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NIC HOLDINGS LTD

NIC HOLDINGS LTD

Opening NEW
HORIZONS for Increased
STAKEHOLDER Value

2014
Annual Report and Accounts
NIC HOLDINGS LTD

2 ANNUAL REPORT AND ACCOUNTS 2014


Table of Contents
Corporate Information iv

Notice of Annual General Meeting v

Results at a glance vi

Chairman’s Statement 1

Managing Director’s Statement 5

The Board of Directors 10

The Management Team 14

Branch and Area Office Network 15

Report of the Directors 18

Statement of Directors’ Responsibilities 24

Independent Auditors’ Report 26

Actuarial Valuation Certificate 27

Consolidated Statement of Financial Position 28

Revenue Account - General Insurance Business 30

Revenue account - Long term Insurance Business 31

Consolidated Statement of Changes in Equity 32

Consolidated Statement of Cash Flows 33

Notes to the Financial Statements 34

NIC Events 84

Proxy Form 85

ANNUAL REPORT AND ACCOUNTS 2014 iii


Corporate Information
Our Vision Be the preferred provider of insurance,risk management and financial
services.

Our Mission Create, preserve and protect wealth.

Registered Office NIC Building


Plot 3 Pilkington Road, P. O. Box 7134. Kampala, Uganda

Directors
Dr. Martin Aliker* Chairman
Rotimi Fashola** Vice Chairman
Michael Olupot Tukei*
Charles Tukacungurwa*
Bernard Katureebe*
Obayomi Lawal**
Bayo Folayan**- Managing Director

* Ugandan
** Nigerian

Company Secretary Elias Edu**


Plot 3 Pilkington Road, P. O. Box 7134. Kampala, Uganda

Auditors KPMG- Certified Public Accountants


3rd Floor, Rwenzori Courts, Plot 2 & 4, Nakasero, Kampala

Major Bankers Guaranty Trust Bank Uganda Ltd


United Bank for Africa
Plot 56 Kiira Road
Plot 22 Jinja Road
P O Box 7323 Kampala, Uganda
P O Box 7396 Kampala, Uganda
Bank of Baroda Uganda Limited
Stanbic Bank Uganda Limited
Kampala Road P.O.Box 7197
Head Office
Kampala, Uganda
P.O. Box 7130 Kampala, Uganda
Orient Bank Uganda Limited
Standard Chartered Bank Uganda Limited
Orient Plaza
Plot 5 Speke Road
Plot 6/6A Kampala Road
P. O. Box 7111 Kampala, Uganda
P. O. Box 3072 Kampala, Uganda

Solicitors Shonubi Musoke & Co. SM Chambers,


Plot 14, Hannington Road, Kampala, Uganda

ENSafrica Advocates Uganda


P. O. Box 24665 Kampala.
Plot 6 Nakasero Road
4th Floor Rwenzori Towers Kampala

Kampala Associated Advocates


KAA House, Plot 41, Nakasero Road, P. O. Box 9566, Kampala, Uganda

Consulting Actuaries Alexander Forbes Financial Services (East Africa) Limited


10th Floor, Landmark Plaza, Argwings Kodhek Road,
Opp. Nairobi Hospital, P. O. Box 52439, City Square, Nairobi, Kenya

iv ANNUAL REPORT AND ACCOUNTS 2014


Notice of the 14th Annual General Meeting
NOTICE IS HEREBY GIVEN that the 14th Annual General Meeting of NIC Holdings Limited (“the
Company”) will be held at the Golf Course Hotel, Kampala, Uganda on Thursday, 30th July, 2015 at 2.00
pm prompt to transact the following businesses:

ORDINARY BUSINESS
1. To lay before the members the financial statements for the year ended 31st December 2014 together
with the reports of the Directors thereon.
2. To declare a dividend.
3. To re-elect or elect Directors in place of the Directors who shall be retiring.
4. To ratify the appointment of Mr. Obayomi Lawal as Director.
5. To appoint External Auditors and authorize Directors to determine the remuneration of the Auditors.

SPECIAL BUSINESS
6. To approve the remuneration of Directors.

Dated this 14th day of May, 2015

BY ORDER OF THE BOARD

ELIAS EDU, ESQ.


CORPORATION SECRETARY

NOTES:

i) PROXY
A Member of the Company entitled to attend and vote at the General Meeting is entitled to appoint a
proxy to attend and vote instead of him/her. A proxy need not also be a Member. For the appointment
to be valid, a completed proxy form must be deposited with the Company Secretary, NIC Holdings
Limited, Plot 3 Pilkington Road, P. O. Box 7134, Kampala, Uganda, not less than 48 hours before the
time fixed for the meeting.
ii) DIVIDEND
The Board recommends for the approval of shareholders a payment of Shs1/- (One Shilling) for
every ordinary share held at the close of register on 24th July, 2015 out of the retained earnings as at
31st December 2014 subject to withholding tax at the appropriate rate.
iii) DIVIDEND WARRANTS
If the recommended dividend is approved by shareholders, the dividend warrants will be posted
by 30th November, 2015 to those Members whose names appear in the Company’s Register of
Members at the close of register.
iv) GENERAL INFORMATION
a) Shareholders are requested to carry some personal identification and proof of their shareholding to
the Annual General Meeting.
b) All Shareholders are advised to notify the Company Secretary in writing of any changes in their
Postal addresses, Bank accounts and other details. The new information supplied will be used in
future transactions.
c) For general enquiries, please call the Company Secretary on +256414258001/5 or send email to
eedu@nic.co.ug.
d) Shareholders are advised to open Securities Central Depository (SCD) accounts in order to fully
participate in share transactions. Interested shareholders may contact any registered stock broker
for information on how to open SCD accounts.

ANNUAL REPORT AND ACCOUNTS 2014 v


Results at a Glance

TOTAL INVESTMENTS (Ushs '000,000) GROSS PREMIUM (Ushs '000,000)

90,000 75,444 20,000


67,799 68,698 67,297
75,000 57,024
15,000
60,000 10,186
8,563 8,869 10,556 10,719
10,000
45,000
30,000 5,000

15,000 -

- 2010 2011
2012 2013
2010 2011 2012 2013 2014 2014

TOTAL ASSETS (Ushs '000,000) NET EARNED PREMIUM '(Ushs '000,000)


86,172 85,037 83,458
90,000 82,054
73,325 12,000
75,000 10,000 8,197
8,000 6,672 7,338 7,514
60,000 6,391
6,000
45,000 4,000
2,000
30,000 -
15,000 2010 2011 2012
- 2013
2014
2010 2011 2012 2013 2014

STATEMENT OF VALUE ADDED

Retained profit
19.27%

Contingency
reserve
5.21% Employees salaries
& other benefits
Capital reserve 62.58%
1.29%

Taxation
9.51%

Depreciation 2.15%

vi ANNUAL REPORT AND ACCOUNTS 2014


Chairman’s Statement

Dr. Martin Aliker

E
minent Members of the Board of This is our first Annual General Meeting after the
Directors, Distinguished Shareholders, demise of our late Chairman, Mr. Oluremi Andrew
Valued Customers and Friends of NIC Olowude OON. It is therefore with a heavy heart
Ladies and Gentlemen and a deep feeling of loss that I also address
you today. Until his passage, Mr. Olowude, was
II, on behalf of the Board of Directors, welcome the founding Vice Chairman and Chief Executive
you all to the 14th Annual General Meeting of NIC Officer of our parent company, Industrial And
Holdings Limited, formerly National Insurance General Insurance Plc (IGI). He was widely
Corporation Limited (NIC) of Uganda, and also respected and regarded in international business
present to you the company’s Annual Report circles as a man of great vision and one of the
and Financial Statements for the year ended most successful insurance professionals and
December 31, 2014. international investors of his generation.

ANNUAL REPORT AND ACCOUNTS 2014 1


A legend of the insurance industry in Nigeria, LISTING OF BONUS SHARES
he was the driving force behind the trailblazing
achievements of the IGI Group. Our late Chairman Another major corporate activity by the company
believed that only Africans themselves can in 2014 was the listing of 819,661,942 NIC bonus
successfully drive economic integration on the shares on the Ugandan Securities Exchange
continent and it was this conviction that propelled (USE) bringing the total number of NIC shares
him to lead the IGI Group on a strategic offshore listed on the USE to 1.415 billion shares. With
investment drive that resulted in the acquisition NIC shares trading at an average UShs17 per
of majority stake in the then National Insurance share, the listing of the bonus shares implied
Corporation Limited by IGI Plc in June 2005. Our that our company’s market capitalization is
company, especially the Board of Directors, shall about UShs24 billion compared to the pre-
greatly miss his bold leadership, great wisdom bonus capitalization of UShs11.9 billion. The
and vision as well as his uncommon humanity. current market capitalization is far in excess
May his soul rest in perfect peace. of the combined minimum capital requirement
set by the regulatory authorities for non life
CORPORATE ACTIVITIES and life insurance operators. The development
has undoubtedly demonstrated our resolve
During the year under review, your company, to increase shareholder value and grow the
erstwhile known as National Insurance investments of our stakeholders. Permit me to,
Corporation Limited (NIC) transformed into at this point, put in context and also highlight the
NIC Holdings Limited, in line with the resolution major developments that impacted the insurance
passed at the 13th Annual General Meeting of industry and the company’s performance during
NIC in June 2014. Also, sequel to the completion the year under review.
of the regulatory requirement for compulsory de-
merger of the businesses of composite insurance THE GLOBAL ECONOMY
operators along the lines of general and long
term businesses with effect from September In 2014 the global economy failed to live up
2014 and pursuant to the resolution passed at to expectations of a return to the path of full
the 12th Annual General Meeting of NIC Limited, recovery, according to the International Monetary
we obtained necessary regulatory approvals Fund (IMF) as it grew by 3.3 percent which barely
for two new entities – NIC General Insurance exceeded the 3 percent expansion recorded in
Company Limited and NIC Life Assurance 2013. Economic performance in many other
Company – as fully-owned incorporated and parts of the world fell short of expectations. In
licensed subsidiaries of NIC Holdings Limited. particular, while Europe experienced sluggish
growth, flagging demand and low inflation,
As part of the restructuring, new Boards the economy of the United States of America
of Directors have been named for the new experienced its highest growth rate in four years
subsidiaries whilst the Board of NIC Holdings in 2014.
Limited (formerly NIC), on which I have humbly
accepted to serve as the substantive Chairman, The US Commerce Department reported that
has a new member. He is Mr. Obayomi Lawal the US Gross Domestic Product (GDP) grew at
who was appointed on March 31, 2015, as an annual pace of 2.4 percent in 2014 compared
replacement for our departed Chairman, Mr. to 2.2 percent in 2013, as consumers’ confidence
Olowude, OON. Please join me in welcoming soared in the wake of the significant drop in oil
Mr. Lawal. We also welcome members of the prices. Oil prices plummeted by nearly 50 percent
Boards of the two new subsidiaries who will be by the middle of the year prompting fears that a
formally presented to this meeting shortly. In line barrel could sell for as low as USD 20 in 2015.
with our corporate culture, the new insurance According to the Department, the halving of fuel
subsidiaries will leverage our plans to invest prices enabled American consumers to spend
robustly in technology and training to take more at the end of the year, while record job
optimum advantage of new opportunities in the creation and a surge in business profits helped
local and regional space. They will be primed and firm up the economy’s steady recovery from the
equipped to key-in into our on-going reinventing recession of 2008/2009.
exercise, focusing on product innovation and On the contrary, there were fears in Europe
delivery of unequalled solutions to our esteemed in 2014 about the possible break-up of the
clients, which will translate to increased value for single currency Eurozone as even the stronger
our stakeholders. economies in the monetary bloc were threatened
by recession arising from slow growth. Not
all was gloomy within the Euro zone as the

2 ANNUAL REPORT AND ACCOUNTS 2014


United Kingdom’s economy generated more Market capitalization also rose significantly by 20
than 750,000 new jobs in 2014 and overall percent from Ushs. 19,325 billion in 2012/2013 to
unemployment fell to 6 percent from 7.2 percent. Ushs. 23,166 billion in 2013/2014.
Outside the Eurozone, Russia, battling low oil
prices, the conflict in Ukraine and sanctions, THE INSURANCE INDUSTRY
witnessed a steep fall in the value of the ruble Gross premium figures released by the Ugandan
and an interest rate hike to 17 percent as the Insurers Association (UIA) indicated that the
government moved to halt the decline. industry wrote businesses worth Ushs. 460
The economies of sub-Saharan African countries billion in 2014, a growth of 13 percent over the
continued to experience robust growth in 2014 Ushs. 406 billion recorded in 2013 when a 16
buoyed by improved external demand and percent growth in gross premium was achieved.
strong growth in public and private investments. The decline in the growth rate was attributed
However, the worsening of the outbreak of the by the UIA partly to the changes in the taxation
Ebola virus epidemic, which claimed thousands regime. The umbrella association for insurance
of lives especially in Guinea, Liberia and Sierra operators was in consultation during the review
Leone, exacted severe social and economic toll period with the Ministry of Finance, Uganda
on those countries and neighbouring economies. Revenue Authority (URA), Insurance Regulatory
Real GDP growth in sub-Saharan Africa in 2014 Authority (IRA) and other relevant agencies
stood at 5.2 percent, slightly up from the 5.1 towards ensuring that the operating environment
percent expansion recorded in 2013. is made more conducive for the growth of the
insurance sector.
THE DOMESTIC ECONOMY
On the regulatory front, consultations
According to the Bank of Uganda (BOU), the commenced during the year on amendments
Ugandan economy grew by 4.7 percent in to the Insurance Act, the Motor Third Party Act
2013/2014 an expansion that was lower than the as well as regulations on Bancassurance and
6 percent growth achieved in 2012/2013 financial Retirement Benefits. Sequel to the regulatory
year. The Bank blamed the decline partly requirement which effectively abolished the
on delayed implementation of infrastructural operation of composite insurers in Uganda
programmes by the government, particularly from September 2014, five new subsidiaries of
the construction of hydropower dams. Arising existing insurance companies, including NIC Life
from the monetary easing policy introduced by Assurance Company Limited, joined the industry
the Bank, household private consumption rose in 2014. In addition, the registration of three new
significantly by 6.8 percent in 2013/2014 compared insurance companies brought the number of UIA
to 0.9 percent recorded for the previous year. In member-companies to 31.
the same vein, the agricultural sector, driven by
expansion in food crops production, grew by 1.5 OPERATING RESULTS
percent against the 1.3 percent growth reported
for the 2012/2013 year. In a year when the re-inventing initiative put in
place by management began to impact positively
Conversely, the industrial sector experienced on our operations, your company posted a
slower growth in 2013/2014 as manufacturing, Gross premium of Ushs9.65billion in 2014
electricity supply and construction sub-sectors representing an increase of 1.35 percent over the
recorded sluggish expansion. Overall, industry Ushs9.62billion written in 2013. Reinsurance cost
grew by 5.6 percent in 2013/2014 compared to was Ushs 1.996 billion in 2014 rising by 15.26
6.8 percent in 2012/2013. Similarly, the services percent when compared to Ushs1.731billion
sector posted a growth of 5.6 percent in the recorded in 2013. As the company sustained
year under review down from the 6.5 percent its reputation for prompt settlement of genuine
expansion achieved in 2012/2013. The drop was claims, Claims Payout for the year under review
due to low growth in the communication and was Ushs1.69billion as against Ushs998million
transport sub-sector which recorded a sharp recorded in 2013 representing an increase of
decline from the 13.5 percent growth reported 69.40 percent while Net Claim incurred was
in 2012/2013 to 4.1 percent in 2013/2014. The Ushs1.44billion in 2014 as against Ushs931million
All Share Index (ALSI) which indicates the in 2013, an increase of 64.35 percent.
average price of shares traded on the Uganda
Securities Exchange (USE) increased from While the underwriting results for 2014 showed
1,481 in 2012/2013 to 1,697 in 2013/2014 as a drop of 3.26 percent from Ushs5.485billion in
trading on the USE gained momentum from 2013 to Ushs5.31billion in 2014 as a result of
the favourable macroeconomic environment. increased claims payment, investment income

ANNUAL REPORT AND ACCOUNTS 2014 3


increased by 3.37 percent to Ushs1.69billion from private sector credit, increased Foreign Direct
Ushs1.63billion generated in 2013. Management Investment and boost in agricultural production
expenses rose marginally in 2014 by 0.52 portend a brighter and more positive economic
percent to Ushs5.37billion from Ushs5.34billion outlook for 2014/2015 financial year.
recorded in 2013 while impairment provisions
on receivables decreased by 9.41 percent to The NIC Group, through its new insurance
Ushs1.16billion from Ushs1.28billion recorded subsidiaries, will leverage its superior technical
in 2013. Profit-before-Taxation in 2014 declined capacity, product innovation and brand visibility
by 12.64 percent to Ushs2.133billion as against to remain ahead of competition in the production
Ushs2.44billion achieved in 2013 arising largely of top-drawer insurance solutions for our
from increased claim payment. Consequently, discerning clients.
Profit-after-Taxation recorded in 2014 was Our shareholders can be assured of our
Ushs1.56billion as against Ushs2.02billion unflagging resolve to continuously meet and
achieved in 2013 representing a decline of 22.78 even exceed their expectations as we explore
percent. new opportunities to accomplish our expanding
CORPORATE CITIZENSHIP vision and projections.

In 2014, the NIC remained a foremost insurance CONCLUSION


brand in corporate citizenship as the company On a final note, I wish to express my sincere
engaged in top-of-the-range social responsibility appreciation to our esteemed customers for their
initiatives in furtherance of its policy of applying support, patronage and unflagging trust in the
industry’s best practice whilst remaining brand “NIC.”
profitable and socially responsible. The Company
continued it’s support to the Uganda Netball My deep gratitude also goes to you, our
Federation at both club and National level as the distinguished shareholders and members of the
She Cranes prepare for the Netball World Cub Board of Directors as well as the Management
in 2015. and Staff of NIC, for your steadfastness and
contributions in various ways to the growth and
Sport has been part and parcel of NIC’s corporate survival of the company in 2014.
DNA as witnessed by the strengthening of the
relationship with the Federation of Football I thank you all for attending this 14th Annual
Associations of Uganda (FUFA) in 2014 as General Meeting of NIC. May God, in His
Uganda looked to secure her place in the African gracious mercies, continue to bless you all and
Cup of Nations 2015. On another note, a new may He continue to bless and prosper NIC
partnership was formed in 2014 between Hospice Holdings Limited and all its subsidiaries.
Africa (Uganda) and the Company as part of our
CSR activities; a donation drive was run to raise
funds that would be used to subsidize medical
treatment for patients. NIC’s CSR policy is at the
core of our future outlook and has placed your
company actively within the community. The true
DR. MARTIN ALIKER
value we receive from our ongoing initiatives is
Chairman
that of social good will – we believe that setting
a good example is the greatest benefit in that we
inspire other organizations.

FUTURE PROSPECTS

In 2014 the Ugandan economy faced some


key challenges which impacted the business
environment and did not spare the insurance
sector. These included the introduction of Value
Added Tax (VAT) on insurance services as well
as Withholding Tax on reinsurance premium
payments, 11 percent depreciation of Uganda
Shilling against the US dollar and withdrawal
of donor funding to the budget amongst
others. However, the planned increased
public investment in infrastructure, growth in

4 ANNUAL REPORT AND ACCOUNTS 2014


Managing Director’s Statement

Bayo Folayan

O
“Learn from yesterday, n behalf of Management and staff of
the Company, I welcome and thank
live for today, hope for you all for attending the 14th Annual
General Meeting of NIC. Being the
tomorrow. The important first AGM since the death of our late Chairman,
the inspirational Mr. Oluremi Andrew Olowude,
thing is not to stop OON, we want to use this opportunity to thank
all our shareholders that commiserated with
questioning.” us on the great loss. He was indeed a great
man! His vision of building an insurance group
Albert Einstein that will be the preferred provider of insurance,

ANNUAL REPORT AND ACCOUNTS 2014 5


risk management and financial services is eight shares already held was also concluded.
being actualized today. We hereby renew our
commitment to actualizing this vision. With the Bonus issue it means that shareholders
that invested in 2010 when the shares of the
A CHALLENGING YEAR Company were listed would have had 61.84%
growth in their investment if they participated in
The year 2014 was quite challenging. We started all the corporate actions of the Company. This
the year with the conclusion of the Rights Issue is apart from the dividends earned within the
which commenced towards the end of 2013. The period i.e 2010 to 2015.
sum of Ushs4,998,182,176 was raised through
the issuance of Rights shares. Later in the year a A clear illustration of the growth in value is
Bonus Issue offering eleven new shares for every presented in the table below:

GROWTH IN NIC SHARE PRICE FROM IPO TO 30TH APRIL, 2015


No. of shares after No. of shares after Value of shares as
Number Of Shares Value of Shares at rights issue of 4 bonus issue of 11 at 30th April 2015
at IPO IPO (Ush) shares for every 5 shares for every 8 (Ush) i.e at the rate of
shares held shares for every share Ushs17/- per share

1,000 45,000 1,800 4,275 72,675

The Company continues to build up the stake as more people became reluctant to take up
holder’s value. Shareholders’ funds increased by or renew insurance policies. Government also
22.22% within the year. imposed 15% ‘Withholding Tax’ on Reinsurance
Services and insurance companies which
The year was also very challenging year for normally are mandated to have reinsurance
insurance companies in Uganda. The new treaties were forced to absorb the Withholding
government tax policy on insurance services Tax as an additional cost of insurance services.
seriously affected the drive to improve insurance
penetration in Uganda. In the year under review, We are happy to announce that despite
many underwriters experienced decline in the challenging business environment, your
profitability as shown in the various published Company posted a modest profit after tax
audited financial statements. of Ushs1.56billion (2013: Ushs2.02 billion).
Although total income, including income from
However with efforts made, your company was Company’s investments improved from Ushs
able to weather the storm. We had started a 10.81billion in 2013 to Ushs 12billion in 2014,
restructuring exercise at the beginning of the year the improved claims payment processes meant
towards making the company more marketing- that a significant amount (Ushs 1.44 billion)
oriented and to diversify the base of the was paid to settle claims in 2014 up from the
company’s income. We took a strategic decision Ushs 931million paid in 2013. This contributed
to acquire robust IT software to power the growth in no small way to the drop in profitability in 2014.
initiatives. Though this could not be implemented
in 2014, the implementation process has started Notwithstanding, we shall continue to emphasise
and envisaged to be completed this year. prompt payment of claims, a veritable part of our
service charter to our valued customers. Our
On the macroeconomic level, Management records of “firsts” in claims payment still resonate
expected consistency in government’s policy on in the history of claims payment in Uganda. In
insurance. Uganda remains one of the lowest in 2006, NIC paid Ushs13 billion, the largest single
insurance penetration in East Africa standing at claim in the insurance industry at the time, to
0.85% in 2013 compared to Kenya with 3.44%. settle claims arising from the crash of M1-172
It was therefore surprising that government’s Presidential Helicopter. In 2010, the Company
promise of improving insurance penetration in paid over Ushs8.2 billion in compensation for the
Uganda was not matched with complementary Uganda Police helicopter which crashed in Bugiri
fiscal policy initiatives. The increase in stamp and followed up with payment of Ushs10billion to
duty and the introduction of 18% Value Added Makerere University in part settlement of Deposit
Tax (VAT) on insurance services made insurance Administration claims.
more expensive for individuals and businesses
thereby worsening insurance penetration levels

6 ANNUAL REPORT AND ACCOUNTS 2014


In addition to the income figures above, THE FUTURE IS BRIGHT
the Company posted strong balance sheet
performance during the period under review. We are committed to a growth trajectory in line
Although total assets dropped by 2.35% from with the company’s five year business plan
Ushs85billion in 2013 to Ushs83billion, total which is aimed at NIC regaining its pre-eminence
liabilities fell by a greater (13.8%) margin from and leadership of the industry. Emphasis of
Ushs 58billion in 2013 to Ushs50billion in 2014. Management will be focused on the provision
Thus, shareholders’ equity grew from Ushs of quality service to customers and building
27million in 2013 to Ushs 33million in 2014. stronger relationships with our partners. We
recognize that there are challenges ahead but
We also continued to improve efficiency in we also know that the potentials of the Company
management with a marginal 0.52% increase are great. It is these potentials that will continue
in management expenses. In order to improve to drive our Management towards actualizing the
income, an immediate restoration plan had Company’s vision.
been instituted since the beginning of 2015 with
the key decision to acquire new web based CONCLUSION
software to power the Company’s Information On behalf of Management, I wish to thank
Communication Technology Systems and link the distinguished members of the Board for
the network of branches nationwide. This new their unwavering support and guidance. More
investment in ICT is expected to improve service importantly, we remain eternally grateful to our
delivery and enhance performance. clients who have maintained their steadfast
Furthermore, the restructuring of NIC into support to the NIC brand. We also join the
specialized entities for non life and life insurance Chairman in expressing our gratitude to brokers,
services is expected to enhance service delivery agents and field officers who have supported our
with consequent improvement in performance. business over the years.
In anticipation of the improved communication Long Live the Republic of Uganda
systems, Management has already expanded Long Live NIC
the Company’s branch operations to new towns
where feasibility reports have projected strong
business growth. The head office building is also
being given a face-lift which will be completed
before the end of 2015.

With the completion of the restructuring exercise


and licensing of the respective insurance
subsidiaries, the NIC group will commence the BAYO FOLAYAN
next phase of its media campaign. Managing Director

ANNUAL REPORT AND ACCOUNTS 2014 7


Our Products

NON LIFE INSURANCE


• Fidelity Guarantee
• Group Personal Accident
• Goods in Transit
• Marine and Aviation
• Public and Products Liability
• Engineering and Contractors All
Risks • Professional Indemnity

• Workers Compensation • Computer and Electronics

• Employer’s Liability • Estate Fire Insurance

• Motor • Estate Comprehensive

• Fire and Allied Perils • Travel Personal Accident

• Theft/Burglary • All Risks Insurance

• Cash in Transit • Travel Insurance (Worldwide)

HEAD OFFICE
Plot 3, Pilkington Road. P.O. Box 7134 Kampala, Uganda. Tel: +256 (0)41 258 001/5, +256 (0)31 258 001/4,
+256 (0)752 258 005, +256 (0)75-2. Fax: +256 (0)41 259 925. Website: www.nic.co.ug. Email: nic@nic.co.ug

8 ANNUAL REPORT AND ACCOUNTS 2014


Our Products

LIFE INSURANCE
• Whole Life Insurance & • Employees Insurance Plan
• Endowment Insurances • Micro Finance Insurance Package
• Group Life Term • Personal Pension and
• Children’s Endowment Insurance • Annuity-Plus Plan (PPA)
• University Sure • Dividend Plus Plan (DDP)
• Group Pensions • Integrated Benefit Plan
• Group Retirement, Deposit • Teachers’ Insurance Savings Plan
(TISP)
• Administration Plan-DAP)
• Morecare/Lease care
• Personal Pension
• DPP for Low income earners
• Group Funeral
• Individual Mortgagee
• Comprehensive Insurance Package
for Schools • Teacher’s Insurance Savings Plan
• Education Endowment

HEAD OFFICE
Plot 3, Pilkington Road. P.O. Box 7134 Kampala, Uganda. Tel: +256 (0)41 258 001/5, +256 (0)31 258 001/4,
+256 (0)752 258 005, +256 (0)75-2. Fax: +256 (0)41 259 925. Website: www.nic.co.ug. Email: nic@nic.co.ug

ANNUAL REPORT AND ACCOUNTS 2014 9


Board of Directors NIC Holdings

DR. MARTIN ALIKER


CHAIRMAN
Dr. Aliker whose appointment as
Chairman of NIC was confirmed by
the Board on 31st March 2015, holds
Doctorate Degree in Dental Surgery
from Northwestern University USA and
also obtained a Licentiate in Dental
Surgery from the Royal College of
Surgeons England. He has served the
country in various capacities including
as Presidential Adviser as well as
Chancellor of Gulu University. He is
currently Chancellor, Victoria University
Uganda.

MR. ROTIMI FASHOLA - VICE CHAIRMAN MR. BAYO FOLAYAN - MANAGING DIRECTOR
Mr. Fashola, a Chartered Insurer (ACII) with over 3 decades Mr Folayan is a seasoned insurance practitioner with a Bsc in
experience in Insurance Practice and Management, holds a Insurance from the University of Lagos, Nigeria and an MBA
Master’s Degree in Business Administration from Obafemi from the University of Ilorin, Kwara State, Nigeria. He is a
Awolowo University, Ile-Ife, Osun State, Nigeria. He is also Fellow of the Chartered Insurance Institute, London (since
an alumnus of the West African Insurance Institute College 1993); Fellow of the Chartered Insurance Institute, Nigeria
of Insurance and Risk Management (WAII) Gambia. An (since 2002) and member of other professional bodies and
Associate of Chartered Institute of Arbitration (London) associations.
(ACIarb) and a Fellow of National Institute of Marketing of
Nigeria (FNIMN), Mr. Fashola joined Industrial and General He has over 30 years’ experience in the insurance world,
Insurance Plc (IGI Plc) in 1993 and is currently the company’s starting with Sakiina Insurance Brokers, Nigeria in 1983. He
Group Managing Director/CEO. eventually rose in the insurance profession to become the
Managing Director.

10 ANNUAL REPORT AND ACCOUNTS 2014


MR. MICHAEL OLUPOT TUKEI - MEMBER
Mr. Tukei holds a Masters’ degree in Development Economics,
from Williams College in Massachusetts, a Postgraduate
Diploma in Monetary Economics from University of Glasgow
and a Bachelors’ of Science Degree in Economics from
Makerere University. He has extensive experience in both
the private and public sectors of Uganda. He has worked MR. CHARLES TUKACUNGURWA - MEMBER
in Uganda Commercial Bank and in Sanwa Bank Limited
(New York Branch) as a Financial Analyst where he had Mr. Tukacungurwa holds a Bachelors’ degree in Botany and
responsibility for Compliance, Risk Management, Industrial Zoology and later on a Masters’ degree in Plant breeding
Research and Merchant Banking. He also worked as Assistant and genetics from Aberdeen, Scotland. He worked in various
Commissioner in the Macroeconomic Policy Department of capacities in the then Agricultural Policy Secretariat under the
the Ministry of Finance, Planning and Economic Development. Ministry of Finance, Planning and Economic Development.
He is currently working in the Directorate of Economic Affairs, The Secretariat implemented major World Bank funded
in the Office of the President. Mr. Tukei has served as Director projects. He currently works as a private Consultant after
in various Boards, including in Capital Markets Authority retiring from the public sector.
(CMA), Non-Performing Assets Recovery Trust (NPART),
Uganda Communications Employees Pensions’ Scheme (as a
Trustee) and Africa Trade Insurance Agency (ATI).

MR. OBAYOMI LAWAL - MEMBER


Mr. Lawal, a thoroughbred professional accountant, is a
Fellow of the Institute of Chartered Accountants of Nigeria
(ICAN). He became an associate member of the Institute
of Chartered Accountants, Nigeria in 1982 and for his
MR. BERNARD KATUREEBE - MEMBER contribution to the noble profession; he was made a fellow
of the same institute in 1991. He commenced his accounting
Mr. Katureebe, a graduate of Law from the University of Wales career with a professional firm of chartered accountants,
Cardiff, is qualified both as a solicitor of England and Wales Messrs Z.O.Ososanya & Co and later worked as the Group
and enrolled as an Advocate of the High Court of Uganda. Financial Controller of Life Flour Mills Limited, Sapele in Delta
Bernard qualified as a solicitor with Edwin Coe Solicitors an State, Nigeria for several years before joining IGI Plc where
established law firm in the city of London. He is currently he is currently Group Director, Finance and Accounts. He
Senior Partner at ENSafrica Advocates formerly Synergy presently serves on the board of many companies in Nigeria
Solicitors & Advocates. and overseas including Sonarwa Life Assurance Company
(Rwanda) Limited.

ANNUAL REPORT AND ACCOUNTS 2014 11


Board of Directors NIC General
Insurance Company Limited

DR. MARTIN ALIKER MR. CHARLES TUKACUNGURWA MR. BERNARD KATUREEBE


CHAIRMAN MEMBER MEMBER

MR. OLUSINA ELUSAKIN MR. KENNETH AIGBINODE MR. ADEYINKA OBALADE


MEMBER MEMBER MEMBER
Mr. Elusakin, whose specialty is in the area Mr. Aigbinode is a Higher National Diploma Graduate A Fellow of the Institute of Chartered
of Oil & Gas insurance and Special Risks, of Institute of Management and Technology, Enugu, Accountants of Nigeria, Mr. Obalade is a
is current Deputy Managing Director of Nigeria. He is also a Masters graduate (M.Sc. in 1980 first class graduate of Mathematics
IGI Plc. A 1986 graduate of Statistics Risk Management) from New York University’s Stern from the Obafemi Awolowo University, Ile-
from the University of Ilorin, Kwara State School of Business. Mr. Aigbinode’s financial sector Ife, Osun State, Nigeria. He is also an MBA
Nigeria, Mr. Elusakin also holds a Masters’ experience spans 40 years having commenced his graduate of the University of Lagos, Lagos
Degree in Business Administration from banking career with Barclays Bank Plc in 1975. He State, Nigeria. Before joining IGI Plc where
Enugu State University of Science and later joined Nigerian-American Merchant Bank, where he is currently Executive Director, Finance,
Technology, Nigeria. Before rejoining IGI he worked for 10 years including a 6-month credit Accounts and Investment, Mr. Obalade had
Plc as Executive Director, Mr. Elusakin internship in Boston USA with the bank’s affiliate, Bank worked in various capacities in the finance
worked with African Reinsurance of Boston. He joined New Nigeria Bank Plc in 2004 sector including as Managing Director of
Corporation where he rose to the position as an Executive Director responsible for business two Banks, namely Societe Bancaire Nigeria
of Assistant Director and Underwriter, development until early 2005. The Central Bank of Ltd, Merchant Bank, Lagos, Nigeria and
Energy and Special Risks. Mr. Elusakin is Nigeria engaged him on national service for later Global Bank Plc, Lagos.
an Associate of the Chartered Insurance in 2005 as part of an interim management board to
Institute of Nigeria and a Member of the oversee the affairs of Assurance Bank Plc towards
Energy Institute, London. an orderly liquidation. Since 2005, Mr. Aigbinode
had been consulting in telecommunications, finance,
and business strategy after an active banking career.
He joined IGI in 2011 and is currently the Executive
Director in charge of Business Strategy and Risk
Management.

12 ANNUAL REPORT AND ACCOUNTS 2014


Board of Directors NIC Life

MR. ROTIMI FASHOLA MR. MICHAEL OLUPOT TUKEI


CHAIRMAN MEMBER

MR. OBAYOMI LAWAL MR. NHAMO MAWADZA


MEMBER MEMBER
Mr. Mawadza is a seasoned underwriter and business
executive with over 19 years of cognate experience in
insurance practice. He holds a Certificate of Proficiency from
the Chartered Insurance Institute of Zimbabwe. Mr. Mawadza
is a Diplomate and Associate member of the Chartered
Insurance Institute of Zimbabwe as well as Diplomate
member of College of Professional Management (London).
He holds a Bachelor of Business Studies Degree from the
University of Azalia (USA). He is a qualified Six Sigma Green
Belt member of South Africa. Before joining IGI Plc where he
is currently Director, Life Operations, Mr. Mawadza worked
in various capacities in the insurance industry including as
New Business and Underwriting Manager and later as Quality
Controller, Life Operations at First Mutual Life Assurance
Society of Zimbabwe. He also worked as Head Life Operations
at Zimnat Life Insurance, Zimbabwe as well as Technical
Director at Unic Insurance (Nigeria) Plc.

MR. NGUGI ANTHONY


AG GENERAL MANAGER

ANNUAL REPORT AND ACCOUNTS 2014 13


NIC Holdings Management Team

Bayo Folayan Elias Edu Wale Oluwaniyi


Managing Director Company Secretary Chief Finance Officer

Jocelyn Ucanda Florence Obore Grace Wanyama Antony Ngungi


Asst. Director Chief Manager, Head Legal & Admin. Ag. General Manager
Technical

Jesca Kweyamba Betty Matovu Pamela Abonyo Edwin Muruka


Head of NIC, Head, Non-Life Head-Corporate Manager, Information
Life Accounts. Communications Technology

Maria Namusisi Stella Ajilong


Manager, Life and Manager,
Pensions Underwriting

14 ANNUAL REPORT AND ACCOUNTS 2014


Branch Network and Area Offices
HEAD OFFICE JINJA BRANCH FORTPORTAL BRANCH
Plot 3, Pilkington Road Plot 15 Main Street PLOT 9 Balya Road
P.O.Box 7134 Kampala, Uganda P.O Box 1755, Jinja P o box 199 Fortportal
Tel:+256 (0) 414-258 001/5 Tel: 0434 120 224, Tel: 0392 906 023
+256 (0)312-258 001/2/3/4/5, 0392 906 024 0779 319 966
+256 (0)752 258 001 Email nicjinja@nic.co.ug Email:nicfortportal@nic.co.ug
Fax: +256 (0)414 259 925
Website: www.nic.co.ug
Email: nic@nic.co.ug

SOROTI BRANCH MASAKA BRANCH ARUA BRANCH


Soroti Avenue Plot 1 Edward Avenue Plot 03, Newlane, Arua
Plot 37/39 Tel: 0481 420029, P.O Box 1369,Arua
Tel: 0454 461 191 0392 759925 Tel: 0476 420 533
Email: nicsoroti@nic.co.ug Email nicmasaka@nic.co.ug Email: nicarua@nic.co.ug

MBALE BRANCH MBARARA BRANCH GULU BRANCH


Plot 28 Republic Street PLOT 4 Buremba Rd Plot 23 Andrea Road
P. O Box 1044 Mbale P.O Box 131 Mbarara P.O Box 276,Gulu
Tel: 0776 219 868 Tel: 0392 707 112, Tel: 0471 432 218
Email: Email: nicmbarara@nic.co.ug 0392 759 925
nicmbale@nic.co.ug Email: nicgulu@nic.co.ug

MALABA BRANCH KABALE BRANCH LIRA BRANCH


Customs Yard Malaba Plot 96 Kabale Road Plot 20/22 Aputi Road
Tel: 0392 707 114 P.O. Box 302 P O Box 163 Lira
Email: nicmalaba@nic.co.ug Tel: 0392 759925 Tel: 0392 707 111
Email: nickabale@nic.co.ug Email: niclira@nic.co.ug

BUSIA BRANCH KASESE BRANCH KITGUM BRANCH


Custom Yard Plot 68 Margherita Road Uhuru Drive, Opp the Mosque,
Busia P.O Box 131- Mbarara Plot 115 A/B
Tel: 0392 906 025 Tel: 0483 444 108 Tel: 0782 392 622 / 0704 392 622
Email: nicbusia@nic.co.ug nickasese@nic.co.ug nickitgum@nic.co.ug

AREA/AGENCY OFFICES
KATUNA AREA OFFICE IGANGA AREA OFFICE ENTEBBE AGENCY OFFICE
Opposite Immigration office Iganga Town Departure Concourse
Next to Transami & Kenfreight Offices Along Jinja Road Ground Floor
Katuna Border Tel: 0702 515 066 / 0783 534 510 Entebbe International Airport- Entebbe
P.O.Box 302, Kabale Email: niciganga@nic.co.ug Email: nicebb@nic.co.ug
Tel: 0776 412 718.
Email: nickabale@nic.co.ug

TORORO AREA OFFICE HOIMA AREA OFFICE


Mbale Road near Hajji Sewallis Building
Rock Mambo FM Radio station Fortportal Road
Tel: 0701 344 262 Tel: 0775 556 955
Email: nictororo@nic.co.ug Email: nichoima@nic.co.ug

ANNUAL REPORT AND ACCOUNTS 2014 15


Map of NIC Branch Network
B R AN C H N E T W O R K
N

W E

KITGUM
BRANCH
ARUA
BRANCH

GULU
BRANCH

LIRA
BRANCH

MASINDI SOROTI KAPCHORWA


AREA OFFICE BRANCH AREA OFFICE
KUMI
AREA OFFICE
HOIMA
AREA OFFICE

TORORO
AREA OFFICE

MBALE
IGANGA BRANCH
LUWERO National Insurance
Co r p o r a t i o n L i mi t e d

Insurance world is ours


AREA OFFICE
AREA OFFICE MALABA
MUKONO BRANCH
JINJA
AREA OFFICE BRANCH
FORTPORTAL BUSIA
BRANCH BRANCH
KAMPALA
MAIN BRANCH
MUBENDE
KASESE AREA OFFICE
BRANCH
MPIGI
AREA OFFICE

MASAKA
BRANCH
MBARARA
BRANCH

MUTUKULA
AREA OFFICE
KABALE
BRANCH
KATUNA
AREA OFFICE
N I C M O TO R TH I R D P AR TY O U TL E TS
Kajjansi Kibuye Nalukolongo Kyazanga
Kawempe Kitintale Old Kla Police Kalugutu
New Tax park Nakawa Ntinda Kagadi
Old Tax Park Lugazi Mpigi Nebbi
Mengo Posta Lumunba Avenue Luwero Vurra
Nakulabye Wandegeya Iganga Oraba
Katwe UMA Kumi Kyazanga
Jinja road Nateete Nebbi Entebbe
Holdings Ltd Matugga Kiseka Market Kyenjojo Ishaka
Tropical complex Kansanga Bundibugyo Nasana
Abayita Ababiiri Kawempe Lyatonde Koboko

16 ANNUAL REPORT AND ACCOUNTS 2014


Financial Statements
31st December 2014

ANNUAL REPORT AND ACCOUNTS 2014 17


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

REPORT OF THE DIRECTORS


FOR THE YEAR ENDED 31 DECEMBER 2014

The directors have pleasure in presenting their report together with the consolidated financial statements
of NIC Holdings Limited (formerly National Insurance Corporation Limited) for the year ended 31
December 2014 which disclose the consolidated state of financial affairs of NIC Holdings Limited (“the
group”) and its subsidiaries (NIC General insurance Company Limited and NIC Life Assurance Company
Limited).

LEGAL STATUS
NIC Holdings Limited was established as National Insurance Corporation by an Act of Parliament under
the National Insurance Corporation Act 1964. The Company was subsequently incorporated in November
2000 as National Insurance Corporation Limited (NIC) and was licensed under the Insurance Act to
transact general and long term Insurance businesses as well as Health and Micro Insurance businesses.
With effect from September, 2014 and pursuant to the provisions of Insurance (Amendment) Act No. 13 of
2011 which required composite insurance companies to separate their insurance businesses under two
different entities for general and long term insurance businesses, the Company, pursuant to resolution
approved during 12th Annual General Meeting (AGM), established two wholly owned subsidiaries, NIC
General Insurance Company Limited (NIC General) and NIC Life Assurance Company Limited (NIC Life)
which took over and were licenced to transact the respective general and long term insurance businesses
previously transacted by NIC. With the incorporation and licencing of the insurance subsidiaries, the
Company was restructured into a holding and investment company. Pursuant to a resolution approved
during the 13th AGM, the name of the Company was changed to NIC Holdings Limited in order to reflect
the new status as a holding company.

PUBLIC LISTING
In line with the objectives set out for the Company prior to privatization, the balance of 40% shares
retained by Government after the sale of majority shares to Industrial and General Insurance Plc, were
sold to individual and corporate shareholders and the shares were subsequently listed on the Uganda
Securities Exchange (USE) on 25 March 2010 making NIC the first and only insurance company in
Uganda to be listed on the USE. The listing of the shares on the USE came with a compliance reporting
obligation to the USE in addition to the usual reporting obligations to the Insurance Regulatory Authority
of Uganda.

PRINCIPAL ACTIVITY
The principal activities of the group are provision of general and long term insurance services and
related activities. These include:
i. General Business :
• Workmen’s compensation/Employers Expenses
Liability • Erection All Risks
• Burglary Insurance • Marine Cargo
• Fire & Special Perils • Marine & Aviation Hull and Liabilities
• Personal Accident (Group and • Oil & Energy
Individual) • Contractor’s All Risks
• Goods in transit • Physical Damage (All Risks)
• Contractors All Risks
• Bonds
• Machinery-Break down/Boiler

ii. Long term Business :


• Group Life • Personal Pension & Annuity
• Individual Life • International Health & Medical
• Education Endowment Insurance
• Dividend Plus Plan • Travel Insurance
• Mortgage Protection

18 ANNUAL REPORT AND ACCOUNTS 2014


31-Dec-14 31-Dec-13
FINANCIAL RESULTS Ushs’ 000 Ushs’ 000

Profit before taxation 2,133,979 2,442,636


Taxation charge (575,244) (424,012)

Profit for the year 1,558,735 2,018,624

FUTURE PROSPECTS
The group will continue to meet the objectives set out in the respective Memorandum and Articles of
Association of component entities with the group. The corporate restructuring which commenced in
early part of the year will be completed and the insurance subsidiaries will be strengthened to take
advantage of business potentials within the economy to improve the overall performance of the group.
Given the importance of modern Information Technology Systems in driving business growth, the Board
had approved the acquisition of new software to power new business channels across the network
of branches as well as integrate processes to enhance service delivery. Implementation is timed for
completion before the end of the 2015 financial year. Major investments are also being proposed in the
area of product development and training with primary focus being to drive business channels using new
innovative ideas and technology all aimed at achieving better value for shareholders.

DIRECTORS
The present Board of Directors is as shown on page (iv).

In line with the Listings Rules of the Uganda Securities Exchange which require one-third of directors to
retire from office by rotation, Dr. Martin Aliker, Mr. Rotimi Fashola and Mr. Michael Tukei retired by rotation
at the 13th Annual General Meeting of the group held on 26 June 2014 and being eligible, they were duly
re-elected by shareholders.

On 24 September 2014, Mr. Michael Kaggwa retired from the Board after years of meritorious service
to the group. The Board wishes Mr. Kaggwa the best in his future endeavours. However, on a rather sad
note, on 27 September 2014, the Chairman of the Board, Mr. Remi Olowude died in the United States
of America after a brief illness. Following Mr. Olowude’s death, Dr. Martin Aliker, then Vice Chairman,
a senior citizen and statesman, who had been deputising for the Chairman assumed the role of Acting
Chairman. Dr. Aliker’s appointment as substantive Chairman was confirmed by the Board on 31 March
2015.

On 31 March 2015 Mr. Obayomi Lawal, a thoroughbred professional accountant and Fellow of the
Institute of Chartered Accountants of Nigeria (ICAN) was appointed as director of the group to fill the
casual vacancy arising from the death of Mr. Remi Olowude. Prior to his appointment as director, Mr.
Lawal had served in the Audit Committee as a non Board member of the Committee.

Directors’ Shareholding
The interest of Directors in the issued share capital of the group is not significant. Only Mr. Michael Tukei
owns shares in the group (171,000 ordinary shares as at 30 January 2015). The Memorandum and
Articles of Association does not prescribe share qualification for Directors.

CORPORATE GOVERNANCE STATEMENT


The directors remain steadfast in implementing governance practices where substance prevails over
form. The group is a member of the Institute of Corporate Governance Uganda. The governance
framework of the group allows the Board of Directors to carry out periodic evaluation, enabling the
directors to balance the Board’s responsibility for oversight with their individual roles to provide strategic
guidance for management actions.

ANNUAL REPORT AND ACCOUNTS 2014 19


The governance framework provides for delegation. Thus the Board has delegated some of its
responsibilities to a number of committees with clear Terms of Reference (TOR) designed to help the
Committees maintain close oversight on management functions.

Regulatory Compliance
The group is committed to achieving full compliance with the extant legal provisions regulating its business.
The wholesome adoption of global best practice makes it imperative to observe greater transparency,
accountability and professionalism consistent with the vision of the group. The Board continually monitors
regulatory compliance and this is one of the basis for assessment of management functions.

Shareholders’ responsibilities
The shareholders’ role is to appoint the Board of Directors and the External Auditors. This role is extended
to holding the Board accountable and responsible for efficient and effective corporate governance. The
major shareholders of the company are listed below.

Shareholding Structure
Major Shareholders (top 10) as at 31 January 2015
Name Of Shareholder No. of Shares %
Corporate Holdings Limited 919,489,617 64.96
Crane Bank Limited 99,096,922 7.00
Mr. Sudhir Ruparelia 98,529,302 6.96
Mr. Ronald Balyejjusa Ssettumba 27,835,561 1.97
Mr. Joseph Tukuratiire & Ketrah 16,835,562 1.19
Mr. Joseph Tukuratiire 16,354,171 1.16
Mr. Timothy Sabiiti Mutebile 11,875,000 0.84
ITF Abala Brian Mundu Abala Joseph 8,550,000 0.60
BID Insurance Brokers (U) Limited 7,481,250 0.53
Mr. Biao Wang 7,125,000 0.50
1862 Other Shareholders 202,207,333 14.29
TOTAL 1,415,379,718 100.0

Shares Distribution Schedule As at: 31 January 2015


Category No. of Shareholders
1 - 1000 shares 13
1001 - 5000 shares 428
5001 - 10000 shares 282
10001 - 100000 shares 1,104
100001 and over shares 46
Total 1,873

*New bonus shares of 819,661,942 units were allotted to shareholders on 30 September 2014 bringing
the group’s paid up share capital to Ushs7,078,898,590/- made up of 1,415,779,718 ordinary shares of
Ushs5/- per share.

Board of Directors
The Board of Directors has ultimate responsibility for the management of the group. The Board provides
the strategic objectives of the group and is responsible for the overall corporate governance framework,
ensuring that appropriate controls, systems and practices are put in place to guide the operations of the
group.

20 ANNUAL REPORT AND ACCOUNTS 2014


The following table shows the attendance of directors at Board meetings during the year ended 31
December 2014.

10th 29th 26th 30th 25th 24th 8th 19th


Names of members Designation January March June July August September October December
2014 2014 2014 2014 2014 2014 2014 2014
Dr. Martin Aliker Chairman        
Mr. Rotimi Fashola Vice Chairman      
Mr. Michael Kaggwa Director       Retired Retired
Mr. Michael Tukei ,,       
Mr. Charles Tukacungurwa ,,        
Mr. Bernard Katureebe ,,       
Mr. Obayomi Lawal ,, Appointed 31st March 2015
Managing
Mr. Bayo Folayan        
Director

Delegation and effective control


The Board maintains effective control of the group through a well developed governance structure
which includes Board committees. These committees provide in-depth focus on specific areas of board
responsibility.

In line with the Articles of Association of each company within the group, authority has also been
delegated to the Managing Director to manage the business together with his Management team. The
Managing Director is tasked with the implementation of board decisions and there is a clear flow of
information between Management and the Board, which facilitates the qualitative evaluation of the
group’s performance.

Directors have full and unrestricted access to Management as well as to all group information and
the resources required to carry out their roles and responsibilities, including external legal advice
at the group’s expense. The access to information also includes unlimited access to the advice and
services of the group company Secretary, who assists and facilitates the effective discharge of directors’
responsibilities.

Board committees
The following Board Committees are in place to ensure effectiveness in the performance of Board’s
duties: Audit Committee, Human Resources and Remuneration Committee, Business Committee and
Investment Committee. A special Committee of the Schools Insurance Trust Fund, headed by a Non
Executive Director was set up to implement an aspect of the Corporate Social Responsibility Policy of
the group relating to provision of insurance support to the education sector.

Audit Committee
The central role of the Board Audit Committee is to assist the Board in fulfilling its oversight responsibilities
as they relate to the integrity of the financial statements, the external auditor’s qualifications and
independence, and the performance of the group’s internal audit functions and its external auditor. The
Committee regularly reviews the group’s financial position and makes recommendations to the Board on
all financial matters.

The Board Audit Committee serves as an independent and objective monitor of the group’s financial
reporting process and system of internal control, and facilitates ongoing communication between the
External Auditor, Management, Internal Audit, the Board and Regulators with regard to the group’s
financial situation.

The following table shows the attendance of members at the meetings of Board Audit Committee during
the year ended 31 December 2014.

ANNUAL REPORT AND ACCOUNTS 2014 21


th th th th th
Names of members 10 February 28 March 29 June 24 18
2014 2014 2014 September December
2014 2014
Mr. Rotimi Fashola    
Mr. Michael Kaggwa     Retired
Mr. Michael Tukei     
Mr. Obayomi Lawal     
Mr. Bayo Folayan     

Human Resources and Remuneration Committee


The role of the Human Resources and Remuneration committee of the Board is to provide oversight
function on human capital resources of the group ensuring implementation of the Organisational
framework and Remuneration Policy. The Committee ensures that the compensation of executive and
senior management and other key personnel is consistent with the approved budget, NIC’s objectives,
strategy and control environment. The goal of the Committee is to maintain compensation policies that
will attract and retain the highest quality of skilled manpower in line with the vision/mission of the group.

Investment Committee
The role of the Investment Committee is to assist the Board in setting the Investment Policy ensuring that
the investment of group funds is conducted in accordance with the Investment Policy. The Investment
Committee is further required to set/establish the Risk Policy to guide the investment.

Business Committee
The mandate of the Business Committee is to provide oversight on the group’s activities pertaining to
the generation of revenues from insurance services and the development of policies to promote good
business practices in the group.

Composition of Board of insurance subsidiaries


NIC General Insurance Company Limited NIC Life Assurance Company Limited
Dr. Martin Aliker - Chairman Mr. Rotimi Fashola - Chairman
Mr. Olusina Elusakin - Member Mr. Michael Olupot Tukei - Member
Mr. Adeyinka Obalade - Member Mr. Obayomi Lawal - Member
Mr. Kenneth Aigbinode - Member Mr. Nhamo Mawadza - Member
Mr. Charles Tukacungurwa - Member Mr. Antony Ngugi - Ag.General Manager/CEO
Mr. Bernard Katureebe - Member
Mr. Bayo Folayan - Managing Director/CEO

* Brief profiles of the above Board members have been included in this report on pages 10 to 13 of this report.

Corporate Social Responsibility Statement


The Company is committed to its ongoing CSR initiatives which are geared towards sports and human
capital development. As part of this initiative the Company committed a total sum of Ushs181million in the
sponsorship of NIC Netball team in 2014 financial year. During the period also, the Company committed
to a total sum Ushs660million in insurance protection to Uganda National Football team, the Uganda
Cranes whilst at the same time providing support to the Federation of Uganda Football Associations
[FUFA]. By these CSR initiatives, the Company has made significant contributions to government’s
efforts towards sports development and youth empowerment.

Evaluation of Board effectiveness


The Board is committed to improvements in Board effectiveness and performance. In this regard constant
evaluation of the Board structure, processes and performance is carried out in line with corporate
governance requirements. The Board also evaluates Managements’ performance through constant
review of performance reports compared with approved Budgets.

22 ANNUAL REPORT AND ACCOUNTS 2014


Remuneration of Directors
The group’s Remuneration Policy is consistent with the provisions of the Companies Act and extant
Corporate Governance Guidelines applicable to the remuneration of Directors. The consolidated package
of Directors is included as Note 38(b) to the Financial Statements.

AUDITORS
The External Auditors, KPMG having served for four years will not be eligible as per the provisions of the
Insurance Act(CAP 213) as amended.

A resolution will be proposed during the Annual General Meeting for the appointment of new External
Auditors.

BY ORDER OF THE BOARD

Elias EDU, Esq


COMPANY SECRETARY
2015 Kampala

ANNUAL REPORT AND ACCOUNTS 2014 23


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE YEAR ENDED 31 DECEMBER 2014

The directors are responsible for the preparation and fair presentation of the consolidated financial
statements which comprise of the statements of financial position as at 31 December 2014, comprehensive
income, changes in equity and cashflows for the year then ended, and summary of significant accounting
policies and other explanatory notes, in accordance with International Financial Reporting Standards, the
Companies Act of Uganda, and the Insurance Act (Amended 2011) and for such internal 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.

The directors‟ responsibility includes: designing, implementing and maintaining internal control relevant to
the preparation and fair presentation of these financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.

Under the Ugandan Companies Act, the Directors are required to prepare financial statements for each
year that give a true and fair view of the state of affairs of the group as at the end of the financial year and of
the operating results of the group for that year. It also requires the Directors to ensure the group keeps
proper accounting records that disclose with reasonable accuracy the financial position of the group.

The directors accept responsibility for the consolidated financial statements set out on pages 28 to 83 which
have been prepared using appropriate accounting policies supported by reasonable and prudent judgments
and estimates, in conformity with International Financial Reporting Standards, the reporting requirements of
Insurance Act (Amended 2011) and Ugandan Companies Act.The directors are of the opinion that the
consolidated financial statements give a true and fair view of the state of the financial affairs and the profit
and cash flows for the year ended 31 December 2014. The directors further accept responsibility for the
maintenance of accounting records that may be relied upon in the preparation of consolidated financial
statements, as well as adequate systems of internal financial control.

The directors have made an assessment of the group's ability to continue as a going concern and have no
reason to believe the business will not be a going concern for the next twelve months from the date of this
statement.

Approval of the Financial Statements

The consolidated financial statements of NIC Holdings Limited for the year ended 31 December 2014 were

approved by the board of directors on 14th May, 2015 and signed on its behalf by

____________________________ ____________________________
Director Director

14th May, 2015


Date: _______________________ 14th May, 2015
Date: _______________________

Page 9

24 ANNUAL REPORT AND ACCOUNTS 2014


REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF NIC HOLDINGS LIMITED
(Formerly National Insurance Corporation Limited)
Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of NIC Holdings Limited and its
subsidiaries, set out on pages 28 to 83 which comprise the consolidated statement of financial position as at
31 December 2014 and the consolidated statements of comprehensive income, changes in equity and cash
flows for the year then ended, and the notes to the consolidated financial statements, which include a
summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Consolidated Financial Statements

The directors are responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards Insurance (Amended 2011) and the
Companies Act of Uganda, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.

Auditors' Responsibility

Our responsibility is to express an independent opinion on these consolidated financial statements based on
our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of NIC
Holdings Limited and its subsidiaries as at 31 December 2014 and of their performance and cash flows for the
year then ended in accordance with International Financial Reporting Standards, Insurance Act (Amended
2011) and the Ugandan Companies' Act.

Page 10

ANNUAL REPORT AND ACCOUNTS 2014 25


INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF NIC HOLDINGS LIMITED (Continued)
(Formerly National Insurance Corporation Limited)

Report on Other Legal and Regulatory Requirements

As required by the Ugandan Companies Act, we report to you based on our audit, that:

i) we have obtained all the information and explanations which, to the best of our knowledge and belief,
were necessary for the purpose of our audit;
ii) in our opinion, proper books of account have been kept by the group, so far as appears from our
examination of those books;
iii) the group's statement of financial position and statement of comprehensive income are in agreement
with the books of account;

KPMG
Certified Public Accountants
P O Box 3509
Kampala, Uganda

Date: 14th May, 2015


………………….

Page 11

26 ANNUAL REPORT AND ACCOUNTS 2014


ANNUAL REPORT AND ACCOUNTS 2014 27
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
Total Total
General Long-term Group
Business Business 31-Dec-14 31-Dec-13

Notes Ushs'000 Ushs'000 Ushs'000 Ushs'000


ASSETS
Cash and cash equivalents balances 14 i 589,169 536,951 1,126,120 2,728,526
Financial Assets;
Fair value through Profit or loss 15b 391,189 1,105,600 1,496,789 1,254,118
Available for sale 15a 1,240,904 3,285,749 4,526,653 6,149,950
Held to Maturity 15c 1,774,425 2,698,986 4,473,411 5,030,164
Loans and Receivables 15d 69,316 94,709 164,025 156,871
Premium receivables 16 3,647,210 - 3,647,210 2,856,405
Reinsurance Assets 17 2,669,524 - 2,669,524 2,121,190
Deferred acquisition costs 316,034 - 316,034 -
Investment in Other Related Parties 18 30,660 - 30,660 30,660
Investment Properties 19 33,589,999 22,315,000 55,904,999 55,589,999
Deferred Income Tax 20 1,024,697 - 1,024,697 1,286,640
Intangible Assets 21a - - - 726
Property and equipment 21b 3,811,590 1,909,806 5,721,396 5,142,568
Other receivables and prepayments 22 1,477,717 178,287 1,656,004 2,125,426
Statutory deposits 23 400,000 300,692 700,692 563,435
TOTAL ASSETS 51,032,434 32,425,780 83,458,214 85,036,678

LIABILITIES
Insurance Contract Liabilities 24 8,546,554 2,022,772 10,569,326 18,511,582
Investment Contract Liabilities 25 - 16,642,735 16,642,735 9,881,293
Payable arising from Reinsurance Contracts 26 2,008,953 153,073 2,162,026 1,836,915
Other payables and Accruals 27 7,326,590 1,053,211 8,379,801 8,056,116
Income tax payable 11c 481,537 - 481,537 715,622
Dividend payable 28 261,733 - 261,733 618,171
Deferred tax liabilities 20 - 7,507,926 7,507,926 7,709,804
Share Application Fund 29 - - - 1,999,059
Loans and Borrowings 30 4,600,000 - 4,600,000 9,097,133
TOTAL LIABILITIES 23,225,367 27,379,717 50,605,084 58,425,695

NET ASSETS 27,807,067 5,046,063 32,853,130 26,610,983

EQUITY
Share capital 31a 4,043,899 3,035,000 7,078,899 2,019,400
Share premium 31b 1,820,758 1,786,108 3,606,866 -
Contingency reserve 32 3,638,667 117,830 3,756,497 3,433,085
Capital Reserves 32 1,585,561 - 1,585,561 1,507,624
Actuarial Contingency reserve 36a(i) - 107,125 107,125 -
Retained earnings 16,718,182 - 16,718,182 19,650,874
SHAREHOLDERS' FUNDS 27,807,067 5,046,063 32,853,130 26,610,983

The financial statements on pages 28 to 83 were approved by the board of directors on 14th May, 2015
and were signed on its behalf by:

________________________ _____________________ _____________________

Director Director Director

The accounting policies and notes on pages 34 to 83 form an integral part of these consolidated financial statements

Page 12

28 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME


FOR THE YEAR ENDED 31 DECEMBER 2014

General Long-term Total Total


Notes Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000
Gross premium written 8,826,127 823,185 9,649,312 9,521,227
Changes in unearned premium (139,314) - (139,314) (451,476)
Gross Premium Income 8,686,813 823,185 9,509,998 9,069,751
Reinsurance cost (1,948,826) (47,024) (1,995,850) (1,731,541)
Net Premium Income 6,737,987 776,161 7,514,148 7,338,210
Fees and commission income 457,830 8,654 466,484 366,513
Deferred acquisition cost (DAC) 316,034 - 316,034 -
Net underwriting income 7,511,851 784,815 8,296,666 7,704,723

Claims expenses (Gross) (1,506,875) (183,633) (1,690,508) (997,919)


Recovered & recoverable from reinsurers 254,193 - 254,193 67,386
Net claims incurred (1,252,682) (183,633) (1,436,315) (930,533)
Commission (1,100,856) (113,655) (1,214,511) (928,542)
Other underwriting expenses (302,000) (37,769) (339,769) (360,644)
(2,655,538) (335,057) (2,990,595) (2,219,719)

Underwriting Profit 4,856,313 449,758 5,306,071 5,485,004


Investment income 7a 1,575,880 112,034 1,687,914 1,632,942
Interest income 7b 63,194 36,406 99,600 125,154
Other income 7c 1,751,903 - 1,751,903 948,750
Fair value gain through Profit or loss 161,130 - 161,130 1,171,465
Net operating income 8,408,420 598,198 9,006,618 9,363,315

Management expenses (5,169,029) (200,779) (5,369,808) (5,342,021)


Transfer to life fund - (343,061) (343,061) (298,484)
Impairment loss on receivables 8 (1,105,413) (54,358) (1,159,771) (1,280,174)
Profit before taxation 2,133,978 - 2,133,978 2,442,636

Taxation 11a (575,243) - (575,243) (424,012)


Profit after taxation 1,558,735 - 1,558,735 2,018,624

Total comprehensive income for the period 1,558,735 - 1,558,735 2,018,624

Earnings per share


Basic (Ushs) 13 1.10 5.00

The accounting policies and notes on pages 34 to 83 form an integral part of these consolidated financial statements

Page 13

ANNUAL REPORT AND ACCOUNTS 2014 29


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

REVENUE ACCOUNT
GENERAL INSURANCE BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2014

Aviation & Total Total


Fire Motor Marine Accident 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000
Premiums

Gross premiums written 1,010,339 3,991,581 1,555,599 2,268,608 8,826,127 8,739,194


Reinsurers' share of gross written premiums (456,426) (26,715) (1,071,637) (394,048) (1,948,826) (1,569,115)

Net written premiums 553,913 3,964,866 483,962 1,874,560 6,877,301 7,170,079


Net change in provision for unearned premiums (36,378) 321,741 (138,410) (286,267) (139,314) (451,476)

Net earned premiums 517,535 4,286,607 345,552 1,588,293 6,737,987 6,718,603

Claims paid (29,448) (489,108) (7,290) (287,278) (813,124) (1,588,682)


Less: claims recoverable from reinsurers - 94,771 - - 94,771 144,211
Gross change in insurance liabilities and reserves (100,759) (222,808) (73,686) (296,498) (693,751) 757,434
Reinsurers' share of change in insurance liabilities 13,694 (11,474) - 157,202 159,422 (76,825)

Net claims incurred (116,513) (628,619) (80,976) (426,574) (1,252,682) (763,862)


Commissions (net) (74,838) (326,191) 81,760 (323,757) (643,026) (511,482)
Deferred acquisition cost (DAC) 31,654 107,342 (30,018) 207,056 316,034 -
Sticker fees - (302,000) - - (302,000) (268,000)

Total Claims / Commissions (159,697) (1,149,468) (29,234) (543,275) (1,881,674) (1,543,344)

Underwriting profits before


management expenses 357,838 3,137,139 316,318 1,045,018 4,856,313 5,175,259

Management expenses (433,514) (3,014,336) (364,758) (1,356,421) (5,169,029) (5,166,623)

Net underwriting Profit / (loss) (75,676) 122,803 (48,440) (311,403) (312,716) 8,636

The accounting policies and notes on pages 34 to 83 form an integral part of these consolidated financial statements

Page 14

30 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

REVENUE ACCOUNT
LONG TERM INSURANCE BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2014

Life Life Total Total


Individual Group 31-Dec-14 31-Dec-13
Notes Ushs'000 Ushs'000 Ushs'000 Ushs'000

Income

Gross premiums written 462,772 360,413 823,185 782,033


Reinsurers' share of gross written premiums (12,751) (34,273) (47,024) (162,426)

Net written and earned premiums 450,021 326,140 776,161 619,607

Commissions income 1,799 6,855 8,654 34,424

Total income 451,820 332,995 784,815 654,031

Expenses

Death claims 6,205 3,302 9,507 534


Surrenders and annuities - 62,399 62,399 89,547
Survival benefits 4,700 - 4,700 1,600
Maturity claims 104,908 - 104,908 74,663
Group medical expenses 814 1,305 2,119 327
Commissions expenses 61,226 52,429 113,655 84,971
Impairment losses on doubtful receivables 34,879 19,479 54,358 123
Management expenses 138,012 62,767 200,779 175,398

Total expenses 350,744 201,681 552,425 427,163

Increase in the fund 101,076 131,314 232,390 226,868


Investment and other income 7 126,731 21,709 148,440 127,202
Fair value gain on investment properties - - - (50,000)
Fair value loss on equity investments - - - 87,058
Interest charged on managed funds - (37,769) (37,769) (92,644)

Net change in funds and reserves 227,807 115,254 343,061 298,484


Transfer to contingency reserve (4,628) (3,604) (8,232) (7,820)
Funds and reserves at 1 January 3,059,654 7,389,151 10,448,805 10,158,141
Reclassification to investment Contract Liabilities (168,373) (7,263,436) (7,431,809) -
Transfered to actuarial contingency reserves (1,562,797) (116,786) (1,679,583) -

Funds and reserves at end of the year 1,551,663 120,579 1,672,242 10,448,805

The accounting policies and notes on pages 34 to 83 form an integral part of these consolidated financial statements

Page 15

ANNUAL REPORT AND ACCOUNTS 2014 31


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

32
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Actuarial
Share Share Revenue Capital Contingency Contingency
capital Premium reserve reserve reserve reserve Total
Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 2013 2,019,400 - 20,055,375 1,406,693 3,122,471 - 26,603,939


Profit for the year - - 2,018,624 - - - 2,018,624
Dividends declared during the year - - (2,019,400) - - - (2,019,400)

ANNUAL REPORT AND ACCOUNTS 2014


Transfer to contingency reserve - - (302,794) - 302,794 - -
Transfer to contingency reserve from Life Fund - - - - 7,820 - 7,820
Transfer to capital reserve - - (100,931) 100,931 - - -

At 31 December 2013 2,019,400 19,650,874 1,507,624 3,433,085 - 26,610,983

At 1 January 2014 2,019,400 - 19,650,874 1,507,624 3,433,085 - 26,610,983


Profit for the period - - 1,558,735 - - - 1,558,735
Transfer to contingency reserve - - (315,180) - 315,180 - -
Transfer to Actuarial contingency reserve from
Life Fund - - - - 107,125 107,125
Transfer to contingency reserve from Life Fund - - - - 8,232 - 8,232
Transfer to capital reserve - - (77,937) 77,937 - - -
Rights Issue ordinary shares allotted 961,189 - - - - - 961,189
Transfer from revenue as Bonus shares 4,098,310 - (4,098,310) - - - -
Share premium - 3,606,866 - - - - 3,606,866

At 31 December 2014 7,078,899 3,606,866 16,718,182 1,585,561 3,756,497 107,125 32,853,130

The accounting policies and notes on pages 34 to 83 form an integral part of these consolidated financial statements
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

CONSOLIDATED STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED 31 DECEMBER 2014

General Long term Total Total


Business Business 31-Dec-14 31-Dec-13
Notes Ushs'000 Ushs'000 Ushs'000 Ushs'000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated/(used) in operations 33 (2,443,867) 3,575,151 1,131,284 (1,047,725)


Tax paid 11c (547,385) - (547,385) (80,973)

Net cash generated from / (used in) operating activities (2,991,252) 3,575,151 583,899 (1,128,698)

CASH FLOWS FROM INVESTING ACTIVITIES

Loans and Receivables 15d 7,974 (15,127) (7,153) (37,611)


Additions to investment properties 19a (25,196) (15,135) (40,331) (19,325)
Purchase of equipment 21 (70,966) (14,459) (85,425) (25,619)
Transfer of shares 15a 1,235,520 (1,235,520) - 1,141,638
Proceeds from disposal of PPE 3,710 - 3,710 31,000
Purchase of shares 15b (127,000) - (127,000) (6,000)
Decrease / (Increase) in statutory deposit 23 (400,000) 262,743 (137,257) (2,666)
(Increase)/decrease in held to maturity investments 15c 219,316 267,616 486,932 (357,953)
Movement in managed funds 34 - (65,026) (65,026) (205,317)

Net cash used in investing activities 843,358 (814,908) 28,450 518,147

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid 28 (356,438) - (356,438) (2,231,246)


Acquisition / (payment) of Loans 30 4,600,000 (4,664,400) (64,400) (956,297)
Deposit for shares 29 (1,999,059) - (1,999,059) 1,999,059
Paid-up Capital 31a 485,211 475,977 961,188 -
Share premium 31b 1,820,758 1,786,108 3,606,866 -

Net cash generated from/(used in) financing activities 4,550,472 (2,402,315) 2,148,157 (1,188,484)

Net decrease in cash and cash equivalents 2,402,578 357,928 2,760,506 (1,799,035)
Cash and cash equivalents at the beginning of the year (1,813,409) 179,023 (1,634,386) 164,649

Cash and cash equivalents at the end of the year 589,169 536,951 1,126,120 (1,634,386)

Represented by;

Cash and cash equivalents 14 589,169 536,951 1,126,120 (1,634,386)

The accounting policies and notes on pages 34 to 83 form an integral part of these consolidated financial statements

Page 17

ANNUAL REPORT AND ACCOUNTS 2014 33


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
1 SIGNIFICANT ACCOUNTING POLICIES
a) Reporting Entity
NIC Holdings Limited (formerly National Insurance CorporationLimited) was established by an Act of
Parliament under the National Insurance Corporation Act 1964 and was subsequently incorporated in
November 2000 as National Insurance Corporation Limited (NIC).

Its registered office is at :


Plot 3 Plikington Road,
P. O. Box 7134,
Kampala, Uganda.

The group is a public limited company with 40% of shares in the group listed on the Main Investment
Market Segment (MIMS) of the Uganda Securities Exchange with effect from 25 March 2010.

The group was licensed under the Insurance Act (Amended 2011) to conduct general and long term
insurance business until September 2014 when the licence was withdrawn in compliance with the
Insurance Act (Amended 2011) which requires composite insurance companies to separate general
business and long term business. The group's licenced wholly owned subsidiaries, NIC General
Insurance Company Limited and NIC Life Assurance Company Limited, carried out general insurance
and long term insurance businesses respectively from 1 October 2014 to 31 December 2014.

Therefore, these consolidated financial statements presents the combined results of NIC Holdings
Limited for nine (9) months to 30 September 2014 and those of its subsidiaries for three (3) months to
31 December 2014.

b) Going concern
The Directors performed an assesssment of the group's ability to continue as a going concern and is
satisfied that it has the resources to continue in business for the forseeable future. This conclusion has
been arrived at after taking into account the following:
i. The group is in compliance with the capital adequacy and minimum capital requirements in line with
the Financial Institutions Act 2004

ii. The group's executive management is not aware of any material uncertainties that may cast
significant doubt on its ability to continue as a going concern. Therefore, the consolidated financial
statements continued to be prepared on the going concern basis.

c) Statement of compliance
The consolidated financial statements have been prepared in accordance with and comply with
International Financial Reporting Standards (IFRS).
d) Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for the
revaluation of certain financial instruments. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.

The following material items are carried at fair values:


i. Investment property
ii. Financial assets

e) Functional and presentation currency


The consolidated financial statements are presented in Uganda Shillings (Ushs), which is also the
group‟s functional currency. Except as indicated, financial information presented in Uganda Shillings
has been rounded to the nearest thousand.

Page 18

34 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
1 SIGNIFICANT ACCOUNTING POLICIES

f) Income recognition

i. Premium income
a. Non-Life insurance business
For all these contracts, premiums are recognised as revenue (earned premiums) proportionally over
the period of coverage. The portion of premium received on in-force contracts that relates to unexpired
risks at the balance sheet date is reported as the unearned premium liability. Premiums are shown
before deduction of commission.

Claims and loss adjustment expenses are charged to income as incurred based on the estimated
liability for compensation owed to contract holders or third parties damaged by the contract holders.
They include direct and indirect claims settlement costs and arise from events that have occurred up to
the end of the reporting period even if they have not yet been reported to the Group. The Group does
not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of
assessments for individual cases reported to the Group and statistical analyses for the claims incurred
but not reported, and to estimate the expected ultimate cost of more complex claims that may be
affected by external factors (such as court decisions).
b. Life insurance business
Premiums are recognised as revenue when they become payable by the contract holders. Premiums
are shown before deduction of commission.

Claims and other benefits are recorded as an expense when they are incurred.
ii. Investment income
Investment income comprises interest and net rents due to be received in the year. Income from
Government securities and dividends is taken on a receipt basis except the discount on treasury bills,
which is apportioned to income over the period of the bills. Dividends accruing from quoted and
unquoted shares are taken into account on a receipt basis.
iii. Dividend income
Dividend income for equities is recognized when payment is received.

iv. Realized gains and losses


Realized gains and losses on investments recorded in the consolidated statement of comprehensive
income include gains and losses on financial assets and investment properties.Gains and losses on
the sale of investments are calculated as the difference between net sales proceeds and the original or
amortized cost and are recorded on occurrence of the sale transaction.

v. Commissions
Commissions are recognised in the period in which they occur.

g) Property and equipment


(i) Recognition and measurement
Property and equipment are stated at cost, less accumulated depreciation and accumulated
impairment losses. Costs include expenditure that is directly attributable to the acquisition of the asset.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of
that equipment.

Leasehold buildings are carried at their revalued amounts, i.e. the fair value at the date of revaluation,
less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Property and equipment is de-recognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Gains and losses arising on disposal of an item
of property and equipment are determined by comparing the net proceeds from disposal with the
carrying amount of the item and are recognized net within "other operating income" in profit or loss.

Page 19

ANNUAL REPORT AND ACCOUNTS 2014 35


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
1 SIGNIFICANT ACCOUNTING POLICIES

g) Property and equipment (Continued)


(ii) Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits of the
expenditure will flow to the group. Ongoing repairs and maintenance are expensed as incurred.

(iii) Depreciation
Items of property and equipment are depreciated from the date they are available for use or, in respect
of self-constructed assets, from the date that the assets are completed and ready for use. Depreciation
is calculated to write off the cost of items of property and equipment less their estimated residual
values using the straight line basis over their estimated useful lives.

The rates of depreciation used are as follows:

Motor vehicles 25.00%


Furniture, Fittings and equipment 12.50%
Computer equipment 30.00%
Freehold properties 3.00%
Leasehold properties Unexpired period of the lease

h) Impairment
At each reporting date, the group reviews the carrying amount of its tangible 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 (if any). Where the asset does not generate cash flows that are independent from
other assets, the group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of the future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a
revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in
which case the reversal of the impairment loss is treated as a revaluation increase.

36 ANNUAL REPORT AND ACCOUNTS 2014


Page 20
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

1 SIGNIFICANT ACCOUNTING POLICIES (continued)

i) Financial assets
The group classifies its financial assets into the following categories: financial assets at fair value through profit
or loss; held to maturity investments; loans and receivables and available-for-sale financial assets. The
Directors determine the appropriate classification of its financial assets at initial recognition.

Initial recognition and measurement


Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss,
loans and receivables, held to maturity investments, available-for-sale financial assets, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate. The Company determines the
classification of its financial assets at initial recognition.

Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through
profit or loss, directly attributable transaction costs. The classification depends on the purpose for which the
investments were acquired or originated. Financial assets are classified as at fair value through profit or loss
where the group's documented investment strategy is to manage financial investments on a fair value basis,
because the related liabilities are also managed on this basis.

Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date
that the group commits to purchase or sell the asset. The group's financial assets include cash and short-term
deposits, trade and other receivables, loan and other receivables, quoted and unquoted financial investment.

Reclassification of financial assets


Financial assets other than loans and receivables are permitted to be reclassified out of the held-for trading
category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the
near-term. In addition, the group may choose to reclassify financial assets that would meet the definition of
loans and receivables out of the held-for-trading or available-for-sale categories if the group has the intention
and ability to hold these financial assets for the foreseeable future or until maturity at the date of
reclassification.

Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or
amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification
date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables
and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of
cash flows adjust effective interest rates prospectively.

Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:

(i) Financial assets at fair value through profit or loss


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 as held for trading if acquired principally for the
purpose of selling in the short term.

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NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

Financial assets are designated at fair value through profit or loss when:
· doing so significantly reduces or eliminates a measurement inconsistency; or
· they form part of a group of financial assets that is managed and evaluated on a fair value basis in
accordance with a documented risk management or investment strategy and reported to key management
personnel on that basis.

(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, other than those for which the holder may not recover substantially all of its initial
investment, other than because of credit deterioration.
Loans and receivables are initially recognised at fair value - which is the cash consideration to originate or
purchase the loan including any transaction costs - and measured subsequently at amortised cost using the
effective interest rate method. Loans and receivables are reported in the consolidated statement of financial
position as loans and advances to banks or customers or as investment securities. Interest on loans is included
in the statement of profit or loss and other comprehensive income and is reported as "interest income". In case
of an impairment, the impairment loss is reported as a deduction from the carrying value of the loan and
recognised in the statement of profit or loss and other comprehensive income as "impairment charge for credit
losses"

(iii) Held-to maturity


Held-to-maturity assets are non-derivative financial assets with fixed or determinable payments and fixed
maturities that management has the positive intention and ability to hold to maturity. Where the group is to sell
more than an insignificant amount of held-to-maturity assets, the entire category would have to be reclassified
as available for sale.
Government securities and corporate bonds are classified as held to maturity.

(iv) Available for sale assets


Available-for-sale assets are non-derivatives that are either designated in this category or not classified in any
other categories. Equity investments are classified as available for sale.

Regular way purchases and sales of financial assets at fair value through profit or loss and held-to-maturity are
recognised on trade-date – the date on which the group commits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs, for all financial assets except those
carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or where the group has transferred substantially all risks and
rewards of ownership.

Loans, advances and receivables and held-to-maturity financial assets are carried at amortised cost using the
effective interest method. Financial assets at fair value through profit or loss are carried at fair value. Gains
and losses arising from changes in the fair value of „financial assets at fair value through profit or loss‟ are
included in the profit and loss account in the period in which they arise. However, interest calculated using the
effective interest method is recognised in the profit and loss account.

Fair values of quoted investments in active markets are based on current bid prices. These include the use of
recent arms length transactions, discounted cash flow analysis and other valuation techniques commonly used
by market participants. Equity securities for which fair values cannot be measured reliably are recognised at
cost less impairment.

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38 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

The group assesses at each statement of financial position date whether there is objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one
or more events that occurred after initial recognition of the asset (a "loss event") and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable
data that comes to the attention of the Company about the following loss events:

a) significant financial difficulty of the borrower;


b) a breach of contract, such as default or delinquency in interest or principal repayments;
c) the Company granting to the borrower, for economic or legal reasons relating to the borrower‟s
financial difficulty, a concession that the Company would not otherwise consider;
d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
e) the disappearance of an active market for that financial asset because of financial difficulties; or
f) observable data indicating that there is a measurable decrease in the estimated future cash flows
from a group of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the Company, including:
adverse changes in the payment status of borrowers in the Company; or national or local economic
conditions that correlate with defaults on the assets in the Company
g) Assets carried at amortised cost

The group assesses whether objective evidence of impairment exists individually for financial assets.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been
incurred, the amount of the loss is measured as the difference between the assets carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial instrument‟s original effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recognised in the profit and loss
account. If a loan or held-to-maturity asset has a variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined under the contract. As a practical expedient,
the group may measure impairment on the basis of an instrument‟s fair value using an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects
the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not
foreclosure is probable.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are
written off after all the necessary procedures have been completed and the amount of the loss has been
determined. Subsequent recoveries of amounts previously written off decrease the amount of the provision for
loan impairment in the consolidated statement of comprehensive income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor‟s
credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The
amount of the reversal is recognised in the consolidated statement of comprehensive income.

Renegotiated loans
Loans that are subject to individual assessment for impairment and whose terms have been renegotiated are
no longer considered to be past due but are treated as new loans. In subsequent years, the renegotiated terms
apply in determining whether the asset is considered to be past due.

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ANNUAL REPORT AND ACCOUNTS 2014 39


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

Reclassifications
Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading
category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the
near-term. In addition, the group may choose to reclassify financial assets that would meet the definition of
loans and receivables out of the held-for-trading or available-for-sale categories, if the group has the intention
and ability to hold these financial assets for the foreseeable future or until maturity at the date of
reclassification.

Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or
amortized cost as applicable, and no reversals of fair value gains or losses recorded before reclassification
date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables
and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of
cash flows adjust effective interest rates prospectively.

Impairment of Financial Assets


The group assesses at each reporting date whether there is objective evidence that a financial asset or group
of financial assets is impaired. A financial asset or group of financial asset is impaired and impairment losses
are incured if, and only if, there is objective evidence of impairment as a result of one or more events that
occured after initial recognition of the asset ( a "loss event') and that loss event ( or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability the debtor
will enter bankruptcy or other financial reorganization and where observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in payment status or economic
conditions that correlate with defaults.

Financial assets carried at amortized cost


Objective evidence that a financial asset or Company of assets is impaired includes observable data
that comes to the attention of the Company about the following events:

- Significant financial difficulty of the issuer or debtor;


- A breach of contract, such as a default or delinquency in payments;
- It is becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganization;
The disappearance of an active market for that financial asset because of financial difficulties; or observable
data indicating that there is a measurable decrease in the estimated future cash flow from a company of
financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with
the individual financial assets in the group, including: adverse changes in the payment status of issuers or
debtors in the group; or national or local economic conditions that correlate with defaults on the assets in the
Company.

The group first assesses whether objective evidence of impairment exists individually for financial assets that
are individually significant. If the group determines that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, it includes the asset in a company of financial
asset with similar credit risk characteristics and collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment loss is or continues to be recognised are not
included in a collective assessment of impairment.

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40 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

If there is objective evidence that an impairment loss has been incurred on loans and receivables or held-to-
maturity investments carried at amortized cost, the amount of the loss is measured as the difference between
the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses
that have been incurred) discounted at the financial asset's original effective interest rate. The carrying amount
of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in
the consolidated statement of comprehensive income. If a held-to-maturity investment or a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under contract. As a practical expedient, the group may measure impairment on the basis of an
instrument's fair value using an observable market price.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar
credit risk characteristics (i.e., on the basis of the group's grading process that considers asset type, industry,
geographical location, past-due status and other relevant factors). Those characteristics are relevant to the
estimation of future cash flows of such assets by being indicative of the issuer's ability to pay all amounts due
under the contractual terms of the debt instrument being evaluated.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as improved credit rating), the
previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the
reversal is recognised in the consolidated statement of comprehensive income.

Derecognition of financial assets


A financial asset (or, when applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognized when:
* The rights to receive cash flows from the asset have expired; or
* The group retains the right to receive cash flows from the asset and has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a 'passthrough' arrangement; and either:
* The group has transferred substantially all the risks and rewards of the asset; or
* The group has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the group has transferred its right to receive cash flows from an asset or has entered into a pass-through
arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the extent of the group's continuing involvement in
the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that the group could be
required to repay. In that case, the group also recognizes an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and obligations that the group has retained.
Assets classified as available for sale
The group assesses at each date of the consolidated statement of financial position whether there is objective
evidence that a financial asset or a company of financial assets is impaired. In the case of equity investments
classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is
an objective evidence of impairment resulting in the recognition of an impairment loss. In this respect, a decline
of 20% or more is regarded as significant, and a period of 12 months or longer is considered to be prolonged. If
any such quantitative evidence exists for available-for-sale financial assets, the asset is considered for
impairment, taking qualitative evidence into account.

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ANNUAL REPORT AND ACCOUNTS 2014 41


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

The cumulative loss (measured as the difference between the acquisition cost and the current fair value, less
any impairment loss on that financial asset previously recognised in profit or loss) is removed from equity and
recognised in the consolidated statement of comprehensive income. Impairment losses recognised in the
consolidated statement of comprehensive incomet on equity instruments are not reversed through the
consolidated statement of comprehensive income. If in a subsequent period the fair value of a debt instrument
classified as available for sale increases and the increase can be objectively related to an event occurring after
the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated
statement of comprehensive income.

Impairment of non-financial assets


Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset‟s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset‟s fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating
units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of
the impairment at each reporting date.
Impairment of other non-financial assets
Assets that have an indefinite useful life – for example, land – are not subject to amortization and are tested
annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use.

Offsetting of financial instruments


Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement
of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
Income and expense will not be offset in the consolidated income statement unless required or permitted by
any accounting standard or interpretation, as specifically disclosed in the accounting policies of the group.

Fair value of financial instruments


The fair value of financial instruments that are actively traded in organized financial markets is determined by
reference to quoted market bid prices for assets and offer prices for liabilities, at the close of business on the
reporting date, without any adjustment for transaction costs.

For other financial instruments other than investment in equity instruments not traded in an active market, the
fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted
cash flow method, comparison to similar instruments for which market observable prices exist and other
relevant valuation models.

Their fair value is determined using a valuation model that has been tested against prices or inputs to actual
market transactions and using the group's best estimate of the most appropriate model assumptions.

For discounted cash flow techniques, estimated future cash flows are based on management's best estimates
and the discount rate used is a market-related rate for a similar instrument. The use of different pricing models
and assumptions could produce materially different estimates of fair values.

The fair value of floating rate and overnight deposits with credit institutions is their carrying value. The carrying
value is the cost of the deposit and accrued interest. The fair value of fixed interest bearing deposits is
estimated using discounted cash flow techniques. Expected cash flows are discounted at current market rates
for similar instruments at the reporting date.

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42 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

If the fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair
value of the consideration paid for the acquisition of the investment or the amount received on issuing the
financial liability. All transaction costs directly attributable to the acquisition are also included in the cost of the
investment.

j) Policy Loans
The group grants cash loans to Policyholders in line with the policy provisions (terms and conditions). The
maximum loan amount that could be granted to policyholders is 90% of the policy cash value.

The cash value (worth of the policy as determined by the actuary) is the cash amount due to policyholder upon
cancellation of the insurance contract as at the date of determination and it is used as collateral on policy cash
loan granted.

The tenor of the loan is not beyond the policy duration and such policy must be in force and has acquired cash
value before loan application can be considered. A pre-determined interest rate (compounded daily) is applied
on the loan. The rate is currently 12% per annum and it is reviewed periodically. The rate is determined after
due consideration on interest rate used by then actuary for premium benefit calculation, allowance for
documentation and other expenses on the policy, margin for contingencies and profit loadings.

They are initially recognized at cost and subsequently measured at cost plus accumulated interest outstanding.
Policy loans will not impair since the policy will terminate and become void when the principal and the
accumulated interest equal the cash-value of the policy.

k) Staff Loans
This comprise of staff vehicle loan, staff emergency loan, mortgage loan and other interest bearing loans

l) Investment property
Buildings, or part of a building, (freehold or held under a finance lease) and land (freehold or held under an
operating lease) held for long term rental yields and/or capital appreciation and are not occupied by the group
are classified as investment property under non-current assets.

Investment property is carried at fair value, representing open market value determined annually by
independent valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in
the nature, location or condition of the specific asset. If this information is not available, the company uses
alternative valuation methods such as discounted cash flow projections or recent prices in less active markets.
These valuations are reviewed annually by an independent valuation expert. Investment property that is being
redeveloped for continuing use as investment property, or for which the market has become less active,
continues to be measured at fair value. Changes in fair values are recorded in the income statement.

If an investment property becomes owner-occupied, it is reclassified as property and equipment, and its fair
value at the date of reclassification becomes its cost for subsequent accounting purposes. If an item of property
and equipment becomes an investment property because its use has changed, any difference arising between
the carrying amount and the fair value of this item at the date of transfer is recognised in other comprehensive
income as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous
impairment loss, the gain is recognised in the consolidated statement of comprehensive income. Upon the
disposal of such investment property, any surplus previously recorded in equity is transferred to retained
earnings; the transfer is not made through the consolidated statement of comprehensive income.

Page 27

ANNUAL REPORT AND ACCOUNTS 2014 43


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

1 SIGNIFICANT ACCOUNTING POLICIES (continued)

m) General business- Insurance Contract Liability

LIABILITY ADEQUACY TEST


The group has adopted the Liability adequacy test model in the valuation of its insurance contract liabilities
in line with IFRS 4; Insurance Contract, which requires an insurer to assess at the end of each reporting
period whether its recognised insurance liabilities are adequate, using current estimates of future cash
flows under its insurance contracts.

At each reporting date, liability adequacy tests are performed to ensure the adequacy of the insurance
contract liabilities net. In performing these tests, current best estimates of future contractual cash flows and
claims handling and administration expenses, as well as investment income from the assets backing such
liabilities, are used. Any deficiency is immediately charged to profit or loss.

The group commissioned Alexander Forbes Financial Services (East Africa) Limited to perform this liability
adequacy test. The liability adequacy test of the general insurance company consists of determining best
estimates of the Outstanding claims liabilities and the premium liabilities of the insurer. In conducting the
Liability adequacy test, Alexander Forbes Financial Services (EA) Limited was guided by generally
accepted actuarial practice.

Methodologies
Outstanding Claims Liabilities
Outstanding Claims Liabilities is composed of a reserve for claims that have been reported by the
valuation date but have not yet been settled (known as the Outstanding Claims Reserve (“OCR”)) and a
reserve for claims that have been incurred prior to the valuation date but not yet reported to the insurer
(known as the Incurred But Not Reported (“IBNR”) reserve).

Reserving Methodologies Used


The Basic Chain Ladder method was used.

Basic Chain-Ladder (”BCL”) Method


Development factors were calculated using the last 5 years of data by accident period (year).
i.e. IBNR = Ultimate claim amount (excl. extreme large losses)
Less: paid claims to date

Assumptions Underlying BCL


The Basic Chain-Ladder method assumes that past experience is indicative of future experience, i.e. that
claims recorded to date will continue to develop in a similar manner in the future as they have developed in
the past.
An implicit assumption is that, for an immature accident period, the claims observed thus far provide
information about the claims yet to be observed.

Further assumptions made in the application of the BCL are as follows:


- Claims processing has been consistent
- There has been a stable mix of types of claims
- Inflation has been stable
- Policy limits have been stable

Page 28
44 ANNUAL REPORT AND ACCOUNTS 2014
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

1 SIGNIFICANT ACCOUNTING POLICIES (continued)

m) General business- Insurance Contract Liability (Continued)

The data provided was used to derive the following “tails” of claims development patterns for each line of
business:

Class of Business Tail


Accident 5.00%
Fire 12.00%
Marine & Aviation 1.00%
Motor 4.00%

Recovery Rate
In order to calculate the net liabilities, a recovery rate was determined using the last 3 years (2012 – 2014)
recovery information, which were considered to be the most appropriate in terms of determining this
recovery rate as it coincides with the period used for projections. This also allowed for the smoothing of the
reinsurance recoveries.

The recovery rate for each class of business was calculated based on the average recovery rate over the
last 3 years and is summarised in the table below:

Class of Business Final Recovery Rate


Accident 15.00%
Fire 0.00%
Marine & Aviation 0.00%
Motor 19.00%

The use of a recovery rate to calculate the net reserves was deemed appropriate as there had not been
significant changes in the reinsurance programme over the recent past.

The detailed result of valuation of IBNR as at 31 December 2014 is as shown in Note 24.

Premium Liabilities
Premium Liabilities are composed of a reserve for policies that have not yet expired at the valuation date
(known as the Unearned Premium Reserve (“UPR”)).
For an insurance company, the following methods can be used for the determination of the UPR:
- 24ths method corresponding to a risk profile that is spread evenly over each month
- 365ths method corresponding to a risk profile that is spread evenly over the year

Unearned Premium Liability (“UPR”)


The UPR was calculated using a time-apportionment basis, in particular, the 365ths method. This implicitly
assumes that the risk profile of the business is spread evenly over the year.
The historic UPR and earned premium were calculated using the 24th's method, assuming that all policies
had a policy duration of 12 months. It is in the opinion of AFFS that the 365ths method is the most
appropriate to use when accurate policy durations are available.

The Gross UPR is calculated using a policy duration defined as: (end date – start date + 1). Net UPR is
calculated by applying the net written premium as a proportion of gross written premium to the calculated
gross UPR.

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ANNUAL REPORT AND ACCOUNTS 2014 45


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

1 SIGNIFICANT ACCOUNTING POLICIES (continued)

m) General business- Insurance Contract Liability (Continued)

Deferred Acquisition Cost (“DAC”)


The same approach was taken as that for the calculation of the UPR.

Net DAC was approximated by applying the net UPR as a proportion of the gross UPR to the calculated
gross DAC.

The Net DAC was approximated by applying the net written premiums for the 2014 accident year as a
proportion of the gross written premiums for the 2014 accident year to the calculated gross DAC. An
accident year has been defined as 1 January – 31 December.

The detailed result of valuation of UPR and DAC as at 31 December 2014 is as shown in Note 35.

AFFS recommends that the total reserves that should be held as at 31 December 2014 for the group are
as follows:

Gross Reinsurance
Reserve (Ushs'000) (Ushs'000) Net (Ushs'000)
IBNR 629,387 80,144 549,242
OCR 3,651,364 992,262 2,659,103
UPR 4,265,803 1,258,458 3,007,345
DAC 524,596 208,562 316,034

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46 ANNUAL REPORT AND ACCOUNTS 2014
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL


FOR THE YEAR ENDED 31 DECEMBER 2014

1 SIGNIFICANT ACCOUNTING POLICIES (continued)

n) Capital base reserve

The capital base reserve is set up as a requirement under the Insurance Statute 1996, under which every
insurer should transfer from its profits each year, before any dividend is declared and after tax provision, at
5% of profits to be paid up capital of the insurer to facilitate capital growth.

o) Contingency reserves

General Business

The Contingency reserve is set up under Section 47(2) (c) of the Insurance Statute 1996. The reserve is
provided for at the greater of 2% of the gross premium income and 15% of net profit each year effective from
1996, and is required to accumulate until it reaches the greater of either minimum paid-up capital or fifty
percent of the net premiums written.

Long term business

The Contingency reserve is set up under Section 47(3) (b) of the Insurance Statute 1996. Provisions for
these reserves are taken at 1% of the premiums written.

A review of the financial condition of the life fund is carried out regularly by the group's Consulting Actuaries.

Surpluses arising are allocated by the directors with the advice of the Actuaries to policyholders' bonuses and

profit and loss account. Any balance remaining is retained in the books as actuarial contingency reserves.

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ANNUAL REPORT AND ACCOUNTS 2014 47


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1 SIGNIFICANT ACCOUNTING POLICIES (Continued)

p) Premium Receivables
Outstanding premiums and amounts due from reinsurers are carried at amortised invoice amount less
provision for impairment. A provision for impairment is established when there is objective evidence that the
group will not be able to collect all the amounts due according to the original terms of receivables. The
amount of the provision is the difference between the carrying amount and the net recoverable amount.

Allowances are made based on an impairment model which consider the loss given default for each
customer, probability of default for the sectors in which the customer belongs and emergence period which
serves as an impairment trigger based on the age of the debt. Impaired debts are derecognized when they
are assessed as uncollectible. If in a subsequent period the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was recognised, the previous
recognised impairment loss is reversed to the extent that the carrying value of the asset does not exceed its
amortised cost at the reversed date. Any subsequent reversal of an impairment loss is recognised in the
consolidated statement of comprehensive income.

q) Reinsurance assets

The group enters into reinsurance contracts in the normal course of business in order to limit the potential for
losses arising from certain exposures. Outward reinsurance premiums are accounted for in the same period
as the related premiums for the direct or inwards reinsurance business being reinsured.

Reinsurance liabilities comprise premiums payable for outwards reinsurance contracts and are recognised as
an expense when due.
Reinsurance assets include balances due from reinsurance companies for paid and unpaid losses.
Reinsurance assets are measured consistently with the amounts associated with the underlying insurance
contract and in accordance with the terms of the reinsurance contract. Reinsurance is recorded as an asset
unless a right of set-off exists, in which case the associated liabilities are reduced to take account of
reinsurance.
Reinsurance assets are subject to impairment testing and the carrying amount is reduced to its recoverable
amount. The impairment loss is recognised as an expense in the consolidated statement of comprehensive
income. The asset is impaired if objective evidence is available to suggest that it is probable that the group
will not be able to collect the amounts due from reinsurers.

Impairment of Reinsurance assets


The group assesses its reinsurance assets for impairment. If there is objective evidence that the reinsurance
asset is impaired, the group reduces the carrying amount of the reinsurance asset to its recoverable amount
and recognizes that impairment loss in the consolidated statement of comprehensive income.

The group gathers the objective evidence that a reinsurance asset is impaired using the same process
adopted for financial assets held at amortized cost. The impairment loss is calculated following the same
method used for these financial assets carried at amortized cost.

Premiums, losses and other amounts relating to reinsurance treaties are recognized over the period from
inception of a treaty to expiration of the related business.

Ceded reinsurance arrangements do not relieve the group from its obligations to policyholders.

Reinsurance assets or liabilities are derecognized when the contractual rights are extinguished or on expiry or
when the contract is transferred to another party.

Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the
consolidated statement of financial position. These are deposit assets that are recognised based on the
consideration paid less any explicit identified premiums or fees to be retained by the reinsured.
Investment income on these contracts is accounted for using the effective interest rate method when
accrued.

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48 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

r) Translation of foreign currencies

Transactions during the year are converted into Uganda Shillings at rates ruling at the transaction dates.
Monetary items denominated in foreign currencies are retranslated at the rate prevailing on the consolidated
statement of financial position date. Foreign exchange gains and losses resulting from the retranslation and
settlement of these items are recognised in the consolidated statement of comprehensive income.

Non-monetary items measured at historical cost denominated in a foreign currency are translated with
exchange rate as at the date of initial recognition. Translation differences on non-monetary financial
instruments held at fair value through profit or loss are reported as part of the fair value gain or loss.
Translation differences on non-monetary financial instruments measured at fair value through other
comprehensive income are included in the fair value reserve in other comprehensive income. Non-monetary
items that are measured under the historical cost basis are not retranslated.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in
the consolidated profit or loss account within "finance income or cost". All other foreign exchange gains and
losses are presented in the profit or loss account within "other income".

s) Employee benefits

The group's employees are eligible for retirement benefits under a defined contribution plan provided through
a separate fund arrangement. Contributions to the plan are charged to the consolidated statement of
comprehensive income as incurred.

t) Claims - Life business

Maturity and annuity claims are recorded as they fall due for payment. Death claims and surrenders are
recorded when notified.

u) Commissions and expenses of management - General business

Commission expense is shown net of commissions received in respect of re-insurance. Expenses of


management are allocated/charged to the relevant revenue accounts as incurred in the management of each
class of business.

v) Taxation
Current taxation is provided on the basis of the results for the year as shown in the financial statements,
adjusted in accordance with the Ugandan tax legislation.

No current tax is computed on the results of long term insurance business as the group recognises taxation
on any surplus distributed to shareholders and policy holders on the advice of the Actuaries.

Deferred tax income is provided in full, using the liability method, for all temporary differences arising between
the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Tax rates
enacted or substantially enacted at the consolidated statement of financial position date are used to
determine deferred income tax.

Deferred tax assets are recognised to the extent that is probable that future taxable profits will be available
against which the temporary differences can be utilized.

Page 33

ANNUAL REPORT AND ACCOUNTS 2014 49


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1 SIGNIFICANT ACCOUNTING POLICIES (Continued)
w) Consolidation
Subsidiary undertakings, which are those companies in which the group directly or indirectly, has an interest
of more than one half of the voting rights or otherwise has power to exercise control over the operations,
have been fully consolidated. Subsidiaries are consolidated from the date on which effective control is
transferred to the Group and are no longer consolidated from the date of disposal. All inter-company
transactions, balances and unrealised surpluses and deficits on transactions between Group companies
have been eliminated.
x) Cash and cash equivalents
For the purposes of cash flow statement, cash and cash equivalents comprise cash on hand and bank
balances, deposits held at call with banks, other short term highly liquid investments with original maturities
of three months or less, and bank overdrafts.
y) Leases

Leases, where a significant portion of the risks and rewards of ownership are retained by the lessee, are
classified as finance leases otherwise, operating leases. Payments made under operating leases are
charged to the consolidated statement of comprehensive income on a straight line basis over the period of
the lease.

The cost of leasehold land is recorded as finance lease and amortised over the remaining lease term. The
obligations associated with the minimum lease payments are all paid off upfront at inception of the lease in
accordance with the local laws.

z) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and
the redemption value is recognised in the consolidated statement of comprehensive income over the period
of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction cost of the loan to the extent
that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the
draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of
the facility to which it relates.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement

of the liabilities for at least 12 month after the date of the consolidated statement of financial position.

aa) Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the
current year.

Page 34

50 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2 ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

(a) New standards and amendments to published standards effective for the year ended 31 December 2014

Effective for annual


periods beginning on or
Amendments and revised standards after

IAS 32, Offsetting Financial Assets and Financial Liabilities- clarify when an entity can 01 January 2014
offset financial assets and financial liabilities. This amendment will result in the Company
no longer offsetting two of its master netting arrangements.

IFRS 10, IFRS 12 and IAS 27, Investment Entities- clarify that a qualifying investment 01 January 2014

entity is required to account for investments in controlled entities, as well as investments

in associates and joint ventures, at fair value through profit or loss; the only exception

would be subsidiaries that are considered an extension of the investment entity‟s

investment activities. The consolidation exemption is mandatory and not optional.


IAS 36, Recoverable Amount Disclosures for Non-Financial Assets- The amendments 01 January 2014
reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the
recoverable amount of every cash-generating unit to which significant goodwill or
indefinite-lived intangible assets have been allocated. Under the amendments, the
recoverable amount is required to be disclosed only when an impairment loss has been
recognised or reversed

IAS 39, Novation of Derivatives and Continuation of Hedge Accounting- The 01 January 2014
amendments permit the continuation of hedge accounting in a situation where a
counterparty to a derivative designated as a hedging instrument is replaced by a new
central counterparty (known as „novation of derivatives‟ ), as a consequence of laws or
regulations, if specific conditions are met.

IFRIC 21, Levies- defines a levy as an outflow from an entity imposed by a government in 01 January 2014
accordance with legislation. It confirms that an entity recognises a liability for a levy when
– and only when – the triggering event specified in the legislation occurs.

IAS 19, Defined benefit plans – Employee contributions- The amendments introduce 01 July 2014
relief that will reduce the complexity and burden of accounting for certain contributions
from employees or third parties. Such contributions are eligible for practical expedient if
they are:

• set out in the formal terms of the plan;


• linked to service; and
• independent of the number of years of service.

When contributions are eligible for the practical expedient, a company is permitted (but
not required) to recognise them as a reduction of the service cost in the period in which
the related service is rendered.

(b) New and amended standards and interpretations in issue but not yet effective in the year ended
31 December 2014

IFRS 9 (2009), Financial Instruments- introduces new requirements for the classification 01 January 2015
and measurement of financial assets. Under IFRS 9 (2009), financial assets are
classified and measured based on the business model in which they are held and the
characteristics of their contractual cash flows.

Page 35 ANNUAL REPORT AND ACCOUNTS 2014 51


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

(b) New and amended standards and interpretations in issue but not yet effective in the year ended
31 December 2014 (Continued)
Effective for annual
IFRS 9 (2010), Financial Instruments- introduces additions relating to financial liabilities. periods beginning on or
The IASB currently has an active project to make limited amendments to the after
classification and measurement requirements of IFRS 9 and add new requirements to 01 January 2015
address the impairment of financial assets and hedge accounting.

IFRS 9 (2009), Financial Instruments- introduces new requirements for the classification 01 January 2015
and measurement of financial assets. Under IFRS 9 (2009), financial assets are
classified and measured based on the business model in which they are held and the
characteristics of their contractual cash flows.
IFRS 9 (2010), Financial Instruments- introduces additions relating to financial liabilities. 01 January 2015
The IASB currently has an active project to make limited amendments to the
classification and measurement requirements of IFRS 9 and add new requirements to
address the impairment of financial assets and hedge accounting.

IFRS 10 and IAS 28, Sale or Contribution of Assets between an Investor and its 01 January 2016
Associate or Joint Venture- The amendments require the full gain to be recognised when
assets transferred between an investor and its associate or joint venture meet the
definition of a "business" under IFRS 3 Business Combinations. Where the assets
transferred do not meet the definition of a business, a partial gain to the extent of
unrelated investors‟ interests in the associate or joint venture is recognised. The
definition of a business is key to determining the extent of the gain to be recognised

IFRS 11, Accounting for Acquisitions of Interests in Joint Operations- The amendments 01 January 2016
require business combination accounting to be applied to acquisitions of interests in a
joint operation that constitutes a business.
Business combination accounting also applies to the acquisition of additional interests in
a joint operation while the joint operator retains joint control. The additional interest
acquired will be measured at fair value. The previously held interest in the joint operation
will not be remeasured.

IAS 16 and IAS 41, Amendments to IAS 41- Bearer Plants- The amendments to IAS 16 01 January 2016
Property, Plant and Equipment and IAS 41 Agriculture require a bearer plant (which is a
living plant used solely to grow produce over several periods) to be accounted for as
property, plant and equipment in accordance with IAS 16 Property, Plant and Equipment
instead of IAS 41 Agriculture. The produce growing on bearer plants will remain within the
scope of IAS 41.

IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortisation- 01 January 2016
The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-
based methods of depreciation cannot be used for property, plant and equipment.

The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the
use of revenue-based amortisation methods for intangible assets is inappropriate. The
presumption can be overcome only when revenue and the consumption of the economic
benefits of the intangible asset are "highly correlated", or when the intangible asset is
expressed as a measure of revenue.

IAS 27, Equity Method in Separate Financial Statements- The amendments allow the use 01 January 2016
of the equity method in separate financial statements, and apply to the accounting not
only for associates and joint ventures but also for subsidiaries

The amendments apply retrospectively for annual periods beginning on or after 1 January
2016 with early adoption permitted.

52 ANNUAL REPORT AND ACCOUNTS 2014


Page 36
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
(b) New and amended standards and interpretations in issue but not yet effective in the year ended
31 December 2014 (Continued)
Effective for annual
IFRS 14, Regulatory Deferral Accounts- provides guidance on accounting for regulatory periods beginning on or
deferral account balances by first-time adopters of IFRS. To apply this standard, the
after
entity has to be rate-regulated i.e. the establishment of prices that can be charged to its
customers for goods and services is subject to oversight and/or approval by an 01 January 2016
authorised body.

IFRS 10, IFRS 12 and IAS 28, Investment Entities: Applying the Consolidation Exception- 01 January 2016
The amendment to IFRS 10 Consolidated Financial Statements clarifies which
subsidiaries of an investment entity are consolidated instead of being measured at fair
value through profit and loss. The amendment also modifies the condition in the general
consolidation exemption that requires an entity‟s parent or ultimate parent to prepare
consolidated financial statements. The amendment clarifies that this condition is also met
where the ultimate parent or any intermediary parent of a parent entity measures
subsidiaries at fair value through profit or loss in accordance with IFRS 10 and not only
where the ultimate parent or intermediate parent consolidates its subsidiaries.

The amendment to IFRS 12 Disclosure of Interests in Other Entities requires an entity


that prepares financial statements in which all its subsidiaries are measured at fair value
through profit or loss in accordance with IFRS 10 to make disclosures required by IFRS
12 relating to investment entities.
The amendment to IAS 28 Investments in Associates and Joint Ventures modifies the
conditions where an entity need not apply the equity method to its investments in
associates or joint ventures to align these to the amended IFRS 10 conditions for not
presenting consolidated financial statements. The amendments introduce relief when
applying the equity method which permits a non-investment entity investor in an
associate or joint venture that is an investment entity to retain the fair value through profit
or loss measurement applied by the associate or joint venture to its subsidiaries.
IAS 1, Disclosure Initiative-The amendments provide additional guidance on the 01 January 2016
application of materiality and aggregation when preparing financial statements.

IFRS 15, Revenue from Contracts with Customers- This standard replaces IAS 11 01 January 2017
Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes,
IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets
from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising
Services.

The standard contains a single model that applies to contracts with customers and two
approaches to recognising revenue: at a point in time or over time. The standard
specifies how and when an IFRS reporter will recognise revenue as well as requiring
such entities to provide users of financial statements with more informative, relevant
disclosures. The standard provides a single, principles based five-step model to be
applied to all contracts with customers in recognising revenue being: Identify the
contract(s) with a customer; Identify the performance obligations in the contract;
Determine the transaction price; Allocate the transaction price to the performance
obligations in the contract; and recognise revenue when (or as) the entity satisfies a
performance obligation.

IFRS 9, Financial Instruments (2014)- On 24 July 2014 the IASB issued the final IFRS 9 01 January 2018
Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes
the IASB‟s project to replace IAS 39 Financial Instruments: Recognition and
Measurement.

This standard introduces changes in the measurement bases of the financial assets to
amortised cost, fair value through other comprehensive income or fair value through
profit or loss. Even though these measurement categories are similar to IAS 39, the
criteria for classification into these categories are significantly different. In addition, the
IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39
to an “expected credit loss” model.

Page 37

ANNUAL REPORT AND ACCOUNTS 2014 53


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2 ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs)(Continued)

c) Impact of new and amended standards and interpretations on the financial statements for the year ended
31 December 2014 and future annual periods

The adoption of these standards are not expected to have a significant impact on the financial statements of
group.

3 SEGMENT INFORMATION
The principal business units in the group, which since 1 October 2014 are now carried out through its licenced
wholly owned subsidiaries- NIC General Insurance (General business) and NIC Life Assurance (Long term
business), are as follows:

i General Business
General business offers non- life insurance to individual customers and businesses throughout Uganda. The
categories under this segment includes Fire, Aviation and Marine, Accident and Motor. The detailed performance
for the segment is as disclosed on page 14.
ii Long term business
Long term business offers life insurance products to individual customers and businesses throughout Uganda.
The categories under this segment includes Life Individual, Life Group, Deposit Adminitration and Managed
Funds. The detailed performance for the segment is as disclosed on page 15.

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the consolidated financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and
liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reported period. Actual results may
differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.

During the year, the areas involving a higher degree of judgement or complexity or where assumptions and
estimates are significant to the financial statements are dealt with below:

The ultimate responsibility arising from claims made under insurance contracts

The main assumption underlying techniques applied in the estimation of this liability is that a group's past claims
experience can be used to project future claims development and hence ultimate claims costs. As such, these
methods extrapolate the development of earlier years and expected loss ratios. Historical claims development is
mainly analysed by accident years. Additional qualitative judgement is used to assess the extent to which past
trends may not apply in future, (for example to reflect one-off occurrences, changes in external or market factors
such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and
legislation, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures) in
order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible
outcomes, taking account of all the uncertainties involved. A margin for adverse deviation may also be included
in the liability valuation.

Impairment losses
At each reporting date, the group reviews the carrying amounts of its tangible 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 group estimates the recoverable amount of the
cash generating unit to which the asset belongs.

Property and equipment


Critical estimates are made by the group management in determining depreciation rates for property and
equipment.

Page 38
54 ANNUAL REPORT AND ACCOUNTS 2014
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5 RISK MANAGEMENT POLICIES
The group's activities expose it to a variety of risks, including insurance risk and financial risks. The
group's overall risk management programme focuses on the identification and management of risks and
seeks to minimise potential adverse effects on its financial performance, by use of underwriting guidelines
and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined
criteria for the approval of reinsurers. Investment policies are in place, which help manage liquidity, and
seek to maximise return within an acceptable level of interest rate risk.
The disclosures below summarise the way the group manages key risks:

INSURANCE RISK MANAGEMENT


The group accepts insurance risk through its insurance contracts where it assumes the risk of loss from
persons or organisations that are directly subject to the underlying loss. The group is exposed to the
uncertainty surrounding the timing, frequency and severity of claims under these contracts.

The group manages its risk through its underwriting and reinsurance strategy within an overall risk
management framework. Pricing is based on assumptions which have regard to trends and past
experience. Exposures are managed by having documented underwriting limits and criteria. Reinsurance
is purchased to mitigate the effect of potential loss to the group from individual large or catastrophic events
and also to provide access to specialist risks and to assist in managing capital. Reinsurance policies are
written with approved reinsurers on either a proportional or excess of loss treaty basis.

Regulatory capital is also managed (though not exclusively) by reference to the insurance risk to which the
group is exposed.

(a) Short-term insurance

The group writes fire, accident, motor, aviation and marine risks primarily over a twelve month
duration. The most significant risks arise from natural disasters, climate change and other
catastrophes (i.e. high severity, low frequency events). A concentration of risk may also arise from a
single insurance contract issued to a particular demographic type of policyholder, within a
geographical location or to types of commercial business. The relative variability of the outcome is
mitigated if there is a large portfolio of similar risks.

Assumptions and sensitivities


The risks associated with the non-life insurance contracts are complex and subject to a number of
variables which complicate quantitative sensitivity analysis. The group uses several statistical and
actuarial techniques based on past claims development experience. This includes indications such as
average claims cost, ultimate claims numbers and expected loss ratios. The key methods used by the
group for estimating liabilities are:

- chain ladder
- expected loss ratio; and
- benchmarking.

The group considers that the liability for non-life insurance claims recognised in the consolidated
statement of financial position is adequate. However, actual experience will differ from the expected
outcome.

Page 39

ANNUAL REPORT AND ACCOUNTS 2014 55


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
5 RISK MANAGEMENT POLICIES (Continued)

INSURANCE RISK MANAGEMENT (Continued)

(b) Short and long-term insurance


The group engages in short and long-term insurance contracts through its wholly owned subsidiaries; NIC
General Insurance (General business) and NIC Life Assurance (Long term business), and funds the insurance
liabilities with a portfolio of debt securities exposed to market risk. During the year, the group maintained a
portion of financial assets invested in debt securities to mitigate the impact of the volatility of equity prices
experienced during the year. An analysis of the group's financial assets and its liabilities is presented below:

General Long term Total Total


Business Business 31-Dec-14 31-Dec-13
Financial assets Ushs'000 Ushs'000 Ushs'000 Ushs'000

Premium receivables 3,647,210 - 3,647,210 2,856,405


Loans and Receivables 69,316 94,709 164,025 156,871
Held to maturity investments 1,774,425 2,698,986 4,473,411 5,030,164
Investment in quoted and unquoted
shares 1,632,093 4,391,349 6,023,442 7,404,067
Other receivables (excluding
prepayments and taxes) 801,867 177,250 979,117 887,113
Statutory deposit 400,000 300,692 700,692 563,435

8,324,911 7,662,986 15,987,897 16,898,055


Insurance liabilities

Insurance contract liabilities 8,546,554 2,022,772 10,569,326 18,511,582


Less assets arising from reinsurance
contracts held (2,669,524) - (2,669,524) (2,121,190)

5,877,030 2,022,772 7,899,802 16,390,392

Insurance liabilities are not directly sensitive to the level of market interest rates, as they are undiscounted and
contractually non interest bearing. However, due to the time value of money and the impact of interest rates on
the level of bodily injury incurred by the group's policyholders (where a reduction of interest rate would normally
produce a higher insurance liability), the group matches the cash flows of assets and liabilities in this portfolio by
estimating their mean duration.

The mean duration of liabilities is calculated using historical claims data to determine the expected settlement
pattern for claims arising from the insurance contracts in force at the consolidated statement of financial position
date (both incurred claims and future claims arising from the unexpired risks at the consolidated statement of
financial position date). The mean durations are:

31-Dec-14 31-Dec-13
Net short term insurance liabilities - life risk 0.2 years 0.2 years
Net short term insurance liabilities - property risk 2.0 years 2.0 years
Net short term insurance liabilities-casualty risk 5.0 years 5.0 years
Financial assets 3.0 years 3.0 years

Page 40

56 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5 RISK MANAGEMENT POLICIES (Continued)
FINANCIAL RISK MANAGEMENT
The group monitors and manages the financial risks relating to the operations of the group through internal
risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk,
credit risk and liquidity risk.

(a) Market risk


Market risk is the risk of adverse financial impact as a consequence of market movements such as
currency exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in
both the value of assets held and the value of liabilities. The group has established policies and
procedures in order to manage market risk.

(i) Interest rate risk


management
Interest rate risk arises primarily from investments in fixed interest securities. The sensitivity analysis for
interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates at the reporting date. For financial instruments and
insurance contracts described in this note, the sensitivity is solely associated with the former, as the
carrying amounts of the latter are not directly affected by changes in market risks.

The group's management monitors the sensitivity of reported interest rate movements on a monthly basis
by assessing the expected changes in the different portfolios due to a parallel movement of plus 5
percentage points in all yield curves of financial assets and financial liabilities. These particular exposures
illustrate the group's overall exposure to interest rate sensitivities included in the group's Asset Liability
Management framework and its impact in the group's profit or loss by business.

An increase/decrease of 5 percentage points in interest yields would result in additional profit/loss for the
period of Ushs 5 million (31 December 2013: Ushs 6 million).

(ii) Equity price risk

The group is exposed to equity securities price risk as a result of its holdings in equity investments,
classified as Fair value through profit or loss. Exposure 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 Uganda Securities Exchange.

Investment management meetings are held by the group. At these meetings, departmental managers
meet to discuss investment return and concentration of the equity investments.

Listed equity securities represent 75% (31 December 2013: 83%) of total equity investments. If equity
market indices had increased/decreased by 5%, with all other variables held constant, and all the group's
equity investments moving according to the historical correlation with the index, the revaluation
losses/gains for the year would increase/decrease by Ushs 81.2 million (31 December 2013: Ushs 29.6
million).

(iii) Foreign currency


risk
The group undertakes certain transactions denominated in foreign currencies. Hence, exposures to
exchange rate fluctuations arises. The group has minimal exposure to currency risk as the group's
financial assets are primarily matched to the same currency as its insurance contract liabilities, i.e. Uganda
shilling.

Page 41
ANNUAL REPORT AND ACCOUNTS 2014 57
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
5 RISK MANAGEMENT POLICIES (Continued)

FINANCIAL RISK MANAGEMENT (Continued)

(b) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the group. The key areas of exposure to credit risk for the group are in relation to its
investment portfolio, reinsurance programme and amounts due from premium debtors.

The group manages the levels of credit risk it accepts by placing limits on its exposures to a single
counterparty, or groups of counterparty and to geographical and industry segments. Such risks are
subject to regular review.

Reinsurance is used to manage insurance risk. This does not, however, discharge the group's liability
as primary insurer. If a reinsurer fails to pay a claim, the group remains liable for the payment to the
policyholder. The creditworthiness of reinsurers is considered on annual basis by reviewing their
financial strength prior to finalisation of annual contracts.

In addition management assesses the creditworthiness of all reinsurers and intermediaries by


reviewing credit grades provided by rating agencies and other publicly available financial information.
The recent payment history of reinsurers is also used to update the reinsurance purchasing strategy.

The exposure to individual counterparties is also managed through other mechanisms such as the
right of offset where counterparties are both debtors and creditors of the group. Management
information reported to the directors include details of provision for impairment on receivables and
subsequent write offs. Exposures to individual policyholders and groups of policyholders are collected
within the ongoing monitoring of the controls associated with regulatory solvency. Where there exists
significant exposure to individual policyholders, or homogenous groups of policyholders, a financial
analysis is carried out by management.

Page 42

58 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

5 RISK MANAGEMENT POLICIES (Continued)

FINANCIAL RISK MANAGEMENT (Continued)

(b) Credit risk (Continued)

The following table shows the carrying value of assets (both short and long-term) that are neither past due nor impaired,
the ageing of assets that are past due but not impaired and assets that have been impaired.

General Business
As at 31 December 2014 Gross Fully
Total Performing Past due Impaired
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Premium receivables 6,197,249 3,647,210 - 2,550,039


Loans and Receivables 104,534 69,316 - 35,218
Held to maturity investments 1,774,425 1,774,425 - -
Investment in quoted and unquoted shares 1,632,093 1,632,093 - -
Sundry debtors (excluding prepayments and taxes) 1,637,744 1,288,905 - 348,839

Total 11,346,045 8,411,949 - 2,934,096


As at 31 December 2013

Premium receivables 6,586,179 2,856,405 - 3,729,774


Loans and Receivables 77,290 56,148 - 21,142
Held to maturity investments 2,010,804 2,010,804 - -
Investment in quoted and unquoted shares 3,571,303 3,571,303 - -
Sundry debtors (excluding prepayments and taxes) 1,317,170 959,863 - 357,307

Total 13,562,746 9,454,523 - 4,108,223

Longterm Business
As at 31 December 2014 Gross Fully
Total Performing Past due Impaired
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Premium receivables - - - -
Loans and Receivables 94,709 94,709 - -
Held to maturity investments 2,698,986 2,698,986 - -
Investment in quoted and unquoted shares 4,391,349 4,391,349 - -
Sundry debtors (excluding prepayments and taxes) 842,966 (302,826) - 1,145,792

Total 8,028,010 6,882,218 - 1,145,792


As at 31 December 2013

Premium receivables - - - -
Loans and Receivables 79,581 79,581 - -
Held to maturity investments 3,019,360 3,019,360 - -
Investment in quoted and unquoted shares 3,832,765 3,832,765 - -
Sundry debtors (excluding prepayments and taxes) 1,081,048 435,429 - 645,619

Total 8,012,754 7,367,135 - 645,619

The customers under the fully performing category are paying their debts as they continue trading. The default rate is
low. The debt that is impaired has been fully provided for which the group continues to recover.

Page 43

ANNUAL REPORT AND ACCOUNTS 2014 59


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

5 RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

FINANCIAL RISK MANAGEMENT (Continued)


(c) Liquidity risk

Liquidity risk is the risk that the group cannot meet its obligations associated with financial liabilities as they fall due. The group has adopted an appropriate liquidity risk management framework for
the management of the group's liquidity requirements. The group manages liquidity by maintaining banking facilities by continuously monitoring forecast and actual cash flows and matching the
maturity profiles of assets and liabilities. The group is exposed to liquidity risk arising from clients on its insurance contracts. In respect of catastrophic events, there is liquidity risk from a difference
in timing between claim payments and recoveries thereon from reinsurers.

The table shows details of the expected maturity profile of the group's undiscounted obligations with respect to its financial liabilities and estimated cash flows of recognised insurance contract
liabilities for both short and long term business. Unit linked liabilities and unearned premiums are excluded from this analysis.

ANNUAL REPORT AND ACCOUNTS 2014


General business
On 1 and 3 3 and 12 1 and 5 Due after 5 Total
Demand Months Months Years Years 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000

Loans and Receivables - - 69,316 - - 69,316 77,290


Fair value through Profit or loss - - - 391,189 - 391,189 250,518
Available for sale 1,240,904 1,240,904 3,320,785
Investment in Other Related Parties 30,660 30,660 30,660
Held to maturity investments - - 1,774,425 - - 1,774,425 2,010,804
Premium receivables - 3,647,210 - - - 3,647,210 2,856,405
Amounts retained under reinsurance contracts - 2,669,524 - - - 2,669,524 2,121,190
Sundry Receivables - 1,477,717 - - - 1,477,717 1,209,922
Cash and bank balances 589,169 - - - - 589,169 2,602,261
Statutory deposit - - 400,000 - - 400,000 -
Insurance contract liability - - (4,631,281) - - (4,631,281) (4,567,100)
Income tax payable - - (481,537) - - (481,537) (715,622)
Dividend payable - - (261,733) - - (261,733) (618,171)
Amounts due to reinsurers - (2,008,953) - - - (2,008,953) (1,687,130)
Sundry creditors - (7,845,894) - - - (7,845,894) (10,134,809)

589,169 (2,060,396) (3,130,811) 1,662,753 - (2,939,285) (3,242,997)

Page 44
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

5 RISK MANAGEMENT POLICIES (Continued)

FINANCIAL RISK MANAGEMENT (Continued)

c) Liquidity risk (Continued)

Long term business


On 1 and 3 3 and 12 1 and 5 Total
Demand Months Months Years 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000

Loans and Receivables - - 94,709 - 94,709 79,581

Fair value through Profit or loss - - - 1,105,600 1,105,600 1,003,600

Available for sale 3,285,749 3,285,749 2,829,165

Held to maturity investments - - 2,698,986 - 2,698,986 3,019,360

Sundry debtors - - 178,287 - 178,287 915,504

Cash and bank balances 536,951 - - - 536,951 126,265

Statutory deposit - - 300,692 - 300,692 563,435

Amounts due to reinsurers - - (153,073) - (153,073) (149,785)

Sundry creditors - - (533,907) - (533,907) (544,103)

Amounts payable under deposit administration contracts - - - (15,573,722) (15,573,722) (8,747,254)

Managed funds - - - (1,069,013) (1,069,013) (1,134,039)

Net liquidity gap 536,951 - 2,585,694 (12,251,386) (9,128,741) (2,038,271)

ANNUAL REPORT AND ACCOUNTS 2014


61
Page 45
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5 RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)
(d) Capital management
The group manages its capital to ensure that it will be able to continue as a going concern and comply with the regulators'
capital requirements while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the group consists of issued capital, reserves and retained earnings. Reinsurance is also used as
part of capital management.
The group has a number of sources of capital available to it and seeks to optimise its investment securities structure in
order to ensure that it can consistently maximise returns to shareholders. The group 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 group manages as capital all items that are eligible to be treated as such for
regulatory purposes.

The group is regulated by the Insurance Regulatory Authority (IRA) and is subject to insurance solvency regulations which
specify the minimum amount and type of capital that the group should hold in accordance with the statute.

The Ugandan Insurance Act requires that each insurance company's total admitted assets should exceed the total
admitted liabilities by an amount above 15% of premium income net of reinsurance cessions.
For purposes of computation of market value in accordance with the Ugandan Insurance Act, computer equipment not
more than two years and 50% of outstanding premiums for not more than one year have been considered. In addition,
values of all pledged assets have been excluded as stipulated by the Ugandan Insurance Act.

General Business Long term Business


Market value Book value Market value Book value
Ushs' 000 Ushs' 000 Ushs' 000 Ushs' 000

Total admitted assets 41,080,944 51,032,434 32,420,254 32,425,780


Total admitted liabilities (26,864,034) (23,225,367) (27,604,671) (27,379,717)

Total net assets 14,216,910 27,807,067 4,815,583 5,046,063

Regulatory required capital resources 1,031,595 1,031,595 116,424 116,424

6 FAIR VALUE MEASUREMENT

The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market
prices or dealer price quotations. For all other financial instruments, the group determines fair values using other valuation
techniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires
varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and
other risks affecting the specific instrument.

(a) Valuation models


The group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in
making the measurements.

Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments e.g quoted equity
securities. These items are exchange traded positions.

• Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active
markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than
active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

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62 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

6 FAIR VALUE MEASUREMENT (CONTINUED)


• Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes
inputs not based on observable data and the unobservable inputs have a significant effect on the instrument‟s valuation.
This category includes instruments that are valued based on quoted prices for similar instruments for which significant
unobservable adjustments or assumptions are required to reflect differences between the instruments.
Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for
which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and
benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices,
foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received
to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement
date.
The group uses widely recognised valuation models for determining the fair value of common and more simple financial
instruments, such as quoted shares that use only observable market data and require little management judgement and
estimation. Observable prices or model inputs are usually available in the market for listed debt and equity securities.
Availability of observable market prices and model inputs reduces the need for management judgement and estimation
and also reduces the uncertainty associated with determining fair values. Availability of observable market prices and
inputs varies depending on the products and markets and is prone to changes based on specific events and general
conditions in the financial markets.

Valuation framework
The group has an established control framework with respect to the measurement of fair values. This framework includes
use of experts who reports to the Top Management, and which has overall responsibility for independently verifying the
results of trading and investment operations and all significant fair value measurements.

Significant valuation issues are reported to the group‟s management committee.


The table below analyses financial instruments measured at fair value as at 31 December 2014 by the level in the fair
value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in
the consolidated statement of financial position.

Level 1 Level 2 Level 3


Ushs'000 Ushs'000 Ushs'000
Fair value through Profit or loss - 1,496,789 -
Available for sale 4,526,653 - -

As at 31 December 2014, there was no level 3 fair valuation.

The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the
level in the fair value hierarchy into which each fair value measurement is categorised.

carrying
Level 1 Level 2 Level 3 amount
Assets Ushs'000 Ushs'000 Ushs'000 Ushs'000
Cash and Cash Equivalents - - 1,126,120 1,126,120
Statutory deposit - - 700,692 -
Held to Maturity - - 4,473,411 4,473,411
Reinsurance Assets - - 2,669,524 2,669,524
Premium receivables - - 3,647,210 3,647,210
Other receivables and prepayments - - 1,496,815 1,496,815

Liabilities
Amounts due to Group Companies - - 183,946 183,946
Insurance Contract Liabilities - - 10,569,326 10,569,326
Investment Contract Liabilities - - 16,642,735 16,642,735
Payable arising from Reinsurance Contracts - - 2,162,026 2,162,026
Loans and Borrowings - - 4,600,000 4,600,000
Other payables and accruals - - 9,307,017 9,307,017

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ANNUAL REPORT AND ACCOUNTS 2014 63


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

7(a) INVESTMENT INCOME General Long term Total Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Rent income 1,496,361 112,034 1,608,395 1,550,825


Dividends 79,519 - 79,519 82,117

1,575,880 112,034 1,687,914 1,632,942

7(b) INTEREST INCOME

Interest on fixed deposits 5,727 6,917 12,644 21,365


Interest on treasury bills and bonds 57,467 29,489 86,956 103,789

63,194 36,406 99,600 125,154

7('c) OTHER INCOME

Exchange gain / (loss) 26,879 - 26,879 105,358


Gain on disposal of assets 1,370 - 1,370 31,000
Loss on disposal of quoted shares - - - (8,178)
Sundry receipts (other operating income) 1,045,833 - 1,045,833 51,085
Bad Debt Recoveries 677,821 - 677,821 769,485

1,751,903 - 1,751,903 948,750

8 IMPAIRMENT LOSSES ON RECEIVABLES

General Long term Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Premium Receivables 804,797 - 804,797 1,227,225


Rent receivable 5,609 5,580 11,189 19,810
Other receivables 295,007 48,778 343,785 33,139
1,105,413 54,358 1,159,771 1,280,174

9 PROFIT BEFORE TAXATION - GENERAL BUSINESS

The profit before taxation, reported under general insurance business is arrived at after charging / (crediting) the following:

31-Dec-14 31-Dec-13
Ushs'000 Ushs'000
Staff costs (note 10) 3,272,174 3,408,858
Directors' emoluments 40,559 139,616
Auditors' fee excluding VAT 110,608 100,360
Amortisation of prepaid operating lease rentals - -
Depreciation 102,837 136,067
Fair value loss / (gain) on available for sale 844,361 (20,682)
Fair value gain on investment property (1,005,492) (1,420,675)

10 STAFF
Salaries 2,809,277 3,057,579
Pension fund contributions 208,879 153,576
Retirement benefit costs 87,248 73,748
Staff welfare costs 166,770 123,955

3,272,174 3,408,858

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64 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

11 TAXATION 31-Dec-14 31-Dec-13


Ushs'000 Ushs'000
a) Taxation charge
Current taxation 313,300 524,328
Deferred tax charge / (credit) (Note 20) 261,943 (100,316)

575,243 424,012

b) Reconciliation of taxation charge


Tax on the group's profit before taxation differs from the theoretical amount that
would arise using the basic tax rate as follows:

Profit before taxation 2,133,978 2,442,636

Tax at applicable rate of 30% (2013: 30%) 640,193 732,791


Tax effect of expenses not deductible for tax purposes 43,011 59,061
Tax effect of non taxable income (107,961) (367,840)

575,243 424,012

c) Movement in tax payable

At 1 January (715,622) (272,267)


Current year tax charge (313,300) (524,328)
Tax paid 547,385 80,973

At 31 December (481,537) (715,622)

12 FOREIGN EXCHANGE GAINS / (LOSSES)


31-Dec-14 31-Dec-13
Ushs'000 Ushs'000

Unrealised exchange gain / (loss) 13,671 (7,828)


Realised exchange gain 13,208 113,186
26,879 105,358

13 EARNINGS PER SHARE

The calculation of basic earnings per share is based on:

Profit attributable to ordinary shareholders 1,558,735 2,018,624

Weighted average number of ordinary shares in issue ('000) 1,415,780 403,880

Basic earnings per share (Ushs) 1.10 5.00

During the year, the group's issued and paid-up share capital was increased from 403,880,000 shares to 1,415,780,000
shares through a sucessful Rights Issue (192,437,776 ordinary shares) and Bonus Issue (819,661,942 ordinary shares) of
shares.

There were no dilutive shares outstanding at 31 December 2014 and 31 December 2013.

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ANNUAL REPORT AND ACCOUNTS 2014 65


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

14 CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:

General Long term Total Total


Business Business 31-Dec-14 31-Dec-13
i) Cash and bank balances Ushs'000 Ushs'000 Ushs'000 Ushs'000
Cash on hand 100 - 100 659
Cash at bank 589,069 536,951 1,126,020 2,727,867

Cash and bank balances 589,169 536,951 1,126,120 2,728,526

ii) Fixed deposits


United Bank of Africa - - - 17,063
DFCU (GTB) - - - 900
ABC Capital Bank Limited - - - 51,858

- - - 69,821

iii) Bank Overdrafts - - - (4,432,733)

- - - (4,432,733)

Total cash and cash equivalent 589,169 536,951 1,126,120 (1,634,386)

15 FINANCIAL ASSETS
General Long-term Total Total
Business Business 31-Dec-14 31-Dec-13
a) Available - for - sale Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 3,320,785 2,829,165 6,149,950 6,752,529


Transfer (1,235,520) 1,235,520 - -
Disposals - - - (1,195,381)
Fair value losses* (844,361) (778,936) (1,623,297) 592,802

At 31 December 1,240,904 3,285,749 4,526,653 6,149,950

*The fair value loss of Ushs 778,935,554 (31 December 2013: gain of Ushs 485,061,529) in respect of NIC Life
Assurance relates to deposit administration contract (Note37).

General Long-term Total Total


Business Business 31-Dec-14 31-Dec-13
b) At fair value through profit or loss Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 250,518 1,003,600 1,254,118 1,314,346


Investment during the year 127,000 - 127,000 6,000
Foreign exchange gain / (loss)* 13,671 102,000 115,671 (66,228)

At 31 December 391,189 1,105,600 1,496,789 1,254,118

This comprises 4,000 ordinary shares of US$ 100 each in Africa Reinsurance Corporation, 127,663 ordinary shares
of US$ 1 each in PTA Reinsurance (The total number of ordinary shares initially held in PTA Re was 50, but a share
split exercise in PTA Re resulted in additional 127,613 ordinary shares being allotted to the group). The group's total
stake in the newly established Uganda Reinsurance Corporation is 243 ordinary shares of Ushs 1 million each.

The ownership of these shares represents less than 5% equity interests in each company.

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66 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

15 FINANCIAL ASSETS (continued)

General Long-term Total Total


Business Business 31-Dec-14 31-Dec-13
c) Held to Maturity Ushs'000 Ushs'000 Ushs'000 Ushs'000

Treasury bills
Maturing after three months 1,688,209 2,631,163 4,319,372 4,960,343

1,688,209 2,631,163 4,319,372 4,960,343

Fixed deposits
United Bank of Africa 34,632 - 34,632 17,063
GT Bank 51,584 - 51,584 -
DFCU (GTB) - 900 900 900
ABC Capital Bank Limited - 66,923 66,923 51,858

86,216 67,823 154,039 69,821

1,774,425 2,698,986 4,473,411 5,030,164

The weighted average effective interest rate on Government securities for general and life businesses as at 31
December 2014 was 12.09% (31 December 2013: 11.55%).

The weighted average effective interest rate on fixed deposits for general and life business as at 31 December
2014 was 9.58% (31 December 2013: 12.26%).

d) Loans and Receivables General Long-term Total Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Staff Loans 104,534 2,000 106,534 77,290


Policy Loans - 92,709 92,709 79,581
Provision for doubtful staff loans (35,218) - (35,218) -

69,316 94,709 164,025 156,871

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ANNUAL REPORT AND ACCOUNTS 2014 67


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

16 PREMIUM RECEIVABLES General Long-term Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000
Premium receivables 6,197,249 - 6,197,249 6,586,179
Provision for impairment losses (2,550,039) - (2,550,039) (3,729,774)

At 31 December 3,647,210 - 3,647,210 2,856,405

Movement in impairment provision


At 1 January 3,729,774 - 3,729,774 3,272,034
Write-off (1,306,711) - (1,306,711) -
Recoveries (677,821) - (677,821) (769,485)
Impairment provision for the year 804,797 - 804,797 1,227,225

At 31 December 2,550,039 - 2,550,039 3,729,774

17 REINSURANCE ASSETS Total


General Long-term 31-Dec-14 31-Dec-13
Business Business Ushs'000 Ushs'000
Ushs'000 Ushs'000
Unearned premiums (Note 35) 1,258,458 - 1,258,458 627,646
Reinsurers share of:
-Notified claims outstanding 992,262 - 992,262 793,899
-Claims incurred but not reported (Note 24) 80,144 - 80,144 119,085
Receivable from Reinsurers 1,123,319 - 1,123,319 1,070,211
(784,659) (784,659) (489,651)

2,669,524 - 2,669,524 2,121,190

Amounts due from reinsurers in respect of claims paid by the group on contracts that are reinsured are included in
receivables arising out of reinsurance arrangements on the consolidated statement of financial position.

18 INVESTMENTS IN OTHER RELATED PARTIES


General Long-term Total
Business Business 31-Dec-14 31-Dec-13
General Insurance business Ushs'000 Ushs'000 Ushs'000 Ushs'000
Domicile country
NIC (Southern Sudan) Limited Sudan 132,811 - 132,811 132,811
Capital Assets Investment Limited Uganda 15,330 - 15,330 15,330
Premium Trust Investment (U) Limited Uganda 7,665 - 7,665 7,665
NIC Trustees and Investment Limited Uganda 7,665 - 7,665 7,665
163,471 163,471 163,471
Impairment loss Sudan (132,811) - (132,811) (132,811)

30,660 - 30,660 30,660

The above amounts, with the exception of NIC(Southern Sudan), were advanced to those companies for investment
purpose. Management carried out an impairment assessment as at 31 December 2014 and confirmed that all the above
amounts are recoverable.
NIC South Sudan was set up as a subsidiary of the group in 2007 to engage in insurance business. The results of NIC SS
have not been consolidated in these financial statements because the group lost the power to govern the financial and
operating policies of NIC (South Sudan) so as to obtain benefit from its activities. As a result, Management reviewed this
investment and carried out an impairment assessment in 2010 and determined that the investment is fully impaired.

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NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

19 INVESTMENT PROPERTIES
General Long-term Total
Business Business 31-Dec-14 31-Dec-13
a) General insurance business Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 32,894,999 22,695,000 55,589,999 54,149,999


Additions through subsequent expenditure 25,196 15,135 40,331 19,325
Transfer from Long term business - - - -
Transfer to Long term business - - - -
Transfer from property, plant and equipment - - - -
Transfer to property, plant and equipment - - -
Fair Value Gain on revaluation 669,804 (395,135) 274,669 1,420,675

At 31 December 33,589,999 22,315,000 55,904,999 55,589,999

An independent professional firm of valuers, Messrs Consultant Surveyors and Planners, carried out valuation of the group's
investment properties in 2014 and the amounts shown above have been extracted from valuation reports issued by them.
The resultant fair value gain / (loss) has been recognised in the consolidated statement of comprehensive income. Three
valuation approaches were used to arrive at the values of the respective properties, namely the Market Approach (the Direct
Sales Comparison Method), the Cost Approach (the Depreciated Replacement Cost Method) and the Income Approach (the
Investment Method). Most of the properties have got lease extensions of up to 99 years. These leasehold properties have
varied un-expired lease periods ranging from 6 years to 65 years.

20 DEFERRED TAX ASSET/LIABILITY

The deferred income tax asset/(liability) comprises of:

General Long-term Total Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Accelerated capital allowances (399,329) - (399,329) (243,888)


Unrealised exchange (gain)/loss (2,484) - (2,484) 5,259
Reinsurance debtors provision 235,397 - 235,397 146,895
Bad debt provision 1,191,113 - 1,191,113 1,378,374
Deferred tax - (7,507,926) (7,507,926) (7,709,804)

1,024,697 (7,507,926) (6,483,229) (6,423,164)

The movement on the deferred tax account is as follows:

At 1 January 1,286,640 (7,709,804) (6,423,164) (6,273,081)


Income statement (charge) / credit (261,943) - (261,943) 100,316
Income statement credit / (charge) - 201,878 201,878 (250,399)

At 31 December 1,024,697 (7,507,926) (6,483,229) (6,423,164)

Deferred tax asset 1,024,697 - 1,024,697 1,286,640


Deferred tax liability - (7,507,926) (7,507,926) (7,709,804)

1,024,697 (7,507,926) (6,483,229) (6,423,164)

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NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

21 INTANGIBLE ASSETS

General Business

31-Dec-14 31-Dec-13
Ushs'000 Ushs'000
COST

At 1 January 14,267 14,267


Additions - -

At 31 December 14,267 14,267

AMORTIZATION

At 1 January 9,261
13,541
Amortization for the year 726 4,280

At 31 December 14,267 13,541

Carrying amount at 31 December - 726

21b PROPERTY AND EQUIPMENT


General Business Longterm Business

Buildings on Furniture & Motor Computer Total Furniture & Buildings on Total
leasehold land equipment vehicles equipment equipment leasehold
Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 land
Ushs'000 Ushs'000
COST

At 1 January 2013 3,400,000 695,291 870,445 499,168 5,464,904 306,926 1,600,000 1,906,926

Additions - 15,065 - 10,554 25,619 - - -


Disposal (168,397) (168,397)
Transfer to Investment Property (75,000) - - - (75,000) - 30,000 30,000

At 31 December 2013 3,325,000 710,356 702,048 509,722 5,247,126 306,926 1,630,000 1,936,926

At 1 January 2014 3,325,000 710,356 702,048 509,722 5,247,126 306,926 1,630,000 1,936,926

Additions - 21,752 21,000 28,214 70,966 6,859 7,600 14,459


Disposal (13,500) (2,718) (16,218) - - -
Revaluation 335,688 - - - 335,688 - 289,125 289,125

At 31 December 2014 3,660,688 732,108 709,548 535,218 5,637,562 313,785 1,926,725 2,240,510

DEPRECIATION

At 1 January 2013 - 527,857 778,877 476,385 1,783,119 297,073 - 297,073


Charge for the year 13,050 57,467 52,325 13,225 136,067 6,672 24,600 31,272
Disposal - - (168,397) - (168,397) - - -
Revaluation (13,050) - - - (13,050) - (24,600) (24,600)

At 31 December 2013 - 585,324 662,805 489,610 1,737,739 303,745 - 303,745

At 1 January 2014 - 585,324 662,805 489,610 1,737,739 303,745 - 303,745


Charge for the year 14,063 32,579 40,993 14,476 102,111 1,084 25,875 26,959
Disposal - - (13,500) (378) (13,878) - - -

At 31 December 2014 14,063 617,903 690,298 503,708 1,825,972 304,829 25,875 330,704

NET BOOK VALUE

At 31 December 2014 3,646,625 114,205 19,250 31,510 3,811,590 8,956 1,900,850 1,909,806

At 31 December 2013 3,325,000 125,032 39,243 20,112 3,509,387 3,181 1,630,000 1,633,181

Page 54

70 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

22 OTHER RECEIVABLES & PREPAYMENTS


General Long-term Total Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Rent receivables 294,056 438,178 732,234 773,499


Prepayments 675,850 - 675,850 633,417
Withholding tax recoverable* - 481,113 481,113 604,895
Sundry receivables 1,343,688 404,788 1,748,476 1,624,720

Provision for other receivables (835,877) (1,145,792) (1,981,669) (1,511,105)

1,477,717 178,287 1,656,004 2,125,426

*Relates to Withholding tax on accrued interest and withholding tax under Life fund investments.

Movement in impairment losses


General Long-term Total Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 865,486 645,619 1,511,105 1,501,372


Reclassified to Loans and receivables (35,218) - (35,218) -
Impairment provision for the year 5,609 500,173 505,782 9,733

At 31 December 835,877 1,145,792 1,981,669 1,511,105

23 STATUTORY DEPOSIT

The group maintains a statutory deposit with Bank of Uganda in line with the requirement of Section 7(1) of the
Insurance Act CAP 213.

The deposit made is considered part of the assets in respect of the capital of the insurer and is invested by Bank of
Uganda in short term investments and securities. Interest and all income accruing from this deposit is payable to the
insurer.

The deposit can be made available if the insurer suffers a substantial loss arising from liability to claimants and the
loss is such that it cannot be met from its available resources or in the event of closure or winding up of the insurance
business.

Movement in statutory deposit General Long-term Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000
At 1 Janaury - 563,435 563,435 560,769
Interest earned - 20,304 20,304 2,666
Transfer 400,000 (400,000) - -
Addition during the year 400,000 206,497 606,497 -
Matured during the year (400,000) (89,544) (489,544) -

At 31 December 400,000 300,692 700,692 563,435

Page 55 ANNUAL REPORT AND ACCOUNTS 2014 71


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
24 INSURANCE CONTRACT LIABILITIES
General Long-term Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

Life fund (Note 36b) - 1,672,242 1,672,242 10,448,805


Claims notified 3,651,364 350,530 4,001,894 4,099,230
Claims incurred but not reported (IBNR) 629,387 - 629,387 467,870
Unearned premium 4,265,803 - 4,265,803 3,495,677

8,546,554 2,022,772 10,569,326 18,511,582

The table below shows the total best estimate IBNR calculated per segment of business underwritten by NIC
General Insurance as at 31 December 2014 gross and net of reinsurance.

IBNR as at 31 December 2014 (Ushs'000)


Class of Business Gross Net Reinsurance
Accident 146,922 124,884 22,038
Fire 24,912 24,912 -
Marine & Aviation 151,731 151,731
Motor 305,822 247,716 58,106
Total 629,387 549,243 80,144

25 INVESTMENT CONTRACT LIABILITIES


General Long-term Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000
Payable under deposit administration
(Note 37) - 15,573,722 15,573,722 8,747,254
Managed funds (Note 34) - 1,069,013 1,069,013 1,134,039
- 16,642,735 16,642,735 9,881,293

26 PAYABLES ARISING FROM REINSURANCE ARRANGEMENTS

General Long-term Total Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 1,687,130 149,785 1,836,915 1,580,840


Movements during the year 321,823 3,288 325,111 256,075

At 31 December 2,008,953 153,073 2,162,026 1,836,915

27 OTHER PAYABLES & ACCRUALS


General Long-term Total Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

VAT payable 718,193 85,304 803,497 394,997


Accrued expenses 1,204,507 168,744 1,373,251 1,688,249
Tenant deposits 110,124 - 110,124 110,124
Audit fees 175,100 - 175,100 118,425
Contributions to COMESA 1,989,550 - 1,989,550 1,841,837
Sundry creditors 3,464,474 279,859 3,744,333 2,990,448
Inter-company (519,304) 519,304 - -
Due to related parties 183,946 - 183,946 912,036

7,326,590 1,053,211 8,379,801 8,056,116

Page 56
72 ANNUAL REPORT AND ACCOUNTS 2014
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
28 DIVIDEND PAYABLE
General Long-term Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 618,171 - 618,171 830,017


Declared dividend - - - 2,019,400
Dividend paid (356,438) - (356,438) (2,231,246)

At 31 December 261,733 - 261,733 618,171

The amount above relates to dividends payable to shareholders for previous years.

29 SHARE APPLICATION FUND


The funds relates to proceeds from a sucessful Rights Issue undertaken by the group.

General Long-term Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000
At 1 January 1,999,059 - 1,999,059 1,999,059
Additional Rights issue funds received 2,999,123 - 2,999,123 -
Transfer to paid-up share capital (961,189) - (961,189) -
Transfer to share premium (3,606,866) - (3,606,866) -
Rights issue expenses (430,127) - (430,127) -
At 31 December - - 1,999,059

30 LOANS AND BORROWINGS Total


General Long-term 31-Dec-14 31-Dec-13
Business Business Total Total
Ushs'000 Ushs'000 Ushs '000 Ushs '000
Bank overdraft - - - 4,432,733
Term loan 4,600,000 - 4,600,000 4,664,400

4,600,000 - 4,600,000 9,097,133

The principal features of the group's borrowings are as follows:


Term loans:
`
The Term loan was obtained from United Bank for Africa (U) Limited and payable in one (1) year. The
effective interest rate as at 31st December, 2014 was 18% p.a.

Limit Utilized
Bank Ushs '000 Ushs '000
United Bank for Africa (U) Limited 4,600,000 4,600,000

Total 4,600,000 4,600,000

Securities:
The term loan is secured by:
(i) Legal mortgage charge over land and property on Plot 13 B Kampala Road .

The overdraft facility with Global Trust Bank (Uganda) Limited and the short term loan with Orient Bank
Limited were fully repaid during the reporting period.

ANNUAL REPORT AND ACCOUNTS 2014 73


Page 57
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
31-Dec-14 31-Dec-13
Ushs'000 Ushs'000
31(a) SHARE CAPITAL
Authorized:
2,000,000,000 (2013: 2,000,000,000) ordinary shares of Ushs 5 each. 10,000,000 10,000,000

Issued and fully paid:


1,415,779,800 (31 December 2013: 403,880,000) ordinary shares of Ushs 5 each.

General Long-term Total Total


Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000
At 1 January 1,019,400 1,000,000 2,019,400 2,019,400
Rights issue ordinary shares 485,211 475,977 961,188 -
Bonus issue ordinary shares 2,539,288 1,559,023 4,098,311 -
At 31 December 4,043,899 3,035,000 7,078,899 2,019,400

31(b) Share premium


General Long-term Total Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January - - - -
Rights issue ordinary shares 1,820,758 1,786,108 3,606,866 -
At 31 December 1,820,758 1,786,108 3,606,866 -

32 STATUTORY RESERVES

The movement in the statutory reserves is outlined in the consolidated statement of changes in equity.

These comprise:
Contingency reserves
General Long-term Total Total
Business Business 31-Dec-14 31-Dec-13
Ushs'000 Ushs'000 Ushs'000 Ushs'000

At 1 January 3,323,487 109,598 3,433,085 3,122,471


Addition during the year 315,180 8,232 323,412 310,614
At 31 December 3,638,667 117,830 3,756,497 3,433,085

Capital reserves
At 1 January 1,507,624 - 1,507,624 1,406,693
Addition during the year 77,937 - 77,937 100,931
At 31 December 1,585,561 - 1,585,561 1,507,624

74 ANNUAL REPORT AND ACCOUNTS 2014


Page 58
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

General Long-term Total Total


33 NOTES TO THE CONSOLIDATED STATEMENT OF Business Business 31-Dec-14 31-Dec-13
CASHFLOWS Ushs'000 Ushs'000 Ushs'000 Ushs'000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 2,133,978 - 2,133,978 2,442,636


Adjustments for:
Increase in insurance funds - 343,061 343,061 298,484
Depreciation 102,111 26,959 129,070 167,339
Amortisation 726 - 726 4,280
Fair value (gains)/losses on equity investments 844,361 778,936 1,623,297 (592,802)
Fair value gains on investment properties (669,804) 395,135 (274,669) (1,420,675)
Fair value gains on property and equipments (335,688) (289,125) (624,813) 7,350
Reclassification to investment contract liabilities - (7,431,809) (7,431,809) -
Bonus Issue shares transferred to Long term business (1,559,023) 1,559,023 - -
Loss/(Profit) on disposal of equity investments - - - 53,743
Loss/(Profit) on disposal of property and equipments (1,370) - (1,370) (31,000)
Change in deferred tax (Asset) / liability - (201,878) (201,878) 250,399
Transfered from actuarial contingency reserves - (1,572,458) (1,572,458) -
Exchange (gain) / loss (13,671) (102,000) (115,671) 66,228

501,620 (6,494,156) (5,992,536) 1,245,982


Movements in working capital
(Increase) in premiums outstanding (790,805) - (790,805) (495,367)
(Increase)/decrease in sundry debtors (267,795) 737,217 469,422 (246,881)
Movement in related party balances (728,090) - (728,090) (1,087,878)
Movement in reinsurers' balances (226,510) 3,288 (223,222) 116,074
Increase / (decrease) in sundry creditors 1,061,971 (10,196) 1,051,775 925,182
Movement in amounts payable under
deposit administration contracts - 6,826,467 6,826,467 (1,566,407)
Change in Inter company balances (3,142,100) 3,142,100 - -
Change in deferred acquicition cost (316,034) - (316,034) -
Change in insurance contract liabilities &
unearned premium reserves 1,463,876 (629,569) 834,307 61,570

Cash (used in)/generated from in operations (2,443,867) 3,575,151 1,131,284 (1,047,725)

34 MANAGED FUNDS 31-Dec-14 31-Dec-13


Longterm business Ushs'000 Ushs'000
At 1 January 1,134,039 1,339,356
Accrued Interest 37,769 92,644
Withdrawal (102,795) (297,961)
At 31 December 1,069,013 1,134,039

The amount above relates to funds managed by the group on behalf its clients. They attract a minimum
guaranteed Interest of 5% per annum and has been included in the financial statements.

Page 59

ANNUAL REPORT AND ACCOUNTS 2014 75


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

35 PROVISION FOR UNEARNED PREMIUMS

This provision represents the liability for short term business where the group's obligations have not expired at the year end.

31-Dec-14 31-Dec-13
Gross Reinsurance Net Gross Reinsurance Net
Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000 Ushs'000

At beginning of year 3,495,677 (627,646) 2,868,031 2,871,607 (455,051) 2,416,556


(Decrease)/increase in the period 770,126 (630,812) 139,314 624,070 (172,595) 451,475

At end of year 4,265,803 (1,258,458) 3,007,345 3,495,677 (627,646) 2,868,031

The UPR and DAC amounts were calculated as per the methodology described in Note 1(m).

Gross UPR Net UPR Gross DAC Net DAC


Class of Business Ushs'000 Ushs'000 Ushs'000 Ushs'000
Accident 1,432,201 1,183,434 281,505 207,056
Fire 420,616 230,601 98,053 31,654
Marine & Aviation 1,177,850 366,441 37,696 (30,018)
Motor 1,235,136 1,226,869 107,342 107,342
Total 4,265,803 3,007,345 524,596 316,034

36 LIFE FUND

a(i) Actuarial Valuation


According to Section 47 (3)(a) of the Insurance Act CAP 213, every insurer conducting long term business is required to maintain a
general reserve (life fund) made up of an amount equal to the net liabilities of policies in force each time an Actuarial valuation is
conducted.

Abstract of the Report of the Actuarial Valuation in respect of Long Term Insurance Business prepared in accordance with
Form 20 of the Insurance Regulations 2002.

The actuarial valuation of the group‟s Life Fund was carried out as at 31 December 2014. The previous statutory actuarial valuation
was carried out as at 31 December 2013.

Actuarial Valuation as at 31 December 2014


The principles for undertaking the actuarial valuation were determined using generally accepted actuarial methods.

For permanent assurances the actuarial liabilities are usually determined by deducting the present value of future net premiums from
the present value of the sums assured and the present value of vested bonuses.

For group life business including group term assurance, group microfinance and comprehensive insurance package, the reserve has
been determined as the net unearned premium reserve at the valuation date. Allowance has been made in respect of reassurances
ceded.

For employees‟ insurance plan and teachers‟ insurance savings plan, the actuarial reserve has been established as the full amount of
the fund standing to the credit of the policyholder as at the valuation date including the guaranteed interest rate of 5% p.a. for the
period ended 31 December 2014.

For deposit administration and managed funds, the actuarial reserve has been established as the full amount of the fund standing to
the credit of the scheme as at the valuation date as provided by the company.

Page 60

76 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
36 LIFE FUND
a(i) Actuarial Valuation (Continued)

We note that the total amount of deposit administration and managed funds as at the previous valuation (30 September 2014) was
Ushs16,820,186,367. This amount has increased to Ushs17,111,093,809 as at this valuation, 31 December 2014.

We are aware that Makerere University has instituted legal challenges against the Company, contesting their Deposit Administration
balances. We have been informed by the Company that the case is still ongoing and is yet to be determined and finalised. In this
regard and for the purposes of the valuation, we have taken the deposit administration balances for Makerere University as provided
by the Company. This balance is as provided for in the valuation carried out by Hymans Robertson Nigeria as at 31 August 2011. No
further verification of the balances has been undertaken by ourselves.

We were provided with the audited accounts as at 31 December 2014. We understand that in line with the requirements of IFRS, the
contributions/premiums from the deposit administration and managed funds business have not been included in the life revenue
account. The Life Fund has therefore been determined as the total assets net of current liabilities and deferred taxation including
allowance for deposit administration and managed funds business as shown in the balance sheet.

The valuation was made in Uganda Shillings. All dollar denominated policies were converted to Uganda Shillings using the prevailing
exchange rate at 31 December 2014 of 1 US Dollar = Ushs 2,768.06 (Source: Interbank Average Exchange Rates, Bank of Uganda,
www.bou.or.ug)

Policies were classified for valuation purposes according to age next birthday at entry. Premium terms and benefit terms were
assumed to be an integral number of years. The valuation age was taken as the age next birthday at entry plus nearest month
duration.

The period from the valuation date to maturity date has been taken as the original term to maturity less curtate duration at the
valuation date.

The future premium term has been taken as the original premium term less the curtate duration at the valuation date.

It has been assumed that premiums are true premiums and the value of outstanding balances has not been taken into account in the
value of future premiums.

When premiums are payable other than annually, the equivalent annual net premium has been valued.

Immediate payment of claims on proof of death has been allowed for by increasing the non-endowment component of
the valuation factors to allow for half a year‟s interest.

Future expenses and profits in the case of limited payment policies and paid-up policies are provided for by margins in the tables of
mortality and the interest rate used.
No liability arises under lapsed policies.
No policy is treated as an asset.

For policies subject to an extra premium by reason of the impaired health of the life assured, a reserve equal to one year‟s extra
premium is held in addition to the normal reserve.

For policies subject to an age rating the valuation age was taken as the rated age.
The A1949/52 Ultimate Table of Assured Lives was used in valuing assurances.

The A (55) Ultimate Table was used in valuing annuities.

The rate of interest used was 4% per annum compound for all permanent assurance policies.

The rate of interest used was 6% per annum compound for annuity policies.

For permanent assurances, the proportion of future annual premiums reserved for future expenses and profits was 42.0% for policies
with immediate participation in profits and 48.1% for policies without participation in profits. There were no policies with deferred
participation in profits.

Page 61

ANNUAL REPORT AND ACCOUNTS 2014 77


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
36 LIFE FUND
a(i) Actuarial Valuation (Continued)

At this valuation, we have included as part of the liability a contingency reserve of U Shs 458 million. The contingency reserve as at the
previous valuation (30 September 2014) was U Shs 452 million. The reserve is in respect of possible additional mortality costs arising
as a result of deterioration in mortality experience and to allow for normal fluctuations in claims payment and investment returns from
the Life Fund.

The basis of distribution of surplus between the insurer and the policyholders is determined by the Directors of the Company on the
advice of the Actuary. The basis adopted complied with the requirements of the Statute and also complies with the provisions of the
Company‟s Memorandum and Articles of Association.

The general principles adopted in the distribution of profits among policyholders were:
a) One full years‟ premium must be paid before bonus is allotted.
b) Bonus is allotted in respect of each year‟s premium paid.
c) Bonuses vest immediately on allocation.

The results of the actuarial valuation as at 31 December 2014 can be summarised as follows:

Deposit
Individual Life Group life Administration Total
Ushs'000 Ushs'000 Ushs'000 Ushs'000
Value of assets as shown in the Life Revenue account 1,547,737 194,828 17,147,896 18,890,461

Value of actuarial liabilities (1,551,660) (120,582) (17,111,094) (18,783,336)

Actuarial Surplus (3,923) 74,246 36,802 107,125

At the valuation date, the deposit administration and managed fund business actuarial liability accounted for 91.1% of the total
actuarial liability, the ordinary life business actuarial liability accounted for 8.3%% of the total actuarial liabilities. The remainder of the
business, mainly group life business, accounted for 0.6% of the total actuarial liabilities.

At this valuation we do not recommend a bonus declaration to with profit individual life policies. We have also not recommended any
additional bonus declaration above the guaranteed rate to the deposit administration, managed funds and insurance savings plan
policies for the period ended 31 December 2014.

VALUATION BALANCE SHEET AS AT 31 DECEMBER 2014


IN RESPECT OF LIFE INSURANCE BUSINESS BY
NIC LIFE ASSURANCE COMPANY LIMITED
FORM 21B
All Amounts in Ushs '000
Deposit
Class of business Individual Life Group Life Administration Total

Net liability under Life Assurance transactions


as shown in the summary and valuation of 1,551,660 120,582 17,111,094 18,783,336
policies
Surplus - 74,246 36,803 111,049

TOTAL 1,551,660 194,828 17,147,896 18,894,385

Insurance fund as shown in the Revenue


1,547,736 194,828 17,147,896 18,890,461
Account

Deficiency 3,924 - 3,924


TOTAL 1,551,660 194,828 17,147,896 18,894,385

Net Surplus / (Deficit) (3,924) 74,246 36,803 107,125

Page 62

78 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014
36 LIFE FUND
a(i) Actuarial Valuation (Continued)

Form 22A
Statement of New Life Insurance Business
For the Period Ended 31 December 2014
In respect of Life Insurance Business Transacted in Uganda
by NIC Life Assurance Company Limited
New Life Insurance Business in Respect of which a premium
has been paid during the Year
Sums Single Yearly
Life Policies '(c.) Number of Insured (a) Premiums (b) Renewal
Policies Ushs'000 Ushs'000 Ushs'000
A. With Participation in Profits
Whole Life Insurance
Endowment Insurance 240 1,568,692 361,725
Temporary Insurance
Others
B. With Participation in Profits
Whole Life Insurance
Endowment Insurance
Temporary Insurance
Mortgages 3 134,681 290 633
Others 2 4,000 320
Total 245 1,707,373 610 362,358
Thereof: Ceded for Reinsurance 13 246,500 - 1,493
Superannuation (Group Business)
Group Life
Micro Finance 4 2,618
Comprehensive Insurance Package 6 20,974

ANNUITY CONTRACTS Number of Annuities Consideration


Renewals
Contracts Per Annum Single (b)
Immediate
Deferred
Total 255 1,707,373 610 385,950

Page 63
ANNUAL REPORT AND ACCOUNTS 2014 79
NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2014

36 LIFE FUND (Continued)


a Actuarial Valuation (Continued)
Form 22B
Policy Exhibit of Life Insurance Policies
Issued within Uganda
For the period ended 31 December 2014

Life policies (a) Annuities

Reversionary Number of Annuities per


Number of Sum Insured (a) Bonus Additions contracts annum
policies Ushs Ushs Ushs Ushs
1 Policies at Beginning of Year 2014 753 6,303,042,244 170,205,147 159 17,729,280
Additions During the year
2 New Policies Issued 255 1,707,373,316
3 Old Policies Reviced
4 Policies Increased
i. by Bonuses alloted 27,857,275
ii. Otherwise 237,159,496
5 Old Policies changed
6 Total 1008 8,247,575,056 198,062,422 159 17,729,280
Deductions During the Year
7 By death 1 12,410,891 4 797,748
8 By Survival (Survival benefits)
9 By Happening of Contingencies Insured
Against other than death (Maturity) 118 136,973,887 6,700,651
By Expiry of Term Under Temporary
10 Insurance
11 By Surrender of Policy 1 10,000,000 1,500,000
12 By Forfeiture or Lapse 57 1,456,573,402 47,170,626
13 By Decrease:
i. By Surrender of Bonuses
ii. By Change into paid up Policy 1 1,736,952
14 iii. Otherwise 765,625,447
15 By Change of Policy
16 By Being Not Taken Up
16 Total 177 2,381,583,627 55,371,277 5 2,534,700
17 Policies Existing © at End of Year 2013
Thereof Policies ceded for Reinsurance 831 5,865,991,429 142,691,145 154 15,194,580
18 Applications declined during the Year
19 Supplemental accident insurance
Policies existing at End of year 2014 831 5,865,991,429 142,691,145 154 15,194,580

b Movement in Life Funds 31-Dec-14 31-Dec-13


Life Individual Life Group Total Total
Ushs '000 Ushs '000 Ushs '000 Ushs '000
At 1st January 3,059,654 7,389,151 10,448,805 10,158,141
Net increase / (decrease) in fund 227,807 115,254 343,061 298,484
Transfer to Contingency reserve (4,628) (3,604) (8,232) (7,820)
Reclassification to Investment Contract Liabilities (168,373) (7,263,436) (7,431,809) -
Transfer to Actuarial Contingency reserves (1,562,797) (116,786) (1,679,583) -
At 31 December 1,551,663 120,579 1,672,242 10,448,805

Page 64

80 ANNUAL REPORT AND ACCOUNTS 2014


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

37 PAYABLES UNDER DEPOSIT ADMINISTRATION CONTRACTS

Deposit administration contracts are recorded at amortised cost. Movements in amounts payable under
deposit administration contracts during the year were as shown below:
31-Dec-14 31-Dec-13
Ushs'000 Ushs'000

At beginning of year 8,747,254 10,313,661

Deposits received 1,069,623 1,034,662


Surrenders and annuities paid (392,172) (1,153,951)
Retirement benefit scheme - (25,999)
Pensions paid (8,205) (10,963)
Commissions and expenses charged - (8,106)
Fair value gains on investment properties (106,010) 349,600
Investment income 1,249,985 1,492,471
Deferred tax credit / (charge) 201,878 (250,399)
Fair value losses on equity investments (778,936) 485,062
Loss on disposal of shares - (45,565)
Management expenses (2,854,363) (2,938,993)
Direct expenses of management - -
Foreign exchange gain/(loss) 103,440 (58,400)
Depreciation expenses (26,959) (31,271)
Interest paid (193,562) (447,771)
Impairment losses on bad and doubtful debts (445,814) 43,216
Reclassification from Life Funds 7,435,105 -
Transfered from actuarial contingency reserves 1,572,458 -

At end of year 15,573,722 8,747,254

38 RELATED PARTIES

The following are the group's related parties:

- Industrial and General Insurance Company Plc (IGI) - holding company


- Global Trust Bank (U) Limited - same parent (Closed 27 July 2014)
- NIC General Insurance Company Limited - wholly owned subsidiary
- NIC Life Assurance Company Limited - wholly owned subsidiary
- Premium Trust Investment (U) Limited - wholly owned subsidiary
- NIC Trustees and Investment Limited - wholly owned subsidiary
- Capital Assets Investment Limited - wholly owned subsidiary
- NIC (Southern Sudan) Limited - wholly owned subsidiary

Page 65 ANNUAL REPORT AND ACCOUNTS 2014 81


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2014

38 RELATED PARTIES (Continued)


31-Dec-14 31-Dec-13
Ushs'000 Ushs'000
a) Amounts due to related parties

NIC (Southern Sudan) Limited 75,408 75,408


Global Trust Bank Uganda - 19,897
Industrial and General Insurance Company Plc (IGI) 108,538 816,731

183,946 912,036

b) Compensation of key management personnel 31-Dec-14 31-Dec-13


Ushs'000 Ushs'000
Directors fees 40,559 184,070
Salaries and other short-term benefits - Local 1,075,446 637,145
Salaries and other short-term benefits - expatriates 737,271 668,719
Bonus 151,385 107,773

2,004,661 1,597,707

31-Dec-14 31-Dec-13
c) Related party transactions Ushs'000 Ushs'000

Rental income received from Global Trust Bank 419,550 636,897


Reinsurance premiums ceded to IGI Plc - 3,375
Technical Assistance and Commitment (TACA) fee to IGI 340,881 250,900
Dividend payable to IGI Plc - 1,211,640
Sale of policies to Global Trust Bank 168,760 156,891
Overdraft facility from Global Trust Bank - 4,432,733
Rights shares issued to IGI Plc 2,999,064 -
Bonus shares issued to IGI Plc 2,459,027 -

82 ANNUAL REPORT AND ACCOUNTS 2014 Page 66


NIC HOLDINGS LIMITED (Formerly National Insurance Corporation Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

39 CONTINGENT LIABILITIES

a Makerere DAP Scheme


Makerere University instituted legal proceedings against the group claiming inter alia the sum of Ushs 16.7billion.
This amount includes the sum of Ushs 6.9billion which the group acknowledged in pleadings filed in 2011 to be
due on the DAP Scheme.

In 2012, Makerere University filed an application for Judgement in respect of Ushs 6.9 billion but this application
could not be heard at the time as Parties commenced discussion on amicable settlement. The application for
partial judgement was however heard in November 2014 and determined in line with the group's earlier averment.
No provision has been made in these consolidated financial statements for the contingent liability of Ushs 9.8
billion arising out of the dispute. The directors have sought legal advise and are confident the final outcome would
be in favour of the company.

The final instruction fee to be paid to the group‟s solicitors will depend on the outcome of mediation efforts on the
issues in dispute. In the meantime, the Directors‟ approved a provision of Ushs 100 million in 2011 fiscal year
towards solicitors‟ fees.

b Following the release of the report of the comprehensive audit exercise (2008 - 2012) carried out by URA dated
21 June 2013, the group was assessed additional tax of Ushs 4.196 billion in respect of Value Added Tax (VAT),
Withholding Tax (WHT), Corporation Tax (CIT) and Pay-As -You-Earn (PAYE). The group admitted and paid
Ushs 773 million, but formally objected to the balance of Ushs 3.423 billion based on advice of the group's tax
consultants. The final report of the objection proceedings released on 21 October 2014 subsequently revised
downward the total additional tax payable to Ushs 1.77 billion. Appropriate provision have been made in the
consolidated financial statements for these additional tax liabilities. Outstanding amount is being settled in line
with installment payment plan agreed with URA.

c In the ordinary course of business, the group is subjected to litigation arising in the normal course of insurance
contracts. The directors are of the opinion that any outstanding litigation in this respect will not have a material
effect on the consolidated financial position or results of the group. The aggregate contingent liability in respect of
such other cases as at the end of the year amounts to Ushs 1.16 billion (31 December 2013: Ushs 560 million).

40 RETIREMENT BENEFIT OBLIGATIONS


The group contributes to a pension plan established for the benefit of the employees. The plan is a defined
contribution scheme, whereby the group contributed to the fund 10% of the employee's consolidated annual
salary. During the year, Ushs 237 million (31 December 2013: Ushs137 million) was charged to the consolidated
statement of comprehensive income.

41 DEALING AS A NATIONAL BUREAU

The group was appointed by the Government of Uganda to act as a National Bureau of COMESA yellow card
scheme in Uganda. NIC was also designated the National Surety for Regional Customs Transit Guarantee
Scheme. In line with COMESA protocols, the group has been discharging the functions of National Bureau and
National Surety of the COMESA schemes.

However, sequel to the implementation of the provision of the Insurance Act (Amended 2011) which required
composite insurance companies to demerge, the duties and resposibilities as a National Burea was transferred to
NIC General Insurance Company Limited (a wholly owned subsidiary of NIC Holdiings Limited) effective 1
October 2014.

42 ULTIMATE HOLDING COMPANY

The ultimate holding company of NIC Holdings Limited (formerly National Insurance Corporation Limited) is
Industrial and General Insurance Plc, a company registered and incorporated in the Federal Republic of Nigeria.

ANNUAL REPORT AND ACCOUNTS 2014 83


Page 67
NIC Events

NIC’s Head of Corporate Communication Abonyo Pamela handing Former Minister of Finance Hon. Syda Bumba
over donated items to staff of Hospice Africa Uganda as part of signing on the Late Chairman Dr. Oluremi Andrew
the NIC at 50 celebrations. Olowude’s photos at the Commendation service held on
16th October 2014 at All Saint’s Cathedral Nakasero.

NIC shareholders share a light moment after the 13th Annual NIC Board members, Mr. Charles Tukacungurwa (left),
General Meeting 2014 at the Golf Course Hotel Kampala Mr. Bernard Katureebe (Center) and the Chairman, Dr.
2014. Martin Aliker (right) light a candle during the
commendation service held for the late Chairman, Dr.
Oluremi Andrew Olowude.

NIC staff participate at the Insurance sports gala 2014. NIC Board and Managers attend the Bonus issue
press conference after listing on the USE 2014.

84 ANNUAL REPORT AND ACCOUNTS 2014


Proxy Form

NIC HOLDINGS LIMITED

14TH ANNUAL GENERAL MEETING OF NIC HOLDINGS LIMITED [FORMERLY NATIONAL


INSURANCE CORPORATION LIMITED] TO BE HELD AT 2.00PM ON THURSDAY, THE 30TH DAY OF
JULY, 2015 AT THE BANQUET HALL, GOLF COURSE HOTEL, KAMPALA, UGANDA

RESOLUTION FOR AGAINST

I _________________________________ 1. To lay before the members the financial


statements for the year ended 31st December
2014 together with the reports of the Directors
thereon.

of _______________________________

2. To declare a dividend.
being a Member of the above named
Company hereby

appoint ___________________________
3. To re-elect or elect Directors in place of the
Directors who shall be retiring.

or failing him 4. To ratify the appointment of Mr. Obayomi Lawal


_______________________________ as Director.

as my Proxy to vote for me on my behalf 5. To appoint External Auditors to the Company


at the Annual General Meeting of the and its insurance subsidiaries and also
Company to be held on the 30th day of July, authorize Directors to determine their
2015. remuneration.

Signed this ______ day of __________


2015

Member’s Signature: 6. To approve the remuneration of Directors.

_____________________________

Please indicate with an “X” in the appropriate space above how you wish your vote to be cast on the resolutions. Unless
otherwise so indicated, the proxy will vote or abstain from voting at his discretion.

ANNUAL REPORT AND ACCOUNTS 2014 85


IF YOU ARE UNABLE TO ATTEND THE MEETING
A member who is unable to attend an Annual General Meeting or an Extra
Ordinary General Meeting is allowed by law to vote by proxy and this Proxy form
has been prepared to enable the member exercise his/her right to vote in case
he/she is unable to personally attend the meeting.

IMPORTANT
(a) The name of the Member must be written in BLOCK CAPITALS where
marked. Please stamp and sign the proxy form if you are not attending the
Meeting, and forward so as to reach the Office of the Company Secretary,
NIC, Kampala not less than 48 hours before the time for holding the
meeting. If executed by a Company, the proxy form should be sealed with
the Company Seal.

(b) In the case of Joint Shareholders, any one of such may complete the form
but the names of all Joint Shareholders must be stated.

(c) If the shareholder is a corporation, this form must be under its common
seal or under the hand of its officer or attorney duly authorized in that
regard.

(d) The Admission Card sent with the Notice must be produced before
a Member or his/her Proxy can obtain entrance to the Annual General
Meeting.

(e) A member wishing to nominate a director should please forward the


nominees curriculum vitae so as to reach the Office of the Company
Secretary, NIC, Kampala not less than 48 hours before the time for holding
the meeting.

NIC HOLDINGS LIMITED


ADMISSION CARD

PLEASE ADMIT ………………………………………………………………………… or his/her


Proxy………………………………………………………...

to the Annual General Meeting of NIC Holdings Limited which will hold at the Banquet Hall, Golf
Course Hotel, Kampala, Uganda on Thursday, the 30th day of July, 2015 at 2.00pm.

Elias Edu, Esq.


Company Secretary

Name of Shareholder ………………………………………………………..…… Number of Shares held

Signature of Shareholder ………………………………........................................................

Signature of Proxy ……………………………….........................................................

(where applicable)

Note: This Admission Card must be produced by the Shareholder or his/her Proxy in order to be
admitted at the meeting. Shareholders or their Proxies are requested to sign the Admission Card
before attending the meeting.

86 ANNUAL REPORT AND ACCOUNTS 2014


facebook/nicug @nic_ug

NIC proudly the Offical Insurance


Partner of the Uganda Cranes.

Celebrating 50 years of insuring


the Pearl of Africa.
For more information contact us at: Tel: +256 0417 119915, 0414 258001/5, +256 0312258005 Website: www.nic.co.ug
ANNUAL REPORT AND ACCOUNTS 2014 87
Holdings Ltd

NIC HOLDINGS LIMITED