For those of you who may attend today's AGM for Kenya Re Insurance Co.,you may want to point out that they got their 2008 (and the comparative 2007) EPS figure wrong.

The Profit for the Year as reported both in the press and on the income statement in Kenya Re's annual report stood at Kshs 1,481,100,914 (2007- Kshs 837,949,080). A simple calculation shows that based on the 600,000,000 issued and fully paid up shares,the EPS should be Kshs 2.47 (2007 - Kshs 1.40). The EPS figures that they have reported on their income statement and on the accompanying notes,of Kshs 1.97 and 1.05 respectively are based on the profit figures for general business only. However,clearly EPS should be based on total profit attributable to shareholders INCLUDING the life business - as it is DEFINITELY part of their operations.

I noted this anomaly when the results were released in the media,but I thought this would have been corrected in their full annual report. However,this error has been escalated to the annual report. It is worth noting that in the 2007 report they used the RIGHT basis of calculation. The same goes for other insurance companies that have both general and life businesses e.g. Jubilee and Pan Africa Insurance.

It is very disappointing that such an error would go unnoticed even by their Auditor. Perhaps this should not be so surprising since they were audited by the Controller and Auditor General,who recent press reports does not have the required CPA/ACCCA certificate to practise as an Auditor in Kenya. Or perhaps our so-called business press should have picked it up.

Anyhow the fact is that this does have an impact on shareholders,since their PE ratio is inadvertently higher than it is,hence undervaluing the share. As of Friday last week,Kenya Re was therefore trading at a real PE of 5.67,which is a substantial discount to the market and even to their industry peer such as Jubilee at 8.63. Shareholders should be pissed off by such glaring errors and should demand an explanation.


Opportunity calls but few respond.

If what MH has indicated it is true,then it is obvious that their Chief Finance Officer needs to clarify this and give a reason why. Otherwise,Kenya Re should publish the results with the correct EPS.

1) Has the EPS been shown in the Notes to the Accounts? (I do not have the AR)
**2) If not,then the EPS is probably shown with the P&L but that is a 'format' issue AFTER the PAT is shown.
***3) If yes,then it should be brought to the attention of the auditors.
****4) The auditors are liable for the SIGNED OFF copy and NOT the printed copies.

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

@VVS,Indeed the EPS is disclosed on Page 30 of the Annual Report - i.e. the Income statement. This is further elaborated on in Note 14,on Page 57 of the annual report. I am afraid that I will not be attending the AGM. I was just raising the issue here for anyone who may have attended to be aware of the same.

Opportunity calls but few respond.

I have not seen the financials but to clarify,profits from long-term insurance (life business and deposit administration) do not belong to the shareholders.

Per IFRS (and as adopted by the Insurance Act.) they are supposed to be treated as longterm liabilities. A portion of this profits may be allocated to the shareholders but this is subject to an actuarial valuation of the entire life business.

On this basis,the use of general business to calculate EPS is correct. The financials would thus be correct.

And also to clarify,auditors (in Kenya) check the published accounts thouroughly


I've noticed the youth in particular coming in to a workplace with a completely outsized notion of their own value and importance... just a thinly-veiled arrogance. May be the credit crunch induced recession is whats needed to remind us all about the value of hard work.... By Anonymous

@Mwanahisa

Sorry,took sometime as I had to brush up on my updates but I got it.

Check up IFRS 4 Insurance Contracts see para. 37(a) ii - iv,

It generally deals with longterm insurance and it explains clearly that because the liability for this type of insurance are expected to be incurred in future example death,you are required to provide for such liability as at the balancesheet date.

Thats why if you look up my previous post,you will see that I stated that you need an actuarial valuation of the life business every year to determine if the shareholders of the company can transfer some amounts to dividends. In case the valuation has a deficit,then the shareholders are required to pay up the deficit,hence life business is generally very profitable but tricky .

To see the actual treatment,I would advise you to look up some Illustrative Financial statements on the Internet,the problem is you will struggle to get one for a composite insurer.

I don't know what Kenya-re did in the past,they must have mixed up their figures,IFRS supports my earlier assertion that surplus from longterm business does not belong to the shareholders and should not be included in the EPS.

I've noticed the youth in particular coming in to a workplace with a completely outsized notion of their own value and importance... just a thinly-veiled arrogance. May be the credit crunch induced recession is whats needed to remind us all about the value of hard work.... By Anonymous