QUICK REVIEW OF PAN AFRICA INSURANCE HOLDINGS LIMITED FINANCIAL STATEMENTS 2012

QUICK REVIEW OF PAN AFRICA INSURANCE HOLDINGS LIMITED FINANCIAL STATEMENTS 2012 By CPA Michael Wanjala M., 5633 Feb 21st 2013, Nairobi Pan Africa Insurance Holdings Limited (PAIHL) published its financials for the year 2012 in the Daily Nation of 21st February 2013. PAIHL indicates that the financials are audited but it makes a grave omission, it fails to name the auditor and the fact the statements received either a qualified or unqualified opinion. The value of audit has been down-graded to a mere mention that audit was done. This correction needs to be made in future publications. In comparison to other companies that published their financials in the week PAIHL makes more disclosures and they deserve congratulations. They disclose the basis of preparation of the financial statements as IFRS and the Kenyan Company Law. They leave out a mention of the Insurance Regulatory Authority, but then again this could be just by mistake. They further provide the names of the directors and their nationality; this is a good corporate governance practice. In the financial statements however, they give an expense termed cost of sales in which I suspect they have lumped more than identical items. We do not for instance see the staff costs, the board costs in the statement of comprehensive income. We can only suspect that they are lumped together in the cost of sales. Board costs if at all they are included in this categorization, then this is a case of misclassification and a reversal of the matching principal of accounting. The performance in remarkable, achieving a growth in income by 51%. It will be interesting to compare this with peers in the insurance industry once they release their full year results for 2012. PAIHL also makes a useful classification as regards its financial instruments, further classifying them on the basis of whether they are held for sale or to maturity. This is a plus since it aids understanding of the cash from investments in the statement of cash flows. In the cash flows however, PAIHL uses the term “cash resources” rather than the acceptable term of cash and cash equivalents. One would need to review the full financial statements including the notes to appreciate if there are any differences in the two terms. If there are differences, then this further reduces comparability which ought to be a key tenet in preparation of financial statements. On the ratios, PAIHL is above the statutory rations and hence it is healthy from a regulators perspective. There will be need to subject such ratios to a comparison with industry peers. The un-forgivable items in my view in the financial of PAIHL are two, one is the failure to disclose board expenses, and this is so because we know that some of the board members are significant shareholders, secondly the failure to disclose the auditor and the opinion they gave reduces our reliability on their financials to near zero. On a rating of one to five where 5 is the best, I will rate them at three CPA Michael Wanjala M., 5633.