In Asia. For Asia. - ACR Capital · PDF fileIn Asia. For Asia. Our Vision To be the leading risk solutions provider and knowledge expert in Asia, ... Capital Reinsurance Malaysia Sdn

ACR Capital Holdings Pte. Ltd.Annual Report 2016

In Asia. For Asia.

OurVision

To be the leading risk solutions provider and knowledge expert in Asia, always placing priority on the needs and interests of our clients.

OurCommitment

Add Value to Our Clients

We embrace innovation and pursue technical excellence to provide quality solutions and services to ensure value creation.

Build Long-Term Relationships Based on Mutual Trust and Respect

We value our clients, business partners, shareholders and employees, and always act with the highest level of honesty,

fairness and openness.

Attract and Nurture the Best

We provide opportunities for our people to grow in their areas of expertise, and constantly look for ways to share our knowledge and

experience with our clients.

Grow Our Presence in Asia

We seek to build a strong franchise across Asia by forging strategic partnerships as well as through organic growth.

Exercise Prudence and Discipline to Protect Our Financial Strength

We seek attractive opportunities but only take risks that commensurate with the rewards.

Maintain High Standards of Accountability

We practise good corporate governance for operational excellence and successful corporate performance.

Contents01 About Us

02 Accolades

03 Financial Highlights

04 Chairman’s Statement

06 Corporate Information

07 Our Offices

09 Statutory Reports and Financial Statements

AboutUs

ACR Capital Holdings Pte. Ltd. (“ACR”) was established in November 2006 to serve the risk solutions needs of the pan-Asian region. ACR’s group of companies includes wholly owned subsidiaries, Asia Capital Reinsurance Group Pte. Ltd. (“Asia Capital Re”) and Asia Risk-Tech Enterprises Management Consulting (Shanghai) Company Limited (“Asia Risk-Tech”).

Headquartered in Singapore, Asia Capital Re is Asia’s first independent reinsurance company with a focus on providing risk solutions to the pan-Asian region with particular specialties in large and complex risks across non-life business lines. Together with its branch and representative offices as well as subsidiaries, Asia Capital Re’s regional presence across Asia includes Hong Kong, Korea, Taiwan, Japan, Malaysia, Vietnam, Bahrain, Dubai, and India. Asia Risk-Tech, in Shanghai, China, serves the Greater China region with risk consulting, risk engineering and other services.

For more information on ACR, please visit www.acrcapitalholdings.com

Our Regional Presence

ACR Capital Holdings together with its wholly owned subsidiaries are referred to as ACR or the Group.

Korea Japan

Taiwan

China

Hong Kong

Vietnam

SingaporeMalaysia

India

Dubai

Bahrain

ACR Business Coverage Local ACR Offices

01

ACR Capital Holdings Pte. Ltd. Annual Report 2016

Accolades

The Asset Triple A Asset Servicing,

Fund Management and Investor Awards 2016

Insurance Company of the Year







The Asset Triple A Investment Awards 2012


Worldwide Reinsurance Awards 2011

Reinsurance Company of the Year

Singapore Venture Capital and Private Equity

Association (SVCA) Annual Awards 2010

Best Performing VC/PE-Backed Company (with 3i Group) – SVCA

Reinsurance Readers’ Awards 2008

Newcomer of the Year

Worldwide Reinsurance Awards 2007

Company Launch of the Year

Triple A Asset Asian Awards 2006

Most Innovative Deal – Equity US$620m Private Placement

02


FinancialHighlights

FY2013/14 FY2014/15 CY2015 FY20161

(Unaudited)1

Financial Results (US$ Million)Gross written premium 923.7 763.3 738.6 591.4Gross earned premium 778.0 758.2 768.2 653.8Gross technical underwriting results 102.3 27.0 39.6 9.6Net written premium 489.7 373.1 356.5 298.4Net earned premium 430.4 400.6 388.2 321.2Net incurred claims (268.7) (297.0) (274.0) (232.6)Net acquisition costs (117.3) (103.4) (110.3) (100.3)Net technical underwriting results 44.4 0.2 3.9 (11.7)Operating expenses (57.4) (57.3) (65.0) (71.5)Ceding fees 19.0 15.6 15.8 5.8Net investment income 25.2 66.6 47.5 59.6Profit/(Loss) for the year 24.2 20.0 (24.1) (16.0)Includes impact of below one-off charges: Restructuring expenses2 (9.4) (25.4) Financial review outcome3 (29.0) (6.4)Profit/(Loss) – excluding one-off charges 24.2 20.0 14.3 15.8

Financial Position (US$ Million)Shareholders’ equity 819.0 844.6 791.4 772.3Total assets 2,772.5 2,838.0 2,363.6 2,256.2Net insurance contract provisions 913.5 854.7 688.2 668.7Investment and cash & cash equivalents 1,140.5 1,199.0 1,172.7 1,195.6

Ratios4 (%)Gross technical combined ratio 86.9 96.4 94.8 98.5Gross operating expense ratio5 7.4 7.6 8.5 10.9Gross combined ratio5 94.3 104.0 103.3 109.4Net combined ratio5 98.6 110.4 111.7 124.1Investment return 2.3 6.4 4.3 5.3Return on average equity 3.0 2.4 (2.9) (2.0)

1 CY2015 (Unaudited) refers to the period 1 January 2015 to 31 December 2015 and FY2016 refers to the period 1 January 2016 to 31 December 2016.

2 Expenses associated with the appointment and retention of key talent which includes the instalment of a share-based retention plan for management and staff as well as a special cash bonus, altogether amounting to US$9.4 million charge for CY2015 (Unaudited) and US$25.4 million for FY2016.

3 Results of financial control review consist of the write-off of a US$21.9 million loan in retakaful joint ventures and US$7.1 million negative impact through invoked reassessment of various technical receivables items arising from prior periods for CY2015 (Unaudited). FY2016 negative impact is US$6.4 million due to the adoption of an accounting practice of recognising the revenue from the booking of retrocession fees gradually, rather than immediately.

4 Unaudited.5 Changes were made to the classification of certain expenses in the presentation of consolidated ratios. The changes were also applied to historical

years and resulted in negative shifts of 1-3 percentage points in the gross operating expense and gross combined and net combined ratios as compared with previously reported figures. The changes only impacted ratios, not the absolute amount of profits and expenses.

03


Chairman’sStatement

On behalf of the Board, I wish to express my appreciation to ACR’s strategic business partners, cedants, brokers and staff, and look forward to their continued support as ACR grows its Asian connections as a leading risk solutions provider in Asia.

04


Chairman’sStatement

November of 2016 marked ACR Capital Holdings’ (“ACR”) first decade of service to Asia, against the backdrop of a persistently soft reinsurance market, slowing growth in Asia as well as political and economic uncertainties. In a process that began in 2015, ACR persisted in its strategy to drive higher production and operational efficiencies, improve financial discipline, and cultivate a sustainable business portfolio of risks. Additionally, key initiatives were undertaken to acquire 100% of the joint venture companies, Asia Capital Reinsurance Malaysia Sdn. Bhd. and ACR ReTakaful Holdings Limited. This move consolidates all ACR-branded operating entities under the same ownership of ACR operating company, Asia Capital Reinsurance Group Pte. Ltd.

For FY2016, the consolidated result of ACR was a loss after tax of US$16 million, due in large part to one-time costs of US$31.8 million related to group-wide restructuring measures as well as fees and other actions related to the strategic change of shareholders in ACR.

New ACR Ownership

In October 2016, ACR’s major shareholders and Shenzhen state-owned investment vehicles, Shenzhen Qianhai Financial Holdings Co. Ltd. (“QFH”) and Shenzhen Investment Holdings Co. Ltd. (“SIHC”) agreed to terms for a 100% acquisition of ACR. The proposed transaction is viewed by all parties as beneficial for ACR’s long-term ambitions to be a leading reinsurer for Asia. To date, it has received the regulatory approvals and clearance from key Singapore, Malaysia and Chinese regulators, namely, the Monetary Authority of Singapore, Bank Negara Malaysia, and China’s National Development and Reform Commission (“NDRC”).

In Appreciation

During the financial year, the Board welcomed Mr Neil Mathison, who was appointed as Independent Director on 30 June 2016. He takes over from Mr John F. Shettle Jr., who stepped down on 30 June 2016. We thank Mr Shettle Jr. for his nine years of dedicated service on the ACR Board.

On behalf of the Board, I wish to express my appreciation to ACR’s strategic business partners, cedants, brokers and staff, and look forward to their continued support as ACR grows its Asian connections as a leading risk solutions provider in Asia.

Hsieh Fu HuaIndependent Chairman

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Corporate Information

BOARD OF DIRECTORS

Hsieh Fu HuaIndependent Chairman

Raja Arshad UdaNon-executive Director

John ThomsonNon-executive Director

Shinji Kasai Non-executive Director

Gan Chee YenNon-executive Director

Andrew S. HawkyardNon-executive Director

Law Song KengIndependent Director

Neil MathisonIndependent Director

Hans-Peter Gerhardt Executive DirectorGroup Chief Executive

Ben Chan Wei BengAlternate Director to Raja Arshad Uda

Ian Matthew Lobley Alternate Director to John Thomson

Toru KomoguchiAlternate Director to Shinji Kasai

EXECUTIVE COMMITTEE

Hans-Peter GerhardtGroup Chief Executive ACR Capital Holdings &Chief ExecutiveAsia Capital Re

A K WongSenior Executive Vice PresidentACR Capital Holdings

Tan Ching GueiChief Risk OfficerAsia Capital Re

Don GuoChief Investment OfficerAsia Capital Re

Hans-Joachim GuentherGroup Chief Underwriting OfficerAsia Capital Re

Lee Ming KienDeputy Chief Underwriting Officer & Head of ActuarialAsia Capital Re

Sergei KorolGroup Chief Financial OfficerACR Capital Holdings

Loh Wei-LynHead of Human ResourcesACR Capital Holdings

COMPANY SECRETARY

Chan Wan MeiGan Lee Teng

AUDITORS

KPMG LLP16 Raffles Quay #22-00Hong Leong BuildingSingapore 048581

06


OurOffices

CORPORATE OFFICES

ACR Capital Holdings Pte. Ltd. (“ACR”)6 Temasek Boulevard #08-01Suntec Tower 4Singapore 038986Telephone: +65 6223 3111Facsimile: +65 6305 8111 www.acrcapitalholdings.com

Shanghai Representative OfficeRoom A-03, 18FTaiping Finance Tower488 Middle Yincheng RoadPudong, Shanghai 200120People’s Republic of ChinaTelephone: +86 21 6156 2350Facsimile: +86 21 6156 1619

SUBSIDIARIES

Asia Capital Reinsurance Group Pte. Ltd. (“Asia Capital Re”)100% ACR-owned Singapore Head Office6 Temasek Boulevard #08-01Suntec Tower 4Singapore 038986Telephone: +65 6223 3111Facsimile: +65 6305 8111www.asiacapitalre.com

Hong Kong Branch OfficeSuites 803-804, 8/F, AIA Kowloon Tower, Landmark East100 How Ming StreetKwun Tong, KowloonHong KongTelephone: +852 2189 7662Facsimile: +852 2189 7663

Dubai Branch OfficeOffice 708, Level 7AI Fattan Currency House, Tower 1Dubai International Financial CentreP.O. Box 506775DubaiUnited Arab EmiratesRegulated by the DFSATelephone: +971 4 424 8500Facsimile: +971 4 432 5255

Korea Branch Office7F, D1 D-Tower17 Jongro 3-gil, Jongro-guSeoul, Korea 03155Telephone: +82 2 6714 1700 Facsimile: +82 2 6714 1777

Taiwan Representative Office32nd Floor Room 3204333 Keelung Road Section 1Taipei 110TaiwanTelephone: +886 2 2757 9622Facsimile: +886 2 2757 6928

Japan Representative OfficeMarunouchi Trust Tower Main, Level 208-3, Marunouchi 1-chomeChiyoda-ku, TokyoJapan 100-0005Telephone: +81 (0)3 6269 3090Facsimile: +81 (0)3 6269 3091

Vietnam Representative Office7th Floor, Agrex Building58 Vo Van Tan Str. 6th Ward 3rd District, Ho Chi Minh City VietnamTelephone: +84 28 3933 3713 Facsimile: +84 28 3933 3714

India Liaison Office213 Trade CentreBandra Kurla ComplexBandra (E) Mumbai 400051IndiaTelephone: +91 22 6741 9526Facsimile: +91 22 6710 3195

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OurOffices

SUBSIDIARIES (cont’d)

Asia Capital Reinsurance Malaysia Sdn. Bhd.100% Asia Capital Re-owned Unit A-12A-8, Level 12AMenara UOA Bangsar5 Jalan Bangsar Utama 159000 Kuala LumpurMalaysiaTelephone: +603 2299 6800Facsimile: +603 2299 6900www.asiacapitalre.com.my

ACR ReTakaful Holdings Limited100% Asia Capital Re-ownedOffice 708, Level 7AI Fattan Currency House, Tower 1Dubai International Financial CentreP.O. Box 482061DubaiUnited Arab Emirateswww.acrretakaful.com

ACR ReTakaful Berhad100%-owned subsidiary of ACR ReTakaful Holdings Limited Unit A-12A-10, Level 12AMenara UOA Bangsar 5 Jalan Bangsar Utama 159000 Kuala LumpurMalaysiaTelephone: +603 2299 2288Facsimile: +603 2299 2289www.acrretakaful.com

ACR ReTakaful MEA B.S.C. (c)100%-owned subsidiary of ACR ReTakaful Holdings Limited Gajria Tower 8th FloorSeef DistrictP.O. Box 1591ManamaKingdom of BahrainTelephone: +973 1738 8350Facsimile: +973 1738 8351www.acrretakaful.com

Asia Risk-Tech Enterprises Management Consulting (Shanghai) Company Limited100% ACR-owned Room A-06, 18FTaiping Finance Tower488 Middle Yincheng RoadPudong, Shanghai 200120People’s Republic of ChinaTelephone: +86 21 6156 2320 Facsimile: +86 21 6156 1619

ACR Holdings Limited100% ACR-owned Suites 803-804, 8/F, AIA Kowloon Tower, Landmark East100 How Ming StreetKwun Tong, KowloonHong KongTelephone: +852 2189 7662Facsimile: +852 2189 7663

Concord Insurance Company Limited51%-owned subsidiary of ACR Holdings Limited 22/F Car Po Commercial Building37 Pottinger Street, CentralHong KongTelephone: +852 2543 4893 Facsimile: +852 2815 3630

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9


Contents10 Directors’ Statement

13 Statement on Corporate Governance

25 Independent Auditors’ Report

27 StatementofFinancialPosition

28 Consolidated Statement of ProfitorLoss

29 Consolidated Statement of Comprehensive Income

30 Consolidated Statement of Changes in Equity

32 Consolidated Statement of Cash Flows

33 Notes to the Financial Statements

ACR Capital Holdings Pte. Ltd.Year ended 31 December 2016

Statutory Reports

and Financial Statements

10


WearepleasedtosubmitthisannualreporttothemembersoftheCompanytogetherwiththeauditedfinancialstatementsforthefinancialyearended31December2016.

In our opinion:

(a) thefinancialstatementssetoutonpages27to99aredrawnupsoastogiveatrueandfairviewofthefinancialpositionoftheGroupandoftheCompanyasat31December2016andthefinancialperformance,changesinequityandcashflowsoftheGroupfortheyearendedonthatdateinaccordancewiththeprovisionsoftheSingaporeCompaniesAct,Chapter50andSingaporeFinancialReportingStandards;and

(b) atthedateofthisstatement,therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheyfalldue.

TheBoardofDirectorshas,onthedateofthisstatement,authorisedthesefinancialstatementsforissue.

Directors

Thedirectorsinofficeatthedateofthisstatementareasfollows:

Hsieh Fu Hua Andrew Scobie Hawkyard Gan Chee Yen Hans-Peter Thomas Gerhardt Neil Robin Mathison (Appointed on 30 June 2016)LawSongKengRaja Arshad bin Raja Tun Uda RobertJohnKellyThomsonShinjiKasaiChan Wei Beng (Alternate director to Raja Arshad bin Raja Tun Uda)IanMatthewLobley (AlternatedirectortoRobertJohnKellyThomson)ToruKomoguchi (AlternatedirectortoShinjiKasai)

Directors’StatementYear ended 31 December 2016

11


Directors’ interests

AccordingtotheregisterkeptbytheCompanyforthepurposesofSection164oftheCompaniesAct,Chapter50(theAct),particularsofinterestsofdirectorswhoheldofficeattheendofthefinancialyear(includingthoseheldbytheirspousesandinfantchildren)inshares,debentures,warrantsandshareoptionsintheCompanyandinrelatedcorporationsareasfollows:

Holdings in the name of the director, spouse or infant childrenName of director in which At beginning At endinterests are held of the year of the year

The Company(Class A ordinary shares)Hans-PeterThomasGerhardt – 105,921

(Series 1 Class B ordinary shares)HsiehFuHua 3,835 3,835 (Series 2 Class B ordinary shares)HsiehFuHua 933 933

(Class C ordinary shares)HsiehFuHua 4,283 4,283 (Series1warrantstosubscribeforClassAordinaryshares,exercisablefrom 28November2006to28November2016atUS$100pershare)HsiehFuHua 922 922

(Series2warrantinstrumentdated28November2006,eachSeries2warrant maybeexercisedon,andconditionaluponanexit)HsiehFuHua 7,907 7,907

Exceptasdisclosedinthisstatement,nodirectorwhoheldofficeattheendofthefinancialyearhadinterests inshares,debentures,warrantsorshareoptionsoftheCompany,orofrelatedcorporations,eitheratthebeginningofthefinancialyear,ordateofappointmentiflater,orattheendofthefinancialyear.

Exceptasdisclosedinthisstatement,neitherattheendof,noratanytimeduringthefinancialyear,wastheCompanyapartytoanyarrangementwhoseobjectsare,oroneofwhoseobjectsis,toenablethedirectorsoftheCompanytoacquirebenefitsbymeansoftheacquisitionofsharesinordebenturesoftheCompanyoranyotherbodycorporate.


12


Share options

Duringthefinancialyear,therewere:

(i) nooptionsgrantedbytheCompanytoanypersontotakeupunissuedsharesintheCompany;and

(ii) nosharesissuedbyvirtueofanyexerciseofoptiontotakeupunissuedsharesoftheCompany.

Asattheendofthefinancialyear,therewere31,222(2015:36,648)outstandingoptionsthathadvested,butnotexercisedtopurchasesharesintheCompany.Thedetailsoftheshareoptionsaredisclosedinnote21tothefinancialstatements.

Auditors

Theauditors,KPMGLLP,haveexpressedtheirwillingnesstoacceptre-appointment.

On behalf of the Board of Directors

Robert John Kelly ThomsonDirector

Hans-Peter Thomas GerhardtDirector

24March2017


13


The Board’s Conduct of Affairs

The Board of Directors (“Board”) comprises the following 12 directors (including 3 alternate directors):

HsiehFuHua Independentandnon-executivedirectorAndrewScobieHawkyard Non-executivedirectorGanCheeYen Non-executivedirectorHans-PeterThomasGerhardt ExecutivedirectorNeilRobinMathison Independentnon-executivedirector (Appointed on 30 June 2016)LawSongKeng Independentandnon-executivedirectorRajaArshadbinRajaTunUda Non-executivedirectorRobertJohnKellyThomson Non-executivedirectorShinjiKasai Non-executivedirectorChan Wei Beng Alternate director (Alternate director to Raja Arshad bin Raja Tun Uda)IanMatthewLobley Alternatedirector (AlternatedirectortoRobertJohnKellyThomson)ToruKomoguchi Alternatedirector (AlternatedirectortoShinjiKasai)

Thekeyinformationregardingthedirectorsissetoutbelow:

Name of Director Nature of Appointment

Date When First Appointed

Board Committees

Academic and Professional Qualifications

Hsieh Fu Hua Chairman,Independent, Non-executive

11June2014 Chairman,NCChairman,RC

BachelorofBusinessAdministration(Honours) from University of Singapore

Andrew Scobie Hawkyard

Non-executiveDirector

28November2006

Member,NCMember,RC

BA(FirstClassHonours,AppliedMathematics&Finance)fromVictoriaUniversity,NewZealand

Gan Chee Yen Non-executiveDirector

2 February 2011 Member,NCMember,RCMember,FIC

BachelorofAccountancyfromNationalUniversityofSingapore,ProgramforManagement Development from Harvard BusinessSchool,USA

Hans-Peter Thomas Gerhardt

ExecutiveDirector 1 February 2011 Member,RMCMember,FIC

Diploma/MBA in Business and Economics fromUniversityofHannover,Germany

Neil Robin Mathison Independent, Non-executiveDirector

30 June 2016 Chairman,RMCMember,AC

BSc (Hons) from University of Southampton

LawSongKeng Independent, Non-executiveDirector

27June2012 Chairman,ACMember,NCMember,RC

B Sc (First Class Honours in Maths) from UniversityofSingapore;MSc (ActuarialScience)fromNortheasternUniversity,USA;Fellow of Society of Actuaries

Raja Arshad bin Raja Tun Uda


28November2006

Member,ACMember,RCMember,NC

Advanced Management Programme from HarvardBusinessSchool,USA,FellowoftheInstituteofCharteredAccountantsinEngland&Wales

RobertJohnKellyThomson


15May2014 Member,RCMember,NC

BSc Honours (Physiology and Sports Science)fromUniversityofGlasgow,Scotland

Statement on Corporate GovernanceYear ended 31 December 2016

14


Name of Director Nature of Appointment

Date When First Appointed

Board Committees

Academic and Professional Qualifications

ShinjiKasai Non-executiveDirector

26 March 2015 Member,RMC Bachelor of Management Engineering fromTokyoInstituteofTechnology,Japan

Chan Wei Beng(Alternate director to Raja Arshad bin Raja Tun Uda)

Alternate Director 1February2007 Chairman,FIC SouthAustralianMatriculationfromTaylorsCollege,Malaysia,Bachelorof Commerce with Merit majoring in AccountingfromUniversityofNewSouthWales,Australia

IanMatthewLobley(Alternate director to Robert John KellyThomson)

Alternate Director 19August2014 – Bachelor (Honours) in Chemical Engineering from the University of Birmingham,UK

ToruKomoguchi(Alternate director toShinjiKasai)

Alternate Director 23 June 2015 – BachelorofLaw,ChuoUniversity,Japan

Board Balance

TheBoardcomprised3independentdirectors, includingtheChairmanoftheBoard,1executivedirectorwhoisalsotheGroupChiefExecutiveoftheCompanyand5non-executivedirectors.Thebio-dataofeachdirectorcanbefoundontheCompany’swebsite(www.acrcapitalholdings.com).ThecompositionoftheBoardandBoardCommitteesiscurrentlybeingreviewedbytheBoardinconjunctionwiththeNominationCommitteeinordertoalignwiththeDirectivesissuedbytheMonetaryAuthorityofSingapore(“MAS”).

DutiesandResponsibilities

The Board directs and oversees the management of the Company and its subsidiaries (together referred to as the Group) in theconductofitsaffairs,undertakingafiduciaryroletoensurethatcorporateresponsibilityandethicalstandardsaremet. The Board is responsible for:

(i) Settingthelong-termstrategicdirectionandlong-termgoalsoftheGroupandensuringthatadequatecapitalandresourcesareavailabletomeetitsstrategicobjectives;

(ii) ApprovingandmonitoringcapitalandfinancialplanstoensurethattheyareinlinewiththeGroup’sstrategicdirections;theannualbudget;theannualfinancialstatements;andcapitalexpendituresanddivestments;

(iii) Establishingariskstrategyandaframeworkforriskstobeassessedandmanaged;(iv) Monitoringandreviewingmanagementperformance;(v) Vettingcorporateplansandpoliciesaswellasmajordecisions;(vi) SettingvaluesandstandardsfortheGroupandensuringthatobligationstoitsstakeholdersareunderstoodandmet;(vii) Consideringsustainabilityissues(includingenvironmentandsocialfactors)aspartoftheGroup’sstrategy;and(viii) EnsuringcompliancewithlawsandregulationsapplicabletotheGroup.


15


DelegationbytheBoard

ToenabletheBoardtodischargeitsstewardshipandfiduciaryresponsibilitieseffectively,Boardcommitteesareestablishedandempoweredwithspecificresponsibilitiesbasedonthewrittentermsofreference.EachCommitteehasdirectaccesstomanagementandthepowertohireindependentadvisersasitdeemsnecessary.Asatthedateofthisstatement,theBoardcommitteesestablishedbytheBoardareasfollows:

(i) AuditCommittee(“AC”);(ii) RiskManagementCommittee(“RMC”);(iii) FinancialandInvestmentCommittee(“FIC”);(iv) NominationCommittee(“NC”);and(v) RemunerationCommittee(“RC”),

(collectively,the“Committees”andsingularly,the“Committee”).

Thetermsofreference(“TORs”)foreachCommitteestipulatetheresponsibilitiesoftheCommittee,quorumandvotingrequirements.TheTORsarereviewedonaregularbasistoensuretheircontinuedrelevance.AnychangetothetermsofreferenceforanyBoardcommitteerequirestheapprovaloftheBoard.FurtherdetailsofeachCommitteemaybereadinthefollowingpagesofthisstatement.

TheBoardhasinplacefinancialauthorisationandapprovallimitsforoperatingandcapitalexpenditureaswellasacquisitionanddisposalofinvestments.Withintheseguidelines,theBoardapprovestransactionsabovecertainthresholds.TheBoardisalsoguidedbytheprovisionsoftheCompany’sArticlesofAssociationinwhicharestatedshareholders’reservedmattersrequiringapprovalbytheshareholders.

MaterialTransactionsRequiringBoardandShareholders’Approval

FollowingarematerialtransactionsrequiringtheBoardandshareholders’approval:

(i) TheGroup’sstrategicandbusinessplans;(ii) TheGroup’sannualbudget;(iii) Capitalexpenditureandexpenditureexceedingannualbudgetand/orapprovallimits;(iv) Strategicinvestmentsanddivestments;(v) Capital-relatedmattersincludingcapitaladequacyobjectives;andproposalsforcapitalissuanceandredemption;(vi) Dividendpolicy;and(vii) Riskstrategyandriskappetite.

AttendanceofBoardandBoardCommitteeMeetings

Duringthefinancialyear,therewerefourBoardmeetings.Atthesemeetings,theBoardreviewedtheGroup’sfinancialperformance,corporatestrategy,businessplansandsignificantoperationalmatters.

WhenexigenciespreventamemberfromattendingBoardmeetingsinperson,hecanparticipatebytelephoneorvideoconferencing.Boardapprovalsfor lessurgentmattersareobtainedthroughwrittenresolutionsapprovedbycirculation.TheArticlesofAssociationoftheCompanyallowsresolutionsinwritingthataresignedbyaquorumofmemberstobeaseffectualasiftheywerepassedatphysicalmeetings.

DuringBoardandCommitteesmeetings,memberswillbeupdatedonimpendingchangesinmarketconditionsaswellascorporategovernance,capital,tax,accountingandotherregulationsimpactingtheGroup’saffairs.


16


Thetablebelowsetsout thenumberofmeetingsheldandattendedbytheBoardmembersduring thefinancialyear (31December2016)coveringeachBoardandCommitteemeeting:

Name of Directors

Board Meetings

AC Meetings

RMC Meetings

FIC Meetings

NC Meetings

RC Meetings

Attended/ Held

Attended/ Held

Attended/ Held

Attended/ Held

Attended/ Held

Attended/ Held

Hsieh Fu Hua 4/4 – – – 3/3 (3) 2/4 (3)

Neil Robin Mathison (2) 2/4 2/4 2/4 – – –

Raja Arshad bin Raja Tun Uda(Alternate Director: Chan Wei Beng)

4/4 4/4 – 2/2 (1) 3/3 3/4

ShinjiKasai(AlternateDirector:ToruKomoguchi)

4/4 – 4/4 – – –

Gan Chee Yen 3/4 – – 1/2 2/3 3/4

Andrew Scobie Hawkyard 4/4 – – – 3/3 2/4

Hans-Peter Thomas Gerhardt 4/4 4/4 4/4 2/2 3/3 –

LawSongKeng(4) 4/4 – – – 1/3 2/4

RobertJohnKellyThomson(AlternateDirector:IanMatthewLobley)

4/4 – – – 3/3 4/4

(1) ChanWeiBeng,analternateDirectortoRajaArshadbinRajaTunUdaistheChairmanoftheFIC.(2) NeilRobinMathisonjoinedtheBoardon30June2016.(3) HsiehFuHuaistheChairmanofNCandRCwitheffectfrom30June2016.(4) LawSongKengisaMemberofNCandRCwitheffectfrom30June2016.

BoardInductionandTraining

EachBoardmemberannuallyundertakestoundergoreasonabletrainingrequiredbytheBoardsoastomeetthefitnessandproprietyrequirements.

NewboardmembersundergoaseriesofinductionbriefingsbymembersofseniormanagementtofamiliarisehimselfwiththeGroup’soperationsandbusinesses.TheNCisdevelopingamorecomprehensivetrainingprogramtoensureincomingandexistingdirectorsarefamiliarwith(i)theGroup’sbusiness;(ii)theregulatoryenvironment;and(iii)governancepractices.

Board Composition and Guidance

Independence of Judgement

The Company determines the independence of its Directors in accordance with the requirements set out in the MAS’ Insurance (CorporateGovernance)Regulations2013andtheMAS’GuidelinesonCorporateGovernanceforFinancialHoldingCompanies,Banks,DirectInsurers,ReinsurersandCaptiveInsurerswhichareincorporatedinSingapore(“theGuidelines”).AssetoutintheGuidelines,anindependentDirectoroftheCompanyisonewhoisindependentfromthesubstantialshareholdersoftheCompany,andmanagementandbusinessrelationshipswiththeCompany,andhasnotservedformorethannineyearsontheBoard. ThefollowingdirectorsarenotindependentfromanyoftheCompany’ssubstantialshareholdersbuthavebeendeterminedbytheNCtobeindependentofmanagementandbusinessrelationships:

1. MrRobertJohnKellyThomson;2. MrRajaArshadbinRajaTunUda;3. MrGanCheeYen;4. MrAndrewScobieHawkyard;and5. MrShinjiKasai.


17


Annual Review of Directors’ Independence

TheNCconductsareviewanddeterminesannuallytheindependenceoftheindependentdirectorsontheBoard.Inmakingitsdetermination,theNCconsiderswhetheradirector is: (i) independentofmanagementandbusinessrelationships;and (ii)independentbasedonhislengthofservice.Duringthefinancialyear,thethreedirectorsconsideredindependentbytheNCwereHsiehFuHua,NeilRobinMathisonandLawSongKeng.TheindependentdirectorsprovidetheBoardwithobjectivityandbalanceofperspectives.Theyalsoensurethattheperformanceofmanagementisobjectivelymeasuredagainstthekeyperformanceindicatorsestablishedannuallytomeasureandguidemanagement’sperformance.Mr.JohnFrancisShettleJr., whohasservedontheBoardforacontinuousperiodof9yearsasatNovember2015,willnolongerbeconsideredanindependentdirectorbyvirtueoftheInsurance(CorporateGovernance)Regulations2013,andresignedfromtheBoardon30June2016.

BoardCompositionandSize

TheNCreviewsthesizeandcompositionoftheBoardannually,aswellastheskillsandcorecompetenciesofitsmembers,takingintoaccounttherequirementsofthebusinessoftheGroup,andtheresourcinglevelrequiredbytheCommittees.

ThecompositionoftheBoardiscurrentlyundergoingareviewinlinewiththeMASDirectives.NotwithstandingthereviewandtheDirectives,takingintoaccountthecurrentnatureandscopeoftheGroup’sbusinessandthenumberofCommittees,theBoardconsidersthesizeoftheBoardasappropriate.TheBoardmemberscollectivelybringrangeanddepthofexperienceandindustryexpertisetothetable,representingdiversityofnationality,skillsandknowledgewithoutinterferingwithefficientdecision-making.TheBoardbelievesthatthecurrentcompositionandsizeprovidessufficientdiversitywithoutinterferingwithefficientdecision-making.

Chairman and Group Chief Executive

AcleardivisionofresponsibilitiesbetweentheChairmanandtheGroupChiefExecutiveallowstheChairmantoformallyassumetheroleofanindependentleaderwhochairsBoardmeetingsandleadsinitsoversightofmanagement.TheChairmanmanagestheBoard’sbusiness,includingitsworkinthevariousCommittees,andensuresthatitsagendafurthersthestrategicprioritiesoftheGroup.HealsoprovidesguidancetoandencouragesconstructiverelationsamongtheBoard,theGroupChiefExecutiveandseniormanagement.

OnthebasisthatthepresentChairmanisindependent,theBoarddoesnotseeitnecessaryatthispointoftimetoappointaleadIndependentDirector.TheChairmanprovidesaclearanddistinctleadershiptotheBoardontheGroup’sstrategicgrowth.

TheGroupChiefExecutiveoverseestheexecutionoftheGroup’sstrategyandisresponsibleformanagingitsday-to-dayoperations.

Board Membership

New Directors

Aspartoftheformalprocessoftheappointmentofnewdirector(s),theNCconductsthefollowingassessmentofeachcandidate(tofillavacancyortoenhancetheskillsetsandeffectivenessoftheBoard):

(i) reviewacandidate’squalifications,attributes,capabilities,skills,age,pastexperienceandsuchotherrelevantfactorsasmaybedeterminedbytheNCtodeterminewhetherthecandidateisafitandproperpersonfortheofficeinaccordancewiththeCompany’sFitandProperPolicy;and

(ii) ascertainwhetherthecandidateisindependentfromanysubstantialshareholderoftheCompanyand/orfrommanagementandbusinessrelationshipswiththeCompany.

Uponappointment,anewdirectorreceiveshisletterofappointmentdetailinghistermsofappointment,andgainsanunderstandingoftheCompany’smanagement,businessandgovernancepracticesthroughaseriesofinductionbriefingsbymembersofseniormanagementoftheGroup.


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RotationandRe-electionofDirectors

TheArticlesofAssociationoftheCompanydoesnotprovideforrotationandre-appointmentofdirectors.Instead,allBoardappointmentsarenotwithinthepurviewoftheBoardtoapproveandaresubjecttotheprovisionsoftheArticlesofAssociationoftheCompanyincludingshareholders’approval(asthecasemaybe).TheDirectorsarealsosubjectedtothetermofofficestipulatedintheMASDirectives,andthecontinuationoftheirofficewillrequiretheapprovalfromtheMAS.AspartofthereviewoftheBoardcompositionpursuanttotheMASDirectives,therotationandre-electionoftheDirectorsmaybeincludedintheArticlesofAssociationoftheCompanywhenitsamendmentsareavailabletobetabledforshareholders’approval.

Directors’ Time Commitment

TheBoardhasnotmadeadeterminationofthemaximumnumberoflistedcompanyboardrepresentationsadirectormayhold.TheNChoweverreviewseachBoardmember’sadditionaldirectorshipsinothercorporationstoensuresufficienttimecommitmentofeachdirector.TheNCisalsoprovidedwithalistingofeachBoardmember’sotherdirectorshipforannualreview.

Board Guidance

TheBoardiskeptwell-informedoftheCompany’sbusinessesandaffairs,andupdatedontheindustrytrendsanddevelopmentsinwhichthebusinessesoperate.This istoenabletheBoardtoremaineffectiveandrobustandformembersoftheBoardtoengageinopenandconstructivedebateandchallengemanagementonitsassumptionsandproposalsaspartofgoodcorporategovernance.ToensurethatNon-executiveDirectorsarewellsupportedbyaccurate,completeandtimelyinformation, Non-executiveDirectorshaveunrestrictedaccesstomanagement,sufficientresourcestodischargetheiroversightfunctioneffectively,andreceiveperiodicinformationpapersandboardbriefingsonlatestmarketdevelopmentsandtrends,andkeybusinessinitiatives.

Board Performance

TheNCmakesanassessmentatleastonceayearonwhetherthefullBoardandthevariousCommitteesareperformingeffectively,anditidentifiesstepsforimprovement.TheevaluationcoversarangeofissuesincludingBoardcomposition,thetimelinessandqualityofinformationprovidedtotheBoardanditsprocess,accountabilityandstandardsofconduct.TheBoardbelievesthathavingarobustevaluationprocessiscriticaltoitsperformance.

Annually,membersoftheBoardarerequiredtoassesstheeffectivenessoftheBoardandBoardCommitteesviaanonlineassessmentportal.TheNCevaluatesthetabulatedresultsoftheassessmentbythemembersoftheBoardandmakestheirrecommendationtotheBoardasmaybeappropriate.TheBoardattherecommendationoftheNCconsidersthecurrentassessmentmethodusefulinevaluatingitsowneffectiveness.

Board Committees

AuditCommittee(“AC”)

The AC comprises:

(i) LawSongKeng(Chairman)(ii) Raja Arshad bin Raja Tun Uda(iii) Neil Robin Mathison

TheAChasrelevantandextensiveaccountingandfinancialmanagementknowledgeandexperience.TheGroupChiefFinancialOfficerandtheexternalauditorsupdatetheCommitteeofanychangestothefinancialreportingstandardsandaccountingissueswhicharerelevanttotheGroupandwhichhaveadirectimpactonthefinancialstatements.


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TheAC’sresponsibilitiesinclude,inter alia:

(i) ReviewingannuallytheadequacyandeffectivenessoftheCompany’sfinancial,operational,complianceandinformationtechnologycontrols,aswellasaccountingpoliciesandsystems,whicharecollectivelyknownasinternalcontrols;

(ii) Monitoringandreviewingtheeffectivenessofinternalandexternalauditprocesses;(iii) MonitoringthefinancialreportingprocessandensuringtheintegrityoftheGroup’sfinancialstatements;(iv) ReviewingtheeffectivecommunicationbetweentheBoard,management,externalauditorsandinternalauditors;(v) Reviewinginternalandexternalauditors’plans,theeffectivenessoftheiraudits,andtheindependenceoftheexternalauditors;(vi) Recommendingtheappointment,re-appointmentanddismissaloftheexternalauditorsincludingtheirremunerationand

termsofengagementtotheBoard;and(vii) Approvingtheappointment,redeploymentorterminationoftheHeadofGroupInternalAuditandseniorofficersofthe

internalauditfunction.

TheGroupChiefFinancialOfficerisrequestedbytheACtobepresentatallACmeetings.

TheACalsohasthediscretiontoinviteanydirectorandexecutivetoattenditsmeetings.SeparatesessionswiththeexternalauditorsandtheHeadofGroupInternalAuditareheldwithoutthepresenceofmanagementatleastonceineachfinancialyear.Inaddition,theACChairmanregularlydiscussestheinternalauditplan,currentwork,keyfindingsandothersignificantmatterswiththeHeadofGroupInternalAudit.

Duringthefinancialyearunderreview,theACissatisfiedthattheinternalauditfunctionisingoodstandingwithintheCompanyandisadequatelyresourcedtofulfilitsmandate.TheACalsoreviewedandevaluatedtheeffectiveness,independenceandobjectivityoftheexternalauditors,takingintoconsiderationthenatureandextentofthenon-auditservicesthattheexternalauditorsprovidetotheCompany.

RiskManagementCommittee(“RMC”)

The RMC comprises:

(i) Neil Robin Mathison (Chairman) (ii) Hans-Peter Thomas Gerhardt (iii) ShinjiKasai

TheRMC’sresponsibilitiesinclude,inter alia:

(i) Maintaining a sound system of risk management and internal controls to safeguard shareholders’ interests and the Group’sassets;

(ii) Overseeingtheestablishmentandtheoperationofanindependentriskmanagementsystemforidentifying,measuring,monitoring,controlling, reportingrisksonanenterprise-widebasisandensuringtherearesufficientresourcesto monitorrisks;

(iii) RecommendingtheriskappetiteframeworktotheBoardforapproval;(iv) ReviewingannuallytheadequacyandeffectivenessoftheriskmanagementandinternalcontrolsoftheGroup,including

financial,operational,complianceandinformationtechnologycontrols;(v) Establishingadequateriskmanagementpracticesformaterialrisks,suchascredit,market,underwriting,liquidity,

countryandtransferrisk,interestraterisk,legal,compliance,fraud,reputational,regulatoryandoperationalrisks,onaregularbasis;

(vi) Reviewingthecurrentriskprofile,risktolerancelevelandriskstrategyoftheGroup;(vii) Designinginvestmentriskparameters,anddelegatestheinvestmentexercisetotheFIC;(viii) Reviewingandrecommendingforapprovaltheinvestmentpolicy,strategicassetallocation,tacticalassetallocationand

investmentrisklimitsoftheGroup,inconsultationwiththeFIC;and(ix) Ensuringthatithasadequateresourcesandisstaffedbyanappropriatenumberofexperiencedandqualifiedemployees

whoaresufficientlyindependenttoperformtheirdutiesobjectivelyandmonitorriskinvariousriskcategoriesandthatithasappropriatereportinglinesthatareindependentofbusinesslines.


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Duringthefinancialyearunderreview,theRMCreviewedtheabovetopicswithmanagement,withaviewtoprotectingtheprofitsofitssubsidiarycompany,AsiaCapitalReinsuranceGroupPte.Ltd.(“ACRG”).Inaddition,theRMCalsoreviewedtheriskappetitestatement,retrocessionanalysis,arrangementsandstrategy,renewalstrategyandlargeclaimsdevelopment.

Finance&InvestmentCommittee(“FIC”)

The FIC comprises:

(i) Chan Wei Beng (Chairman) (ii) Gan Chee Yen (iii) Hans-Peter Thomas Gerhardt

TheFIC’sresponsibilitiesinclude,inter alia:

(i) Exercisingoversightofthepoliciesandactivitiesrelatedtocapitalstructure,financingarrangementsandinvestmentsoftheGroup;

(ii) OverseeingtheselectionandremunerationoftheInvestmentManager;(iii) AdvisingtheBoardoninvestmentguidelinesandpolicies;and(iv) AdvisingtheBoardonspecificinvestmenttransactions.

Duringthefinancialyearunderreview,theFICwasupdatedontheinvestmentoutlook,strategy,budgetandtheGroup’sinvestmentportfolio.

NominationCommittee(“NC”)

The NC comprises:

(i) Hsieh Fu Hua (Chairman) (ii) Gan Chee Yen(iii) RobertJohnKellyThomson(iv) Raja Arshad bin Raja Tun Uda (v) Andrew Scobie Hawkyard (vi) LawSongKeng

TheNC’sresponsibilitiesinclude,inter alia:

(i) ReviewingandrecommendingBoardappointmentsfortheapprovalbytheBoard,takingintoaccounttheexpertise,skillsandknowledgeofferedbythecandidateandtheneedsoftheBoard;

(ii) RecommendingthemembershipofvariousCommitteesandtheappointmentsofkeyseniorpositions;(iii) ReviewingtheindependenceoftheDirectorsinlinewithMASdirectivesandregulations;(iv) ReviewingtrainingandprofessionaldevelopmentprogramsfortheBoard;(v) AssessingtheeffectivenessofBoardandCommitteesannually;and(vi) SuccessionplanningofDirectorsandkeyseniorpositions.

TheNCexaminedtheskillsetsofexistingBoardmembersandreviewedtheirsuitabilitytocontributetospecificCommittees.Inaddition,theNChasalsoactivelyreviewedanddiscussedcertainrequisitechangestothecompositionoftheBoardinlinewiththedirectivesandregulationsoftheMAS,forrecommendationtotheBoard.


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TheNCistaskedwithensuringthatDirectorshavegivensufficienttimeandattentiontotheaffairsoftheCompanyandtodecideifadirectorhasbeenadequatelycarryingout,andisabletocontinuecarryingout,thedutiesofaDirectoroftheCompany. Indoingso,theNCwillalsoconsidertheotherdirectorshipsheldbytheDirectorsandtheirprincipalcommitments.TheNChasdeterminedthatalltheDirectorshavedevotedasatisfactoryamountoftimeandattentiontotheCompany.

RemunerationCommittee(“RC”)

The RC comprises:

(i) Hsieh Fu Hua (Chairman) (ii) Gan Chee Yen(iii) RobertJohnKellyThomson(iv) Raja Arshad bin Raja Tun Uda (v) Andrew Scobie Hawkyard (vi) LawSongKeng

TheRC’sresponsibilitiesinclude,inter alia:

(i) OverseeingtheprinciplesandframeworkofcompensationfortheBoardandkeyseniorpositionstoensuretheiralignmentwithprudentrisk-takingtobuildasustainablebusinessinthelongterm;

(ii) Ensuringthattheremunerationpolicyisconsistentwithemploymentlawsandregulationsandremainsrelevant;(iii) Approvingemployeeincentiveschemesandreviewingtheireffectivenessinemployeeretentionandthecreationof

long-termvaluefortheCompany;and(iv) Overseeing management development and succession planning to ensure that the Company strengthens its core

competencies,benchstrengthandleadershippipeline.

Remuneration matters

TheRCreviewsmattersconcerningremunerationoftheBoard,theGroupChiefExecutiveandseniormanagement.TheRCapprovestheframeworkofremunerationfortheentireorganisationincludingthestructuringofthelong-termincentiveplans.TheRCalsoapprovestheannualsalaryincrementpoolandtotalincentivepoolfordistributiontostaffofallgrades.TheRC’srecommendationsaresubmittedfortheBoard’sdiscussionor(asthecasemaybe)approval.NomemberoftheRCisinvolvedindeliberationsinrespectofanyremuneration,compensation,optionsoranyformofbenefitstobegrantedtohim.

TheRCChairman,togetherwiththeNC,reviewsandrecommendstotheBoardthespecificremunerationpackagesforExecutiveDirectorsandthekeyseniorpositionsuponrecruitment.Subsequently,annualincrements,variablebonuses,employees’shareoptionplangrantsandotherincentiveawards,willbereviewedandapprovedbytheRCor(asthecasemaybe)presentedfortheBoard’sapproval.

TheRChasaccesstoappropriateadvicefromtheGroupChiefExecutive,whoattendsallRCmeetings.TheRCmayseekexpertadviceinsideand/oroutsideoftheCompanyonremunerationofDirectorsandstaff.

Afterdueconsideration,theCompanyhasdecidednotto(1)disclosepreciseremunerationofthedirectorsand(2)discloseinformationonthenamesandremunerationof itstopkeymanagementexecutives includingtheGroupChiefExecutive (Hans-PeterThomasGerhardt,whoisalsoanExecutiveDirector)inviewofthedisparitiesinremunerationintheindustryandthecompetitivepressuresthatarelikelytoresultfromsuchdisclosuresinparticularinahighlycompetitivemarketfortalent.Accordingly,theCompanywilldisclosetheremunerationofdirectorsinbandsofUS$250,000.Non-executiveDirectorsnotlistedinthetablebelowdonotreceiveanyremunerationfromtheCompany.


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Breakdown of Directors’ Remuneration for the financial year ended 31 December 2016

Name of DirectorSalary

%

Directors’ Fees

%Bonus

%

Other Fees, Allowances

and Benefits*

%Total

%LawSongKeng 0 100 0 0 100

JohnFrancisShettleJr (1) 0 100 0 0 100

Hans-Peter Thomas Gerhardt 10 0 0 90 100

Hsieh Fu Hua 0 100 0 0 100

Raja Arshad bin Raja Tun Uda 0 100 0 0 100

Neil Robin Mathison 0 100 0 0 100

(1) JohnFrancisShettleJrresignedfromtheBoardon30June2016.* Otherfees,allowances,meetingallowancesandbenefitsincludingadviserfees,sharebasedpaymentandout-of-pocketallowances.

Thefollowinginformationrelatestodirectors’remuneration:

Number of Directors in RemunerationRemuneration Bands Bands

AboveUS$499,999 1US$250,000toUS$499,999 2BelowUS$250,000 3Total 6

NoneoftheDirectorsortheGroupChiefExecutivehaveimmediatefamilymemberswhowereemployeesoftheCompanyandwhoseremunerationexceededS$50,000inrespectofthefinancialyearended31December2016.

Access to Information

BoardmeetingagendaaresetinadvancewithitemsproposedbytheGroupChiefExecutiveandseniormanagement.Documentsrelatedtotheagendaaredistributedinadvance.Theyincludefinancialmanagementreports,annualbudgetsandperformanceagainstbudget,mattersrequiringtheBoard’sdecisionandupdatesonkeyoutstandingissues.

Inpresentingtheannualfinancialstatementstoshareholders, it istheaimoftheBoardtoprovidetheshareholderswithabalancedandcomprehensiveassessmentoftheGroup’spositionandprospects.

TheBoardalsohasseparateandindependentaccesstomanagement.ShouldtheDirectors,whetherasagrouporindividually,requireindependentprofessionaladvicetocarryouttheirduties,theCompanywillengageexternalprofessionaladvisorstorendertheadviceattheexpenseoftheCompany.

Accountability and Audit

ManagementprovidesBoardmemberswithdetailedreportsontheGroup’sfinancialperformanceandrelatedmatterspriortoeachquarterlyBoardmeeting.TheBoardensurestimelyandfulldisclosureofmaterialcorporatedevelopmentstoitsshareholdersforitsbalancedandunderstandableassessmentoftheGroup’sperformanceandposition.


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Risk Management and Internal Controls

Risk management

Riskmanagementhasbeendisclosedinnote5tothefinancialstatements.

Internal controls

TheBoardisassistedbytheAC,RMCandFICtoensurethatsoundinternalcontrols, includingfinancial,operationalandcomplianceandriskmanagementpoliciesandsystemsestablishedbymanagementaremaintained.Indischargingitsobligations,theBoardreliesonthefindingsoftheinternalandexternalauditors.

TheBoardhasreceivedassurancefromtheGroupChiefExecutiveandGroupChiefFinancialOfficerontheeffectivenessoftheGroup’sriskmanagementandinternalcontrolsystems,andthatthefinancialrecordshavebeenproperlymaintainedandthefinancialstatementsgiveatrueandfairviewoftheGroup’soperationsandfinances.

BasedontheinternalcontrolsestablishedandmaintainedbytheGroup,workperformedbytheinternalandexternalauditors,andreviewsperformedbymanagementandvariousBoardCommittees,theBoard,withtheconcurrenceoftheAuditandRiskManagementCommittees,isoftheopinionthatthesystemofinternalcontrols, includingfinancial,operational,complianceandinformationtechnologycontrolsandriskmanagementsystems,wereadequateandeffectiveasat31December2016, toaddresstheriskswhichtheGroupconsidersrelevantandmaterialtoitsoperations.

Thesystemofinternalcontrolsandriskmanagementprovidesreasonable,butnotabsolute,assurancethattheGroupwillnotbeadverselyaffectedbyanyeventthatcouldbereasonablyforeseenasitstrivestoachieveitsbusinessobjectives.However,theBoardalsonotesthatnosystemofinternalcontrolscanprovideabsoluteassuranceinthisregard,orabsoluteassuranceagainsttheoccurrenceofmaterialerrors,poorjudgmentindecision-making,humanerror,losses,fraudorotherirregularities.

Code of Conduct

TheCompany’sCodeofConductsetsouttheprinciplesandstandardsofbehaviorthatareexpectedofallemployeeswhendealingwithcustomers,competitors,authoritiesandcolleagues.TheprinciplescoveredintheCodeofConductincludeprofessionalintegrity,confidentialityandconflictofinterest.

Whistle-blowing Policy

TheCompanyhasinstitutedawhistle-blowingpolicy.Itprovidesguidelinesforemployeestoreportirregularities,impropriety,breachesoflawsandregulations,informationontheinvestigationprocedure,criteriafordisciplinaryactionincludingsuspensionforoffendingpartiesandinformationontheappealsprocess.TheCompliancedepartmentisresponsibleformanagingthisprocessandemployeesmay,iftheysowish,maketheirreportsdirectlytotheChairmanoftheACinthefirstinstance.

MaterialRelatedPartyTransactions

Allrelatedpartytransactionsareconductedonreasonablecommercialtermsandintheordinarycourseofbusiness.Thetermsandconditionsofsuchtransactionsarecarriedoutonanarm’slengthbasis.Directorswithconflictsofinterestaretorecusethemselvesfromtheapprovalprocessofgrantingandmanagingrelatedpartytransactions.DetailsoftheCompany’smaterialrelatedpartytransactionshavebeendisclosedinnote29tothefinancialstatements.

There were no material contracts entered into by the Company or any of its subsidiaries involving the interests of the Group ChiefExecutiveoranydirector.

Internal Audit

TheCompanyhasitsownin-houseindependentinternalauditorstocarryoutauditactivitiesandreportdirectlytotheAC. Theinternalauditfunctionisexpectedtomeetthestandardsetbyrecognisedprofessionalbodies.TheACensuresthattheinternalauditfunctionisadequatelyresourced,whichisassessedannually,andhasappropriatestandingwithintheGroup.


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Communication with Shareholders

TheCompanyensuresthattimelyandadequatedisclosureofinformationonmattersofmaterialimpactontheCompanyismadeavailabletoitsshareholders.ThisisdonethroughtheCompany’sannualreportsaswellasvariousannouncementsandpressreleases.

Shareholders’ Participation

TheCompanyviewstheannualgeneralmeetingasanopportuneforumforinvestorstomeettheBoard,ChairpersonsoftheAC,RMC,FIC,NC,RCandcertainmembersofseniormanagement.UndertheArticlesofAssociationoftheCompany,ClassAandBordinaryshareholdersareentitledtoattendandvoteattheannualgeneralmeetingsbypersonorproxy.Ashareholdermayappointaproxy,whoneednotbeashareholderoftheCompany.TheCompany’sexternalauditorsisalsoavailabletoanswershareholders’queries.

Resolutionsrequiringshareholders’approvalaretabledseparatelyforadoptionattheannualgeneralmeetingunlesstheyarecloselyrelatedandaremoreappropriatetobetabledtogether.

Atannualgeneralmeetings,theChairmanplaysapivotalroleinfosteringconstructivedialoguebetweenshareholdersandtheBoardmembers.


25


Report on the audit of the financial statements

Opinion

WehaveauditedthefinancialstatementsofACRCapitalHoldingsPte.Ltd.(“theCompany”)anditssubsidiaries(“theGroup”),whichcomprisetheconsolidatedstatementoffinancialpositionoftheGroupandthestatementoffinancialpositionoftheCompanyasat31December2016,theconsolidatedstatementofprofitor loss,consolidatedstatementofcomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsoftheGroupfortheyearthenended,andnotestothefinancialstatements,includingasummaryofsignificantaccountingpolicies,assetoutonpages27to99.

Inouropinion,theaccompanyingconsolidatedfinancialstatementsoftheGroupandthestatementoffinancialpositionoftheCompanyareproperlydrawnupinaccordancewiththeprovisionsoftheCompaniesAct,Chapter50(“theAct”)andFinancialReportingStandardsinSingapore(“FRSs”)soastogiveatrueandfairviewoftheconsolidatedfinancialpositionoftheGroupandthefinancialpositionoftheCompanyasat31December2016andoftheconsolidatedfinancialperformance,consolidatedchangesinequityandconsolidatedcashflowsoftheGroupfortheyearendedonthatdate.

Basis for opinion

WeconductedourauditinaccordancewithSingaporeStandardsonAuditing(“SSAs”).Ourresponsibilitiesunderthosestandardsare further described in the ‘Auditors’ responsibilities for the audit of the financial statements’ sectionofourreport.WeareindependentoftheGroupinaccordancewiththeAccountingandCorporateRegulatoryAuthorityCode of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant toourauditofthefinancialstatementsinSingapore,andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeserequirementsandtheACRACode.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

Other information

Managementisresponsiblefortheotherinformation.Theotherinformationobtainedatthedateofthisauditors’reportisDirectors’statementandStatementoncorporategovernance.

Ouropiniononthefinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanyformofassuranceconclusionthereon.

Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialstatementsorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.

If,basedontheworkwehaveperformedontheotherinformationobtainedpriortothedateofthisauditors’report,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

Responsibilities of management and directors for the financial statements

ManagementisresponsibleforthepreparationoffinancialstatementsthatgiveatrueandfairviewinaccordancewiththeprovisionsoftheActandFRSs,andfordevisingandmaintainingasystemofinternalaccountingcontrolssufficienttoprovideareasonableassurancethatassetsaresafeguardedagainstlossfromunauthoriseduseordisposition;andtransactionsareproperlyauthorisedandthattheyarerecordedasnecessarytopermitthepreparationoftrueandfairfinancialstatementsandtomaintainaccountabilityofassets.

Inpreparingthefinancialstatements,managementisresponsibleforassessingtheGroup’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessmanagementeitherintendstoliquidatetheGrouportoceaseoperations,orhasnorealisticalternativebuttodoso.

Thedirectors’responsibilitiesincludeoverseeingtheGroup’sfinancialreportingprocess.

Independent Auditors’ ReportMembers of the CompanyACRCapitalHoldingsPte.Ltd.

26


Auditors’ responsibilities for the audit of the financial statements

Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditors’reportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,but isnotaguaranteethatanauditconductedinaccordancewithSSAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements. AspartofanauditinaccordancewithSSAs,weexerciseprofessionaljudgementandmaintainprofessionalscepticismthroughouttheaudit.Wealso:

• Identifyandassesstherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrols.

• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate inthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheGroup’sinternalcontrols.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebymanagement.

• Concludeontheappropriatenessofmanagement’suseofthegoingconcernbasisofaccountingand,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheGroup’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditors’reporttotherelateddisclosuresinthefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditors’report.However,futureeventsorconditionsmaycausetheGrouptoceasetocontinueasagoingconcern.

• Evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthedisclosures,andwhetherthefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

• ObtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithintheGrouptoexpressanopinionontheconsolidatedfinancialstatements.Weareresponsibleforthedirection,supervisionandperformanceofthegroupaudit.Weremainsolelyresponsibleforourauditopinion.

Wecommunicatewiththedirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolsthatweidentifyduringouraudit.

Report on other legal and regulatory requirements

Inouropinion,theaccountingandotherrecordsrequiredbytheActtobekeptbytheCompanyandbythosesubsidiarycorporationsincorporatedinSingaporeofwhichwearetheauditorshavebeenproperlykeptinaccordancewiththeprovisionsoftheAct.

KPMG LLPPublic Accountants andChartered Accountants

Singapore24March2017

Independent Auditors’ ReportMembers of the CompanyACRCapitalHoldingsPte.Ltd.

27


Group Company Note 2016 2015 2016 2015 US$’000 US$’000 US$’000 US$’000

AssetsPropertyandequipment 6 1,702 2,198 1,400 2,002Intangibleassets 7 2,417 4,022 77 1,749Investmentsinsubsidiaries 8 – – 765,450 765,450Investmentsinassociates 9 49,229 56,003 – 52,937Investments 10 1,076,204 1,025,323 41,488 36,448Deferredacquisitioncosts 11 98,406 114,785 – –Cededshareofinsurancecontractprovisions 12 616,190 628,155 – –Deferredtaxassets 24 7,726 8,768 – –Insurancereceivables 13 323,191 410,441 – –Loantoassociate 14 5,873 5,873 5,873 5,873Loantosubsidiary 15 – – 17,000 17,000Otherreceivables 16 5,012 16,637 6,071 8,248Taxrecoverable 78 – – –Cashandcashequivalents 17 70,202 91,393 4,972 5,646Assetsheldforsale 18 – – 48,197 –Total assets 2,256,230 2,363,598 890,528 895,353

EquitySharecapital 19 816,425 803,284 816,425 803,284Reserves 20 (12,367) 2,701 (406) 19Accumulated(losses)/profits (31,734) (14,602) 57,820 84,986Total equity attributable to equity holders of the Company 772,324 791,383 873,839 888,289Non-controlling interests 8 16,507 15,159 – –Total equity 788,831 806,542 873,839 888,289

LiabilitiesInsurancecontractprovisions 12 1,284,887 1,316,334 – –Cededshareofdeferredacquisitioncosts 11 45,858 58,555 – –Financialliabilities 10 11,580 1,972 – –Insurancepayables 22 98,815 165,251 – –Otherpayablesandaccruals 23 26,068 13,143 16,554 7,064Provisionfortaxation 191 1,801 135 –Total liabilities 1,467,399 1,557,056 16,689 7,064Total equity and liabilities 2,256,230 2,363,598 890,528 895,353

Statements of Financial PositionAs at 31 December 2016

Theaccompanyingnotesformanintegralpartofthesefinancialstatements.

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Consolidated Statement of Profit or LossYear ended 31 December 2016

Period from Year ended 1/4/2015 to Note 31/12/2016 31/12/2015 US$’000 US$’000

GrossWrittenpremiums 12 591,387 281,221Changeinprovisionforunexpiredrisks 62,383 314,542Earnedpremiums 12 653,770 595,763Claimsincurred 12 (457,722) (412,484)Amortisationofdeferredacquisitioncosts 11 (186,455) (173,602)Grosstechnicalunderwritingresults 9,593 9,677

CededWrittenpremiums 12 (293,021) (157,332)Changeinprovisionforunexpiredrisks (39,542) (143,071)Earnedpremiums 12 (332,563) (300,403)Claimsincurred 12 225,144 199,581Amortisationofdeferredacquisitioncosts 11 86,133 82,664 (21,286) (18,158)

NetWrittenpremiums 12 298,366 123,889Changeinprovisionforunexpiredrisks 22,841 171,471Earnedpremiums 12 321,207 295,360Claimsincurred 12 (232,578) (212,903)Amortisationofdeferredacquisitioncosts 11 (100,322) (90,938)Nettechnicalunderwritingresults (11,693) (8,481)

Netoperatingexpenses 26 (39,170) (30,121)Netinvestmentincomefromreinsurancebusiness 25 14,867 10,051Loss from reinsurance business (35,996) (28,551)

Netinvestmentincomefromcapitalfundandnon-reinsurancebusiness 25 44,748 23,925Managementfeeincomefromassociates 685 351Otheroperatingexpenses 26 (26,754) (10,874)Impairmentlossoninvestmentinassociate 9 – (21,908)Shareofprofitofassociates,netoftax 3,198 (382)Loss before tax (14,119) (37,439)Taxexpense 27 (1,915) (60)Loss for the year/period 26 (16,034) (37,499)

Loss attributable to:EquityholdersoftheCompany (17,132) (38,203)Non-controllinginterests 1,098 704Loss for the year/period (16,034) (37,499)


29


Consolidated Statement of Comprehensive IncomeYear ended 31 December 2016


Loss for the year/period (16,034) (37,499)

Other comprehensive incomeItemsthatareormaybereclassifiedsubsequentlytoprofitorlossForeigncurrencytranslationdifferencesofforeignoperations (48) –Netchangeinfairvalueofavailable-for-salefinancialassets (820) (5,061)Netchangeinfairvalueofavailable-for-salefinancialassetsreclassified toprofitorloss 25 (2,208) –Shareofassociates’reservemovements (9,972) (1,909)Taxonothercomprehensiveincome 27 (17) 772Other comprehensive income for the year/period, net of tax (13,065) (6,198)Total comprehensive income for the year/period (29,099) (43,697)

Total comprehensive income attributable to:EquityholdersoftheCompany (30,447) (44,318)Non-controllinginterests 1,348 621Total comprehensive income for the year/period (29,099) (43,697)


30


Consolidated Statement of Changes in EquityYear ended 31 December 2016

Attributable to equity holders of the Company Attributable Foreign to equity currency Share Reserve Accumulated holders Non- Share Warrants translation Fair value Revaluation option for own profits/ of the controlling Total capital reserve reserve reserve reserve reserve shares (losses) Company interests equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 At1April2015 803,284 * 490 6,772 207 1,097 (950) 33,601 844,501 14,538 859,039

Total comprehensive income for the periodLossfortheperiod – – – – – – – (38,203) (38,203) 704 (37,499)

Other comprehensive incomeForeigncurrencytranslationdifferencesofforeignoperations – – – (5) – – – – (5) 5 –Netchangeinfairvalueofavailable-for-salefinancialassets – – – (4,973) – – – – (4,973) (88) (5,061)Shareofassociates’reservemovements – – (1,705) (190) (14) – – – (1,909) – (1,909)Taxonothercomprehensiveincome – – – 772 – – – – 772 – 772Totalothercomprehensiveincome,netoftax – – (1,705) (4,396) (14) – – – (6,115) (83) (6,198)Totalcomprehensiveincomefortheperiod – – (1,705) (4,396) (14) – – (38,203) (44,318) 621 (43,697)

Transactions with owners, recognised directly in equityContributions by and distributions to ownersDividendspaid – – – – – – – (10,000) (10,000) – (10,000)Valueofemployeeservicesreceivedforissueofshareoptions – – – – – 1,200 – – 1,200 – 1,200Total transactions with owners – – – – – 1,200 – (10,000) (8,800) – (8,800)

At31December2015 803,284 * (1,215) 2,376 193 2,297 (950) (14,602) 791,383 15,159 806,542

At1January2016 803,284 * (1,215) 2,376 193 2,297 (950) (14,602) 791,383 15,159 806,542

Total comprehensive income for the yearLossfortheyear – – – – – – – (17,132) (17,132) 1,098 (16,034)

Other comprehensive incomeForeigncurrencytranslationdifferencesofforeignoperations – – (127) 87 – – – – (40) (8) (48)Netchangeinfairvalueofavailable-for-salefinancialassets – – – (1,071) – – – – (1,071) 251 (820)Netchangeinfairvalueofavailable-for-salefinancialassetsreclassified toprofitorloss – – – (2,225) – – – – (2,225) 17 (2,208)Shareofassociates’reservemovements – – (9,898) (77) 3 – – – (9,972) – (9,972)Taxonothercomprehensiveincome – – – (7) – – – – (7) (10) (17)Totalothercomprehensiveincome,netoftax – – (10,025) (3,293) 3 – – – (13,315) 250 (13,065)Totalcomprehensiveincomefortheyear – – (10,025) (3,293) 3 – – (17,132) (30,447) 1,348 (29,099)

Transactions with owners, recognised directly in equityContributions by and distributions to ownersIssueofordinaryshares 12,711 – – – – – – – 12,711 – 12,711Valueofemployeeservicesreceivedforissueofshareoptions – – – – – (1,472) – – (1,472) – (1,472)Shareoptionsexercised 430 – – – – – – – 430 – 430Ownsharesacquired – – – – – – (281) – (281) – (281)Total transactions with owners 13,141 – – – – (1,472) (281) – 11,388 – 11,388

At31December2016 816,425 * (11,240) (917) 196 825 (1,231) (31,734) 772,324 16,507 788,831

* Amount is less than US$1,000.


31


Attributable to equity holders of the Company Attributable Foreign to equity currency Share Reserve Accumulated holders Non- Share Warrants translation Fair value Revaluation option for own profits/ of the controlling Total capital reserve reserve reserve reserve reserve shares (losses) Company interests equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 At1April2015 803,284 * 490 6,772 207 1,097 (950) 33,601 844,501 14,538 859,039

Total comprehensive income for the periodLossfortheperiod – – – – – – – (38,203) (38,203) 704 (37,499)

Other comprehensive incomeForeigncurrencytranslationdifferencesofforeignoperations – – – (5) – – – – (5) 5 –Netchangeinfairvalueofavailable-for-salefinancialassets – – – (4,973) – – – – (4,973) (88) (5,061)Shareofassociates’reservemovements – – (1,705) (190) (14) – – – (1,909) – (1,909)Taxonothercomprehensiveincome – – – 772 – – – – 772 – 772Totalothercomprehensiveincome,netoftax – – (1,705) (4,396) (14) – – – (6,115) (83) (6,198)Totalcomprehensiveincomefortheperiod – – (1,705) (4,396) (14) – – (38,203) (44,318) 621 (43,697)

Transactions with owners, recognised directly in equityContributions by and distributions to ownersDividendspaid – – – – – – – (10,000) (10,000) – (10,000)Valueofemployeeservicesreceivedforissueofshareoptions – – – – – 1,200 – – 1,200 – 1,200Total transactions with owners – – – – – 1,200 – (10,000) (8,800) – (8,800)

At31December2015 803,284 * (1,215) 2,376 193 2,297 (950) (14,602) 791,383 15,159 806,542

At1January2016 803,284 * (1,215) 2,376 193 2,297 (950) (14,602) 791,383 15,159 806,542

Total comprehensive income for the yearLossfortheyear – – – – – – – (17,132) (17,132) 1,098 (16,034)

Other comprehensive incomeForeigncurrencytranslationdifferencesofforeignoperations – – (127) 87 – – – – (40) (8) (48)Netchangeinfairvalueofavailable-for-salefinancialassets – – – (1,071) – – – – (1,071) 251 (820)Netchangeinfairvalueofavailable-for-salefinancialassetsreclassified toprofitorloss – – – (2,225) – – – – (2,225) 17 (2,208)Shareofassociates’reservemovements – – (9,898) (77) 3 – – – (9,972) – (9,972)Taxonothercomprehensiveincome – – – (7) – – – – (7) (10) (17)Totalothercomprehensiveincome,netoftax – – (10,025) (3,293) 3 – – – (13,315) 250 (13,065)Totalcomprehensiveincomefortheyear – – (10,025) (3,293) 3 – – (17,132) (30,447) 1,348 (29,099)

Transactions with owners, recognised directly in equityContributions by and distributions to ownersIssueofordinaryshares 12,711 – – – – – – – 12,711 – 12,711Valueofemployeeservicesreceivedforissueofshareoptions – – – – – (1,472) – – (1,472) – (1,472)Shareoptionsexercised 430 – – – – – – – 430 – 430Ownsharesacquired – – – – – – (281) – (281) – (281)Total transactions with owners 13,141 – – – – (1,472) (281) – 11,388 – 11,388

At31December2016 816,425 * (11,240) (917) 196 825 (1,231) (31,734) 772,324 16,507 788,831

* Amount is less than US$1,000.


32


Consolidated Statement of Cash FlowsYear ended 31 December 2016


Cash flows from operating activitiesInsurancepremiumsreceived 456,551 425,106Insuranceclaimspaid (416,149) (317,570)Cededpremiumspaid (224,249) (103,409)Cededshareofclaimsreceived 192,888 45,809Receiptsfromassociates – (14,367)Paymentstoemployeesandsuppliers (40,811) (21,741)Cash(usedin)/generatedfromoperatingactivities (31,770) 13,828Taxpaid (2,578) (1,168)Net cash (used in)/generated from operating activities (34,348) 12,660

Cash flows from investing activitiesProceedsfromrepaymentofcapitalfromassociate 9 – 9,400Dividendsreceivedfromassociate 9 – 270Interestreceived 26,749 18,036Proceedsfromsaleofinvestments 794,771 633,799Settlementofderivatives (9,300) (5,455)Acquisitionofinvestments (798,754) (694,059)Paymentofinvestmentexpenses (800) (544)Acquisitionofpropertyandequipment 6 (581) (142)Acquisitionofintangibleassets 7 (237) (114)Net cash generated from/(used in) investing activities 11,848 (38,809)

Cash flows from financing activitiesDividendspaidtoownersoftheCompany – (10,000)Repurchaseofownshares (281) –Proceedsfromexerciseofshareoptions 430 –Net cash generated from/(used in) financing activities 149 (10,000)

Net decrease in cash and cash equivalents (22,351) (36,149)Cashandcashequivalentsatbeginningoftheyear/period 91,393 131,698Effectofexchangeratefluctuationsoncashheld 1,160 (4,156)Cash and cash equivalents at end of the year/period 17 70,202 91,393


33


Notes to the Financial StatementsYear ended 31 December 2016

Thesenotesformanintegralpartofthefinancialstatements.

ThefinancialstatementswereauthorisedforissuebytheBoardofDirectorson24March2017.

1 Domicile and activities

ACRCapitalHoldingsPte.Ltd.(the“Company”)isincorporatedintheRepublicofSingaporeandhasitsregisteredofficeat6TemasekBoulevard,#08-01SuntecTower4,Singapore038986.

ThefinancialstatementsoftheCompanyasatandfortheyearended31December2016comprisetheCompanyanditssubsidiaries(togetherreferredtoasthe“Group”)andtheGroup’sinterestsinassociates.

TheprincipalactivitiesoftheGrouparethoserelatingtounderwritingofgeneralandlife(re)insurancebusinessandotherrelatedactivities.TheprincipalactivitiesoftheCompanyarethoseofaninvestmentholdingandreinsurancemanagementcompany.

2 Basis of preparation

2.1 Statement of compliance

ThefinancialstatementshavebeenpreparedinaccordancewiththeSingaporeFinancialReportingStandards(“FRSs”).

TheassetsandliabilitiesoftheGroup,whichrelatetothereinsurancebusinesscarriedoninSingapore(“Singaporereinsurancesubsidiary”),aresubjecttotherequirementsoftheInsuranceAct.SuchassetsandliabilitiesareaccountedforinthebooksoftheinsurancefundsoftheSingaporereinsurancesubsidiaryestablishedundertheInsuranceAct.AssetsheldintheinsurancefundsmaybewithdrawnonlyifthewithdrawalmeetstherequirementsstipulatedinSection17oftheInsuranceActandtheSingaporereinsurancesubsidiarycontinuestobeabletomeetthesolvencyrequirementsofSection18oftheInsuranceActandInsurance(ValuationandCapital)Regulations.AllotherassetsandliabilitiesoftheSingaporereinsurancesubsidiaryareaccountedforinitsbooksofthenon-insurancefunds.

2.2 Basis of measurement

Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforcertainfinancialassetswhicharemeasuredatfairvalue.

ThefinancialstatementsoftheGroupandtheCompanyrepresentthecombinedassetsandliabilities,andincomeandexpensesoftheinsuranceandnon-insurancefunds.

2.3 Functional and presentation currency

ThesefinancialstatementsarepresentedinUnitedStatesdollar,whichistheCompany’sfunctionalcurrency.AllfinancialinformationpresentedinUnitedStatesdollarhavebeenroundedtothenearestthousand,unlessotherwisestated.

34


Notes to the Financial Statements

2 Basis of preparation (cont’d)

2.4 Use of estimates and judgements

ThepreparationofthefinancialstatementsinconformitywithFRSsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.

Inparticular,informationaboutsignificantareasofestimationuncertaintyandcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountsrecognisedinthefinancialstatementsaredescribedinnote4–Criticalaccountingestimatesandjudgementsinapplyingaccountingpolicies.

Measurement of fair values

AnumberoftheCompany’saccountingpoliciesanddisclosuresrequirethemeasurementoffairvalues,forbothfinancialandnon-financialassetsandliabilities.

TheCompanyhasanestablishedcontrolframeworkwithrespecttothemeasurementoffairvalues.This includesavaluationteamthathasoverallresponsibilityforallsignificantfairvaluemeasurementsandreportsdirectlytotheGroupChiefFinancialOfficer.

Thevaluationteamregularlyreviewssignificantunobservableinputsandvaluationadjustments.Ifthirdpartyinformation,suchasbrokerquotesorpricingservices,isusedtomeasurefairvalues,thenthevaluationteamassessesanddocumentstheevidenceobtainedfromthethirdpartiestosupporttheconclusionthatsuchvaluationsmeettherequirementsofFRSs,includingthelevelinthefairvaluehierarchyinwhichsuchvaluationsshouldbeclassified.

Whenmeasuringthefairvalueofanassetoraliability,theCompanyusesmarketobservabledataasfaraspossible.Fairvaluesarecategorisedintodifferentlevelsinafairvaluehierarchybasedontheinputsusedinthevaluationtechniquesas follows:

• Level1: quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.• Level2: inputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,either

directly(i.e.,asprices)orindirectly(i.e.,derivedfromprices).• Level3: inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

Iftheinputsusedtomeasurethefairvalueofanassetoraliabilitymightbecategorisedindifferentlevelsofthefairvaluehierarchy,thenthefairvaluemeasurementiscategorisedinitsentiretyinthesamelevelofthefairvaluehierarchyasthelowestlevelinputthatissignificanttotheentiremeasurement(withLevel3beingthelowest).

TheCompanyrecognisestransfersbetweenlevelsofthefairvaluehierarchyasattheendofthereportingperiodduringwhichthechangehasoccurred.

Furtherinformationabouttheassumptionsmadeinmeasuringfairvaluesisincludedinnote5–Riskmanagement.

2.5 Changes in accounting policies

Anumberofnewstandards,amendmentstostandardsandinterpretationsareeffectiveforannualperiod1January2016,andhavebeenappliedinpreparingthesefinancialstatements.NoneofthesehaveasignificanteffectonthefinancialstatementsoftheCompany.

Year ended 31 December 2016

35


Notes to the Financial Statements

3 Significant accounting policies

Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthesefinancialstatements.

3.1 Basis of consolidation

Business combinations

BusinesscombinationsareaccountedforusingtheacquisitionmethodinaccordancewithFRS103Business Combination asattheacquisitiondate,whichisthedateonwhichcontrolistransferredtotheGroup.

TheGroupmeasuredgoodwillattheacquisitiondateas:

• thefairvalueoftheconsiderationtransferred;plus

• therecognisedamountofanynon-controllinginterests(“NCI”)intheacquiree;plus

• ifthebusinesscombinationisachievedinstages,thefairvalueofthepre-existingequityinterestintheacquiree,

overthenetrecognisedamount(generallyfairvalue)oftheidentifiableassetsacquiredandliabilitiesassumed.Anygoodwillthatarisesistestedannuallyforimpairment.

Whentheexcessisnegative,abargainpurchasegainisrecognisedimmediatelyinprofitorloss.

Anycontingentconsiderationpayableisrecognisedatfairvalueattheacquisitiondateandincludedintheconsiderationtransferred.Ifthecontingentconsiderationisclassifiedasequity,itisnotremeasuredandsettlementisaccountedforwithinequity.Otherwise,subsequentchangestothefairvalueofthecontingentconsiderationarerecognisedinprofitorloss.

NCIthatarepresentownershipinterestsandentitletheirholderstoaproportionateshareoftheacquiree’snetassetsintheeventofliquidationaremeasuredeitheratfairvalueorattheNCI’sproportionateshareoftherecognisedamountsoftheacquiree’sidentifiablenetassets,attheacquisitiondate.Themeasurementbasistakeniselectedonatransaction-by-transactionbasis.AllotherNCIaremeasuredatacquisition-datefairvalue,unlessanothermeasurementbasisisrequiredbyFRSs.

CostsrelatedtotheacquisitionthattheGroupincursinconnectionwithabusinesscombinationareexpensedasincurred.

Subsidiaries

SubsidiariesareentitiescontrolledbytheGroup.TheGroupcontrolsanentitywhenit isexposedto,orhasrightto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.Thefinancialstatementsofthesubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedatethatcontrolcommencesuntilthedatethatcontrolceases.

TheaccountingpoliciesofthesubsidiarieshavebeenchangedwhennecessarytoalignthemwiththepoliciesadoptedbytheGroup.LossesapplicabletotheNCIinasubsidiaryareallocatedtotheNCIevenifdoingsocausestheNCItohaveadeficitbalance.

Investments in associates

AssociatesarethoseentitiesinwhichtheGrouphassignificantinfluence,butnotcontrol,overthefinancialandoperatingpoliciesoftheseentities.SignificantinfluenceispresumedtoexistwhentheGroupholdsbetween20%ormoreofthevotingpowerofanotherentity.

Investmentsinassociatesareaccountedforusingtheequitymethod(equity-accountedinvestees)andarerecognisedinitiallyatcost,whichincludestransactioncosts.Subsequenttoinitialrecognition,theconsolidatedfinancialstatementsincludetheGroup’sshareoftheprofitorlossandothercomprehensiveincome(“OCI”)oftheequity-accountedinvestees,afteradjustmentstoaligntheaccountingpolicieswiththoseoftheGroup,fromthedatethatsignificantinfluencecommencesuntilthedatethatsignificantinfluenceceases.

Year ended 31 December 2016

36


3 Significant accounting policies (cont’d)

3.1 Basis of consolidation (cont’d)

Investments in associates (cont’d)

WhentheGroup’sshareof lossesexceeds its interest inanequity-accounted investee,thecarryingamountoftheinvestment,togetherwithanylong-termintereststhatformpartthereof,isreducedtozero,andtherecognitionoffurtherlossesisdiscontinuedexcepttotheextentthattheGrouphasanobligationtofundtheinvestee’soperationsorhasmadepaymentsonbehalfoftheinvestee.

Transactions eliminated on consolidation

Intra-groupbalancesandtransactions,andanyunrealisedincomeandexpensesarisingfromintra-grouptransactions,areeliminatedinpreparingtheconsolidatedfinancialstatements.Unrealisedgainsarisingfromtransactionswithequity-accountedinvesteesareeliminatedagainsttheinvestmenttotheextentoftheGroup’sinterestintheinvestee.Unrealisedlossesareeliminatedinthesamewayasunrealisedgains,butonlytotheextentthatthereisnoevidenceofimpairment.

Accounting for subsidiaries and associates by the Company

InvestmentsinsubsidiariesandassociatesarestatedintheCompany’sstatementoffinancialpositionatcostlessanyaccumulatedimpairmentlosses.

Accounting policies of the subsidiaries and associates

AllsignificantaccountingpoliciesofthesubsidiariesandassociatesareconsistentwiththepoliciesadoptedbytheGroup.

3.2 Foreign currency

Foreign currency transactions

TransactionsinforeigncurrenciesaretranslatedtotherespectivefunctionalcurrenciesofGroupentitiesatexchangeratesatthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthereportingdateareretranslatedtothefunctionalcurrencyattheexchangerateatthatdate.Theforeigncurrencygainorlossonmonetaryitemsisthedifferencebetweenamortisedcostinthefunctionalcurrencyatthebeginningoftheyear,adjustedforeffectiveinterestandpaymentsduringtheyear,andtheamortisedcostinforeigncurrencytranslatedattheexchangerateattheendoftheyear.

Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthataremeasuredatfairvalueareretranslatedtothefunctionalcurrencyattheexchangerateatthedatethatthefairvaluewasdetermined.Non-monetaryitemsinaforeigncurrencythataremeasuredintermsofhistoricalcostaretranslatedusingtheexchangerateatthedateofthetransaction.Foreigncurrencydifferencesarisingonretranslationarerecognisedinprofitorloss,exceptfordifferenceswhicharerecognisedinOCIarisingontheretranslationofavailable-for-saleequityinstruments(exceptonimpairmentinwhichcaseforeigncurrencydifferencesthathavebeenrecognisedinOCIarereclassifiedtoprofitorloss).

Foreign operations

Theassetsandliabilitiesofforeignoperations,excludinggoodwillarisingonacquisition,aretranslatedtoUnitedStatesDollaratexchangeratesatthereportingdate.TheincomeandexpensesofforeignoperationsaretranslatedtoUnitedStatesDollaratexchangeratesatthedatesofthetransactions.Goodwillarisingontheacquisitionofaforeignoperationonorafter1January2005aretreatedasassetsandliabilitiesoftheforeignoperationandaretranslatedattheexchangeratesatthereportingdate.

ForeigncurrencydifferencesarerecognisedinOCI,andarepresentedwithinequityintheforeigncurrencytranslationreserve.However,iftheforeignoperationisanon-wholly-ownedsubsidiary,thentherelevantproportionateshareofthetranslationdifferenceisallocatedtotheNCI.Whenaforeignoperationisdisposedofsuchthatthecontrolorsignificantinfluenceislost,thecumulativeamountinthetranslationreserverelatedtotheforeignoperationisreclassifiedtoprofitorlossaspartofthegainorlossondisposal.WhentheGroupdisposesoffonlypartofitsinterestinasubsidiarythatincludesaforeignoperationwhileretainingcontrol,therelevantproportionofthecumulativeamountisreattributedtoNCI.


37



3.3 Property and equipment

Itemsofpropertyandequipmentaremeasuredatcostlessaccumulateddepreciationandanyaccumulatedimpairmentlosses.

Costincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheasset.

Purchasedsoftwarethatisintegraltothefunctionalityoftherelatedequipmentiscapitalisedaspartofthatequipment.

The cost of replacing a component of an item of property and equipment is recognised in the carrying amount of the item ifitisprobablethatthefutureeconomicbenefitsembodiedwithinthecomponentwillflowtotheGroup,anditscostcanbemeasuredreliably.Thecarryingamountofthereplacedcomponentisderecognised.Thecostsoftheday-to-dayservicingofpropertyandequipmentarerecognisedinprofitorlossasincurred.

Whenpartsofanitemofpropertyandequipmenthavedifferentusefullives,theyareaccountedforasseparateitems(majorcomponents)ofpropertyandequipment.

Thegainorlossondisposalofanitemofpropertyandequipment(calculatedasthedifferencebetweenthenetproceedsfromdisposalandthecarryingamountoftheitem)isrecognisedinprofitorloss.

Depreciationisbasedonthecostofanassetlessitsresidualvalue.Significantcomponentsofindividualassetsareassessedand ifacomponenthasauseful lifethat isdifferentfromtheremainderofthatasset, thatcomponent isdepreciatedseparately.

Depreciationisrecognisedasanexpenseinprofitorlossonastraight-linebasisovertheestimatedusefullivesofeachcomponentofanitemofpropertyandequipment,unlessitisincludedinthecarryingamountofanotherasset.Depreciationisrecognisedfromthedatethatthepropertyandequipmentareinstalledandarereadyforuse.

Theestimatedusefullivesforthecurrentandcomparativeperiodsareasfollows:

Computer equipment 3 yearsMotor vehicle 3 yearsOfficeequipment 3to5yearsFurnitureandfittings 3to5years

Depreciationmethods,usefullivesandresidualvaluesarereviewedattheendofeachreportingperiodandadjustedifappropriate.

3.4 Intangible assets and goodwill

Goodwill

Goodwillthatarisesupontheacquisitionofsubsidiariesisincludedinintangibleassets.Forthemeasurementofgoodwillatinitialrecognition,seenote3.1.Goodwillismeasuredatcostlessanyaccumulatedimpairmentlosses.

Software

Softwareisrecognisedasanintangibleassetifitisprobablethattheexpectedfutureeconomicbenefitsthatareattributabletotheassetwillflowtotheentityandthecostoftheassetcanbemeasuredreliably.Afterrecognition,theintangibleassetwithfiniteusefullifeismeasuredatcostlessaccumulatedamortisationandanyaccumulatedimpairmentlosses.Amortisationiscalculatedbasedonthecostoftheasset,lessitsresidualvalue.Amortisationisrecognisedinprofitorlossonastraight-linebasisovertheestimatedusefullivesof3years,fromthedatethattheyareavailableforuse.

Amortisationmethod,usefullivesandresidualvaluesarereviewedattheendofeachreportingperiodandadjustedifappropriate.


38



3.4 Intangible assets and goodwill (cont’d)

Club membership

Clubmembership isrecognisedasan intangibleasset.Clubmembership ismeasuredatcost lessanyaccumulatedimpairmentlosses.

3.5 Assets held for sale

Assetsthatarehighlyprobabletoberecoveredprimarilythroughsaleratherthanthroughcontinuinguse,areclassifiedasheldforsale.Immediatelybeforeclassificationasheldforsale,theassetsareremeasuredinaccordancewiththeGroup’saccountingpolicies.Thereafter,theassetsclassifiedasheldforsalearegenerallymeasuredattheloweroftheircarryingamountandfairvaluelesscoststosell.Impairmentlossesoninitialclassificationasheldforsaleandsubsequentgainsorlossesonremeasurementarerecognisedinprofitorloss.

3.6 Financial instruments

Non-derivative financial assets

TheGroupinitiallyrecognisesloansandreceivablesanddepositsonthedatethattheyareoriginated.Allotherfinancialassets(includingassetsdesignatedatfairvaluethroughprofitorloss)arerecognisedinitiallyonthetradedate,whichisthedatethattheGroupbecomesapartytothecontractualprovisionsoftheinstrument.

TheGroupderecognisesafinancialassetwhenthecontractualrightstothecashflowsfromtheassetexpire,orittransferstherightstoreceivethecontractualcashflowsonthefinancialassetinatransactioninwhichsubstantiallyalltherisksandrewardsofownershipofthefinancialassetaretransferred,oritneithertransfersnorretainssubstantiallyalloftherisksandrewardsofownershipanddoesnotretaincontroloverthetransferredasset.AnyinterestintransferredfinancialassetsthatiscreatedorretainedbytheGroupisrecognisedasaseparateassetorliability.

Financialassetsandliabilitiesareoffsetandthenetamountispresentedinthestatementoffinancialpositionwhen,andonlywhen,theGrouphasalegalrighttooffsettheamountsandintendseithertosettleonanetbasisortorealisetheassetandsettletheliabilitysimultaneously.

TheGroupclassifiesnon-derivativefinancialassetsintothefollowingcategories:financialassetsatfairvaluethroughprofitorloss,available-for-salefinancialassetsandloansandreceivables.

Financial assets at fair value through profit or loss

Afinancialassetisclassifiedatfairvaluethroughprofitorlossifitisclassifiedasheldfortradingorisdesignatedassuchuponinitialrecognition.FinancialassetsaredesignatedatfairvaluethroughprofitorlossiftheGroupmanagessuchinvestments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented riskmanagementorinvestmentstrategy.Attributabletransactioncostsarerecognisedinprofitorlossasincurred.Financialassetsatfairvaluethroughprofitorlossaremeasuredatfairvalue,andchangesthereinarerecognisedinprofitorloss.

Financialassetsdesignatedatfairvaluethroughprofitorlosscomprisedebtandequitysecuritiesandinvestmentfundsthatotherwisewouldhavebeenclassifiedasavailable-for-sale.

Loans and receivables

Loansandreceivablesarefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinactivemarket.Suchassetsarerecognisedinitiallyatfairvalueplusanydirectlyattributabletransactioncosts.Subsequenttoinitialrecognition,loansandreceivablesaremeasuredatamortisedcostusingeffectiveinterestratemethodorcostiftheeffectofamortisationisnotmaterial,lessanyimpairmentlosses.

Loansandreceivablescompriseloantoassociate,loantosubsidiary,otherreceivables(excludingprepayments)andcashandcashequivalents.

Cashandcashequivalentscomprisecashandbankbalancesanddepositswithfinancialinstitutions.


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3.6 Financial instruments (cont’d)

Non-derivative financial assets (cont’d)

Available-for-sale financial assets

Available-for-salefinancialassetsarenon-derivativefinancialassetsthataredesignatedasavailableforsaleorarenotclassifiedinanyoftheabovecategoriesoffinancialassets.TheGroup’sinvestmentsincertaindebtsecuritiesareclassifiedasavailable-for-salefinancialassets.Available-for-salefinancialassetsarerecognisedinitiallyatfairvalueplusanydirectlyattributabletransactioncosts.Subsequenttoinitialrecognition,theyaremeasuredatfairvalueandchangestherein,otherthanimpairmentlossesandforeigncurrencydifferencesonavailable-for-saledebtinstrumentsarerecognisedinOCIandpresentedinthefairvaluereserveinequity.Whenaninvestmentisderecognised,thegainorlossaccumulatedinequityisreclassifiedtoprofitorloss.

Available-for-salefinancialassetscomprisedebtandequitysecurities.

Non-derivative financial liabilities

TheGroupinitiallyrecognisesfinancialliabilitiesonthetradedate,whichisthedatethattheGroupbecomesapartytothecontractualprovisionsoftheinstrument.

TheGroupderecognisesafinancialliabilitywhenitscontractualobligationsaredischarged,cancelledorexpire.

Financialassetsandliabilitiesareoffsetandthenetamountispresentedinthebalancesheetwhen,andonlywhen,theGrouphasalegalrighttooffsettheamountsandintendseithertosettleonanetbasisortorealisetheassetandsettletheliabilitysimultaneously.

TheGroupclassifiesnon-derivativefinancialliabilitiesintotheotherfinancialliabilitiescategorywhichcompriseotherpayablesandaccruals.

Suchfinancialliabilitiesarerecognisedinitiallyatfairvalueplusanydirectlyattributabletransactioncosts.Subsequenttoinitialrecognition,thesefinancialliabilitiesaremeasuredatamortisedcostusingtheeffectiveinterestmethod.

Share capital

Ordinary shares

Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofordinarysharesarerecognisedasadeductionfromequity,netofanytaxeffects.

Repurchase of share capital (treasury shares)

Whensharecapitalrecognisedasequityisrepurchased,theamountoftheconsiderationpaid,whichincludesdirectlyattributablecosts,netofanytaxeffects, isrecognisedasadeductionfromequity.Repurchasedsharesareclassifiedastreasurysharesandarepresentedinthereserveforownshareaccount.Whentreasurysharesaresoldorreissuedsubsequently,theamountreceivedisrecognisedasanincreaseinequity,andtheresultingsurplusordeficitonthetransactionispresentedinnon-distributablecapitalreserve.

Derivative financial instruments

TheGroupholdsderivativefinancialinstrumentstohedgeitsforeigncurrency,creditandinterestrateriskexposures.Embeddedderivativesareseparatedfromthehostcontractandaccountedforseparatelyiftheeconomiccharacteristicsandrisksofthehostcontractandtheembeddedderivativearenotcloselyrelated,aseparateinstrumentwiththesametermsastheembeddedderivativewouldmeetthedefinitionofaderivative,andthecombinedinstrumentisnotmeasuredatfairvaluethroughprofitorloss.


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3.6 Financial instruments (cont’d)

Derivative financial instruments (cont’d)

Derivativesarerecognisedinitiallyatfairvalue;anyattributabletransactioncostsarerecognisedinprofitorlossasincurred.Subsequentto initialrecognition,derivativesaremeasuredatfairvalue,andchangesin itsfairvaluearerecognisedimmediatelyinprofitorloss.

Thefairvalueofforwardexchangecontractsistheirquotedmarketpriceatthereportingdate,beingthepresentvalueofthequotedforwardprice.

Economic hedges

Hedgeaccounting isnotappliedtoderivative instrumentsthateconomicallyhedgemonetaryassetsand liabilitiesdenominatedinforeigncurrencies.Changesinthefairvalueofsuchderivativesarerecognisedinprofitorlossaspartofforeigncurrencygainsandlosses.

3.7 Impairment

Non-derivative financial assets

Afinancialassetnotcarriedatfairvaluethroughprofitorlossisassessedatendofeachreportingperiodtodeterminewhetherthereisobjectiveevidencethatitisimpaired.Afinancialassetisimpairedifobjectiveevidenceindicatesthatalossevent(s)hasoccurredaftertheinitialrecognitionoftheasset,andthatthelossevent(s)hasanimpactontheestimatedfuturecashflowsofthatassetthatcanbeestimatedreliably. Objectiveevidencethatfinancialassetsareimpairedcanincludedefaultordelinquencybyadebtor,restructuringofanamountduetotheGroupontermsthattheGroupwouldnotconsiderotherwise,indicationsthatadebtororissuerwillenterbankruptcy,economicconditionsthatcorrelatewithdefaultsorthedisappearanceofanactivemarketforasecurity.Inaddition,foraninvestmentinanequitysecurity,asignificantorprolongeddeclineinitsfairvaluebelowitscostisobjectiveevidenceofimpairment.

Loans and receivables

TheGroupconsidersevidenceofimpairmentforloansandreceivablesataspecificassetlevel.Allindividuallysignificantloansandreceivablesareassessedforspecificimpairment.

Animpairmentlossinrespectofafinancialassetmeasuredatamortisedcostiscalculatedasthedifferencebetweenitscarryingamountandthepresentvalueoftheestimatedfuturecashflows,discountedattheasset’soriginaleffectiveinterestrate.Lossesarerecognisedinprofitorlossandreflectedinanallowanceaccountagainstloansandreceivables.Interestontheimpairedassetcontinuestoberecognised.WhentheGroupconsidersthattherearenorealisticprospectsofrecoveryoftheasset,therelevantamountsarewrittenoff.Iftheamountofimpairmentlosssubsequentlydecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised,thenthepreviouslyrecognisedimpairmentlossisreversedthroughprofitorloss.

Available-for-sale financial assets

Impairmentlossesonavailable-for-salefinancialassetsarerecognisedbyreclassifyingthelossesaccumulatedinthefairvaluereserveinequitytoprofitorloss.Thecumulativelossthatisreclassifiedfromequitytoprofitorlossisthedifferencebetweentheacquisitioncost,netofanyprincipalrepaymentandamortisation,andthecurrentfairvalue,lessanyimpairmentlossrecognisedpreviouslyinprofitorloss.

If,inasubsequentperiod,thefairvalueofanimpairedavailable-for-saledebtsecurityincreasesandtheincreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognised,thentheimpairmentlossisreversed.Theamountofthereversalisrecognisedinprofitorloss.However,anysubsequentrecoveryinthefairvalueofanimpairedavailable-for-saleequitysecurityisrecognisedinOCI.


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3.7 Impairment (cont’d)

Non-financial assets

ThecarryingamountsoftheGroup’snon-financialassets,otherthandeferredtaxassets,arereviewedateachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationexists,thentheasset’srecoverableamountsareestimated.

Therecoverableamountofanassetorcash-generatingunit(“CGU”)isthegreaterofitsvalueinuseanditsfairvaluelesscoststosell.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusinga pre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetorCGU.Forthepurposeofimpairmenttesting,assetsthatcannotbetestedindividuallyaregroupedtogetherintothesmallestgroupofassetsthatgeneratescashinflowsfromcontinuingusethatarelargelyindependentofthecashinflowsofotherassetsorCGU.

AnimpairmentlossisrecognisedifthecarryingamountofanassetoritsCGUexceedsitsestimatedrecoverableamount.Impairmentlossesarerecognisedinprofitorloss.

Impairmentlossesrecognisedinpriorperiodsareassessedateachreportingdateforanyindicationsthatthelosshasdecreasedornolongerexists.Animpairmentlossisreversediftherehasbeenachangeintheestimatesusedtodeterminetherecoverableamount.Animpairmentlossisreversedonlytotheextentthattheasset’scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortisation,ifnoimpairmentlosshadbeenrecognised.

3.8 Employee benefits

Defined contribution plans

Adefinedcontributionplanisapost-employmentbenefitplanunderwhichanentitypaysfixedcontributionsintoaseparateentityandwillhavenolegalorconstructiveobligationtopayfutureamounts.

Obligationsforcontributionstodefinedcontributionpensionplansarerecognisedasanexpenseinprofitorlossintheperiodsduringwhichrelatedservicesarerenderedbyemployees.

Short-term employee benefits

Short-termemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceisprovided.

Aliabilityisrecognisedfortheamountexpectedtobepaidundershort-termcashbonusorprofit-sharingplansiftheGrouphasapresentlegalorconstructiveobligationtopaythisamountasaresultofpastserviceprovidedbytheemployeeandtheobligationcanbeestimatedreliably.

Share-based payments

Share options

TheCompanyoperatesanequity-settled,share-basedcompensationplan intheformofanemployeeshareoptionprogramme.TheprogrammeallowstheGroup’semployeestoacquiresharesoftheCompany.Thegrantdatefairvalueofshare-basedpaymentawardsgrantedtoemployeesisrecognisedasanemployeeexpense,withacorrespondingincreaseinequity,overtheperiodthattheemployeesunconditionallybecomeentitledtotheawards.Theamountrecognisedasanexpenseisadjustedtoreflectthenumberofawardsforwhichtherelatedserviceandnon-marketvestingconditionsareexpectedtobemet,suchthattheamountultimatelyrecognisedasanexpenseisbasedonthenumberofawardsthatdomeettherelatedserviceandnon-marketperformanceconditionsatthevestingdate.

Share-basedpaymentarrangementsinwhichtheGroupreceivesservicesasconsiderationforitsownequityinstrumentsareaccountedforasequity-settledshare-basedpaymenttransactions,regardlessofhowtheequity instrumentsareobtainedbytheGroup.


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3.8 Employee benefits (cont’d)

Share-based payments (cont’d)

Partnership plan

TheCompanygrantsawardstoitsemployeesincludingtheGroup’semployees.TheawardisacontingentrighttoreceivecashpaymentequaltothebookormarketvalueofaspecifiednumberofdeemedsharesintheCompanyontherelevantvestingdatesandthefairvalueoftheawardsgrantedtoemployees isrecognisedasanemployeeexpense,withacorrespondingincreaseinliability,overthevestingperiod.AnyawardnotvestedwillbelapsedwhentheeligibleemployeeceasestobeinemploymentwiththeCompanyoranyofitssubsidiaries.

3.9 Lease payments

Paymentsmadeunderoperatingleasesarerecognisedinprofitorlossonastraight-linebasisoverthetermofthelease.Leaseincentivesreceivedarerecognisedasanintegralpartofthetotalleaseexpense,overthetermofthelease.

3.10 Provisions

Aprovision,otherthaninsurancecontractprovisions,isrecognisedif,asaresultofapastevent,theGrouphasapresentlegalorconstructiveobligationthatanoutflowofeconomicbenefitswillberequiredtosettletheobligation.Iftheeffectismaterial,provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyand,whereappropriate,therisksspecifictotheliability.

3.11 Classification of insurance contracts

ContractsunderwhichtheGroupacceptssignificantinsuranceriskfromanotherpartybyagreeingtocompensatethebeneficiaryifaspecifieduncertainfutureevent(theinsuredevent)adverselyaffectsthecedantsorinsuredareclassifiedasinsurancecontracts.

Insuranceriskissignificantif,andonlyif,aninsuredeventcouldcausetheGrouptopaysignificantadditionalbenefits.Onceacontractisclassifiedasaninsurancecontract,itremainsclassifiedasaninsurancecontractuntilallrightsandobligationsareextinguishedorexpire.

3.12 Insurance contracts

Written premiums and earned premium revenue

Reinsurance business

Writtenpremiumsincludepremiumsoncontractsenteredintoduringtheyear, irrespectiveofwhethertheyrelateinparttolaterfinancialyears.Writtenpremiumsaredisclosedgrossofcommissionpayabletocedantsandintermediaries.

Premiumsarefirstrecognisedaswrittenonthedatethatthecontractisincepted.Writtenpremiumisrecognisedbasedonestimatesofultimatepremiumsprovidedbythecedingcompanies.Initialestimatesofwrittenpremiumarerecognisedintheyearinwhichtheunderlyingrisksincept.Subsequentadjustments,basedonreportsofactualpremiumbythecedingcompaniesorrevisionsinestimates,arerecordedintheyearinwhichtheyaredetermined. Earnedpremiumcomprisespremiumwrittenduringthefinancialyearandchangesinprovisionforunexpiredrisks.Premiumsareearnedfromthedateofattachmentofrisk,overtheindemnityperiod,inaccordancewiththepatternoftheexposureofriskexpectedunderthecontracts.Thepatternoftheriskexposureisgenerallymatchedbythepassageoftime.

Insurance business

Premiumswrittenondirectinsurancebusinessarerecognisedasincomewhentheriskofaninsurancepolicyisaccepted.Premiumsarerecognisedasearnedpremiumsproportionallyovertheperiodofcoverage.Theportionofpremiumsreceivedonin-forcecontractsthatrelatestounexpiredrisksattheendofthereportingperiodisreportedastheunearnedpremiums.

Unearnedpremiumsarecalculatedattherateof50%or1/24thmethodonthegrosspremiumswrittenduringtheyear.


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3.12 Insurance contracts (cont’d)

Provision for unexpired risks

Theprovisionforunexpiredrisksincludesaprovisionforunearnedpremiumandanyadditionalprovisionforpremiumdeficiency.Theprovisionforunearnedpremiumiscalculatedusingwrittenpremiumsforallclassesofbusinessinaccordancewiththepatternofriskunderwritten.Anadditionalprovisionforpremiumdeficiencyismadewheretheexpectedvalueofclaimsandexpensesattributabletotheunexpiredperiodsofpoliciesinforceatthereportingdateexceedstheprovisionforunearnedpremiuminrelationtosuchpolicies.

Provisionforunexpiredrisksdenominatedinforeigncurrenciesatthereportingdateistranslatedtothefunctionalcurrencyattheexchangerateatthatdate.Theresultingexchangedifferencesarerecognisedinprofitorloss.

Claims incurred and provision for insurance claims

Claimsincurredconsistofclaimspaidduringthefinancialyear,netofsubrogationrecoveries,andchangesinprovisionforinsuranceclaims.

ProvisionforinsuranceclaimscompriseprovisionsfortheGroup’sestimateoftheultimatecostofsettlingallclaimsincurredbutunpaidatthereportingdatewhetherreportedornot,andrelatedinternalandexternalclaimshandlingexpenses.Provision for insurance claims are assessed by reviewing individual claims and making allowance for claims incurred but not yetreported,theeffectofbothinternalandexternalforeseeableevents,suchaschangesinclaimshandlingprocedures,inflation,judicialtrends,legislativechangesandpastexperienceandtrends.

Provisionfor insuranceclaimsdenominatedinforeigncurrenciesatthereportingdateistranslatedtothefunctionalcurrencyattheexchangerateatthatdate.Theresultingexchangedifferencesarerecognisedinprofitorloss.

Reinsurance

TheGroupcedesreinsuranceinthenormalcourseofbusinessforthepurposeoflimitingitsnetlosspotential.Assets,liabilities,incomeandexpensearisingfromceded(re)insurancecontractsarepresentedseparatelyfromtherelatedassets,liabilities,incomeandexpensefromtherelatedinsurancecontractsbecausethe(re)insurancearrangementsdonotrelievetheGroupfromitsdirectobligationstoitsinsuredandcedants.Premiumsrelatingto(re)insurancecededarerecognisedasanexpenseinaccordancewiththepatternofreinsuranceservicereceived.

Cededshareofearnedpremiumsandclaimsincurredarepresentedinprofitorlossandstatementoffinancialpositionseparately.

The amounts recognised as ceded share of insurance contract provisions are measured on a basis that is consistent with themeasurementoftheprovisionsheldinrespectoftherelatedinsurancecontracts.Balancesduefromreinsurancecompaniesinrespectofclaimspaidareincludedwithininsurancereceivablesinthestatementoffinancialposition.

Cededshareofinsurancecontractprovisionsandinsurancereceivablesareassessedforimpairmentateachreportingdate.Suchassetsaredeemedtobeimpairedifthereisobjectiveevidence,asaresultofaneventthatoccurredafteritsinitialrecognition,thattheGroupmaynotrecoverallamountsdueandthattheeventhasareliablymeasurableimpactontheamountsthattheGroupwillreceivefromthereinsurer.

Deferred acquisition costs

Acquisitioncostscomprisecommissionsandbrokerageswhichvarywithandaredirectlyrelatedtotheacquisitionandrenewalofinsurancecontracts.Theseacquisitioncostsaredeferred,totheextentthattheyarerecoverable,andamortisedconsistentwiththeexpirationoftherisksassociatedwiththeunderlyinginsurancecontracts.

Deferredacquisitioncostsdenominatedinforeigncurrenciesatthereportingdatearetranslatedtothefunctionalcurrencyattheexchangerateatthatdate.Theresultingexchangedifferencesarerecognisedinprofitorloss.


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3.12 Insurance contracts (cont’d)

Liability adequacy test

TheliabilityoftheGroupunderinsurancecontractsistestedforadequacybycomparingtheexpectedfuturecontractualcashflowswiththecarryingamountofgrossinsurancecontractprovisionsforunearnedpremiumsandinsuranceclaims.Whereanexpectedshortfallisidentified,additionalprovisionsaremadeforunearnedpremiumsorinsuranceclaimsandthedeficiencyisrecognisedinprofitorloss.

3.13 Receivables and payables related to insurance contracts

Insurance receivables and insurance payables are recognised on the date that the Group becomes a party to the insurance contracts.Theseincludeamountsduetoandfromreinsurancecontractholders.Theyaremeasuredoninitialrecognitionatthefairvalueoftheconsiderationreceivableorpayable.Subsequenttoinitialrecognition,receivablesandpayablesaremeasuredatamortisedcost,usingtheeffectiveinterestratemethod.

The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that thecarryingamountmaynotberecoverable.Ifthereisobjectiveevidencethattheinsurancereceivablesisimpaired,theGroupreducesthecarryingamountoftheinsurancereceivablesandrecognisesthatimpairmentlossintheprofitorloss.TheGroupgatherstheobjectiveevidencethataninsurancereceivableisimpairedusingthesameprocessadoptedforloansandreceivables.Theimpairmentlossiscalculatedunderthesamemethodusedforthesefinancialassets.Insurancereceivablesandinsurancepayablesarederecognisedbasedonthesamederecognitioncriteriaasfinancialassetsandliabilitiesrespectively,asdescribedinnote3.6.

3.14 Investment income and expenses

Investment income

Investment incomecomprises interest income,dividendincome,netrealisedgains/lossesresultingfromdisposalofinvestmentsandnetfairvaluegains/lossesonfinancialassetsatfairvaluethroughprofitorloss.

Interestincomeisrecognisedasitaccruesinprofitorloss,usingtheeffectiveinterestmethod.

DividendincomeisrecognisedinprofitorlossonthedatethattheCompany’srighttoreceivepaymentisestablished.

Investment expenses

Investmentexpensescomprisefeespaidtoexternalinvestmentmanagersandfundadministrationcosts.

3.15 Tax

Taxexpensecomprisescurrentanddeferredtax.CurrenttaxanddeferredtaxisrecognisedinprofitorlossexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequityorinOCI.

Currenttaxistheexpectedtaxpayableorreceivableonthetaxableincomeorlossfortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.Theamountofcurrenttaxpayableorreceivableisthebestestimateoftaxamountexpectedtobepaidorreceivedthatreflectsuncertaintyrelatedtoincometaxes,ifany.

Deferredtaxisrecognisedinrespectoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.Deferredtaxisnotrecognisedfortemporarydifferencesthataffectsneitheraccountingnortaxableprofitorloss.ThemeasurementofdeferredtaxesreflectsthetaxconsequencesthatwouldfollowthemannerinwhichtheGroupexpects,atthereportingdate,torecoverorsettlethecarryingamountofitsassetsandliabilities.Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtotemporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactedbythereportingdate.


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3.15 Tax (cont’d)

Deferredtaxassetsandliabilitiesareoffsetifthereisalegallyenforceablerighttooffsetcurrenttaxliabilitiesandassets,andtheyrelatetotaxesleviedbythesametaxauthorityonthesametaxableentity.

Adeferredtaxassetisrecognisedforunusedtaxlosses,taxcreditsanddeductibletemporarydifferences,totheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheycanbeutilised.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

Indeterminingtheamountofcurrentanddeferredtax,theGrouptakesintoaccounttheimpactofuncertaintaxpositionsandwhetheradditionaltaxesandinterestmaybedue.TheGroupbelievesthatitsaccrualsfortaxliabilitiesareadequateforallopentaxyearsbasedonitsassessmentofmanyfactors,includinginterpretationsoftaxlawandpriorexperience.Thisassessmentreliesonestimatesandassumptionsandmay involveaseriesof judgementsaboutfutureevents. NewinformationmaybecomeavailablethatcausestheGrouptochangeitsjudgementregardingtheadequacyofexistingtaxliabilities;suchchangestotaxliabilitieswillimpacttaxexpenseintheperiodthatsuchadeterminationismade.

3.16 Key management personnel

KeymanagementpersonneloftheGrouparethosepersonshavingtheauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheGroup.ThedirectorsandcertainexecutiveofficersareconsideredaskeymanagementpersonneloftheGroup.

4 Critical accounting estimates and judgements in applying accounting policies

Managementhasassessedthedevelopment,selectionanddisclosureofthecriticalaccountingpoliciesandestimates,andtheapplicationofthesepoliciesandestimates.Thecriticalaccountingestimatesmadebythemanagementinapplyingaccountingpoliciesrelatetotheprovisionsforunexpiredrisks,insuranceclaimsandfairvaluesoftheGroup’sinvestments.

Theinsurancecontractprovisionsforgeneralreinsuranceandinsurancebusinessconsistofclaimsliabilitiesandpremiumliabilities.TheprocessundertakenbytheGrouptoderivetheinsurancecontractprovisionsofthegeneral(re)insurancebusiness is as follows:

Process involved in determining claims liabilities

TheGroupdeterminestheclaimsliabilitiesinaccordancewithinternationallyrecognisedpractices.Theassumptionsusedintheestimationofinsuranceassetsandliabilitiesareintendedtoresultinprovisionswhicharesufficienttocoveranyliabilitiesarisingoutofinsurancecontractstotheextentthatcanbereasonablyforeseen.

However,giventheuncertaintyinestablishingaprovisionforinsuranceclaims,itislikelythatthefinaloutcomecouldprovetobesignificantlydifferentfromtheoriginalliabilityestablished.

Provisionismadeatthereportingdatefortheexpectedultimatecostofsettlementofallclaimsincurredinrespectofeventsuptothatdate,whetherreportedornot,togetherwithrelatedclaimshandlingexpenses,lessamountsalreadypaid. ThedatausedfordeterminingtheexpectedultimateclaimsliabilitiesiscollatedinternallybasedoninformationreceivedfromcedantsrelatingtobusinessunderwrittenbytheGroup.Fordirectinsurancebusiness,theinternaldataismostlyderived from the insurance subsidiary’s claims report and screening of the actual insurance contracts carried out in prior years.Thisisfurthersupplementedbyexternallyavailableinformationonindustrystatisticsandtrends.

TheGroup’sreservingmethodologyestimatestheexpectedultimateclaimsamountsfortheportfolioofrisksbyanalysingthehistoricaldata,pricingandunderwritinginformation,currentmarket,legalandsocio-economicenvironment,andlikelyfuturetrends.Theestimationprocessalsoconsidersfactorsthatinfluencetheamountandtimingofcashflowsfromthecontracts.Aclaimofinsurancecontractusuallyarisesfromaneventoflossreportedbythecontractholders.Theuncertaintyoffuturecashflowsthereforearisesmainlyfromtheuncertaintyofthetimingofoccurrenceandreportingofsuchevent.


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4 Critical accounting estimates and judgements in applying accounting policies (cont’d)

Process involved in determining claims liabilities (cont’d)

TheGroupsetsasidecasereservesaftertakingintoconsiderationtheclaimcircumstances,currentavailableinformationandhistoricalevidenceofsimilarclaims.Casereservesarereviewedregularlyandupdatedasandwhennewinformationbecomesavailable.However,theultimateclaimsliabilitiesmayvarysignificantlyasaresultofsubsequentdevelopments.

TheGroupsystematicallyandperiodicallyreviewstheprovisionsestablishedandadjuststhelossestimationprocessinanefforttominimisevariationsbetweentheactualfinaloutcomeandtheoriginalprojection.Theprovisionsforoutstandingclaimsliabilitiesarediscountedforthetimevalueofmoney.

Provisionsforinsuranceliabilitiesasat31December2016havebeenassessedbyanexternalconsultingactuarialfirm,withsupportfromtheGroup’sactuarialreservingteam.

Inestimatingtheclaimsliabilities,riskswerecategorisedintovariousreservingcohorts,withaviewtobalancetheneedforstatisticalstabilityandhomogeneityinrespectoffactorsincludingriskcharacteristicsandlossreportingpatterns.Broadly,thesegregationofriskswasguidedbyclassofbusinessandtypeofreinsurance.

TheGroupusesanumberofreservingmethodstoestimatetheultimateclaimsliabilities.ThesemethodsincludeIncurredChainDevelopment(“ICD”)Method,IncurredBornhuetter-Ferguson(“BF”)methodandExpectedLossRatiomethod.Inthereservevaluation,lossstatisticsrelatetonaturalcatastrophesarearrangedbyaccidentyear,whileotherlossstatisticsarearrangedbyunderwritingyear.

Totheextentthatthestatisticalmethoduseshistoricalclaimsdevelopmentinformation,itisassumedthatthehistoricalclaimsdevelopmentpatternwilloccuragaininthefuture.Therearereasonswhythismaynotbethecase,which,insofarastheycanbeidentified,havebeenallowedforbymodifyingthemathematicalmodels.Suchreasonsinclude:

• Changesinprocessesthataffectthedevelopment/recordingofclaimspaidandincurred;

• Economic,legal,political,socialandenvironmentaltrends,whichcouldresultindifferentexpectedlevelsofinflation,claimfrequencyandseverity;

• Changesinbusinesscomposition;and

• Randomfluctuations,includingtheimpactofahigherfrequencyoflargelosses.

ThebestestimateofclaimsliabilitiesisdiscountedbasedonabasketofAsian/USrisk-freeratesofvaryingdurationswitha0.5%liquiditypremiumaddedontopofthem,reflectingtheexpectedcurrencycompositionofunderlyingliabilities.

Process involved in determining premium liabilities

TheGroupdeterminesthepremiumliabilitiesbasedonthehigherofunearnedpremiumreserves(“UPR”)lessdeferredacquisitioncostsandunexpiredriskreserves(“URR”)attheinsurancefundlevel,withaminimumofURRbylineofbusiness.

TheURRneedstobeadequatetomeetfutureclaimsplustheportionoftheGroupexpensesassociatedwithadministeringtherun-offoftheseclaims.TheURRisdiscountedbasedonabasketofAsian/USrisk-freeratesofvaryingdurationswitha0.5%liquiditypremiumaddedontopofthem,similartoclaimsliabilities.

RatherthancalculatingtheUPRonauniformbasisforalltypesofcontracts,theGrouphasconsideredtheactualunderlyingriskexposureandapproximatedtheappropriatepremiumrecognitionpatterns.


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4 Critical accounting estimates and judgements in applying accounting policies (cont’d)

Process involved in determining premium liabilities (cont’d)

Sensitivity analysis

Thesensitivityanalysisisperformedonthenetpremiumsandnetclaimsliabilities,basedonchangesinassumptionsthatmayaffectthelevelofliabilities.Theassumptionsconsideredinthesensitivityanalysisareasfollows:

• Discount rate• Technicalcombinedratio

Totestthesensitivityofpremiumandclaimsliabilitiesseparatelyforgrossandnetofreinsurancerecoveries,changesinthediscountrates,simultaneouschangesinthediscountrateforalldurationswereconsidered.Thelevelofchangeisfrom–1%to+1%.Theresultateachchange level isthencomparedtothepremiumandclaims liabilities,netofreinsurancerecoveries.

Theassumptionthathasthegreatesteffectonthedeterminationofinsurancecontractprovisionsistheexpectedlossratio(inpercentageterms).Expectedlossratiosarederivedwithreferencetoexpectedtechnicalcombinedratio.Thetestwasconductedbasedonachangelevelof-10%to+10%(2015:-10%to+10%)ofthenetearnedpremiums,netofreinsurancerecoveries.Theimpactonprofitorlossisshownbelow:

Net of reinsurance recoveries Discount rate Technical combined ratio +1% –1% +10% –10% US$’000 US$’000 US$’000 US$’000

31 December 2016Profit/(loss) 8,132 (8,453) (32,121) 32,121

31 December 2015Profit/(loss) 8,217 (7,993) (29,536) 29,536

Inaddition,premiumandclaimsliabilitiesaredeterminedasbestestimates.AnadditionalprovisionofapproximatelyUS$58.3million(2015:US$54.3million)(netofreinsurancerecoveries)isrequiredifpremiumandclaimsliabilitiesarecalculatedata75%levelofsufficiencyanddiscountedbasedonabasketofAsian/USrisk-freeratesofvaryingdurations.

Process involved in determining the fair values of the investments

The fair values of investments are based on current bid prices or last traded prices obtained from independent price sources suchasBloombergandInteractiveDataCorporation(“IDC”).ForsecuritiesthatarenotactivelytradedandvaluationsarenotavailableonBloomberg,thefairvaluesarebasedonbidpricesobtainedfrombrokers.

5 Risk management

5.1 Risk management framework

TheGroupisexposedtoavarietyofreinsuranceandfinancialrisksinthenormalcourseofitsbusinessactivities.TheBoardof Directors (the “Board”) has overall responsibility for the establishment and oversight of the Group’s risk management framework.TheBoardistheapprovingauthorityforchangesandexceptionstoallkeyriskmanagementstrategyandpolicieswhichareestablishedtoidentify,analyse,manageandmonitortherisksfacedbytheGroup.TheBoardisalsoresponsibleforapprovingtheGroup’srisktoleranceandrisklimits.TheBoardissupportedbytheRiskManagementCommittee(“RMC”).

TheGroupleveragesonEnterpriseRiskManagement(“ERM”)frameworktoidentifypotentialeventsthatmayaffecttheorganisationandmanagerisktobewithinitsriskappetitetoprovidereasonableassuranceregardingtheachievementoforganisationobjectives.


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5 Risk management (cont’d)

5.1 Risk management framework (cont’d)

TheERMframeworkprovidesasystematicandholisticriskmanagementapproachthroughout theorganisation, andfacilitatesalignmentofriskappetite,businessstrategyandcapitalmanagement.Underthisframework,theGroupcanmoreeffectivelymanageandassessitssolvencyconditionbylinkingbusinessstrategyandcapitalmanagementthroughaclearlydefinedriskappetite.TheGroupdefinesitsriskappetiteintovariouslevelsandlimits.Keyriskindicatorsarethendevelopedinlinewiththesevariousrisklevelssothattherisk-takingactivitiesofthevariousbusinessandfunctionalunitscanbemeasuredandcontrolled.Ithasputinplacekeypoliciesandguidelinestoensurerisksareidentifiedandcontrolledandtheseareregularlyreviewed.

TheERMframeworkenablesmanagementofdownsiderisks,improvesqualityofrisk-takingandfacilitatessustainablebusinessdevelopmentbyidentifyingandaddressingpotentialobstaclestoachieveorganisationalobjectives.Theframeworkalsoprovidesacomparableandconsistentmeasurementofthevariousrisksfromdifferentbusinessareasandfunctions.

TheERMframeworkiscontinuouslybeingoperationalisedtoconsistentlyandsystematicallyevaluate,manageandmonitorrisksandbeingrefinedtostrengthentheeffectivenessoftheGroup’sriskmanagementpractices.

TheGroupcontinuestobuildriskmanagementculturebyimplementingariskgovernancestructure,definingrolesofresponsibilitiesandsettingupclearchannelsofcommunicationregardingriskmanagementobjectivesandplans.

TheERMframeworkprovidesthreelinesofdefencetomitigatetheGroup’srisks:

(i) Riskownersinbusinessandfunctionalunitsconductday-to-dayactivitiesinaccordancewiththeframeworkbyproperly identifying,assessing,controlling,managingandmonitoringrisks.Theriskmanagementpracticesaregovernedbyriskmanagementpoliciesforvariousmajorriskcategoriesandguidelinesforspecificbusinessandfunctionalunits.

(ii) TheERMandCompliancedepartmentsfacilitatetheriskmanagementpractices,developriskmanagementsystemandtools,monitorandcommunicatematerialrisks.TheERMteamalsohasdirectaccesstotheBoardoftheGroupthroughtheRMCforindependentreportingofsignificantriskissues.

(iii) Theinternalauditunitprovidesindependentassuranceofintegrityoftheriskmanagementprocessandeffectivenessofinternalcontrols.TheunitworksindependentlywithintheGroupandreportsdirectlytotheAuditCommitteeoftheGroup.

5.2 Insurance risk management

Reinsuranceandinsuranceriskreferstotheriskoffinanciallossandconsequentinabilitytomeetliabilitiesasaresultofinadequateorinappropriateunderwriting,claimsmanagement,productdesign,pricingandreserving.

Thereinsurancesubsidiaryunderwritestreatyandfacultativereinsurancebusinessbothonaproportionalandnon-proportionalbasis.Mainclassesofreinsurancebusinessunderwrittenincludeaviation,credit,marine,energy,property,engineering,casualtyandmotor.Theinsurancesubsidiaryunderwritesinsurancebusinessofemployers’liability,publicliability,property,motor,pecuniaryloss,marine,personalaccidentandothermiscellaneousclasses.

TheGroupmanagesinsuranceriskbymonitoringfactorsthataffecttheperilsandcoverageofthepoliciessuchaschangesinthemacroeconomicorindustrylandscapesandriskenvironment.TheGroupcontinuouslystrengthensitsinformationtechnologysystemanddatamanagementframeworktoensurequalitydata isavailableforcomprehensiveportfolioanalysisandactuarialstudies.


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5.2 Insurance risk management (cont’d)

(a) Underwriting risks

ThevariousunderwritingrisksandprocessesandprotectionsputinplaceinrelationtotheserisksbytheGroupare as follows:

Pricing risk

Pricingistheprocessofdeterminingtheappropriatepremiumtochargefortherisksunderwrittenwhichinvolvestheestimationoffutureclaimfrequencyandseverity,andthepaymentpatternassociatedwiththeultimateclaimspayable.

TheGrouphasanextensivesetofunderwritingguidelinesforusebyunderwritersandemploysseniorunderwriterseachwithconsiderableindustryexperiencetodeterminetheappropriatepriceofeachriskaccepted.Underwritersarealsosupportedbyateamofpricingactuariesandnaturalcatastrophemodellingspecialists.Arangeofsophisticatedpricingtoolsisalsomadeavailabletotheunderwriterswhichcomplementtheirunderwritingjudgement,thusfailuretoconsidertheappropriatefactorsaffectingtheriskisreduced.

TheGroupacceptsrisksfromoverfiftydifferentcountries,acrosseightlinesofbusiness,andfourtypesofbusiness.Thisensuressignificantdiversificationandreducestheriskofsystemicpricingerror.

Selection risk

Selectionriskemanatesfrompersistentlypoorselectionofrisks.Estimationoffutureclaimscanneverbeperfectandinvolvesprofessionaljudgement.

TheGrouphasanextensivesetofunderwritingguidelinesdelineatingauthorities,referralprocess,limitsandcapacitiesforusebyunderwriters.Allrisksaresubjecttoapeerreviewprocesspriortoacceptance.Largeandcomplexrisksaresubjecttoreferraltomanagement.

Stochastic claims risk

Theoccurrence,sizeandpaymenttimingofreinsuranceclaimsisaninherentlystochasticprocessandrandomadversefluctuationsposearisktotheGroup.

TheGroupwouldlimit itsnetexposuretoanysinglerisktoUS$20million(2015:US$24million).TheGroup’sriskandcapitalmanagementaredesignedandexecutedinordertomaintainan“A”levelratingposta1in1000yearreturnperiodlosseventaffectingtheCompanyoveraoneyearhorizon.The1in1000yearreturnperiodevent,benchmarkedagainsttheAsiannaturalcatastrophepeakscenarios,ismodelledtoresultinaUS$54million (2015:US$32.1million)(netofretrocession)negativeimpactonprofitorloss.

ThesignificantdiversificationoftheGroup’sbusinessacrosscountriesandlinesofbusinessesalsoreducestheimpactofanysingleclaims.

Reserving risk

Theestimationofliabilitiesisinherentlyuncertain.Theuncertaintiescanarisefromthefollowingfactors:

• Range and quality of data available• Model error • Parameter error• Randomvolatilityinfutureexperience


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(a) Underwriting risks (cont’d)

Reserving risk (cont’d)

Onceaclaimhasoccurred,theGroupmustsetasideadequateclaimsreservetomeettheultimatecostofthoseclaims.Therearetypicallyanumberofcomponentsofthereserves:

• Caseestimate–anestimateforaparticularknownclaimoftheamountoftheultimateclaimcosttakingintotheparticularcircumstancesoftheclaim.

• IBNER–knownas“incurredbutnotenoughreported”.Thisisaportfolioadjustmenttoallcaseestimatesreflectinganyoverallinadequacy(ifany)inthoseamounts.

• IBNR–knownas“incurredbutnotreported”.ThisisanestimateofclaimscoststhathavebeenincurredbuthavenotyetbeenreportedtotheGroup.

• Claimsexpensecosts–this isanamountthat issetasidefortheexpectedcostsofadministeringclaimssettlement.

Inadditiontoreservingforoutstandingclaims,areservemayneedtobeestablishedforanyinadequacies(ifany)inunearnedpremium.Unearnedpremiumsshouldreflecttheamountoffutureexposureremainingoverotherperiodoftheunderlyingcontract.CircumstancesmayhavearisensinceacceptingaparticularriskthatleadstheGrouptore-evaluatetheexposure,andasaresulttheunearnedpremiummightbeinadequate.

Theprovisionsforinsuranceliabilitiesaresignedoffbyanexternalconsultingactuarialfirm,withsignificantanalyticalsupportfromtheGroup’sactuarialreservingteam.Duringthecourseoftheyear,theprovisionsarereviewedcloselybytheGroup’sactuarialreservingteam.

(b) Concentration/accumulation of insurance risks

Claimscanaccumulatefromvariouscontractsfromasinglesystemiccause,suchasanaturalcatastropheorchangeinliabilityawardlevels.Furtherconcentrationcanoccurifpartsofthesamerisksareacceptedfromdifferentclients.SuchaccumulationscanputfinancialstrainontheresourcesoftheGroup.

TheGroupcloselymonitorspotentialaccumulationfornaturalcatastrophesthroughoutAsia.RisksforeachpotentialnaturalcatastrophearecapturedwithintheGroup’ssystemsandarefrequentlyanalysed.

TheGrouphasnaturalcatastrophespecialistswhoassesstheimpactofpotentialaccumulations.Accumulationisassessedusinganumberofdifferentmethodologiestoensurereliabilityandtoreducetheriskofsystemicmisevaluation.Inadditiontoproportionalretrocessionarrangements,theGrouphasinplaceanexcessoflossreinsuranceprotectionfornaturalcatastrophesamountingtoUS$188.7million(2015:US$182.4million).TheGroupalsocarriesoutregularanalysistomonitorpotentialconcentrationofthesameriskreinsuredfromdifferentclients.


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(b) Concentration/accumulation of insurance risks (cont’d)

ThefollowingtablessetouttheGroup’sconcentrationofinsurancerisksbycountriesbasedonthelocationoftheinsuredandcedinginsurerorreinsurerandlinesofbusinessbygrosswrittenpremiums.

2016 2015 US$’000 US$’000

CountriesChina 224,462 29,936HongKongandMacau 15,864 6,819India 40,848 34,774Indonesia 24,693 17,163Japan 89,031 82,325Malaysia 18,470 (5,844)MiddleEast 21,696 18,071Philippines 10,279 7,217Singapore 17,328 11,897SouthKorea 30,779 20,515Taiwan 31,029 34,284Thailand 15,590 8,665Turkey 19,022 1,491Vietnam 14,840 2,654Others 17,456 11,254 591,387 281,221

Line of businessAviation 27,472 22,165Casualty 22,632 21,068Credit 39,961 27,096Energy 12,507 8,935Engineering 32,247 28,062Marine 59,488 24,999Motor 84,421 35,633Property 309,288 110,812Reinsurancebusiness 588,016 278,770Insurancebusiness 3,371 2,451 591,387 281,221

(c) Claims development

Thefollowingtablesshowtheestimatesofcumulativeincurredclaims,includingbothclaimsnotifiedandIBNRforeachsuccessiveunderwritingyearateachreportingdate,togetherwithcumulativepaymentstodate.Theimpactofexchangedifferencesbetweentransactionrateandperiodendrateisshownatthebottomofthetable.TheGroupalsopresentstablesshowingthedevelopmentofthegrossearnedpremiumsforeachunderwritingyearateachreportingdate.

Underwritingyearisdefinedfrom1Januaryto31Decemberoftheyear,exceptforunderwritingyear2007wherecontractsinceptingpriorto1April2007areincluded;forunderwritingyears2008to2014,underwritingyearisdefinedfrom1Apriloftheyearto31Marchofthefollowingyearandforunderwritingyear2015,underwritingyearisdefinedfrom1April2015to31December2015.


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(c) Claims development (cont’d)

Accidentyearisdefinedasdateofaccidentorclaimsoccurredfrom1Januaryto31Decemberoftheyear,exceptforaccidentyear2015whereitisdefinedasdateofaccidentorclaimsoccurredfrom1April2015to31December2015;foraccidentyears2014andprior,accidentyearisdefinedasdateofaccidentorclaimsoccurredfrom1Apriloftheyearto31Marchofthefollowingyear.

Reinsurance business

(i) Analysis of claims development – gross of reinsurance recoveries

Gross incurred claims31 December 2016 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirst financialyear 101,494 94,275 85,197 218,135 271,019 170,122 184,035 125,245 106,246 238,520Oneyearlater 227,928 255,198 256,467 825,295 524,115 415,134 534,366 343,730 196,998Twoyearslater 277,226 288,831 341,902 891,762 564,504 480,776 600,326 448,962Threeyearslater 280,348 294,225 342,941 904,270 557,845 489,868 593,357Fouryearslater 275,469 302,244 351,969 923,406 564,402 521,541Fiveyearslater 274,581 297,234 350,701 931,321 554,819Sixyearslater 271,557 294,652 352,947 936,467Sevenyearslater 270,352 292,582 356,735Eightyearslater 270,342 293,198Nineyearslater 270,454Currentestimates oflossreserves 270,454 293,198 356,735 936,467 554,819 521,541 593,357 448,962 196,998 238,520 4,411,051Cumulative payments (267,700)(281,165)(344,303)(856,832)(516,100)(427,107)(438,817)(234,346) (55,592) (11,939) (3,433,901)Best estimate of outstanding claims liabilities 2,754 12,033 12,432 79,635 38,719 94,434 154,540 214,616 141,406 226,581 977,150Currencytranslation (47,171)Total current estimatesof lossreserves 929,979

Gross earned premiums31 December 2016 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirst financialyear 128,362 146,551 159,196 225,724 282,387 272,313 292,726 207,373 102,160 299,015Oneyearlater 305,395 403,360 436,538 666,915 619,731 670,015 749,130 540,821 243,671Twoyearslater 359,770 465,200 504,111 755,682 698,804 748,380 876,770 745,315Threeyearslater 366,777 463,463 510,884 755,293 698,601 764,141 864,046Fouryearslater 368,816 468,146 515,537 762,938 704,589 773,480Fiveyearslater 372,000 471,307 520,452 766,853 707,877Sixyearslater 373,091 473,076 523,857 769,315Sevenyearslater 373,315 473,560 526,133Eightyearslater 373,575 473,881Nineyearslater 373,583Total gross earned premiums 373,583 473,881 526,133 769,315 707,877 773,480 864,046 745,315 243,671 299,015 5,776,316


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Reinsurance business (cont’d)

(i) Analysis of claims development – gross of reinsurance recoveries (cont’d)

Gross incurred claims31 December 2015 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirstfinancialyear 101,494 94,275 85,197 218,135 271,019 170,122 184,035 125,245 106,246Oneyearlater 227,928 255,198 256,467 825,295 524,115 415,134 534,366 343,730Twoyearslater 277,226 288,831 341,902 891,762 564,504 480,776 600,326Threeyearslater 280,348 294,225 342,941 904,270 557,845 489,868Fouryearslater 275,469 302,244 351,969 923,406 564,402Fiveyearslater 274,581 297,234 350,701 931,321Sixyearslater 271,557 294,652 352,947Sevenyearslater 270,352 292,582Eightyearslater 270,342Currentestimatesof lossreserves 270,342 292,582 352,947 931,321 564,402 489,868 600,326 343,730 106,246 3,951,764Cumulativepayments (266,926)(277,456)(335,100)(835,748)(498,820)(389,829)(325,628) (69,467) 2,018 (2,996,956)Best estimate of outstanding claims liabilities 3,416 15,126 17,847 95,573 65,582 100,039 274,698 274,263 108,264 954,808Currencytranslation (54,421)Totalcurrentestimatesof lossreserves 900,387

Gross earned premiums31 December 2015 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirstfinancialyear 128,362 146,551 159,196 225,724 282,387 272,313 292,726 207,373 102,160Oneyearlater 305,395 403,360 436,538 666,915 619,731 670,015 749,130 540,821Twoyearslater 359,770 465,200 504,111 755,682 698,804 748,380 876,770Threeyearslater 366,777 463,463 510,884 755,293 698,601 764,141Fouryearslater 368,816 468,146 515,537 762,938 704,589Fiveyearslater 372,000 471,307 520,452 766,853Sixyearslater 373,091 473,076 523,857Sevenyearslater 373,315 473,560Eightyearslater 373,575Totalgrossearnedpremiums 373,575 473,560 523,857 766,853 704,589 764,141 876,770 540,821 102,160 5,126,326


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(ii) Analysis of claims development – net of reinsurance recoveries

Net incurred claims31 December 2016 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirst financialyear 92,443 80,770 50,917 144,661 181,482 95,539 102,224 62,012 49,350 121,720Oneyearlater 215,772 193,277 176,086 524,698 350,496 229,740 288,933 171,311 91,930Twoyearslater 264,178 209,025 234,672 556,831 369,720 273,142 325,160 228,253Threeyearslater 266,559 213,178 237,747 565,991 366,843 278,921 320,270Fouryearslater 262,291 220,088 248,087 579,982 370,423 296,931Fiveyearslater 261,675 216,565 246,214 589,453 364,539Sixyearslater 258,795 214,094 247,887 591,839Sevenyearslater 257,468 212,560 249,614Eightyearslater 257,472 213,276Nineyearslater 257,566Currentestimates oflossreserves 257,566 213,276 249,614 591,839 364,539 296,931 320,270 228,253 91,930 121,720 2,735,938Cumulative payments (256,230)(202,799)(238,517)(532,149)(344,937)(243,994)(243,480)(121,449) (26,875) (5,521) (2,215,951)Best estimate of outstanding claims liabilities 1,336 10,477 11,097 59,690 19,602 52,937 76,790 106,804 65,055 116,199 519,987Currencytranslation (27,063)Total current estimatesof lossreserves 492,924

Net earned premiums31 December 2016 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirst financialyear 111,881 118,545 90,507 147,188 198,750 147,893 160,725 100,232 45,129 150,668Oneyearlater 267,481 297,438 282,230 488,771 399,652 370,467 405,883 261,361 110,324Twoyearslater 321,732 336,377 327,848 551,213 447,458 412,489 475,743 363,104Threeyearslater 328,040 329,877 330,764 536,638 447,702 421,223 467,498Fouryearslater 327,177 332,204 338,960 541,439 450,262 425,625Fiveyearslater 328,777 334,782 343,469 544,593 452,195Sixyearslater 331,872 336,662 345,865 545,709Sevenyearslater 332,373 337,094 347,413Eightyearslater 332,525 337,328Nineyearslater 332,528Total net earned premiums 332,528 337,328 347,413 545,709 452,195 425,625 467,498 363,104 110,324 150,668 3,532,392


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(ii) Analysis of claims development – net of reinsurance recoveries (cont’d)

Net incurred claims31 December 2015 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirstfinancialyear 92,443 80,770 50,917 144,661 181,482 95,539 102,224 62,012 49,350Oneyearlater 215,772 193,277 176,086 524,698 350,496 229,740 288,933 171,311Twoyearslater 264,178 209,025 234,672 556,831 369,720 273,142 325,160Threeyearslater 266,559 213,178 237,747 565,991 366,843 278,921Fouryearslater 262,291 220,088 248,087 579,982 370,423Fiveyearslater 261,675 216,565 246,214 589,453Sixyearslater 258,795 214,094 247,887Sevenyearslater 257,468 212,560Eightyearslater 257,472Currentestimatesof lossreserves 257,472 212,560 247,887 589,453 370,423 278,921 325,160 171,311 49,350 2,502,537Cumulativepayments (255,464)(199,562)(230,967)(518,598)(334,126)(224,218)(179,960) (36,530) 873 (1,978,552)Best estimate of outstanding claims liabilities 2,008 12,998 16,920 70,855 36,297 54,703 145,200 134,781 50,223 523,985Currencytranslation (33,761)Totalcurrentestimatesof lossreserves 490,224

Net earned premiums31 December 2015 Underwriting years 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendoffirstfinancialyear 111,881 118,545 90,507 147,188 198,750 147,893 160,725 100,232 45,129Oneyearlater 267,481 297,438 282,230 488,771 399,652 370,467 405,883 261,361 Twoyearslater 321,732 336,377 327,848 551,213 447,458 412,489 475,743 Threeyearslater 328,040 329,877 330,764 536,638 447,702 421,223 Fouryearslater 327,177 332,204 338,960 541,439 450,262 Fiveyearslater 328,777 334,782 343,469 544,593 Sixyearslater 331,872 336,662 345,865 Sevenyearslater 332,373 337,094 Eightyearslater 332,525 Totalnetearnedpremiums 332,525 337,094 345,865 544,593 450,262 421,223 475,743 261,361 45,129 3,213,795


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Insurance business

(i) Analysis of claims development – gross of reinsurance recoveries

Gross incurred claims

31 December 2016 Accident years 2012 2013 2014 2015 2016 Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Atendofaccidentyear 6,640 3,375 3,252 2,421 2,055Oneyearlater 5,860 1,934 1,638 1,607Twoyearslater 6,149 1,908 1,655Threeyearslater 5,677 1,788Fouryearslater 4,783Currentestimatesoflossreserves 4,783 1,788 1,655 1,607 2,055 11,888Cumulativepayments (4,044) (903) (705) (469) (132) (6,253)Best estimate of outstanding claims liabilities 739 885 950 1,138 1,923 5,635Lossreservesinrespectofprioryears 1,046Currencytranslation 1Totalcurrentestimatesoflossreserves 6,682

Gross incurred claims


Atendofaccidentyear 6,054 6,640 3,375 3,252 2,421Oneyearlater 4,777 5,860 1,934 1,638Twoyearslater 4,934 6,149 1,908Threeyearslater 4,257 5,677Fouryearslater 3,047Currentestimatesoflossreserves 3,047 5,677 1,908 1,638 2,421 14,691Cumulativepayments (2,135) (3,959) (760) (688) (186) (7,728)Best estimate of outstanding claims liabilities 912 1,718 1,148 950 2,235 6,963Lossreservesinrespectofprioryears 2,194Currencytranslation 8Totalcurrentestimatesoflossreserves 9,165


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Insurance business (cont’d)

(ii) Analysis of claims development – net of reinsurance recoveries

Net incurred claims


Atendofaccidentyear 3,577 2,376 2,300 1,796 1,453Oneyearlater 2,988 1,565 1,352 1,471Twoyearslater 3,255 1,567 1,369Threeyearslater 3,103 1,486Fouryearslater 2,435Currentestimatesoflossreserves 2,435 1,486 1,369 1,471 1,453 8,214Cumulativepayments (1,836) (655) (480) (346) (133) (3,450)Best estimate of outstanding claims liabilities 599 831 889 1,125 1,320 4,764Lossreservesinrespectofprioryears 763Currencytranslation 1Totalcurrentestimatesoflossreserves 5,528

Net incurred claims


Atendofaccidentyear 3,774 3,577 2,376 2,300 1,796Oneyearlater 3,038 2,988 1,565 1,352Twoyearslater 3,214 3,255 1,567Threeyearslater 2,886 3,103Fouryearslater 2,004Currentestimatesoflossreserves 2,004 3,103 1,567 1,352 1,796 9,822Cumulativepayments (1,275) (1,780) (505) (470) (156) (4,186)Best estimate of outstanding claims liabilities 729 1,323 1,062 882 1,640 5,636Lossreservesinrespectofprioryears 1,358Currencytranslation 4Totalcurrentestimatesoflossreserves 6,998


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5.3 Financial risk management

(a) Introduction and overview

TransactionsinfinancialinstrumentsmayresultintheGroupassumingfinancialrisks.Theseinclude:

• Credit risk• Liquidityrisk• Market risk

ThisnotepresentsinformationabouttheGroup’sexposuretoeachoftheaboverisks,theGroup’sobjectives,policiesandprocessesformeasuringandmanagingsuchrisks.

(b) Credit risk

Creditrisk istheriskthat issuerofthefixed incomesecuritymayfail tohonor itsobligationonprincipalandinterestpaymentonatimelybasis,aswellastheriskthatcounterpartiestoinsurancetransactionsfailedtomeetitscontractualobligations.

Insurerfinancialstrengthratingisaforward-lookingopinionaboutthefinancialsecuritycharacteristicsofaninsuranceorganisationwithrespecttoitsabilitytopayunderitsinsurancepoliciesandcontractsinaccordancewiththeirterms.

TransactionsaremainlyenteredintowithexternalretrocessionairesratedA-andabovebyeitherAMBestorStandard&Poor’s(“S&P”)andassociatesoftheGroup.Thecontingentcreditexposuretoanysingleretrocessionaireislimitedanddependantonanumberoffactors,includingratingandcompanysize.ThelargestcontingentcreditriskforasinglecounterpartyforasingledefaulteventisUS$87.6million(2015:US$50.7million).

Themaximumexposuretocreditriskisnormallyrepresentedbythecarryingamountofeachfinancialassetinthefinancialstatements,althoughinthecaseofinsurancereceivables,itisfairlycommonpracticeforaccountstobesettledonanetbasis.Insuchcases,themaximumexposuretocreditriskisexpectedtobelimitedtotheextentoftheamountoffinancialassetsthathasnotbeenfullyoffsetbyfinancialliabilitieswiththesamecounterparty. Themaximumamountrecoverablefromeachretrocessionaireatanytimeisalsodependentontheclaimsrecoverablefromsuchretrocessionairesatthatpointintime.Asat31December2016,thetopfiveinsurancecounterpartiescollectivelyaccountedforabout32%(2015:40%)oftotalinsurancereceivables.Allfiveinsurancecounterpartiesareregulatedbytheirrespectiveauthorityinthecountrytheyoperateandarefinanciallysound,andthereforetheGroupdoesnotexpectanydefaultinpaymentsasandwhenpaymentsfalldue.

TheGroup’sinvestmentportfolioismanagedinaccordancetotheGroup’sconservativeandprudentinvestmentphilosophywiththeprimaryfocusonmaintainingminimalrisktocapital. Itfocusesoninvestinginhighqualityinvestmentgradefixedincomesecurities.Asat31December2016,theaveragecreditqualityofboththeGroup’sandCompany’sinvestmentportfoliowasAandA-(2015:A-andBBB).

TheGroupalsoenters intocreditdefaultswapsforthepurposeofcreditriskhedgingandefficientportfoliomanagement.Acreditriskswapisdesignedtotransferthecreditexposureoffixedincomeproductsbetweentwoormoreparties.Atinception,thereisnoexchangeofprincipalamountsandthenetreceivableorpayablepositionissettledonmaturity.


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5.3 Financial risk management (cont’d)

(b) Credit risk (cont’d)

TheGroupreviewsitsissuerconcentrationandcreditqualityaswellascompliancewithestablishedcreditlimitsonaregularbasis.TheGroup isnotexposedtoanysignificantcreditconcentrationriskon its investments. Asat31December2016,theGroup’s largestcorporate issuerexposure is1.6%(2015:2.0%)oftheGroup’s totalinvestments.

Seenote10forasummaryofthetypeofinvestment,heldbytheGroupandtherespectivecreditratings.

In2013,theCompanyenteredintoaConvertibleLoanAgreementwith itsassociate,AsiaCapitalReinsuranceMalaysiaSdn.Bhd.(“ACRM”)whichbearsinterestataninitialinterestrateof8%perannum.ACRMisregulatedbyBankNegaraMalaysiaandisfinanciallysound,andthereforetheCompanydoesnotexpectanydefaultinpayments.

In2014,theCompanyenteredintoaLoanAgreementwithitswholly-ownedsubsidiary,ACRHoldingsLimitedwhichbearsaneffectiveinterestrateof3.95%perannum.TheCompanydoesnotexpectanydefaultinpayments.

(c) Liquidity risk

LiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingobligationsassociatedwithitsfinancialandinsuranceliabilitiesthataresettledbydeliveryofcashoranotherfinancialasset.TheGrouphastomeetitsliabilitiesasandwhentheyfalldue,notablyfromclaimsarisingfromitsgeneralreinsurancecontracts.Thereishenceariskthatthecashandcashequivalentsheldwillnotbesufficienttomeetitsliabilitieswhentheybecomedue.

TheGroup’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitiesarisingfrominsuranceclaimsandmaturingliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheGroup’sreputation.

The Group’s approach to managing its liquidity risk is as follows:

• Cashflowpositionisbeingreviewed,onanongoingbasis,bymonitoringitsoverall liquiditypositionandfundingrequirementsovertheshort,mediumandlongterm;

• TheassetspurchasedfortheGroup’sliabilitymatchinghavetosatisfyspecifiedmarketabilityrequirementsintermsofrating,durationandconcentrationlimitsasrequiredbytheGroup’sinvestmentguidelineandassetandliabilitymanagement(“ALM”)requirements;

• TheGroupmaintainssufficientcashandliquidassetstomeetdailycallsonitsinsuranceandinvestmentneeds;and

• TheGroupregularlyupdatesitscontingencyfundingplanstoensurethatadequateliquidfinancialresourcesareinplacetomeetobligationsastheyfalldueintheeventofreasonablyforeseeableabnormalcircumstances.

Giventhehighlevelofcreditqualityandshortdurationinvestmentportfolio,theGroupisabletoquicklyliquidateitsinvestmentsatanamountclosetotheirfairvaluetomeetitsliquidityrequirementsortorespondtospecificeventssuchasdeteriorationinthecreditworthinessofanyparticularissuer.Inaddition,theGroupinvestsinAAAratedliquidityfundswhichprovideliquidityforworkingcapitalrequirementsandpaymentofliabilitieswhentheneedarises.


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(c) Liquidity risk (cont’d)

Theexpectedcontractualundiscountedcashoutflowsoffinancialliabilitiesasat31December2016and2015areas follows:

Cash flows Contractual Within 1 to 5 cash flows 1 year years US$’000 US$’000 US$’000

Group

2016Insurancepayables 98,815 5,992 92,823Otherpayables* 6,664 6,664 – 105,479 12,656 92,823

2015Insurancepayables 165,251 69,817 95,434Otherpayables* 7,368 7,368 – 172,619 77,185 95,434

Company

2016Otherpayables* 1,173 1,173 –

2015Otherpayables* 2,748 2,748 –

* The amount excludes accrued expenses.

Forinsurancecontractprovisions,theanalysisoftheestimatedtimingofcashoutflowsisshowninnote12.


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(d) Market risk

MarketriskistheriskthatchangesinmarketpricesthatwillaffecttheGroup’sincomeorthevalueofitsholdingoffinancialinstruments.MarketriskfortheGroupcomprisesthreetypesofrisks:

• Currency risk• Interest rate risk• Price risk Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturnonrisk.ThenatureoftheGroup’sexposurestomarketrisksanditsobjectives,policiesandprocessesformanagingmarketriskhavenotchangedsignificantlyfromthepreviousfinancialperiod.

For each of the major components of market risk the Group has policies and procedures in place which detail how eachriskshouldbemanagedandmonitored.ThemanagementofeachofthesemajorcomponentsofmajorriskandtheexposureoftheGroupatthereportingdatetoeachmajorriskisaddressedbelow.

(i) Currency risk

Currencyriskistheriskthatthefairvalueoffuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinforeignexchangerates.

TheGroup’scurrencyriskislargelymitigatedbyitsALMframework.Underthisframework,theGroupestablishedaninternallymanagedinvestmentportfolioaswellasexternalmanagedfunds,withtheobjectiveofinvestingintoAsianlocalcurrencydenominatedfixedincomesecuritiestomatchitsliabilitiesdenominatedinthevariousAsiancurrencies.TheGroupisrequiredtomaintainassetsinthecurrencyinwhichthecashflowsfromitsliabilitiesaretobesettledinordertoeconomicallyhedgethecurrencyriskinherentintheseexpectedcashflows.Notwithstandingthis,theALMframeworkissubjecttotimelag,estimatesandjudgementswhichmayaffectthedesiredoutcome.

TheGroupenters intocurrencyforwardcontractsforthepurposeofforeignexchangeriskhedgingandefficientportfoliomanagement.Acurrencyforwardcontractisanagreementbetweentwopartiestobuyorsellacurrencyataspecifiedprice,ataspecifiedquantityandonaspecifiedfuturedate.Atinception,thereisnoexchangeofprincipalamountsandthenetreceivableorpayablepositionissettledonmaturity.Currencyforwardsareusedforforeignexchangeriskhedgingandefficientportfoliomanagement.

TheGroupmayoverweightcertainassetsdenominatedinacurrencyotherthanthefunctionalcurrencyoftheGroupbeyondcurrentALMrequirementsaspartofstrategyassetallocationapprovedbytheBoardtoprepareunderwritingbusinessexpansionincertaincountriesand/orenhanceinvestmentreturn.Theseinvestmentsaremonitoredandmaybereducedwhenthecurrencyoutlook/valuationofthatinvestmentbecomesstretched.

ThenatureoftheGroup’sexposurestocurrencyriskanditsobjectives,policiesandprocessesformanagingcurrencyriskhavenotchangedsignificantlyfromthepreviousfinancialperiod.

ThefollowingtablesetsouttheGroupandCompany’smainexposuresatthereportingdatetocurrencyriskarisingfromrecognisedassetsorliabilitiesdenominatedinacurrencyotherthanthefunctionalcurrencyoftheGroup.TheoverallnetexposureisbeforetakingintoconsiderationtheGroup’scurrencyforwardcontractsposition.


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(d) Market risk (cont’d)

(i) Currency risk (cont’d)

Group South Malaysian Singapore Korean Japanese Renminbi Ringgit Dollar Won Yen US$’000 US$’000 US$’000 US$’000 US$’000

31 December 2016AssetsInvestments 73,313 13,748 5,150 15,319 –Insurancereceivables 76,842 14,061 5,035 9,024 31,215Otherreceivables 47 (412) 5,737 75 6Cashandcashequivalents 1,667 1,727 17,153 3,082 4,342 151,869 29,124 33,075 27,500 35,563

LiabilitiesInsurance contract provisions (net of ceded share and deferred acquisitioncosts) (110,367) (11,874) (18,110) (24,602) (98,665)Insurancepayables (16,548) (13,689) (12,942) (20,385) (14,367)Otherpayablesandaccruals (159) – (4,819) (48) 36 (127,074) (25,563) (35,871) (45,035) (112,996)

Overallnetexposure 24,795 3,561 (2,796) (17,535) (77,433)

31 December 2015AssetsInvestments 117,958 8,303 24,042 – –Insurancereceivables 68,438 11,862 11,789 16,902 26,574Otherreceivables 4,703 (101) 5,642 10 6Cashandcashequivalents 6,252 1,201 16,785 – 8,811 197,351 21,265 58,258 16,912 35,391

LiabilitiesInsurance contract provisions (net of ceded share and deferred acquisitioncosts) (125,600) (13,966) (22,399) (38,352) (84,629)Insurancepayables (18,954) (12,293) (16,994) (25,298) (5,357)Otherpayablesandaccruals (1) (185) (4,772) (1) (6) (144,555) (26,444) (44,165) (63,651) (89,992)

Overallnetexposure 52,796 (5,179) 14,093 (46,739) (54,601)


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(i) Currency risk (cont’d)

Malaysian Singapore Ringgit Dollar US$’000 US$’000

Company

31 December 2016AssetsOtherreceivables (413) 5,356Cashandcashequivalents – 2,580 (413) 7,936

LiabilitiesOtherpayablesandaccruals – (1,448)Overallnetexposure (413) 6,488

31 December 2015AssetsOtherreceivables – 5,101Cashandcashequivalents – 1,782 – 6,883

LiabilitiesOtherpayablesandaccruals – (181)Overallnetexposure – 6,702


A10%strengtheningofUnitedStatesdollaragainstthefollowingcurrenciesatthereportingdatewouldincrease/(decrease)profitorlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestrates,remainconstant.

Impact on profit or loss Group Company US$’000 US$’000

31 December 2016Renminbi (2,480) –MalaysianRinggit (356) 41SingaporeDollar 280 (649)SouthKoreanWon 1,754 –JapaneseYen 7,743 –

31 December 2015Renminbi (5,280) –MalaysianRinggit 518 –SingaporeDollar (1,409) (670)SouthKoreanWon 4,674 –JapaneseYen 5,460 –

A10%weakeningofUnitedStatesdollaragainsttheabovecurrencieswouldhavehadtheequalbutoppositeeffectontheabovecurrenciestotheamountsshownabove,onthebasisthatallothervariablesremainconstant.


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(ii) Interest rate risk

Interestrateriskistheriskthatthevalueorfuturecashflowsofafinancialinstrumentwillfluctuateduetotheimpactofchangesinmarketinterestrateshaveoninterestincomefromcashandcashequivalents,loanstoassociateandsubsidiary,andotherfixedincomeinvestments.

TheearningsoftheGroupareaffectedbychangesinmarketinterestratesduetotheimpactsuchchangeshaveoninterestincomefromcashandcashequivalents,includinginvestmentsinfixeddeposits.

TheGroupmanagesitsinterestrateriskbymatching,wherepossible,thedurationandprofileofassetsandliabilitiestominimisethe impactofmismatchesbetweenthevalueofassetsand liabilitiesfrominterestratemovements.

TheGroupalsoentersintointerestratefuturescontractsforthepurposeofinterestriskhedgingandefficientportfoliomanagement.Aninterestratefuturescontractisacontractbetweenthebuyerandselleragreeingtothefuturedeliveryofanyinterest-bearingasset.Atinception,thereisnoexchangeofprincipalamountsandthenetreceivableorpayablepositionissettledonmaturity.

TheGroup’sandCompany’sinvestmentportfoliohasanaveragedurationof2.19yearsand3.6yearsrespectively(2015:2.7yearsand3.4yearsrespectively),significantlyreducinganylongterminterestratevolatilitywithintheportfolio.

ThenatureoftheGroup’sexposuretointerestrateriskanditsobjectives,policiesandprocessesformanaginginterestrateriskhavenotchangedsignificantlyfromthepreviousfinancialperiod.

Thefollowingtablessetoutthecarryingamount,bymaturity,oftheGroup’sfinancialinstrumentsthatareexposedtointerestraterisk:

Within 1 to 5 More than 1 year years 5 years Total US$’000 US$’000 US$’000 US$’000

Group

31 December 2016

Fixed rateDebtsecurities 44,133 205,017 195,545 444,695Fixeddeposits 23,139 – – 23,139Bondfunds 87,761 133,038 126,112 346,911Loantoassociate – 5,873 – 5,873 155,033 343,928 321,657 820,618 Floating rateCashatbank 47,056 – – 47,056Debtsecurities – – 9,868 9,868Liquidityfunds 123,300 – – 123,300 170,356 – 9,868 180,224 325,389 343,928 331,525 1,000,842


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(ii) Interest rate risk (cont’d)

Within 1 to 5 More than 1 year years 5 years Total US$’000 US$’000 US$’000 US$’000

Group

31 December 2015

Fixed rateDebtsecurities 36,509 193,812 132,813 363,134Fixeddeposits 23,530 – – 23,530Bondfunds 106,624 166,291 169,012 441,927Loantoassociate – 5,873 – 5,873 166,663 365,976 301,825 834,464

Floating rateCashatbank 67,855 – – 67,855Debtsecurities – – 2,930 2,930Bondfunds – 1,602 – 1,602Liquidityfunds 10,974 – – 10,974 78,829 1,602 2,930 83,361 245,492 367,578 304,755 917,825

Company

31 December 2016

Fixed rateLoantoassociate – 5,873 – 5,873Bondfunds 12,051 14,100 15,337 41,488 12,051 19,973 15,337 47,361 Floating rateCashatbank 4,965 – – 4,965Loantosubsidiary – – 17,000 17,000 4,965 – 17,000 21,965 17,016 19,973 32,337 69,326

31 December 2015

Fixed rateLoantoassociate – 5,873 – 5,873Bondfunds 9,632 11,899 14,917 36,448 9,632 17,772 14,917 42,321

Floating rateCashatbank 5,639 – – 5,639Loantosubsidiary – – 17,000 17,000 5,639 – 17,000 22,639 15,271 17,772 31,917 64,960


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(ii) Interest rate risk (cont’d)


Achangeof100basispoints(“bp”)ininterestratesatthereportingdatewouldhaveincreased/(decreased)profitorlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularforeigncurrencyrates,remainconstantanddoesnottakeintoconsiderationtheGroup’sinterestratefuturescontractsandinterestrateswapspositions.

Profit or loss Equity 100 bp 100 bp 100 bp 100 bp increase decrease increase decrease US$’000 US$’000 US$’000 US$’000

Group

31 December 2016Debtsecurities – – (17,896) 17,896Bondfunds (12,188) 12,188 – – (12,188) 12,188 (17,896) 17,896

31 December 2015Debtsecurities (272) 272 (12,114) 12,114Bondfunds (15,053) 15,053 – – (15,325) 15,325 (12,114) 12,114

Company

31 December 2016Bondfunds (1,492) 1,492 – –

31 December 2015Bondfunds (1,231) 1,231 – –

(iii) Price risk

Priceriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketprices,whetherthosechangesarecausedbyfactorsspecifictotheindividualfinancialinstrumentoritsissuer,orfactorsaffectingallsimilarfinancialinstrumentstradedinthemarket.

TheGroupinvestsprimarilyindebtsecuritieswherebyfairvaluesorfuturecashflowsofthefinancialinstrumentsmainlyarisefromchangesininterestrateandtheissuers’repaymentabilities.TheGrouphassmallallocationtoequitysecurities,equityfundsandrealestates,thusthepriceriskfacedbytheGroupisrelativelylessvolatileinthecontextoftotalinvestibleassets.TheGroupmayconsiderreducingweightingsinriskassetswhentheeconomyandassetoutlookappearslessoptimistic.


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5.4 Capital management

TheGroup’scapitalmanagementapproachisfoundedontheobjectivesofmaintainingadequatecapitaltomeetregulatoryandratingagencies’requirementsandmaintainingacapitalstructureandbusinessmixthatoptimisestakeholdervalue.Significantbuffersarealsomaintainedagainstunexpectedandcatastrophiclossesthatcouldthreatensolvency.

TheGroup’sobjectiveswhenmanagingcapitalare:

• TocomplywithinsurancecapitalrequirementsstipulatedbytheregulatorsoftherespectiveinsurancemarketswheretheGroupoperatesasrequired.InthisrespecttheGroupmanagesitscapitalatanamountinexcessoftheminimumregulatorycapital;

• TosafeguardtheGroup’sabilitytocontinueasagoingconcern,sothatitcancontinuetoprovidereturnsforitsshareholdersandbenefitsforotherstakeholders;

• To provide an adequate return to its shareholders by pricing reinsurance contracts commensurately with the level ofrisk;

• Toaligntheprofileoftheassetsandliabilitiestakingintoaccountofrisksinherentinthebusiness;and

• Tomaintainstrongcreditratingsandhealthycapitalratiosinordertosupportitsbusinessobjectivesandmaximiseshareholders’value.

Primary capital

TheprimarysourceofcapitalusedbytheGroupisshareholders’equity.TheGroupalsoconsidersalternativesourcesofcapitalincludingretrocession,asappropriatewhenassessingitsdeploymentandusageofcapital.

Theobjectiveofthecapitalmanagementpolicyissustainedandensuredthroughupdatesofforecastsaspartofanannualstrategicandfinancialplanningprocess.

Regulatory capital

TheCompanyisregulatedbyitslocalinsuranceregulator,MonetaryAuthorityofSingapore(“MAS”)asaFinancialHoldingCompany(“FHC”)pursuanttoSection28oftheMonetaryAuthorityofSingaporeActwitheffectfrom22February2013.TheDirectivesissuedbyMASspecifiedtheminimumamountofgroupavailablecapitalthatmustbemaintainedatalltimesthroughouttheyear.

ThereinsurancesubsidiaryoftheCompany,AsiaCapitalReinsuranceGroupPte.Ltd.(“ACRG”)isalsorequiredtocomplywithMASregulatorycapitalrequirement.MASspecifiestheminimumrequiredcapitalthatmustbemaintainedatalltimesthroughouttheyear.Thisminimumrequiredcapitalisdeterminedtobetheriskbasedcapital,basedontheMAS’sRiskBasedCapitalframework(“RBC”).RBCisamethodofmeasuringtheminimumamountofcapitalappropriateforaninsurancecompanytosupportitsoverallbusinessoperationsinconsiderationofitssizeandriskprofile.Thecalculationisbasedonfactorsdeemedhigherforthoseitemswithgreaterunderlyingrisk. TheHongKonginsurancesubsidiaryoftheCompany,ConcordInsuranceCompanyLimited(“Concord”)isregulatedbyitslocalregulator,OfficeoftheCommissionofInsurance(HongKongInsuranceAuthority)(“HKOCI”).ConcordisrequiredtocomplywithHKOCIstatutorycapitalrequirements.HKOCIspecifiestheminimumrequiredcapitalthatmustbemaintainedatalltimesthroughouttheyear.


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5.4 Capital management (cont’d)

Rating agency capital

ThewhollyownedsubsidiaryoftheCompany,ACRG,andassociatesoftheCompany,AsiaCapitalReinsuranceMalaysiaSdn.Bhd.(“ACRM”)andACRReTakafulHoldingsLimited(“ACRR”),wereassignedfinancialstrengthandissuercreditratingsbyratingagencies.TheassignmentofsuchratingsarebasedonassessmentofACRG,ACRMandACRR’scapitaladequacycalculatedusingtheagencies’ownratingmethodology.

Asat31December2016and2015,ACRGcarriesanassignedratingof‘A-’(Excellent)and‘A-’(Strong)issuedbyA.M.BestandStandard&Poor’srespectively.

Asat31December2016and2015,ACRMcarriesanassignedratingsof‘A-’(Excellent)issuedbyA.M.Best.

Asat31December2016and2015,ACRRcarriesanassignedratingsof‘B++’(Good)issuedbyA.M.Best.

TherewerenochangesintheGroup’sapproachtocapitalmanagementduringthefinancialyear.

5.5 Accounting classifications and fair values

Fair values versus carrying amounts

Thefairvaluesoffinancialassetsandliabilities,togetherwiththecarryingamountsshowninthestatementsoffinancialposition,areasfollows:

Designated Fair value – Other Total at fair hedging Loans and Available- financial carrying Fair Note value instruments receivables for-sale liabilities amount value US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Group

31 December 2016Cashandcashequivalents 17 – – 70,202 – – 70,202 70,202Loantoassociate 14 – – 5,873 – – 5,873 5,873Otherreceivables* 16 – – 4,311 – – 4,311 4,311Available-for-salefinancialassets 10 – – – 456,929 – 456,929 456,929Financial assets designated at fairvaluethroughprofitorloss 10 615,840 – – – – 615,840 615,840Currencyforwardexchange contractsusedforhedging 10 – 2,916 – – – 2,916 2,916Credit default and interest rate swaps used for hedging 10 – 513 – – – 513 513Interest rate futures contracts used for hedging 10 – 6 – – – 6 6 615,840 3,435 80,386 456,929 – 1,156,590 1,156,590

Currencyforwardexchange contractsusedforhedging 10 – (11,290) – – – (11,290) (11,290)Credit default and interest rate swaps used for hedging 10 – (202) – – – (202) (202)Interest rate futures contracts used forhedging 10 – (88) – – – (88) (88)Otherpayablesandaccruals 23 – – – – (26,068) (26,068) (26,068) – (11,580) – – (26,068) (37,648) (37,648)


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5.5 Accounting classifications and fair values (cont’d)

Fair values versus carrying amounts (cont’d)

Designated Fair value – Other Total at fair hedging Loans and Available- financial carrying Fair Note value instruments receivables for-sale liabilities amount value US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Group

31 December 2015Cashandcashequivalents 17 – – 91,393 – – 91,393 91,393Loantoassociate 14 – – 5,873 – – 5,873 5,873Otherreceivables* 16 – – 15,794 – – 15,794 15,794Available-for-salefinancialassets 10 – – – 350,213 – 350,213 350,213Financial assets designated at fairvaluethroughprofitorloss 10 673,257 – – – – 673,257 673,257Currencyforwardexchange contractsusedforhedging 10 – 1,166 – – – 1,166 1,166Interest rate futures contracts used forhedging 10 – 687 – – – 687 687 673,257 1,853 113,060 350,213 – 1,138,383 1,138,383

Currencyforwardexchange contractsusedforhedging 10 – (1,972) – – – (1,972) (1,972)Otherpayablesandaccruals 23 – – – – (13,143) (13,143) (13,143) – (1,972) – – (13,143) (15,115) (15,115)

Designated Other Total at fair Loans and financial carrying Fair Note value receivables liabilities amount value US$’000 US$’000 US$’000 US$’000 US$’000

Company

31 December 2016Cashandcashequivalents 17 – 4,972 – 4,972 4,972Loantoassociate 14 – 5,873 – 5,873 5,873Loantosubsidiary 15 – 17,000 – 17,000 17,000Otherreceivables* 16 – 5,867 – 5,867 5,867Financialassetsdesignatedatfairvaluethroughprofitorloss 10 41,488 – – 41,488 41,488 41,488 33,712 – 75,200 75,200

Otherpayablesandaccruals 23 – – (16,554) (16,554) (16,554)

31 December 2015Cashandcashequivalents 17 – 5,646 – 5,646 5,646Loantoassociate 14 – 5,873 – 5,873 5,873Loantosubsidiary 15 – 17,000 – 17,000 17,000Otherreceivables* 16 – 7,926 – 7,926 7,926Financialassetsdesignatedatfairvaluethroughprofitorloss 10 36,448 – – 36,448 36,448 36,448 36,445 – 72,893 72,893

Otherpayablesandaccruals 23 – – (7,064) (7,064) (7,064)

* The amount excludes prepayments.


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Fair value hierarchy

Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000

Group

Financial assets and financial liabilities carried at fair value

31 December 2016Fair value through profit or lossEquitysecurities 10,340 – – 10,340Equityfund – 5,466 – 5,466Bondfunds 346,911 – – 346,911Liquidityfunds 123,300 – – 123,300Propertyfunds – – 129,823 129,823 480,551 5,466 129,823 615,840

Available-for-saleDebtsecurities 454,563 – – 454,563Equitysecurities 2,366 – – 2,366 456,929 – – 456,929

Derivatives designated as hedging instrumentsCurrencyforwardcontracts – (8,374) – (8,374)Interestratefuturescontracts – (82) – (82)Credit default and interest rate swaps – 311 – 311 – (8,145) – (8,145)

937,480 (2,679) 129,823 1,064,624

31 December 2015Fair value through profit or lossEquitysecurities 10,942 – – 10,942Debtsecurities 17,026 1,173 – 18,199Equityfund 37,532 35,982 – 73,514Bondfunds 443,529 – – 443,529Liquidityfunds 10,974 – – 10,974Propertyfunds – – 116,099 116,099 520,003 37,155 116,099 673,257

Available-for-saleDebtsecurities 311,710 36,155 – 347,865Equitysecurities 2,348 – – 2,348 314,058 36,155 – 350,213

Derivatives designated as hedging instrumentsCurrencyforwardcontracts – (806) – (806)Interestratefuturescontracts – 687 – 687 – (119) – (119)

834,061 73,191 116,099 1,023,351


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Fair value hierarchy (cont’d)

Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000

Company

Financial assets and financial liabilities carried at fair value

31 December 2016Fair value through profit or lossBondfunds 41,488 – – 41,488

31 December 2015Fair value through profit or lossBondfunds 36,448 – – 36,448

5.6 Measurement of fair values

Thefairvalueoffinancialassetstradedinactivemarketsisbasedonquotedmarketpricesatthebalancesheetdate. Thequotedmarket isdeterminedbyreferencetotheirquotedbidpricesor lasttradedprice.TheseinvestmentsareincludedinLevel1.

Thefairvalueoffinancialassetsandfinancialliabilitiesthatarenottradedinanactivemarket(forexample,over-the-counterderivatives)isdeterminedbyusingvaluationtechniques.Quotedmarketpricesordealerquotesforsimilarinstrumentsareusedtoestimatefairvalue.Thefairvaluesofforwardexchangecontracts,creditdefaultandinterestrateswaps,interestratefuturescontractsandcertaindebtsecuritiesandequityfundareestimatedbasedonquotesobtainedfromReuters/Bloombergandpricesquotedbythebrokeratthereportingdate.TheseinvestmentsareincludedinLevel2andcomprisedebtsecurities,equityfundandderivativefinancialinstruments.

The fair values of property funds are derived based on the net asset values obtained from the fund managers as at the reportingdate.Thevaluationsobtainedfromthemanagersarebasedonvariousanalysesontheunderlyingholdingsineachfund,includingfinancialvaluationmodelsandprojections,comparablevaluationsfromthepublicmarkets,andprecedentprivatemarkettransactions.Investmentsarevaluedbasedonthefund’sbeneficialinterestintheunderlyingnetassetsofthefundasdeterminedbythepartnershipagreement.Asthevaluationtechniquefortheseinvestmentsisbasedonsignificantunobservableinputs,suchinvestmentsareincludedinLevel3.

TheLevel3relatestopropertyfundswhereobservablemarketdataisnotavailable.AlthoughtheGroupbelievesthatthefairvaluesareappropriate,theuseofdifferentmethodologiesorassumptionscouldleadtodifferentmeasurementsoffairvalue.

Fairvalueofpropertyfundswillincreaseifcomparablevaluationsfromthepublicmarketsandprecedentprivatemarkettransactionsarefavourable.

Duringthefinancialyear,thereisnotransferofinvestmentsbetweenLevel1,2and3.


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5.6 Measurement of fair values (cont’d)

ThefollowingtableshowsareconciliationfromtheopeningbalancestotheendingbalancesforLevel3fairvalues:

Fair value through profit or loss US$’000

At1January2016 116,099Purchases 8,116Totalgainsandlossesrecognisedinprofitorloss:– Changeinfairvalueofinvestments 5,608At31December2016 129,823

6 Property and equipment

Furniture Computer Motor Office and equipment vehicle equipment fittings Total US$’000 US$’000 US$’000 US$’000 US$’000

Group

CostAt1April2015 10,272 378 546 1,536 12,732Additions 138 – 4 – 142Disposals – – (12) – (12)At31December2015 10,410 378 538 1,536 12,862

At1January2016 10,410 378 538 1,536 12,862Additions 422 – 2 157 581Disposals (17) – (1) (146) (164)At31December2016 10,815 378 539 1,547 13,279

Accumulated depreciationAt1April2015 8,035 378 514 1,213 10,140Depreciationchargefortheperiod 373 – 27 136 536Disposals – – (12) – (12)At31December2015 8,408 378 529 1,349 10,664

At1January2016 8,408 378 529 1,349 10,664Depreciationchargefortheyear 894 – 11 142 1,047Disposals (16) – (1) (117) (134)At31December2016 9,286 378 539 1,374 11,577

Carrying amountsAt1April2015 2,237 – 32 323 2,592

At31December2015 2,002 – 9 187 2,198

At31December2016 1,529 – – 173 1,702


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6 Property and equipment (cont’d)

Furniture Computer Motor Office and equipment vehicle equipment fittings Total US$’000 US$’000 US$’000 US$’000 US$’000

Company

CostAt1April2015 9,878 296 217 906 11,297Additions 138 – – – 138At31December2015 10,016 296 217 906 11,435

At1January2016 10,016 296 217 906 11,435Additions 257 – – – 257Disposals (12) – – – (12)At31December2016 10,261 296 217 906 11,680

Accumulated depreciationAt1April2015 7,752 296 211 833 9,092Depreciationchargefortheperiod 321 – 6 14 341At31December2015 8,073 296 217 847 9,433

At1January2016 8,073 296 217 847 9,433Depreciationchargefortheyear 839 – – 20 859Disposals (12) – – – (12)At31December2016 8,900 296 217 867 10,280

Carrying amountsAt1April2015 2,126 – 6 73 2,205

At31December2015 1,943 – – 59 2,002

At31December2016 1,361 – – 39 1,400


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7 Intangible assets

Club Goodwill Software membership Total US$’000 US$’000 US$’000 US$’000

Group

CostAt1April2015 2,273 8,387 – 10,660Additions – 114 – 114At31December2015 2,273 8,501 – 10,774

At1January2016 2,273 8,501 – 10,774Additions – 170 67 237Reclass from other receivables – – 133 133Disposals – (335) – (335)At31December2016 2,273 8,336 200 10,809

Accumulated impairmentAt 1 April 2015/31 December 2015 – – – –Impairment for the year – – 56 56At 31 December 2016 – – 56 56

Accumulated amortisationAt1April2015 – 4,765 – 4,765Amortisationchargefortheperiod – 1,987 – 1,987At31December2015 – 6,752 – 6,752

At1January2016 – 6,752 – 6,752Amortisationchargefortheyear – 1,881 – 1,881Disposals – (297) – (297)At31December2016 – 8,336 – 8,336

Carrying amountsAt1April2015 2,273 3,622 – 5,895

At31December2015 2,273 1,749 – 4,022

At31December2016 2,273 – 144 2,417


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7 Intangible assets (cont’d)

Club Software membership Total US$’000 US$’000 US$’000

Company

CostAt1April2015 8,137 – 8,137Additions 114 – 114At31December2015 8,251 – 8,251

At1January2016 8,251 – 8,251Additions 170 – 170Reclass from other receivables – 133 133Disposals (335) – (335)At31December2016 8,086 133 8,219

Accumulated impairmentAt 1 April 2015/31 December 2015 – – –Impairment for the year – 56 56At 31 December 2016 – 56 56

Accumulated amortisationAt1April2015 4,515 – 4,515Amortisationchargefortheperiod 1,987 – 1,987At31December2015 6,502 – 6,502

At1January2016 6,502 – 6,502Amortisationchargefortheyear 1,881 – 1,881Disposals (297) – (297)At31December2016 8,086 – 8,086

Carrying amountsAt1April2015 3,622 – 3,622

At31December2015 1,749 – 1,749

At31December2016 – 77 77


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8 Investments in subsidiaries

Company 2016 2015 US$’000 US$’000

Equitysharesatcost 765,450 765,450

Details of the investments in subsidiaries are as follows:

Country of Principal Class of OwnershipName of subsidiaries incorporation activities shares interest 2016 2015 % %

Asia Capital Reinsurance Singapore General and Ordinary 100 100 GroupPte.Ltd. lifereinsurance

Asia Risk-Tech People’s Republic Provision of risk Ordinary 100 100 EnterprisesManagement ofChina consultingand Consulting(Shanghai) engineeringservices CompanyLimited

ACRHoldingsLimited HongKong Investmentholding Ordinary 100 100

ConcordInsurance HongKong Generalinsurance Ordinary 51 51 CompanyLimited

Thefollowingsummarisesthefinancial informationofConcordInsuranceCompanyLimited,fortheyear/periodwithmaterialNCI,basedonitsfinancialstatementspreparedinaccordancewithFRS,modifiedfordifferencesintheGroup’saccountingpolicies.

Period from Year ended 1/4/2015 to 31/12/2016 31/12/2015 US$’000 US$’000

Grosswrittenpremiums 3,371 2,451Profit 2,241 1,437Othercomprehensiveincome 470 (169)Total comprehensive income 2,711 1,268Attributabletonon-controllinginterests:Profit 1,098 704Othercomprehensiveincome 250 (83)Total comprehensive income 1,348 621

Assets 42,738 43,078Liabilities (9,051) (12,154)Net assets 33,687 30,924Net assets attributable to non-controlling interests 16,507 15,159

Cashflowsusedinoperatingactivities (814) (1,476)Cashflowsusedininvestingactivities (4,736) (8,863)Cashflowsfromfinancingactivities(dividendstonon-controllinginterests:Nil) – –Netdecreaseincashandcashequivalents (5,550) (10,339)


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9 Investments in associates

Group Company 2016 2015 2016 2015 US$’000 US$’000 US$’000 US$’000

Cost 84,245 84,245 – 84,245Shareofresults 7,727 4,529 – –Reductionincapital (9,400) (9,400) – (9,400)Dividendsfromassociate (270) (270) – –Shareofassociates’reserves (11,165) (1,193) – –Impairmentonassociate (21,908) (21,908) – (21,908) 49,229 56,003 – 52,937

Investmentsinassociatesarecarriedattheequity-accountedamountfortheGroupandatcostfortheCompany.

Details of investments in associates are as follows:

Country of Principal Class of OwnershipName of associate incorporation activities shares interest 2016 2015 % %

Asia Capital Reinsurance Malaysia General reinsurance Ordinary 30 30 MalaysiaSdn.Bhd. (“ACRM”)

ACR ReTakaful Holdings Dubai Investment holding Ordinary 20 20 Limited(“ACRR”)

Wholly owned subsidiaries of ACR ReTakaful HoldingsLimited

– ACRReTakaful Kingdomof Retakafulactivities Ordinary 100 100 MEAB.S.C.(c) Bahrain

– ACRReTakafulBerhad Malaysia Retakafulactivities Ordinary 100 100


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9 Investments in associates (cont’d)

The followingsummarises thefinancial informationofeachof theGroup’smaterial associatesbasedon theirrespective (consolidated)financial statementsprepared inaccordancewithFRS,modified fordifferences in theGroup’saccountingpolicies.

ACRM ACRR Total US$’000 US$’000 US$’000

31 December 2016Assets and liabilitiesTotalassets 222,300 165,079 387,379Totalliabilities 154,579 4,599 159,178Participants’(deficit)fund – – –Netassets 67,721 160,480 228,201

ResultsGrosswrittenpremiums 40,172 – 40,172Profitafterincometax 9,635 707 10,342Othercomprehensiveincome (24,137) (2,573) (26,710)Totalcomprehensiveincome (14,502) (1,866) (16,368)

31 December 2015Assets and liabilitiesTotalassets 276,609 374,709 651,318Totalliabilities (214,159) (221,821) (435,980)Participants’(deficit)fund* – – –Netassets 62,450 152,888 215,338

ResultsGrosswrittenpremiums 41,072 – 41,072Profit/(Loss)afterincometax 3,792 (110,303) (106,511)Othercomprehensiveincome 11,420 (17,787) (6,367)Totalcomprehensiveincome 15,212 (128,090) (112,878)

Theinvestmentholdingsinassociates(i.e.AsiaCapitalReinsuranceMalaysiaSdn.Bhd.(“ACRM”)andACRRetakafulHoldingsLimited(“ACRR”))weredisposedon31January2017totheCompany’swhollyownedsubsidiary,AsiaCapitalReinsuranceGroupPte.Ltd.(“ACRG”),throughsharesswoparrangements.Inviewoftheimpendingsaleatthereportingdate, the investmentholdings inassociateshavebeenclassifiedasassetsheldforsaleattheCompany’sfinancialstatementsasat31December2016,asdisclosedinnote18.

Onconsolidatedaccountsbasis,theinvestmentsinassociateswillnotbeclassifiedasassetsheldforsaleasitisnottheintentionoftheGrouptodisposetheassociatesandthereforenotshownasdiscontinuedoperationsintheconsolidatedstatementofprofitorloss.

* FollowingtheratingdowngradeofACRRfromA-(Excellent)toB++(Good)byA.M.Beston18December2015,theCompanyhasconductedanimpairmentassessmentonACRR,andhaswrittendownitsproportionalshareinQardloanusedtofundtheParticipation’sfunddeficits.ItfurthertakesintoaccounttheadditionallossesduetolargeeventstoberecognisedbyACRRin2016.ThetotalamountwrittendownwasUS$21.9million.


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10 Investments


Financial assets

Fair value through profit or loss– Equitysecurities 10,340 10,942 – –– Debtsecurities – 18,199 – –– Bondfunds 346,911 443,529 41,488 36,448– Equityfund 5,466 73,514 – –– Liquidityfunds 123,300 10,974 – –– Propertyfunds 129,823 116,099 – – 615,840 673,257 41,488 36,448

Available-for-sale– Debtsecurities 454,563 347,865 – –– Equitysecurities 2,366 2,348 – – 456,929 350,213 – –

Derivatives designated as hedging instruments– Currencyforwardcontracts 2,916 1,166 – –– Credit default and interest rate swaps 513 – – –– Interestratefuturescontracts 6 687 – – 3,435 1,853 – – 1,076,204 1,025,323 41,488 36,448

Financial liabilities

Derivatives designated as hedging instruments– Currencyforwardcontracts (11,290) (1,972) – –– Credit default and interest rate swaps (202) – – –– Interestratefuturescontracts (88) – – – (11,580) (1,972) – –

Investments are allocated as follows:


Non-current 799,716 782,559 29,437 26,816Current 264,908 240,792 12,051 9,632 1,064,624 1,023,351 41,488 36,448


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10 Investments (cont’d)

The following tables show a summary of investments held by the Group and the Company as at 31 December 2016 and 2015andtherespectivecreditratings,whicharebasedonS&P’screditratingsoritsequivalent.

AAA AA A BBB BB B Below B Not rated rated rated rated rated rated rated rated Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

31 December 2016

Group

Fair value through profit or lossEquityfund* – – – – – – – 5,466 5,466Equitysecurities – – – – – – – 10,340 10,340Bond funds# 119,044 23,082 36,858 77,808 26,124 31,298 32,697 – 346,911Liquidityfunds** 122,278 – 1,022 – – – – – 123,300Property funds^ – – – – – – – 129,823 129,823 241,322 23,082 37,880 77,808 26,124 31,298 32,697 145,629 615,840

Available-for-saleDebt securitiesCorporatebonds 12,412 29,879 137,263 178,109 43,865 – – 7,191 408,719Government&quasi- governmentbonds 12,421 13,694 11,027 5,327 3,375 – – – 45,844 24,833 43,573 148,290 183,436 47,240 – – 7,191 454,563

Equitysecurities – – – – – – – 2,366 2,366 24,833 43,573 148,290 183,436 47,240 – – 9,557 456,929

Derivatives designated as hedging instrumentsCurrency forward contracts – (6,883) (1,490) – – – – (1) (8,374)Interest rate futures contracts – – (82) – – – – – (82)Credit default and interest rate swaps – – 311 – – – – – 311 – (6,883) (1,261) – – – – (1) (8,145)Total 266,155 59,772 184,909 261,244 73,364 31,298 32,697 155,185 1,064,624

Company

Fair value through profit or loss Bond funds# 17,963 1,784 4,526 5,698 2,784 4,346 4,387 – 41,488

* TheGroupinvestsinanequityfundwiththeaimofdiversifyinginvestmentportfolioaswellasenhancinglongterminvestmentreturn.Thefund,whichfocusesonvalueinvestmentphilosophy,investsprimarilyinAsianlistedsecuritieswiththeobjectivetoachievelongtermabsolutegain.

** TheGroupinvestsinliquidityfunds(“funds”)mainlyforworkingcapitalrequirement.Thesefundsaimtoachieveacurrentinvestmentincomewhilemaintainingliquidityandstabilityoftheprincipal.Thesefundsinvestprimarilyinaportfolioofhighquality,shortdurationfixedincomesecuritiessuchascommercialpapers,certificatesofdeposits,timedeposits,governmentbonds,governmentagencydebtsandcorporatebonds.

# TheGroupandtheCompanyinvestinbondfundswiththeaimofachievinginvestmentreturnwhilemaintainingstrongliquidityandpreservationofcapital.Thefundsinvestprimarilyingovernmentandcorporatebonds.

^ TheGroupinvestsinpropertyfundswiththeaimofdiversifyingtheinvestmentportfolioaswellasenhancinglongterminvestmentreturns.Thesefundsutilisedisciplinedvalue-addedinvestmentapproach,investsinpan-EuropeanandNorthAmericanprivatepropertieswiththeobjectiveofachievinginvestmentgainsthroughenhancingthevaluepropositionofitspropertyassets.


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AAA AA A BBB BB B Below B Not rated rated rated rated rated rated rated rated Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

31 December 2015

Group

Fair value through profit or lossDebt securitiesCorporatebonds – – 5,721 9,733 1,043 1,487 – – 17,984Government&quasi- government bonds – 215 – – – – – – 215 – 215 5,721 9,733 1,043 1,487 – – 18,199

Equityfund* – – – – – – – 73,514 73,514Equitysecurities – – – – – – – 10,942 10,942Bond funds# 125,412 50,302 44,216 96,368 37,691 57,633 31,907 – 443,529Liquidityfunds** – 10,974 – – – – – – 10,974Property funds^ – – – – – – – 116,099 116,099 125,412 61,491 49,937 106,101 38,734 59,120 31,907 200,555 673,257

Available-for-saleDebt securitiesCorporatebonds – 53,073 124,689 89,391 29,132 – – 3,097 299,382Government&quasi- governmentbonds 7,235 20,228 – 14,967 6,053 – – – 48,483 7,235 73,301 124,689 104,358 35,185 – – 3,097 347,865

Equitysecurities – – – – – – – 2,348 2,348 7,235 73,301 124,689 104,358 35,185 – – 5,445 350,213

Derivatives designated as hedging instrumentsCurrency forward contracts – (52) – – – – – (754) (806)Interest rate futures contracts – 687 – – – – – – 687 – 635 – – – – – (754) (119)Total 132,647 135,427 174,626 210,459 73,919 59,120 31,907 205,246 1,023,351

Company

Fair value through profit or lossBond funds# 11,914 4,426 3,811 5,592 2,435 5,675 2,595 – 36,448

* TheGroupinvestsinanequityfundwiththeaimofdiversifyinginvestmentportfolioaswellasenhancinglongterminvestmentreturn.Thefund,whichfocusesonvalueinvestmentphilosophy,investsprimarilyinAsianlistedsecuritieswiththeobjectivetoachievelongtermabsolutegain.

** TheGroupinvestsinliquidityfunds(“funds”)mainlyforworkingcapitalrequirement.Thesefundsaimtoachieveacurrentinvestmentincomewhilemaintainingliquidityandstabilityoftheprincipal.Thesefundsinvestprimarilyinaportfolioofhighquality,shortdurationfixedincomesecuritiessuchascommercialpapers,certificatesofdeposits,timedeposits,governmentbonds,governmentagencydebtsandcorporatebonds.

# TheGroupandtheCompanyinvestinbondfundswiththeaimofachievinginvestmentreturnwhilemaintainingstrongliquidityandpreservationofcapital.Thefundsinvestprimarilyingovernmentandcorporatebonds.

^ TheGroupinvestsinpropertyfundswiththeaimofdiversifyingtheinvestmentportfolioaswellasenhancinglongterminvestmentreturns.Thesefundsutilisedisciplinedvalue-addedinvestmentapproach,investsinpan-EuropeanandNorthAmericanprivatepropertieswiththeobjectiveofachievinginvestmentgainsthroughenhancingthevaluepropositionofitspropertyassets.


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Derivative financial instruments

TheGroupentersintocurrencyforwardcontracts,creditdefaultandinterestrateswapsandinterestratefuturescontractsforthepurposeofforeignexchangeriskhedging,creditriskhedgingandinterestratehedgingrespectivelyandefficientportfoliomanagement.

Thenotionalamountandnetfairvalueofthederivativefinancialinstrumentsasat31December2016and2015areassetoutbelow.

Notional Fair Notional Fair amount value amount value 2016 2016 2015 2015 US$’000 US$’000 US$’000 US$’000

Currencyforwardcontracts 323,451 (8,374) 213,626 (806)Creditdefaultandinterestrateswaps 19,702 311 – –Interestratefuturescontracts 10,964 (82) 48,300 687

11 Deferred acquisition costs

Themovementsindeferredacquisitioncostsareasfollows:

Group 2016 2015 Gross Ceded share Net Gross Ceded share Net US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Deferred acquisition costsAtbeginningoftheyear/period 114,785 (58,555) 56,230 195,626 (99,091) 96,535Acquisitioncosts 169,121 (72,903) 96,218 92,440 (42,640) 49,800Amortisationofdeferred acquisitioncosts (186,455) 86,133 (100,322) (173,602) 82,664 (90,938)Currencytranslation 955 (533) 422 321 512 833Atendofthefinancialyear/period 98,406 (45,858) 52,548 114,785 (58,555) 56,230

Deferredacquisitioncostsareallocatedasfollows:


Non-current 11,493 (6,742) 4,751 41,383 (19,366) 22,017Current 86,913 (39,116) 47,797 73,402 (39,189) 34,213 98,406 (45,858) 52,548 114,785 (58,555) 56,230


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12 Insurance contract provisions


Provisionforunexpiredrisks 348,226 (177,981) 170,245 406,782 (215,825) 190,957Provisionforinsuranceclaims 936,661 (438,209) 498,452 909,552 (412,330) 497,222Total 1,284,887 (616,190) 668,697 1,316,334 (628,155) 688,179

Insurance contract provisions are allocated as follows:

2016 2015 Gross Ceded share Net Gross Ceded share Net US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Non-current 562,545 (271,544) 291,001 713,411 (331,987) 381,424Current 722,342 (344,646) 377,696 602,923 (296,168) 306,755 1,284,887 (616,190) 668,697 1,316,334 (628,155) 688,179

The movements in insurance contract provisions are as follows:


Provision for unexpired risksAtbeginningoftheyear/period 406,782 (215,825) 190,957 720,361 (360,087) 360,274Premiumswritten 591,387 (293,021) 298,366 281,221 (157,332) 123,889Premiumsearned (653,770) 332,563 (321,207) (595,763) 300,403 (295,360)Currencytranslation 3,827 (1,698) 2,129 963 1,191 2,154Atendoftheyear/period 348,226 (177,981) 170,245 406,782 (215,825) 190,957

Provision for insurance claimsAtbeginningoftheyear/period 909,552 (412,330) 497,222 871,764 (377,297) 494,467Claimspaid (433,774) 197,204 (236,570) (362,996) 158,749 (204,247)Lossportfoliotransfers (4,082) 2,609 (1,473) 4,684 (3,126) 1,558Claimsincurred 457,722 (225,144) 232,578 412,484 (199,581) 212,903Currencytranslation 7,243 (548) 6,695 (16,384) 8,925 (7,459)Atendoftheyear/period 936,661 (438,209) 498,452 909,552 (412,330) 497,222Total 1,284,887 (616,190) 668,697 1,316,334 (628,155) 688,179


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12 Insurance contract provisions (cont’d)

Thetablebelowsummarisestheestimatedmaturityprofilesoftheprovisionfor insuranceclaimsbytheexpectedpayment dates:


Dueinoneyear 416,458 (193,328) 223,130 391,381 (178,814) 212,567Dueafteronethroughthreeyears 354,005 (169,705) 184,300 348,792 (158,852) 189,940Dueafterthreeyearsbutlessthan fiveyears 120,080 (54,557) 65,523 123,289 (54,161) 69,128Dueafterfiveyears 46,118 (20,619) 25,499 46,090 (20,503) 25,587Total 936,661 (438,209) 498,452 909,552 (412,330) 497,222

13 Insurance receivables

Group 2016 2015 US$’000 US$’000

Reinsurance businessInward insurance receivables and amounts due from retrocessionaires– thirdparties 277,354 343,069– associates 26,388 46,359 303,742 389,428Insurance businessInward insurance receivables and amounts due from retrocessionaires– thirdparties 408 325 304,150 389,753Depositsretainedbycedants 19,041 20,688 323,191 410,441

Insurancereceivablesarecurrent.

Theageingofinsurancereceivables,amountsduefromretrocessionairesandrelatedallowancefordoubtfulreceivablesatthereportingdateareasfollows:

2016 2015 Gross Allowance Net Gross Allowance Net US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Notdue 233,901 – 233,901 276,344 – 276,344Upto6months 23,952 – 23,952 34,234 – 34,234Above 6 months but not exceeding12months 13,964 – 13,964 13,703 – 13,703Above12months 33,629 (1,296) 32,333 66,659 (1,187) 65,472 305,446 (1,296) 304,150 390,940 (1,187) 389,753

Theabovereceivableshavebeenindividuallyassessedforimpairmentafterconsideringinformationsuchasoccurrenceofsignificantchangesinthecounterparty’sfinancialposition,patternsathistoricalpaymentinformationanddisputewithcounterparties.


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13 Insurance receivables (cont’d)

Basedonhistoricaldefaultrates,theGroupbelievesthatnoimpairmentallowanceisnecessaryinrespectoftheinsurancereceivablesnotpastdueorpastdueupto6months.ThesereceivablesaremainlyarisingbycedantsandbrokersthathaveagoodcredithistorywiththeGroup.

ConcentrationofcreditriskrelatingtoinsurancereceivablesislimitedduetotheGroup’sdiversifiedgroupofcedantsandbrokers.

Themovementsinallowancefordoubtfulreceivablesinrespectofinsurancereceivablesduringtheyear/periodareas follows:

Group Note 2016 2015 US$’000 US$’000

Atbeginningoftheyear/period 1,187 198Impairmentlossesoninsurancereceivables 26 71 1,013Currencytranslation 38 (24)Atendoftheyear/period 1,296 1,187

14 Loan to associate


Loantoassociate 5,873 5,873 5,873 5,873

In2013,theCompanyenteredintoaConvertibleLoanAgreementwithitsassociate,AsiaCapitalReinsuranceMalaysiaSdn.Bhd.(“ACRM”).Theloanhasatenureof50yearswithanoptiontoberepayableattheendofthefifthyearfromthefirstdrawdowndate.

Theloanearnsinterestataninitialinterestrateof8%perannumfor5yearsand10%perannumafterthefifthyearischargedanddeemedrepayablebi-yearly.Anadditionalchargeof2%perannumwillbeimposediftheinterestremainedunpaidaftertheseventhyear.

15 Loan to subsidiary


Loantosubsidiary – – 17,000 17,000

In2014,theCompanyenteredintoaLoanAgreementwithitswhollyownedsubsidiary,ACRHoldingsLimited.Theloanhasatenureof10yearsandbearsaneffectiveinterestrateof3.95%perannum.


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16 Other receivables


Amountsduefromsubsidiaries(trade) – – 3,685 3,029Amountsduefromassociates(trade) 1,633 2,466 1,633 2,466Accrued interest:– Cashandcashequivalents 292 165 – –Investmentreceivables 575 8,048 – –Otherreceivables 1,811 5,115 549 2,431Prepayments 701 843 204 322 5,012 16,637 6,071 8,248

Otherreceivablesarecurrent.

Theamountsduefromsubsidiariesandassociatesareunsecuredandinterest-free.Thereisnoallowancefordoubtfuldebtsarisingfromtheoutstandingbalances.

AmountsduefromassociatesmainlyrelatetomanagementfeeschargedandexpensesrechargedbytheCompany.

17 Cash and cash equivalents


Cashonhand 7 8 7 7Cashatbank 47,056 67,855 4,965 5,639Depositswithfinancialinstitutions 23,139 23,530 – – 70,202 91,393 4,972 5,646

Theweightedaverageeffectiveinterestrateperannumrelatingtodepositswithfinancialinstitutionsatthereportingdateis1.2%(2015:2.1%).

Depositswithfinancialinstitutionsaregenerallyplacedonshort-termmaturitiesoflessthan12monthsinduration.

18 Assets held for sale

Company 2016 2015 US$’000 US$’000

Costofinvestmentinassociates 84,245 –Reductionincapital (9,400) –Impairmentonassociate (26,648) – 48,197 –

Thevalueofshares(“realisablevalue”)issuedbyACRGinexchangefortheCompany’s30%stakeinACRMand20%stakeinACRRwasUS$24.2millionandUS$24.0million,respectively.Onreviewoftherealisablevalue,therewasanimpairmenttotheCompany’scostofinvestmentholdinginACRRatthereportingdatewhereitrecognisedanimpairmentlossofUS$4.7millionduringthefinancialyearended31December2016.


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19 Share capital

Company 2016 2015 No. of No. of shares shares

Fully paid ordinary shares with no par valueOnissueatbeginningoftheyear/period 8,256,450 8,256,450Issuanceofordinaryshares 109,327 –Atendoftheyear/period 8,365,777 8,256,450

Duringtheyear,theCompanyissued105,921ClassAordinarysharestoaDirectoroftheCompanyandashareoptionholdersubscribedandfullypaidfor3,406ClassBordinaryshares.

The table below shows the breakdown of the number of shares by classes:

Company 2016 2015 No. of No. of shares shares

Fully paid ordinary sharesClassAordinaryshares 8,112,681 8,006,760Series1ClassBordinaryshares 95,882 95,882Series2ClassBordinaryshares 41,708 41,708ClassBordinaryshares 19,630 16,224ClassCordinaryshares 95,876 95,876 8,365,777 8,256,450

Therights,preferencesandrestrictionsattachingtoeachclassofshares, includingrestrictionsonthedistributionofdividendsandrepaymentofcapital,areasfollows:

• Class A ordinary shares

HoldersofClassAordinarysharesareentitledtovoteatanygeneralmeetingoftheCompanyandtoreceivedividendsorotherdistributionsfromtheCompany.AnyClassAordinarysharesmaybetransferredatanytime,subjecttoconditionsstipulatedintheShareholdersAgreement.

• Class B ordinary shares (Inclusive of Series 1 and 2)

HoldersofClassBordinarysharesareentitledtovoteatanygeneralmeetingoftheCompanyandtoreceivedividendsorotherdistributionsfromtheCompany.Series1andSeries2ClassBordinarysharesarenottransferableuntil 28November2011,subjecttoconditionsstipulatedintheShareholders’Agreement.

• Class C ordinary shares

HoldersofClassCordinarysharesarenotentitledtovoteatanygeneralmeetingoftheCompanyortoreceivedividendsorotherdistributionsfromtheCompany.AllClassCordinarysharesshallbeconvertedtoClassAordinarysharesonaone-to-onebasisupontheoccurrenceofcertaineventsandconditionaluponthefulfilmentofothercriteriastipulatedintheShareholders’Agreement.ClassCordinarysharesmaynotbetransferableuntil28November2011,subjecttoconditionsstipulatedintheShareholders’Agreement.


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19 Share capital (cont’d)

Dividends

On12May2015, the followingdividendsweredeclared.Theywerepaidduring thefinancial periodended 31December2015.

2015 US$’000

Interim dividend proposed:– US$1.21pershare 10,000

20 Reserves


Warrants reserve # # # #

Shareoptionreserve 825 2,297 825 969Foreigncurrencytranslationreserve (11,240) (1,215) – –Fairvaluereserve (917) 2,376 – –Revaluationreserve 196 193 – –Reserveforownshares (1,231) (950) (1,231) (950) (12,367) 2,701 (406) 19

# Amount is less than US$1,000.

(a) Warrants reserve

Group and Company 2016 2015 No. of No. of warrants warrants

Series1warrants 62,656 62,656Series2warrants 122,398 122,398 185,054 185,054

EachSeries1and2warrantentitlesthewarrantholdertosubscribeforonenewClassAordinaryshareinthesharecapitaloftheCompanyatanexercisepriceofUS$100upto28November2016.

On6October2016,theCompanyhaswrittentoallRightsHolders(i.e.optionsandwarrantsholders)toofferacash-outpaymentonthecompletiondateoftheproposedacquisitionoftheCompanybyapotentialbuyer. AllRightsHoldershaverespondedbefore21October2016withtheundertakingsnottoexercisetheiroptions/warrantsandelectedtoreceivethecash-outpaymentoffered.

Thecashamountforeachoption/warrantwillequaltothedifferencebetweenthepurchasepricepersharepaidbythepotentialbuyeroncompletionandthestrikepriceofUS$100foreachoption/warrant.

(b) Share option reserve

Theshareoptionreservecomprisesthecumulativevalueofemployeeservicesreceivedfortheissueofemployeeshareoptions.Detailsoftheemployeeshareoptionsaredisclosedinnote21.


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20 Reserves (cont’d)

(c) Foreign currency translation reserve

Foreigncurrencytranslationreservecomprises:

• Foreignexchangedifferencesarisingfromthetranslationofthefinancialstatementsofaforeignassociatewhose functionalcurrency isdifferent fromthepresentationcurrencyof theconsolidatedfinancialstatements;and

• TheGroup’sshareoftheforeigncurrencytranslationreserveofanassociate.

(d) Fair value reserve

Fair value reserve comprises:

• Thecumulativenetchangeinthefairvalueofavailable-for-salefinancialassetsuntiltheinvestmentsarederecognisedorimpaired.

• TheGroup’sshareoftheavailable-for-saleinvestmentsreserveofanassociate.

(e) Revaluation reserve

TherevaluationreserverelatestotheGroup’sshareoftherevaluationreserveofaninvestmentpropertyofanassociate.

(f) Reserves for own shares

ThereservefortheCompany’sownsharescomprisesthecostof theCompany’ssharesheldbytheGroup. At31December2016,theGroupheld3,835,8,949,2100and6,123oftheCompany’sSeries1ClassBordinaryshares,Series2ClassBordinaryshares,ClassBordinarysharesandClassCordinaryshares(2015:3,835,8,949,1,700and6,123oftheCompany’sSeries1ClassBordinaryshares,Series2ClassBordinaryshares,ClassBordinarysharesandClassCordinaryshares)respectively.

21 Employee share options/other share-based payment

On15November2007,theCompanyestablishedanemployeeshareoptionprogrammethatentitlesemployeesanddirectorstopurchasesharesintheCompany.Inaccordancewiththeseprogrammes,optionsareexercisableattheexercisepriceofthesharesaftertheoptionshadvested.

Thetermsandconditionsofemployeeshareoptionprogrammeareasfollows:

Number of ContractualGrant date options Vesting conditions life of options

15November2007 207,281 50%ofoptionscanbevestedafter3years 10years fromgrantdate,regardlessofperformance.


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21 Employee share options/other share-based payment (cont’d)

Movementsinthenumberofshareoptionsandtheirrelatedweightedaverageexercisepricesareasfollows:

2016 2015 Weighted Weighted average average exercise exercise price No. of price No. of US$ options US$ options

Atbeginningoftheyear/period 100.00 36,648 100.00 41,515Exercisedduringtheyear/period 100.00 (3,406) 100.00 –Forfeitedduringtheyear/period 100.00 (2,020) 100.00 (4,867)Atendoftheyear/period 31,222 36,648

Shareoptionsoutstandingattheendoftheyear/periodhavethefollowingexpirydatesandexerciseprices:

Exercise price Share optionsDate of grant of options Expiry date (US$) outstanding 2016 2015

15November2007 15November2017 100 31,222 36,648

ThefairvalueofservicesreceivedinreturnforshareoptionsgrantedaremeasuredbyreferencetothefairvalueofshareoptionsgrantedwhichisestimatedbasedontheBlack-Scholesmodel.

Fair value of share options and assumptions

15 NovemberDate of grant 2007

Fairvalueofeachoptionatdateofgrant US$26.44

Shareprice US$100Strikeprice US$100Expectedvolatility 21.6%Expectedduration 4.8yearsRisk-freeinterestratebasedontheannualyieldofa5-yearTreasuryNote 3.672%

Thereisnomarketconditionassociatedwiththeshareoptiongrants.Serviceconditionsandnon-marketperformanceconditionsarenottakenintoaccountinthemeasurementofthefairvalueoftheoptionstobereceivedatthegrantdate.

On6October2016,theCompanyhaswrittentoallRightsHolders(i.e.optionsandwarrantsholders)toofferacash-outpaymentonthecompletiondateoftheproposedacquisitionoftheCompanybyapotentialbuyer.AllRightsHoldershaverespondedbefore21October2016withtheundertakingsnottoexercisetheiroptions/warrantsandelectedtoreceivethecash-outpaymentoffered.

Thecashamountforeachoption/warrantwillequaltothedifferencebetweenthepurchasepricepersharepaidbythepotentialbuyeroncompletionandthestrikepriceofUS$100foreachoption/warrant.


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21 Employee share options/other share-based payment (cont’d)

Other share-based payment

On12November2015,theCompanygrantedtherighttoown105,921ClassAordinarysharestoitsGroupChiefExecutive,whoisalsoadirectoroftheCompany,in2016,uponfulfillingcertainconditions.On12November2016,105,921ClassAordinaryshareswereissuedtohim.

Partnership plan

On24February2016, theCompanyestablishedanemployeeshareplan,ACRCapitalHoldingsPartnershipPlan (“the Plan”) where all employees in permanent employment with the Company and its subsidiaries as at and from 1 January 2016andwhoarenotservinganynoticeperiodatsuchtime(subjecttotheircompletionofanyapplicableprobationperiod),unlessotherwisewaivedbytheCompany’sRemunerationCommitteeatitssoleandabsolutediscretion,shallbeeligibletothePlanandbegrantedanaward.

Theawardisacontingentrighttoreceiveacashpaymentequaltothebookormarketvalueofaspecifiednumberofdeemedshares(“DS”)intheCompanyontherelevantvestingdates,intheformofanawardletterandanyawardnotvestedwillbelapsedwhentheeligibleemployeeceasestobeinemploymentwiththeCompanyoranyofitssubsidiaries.

AparticipatingemployeeDSvestingdate(s)willfallunderoneofthefollowingcombinations:

(a) 100%on31December2016;(b) 33%on31December2016,andtheremainder,or67%,on31December2017;or(c) 100%on31December2017.

Thetotalvalueoftheawardsasat31December2016wasUS$10.9millionbasedon91,010DSatUS$120perDS,outofwhichUS$3.4millionwasfullyvestedby31December2016andtheremainingUS$7.5millionisexpectedtobefullyvestedby31December2017.

22 Insurance payables

Group 2016 2015 US$’000 US$’000

Insurance payables– Reinsurancebusiness 98,738 165,071– Insurancebusiness 77 180 98,815 165,251

Insurancepayablesarecurrent.

23 Other payables and accruals


Accruedexpenses 12,257 5,775 8,234 4,316Partnershipplanliability 7,147 – 7,147 –Investmentpayables 57 195 – –Otherpayables 6,607 7,173 1,173 2,748 26,068 13,143 16,554 7,064

Otherpayablesandaccrualsarecurrent.


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24 Deferred tax assets and liabilities

Group 2016 2015 US$’000 US$’000

Deferredtaxasset 7,908 8,933Deferredtaxliabilities (182) (165)Net 7,726 8,768

Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandwhenthedeferredtaxesrelatetothesametaxauthority.

Deferredtaxassetsandliabilitiesareattributabletothefollowing:

Assets Liabilities Net 2016 2015 2016 2015 2016 2015 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

GroupAvailable-for-salefinancialassets – – 182 165 182 165Taxlosscarry-forwards (7,905) (8,930) – – (7,905) (8,930)Others (3) (3) – – (3) (3)Deferredtax(assets)/liabilities (7,908) (8,933) 182 165 (7,726) (8,768)Set-offoftax – – – – – –Netdeferredtax(assets)/liabilities (7,908) (8,933) 182 165 (7,726) (8,768)

Movementsindeferredtaxassetsandliabilities(priortooffsettingofbalances)duringtheyear/periodareasfollows:

Balance Recognised Balance Recognised Balance as at Recognised in other as at Recognised in other as at 1 April in profit comprehensive 31 December in profit comprehensive 31 December 2015 or loss income 2015 or loss income 2016 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Group Available-for-sale financialassets 937 – (772) 165 – 17 182Taxlosscarry-forwards (6,686) (2,244) – (8,930) 1,025 – (7,905)Others (4) 1 – (3) – – (3) (5,753) (2,243) (772) (8,768) 1,025 17 (7,726)

Thefollowingtemporarydifferenceshavenotbeenrecognised:

Company 2016 2015 US$’000 US$’000

Unutilisedtaxlosses 14,676 18,195

TheutilisationoftaxlossescarriedforwardissubjecttocompliancewithSection37oftheSingaporeIncomeTaxAct,Chapter134andagreementwiththeComptrollerofIncomeTax.DeferredtaxassetshavenotbeenrecognisedinrespectofthesetemporarydifferencesbecauseoftheuncertaintyovertheavailabilityoffuturetaxableprofitsagainstwhichtheCompanycanutilisethebenefits.


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25 Net investment income

Group Period from Year ended 1/4/2015 to 31/12/2016 31/12/2015 US$’000 US$’000

Investment incomeInterest income:– Cashandcashequivalents 281 581– Liquidityfunds 102 179– Debtsecurities 23,624 15,477– Loantoassociate 349 274– Insurance deposits and others 212 262Dividendincomefromequitysecurities 5,576 3,671Net(losses)/gainsonsaleofinvestments (16,744) 33,875Netgainondisposalofavailable-for-salefinancialassetsreclassifiedfromequity 2,208 –Netfairvaluegains/(losses) 46,927 (19,263)Investmentexpenses (2,920) (1,080) 59,615 33,976

Net investment income is derived from:

Reinsurancebusiness 14,867 10,051Capitalfundandnon-reinsurancebusiness 44,748 23,925 59,615 33,976

Netinvestmentincomefromreinsurancebusinessisdeterminedbasedonthenetcashinflows/(outflows)received/(paid)derivedfromreinsuranceoperationsthatareinvestedintotheGroup’sfinancialassetsforgenerationofinvestmentincomeandafterdeductinginvestmentexpenses.

Net investment income from capital fund and non-reinsurance business is derived from investment of capital injected intotheGroupandnetcashinflows/(outflows)received/(paid)fromothernon-reinsuranceactivities,takingintoaccountaccumulatedinvestmentincome/(loss)received/(paid),afterdeductinginvestmentexpenses.


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26 Loss for the year/period

The following items have been included in arriving at loss for the year/period:

Group Group Year ended Period from 31/12/2016 1/4/2015 to 31/12/2015 Net Other Net Other operating operating operating operating Note expenses expenses expenses expenses US$’000 US$’000 US$’000 US$’000

Personnelexpenses – Staffcosts 26,375 2,081 20,734 4,075– Contributionstodefinedcontributionplan 1,335 44 895 106– Valueofemployeeservicesreceived forissueofshares/shareoptions (53) 11,383 (129) 1,328– Partnershipplan 560 6,587 – –– Otherstaffcosts 1,838 247 1,754 2,690Depreciationofpropertyandequipment 6 187 860 190 346Amortisationofintangibleassets 7 1,881 – 1,967 20Impairmentlossesoninsurancereceivables 13 71 – 1,013 –Impairmentofinvestmentinassociate 18 – – – 21,908Impairmentofintangibleassets 7 – 56 – –Audit fees paid to:– auditorsoftheCompany 422 95 364 109Non-audit fees paid to:– auditorsoftheCompany – – 8 –Professionalfees 1,281 6,930 1,464 662ITexpenses 2,521 – 1,835 78Operatingleaseexpense 2,448 69 1,856 92Ceding fee# (5,811) – (6,516) –Netforeignexchangelosses – 773 – 2,086Otherincome – (638) – (148)

# Ceding fee is derived from the Group’s whole account quota share arrangement to defray operating expenses incurred.


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27 Tax expense

Recognised in profit or loss


Current tax expenseCurrentyear/period 339 453Adjustmentforprioryears 551 1,850 890 2,303

Deferred tax expenseMovementsintemporarydifferences (892) (1,771)Adjustmentforprioryears 1,917 (472) 1,025 (2,243)

Total tax expense 1,915 60

Recognised in other comprehensive income

For the year/period ended 31 December

2016 2015 Before Tax Net of Before Tax Net of tax expense tax tax credit tax US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Available-for-salefinancialassets (3,028) (17) (3,045) (5,061) 772 (4,289)Foreigncurrencytranslation differencesofforeignoperations (48) – (48) – – –Shareofassociates’reserves (9,972) – (9,972) (1,909) – (1,909)


Reconciliation of effective tax rateLossbeforetax (14,119) (37,439)

TaxcalculatedusingSingaporetaxratesof17% (2,400) (6,364)Effectsof:– Concessionarytaxrateof10% 268 1,619– (Profit)/Lossnotsubjecttotax (2,145) 3,064– Currentyearlossesforwhichnodeferredtaxassetwasrecognised 2,495 973– Effectsoftaxratesinforeignjurisdiction 488 (684)– Non-deductibleexpenses 741 74– Adjustmentsforprioryears 2,468 1,378 1,915 60


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27 Tax expense (cont’d)

Pursuanttosection43CoftheSingaporeIncomeTaxAct,Cap134,incomefromoffshorebusinessissubjecttotaxattheconcessionaryrateof10%,insteadofthestandardrateof17%.

AwhollyownedsubsidiaryoftheCompany,AsiaCapitalReinsuranceGroupPteLtd,hasbeenawardedthefollowingtaxexemptionschemes:

• TaxexemptionschemeforOffshoreMarineHullandLiabilityinsurancebusinessforaperiodof10yearscommencing5February2007;and

• TaxexemptionschemeforQualifyingOffshoreSpecialisedInsuranceRiskswasrenewedforaperiodof5yearswitheffectfrom1January2013.

Incomeandexpensesderivedfromunderthesetaxexemptionschemesareexemptedfromtax,subjecttotheconditionssetoutinsection43CoftheSingaporeIncomeTaxAct,Cap134.

28 Operating leases

Non-cancellableoperatingleaserentalsarepayableasfollows:


Payable: Withinoneyear 2,455 2,169 1,644 1,556Betweenoneandfiveyears 3,738 368 2,906 128 6,193 2,537 4,550 1,684

29 Significant related party transactions

Duringtheyear/period,apartfromthebalancesandtransactionsdisclosedelsewhere inthesefinancialstatements, thetransactionswiththeGroup’srelatedpartiesareasfollows:

2016 2015 US$’000 US$’000

Related parties– Premiumsreceived/receivable 1,802 2,213– Commissionpaid/payable (878) (735)– Claimspaid/payable (155) (80)– Brokeragefeespaid/payable (470) (908)

Associates of the Company– Premiumspaid/payable (18,789) (11,927)– Premiumsreceived/receivable 18,023 (255)– Commissionreceived/receivable 3,105 649– Commissionpaid/payable (5,865) (15,650)– Claimsreceived/receivable 20,053 13,131– Claimspaid/payable (50,368) (45,116)– Servicefeespaid/payable (125) (404)


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29 Significant related party transactions (cont’d)

2016 2015 US$’000 US$’000

Affiliates of the Company– Premiumspaid/payable (24) (98)– Premiumsreceived/receivable 37 108– Commission received/receivable – 22– Commission paid/payable – (260)– Claimsreceived/receivable 7 –

RelatedpartycomprisescompaniesrelatedtoasubstantialshareholderoftheCompany.

30 Key management personnel compensation

Group 2016 2015 US$’000 US$’000

Short-termemploymentbenefits 6,739 5,699Post-employmentbenefits 91 63 6,830 5,762

Shareoptionsthatweregrantedtokeymanagementpersonnelon15November2007,18December2009and 21December2010wereonthesametermsandconditionsasthoseofferedtootheremployeesoftheGroupasdescribedinnote21.Atthereportingdate,27,889(2015:33,315)ofthoseshareoptions,heldbykeymanagementpersonnel,areoutstanding.

31 New accounting standards and interpretations not yet adopted

Anumberofnewstandards,amendmentstostandardsandinterpretationsareeffectiveforannualperiodsbeginningafter1January2016andearlierapplicationispermitted;howevertheGrouphasnotearlyappliedthefollowingneworamendedstandardsinpreparingthesestatements.

ForthosenewstandardsandamendmentstostandardsthatareexpectedtohaveaneffectonthefinancialstatementsoftheGroupinfuturefinancialperiods,theGroupisassessingthetransitionoptionsandthepotentialimpactonitsfinancialstatements,andtoimplementthesestandards.TheGroupdoesnotplantoadoptthesestandardsearly.


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31 New accounting standards and interpretations not yet adopted (cont’d)

Applicable to 2018 financial statements

New standardsSummary of the requirements Potential impact on the financial statementsApplying FRS 109 Financial Instruments with FRS 104 Insurance Contracts(AmendmentstoFRS104)

The amendments introduce two approaches: an overlay approachandadeferralapproach.TheamendedFRS104:

• gives all companies that issue insurance contracts theoptiontorecognise inothercomprehensiveincome,ratherthanprofitorloss,thevolatilitythatcouldarisewhenFRS109isappliedbeforethenewinsurance contracts standard is issued (the “Overlay Approach”);and

• givescompanieswhoseactivitiesarepredominantlyconnectedwithinsuranceanoptionaltemporaryexemptionfromapplyingFRS109until2021(the“DeferralApproach”).TheentitiesthatdefertheapplicationofFRS109willcontinuetoapplytheexistingfinancialinstrumentsstandard–FRS39.

An insurer that applies the Overlay Approach shall disclose informationtoenableusersoffinancialstatementstounderstand:

(a) howthetotalamountreclassifiedbetweenprofitor loss and other comprehensive income in the reportingperiodiscalculated;and

(b) theeffectofthatreclassificationonthefinancialstatements.

AninsurerthatelectstoapplytheTemporaryExemptionfromFRS109shalldiscloseinformationtoenableusersoffinancialstatements:

(a) tounderstandhowthe insurerqualifiedforthetemporaryexemption;and

(b) to compare insurers applying the temporary exemptionwithentitiesapplyingFRS109.

Anentityshallapplythoseamendments,whichpermitinsurersthatmeetspecifiedcriteriatoapplytheDeferralApproach, for annual periodsbeginningonor after 1January2018.

Anentityshallapplythoseamendments,whichpermitinsurers to apply the overlay approach to designated financialassets,whenitfirstappliesFRS109.

ThenewinsuranceaccountingstandardthatiscurrentlyunderdevelopmentisexpectedtohaveasignificantimpactontheGroup’sfinancialstatements.ThatstandardmayimpacthowtheclassificationandmeasurementoffinancialinstrumentsrequirementsunderFRS109isadopted. The Group is currently assessing the impact and has decided thatitwilldefertheimplementationofFRS109tillthenewinsuranceaccountingstandardisissuedanditisabletoperformacomprehensiveassessmentofbothstandardstogether.


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31 New accounting standards and interpretations not yet adopted (cont’d)

Applicable to 2019 financial statements

New standardsSummary of the requirements Potential impact on the financial statementsFRS 116 Leases

FRS116eliminatesthelessee’sclassificationofleasesaseitheroperatingleasesorfinanceleasesandintroducesasingle lesseeaccountingmodel.Applying thenewmodel,a lessee is requiredtorecogniseright-of-use(“ROU”)assetsand lease liabilitiesforall leaseswithatermofmorethan12months,unlesstheunderlyingassetisoflowvalue.

FRS116substantiallycarriesforwardthelessoraccountingrequirements inFRS17Leases.Accordingly,a lessorcontinuestoclassifyitsleasesasoperatingleasesorfinanceleases,andtoaccountforthesetwotypesofleasesusingtheFRS17operatingleaseandfinanceleaseaccountingmodelsrespectively.However,FRS116requiresmoreextensivedisclosurestobeprovidedbyalessor.

When effective, FRS 116 replaces existing leaseaccountingguidance, includingFRS17, INTFRS104 Determining whether an Arrangement contains a Lease; INTFRS15Operating Leases – Incentives;and INTFRS27Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

FRS116iseffectiveforannualperiodsbeginningonorafter1January2019,withearlyadoptionpermittedifFRS115isalsoapplied.

The Group has performed a preliminary high-level assessmentofthenewstandardonitsexistingoperatingleasearrangementsasalessee(refertoNote28).Basedonthepreliminaryassessment,theGroupexpectstheimpacttothefinancialstatementstobeimmaterialtothenetassetsoftheGroupunderthenewstandard.

The Group plans to adopt the standard when it becomes effectivein2019.TheGroupwillperformadetailedanalysisofthestandard,includingthetransitionoptionsandpracticalexpedientsbeforethestandardiseffective.

32 Comparative information

Thecurrentreportingperiodrunsfrom1January2016to31December2016whereasthepriorperiodcomparativecoversaperiodofninemonthsfrom1April2015to31December2015.

33 Subsequent event

TheCompanydisposeditsstakeof30%and20%inAsiaCapitalReinsuranceMalaysiaSdn.Bhd.(“ACRM”)andACRReTakafulHoldingsLimited (“ACRR”), respectivelyon31January2017to itswhollyownedsubsidiary,AsiaCapitalReinsuranceGroupPte.Ltd.(“ACRG”)throughsharesswoparrangements.

Asaresultofthisarrangement,on31January2017,ACRGissuedshareswithavalueofUS$24.0millioninexchangefortheCompany’s20%stakeinACRRandissuedshareswithavalueofUS$24.2millioninexchangefortheCompany’s30%stakeinACRM.


ACR Capital Holdings Pte. Ltd.6 Temasek Boulevard #08-01 Suntec Tower 4 Singapore 038986

Telephone: +65 6223 3111 Facsimile: +65 6305 8111 www.acrcapitalholdings.com

Co. Reg. No. (UEN) 200617057M