Annual report - front page - Jubilee Insurance

NOTES TO THE FINANCIAL STATEMENTSAS AT 31ST DECEMBER 2011 (CONTINUED)4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK (CONTINUED)The Group manages these positions within an asset liability management (ALM) framework that has been developed to achievelong-term investment returns in excess of its obligations under insurance and investment contracts. The principal techniqueof the Group’s ALM is to match assets to the liabilities arising from insurance and investment contracts by reference to the typeof benefits payable to contract holders. For each distinct category of liabilities, a separate portfolio of assets is maintained.(a) Market risk(i) Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarilywith respect to the US dollar, Uganda shilling and Tanzania shilling. Foreign exchange risk arises from future commercialtransactions, recognized assets and liabilities and net investments in foreign operations.The Group manages foreign exchange risk arising from future commercial transactions and recognized assets and liabilitiesusing forward contracts, but has not designated any derivative instruments as hedging instruments. Currency exposure arisingfrom the net assets of foreign operations is managed primarily through borrowings denominated in the relevantforeign currencies.The Group had the following significant foreign currency positions (all amounts expressed in Kenya Shillings thousands)Exchange Risk Kenya Uganda Tanzania Mauritius Burundi TotalUS Dollar Shillings Shillings Rupees FrancsAs at 31st December, 2011 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000ASSETSReceivables arising outof reinsurance arrangements 126,984 183,810 279,454 - 38,367 628,615Deferred acquisition costs - 15,666 4,341 30,085 8,479 58,571Deposit with financial institutions 322,770 - 309,879 - - 632,649Cash and bank balances 31,942 78 45,212 - 57,520 134,752Total assets 481,696 199,554 638,886 30,085 104,366 1,454,587LIABILITIESProvision for unearned premium 70,166 93,915 233,619 87,078 29,485 514,263Insurance contract liabilities 28,216 103,407 211,911 47,904 12,013 403,451Creditors arising outof reinsurance arrangements 13,958 29,972 187,807 52,091 - 283,828Total liabilities 112,340 227,294 633,337 187,073 41,498 1,201,542Net Balance sheet position 369,356 (27,740) 5,549 (156,988) 62,868 253,045Exchange Risk Kenya Uganda Tanzania Mauritius Burundi TotalUS Dollar Shillings Shillings Rupees FrancsAs at 31st December, 2010 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000ASSETSReceivables arising outof reinsurance arrangements 285,202 225,650 25,400 - 26,536 562,788Deferred acquisition costs - 14,469 4,160 - 1,020 19,649Deposit with financial institutions 67,630 44,574 - 25,052 3,876 141,132Cash and bank balances 998 18,192 - 1,367 70,475 91,032Total assets 353,830 302,885 29,560 26,419 101,907 814,601LIABILITIESProvision for unearned premium - 67,026 21,651 - 16,600 105,277Insurance contract liabilities 212,701 99,368 28,229 13,783 904 354,985Creditors arising outof reinsurance arrangements 16,072 48,846 2,214 - 13,638 80,770Total liabilities 228,773 215,240 52,094 13,783 31,142 541,032Net Balance sheet position 125,057 87,645 (22,534) 12,636 70,765 273,569At 31st December, 2011, if the Shilling had weakened/strengthened by 10% against the US dollar with all other variables heldconstant, the impact on post-tax profit for the year would have been negligible (2010: negligible), mainly as a result of US dollarreceivables and bank balances.JUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 2011 39