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CIC INSURANCE GROUP LIMITEDCHAIRMAN’S STATEMENTIt gives me great pleasure to presentto you the Group’s Annual report andfinancial statements for the year ended31 December 2011.OPERATING ENVIRONMENTThe economic environment in 2011in Kenya was characterised by highinflation (close to 20% in the latter part ofthe year) and high interest rates (as highas 29% in the latter part of the year). TheKenya Shilling weakened considerablyagainst major world currencies, losingover 20% of its value during the year.The economy experienced a seriesof domestic and external shocks,dampening the growth prospects and reducing the gains fromhigher economic growth and recovery in 2010. The GrossDomestic Product (GDP) growth declined from 5.6% in 2010to about 4.5% in 2011 mainly on account of higher food andfuel prices, electricity shortages and drought.During the year the economy suffered further from uncertaintyand insecurity due to the Al- Shabaab threats.The fluid political environment ahead of the general electionsposes a serious challenge to continued economic growth.Inspite of the above challenges, the Kenyan economy isforecasted to grow by 5.3% in the year 2012.GROUP’S PERFORMANCEFor the second year running the Group has continued toperform exceptionally well both in volume of business andprofitability. In the years 2010 and 2011, growth in volume ofinsurance business of 58% and 48% respectively, surpassedby far, that of the competition and the Industry average. The splitbetween Life and General business into separate companiesand Issuance of a CMA license to CIC Asset ManagementLimited to sell unit Trusts is expected to further enhance theIn the years 2010and 2011, growth involume of insurancebusiness of 58% and48% respectively,surpassed by far, that ofthe competition and theIndustry average.Group’s revenue generation. This growthis expected to translate to improvedmarket share and profitability.In the year under review, the Group’sgross premiums increased by 48% fromKsh 4.6 billion to Ksh 6.7 billion. Profitbefore tax increased by 30% from Ksh605 million to Ksh 787 million. Similarly,total assets increased by 48% from Ksh7.5 billion to Ksh 11.1 billion while theshareholders equity increased by 65%from Ksh 2.6 billion to Ksh 4.3 billion.Following a review of the performance,the Board of directors resolved torecommend to shareholders a first andfinal dividend of Ksh 1.80 per share (2010 – Ksh 1.60 pershare).GENERAL BUSINESSGross premium income increased by 55% from Ksh 3.0 billionto Ksh 4.6 billion.Net earned premiums increased by 67% fromKsh 2.0 billion to Ksh 3.4 billion. The claims expenses increased63% from Ksh 1.2 billion to Ksh 1.9 billion. Investment andother income increased by 76% from Ksh 184.8 million to Ksh324.4 million. Commission and operating expenses increasedby 67% from Ksh 769.7 million to Ksh 1.3 billion. Profit beforetax increased by 91% from Ksh 348.1 million to Ksh 666.6million. All classes of business had positive contribution to theprofitability save for medical and liability classes.LONGTERM BUSINESSGross premium income increased by 35% from Ksh 1.6 billionto Ksh 2.2 billion.Net earned premiums increased by 29% fromKsh 1.5 billion to Ksh 2.0 billion. Investment and other incomeincreased by 39% from Ksh 144.0 million to Ksh 200.6 million.Claims and policyholders benefits increased by 49% from Ksh840.2 million to Ksh 1.3 billion. Operating and commissionexpenses increased by 39% from Ksh 560.8 million to Ksh2011 ANNUAL REPORT & FINANCIAL STATEMENTS PAGE 9