thesponsorship includes the fees for RYSA to participate invarious leagues and provides the football kits, for logisticsand team allowances.","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017   APA IMARIKA    Life is full of precious moments that once gone,    can never be relived. This is why you shouldn’t    let your search for money get in the way.    With APA Imarika, you can save towards specific    goals so you can have more time to experience    those precious moments.    APA, Insuring Happiness30","ANNUAL REPORT                                             AND FINANCIAL                                             STATEMENTS                                             2017APA PUMZISHAThe loss of a loved one is hard enoughwithout having to worry about funeralexpenses. The APA Pumzisha cover willtake care of all funeral expenses, allowingyour loved ones to grieve in peace.APA, Insuring Happiness                                             31","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017STATEMENT OFCOMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2017                                                      Notes Long term                 Shareholders’        2017       2016                                                                   business                      funds      Total      Total                                                                    Shs’000                             Shs’000    Shs’000                                                                                              Shs’000INCOME                                                3 907,579                       - 907,579 725,263Gross premium income earned                                    (548,176)              - (548,176) (386,487)Reinsurance premium cededNet earned premium                                           359,403                  - 359,403 338,776Investment income                                     4 376,449                       37,543            413,992    310,222Commissions earned                                               113,745                     -          113,745     76,542Total income                                                    849,597               37,543 887,140 725,540OUTGO                                                 5 (568,720)                               -       (568,720)  (376,333)Claims and policyholders’ benefits                    6 (223,025)                     (10,740)          (233,765)  (235,189)Operating and other expenses                                                                            (144,357)  (127,008)Commissions payable                                            (144,357)                        -Total claims and expenses                                    (936,102)                (10,740) (946,842) (738,530)Profit / (loss) before income tax                                 (86,505)            26,803 (59,702) (12,990)Income tax credit /(expense)                          8(a) (6,643)                            - (6,643) (2,180)Profit / (loss) for the year                                 (93,148)                 26,803 (66,345) (15,170)OTHER COMPREHENSIVE INCOME; NET OF TAXItems that may be reclassified subsequently to         12    23,919                        9            23,928     (48,510)profit or loss:                                        13           -                       -                  -   (11,744)-fair value gain /(loss) from quoted equities         17(b)                           3,298-fair value gain /(loss) on unquoted equities                12,969                                     16,267      (7,228)-fair value gain /(loss) on government securitiesTotal other comprehensive income (loss) for the year         36,888                   3,307 40,195 (67,482)Total comprehensive (loss) /income                           (56,260)                 30,110 (26,150) (82,652)Appropriated as follows:                                                -               3,307              3,307      (5,701)-To revaluation reserves                                                -             26,803              26,803      24,259-To retained earnings                                        (56,260)                                   (56,260)   (101,210)-To statutory reserves                                                                        -                                                             (56,260)                                   (26,150) (82,652)Total comprehensive income                                                            30,110     The notes on pages 36 to 71 form an integral part of these financial statements32","ANNUAL REPORT                                                                                                                AND FINANCIAL                                                                                                                STATEMENTS                                                                                                                2017STATEMENT OFFINANCIAL POSITIONAS AT 31 DECEMBER 2017ASSETS                                                                           Notes         2017          2016Intangible asset                                                                           Shs’000       Shs’000Motor vehicle and equipment                                                        10Investment properties                                                               9        10,367                Quoted equity investments - available for sale                                     11        13,176        15,550Unquoted equity investments                                                        12       273,000        14,361Life policy loans                                                                  13       195,119       313,000Investment in unit trusts                                                                                 349,411Reinsurers’ share of insurance liabilities                                         14          8,970Receivables arising from direct insurance arrangements                             15          2,240         8,970Current income tax                                                                           15,729          2,055Other receivables                                                                 8(b)      124,546        15,209Government securities - held to maturity                                           16        75,358        73,493                                                                                 17(a)       13,690        49,888                               - available for sale                              17(b)       44,450        13,179Commercial paper and corporate bonds                                               18    2,618,122         44,380Deposits with financial institutions                                               19       658,058    1,669,838Cash and bank balances                                                                      185,116       733,221Total assets                                                                       20       423,327       145,459                                                                                             21,492       448,090EQUITY AND RESERVES                                                                21   4,682,760          83,313Share capital                                                                                         3,979,417Investment revaluation reserve                                                     22Retained earnings                                                                         550,000      450,000Total shareholders’ funds                                                                    7,412        4,105Statutory reserve                                                                                        (134,466)     (89,450)Total shareholders’ funds and statutory reserves                                         422,946      364,655                                                                                           23,399         7,840                                                                                         446,345      372,495LIABILITIES                                                                      23     984,800       862,532Insurance contract liabilitiesPayables under deposit administration contracts                                  25     3,115,339     2,601,453Payables arising from reinsurance arrangementsOther payables                                                                          22,297        51,437Deferred income taxTotal liabilities                                                                26     103,952       88,116Total equity and liabilities                                                     27     10,027        3,384                                                                                        4,236,415     3,606,922                                                                                        4,682,760     3,979,417The financial statements on pages 32 to 71 were approved and authorised for issue by the board of directors on15 March 2018 and were signed on its behalf by:Daniel Ndonye						Ashok ShahDirector	                                               Director	The notes on pages 36 to 71 form an integral part of these financial statements                                                                                                                     33","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    STATEMENT OF    CHANGES IN EQUITY    FOR THE YEAR ENDED 31 DECEMBER 2017                                                 Invest-                                                         Total Share-                                              ment Re-                                          Total            holder and                                   Share     valuations   Retained  Proposed            Sharehold-     Statutory statutory                                 capital                  earnings  dividends            ers’ funds    reserves  reserve                                Shs’000         Shs’000    Shs’000                                     Shs’000   Shs’000                                                                      Shs’000               Shs’000    Balance as at               450,000      9,806 (23,709)                          -  436,097        19,050    455,147     1 January 2016                        -    Total comprehensive in-                  (5,701)      24,259                     -  18,558 (101,210)         (82,652)    come for the year                                                                                              Transfer from shareholders            -         - (90,000)                       -  (90,000)       90,000    -    to long-term business                                                                                                                                                                                      Balance as at 31            450,000      4,105 (89,450)    December 2016                                                                    - 364,655         7,840     372,495    Balance as at               450,000      4,105 (89,450)                          - 364,655         7,840     372,495    1 January 2017    Issue of new shares         100,000            -             -                   - 100,000         - 100,000    Total comprehensive in-              -   3,307        26,803    come for the year                                                                -  30,110 (56,260)          (26,150)    Transfer from shareholders  -            - (71,819)                              -  (71,819)       71,819    -    to long-term business    Balance as at 31            550,000      7,412 (134,466)                         -  422,946        23,399    446,345    December 2017    The notes on pages 36 to 71 form an integral part of these financial statements34","ANNUAL REPORT                                                                                                               AND FINANCIAL                                                                                                               STATEMENTS                                                                                                               2017STATEMENT OF                                     Notes                               2017         2016CASH FLOWS                                       28 (a)                          Shs’000      Shs’000FOR THE YEAR ENDED 31 DECEMBER 2017                 4                                                                                                     8 (b)                           109,071      189,178  Cash flows from operating activities                                            367,448      277,838  Cash generated from operations                                                                (1,513)  Interest received                                                                  (511)  Tax paid                                          9                                         465,503                                                                                 476,008  Net cash inflow from operating activities        11                                                   12                               (4,371)        (4,414)  Cash flows from investing activities                                                   465                -  Purchase of equipment                                Proceeds from disposal of fixed assets           20                              253,983        250,842  Proceeds from disposal of quoted shares                                           47,000                  -  Proceeds from disposal of investment property        Purchase of quoted shares                                                       (75,969)        (31,366)  Net investment in unit trusts                                                       (520)         17,531  Net policy loans recovered/(advanced)          28 (b)                               (185)             376  Net investment in corporate bonds                                                                   4,470  Net investment in government securities                                         (39,657)                                                                                 (843,338)    (1,147,900)  Net cash outflow from investing activities                                                                                 (662,592)    (910,461)  Cash flows from financing activities  Issue of new shares                                                             100,000                 -                                                                                 100,000                  -  Net cash inflow from financing activities                                      (86,584)     (444,958)  Decrease in cash and cash equivalents                                           531,403       976,361                                                                                 (86,584)     (444,958)  Movement in cash and cash equivalents :  At start of year                                                               444,819       531,403  Decrease during the year     At end of yearThe notes on pages 36 to 71 form an integral part of these financial statements                                                                                                               35","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  ACCOUNTING  POLICIES     1 Summary of significant accounting policies      		      The principal accounting policies adopted in the preparation of these financial statements are set out below:     (a) Basis of preparation      		           The financial statements of APA Life Assurance Limited have been prepared in accordance with International Financial           Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS.           The financial statements have been prepared under the historical cost convention, except for investment properties,           investments in unit trusts and available-for-sale financial assets 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 management to exercise its judgment in the process of applying the Company’s accounting policies. The           areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to           the financial statements are disclosed in note 1 (t).     (b) Changes in accounting policy and disclosures           i) New and amended standards adopted by the Company           	 The following standards and amendments have been applied by the Company for the first time for the financial year              beginning 1 January 2017:           	 Amendments to IAS 7; Effective 1 January 2017, entities will be required to explain changes in their liabilities arising              from financing activities. This includes changes arising from cash flows (e.g. drawdowns and repayments of borrow-              ings) and on cash changes such as acquisitions, disposals, accretion of interest and unrealized exchange differences.              Changes in financial assets must be included in this disclosure if the cash flows were, or will be included in cash flows              from financing activities. This could be the case, for example, for assets that hedge liabilities arising from financing              liabilities.	 Entities may include changes in other items as part of this disclosure, for example, by providing a net debt              reconciliation. However, in this case the changes in other items must be disclosed separately from the changes in li-              abilities arising from financing activities. The information may be disclosed in tabular format as a reconciliation from              opening and closing balances, but a specific format is not mandated.           	           	 Amendments to IAS 12: Income taxes, Recognition of deferred tax assets for unrealised losses – effective 1 January              2017. The amendment was issued to clarify the requirements for recognising deferred tax assets on unrealised losses.              The amendment clarifies the accounting for deferred tax where an asset is measured at fair value and that fair value is              below the asset’s tax base. It also clarifies certain other aspects of accounting for deferred tax assets. The amendment              clarifies the existing guidance under IAS 12. It does not change the underlying principles for the recognition of deferred              tax assets.           	 The adoption of these amendments did not have any material impact on the current period or any prior period and is              not likely to affect future periods.           (ii) New standards and interpretations issued but not yet effective for 31 December 2017 year-end           The Company has not applied the following new and revised standards and interpretations that have been published but           are not yet effective for the year beginning 1 January 2017.           •	 IFRS 9 Financial Instruments (issued in July 2014) – This standard will replace IAS 39 (and all the previous versions of              IFRS 9) effective for annual periods beginning on or after 1 January 2018. It contains requirements for the classification              and measurement of financial assets and financial liabilities, impairment, hedge accounting and derecognition:           •	 IFRS 9 requires all recognised financial assets to be subsequently measured at amortised cost or fair value (through              profit or loss or through other comprehensive income), depending on their classification by reference to the business              model within which they are held and their contractual cash flow characteristics.36","ANNUAL REPORT                                                                                                                                                                                                                                         AND FINANCIAL                                                                                                                                                                                                                                         STATEMENTS                                                                                                                                                                                                                                         2017ACCOUNTINGPOLICIES (continued)    1. Summary of significant accounting policies (continued)    b) Changes in accounting policy and disclosures (continued)     (ii) New standards and interpretations issued but not yet effective for 31 December 2017 year-end (continued)     •	 For financial liabilities, the most significant effect of IFRS 9 relates to cases where the fair value option is taken:     	 the amount of change in fair value of a financial liability designated as at fair value through profit or loss that is attrib-        utable to changes in the credit risk of that liability is recognised in other comprehensive income (rather than in profit        or loss), unless this creates an accounting mismatch.     •	 For the impairment of financial assets, IFRS 9 introduces an “expected credit loss” model based on the concept of pro-        viding for expected losses at inception of a contract; it will no longer be necessary for there to be objective evidence        of impairment before a credit loss is recognised.     •	 For hedge accounting, IFRS 9 introduces a substantial overhaul allowing financial statements to better reflect how risk        management activities are undertaken when hedging financial and non¬financial risk exposures.     •	 The derecognition provisions are carried over almost unchanged from IAS 39.     	 APA Life Assurance Limited has done the assessment of IFRS 9’s full impact and expect the following impact on imple-        mentation:     	 The standard will affect the classification and measurement of financial assets held as 1 January 2018 as follows:     •	 Equity investments - the Company holds quoted and unquoted equities as available for sale through other comprehen-        sive income. The intention is to continue to be measured at Fair value though other comprehensive income (FVTOCI).     •	 Government Securities classified as available-for-sale investments carried at fair value are held with a business model        whose objective is to collect contractual cash flows and selling the instruments in the open market. The directors        intention is to continue measuring these instruments at FVTOCI upon the application of IFRS 9,     •	 Government securities, Commercial Paper Corporate Bonds and Life policy loans are held to maturity with a business        model whose objective is to collect contractual cash flows by sole payments of principal and interest. The intention is        to measure these at amortised cost under IFRS 9.     •	 Receivables arising out of direct insurance and reinsurance arrangements will continued to be measured at FVTPL un-        der IFRS 9.     	 Financial assets measured at amortized cost under IFRS 9 will be subject to the impairment provision of     	 IFRS 9.     	 The Company will apply the simplified approach to recognize lifetime expected credit losses for its receivables aris-        ing out of direct and reinsurance arrangements and Life policy loans. Government Securities, Deposits with financial        institutions and Commercial papers and corporate bonds are considered to have low credit risk and hence expect to        recognize 12-month expected credit losses for these items.     	 The Company will apply the new rules retrospectively from 1 January 2018. Comparatives for 2017 will not be restated,        the impact of the implementation will be adjusted in the opening retained earnings. Initial assessment shows that im-        pact of impairment charges will be between 4% and 8% of the total value of closing retained earnings as of 31 December        2017.     •	 Amendments to IFRS 4 Insurance Contracts (issued in September 2016) - The amendments, applicable to annual peri-        ods beginning on or after 1 January 2018, include a temporary exemption from IFRS 9 for insurers that meet specified        criteria and an option for insurers to apply the overlay approach to designated financial assets.     •	 IFRS 17 Insurance Contracts (issued in May 2017) - establishes principles for the recognition, measurement, presenta-        tion and disclosure of insurance contracts issued. It also requires similar principles to be applied to reinsurance con-        tracts held and investment contracts with discretionary participation features issued. The objective is to ensure that        entities provide relevant information in a way that faithfully represents those contracts     •	 IFRS 16 Leases (issued in January 2016) - The new standard, effective for annual periods beginning on or after 1 Janu-        ary 2019, introduces a new lessee accounting model, and will require a lessee to recognise assets and liabilities for all        leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee will be required to                                                                                                                                                                         37","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  ACCOUNTING  POLICIES (continued)         1. Summary of significant accounting policies (continued)         (b) changes in accounting policy and disclosures (continued)           (ii) New standards and interpretations issued but not yet effective for 31 December 2017 year-end (continued)              recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing              its obligation to make lease payments.           •	 IFRS 15 Revenue from Contracts with Customers (issued in May 2014) - The new standard, effective for annual periods              beginning on or after 1 January 2018, replaces IAS 11, IAS 18 and their interpretations (SIC-31 and IFRIC 13, 15 and 18).              It establishes a single and comprehensive framework for revenue recognition to apply consistently across transactions,              industries and capital markets, with a core principle (based on a five-step model to be applied to all contracts with              customers), enhanced disclosures, and new or improved guidance.           •	 IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for report-              ing 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 can 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 2018 and earlier application is permitted. The Company’s main activity              is insurance (underwriting individual life and super annuation) business.           	 Insurance contracts are excluded from the scope of IFRS 15. Consequently, the impact of IFRS 15 to the Company will              not be significant.                       •	 Amendment to IFRS 1 (Annual Improvements to IFRSs 2014–2016 Cycle, issued in December 2016) - The amendment,              applicable to annual periods beginning on or after 1 January 2018, deletes certain short-term exemptions and removes              certain reliefs for first-time adopters.           •	 Amendments to IAS 40 titled Transfers of Investment Property (issued in December 2016) – The amendments, applicable              to annual periods beginning on or after 1 January 2018, clarify that transfers to or from investment property should be              made when, and only when, there is evidence that a change in use of property has occurred.           	 The Directors do not plan to apply any of the above until they become effective. Based on their assessment of the po-              tential impact of application of the above, with the exception of IFRS 9, IFRS 16 and IFRS 17, they do not expect that              there will be a significant impact on the Company’s financial statements. There are no other standards that are not yet              effective that would be expected to have a material impact on the entity in the current or future reporting periods              and on near future transactions           	 There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material              impact on the Company.     (c) Revenue recognition      		           	 For long term insurance business, premiums are recognised as revenue when they become payable by the policyholder.              For single premium business, revenue is recognised on the date on which the policy is effective. Premiums are shown              before deduction of commission.           	 Commissions receivable are recognised as income in the period in which they are earned.           	 Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset.           	 Dividends receivable are recognised as income in the period in which the right to receive payment is established.           	 Rental income from operating leases is recognised on a straight line basis over the term of the lease.38","ANNUAL REPORT                                                                                                                                                                                                                                         AND FINANCIAL                                                                                                                                                                                                                                         STATEMENTS                                                                                                                                                                                                                                         2017ACCOUNTINGPOLICIES (continued)1. Summary of significant accounting policies (continued)(d) Claims incurred	   	 Claims and policyholders’ benefits payable comprise claims paid in the year and changes in the provision for insurance      contract liabilities. Claims are recorded as an expense when they are incurred. Claims arising on maturing policies are      recognised when the claims becomes due for payment. Death claims are accounted for on notification while surrenders      are accounted for on payment.(e) Deposit administration contracts      The Company administers the funds of a number of retirement benefit schemes. The Company’s liabilities in relation to      these schemes have been treated as payables in the statement of financial position. The liabilities with respect to the      deposit administration contracts are determined by the Consulting Actuary on an annual basis.		(f) Insurance contract liabilities      The Company issues contracts that transfer insurance risk or financial risk or both. Insurance contracts are those con-      tracts that transfer significant insurance risk. Such contracts may also transfer financial risk. As a general guideline, the      Company defines as significant insurance risk the possibility of having to pay benefits on the occurrence of an insured      event that are at least 10% more than the benefits payable if the insured event did occur.      Insurance contract liabilities represent the estimated ultimate cost of settling all claims arising from incidents occurring      prior to the end of the reporting period, but not settled at that date. Insurance contract liabilities 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      intimated but not paid. Insurance contract liabilities are not discounted.(g) Reinsurance	       The Company 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 rein-       surance were considered direct business. Premiums ceded and claims reimbursed are presented on a gross basis in profit       and loss 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 Company 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 Company will receive from the reinsurer. The       impairment loss is recognised in the profit or loss.       		       Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. The Company also       assumes reinsurance risk in the normal course of business for life insurance and non-life insurance contracts where       applicable.       Reinsurance assets or liabilities are derecognized when the contractual rights are extinguished or expire or when the       contract is transferred to another party. 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 com-       panies. Amounts payable are estimated in a manner consistent with the related reinsurance contract.                                                                                                                                                                         39","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    ACCOUNTING    POLICIES (continued)    1. Summary of significant accounting policies (continued)    (h) Equipment    		         All equipment are initially recorded at cost less depreciation and any accumulated impairment losses. The useful lives         used in determining depreciation charge are:    Computer equipment 	 			  	 3 years    Motor vehicles 	 				                                4 years    Furniture fittings and equipment 			                 8 years    		    The residual values of items of equipment and their estimated useful lives are reviewed at the reporting date and    adjusted if appropriate. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is    written down immediately to its recoverable amount.    Gains and losses on disposal of property and equipment are determined by reference to their carrying amounts.    (i) Intangible assets – Computer software         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 five years.    	    (j) Investment properties         Investment properties comprises land and buildings held to earn rentals and/or for capital appreciation. They are         carried at fair value, determined at the reporting date by valuation experts with experience and knowledge of the lo-         cations where the properties are located. Fair value is based on active market prices as adjusted, if necessary, for any         difference in the nature, condition or location of the specific asset.         Investment properties are not subject to depreciation. Changes in their carrying amount between end of reporting peri-         ods are dealt with, through profit or loss for the year. Upon disposal of an investment property, the difference between         the net disposal proceeds and the carrying amount is charged or credited to profit or loss for the year.    		    (k) Financial Instruments    Financial Assets    The Company classifies its financial assets into the following categories: financial assets at 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 investment depends on the purpose for which the investment was acquired. Management de-    termines the classification of its investments at initial recognition and re-evaluates this at every reporting period end.    i) Financial assets at fair value through profit or loss (“FVTPL”)    This category has two sub-categories: financial assets held for trading and those designated at fair value through profit    or loss at inception. A financial asset is classified into this category at inception if acquired principally for the purpose    of selling in the year, if it forms part of a portfolio of financial assets in which there is evidence of profit-taking or if so    designated by management.    ii) Loans and receivables    Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in    an active market. Receivables arising from insurance contracts are also classified in this category and are reviewed for    impairment as part of the impairment review of loans and receivables.40","ANNUAL REPORT                                                                                                                                                                                                                                         AND FINANCIAL                                                                                                                                                                                                                                         STATEMENTS                                                                                                                                                                                                                                         2017ACCOUNTINGPOLICIES (continued)1. Summary of significant accounting policies (continued)(k) Financial Instruments (continued)     iii) Held-to-maturity financial assets continued       	 Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed          maturities – other than those that meet the definition of loans and receivables – that the Company’s management has          the positive intention and ability to hold to maturity.     iv) Available-for-sale financial assets      	 This classification represents financial assets that are not (a) financial assets at fair value through profit or loss, (b)         loans and receivables, or (c) financial assets held to maturity.	     Recognition of financial assets     Financial assets are initially recognised cost plus transaction costs. Available-for-sale financial assets and financial assets     at fair value through profit or loss are subsequently carried at fair value. Loans and receivables     and held-to-maturity investments are carried at amortized cost using the effective interest method. Gains and losses     arising from changes in the fair value of “financial assets at fair value through profit or loss” are dealt with in the profit     or loss in the period in which they arise. Gains and losses arising from changes in the fair value of available-for-sale     financial assets are recognised through other comprehensive income and accumulated under a separate heading of fair     value reserve in the statement of changes in equity, until the financial asset is derecognized or impaired, at which time     the cumulative gain or loss previously recognised through other comprehensive income is recognised in the profit or loss     for the year.     Effective interest method     The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest     income over the relevant period. The effective interest rate is the rate that exactly discounts estimated cash receipts     including all fees, transaction costs and premiums or discounts through the expected life of the financial asset, or, where     appropriate, a shorter period.     Impairment of financial assets     Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each     reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events     that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have     been impacted.     Objective evidence of impairment for receivables could include the Company’s past experience of collecting payments,     an increase in the number of delayed payments past the average credit period as well as observable changes in national     or local economic conditions that correlate with default on receivables The carrying amount of the financial asset is re-     duced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying     amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is     written off against the allowance account. Subsequent recoveries of amounts previously written off are recognized as     income in the profit and loss account. Changes in the carrying amount of the allowance account are recognised in profit     or loss.     Derecognition of financial assets     The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire;     orit transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If     the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control     the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts     it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial     asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the     proceeds received.     Financial liabilities and equity instruments issued by the company     Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of     the contractual arrangement.                                                                                                                                                                         41","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  ACCOUNTING  POLICIES (continued)     1. Summary of significant accounting policies (continued)     (k) Financial Instruments (continued)              Classification as debt or equity           	 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 Company are recorded at the proceeds received, net of direct issue              costs.              Financial liabilities           	 Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are sub-              sequently measured at amortized cost using the effective interest method, with interest expense recognised on an              effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial lia-              bility and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly              discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate,              a shorter period.              Derecognition of financial liabilities           	 The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, can-              celled or they expire.           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 Company 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 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 categorized 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.           • 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).           • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or lia-              bility that are not based on observable market data (unobservable inputs).           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.42","ANNUAL REPORT                                                                                                                                                                                                                                         AND FINANCIAL                                                                                                                                                                                                                                         STATEMENTS                                                                                                                                                                                                                                         2017ACCOUNTINGPOLICIES (continued)1. Summary of significant accounting policies (continued)(l) Translation of foreign currencies     (i) Functional and presentation currency     Items included in the financial statements of each of the Company’s entities are measured using the currency of the     primary economic environment in which the entity operates (the ‘functional currency’).The financial statements are     presented in Kenya shillings rounded to the nearest thousand (“Shs”), which is the Company’s presentation currency.     (ii) Transactions and balances     Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the     dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from     the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabil-     ities denominated in foreign currencies are recognised in profit or loss, except when deferred in other comprehensive     income as qualifying cash flow hedges and qualifying net investment hedges.     Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the state-     ment of profit or loss within finance income or costs’. All other foreign exchange gains and losses are presented in the     statement of profit or loss within other (losses)/gains.	(m) Accounting for leases 	 Leases of assets where a significant proportion of the risks and rewards of ownership are retained by the Company as a      lessee are classified as finance leases. All other leases are classified as operating leases. Payments made under oper-      ating leases are charged to profit or loss for the year on the straight-line basis over the term of the lease.	(n) Employee entitlements 	 Employee entitlements to long service awards are recognised when they accrue to employees. A provision is made for      the estimated liability for such entitlements as a result of services rendered by employees up to the reporting date. The      estimated monetary liability for employees’ accrued annual leave entitlement at the reporting date is recognised as an      expense accrual.	(o) Income tax expense 	 Income tax expense is the aggregate amount charged/(credited) in respect of current income tax and deferred income      tax in determining the profit or loss for the year. Tax is recognised in the 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.	     Current income 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.     Deferred income tax asset     	   	 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 nor 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 realized 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 utilized.                                                                                                                                                                         43","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017  ACCOUNTING  POLICIES (continued)     1. Summary of significant accounting policies (continued)     (p) Retirement benefit obligations         	 The Company operates a defined contribution scheme for its employees. The assets of the scheme are held in a separate            trustee administered fund, which is funded from contributions from both the Company and employees. Contributions            are determined by the rules of the scheme.         	 The Company also contributes to the statutory defined contribution pension scheme, the National Social Security Fund            (NSSF). Contributions to this scheme are determined by local statute. The Company’s obligations to these schemes are            charged to profit or loss in the year they fall due.     (q) Dividend distribution         	 Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the year            in which the dividends are approved by the shareholders.     (r) 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.     (s) Bonus stabilisation reserve       	 The bonus stabilisation reserve represents amount of surplus set aside to allow for smoothening of return of interest          declaration for the deposit administration schemes based on the recommendation of the independent       	 actuarial consultant.      	     (t) Critical accounting judgements and key sources of estimation uncertainty       	 In the process of applying the Company’s accounting policies, management has made estimates and assumptions that          affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continu-          ally evaluated and are based on historical experience and other factors, including expectations of future events that are          believed to be reasonable under the circumstances.       	 (i) Critical judgements in applying companies accounting policies          The key areas of judgment in applying the Company’s accounting policies are dealt with as follows:       	 Future benefit payments from long-term insurance contracts       	 The estimation of future benefit payments from long-term insurance contracts is one of the Company’s most critical ac-          counting estimates. There are several sources of uncertainty that need to be considered in the estimate of the liability          that the Company will ultimately pay for such claims.44","ANNUAL REPORT                                                                                                                                                                                                                                         AND FINANCIAL                                                                                                                                                                                                                                         STATEMENTS                                                                                                                                                                                                                                         2017ACCOUNTINGPOLICIES (continued)1. Summary of significant accounting policies (continued) (t) Critical accounting judgements and key sources of estimation uncertainty (continued)     	 The determination of the liabilities under long-term insurance contracts is dependent on estimates made by the Com-        pany. Estimates are made as to the expected number of deaths for each of the years in which the Company is exposed        to risk. The Company bases these estimates on standard mortality tables that reflect historical mortality experience.        The estimated number of deaths determines the value of the benefit payments and the value of the valuation premi-        ums. The main source of uncertainty is that epidemics such as AIDS could result in future mortality being significantly        worse than in the past for the age Company’s in which the Company has significant exposure to mortality risk.      	 However, continuing improvements in medical care and social conditions could result in improvements in longevity in        excess of those allowed for in the estimates used to determine the liability for contracts where the Company is ex-        posed to longevity risk. For contracts without fixed terms and with discretionary participation in profits, it is assumed        that the Company will be able to increase mortality risk charges in future years in line with emerging mortality expe-        rience. Estimates are also made as to future investment income arising from the assets backing long-term insurance        contracts. These estimates are based on current market returns as well as expectations about future economic and        financial developments. The average estimated rate of investment return is 12.0%p.a. (2015: 12.00% p.a)     	 Held-to-maturity investments        The Company follows the guidance of IAS 39 in classifying non-derivative financial assets with fixed or determinable        payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this        judgement, the company evaluates its intention and ability to hold such investments to maturity. If the Company        fails to hold these investments to maturity other than for the specific circumstances - for example, selling more than        an insignificant amount close to maturity - it will be required to reclassify the entire class as available-for-sale. The        investments would therefore be measured at fair value and not at amortized cost.    	 Key sources of estimation uncertainty     	 Impairment losses     	 At the reporting date, the Company 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. Where it is not        possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of        the cash generating unit to which the asset belongs.     	 Equipment     	 Critical estimates are made by the Company’s directors, in determining depreciation rates and useful lives for        equipment                                                                                                                                                                         45","We always putour customers first,that’s why the judgespicked us first.APA is the Most Awarded Insurerat the 2017 Annual Insurance Awards.Winner                             1st Runners Up                 2nd Runners Up• Best in Claim Settlement (Life)  •Best in Product Marketing     •Best in Claim Settlement (General)• Fraud Detection & Protection     •Best in Product Innovation• Major Loss Award                 •Best Insurance in Use         •Risk Management Award• Training Award                                                  •Socially Responsible Corporate• Best in Customer Satisfaction     of Technological Application Index     46","ANNUAL REPORT                                  AND FINANCIAL                                  STATEMENTS                                  2017APA ELIMUGood education comes at aprice. The APA Elimu coverallows you to build an educationfund for your children, allowingyou to secure a happy futurefor them.APA, Insuring Happiness                                  47","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017 NOTES TO THE FINANCIAL STATEMENTS         1 Incorporation and registered office           	 APA Life Assurance Limited is a limited liability company incorporated in Kenya under the Kenyan Companies Act and              domiciled in Kenya. The parent company, which is the ultimate holding company is Apollo Investments Limited which is              incorporated in Kenya. The address of its registered office is 07Apollo Centre, Ring Road Parklands, Westlands, Nairobi.           	         2 Risk management objectives and policies              The Company’s activities expose it to a variety of risks, including insurance risk, financial risk, credit risk, and the ef-              fects of changes in property values, debt and equity market prices, foreign currency exchange rates and interest rates.              The Company’s overall risk management programme focuses on the identification and management of risks and seeks              to minimize potential adverse effects on its financial performance, by use of underwriting guidelines and capacity              limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval              of intermediaries and reinsurers. Investment policies are in place which help manage liquidity, and seek to maximize              return within an acceptable level of interest rate risk. The Company manages key risks as follows:         2.1 Insurance risk management           	 The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the              amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpre-              dictable.           	 For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the prin-              cipal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed              the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and              benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and              benefits will vary from year to year from the level established using statistical techniques. Experience shows that the              larger the portfolio of similar insurance contracts, the smaller the relative variability of the expected outcome will be.              In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the              portfolio.           	 The Company has developed its insurance underwriting and investment strategy to diversify the type of risks accept-              ed and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of              the expected outcome. Factors that aggravate insurance risk include lack of risk diversification in terms of type and              amount of risk, geographical, local and type of industry covered.           	 The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks              to minimize potential adverse effects on the Company’s financial performance. It manages these positions within              an asset-liability management (ALM) framework that has been developed to achieve investment returns in excess of              obligations under insurance contracts. The Company produces regular reports at portfolio, legal entity and asset and              liability class level that are circulated to the Company’s key management personnel. The principal technique of the              Company’s ALM framework is to match assets to the liabilities arising from insurance contracts by reference to the              type of benefits payable to contract holders. Separate portfolios of assets are maintained for with-profit business, non-              linked non-profit business, and unit-linked business. For the purposes of the ALM framework, the Company does not              manage the fund for future appropriations as a liability. The Company’s ALM is also integrated with the management              of the financial risks associated with the Company’s other financial assets and liabilities not directly associated with              insurance and investment liabilities. The Company does not use hedge accounting.           	 The Company has not changed the processes used to manage its risks from previous periods. The notes below explain              how insurance risks are managed using the categories utilized in the Company’s ALM framework.48","ANNUAL REPORT                                                                          AND FINANCIAL                                                                          STATEMENTS                                                                          2017NOTES TO THEFINANCIAL STATEMENTS (continued)2.1 Insurance risk management (continued)The Company engages in long-term insurance contracts and funds the insurance liabilities with a portfolio of equityand debt securities exposed to market risk. An analysis of the Company’s financial assets and its long term insuranceliabilities is presented below:Financial assets                                               2017              2016Debt securities:                                           Shs’000           Shs’000- Government securities - held to maturity-  Government securities - available for sale                                          - Commercial paper & corporate bonds                     2,618,122         1,669,838- Investment in unit trustsEquity securities:- listed                                  658,058           733,221                                                            185,116           145,459                        - unlistedReceivables from reinsurance share of liability              15,729            15,209Receivables arising from direct insurance arrangements      195,119           349,411Other receivablesLife policy loans                                              8,970             8,970Deposits with financial institutions                        124,546            73,493Cash and bank balances                                                         49,888                                                             75,358            44,380Total                                                        44,450                                                                                 2,055                                                               2,240          448,090                                                            423,327                                                                               83,313                                                             21,492                                                                          3,623,327                                                        4,372,527Financial liabilities                                       984,800           862,532Insurance contracts liabilities                          3,115,339         2,601,453Payable under deposit administration contractsPayables arising from reinsurance contracts                  22,297            51,437Total                                                   4,122,436         3,515,422                                                                                                                       49","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    2 Risk management objectives and policies (continued)    2.1 Insurance risk management (continued)    Under certain contracts, the Company has offered guaranteed annuity options. In determining the value of these op-    tions, estimates have been made as to the percentage of contract holders that will exercise them. There is not enough    historical information available on which to base these estimates.    The table below shows the contractual timing of undiscounted cash flows arising from assets and liabilities included in    the company’s ALM framework for management of long term insurance contracts movement as at 31 December 2017.                                                  Total  No stated            0-1   1-5 years   >5 years                                              Shs’000     maturity          year      Shs’000   Shs’000                                                           Shs’000      Shs’000                                            2,618,122    Financial assets                          658,058                -  643,612     355,839     1,618,671    Debt securities:                          185,116      658,058               -           -              -    - Government bonds and                                                                                  -                                              195,119                -     8,936    176,180     treasury bills fixed rate                   8,970    - Held to maturity                                     195,119               -         -                                 -    - Available for sale                        15,729         8,970             -         -                                 -    Listed securities-fixed rate              126,786                -           -  15,729                                   -    Equity securities:                                                     2,240           -                                 -    - Listed                                    75,358     124,546    - Unlisted                                  44,450               -   75,358            -                                 -    Investment in unit trusts                 444,819                -    Life policy loans and receivables                                -   44,450            -                                 -    from reinsurance contracts                                          444,819            -                                 -    Receivables arising from direct insur-    ance arrangements    Other receivables    Cash and cash equivalents    Total                                   4,372,527    986,693        1,219,415   547,748 1,618,671    Liabilities:                              984,800        35,000     187,111     490,116     272,573    Insurance contracts    Payables arising from reinsurance           22,297               -   22,297              -           -    arrangements                            3,115,339    3,115,339               -           -           -    Payables under deposit insurance    contracts    Total                                   4,122,436    3,150,339      209,408     490,116     272,573    Difference in contractual               250,091 (2,163,646)         1,010,007   57,632 1,346,098    cash flows50","ANNUAL REPORT                                                                                               AND FINANCIAL                                                                                               STATEMENTS                                                                                               2017NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued)2.1 Insurance risk management (continued)The table below shows the contractual timing of discounted cash flows arising from assets and liabilities included in thecompany’s Asset Liability Management framework for management of long term insurance contracts movement as at 31December 2016.                                                Total   No stated            0-1         1-5   >5 years                                            Shs’000      maturity                     years    Shs’000                                                          Shs’000          year    Shs’000                                                                       Shs’000Financial assets                            1,669,838            -     421,030     170,914     1,077,894Debt securities:                              733,221   733,221                 -           -              -- Government bonds and                        145,459                                                      -                                                                 -        4,375    141,084  treasury bills fixed rate                   349,411- Held to maturity                               8,970  349,411                 -         -                                -- Available for sale                                       8,970                -         -                                -Listed securities-fixed rate                    15,209           -              -  15,209                                  -Equity securities:                              75,548                    2,055           -                                -- Listed                                                 73,493- Unlisted                                      49,888                  49,888            -                                -Investment in unit trusts                                        -Life policy loans and receivables from          44,380                  44,380            -                                -reinsurance contracts                         531,403            -     531,403            -                                -Receivables arising from direct insurance                        -arrangementsOther receivablesCash and cash equivalentsTotal                                       3,623,327 1,165,095 1,053,131          327,207 1,077,894Liabilities:                                  862,532       35,000     163,489     428,808     235,235Insurance contracts                             51,437              -   51,437              -           -Payables arising from reinsurancearrangements                                2,601,453   2,601,453               -           -           -Payables under deposit insurance contractsTotal                                       3,515,422 2,636,453        214,926     428,808     235,235Difference in contractual cash flows        107,905 (1,471,358)        838,205 (101,601)       842,659                                                                                                                              51","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017 NOTES TO THE FINANCIAL STATEMENTS (continued)    2 Risk management objectives and policies (continued)    2.2 Financial risk management     The Company is exposed to a range of financial risks through its financial assets, financial liabilities (investment contracts     and borrowings), reinsurance assets and policyholder liabilities. In particular, the key financial risk is that the proceeds from     financial assets are not sufficient to fund the obligations arising from insurance policies and investment contracts as they fall     due. The most important components of this financial risk are market risk (including interest rate risk, equity price risk and     currency risk), credit risk and liquidity risk.     These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and     specific market movements. The risks that the Company primarily faces due to the nature of its investments and liabilities     are interest rate risk and equity price risk.    (a) Market risks    (i) Interest rate risk     Interest rate risk arises primarily from investments in fixed interest securities. In addition to the extent that claims costs are     related to interest rates, liabilities to policyholders are exposed to interest rate risk. Insurance and non-profit investment     contracts have benefit payments that are fixed and guaranteed at the inception of the contract. The financial component of     these benefits is usually a guaranteed fixed interest rate (for the insurance contracts, this rate may apply to maturity and/     or death benefits) and hence the company’s primary financial risk on these contracts is the risk that interest income and     capital redemptions from the financial assets backing the liabilities are insufficient to fund the guaranteed benefits payable.     The Company monitors interest rate risk by calculating the mean duration of the investment portfolio and of the liabilities     to policyholders under insurance and investment contracts. The mean duration is an indicator of the sensitivity of the assets     and liabilities to changes in current interest rates. The mean duration of the liabilities is determined by means of projecting     expected cash flows from the contracts using best estimates of mortality and voluntary terminations. This is calculated in a     consistent manner with the prior year. Any gap between the mean duration of the assets and the estimated mean duration     of the liabilities is minimised by means of buying and selling fixed interest securities of different durations.     The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial in-     strument will fluctuate because of changes in market interest rates at the reporting date. For the guaranteed element of     liabilities under with-profits contracts, changes in interest rate will not cause a change to the amount of the liability because     their carrying amounts are not affected by the level of market interest rates. However the with profits element of the lia-     bilities is directly affected by changes in the level of interest rates to the extent that they affect the carrying amount of the     assets held in the with-profits funds.     The Company’s management monitors the sensitivity of reported interest rate movements on a monthly basis by assessing     the expected changes in the different portfolios.     Interest bearing securities represent 95% (2016: 89%) of total investments. If interest rates in market indices had increased     / decreased by a further 5%, with all other variables held constant, and all the company’s investments moving according     to the historical correlation with the index, income would increase / decrease by Shs 194 million (2016: Shs 149 million).    (ii) Equity price risk     The Company is exposed to equity securities price risk as a result of its holdings in equity investments, classified as financial     assets available for sale. Exposures to individual companies and to equity shares in aggregate are monitored in order to     ensure compliance with the relevant regulatory limits for solvency purposes. Investments held are listed and traded on the     Nairobi Stock Exchange.52","ANNUAL REPORT                                                                                                                                                                                                                                          AND FINANCIAL                                                                                                                                                                                                                                          STATEMENTS                                                                                                                                                                                                                                          2017NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued)2.2 Financial risk management (continued)(a) Market risks (continued)(ii) Equity price risk (continued)The Company has a defined investment policy which sets limits on the Company’s exposure to equities both in aggregateterms and by geography, industry and counterparty. This policy of diversification is used to manage the company’s price riskarising from its investments in equity securities. Investment management meetings are held daily. At these meetings, seniorinvestment managers meet to discuss investment return and concentration across the company.The sensitivity analysis for equity risk illustrates how changes in the fair value of equity securities will fluctuate because ofchanges to market prices, whether those changes are caused by factors specific to the individual equity issuer, or factorsaffecting all similar equity securities traded in the market.Listed equities securities represent 96% (2016: 97%) of total equity investments. If equity market indices had increased /decreased by a further 5%, with all other variables held constant, and all the company’s equity investments moving accordingto the historical correlation with the index, equity would increase / decrease by Shs 9.7 million (2016: Shs 17.4 million).(iii) Currency riskForeign currency exchange risk arises when future commercial transactions or recognised assets and liabilities are denomi-nated in a currency that is not the entity’s functional currency. The Company primarily transacts in the Kenya shilling and itsassets and liabilities are denominated in the same currency. The company is therefore not exposed to currency risk.(b) Credit riskCredit risk is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the company isexposed to credit risk are:• reinsurers’ share of insurance liabilities and reserves;• amounts due from reinsurers in respect of claims already paid;• amounts due from insurance contract holders;• amounts due from insurance intermediaries;• amounts due from corporate bond issuers and• amount held with financial institutions - under cash and cash equivalentsThe Company manages the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or com-panies of counterparties and to geographical and industry segments. Such risks are subject to regular review. Limits on thelevel of credit risk by category and territory are approved quarterly by the board of directors.Reinsurance is used to manage insurance risk. This does not, however, discharge the Company of its liability as the primaryinsurer. If a reinsurer fails to pay a claim, the company remains liable for the payment to the policyholder. The creditworthi-ness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of any contract. Inaddition, management assesses the creditworthiness of all reinsurers and intermediaries by reviewing credit grades providedby rating agencies and other publicly available financial information. The recent payment history of reinsurers is also usedto update the reinsurance purchasing strategy.                                                                                                                                                                         53","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    2 Risk management objectives and policies (continued)    2.2 Financial risk management (continued)    (b) Credit risk (continued)    Management information reported to the directors include details of provisions for impairment on receivables and subse-    quent write offs. Internal audit makes regular reviews to assess the degree of compliance with the company’s procedures    on credit. Exposures to individual policyholders and groups of policyholders are within the ongoing monitoring of the con-    trols associated with regulatory solvency. Where there exists significant exposure to individual policyholders or homogenous    groups of policyholders, a financial analysis is carried out by the management. The Company’s assets bearing credit risk are    summarized below:                                                            2017                                          2016                                                            Shs ‘000                                      Shs ‘000    Investment in unit trust                                15,729                                        15,209    Government securities                                   3,276,180                                     2,403,059    Reinsurers share of insurance liabilities               124,546                                       73,493    Receivables arising from direct insurance arrangements  75,358                                        49,888    Life policy loans                                       2,240                                         2,055    Other receivables                                       44,450                                        33,070    Corporate bonds and commercial paper                    185,116                                       145,459    Deposits with financial institutions                    423,327                                       448,090    Cash and bank                                           21,492                                        83,313    Total assets bearing credit risk                        4,168,438                                     3,253,636    The concentration of credit risk is substantially unchanged compared to prior year. No credit limits       49,888    were exceeded during the period. The amounts that are past due and not impaired are as shown below:          2,055    Receivables arising from direct insurance arrangements  75,358                                             33,070    Life policy loans                                        2,240    Other receivables                                                            44,450    Total assets past due but not impaired                  122,048                                       85,013    The assets reported above include Shs 15.7 million (2016: Shs 15.2 million) related to the assets backing unit linked con-    tracts. The holders of these contracts bear the credit risk arising from these assets. The assets above also include assets held    in the with-profits funds where the company is able to transfer part of the credit risk arising from these assets to holders of    with-profits investment and insurance contracts to the extent that the future level of discretionary bonuses can be reduced    to absorb any associated credit losses (as well as losses arising from all other financial risks). During the year, there was no    financial assets that were impaired.    (c) Liquidity risk    Liquidity risk is the risk that cash may not be available at a reasonable cost to pay obligations as they fall due. The primary    liquidity risk of the Company is the obligation to pay claims to policyholders as they fall due. The projected settlement of    these liabilities is modelled, on a regular basis, using actuarial techniques. The board sets limits on the minimum proportion    of maturing funds available to meet such calls and on the minimum level of borrowing facilities that should be in place to    cover anticipated liabilities and unexpected levels of demand.54","ANNUAL REPORT                                                                                                                  AND FINANCIAL                                                                                                                  STATEMENTS                                                                                                                  2017NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued)2.2 Financial risk management (continued)(c) Liquidity risk (continued)The table below provides the contractual maturity analysis of the Company’s financial liabilities at 31 December2017:                                                       No stated   Less than   More than          Total                                                        maturity       1 year       1 year                                                                      Sh’000       Sh’000      Sh’000                                                          Sh’000                                        Insurance contract liabilities                                     187,111     762,689Payables under deposit insurance contracts                 35,000           -           -     984,800Payables arising out of reinsurance arrangements       3,115,339            -           -   3,115,339Other payables                                                              -           -                                                           22,297                               22,297                                                         103,952                              103,952The table below provides a contractual maturity analysis of the company’s financial liabilities as at 31 December 2016:                                                  No stated Less than 1        More than          Total                                                  maturity         year             1 year                                                                                   Sh’000      Sh’000                                                       Sh’000      Sh’000                               Insurance contract liabilities                        35,000       163,489     664,043        862,532Payables under deposit insurance contracts        2,601,453                 -           -   2,601,453Payables arising out of reinsurance arrangements                            -           -Other payables                                        51,437                -           -       51,437                                                      88,116                                    88,116(d) Unit-linked contractsFor unit-linked contracts, the Company matches all the liabilities with assets in the portfolio in which the unit prices arebased. There is therefore no interest, price, currency or credit risk for the Company on these contracts2.3 Fair value hierarchyThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have beendefined 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).                                                                                                                                 55","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    2 Risk management objectives and policies (continued)    2.3 Fair value hierarchy    The following table presents the company’s financial assets measured at fair value at 31 December 2017 and 31    December 2016    31 December 2017          Level 1                      Level 2     Level 3                                         Total    Available for sale       Shs’000                       Shs’000     Shs’000                                     Shs’000    - Government securities    - Quoted equities         658,058                               -           -                                   658,058    - Unquoted equities       195,119                               -           -                                   195,119    Total                                                     8,970             -                                       -                     8,970              -                                      8,970                             853,177                                                                               862,147    31 December 2016             733,221                          -    - 733,221    Available for sale           349,411                          -    - 349,411    - Government securities                                8,970       - 8,970    - Quoted equities                     -                8,970       - 1,091,602    - Unquoted equities      1,082,632    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.56","ANNUAL REPORT                                  AND FINANCIAL                                  STATEMENTS                                  2017NOTES TO THEFINANCIAL STATEMENTS (continued)                                  57","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017 NOTES TO THE FINANCIAL STATEMENTS (continued)    2 Risk management objectives and policies (continued)    2.4 Capital risk management     The Company maintains an efficient capital structure from a combination of equity shareholders’ funds and borrowings,     consistent with the company’s risk profile, the regulatory and market requirements of its business.     The Company is subject to a number of regulatory capital tests and also employ a number of realistic tests to allocate capital     and manage risk.     In reporting the Company’s financial strength, capital and solvency is measured using the regulations prescribed by the In-     surance Regulatory Authority (IRA). These regulatory capital tests are based upon required levels of solvency capital and a     series of prudent assumptions in respect of the type of business written by the company.     The Company’s objectives in managing its capital are:     • to match the profile of its assets and liabilities, taking account of the risks inherent in the business;     • to maintain financial strength to support business growth;     • to satisfy the requirements of its policyholders, regulators and rating agencies;     • to retain financial flexibility by maintaining strong liquidity and access to a range of capital markets;     • to allocate capital efficiently to support growth; and     • to manage exposures to movement in exchange rate     An important aspect of the Company's overall capital management process is the setting of target risk-adjusted rates of     return for individual business units, which are aligned to performance objectives and ensure that the Company is focused on     the creation of value for shareholders.     The Company has a number of sources of capital available to it and seeks to optimise its debt to equity structure in order to     ensure that it can consistently maximise returns to shareholders. The Company considers not only the traditional sources of     capital funding but the alternative sources of capital including reinsurance, as appropriate, when assessing its deployment     and usage of capital. The Company manages as capital all items that are eligible to be treated as capital for regulatory     purposes.     The Company is regulated by the Insurance Regulatory Authority in Kenya and as such, is subject to insurance solvency reg-     ulations which specify the minimum amount and type of capital that must be held in addition to the insurance liabilities.58","ANNUAL REPORT                                                      AND FINANCIAL                                                      STATEMENTS                                                      2017NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued)2.4 Capital risk management (continued)The Kenya Insurance regulatory authority has also introduced Risk Based Capital model which will result in risk based ap-proach to supervision. In line with risk based methodology, IRA has developed a Risk Based Capital (RBC) model, which isaimed at introducing capital requirements that are commensurate to the levels of risk being undertaken, and provide appro-priate incentives for good risk management. The RBC model is a factor based model that computes the capital requirementbased on four risk segments: insurance, market, credit and operational risk.The new capital requirement (Risk Based Capital) were introduced in the Finance Act, 2015. Insurance companies are re-quired to hold paid up capital by the 30th June 2020; the higher of:-(i). Shs 400 million; or(ii). risk based capital determined by the Insurance Regulatory Authority (IRA) from time to time; or(iii). 5% of the liabilities of the life business for the financial year.The Capital Adequacy ratio of the Company as at 31 December 2017 and 2016 is illustrated below.                                            2017         2016                                         Shs’000      Shs’000Available Capital                        422,802      342,584Required Capital                         400,000      400,000Capital Adequacy Ratio                   106%          86%Minimum Required Capital Adequacy Ratio  100%         100%3 Gross earned premium incomeThe Company is organised into two main divisions, ordinary life and group life business. Long term business relates to theunderwriting of risks relating to death of an insured person, and includes contracts subject to the payment of premiums fora term dependent on the termination or continuance of the life of an insured person. The premium income of the Companyis analysed between the main classes of business as shown below:Class of business                            2017         2016                                         Shs ‘000     Shs ‘000Ordinary lifeGroup life                                                                                                  77,583       63,476                                          829,996      661,787Total                                    907,579      725,263                                                                                                                             59","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    4 Investment income                            Long-term                     Shareholders        2017            2016                                                     business                          business       Total           Total       Interest from government securities           Shs ‘000                          Shs ‘000  Shs ‘000        Shs ‘000       Bank deposit interest       Rental income from investment properties    308,793                       34,496                                            Dividends received from equity investments   22,117                        2,042           343,289         204,522       Fair value gain on investment                12,185                              -       properties (Note 11)                           9,792                          104           24,159          74,833       Loss on sale of quoted equities                                                             12,185            3,934       Gain on sale of government securities          7,000                             -       Other income                                   (251)                          448             9,896         28,370                                                    13,113       Total                                          3,700                             -         7,000            18,000                                                                                     453             197         (23,491)                                                                                                 13,113              1,620                                                                                                  4,153              2,434                                                   376,449                       37,543 413,992   310,222    5 Claims and policy holders benefits payable                                                     2017            2016                                                                                                      Total           Total       Life and death claims                                                                     Shs ‘000        Shs ‘000       Surrenders and annuity payments       Maturities                                                                                 154,739         133,801       Increase/(decrease) in actuarial value of insurance contract liabilities                    60,860          57,230       Interest declared on deposit administration contracts                                       18,556          20,603       Total                                                                                       74,243          (6,670)                                                                                                  260,322         171,369                                                                                                 568,720         376,33360","ANNUAL REPORT                                                                                             AND FINANCIAL                                                                                             STATEMENTS                                                                                             2017NOTES TO THEFINANCIAL STATEMENTS (continued)6 Operating and other expenses                      Long term   Shareholders        2017         2016                                                      business        business       Total        Total       Employee benefit expense (Note 7)              Shs ‘000        Shs ‘000  Shs ‘000     Shs ‘000       Auditors’ remuneration       Directors emoluments – fees                  118,652           -                       114,666       Depreciation (Note 9)                           2,463          -          118,652         2,286       Amortization (Note 10)                          3,773          -                          3,409       Repairs and maintenance expenditure                   -  5,556               2,463        7,143       Rent of office space                                  -  5,184               3,773        5,184       Advertising and promotion                                      -             5,556       Professional fees                             11,039           -             5,184      10,897       Business levies and taxes                     16,134           -           11,039       15,199       Insurances costs                              16,927           -           16,134       11,734       Travelling, motor vehicle and accommodation                    -           16,927       License and subscriptions                       5,760          -             5,760        8,561       Training and seminars                           4,306          -             4,306        7,619       Communication                                 12,186           -           12,186       10,141       Printing & stationery                           3,264          -             3,264        3,469       Other Board expenses                            1,181          -             1,181       Other expenses                                  3,349          -             3,349           947                                                       3,338                        3,338        2,448      Total                                            2,423          -             2,423        3,691                                                                      -                          2,5807 Employee benefit expense                             2,474                        2,474        2,115                                                     15,756                       15,756       23,100      Salaries and wages      Social security benefit costs                 223,025     10,740 233,765               235,189      Retirement benefit costs                                                    Long term   Shareholders        2017         2016      Total                                           business        business       Total        Total                                                      Shs ‘000        Shs ‘000  Shs ‘000     Shs ‘000                                                    101,115     -                              97,474                                                         230    -                101,115            230                                                                -                                                     17,307                            230     16,962                                                                                  17,307                                                    118,652     -               118,652 114,666The Company had 56 employees as at 31 December 2017 (2016: 52)                                                                                                         61","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    8 Current income tax                                       Long-term    Shareholders        2017        2016                                                                 business         business       Total       Total       (a)  Current income tax expense                           Shs ‘000         Shs ‘000  Shs ‘000    Shs ‘000       Current income tax       Deferred income charge /(credit) (Note 27)                    -      -- -                                                               6,643        - 6,643 2,180       Income tax expense                                                               - - 6,643 2,180       Reconciliation of current income tax:       Profit /(loss) before tax                               (86,505)       26,803        (59,702)    (12,990)       Income tax calculated at a tax rate of 30% (2016: 30%)  (25,951)        8,041        (17,911)     (3,897)       Effect of income not subject to tax                       25,951       10,283          36,234       4,720       Effect of expenses not deductible for tax                         -                     3,222       Tax on transfer to long-term business                             -     3,222                      38,850       Deferred income tax (Note 27)                              6,643     (21,546)        (21,546)    (27,000)                                                                                               6,643       Income tax expense                                         6,643               -                    2,180                                                                                               6,643       (b)  Taxation recoverable                                                      -                    2,180       At 1 January                                            Long-term    Shareholders        2017        2016       Tax paid during the year                                  business         business       Total       Total       Current taxation charge (Note 8(a))                       Shs ‘000         Shs ‘000  Shs ‘000    Shs ‘000        At 31 December                                         -            (13,179)        (13,179)    (11,666)                                                               -            (511)           (511)       (1,513)                                                               - -- -                                                               -            (13,690)        (13,690)    (13,179)62","ANNUAL REPORT                                                                         AND FINANCIAL                                                                         STATEMENTS                                                                         2017NOTES TO THEFINANCIAL STATEMENTS (continued)9 Motor vehicle and equipment  Motor vehicle Computers  Furniture,            Total                                                           fittings &     At cost:                  Shs’000 Shs’000                           Shs’000     At 1 January 2016                                  equipment                        Additions                 6,561    17,310              Shs’000     At 31 December 2016             -   2,736                             39,852                                                              15,981         4,414     At 1 January 2017         6,561    20,046                 1,678     Additions                                                             44,266     Disposal                  6,561    20,047                17,659                                               1,175     2,860     At 31 December 2017       (630)           -              17,658       44,266                                                                  336        4,371     Depreciation:             7,106    22,907                        -       (630)     At 1 January 2016                                                                   Charge for the year                                      17,994                                                                           48,007     At 31 December 2016       5,270    11,426          6,066                                                        500     4,659          1,984                            At 1 January 2017                               Charge for the year       5,770                                       22,762     Disposal                           16,085          8,050                7,143                               5,770                                                     At 31 December 2017         524    16,085          8,050                                         3,196          1,836              29,905     Net book value:           (630)           -                                                                                                  -     At 31 December 2017       5,664                                       29,905                                        19,281          9,886                5,556     At 31 December 2016                                                      (630)                               1,442    3,626           8,108                       10 Intangible asset              791    3,961           9,609                                                                           34,831     At 1 January                                         2017                           Amortization                                    Shs ‘000                                                                                                                At 31 December                                     15,550                                                        (5,183)            13,176                                                                                                                              10,367                                                                           14,361                                                                             2016                                                                         Shs ‘000                                                                           20,734                                                                           (5,184)                                                                           15,550                                                                                        63","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    11 Investment properties                                                                                   2017          2016                                                                               Shs ‘000      Shs ‘000    At 1 January                                                               313,000       295,000    Disposal                                                                   (47,000)               -    Fair value gain                                                                                  7,000       18,000    At 31 December                                                    	273,000               313,000    Investment properties were last revalued on 31 December 2017, by Axis Real Estate Limited, independent valuers, on    the basis of open market value for existing use.    The table below 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)    At 31 December 2017                                      Level 1  Level 2  Level 3           Total                                                             Shs’000  Shs’000  Shs’000       Shs’000    Investment property                                      - 273,000         - 273,000    At 31 December 2016                                      - 313,000         - 313,000    Investment property    Valuation technique used to derive level 2 fair values    Level 2 fair value of land and building has been derived using the sales comparison approach. Sales prices of comparable    land and buildings in close proximity are adjusted for differences in key attributes such as property size and location.    12 Quoted equity investments                                                    2017          2016                                                                               Shs ‘000      Shs ‘000          Available for sale                                                     349,411       630,648          At 1 January                                                            75,969        31,366          Additions                                                                       -     10,240          Reclassification from unquoted equities (Note 13)                                  (274,333)          Disposals                                                            (254,189)      (48,510)          Fair value (gain)/losses                                                23,928    At 31 December                                                             195,119       349,41164","ANNUAL REPORT                                                              AND FINANCIAL                                                              STATEMENTS                                                              2017NOTES TO THEFINANCIAL STATEMENTS (continued)13 Unquoted equity investments                        2017       2016    Available for sale                             Shs’000    Shs’000At 1 January                                       8,970        30,954Reclassification to quoted equities (Note 12)            -    (10,240)Fair value loss                                          -    (11,744)At 31 December                                                   8,970         8,970Investments in unquoted shares are carried at fair value based on the available market values at close ofbusiness on 31 December.14 Investment in unit trusts                          2017        2016                                                   Shs’000    Shs’000     At 1 January     New additions                                   15,209     32,740     Fair value gain/(loss) on revaluation               473        407                                                          47                                                              (17,938)At 31 December                                     15,729     15,209Unit linked investment contracts designated as financial assets at fair value through profit or loss. These funds aremanaged by Apollo Asset Management Company Limited. The benefits offered under the contract are based on thereturn of the portfolio of equities and debt securities. The matching financial liabilities are included under theinsurance contract liabilities.15 Reinsurers’ share of insurance liabilities         2017       2016                                                   Shs’000    Shs’000     At 31 December (Note 24)                      124,546                                                                73,493Amounts due from reinsurers in respect of claims outstanding with the Company on contracts that are reinsured areincluded as reinsurers’ share of liabilities in the statement of financial position.16 Other receivables                                  2017       2016                                                   Shs’000    Shs’000     Due from related parties (Note 31)     Prepayments and deposits                            886     1,109     Staff advances                                  12,397     12,035     Rent receivables     Accrued dividend income                          9,428      7,146     Proceeds receivables from disposal of shares     3,407      3,457     Others                                           1,223      3,565                                                      7,339      5,580                                                      9,770     11,488At 31 December                                     44,450     44,380                                                                                                                       65","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    17 Government securities                                      2017           2016                                                              Shs’000        Shs’000         (a) Government Securities - held to maturity              Treasury bills and bonds maturing:                                                                                                                    421,030         - In 1 year                                          643,612        170,914         - In 1- 5 years                                      355,839      1,077,894         - After 5 years                                   1,618,671                                                                           1,669,838         Total                                              2,618,122                                                                            371,480         (b) Government Securities-available for sale         733,221       506,202         At 1 January                                         140,577      (97,188)         Additions                                          (137,969)      (40,045)         Maturity                                             (94,038)       (7,228)         Disposal         Fair value gain / (loss)                               16,267    Total                                                  658,058         733,221    18 Commercial paper & corporate bonds                      185,116     145,459                                                                        -           -         Commercial paper and bonds held to maturity:         - In 1 -5 years                                       185,116     145,459         - Over 5 years         Total                                               418,292       448,090                                                                5,035               -    19 Deposits with financial institutions                                                             423,327       448,090          Held to maturity:                                  Number        Shs’000          - Within 90 days                                 of Shares          - Within 1 year                                  4,500,000       450,000          Total                                            1,000,000       100,000                                                           5,500,000       550,000    20 Share capital          Balance at 31 December 2016, and 1 January 2017          New shares issued during the year          Balance at 31 December 2017           An additional share capital was injected during the year. The total authorized number of ordinary shares is 5,500,000           with a par value of Shs 100. All shares are fully issued and paid up.    21 Retained earnings          The retained earnings / (deficits) represent the transfer of accumulated surpluses / (deficits) from the long-term insur-          ance business net of tax. Movement in the retained earnings is shown in the statement of changes in equity.66","ANNUAL REPORT                                                                                                            AND FINANCIAL                                                                                                            STATEMENTS                                                                                                            2017NOTES TO THEFINANCIAL STATEMENTS (continued)22 Statutory reserve 	The statutory reserve represents unappropriated actuarial surpluses from the long term business whose distribution issubject to restrictions imposed by the Insurance Act. The Act restricts the amounts of surpluses of the long-term busi-ness available for distribution to shareholders to 30% of the accumulated surplus of the long term insurance business.The movement in the statutory reserve is shown in the statement of changes in equity.23 Insurance contract liabilities                                                  2017                        2016                                                                                Shs’000                     Shs’000      Long term insurance contracts at 31 December- claims reported and claims handling expenses                                  198,648                     150,623- actuarial liabilities with respect to contracts in force                      786,153                     711,909Total                                                                           984,801                     862,532     Insurance contract liabilities comprises gross claims reported, claims handling expenses and actuarial liabilities with     respect to all contracts in force for ordinary (including unit linked policies) and group life business24 Movements in insurance liabilities and reinsurance assetsAt start of year                       Gross                  2017         Net       Gross            2016         NetCash paid for claims               Shs’000          Reinsurance      Shs’000     Shs’000    Reinsurance      Shs’000settled in the year                 862,532                           789,039     878,084                     779,706                                  (349,147)               Shs’000   (183,985)   (279,545)         Shs’000   (112,907)                                                         (73,493)                                (98,378)                                                          165,162                                 166,638                                  513,385           91,669          605,054 598,539         68,260          666,799(Decrease) /increase in liabili-   81,110            (59,060)        22,050     136,061      (69,469)        66,592ties arising                      390,305           (157,156)       233,149     127,932      (72,284)        55,648- from prior year claims          471,415           (216,216)       255,199     263,993     (141,753)       122,240- from current year claimsTotal increase in liabilitiesTotal                             984,800           (124,547)       860,253 862,532         (73,493)        789,039Notified claims                   198,647           (124,547)       74,100 150,623          (73,493)         77,130Actuarial value of life contract                                                                      -     711,909liabilities                       786,153                      -    786,153     711,909                     789,039                                                                                862,532     (73,493)Total at the end of year                            (124,547)                                  984,800                           860,253                                                                                                                              67","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    25 Amounts payable under deposit administration contracts    Liabilities due under deposit administration contracts are recorded at amortized cost. Movements in amounts payable    under deposit administration contracts during the year are as shown below. The liabilities are shown inclusive of interest    accumulated to 31 December. Interest was declared and credited to the customer accounts at a weighted average rate of    9.50%, (2016:7.00%).    At 1 January                                                       2017                     2016    Pension fund deposits received                                 Shs’000                  Shs’000    Pension fund withdrawals                                     2,601,453                2,247,144    Interest payable to policyholders                              585,374                  498,176    At 31 December                                               (331,811)                (315,236)                                                                   260,323                  171,369                                                                 3,115,339             2,601,453    26 Other payables    Due to related companies (Note 31)                           4,353               2,819    Accrued expenses    Rental deposits                                              42,059              26,637    Trade Creditors    Premium deposits                                             1,948               2,219    Excise duty tax accrual    Other liabilities                                            2,185               469    At 31 December                                                                 45,147              33,305                                                                          - 13,056                                                                 8,260               9,611                                                                 103,952             88,116    27 Deferred income tax    	    Deferred income tax is calculated using the enacted tax rate of 30% (2016: 30%). The movement on the deferred income    tax account is as follows                                                                 2017                2016                                                                 Shs’000             Shs’000    At 1 January                                                 3,384               1,204    (Credit) /charge to profit or loss (Note 8(a))               6,643               2,180    At 31 December                                               10,027              3,384    Deferred tax movement is made up as follows:                                     20,313    Movement in unappropriated surplus /(deficit)                         11,283     11,283    At 1 January                                                          33,427    At 31 December                                                        22,144       9,030    Movement of the surplus during the year                                 6,643    (2,709)    Deferred income tax charged/ (credit) at 30% (2016: 30%)                      -    Deferred income tax asset on losses                                     6,643      4,889    At 31 December                                                                     2,18068","ANNUAL REPORT                                                                                 AND FINANCIAL                                                                                 STATEMENTS                                                                                 2017NOTES TO THEFINANCIAL STATEMENTS (continued)28 (a) Notes to the statement of cash flows                 Notes       2017          2016                                                                    Shs’000       Shs’000Reconciliation of profit before taxation to cash generated     4from operations:                                               4                  (12,990)                                                               4    (59,702)Profit /(loss) before income tax                               9                 (277,838)Adjustments for:                                              10   (367,448)        23,491Interest income                                               11        (197)       (1,620)Profit /( loss) on sale of quoted equities                                            7,143Profit on sale of government securities                             (13,113)          5,184Depreciation charge                                                     5,556Amortization charge                                                     5,184     (18,000)Fair value gain on investment properties                                                    -Gains from sale of fixed assets                                       (7,000)                                                                        (465)Changes in:- technical provisions                                               585,099     363,647- payables arising from reinsurance arrangement                    (104,497)      71,900- other payables                                                                 (1,039)- other receivables                                                   15,836      29,300                                                                      49,818Cash generated from operations                                                   189,178                                                                     109,071(b) Cash and cash equivalents                                                                    21,492        83,313For the purposes of the cash flow statement, cash and cash         423,327       448,090equivalents comprise the following:Cash and bank balances                                             444,819       531,403Deposits with financial institutions (Note 19) Total                                                                                               69","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    NOTES TO THE    FINANCIAL STATEMENTS (continued)    29 Contingent liabilities				        	In common with the insurance industry in general, the Company is subject to litigation arising in the normal course of         insurance business. At the reporting date, there was no litigation that the company was aware of. The directors are of         the opinion that any litigation that may arise from this source will not have a material effect on the financial position or         profits of the Company.    	In 2015, the Company received a tax assessment for principal tax of Shs 33,745,125 relating to prior periods, which is    in dispute and the company is contesting the assessment. No provision has been made in these financial statements for    these amounts as the Company considers it has adequate grounds to dispute the assessment.    30 Operating lease commitments					                                               2017        2016                                                                                   Shs’000     Shs’000         The future minimum lease payments under operating leases are as follows:                                                                                     11,352       9,461         Due not later than 1 year                                                   68,361      62,561         Due after 1 year and not later than 5 years                                 17,793      14,144         Later than 5 years                                                          97,506      86,166         Total    31 Related parties					    						        	In the normal course of business, insurance policies are sold to related parties at terms and conditions similar to those        offered to major clients. The Company is a wholly owned subsidiary of Apollo Investments Limited, also incorporated in        Kenya. Apollo Holdings Limited, Apollo Asset Management Company Limited, Gordon Court Limited and APA Insurance        Limited are related to APA Life Assurance Limited through common shareholdings and directorships.    Outstanding balances with related parties                                          2017        2016                                                                                   Shs’ 000    Shs’ 000    (i) Due from related parties (Note 16)        Due from Apollo Investments Limited                                               886      1,109        Total                                                                             886      1,10970","ANNUAL REPORT                                                                                 AND FINANCIAL                                                                                 STATEMENTS                                                                                 2017NOTES TO THEFINANCIAL STATEMENTS (continued)31 Related parties (continued)				                                       2017        2016                                                                     Shs ‘000    Shs ‘000    (ii) Due to related parties (Note 26)                                                                            105         211    Due to Gordon Court Limited                                          1,636       1,302    Due to Apollo Asset Management Limited                               2,612       1,306    Due to APA Insurance Limited                                         4,353       2,819    Total                                                                     10,856       9,164    (iii) Related party transactions                                                                     11,229      10,796    Apollo Asset Management Company Limited    Fees for asset management                                        82,621      67,404                                                                      4,376       4,187    Gordon Court Company Limited                                                  8,449    Office rent                                                      11,598                                                                                        -    APA Insurance Limited                                            47,000             -    Contributions received for pension scheme                               -    Premium received for group life assurance                                     3,409    Premium paid for general insurance business                       3,870      17,109                                                                     17,109      50,522    Other related party transactions                                 48,025      71,040    Sale of investment property to a director                        69,004    Sale of investment property to a staff employed by the group    (iv) Key management and directors’ compensation    Directors’ fees    Other remuneration    Key management compensation    Total32 Weighted average effective interest ratesThe following table summarises the company’s weighted average effective interest rates realized during the year onthe principal interest-bearing investments:                                                                     2017        2016                                                                     %%Government securities                                                11.93       11.78Deposits with financial institutions                                 9.63 13.91Commercial paper & corporate bonds                                   12.95       12.66                                                                                                                    71","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  2017    SUPPLEMENTARY INFORMATION    REVENUE ACCOUNT    FOR THE YEAR ENDED 31 DECEMBER 2017                                                      Ordinary        Group         Other           Total       Total                                                            Life         Life    Shs’ 000                                                                                                   2017         2016                                                      business     business                    Shs’ 000    Shs’ 000                                                      Shs’ 000     Shs’ 000                                                                                                             725,263    Income                                            77,583         829,996     - 907,579                 (386,487)    Gross earned premium                              (1,115)      (547,061)     - (548,176)                338,776    Reinsurance premiums ceded                        76,468        282,935      - 359,403    Net earned premium    Investment income                                   2,809        66,527       307,113       376,449     273,636    Commission earned                                      436      113,309                -    113,745      76,542    Total income                                      79,713       462,771       307,113       849,597     688,954    OUTGO                                                 (374)    (154,365)                -  (154,739)   (133,801)    Claims and policy holder benefit                   (2,192)      (58,668)                -   (60,860)    (57,230)    Life and death claims                             (18,556)                -             -   (18,556)    (20,603)    Surrenders and annuity payments                    (2,055)      (72,188)                -   (74,243)        6,670    Maturities                                                                -  (260,322)    Increase in insurance contract liabilities                  -                              (260,322)   (171,369)    Interest on deposit administration policyholders    Net claims and policyholder benefits payable      (23,177) (285,221) (260,322) (568,720) (376,333)    Expenses                                          (95,651)     (102,245)     (25,129)      (223,025)   (222,862)    Operating and other expenses                      (32,115)     (102,719)      (9,523)      (144,357)   (127,008)    Commissions payable    Total expenses and commissions                    (127,766) (204,964) (34,652) (367,382) (349,870)    (Loss) / profit the year before income tax        (71,230)     (27,414)      12,139        (86,505)    (37,249)    Income tax expense                                    (401)       2,714      (8,956)        (6,643)       2,180    (Loss)/ profit for the year after tax             (71,631) (24,700)          3,183 (93,148)            (39,429)    The above supplementary information was approved by the board of directors on 15 March 2018 and signed on its behalf by:    Daniel Ndonye						Ashok Shah    Director							Director		72","ANNUAL REPORT                                                                                                                                                                                                                                    AND FINANCIAL                                                                                                                                                                                                                                    STATEMENTS                                                                                                                                                                                                                                    2017APA PERSONAL PENSION PLANWhen you retire, you will have a lot of freetime to spend travelling, visiting loved onesand maybe even start your own business.All these things come at a cost.The APA Personal Pension Plan will help youget ready to meet the costs and enjoy yourretirement in peace.APA, Insuring Happiness                                                                                                                                                                      73","ANNUAL REPORT AND FINANCIAL      STATEMENTS                  201774","","APA Life Assurance Limited                  Embu    Apollo Centre, Ring Road, Parklands         1st Floor, Ganga Building, Kenyatta Highway    P.O. Box 30389-00100, Nairobi               Tel: +254 (0) 68 223 0103    Tel: +254 (0) 20 364 1000                   E-mail: apa.embu@apainsurance.org    E-mail: info@apalife.co.ke                  Website: www.apainsurance.org    Website: www.apalife.co.ke                  Kisii                                                2nd Floor, Mocha Place, Kisii/Kisumu Road    City Centre                                 Tel: +254 (0) 58 203 1773    6th Floor, Hughes Building,                 E-mail: apa.kisii@apainsurance.org    Kenyatta Avenue                             Machakos    Tel: +254 (0) 20 286 2000                   ABC Imani Plaza, Ngei Road    E-mail: info@apainsurance.org               Tel: +254 (0) 44 21455    Nakuru                                      E-mail: apa.machakos@apainsurance.org    Giddo Plaza, George Morara Road             Group Companies    Tel: +254 (0)51 221 3412/6 | 020 286 2337   APA Insurance Limited    E-mail: apa.nakuru@apainsurance.org         Apollo Centre, Ring Road, Parklands    Mombasa                                     P.O. Box 30389-00100, Nairobi    Apollo House, Moi Avenue                    Tel: +254 (0) 20 286 2000    Tel: +254 (0) 41 222 1941                   E-mail: info@apainsurance.org    E-mail: apa.mombasa@apainsurance.org        Website: www.apainsurance.org    Kisumu    Ground Floor, TuffFoam Mall                 APA Insurance (Uganda) Limited    Jomo Kenyatta Highway                       AHA Towers, 5th Floor, 7 Lourdel Road    Tel: +254 (0) 20 216 2908                   Nakasero, Kampala    E-mail: apa.kisumu@apainsurance.org         P.O. Box 7561    Naivasha                                    Tel: +256 200 907 003 | +256 200 907 004    1st Floor, Eagle Centre, Mbaria Kaniu Road  E-mail: apa.uganda@apainsurance.org    Tel: +254 (0) 50 202 0086                   Apollo Asset Management Company Limited    E-mail: apa.naivasha@apainsurance.org       Apollo Centre, Ring Road, Parklands    Eldoret                                     P.O. Box 30389-00100, Nairobi    1st Floor, Zion Mall, Uganda Road           Tel: +254 (0) 20 364 1000    Tel: +254 (0) 53 203 0937                   E-mail: assetmanagement@apollo.co.ke    E-mail: apa.eldoret@apainsurance.org        Website: www.apolloassetmanagement.co.ke    Thika                                       Gordon Court Limited    5th Floor, Zuri Centre, Kenyatta Highway    Apollo Centre, Ring Road, Parklands    Tel: +254 (0) 67 222 0196                   P.O. Box 30389-00100, Nairobi    E-mail: apa.thika@apainsurance.org          Tel: +254 020 364 1900    Meru                                        E-mail: info@apollocentre.org    2nd Floor, Hart Towers, off Meru Highway    Website: www.apollocentre.org    Tel: +254 (0)74 31821                       Associate Company    E-mail: apa.meru@apainsurance.org           Reliance Insurance Company (Tanzania) Limited    Nyeri                                       3rd & 4th Floor, Reliance House    1st Floor, Peak Business Centre, off        Plot No. 356, United Nations Road, Upanga    Kenyatta Highway                            P.O. Box 9826, Dar es Salaam    Tel: +254 (0) 61 203 0332                   Tel: +255 (22) 212 0088-90    E-mail: apa.nyeri@apainsurance.org          E-mail: insure@reliance.co.tz76"]; var positionForPages = [];