Audited Financial Statements - Tokio Marine · 2020. 6. 9. · TOKIO MARINE LIFE INSURANCE...

Audited Financial Statements For the Financial Year ended 31 December 2016

Tokio Marine Life Insurance Singapore Ltd.(Incorporated in Singapore. Registration Number: 194800055D)

And Its Subsidiary

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD(Incorporated in Singapore)AND ITS SUBSIDIARY

ANNUAL REPORTFor the financial year ended 31 December 2016

ContentsPage

Directors’ Statement 1

Independent Auditor’s Report 3

Statement of Comprehensive Income 6

Balance Sheet 7

Consolidated Statement of Changes in Equity 8

Statement of Changes in Equity - Company 9

Consolidated Statement of Cash Flows 10

Notes to the Financial Statements 12

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD.AND ITS SUBSIDIARY

DIRECTORS’ STATEMENTFor the financial year ended 31 December 2016

1

The directors present their statement to the members together with the audited financialstatements of the Company and of the Group for the financial year ended 31 December2016.

In the opinion of the directors,

(a) the financial statements of the Company and the consolidated financial statementsof the Group set out on pages 6 to 98 are drawn up so as to give a true and fair viewof the financial position of the Company and of the Group as at 31 December 2016and of the financial performance, changes in equity of the Company and of theGroup and cash flows of the Group for the financial year covered by the financialstatements; and

(b) at the date of this statement, there are reasonable grounds to believe that theCompany will be able to pay its debts as and when they fall due.

Directors

The directors of the Company in office at the date of this statement are as follows:

Tan Cheng HanLee King Chi ArthurKichiichiro YamamotoOoi Chee KarRolf Gerber (appointed on 6 June 2016)

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the financial year was the Company a party toany arrangement whose object was to enable the directors of the Company to acquirebenefits by means of the acquisition of shares in, or debentures of, the Company or anyother body corporate.


DIRECTORS’ STATEMENTFor the financial year ended 31 December 2016

2

Directors’ interests in shares or debentures

According to the register of directors’ shareholdings, none of the directors holding office atthe end of the financial year had any interest in the shares or debentures of the Companyor its related corporations, except as follows:

Holdings registeredin name of directorAt

31.12.2016At

1.1.2016Company(No. of ordinary stock units)Lee King Chi Arthur (as nominee of Asia General Holdings Limited) 1 1Kichiichiro Yamamoto (as nominee of Asia General Holdings Limited) 1 -

Immediate Holding Company- Asia General Holdings Limited(No. of ordinary shares)Lee King Chi Arthur (as nominee of Tokio Marine & Nichido Fire Insurance Co. Ltd) 1 1

Share options

There were no options granted during the financial year to subscribe for unissued sharesof the Company.

No shares have been issued during the financial year by virtue of the exercise of optionsto take up unissued shares of the Company.

There were no unissued shares of the Company under option at the end of the financialyear.

Independent auditor

The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness toaccept re-appointment.

On behalf of the directors

Tan Cheng HanDirector

Kichiichiro YamamotoDirector

3

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OFTOKIO MARINE LIFE INSURANCE SINGAPORE LTD.

Report on the Audit of the Financial Statements

Our Opinion

In our opinion, the accompanying financial statements of Tokio Marine Life Insurance Singapore Ltd. (the“Company”) and its subsidiary (the “Group”) are properly drawn up in accordance with the provisions ofthe Companies Act, Chapter 50 (the “Act”) and Financial Reporting Standards in Singapore (“FRSs”) soas to give a true and fair view of the consolidated financial position of the Group and the financial positionof the Company as at 31 December 2016 and of the consolidated financial performance, consolidatedchanges in equity and consolidated cash flows of the Group, and the financial performance and changesin equity of the Company for the financial year ended on that date.

What we have audited

The financial statements of the Company and of the Group comprise:

• the consolidated balance sheet of the Group as at 31 December 2016;• the balance sheet of the Company as at 31 December 2016;• the consolidated statement of comprehensive income of the Group for the financial year then ended;• the statement of comprehensive income of the Company for the financial year then ended:• the consolidated statement of changes in equity of the Group for the financial year then ended;• the statement of changes in equity of the Company for the financial year then ended;• the consolidated statement of cash flows of the Group for the financial year then ended; and• the notes to the financial statements, including a summary of significant accounting policies.

Basis for Opinion

We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.

Independence

We are independent of the Company in accordance with the Accounting and Corporate RegulatoryAuthority (“ACRA”) Code of Professional Conduct and Ethics for Public Accountants and AccountingEntities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of thefinancial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the ACRA Code.

Other Information

Management is responsible for the other information. The other information comprises the Directors’Statement included in pages 1 to 2 but does not include the financial statements and our auditor’s reportthereon.

Our opinion on the financial statements does not cover the other information and we do not and will notexpress any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other informationidentified above and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit, or otherwise appears to be materiallymisstated. If, based on the work we have performed on the other information that we obtained prior to thedate of this auditor’s report, we conclude that there is a material misstatement of this other information,we are required to report that fact. We have nothing to report in this regard.

4

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OFTOKIO MARINE LIFE INSURANCE SINGAPORE LTD. (continued)

Responsibilities of Management and Directors for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view inaccordance with the provisions of the Act and FRSs, and for devising and maintaining a system of internalaccounting controls sufficient to provide a reasonable assurance that assets are safeguarded against lossfrom unauthorised use or disposition; and transactions are properly authorised and that they are recordedas necessary to permit the preparation of true and fair financial statements and to maintain accountabilityof assets.

In preparing the financial statements, management is responsible for assessing the Group’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Group or to ceaseoperations, or has no realistic alternative but to do so.

The directors’ responsibilities include overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with SSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,they could reasonably be expected to influence the economic decisions of users taken on the basis ofthese financial statements.

As part of an audit in accordance with SSAs, we exercise professional judgement and maintainprofessional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s reportto the related disclosures in the financial statements or, if such disclosures are inadequate, to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’sreport. However, future events or conditions may cause the Group to cease to continue as a goingconcern.

• Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation.

• Obtain sufficient appropriate evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision and performance of the Group audit. We remain solelyresponsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identifyduring our audit.

5

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OFTOKIO MARINE LIFE INSURANCE SINGAPORE LTD. (continued)

Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and bythose subsidiary corporations incorporated in Singapore of which we are auditors have been properlykept in accordance with the provisions of the Act.

Public Accountants and Chartered Accountants

Singapore, 27 March 2017


STATEMENT OF COMPREHENSIVE INCOMEFor the financial year ended 31 December 2016

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

6

The Group The CompanyNotes 2016

$'0002015$'000

2016$'000

2015$'000

IncomeGross premiums 1,251,382 1,182,751 888,401 808,899Less: Reinsurance premiums (74,749) (63,201) (50,322) (44,827)Net premiums 1,176,633 1,119,550 838,079 764,072

Fees and commission income 6(a) 4,633 6,570 4,613 4,820Other income 6(b) 269,584 268,206 166,578 164,371Other gains/(losses) – net 6(c) 5,584 54,925 (9,341) 42,937Net rental income 1,711 1,642 848 862Total income 1,458,145 1,450,893 1,000,777 977,062

OutgoClaims under policies, paid and outstanding:- Death (48,544) (37,700) (23,659) (18,185)- Maturity (284,408) (194,018) (159,586) (96,747)- Others (70,633) (66,288) (29,233) (21,586)- Surrenders including bonus (108,110) (93,393) (30,893) (25,005)- Annuities (6,461) (6,610) (6,461) (6,610)- Change in Life Assurance Fund 24 (649,291) (789,987) (562,632) (644,613)- Change in Reinsurance assets arising frompolicy liabilities 9(ii) (14,388) 4,684 (14,388) 4,684

(1,181,835) (1,183,312) (826,852) (808,062)Operating expenses and commissionCommission and agency expenses (155,486) (165,977) (110,207) (118,536)Employee compensation 6(d) (49,737) (44,117) (29,090) (25,767)Depreciation 6(e) (1,951) (2,891) (1,002) (1,079)Amortisation 19 (10,470) (9,356) (575) (451)Other operating expenses 6(f) (41,352) (34,389) (25,886) (20,681)Total expenses (1,440,831) (1,440,042) (993,612) (974,576)

Profit before income tax 17,314 10,851 7,165 2,486Income tax (expense)/credit 5 (248) (2,997) 1,397 (1,668)Net profit for the financial year 17,066 7,854 8,562 818

Other comprehensive income:

Items that may be reclassified subsequently toprofit or loss:

Financial assets, available-for-sale- fair value (losses)/gains (529) (1,074) (550) (630)- reclassification upon disposal 6(c) (829) (857) (651) (913)- deferred tax 240 256 204 262Currency translation differences arisingfrom consolidation (1,989) (12,233) - -

Other comprehensive (loss)/income, net of tax (3,107) (13,908) (997) (1,281)

Total comprehensive income/(loss) 13,959 (6,054) 7,565 (463)


BALANCE SHEETAs at 31 December 2016


7

The Group The CompanyNotes 2016

$'0002015$'000

2016$'000

2015$'000

ASSETSCash and cash equivalents 7 330,313 540,800 227,726 432,171Trade receivables 7,019 2,677 3,997 1,782Outstanding premium and agents’ balances 8 27,101 21,933 16,156 13,057Reinsurance assets 9 58,928 56,348 54,540 53,264Financial assets, available-for-sale 10 7,029,912 6,042,207 5,425,166 4,499,729Financial assets at fair value through profit orloss 11 253,830 225,495 46,973 46,374Financial assets, held-to-maturity 12 296,865 315,912 - -Derivative financial instruments 13 1,152 911 - -Other assets 14 70,695 64,772 53,003 40,141Loans 15 205,502 205,380 41,599 37,582Investment properties 16 17,620 17,942 8,828 9,117Investment in a subsidiary 17 - - 87,636 87,636Property, plant and equipment 18 63,664 62,854 33,709 33,273Intangible assets 19 38,212 39,327 6,710 3,348TOTAL ASSETS 8,400,813 7,596,558 6,006,043 5,257,474

LIABILITIESClaims admitted or intimated 203,559 169,694 65,738 49,011Trade payables 135,505 124,602 88,299 78,739Other payables 20 93,523 40,692 76,419 24,994Current tax liabilities 17,489 6,771 15,438 5,457Deferred tax liabilities 21 355,965 318,707 341,659 304,108Staff retirement benefits 22 585 630 502 511Agents’ retirement benefits 23 9,430 9,771 569 561Derivative financial instruments 13 74,932 19,829 74,932 19,829Life Assurance Fund 24 7,410,218 6,770,651 5,232,641 4,622,420TOTAL LIABILITIES 8,301,206 7,461,347 5,896,197 5,105,630

EQUITYShare capital and reservesShare capital 25 36,000 36,000 36,000 36,000Capital reserve 4,800 4,800 - -Fair value reserve (902) 216 (1,025) (28)Foreign currency translation reserve (26,858) (24,869) - -Retained earnings 86,567 119,064 74,871 115,872TOTAL EQUITY 99,607 135,211 109,846 151,844

TOTAL LIABILITIES AND EQUITY 8,400,813 7,596,558 6,006,043 5,257,474


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the financial year ended 31 December 2016


8

NotesSharecapital

Capitalreserve

Fair valuereserve

Foreigncurrencytranslationreserve

Retainedearnings Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 January 2016 36,000 4,800 216 (24,869) 119,064 135,211

Transfer to Life Assurance Fund 24 - - - - (46,683) (46,683)

Dividends relating to 2015 paid 32 - - - - (2,880) (2,880)

Total comprehensive (loss)/income - - (1,118) (1,989) 17,066 13,959

Balance at 31 December 2016 36,000 4,800 (902) (26,858) 86,567 99,607

Balance at 1 January 2015 36,000 4,800 1,891 (12,636) 167,949 198,004

Transfer to Life Assurance Fund 24 - - - - (51,339) (51,339)

Dividends relating to 2014 paid 32 - - - - (5,400) (5,400)

Total comprehensive (loss)/income - - (1,675) (12,233) 7,854 (6,054)

Balance at 31 December 2015 36,000 4,800 216 (24,869) 119,064 135,211

The foreign currency translation reserve and fair value reserve are not distributable.


STATEMENT OF CHANGES IN EQUITY - COMPANYFor the financial year ended 31 December 2016


9

NotesSharecapital

Fair valuereserve

Retainedearnings Total

$’000 $’000 $’000 $’000

Balance at 1 January 2016 36,000 (28) 115,872 151,844

Transfer to Life Assurance Fund 24 - - (46,683) (46,683)

Dividends relating to 2015 paid 32 - - (2,880) (2,880)

Total comprehensive (loss)/income - (997) 8,562 7,565

Balance at 31 December 2016 36,000 (1,025) 74,871 109,846

Balance at 1 January 2015 36,000 1,253 127,454 164,707

Transfer to Life Assurance Fund 24 - - (7,000) (7,000)

Dividends relating to 2014 paid 32 - - (5,400) (5,400)

Total comprehensive (loss)/income - (1,281) 818 (463)

Balance at 31 December 2015 36,000 (28) 115,872 151,844

The fair value reserve is not distributable.


CONSOLIDATED STATEMENT OF CASH FLOWSFor the financial year ended 31 December 2016


10

2016$'000

2015$'000

Cash flows from operating activitiesProfit before income tax 17,314 10,851Change in life assurance fund 649,291 789,987Change in Reinsurance assets arising from policy liabilities 14,388 (4,684)

680,993 796,154Adjustments for:Depreciation of property, plant and equipment 1,655 2,558Depreciation of investment properties 296 333Amortisation of intangible asset 10,470 9,356Loss on disposal of property, plant and equipment 9 10Property, plant and equipment written off 4 2(Gain)/loss on disposal of:- Financial assets, available-for-sale (28,956) (66,603)- Financial assets, held-to-maturity 11 -Allowance for impairment (written back)/made:- Financial assets, available-for-sale (3,756) 1,326Fair value (gains)/losses:- Financial assets at fair value through profit or loss (9,834) (6,406)- Forward foreign exchange contracts 64,182 58,572- Warrants (378) 664- Currency exchange on foreign currency denominateddebt securities (25,996) (44,007)

Dividend income (63,411) (74,736)Interest income (205,840) (193,216)Rental Income (1,711) (1,642)(Decrease)/Increase in allowance for impairment ofoutstanding premiums and agents’ balances (103) 836

(Decrease)/Increase in provision for staff retirement benefits (42) 142Provision for agents’ retirement benefits 1,384 1,798Unrealised currency translation gain (3,254) (14,422)

(265,270) (325,435)Changes in working capital:Receivables and other current assets (19,735) (5,929)Reinsurance assets (17,042) 7,464Claims admitted or intimated 36,751 23,676Trade and other payables 18,523 (3,659)

18,497 21,552

Income tax refund/(paid) 3,241 (21,399)Payment of agents’ retirement benefits (1,505) (1,886)

1,736 (23,285)

Net cash provided by operating activities 435,956 468,986


CONSOLIDATED STATEMENT OF CASH FLOWSFor the financial year ended 31 December 2016


11

Note 2016$'000

2015$'000

Cash flows from investing activitiesPurchase of property, plant and equipment (4,459) (1,994)Purchase of investment property (207) -Purchase of intangible assets (8,700) (46,430)Proceeds from disposal of property, plant and equipment 113 14Proceeds from disposal of investment property 43 -Purchase of:- Financial assets, available-for-sale (3,124,006) (3,105,901)- Financial assets, held-to-maturity (6,448) (64,728)- Financial assets at fair value through profit or loss (118,579) (61,616)- Derivative financial instruments (9,080) (71,609)Proceeds from disposal of:- Financial assets, available-for-sale 2,195,558 2,630,275- Financial assets, held-to-maturity 18,054 8,918- Financial assets at fair value through profit or loss 95,541 42,148- Derivative financial instruments 103 -Proceeds from (disbursement of)/repayment of loans (4,135) 2,946Rental received 1,851 1,502Dividend received 66,313 74,520Interest received 210,390 192,304Net cash used in investing activities (687,648) (399,651)

Cash flows from financing activitiesDividends paid to shareholders of the Company (2,880) (5,400)Loan from immediate holding company 46,683 -Net cash provided by/(used in) financing activities 43,803 (5,400)

Net (decrease)/increase in cash and cash equivalents held (207,889) 63,935Cash and cash equivalents at beginning of financial year 540,800 504,348Effects of currency translation on cash and cash equivalents (2,598) (27,483)Cash and cash equivalents at end of financial year 7 330,313 540,800


NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 31 December 2016

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These notes form an integral part of and should be read in conjunction with theaccompanying financial statements.

1. General Information

Tokio Marine Life Insurance Singapore Ltd. (the “Company”) is incorporated anddomiciled in Singapore. The address of its registered office is 20 McCallum Street,Tokio Marine Centre, #07-01, Singapore 069046.

The principal activity of the Company and its subsidiary is life assurance business.

2. Significant accounting policies

2.1 Basis of preparation

These financial statements have been prepared in accordance with SingaporeFinancial Reporting Standards (“FRS”). The financial statements have beenprepared under the historical cost convention, except as disclosed in the accountingpolicies below.

The preparation of financial statements in conformity with FRS requiresmanagement to exercise its judgement in the process of applying the Group’saccounting policies. It also requires the use of certain critical accounting estimatesand assumptions. Areas involving a higher degree of judgement or complexity, orareas where assumptions and estimates are significant to the financial statements,are disclosed in Notes 3 and 4.

Interpretations and amendments to published standards effective in 2016

On 1 January 2016, the Group adopted the new or amended FRS andInterpretations to FRS (“INT FRS”) that are mandatory for application for thefinancial year. Changes to the Group’s accounting policies have been made asrequired, in accordance with the transitional provisions in the respective FRS andINT FRS.

The adoption of these new or amended FRS and INT FRS did not result insubstantial changes to the Group’s and Company’s accounting policies and had nomaterial effect on the amounts reported for the current or prior financial years.



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2. Significant accounting policies (continued)

2.2 Insurance contracts

(a) Discretionary participation feature

The Group issues contracts that transfer mainly insurance risk.

Insurance contracts are those contracts that transfer significant insurancerisk. Such contracts may also transfer financial risk. As a general guideline,the Group defines as significant insurance risk the possibility of having topay benefits on the occurrence of an insured event that are at least 1% morethan the benefits payable if the insured event did not occur at some pointduring the contract.

Investment contracts are those contracts that transfer financial risk with nosignificant insurance risk. Currently the Group does not issue investmentcontracts.

A number of insurance contracts contain a discretionary participation feature(“DPF”). This feature entitles the holder to receive, as a supplement toguaranteed benefits, additional bonuses:

- that are likely to be a significant portion of the total contractual benefits;- whose amount or timing is contractually at the discretion of the Group;

and- that are contractually based on:

(i) the performance of a specified pool of contracts or a specifiedtype of contract;

(ii) realised and/or unrealised investment returns on a specifiedpool of assets held by the Group; or

(iii) the profit or loss of the Group, fund or other entity that issuesthe contract.

Local statutory regulations and the terms and conditions of these contractsset out the bases for the determination of the amounts on which theadditional discretionary benefits are based (the DPF eligible surplus) andwithin which the Group may exercise its discretion as to the quantum andtiming of their payment to contract holders. At least 90% of the eligibledistributions must be attributed to the contract holders as a group, while theamount and timing of the distribution to individual contract holders are at thediscretion of the Group, approved by the Board of Directors based on theadvice of the Appointed Actuaries.



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2.2 Insurance contracts (continued)

(b) Recognition and measurement

Participating Insurance Contracts

These contracts insure events associated with human life (for exampledeath or survival) over a long duration. The contract holders participatein profits of the participating life fund by sharing a significant portion ofinsurance risk. Profits are distributed to the contract holders by way ofa regular cash dividend, reversionary bonus, or terminal dividend orbonus.

Liabilities from these contracts are determined using the prospectivediscounted cashflow method. Insurance contract liabilities aredetermined based on a series of relevant assumptions by theCompany’s and the subsidiary’s Appointed Actuaries for all territoriesthat the Company and the subsidiary operate in. Details of themethods used to determine the liabilities are provided in Note 3.

Non-Participating Insurance Contracts

Non-Participating Insurance Contracts, which pay guaranteed benefitson the occurrence of specified insurance events, can be classified intotwo main categories: Individual and Group Insurance Contracts.

The Non-Participating Individual Insurance Contracts insure humanlife events (for example death, dread disease or survival) over theduration of the contract.

Details of the methods used to determine the liabilities are provided inNote 3.

Non-Participating Group Insurance Contracts are short-duration lifeinsurance contracts mainly issued to employers to insure theircommitment to their employees in terms of the employees’ benefitplans. The guaranteed benefits paid on occurrence of the specifiedinsurance event (for example death or disability) are either fixed orlinked to the extent of the economic loss suffered by the assured.There are no maturity or surrender benefits.



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(b) Recognition and measurement (continued)

Investment-Linked Contracts

These contracts insure human life events (for example death orsurvival) over a long duration. Liabilities for Investment-LinkedContracts consist of unit and non-unit reserves.

Unit reserves, comprising mainly the contract holders’ accountbalances, are determined by multiplying the number of units with theunit prices. The reserves represents the Company’s liabilities in termsof units under the Investment-Linked Contracts.

Non-unit reserves are held for claims, expenses or other net cashoutflows, as well as to serve as additional margin for adversedeviations. Non-unit reserves are determined by projecting futurecashflows of non-unit income (such as bid offer spread, policy fee,mortality charge and other annual charges) and outgo (includingoperating, distribution, claims and other expenses). Details of themethods used to determine the liabilities are provided in Note 3.

(c) Premiums

Premiums from Participating, Non-Participating and Investment-LinkedInsurance Contracts are recognised on their respective due dates and withingrace period of one month for premiums due before the financial year end.Premiums not received on due date and within grace period of one monthfor premiums due before the financial year end are recognised as revenuein profit or loss with the corresponding outstanding premiums reported in thebalance sheet.

Outstanding premiums are carried at amortised cost, which approximate fairvalue.

Premiums due after but received before the financial year end are recordedas advance premiums and this item is included in trade payables in thebalance sheet.

Premiums from insurance contracts which remain outstanding beyond thecontractual date would automatically trigger premium loans which are takenagainst the cash value standing to the credit of the policy. Where the cashvalue is insufficient to activate a premium loan, the policy lapses and thecontract between the Group and the contract holder is deemed cancelledwithout further liabilities accruing from either party.



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(d) Claims

Full provision is made for the estimated cost of all life assurance claimsnotified but not settled at the balance sheet date using best estimatesavailable at that time. Provision is made for claims incurred but not reportedat the balance sheet date using best estimates available at that time.

(e) Commission

The commission expense is incurred or accrued for premiums paid or duewithin the grace period of one month before the financial year end. Thecommission expense arising from advance premiums is not accrued in thefinancial statements until the premiums are due and recognised as revenuein profit or loss.

(f) Liability adequacy test

At each balance sheet date, liability adequacy tests are performed to ensurethe adequacy of the insurance contract liabilities.

In performing these tests for the Group, current best estimates of futurecontractual cash flows and claims handling and administration expenses, aswell as investment income from the assets backing such liabilities are used.The results of liability adequacy tests for the Group are shown in the tablesbelow:

Group

ParticipatingNon-

participatingInvestment-linked

$’000 $’000 $’0001. Reported insurance contract liabilities net of

reinsurance asset 6,132,382 412,168 114,7352. Gross Premium Reserve 5,789,670 214,691 24,898Excess of reported insurance contract liabilities (1-2) 342,712 197,477 89,837

Company

ParticipatingNon-

participatingInvestment-linked

$’000 $’000 $’0001. Reported insurance contract liabilities net of

reinsurance asset 4,527,660 216,372 42,3382. Gross Premium Reserve 4,266,011 49,072 31,123Excess of reported insurance contract liabilities (1-2) 261,649 167,300 11,215

From the results, it is clear that the reported liabilities for each respectiveline of business for the Group and the Company are greater than the bestestimate liabilities obtained by cash flowmethod. As such, no shortfall needsto be recorded in the income statement.



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(g) Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Groupis compensated for losses on one or more contracts issued by the Groupand that meet the classification requirements for insurance contracts in Note2.2(a) are classified as reinsurance contracts held.

The benefits to which the Group is entitled under its reinsurance contractsare recognised as reinsurance assets. These assets consist of short termbalances due from reinsurers as well as long term receivables that aredependent on expected claims and benefits arising under the relatedreinsured insurance contract. Amounts recoverable from or due to reinsurersare measured consistently with the amounts associated with the reinsuredinsurance contracts and in accordance with the terms of each insurancecontract. Reinsurance liabilities are primarily premium payable forreinsurance contracts and are recognised as an expense when due.

The Group assesses its reinsurance assets for impairment at each balancesheet date. An allowance for impairment loss is established using the samemethod used for loans and receivables. These processes are described inNote 2.11(e).

2.3 Revenue recognition

Revenue is recognised as follows:

(a) Premiums

The policy in respect of recognition of premiums is disclosed in Note 2.2(c).

(b) Fees and commission income

Fees and commission income comprise mainly of commission and servicefee income, which includes income earned from the provision ofadministration services. This fee income is recognised as revenue over theperiod in which the services are rendered. If the fees are for service to beprovided in future periods, then they are deferred and recognised over thoseperiods.

(c) Interest income

Interest income is recognised using the effective interest method.



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2.3 Revenue recognition (continued)

(d) Dividend income

Dividend income is recognised when the right to receive payment isestablished.

(e) Rental income

Rental income from operating leases on investment properties is recognisedon a straight-line basis over the lease term.

2.4 Group accounting

Subsidiaries

(i) Consolidation

Subsidiaries are all entities (including structured entities) over which theGroup has control. The Group controls an entity when the Group is exposedto, or has rights to, variable returns from its involvement with the entity andhas the ability to affect those returns through its power over the entity.Subsidiaries are fully consolidated from the date on which control istransferred to the Group fully. They are de-consolidated from the date onwhich control ceases.

In preparing the consolidated financial statements, transactions, balancesand unrealised gains on transactions between group entities are eliminated.Unrealised losses are also eliminated but are considered an impairmentindicator of the asset transferred. Accounting policies of subsidiaries havebeen changed where necessary to ensure consistency of policies adoptedby the Group.

(ii) Acquisitions

The acquisition method of accounting is used to account for businesscombinations by the Group.

The consideration transferred for the acquisition of a subsidiary or businesscomprises the fair value of the assets transferred, the liabilities incurred andthe equity interests issued by the Group. The consideration transferred alsoincludes any contingent consideration arrangement and any pre-existingequity interest in the subsidiary measured at their fair values at theacquisition date.



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2.4 Group accounting (continued)

Subsidiaries (continued)

(ii) Acquisitions (continued)

Acquisition-related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumedin a business combination are, with limited exceptions, measured initially attheir fair values at the acquisition date.

(iii) Disposals

When a change in the Group’s ownership interest in a subsidiary results in aloss of control over the subsidiary, the assets and liabilities of the subsidiaryincluding any goodwill are derecognised. Amounts previously recognised inother comprehensive income in respect of that entity are also reclassified toprofit or loss or transferred directly to retained earnings if required by aspecific Standard.

Any retained equity interest in the entity is remeasured at fair value. Thedifference between the carrying amount of the retained interest at the datewhen control is lost and its fair value is recognised in profit or loss.

Please refer to the paragraph “Investment in a subsidiary” for the accountingpolicy on investment in a subsidiary (Note 2.8).

2.5 Property, plant and equipment

(a) Measurement

(i) Land and buildings

Land and buildings are initially recognised at cost. Freehold land issubsequently carried at cost less accumulated impairment losses.Leasehold land and buildings are subsequently carried at cost lessaccumulated depreciation and accumulated impairment losses(Note 2.10).

(ii) Other property, plant and equipment

All other items of property, plant and equipment are initiallyrecognised at cost and subsequently carried at cost lessaccumulated depreciation and impairment losses (Note 2.10).



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2.5 Property, plant and equipment (continued)

(a) Measurement (continued)

(iii) Components of cost

The cost of an item of property, plant and equipment initiallyrecognised includes its purchase price and any cost that is directlyattributable to bringing the asset to the location and conditionnecessary for it to be capable of operating in the manner intendedby management. The projected cost of dismantlement, removal orrestoration costs is also included as part of the cost of property, plantand equipment if the obligation for dismantlement, removal orrestoration is incurred as a consequence of acquiring or using theasset.

(b) Depreciation

Freehold land is not depreciated. Depreciation on other items of property,plant and equipment is calculated using the straight-line method to allocatetheir depreciable amounts over their estimated useful lives as follows:

Useful livesLeasehold land and buildings Shorter of 50 years and the lease termMotor vehicles 5 yearsFurniture and equipment 3 - 10 years

The residual values, estimated useful lives and depreciation method ofproperty, plant and equipment are reviewed and adjusted as appropriate, ateach balance sheet date. The effects of any revision are recognised in profitor loss when the changes arise.

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that hasalready been recognised is added to the carrying amount of the asset onlywhen it is probable that future economic benefits associated with the itemwill flow to the Group and the cost can be measured reliably. All other repairand maintenance expenses are recognised in profit or loss when incurred.

(d) Disposal

On disposal of an item of property, plant and equipment, the differencebetween the net disposals proceeds and its carrying amount is recognisedin profit or loss.



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2.6 Intangible assets

(a) Bancassurance rights

The bancassurance agreement provides an exclusive right to the use of thebancassurance network. The agreement fee is amortised over its useful lifeof 5 years using the straight-line method. It is reviewed for impairmentwhenever events or changes in circumstances indicate the carrying amountmay not be recoverable. Please refer to Note 2.10 for accounting policy onimpairment of non-financial assets.

(b) Acquired computer software licences

Acquired computer software licences are initially capitalised at cost whichincludes the purchase prices (net of any discounts and rebates) and otherdirectly attributable costs of preparing the asset for its intended use. Directexpenditures including employee costs, which enhance or extend theperformance of computer software beyond its specifications and which canbe reliably measured, are added to the original cost of the software. Costsassociated with maintaining the computer software are recognised as anexpense when incurred.

Computer software licences are subsequently carried at cost lessaccumulated amortisation and accumulated impairment losses. Thesecosts are amortised to profit or loss using the straight-line method over theirestimated useful lives of four to ten years.

The amortisation period and amortisation method of intangible assets other thangoodwill are reviewed at least at each balance sheet date. The effects of anyrevision are recognised in profit or loss when the changes arise.

2.7 Investment properties

Investment properties include those portions of buildings that are held for long-termrental yields and/or for capital appreciation and land under operating leases that areheld for long-term capital appreciation or for a currently indeterminate use.

Investment properties are initially recognised at cost and subsequently carried atcost less accumulated depreciation and accumulated impairment losses.Depreciation is calculated using a straight-line method to allocate the depreciableamounts over the estimated useful lives of 50 years. The residual values, usefullives and depreciation method of investment properties are reviewed, and adjustedas appropriate, at each balance sheet date. The effects of any revision are includedin profit or loss when the changes arise.



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2.7 Investment properties (continued)

The cost of major renovations and improvements is capitalised and the carryingamounts of the replaced components are recognised in profit or loss. The cost ofmaintenance, repairs and minor improvements is recognised in profit or loss whenincurred. On disposal of an investment property, the difference between thedisposal proceeds and its carrying amount is recognised in profit or loss.

2.8 Investment in a subsidiary

Investment in a subsidiary is stated at cost less accumulated impairment losses(Note 2.10) in the Company’s balance sheet. On disposal, the difference betweennet disposal proceeds and the carrying amount of the investment is recognised inprofit or loss.

2.9 Structured entities

A structured entity is an entity that has been designed so that voting or similar rightsare not the dominant factor in deciding who controls the entity, such as when anyvoting rights relate to administrative tasks only and the relevant activities aredirected by means of contractual arrangements. A structured entity often has someor all of the following features or attributes: (a) restricted activities, (b) a narrow andwell-defined objective, such as to provide investment opportunities for investors bypassing on risks and rewards associated with the assets of the structured entity toinvestors, (c) insufficient equity to permit the structured entity to finance its activitieswithout subordinated financial support and (d) financing in the form of multiplecontractually linked instruments to investors that create concentrations of credit orother risks (tranches).

The Group considers all of its investments in funds to be investments inunconsolidated structured entities. The Group invests in funds whose objectivesrange from achieving medium to long term capital growth. The funds are managedby related and unrelated asset managers and apply various investment strategiesto accomplish their respective investment objectives. The funds finance theiroperations by issuing redeemable shares/units which entitles the holder to aproportional stake in the respective fund’s net assets. The Group holds redeemableshares/units in each of these funds.

The change in fair value of the funds classified as fair value through profit or loss isincluded in the Consolidated Statement of Comprehensive Income in “other gains -net and fair value gains/(losses)”.

The change in fair value of the funds classified as available-for-sale is included inthe Consolidated Balance Sheet within the fair value reserve and the Life AssuranceFund.



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2.10 Impairment of non-financial assets

Property, plant and equipmentIntangible assetsInvestment in a subsidiaryInvestment properties

Property, plant and equipment, intangible assets, investment in a subsidiary andinvestment properties are tested for impairment whenever there is any objectiveevidence or indication that these assets may be impaired.

For the purpose of impairment testing of these assets, the recoverable amount (i.e.the higher of the fair value less cost to sell and the value-in-use) is determined onan individual asset basis unless the asset does not generate cash flows that arelargely independent of those from other assets. If this is the case, the recoverableamount is determined for the cash-generating-unit (“CGU”) to which the assetbelongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than itscarrying amount, the carrying amount of the asset (or CGU) is reduced to itsrecoverable amount.

The difference between the carrying amount and recoverable amount is recognisedas an impairment loss in profit or loss.

An impairment loss for an asset is reversed if, and only if, there has been a changein the estimates used to determine the asset’s recoverable amount since the lastimpairment loss was recognised. The carrying amount of an asset is increased toits revised recoverable amount, provided that this amount does not exceed thecarrying amount that would have been determined (net of any accumulatedamortisation or depreciation) had no impairment loss been recognised for the assetin prior years. A reversal of impairment loss is recognised in profit or loss.

2.11 Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: financialassets at fair value through profit or loss, loans and receivables, held-to-maturity and available-for-sale financial assets. The classification dependson the nature of the assets and the purpose for which the assets wereacquired. Management determines the classification of its financial assetsat initial recognition and in the case of assets classified as held-to-maturity,re-evaluates this designation at each balance sheet date. The designationof financial assets at fair value through profit or loss is irrevocable.



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2.11 Financial assets (continued)

(a) Classification (continued)

(i) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held fortrading, and those designated at fair value through profit or loss atinception. A financial asset is classified as held for trading if it isacquired principally for the purpose of selling in the short term.Financial assets designated as at fair value through profit or loss atinception are those that are managed and their performance areevaluated on a fair value basis, in accordance with the Group’sinvestment strategy. Derivatives are also categorised as held fortrading unless they are designated as hedges. Assets in thiscategory are classified as current assets if they are either held fortrading or are expected to be realised within 12 months after thebalance sheet date.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixedor determinable payments that are not quoted in an active market.They are presented as current assets, except those maturing laterthan 12 months after the balance sheet date which are presented asnon-current assets. Loans and receivables are presented as “Cashand cash equivalents”, “Trade receivables”, “Outstanding premiumand agents’ balances”, and “Loans” on the balance sheet.

(iii) Financial assets, held-to-maturity

Financial assets, held-to-maturity are non-derivative financial assetswith fixed or determinable payments and fixed maturities that theGroup’s management has the positive intention and ability to hold tomaturity. If the Group were to sell other than an insignificant amountof held-to-maturity financial assets, the whole category would betainted and reclassified as Financial assets, available-for-sale. Theyare presented as non-current assets, except for those maturingwithin 12 months after the balance sheet date which are presentedas current assets.

(iv) Financial assets, available-for-sale

Financial assets, available-for-sale are non-derivatives that areeither designated in this category or not classified in any of the othercategories. They are presented as non-current assets unlessmanagement intends to dispose off the assets within 12 months afterthe balance sheet date.



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(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised ontrade-date – the date on which the Group commits to purchase or sell theasset.

Financial assets are derecognised when the rights to receive cash flowsfrom the financial assets have expired or have been transferred and theGroup has transferred substantially all risks and rewards of ownership.

On disposal of a financial asset, the difference between the sale proceedsand the carrying amount is recognised in profit or loss. Any amount in thefair value reserve relating to that asset is transferred to profit or loss.

(c) Initial measurement

Financial assets are initially recognised at fair value plus transaction costsexcept for financial assets at fair value through profit or loss, which arerecognised at fair value. Transaction costs for financial assets at fair valuethrough profit or loss are recognised immediately as expenses.

(d) Subsequent measurement

Financial assets, both available-for-sale and at fair value through profit orloss, are subsequently carried at fair value. Loans and receivables andfinancial assets, held-to-maturity are subsequently carried at amortised costusing the effective interest method.

Changes in the fair value of financial assets at fair value through profit orloss, including the effects of currency translation, interest and dividends, arerecognised in profit or loss when the changes arise.

Interest and dividend income on financial assets, available-for-sale arerecognised separately in profit or loss. Changes in the fair values ofavailable-for-sale debt securities (i.e. monetary items) denominated inforeign currencies are analysed into currency translation differences on theamortised cost of the securities and other changes; the currency translationdifferences are recognised in profit or loss and the other changes arerecognised in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fairvalue reserve, together with the related currency translation differences.



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(e) Impairment

The Group assesses at each balance sheet date whether there is objectiveevidence that a financial asset or a group of financial assets is impaired andrecognises an allowance for impairment when such evidence exists.

(i) Loans and receivables/Financial assets, held-to-maturity

Significant financial difficulties of the debtor, probability that thedebtor will enter bankruptcy, and default or significant delay inpayments are objective evidence that these financial assets areimpaired.

The carrying amount of these assets is reduced through the use ofan impairment allowance account which is calculated as thedifference between the carrying amount and the present value ofestimated future cash flows, discounted at the original effectiveinterest rate. When the asset becomes uncollectible, it is written offagainst the allowance account. Subsequent recoveries of amountspreviously written off are recognised against the same line item inprofit or loss.

The allowance for impairment loss account is reduced through profitor loss in a subsequent period when the amount of impairment lossdecreases and the related decrease can be objectively measured.The carrying amount of the asset previously impaired is increased tothe extent that the new carrying amount does not exceed theamortised cost, had no impairment been recognised in prior periods.

(ii) Financial assets, available-for-sale

In addition to the objective evidence of impairment described in Note2.11(e)(i), a significant or prolonged decline in the fair value of anequity security below its cost is considered as an indicator that thefinancial asset is impaired.

The cumulative loss that was recognised in the fair value reserve istransferred to profit or loss. The cumulative loss is measured as thedifference between the acquisition cost (net of any principalrepayments and amortisation) and the current fair value, less anyimpairment loss previously recognised as an expense. Theimpairment losses recognised as an expense on equity securitiesare not reversed through profit or loss.



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2.12 Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount reported in the balancesheet when there is a legally enforceable right to offset and there is an intention tosettle on a net basis or realise the asset and settle the liability simultaneously.

2.13 Trade and other payables

Trade and other payables represent liabilities for goods and services provided tothe Group prior to the end of financial year which are unpaid. They are classifiedas current liabilities if payment is due within one year or less (or in the normaloperating cycle of the business if longer). Otherwise, they are presented as non-current liabilities.

Trade and other payables are initially measured at fair value, and subsequentlymeasured at amortised cost, using the effective interest method.

2.14 Derivative financial instruments

A derivative financial instrument is initially recognised at its fair value on the datethe contract is entered into and is subsequently carried at its fair value. Fair valuechanges for derivative financial instruments that do not qualify for hedge accountingare recognised in profit or loss in the financial year when the changes arise.Transaction costs incurred in buying and selling derivative instruments arerecognised in the profit or loss account when incurred.

All derivatives are carried at assets when fair value is positive and as liabilities whenfair value is negative.

2.15 Fair value estimation of financial assets and liabilities

The fair value of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) is based on quoted marketprices at the balance sheet date. The quoted market prices used for financial assetsare the current bid prices; the appropriate quoted market prices for financialliabilities are the current asking price.

The fair values of financial instruments that are not traded in an active market aredetermined by using valuation techniques. The Group uses a variety of methodsand makes assumptions that are based on market conditions existing at eachbalance sheet date. Where appropriate, quoted market prices or dealer quotes forsimilar instruments are used. Valuation techniques, such as estimated discountedcash flow analyses, are also used to determine fair values of the financialinstruments.



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2.15 Fair value estimation of financial assets and liabilities (continued)

The fair values of currency forwards are determined using actively quoted forwardexchange rates. The fair values of current financial assets and liabilities carried atamortised cost approximate their carrying amounts.

2.16 Operating leases

(a) When the Group is the lessee:

The Group leases certain assets from third parties.

Leases of assets where substantially all risks and rewards incidental toownership are retained by the lessors are classified as operating leases.Payments made under operating leases (net of any incentives received fromthe lessors) are recognised in profit or loss on a straight-line basis over theperiod of the lease.

(b) When the Group is the lessor:

Leases of investment properties where the Group retains substantially allrisks and rewards incidental to ownership are classified as operating leases.Rental income from operating leases (net of any incentives given to thelessees) is recognised in profit or loss on a straight-line basis over the leaseterm.

Initial direct costs incurred by the Group in negotiating and arrangingoperating leases are added to the carrying amount of the leased assets andrecognised as an expense in profit or loss over the lease term on the samebasis as the lease income.

2.17 Income tax

Current income tax for current and prior periods is recognised at the amountexpected to be paid to or recovered from the tax authorities, using the tax rates andtax laws that have been enacted or substantively enacted by the balance sheetdate.

Deferred income tax is recognised for all temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the financialstatements except when the deferred income tax arises from the initial recognitionof an asset or liability in a transaction that is not a business combination and affectsneither accounting nor taxable profit or loss at the time of transaction.



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2.17 Income tax (continued)

A deferred income tax liability is recognised on temporary differences arising oninvestment in a subsidiary, except where the Group is able to control the timing ofthe reversal of the temporary difference and it is probable that the temporarydifference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences and taxlosses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred incometax asset is realised or the deferred income tax liability is settled, based ontax rates and tax laws that have been enacted or substantively enacted bythe balance sheet date; and

(ii) based on the tax consequence that would follow from the manner in whichthe Group expects, at the balance sheet date, to recover or settle thecarrying amounts of its assets and liabilities.

Current and deferred income tax are recognised as income or expenses in profit orloss, except to the extent that the tax arises from a business combination or atransaction which is recognised directly in equity. Deferred tax arising from the fairvalue gains and losses on Financial assets, available-for-sale are charged orcredited directly to Equity/Life assurance fund in the same period the temporarydifferences arise.

2.18 Provisions

Provisions for agents’ retirement benefits are recognised when the Group has apresent legal or constructive obligation as a result of past events, it is more likelythan not that an outflow of resources will be required to settle the obligation and theamount has been reliably estimated.

Agents’ retirement benefits are provided for the Group’s tied agents and arecalculated in accordance with the terms and conditions of the Agency Agreement.



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2.19 Employee compensation

(a) Defined contribution plans

Defined contribution plans are post-employment benefit plans under whichthe Group pays fixed contributions into separate entities such as the CentralProvident Fund and Employees Provident Fund on a mandatory, contractualor voluntary basis. The Group has no further payment obligations once thecontributions have been paid. The Group’s contributions are recognised asemployee compensation expenses when they are due. No legal orconstructive obligation exists to pay further contributions if any of the fundsdo not hold sufficient assets to pay all employee benefits relating toemployee services in the current and preceding financial years. TheGroup’s contribution to defined contribution plans are recognised in thefinancial year to which they relate.

(b) Employee leave entitlement

Employee entitlements to annual leave and long service leave arerecognised when they accrue to employees. A provision is made for theestimated liability for annual leave and long service leave as a result ofservices rendered by employees up to the balance sheet date.

(c) Staff retirement benefits

Retirement benefits are provided for executive staff. The benefit accrued iscomputed based on the length of service of the employees and his lastdrawn salary less the employer’s contribution to the employee’s CentralProvident Fund or Employees Provident Fund.

2.20 Currency translation

(a) Functional and presentation currency

Items included in the financial statements of each entity in the Group aremeasured using the currency of the primary economic environment in whichthe entity operates (“functional currency”). The financial statements arepresented in Singapore Dollars, which is the functional currency of theCompany.



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2.20 Currency translation (continued)

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreigncurrency”) are translated into the functional currency using the exchangerates prevailing at the dates of the transactions. Currency exchangedifferences from the settlement of such transactions and from the translationof monetary assets and liabilities denominated in foreign currencies at theclosing rates at the balance sheet date are recognised in profit or loss.

Non-monetary items measured at fair values in foreign currencies aretranslated using the exchange rates at the date when the fair values aredetermined.

(c) Translation of Group entities’ financial statements

The results and financial position of all the Group entities that have afunctional currency different from the presentation currency are translatedinto the presentation currency as follows:

(i) assets and liabilities are translated at the closing rates at the date ofthe balance sheet;

(ii) income and expenses for each income statement are translated atthe average exchange rate (unless the average rate is not areasonable approximation of the cumulative effect of the ratesprevailing on the transaction dates, in which case income andexpenses are translated using the exchange rates at the dates of thetransactions); and

(iii) all resulting currency translation differences are recognised in othercomprehensive income and accumulated in the foreign currencytranslation reserve. These currency translation differences arereclassified to profit or loss on disposal or partial disposal of theentity giving rise to such reserve.

2.21 Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cashand cash equivalents comprise cash on hand and deposits with financial institutionswhich are subject to an insignificant risk of change in value.



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2.22 Dividends to Company’s shareholders

Dividends to the Company’s shareholders are recognised when the dividends areapproved for payment.

3. Insurance contracts

Insurance contract liabilities are determined based on a series of relevantassumptions made by the actuary of the respective companies in all the territoriesthat the Group operates in.

(a) Methodology

A prospective cashflowmethod, known as gross premium valuation method,is used to compute insurance contract liabilities.

Under the gross premium valuation approach, broadly speaking, theinsurance contract liabilities are determined by first projecting future cashflows using realistic assumptions and then discounting these cash flowstreams at appropriate interest rates.

For this liability valuation method, assumptions are needed for:

Mortality and morbidityPersistencyDiscount rateRenewal expenses and inflationExpected future bonus (for participating policies)

For participating policies, the insurance contract liabilities include provisionfor future payments arising for both guaranteed and non-guaranteedbenefits. In addition, the insurance contract liabilities are derived not only byaggregating the insurance contract liability of all policies in the fund, but arealso dependent on the value of assets backing the liabilities and the extentto which benefits are guaranteed.

The insurance contract liabilities of the non-participating or investment-linked fund are calculated by aggregating the insurance contract liability ofall policies in the fund.

Additional provision is made in the liability valuation assumptions to allowfor any adverse deviation from the best estimate experience and to reflectthe inherent uncertainty of the best estimate of the insurance liabilities.Methodology used to calculate provision for adverse deviation is consistentwith generally accepted actuarial practice. For Singapore, it is alsoconsistent with the guidance published by the Singapore Actuarial Society.



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3. Insurance contracts (continued)

(b) Process to determine assumptions

All assumptions are reviewed and updated, if necessary, each year in orderto value insurance contract liabilities that reflect the Company’s experience.The assumptions are required to be on best estimate basis.

Mortality and morbidity

Assumptions for death and total and permanent disability (TPD)rates used in each territory are based on annual investigation intotheir respective mortality and morbidity experiences over the recentyears, and are generally expressed as a percentage of a standardtable or reinsurer’s risk premium rates.

For all territories, morbidity assumptions for Dread Disease benefitsare based on a percentage of the reinsurer’s risk premium rates.

For Singapore and Brunei, the mortality assumption remainsunchanged from last year.

For Malaysia, the mortality assumption for three non-participatingproduct groups and investment-linked regular premium productshave been revised upward to reflect past mortality experience.

Persistency

For each territory, an investigation into the Group’s experience overrecent years was performed. This investigation is conducted withrespect to product classes, policy duration and premium paymentmode (regular or single premium) as persistency rates are expectedto vary by these factors. An allowance is then made for any trendsin the data to arrive at a best estimate of future persistency rates.

For Singapore and Brunei, persistency remains broadly stable. Theassumptions remain unchanged from last year.

For Malaysia, persistency remains broadly stable with someimprovement for investment-linked regular premium and certain non-participating products.

The assumptions have been suitably revised to reflect this.



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(b) Process to determine assumptions (continued)

Discount rate

For the Participating business, discount rates used to valueinsurance contract liabilities for each territory is determined basedon the best estimate net investment return.

To determine the best estimate investment returns, the Group hasbroken down the assets in the fund as at the reporting date intovarious asset classes and has applied long term expected returns toeach class. A weighted average rate of investment return is thenderived by combining different proportions of the various assetclasses. A weighted average return is computed based on a notionalasset mix and the long term expected return of each asset class.The assumed investment expense is subtracted from the results toarrive at the best estimate investment return. This is done separatelyfor suitable subgroups of assets within the fund (single and regularpremium products).

For Singapore and Brunei, the discount rate assumptions forParticipating business have been revised downward.

For Malaysia, the discount rate assumption for participating businesshas been revised downward.

Contract liabilities for non-participating business and minimumcondition liability of the participating business are computed bydiscounting policy cash flows using risk-free interest rates. The risk-free rates used are derived from the gross yields to redemption ofbenchmark government securities as at the date of valuation in linewith regulatory requirements.

Renewal expenses and inflation

For each territory, expense analyses are carried out regularly todetermine the long-term unit cost assumptions.

The analysis is done by dividing the current level of expense with thebusiness volume. Adjustments are made to reflect expectedchanges in expense levels or business volume in the future, if any,to arrive at the long term best estimate unit cost assumptions.

Different expense inflation is used for each territory, reflecting theirrespective interest rate and general economic environment. Theinflation assumption for Singapore and Brunei remains at 2% perannum. For Malaysia, this remains at 3% per annum.



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(b) Process to determine assumptions (continued)

Additional assumptions for investment-linked contracts

For investment-linked insurance policies, additional estimates aremade for unit fund growth rate, fund management charge andinvestment and administration expenses. These assumptions areused for calculating the liabilities and are updated at each reportingdate to reflect the best estimates.

- Unit growth rate: For Malaysia, it is determined by taking intoconsideration the average actual unit price growth rateweighted by unit fund values. For Singapore, the unit growthrate is set to an average risk free return consistent with therisk free discount rate and average in-force duration of theproduct group in question. There is no investment-linkedbusiness in Brunei.

- Fund management charge: Current actual rates of fundmanagement charge the Company levies are used in thevaluation. No changes for Singapore. For Malaysia, fundmanagement charges assumption is revised upward toreflect actual experience.

- Investment expenses: A portfolio average of investment andother related expenses, as determined based on an internalexpense analysis, for investment linked funds are used. Nochanges for Singapore and Malaysia.

- Take-up rate for premium holding option: For Singapore, thetake-up rate for the option to cease premium payment whilethe policy remains in-force is set based on industryexperience.

There are no changes to other assumptions from the previous year.



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(c) Assumptions used

Singapore and Brunei Malaysia

Mortality and morbidity Death, TPD and DD:Between 64% and 100% ofreinsurance rates, depending onproduct type, age and gender.

Death, TPD and DD:Between 45% to 110% of standardmortality table depending onproduct type.

Discount rate (bestestimate)

Par Fund: between 3.4% and 5.0% Par Fund: 3.86% to 5.75% (aftertax investment return).

Risk-free discount rate(For guaranteed benefitsfor Min. Condition Liability(MCL))

Derivation based on MAS Notice 319 Malaysian Government Security(MGS) rate as at 31/12/2016(Obtained from BondWeb - bondrating agency prescribed by BankNegara Malaysia (BNM)).

Persistency Based on Company’s experience. Based on subsidiary’sassumptions.

Management expenses Based on past actual expenses withadjustment for future trend, expressedas unit costs per in-force policy andpercentage of premiums.

Based on subsidiary’s assumptions(expressed as unit costs per in-force policy and percentage ofpremiums).

Distribution expenses Based on actual payments, expressedas percentage of commissions.

Maximum limit based on BNM’s“Guidelines on Operating CostControl” (OCC).

Expense inflation rate 2% p.a. 3% p.a.

(d) Insurance contract liabilities

Figures in S$‘000 Singapore and Brunei Malaysia2016 2015 2016 2015

Participating Business 4,527,660 4,014,134 1,604,721 1,622,402Non-Participating Business 231,312 252,735 195,795 182,110Investment-Linked Business 42,323 42,203 72,397 61,070

The insurance contract liabilities are gross of reinsurance assets andexclude the deferred tax liabilities related to the Participating Business.

(e) Sensitivity analysis

The Company conducted sensitivity analyses of the value of insuranceliabilities disclosed to movements in the assumptions used in the estimationof insurance liabilities.

The analyses are based on a change in an assumption while holding allother assumptions constant.



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(e) Sensitivity analysis (continued)

In practice, this is unlikely to occur, and changes in some of the assumptionsmay be correlated, for example:

change in interest rate and change in market values; andchange in lapses and future mortality.

For liabilities under Participating contracts (where total insurance contractliabilities take the value of the policy assets of the Participating fund),changes in these assumptions will not cause a change to the reportedinsurance contract liability unless the guaranteed liabilities under thestressed assumptions exceeds the value of assets backing liabilities. Thesensitivities are based on liabilities net of reinsurance assets.

Singapore and Brunei - Participating and Non-Participating Business

Change in liabilityChange in 2016 2015

Variable variable Value Percentage Value Percentage$’000 (%) $’000 (%)

Worsening of annuitant mortality +25% -4,622 -0.10% -4,732 -0.11%Improvement in annuitant mortality -25% 5,204 0.11% 5,402 0.13%Worsening of assurance mortalityand morbidity +25% 7,927 0.17% 10,673 0.25%Improvement in assurance mortality andmorbidity -25% -6,075 -0.13% -8,366 -0.20%Worsening of lapse rate +25% 46 0.00% -657 -0.02%Improvement in lapse rate -25% 313 0.01% 1,125 0.03%Increase in nominal discount rate +100bps -10,842 -0.23% -11,059 -0.26%Lowering of nominal discount rate -100bps 12,148 0.26% 12,378 0.29%Worsening of expense +25% 4,047 0.09% 4,179 0.10%Improvement in expense -25% -3,983 -0.08% -4,117 -0.10%

Liabilities of non-linked insurance contracts are most sensitive to changesin discount rates.

Singapore - Investment-linked insurance contracts

Change in liabilityChange in 2016 2015

Variable variable Value Percentage Value Percentage$’000 (%) $’000 (%)

Worsening of assurance mortalityand morbidity +25% 20 0.05% 8 0.02%Improvement in assurance mortality andmorbidity -25% -15 -0.04% -5 -0.01%Worsening of lapse rate +25% -46 -0.11% -35 -0.08%Improvement in lapse rate -25% 86 0.20% 56 0.13%Increase in nominal discount rate +100bps 1 0.00% -34 -0.08%Lowering of nominal discount rate -100bps -5 -0.01% 38 0.09%Worsening of expense +25% 339 0.80% 254 0.60%Improvement in expense -25% -173 -0.41% -106 -0.25%



38


(e) Sensitivity analysis (continued)

Liabilities of investment-linked insurance contracts are most sensitive tochanges in management expense.

Malaysia - Participating & Non-Participating Business

Change in liability2016 2015

Variable Change invariable

Value in Value inRM’000 $’000 (%) RM’000 $’000 (%)

Worsening of assurancemortality and morbidity +25% 84,770 27,330 1.52% 74,479 24,600 1.36%Improvement in assurancemortality and morbidity -25% -85,495 -27,564 -1.53% -75,222 -24,846 -1.38%Worsening of lapse rate +25% 14,434 4,653 0.26% 13,914 4,596 0.25%Improvement in lapse rate -25% -15,195 -4,899 -0.27% -15,406 -5,089 -0.28%Increase in nominal discountrate +100bps -50,213 -16,189 -0.90% -42,744 -14,118 -0.78%Lowering of nominal discountrate -100bps 60,023 19,351 1.07% 50,969 16,835 0.93%Worsening of expense +25% 15,163 4,889 0.27% 15,070 4,978 0.28%Improvement in expense -25% -15,031 -4,846 -0.27% -14,953 -4,939 -0.27%

Liabilities of non-linked insurance contracts are affected most by changesin mortality rates.

Malaysia - Investment-linked insurance contracts

Change in liability2016 2015

Variable Change invariable

Value in Value inRM’000 $’000 (%) RM’000 $’000 (%)

Worsening of assurancemortality +25% 635 205 0.28% 4,945 1,633 2.67%Improvement in assurancemortality -25% -230 -74 -0.10% -4,920 -1,625 -2.66%Worsening of lapse rate +25% -556 -179 -0.25% -243 -80 -0.13%Improvement in lapse rate -25% 684 221 0.30% 265 88 0.14%Increase in nominal discountrate

+100bps -3,335 -1,075 -1.49%-2145 -709 -1.16%

Lowering of nominal discountrate

-100bps 3,905 1,259 1.74%2,385 788 1.29%

Worsening of expense +25% 1,365 440 0.61% 901 298 0.49%Improvement in expense -25% -993 -320 -0.44% -524 -173 -0.28%

The liabilities of investment-linked insurance contracts are most sensitive tochanges in discount rates.

There are no annuity policies for the Malaysia business.



39

4. Critical accounting estimates and judgements

Estimates/assumptions and judgements are continually evaluated and are basedon historical experience and other factors, including expectations of future eventsthat are believed to be reasonable under the circumstances.

(a) Liabilities of insurance business

The estimation of the ultimate liability arising from claims made under lifeinsurance contracts is the Group’s most critical accounting estimate. Theprocess for estimating the liabilities of insurance business is described inNote 3.

(b) Impairment of financial assets, available-for-sale

The Group reviews its financial assets for objective evidence of impairmenton a quarterly basis during the investment committee meeting. Equitysecurities are considered to be impaired if there has been a significant orprolonged period of decline in fair value below its cost or if there is objectiveevidence of impairment. Debt securities are considered to be impaired ifthere has been default in cash flows and a significant decline in credit ratingbelow investment grade. The consideration of this requires management’sjudgement. The Group evaluates, among other factors, the duration andextent to which the fair value of an investment is less than its cost; and thefinancial health of and near-term business outlook for the investee, includingfactors such as industry and sector performance, changes in technology andoperational and financing cash flow. If actual experience differs negativelyfrom the assumptions and other considerations used in the consolidatedfinancial statements, unrealised losses currently in equity may berecognised in profit or loss in future periods.

(c) Determining the fair value of unquoted investments

The Group holds financial assets which are not quoted on active markets,particularly its fixed income portfolio. The majority of the unquoted fixedincome investments is debt securities issued by government and publicauthorities and by private sector corporations. The fair values of thesefinancial assets are based on quotations from independent third parties,such as brokers. The quotations from these third parties may changedrastically due to market and economic conditions. The Group uses recentarm’s length transactions or reference to instruments that are substantiallythe same or at cost if these are not available to value its unlisted equities.The assumption for valuation at cost will be affected by change in credit riskand interest rate and may have a negative impact on the financialstatements.



40

4. Critical accounting estimates and judgements (continued)

(d) Uncertain tax positions

The Group is subject to income taxes in a number of jurisdictions. Indetermining the income tax liabilities, management has estimated theamount of capital allowances and the taxability/deductibility of certainincome/expenses (“uncertain tax positions”) at each tax jurisdiction.

The Group has significant open tax assessments with a tax authority at thebalance sheet date that requires a certain degree of judgement andestimates. As the amount are subject to query by the tax authority, theGroup has recognised the tax liability on these uncertain tax positions.

5. Income taxes

(a) Income tax expense/(credit)

The Group The Company2016$’000

2015$’000

2016$’000

2015$’000

Life Assurance FundOn the profit for the financial year:Singapore income tax 10,032 6,938 10,032 6,938Foreign income tax 8,137 7,391 - -Deferred tax (Note 21) 33,171 24,333 33,398 22,970

51,340 38,662 43,430 29,908(Over)/under provision in precedingfinancial years:

Singapore income tax (9,342) (427) (9,342) (427)Foreign income tax (1,189) - - -

40,809 38,235 34,088 29,481

Shareholders’ fundOn the results for the financial year:Singapore income tax 207 356 207 356Foreign income tax 1,815 1,302 - -Deferred tax (Note 21) (20) 27 - -

2,002 1,685 207 356(Over)/under provision in precedingfinancial years:

Singapore income tax (1,604) 1,312 (1,604) 1,312Foreign income tax (150) - - -

248 2,997 (1,397) 1,668



41

5. Income taxes (continued)

(b) The tax expense on profit differs from the amount that would arise using theSingapore standard rate of income tax due to the following:


2015$’000

2016$’000

2015$’000

Profit before tax 17,314 10,851 7,165 2,486Change in Life Assurance Fund 649,291 789,987 562,632 644,613Change in reinsurance assets arisingfrom policy liabilities 14,388 (4,684) 14,388 (4,684)

680,993 796,154 584,185 642,415

Tax calculated at Singapore statutorytax rate of 17% (2015: 17%) 115,769 135,346 99,311 109,211

Tax calculated at concessionary tax rate (4,350) (2,765) (4,350) (2,765)Effect of different tax rates in othercountries (4,003) (13,501) - -

Income not subject to tax (9,650) (12,273) (7,302) (10,142)Expenses not deductible for tax purpose 1,001 1,127 813 1,069Tax effect of overseas branch 119 151 119 151Effect of concessionary tax rate onparticipating fund (19,354) (13,371) (19,354) (13,371)

Tax effect of change in actuarialvaluation (26,368) (54,703) (25,778) (54,225)

Others 178 336 178 33653,342 40,347 43,637 30,264

6(a). Fees and commission income


2015$’000

2016$’000

2015$’000

Management fee rebates andcommission income 4,633 6,570 4,613 4,820



42

6(b). Other incomeThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Investment incomeDividend income- Financial assets, available-for-sale 62,167 73,150 47,124 57,627- Financial assets at fair value through

profit or loss 1,244 1,586 - -63,411 74,736 47,124 57,627

Interest income- Loans 14,365 15,526 2,842 2,683- Fixed deposits 6,327 7,058 2,689 1,366- Financial assets, available-for-sale 167,572 153,794 113,590 102,441- Financial assets at fair value throughprofit or loss 2,020 1,672 - -

- Financial assets, held-to-maturity 15,556 15,166 - -205,840 193,216 119,121 106,490

Government grant 333 254 333 254269,584 268,206 166,578 164,371

6(c). Other gains/(losses) - netThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Fair value gains/(losses)- Financial assets at fair value throughprofit or loss 9,799 6,406 2,572 (2,778)

- Derivatives (63,804) (58,572) (64,182) (58,572)(54,005) (52,166) (61,610) (61,350)

Financial assets, available-for-sale-Transfer from Life Assurance Fund ondisposal (Note 24) 28,127 65,746 23,801 61,563

-Transfer from equity on disposal 829 857 651 913- Currency exchange gains on debtsecurities (Note 10) 25,996 44,007 25,996 44,007

- Impairment losses written back/(made)(Note 10) 3,756 (1,326) 2,015 63

58,708 109,284 52,463 106,546Financial assets, held-to-maturity- Net (loss)/gains on early redemption (11) - - -Loss on disposal of property, plant andequipment (9) (10) (9) -

Property, plant and equipment written off (4) (2) - -Currency exchange (losses)/gains - net (2,284) (2,763) (2,284) (2,765)Others 3,189 582 2,099 506

5,584 54,925 (9,341) 42,937



43

6(d). Employee compensationThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Employee compensationWages and salaries 43,923 39,591 26,204 23,314Employer’s contribution to definedcontribution plans including CentralProvident Fund and Employees’Provident Fund 5,856 4,384 2,895 2,311Staff retirement benefits (42) 142 (9) 142

49,737 44,117 29,090 25,767

6(e). Depreciation


2015$’000

2016$’000

2015$’000

Depreciation of property, plant andequipment:- Leasehold land and buildings 1,145 821 255 255- Motor vehicles 49 61 - 21- Furniture and equipment 461 1,676 458 514

Total depreciation (Note 18) 1,655 2,558 713 790

Depreciation of investment properties:Buildings (Note 16) 296 333 289 289

1,951 2,891 1,002 1,079

6(f). Other operating expensesThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Rental expenses 729 734 596 593Investment management fees to afellow subsidiary 6,964 6,709 6,964 6,709

Maintenance of property, plant andequipment 2,179 1,476 2,066 881

Professional fees 3,380 2,212 2,955 2,202Management fee to a fellow subsidiary 3,343 1,842 2,767 1,820Advertising 1,479 1,516 674 782Computer services and expenses 1,490 1,386 20 9Medical fees 985 817 208 329Printing and stationery 972 934 321 314Utilities 745 669 43 45Other expenses 19,086 16,094 9,272 6,997

41,352 34,389 25,886 20,681



44

7. Cash and cash equivalents

(a)The Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Cash at bank and on hand 192,583 200,100 180,051 190,620Fixed deposits with financial institutions 137,730 340,700 47,675 241,551

330,313 540,800 227,726 432,171

(b) The fixed deposits with financial institutions at the balance sheet date had anaverage maturity of 2 months (2015: 2 months) from the end of the financial yearwith the following weighted average effective interest rates per annum:

The Group The Company2016 2015 2016 2015

Singapore Dollar 0.93% 1.33% 0.93% 1.33%Malaysian Ringgit 3.55% 4.19% - -

(c) The fixed deposits with financial institutions are analysed as follows:


2015$’000

2016$’000

2015$’000

Fixed deposits maturing within12 months 137,730 340,700 47,675 241,551

8. Outstanding premium and agents’ balances


2015$’000

2016$’000

2015$’000

Outstanding premium and agents’balances 20,037 16,142 11,701 8,948Amounts due from brokers 8,550 7,411 4,906 4,420

28,587 23,553 16,607 13,368Less: Provision for impairmentBalance at beginning of financial year (1,620) (855) (311) (315)Decrease/(increase) in allowance forimpairment 103 (836) (140) 4Currency translation differences 31 71 - -Balance at end of financial year (1,486) (1,620) (451) (311)

Due within 12 months 27,101 21,933 16,156 13,057



45

9. Reinsurance assets

The Group The Company2016 2015 2016 2015$’000 $’000 $’000 $’000

Reinsurers’ share of claims admittedor intimated 44,003 27,035 39,615 23,951

Reinsurance assets arising from policyliabilities 14,925 29,313 14,925 29,313

58,928 56,348 54,540 53,264

(i) Reinsurers’ share of claims admitted or intimated


Reinsurers’ share of claimsadmitted or intimated 44,003 27,035 39,615 23,951

Balance at beginning of financialyear 27,035 34,788 23,951 32,540Currency translation differences (74) (289) - -Amount received for claimssettled during the financial year (21,778) (37,787) (19,695) (35,829)Claims notified during thefinancial year 38,820 30,323 35,359 27,240Balance at end of financial year 44,003 27,035 39,615 23,951

Due within 12 months 44,003 27,035 39,615 23,951

(ii) Reinsurance assets arising from policy liabilities


Reinsurance assets arising frompolicy liabilities 14,925 29,313 14,925 29,313

Balance at beginning of financialyear 29,313 24,629 29,313 24,629

Due to assumption changes (19,515) 325 (19,515) 325Due to risk free rate changes (4,542) (108) (4,542) (108)Due to movement during theyear 9,669 4,467 9,669 4,467

Change in Reinsurance assetsarising from policy liabilities (14,388) 4,684 (14,388) 4,684

Balance at end of financial year 14,925 29,313 14,925 29,313



46

10. Financial assets, available-for-sale


Balance at beginning of financial year 6,042,207 5,897,402 4,499,729 4,268,093Currency translation differences (36,953) (209,190) - -Additions 3,124,006 3,105,901 2,787,851 2,567,780Carrying value of disposals (2,195,558) (2,630,275) (1,946,899) (2,237,722)Amortisation of effective interest (4,236) (3,876) (6,128) (5,655)Fair value gains on foreign exchange ondebt securities (Note 6(c)) 25,996 44,007 25,996 44,007

Impairment losses written back/(made)(Note 6(c)) 3,756 (1,326) 2,015 63

Fair value gains/(losses) transferred toLife Assurance Fund (Note 24) 71,223 (159,362) 63,152 (136,207)Fair value net (losses)/gains transferredto equity (529) (1,074) (550) (630)Balance at end of financial year 7,029,912 6,042,207 5,425,166 4,499,729

Current 1,349,124 1,144,057 1,294,210 1,109,871Non-current 5,680,788 4,898,150 4,130,956 3,389,858

Financial assets, available-for-sale are analysed as follows:


Quoted securities:- Equity securities - Singapore 898,001 1,022,950 898,001 1,019,999- Equity securities - Malaysia 444,305 432,288 - -- Equity securities - Others 355,224 72,044 355,224 72,044- Debt securities - Singapore 2,188,829 1,699,006 2,188,829 1,699,006- Debt securities - Malaysia 1,222,187 1,155,926 103,443 89,578- Debt securities - Others 1,510,608 1,275,543 1,510,608 1,275,543- Investment in funds 384,467 358,095 369,061 343,339

7,003,621 6,015,852 5,425,166 4,499,509

Unquoted securities- Equity securities - Others - 200 - 200- Equity securities - Malaysia 2,663 2,728 - -- Investment in funds 23,628 23,427 - 20

26,291 26,355 - 220

7,029,912 6,042,207 5,425,166 4,499,729



47

11. Financial assets at fair value through profit or loss


Debt securities 59,498 33,267 - -Equity securities 41,982 49,541 - -Investment in funds 152,350 142,687 46,973 46,374

253,830 225,495 46,973 46,374

Current 253,830 225,495 46,973 46,374

Financial assets at fair value through profit or loss are analysed as follows:


Quoted securities:- Equity securities 41,982 49,541 - -- Investment in funds 152,350 142,687 46,973 46,374Unquoted securities:- Equity securities - - - -- Debt securities 59,498 33,267 - -

253,830 225,495 46,973 46,374

12. Financial assets, held-to-maturityThe Group

2016$’000

2015$’000

Government and public authority securities 224,266 236,669Debt securities in corporations 72,599 79,243

296,865 315,912

Due within 12 months 14,451 18,132Due after 12 months 282,414 297,780

The fair values of the financial assets, held-to-maturity at the balance sheet dateare analysed as follows:

The Group2016$’000

2015$’000

Government and public authority securities 222,764 234,276Debt securities in corporations 73,596 80,909

296,360 315,185



48

13. Derivative financial instruments

(a)The Group The Company

2016 2015 2016 2015$’000 $’000 $’000 $’000

Warrants 1,152 911 - -Foreign exchange contracts (74,932) (19,829) (74,932) (19,829)Derivative financial (liabilities)/assets (73,780) (18,918) (74,932) (19,829)

Presented as:Derivative financial assets 1,152 911 - -Derivative financial liabilities (74,932) (19,829) (74,932) (19,829)

(73,780) (18,918) (74,932) (19,829)

(b) Warrants

The Group2016 2015$’000 $’000

Warrants due after 12 months 1,152 911

(c) Foreign exchange contracts

At 31 December, the contractual amounts and the fair value of the Group and theCompany’s outstanding foreign exchange contracts are as follows:

The Group and the Company

DescriptionContract

notional amount Fair value liabilities2016$’000

2015$’000

2016$’000

2015$’000

United States Dollar 1,442,855 1,556,252 74,932 19,829

2016$’000

2015$’000

Balance at beginning of financial year 19,829 32,866Fair value losses/(gains) recognised in profit or loss 55,103 (13,037)Balance at end of financial year 74,932 19,829



49

14. Other assetsThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Accrued investment income 53,535 57,499 37,389 35,479Club memberships 79 94 79 94Due from intermediate holding company- non-trade - 27 - 27Due from fellow subsidiary - non-trade 211 113 211 70Due from related companies - non-trade 83 18 - -Receivable from sale of investment 12,596 2,768 12,252 2,149Prepayments 2,354 1,654 2,295 1,654Other receivables 1,837 2,599 777 668

70,695 64,772 53,003 40,141

Amounts due from subsidiary, fellow subsidiaries, related companies andintermediate holding company are unsecured, non-interest bearing and repayableon demand.

15. LoansThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Loans secured on properties 351 412 - -Cash and non-forfeiture loans onpolicies within the surrender value 205,027 204,757 41,599 37,582

Other secured loans 124 211 - -205,502 205,380 41,599 37,582

16. Investment properties

(a) The GroupFreeholdland Buildings Total$’000 $’000 $’000

2016CostAt 1 January 2016 3,172 20,871 24,043Currency translation differences (74) (154) (228)Transfer from property, plant and equipment (Note 18(a)) (4) 21 17Additions - 207 207Disposals (43) - (43)At 31 December 2016 3,051 20,945 23,996

Accumulated depreciationAt 1 January 2016 - 6,101 6,101Currency translation differences - (17) (17)Transfer from property, plant and equipment (Note 18(a)) - (4) (4)Depreciation charge (Note 6(e)) - 296 296At 31 December 2016 - 6,376 6,376

Net book value at 31 December 2016 3,051 14,569 17,620



50

16. Investment properties (continued)

(a) The Group (continued)

Freeholdland Buildings Total$’000 $’000 $’000

2015CostAt 1 January 2015 3,626 21,766 25,392Currency translation differences (459) (942) (1,401)Transfer from property, plant and equipment (Note 18(a)) 5 47 52At 31 December 2015 3,172 20,871 24,043

Accumulated depreciationAt 1 January 2015 - 5,862 5,862Currency translation differences - (102) (102)Transfer from property, plant and equipment (Note 18(a)) - 8 8Depreciation charge (Note 6(e)) - 333 333At 31 December 2015 - 6,101 6,101

Net book value at 31 December 2015 3,172 14,770 17,942

The following amounts are recognised in profit or loss:

The Group2016 2015$’000 $’000

Rental income (net) 1,711 1,642

Direct operating expenses arising from:- Investment properties that generate rental income (1,546) (1,516)- Investment properties that do not generate rental income (1,219) (1,913)

(b) The Company


2016CostAt 1 January 2016 and 31 December 2016 59 14,433 14,492

Accumulated depreciationAt 1 January 2016 - 5,375 5,375Depreciation charge (Note 6(e)) - 289 289At 31 December 2016 - 5,664 5,664

Net book value at 31 December 2016 59 8,769 8,828



51

16. Investment properties (continued)

(b) The Company (continued)


2015CostAt 1 January 2015 and 31 December 2015 59 14,433 14,492

Accumulated depreciationAt 1 January 2015 - 5,086 5,086Depreciation charge (Note 6(e)) - 289 289At 31 December 2015 - 5,375 5,375

Net book value at 31 December 2015 59 9,058 9,117

The following amounts are recognised in profit or loss:

The Company2016 2015$’000 $’000

Rental income (net) 848 862

Direct operating expenses arising from:- Investment properties that generate rental income (206) (255)- Investment properties that do not generate rental income - -

The fair values of the investment properties for the Group and the Company as at31 December 2016 were approximately $111,911,000 (2015: $110,741,000) and$66,000,000 (2015: $67,000,000) respectively. Included in the fair values of theinvestment properties were $111,911,000 (2015: $110,741,000) and $66,000,000(2015: $67,000,000) attributable to the Life Assurance Fund of the Group and theCompany respectively. The investment properties of the Group were valued byindependent professional valuers based on the properties’ highest-and-best useusing the sales comparison approach at the balance sheet date. These areregistered as Level 3 of the fair value measurement hierarchy. Under the salescomparison approach, the recent sale prices of properties in close proximity areadjusted for differences in key attributes such as tenure, location, condition of theproperties. The most significant input into this valuation approach is selling priceper square foot.



52

17. Investment in a subsidiaryThe Company2016 2015$’000 $’000

(a) Unquoted equity shares, at cost 87,636 87,636

Beginning of financial year 87,636 40,952Additions - 46,684End of financial year 87,636 87,636

During the prior financial year, the Company injected $46,684,000 into its subsidiaryto secure Bancassurance rights as noted in Note 19 (a).

(b) The subsidiary of the Company is as follows:

Name of subsidiary Principal activities

Country ofincorporationand placeof business

Cost ofinvestment

% of paid upcapital held bythe Company

2016$’000

2015$’000

2016%

2015%

Tokio Marine LifeInsurance Malaysia Bhd.* Life assurance Malaysia 87,636 87,636 100 100

* Audited by PricewaterhouseCoopers, Malaysia.

18. Property, plant and equipment

(a) The Group

Freeholdland

Leaseholdland Buildings

Motorvehicles

Furnitureand

equipment Total$’000 $’000 $’000 $’000 $’000 $’000

2016CostAt 1 January 2016 25,947 888 46,069 806 12,486 86,196Currency translation differences (124) (21) (797) (11) (157) (1,110)Transfer from/(to) investmentproperties (Note 16(a))

4 - (21) - - (17)

Transfer to intangible assets(Note 19)

- - - - (2,315) (2,315)

Additions - 1,236 832 - 2,391 4,459Disposals (112) - - (2) (204) (318)Write offs - - - - (100) (100)At 31 December 2016 25,715 2,103 46,083 793 12,101 86,795

Accumulated depreciationAt 1 January 2016 - 95 13,084 526 9,637 23,342Currency translation differences - (3) (312) (6) (114) (435)Transfer from/(to) investmentproperties (Note 16(a)) - - 4 - - 4

Transfer to intangible assets(Note 19) - - - - (1,143) (1,143)

Depreciation charge (Note 6(e)) - 28 1,117 49 461 1,655Disposals - - - (1) (195) (196)Write offs - - - - (96) (96)At 31 December 2016 - 120 13,893 568 8,550 23,131

Net book value at31 December 2016 25,715 1,983 32,190 225 3,551 63,664



53

18. Property, plant and equipment (continued)


Freeholdland

Leaseholdland Buildings

Motorvehicles

Furnitureand

equipment Total$’000 $’000 $’000 $’000 $’000 $’000

2015CostAt 1 January 2015 26,716 1,019 51,033 872 12,841 92,481Currency translation differences (764) (131) (4,917) (66) (968) (6,846)Transfer to investment properties(Note 16(a)) (5) (47) - - (52)

Transfer to intangible assets(Note 19) - - - - (1,239) (1,239)

Additions - - - 49 1,945 1,994Disposals - - - (49) (9) (58)Write offs - - - - (84) (84)At 31 December 2015 25,947 888 46,069 806 12,486 86,196

Accumulated depreciationAt 1 January 2015 - 102 13,976 514 9,821 24,413Currency translation differences - (14) (1,698) (26) (772) (2,510)Transfer to investment properties(Note 16(a)) - - (8) - - (8)

Transfer to intangible assets(Note 19) - - - - (997) (997)

Depreciation charge (Note 6(e)) - 7 814 61 1,676 2,558Disposals - - - (23) (9) (32)Write offs - - - - (82) (82)At 31 December 2015 - 95 13,084 526 9,637 23,342

Net book value at31 December 2015 25,947 793 32,985 280 2,849 62,854

(b) The Company

Freeholdland Buildings

Motorvehicles

Furnitureand

equipment Total$’000 $’000 $’000 $’000 $’000

2016CostAt 1 January 2016 20,766 12,765 353 5,925 39,809Additions - - - 1,158 1,158Disposals - - - (204) (204)At 31 December 2016 20,766 12,765 353 6,879 40,763

Accumulated depreciationAt 1 January 2016 - 1,296 353 4,887 6,536Depreciation charge (Note 6(e)) - 255 - 458 713Disposals - - - (195) (195)At 31 December 2016 - 1,551 353 5,150 7,054

Net book value at31 December 2016 20,766 11,214 - 1,729 33,709



54

18. Property, plant and equipment (continued)


Freeholdland Buildings

Motorvehicles

Furnitureand

equipment Total$’000 $’000 $’000 $’000 $’000

2015CostAt 1 January 2015 20,766 12,765 353 5,308 39,192Additions - - - 626 626Disposals - - - (9) (9)At 31 December 2015 20,766 12,765 353 5,925 39,809

Accumulated depreciationAt 1 January 2015 - 1,041 332 4,382 5,755Depreciation charge (Note 6(e)) - 255 21 514 790Disposals - - - (9) (9)At 31 December 2015 - 1,296 353 4,887 6,536

Net book value at31 December 2015 20,766 11,469 - 1,038 33,273

19. Intangible assetsThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

Composition:Bancassurance rights (Note (a)) 24,421 33,359 - -Computer software licences (Note (b)) 13,791 5,968 6,710 3,348

38,212 39,327 6,710 3,348

(a) Bancassurance rightsThe Group

2016$’000

2015$’000

CostAt 1 January 61,648 22,891Currency translation differences (1,475) (2,942)Additions - 41,699At 31 December 60,173 61,648

Accumulated amortisationAt 1 January 28,289 22,891Currency translation differences (970) (3,487)Amortisation charge 8,433 8,885At 31 December 35,752 28,289

Net book value at31 December 24,421 33,359



55

19. Intangible assets (continued)

(a) Bancassurance rights (continued)

The Subsidiary has entered into an exclusive bancassurance agreement fora period of 10 years with a Malaysian bank commencing on 1 January 2015.Under this agreement, the Malaysian bank will only sell, distribute, marketand promote conventional life insurance products of the Subsidiary.

(b) Computer software licences


2015$’000

2016$’000

2015$’000

CostAt 1 January 7,801 1,831 4,164 1,831Currency translation differences (87) - - -Transfer from Property, plantand equipment (Note 18(a)) 2,315 1,239 - -

Additions 8,700 4,731 3,937 2,333At 31 December 18,729 7,801 8,101 4,164

Accumulated amortisationAt 1 January 1,833 365 816 365Currency translation differences (75) - - -Transfer from Property, plantand equipment (Note 18(a)) 1,143 997 - -

Amortisation charge 2,037 471 575 451At 31 December 4,938 1,833 1,391 816

Net book value at31 December 13,791 5,968 6,710 3,348

Recognised within the computer software licenses are assets underconstruction amounting to $4,418,000 (2015: $1,528,000). Assets underconstruction are not amortised until they are put in use.



56

20. Other payables


2015$’000

2016$’000

2015$’000

Investment creditors 103 2,102 103 1,913Due to related companies - non-trade 3,687 3,116 3,305 2,772Due to immediate holding company- non-trade 47,129 - 47,129 -Unclaimed dividend 608 597 608 597Accrued management expenses 19,534 17,888 7,253 6,712Rental deposits and advances 1,199 1,292 153 216GST payables 595 706 399 447Other non-trade payables 20,668 14,991 17,469 12,337

93,523 40,692 76,419 24,994

Due within 12 months 46,840 40,692 29,736 24,994Due after 12 months 46,683 - 46,683 -

Amounts due to related companies are unsecured, non-interest bearing andrepayable on demand.

The amount due to immediate holding company is unsecured and repayable in fullon 13 September 2026. Interest is fixed at 3.2% per annum.

21. Deferred income taxes

Deferred tax assets and liabilities are offset when there is a legally enforceable rightto set off current tax assets against current tax liabilities and when the deferredincome taxes relate to the same fiscal authority.

The following amounts, determined after appropriate offsetting, are shown in thebalance sheet:


2015$’000

2016$’000

2015$’000

Deferred tax liabilities- Settled after 12 months 355,965 318,707 341,659 304,108



57

21. Deferred income taxes (continued)

The movement in the deferred income tax account is as follows:

Deferred tax liabilitiesThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

At 1 January 318,707 320,696 304,108 303,621Currency translation differences (340) (2,281) - -Transfer from Life Assurance Fund(Note 5(a) and Note 24) 33,171 24,333 33,398 22,970

Tax charge/(credit) to Life AssuranceFund (Note 24) 4,687 (23,812) 4,357 (22,221)

Tax (credit)/charge to profit or loss(Note 5(a)) (20) 27 - -

Tax (credit)/charge to equity (240) (256) (204) (262)At 31 December 355,965 318,707 341,659 304,108

The movement in deferred tax liabilities (prior to offsetting of balances within thesame jurisdiction) during the period is as follows:

The Group

Deferred tax liabilitiesAccelerated

taxdepreciation

Fairvaluereserve

Othertemporarydifferences Total

$’000 $’000 $’000 $’0002016At 1 January 2016 564 16,344 301,799 318,707Currency translation differences - (345) 5 (340)Transfer from Life Assurance Fund (Note 24) 628 1,591 30,952 33,171Tax charge to Life Assurance Fund (Note 24) - 4,687 - 4,687Tax credit to profit or loss (Note 5(a)) - - (20) (20)Tax credit to equity - (240) - (240)At 31 December 2016 1,192 22,037 332,736 355,965

2015At 1 January 2015 251 42,434 278,011 320,696Currency translation differences - (2,022) (259) (2,281)Transfer from Life Assurance Fund (Note 24) 313 - 24,020 24,333Tax credit to Life Assurance Fund (Note 24) - (23,812) - (23,812)Tax charge to profit or loss (Note 5(a)) - - 27 27Tax credit to equity - (256) - (256)At 31 December 2015 564 16,344 301,799 318,707



58

21. Deferred income taxes (continued)

The Company

Deferred tax liabilitiesAccelerated

taxdepreciation

Fairvaluereserve

Othertemporarydifferences Total

$’000 $’000 $’000 $’000

2016At 1 January 2016 564 4,100 299,444 304,108Transfer from Life Assurance Fund (Note 24) 628 - 32,770 33,398Tax charge to Life Assurance Fund (Note 24) - 4,357 - 4,357Tax credit to equity - (204) - (204)At 31 December 2016 1,192 8,253 332,214 341,659

2015At 1 January 2015 251 26,583 276,787 303,621Transfer from Life Assurance Fund (Note 24) 313 - 22,657 22,970Tax credit to Life Assurance Fund (Note 24) - (22,221) - (22,221)Tax credit to equity - (262) - (262)At 31 December 2015 564 4,100 299,444 304,108

22. Staff retirement benefitsThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

At 1 January 630 506 511 369Currency translation differences (3) (18) - -Amount paid during the financial year - - - -(Decrease)/Increase in provision for thefinancial year (42) 142 (9) 142

At 31 December 585 630 502 511

Due after 12 months 585 630 502 511

23. Agents’ retirement benefitsThe Group The Company

2016$’000

2015$’000

2016$’000

2015$’000

At 1 January 9,771 11,201 561 754Currency translation differences (220) (1,342) - -Amount paid during the financial year (1,505) (1,886) (14) (79)Increase/(decrease) in provision for thefinancial year 1,384 1,798 22 (114)

At 31 December 9,430 9,771 569 561

Due within 12 months 2,460 2,065 - -Due after 12 months 6,970 7,706 569 561



59

24. Life Assurance Fund

(a) The Group

Unallocatedsurplus

Policyliabilities

Fair valuereserve Total

$'000 $'000 $’000 $’0002016At 1 January 2016 431,296 6,174,654 164,701 6,770,651

Currency translation differences (4,655) (46,492) (2,860) (54,007)Fair value gains on Financial assets,available-for-sale (Note 10) - - 71,223 71,223

Fair value changes transferred to profit orloss on disposal during the financial year(Note 6(c)) - - (28,127) (28,127)

Tax on fair value changes (Note 21) - - (4,687) (4,687)Net gains recognised directly inLife Assurance Fund - - 38,409 38,409

Change in Life Assurance Fund- Due to assumption changes - (29,831) - (29,831)- Due to risk free rate changes - 1,328 - 1,328- Due to movement during the year 65,031 612,763 - 677,794Change in Life Assurance Fund 65,031 584,790 - 649,291Transfer from equity 46,683 - - 46,683Deferred tax expense (732) (32,439) - (33,171)Income tax expense (1,863) (5,775) - (7,638)At 31 December 2016 535,760 6,674,208 200,250 7,410,218

2015At 1 January 2015 341,213 5,745,892 388,058 6,475,163

Currency translation differences (17,626) (266,620) (22,061) (306,307)Fair value losses on Financial assets,available-for-sale (Note 10) - - (159,362) (159,362)


Tax on fair value changes (Note 21) - - 23,812 23,812Net gains recognised directly inLife Assurance Fund - - (201,296) (201,296)

Change in Life Assurance Fund- Due to assumption changes - 10,294 - 10,294- Due to risk free rate changes - (2,867) - (2,867)- Due to movement during the year 62,453 720,107 - 782,560Change in Life Assurance Fund 62,453 727,534 - 789,987Transfer from equity 51,339 - - 51,339Deferred tax expense (527) (23,806) - (24,333)Income tax expense (5,556) (8,346) - (13,902)At 31 December 2015 431,296 6,174,654 164,701 6,770,651



60

24. Life Assurance Fund (continued)


Included in the Life Assurance Fund are the unallocated surplus and fair valuereserves of $537,414,000 (2015: $437,315,000) of the non-participating andinvestment-linked funds that are attributable to shareholders.

During the current financial year, there was a transfer of $46,683,000 (2015:$51,339,000) from the retained earnings of the Shareholders’ Fund to the LifeAssurance Fund.

(b) The CompanyUnallocatedsurplus

Policyliabilities

Fair valuereserve Total

$’000 $’000 $’000 $’0002016At 1 January 2016 277,259 4,309,072 36,089 4,622,420

Fair value gains on Financial assets,available-for-sale (Note 10) - - 63,152 63,152


Tax on fair value changes (Note 21) - - (4,357) (4,357)Net gains recognised directly inLife Assurance Fund - - 34,994 34,994

Change in Life Assurance Fund- Due to assumption changes - (30,051) - (30,051)- Due to risk free rate changes - (1,247) - (1,247)- Due to movement during the year 37,465 556,465 - 593,930Change in Life Assurance Fund 37,465 525,167 - 562,632Transfer from equity 46,683 - - 46,683Deferred tax expense (527) (32,871) - (33,398)Income tax expense (617) (73) - (690)At 31 December 2016 360,263 4,801,295 71,083 5,232,641

2015At 1 January 2015 240,907 3,723,292 211,638 4,175,837

Fair value losses on Financial assets,available-for-sale (Note 10) - - (136,207) (136,207)


Tax on fair value changes (Note 21) - - 22,221 22,221Net gains recognised directly in LifeAssurance Fund - - (175,549) (175,549)

Change in Life Assurance Fund- Due to assumption changes - 7,941 - 7,941- Due to risk free rate changes - (2,490) - (2,490)- Due to movement during the year 34,169 604,993 - 639,162Change in Life Assurance Fund 34,169 610,444 - 644,613Transfer from equity 7,000 - - 7,000Deferred tax expense (260) (22,710) - (22,970)Income tax expense (4,557) (1,954) - (6,511)At 31 December 2015 277,259 4,309,072 36,089 4,622,420



61

24. Life Assurance Fund (continued)


Included in the Life Assurance Fund are the unallocated surplus and fair valuereserves of $359,479,000 (2015: $274,430,000) of the non-participating andinvestment-linked funds that are attributable to shareholders.

During the current financial year, there was a transfer of $46,683,000 (2015:$7,000,000) from the retained earnings of the Shareholders’ Fund to the LifeAssurance Fund.

In December 2016, the Monetary Authority of Singapore (“MAS”) allowed insurersto apply for exemption in making reference to the prescribed mortality tables whencomputing the statutory capital requirement. The Company was successful inapplying for the exemption. This resulted in a reduction in the provision for adversedeviation, which was set as half of the adjustment required for statutory capital. Theimpact is a $9m reduction in insurance contract liabilities.

25. Share capital


Issued share capitalNo. of ordinarystock units Amount’000 $’000

Beginning and end of financial year 36,000 36,000

All issued ordinary stock units (with no par value) are fully paid.



62

26. Related party transactions

(a) Other than disclosed elsewhere in the financial statements, the following significanttransactions took place between the Group, the Company and related parties duringthe financial year on terms agreed between the parties concerned:


2015$’000

2016$’000

2015$’000

Office rent paid to a fellow subsidiary 460 466 460 466Office rent received from a fellowsubsidiary 109 115 - -

Dividend paid to immediate holdingcompany 2,469 4,630 2,469 4,630

Insurance premium received from afellow subsidiary 264 273 152 162

Insurance premium paid to a fellowsubsidiary 215 208 53 41

Investment management fees paid to afellow subsidiary 5,122 4,621 5,122 4,621

Expenses incurred on behalf by fellowsubsidiaries 1,959 1,129 1,959 722

Expenses incurred on behalf of fellowsubsidiaries 29 123 29 29

Expenses incurred on behalf ofintermediate holding company 70 46 70 46

Staff secondment expense paid tointermediate holding company 220 205 220 205

Management fee received from a fellowsubsidiary 3 163 - 112

Reinsurance arrangement paid to afellow subsidiary 165 83 71 25

Guarantee fee paid to an intermediateholding company 175 54 175 54

(b) Key management personnel compensation

Key management personnel refers to directors of the Group and the Company.

Key management personnel compensation is analysed as follows:


2015$’000

2016$’000

2015$’000

Salaries and other short-termemployment benefits 795 738 795 738

Directors’ post-employment benefitsincluding contributions to CPF 13 12 13 12

Directors’ fees 514 308 379 238



63

27. Immediate holding company and ultimate holding corporation

The Company’s immediate holding company is Asia General Holdings Limited,incorporated in Singapore. The ultimate holding corporation is Tokio MarineHoldings, Inc incorporated in Japan.

28. Commitments

(a) Capital commitments

Capital expenditure contracted for at the balance sheet date but not recognised inthe financial statements is as follows:

The Group2016 2015$’000 $’000

Capital commitments 28,197 30,607

(b) Operating lease commitments - where the Group is the lessee

The future minimum lease payables under non-cancellable operating leasescontracted for at the balance sheet date but not recognised as liabilities, are asfollows:


2015$’000

2016$’000

2015$’000

Not later than one year 1,541 1,488 1,449 1,383Between one and five years 1,032 608 831 399

2,573 2,096 2,280 1,782

Included in operating lease commitments is the lease of the agency office. Rentalexpense on the lease of agency office amounting $738,000 (2015: $742,000) isrecorded under “Commission and agency expenses” on the statement ofcomprehensive income.

(c) Operating lease commitments - where the Group is the lessor

The future aggregate minimum lease receivables under non-cancellable operatingleases contracted for at the balance sheet date but not recognised as receivablesare as follows:


2015$’000

2016$’000

2015$’000

Not later than one year 2,711 3,232 612 509Between one and five years 1,268 1,888 789 368

3,979 5,120 1,401 877



64

29. Insurance and financial risk management

(A) Insurance risk

The risk under any one life insurance contract is the possibility that the insuredevent occurs and the uncertainty of the amount of the resulting claim. By the natureof an insurance contract, this risk is random and therefore unpredictable.

For a portfolio of insurance contracts where the theory of probability is applied topricing and provisioning, the principal risk that the Group faces under its insurancecontracts is that the actual claims and benefit payments exceed the carrying amountof the insurance liabilities. This could occur because the frequency or severity ofclaims and benefits will vary from year to year from the estimate. A more diversifiedportfolio is less likely to be affected across the board by a change in any subset ofthe portfolio.

Each life insurance company in Singapore is also required to conduct stress testingon the financial condition on an annual basis to assess its ability to withstandadverse deviations in various assumptions.

For Malaysia, a dynamic solvency testing is performed annually to monitor itssolvency position.

Factors that aggravate insurance risk include lack of risk diversification in terms oftype and amount of risk covered.

(a) Long-term insurance contracts (All insurance contracts other than Groupinsurance contracts)

(i) Frequency and severity of claims

For contracts where death or critical illness is the insured risk, themost significant factors that could increase the overall frequency ofclaims are epidemics (such as AIDS or SARS) or wide spreadchanges in lifestyle, such as eating, smoking and exercise habits,resulting in earlier or more claims than expected. For contractswhere survival is the insured risk, the most significant factor iscontinued improvement in medical science and social conditions thatwould increase longevity.

Undue concentration by amounts could have an impact on theseverity of benefit payments on a portfolio basis.



65

29. Insurance and financial risk management (continued)

(A) Insurance risk (continued)

(a) Long-term insurance contracts (All insurance contracts other than Groupinsurance contracts) (continued)

(i) Frequency and severity of claims (continued)

For non-participating contracts where the benefits are fullyguaranteed and future premiums are fixed, there are no mitigatingterms and conditions that reduce the insurance risk accepted. Forparticipating contracts, the participating nature of these contractsresults in a significant portion of the insurance risk being shared withthe policyholders. In addition, for Singapore contracts offering DreadDisease (after 1 July 2003) and stand-alone medical benefits, theGroup generally has the right to vary the non-guaranteed futurepremium rates if claim experience deteriorates in the future.

For investment-linked contracts, the Group charges for mortality andmorbidity risks on a monthly basis. It has the right to alter thesecharges based on its mortality and morbidity experience and henceminimise its exposure to these risks. Delays in implementingincreases in charges and market or regulatory restraints over theextent of the increases may reduce its mitigating effect.

The Group manages these risks through its underwriting strategy andreinsurance arrangements.

The Group has developed its underwriting strategy for acceptinginsurance risks, including selection and approval of risks to beinsured, use of limits, appropriate risk classification and premiumlevel.

For Singapore and Brunei, the Group has a retention limit of up to$1,300,000 on any single life insured who purchased individual lifeproducts, with a lower limit of $300,000 applicable to lives whopurchased only mass market (as opposed to High Net Worth)products. RGA International Reinsurance Company Ltd (SingaporeBranch) is the main incumbent reinsurer.



66





For Malaysia, the Group also manages the insurance risk by cedinginsurance amounts above retention of RM200,000 (approximately$64,500) per life to reinsurers through traditional reinsurancearrangements.

The tables below presents the concentration of insured benefitsacross three bands of insured benefits per individual life assured,separately for non-linked and investment-linked business. Thesetables do not include annuity contracts.

Singapore

Benefits assured ($’000) per life assured at the end of 2016

Total benefits insured ($’000)for Non-Linked Business (Singapore)

Before Reinsurance After Reinsurance (Estimated)

0 - 500 17,979,804 75.87% 13,803,995 87.36%500 - 1,000 2,756,383 11.63% 1,266,069 8.01%More than 1,000 2,962,678 12.50% 731,728 4.63%Total 23,698,865 100.00% 15,801,792 100.00%

Benefits assured (in terms of Sum at Risk, $’000) per life assured at the end of 2016

Total benefits insured (in terms of Sum at Risk, $’000)for Linked Business (Singapore)

Before Reinsurance After Reinsurance (Estimated)

0 - 100 141,001 47.48% 122,749 54.99%100 - 200 59,570 20.06% 46,109 20.66%More than 200 96,416 32.46% 54,350 24.35%Total 296,987 100.00% 223,208 100.00%



67





Malaysia

Benefits assured (RM’000) per life assured at the end of 2016

Total benefits insured (RM’000)for Non-Linked Business (Malaysia)

Before Reinsurance After Reinsurance (Estimated)Equivalent Equivalent

RM$’000 $’000 % RM$’000 $’000 %

0 - 500 51,037,495 16,454,488 86.19% 41,177,028 13,275,474 86.19%500 - 1,000 6,253,264 2,016,052 10.56% 5,045,131 1,626,550 10.56%More than 1,000 1,924,652 620,508 3.25% 1,552,809 500,625 3.25%Total 59,215,411 19,091,048 100.00% 47,774,968 15,402,649 100.00%

Benefits assured (RM’000) per life assured at the end of 2016

Total benefits insured (RM’000)for Linked Business (Malaysia)

Before Reinsurance After Reinsurance (Estimated)Equivalent Equivalent

RM$’000 $’000 % RM$’000 $’000

0 - 100 3,253,457 1,048,915 53.24% 2,624,888 846,264 53.24%100 - 200 1,189,486 383,490 19.47% 959,677 309,400 19.47%More than 200 1,667,635 537,646 27.29% 1,345,448 433,772 27.29%Total 6,110,578 1,970,051 100.00% 4,930,013 1,589,436 100.00%

The following table for annuity insurance contracts illustrates theconcentration of risk based on three bands that group these contractsin relation to the amount payable per annum as if the annuity were inpayment at the year end. The Group does not hold any reinsurancecontracts against the liabilities carried for these contracts.

Singapore

Annuity payable ($’000) per annum per life assured at the end of 2016

0 - 10 6,543 83.16%10 - 20 959 12.19%More than 20 366 4.65%Total 7,868 100.00%

Malaysia

There is no annuity business in force as at 31 December 2016.



68




(ii) Sources of uncertainty in the estimation of future benefit paymentsand premium receipts

Uncertainty in the estimation of future benefit payments andpremium receipts for long-term insurance contracts arises from theunpredictability of long-term changes in overall levels of mortality,morbidity and the variability in contract holder behaviour.

The Group performs regular experience analyses, includingmortality, morbidity, investment return, management expenses, andpolicy persistency. The objective is to compare the current bestestimate assumptions with actual experiences, to identify anyunexpected changes that would materially impact the Company’sfinancial position. The Group reviews and updates the assumptions(where the basis are not prescribed) used in the estimation of itsinsurance contract liabilities regularly to ensure its relevance andappropriateness.

In addition, on a yearly basis, the Group also carries out a bonusinvestigation to ascertain the sustainability of current bonus scales.

(b) Short-term life insurance contracts (Group Insurance Contracts)

(i) Frequency and severity of claims

These contracts are mainly issued to employers as part of theiremployee benefit plans. The risk of death and disability may beaffected by the nature of the industry in which the employer operates,in addition to other factors stated above. The Group manages theserisks through its underwriting strategy, adequate reinsurancearrangements and proactive claims handling.

The underwriting strategy attempts to ensure that the underwrittenrisks are well diversified in terms of type and amount of risk.

Underwriting limits are in place to enforce appropriate risk selectioncriteria. For example, the Group has the right not to renew individualpolices, it can impose deductibles and it has the right to reject thepayment of a fraudulent claim.



69



(b) Short-term life insurance contracts (Group Insurance Contracts) (continued)


In addition, an authority table and underwriting guidelines areestablished to ensure that business underwriting is conducted withappropriate authorisation in accordance to level of seniority in therespective Company.

The main reinsurance arrangement is a surplus reinsurance with aretention limit of $100,000 per life for Group Term Life, PersonalAccident and Critical Illness benefits. The Group Disability Incomebenefit is reinsured on a quota share arrangement. These aresupplemented by catastrophe excess of loss reinsurance cover.

Group Insurance business in Malaysia is insignificant.

(ii) Sources of uncertainty in the estimation of future claim payments

Uncertainty in the estimation of future claims payments for short-term life insurance contracts arises from the unpredictability ofmortality and morbidity experience for unexpired coverage as atvaluation date, and uncertainty over the timing and amount of latereporting of claims that have incurred as at valuation date.

The Group analyses each year the loss ratios in recent past in orderto refresh the assumption about claims experience of variousproduct lines.

(B) Group Risk Management Policies

The Group being a member of the Tokio Marine Group of Companies takesinto consideration the risk management philosophy and business strategyof Tokio Marine Group when managing the risk. The Group aims to assumeand manage risks that are consistent with maintaining its internal capitaltarget return and supporting its business objectives. The Group is selectivein its approach to risk taking, striking a balance between risk accepted andthe reward it can derive from accepting that risk.

The Boards of Directors are responsible for the overall establishment,supervision and review of all risk management processes in the Companyand Subsidiary. The Boards of Directors are assisted by the respectiveBoard-level and Management-level committees in the identification,evaluation and assessment of risks in the Company and Subsidiary.



70


(B) Group Risk Management Policies (continued)

The Company established a Board-level Risk Management Committee in2016 to assist the Board of Directors in carrying out the responsibility ofoverseeing the Company’s risk management framework and policies.

The Boards of Directors’ responsibilities associated with risk governanceinclude the following:

1. Approving the philosophy to risk management;2. Establishing risk appetite and limits;3. Approving Risk Management Policy and other associated policies;4. Ensuring that systems and controls are in place to manage risks

effectively within the Group according to approved policies;5. Reviewing risk information presented by the Group’s management;6. Setting a consistent tone-from-the-top on risk matters.

Risk Management within the Group is a combined effort from seniorexecutives, departments and committees, who are responsible for theimplementation of any controls, measures or policies put in place as part ofthe risk management process. The respective parties are also supported bythe Risk Management Department in monitoring and coordination of theGroup’s Risk Management practices.

The Group’s risks are categorised into broad categories to streamline therisk management processes and are not meant to be restrictive as to therisk identification and evaluation process.

The following are the 3 broad categories of risk faced by the Group:

1. Business Risk2. Operational Risk3. Financial Risk

Business risk arising from the Group’s business strategy, the environmentin which the Group operates, and its ability to provide suitable products andservices to customers often have a direct impact on business results shouldsuch risks occur and not be mitigated. There is also risk of loss or harm topolicyholders arising from undesirable market conduct practices such asfraud committed by the Group and/or its financial adviser representatives,and/or their inability or unwillingness to comply with the requisite market andbusiness conduct requirements. The Group has in place measures to controland optimise the Group’s exposure to business risk in pursuit of the Group’sbusiness objectives.



71


(B) Group Risk Management Policies (continued)

Operational risk may arise from inadequate or failed internal processes andcontrols, poor corporate governance or from external events such as suddendisasters crippling the operations of the Group. Such risks, although difficultto quantify, have the potential to impose significant costs upon, and possiblyseriously upset, the financial soundness and ongoing business of the Group.Business Continuity Risk is the risk of not being able to resume normalbusiness operation in view of disruption which includes civil, economic,natural disasters etc. Such risks may cause the Group to be unable tocontinue business as a going concern due to significant financial losses orthe destruction of lives and infrastructures arising from natural disasters.The Group has in place measures to control and minimise the Group’sexposure to operational risks.

Financial risk pertaining to market risk is kept under close monitoring by theInvestment Committee, which is elaborated in the next section.

To maintain financial soundness, the Group is using the statutory Risk-based Capital Requirement (“RBC”) as a proxy for capital adequacyassessment. RBC Framework ensures that a company holds the statutoryminimum amount of capital to appropriately support its overall businessoperations in consideration to its size and risk profile. The frameworkdetermines the amount of risk a company can take as it requires a companywith a higher amount of risk to hold a higher amount of capital. On riskconcentration, extra capital will be held in accordance to the InsuranceRegulations when concentration limits are exceeded.

(C) Investment Committees

The Company’s Investment Committee (now known as “Asset LiabilityManagement & Investment Committee”) is responsible for managing theCompany’s investment activities and has appointed Tokio Marine AssetManagement International Pte. Ltd. as the Investment Manager for the noninvestment-linked funds. The Subsidiary’s Investment Committee isresponsible for managing the subsidiary’s investment activities and theseare managed through an in-house investment team headed by the ChiefInvestment Officer. The respective Investment Committees are responsiblefor formulation of the Company’s and Subsidiary’s investment strategy,principles, policies and procedures for the investment function. TheInvestment Committees set the investment limits and procedures to managethe market and credit risks faced by the Company and Subsidiary.



72


(C) Investment Committees (continued)

The Company establishes suitable investment allocations and limits -Strategic Asset Allocation (“SAA”) for each asset class that are in line withthe Company’s broad investment strategy, subject to an overall risktolerance and requirements from shareholders, regulators andpolicyholders.

For the insurance funds, the setting of SAA pays due regard to asset-liabilitymanagement, which puts priority on ensuring the ability to pay all contractualpolicyholder benefits and expense obligations. The primary aim is togenerate relatively stable investment returns for the portfolio over the long-term.

The SAA are reviewed on an annual basis, recognising among other things,changes in business in-force and the economic environment, so as toensure that they remain appropriate and are consistent with the asset-liability management strategies required to support any new products.

The monitoring of market risks include the quantification of the Group’sexposure to interest rate, currency, equity price and credit risks.

The Group is exposed to market risk arising from its investment in debtsecurities, equities and properties. Changes in interest rates, foreignexchange rates, equity prices and credit will impact the financial positions ofthe Group as they affect the present and future earnings of the Group forthe life insurance operations and shareholders’ equity.

The Investment Committees are responsible and have oversight over theinvestment teams to manage market risk actively through the setting ofinvestment policies and strategic asset allocations. Investment limits are setand monitored at various levels to ensure that all investment activities arewithin the guidelines set by the Investment Committees.

The following is a brief description of the Group’s various exposures tomarket risk.

The liabilities assumptions used for Asset Liability Management (“ALM”)purpose are the same as those disclosed in Note 3(c) in Assumptions usedfor insurance contracts. Capital held as a consequence of a mismatchbetween assets and liabilities are in accordance with the Insurance(Valuation & Capital) Regulations 2004.



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(a) Interest rate risk

The Group is exposed to interest rate risk primarily through investments indebt instruments.

The Group manages the interest rate risk after taking into consideration theunderwriting and investment risks. The Company produces a quarterlyInvestment and ALM report for the Investment Committee to monitor theduration, convexity of its fixed income portfolio and projected policy cash-flow. The Investment Committee of the respective Company and Subsidiarywould receive quarterly updates on their exposure to interest rate as part ofthe fixed income review.

The tables below illustrate the interest rate exposure of the Group’s financial assetsand liabilities:

The GroupIn Singapore Dollar Fixed Rate Floating Rate

Non-InterestBearing Total

$’000 $’000 $’000 $’000As at 31 December 2016FINANCIAL ASSETSFinancial assets, held-to-maturity 296,865 - - 296,865Financial assets, available-for-sale 4,583,432 338,193 2,108,287 7,029,912Financial assets at fair value throughprofit or loss 59,498 - 194,332 253,830Derivative financial instruments - - 1,152 1,152Secured loans - - 475 475Policy loans 41,599 - 163,428 205,027Reinsurance assets - - 58,928 58,928Outstanding premium and agents’ balances - - 27,101 27,101Trade receivables - - 7,019 7,019Other assets - - 70,695 70,695Cash and cash equivalents 47,675 - 282,638 330,313

5,029,069 338,193 2,914,055 8,281,317

FINANCIAL LIABILITIESClaims admitted or intimated - - 203,559 203,559Trade payables - - 135,505 135,505Other payables - - 93,523 93,523Derivative financial instruments - - 74,932 74,932

- - 507,519 507,519



74



(a) Interest rate risk (continued)

The tables below illustrate the interest rate exposure of the Group’s financial assetsand liabilities: (continued)

The GroupIn Singapore Dollar Fixed Rate Floating Rate


$’000 $’000 $’000 $’000As at 31 December 2015FINANCIAL ASSETSFinancial assets, held-to-maturity 315,912 - - 315,912Financial assets, available-for-sale 3,764,423 366,051 1,911,733 6,042,207Financial assets at fair value throughprofit or loss 33,267 - 192,228 225,495Derivative financial instruments - - 911 911Secured loans - - 623 623Policy loans 37,582 - 167,175 204,757Reinsurance assets - - 56,348 56,348Outstanding premium and agents’ balances - - 21,933 21,933Trade receivables - - 2,677 2,677Other assets - - 64,772 64,772Cash and cash equivalents 241,551 - 299,249 540,800

4,392,735 366,051 2,717,649 7,476,435


- - 354,817 354,817

The tables below illustrate the interest rate exposure of the Company’s financialassets and liabilities:

The CompanyIn Singapore Dollar Fixed Rate Floating Rate


$’000 $’000 $’000 $’000As at 31 December 2016FINANCIAL ASSETSFinancial assets, available-for-sale 3,464,688 338,193 1,622,285 5,425,166Financial assets at fair value throughprofit or loss - - 46,973 46,973

Policy loans 41,599 - - 41,599Reinsurance assets - - 54,540 54,540Outstanding premium and agents’ balances - - 16,156 16,156Trade receivables - - 3,997 3,997Other assets - - 53,003 53,003Cash and cash equivalents 47,675 - 180,051 227,726

3,553,962 338,193 1,977,005 5,869,160


- - 305,388 305,388



75




The tables below illustrate the interest rate exposure of the Company’s financialassets and liabilities: (continued)

The CompanyIn Singapore Dollar Fixed Rate Floating Rate


$’000 $’000 $’000 $’000As at 31 December 2015FINANCIAL ASSETSFinancial assets, available-for-sale 2,698,076 366,051 1,435,602 4,499,729Financial assets at fair value throughprofit or loss - - 46,374 46,374

Policy loans 37,582 - - 37,582Reinsurance assets - - 53,264 53,264Outstanding premium and agents’ balances - - 13,057 13,057Trade receivables - - 1,782 1,782Other assets - - 40,141 40,141Cash and cash equivalents 241,551 - 190,620 432,171

2,977,209 366,051 1,780,840 5,124,100


- - 172,573 172,573

As the Group also invests in bonds, a study of movement in risk-free rate isundertaken for all the bonds held on the balance sheet date. For investment linkedfunds, the risk exposure for the Group is limited only to the underwriting aspect asinvestment risks are generally borne by the policyholders.

A study of a 1% yield movement across relevant curves has been undertaken onthe fixed income securities and this is considered to be a reasonable basis forinterest rate sensitivity analysis. The table below summarises the impact on profitafter tax, equity and Life Assurance Fund based on a 1% parallel shift in the yieldcurves:

Singapore OperationsImpact on

profit after tax Impact on equityImpact on

Life Assurance FundIn Singapore Dollar 2016 2015 2016 2015 2016 2015Change in variables $’000 $’000 $’000 $’000 $’000 $’000Interest rate+100bps - - (5,073) (3,134) (309,964) (194,516)-100bps - - 5,073 3,134 309,964 194,516



76




Malaysia OperationsImpact on

profit after tax Impact on equityImpact on

Life Assurance FundIn Singapore Dollar 2016 2015 2016 2015 2016 2015Change in variables $’000 $’000 $’000 $’000 $’000 $’000Interest rate+50bps (2015: +20bps) (21) (28) (737) (780) (33,279) (31,976)-50bps (2015: -20bps) 22 29 763 804 35,055 33,575

Note: Fixed income securities in this sensitivity analysis includes preference shares.

(b) Foreign currency risk

The Group is exposed to foreign exchange risk primarily from transactionsdenominated in foreign currencies pertaining to investment activities. TheInvestment Committees manage foreign currency risk by setting limits andmonitoring the exposure to foreign currency on a regular basis.

The Singapore Operations has less than 10% net foreign currency exposurefor all its overseas investment assets. Currency risk arising from fixedincome investments in foreign currency instruments is generally managedusing foreign currency forward contracts, which are relatively certain in theirtiming and extent.

The exposure to Singapore Dollar (SGD) for the Subsidiary, MalaysianRinggit (MYR) for the Company and other currencies for the Group at theGroup level relating to investment securities are not material.



77



(b) Foreign currency risk (continued)

The tables below show the foreign exchange position of the Group’s financial assetsand liabilities by major currencies:

The GroupIn Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000As at 31 December 2016FINANCIAL ASSETSFinancial assets, held-to-maturity - 296,865 - - 296,865Financial assets, available-for-sale 3,553,710 1,604,746 1,751,560 119,896 7,029,912Financial assets at fair value throughprofit or loss 46,973 111,757 - 95,100 253,830

Derivative financial instruments - 1,152 - - 1,152Secured loans - 475 - - 475Policy loans 38,025 163,428 16 3,558 205,027Reinsurance assets 31,988 4,388 22,552 - 58,928Outstanding premium and agents’balances 15,383 10,945 665 108 27,101

Trade receivables 3,061 3,022 936 - 7,019Other assets 52,732 17,692 - 271 70,695Cash and cash equivalents 172,606 102,763 29,084 25,860 330,313

3,914,478 2,317,233 1,804,813 244,793 8,281,317

FINANCIAL LIABILITIESClaims admitted or intimated 64,923 137,820 - 816 203,559Trade payables 57,297 47,205 30,881 122 135,505Other payables 76,300 17,104 - 119 93,523

198,520 202,129 30,881 1,057 432,587

Net financial assets 3,715,958 2,115,104 1,773,932 243,736 7,848,730Less: Foreign exchange contracts

(net) - - 1,442,032 - 1,442,032Less: Net financial assets

denominated in the respectiveentities’ functional currencies 3,715,958 2,114,928 - - 5,830,886

Currency exposure - 176 331,900 243,736 575,812



78




The tables below show the foreign exchange position of the Group’s financial assetsand liabilities by major currencies: (continued)

The GroupIn Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000As at 31 December 2015FINANCIAL ASSETSFinancial assets, held-to-maturity - 315,912 - - 315,912Financial assets, available-for-sale 3,376,984 1,539,527 1,114,456 11,240 6,042,207Financial assets at fair value throughprofit or loss 46,374 92,272 - 86,849 225,495

Derivative financial instruments - 911 - - 911Secured loans - 623 - - 623Policy loans 32,940 167,175 39 4,603 204,757Reinsurance assets 39,406 3,084 13,858 - 56,348Outstanding premium and agents’balances 12,074 8,876 860 123 21,933

Trade receivables 865 895 917 - 2,677Other assets 39,889 24,631 - 252 64,772Cash and cash equivalents 383,604 108,662 39,186 9,348 540,800

3,932,136 2,262,568 1,169,316 112,415 7,476,435

FINANCIAL LIABILITIESClaims admitted or intimated 48,362 120,683 - 649 169,694Trade payables 60,113 45,874 18,532 83 124,602Other payables 24,795 15,698 - 199 40,692

133,270 182,255 18,532 931 334,988

Net financial assets 3,798,866 2,080,313 1,150,784 111,484 7,141,447Less: Foreign exchange contracts

(net) - - 977,233 - 977,233Less: Net financial assets

denominated in therespective entities’ functionalcurrencies 3,795,915 2,080,291 - - 5,876,206

Currency exposure 2,951 22 173,551 111,484 288,008



79




The tables below show the foreign exchange position of the Company’s financialassets and liabilities by major currencies:

The CompanyIn Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000As at 31 December 2016FINANCIAL ASSETSFinancial assets, available-for-sale 3,553,710 - 1,751,560 119,896 5,425,166Financial assets at fair value throughprofit or loss 46,973 - - - 46,973

Policy loans 38,025 - 16 3,558 41,599Reinsurance assets 31,988 - 22,552 - 54,540Outstanding premium and agents’balances 15,383 - 665 108 16,156

Trade receivables 3,061 - 936 - 3,997Other assets 52,732 - - 271 53,003Cash and cash equivalents 172,606 176 29,084 25,860 227,726

3,914,478 176 1,804,813 149,693 5,869,160

FINANCIAL LIABILITIESClaims admitted or intimated 64,923 - - 815 65,738Trade payables 57,297 - 30,881 121 88,299Other payables 76,300 - - 119 76,419

198,520 - 30,881 1,055 230,456

Net financial assets 3,715,958 176 1,773,932 148,638 5,638,704Less: Foreign exchange contracts

(net) - - 1,442,032 - 1,442,032Less: Net financial assets

denominated in theCompany’s functionalcurrency 3,715,958 - - - 3,715,958




80




The tables below show the foreign exchange position of the Company’s financialassets and liabilities by major currencies: (continued)

The CompanyIn Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000As at 31 December 2015FINANCIAL ASSETSFinancial assets, available-for-sale 3,374,033 - 1,114,456 11,240 4,499,729Financial assets at fair value throughprofit or loss 46,374 - - - 46,374

Policy loans 32,940 - 39 4,603 37,582Reinsurance assets 39,406 - 13,858 - 53,264Outstanding premium and agents’balances 12,074 - 860 123 13,057

Trade receivables 865 - 917 - 1,782Other assets 39,889 - - 252 40,141Cash and cash equivalents 383,604 33 39,186 9,348 432,171

3,929,185 33 1,169,316 25,566 5,124,100

FINANCIAL LIABILITIESClaims admitted or intimated 48,362 - - 649 49,011Trade payables 60,113 11 18,532 83 78,739Other payables 24,795 - - 199 24,994

133,270 11 18,532 931 152,744

Net financial assets 3,795,915 22 1,150,784 24,635 4,971,356Less: Foreign exchange contracts

(net) - - 977,233 - 977,233Less: Net financial assets

denominated in theCompany’s functionalcurrency 3,795,915 - - - 3,795,915


(c) Equity risk

The Group is exposed to equity price risk primarily through its investmentsin quoted equity instruments. The Group is directly exposed to equity pricerisk for investments and bears all or most of the volatility in returns andinvestment performance. Equity price risk also exists in investment-linkedproducts but these risks are generally borne by the policyholders. Theimpact to the Group is that the revenues of the insurance operations(management fees) are linked to the value of the underlying investment-linked assets.



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(c) Equity risk (continued)

The Group has determined the target percentage of equity exposure to thetotal investment portfolio. These exposure limits approved by the InvestmentCommittees, are defined within SAA and includes the monitoring of limits tovarious countries and sectors in the equity market.

The table below summarises the Group’s and Company’s exposure to theequity securities across different markets.

The Group The Company2016%

2015%

2016%

2015%

MarketSingapore Exchange 39 50 54 71KLSE 22 24 - -Others including unlistedequities 39 26 46 29

Total 100 100 100 100

(i) Sensitivity analysis

The analysis below is performed for reasonable possible movementsin key variables with all other variables remaining constant. Inpractice, the estimated future change may not be accurateparticularly in periods of market turmoil. Actual results may differsubstantially from these estimates.

The Group invests primarily in the Singapore and Asian stockmarkets with a small exposure to developed Global stock marketsfor its Singapore operations and Malaysia and Asian stock marketsfor its Malaysia operations. In this analysis, the applicable shock isapplied to each market exposure. In addition, the Group makesadjustments or assumptions where it determines this to benecessary or appropriate.



82



(c) Equity risk (continued)

(i) Sensitivity analysis (continued)

The table below summarises the Group’s sensitivity analysis basedon investment holdings as of 31 December 2016. The parametersused are for illustration purpose only.

Singapore Operations

Impact onprofit after tax Impact on equity

Impact onLife Assurance Fund

In Singapore Dollar 2016 2015 2016 2015 2016 2015Change in variables $’000 $’000 $’000 $’000 $’000 $’000Equities+10% - - - 230 126,305 118,064-10% - - - (230) (126,305) (118,064)

Malaysia Operations

Impact onprofit after tax Impact on equity

Impact onLife Assurance Fund

In Singapore Dollar 2016 2015 2016 2015 2016 2015Change in variables $’000 $’000 $’000 $’000 $’000 $’000Equities+10% Change in KLSEIndex (2015: +10%) - - 113 57 58,933 56,636-10% Change in KLSEIndex (2015: -10%) - - (113) (57) (58,933) (56,636)

Note: The equity holdings in this sensitivity analysis exclude preference shares.



83



(d) Credit risk

The Group is exposed to credit risk through (i) investments in cash, moneymarket and debt instruments (ii) exposure to counterparty’s credit in groupand reinsurance contracts (iii) lending activities.

For all three types of exposures, financial loss may materialise as a resultof a default by the borrower or counterparty. For investments in cash, moneymarket and debt instruments, financial loss may also materialise as a resultof a default by the issuer on the coupon payment or the principal amount.Even without a default, losses may materialise due to a widening of creditspread or a downgrade of credit rating. The Group has internal limits byissuer or counterparty and restrict debt instruments to investment graderatings or equivalents (internal ratings for unrated bonds). These limits areactively monitored to manage the credit and concentration risk. These limitsare reviewed on a regular basis by the Investment Committees. For unratedissues, they were not voted as the issuer did not obtain any credit ratingfrom the respective rating agencies during the launch. Such issues althoughnot rated are issued by companies which have sound financial and highcredit worthiness. The credit worthiness for such bonds is evaluated andgiven an internal rating by the investment manager. They are thenmonitoredon an ongoing basis with a review annually at the minimum for any deviationespecially for a deterioration.

The creditworthiness of reinsurers is assessed on at least a quarterly basisby reviewing their financial strength through published credit ratings andother publicly available financial information.

The Group manages its lending activities by extending loans againstcollateral pledged to the Group. Regular monitoring and review of thepayments of loans are performed by the Group to identify any non-performing loan. Any non-performing loan identified is communicated to themanagement. Based on the decisions made by the management on thepossible course of recovery and provision of these loans, appropriate actionis taken.



84



(d) Credit risk (continued)

The table below shows the maximum exposure to credit risk for thecomponents of the balance sheet. The table also provides informationregarding the credit risk exposure of the Group by classifying assetsaccording to the Group’s credit ratings of counterparties.

The tables below show the credit ratings of financial assets held by the Group:

Neither past-due nor impairedPast dueor impaired Total

InvestmentGrade*

(AAA+ to A-)

InvestmentGrade*(BBB+ toBBB-)

Non-InvestmentGrade*

(BB+ to C) Not Rated Not RatedThe Group $’000 $’000 $’000 $’000 $’000 $’000In Singapore DollarAs at 31 December 2016HTM1 - Government and publicauthority securities

- - - 224,266 - 224,266

HTM - Unquoted debentures incorporations

72,599 - - - - 72,599

AFS2 - Quoted government and publicauthority securities

940,901 187,056 - 338,861 - 1,466,818

AFS - Quoted debentures 2,190,680 803,529 - 460,598 - 3,454,807AFS - Equities: - - - 1,875,002 233,285 2,108,287FVTPL3 - Unquoted debentures 37,360 - - 22,138 - 59,498FVTPL - Equities - - - 194,332 - 194,332Derivative financial instruments - - - 519 633 1,152Secured loans - - - 475 - 475Policy loans - - - 205,027 - 205,027Reinsurance assets - - - 58,928 - 58,928Trade receivables - - - 3,022 3,997 7,019Outstanding premium and agents’balances

- - - - 27,101 27,101

Other assets - - - 70,695 - 70,695Cash and cash equivalents 294,338 35,974 - 1 - 330,313

3,535,878 1,026,559 - 3,453,864 265,016 8,281,317

1 “HTM” refers to financial assets, held-to-maturity2 “AFS” refers to financial assets, available-for-sale3 “FVTPL” refers to financial assets at fair value through profit or loss



85




The tables below show the credit ratings of financial assets held by the Group:(continued)


InvestmentGrade*

(AAA+ to A-)



(BB+ to C) Not Rated Not RatedThe Group $’000 $’000 $’000 $’000 $’000 $’000In Singapore DollarAs at 31 December 2015HTM4 - Government and publicauthority securities 3,292 - - 233,376 - 236,668

HTM - Unquoted debentures incorporations 79,244 - - - - 79,244

AFS5 - Quoted government and publicauthority securities 564,502 117,975 - 552,956 - 1,235,433

AFS - Quoted debentures 1,675,496 745,004 - 474,542 - 2,895,042AFS - Equities: - - - 1,648,846 262,886 1,911,732FVTPL6 - Unquoted debentures 33,267 - - - - 33,267FVTPL - Equities - - - 192,228 - 192,228Derivative financial instruments - - - 911 - 911Secured loans - - - 623 - 623Policy loans - - - 204,757 - 204,757Reinsurance assets - - - 56,348 - 56,348Trade receivables - - - 895 1,782 2,677Outstanding premium and agents’balances - - - - 21,933 21,933

Other assets - - - 64,772 - 64,772Cash and cash equivalents 249,136 182,699 - 108,965 - 540,800

2,604,937 1,045,678 - 3,539,219 286,601 7,476,435

4 “HTM” refers to financial assets, held-to-maturity5 “AFS” refers to financial assets, available-for-sale6 “FVTPL” refers to financial assets at fair value through profit or loss



86




The tables below show the credit ratings of financial assets held by the Company:


InvestmentGrade*

(AAA+ to A-)



(BB+ to C) Not RatedNotRated

The Company $’000 $’000 $’000 $’000 $’000 $’000In Singapore DollarAs at 31 December 2016AFS8 - Quoted government and publicauthority securities 931,202 187,056 - - - 1,118,258

AFS8 - Quoted debentures 1,436,616 803,529 - 444,477 - 2,684,622AFS8 - Equities - - - 1,477,307 144,979 1,622,286FVTPL9 - Equities - - - 46,973 - 46,973Policy loans - - - 41,599 - 41,599Reinsurance assets - - - 54,540 - 54,540Trade receivables - - - - 3,997 3,997Outstanding premium and agents’balances - - - - 16,156 16,156


2,559,569 1,026,559 - 2,117,900 165,132 5,869,160

As at 31 December 2015AFS8 - Quoted government and publicauthority securities 554,529 117,975 - 250,469 - 922,973

AFS8 - Quoted debentures 938,123 745,004 - 458,027 - 2,141,154AFS8 - Equities - - - 1,250,230 185,372 1,435,602FVTPL9 - Equities - - - 46,374 - 46,374Policy loans - - - 37,582 - 37,582Reinsurance assets - - - 53,264 - 53,264Trade receivables - - - - 1,782 1,782Outstanding premium and agents’balances - - - - 13,057 13,057


1,741,788 1,045,678 - 2,136,423 200,211 5,124,100

_______________________8 “AFS” refers to financial assets, available-for-sale9 “FVTPL” refers to financial assets at fair value through profit or loss



87




The financial assets, available-for-sale, which are not rated comprise mainlybonds issued by statutory authorities or companies listed on the SingaporeStock Exchange or the Kuala Lumpur Stock Exchange. The issues were notrated as the issuer did not obtain any credit rating from the respective ratingagencies during the launch. Such issues although not rated are issued bycompanies which have sound financial and high credit worthiness. Thecredit worthiness for such bonds is monitored by the investment manageron a regular basis and reviewed annually at the minimum.

The Group’s business portfolio includes mortgage loans as well as otherunsecured loans to staff or advisers. Mortgage loans are generally securedby collateral. The amount of loan is based on the valuation of the collateralas well as an assessment of the credit risk of the counterparty. Guidelinesare implemented regarding the acceptability of the types of collateral andthe valuation parameters. The fair value of collaterals, held by the Group aslender, for which it is entitled to sell or pledge in the event of default is asfollows:

The tables below show the status of loans given by the Group and theCompany:

Financial assets of the Group (including AFS - unquoted debentures,outstanding premium and agents’ balances, loan secured by properties andtrade receivables) are neither past due nor impaired except for $31,099,000(2015: $23,715,000) which are past due but not impaired; and $1,486,000(2015: $1,620,000) which are past due and impaired.

Type ofcollaterals

Carryingamountof loans

Fair value ofcollaterals

The Group and the Company $’000 $’000As at 31 December 2016Loan secured by properties Properties 351 1,895Secured loans Computers 124 -

475 1,895

As at 31 December 2015Loan secured by properties Properties 412 991Secured loans Computers 211 -

623 991



88




Financial assets of the Company (including AFS - unquoted debentures,outstanding premium and agents’ balances, loan secured by properties andtrade receivables) are neither past due nor impaired except for $20,153,000(2015: $14,839,000) which are past due but not impaired; and $450,000(2015: $311,000) which are past due and impaired.

In respect of those financial assets which are past due but not impaired,there was no objective evidence that the amount due cannot be collected.The objective evidence includes significant financial difficulties of thecounterparty and the probability that the counterparty will enter bankruptcy.

(e) Alternative investment risk

The Group is exposed to alternative investment risk through investments indirect real estate investments in Singapore and Malaysia, but the exposureis minimal.

(f) Fair value measurements

The following table presents the assets and liabilities measured at fair valueand classified by level of the following fair value measurement hierarchy:

(a) Quoted prices (unadjusted) in active markets for identical assets orliabilities (Level 1);

(b) Inputs other than quoted prices included within Level 1 that areobservable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices) (Level 2); and

(c) Inputs for the asset or liability that are not based on observable marketdata (unobservable inputs) (Level 3).

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

The GroupAs at 31 December 2016Financial assets, available-for-sale 2,256,647 4,770,602 2,663 7,029,912Financial assets at fair value though profit or loss 41,982 211,848 - 253,830Financial assets held-to-maturity - 296,865 - 296,865Derivatives financial instruments 1,152 - - 1,152Total assets 2,299,781 5,279,315 2,663 7,581,759

Derivative financial instruments - 74,932 - 74,932Total liabilities - 74,932 - 74,932



89



(f) Fair value measurements (continued)

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

The Group (continued)As at 31 December 2015Financial assets, available-for-sale 1,838,636 4,200,824 2,747 6,042,207Financial assets at fair value though profit or loss 49,541 175,954 - 225,495Financial assets held-to-maturity - 315,912 - 315,912Derivatives financial instruments 911 - - 911Total assets 1,889,088 4,692,690 2,747 6,584,525


The CompanyAs at 31 December 2016Financial assets, available-for-sale 1,796,936 3,628,230 - 5,425,166Financial assets at fair value though profit or loss - 46,973 - 46,973Total assets 1,796,936 3,675,203 - 5,472,139


As at 31 December 2015Financial assets, available-for-sale 1,388,640 3,111,069 20 4,499,729Financial assets at fair value though profit or loss - 46,374 - 46,374Total assets 1,388,640 3,157,443 20 4,546,103


The fair value of financial instruments traded in active markets (such as trading andavailable-for-sale securities) is based on quoted market prices at the balance sheetdate. The quoted market price used for financial assets held by the Group is the lastcurrent bid prices. These instruments are included in Level 1.

The fair value of financial instruments that are not traded in an active market (forexample, over-the-counter derivatives) is determined by using valuationtechniques. The Group uses a variety of methods and makes assumptions that arebased on market conditions existing at each balance sheet date. Quoted marketprices or dealer quotes for similar instruments are used to estimate fair value forlong-term debt for disclosure purposes. Other techniques, such as estimateddiscounted cash flows, are used to determine fair value for the remaining financialinstruments. The fair value of forward foreign exchange contracts is determinedusing quoted forward exchange rates at the balance sheet date. These investmentsare included in Level 2 and comprise debt investments and derivative financialinstruments. In infrequent circumstances, where a valuation technique for theseinstruments is based on significant unobservable inputs, such instruments areincluded in Level 3.



90



(f) Fair value measurements (continued)

The following table presents the changes in Level 3 instruments:


2015$’000

2016$’000

2015$’000

Balance at beginning of financial year 2,747 2,824 20 19Currency translation differences (64) (361) - -Purchases - - - -Disposals - - - -Fair value gains/(losses) recognised in:- other comprehensive income (20) 284 (20) 1- profit or loss - - - -Balance at end of financial year 2,663 2,747 - 20

Total losses for the period included inprofit or loss for assets and liabilitiesheld at the end of financial year - - - -

During the financial years ended 31 December 2016 and 2015, there is no transferof investments between Level 1 and 2 and in and out of Level 3 of the fair valuehierarchy.

The carrying amount less impairment provision of trade receivables and payablesare assumed to approximate their fair values. The fair value of financial liabilities fordisclosure purposes is estimated based on quoted market prices for dealer quotesfor similar instruments by discounting the future contractual cash flows at the currentmarket interest rate that is available to the Group for similar financial instruments.



91



(g) Offsetting financial assets and financial liabilities

The Group and the Company has the following financial instruments subject toenforceable master netting arrangements or similar agreement as follows:

Derivativefinancial liabilities2016$’000

2015$’000


Gross amount 74,938 20,722Less: Gross amount set off in balance sheet (6) (893)Net amount presented in balance sheet 74,932 19,829

Net exposure 74,932 19,829

(h) Investment in funds

The funds invested in by the Group may utilise a variety of financialinstruments in their trading strategies, including equity and debtsecurities as well as an array of derivative instruments. Several ofthese financial instruments contain varying degrees of off-balancesheet risk whereby changes in market values of the securitiesunderlying the financial instruments may be in excess of the amountsrecorded on each portfolio fund’s statement of financial position.However, as the Group has limited interests in these funds, theGroup’s risk with respect to such transactions is limited to its capitalbalance in each fund.

The Group’s holding in a fund, as a percentage of the fund’s total netasset value, may vary from time to time depending on the volume ofsubscriptions and redemptions at the fund level. It is possible that theGroup may, at any point in time, hold a majority of a fund’s total unitsin issue.

The Group’s maximum exposure to loss from its interests in fund isequal to the total fair value of its investments in the funds. Once theGroup has disposed of its shares/units in a portfolio fund, the Groupceases to be exposed to any risk from that fund.



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(h) Investment in funds (continued)

The following table summarise the Group’s holdings in funds by riskof concentration with respect to geographic region and investmentstrategy of the funds:

% of theinvestmentin funds

MarketValue(S$’000)

The Group31 December 2016

Investment strategyLong only 100% 560,445

GeographySingapore 0.7% 3,818Malaysia 7.3% 41,112Asia (excluding Singapore and Malaysia) 88.7% 497,085Others 3.3% 18,430

100.0% 560,445

31 December 2015


GeographySingapore 0.6% 2,893Malaysia 7.6% 39,911Asia (excluding Singapore and Malaysia) 88.0% 461,336Others 3.8% 20,068

100.0% 524,208



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(h) Investment in funds (continued)

The following table summarise the Company’s holdings in funds byrisk of concentration with respect to geographic region and investmentstrategy of the funds:

% of theinvestmentin funds

MarketValue(S$’000)

The Company31 December 2016


GeographySingapore 0.9% 3,818Asia (excluding Singapore) 95.0% 395,303Others 4.1% 16,913

100.0% 416,034

31 December 2015


GeographySingapore 0.7% 2,893Malaysia 94.4% 367,871Asia (excluding Singapore) 4.9% 18,969Others 100.0% 389,733

30. Capital management

The Group’s capital management objective is to hold sufficient capital in order to

Ensure obligations to policyholders are met with a high degree of certainty.Provide capacity to take risk and generate a reasonable return on capital forshareholders.Fulfil expectations of regulators about the Company’s capital adequacy.



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30. Capital management (continued)

The Group currently uses capital requirements under the respective regulatoryregimes it operates in as a proxy for capital adequacy assessment. Each regimeprescribes a minimum amount of capital that must be held to fulfil statutory solvencyrequirements in each country that it operates in and must be met at all timesthroughout the year. As part of the statutory requirements, the Company and itsMalaysian subsidiary report their capital position quarterly. Internally, the Groupalso sets its own minimum capital position with consideration for the aboveobjectives.

In Singapore, under the Risk-based Capital Framework regulated by the MonetaryAuthority of Singapore (MAS), the minimum capital adequacy ratio is 120%. As at31 December 2016, the capital adequacy ratio is 237% (2015: 222%), which is theratio of available capital of $1,990 million (2015: $1,811 million) to the total riskrequirement of $838 million (2015: $817 million). The current internal target isminimum capital adequacy ratio of 200% under normal circumstances.

In Malaysia, under the Risk-based Capital Framework regulated by the BankNegara Malaysia (BNM), the minimum requirement for each insurance entity is130%. As at 31 December 2016, the capital adequacy ratio is 267% (2015: 275%),which is the ratio of available capital of $791 million (2015: $802 million) to the totalrisk requirement of $296 million (2015: $291 million). The current internal target iscapital adequacy ratio of 185%.

Liquidity Risks

Liquidity risk arises when a company is unable to meet its obligations on a timelybasis; especially so when the investment portfolio is largely made up of illiquidassets. Under normal circumstances, the liquidity demands of an insurancecompany are often determined through ongoing operations, continuous premiumincome, sale of disposable assets and borrowings. For insurers, the expectedliquidity needs are often determined through projection of outflows from the in-forceinsurance policy contract liabilities; the liabilities include renewal commissions,claims and other benefits (maturity and surrender). While the nature of theseoutflows is deemed to be largely stable and can be assumed at outset, the Groupremains susceptible to exceptional experiences (surrender or catastrophic events)for its insurance portfolio. Also, companies may be subject to unexpected liquiditytightening due to adverse implications from the wider economic factors (domesticor global) or undue volatilities and unexpected losses experienced withininvestments.

Liquidity risk is reduced by having insurance contract liabilities that are welldiversified by product and policyholder. The Group designs insurance products toencourage policyholders to maintain their policies in-force, thereby generating adiversified and stable flow of recurring premium income.



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Liquidity Risks (continued)

The Group adopts prudent liquidity risk management by monitoring daily operatingliquidity and cash movements to ensure liquidity is available and cash is employedoptimally. The Group has cash and cash equivalents of $330 million (2015: $541million) to meet its liquidity requirements.

The following table shows the contractual maturity profile of the Group’s financialliabilities. As all the financial liabilities are current, the carrying value approximatesthe undiscounted cash flows.

The GroupIn Singapore Dollar (millions) 2016 <1 Year 1- 5 years > 5 years

Claims admitted or intimated 204 - -Trade payables 136 - -Other payables 47 - 47

In Singapore Dollars (millions) 2015

Claims admitted or intimated 170 - -Trade payables 125 - -Other payables 41 - -

The CompanyIn Singapore Dollar (millions) 2016 <1 Year 1- 5 years > 5 years

Claims admitted or intimated 66 - -Trade payables 88 - -Other payables 29 - 47

In Singapore Dollars (millions) 2015

Claims admitted or intimated 49 - -Trade payables 79 - -Other payables 25 - -



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Liquidity Risks (continued)

The following table shows the expected contractual maturity profile of the Group’sinsurance contract liabilities. All insurance contract liabilities values areapproximates of the undiscounted cash flows and are net of reinsurance assets.

In Singapore Dollars (millions) 2016 <1 Year 1- 5 years > 5 yearsInsurance contract liabilities 100 (103) (29,624)

In Singapore Dollars (millions) 2015 <1 Year 1- 5 years > 5 yearsInsurance contract liabilities 177 (109) (27,526)

Demands for funds can usually be met through ongoing normal operations,premiums received, sale of assets or borrowings. Unexpected demands for liquiditymay be triggered by negative publicity, deterioration of the economy, reports ofproblems in other companies in the same or similar lines of business, unanticipatedpolicy claims, or other unexpected cash demands from policyholders. Expectedliquidity demands are managed through a combination of treasury, investment andasset-liability management practices, which are monitored on an ongoing basis.Actual and projected cash inflows and outflows are monitored and a reasonableamount of assets are kept in liquid instruments at all times. The projected cash flowsfrom the in-force insurance policy contract liabilities consist of renewal premiums,commissions, claims, maturities and surrenders. Renewal premiums, commissions,claims and maturities are generally stable and predictable. Surrenders can be moreuncertain although it has been quite stable over the past several years. Unexpectedliquidity demands are managed through a combination of product design,diversification limits, investment strategies and systematic monitoring. Theexistence of surrender penalty in insurance contracts also protects the Group fromlosses due to unexpected surrender trends as well as reduces the sensitivity ofsurrenders to changes in interest rates.

31. Net fair values of financial assets and liabilities

The financial assets and the financial liabilities of the Group and the Companycomprise current assets (except tax recoverable and prepayments), loans, financialassets at fair value through profit or loss, financial assets available-for-sale,financial assets held-to-maturity, derivative financial instruments, current liabilities(except current tax liabilities), staff retirement benefits and agents’ retirementbenefits. The fair values of these financial assets and liabilities (except held-to-maturity financial assets) at 31 December 2016 approximate their carrying amountsas shown in the balance sheet. The fair values of held-to-maturity financial assetsare disclosed in Note 12.



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32. DividendsThe Group

and the Company2016$’000

2015$’000

Ordinary dividends paidFinal dividend paid in respect of the previous financial yearof $0.08 (2015: $0.15) per share 2,880 5,400

At the next Annual General Meeting, a final dividend of $0.08 per ordinary stockamounting to $2,880,000 will be recommended. These financial statements do notreflect this dividend, which will be accounted for in shareholders’ equity as anappropriation of retained profits in the financial year ending 31 December 2017.

33. New or revised accounting standards and interpretations

Below are the mandatory standards, amendments and interpretations to existingstandards that have been published and are relevant for the Group’s accountingperiods beginning on or after 1 January 2017 and which the Group has not earlyadopted:

FRS 109 Financial instruments (effective for annual periods beginning on orafter 1 January 2018)

FRS 109 introduces new requirements for classification and measurement offinancial assets, impairment of financial assets and hedge accounting.Financial assets are classified according to their contractual cash flowcharacteristics and the business model under which they are held. Theimpairment requirements in FRS 109 are based on an expected credit lossmodel and replace the FRS 39 incurred loss model. Adopting the expectedcredit losses requirements will require the Company to make changes to itscurrent systems and processes. FRS 109 is effective for annual periodsbeginning on or after 1 January 2018 with early application permitted.Retrospective application is required, but comparative information is notcompulsory.

IASB published (on 12 September 2016) an amendment to IFRS 4, “InsuranceContracts” (Applying IFRS 9 “Financial Instruments” with IFRS 4 “InsuranceContracts” (Amendments to IFRS 4)). The amendment addresses the concernsthat have been expressed about the different effective dates of IFRS 9 (annualperiods beginning on or after 1 January 2018) and the forth coming newinsurance contract standard (not likely to be before 2021). These standards areexpected to be relevant to the Company as the ASC will be introducing a newSingapore financial reporting framework that is identical to the InternationalFinancial Reporting Standards (IFRS) on 1 January 2018. The new frameworkis referred to as “IFRS - identical Financial Reporting Standards”. An entity thatcomplies with IFRS - identical Financial Reporting Standards will simultaneouslycomply with IFRS.



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33. New or revised accounting standards and interpretations (continued)

FRS 109 Financial instruments (effective for annual periods beginning on orafter 1 January 2018) (continued)

These measures include a temporary option for companies that predominantlyissue insurance contracts to defer IFRS 9 until earlier of the effective date of theforthcoming insurance contracts standard and the annual reporting periodsbeginning on or after 1 January 2021, as well as an approach that allows anentity to remove from profit or loss the effects of certain accounting mismatchesthat may occur before the forthcoming insurance contract standard is applied.

FRS 116 Leases (effective for annual periods beginning on or after 1 January2019)

FRS 116 will result in almost all leases being recognised on the balance sheet,as the distinction between operating and finance leases is removed. Under thenew standard, an asset (the right to use the leased item) and a financial liabilityto pay rentals are recognised. The only exceptions are short-term and low-valueleases. The accounting for lessors will not change significantly.

The standard will affect primarily the accounting for the Group’s operatingleases. As at the reporting date, the Group has non-cancellable operating leasecommitments of $2,573,000 (Note 28(b)). However, the Group has yet todetermine to what extent these commitments will result in the recognition of anasset and a liability for future payments and how this will affect the Group’s profitand classification of cash flows.

Some of the commitments may be covered by the exception for short-term andlow-value leases and some commitments may relate to arrangements that willnot qualify as leases under FRS 116.

34. Authorisation of financial statements

These financial statements were authorised for issue in accordance with a resolutionof the Board of Directors of Tokio Marine Life Insurance Singapore Ltd. on 27 March2017.

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