I am delighted to present to you our 33rd Annual Report and Financial Statements for the year ended 31 December 2020.

The Economy

2020 will be remembered as the year of COVID-19. As the pandemic swept across the globe. it caused an unprecedented public health crisis, throwing the world economy into great turbulence and a sense of uncertainty, with terrible loss of lives and livelihoods across the globe as economic recession became the norm for so many sectors.

Yet, despite this uniquely challenging environment, we at Occidental Insurance delivered to our customers and other stakeholders, proving once again that we are a reliable and trusted partner, in line with our vision of being the most reliable protector of wealth and health in the East African Region, allowing you to LIVE LIFE CONFIDENT.

Economic performance in Q.3 2020 remained depressed. but better compared to Q.2 2020. Real GDP is estimated to have grown by 1.1% in the quarter compared to a growth of 5.8% in Q.3 2019. During the quarter under review, the performance — albeit constrained — was supported by a significant improvement in agricultural production and accelerated growth in mining and quarrying, construction and public administration. Strong growth in the ICT, financial and insurance, and real estate sectors also supported a growth from a deeper contraction. Actually, the contraction was much lower than that recorded during the previous quarter — largely against a backdrop of the partial easing of COVID-19 containment measures.

The inflation rate remained relatively low in 2020, with the average monthly inflation rate coming in at 5.2%. The rate was 5.6% at December. lower than the December 2019 inflation rate of 5.8%. The low inflation can be attributed to the low fuel prices experienced during the first half of the year, coupled with the favourable weather conditions experienced at the tail end of the year which has ensured that food commodity prices remained low through most of the year. On interest rates. the Monetary Policy Committee (MPC) lowered the Central Bank Rate (CBR) twice, from 8.25% at the beginning of the year to 7.00%. indicating that the previous cuts were having the intended effect on the economy. Meanwhile. the Kenya Shilling depreciated by 7.7% against the US Dollar to close at Kshs 109.2 in 2020. compared to Kshs 101.3 at the end of 2019 due to increased dollar demand and a decline in dollar inflows from both exports of goods and services like tourism.

The inflation rate remained relatively low in 2020, with the average monthly inflation rate coming in at 5.2%. The rate was 5.6% at December, lower than the December 2019 inflation rate of 5.8%, The low inflation can be attributed to the low fuel prices experienced during the first half of the year, coupled with the favourable weather conditions experienced at the tail end of the year which has ensured that food commodity prices remained low through most of the year. On interest rates, the Monetary Policy Committee (MPC) towered the Central Bank Rate (CBR) twice, from 8.25% at the beginning of the year to 7.00%, indicating that the previous cuts were having the intended effect on the economy. Meanwhile, the Kenya Shilling depreciated by 7.7% against the US Dollar to close at Kshs 109.2 in 2020, compared to Kshs 101.3 at the end of 2019 due to increased dollar demand and a decline in dollar inflows from both exports of goods and services like tourism.

During the year, the Kenyan equities market was on a downward trajectory, with NASI, NSE 25, and NSE 20 declining by 8.6%, 16.7%, and 29.6% respectively. Equity turnover during the year declined by 5.9% to USD 1.4B, from USD 1.5B in FY ‘2019. Rates in the fixed income market remained relatively stable, due to the high liquidity in the money markets. T-bills auctions recorded an oversubscription with yields on the 91 -day, 182-day and 364-day T-bills declining to 6.9%, 7.4% and 8.3% in 2020 from 7.2%. 8.2% and 9.8% at the end of 2019. respectively — due to the Central Bank of Kenya’s efforts to keep rates low by rejecting expensive bids. According to the Kenya National Bureau of Statistics Q3 release, the construction and real estate sector rebounded to a 16.2% growth, compared to a 6.6% growth in the corresponding quarter of 2019. The growth was evidenced by a 23.5% increase in the volume of cement consumed, and a 4.9% growth in credit advanced to this sector in the review period.

The Insurance Industry

The Insurance Regulatory Authority industry release for Q.3 2020 showed that industry insurance premiums grew by only 2.6% to 179.4B, from 174.9B in Q.3 2019. This was largely driven by a growth of 6.6% in the long-term insurance business segment, compared to a growth of -0.1% in general insurance. 58.6% of the industry business comprised of general insurance, while long-term business equated to 41 The insurance industry asset base grew by 9.6% to Kshs 688.51B as at Q.3 2020. In the general insurance segment, motor and medical insurance accounted for 67.2% of total premiums. During the same period, OIC posted a growth of 1 .0 0/0, compared to our segment (excluding medical & motor PSV) growth rate of -3.4%.

The Year in Retrospect

It is rare that a single topic defines an entire year as the spread of the coronavirus defined 2020. Despite the unprecedented challenges, our employees remained impressively focussed on serving our clients and executing our strategy. Despite being as vulnerable to this deadly virus as anyone, we worked together to physically distance, and as with other organisations that entered this uniquely challenging year with string values and an underlying sense of trust, I have never felt such a strong sense of togetherness and unity across the organization. Like our customers, our employees valued the stability, support and security offered in these uncertain times. I am proud of our attitude and our behaviour.

Our Financial Performance:

While 2020 was not a record year in terms of financial performance, we took a deliberate path to vigilantly manage our costs, with a view to improving efficiency and strengthening our capital and liquidity metrics. During the year under review, the company experienced a premium growth of 0.1 0/0, from Kshs 2.810B in 2019 to Kshs 2.812B in 2020. The total asset base of the company grew from Kshs 4.315B in 2019 to Kshs 4.783B in 2020, while shareholders’ funds reduced from Kshs 1.560B to Kshs 1.367B. The company posted an underwriting loss of Kshs 313M million, down from the Kshs 19M underwriting profit recorded in 2019, We expect an improvement in the underwriting result in the coming period, given our prudent underwriting practices and cost management initiatives. Our investment income declined by 34 0/0, from Kshs 380 million to Kshs 249 million, due to one-off gains recorded in 2019. Profit before tax posted in 2020 was Kshs (156M), down from the Kshs 307 million recorded in the previous year. Our profit after tax dropped by 133%, to close at Kshs (81) million, down from the Kshs 248 million posted in the previous year.

Looking Ahead

While our company continues to face external market challenges and others due to the pandemic, our people remain the most important pillar in OIC. And this means all the best practices of talent management: attracting, development and retaining the best ones is constantly uppermost in our minds at all levels of leadership — including an ever-strengthening HR function. I can confidently state that we keep getting better at getting better in this regard — with the proof being the team we have, has been evolving, from the dynamic millennials to the senior experienced personnel.

The development and welfare of our staff have always been of paramount importance to the business. Our primary focus remains their health and well-being. To best ensure safety and to minimise the risk of virus transmission, we have implemented a series of preventative health measures for ourselves, based on best health practices and government guidance. Of course, our workforce was not immune to the worst health impacts of the virus either. For those colleagues we have lost or who suffered personally, or whose families have been affected, I extend my deepest sympathy.

One of our priorities for this coming year, and of course for the years beyond, is to ensure that we improve on the agility and innovation that stood us in such good stead in weathering this crisis. This has prompted an assessment of our operational mindset, and we will continue embedding new ways of thinking about our work and operations across the entire organization. And here of course there is great emphasis on the ambitious application of technology for digitisation, controls and other fundamental purposes.

As we look to the future, we see markets remaining volatile, and with the Covid-19 virus impacting businesses globally it is of course taken for granted that the environment will remain volatile and uncertain. Yet despite these transitory challenges, we will continue to invest in the business, develop our people to be better equipped to handle these challenges, and so grow the business sustainably. Further, we will continue to be increasingly proactive in making a substantive contribution in this emerging age of greater corporate responsibility, including but not merely related to the challenges brought about by the pandemic.

Strategic Plan 2021-2025

Following the expiry of our 2015-2020 strategic plan, the board together with (very much together with!) management has embarked on the formulation of the 2021-2025 strategy. We remain very confident regarding the longer-term prospects of the company, thanks to a combination of a well-established growth strategy, a strong balance sheet, significant market opportunities, and an ever-growing customer base. All this of course related to our strong culture. Further, our national claims-paying ability was affirmed at A-(KE) by the Global Credit Rating (GCR) Company, a major milestone as we focus on business excellence and achieving market leadership.

LIVE LIFE CONFIDENT

It was our increased spirit of dynamism and ambitiousness that led us to our highly successful rebranding programme. Through this, with our vibrant new logo and colours and our inspiring tag line of LIVE LIFE CONFIDENT, we reinforced that spirit among our staff, our customers and other stakeholders. We know it is by living our vision and values that we will continue to strengthen the positive relationship between us all.

Appreciation

I wish to extend my sincere appreciation to all our customers, business associates and service providers for their endearing trust, support and loyalty to our company, which inspires our commitment to provide the best insurance solutions in the region.

I am equally grateful to my fellow directors for the wise counsel and exemplary leadership they have continued to offer during the past year. Their level of engagement remains high, but in ways that hold the board back from micromanagement. It is, of course, thanks to the level of trust in management.

I also wish to appreciate our outstanding CEO Asok Ghosh and his management team for their exemplary leadership, but above all, a big thank you to our staff, whose indomitable spirit has been a credit to themselves and to our company in what has been such a challenging year. I am also thankful to the Insurance Regulatory Authority for their supervisory support and guidance, and while expecting this to continue in future I assure them of our company’s commitment to the industry’s robust sustainable development in all respects

Mike Eldon

CHAIRMAN

Date:- 24 March 2021