use This Ai file No. 23820 W i AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) CONTENTS Page CORPORATE INFORMATION ii DIRECTORS’ REPORT 1 - 10 STATEMENT BY DIRECTORS

Company No.

23820 W

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) STATUTORY FINANCIAL STATEMENTS 31 DECEMBER 2012

Company No.

23820 W

i

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) CONTENTS Page CORPORATE INFORMATION ii DIRECTORS’ REPORT 1 - 10 STATEMENT BY DIRECTORS 11 STATUTORY DECLARATION 11 INDEPENDENT AUDITORS' REPORT 12 - 13 FINANCIAL STATEMENTS BALANCE SHEETS 14 STATEMENTS OF INCOME 15 STATEMENTS OF COMPREHENSIVE INCOME 16 STATEMENTS OF CHANGES IN EQUITY 17 - 18 STATEMENTS OF CASH FLOWS 19 - 20 NOTES TO THE FINANCIAL STATEMENTS 21 - 95

Company No.

23820 W

ii

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) CORPORATE INFORMATION BOARD OF DIRECTORS Executive Director Emmanuel Jean Louis Nivet (appointed on 14 September 2012) Jahanath A/L Muthusamy (resigned on 14 September 2012) Non-Executive Directors Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) (Chairman) Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Tan Sri Dato’ Hashim bin Meon Kang Beng Hoe Oh Teik Tatt Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Ramli bin Putih (resigned on 1 October 2012) Ngo Siew Pod (resigned on 31 December 2012) SECRETARY Aisah Bevi binti Abdul Rahman AUDITORS PricewaterhouseCoopers REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Ground Floor, Wisma Boustead 71 Jalan Raja Chulan 50200 Kuala Lumpur

Company No.

23820 W

1

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT The Directors have pleasure in submitting their report together with the audited financial statements of the Group and Company for the financial year ended 31 December 2012. PRINCIPAL ACTIVITY The Group and Company are principally engaged in the underwriting of all classes of general insurance business. There have been no significant changes in the nature of this activity of the Group and Company during the financial year. FINANCIAL RESULTS Group Company RM'000 RM'000 Net profit for the financial year 89,819 90,119 ════════ ════════ DIVIDENDS Since the end of the previous financial year, the Company paid an interim gross dividend of 8.40 sen per share, less income tax at 25% totaling RM7,500,000 in respect of the financial year ended 31 December 2012 on 17 December 2012. The Directors do not recommend any final dividend for the financial year ended 31 December 2012. ISSUE OF SHARES No shares were issued by the Company during the financial year. RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the financial year are as disclosed in the financial statements. INSURANCE LIABILITIES Before the financial statements of the Group and Company were made out, the Directors took reasonable steps to ascertain that there was adequate provision for insurance liabilities in accordance with the valuation methods specified in Part D of the Risk-Based Capital Framework (“RBC Framework”) issued by Bank Negara Malaysia (“BNM”) for insurers.

Company No.

23820 W

2

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and Company were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of impaired debts and the making of impairment allowance for impaired debts, and satisfied themselves that all known impaired debts had been written off and adequate allowance had been made for impaired debts. At the date of this report, the Directors are not aware of any circumstances that would render the amount written-off for impaired debts or the amount of the impairment allowance for impaired debts in the financial statements of the Group and Company inadequate to any substantial extent. CURRENT ASSETS Before the financial statements of the Group and Company were made out, the Directors took reasonable steps to ascertain that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Group and Company have been written down to amounts which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and Company misleading. VALUATION METHODS At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) any charge on the assets of the Group and Company which has arisen since the end of

the financial year which secures the liabilities of any other person, or

(b) any contingent liability in respect of the Group and Company that has arisen since the end of the financial year.

No contingent or other liability of the Group and Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and Company to meet their obligations when they fall due. For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Group and Company.

Company No.

23820 W

3

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and Company, which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and Company for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Group and Company for the financial year in which this report is made. CORPORATE GOVERNANCE The Board and management have reviewed the Group’s and Company’s corporate governance structures and procedures with reference to BNM Prudential Framework of Corporate Governance JPI/GPI 25 (Consolidated) for Insurers (“the Framework”), and are satisfied that the Company has complied with all the prescriptive applications in the Framework. Where applicable, best practices are adopted to improve the standard of the Group’s and Company’s corporate governance. There is no departure from the Framework principles applicable to general insurance business. Composition of the Board of Directors (“the Board”) The composition of the Board during the period since the date of the last report is as follows: Admiral Datuk Mohd Ramly bin Abu Bakar, (Retired) (Chairman) Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Tan Sri Dato’ Hashim bin Meon Kang Beng Hoe Oh Teik Tatt Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Emmanuel Jean Louis Nivet (appointed on 14 September 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Jahanath A/L Muthusamy (resigned on 14 September 2012) Ramli bin Putih (resigned on 1 October 2012) Ngo Siew Pod (resigned on 31 December 2012)

Company No.

23820 W

4

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Composition of the Board of Directors (“the Board”) (continued) In accordance with Article 131 of the Company’s Articles of Association, Mr Oh Teik Tatt, retires by rotation at the forthcoming Annual General Meeting and, being eligible, offer himself for re-election. In accordance with Article 134(1) of the Company’s Articles of Association, Mr. Kang Beng Hoe retires at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election. The Board comprises individuals with a wide range of professional skills and operational experience: Admiral Datuk Mohd Ramly bin Abu Bakar (Retired)

Admiral Datuk Mohd Ramly bin Abu Bakar holds a Master of Arts degree in International Relations and Strategic Studies and a Diploma in Political Science. In the rank of Admiral, he was the Chief of the Royal Malaysian Navy until his retirement in 2003. He is presently Director of a number of local companies. He engages in charity efforts that benefit navy widows and handicapped children.

Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Gen. Tan Sri Ahmad Saruji bin Che Rose RMAF, (Retired) holds a Masters Degree in Defence Studies and an Advanced Diploma in Defence Resources Management. He was the Chief of the Royal Malaysian Air Force from 1996 to 2001 and was an Independent Director of a number of defence related companies namely, Airod Sdn Bhd, SME Aerospace Sdn Bhd and Aerospace Technology System Corporation (ATSC). After retirement from government service in 2001, he served as Chairman of BH Insurance (M) Bhd (formerly Royal & Sun Alliance Insurance Bhd.). He was appointed as an Independent Director of the Company on 2 June 2010. Tan Sri Dato’ Hashim bin Meon Tan Sri Dato’ Hashim bin Meon holds a Master of Public Administration degree from University of Southern California, Los Angeles, USA, and has held several senior government positions during his long career. He now sits on the Board of a number of local companies, and also the Board of Trustees of several Non-Governmental Organisations (“NGOs”). He was appointed as a Director of the Company in January 2006. Mr. Kang Beng Hoe Mr. Kang Beng Hoe, a Fellow of the Chartered Tax Institute of Malaysia (formerly known as the Malaysian Institute of Taxation) was in the forefront of professional tax practice for more than thirty years. He headed the Malaysian tax practice of a major international accounting firm until retirement as the Senior Executive Director. He was retained as an Advisor of the practice until 2006. Mr Kang was appointed as a Director of the Company in August 2006, and as a Director of AXA Management Services Bhd. (formerly known as BH Insurance (M) Bhd.) on 30 April 2010. Mr. Oh Teik Tatt Mr. Oh Teik Tatt is a graduate in Agricultural Science from University of Malaya and was the Managing Director of Tractors Malaysia Holdings Berhad for 11 years until his retirement in 2004. He was the Chairman of Landmarks Bhd and is on the Board of a number of companies. He is also the Chairman of CEO Solutions Sdn Bhd, a consultancy group. He has been an independent Director of the Company since November 2005.

Company No.

23820 W

5

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Composition of the Board of Directors (“the Board”) (continued) Ms. Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Ms. Gaelle Olivier holds a qualification in engineering and actuary studies. She started her career at Credit Lyonnais and then joined AXA Group in 1998, occupying various positions in France and in Japan, in asset management, Life & P&C insurance operations and at Group level. She is currently the Chief Executive Officer of AXA General Insurance Asia and also a director of AXA Asia Regional Center Pte Ltd, Bharti AXA General Insurance Company Limited, AXA General Insurance Hong Kong Limited, AXA General Insurance China Limited, AXA Insurance Singapore Pte Limited, AXA Technology Singapore Pte Limited, Win Property (Shanghai Links) Limited. She was appointed as Director of the Company on 2 July 2012. Mr. Emmanuel Jean Louis Nivet (appointed on 14 September 2012) Mr. Emmanuel Nivet graduated from Ecole Superieure de Commerce et d’Administration des Enteprises (ESCAE), France and a decade later he obtained his engineering qualification from Institut Superieur de Securite Incendie, Franceis. Prior to joining the Company, he was the Chief Executive Officer of AXA Corporate Solutions, UK Branch. He is currently the Chief Executive Officer and Executive Director of the Company. Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Dr. Victor Kuk holds a First Class Honours degree in Bachelor of Engineering, Aeronautical Engineering from University of Manchester, PhD in Engineering from Oxford University and a Master degree in Business Administration from Warwick Business School. He joined AXA’s Regional Centre in Singapore in 2001 and has since been responsible for various operational functions within Asia. In 2006, he was appointed the Chief Executive Officer of AXA General Insurance Hong Kong and in February 2010, he was appointed the Chief Executive Officer, South East Asia and Greater China. He was appointed as Director of the Company on 17 January 2011. Jahanath A/L Muthusamy (resigned on 14 September 2012) Mr Jahanath is a Fellow of the Chartered Insurance Institute. He joined the Company in 1979 and in 2002, whilst holding the position of Senior Executive Vice President, he was seconded to Indonesia as the President Director of PT Asuransi AXA Indonesia until October 2006. In November 2006, he was appointed as President/Chief Executive Officer (“CEO”) of the Company. Mr Jahanath has also been appointed a Board member of AXA Management Services Bhd. (formerly known as BH Insurance (M) Bhd.) since 30 April 2010. Ramli bin Putih (resigned on 1 October 2012) En. Ramli holds a Bachelor of Science Degree from Universiti Putra Malaysia, and he presently sits on the board of several local companies. He has held various senior positions in government linked companies, and has vast experience in business operations and management. He was appointed as Director of the Company on 2 June 2010. Ngo Siew Pod (resigned on 31 December 2012) Ms Ngo is a Fellow of the Chartered Association of Certified Accountants and until her retirement at the end of 2010, held the position of Regional Chief Financial Officer, AXA Asia Pacific General Insurance. She is a board member of several companies of the AXA Group in the region. She was appointed as a Director of the Company in 1999.

Company No.

23820 W

6

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Attendance at Board Meeting The Board holds regular meetings, with additional meetings being convened as necessary. All members complied with the minimum attendance requirements for the Board meetings during the financial year ended 31 December 2012. Directors’ Training Except Mr Emmanuel Nivet and Ms Gaelle Olivier, all Directors have attended the “Corporate Directors’ Training Programme”. The Directors also participated in additional trainings conducted by the Companies Commission of Malaysia, BNM and other external training co-ordinators to better equip themselves to effectively discharge their duties. Audit Committee The Audit Committee (“AC”) comprises five Directors, three of whom are independent Directors. The composition of the AC is as follows: Kang Beng Hoe Chairman (Independent) Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Member (Non-Independent) Oh Teik Tatt Member (Independent) Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Member (Independent) Ngo Siew Pod (resigned on 31 December 2012) Member (Non-Independent) The responsibilities of the AC include, but are not limited to the following: (i) Review the overall condition, in particular, the financial status of the Company, its internal

controls and audit programme. (ii) Review with external auditors, the scope of their audit and audit reports, including their

findings and any action to be taken. (iii) Select independent auditors for appointment by the Company’s Board each year. There were six (6) meetings held in the current financial year and all members attended these meetings.

Company No.

23820 W

7

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Remuneration Committee The Remuneration Committee (“RC”) was established in 2003. The composition of the RC is as follows:

Kang Beng Hoe Chairman (Independent) Oh Teik Tatt Member (Independent) Tan Sri Hashim bin Meon Member (Non-Independent) Gaelle Marie Blandine Olivier Member (Non-Independent) (appointed on 2 July 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Member (Non-Independent) Ramli bin Putih (resigned on 1 October 2012) Member (Non-Independent) Ngo Siew Pod (resigned on 31 December 2012) Member (Non-Independent) The responsibilities of the RC are as follows: (i) Develop a policy on remuneration of Directors and senior executives, and determine the

remuneration packages of individual Directors under conditions of objectivity and full transparency in accordance with Guideline JPI/GPI 25 issued by BNM.

(ii) Examine and recommend the Directors’ fees and allowances in accordance with market

practice or as prescribed by the shareholders of the Company. There were two (2) meetings held in the current financial year and other than Dr. Victor Kuk Ho Ming (who was absent during the second meeting), all members attended both the meetings. Risk Management Committee The Risk Management Committee (“RMC”) was established in 2003. The composition of the RMC is as follows: Oh Teik Tatt Chairman (Independent) Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Member (Non-Independent) Kang Beng Hoe Member (Independent) Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Member (Independent) Ngo Siew Pod (resigned on 31 December 2012) Member (Non-Independent) The responsibilities of the RMC are as follows: (i) Review and recommend risk management strategies, policies and risk tolerance for the

Board’s approval. (ii) Review and assess the adequacy of risk management policies and framework for

identifying, measuring, monitoring and controlling risks as well as the extent to which these are operating effectively.

(iii) Ensure adequate infrastructure, resources and systems are in place for an effective risk

management, for example ensuring that staff responsible for implementing risk management system, perform their duties independently of the Company’s risk taking activities.

There were four (4) meetings held in the current financial year and all members attended these meetings.

Company No.

23820 W

8

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Nomination Committee The Nomination Committee (“NC”) was established in 2003. The composition of the NC is as follows: Oh Teik Tatt Chairman (Independent) Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Member (Non-Independent) Tan Sri Dato’ Hashim bin Meon Member (Non-Independent) Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Member (Non-Independent) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Member (Non-Independent) Ramli bin Putih (resigned on 1 October 2012) Member (Non-Independent) Ngo Siew Pod (resigned on 31 December 2012) Member (Non-Independent) The responsibilities of the NC are as follows: (i) Overseeing the overall composition of the Board in terms of the appropriate size and mix of

skills, the balance between executive, non-executive and independent Directors and other core competencies required.

(ii) Recommending and assessing the nominees for directorship, the Directors to fill Board

committees as well as nominees for the CEO position including assessment and recommendation on the Directors to be re-appointed at the Annual General Meeting of the Company.

(iii) On an annual basis, review and evaluate the effectiveness of the Board as a whole, the

contribution by each Director to the effectiveness of the Board, the contribution of the Board’s various committees and the performance of the CEO.

There were two (2) meetings held in the current financial year and except for Admiral Datuk Mohd Ramly bin Abu Bakar (Retired); (who was absent during the first meeting), all members attended both the meetings. DIRECTORS’ BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Group and Company are parties, with the object or objects of enabling Directors of the Group and Company to acquire benefits by means of the acquisition of shares in or debentures of the Group and Company or any other body corporate, other than the AXA Group Share Plan scheme which applies to all employees of the Group and Company and the options over the shares in the ultimate holding corporation as disclosed in this report. Since the end of the previous financial year, no Director of the Group and Company has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors disclosed in Note 25 to the financial statements) by reason of a contract made by the Group and Company or a related corporation with a Director or with a firm of which he is a member, or with a company in which the Director has a substantial financial interest, except that certain Directors receive remuneration as Directors/Executives of the related corporations.

Company No.

23820 W

9

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ INTERESTS According to the register of Directors’ shareholdings, the interest of the Directors in office at the end of the financial year in shares in the Company and its related corporation were as follows: Number of ordinary shares of 2.29 Euros each At 1.1.2012/ date of At appointment Acquired Disposed 31.12.2012 The ultimate holding corporation, AXA Ngo Siew Pod 398 - - 398 Emmanuel Jean Louis Nivet 1,955 - - 1,955 Gaelle Marie Blandine Olivier 13,572 - - 13,572 Options over shares in the ultimate holding corporation, AXA, granted to the Directors are as follows: Options over ordinary shares of 2.29 Euros each At 1.1.2012/ date of At appointment Granted Exercised Forfeited 31.12.2012 Ngo Siew Pod 31,863 - - (3,680) 28,183 Emmanuel Jean Louis Nivet 13,775 - - - 13,775 Gaelle Marie Blandine Olivier 146,975 - (23,132) - 123,843 Other than the above, none of the other Directors in office at the end of the financial year held any interest in shares in, or debentures of, the Company or its related corporations during the financial year. ULTIMATE HOLDING CORPORATION The Directors regard AXA, a corporation incorporated in France, as the ultimate holding corporation.

Company No.

23820 W

10

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT (CONTINUED) AUDITORS The auditors, PricewaterhouseCoopers, have indicated their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution dated 9 May 2013. ADMIRAL DATUK MOHD RAMLY EMMANUEL JEAN LOUIS NIVET BIN ABU BAKAR (RETIRED) DIRECTOR DIRECTOR Kuala Lumpur

Company No.

23820 W

11

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) STATEMENT BY DIRECTORS PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965 We, Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) and Emmanuel Jean Louis Nivet, being two of the Directors of AXA Affin General Insurance Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 14 to 95 are drawn up so as to show a true and fair view of the financial position of the Group and Company as at 31 December 2012 and of the financial performance and cash flows of the Group and Company for the financial year ended on that date in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act, 1965. Signed on behalf of the Board of Directors in accordance with their resolution dated 9 May 2013. ADMIRAL DATUK MOHD RAMLY EMMANUEL JEAN LOUIS NIVET BIN ABU BAKAR (RETIRED) DIRECTOR DIRECTOR Kuala Lumpur STATUTORY DECLARATION PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965 I, Emmanuel Jean Louis Nivet, the Director primarily responsible for the financial management of AXA Affin General Insurance Berhad, do solemnly and sincerely declare that the financial statements set out on pages 14 to 95 are, in my opinion, correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960. EMMANUEL JEAN LOUIS NIVET Subscribed and solemnly declared by the abovenamed Emmanuel Jean Louis Nivet at Kuala Lumpur in Malaysia on 9 May 2013, before me. COMMISSIONER FOR OATHS

PricewaterhouseCoopers (AF 1146), Chartered Accountants, Level 10, 1 Sentral, Jalan Travers, Kuala Lumpur Sentral, P.O. Box 10192, 50706 Kuala Lumpur, Malaysia T: +60 (3) 2173 1188, F: +60 (3) 2173 1288, www.pwc.com/my

12

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) (Company No. 23820 W) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of AXA Affin General Insurance Berhad, which comprise the balance sheets as at 31 December 2012 of the Group and Company, and the statements of income, comprehensive income, changes in equity and cash flows of the Group and Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 14 to 95. Directors’ Responsibility for the Financial Statements The Directors of the Group and Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and comply with the provisions of the Companies Act, 1965, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Group’s and Company’s preparation of the financial statement that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and comply with the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and Company as of 31 December 2012 and of its financial performance and cash flows for the financial year then ended.

13

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AXA AFFIN GENERAL INSURANCE BERHAD (CONTINUED) (Incorporated in Malaysia) (Company No. 23820 W) REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the Act to be

kept by the Company and its subsidiary have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the financial statements of the subsidiary that have been consolidated

with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) Our audit report on the financial statements of the subsidiary did not contain any qualification

or any adverse comment made under Section 174(3) of the Act. OTHER MATTERS

1. As stated in Note 2 to the financial statements, the Group and Company adopted Malaysian Financial Reporting Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by the Directors to the comparative information in these financial statements, including the balance sheets as at 31 December 2011 and 1 January 2011, and the statements of income, comprehensive income, changes in equity and cash flows for the financial year ended 31 December 2011 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and Company for the financial year ended 31 December 2012 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 December 2012 and financial performance and cash flows for the financial year then ended.

2. This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS JAYARAJAN A/L U. RATHINASAMY (No. AF: 1146) (No. 2059/06/14(J)) Chartered Accountants Chartered Accountant Kuala Lumpur 9 May 2013

Company No. 23820 W

14

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) BALANCE SHEETS AS AT 31 DECEMBER 2012

31.12.2012 31.12.2011 1.1.2011

Notes Group Company Group Company Group Company

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets - Property, plant and equipment 5 16,446

16,446

15,844

15,844

16,557

16,557

Intangible asset – software 6 6,279

6,279

5,185

5,185

3,262

3,262

Goodwill 7 165,822 165,822 165,822 165,822 165,822 165,822 Investment in a subsidiary 8 -

220,388

-

268,658

-

298,693

Other investments 9 1,280,881 1,280,881 1,063,124 1,063,124 1,049,843 1,049,843 Available-for-sale financial assets 736,010

736,010

570,160 570,160

506,918

506,918

Loans and receivables 544,871

544,871

492,964 492,964

542,925

542,925

Reinsurance assets 10 206,294 206,294 159,959 159,959 235,067 235,067

Insurance receivables 11 128,663 128,663 122,810 122,810 80,704 80,704

Other receivables 12 35,520 35,487 43,810 43,810 26,313 26,313

Deferred tax asset 16 3,662 3,662 - - - -

Tax recoverable - - 11,219 11,219 7,428 7,428 Cash and cash equivalents 21,507

21,476

28,930

28,687

20,277

17,277

Total assets 1,865,074 2,085,398 1,616,703 1,885,118 1,605,273 1,900,966

Equity and liabilities

Share capital 13 119,048 119,048 119,048 119,048 119,048 119,048

Share premiums 71,597 71,597 71,597 71,597 71,597 71,597

Retained earnings 14 341,058 343,821 258,739 261,202 242,158 244,809 Available-for-sale reserve 14,015

11,648

22,621

20,254

24,115

21,748

Revaluation reserve 9,342 9,342 7,917 7,917 7,917 7,917

Share option reserve 2,271 2,271 2,270 2,270 2,274 2,274

Total equity 557,331 557,727 482,192 482,288 467,109 467,393

Insurance contract liabilities 15 941,589

941,589

813,446

813,446

779,873

779,873

Deferred tax liabilities 16 - - 141 141 3,563 3,251

Borrowings 17 150,000 150,000 150,000 150,000 205,000 205,000

Insurance payables 18 157,064 157,064 141,500 141,500 112,144 112,144

Other payables 19 44,255 264,603 29,226 297,743 34,612 333,305

Tax payable 14,835 14,415 198 - 2,972 -

Total liabilities 1,307,743 1,527,671 1,134,511 1,402,830 1,138,164 1,433,573

Total equity and liabilities 1,865,074 2,085,398 1,616,703 1,885,118 1,605,273 1,900,966

The accompanying notes form an integral part of the financial statements.

Company No. 23820 W

15

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) STATEMENTS OF INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

2012 2011 Note Group Company Group Company

RM'000 RM'000 RM'000 RM'000

Operating revenue 20 834,750 899,111 736,702 776,724

Gross earned premiums 21(a) 792,194 792,194 701,869 701,869 Premiums ceded to reinsurers 21(b) (142,477)

(142,477)

(210,065)

(210,065)

Net earned premiums 649,717 649,717 491,804 491,804

Investment income 22 42,556 106,917 34,833 74,855 Realised gains and losses 23 17,794 17,794 7,214 7,214 Fair value gains and losses 24 (346) (48,616) (982) (31,017) Reinsurance commission income 35,421

35,421

28,692

28,692

Other operating revenue 178 178 631 631 Other revenue 95,603 111,694 70,388 80,375

Gross claims paid 15(i) (373,836) (373,836) (367,990) (367,990) Claims ceded to reinsurance 15(i) 70,929

70,929

96,117

96,117

Gross change to claims liabilities (93,408)

(93,408)

(35,005)

(35,005)

Change to claims liabilities ceded to reinsurers (274)

(274)

(26,921)

(26,921) Net claims incurred (396,589) (396,589) (333,799) (333,799)

Commission expense (103,403) (103,403) (87,454) (87,454) Management expenses 25(a) (112,399) (112,350) (107,273) (107,111) Finance costs 25(b) (12,033) (12,033) (13,208) (13,208) Other operating expenses (500) (500) - - Other expenses (228,335) (228,286) (207,935) (207,773)

Profit before taxation 120,396 136,536 20,458 30,607 Taxation 26 (30,577) (46,417) (3,877) (14,214) Net profit for the financial year 89,819

90,119

16,581

16,393

Basic earnings per share (sen) 28 75

76

14

14


Company No.

23820 W

16

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

2012 2011 Group Company Group Company

RM'000 RM'000 RM'000 RM'000

Net profit for the financial year 89,819 90,119 16,581 16,393

Other comprehensive income

Available-for-sale reserve: Net loss arising during the financial year (Note 9(c)) (11,475)

(11,475)

(1,992)

(1,992)

Tax effect thereon (Note 16) 2,869 2,869 498 498 (8,606) (8,606) (1,494) (1,494)

Revaluation reserve: Surplus arising during the financial year 1,500

1,500

-

-

Tax effect thereon (Note 16) (75) (75) - - 1,425 1,425 - -

Total comprehensive income for the financial year 82,638

82,938

15,087

14,899


Com

pany

No.

2382

0 W

17

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

S

TA

TE

ME

NT

S O

F C

HA

NG

ES

IN E

QU

ITY

F

OR

TH

E F

INA

NC

IAL

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

012

S

har

e S

har

e R

eval

uat

ion

S

har

e op

tion

A

FS

R

etai

ned

G

RO

UP

N

ote

ca

pit

al

pre

miu

ms

rese

rve

rese

rve

rese

rve

earn

ing

s T

ota

l

RM

'000

R

M'0

00

RM

'000

R

M'0

00

RM

'000

R

M'0

00

RM

'000

At 1

Jan

uary

201

2

119,

048

71,5

97

7,91

7 2,

270

22,6

21

258,

739

482,

192

Tot

al c

ompr

ehen

sive

inco

me

for

the

f

inan

cial

yea

r

- -

1,42

5 -

(8,6

06)

89,8

19

82,6

38

Val

uatio

n of

em

ploy

ee s

ervi

ces

–

sha

re o

ptio

ns

-

- -

1 -

- 1

Div

iden

d pa

id in

res

pect

of t

he fi

nanc

ial

y

ear

ende

d 31

Dec

embe

r 20

12

27

-

- -

- -

(7,5

00)

(7,5

00)

At 3

1 D

ecem

ber

2012

119,

048

71,5

97

9,34

2 2,

271

14,0

15

341,

058

557,

331

A

t 1 J

anua

ry 2

011

11

9,04

8 71

,597

7,

917

2,27

4 24

,115

24

2,15

8 46

7,10

9 T

otal

com

preh

ensi

ve in

com

e fo

r th

e

fin

anci

al y

ear

-

- -

- (1

,494

) 16

,581

15

,087

V

alua

tion

of e

mpl

oyee

ser

vice

s –

s

hare

opt

ions

- -

- (4

) -

- (4

) A

t 31

Dec

embe

r 20

11

11

9,04

8 71

,597

7,

917

2,27

0 22

,621

25

8,73

9 48

2,19

2

Com

pany

No.

2382

0 W

18

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

S

TA

TE

ME

NT

S O

F C

HA

NG

ES

IN E

QU

ITY

F

OR

TH

E F

INA

NC

IAL

YE

AR

EN

DE

D 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

N

on

-dis

trib

utab

le

Dis

trib

uta

ble

S

har

e S

har

e R

eval

uat

ion

S

har

e o

pti

on

A

FS

R

etai

ned

CO

MP

AN

Y

No

te

cap

ital

p

rem

ium

s re

serv

e re

serv

e re

serv

e ea

rnin

gs

To

tal

R

M'0

00

RM

'000

R

M'0

00

RM

'000

R

M'0

00

RM

'000

R

M'0

00

A

t 1 J

anua

ry 2

012

11

9,04

8 71

,597

7,

917

2,27

0 20

,254

26

1,20

2 48

2,28

8 T

otal

com

preh

ensi

ve in

com

e fo

r th

e

fin

anci

al y

ear

- -

1,42

5 -

(8,6

06)

90,1

19

82,9

38

Val

uatio

n of

em

ploy

ee s

ervi

ces

–

sha

re o

ptio

ns

-

- -

1 -

- 1

Div

iden

d pa

id in

res

pect

of t

he fi

nanc

ial

yea

r en

ded

31 D

ecem

ber

2012

27

- -

- -

- (7

,500

) (7

,500

)

At 3

1 D

ecem

ber

2012

119,

048

71,5

97

9,34

2 2,

271

11,6

48

343,

821

557,

727

At 1

Jan

uary

201

1

119,

048

71,5

97

7,91

7 2,

274

21,7

48

244,

809

46

7,39

3 T

otal

com

preh

ensi

ve in

com

e fo

r th

e

fin

anci

al y

ear

- -

- -

(1,4

94)

16,3

93

14,8

99

Val

uatio

n of

em

ploy

ee s

ervi

ces

–

sha

re o

ptio

ns

-

- -

(4)

- -

(4)

At 3

1 D

ecem

ber

2011

119,

048

71,5

97

7,91

7 2,

270

20,2

54

261,

202

482,

288

The

acc

ompa

nyin

g no

tes

form

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.

Company No.

23820 W

19

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012


RM'000 RM'000 RM'000 RM'000

Operating Activities Net profit for the financial year 89,819 90,119 16,581 16,393 Investment income (42,556) (106,917) (34,833) (74,855) Realised gains and losses (17,794) (17,794) (7,214) (7,214) Fair value gains and losses 346 48,616 982 31,017 Taxation 30,577 46,417 3,877 14,214 Purchase of AFS financial assets (295,064) (295,064) (189,999) (189,999) Proceeds from disposal of AFS financial assets 43,881

43,881

44,217

44,217

Proceeds from maturity of AFS financial assets 90,000

90,000

85,000

85,000

Share-based compensation 1 1 (4) (4)

Non-cash items: Depreciation of property, plant and equipment 2,102

2,102

2,865

2,865

Amortisation of intangible asset - software 2,644

2,644

1,995

1,995

(Write-back of)/allowance for impairment of insurance receivables (706)

(706)

3,633

3,633

Changes in working capital: (Increase)/decrease in loans and receivables (53,996)

(53,996)

54,660

54,660

(Increase)/decrease in reinsurance assets (46,335)

(46,335)

75,108

75,108

Increase in insurance receivables (5,147) (5,147) (45,739) (45,739) Decrease/(increase) in other receivables 8,290

8,323

(17,497)

(16,829)

Increase in insurance contract liabilities 128,143

128,143

33,573

33,573

Increase in insurance payables 15,564 15,564 29,356 29,356 Increase/(decrease) in other payables 15,029

(33,139)

(5,386)

(36,230)

Cash (used in)/generated from operating activities (35,202)

(83,288)

51,175

21,161

Dividend income received 3,202 67,563 3,119 43,166 Interest income received 42,455 42,455 28,659 28,634 Income tax paid (5,432) (21,495) (13,366) (20,617) Net cash inflows from operating activities 5,023

5,235

69,587

72,344

Company No.

23820 W

20

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 (CONTINUED)


RM'000 RM'000 RM'000 RM'000

Investing Activities Proceeds from disposal of property, plant and equipment 269

269

140

140

Purchase of property, plant and equipment (1,477)

(1,477)

(2,696)

(2,696)

Purchase of intangible asset - software (3,738)

(3,738)

(3,378)

(3,378)

Net cash outflows from investing activities (4,946)

(4,946)

(5,934)

(5,934)

Financing Activities Repayment of borrowings - - (55,000) (55,000) Dividend paid to shareholders (7,500) (7,500) - - Net cash outflows from financing activities (7,500)

(7,500)

(55,000)

(55,000)

Net (decrease)/increase in cash and cash equivalents (7,423)

(7,211)

8,653

11,410

Cash and cash equivalents at the beginning of the financial year 28,930

28,687

20,277

17,277 Cash and cash equivalents at the end of the financial year 21,507

21,476

28,930

28,687

Cash and cash equivalents comprise:

Cash and bank balances 21,507 21,476 28,930 28,687


Company No.

23820 W

21

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2012

1 PRINCIPAL ACTIVITIES AND GENERAL INFORMATION The Company, a public limited liability company incorporated and domiciled in Malaysia, is principally engaged in the underwriting of all classes of general insurance business. There have been no significant changes in the nature of the activities during the financial year. The Directors regard AXA, a corporation incorporated in France, as the ultimate holding corporation. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 9 May 2013.

2 BASIS OF PREPARATION The financial statements of the Group and Company have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies, and comply with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the provisions of the Companies Act, 1965. The financial statements of the Group and Company for the financial year ended 31 December 2012 are the first set of financial statements prepared in accordance with MFRS, including MFRS 1 “First-time Adoption of Malaysian Financial Reporting Standards”. The Group and Company have consistently applied the same accounting policies in its opening MFRS statement of financial position at 1 January 2011 (transition date) and throughout all years presented as if these policies had always been in effect. Subsequent to the transition in the financial reporting framework to MFRS on 1 January 2012, the comparative information has not been audited under MFRS. However, the comparative balance sheets as at 31 December 2011, comparative statements of income, comprehensive income, changes in equity and cash flows for the financial year then ended have been audited under the previous financial reporting framework, Financial Reporting Standards (“FRS”) in Malaysia. There is no impact from the transition from FRS to MFRS on the Group and Company’s reported financial position, financial performance and cash flows. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the financial year. It also requires the Directors to exercise their judgement in the process of applying the Group’s and Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4 to the financial statements.

Company No.

23820 W

22

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2012 (CONTINUED)

2 BASIS OF PREPARATION (CONTINUED)

(a) Standards, amendments to published standards and interpretations to existing standards

that are applicable and relevant to the Group and Company but not yet effective.

The Group and Company will apply the new standards amendments to standards and interpretations in the following period: Financial year beginning on/after 1 January 2013 MFRS 13 “Fair Value Measurement” (effective from 1 January 2013) aims to improve

consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across MFRS. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in MFRS 7 “Financial instruments: Disclosures”, but apply to all assets and liabilities measured at fair value, not just financial ones. The Group and Company will apply this standard from financial period beginning on 1 January 2013.

Amendment to MFRS 7 “Financial Instruments: Disclosures” (effective from 1 January

2013) requires more extensive disclosures for using quantitative information about recognised financial instruments that are offset in the statement of financial position and those that are subject to master netting or similar arrangements irrespective of whether they are offset. The Group and Company will apply this standard from financial period beginning on 1 January 2013.

Amendment to MFRS 101 “Presentation of items of Other Comprehensive Income”

(effective from 1 July 2012) requires entities to separate items presented in other comprehensive income in the statement of comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future. The amendments do not address which items are presented in other comprehensive income. The Group and Company will apply this standard from financial period beginning on 1 January 2013.

Amendment to MFRS 119 “Employee Benefits” (effective from 1 January 2013)

makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. MFRS 119 shall be withdrawn on application of this amendment. The Group and Company will apply this standard from financial period beginning on 1 January 2013.

Company No.

23820 W

23


2 BASIS OF PREPARATION (CONTINUED) (a) Standards, amendments to published standards and interpretations to existing standards

that are applicable and relevant to the Group and Company but not yet effective (continued)

Financial year beginning on/after 1 January 2014

Amendment to MFRS 132 “Financial Instruments: Presentation” (effective from 1

January 2014) does not change the current offsetting model in MFRS 132. It clarifies the meaning of “currently has a legally enforceable right of set-off” that the right of set off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business. It clarifies that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the MFRS 132 offsetting criteria. The Group and Company will apply this standard from financial period beginning on 1 January 2014.

Financial year beginning on/after 1 January 2015

MFRS 9 “Financial Instruments – Classification and Measurement of Financial Assets

and Financial Liabilities” (effective from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss (“FVTPL”). Entities with financial liabilities designated at FVTPL recognise changes in fair value due to changes in the liability’s credit risk directly in other comprehensive income. There is no subsequent recycling of the amounts in other comprehensive income to profit and loss, but accumulated gains or losses may be transferred within equity.

The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply. MFRS 7 requires disclosure on transition from MFRS 139 to MFRS 9. The Group and Company will apply this standard from financial period beginning on 1 January 2015.

The Group and Company are reviewing the adoption of the above accounting standards, amendments to published standards and interpretations to existing standards and will complete the process prior to the reporting requirement deadline. The Group and Company have not finalised consideration of any financial impact of the adoption of the above accounting standards.

Company No.

23820 W

24


3 SIGNIFICANT ACCOUNTING POLICIES (a) Subsidiaries Subsidiaries are those entities over which the Group has power to govern the financial and

operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated using the acquisition method of accounting. Under the

acquisition method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business

combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. See accounting policy Note 3(d) on goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the gain is recognised directly in the statement of income. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. This may indicate an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The gain or loss on disposal of a subsidiary which is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the statement of income attributable to the parent.

(b) Investment in a subsidiary Investment in a subsidiary is stated at cost less accumulated impairment losses. Where

an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(g) on impairment of financial assets.

Company No.

23820 W

25


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Property, plant and equipment Property and equipment are stated at cost less accumulated depreciation and any

accumulated impairment losses. All items of property and equipment are initially recorded at cost. Subsequent costs are

included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.

Subsequent costs recognition, property and equipment are stated at cost less

accumulated depreciation and any accumulated impairment losses. Land and buildings, which are substantially occupied by the Group and Company for their

operations, are classified under property, plant and equipment. Land and buildings are initially stated at cost and subsequently revalued by the Directors,

based on independent valuation of the open market value on the existing use basis carried out by professional valuers. The valuation of the land and buildings is carried out once in every three years or earlier if the carrying values of the revalued assets are materially higher and/or lower than the market values. When the land and buildings are revalued, any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset. The net amount is then restated as the revalued amount of the asset. The surplus arising on revaluation is credited to an asset revaluation reserve account except that a surplus, to the extent that such surplus is related to and not greater than a deficit arising on revaluation previously recorded as an expense, is credited to the income statement. A deficit arising on revaluation is recognised as an expense except that, to the extent that such a deficit is related to a surplus which was previously recorded as a credit to the asset revaluation reserve account and which has not been subsequently reversed or utilised, it is charged directly to that account. Freehold land is not depreciated as it has infinite life. Depreciation of property and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, the following rates: Freehold building 50 years Motor vehicles 5 - 6 years Office and computer equipment 3 - 5 years Furniture, fixtures and fittings 5 - 10 years The residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each balance sheet date.

Company No.

23820 W

26


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Property, plant and equipment (continued)

At each balance sheet date, the Group and Company assess whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write-down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 3(h) on impairment of non-financial assets.

Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are credited or charged in the income statement.

(d) Goodwill

Goodwill represents the excess of the cost of acquisition of the subsidiary over the fair

value of the Group’s share of the identifiable net assets at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated

impairment losses. Impairment losses on goodwill (inclusive of impairment losses are not reversed. See accounting policy Note 3(h) on impairment of non-financial assets.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The

allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.

The Group allocates goodwill to the combined general insurance business as a whole,

which has been identified as a cash-generating unit.

(e) Intangible assets – software Where computer software is not an integral part of a related item of computer hardware,

the software is treated as an intangible asset. Capitalised internal-use software costs include external direct costs of materials and services consumed in developing or obtaining the software, payroll and payroll-related costs for employees who are directly associated with and who devote substantial time to the project. Capitalisation of these costs ceases no later than the point at which the project is substantially completed and ready for its intended purpose. These costs are amortised over their expected useful life of 4 years on a straight-line basis, with the useful lives being reviewed annually.

Company No.

23820 W

27


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Investments and financial assets The Group and Company classify their investments into loans and receivables (“LAR”) or

available-for-sale (“AFS”) financial assets. Classification of the financial assets is determined at initial recognition.

(i) LAR

LAR are non-derivative financial assets with fixed or determinable payments that

are not quoted in an active market. These financial assets are initially recognised at fair value plus all transaction costs directly attributable to the acquisition. After initial measurement, LAR are measured at amortised cost, using the effective yield method, less allowance for impairment. Gains and losses are recognised in the income statement when the financial assets are derecognised or impaired, as well as through the amortisation process.

(ii) AFS

AFS financial assets are investment that are not classified as fair value through

profit or loss, held-to-maturity. AFS financial assets initially recorded at fair value. After initial measurement, the AFS financial assets are re-measured at fair value.

Interest from AFS financial assets calculated using the effective interest method, is recognised in the income statement. Any gains or losses arising from a change in fair value, net of income tax, are recognised directly in other comprehensive income, except for impairment losses. When the AFS financial assets are derecognised, the cumulative fair value gains or losses previously recognised in other comprehensive income are transferred to the income statement as net realised gains or losses on AFS financial assets.

Company No.

23820 W

28



(g) Impairment of financial assets The Group and Company assess at each balance sheet whether there is objective

evidence that a financial asset or a group of financial assets is impaired. A financial asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

(i) Financial assets carried at amortised cost If there is objective evidence that an impairment loss on financial asset carried at

amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement.

(ii) Financial assets carried at cost If there is objective evidence that an impairment loss on securities carried at cost

(e.g. equity instruments for which there is no active market or whose fair value cannot be reliably measured) has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for similar securities. Such impairment losses shall not be reversed.

(iii) Financial assets carried at fair value

In the case of AFS financial assets, a significant or prolonged decline in the fair value of the financial asset below its cost is considered in determining whether the assets are impaired. If any such evidence exists for financial asset held at AFS, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement is removed from other comprehensive income and recognised in the income statement.

If, in a subsequent period, the fair value of a debt instrument classified as AFS

increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement. Impairment losses previously recognised in the income statement on equity instruments are not reversed through the income statement.

Company No.

23820 W

29



(h) Impairment of other non-financial assets The carrying values of assets that are subject to amortisation are reviewed for impairment

when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount is the higher of the fair value less cost to sell and the value in use, which is measured by reference to discounted cash flows. Recoverable amounts are estimated for individual assets, or, if it is not possible, for the cash-generating unit. Non-financial assets that suffered impairment are reviewed for possible reversal of impairment at each reporting date.

An impairment loss is charged to the income statement immediately. A subsequent increase in the recoverable amount of an asset is treated as a reversal of

the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately. Impairment loss on goodwill is not reversed.

(i) Insurance receivables Insurance receivables are recognised when due and measured on initial recognition at the

fair value. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective yield method.

If there is objective evidence that the insurance receivable is impaired, the Group and

Company reduce the carrying amount of the insurance receivable accordingly and recognise that impairment loss in the income statement. The Group and Company gather the objective evidence that an insurance receivable is impaired using the same processes adopted for financial assets carried at amortised cost. The impairment loss is calculated under the same method used for these financial assets.

(j) Cash and cash equivalents Cash and cash equivalents consist of cash and bank balances, excluding fixed and call

deposits which are held for investment purpose.

(k) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the

issuance of new shares and options are shown in equity as a deduction, net of tax, from the proceeds.

Company No.

23820 W

30


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Insurance product classification The Group and Company issue contracts that transfer insurance risk. Insurance contracts are those that transfer significant insurance risk. An insurance

contract is a contract under which the Group and Company (the insurer) have accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. As a general guideline, the Group and Company determine whether they have significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.

(m) General insurance underwriting results The general insurance underwriting results are determined for each class of business after

taking into account reinsurances, commissions, unearned premiums and claims incurred. Premium income Premiums are recognised in a financial year in respect of the risks assumed during that

particular financial year. Premiums from direct business are recognised during the financial year upon the issuance of debit notes or policies. Premiums in respect of risks incepted for which debit notes or policies have not been raised as of the balance sheet date are accrued at that date as pipeline premiums.

Inward treaty reinsurance premiums are recognised on the basis of periodic advices

received from ceding insurers. Outward reinsurance premiums are recognised in the same accounting period as the

original policy to which the reinsurance relates. Premium liabilities Premium liabilities refer to the higher of:

(i) the aggregate of the unearned premium reserves (“UPR”); or (ii) the best estimate value of the insurer’s unexpired risk reserves (“URR”) at the

valuation date and the Provision of Risk Margin for Adverse Deviation (“PRAD”) calculated at the overall Group and Company level. The best estimate value is a prospective estimate of the expected future payments arising from future events insured under policies in force as at valuation date and also includes allowance for the insurer’s expenses, including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and shall allow for expected future premium refunds.

Company No.

23820 W

31


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) General insurance underwriting results (continued) UPR represent the portion of the net premiums of insurance policies written that relate to

the unexpired periods of the policies at the end of the financial period. In determining UPR at the balance sheet date, the method that most accurately reflected

the actual unearned premium is used, as follows:

(i) 25% method for marine cargo, aviation cargo and transit business; and (ii) time apportionment method for non-annual policies reduced by the percentage of

accounted gross direct business commissions to the corresponding premiums, not exceeding limits specified by BNM; and

(iii) 1/365th method for all other classes of general business in respect of Malaysian

policies, reduced by the corresponding percentage of accounted gross direct business commission to the corresponding premium, not exceeding limits specified by BNM.

In the previous financial years, the UPR were computed based on the 25% method for marine cargo, time apportionment method for non-annual policies and 1/24th method for all other classes of general business. The change in the basis of computation of UPR is treated as a change in accounting estimate. The impact of the change in accounting estimate arising from the different UPR methods used and the differences between the estimated and actual pipeline premiums resulted in an increase of the Group and Company’s profit before taxation for the current financial year by RM39,303,000. Acquisition costs The cost of acquiring and renewing insurance policies net of income derived from ceding reinsurance premiums is recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Claims liabilities A liability for outstanding claims is recognised in respect of both direct insurance and inward reinsurance. Provision for claims liabilities is made for the estimated costs of all claims together with related expenses less reinsurance recoveries, in respect of claims notified but not settled at the balance sheet date. Provision is also made for the cost of claims, together with related expenses, incurred but not reported at the balance sheet date, based on an actuarial valuation. Throughout the course of the financial year, management regularly re-assesses claims and provision both on an individual and class basis, based on independent professional advice and reports, other available information and management’s own assessment of the claims and provisions.

Company No.

23820 W

32


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) General insurance underwriting results (continued)

Reinsurance

The Group and Company cede insurance risk in the normal course of business for all of its businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contracts. Ceded reinsurance arrangements do not relieve the Group and Company from their obligations to policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance. Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group and Company may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group and Company will receive from the reinsurer. The impairment loss is recorded in the income statement. Gains or losses on buying reinsurance are recognised in the income statement immediately at the date of purchase and are not amortised. The Group and Company also assume reinsurance risk in the normal course of business for general insurance contracts when applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business. Reinsurance liabilities represent balances due to reinsurance companies. Amount payable are estimated in a manner consistent with the related insurance contract. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party. Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the balance sheet. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Investment income on these contracts is accounted for using the effective yield method when accrued.

Company No.

23820 W

33


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) General insurance underwriting results (continued)

Insurance contract liabilities General insurance contract liabilities are recognised when contracts are entered into and premiums are charged. These liabilities comprise claims liabilities and premiums liabilities. Claims liabilities are based on the estimated ultimate cost of all claims incurred but not settled at the balance sheet date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the balance sheet date. The liability is calculated at the reporting date using a range of standard actuarial claim projection techniques based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserve is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled. The provision for unearned premiums represents premiums received for risks that have not yet expired. Generally, the reserve is released over the term of the contract and is recognised as premium income. At each reporting date, the Group and Company review the unexpired risks and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows (taking into consideration current loss ratios) after taking account the investment return expected to arise on assets relating to the relevant general insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums less related deferred acquisition costs is inadequate, the deficiency is recognised in the income statement by setting up a provision for liability adequacy.

Company No.

23820 W

34



(n) Other revenue recognition Interest income is recognised using the effective interest method. The effective interest

rate is the rate that discounts estimated future cash receipts or payments through the expected life of the financial instrument or, when appropriate, a shorter period to its carrying amount. The calculation includes significant fees and transaction costs that are integral to the effective interest rate, as well as premiums or discounts.

When a loan and receivable is impaired, the Group and Company reduce the carrying

amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continue unwinding the discount as interest income. Interest income on impaired loan and receivables are recognised using the original effective interest rate.

Other interest income, including amortisation of premiums or accretion of discounts, is

recognised on a time proportion basis that takes into account the effective yield of the asset.

Dividend income is recognised when the right to receive payment is established. Rental income is recognised on a time proportion basis except where default in payment of

rent has already occurred and the rent due remains outstanding, in which case recognition of rental income is suspended. Subsequent to suspension, rental income is recognised on the receipt basis until all arrears have been paid.

Gains or losses arising on disposal of financial assets are credited or charged to the

income statement. (o) Income tax

Current tax expense is determined according to the tax laws in Malaysia and includes all taxes based upon the taxable profits and is measured using the tax rates that have been enacted at the reporting date. Current tax is recognised in the income statement. Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purpose and their carrying amounts in the financial statements. However, deferred tax is not accounted if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences or unused tax losses can be utilised. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled. Deferred tax is recognised in the income statement except when it arises from a transaction which is recognised in other comprehensive income, in which case, the deferred tax is also charged or credited to other comprehensive income.

Company No.

23820 W

35


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) Employees benefits

(i) Short-term employees’ benefits Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary

benefits are accrued in the financial year in which the associated services are rendered by employees of the Group and Company.

(ii) Post-employment benefits The Group and Company contribute to the Employees’ Provident Fund (‘EPF”), a

defined contribution plan. The Group’s and Company’s contributions to the defined contribution plan are charged to the income statement in the financial year to which they relate. Once the contributions have been paid, the Group and Company have no further payment obligations.

The Group and Company also operate a defined contribution retirement gratuity

scheme based on a percentage of basic staff salary, less contributions made to the EPF.

(iii) Termination benefits Termination benefits are payable whenever an employee’s employment is

terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group and Company recognise termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

(iv) Share-based compensation AXA, the ultimate holding corporation, offers certain eligible employees of the Group

and Company options to purchase ordinary shares of AXA, pursuant to the share options plan maintained by AXA, at a fixed price. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and premium income growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the Group and Company revise the estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the statement of income, and a corresponding adjustment to equity over the remaining vesting period.

Company No.

23820 W

36



(q) Foreign currencies

Items included in the financial statements of the Group and Company are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Group’s and Company’s functional and presentation currency. All transactions in a currency other than the functional currency (“foreign currency”) are converted into Ringgit Malaysia at the rates of exchange prevailing on the transaction dates. Foreign currency monetary assets and liabilities at the balance sheet date are translated at the rates of exchange prevailing at that date. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in the income statement.

(r) Insurance payables and other payables

Insurance payables and other payables are recognised when due and measured on initial recognition at the fair value of the consideration less directly attributable transaction costs. Subsequent to the initial recognition, they are measured at amortised cost using the effective yield method.

(s) Provisions

Provisions are recognised when the Group and Company have a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made.

(t) Operating leases

Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the financial year in which termination takes place.

(u) Dividends

Dividends are recognised as liabilities when the obligation to pay is established in which the dividends are declared and approved by the Company’s shareholders. No provision is made for a proposed dividend.

Company No.

23820 W

37



(v) Contingent liabilities and contingent assets The Group and Company do not recognise a contingent liability but disclose its existence

in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group and Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be

confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group and Company. The Group and Company do not recognise a contingent asset but disclose its existence where inflows of economic benefits are probable, but not virtually certain.

(w) Fair value estimation for disclosure purpose The basis of estimation of fair values for financial instruments is as follows:

(i) The fair values of Malaysian Government securities and unquoted corporate debt securities are based on the indicative market prices.

(ii) The fair values of quoted equity securities and real estate investment trusts

(“REITs”) are based on quoted market prices. (iii) The fair values of fixed rate loans are estimated by discounting future expected cash

flows, taking into consideration market conditions and contractual terms of these loans.

(iv) The carrying amounts for other financial assets and liabilities with a maturity period

of less than one year are assumed to approximate their fair values.

Company No.

23820 W

38


3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (x) Business combination under common control

The transfer of business from the subsidiary has been accounted for as business combination under common control using the predecessor method of accounting. Under the predecessor method of accounting, the consolidated statements of income include the results of each of the combining entities from the date of the combinations. The assets and liabilities of the combining entities are accounted for based on the carrying amounts from the perspective of the common controlling party or the combining entities if the common controlling party does not prepare consolidated financial statements. The excess of the cost of acquisition over the aggregate carrying amounts of assets and liabilities as of the date of the combination is taken to equity. A similar treatment applies in the Company’s separate financial statements when assets and liabilities representing the underlying businesses under common control are directly acquired by the Company. In accounting for the business combination in the Company’s separate financial statements, the excess of the cost of acquisition over the aggregate carrying amounts of assets and liabilities as of the date of the combination is taken to equity.

4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Critical accounting estimates and assumptions

The Group and Company make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Claims liabilities

The estimation of the ultimate liability arising from claims made under insurance contracts is the Group’s and Company’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group and Company will ultimately pay for such claims.

Estimation of the ultimate cost of certain liabilities claims is a complex process. The Group

and Company apply the AXA Group “Analyze” tool or use an external actuary, to determine the liability within the chain ladder model. Some factors that affect the liability estimation process are the inconsistent court resolutions and jurisprudence that has broadened the intent and scope coverage of the protections offered in the insurance contracts issued by the Group and Company.

Company No.

23820 W

39


4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) (a) Critical accounting estimates and assumptions (continued) Claims liabilities (continued) A risk margin for uncertainty is added to the central estimate of outstanding claims. A

central estimate is an estimate of the level of claims provision that is intended to contain no intentional under or over estimation. In simple terms, the central estimate i.e. equally likely to be too high (more than adequate) or too low (inadequate) and is commonly described as providing a 50% probability of adequacy. As the Group and Company require a higher degree of certainty that estimates will be adequate over time, a risk margin is added to the central estimate of outstanding claims.

The key assumptions and the sensitivity analysis of claims liabilities are disclosed in Note 32 to the financial statements.

Impairment of goodwill The Group and Company assess the impairment of goodwill on an annual basis in accordance with its accounting policy in Note 3(d) to the financial statements. The recoverable amount of the goodwill is assessed based on its value-in-use. Value-in-use is determined using the present value of estimated future cash flows expected to be generated from future new business, using the estimates and key assumptions as disclosed in Note 7 to the financial statements.

(b) Critical judgement in applying the entity’s accounting policies

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific accounting policy could materially affect the reported results and financial position of the Group and Company. However, the Directors are of the view that there are currently no accounting policies which require significant judgement to be exercised in their application.

Com

pany

No.

2382

0 W

40

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

5 P

RO

PE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

Fre

eho

ld

F

reeh

old

Mo

tor

O

ffic

e an

d

com

pu

ter

F

urn

itu

re,

fixt

ure

s

GR

OU

P A

ND

CO

MP

AN

Y

lan

d

b

uild

ing

veh

icle

s

equ

ipm

ent

an

d f

itti

ng

s

To

tal

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

C

ost

At 1

Jan

uary

201

2 11

,220

280

47

1

14,5

32

6,

005

32

,508

A

dditi

ons

-

-

50

93

1

496

1,

477

Dis

posa

ls

-

-

(460

)

(3)

(3

)

(466

) R

eval

uatio

n su

rplu

s

1,50

0

-

-

-

-

1,50

0 A

t 31

Dec

embe

r 20

12

12,7

20

28

0

61

15

,460

6,49

8

35,0

19

C

ost

-

-

61

15

,460

6,49

8

22,0

19

Val

uatio

n 12

,720

280

-

-

-

13

,000

A

t 31

Dec

embe

r 20

12

12,7

20

28

0

61

15

,460

6,49

8

35,0

19

A

ccu

mu

late

d d

epre

ciat

ion

At 1

Jan

uary

201

2 -

23

118

12

,080

4,44

3

16,6

64

Cha

rge

for

the

finan

cial

yea

r

(N

ote

25(a

))

-

6

90

1,

426

58

0

2,10

2 D

ispo

sals

-

-

(1

92)

(1

)

-

(193

) A

t 31

Dec

embe

r 20

12

-

29

16

13,5

05

5,

023

18

,573

Net

bo

ok

valu

e

At 3

1 D

ecem

ber

2012

12

,720

251

45

1,95

5

1,47

5

16,4

46

Com

pany

No.

2382

0 W

41

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

5 P

RO

PE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

(C

ON

TIN

UE

D)

Fre

eho

ld

F

reeh

old

Mo

tor

O

ffic

e an

d

com

pu

ter

F

urn

itu

re,

fixt

ure

s

GR

OU

P A

ND

CO

MP

AN

Y

lan

d

b

uild

ing

veh

icle

s

equ

ipm

ent

an

d f

itti

ng

s

To

tal

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

C

ost

At 1

Jan

uary

201

1 11

,220

290

83

7

18,3

66

5,

340

36

,053

R

ecla

ssifi

catio

n to

inta

ngib

le

ass

et -

sof

twar

e (N

ote

6)

-

-

-

(5,6

25)

-

(5

,625

) R

ecla

ssifi

catio

n fr

om

a

ccum

ulat

ed d

epre

ciat

ion

-

(10)

-

-

-

(10)

A

dditi

ons

-

-

-

1,79

2

904

2,

696

Dis

posa

ls

-

-

(366

)

(1)

(2

39)

(6

06)

At 3

1 D

ecem

ber

2011

11

,220

280

47

1

14,5

32

6,

005

32

,508

Cos

t -

-

47

1

14,5

32

6,

005

21

,008

V

alua

tion

11,2

20

28

0

-

-

-

11,5

00

At 3

1 D

ecem

ber

2011

11

,220

280

47

1

14,5

32

6,

005

32

,508

Acc

um

ula

ted

dep

reci

atio

n

A

t 1 J

anua

ry 2

011

-

27

35

1

15,0

67

4,

051

19

,496

R

ecla

ssifi

catio

n to

inta

ngib

le

ass

et -

sof

twar

e (N

ote

6)

-

-

-

(5,0

85)

-

(5

,085

) R

ecla

ssifi

catio

n to

cos

t -

(1

0)

-

-

-

(1

0)

Cha

rge

for

the

finan

cial

yea

r

(N

ote

25(a

))

-

6

133

2,

099

62

7

2,86

5 D

ispo

sals

-

-

(3

66)

(1

)

(235

)

(602

) A

t 31

Dec

embe

r 20

11

-

23

11

8

12,0

80

4,

443

16

,664

Net

bo

ok

valu

e

At 3

1 D

ecem

ber

2011

11

,220

257

35

3

2,45

2

1,56

2

15,8

44

Com

pany

No.

2382

0 W

42

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

5 P

RO

PE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

(C

ON

TIN

UE

D)

Fre

eho

ld

F

reeh

old

Mo

tor

O

ffic

e an

d

com

pu

ter

F

urn

itu

re,

fixt

ure

s

GR

OU

P A

ND

CO

MP

AN

Y

lan

d

b

uild

ing

veh

icle

s

equ

ipm

ent

an

d f

itti

ng

s

To

tal

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

C

ost

Cos

t -

-

83

7

18,3

66

5,

340

24

,543

V

alua

tion

11,2

20

29

0

-

-

-

11,5

10

At 1

Jan

uary

201

1 11

,220

290

83

7

18,3

66

5,

340

36

,053

Acc

um

ula

ted

dep

reci

atio

n

At 1

Jan

uary

201

1 -

27

351

15

,067

4,05

1

19,4

96

N

et b

oo

k va

lue

At 1

Jan

uary

201

1 11

,220

263

48

6

3,29

9

1,28

9

16,5

57

Company No.

23820 W

43


5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) The freehold land and freehold building, which are used as the Company’s training facilities, were last revalued in 2012 by an independent professional valuer, James Wong Kwong Onn, member of the Institution of Surveyors, Malaysia of VPC Alliance (KL) Sdn Bhd at open market value on an existing use basis. The net book value of the revalued land and building had these assets been carried at cost less accumulated depreciation is not disclosed due to the absence of historical records.

6 INTANGIBLE ASSET - SOFTWARE GROUP AND COMPANY 2012 2011 1.1.2011

RM'000 RM'000 RM'000 Cost At 1 January 21,947 12,944 12,944 Reclassification from property, plant and equipment (Note 5) -

5,625

Additions 3,738 3,378 At 31 December 25,685 21,947

Accumulated amortisation At 1 January 16,762 9,682 9,682 Reclassification from property, plant and equipment (Note 5) -

5,085

Amortisation during the financial year (Note 25(a)) 2,644 1,995 At 31 December 19,406 16,762

Net book value At 1 January 2011 3,262 At 31 December 6,279 5,185

7 GOODWILL

GROUP AND COMPANY 2012 2011 1.1.2011 RM'000 RM'000 RM'000 Cost / Net book value At 1 January / 31 December 165,822 165,822 165,822 The goodwill has been allocated to the cash generating unit, being the combined general insurance business as a whole. The recoverable amount of the goodwill has been determined based on value-in-use calculations using cash flow projections based on the strategic plan 2012 - 2016 approved by senior management covering a five year period. The projected cash flows beyond 5 years are determined on the assumptions that earnings level will remain fairly stable for the period covering 2017 to 2022 (2011: 2017 to 2021). The projected cash flows are determined by budgeted profitability based on past performance and management’s expectations of market developments.

Company No.

23820 W

44


7 GOODWILL (CONTINUED)

The key assumptions used in the value-in-use calculation are as follows: (a) Premium growth rates have been projected on the basis of management’s expectations of

market developments taking into account the business plan which reflect future expansion plans and synergies arising from integration of the business of the subsidiary acquired with existing business of the Company.

(b) Loss ratios have been projected after taking into account management’s strategy for

premium growth as well as past developments with respect to loss development patterns. The loss ratios are expected to remain at the existing levels.

(c) The expense projections including projection of acquisition cost/commission have been

done after taking into account the projected inflation over the strategic business plan period as well as projected portfolio growth. The projected portfolio mix has also been considered in determining the projection of acquisition cost/commission.

(d) A discount rate of 12% (2011: 12%) has been considered based on the weighted cost of

capital of the Company. (e) Terminal value is determined based on the present value of the net assets at the end of

2012. Based on the assessment of value-in-use for the cash generating unit, the Group and Company do not expect that any reasonable change in the key assumptions will cause the carrying amount of the goodwill to exceed its recoverable amount, resulting in impairment of goodwill.

8 INVESTMENT IN A SUBSIDIARY COMPANY 2012 2011 1.1.2011 RM’000 RM’000 RM’000 At 1 January 268,658 298,693 298,693 Impairment (Note 24) (48,270) (30,035) At 31 December 220,388 268,658

The details of the subsidiary are as follows: Group’s Country of effective Principal incorporation interest activity AXA Management Services Bhd. Malaysia 100% Dormant in 2012 and 2011

Company No.

23820 W

45


8 INVESTMENT IN A SUBSIDIARY (CONTINUED) Business transfer from a subsidiary on 1 January 2011 With effect from 1 January 2011, the assets and liabilities of the general insurance business of a subsidiary, AXA Management Services Bhd. (formerly known as BH Insurance (M) Bhd.), were transferred to the Company in accordance with a scheme transfer and vesting order granted by the High Court on 26 October 2010. The fair values of the assets and liabilities transferred to the Company as at 1 January 2011 are as follows: RM’000 Assets Property and equipment 1,393 Other investments Available-for-sale financial assets 228,403 Loans and receivables 280,932 Reinsurance assets: Claims liabilities 81,983 Premium liabilities 30,084 Insurance receivables (net of impairment allowance of RM4,362,000) 41,253 Other receivables 12,233 Tax recoverable 459 Cash and cash equivalents 1,681 ──────── Total assets 678,421 ──────── Liabilities Insurance contract liabilities: Claims liabilities 217,881 Premium liabilities 103,786 Insurance payables 46,176 Other payables 11,885 ──────── Total liabilities 379,728 ──────── Net assets transferred 298,693 ════════ The post-acquisition profits recognised upon the business transfer are computed as follows: RM’000 Total net assets transferred as at 1 January 2011 298,693 Less: Total net assets of subsidiary acquired as at 30 April 2010 (287,403) ──────── Post-acquisition profits recognised upon business transfer on 1 January 2011 11,290 ════════ Investment in a subsidiary as at 31 December 2010 453,225 Less: Goodwill capitalised upon business transfer on 1 January 2011 (165,822) Add: Post-acquisition profits recognised upon business transfer on 1 January 2011 11,290 ──────── Investment in a subsidiary as at 1 January 2011 298,693 ════════

Company No.

23820 W

46


9 OTHER INVESTMENTS

GROUP AND COMPANY 31.12.2012 31.12.2011 1.1.2011 RM'000 RM'000 RM'000

Available-for-sale (“AFS”) financial assets 736,010 570,160 506,918 Loans and receivables (“LAR”) 544,871 492,964 542,925

1,280,881 1,063,124 1,049,843

Maturing after 12 months: AFS financial assets 657,081 417,331 338,501 LAR 515 1,142 1,663

657,596 418,473 340,164

(a) AFS financial assets

At fair value Malaysian Government Securities - unquoted in Malaysia 437,698 347,130 304,480 Corporate debt securities - unquoted in Malaysia 268,181 163,934 126,918 Equity securities - quoted in Malaysia 29,881 58,846 74,562 - unquoted in Malaysia 250 250 250 REITs - quoted in Malaysia - - 708

736,010 570,160 506,918

(b) LAR

At amortised cost Loans 951 1,765 2,583 Fixed and call deposits 543,920 491,199 540,342

544,871 492,964 542,925

Company No.

23820 W

47


9 OTHER INVESTMENTS (CONTINUED) (c) Carrying value of financial instruments

AFS LAR Total GROUP AND COMPANY RM'000 RM'000 RM'000

At 1 January 2011 506,918 542,925 1,049,843 Purchases 189,999 1,483,565 1,673,564 Maturities (85,000) (1,538,226) (1,623,226) Disposals (37,138) - (37,138) Fair value loss recorded in other comprehensive income (1,992)

-

(1,992)

Movement in impairment allowance (Note 24) (982)

-

(982)

Amortisation adjustment (Note 22) (2,647) - (2,647) Movement in interest income accrued 1,002

4,700

5,702

At 31 December 2011 570,160 492,964 1,063,124 Purchases 295,064 1,777,424 2,072,488 Maturities (90,000) (1,723,426) (1,813,426) Disposals (26,084) - (26,084) Fair value loss recorded in other comprehensive income (11,475)

-

(11,475)

Movement in impairment allowance (Note 24) (346)

-

(346)

Amortisation adjustment (Note 22) (3,368) - (3,368) Movement in interest income accrued 2,059

(2,091)

(32)

At 31 December 2012 736,010 544,871 1,280,881

Company No.

23820 W

48


9 OTHER INVESTMENTS (CONTINUED) (d) Fair value of financial instruments

The following tables show financial instruments recorded at fair value analysed by the different basis of fair values as follows:

GROUP AND COMPANY 31.12.2012 31.12.2011 1.1.2011

RM'000 RM'000 RM'000

Level 1 29,881 58,846 75,270 Level 2 705,879 511,064 431,398 Level 3 250 250 250

736,010 570,160 506,918

The Group and Company categorise fair value measurements according to a three-level hierarchy. The hierarchy prioritises the inputs used by the Group and Company’s valuation techniques for determining the fair value of the financial instruments. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three-level hierarchy is defined as follows: Level 1 – Fair value measurements that reflect unadjusted, quoted prices in active

markets for identical assets and liabilities that the Company has the liability to access at the measurement date. Valuations are based on quoted prices reflecting market transactions involving assets or liabilities identical to those being measured.

Level 2 – Fair value measurements using inputs other than quoted prices included within

Level 1 that are observable for the asset or liability, either directly or indirectly. Those include quoted prices for similar assets and liabilities in active market markets, quoted prices for identical assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates, credit risks, etc) and inputs that are derived from or corroborated by observable market data.

Level 3 – Fair value measurements using significant non market observable inputs.

These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable, including assumptions about risk.

10 REINSURANCE ASSETS


Claims liabilities (Note 15) 146,448 146,721 173,642 Premium liabilities (Note 15) 59,846 13,238 61,425

206,294 159,959 235,067

The carrying amounts approximate the fair values at the balance sheet date.

Company No.

23820 W

49


11 INSURANCE RECEIVABLES


Due premiums including agents, brokers and co-insurers balances

109,951

90,626

80,802

Due from reinsurers and cedants 31,381 45,559 9,644 141,332 136,185 90,446

Allowance for impairment (12,669) (13,375) (9,742) 128,663 122,810 80,704


Movement in allowance for impairment: At 1 January 13,375 9,742 9,742 (Write-back)/ allowance during the financial year (Note 25(a))

(706)

3,633

At 31 December 12,669 13,375 The carrying amounts approximate the fair values at the balance sheet date.

12 OTHER RECEIVABLES

31.12.2012 31.12.2011 1.1.2011 Group Company Group Company Group Company

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Assets held under Malaysian Motor Insurance Pool 22,105

22,105

21,844

21,844

15,956

15,956 Due from AXA regional offices 9,245

9,245

18,120

18,120

5,831

5,831

Other receivables, deposits and prepayments 4,170

4,137

3,846

3,846

4,526

4,526 35,520 35,487 43,810 43,810 26,313 26,313

The amounts due from AXA regional offices are unsecured, interest free and have no fixed terms

of repayment.

The carrying amounts approximate the fair values at the balance sheet date.

Company No.

23820 W

50


13 SHARE CAPITAL

GROUP AND COMPANY 31.12.2012 31.12.2011

1.1.2011

Amount No. of

shares

Amount No. of

shares

Amount No. of

shares RM'000 000 RM'000 000 RM'000 000

Authorised share capital of RM1 each

At 1 January / 31 December 150,000

150,000

150,000

150,000

150,000

150,000

Issued and fully paid share capital of RM1 each

At 1 January / 31 December 119,048

119,048

119,048

119,048

119,048

119,048

14 RETAINED EARNINGS

Presently, Malaysian companies adopt the full imputation system. In accordance with the Finance Act 2007, which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders (“single-tier system”). However, there is a transitional period of six years expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard their accumulated tax credit under Section 108 of the Income Tax Act, 1967 (“Section 108 balance”) and opt to pay dividends under the single-tier system. The change in the tax legislation also provides for the Section 108 balance to be locked in as at 31 December 2007 in accordance with Section 39 of the Finance Act, 2007.

The Company did not elect for the irrevocable option to disregard the Section 108 balance. During

the transitional period, the Company will utilise the credits in the Section 108 balance as at 31 December 2007 to distribute cash dividend payments to ordinary shareholders as defined under the Finance Act, 2007. The Company has sufficient Section 108 balance and balance in the tax-exempt account to frank the payment of dividends out of its entire retained earnings as at 31 December 2012.

Com

pany

No.

2382

0 W

51

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

15

INS

UR

AN

CE

CO

NT

RA

CT

LIA

BIL

ITIE

S

31

.12.

2012

31

.12.

2011

1.1.

2011

G

RO

UP

AN

D C

OM

PA

NY

G

ross

Rei

nsu

ran

ce

N

et

Gro

ss

Rei

nsu

ran

ce

N

et

G

ross

Rei

nsu

ran

ce

N

et

RM

'000

RM

'000

RM

'000

R

M'0

00

RM

'000

RM

'000

RM

'000

RM

'000

RM

'000

Pro

visi

on fo

r cl

aim

s re

port

ed

by

pol

icyh

olde

rs

448,

271

(121

,311

)

326,

960

444,

225

(150

,309

)

293,

916

46

5,14

9

(

175,

085)

290,

064

P

rovi

sion

for

IBN

R c

laim

s 16

8,64

8 (2

5,13

7)

14

3,51

1 79

,286

3,

588

82

,874

23,

357

1,

443

24,8

00

Cla

ims

liabi

litie

s (i)

61

6,91

9 (1

46,4

48)

47

0,47

1 52

3,51

1 (1

46,7

21)

37

6,79

0

488,

506

(173

,642

)

314,

864

P

rem

ium

liab

ilitie

s (ii

) 32

4,67

0 (5

9,84

6)

26

4,82

4 28

9,93

5 (1

3,23

8)

27

6,69

7

291,

367

(61

,425

)

229,

942

941,

589

(206

,294

)

735,

295

813,

446

(159

,959

)

653,

487

77

9,87

3

(2

35,0

67)

54

4,80

6

Com

pany

No.

2382

0 W

52

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

15

INS

UR

AN

CE

CO

NT

RA

CT

LIA

BIL

ITIE

S (

CO

NT

INU

ED

) (i)

C

laim

s lia

bilit

ies

(con

tinue

d)

20

12

20

11

GR

OU

P A

ND

CO

MP

AN

Y

Gro

ss

R

ein

sura

nce

Net

Gro

ss

Rei

nsu

ran

ce

N

et

RM

'000

RM

'000

RM

'000

RM

'000

R

M'0

00

R

M'0

00

At 1

Jan

uary

52

3,51

1

(146

,721

)

376,

790

48

8,50

6

(173

,642

)

314,

864

Cla

ims

incu

rred

in th

e cu

rren

t acc

iden

t yea

r 46

0,82

7

(82,

481)

378,

346

40

1,28

6

(83,

231)

318,

055

Mov

emen

ts in

cla

ims

incu

rred

in p

rior

acci

dent

yea

rs

(6,1

70)

13

,744

7,57

4

7,28

9

9,15

0

16,4

39

Mov

emen

t in

prov

isio

n of

ris

k m

argi

n fo

r ad

vers

e

dev

iatio

n of

cla

ims

liabi

litie

s at

75%

con

fiden

ce le

vel

11,1

30

(1

,919

)

9,21

1

(4,8

82)

4,

885

3

Mov

emen

t in

clai

ms

hand

ling

expe

nses

1,

457

-

1,

457

(698

)

-

(698

)

Cla

ims

paid

dur

ing

the

finan

cial

yea

r (3

73,8

36)

70

,929

(302

,907

)

(367

,990

)

96,1

17

(2

71,8

73)

At 3

1 D

ecem

ber

616,

919

(1

46,4

48)

47

0,47

1

523,

511

(1

46,7

21)

37

6,79

0

Com

pany

No.

2382

0 W

53

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

15

INS

UR

AN

CE

CO

NT

RA

CT

LIA

BIL

ITIE

S (

CO

NT

INU

ED

) (ii

) P

rem

ium

liab

ilitie

s

2012

2011

GR

OU

P A

ND

CO

MP

AN

Y

Gro

ss

R

ein

sura

nce

Net

Gro

ss

R

ein

sura

nce

Net

R

M'0

00

R

M'0

00

R

M'0

00

R

M'0

00

R

M'0

00

R

M'0

00

At 1

Jan

uary

28

9,93

5

(13,

238)

276,

697

29

1,36

7

(61,

425)

229,

942

Pre

miu

ms

writ

ten

in th

e fin

anci

al y

ear

(Not

e 21

) 82

6,92

9

(189

,085

)

637,

844

70

0,43

7

(161

,878

)

538,

559

Pre

miu

ms

earn

ed d

urin

g th

e fin

anci

al y

ear

(

Not

e 21

) (7

92,1

94)

14

2,47

7

(649

,717

)

(701

,869

)

210,

065

(4

91,8

04)

At 3

1 D

ecem

ber

324,

670

(5

9,84

6)

26

4,82

4

289,

935

(1

3,23

8)

27

6,69

7

The

car

ryin

g am

ount

s ap

prox

imat

e th

e fa

ir va

lues

at t

he b

alan

ce s

heet

dat

e.

Company No.

23820 W

54


16 DEFERRED TAXATION Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority.


RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Deferred tax assets/ (liabilities) 3,662

3,662

(141)

(141)

(3,563)

(3,251)

At 1 January (141) (141) (3,563) (3,251)

Movement during the financial year

Recognised in: - statement of income (Note 26) 1,009

1,009

2,924

2,612

- other comprehensive income 2,869

2,869

498

498

- revaluation reserve (75) (75) - - At 31 December 3,662 3,662 (141) (141)

Deferred tax liabilities: - Deferred tax liability to be

settled after more than 12 months

1,390

1,390

591

591

- Deferred tax liability to be settled within 12 months 2,272 2,272 (732) (732)

3,662 3,662 (141) (141)

Company No.

23820 W

55


16 DEFERRED TAXATION (CONTINUED)

At 1 January

Charged/ (credited)

At 31 December

GROUP RM'000 RM'000 RM'000

2012 Recognised in statement of income Excess of capital allowance over depreciation (1,775) (165) (1,940) AFS financial assets 686 910 1,596 Impairment on equities 1,324 (584) 740 Provision and accruals 6,792 848 7,640

7,027 1,009 8,036 Recognised in comprehensive income AFS financial assets (6,751) 2,869 (3,882)

Recognised in revaluation reserve Self-occupied property (417) (75) (492)

(141) 3,803 3,662

2011 Recognised in statement of income Excess of capital allowance over depreciation (1,565) (210) (1,775) AFS financial assets 213 473 686 Impairment on equities 1,540 (216) 1,324 Provision and accruals 3,915 2,877 6,792

4,103 2,924 7,027 Recognised in comprehensive income AFS financial assets (7,249) 498 (6,751)

Recognised in revaluation reserve Self-occupied property (417) - (417)

(3,563) 3,422 (141)

Company No.

23820 W

56


16 DEFERRED TAXATION (CONTINUED)

COMPANY At 1 January Charged/ (credited)

At 31 December

RM'000 RM'000 RM'000

2012 Recognised in statement of income Excess of capital allowance over depreciation (1,775) (165) (1,940) AFS financial assets 686 910 1,596 Impairment on equities 1,324 (584) 740 Provision and accruals 6,792 848 7,640

7,027 1,009 8,036 Recognised in comprehensive income AFS financial assets (6,751) 2,869 (3,882)

Recognised in revaluation reserve Self-occupied property (417) (75) (492)

(141) 3,803 3,662

2011 Recognised in statement of income Excess of capital allowance over depreciation (1,253) (522) (1,775) AFS financial assets 213 473 686 Impairment on equities 1,540 (216) 1,324 Provision and accruals 3,915 2,877 6,792

4,415 2,612 7,027 Recognised in comprehensive income AFS financial assets (7,249) 498 (6,751)

Recognised in revaluation reserve Self-occupied property (417) - (417)

(3,251) 3,110 (141)

Company No.

23820 W

57


17 BORROWINGS

GROUP AND COMPANY 31.12.2012 31.12.2011 1.1.2011 RM'000 RM'000 RM'000 6% Senior loan - - 55,000 8% Subordinated loan 150,000 150,000 150,000 150,000 150,000 205,000

On 10 February 2010, the Company received the following approval from BNM in regards to the acquisition of the entire share capital of AXA Management Services Bhd. (“AMS”): (a) Issuance by the Company of RM150 million subordinated loan and RM55 million senior

loan from its shareholders subject to the following conditions:

(i) the interest payment be borne by the shareholder’s fund of the Company; (ii) the interest payment can be only made when the Company records operating

profit in the year of payment and such payment obligation is non-cumulative; (iii) the Company shall not declare dividend to its shareholders if its capital adequacy

ratio is below the internal target level; and (iv) the subordinated loan to comply with the conditions imposed under the RBC

Framework.

(b) The RM150 million subordinated loan is to be treated as Tier-2 capital under the RBC Framework.

Subordinated loan – RM150,000,000 On 28 April 2010, with the approval from BNM, the Company received RM150 million subordinated loan from AXA S.A. and Affin Holdings Berhad for its acquisition of AMS. This subordinated loan has a tenor of not exceeding 10 years from the drawdown date of 28 April 2010. Interest of 8% per annum for 5 years and 10% per annum after the fifth year is charged and deemed payable every 3 months. An additional charge of 2% per annum above the prescribed rate will be imposed if the interest remained unpaid when it is ought to be paid. Senior loan – RM55,000,000 An amount of RM55 million was received from AXA S.A. and Affin Holdings Berhad as senior loan for the acquisition of AMS on 28 April 2010. This senior loan has a 3 year tenor from the drawdown date of 28 April 2010 with interest of 6% per annum. An additional charge of 2% per annum above the prescribed rate will be imposed if the interest remained unpaid when it is ought to be paid. This senior loan was fully settled by the Company on 10 May 2011.

Company No.

23820 W

58


18 INSURANCE PAYABLES


Due to agents and intermediaries 41,392 48,819 42,289 Due to reinsurers and cedants 103,412 83,394 55,462 Deposits received from reinsurers 12,260 9,287 14,393

157,064 141,500 112,144 The carrying amounts approximate the fair values at the balance sheet date.

19 OTHER PAYABLES


RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Accrued expenses 7,377 7,377 6,415 6,274 16,619 16,619 Amount due to a subsidiary - 220,388

-

268,658 -

298,693

Interest payable on borrowings 1,954 1,954

2,005

2,005 2,557

2,557

Provision for staff bonus 15,461 15,461

9,898

9,898 4,990

4,990

Other payables 19,463 19,423 10,908 10,908 10,446 10,446 44,255 264,603 29,226 297,743 34,612 333,305

The amount due to a subsidiary is unsecured, interest free and has no fixed terms of repayment. The carrying amounts approximate the fair values at the balance sheet date.

20 OPERATING REVENUE


RM'000 RM'000 RM'000 RM'000

Gross earned premiums (Note 21(a)) 792,194

792,194

701,869 701,869

Investment income (Note 22) 42,556 106.917 34,833 74,855 834,750 899,111 736,702 776,724

Company No.

23820 W

59


21 NET EARNED PREMIUMS


RM'000 RM'000 RM'000 RM'000

(a) Gross premiums (Note 15(ii)) 826,929 826,929 700,437 700,437 Change in premium liabilities (34,735) (34,735) 1,432 1,432 Gross earned premiums (Note 15(ii) and 20) 792,194

792,194

701,869

701,869

(b) Reinsurance premiums ceded (Note 15(ii)) (189,085)

(189,085)

(161,878)

(161,878)

Change in premium liabilities 46,608 46,608 (48,187) (48,187) Premiums ceded to reinsurers (Note 15(ii)) (142,477)

(142,477)

(210,065)

(210,065)

22 INVESTMENT INCOME


RM'000 RM'000 RM'000 RM'000 AFS financial assets

- interest income 26,372 26,372 18,829 18,804 - dividend income 3,202 3,202 3,119 3,119 - amortisation of premiums, net of accretion (Note 9(c)) (3,368)

(3,368)

(2,647)

(2,647)

LAR - interest income from loans 89 89 78 78 - interest income from fixed and call deposits 15,763

15,763

14,977

14,977

Investment in a subsidiary - dividend income - 64,361 - 40,047

Others 498 498 477 477

42,556 106,917 34,833 74,855

Company No.

23820 W

60


23 REALISED GAINS AND LOSSES


RM'000 RM'000 RM'000 RM'000 Property, plant and equipment

Realised (loss)/gain (4) (4) 136 136

Available-for-sale financial assets Realised gains from disposal of - equity securities quoted in Malaysia 17,790

17,790

6,988

6,988

- debt securities unquoted in Malaysia 8

8

90

90

17,794 17,794 7,214 7,214

24 FAIR VALUE GAINS AND LOSSES


RM'000 RM'000 RM'000 RM'000 AFS financial assets - impairment loss of equities quoted in Malaysia (Note 9(c)) (346)

(346)

(982)

(982) Investment in a subsidiary - impairment loss (Note 8) -

(48,270)

-

(30,035)

(346) (48,616) (982) (31,017)

Company No.

23820 W

61


25 MANAGEMENT EXPENSES AND FINANCE COSTS

(a) Management expenses


RM'000 RM'000 RM'000 RM'000

Staff salaries and bonus 36,026 36,026 35,884 35,884 Defined contribution plans 6,900 6,900 6,188 6,188 Other employee benefits 13,581 13,581 11,347 11,347 Staff costs 56,507 56,507 53,419 53,419

Executive Director - salaries and bonus 964 964 882 882 - defined contribution plan 122 122 134 134 - other emoluments 151 151 76 76 Non-Executive Directors - fees 455 415 505 364 - other emoluments 155 154 88 84 Directors' remuneration 1,847 1,806 1,685 1,540

Auditor's remuneration - statutory audit 200 195 210 205 - audit related services 35 35 35 35 Depreciation of property, plant and equipment (Note 5) 2,102

2,102

2,865

2,865

Amortisation of intangible asset - software (Note 6) 2,644

2,644

1,995

1,995

Rental of offices 3,999 3,999 4,093 4,093 EDP expenses 5,683 5,683 4,440 4,440 Insurance levy 1,335 1,335 (324) (324) Recovery of bad debts (33) (33) (13) (13) (Write-back of)/allowance for Impairment of insurance receivables (Note 11) (706)

(706)

3,633

3,633 Other expenses 38,786 38,783 35,235 35,223

54,045 54,037 52,169 52,152

Total management expenses 112,399 112,350 107,273 107,111 The total staff costs including the remuneration of Executive Director of the Group and Company during the financial year amounted to RM57,744,000 (2011: RM54,511,000).

Company No.

23820 W

62


25 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED) (a) Management expenses (continued) The remuneration, including benefits-in-kind, attributable to the Chief Executive Officer of the

Group and Company during the financial year amounted to RM1,237,000 (2011: RM1,092,000).

(b) Finance costs

(c) AXA Share Option Scheme

Pursuant to the Share Option Scheme operated by AXA, the ultimate holding corporation of the Company, Directors and eligible employees of the Company are granted options to purchase ordinary shares of AXA. While the precise terms and conditions of each option grant may vary, current options are: (a) granted at a price not less than the average closing price of the ordinary share on the

Paris Stock Exchange during the 20 trading days preceding the date of grant; (b) valid for a maximum term of 10 years; and (c) becomes exercisable in instalments of 33.33% per year on each of the second, third

and fourth anniversaries of the grant date which is generally end of March. The Black-Scholes option pricing model was used by AXA in determining the fair values of the AXA share options.

(i) In respect of the Executive Director and employees of the Company

Movements in the number of share options held by the Executive Director and employees of the Company and their related weighted average exercise prices are as follows:

2012 2011 Average Average exercise exercise price in Euro price in Euro per share Options per share Options

At 1 January 17.45 13,775 19.24 43,016 Granted - - 14.73 9,925 Exercised - - 23.42 (5,702) ─────── ─────── ─────── ─────── At 31 December 17.45 13,775 19.53 47,239

═══════ ═══════ ═══════ ═══════


RM'000 RM'000 RM'000 RM'000 Interest expense on subordinated and senior loans 12,033

12,033

13,208

13,208

Company No.

23820 W

63


25 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED) (c) AXA Share Option Scheme (continued)

(i) In respect of the Executive Director and employees of the Company (continued)

Share options outstanding at the end of the financial year held by the Executive Director and employees of the Company have the following expiry dates and exercise prices:

Exercise price in Euro Outstanding options

Expiry date per share 2012 2011 27.2.2012 20.45 - 4,206 14.3.2013 10.73 5,607 5,607 26.3.2014 17.31 7,114 7,114 29.3.2015 20.18 4,708 4,708 31.3.2016 28.43 3,139 3,139 10.5.2017 33.75 3,584 3,584 01.4.2018 21.75 2,331 2,331 20.3.2019 9.76 3,175 3,175 21.3.2020 15.43 3,575 3,450 18.3.2021 14.73 9,925 9,925 16.3.2022 12.22 3,000 - ─────── ─────── Total number of options 46,158 47,239 ═══════ ═══════ Exercisable share options at the end of the financial year held by the Executive Director and employees of the Company have the following expiry dates and exercise prices:

Exercisable options Expiry date 2012 2011 27.2.2012 - 4,206 14.3.2013 5,607 5,607 26.3.2014 7,114 7,114 29.3.2015 4,708 4,708 31.3.2016 3,139 3,139 10.5.2017 3,584 2,389 1.4.2018 1,554 1,554 20.3.2019 2,116 1,058 21.3.2020 1,192 - ─────── ─────── Total number of options 29,014 29,775 ═══════ ═══════ Weighted average exercise price in Euro per share 18.48 19.53

═══════ ═══════

Company No.

23820 W

64



(ii) In respect of the Executive Director of the Company only

Movements in the number of share options held by the Executive Director of the Company and the related weighted average prices are as follows:

2012 2011 Average Average exercise exercise price in Euro price in Euro per share Options per share Options

At 1 January 17.45 13,775 19.24 18,539 Granted - - 14.73 2,800 Exercised - - 31.49 (2,103) ─────── ─────── ─────── ─────── At 31 December 17.45 13,775 19.53 19,236

═══════ ═══════ ═══════ ═══════

Share options outstanding at the end of the financial year held by the Executive Director of the Company have the following expiry dates and exercise prices:

Exercise price in Euro Outstanding options

Expiry date per share 2012 2011 27.2.2012 20.45 - 2,103 14.3.2013 10.73 3,154 3,154 26.3.2014 17.31 2,668 2,668 29.3.2015 20.18 1,962 1,569 31.3.2016 28.43 1,308 1,308 10.5.2017 33.75 1,281 1,024 01.4.2018 21.51 - 717 20.3.2019 9.76 1,152 1,793 21.3.2020 15.43 1,125 2,100 18.3.2021 14.73 1,125 2,800 ─────── ─────── Total number of options 13,775 19,236

═══════ ═══════

Company No.

23820 W

65



(ii) In respect of the Executive Director of the Company only (continued)

Exercisable share options outstanding at the end of the financial year held by the Executive Director of the Company have the following expiry dates and exercise prices:

Exercisable options Expiry date 2012 2011 27.2.2012 - 2,103 14.3.2013 3,154 3,154 26.3.2014 2,668 2,668 29.3.2015 1,962 1,569 31.3.2016 1,308 1,308 10.5.2017 1,281 1,024 1.4.2018 - 478 20.3.2019 768 598 21.03.2020 375 - ─────── ─────── Total number of options 11,516 12,902 ═══════ ═══════ Weighted average exercise price in Euro per share 17.45 19.53

═══════ ═══════

(d) AXA Miles

In 2007, AXA, the ultimate holding corporation of the Company introduced the “AXA Miles Program”. The AXA Miles Program entitles all eligible employees of AXA world wide as at 1 July 2007 to 50 AXA Miles subject to the employee meeting certain eligibility conditions. These 50 AXA Miles will be converted to 50 AXA shares at the end of the acquisition period which for the grant made on 16 March 2012 will be 16 March June 2016 (4 years from the grant of AXA Miles), i.e. 4 years vesting period with no subsequent restriction period. The cumulative fair value of AXA Miles for eligible employees as at 31 December 2012 amounted to RM230,000 (2011: RM1,370,000).

Company No.

23820 W

66


26 TAXATION 2012

2011

Group Company Group Company RM'000 RM'000 RM'000 RM'000

Current tax Current financial year 31,064 47,154 7,564 17,570 Under/(over)-provision in prior financial years 522

272

(763)

(744)

31,586 47,426 6,801 16,826 Deferred tax (Note 16) Origination and reversal of temporary differences (1,009)

(1,009)

(2,924)

(2,612)

30,577 46,417 3,877 14,214 The income tax for the Shareholders’ and General funds are calculated based on the tax rate of

25% (2011: 25%) of the estimated assessable profit for the financial year. A reconciliation of taxation applicable to profit before taxation at the statutory income tax rate to tax

at the effective tax rate is as follows:


RM'000 RM'000 RM'000 RM'000

Profit before taxation 120,396 136,536 20,458 30,607

Tax calculated at the statutory rate of 25% (2011: 25%) 30,099

34,134

5,115

7,652

Tax effect of expenses not deductible for tax purposes 2,023

14,078

1,920

9,701

Different tax rate for offshore Insurance business (2,067)

(2,067)

(2,395)

(2,395)

Under/(over)-provision of tax in prior financial years 522

272

(763)

(744)

30,577 46,417 3,877 14,214

27 DIVIDENDS 2012 2011 Gross Amount Gross Amount dividend of dividend of per share dividend per share dividend Sen RM’000 Sen RM’000 In respect of the financial year ended 31 December 2012: Interim dividend paid, net of tax 8.4 7,500 - - ════════ ════════ ════════ ════════

The Directors do not recommend any final dividend for the financial year ended 31 December 2012.

Company No.

23820 W

67


28 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit for the financial year attributable to ordinary equity holders of the Group and Company by the weighted average number of ordinary shares in issue during the financial year:


RM'000 RM'000 RM'000 RM'000

Net profit for the financial year 89,819 90,119 16,581 16,393 Weighted average number of ordinary shares in issue 119,048

119,048

119,048

119,048

Basic earnings per share (sen) 75 76 14 14

29 OPERATING LEASE COMMITMENTS The Group and Company (as lessee) have entered into non-cancellable operating lease

agreements on the rental of offices for branch operations. These leases have remaining non-cancellable lease terms not later than 5 years.

GROUP AND COMPANY 31.12.2012 31.12.2011 1.1.2011 RM'000 RM'000 RM'000 Not later than 1 year 3,995 2,471 2,471 Later than 1 year and not later than 5 years 596 687 687 4,591 3,158 3,158

30 CAPITAL COMMITMENTS

GROUP AND COMPANY 31.12.2012 31.12.2011 1.1.2011 RM'000 RM'000 RM'000 Capital expenditure approved and contracted for: Property, plant and equipment 4,670 3,736 3,459

Company No.

23820 W

68


31 RELATED PARTY TRANSACTIONS In addition to related party disclosures mentioned elsewhere in the financial statements, set out

below are other related party disclosures. In the normal course of business, the Group and Company undertake various transactions with other companies deemed related parties by virtue of them being members of Affin Holdings Berhad group of companies (“Affin Group”) and AXA group of companies (“AXA Group”) on agreed terms and conditions. The related parties of, and their relationship with the Group and Company, are as follows: Country of Name of company Incorporation Relationship AXA S.A. France Holding and ultimate holding corporation Affin Holdings Berhad Malaysia Entity which has significant influence in the Company AXA Asia Regional Centre Pte Ltd Singapore Subsidiary of ultimate holding corporation AXA Global P&C France Subsidiary of ultimate holding corporation GIE AXA France Subsidiary of ultimate holding corporation AXA Management Services Bhd. Malaysia Subsidiary of the Company

Related party balances The following is a summary of significant related party balances, which were carried out in the

normal course of the business:

GROUP AND COMPANY 31.12.2012 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 Receivables Outstanding premiums due from Affin Group 6,779 7,303 4,967 Other receivables due from other subsidiaries of AXA Group 7,867

18,120

5,831

═══════ ═══════ ═══════ Cash and bank balances Bank balances with a licensed bank of Affin Group 767

3,069

3,595

═══════ ═══════ ═══════ Investments Fixed deposits placed with a licensed bank of Affin Group 125,350

99,750

49,750

═══════ ═══════ ═══════ Payables

Reinsurance balances due to: - AXA Global P&C 7,426 2,652 5,409 - Other subsidiaries of AXA Group 26,483 20,795 11,248 Reinsurance deposits due to AXA Global P&C 12,352

7,884

4,295

Amount due to AXA Management Services Bhd. 220,388

268,658

-

Other payables due to other subsidiaries of AXA Group 1,430

- 3,545

═══════ ═══════ ═══════

Company No.

23820 W

69


31 RELATED PARTY TRANSACTIONS (CONTINUED) Significant related party transactions

Significant related party transactions of the Group and Company with the related parties during the financial year are as follows: GROUP AND COMPANY 2012 2011

RM’000 RM’000 Transactions with AXA Management Services Bhd: Business transfer on 1 January 2011 (Note 8) - (298,693) Dividend income received 64,361 40,407

═══════ ═══════

Transactions with AXA Global P&C: Reinsurance premiums ceded (39,185) (28,897) Reinsurance claims recovered 13,515 5,654 Commissions received 9,968 8,061 ═══════ ═══════ Transactions with other subsidiaries of AXA Group: Reinsurance premiums ceded (47,461) (33,734) Reinsurance claims recovered 17,780 13,276 Commissions received 5,681 3,776 ═══════ ═══════ Transactions with AXA Asia Regional Centre Pte Ltd: Management expenses incurred (14,685) (14,086) ═══════ ═══════ Transactions with Affin Group: Interest income earned 3,450 2,010 Gross premiums received 39,273 37,584 Commissions paid (4,232) (4,073) ═══════ ═══════

(a) The Company has reinsurance agreements (treaty and facultative) with a number of fellow

subsidiaries of AXA under which the Company agrees to cede and assume premiums and liabilities in accordance with specific reinsurance schedules. Commissions are paid and received on such arrangements. Such reinsurance agreements with fellow subsidiaries are entered into in the Company’s normal course of business.

(b) The Company entered into management service agreements with fellow subsidiaries, AXA

Asia Regional Centre and GIE AXA, an economic interest group whereby the fellow subsidiaries undertake to provide certain management services set out in the service agreements.

Company No.

23820 W

70


31 RELATED PARTY TRANSACTIONS (CONTINUED)

Key management personnel are those people defined as having authority and responsibility for planning, directing and controlling the activities of the Group and Company, either directly or indirectly, including any director (Executive or Non-Executive). The total remuneration of the Directors is disclosed in Note 25 to the financial statements. The compensation of the other key management personnel (including Executive Directors) is as follows:

Group Group Company Company

2012 2011 2012 2011 RM’000 RM’000 RM’000 RM’000

Salaries and other remuneration 4,946 4,213 4,471 4,213 Benefits-in-kind 183 52 183 52

5,129 4,265 4,654 4,265

Company No.

23820 W

71


32 RISK MANAGEMENT FRAMEWORK The Group and Company issue contracts that transfer Insurance risk. This section summarises these risks

and the way the Group and Company manage them. Insurance risks

The Group and Company underwrite various types of general insurance contracts, where majority of contracts are having annual coverage and premium, with the exception of short term policies in Travel and Marine Cargo (single trip and single shipment policies respectively) and multi-year policies in Construction and Contractor’s All Risks (project policies). For the current financial year ended 31 December 2012, Motor and Fire classes constitute 64.50% (2011: 66.7%) of the Group’s and Company’s business. Insurance contracts transfer the risk from the policyholders to the Group and Company. The Group and Company receive a premium and are then liable for all the claims (as per wording) occurring between the inception date and the expiry date of the insurance contract arising from random events. Underestimation of this insurance risk leads to financial consequences for the Group and the Company as the premium might not be enough to cover the costs. The causes of underestimation can be various such as: (i) Underestimation of the frequency and / or severity of the claims; (ii) Change in legal/economic environment; (iii) Change in insured’s behavior; or (iv) Change in reinsurance rates etc.

Due to the nature of the business, all the above mentioned elements are assessed and the following procedures are in place to mitigate the risks: (i) Documented underwriting guidelines and underwriting authorities; (ii) Risk management engineering and risk accumulation limits; (iii) Reinsurance is placed to minimise certain insurance risks within approved limits and security; (iv) Claims approval and settlement authorities are clearly defined for prudent control on financial exposure;

and (v) Regular internal audit reviews are performed to ensure compliance with the Group’s and Company's

guidelines and standards.

Com

pany

No.

2382

0 W

72

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

In

sura

nce

ris

ks (

con

tinu

ed)

The

tabl

e be

low

set

s ou

t the

con

cent

ratio

n of

the

Gro

up’s

and

Com

pany

’s p

rem

ium

s by

cla

sses

of b

usin

ess:

20

12

2012

20

12

2011

20

11

2011

G

ross

R

ein

sura

nce

N

et

Gro

ss

Rei

nsu

ran

ce

Net

RM’000

RM’000

RM’000

RM’000

RM’0

00

RM’000

M

otor

406,

803

(11,

500)

39

5,30

3 34

8,03

7 (1

1,46

4)

336,

573

Fire

126,

507

(65,

901)

60

,606

11

9,35

2 (5

7,20

7)

62,1

45

Mar

ine,

avi

atio

n an

d tr

ansi

t

61,0

39

(24,

293)

36

,746

55

,036

(2

1,31

9)

33,7

17

Mis

cella

neou

s

232,

580

(87,

391)

14

5,18

9 17

8,01

2 (7

1,88

8)

106,

124

──

─────

───────

───────

───────

───────

──────

826,

929

(189

,085

) 63

7,84

4 70

0,43

7 (1

61,8

78)

538,

559

══

═════

═══════

═══════

═══════

═══════

═══════

(a

) K

ey a

ssu

mp

tion

s

The

prin

cipa

l as

sum

ptio

n un

derly

ing

the

estim

atio

n of

lia

bilit

ies

is t

he f

utur

e cl

aim

s de

velo

pmen

t w

ill f

ollo

w a

sim

ilar

patte

rn t

o th

e pa

st c

laim

s de

velo

pmen

t ex

perie

nce.

Thi

s in

clud

es a

ssum

ptio

ns in

res

pect

of u

ltim

ate

loss

rat

ios,

cas

e re

serv

e, p

rovi

sion

for

risk

mar

gin

for

adve

rse

devi

atio

n (“

PR

AD

”) a

nd c

laim

s ha

ndlin

g ex

pens

es.

A

dditi

onal

qua

litat

ive

judg

emen

ts a

re u

sed

to a

sses

s th

e ex

tent

to

whi

ch t

he p

ast

tren

ds m

ay n

ot a

pply

in

the

futu

re,

for

exam

ple,

iso

late

d oc

curr

ence

, ch

ange

s in

mar

ket

fact

ors

such

as

publ

ic a

ttitu

de t

o cl

aim

ing,

eco

nom

ic c

ondi

tions

, as

wel

l as

inte

rnal

fac

tors

, su

ch a

s, p

ortfo

lio m

ix,

polic

y co

nditi

ons

and

clai

ms

hand

ling

proc

edur

es.

Judg

emen

t is

fur

ther

use

d to

ass

ess

the

exte

nt t

o w

hich

ext

erna

l fa

ctor

s, s

uch

as j

udic

ial

deci

sion

s an

d go

vern

men

t leg

isla

tion

affe

ct th

e es

timat

es.

Company No.

23820 W

73


32 RISK MANAGEMENT FRAMEWORK (CONTINUED) Insurance risks (continued)

(b) Sensitivity analysis

The insurance claim liabilities calculation is based on key assumptions. Variation of these assumptions may make vary the amount of claim liabilities and impact significantly the results. As below illustrated, sensitivity analysis are carried out in order to understand how key assumptions (i.e. ultimate loss ratios of the last 3 accident years, case reserve, PRAD and claims handling expenses) impact the claim liability. It is worth mentioning that these 4 assumptions do not represent an exhaustive list but are likely to be the most important.

The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross liabilities, net liabilities, profit before tax and equity (profit after tax). Impact on Impact on Impact on Change in gross net profit Impact on

assumptions liabilities liabilities before tax equity % RM’000 RM’000 RM’000 RM’000

GROUP AND COMPANY 31 December 2012 Loss ratios for last 3 years +10% 125,605 100,933 (100,933) (75,700) Case reserve +10% 44,827 32,696 (32,696) (24,522) PRAD +10% 3,656 2,725 (2,725) (2,044) Claims handling expenses +10% 1,457 1,457 (1,457) (1,093) 31 December 2011 Loss ratios for last 3 years +10% 115,306 87,037 (87,037) (65,278) Case reserve +10% 23,499 29,392 (29,392) (22,044) PRAD +10% 2,543 1,804 (1,804) (1,353) Claims handling expenses +10% 766 766 (766) (575)

1 January 2011 Loss ratios +10% 96,696 74,417 (74,417) (55,813) PRAD +10% 2,886 1,804 (1,804) (1,354) Claims handling expenses +10% 836 836 (836) (627)

Company No.

23820 W

74


32 RISK MANAGEMENT FRAMEWORK (CONTINUED) Insurance risks (continued)

(c) Claims development tables

The following tables show estimates of cumulative incurred claims including both claims notified (settled or not yet settled) and IBNR for each successive accident year at each balance sheet date, together with cumulative payments to-date. The past year pattern is used to assess future pattern and therefore estimate the ultimate loss ratio and then ultimate cost of claims per accident year. Actuarial methods such as Chain Ladder but also other quantitative information (such as market benchmarks) and qualitative information (such as claim manager’s feedback) are taken into account in the assessments. In setting provisions for claims, the Group and Company assess the future experience and adjust the level of reserve to the level of uncertainty. Risk margin is also provided to cope with this uncertainty. The higher the uncertainty, the higher the risk margin is. This uncertainty depend on the line of business (short tail or long tail), the nature of the risks (high sum insured or low sum insured) as well as the accident year (the more recent the accident year is, the higher the uncertainty associated with the ultimate claims experience is).

Com

pany

No.

23

820

W

75

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Insu

ran

ce r

isks

- C

laim

s d

evel

opm

ent

tabl

es (

con

tinu

ed)

GR

OU

P A

ND

CO

MP

AN

Y

Gro

ss c

laim

s lia

bilit

ies

for

31 D

ecem

ber

2012

:

Acc

iden

t Y

ear

20

05 &

pr

ior

2006

20

07

2008

20

09

2010

20

11

2012

To

tal

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

At

the

end

of a

ccid

ent

year

1,

501,

718

25

6,43

1

301,

537

36

3,40

1

393,

313

40

4,40

5

418,

084

48

4,59

5

1 y

ear

late

r

1,46

1,92

3

252,

387

27

6,04

3

320,

274

37

2,56

0

387,

857

41

8,24

8

2 y

ears

late

r

1,47

4,22

8

264,

111

25

7,81

5

330,

659

37

3,57

4

391,

254

3

yea

rs la

ter

1,

481,

462

26

2,09

0

261,

027

33

4,95

4

367,

593

4

yea

rs la

ter

1,

476,

582

26

2,17

1

266,

014

33

2,51

9

5 y

ears

late

r

1,49

2,60

4

288,

212

26

5,98

1

6 y

ears

late

r

1,96

0,27

3

278,

639

7

yea

rs la

ter

1,

957,

386

Cu

rren

t Es

timat

e of

Cum

ulat

ive

Clai

ms

Incu

rred

1,

957,

386

27

8,63

9

265,

981

33

2,51

9

367,

593

39

1,25

4

418,

248

48

4,59

5

2005

&

prio

r 20

06

2007

20

08

2009

20

10

2011

20

12

At

the

end

of a

ccid

ent

year

(1

,272

,643

) (7

0,30

8)

(115

,937

) (1

35,2

99)

(128

,448

) (1

41,0

84)

(152

,494

) (1

63,6

15)

1 y

ear

late

r

(1,3

61,9

73)

(170

,249

) (2

07,7

47)

(249

,365

) (2

79,9

61)

(283

,090

) (2

95,7

20)

2 y

ears

late

r

(1,3

95,5

14)

(209

,822

) (2

29,6

04)

(296

,299

) (3

25,6

55)

(321

,020

) 3

yea

rs la

ter

(1

,416

,459

) (2

19,9

49)

(243

,093

) (3

11,6

35)

(337

,692

) 4

yea

rs la

ter

(1

,429

,066

) (2

28,6

50)

(249

,912

) (3

17,8

92)

5 y

ears

late

r

(1,4

45,8

34)

(261

,299

) (2

51,7

34)

6 y

ears

late

r

(1,9

21,3

73)

(267

,450

) 7

yea

rs la

ter

(1

,924

,173

) Cu

mul

ativ

e pa

ymen

ts t

o-da

te

(1,9

24,1

73)

(267

,450

) (2

51,7

34)

(317

,892

) (3

37,6

92)

(321

,020

) (2

95,7

20)

(163

,615

)

Gro

ss c

laim

s lia

bilit

ies

as p

er b

alan

ce s

heet

33

,213

11

,189

14

,247

14

,627

29

,901

70

,234

12

2,52

8

320,

980

61

6,91

9

Com

pany

No.

23

820

W

76

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Insu

ran

ce r

isks

- C

laim

s d

evel

opm

ent

tabl

es (

con

tinu

ed)

G

RO

UP

AN

D C

OM

PA

NY

N

et c

laim

s lia

bilit

ies

for

31 D

ecem

ber

2012

:

Acc

iden

t Y

ear

20

05 &

pr

ior

2006

20

07

2008

20

09

2010

20

11

2012

To

tal

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

At

the

end

of a

ccid

ent

year

1,

035,

980

19

5,49

9

215,

658

24

8,90

6

262,

000

30

9,32

4

332,

697

39

8,49

3

1 y

ear

late

r

1,02

3,48

3

190,

401

20

5,97

0

227,

821

25

8,54

0

298,

515

33

6,79

8

2 y

ears

late

r

1,03

1,39

3

194,

674

20

3,20

8

237,

524

26

1,42

8

306,

145

3

yea

rs la

ter

1,

038,

760

19

5,31

0

202,

870

24

2,51

1

255,

419

4

yea

rs la

ter

1,

041,

674

19

6,67

3

207,

417

23

9,10

2

5 y

ears

late

r

1,04

8,49

7

199,

455

20

6,71

9

6 y

ears

late

r

1,33

5,18

2

195,

043

7

yea

rs la

ter

1,

336,

072

Cu

rren

t Es

timat

e of

Cum

ulat

ive

Clai

ms

Incu

rred

1,

336,

072

19

5,04

3

206,

719

23

9,10

2

255,

419

30

6,14

5

336,

798

39

8,49

3

2005

&

prio

r 20

06

2007

20

08

2009

20

10

2011

20

12

At

the

end

of a

ccid

ent

year

(8

95,4

05)

(87,

247)

(9

6,48

6)

(112

,612

) (1

04,2

99)

(114

,807

) (1

17,4

20)

(137

,889

) 1

yea

r la

ter

(9

79,0

02)

(161

,574

) (1

67,2

37)

(190

,619

) (1

95,0

97)

(224

,795

) (2

31,5

46)

2 y

ears

late

r

(1,0

02,5

63)

(176

,250

) (1

81,5

48)

(211

,757

) (2

22,9

92)

(256

,772

) 3

yea

rs la

ter

(1

,014

,974

) (1

83,3

86)

(190

,777

) (2

24,1

26)

(232

,045

) 4

yea

rs la

ter

(1

,025

,668

) (1

89,1

11)

(197

,240

) (2

27,9

36)

5 y

ears

late

r

(1,0

42,8

54)

(189

,471

) (1

98,7

39)

6 y

ears

late

r

(1,3

24,3

70)

(191

,951

) 7

yea

rs la

ter

(1

,326

,442

) Cu

mul

ativ

e pa

ymen

ts t

o-da

te

(1,3

26,4

42)

(191

,951

) (1

98,7

39)

(227

,936

) (2

32,0

45)

(256

,772

) (2

31,5

46)

(137

,889

)

Net

s cl

aim

s lia

bilit

ies

as p

er b

alan

ce s

heet

9,

630

3,

092

7,

980

11

,166

23

,374

49

,373

10

5,25

2

260,

604

47

0,47

1

Com

pany

No.

23

820

W

77

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Insu

ran

ce r

isks

- C

laim

s d

evel

opm

ent

tabl

es (

con

tinu

ed)

GR

OU

P A

ND

CO

MP

AN

Y

Gro

ss c

laim

s lia

bilit

ies

for

31 D

ecem

ber

2011

: A

ccid

ent

Yea

r

2004

& p

rior

2005

20

06

2007

20

08

2009

20

10

2011

To

tal

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

At

the

end

of a

ccid

ent

year

1,

254,

564

232,

220

256,

431

301,

537

363,

401

393,

313

404,

405

418,

084

1 y

ear

late

r

1,26

9,49

8 20

0,97

7 25

2,38

7 27

6,04

3 32

0,27

4 37

2,56

0 38

7,85

7 2

yea

rs la

ter

1,

260,

946

211,

852

264,

111

257,

815

330,

659

373,

574

3 y

ears

late

r

1,26

2,37

6 21

2,05

6 26

2,09

0 26

1,02

7 33

4,95

4 4

yea

rs la

ter

1,

269,

406

210,

851

262,

171

266,

014

5 y

ears

late

r

1,26

5,73

1 21

3,83

4 28

8,21

3 6

yea

rs la

ter

1,

278,

770

221,

142

7 y

ears

late

r

1,73

9,13

1 Cu

rren

t es

timat

e of

cum

ulat

ive

c

laim

s in

curr

ed

1,73

9,13

1 22

1,14

2 28

8,21

3 26

6,01

4 33

4,95

4 37

3,57

4 38

7,85

7 41

8,08

4

At

the

end

of a

ccid

ent

year

(1

,064

,460

) (8

9,48

3)

(70,

308)

(1

15,9

37)

(135

,299

) (1

28,4

48)

(141

,084

) (1

52,4

94)

1 y

ear

late

r

(1,1

83,1

60)

(147

,380

) (1

70,2

49)

(207

,747

) (2

49,3

65)

(279

,961

) (2

83,0

90)

2 y

ears

late

r

(1,2

14,5

93)

(167

,591

) (2

09,8

22)

(229

,604

) (2

96,2

99)

(325

,655

) 3

yea

rs la

ter

(1

,227

,923

) (1

78,1

70)

(219

,949

) (2

43,0

93)

(311

,635

) 4

yea

rs la

ter

(1

,238

,289

) (1

82,5

00)

(228

,650

) (2

49,9

12)

5 y

ears

late

r

(1,2

46,5

66)

(186

,900

) (2

61,2

99)

6 y

ears

late

r

(1,2

58,9

34)

(215

,474

) 7

yea

rs la

ter

(1

,705

,899

) Cu

mul

ativ

e pa

ymen

ts t

o-da

te

(1,7

05,8

99)

(215

,474

) (2

61,2

99)

(249

,912

) (3

11,6

35)

(325

,655

) (2

83,0

90)

(152

,494

)

Gro

ss c

laim

s lia

bilit

ies

as p

er b

alan

ce s

heet

33

,232

5,

668

26,9

14

16,1

02

23,3

19

47,9

19

104,

767

265,

590

523,

511

Com

pany

No.

23

820

W

78

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Insu

ran

ce r

isks

- C

laim

s d

evel

opm

ent

tabl

es (

con

tinu

ed)

G

RO

UP

AN

D C

OM

PA

NY

N

et c

laim

s lia

bilit

ies

for

31 D

ecem

ber

2011

:

Acc

iden

t Y

ear

20

04 &

pr

ior

2005

20

06

2007

20

08

2009

20

10

2011

To

tal

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

At

the

end

of a

ccid

ent

year

87

0,15

5 16

4,20

8 19

5,49

9 21

5,65

8 24

8,90

6 26

2,00

0 30

9,32

4 33

2,69

6 1

yea

r la

ter

87

1,77

2 16

5,40

6 19

0,40

1 20

5,97

0 22

7,82

1 25

8,54

0 29

8,51

5 2

yea

rs la

ter

85

8,07

7 16

8,14

8 19

4,67

4 20

3,20

8 23

7,52

4 26

1,42

8 3

yea

rs la

ter

86

3,24

5 16

9,53

1 19

5,31

0 20

2,87

0 24

2,51

0 4

yea

rs la

ter

86

9,22

9 17

1,67

2 19

6,67

3 20

7,41

7 5

yea

rs la

ter

87

0,00

2 17

4,23

1 19

9,45

5 6

yea

rs la

ter

87

4,26

6 17

6,59

6 7

yea

rs la

ter

1,

158,

586

Curr

ent

estim

ate

of c

umul

ativ

e

cla

ims

incu

rred

1,

158,

586

176,

596

199,

455

207,

417

242,

510

261,

428

298,

515

332,

696

At

the

end

of a

ccid

ent

year

(7

36,7

21)

(78,

521)

(8

7,24

7)

(96,

486)

(1

12,6

12)

(104

,299

) (1

14,8

07)

(117

,420

) 1

yea

r la

ter

(8

16,8

84)

(142

,522

) (1

61,5

74)

(167

,237

) (1

90,6

19)

(195

,097

) (2

24,7

95)

2 y

ears

late

r

(836

,480

) (1

56,0

83)

(176

,250

) (1

81,5

48)

(211

,757

) (2

22,9

92)

3 y

ears

late

r

(846

,480

) (1

61,6

89)

(183

,386

) (1

90,7

77)

(224

,126

) 4

yea

rs la

ter

(8

53,2

85)

(165

,163

) (1

89,1

11)

(197

,240

) 5

yea

rs la

ter

(8

60,5

05)

(175

,040

) (1

89,4

71)

6 y

ears

late

r

(867

,814

) (1

74,4

52)

7 y

ears

late

r

(1,1

49,9

17)

Cum

ulat

ive

paym

ents

to-

date

(1

,149

,917

) (1

74,4

52)

(189

,471

) (1

97,2

40)

(224

,126

) (2

22,9

92)

(224

,795

) (1

17,4

20)

Net

cla

ims

liabi

litie

s as

per

bal

ance

she

et

8,66

9 2,

144

9,98

4 10

,177

18

,384

38

,436

73

,720

21

5,27

6 37

6,79

0

Com

pany

No.

23

820

W

79

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Insu

ran

ce r

isks

- C

laim

s d

evel

opm

ent

tabl

es (

con

tinu

ed)

G

RO

UP

AN

D C

OM

PA

NY

G

ross

cla

ims

liabi

litie

s fo

r 1

Janu

ary

2011

: A

ccid

ent

Yea

r

2003

& p

rior

2004

20

05

2006

20

07

2008

20

09

2010

To

tal

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

At

the

end

of a

ccid

ent

year

1,

120,

089

199,

788

232,

220

256,

431

301,

537

363,

401

393,

313

404,

406

1 y

ear

alte

r

1,05

4,77

6 20

4,48

0 20

0,97

7 25

2,38

7 27

6,04

3 32

0,27

4 37

2,56

0 2

yea

rs la

ter

1,

065,

018

199,

432

211,

852

264,

111

257,

815

330,

659

3 y

ears

late

r

1,06

1,51

4 20

4,78

4 21

2,05

6 26

2,09

0 26

1,02

7 4

yea

rs la

ter

1,

057,

592

202,

070

210,

851

262,

172

5 y

ears

late

r

1,06

7,33

6 20

2,12

9 21

3,83

4 6

yea

rs la

ter

1,

063,

602

201,

743

7 y

ears

late

r

1,07

7,02

7 Cu

rren

t es

timat

e of

cum

ulat

ive

clai

ms

incu

rred

1,

077,

027

201,

743

213,

834

262,

172

261,

027

330,

659

372,

560

404,

406

At

the

end

of a

ccid

ent

year

(8

57,9

78)

(87,

150)

(8

9,48

3)

(70,

308)

(1

15,9

37)

(135

,299

) (1

28,4

48)

(141

,084

) 1

yea

r la

ter

(9

77,3

10)

(164

,521

) (1

47,3

80)

(170

,249

) (2

07,7

47)

(249

,365

) (2

79,9

62)

2 y

ears

late

r

(1,0

18,6

39)

(185

,135

) (1

67,5

91)

(209

,822

) (2

29,6

04)

(296

,299

) 3

yea

rs la

ter

(1

,029

,458

) (1

91,7

18)

(178

,170

) (2

19,9

49)

(243

,093

) 4

yea

rs la

ter

(1

,036

,205

) (1

94,6

69)

(182

,500

) (2

28,6

50)

5 y

ears

late

r

(1,0

43,6

20)

(197

,836

) (1

86,9

00)

6 y

ears

late

r

(1,0

48,7

30)

(199

,923

) 7

yea

rs la

ter

(1

,059

,011

) Cu

mul

ativ

e pa

ymen

ts t

o-da

te

(1,0

59,0

11)

(199

,923

) (1

86,9

00)

(228

,650

) (2

43,0

93)

(296

,299

) (2

79,9

62)

(141

,084

)

Gro

ss c

laim

s lia

bilit

ies

as p

er b

alan

ce s

heet

18

,016

1,

820

26,9

34

33,5

22

17,9

34

34,3

60

92,5

98

263,

322

488,

506

Com

pany

No.

23

820

W

80

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Insu

ran

ce r

isks

- C

laim

s d

evel

opm

ent

tabl

es (

con

tinu

ed)

G

RO

UP

AN

D C

OM

PA

NY

N

et c

laim

s lia

bilit

ies

for

1 Ja

nuar

y 20

11:

Acc

iden

t Y

ear

20

03 &

pr

ior

2004

20

05

2006

20

07

2008

20

09

2010

To

tal

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

RM'0

00

At

the

end

of a

ccid

ent

year

74

3,52

8 15

6,56

2 16

4,20

8 19

5,49

9 21

5,65

8 24

8,90

6 26

2,00

0 30

9,32

3 1

yea

r la

ter

71

3,59

3 15

7,52

3 16

5,40

6 19

0,40

1 20

5,97

0 22

7,82

1 25

8,54

0 2

yea

rs la

ter

71

4,24

9 15

1,50

6 16

8,14

8 19

4,67

4 20

3,20

8 23

7,52

4 3

yea

rs la

ter

70

6,57

1 15

6,50

6 16

9,53

1 19

5,31

0 20

2,87

0 4

yea

rs la

ter

70

6,73

9 15

6,24

2 17

1,67

2 19

6,67

3 5

yea

rs la

ter

71

2,98

7 15

6,61

1 17

4,23

1 6

yea

rs la

ter

71

3,39

1 15

5,94

1 7

yea

rs la

ter

71

8,32

5 Cu

rren

t es

timat

e of

cum

ulat

ive

clai

ms

incu

rred

71

8,32

5 15

5,94

1 17

4,23

1 19

6,67

3 20

2,87

0 23

7,52

4 25

8,54

0 30

9,32

3

At

the

end

of a

ccid

ent

year

(5

81,7

74)

(75,

294)

(7

8,52

1)

(87,

247)

(9

6,48

6)

(113

,062

) (1

04,2

99)

(114

,807

) 1

yea

r la

ter

(6

61,4

27)

(131

,188

) (1

42,5

22)

(161

,574

) (1

67,2

37)

(190

,619

) (1

95,0

97)

2 y

ears

late

r

(685

,696

) (1

41,7

46)

(156

,083

) (1

76,2

50)

(181

,548

) (2

11,7

57)

3 y

ears

late

r

(694

,734

) (1

47,1

71)

(161

,689

) (1

83,3

86)

(190

,777

) 4

yea

rs la

ter

(6

99,3

09)

(149

,850

) (1

65,1

63)

(189

,111

) 5

yea

rs la

ter

(7

03,4

35)

(153

,251

) (1

69,2

00)

6 y

ears

late

r

(707

,254

) (1

54,6

14)

7 y

ears

late

r

(713

,200

) Cu

mul

ativ

e pa

ymen

ts t

o-da

te

(713

,200

) (1

54,6

14)

(169

,200

) (1

89,1

11)

(190

,777

) (2

11,7

57)

(195

,097

) (1

14,8

07)

Net

cla

ims

liabi

litie

s as

per

bal

ance

she

et

5,12

5 1,

327

5,03

1 7,

562

12,0

93

25,7

67

63,4

43

194,

516

314,

864

Company No. 23820 W

81


32 RISK MANAGEMENT FRAMEWORK (CONTINUED)

Financial risks The Group and Company are exposed to financial risks through their financial assets, reinsurance assets and insurance liabilities. In particular, the key financial risk is that the proceeds from the financial assets are not sufficient to fund the obligations arising from the insurance contracts. The important components of these financial risks are interest rate risk, equity price risk, credit risk, liquidity risk and currency risk.

Credit risk The Group and Company have exposures to credit risk, which is the risk that a counterparty will

not be able to pay amounts in full when due. Key areas where the Group and Company are exposed to credit risks are:

Reinsurer’s share of insurance liabilities Amounts due from reinsurers’ in respect of claims already paid Amounts due from insurance contract holders Amounts due from insurance intermediaries, and Counterparty risk with respect to derivative transactions and custodian

The Group and Company structure the levels of credit risk they accepts by placing limits on the exposure to a single counterparty, or groups of counterparty. Such risks are subject to regular review by the management. The Group and Company entered into custody agreements with Standard Chartered Malaysia Berhad and AmInvestment Management Sdn Bhd, whose credit rating is AAA and BBB respectively whereby both companies provide safekeeping services for the Group’s and Company’s investment assets (equities and bonds). Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s and Company’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group and Company remain liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on a regular basis by reviewing their financial strength prior to finalisation of any contract. Concentration of credit risk exists when changes in geographic, economic or industry factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to the Group’s and Company’s total exposures. The Group’s and Company’s portfolio of financial assets is diversified along geographic, industry and product sectors. The Group and Company have been monitoring the concentration risk by adopting appropriate risk control measures, such as setting limit on exposures to individual counterparty.

Com

pany

No.

23

820

W

82

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

R

ISK

MA

NA

GE

ME

NT

FR

AM

EW

OR

K (

CO

NT

INU

ED

)

C

red

it r

isk

(co

ntin

ued

) T

he ta

ble

belo

w p

rovi

des

info

rmat

ion

rega

rdin

g th

e cr

edit

risk

expo

sure

of t

he G

roup

and

Com

pany

by

clas

sify

ing

asse

ts a

ccor

ding

to th

e re

cogn

ised

loca

l or

inte

rnat

iona

l rat

ing

agen

cies

’ cre

dit

ratin

gs o

f co

unte

rpar

ties.

AA

A is

the

high

est

poss

ible

rat

ing.

Rat

ed a

sset

s th

at f

all o

utsi

de t

he r

ange

of A

AA

to

BB

B

are

clas

sifie

d as

spe

cula

tive

grad

e an

d th

us a

re c

onsi

dere

d as

non

-inve

stm

ent g

rade

.

AA

A

AA

A

B

BB

B

B

B

No

n-r

ated

T

ota

l G

RO

UP

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

31

Dec

emb

er 2

012

AF

S fi

nanc

ial a

sset

s 12

6,39

0 12

5,62

4 -

- -

- 48

3,99

6 73

6,01

0 Lo

ans

and

rece

ivab

les

- 17

8,83

5 17

8,08

6 52

,756

13

4,24

2 -

952

544,

871

Rei

nsur

ance

ass

ets

- 84

,886

11

1,57

8 -

- -

9,83

0 20

6,29

4 In

sura

nce

rece

ivab

les

53

22,5

67

7,25

7 -

- -

98,7

86

128,

663

Oth

er r

ecei

vabl

es

- -

- -

- -

35,5

20

35,5

20

Cas

h an

d ca

sh e

quiv

alen

ts

21,5

07

- -

- -

- -

21,5

07

───────

───────

───────

───────

───────

───────

───────

───────

14

7,95

0 41

1,91

2 29

6,92

1 52

,756

13

4,24

2 -

629,

084

1,67

2,86

5

═══════

═══════

═══════

═══════

═══════

═══════

═══════

═══════

31 D

ecem

ber

201

1 A

FS

fina

ncia

l ass

ets

82,4

35

65,1

11

- -

- -

422,

614

570,

160

Loan

s an

d re

ceiv

able

s -

116,

916

152,

283

106,

200

115,

800

- 1,

765

492,

964

Rei

nsur

ance

ass

ets

- 17

,840

9,

086

- -

- 13

3,03

3 15

9,95

9 In

sura

nce

rece

ivab

les

- -

38,0

42

- -

- 84

,768

12

2,81

0 O

ther

rec

eiva

bles

-

- -

- -

- 43

,810

43

,810

C

ash

and

cash

equ

ival

ents

28

,930

-

- -

- -

- 28

,930

───────

───────

───────

───────

───────

───────

───────

───────

11

1,36

5 19

9,86

7 19

9,41

1 10

6,20

0 11

5,80

0 -

685,

990

1,41

8,63

3

═══════

═══════

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

83

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

C

red

it r

isk

(co

nti

nu

ed)

AA

A

AA

A

B

BB

B

B

B

No

n-r

ated

T

ota

l G

RO

UP

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

1

Jan

uar

y 20

11

AF

S fi

nanc

ial a

sset

s 85

,033

41

,370

-

- -

- 38

0,51

5 50

6,91

8 Lo

ans

and

rece

ivab

les

95,2

37

139,

964

136,

080

47,0

98

69,9

34

14,3

50

40,2

62

542,

925

Rei

nsur

ance

ass

ets

2 48

,874

48

,452

8

- -

137,

731

235,

067

Insu

ranc

e re

ceiv

able

s -

314

5,35

7 -

- -

75,0

33

80,7

04

Oth

er r

ecei

vabl

es

- -

- -

- -

26,3

13

26,3

13

Cas

h an

d ca

sh e

quiv

alen

ts

14,3

00

5,84

4 (1

,202

) 1,

027

4 10

2 20

2 20

,277

───────

───────

───────

───────

───────

───────

───────

───────

19

4,57

2 23

6,36

6 18

8,68

7 48

,133

69

,938

14

,452

66

0,05

6 1,

412,

204

═══════

═══════

═══════

═══════

═══════

═══════

═══════

═══════

CO

MP

AN

Y

31 D

ecem

ber

201

2 A

FS

fina

ncia

l ass

ets

126,

390

125,

624

- -

- -

483,

996

736,

010

Loan

s an

d re

ceiv

able

s -

178,

835

178,

086

52,7

56

134,

242

- 95

2 54

4,87

1 R

eins

uran

ce a

sset

s -

84,8

86

111,

578

- -

- 9,

830

206,

294

Insu

ranc

e re

ceiv

able

s 53

22

,567

7,

257

- -

- 98

,786

12

8,66

3 O

ther

rec

eiva

bles

-

- -

- -

- 35

,487

35

,487

C

ash

and

cash

equ

ival

ents

21

,476

-

- -

- -

- 21

,476

───────

───────

───────

───────

───────

───────

───────

───────

14

7,91

9 41

1,91

2 29

6,92

1 52

,756

13

4,24

2 -

629,

051

1,67

2,80

1

═══════

═══════

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

84

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

C

red

it r

isk

(co

nti

nu

ed)

AA

A

AA

A

B

BB

B

B

B

No

n-r

ated

T

ota

l C

OM

PA

NY

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

31

Dec

emb

er 2

011

AF

S fi

nanc

ial a

sset

s 82

,435

65

,111

-

- -

- 42

2,61

4 57

0,16

0 Lo

ans

and

rece

ivab

les

- 11

6,91

6 15

2,28

3 10

6,20

0 11

5,80

0 -

1,76

5 49

2,96

4 R

eins

uran

ce a

sset

s -

17,8

40

9,08

6

- -

133,

033

159,

959

Insu

ranc

e re

ceiv

able

s -

- 38

,042

-

- -

84,7

68

122,

810

Oth

er r

ecei

vabl

es

- -

- -

- -

43,8

10

43,8

10

Cas

h an

d ca

sh e

quiv

alen

ts

28,6

87

- -

- -

- -

28,6

87

───────

───────

───────

───────

───────

───────

───────

───────

11

1,12

2 19

9,86

7 19

9,41

1 10

6,20

0 11

5,80

0 -

685,

990

1,41

8,39

0

═══════

═══════

═══════

═══════

═══════

═══════

═══════

═══════

1 Ja

nu

ary

2011

A

FS

fina

ncia

l ass

ets

85,0

33

41,3

70

- -

- -

380,

515

506,

918

Loan

s an

d re

ceiv

able

s 95

,237

13

9,96

4 13

6,08

0 47

,098

69

,934

14

,350

40

,262

54

2,92

5 R

eins

uran

ce a

sset

s 2

48,8

74

48,4

52

8 -

- 13

7,73

1 23

5,06

7 In

sura

nce

rece

ivab

les

- 31

4 5,

357

- -

- 75

,033

80

,704

O

ther

rec

eiva

bles

-

- -

- -

- 26

,313

26

,313

C

ash

and

cash

equ

ival

ents

14

,300

2,

844

(1,2

02)

1,02

7 4

102

202

17,2

77

───────

───────

───────

───────

───────

───────

───────

───────

19

4,57

2 23

3,36

6 18

8,68

7 48

,133

69

,938

14

,452

66

0,05

6 1,

409,

204

═══════

═══════

═══════

═══════

═══════

═══════

═══════

═══════

Company No. 23820 W

85



Credit risk (continued) To manage the credit risks of insurance receivables, the Group and Company have established credit policies that govern credit approval, review and monitoring processes and impairment assessment processes. The credit policies also lay down the actions to be taken to handle debts overdue for a certain period of time. There are also monthly management reports showing the ageing analysis of balanced overdue, and the management will monitor the ageing analysis on a regular basis. The following table summarises the credit quality of financial assets at the balance sheet date. Neither past Past due Past due due nor but not and GROUP impaired impaired impaired Total RM’000 RM’000 RM’000 RM’000 31 December 2012 AFS financial assets 736,010 - - 736,010 Loans and receivables 544,871 - - 544,871 Reinsurance assets 206,294 - - 206,294 Insurance receivables 92,236 36,427 - 128,663 Other receivables 35,520 - - 35,520 Cash and cash equivalents 21,507 - - 21,507 ─────── ─────── ─────── ─────── 1,636,438 36,427 - 1,672,865 ═══════ ═══════ ═══════ ═══════ 31 December 2011 AFS financial assets 570,160 - - 570,160 Loans and receivables 492,964 - - 492,964 Reinsurance assets 159,959 - - 159,959 Insurance receivables 93,729 29,081 - 122,810 Other receivables 43,810 - - 43,810 Cash and cash equivalents 28,930 - - 28,930 ─────── ─────── ─────── ─────── 1,389,552 29,081 - 1,418,633 ═══════ ═══════ ═══════ ═══════ 1 January 2011 AFS financial assets 506,918 - - 506,918 Loans and receivables 542,925 - - 542,925 Reinsurance assets 235,067 - - 235,067 Insurance receivables 55,802 24,902 - 80,704 Other receivables 26,313 - - 26,313 Cash and cash equivalents 20,277 - - 20,277 ─────── ─────── ─────── ─────── 1,387,302 24,902 - 1,412,204 ═══════ ═══════ ═══════ ═══════

Company No. 23820 W

86



Credit risk (continued) Neither past Past due Past due due nor but not and COMPANY impaired impaired impaired Total RM’000 RM’000 RM’000 RM’000 31 December 2012 AFS financial assets 736,010 - - 736,010 Loans and receivables 544,871 - - 544,871 Reinsurance assets 206,294 - - 206,294 Insurance receivables 92,236 36,427 - 128,663 Other receivables 35,487 - - 35,487 Cash and cash equivalents 21,476 - - 21,476 ─────── ─────── ─────── ─────── 1,636,374 36,427 - 1,672,801 ═══════ ═══════ ═══════ ═══════ 31 December 2011 AFS financial assets 570,160 - - 570,160 Loans and receivables 492,964 - - 492,964 Reinsurance assets 159,959 - - 159,959 Insurance receivables 93,729 29,081 - 122,810 Other receivables 43,810 - - 43,810 Cash and cash equivalents 28,687 - - 28,687 ─────── ─────── ─────── ─────── 1,389,309 29,081 - 1,418,390 ═══════ ═══════ ═══════ ═══════ 1 January 2011 AFS financial assets 506,918 - - 506,918 Loans and receivables 542,925 - - 542,925 Reinsurance assets 235,067 - - 235,067 Insurance receivables 55,802 24,902 - 80,704 Other receivables 26,313 - - 26,313 Cash and cash equivalents 17,277 - - 17,277 ─────── ─────── ─────── ─────── 1,384,302 24,902 - 1,409,204 ═══════ ═══════ ═══════ ═══════

Company No. 23820 W

87


32 RISK MANAGEMENT FRAMEWORK (CONTINUED) Credit risk (continued)

The ageing analysis of insurance receivables is as follows: Neither Past due past due but not Past due nor impaired impaired and GROUP AND COMPANY 0-2 months 3-5 months 6-11 months impaired Total RM’000 RM’000 RM’000 RM’000 RM’000 31 December 2012 Insurance receivables 92,236 25,732 10,695 12,669 141,332 Allowance for impairment - - - (12,669) (12,669) ─────── ─────── ─────── ─────── ─────── 92,236 25,732 10,695 - 128,663 ═══════ ═══════ ═══════ ═══════ ═══════ 31 December 2011 Insurance receivables 93,729 22,265 6,816 13,375 136,185 Allowance for impairment - - - (13,375) (13,375) ─────── ─────── ─────── ─────── ─────── 93,729 22,265 6,816 - 122,810 ═══════ ═══════ ═══════ ═══════ ═══════ 1 January 2011 Insurance receivables 55,802 20,673 4,229 9,742 90,446 Allowance for impairment - - - (9,742) (9,742) ─────── ─────── ─────── ─────── ─────── 55,802 20,673 4,229 - 80,704 ═══════ ═══════ ═══════ ═══════ ═══════

Com

pany

No.

23

820

W

88

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Liq

uid

ity

risk

T

he G

roup

and

Com

pany

are

exp

osed

to

daily

cal

ls o

n its

ava

ilabl

e ca

sh r

esou

rces

mai

nly

from

cla

ims

aris

ing

from

sho

rt-t

erm

ins

uran

ce c

ontr

acts

. Li

quid

ity r

isk

is th

e ris

k th

at c

ash

may

not

be

avai

labl

e to

pay

obl

igat

ions

whe

n du

e at

a r

easo

nabl

e tim

e.

The

Gro

up a

nd C

ompa

ny m

anag

e liq

uidi

ty r

isk

by h

oldi

ng s

uffic

ient

liqu

id a

sset

s (e

.g.

cash

and

deb

t se

curit

ies)

of

appr

opria

te q

ualit

y to

ens

ure

that

sho

rt

term

fund

ing

requ

irem

ents

are

cov

ered

with

in p

rude

nt ti

mes

. In

addi

tion,

the

Gro

up a

nd C

ompa

ny r

egul

arly

con

duct

str

ess-

test

s on

its

liqui

dity

pos

ition

. T

he ta

ble

belo

w s

umm

aris

es th

e es

timat

ed m

atur

ity p

rofil

e of

the

finan

cial

ass

ets

and

liabi

litie

s ba

sed

on r

emai

ning

und

isco

unte

d co

ntra

ctua

l obl

igat

ions

. F

or i

nsur

ance

con

trac

t lia

bilit

ies

and

rein

sura

nce

asse

ts,

mat

urity

pro

files

are

det

erm

ined

bas

ed o

n es

timat

ed t

imin

g of

net

cas

h ou

tflow

s fr

om t

he

reco

gnis

ed in

sura

nce

liabi

litie

s.

Up

to

M

ore

th

an

No

mat

uri

ty

a ye

ar

1 –

3 ye

ars

3 –

5 ye

ars

5 ye

ars

dat

e T

ota

l G

RO

UP

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

31

Dec

emb

er 2

012

AF

S fi

nanc

ial a

sset

s 76

,425

36

0,52

7 18

7,33

7 16

2,35

8 30

,131

81

6,77

8 Lo

ans

and

rece

ivab

les

550,

884

66

- 65

9 -

551,

609

Rei

nsur

ance

ass

ets

- -

- -

146,

448

146,

448

Insu

ranc

e re

ceiv

able

s 12

8,66

3 -

- -

- 12

8,66

3 O

ther

rec

eiva

bles

22

,105

-

- -

12,7

16

34,8

21

Cas

h an

d ca

sh e

quiv

alen

ts

21,5

07

- -

- -

21,5

07

───────

───────

───────

───────

───────

───────

Tot

al

799,

584

360,

593

187,

337

163,

017

189,

295

1,69

9,82

6

═══════

═══════

═══════

═══════

═══════

═══════

Insu

ranc

e co

ntra

ct li

abili

ties

320,

980

192,

762

44,5

27

58,6

50

- 61

6,91

9 B

orro

win

gs

13,9

54

26,0

39

30,0

00

184,

808

- 25

4,80

1 In

sura

nce

paya

bles

14

4,80

4 -

- -

12,2

60

157,

064

Oth

er p

ayab

les

44,2

55

- -

- -

44,2

55

───────

───────

───────

───────

───────

───────

Tot

al

52

3,99

3 21

8,80

1 74

,527

24

3,45

8 12

,260

1,

073,

039

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

89

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

L

iqu

idit

y ri

sk (

con

tin

ued

)

U

p t

o

Mo

re t

han

N

o m

atu

rity

a

year

1 –

3 ye

ars

3 –

5 ye

ars

5 ye

ars

dat

e T

ota

l G

RO

UP

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

31

Dec

emb

er 2

011

AF

S fi

nanc

ial a

sset

s 11

2,46

2 20

4,99

4 18

3,17

6 59

,991

59

,096

61

9,71

9 Lo

ans

and

rece

ivab

les

503,

987

485

44

894

- 50

5,41

0 R

eins

uran

ce a

sset

s -

- -

- 14

6,72

1 14

6,72

1 In

sura

nce

rece

ivab

les

122,

810

- -

- -

122,

810

Oth

er r

ecei

vabl

es

21,8

44

- -

- 21

,477

43

,321

C

ash

and

cash

equ

ival

ents

28

,930

-

- -

- 28

,930

───────

───────

───────

───────

───────

───────

Tot

al

790,

033

205,

479

183,

220

60,8

85

227,

294

1,46

6,91

1

═══════

═══════

═══════

═══════

═══════

═══════

Insu

ranc

e co

ntra

ct li

abili

ties

265,

590

152,

686

39,4

21

65,8

14

- 52

3,51

1 B

orro

win

gs

14,0

05

24,0

00

26,0

39

202,

808

- 26

6,85

2 In

sura

nce

paya

bles

13

2,21

3 -

- -

9,28

7 14

1,50

0 O

ther

pay

able

s 29

,226

-

- -

- 29

,226

───────

───────

───────

───────

───────

───────

Tot

al

44

1,03

4 17

6,68

6 65

,460

26

8,62

2 9,

287

961,

089

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

90

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Liq

uid

ity

risk

(co

nti

nu

ed)

Up

to

M

ore

th

an

No

mat

uri

ty

a ye

ar

1 –

3 ye

ars

3 –

5 ye

ars

5 ye

ars

dat

e T

ota

l G

RO

UP

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

1

Jan

uar

y 20

11

AF

S fi

nanc

ial a

sset

s 10

1,67

5 15

8,76

5 18

6,71

5 23

,578

75

,520

54

6,25

3 Lo

ans

and

rece

ivab

les

551,

224

865

200

1,42

4 -

553,

713

Rei

nsur

ance

ass

ets

- -

- -

173,

642

173,

642

Insu

ranc

e re

ceiv

able

s 80

,704

-

- -

- 80

,704

O

ther

rec

eiva

bles

19

,318

-

- -

6,62

0 25

,938

C

ash

and

cash

equ

ival

ents

4,

681

- -

- 15

,596

20

,277

───────

───────

───────

───────

───────

───────

Tot

al

757,

602

159,

630

186,

915

25,0

02

271,

378

1,40

0,52

7

═══════

═══════

═══════

═══════

═══════

═══════

Insu

ranc

e co

ntra

ct li

abili

ties

263,

322

126,

958

51,4

56

46,7

70

- 48

8,50

6 B

orro

win

gs

70,7

32

24,0

00

26,0

39

202,

808

- 32

3,57

9 In

sura

nce

paya

bles

10

7,93

7 -

- -

4,20

7 11

2,14

4 O

ther

pay

able

s 34

,612

-

- -

- 34

,612

───────

───────

───────

───────

───────

───────

Tot

al

47

6,60

3 15

0,95

8 77

,495

24

9,57

8 4,

207

958,

841

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

91

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Liq

uid

ity

risk

(co

nti

nu

ed)

Up

to

M

ore

th

an

No

mat

uri

ty

a ye

ar

1 –

3 ye

ars

3 –

5 ye

ars

5 ye

ars

dat

e T

ota

l C

OM

PA

NY

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

31

Dec

emb

er 2

012

AF

S fi

nanc

ial a

sset

s 76

,425

36

0,52

7 18

7,33

7 16

2,35

8 30

,131

81

6,77

8 Lo

ans

and

rece

ivab

les

550,

884

66

- 65

9 -

551,

609

Rei

nsur

ance

ass

ets

- -

- -

146,

448

146,

448

Insu

ranc

e re

ceiv

able

s 12

8,66

3 -

- -

- 12

8,66

3 O

ther

rec

eiva

bles

22

,105

-

- -

12,6

83

34,7

88

Cas

h an

d ca

sh e

quiv

alen

ts

21,4

76

- -

- -

21,4

76

───────

───────

───────

───────

───────

───────

Tot

al

799,

553

360,

593

187,

337

163,

017

189,

262

1,69

9,76

2

═══════

═══════

═══════

═══════

═══════

═══════

Insu

ranc

e co

ntra

ct li

abili

ties

320,

980

192,

762

44,5

27

58,6

50

- 61

6,91

9 B

orro

win

gs

13,9

54

26,0

39

30,0

00

184,

808

- 25

4,80

1 In

sura

nce

paya

bles

14

4,80

4 -

- -

12,2

60

157,

064

Oth

er p

ayab

les

44,2

15

- -

- 22

0,38

8 26

4,60

3

───────

───────

───────

───────

───────

───────

Tot

al

52

3,95

3 21

8,80

1 74

,527

24

3,45

8 23

2,64

8 1,

293,

387

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

92

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Liq

uid

ity

risk

(co

nti

nu

ed)

Up

to

M

ore

th

an

No

mat

uri

ty

a ye

ar

1 –

3 ye

ars

3 –

5 ye

ars

5 ye

ars

dat

e T

ota

l C

OM

PA

NY

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

31

Dec

emb

er 2

011

AF

S fi

nanc

ial a

sset

s 11

2,46

2 20

4,99

4 18

3,17

6 59

,991

59

,096

61

9,71

9 Lo

ans

and

rece

ivab

les

503,

987

485

44

894

- 50

5,41

0 R

eins

uran

ce a

sset

s -

- -

- 14

6,72

1 14

6,72

1 In

sura

nce

rece

ivab

les

122,

810

- -

- -

122,

810

Oth

er r

ecei

vabl

es

21,8

44

- -

- 21

,477

43

,321

C

ash

and

cash

equ

ival

ents

28

,687

-

- -

- 28

,687

───────

───────

───────

───────

───────

───────

Tot

al

78

9,79

0 20

5,47

9 18

3,22

0 60

,885

22

7,29

4 1,

466,

668

═══════

═══════

═══════

═══════

═══════

═══════

Insu

ranc

e co

ntra

ct li

abili

ties

265,

590

152,

686

39,4

21

65,8

14

- 52

3,51

1 B

orro

win

gs

14,0

05

24,0

00

26,0

39

202,

808

- 26

6,85

2 In

sura

nce

paya

bles

13

2,21

3 -

- -

9,28

7 14

1,50

0 O

ther

pay

able

s 29

,085

-

- -

268,

658

297,

743

───────

───────

───────

───────

───────

───────

Tot

al

44

0,89

3 17

6,68

6 65

,460

26

8,62

2 27

7,94

5 1,

229,

606

═══════

═══════

═══════

═══════

═══════

═══════

Com

pany

No.

23

820

W

93

AX

A A

FF

IN G

EN

ER

AL

INS

UR

AN

CE

BE

RH

AD

(I

ncor

pora

ted

in M

alay

sia)

N

OT

ES

TO

TH

E F

INA

NC

IAL

ST

AT

EM

EN

TS

- 3

1 D

EC

EM

BE

R 2

012

(CO

NT

INU

ED

)

32

RIS

K M

AN

AG

EM

EN

T F

RA

ME

WO

RK

(C

ON

TIN

UE

D)

Liq

uid

ity

risk

(co

nti

nu

ed)

Up

to

M

ore

th

an

No

mat

uri

ty

a ye

ar

1 –

3 ye

ars

3 –

5 ye

ars

5 ye

ars

dat

e T

ota

l C

OM

PA

NY

RM’000

RM’000

RM’000

RM’000

RM’000

RM’000

1

Jan

uar

y 20

11

AF

S fi

nanc

ial a

sset

s 10

1,67

5 15

8,76

5 18

6,71

5 23

,578

75

,520

54

6,25

3 Lo

ans

and

rece

ivab

les

551,

224

865

200

1,42

4 -

553,

713

Rei

nsur

ance

ass

ets

- -

- -

173,

642

173,

642

Insu

ranc

e re

ceiv

able

s 80

,704

-

- -

- 80

,704

O

ther

rec

eiva

bles

19

,318

-

- -

6,62

0 25

,938

C

ash

and

cash

equ

ival

ents

1,

681

- -

- 15

,596

17

,277

───────

───────

───────

───────

───────

───────

Tot

al

754,

602

159,

630

186,

915

25,0

02

271,

378

1,39

7,52

7

═══════

═══════

═══════

═══════

═══════

═══════

Insu

ranc

e co

ntra

ct li

abili

ties

263,

322

126,

958

51,4

56

46,7

70

- 48

8,50

6 B

orro

win

gs

70,7

32

24,0

00

26,0

39

202,

808

- 32

3,57

9 In

sura

nce

paya

bles

10

7,93

7 -

- -

4,20

7 11

2,14

4 O

ther

pay

able

s 34

,612

-

- -

298,

693

333,

305

───────

───────

───────

───────

───────

───────

Tot

al

47

6,60

3 15

0,95

8 77

,495

24

9,57

8 30

2,90

0 1,

257,

534

═══════

═══════

═══════

═══════

═══════

═══════

Company No. 23820 W

94



Equity price risk

The Group’s and Company’s equity risk position arises from the holdings of certain equity securities listed in the Bursa Malaysia Depository Sdn Bhd. The Group and Company have been monitoring its concentration risk by adopting appropriate risk control measures. The analysis below is performed for reasonably possible movements in equity price with all other variables held constant, showing the impact of statement of income and equity (due to changes in fair value of AFS financial assets). 31.12.2012 31.12.2011 1.1.2011 Impact on Impact Impact on Impact Impact on Impact statement on statement on statement on GROUP AND COMPANY of income equity* of income equity* of income equity* RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Change in market price +10% - 2,988 - 5,885 - 2,117 -10% - (2,988) - (5,885) - (2,117)

* Impact on equity reflects adjustments for tax, when applicable. Interest-rate risk Short term insurance liabilities are not directly sensitive to the level of market interest rates, as they are undiscounted and contractually non-interest-bearing. However, due to the time value of money and impact of interest rates on the level of bodily injury and certain liability claims incurred by the Group’s and Company’s insurance contract holders (where an increase of interest rates would normally produce a higher insurance liability), the Group and Company match the liabilities by using portfolios of debt securities of mean duration of 2 - 3 years. The Group and Company’s interest rate risk mainly arises from investment in AFS debt securities which are recorded at fair value. The impact on profit before tax at +/- 50 basis point change in the interest rate, with all other variables held consistent, is insignificant to the Group and Company given that there are minimal floating rate financial instruments. Foreign currency risk As the Group’s and Company’s business is conducted primarily in Malaysia, the financial assets are also primarily maintained in Malaysia and denominated in the local currency as its insurance contract liabilities. As the Group’s and Company’s main foreign currency risk from recognised assets and liabilities arises from reinsurance transactions for which the balances are expected to be settled and realised in less than a year, the impact arising from sensitivity in foreign currency exchange rates is deemed minimal as the Group and Company have no significant concentration of foreign currency risk.

Company No. 23820 W

95

AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2012 (CONTINUED)

33 CAPITAL MANAGEMENT PLAN AND STRUCTURE Capital Management Plan (“CMP”)

As per the RBC Framework issued by BNM, the Group and Company are required to assess its capital profiles and develop appropriate plans towards developing internal capital target/plans. In line with this requirement, management had developed a CMP that takes into account the Group’s and Company’s strategic business direction and changing business environment, and adequate processes to monitor and ensure the maintenance of an appropriate level of capital which commensurate with the current risk profile of the Group and Company. The Board had approved and adopted the CMP for implementation with effect from 1 January 2009. The Risk Management Committee is responsible for the oversight of the Group’s and Company’s capital management. All proposals for any deviation from capital targets or capital raising exercise must be approved by the Risk Management Committee prior to recommendation to the Board of Directors for approval and implementation.

Stress testing Stress tests and scenario analyses are important components of a risk management framework.

The Group and Company are required to perform stress tests at least twice a year on the financial performance of the Group and Company to detect possible sources of vulnerability. The objective is to ensure that management can identify problems early so that pre-emptive measures can be implemented at an early stage.

The results and proposed action plan would be incorporated into the Group‘s and Company’s

capital management plan and be used to determine the extent by which capital will be eroded by the threats identified and the impact on the Group’s and Company’s financial health, the actions that will be required to mitigate the threats identified and the future financial resilience of the Group and Company.

Capital structure The capital structure of the Company as at 31 December 2012, as prescribed under the RBC

Framework is provided below: 31.12.2012 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 Eligible Tier 1 capital Share capital (paid-up) 119,048 119,048 119,048 Share premiums 71,597 71,597 71,597 Retained earnings 343,821 261,202 233,519 ──────── ──────── ──────── 534,466 451,847 424,164 ───────── ─────── ──────── Tier 2 capital AFS reserve 11,648 20,254 21,748 Revaluation reserve 9,342 7,917 7,917 Share option reserve 2,271 2,270 2,274 Subordinated loan 150,000 150,000 150,000 ──────── ──────── ──────── 173,261 180,441 181,939 ──────── ──────── ──────── Deductions Goodwill (165,822) (165,822) - Deferred tax assets (3,777) - - Investment in a subsidiary - - (453,225) ──────── ──────── ──────── Total capital available 538,128 466,466 152,878 ════════ ════════ ════════

Documents

use This Ai file No. 23820 W i AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) CONTENTS Page CORPORATE INFORMATION ii DIRECTORS’ REPORT 1 - 10 STATEMENT BY DIRECTORS