PROGRESSIVE INSURANCE BHD (Incorporated in … · (Incorporated in Malaysia) CORPORATE INFORMATION...

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PROGRESSIVE INSURANCE BHD(Incorporated in Malaysia)

CORPORATE INFORMATION

DIRECTORS

Datuk Datu Harun bin Datu Mansor, JP (Chairman)Datuk Lim Siong EngHaji Onn bin AbdullahFrancis Lai @ Lai Vun SenSiau Wui KeeLim Fung HaPetrus Gimbad

SECRETARY

Kan Poh Yee

REGISTERED OFFICE

7th Floor,Wisma Perkasa, Jalan Gaya88845 Kota KinabaluSabah

PRINCIPAL PLACE OF BUSINESS

6th, 9th and 10th FloorsPlaza BerjayaNo. 12, Jalan Imbi55100 Kuala Lumpur

DOMICILE : MALAYSIA

AUDITORS

Messrs Ernst & YoungChartered AccountantsLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar Damanlela50490 Kuala Lumpur

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CONTENTS PAGE

Directors' Report 1 - 11

Statement by Directors 12

Statutory Declaration 13

Independent Auditors' Report 14 - 15

Statements of Financial Position 16 - 17

Income Statements 18 - 19

Statements of Comprehensive Income 20

Statements of Changes in Equity 21 - 22

Statements of Cash Flows 23 - 26

Notes to the Financial Statements 27 - 119

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DIRECTORS' REPORT

PRINCIPAL ACTIVITY

FINANCIAL RESULTS

Group CompanyRM RM

Net profit for the year 16,620,274 17,989,844

Attributable to :Equity holder of the Company 16,566,092Non controlling interest 54,182

16,620,274

RESERVES AND PROVISIONS

The Directors have pleasure in presenting their report together with the audited financialstatements of the Group and of the Company for the financial year ended 31 December 2013.

The principal activity of the Group and of the Company is the underwriting of all classes ofgeneral insurance business.

The results of the operations of the Group and of the Company for the year ended 31 December2013 are as follows:

There were no material transfers to or from reserves or provisions during the financial yearother than those disclosed in the financial statements.

There has been no significant change in the nature of these activities during the financial year.

The principal activities of the wholesale unit trust funds are as disclosed in Note 4(c) to thefinancial statements.

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DIVIDENDS

CompanyRM

In respect of financial year ended 31 December 2012 as reported in theDirector's report of that year:

5,718,750declared and paid on 23 May 2013.

INSURANCE LIABILITIES

IMPAIRED DEBTS

Final dividend of 7.60% less 25% taxation on 100,000,000 ordinary

Before the income statements, statements of comprehensive income and statements of financialposition of the Group and of the Company were made out, the Directors took reasonable steps toascertain that action had been taken in relation to the writing off of impaired debts and the makingof impairment allowance for impaired debts and satisfied themselves that all known impaireddebts had been written off and that adequate allowance had been made for impaired debts.

At the date of this report, the Directors of the Group and of the Company are not aware of anycircumstances which would render the amount written off for impaired debts or the amount of theimpairment allowance for impaired debts in the financial statements of the Group and of theCompany inadequate to any substantial extent.

Before the income statement, statements of comprehensive income and statements of financialposition of the Group and of the Company were made out, the Directors took reasonable steps toascertain that there was adequate provision for its insurance liabilities in accordance with thevaluation methods prescribed in the Risk Based Capital (RBC) Framework for Insurers by BankNegara Malaysia (BNM).

At this forthcoming Annual General Meeting, a final single-tier dividend in respect of the financialyear ended 31 December 2013 of 7.7% on 100,000,000 ordinary shares amounting to a totaldividend payable of RM7,714,102 (7.7 sen per ordinary share) will be proposed for shareholders'approval. This dividend, if approved by the shareholders, will be accounted for in shareholders'equity as an appropriation of retained earnings in the financial year ending 31 December 2014.

The amount of dividend declared and paid by the Company since the end of previous financialyear is as follows:

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CURRENT ASSETS

VALUATION METHODS

CONTINGENT LIABILITIES

At the date of this report, there does not exist:

(a)

(b)

CHANGE OF CIRCUMSTANCES

any contingent liability of the Group and of the Company which has arisen since the end ofthe financial year.

At the date of this report, the Directors are not aware of any circumstances which have arisenwhich render adherence to the existing methods of valuation of assets or liabilities of the Groupand of the Company misleading or inappropriate.

any charge on the assets of the Group and of the Company which has arisen since the end ofthe financial year which secures the liabilities of any other person; or

In the opinion of the Directors, no contingent or other liability has become enforceable or is likelyto become enforceable within the period of twelve months after the end of the financial year whichwill or may affect the ability of the Group and of the Company to meet their obligations as andwhen they fall due.

For the purpose of this paragraph, contingent or other liabilities do not include liabilities arisingfrom contracts of insurance underwritten in the ordinary course of business of the Group and of theCompany.

At the date of this report, the Directors are not aware of any circumstances, not otherwise dealtwith in this report or financial statements of the Group and of the Company which would renderany amount stated in the financial statements misleading or inappropriate.

At the date of this report, the Directors are not aware of any circumstances which would render thevalues attributed to current assets in the financial statements of the Group and of the Companymisleading.

Before the income statements, statements of comprehensive income and statements of financialposition of the Group and of the Company were made out, the Directors took reasonable steps toascertain that any current assets which were unlikely to realise their value as shown in theaccounting records in the ordinary course of business had been written down to their recoverableamount.

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ITEMS OF AN UNUSUAL NATURE

ISSUE OF SHARES

DIRECTORS AND THEIR INTERESTS IN SHARES

Datuk Datu Harun bin Datu Mansor, JPDatuk Lim Siong EngHaji Onn bin AbdullahFrancis Lai @ Lai Vun SenSiau Wui KeeLim Fung HaPetrus Gimbad

In accordance with Article 76 of the Company's Articles of Association, Datuk Lim Siong Eng andSiau Wui Kee retire at the forthcoming Annual General Meeting, and being eligible, offerthemselves for re-election.

Directors who served since the date of the last report and at the date of this report are:

Since the end of the previous financial year, no Director has received or become entitled to receiveany benefits (other than benefits included in the aggregate amount of emoluments and feesreceived or due and receivable by the Directors or the fixed salary of a full-time employee of theCompany as shown in Note 19 to the financial statements) by reason of a contract made by theCompany or a related company with a Director or with a firm of which the Director is a member,or with a company in which the Director has a substantial financial interest.

There were no changes in the authorised, issued and paid-up capital of the Group and of theCompany during the financial year.

In the opinion of the Directors, no item, transaction or event of a material and unusual nature hasarisen in the interval between the end of the financial year and the date of this report which islikely to affect substantially the results of the operations of the Group and of the Company for thefinancial year in which this report is made.

In the opinion of the Directors, the results of the operations of the Group and of the Companyduring the financial year were not substantially affected by any item, transaction or event of amaterial and unusual nature, other than the share of loss from Malaysian Motor Insurance Pool("MMIP") of RM9.5 million based on the unaudited results of MMIP for the year ended 31December 2013.

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DIRECTORS AND THEIR INTERESTS IN SHARES

CORPORATE GOVERNANCE

BOARD RESPONSIBILITY AND OVERSIGHT

Board Meetings

No. of Board AttendanceDirector Meetings Attended at AGM

Datuk Datu Harun bin Datu Mansor, JP 6 YesDatuk Lim Siong Eng 6 YesHaji Onn bin Abdullah 6 YesFrancis Lai @ Lai Vun Sen 6 YesSiau Wui Kee 6 YesLim Fung Ha 6 YesPetrus Gimbad 6 Yes

The Board of Directors fully appreciate the importance and is committed to the principles of goodcorporate governance and is responsible to ensure that the highest standards of corporategovernance are observed and that the affairs of the Group and of the Company are conducted withprofessionalism and with the objective of safeguarding policyholders' interests, shareholders'investments and meeting the obligations owed to other stakeholders.

There were no arrangements during and at the end of the year to which the Group and theCompany was a party, whereby the Directors of the Company might acquire benefits by means ofthe acquisition of shares in or debentures of the Company or any other body corporate.

The Company has complied with the prescriptive requirements of BNM/RH/GL 003-2: PrudentialFramework of Corporate Governance for Insurers issued by Bank Negara Malaysia ("BNM") andadopted management practices that are consistent with the best practise standards advocated in theFramework.

The Board has the full responsibility of leading the Company and providing strategic directions interms of setting corporate objectives and business strategies for the Company and discharges itsresponsibility through compliance with the prescriptive requirements and adopting the bestpractice standards advocated in the Prudential Framework of Corporate Governance for Insurers.

Six (6) Board meetings were held during the year 2013 and the number of meetings attended byeach Director was as follows:

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BOARD RESPONSIBILITY AND OVERSIGHT (CONTD.)

Board Meetings (Contd.)

Audit and Examination Committee

The activities of the Audit and Examination Committee (AEC) are governed by its terms ofreference that are approved by the Board. The Committee, comprising of non-executive members,meets regularly and a total of four (4) meetings were held during the year ended 31 December2013. The Committee reviews the Annual Financial Statements of the Company tabled to theBoard for approval and adequacy and effectiveness of internal control systems and perform anyother functions as advised by the Board.

The Internal Audit Department (IAD) assists the AEC in the discharge of its duties andresponsibilities and amongst others, it reports on the Group's management, records, accountingpolicies and controls.

As at the date of this report, the Board comprises six (6) non-executive Directors, of which two (2)are independent including the Chairman, and one (1) Executive Director/Chief Executive Officer.The Board consists mainly of non-executive Directors which has enhanced the Board's objectivityand enabled it to effectively discharge its oversight function. The Board members are from diversebackgrounds with a mix of financial, technical, legal and business expertise and have the necessarydepth of experience to deliberate on issues regarding strategy, monitoring of performance,succession and resources planning, formalisation of policies on issues specifically reserved for itsdecision and ensuring that the Group's internal controls and procedures are adequate. AllDirectors comply with the prescribed limit of other directorships held.

The position of an independent Chairman on the Board without executive responsibilities hasensured a balance of power and authority. The non-executive Directors are independent ofmanagement and do not participate in the day to day management of the Company.

The independent Directors fulfil their roles of corporate accountability and the followingcommittees are established to assist the Board in the discharge of its duties. The activities andmembers of the relevant committees are as follows:

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Audit and Examination Committee (Contd.)

Members

Haji Onn bin Abdullah 4/4(Retired on 23 December 2013) Chairman - Non-executive

Petrus Gimbad 4/4(Appointed on 23 December 2013)

Siau Wui Kee Non-executive 4/4

Investment Committee

Members

Datuk Lim Siong Eng Chairman - Non-executive 4/4Datuk Datu Harun bin Datu Mansor, JP Non-executive (Independent) 4/4Haji Onn bin Abdullah Non-executive 4/4Lim Fung Ha Non-executive 4/4Francis Lai @ Lai Vun Sen Executive 4/4

Risk Management Committee

The Committee reviews and recommends investment strategies and policies for the Board'sapproval and meets quarterly and other times as required. The Committee monitors the investmentperformance of the Company against the strategic plan, ensures investments are in accordancewith the approved internal policies, investment risk management processes are in place and reportsto the Board on any specific transactions requiring the awareness and sanction of the Board.

The Company has in place a formal and integrated enterprise-wide risk management framework toidentify, evaluate and manage risks by identifying all major risks in critical areas of operations,assessing the possible impact of significant exposures and the risk mitigation measures taken.

Meetings Attended

Meetings Attended

The IAD reports to the AEC and its findings and recommendations are communicated to theBoard.

Chairman Non-executive (Independent)

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Risk Management Committee (Contd.)

Members

Datuk Datu Harun bin Datu Mansor, JP Chairman - 4/4 Non-executive (Independent)

Datuk Lim Siong Eng Non-executive 4/4Siau Wui Kee Non-executive 4/4

Establishment Committee

Members


Datuk Lim Siong Eng Non-executive 1/1Siau Wui Kee Non-executive 1/1Lim Fung Ha Non-executive 1/1Petrus Gimbad Non-executive (Independent) 1/1

Nominating Committee

The Committee, comprising of non-executive members, reviews on an annual basis theremuneration package and other benefits applicable to the executive Director, management andstaff and recommendations are made to the Board. The Committee ensures that the recommendedremuneration package links reward to performance and the level of responsibilities undertaken andthat they are in accordance with market practice.

The Committee has responsibilities of assessing and recommending nominees for directorshipincluding re-appointments and establishing a mechanism for formal assessment on theeffectiveness and contribution of the Board as a whole, Board Committees, individual Directorsand the performance of the Chief Executive Officer. The Committee reviews and recommends tothe full Board to ensure that the composition of the Board in terms of appropriate mix of skills andexperience, size, balance of power and authority between executives and non-executives are inplace. The members of the Nominating Committee are from various academic backgrounds andwith extensive experience in both the government and private sectors.

The Committee reviews and recommends risk management strategies and policies for the Board'sapproval including assessing the adequacy of risk management policies and framework foridentifying, measuring, monitoring and controlling risks as well as the extent to which these areoperating effectively on a continuing basis.

Meetings Attended

Meetings Attended

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Nominating Committee (Contd.)

Members


Datuk Lim Siong Eng Non-executive 1/1Haji Onn bin Abdullah Non-executive 1/1Francis Lai @ Lai Vun Sen Executive 1/1Lim Fung Ha Non-executive 1/1Petrus Gimbad Non-executive (Independent) 1/1

MANAGEMENT ACCOUNTABILITY

CORPORATE INDEPENDENCE

PUBLIC ACCOUNTABILITY

The Company has in place a documented and updated organisation structure with clear reportinglines and job descriptions for management and executive employees. In addition, there are alsowell documented policies and procedures in the operating manuals for all major functions withinthe Company. Monthly executive committee and departmental/branch meetings are held for bettercommunication amongst the senior management team and employees on the affairs and operationsof the Company.

Related party transactions, if any, are disclosed to the Board and they are on terms and conditionsno more favourable than those available on similar transactions to the Company's other customers.

Meetings Attended

The Company upholds the principles of good business practices and ensures that dealings with thepublic are conducted fairly, honestly, and professionally. The Company has in place a system tohandle public complaints and grievances, and the information on the avenue for further recourseagainst unfair practices is disclosed to the insureds.

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FINANCIAL REPORTING

INTERNAL CONTROLS AND OPERATIONAL RISK MANAGEMENT

The Directors acknowledge their responsibility over both the system of internal controlsmaintained by the Company and in reviewing its effectiveness. The scope of internal controlscover not only financial but also operational and compliance controls as well as business riskmanagement.

The business risk management, other than insurance operations, includes the business recoveryplan in the event of a business disruption, adequate treaty reinsurance programmes and half yearlystress tests to detect possible sources of vulnerability. The Company has implemented anenterprise-wide risk management framework through the application of the corporate riskscorecard to proactively identify and manage risks effectively in order to achieve the Company'sbusiness objectives. There are procedures in place for both internal and external auditors to reporttheir findings and recommendations to the Board, Audit and Examination Committee andManagement. All aspects of the systems of internal controls are subject to regular review to ensuretheir adequacy and effectiveness.

The financial statements of the Company have been prepared in accordance with MalaysianFinancial Reporting Standards and International Financial Reporting Standards.

The Board receives regular financial and management reports and senior management receivesmonthly management reports to enable them to effectively monitor the performance and goals ofthe Company.

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AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Boardin accordance with a resolutionof the Directors dated

DATUK DATU HARUN BIN DATU MANSOR, JP )))) DIRECTORS))

FRANCIS LAI @ LAI VUN SEN )

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STATEMENT BY DIRECTORSPURSUANT TO SECTION 169(15) OF THE COMPANIES ACT 1965

Signed on behalf of the Boardin accordance with a resolutionof the Directors dated 20 March 2014

DATUK DATU HARUN BIN DATU MANSOR, JP )))) DIRECTORS))

FRANCIS LAI @ LAI VUN SEN )

We, Datuk Datu Harun bin Datu Mansor, JP and Francis Lai @ Lai Vun Sen, being two ofthe Directors of PROGRESSIVE INSURANCE BHD, do hereby state that, in the opinion of theDirectors, the accompanying financial statements set out on pages 16 to 119 are drawn up inaccordance with Malaysian Financial Reporting Standards, International Financial ReportingStandards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true andfair view of the financial positions of the Group and of the Company as at 31 December 2013 andof their results and their cash flows for the year then ended.

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STATUTORY DECLARATIONPURSUANT TO SECTION 169(16) OF THE COMPANIES ACT 1965

Subscribed and solemnly declared bythe abovementioned KAN POH YEEat Kuala Lumpur in the Federal Territoryon 20 March 2014 KAN POH YEE

Before me,

I, Kan Poh Yee, being the officer primarily responsible for the financial management ofPROGRESSIVE INSURANCE BHD, do solemnly and sincerely declare that the accompanyingfinancial statements set out on pages 16 to 119 are, in my opinion, correct and I make this solemndeclaration conscientiously believing the same to be true and by virtue of the provisions of theStatutory Declarations Act 1960.

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Independent auditors' report to the members ofProgressive Insurance Bhd(Incorporated in Malaysia)

Report on the financial statements

We have audited the financial statements of Progressive Insurance Bhd, which comprise thestatements of financial position as at 31 December 2013 of the Group and of the Company, andthe income statements, statements of comprehensive income, statements of changes in equityand statements of cash flows of the Group and of the Company for the year then ended, and asummary of significant accounting policies and other explanatory information, as set out onpages 16 to 119.

Directors’ responsibility for the financial statements

The directors of the Company are responsible for the preparation of financial statements so asto give a true and fair view in accordance with Malaysian Financial Reporting Standards,International Financial Reporting Standards and the requirements of the Companies Act, 1965in Malaysia. The directors are also responsible for such internal control as the directorsdetermine is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with approved standards on auditing in Malaysia. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on our judgement,including the assessment of risks of material misstatement of the financial statements, whetherdue to fraud or error. In making those risk assessments, we consider internal control relevantto the entity’s preparation of financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by the directors, as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

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Independent auditors' report to the members ofProgressive Insurance Bhd (Contd.)(Incorporated in Malaysia)

(a)

(b)

(c)

(d)

Other matters

Ernst & Young Brandon Bruce Sta MariaAF: 0039 No. 2937/09/15(J)Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia20 March 2014

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of theGroup and of the Company as at 31 December 2013 and of their financial performance andcash flows for the year then ended in accordance with Malaysian Financial Reporting Standards,International Financial Reporting Standards and the requirements of the Companies Act, 1965in Malaysia.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also reportthe following:

In our opinion, the accounting and other records and the registers required by the Act to bekept by the Company and its subsidiaries of which we have acted as auditors have beenproperly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors’ reports of the subsidiariesof which we have not acted as auditors, which are indicated in Note 4(c) to the financialstatements, being financial statements that have been included in the consolidatedfinancial statements.

We are satisfied that the financial statements of the subsidiaries that have beenconsolidated with the financial statements of the Company are in form and contentappropriate and proper for the purposes of the preparation of the consolidated financialstatements and we have received satisfactory information and explanations required by usfor those purposes.

The auditors' reports on the financial statements of the subsidiaries were not subjecttoany qualification and did not include any comment required to be made under Section174(3) of the Act.

This report is made solely to the members of the Company, as a body, in accordance withSection 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do notassume responsibility to any other person for the content of this report.

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STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

Note 31.12.2013 31.12.2012 1.1.2012 31.12.2013 31.12.2012 1.1.2012RM RM RM RM RM RM

(Restated) (Restated)

ASSETS

Property, plant and equipment 3 11,628,959 11,797,434 11,589,374 11,628,959 11,797,434 11,589,374

Investments: 239,337,319 213,409,876 202,667,081 241,347,025 219,678,229 206,477,362- Available-for-sale ("AFS") financial assets 4 (a) 57,734,857 41,561,785 33,360,064 161,738,863 155,733,888 147,317,245- Financial assets at fair value through profit or loss ("FVTPL") 4 (b) 181,602,462 171,848,091 169,307,017 79,608,162 63,944,341 59,160,117

Reinsurance assets 5 88,607,785 92,886,867 85,859,538 88,607,785 92,886,867 85,859,538Loans and other receivables 6 161,346,207 155,790,222 124,509,084 157,243,423 147,006,460 119,614,122Tax recoverable 5,722,329 1,218,159 431,651 5,722,329 1,218,159 431,651Deferred tax assets 7 122,761 - - 122,761 - -Insurance receivables 8 26,322,944 34,623,784 50,239,151 26,322,944 34,623,784 50,239,151Cash and cash equivalents 9 8,853,864 8,549,025 4,624,919 8,830,108 8,518,342 4,591,272TOTAL ASSETS 541,942,168 518,275,367 479,920,798 539,825,334 515,729,275 478,802,470

Group Company

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STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013 (CONTD.)

Note 31.12.2013 31.12.2012 1.1.2012 31.12.2013 31.12.2012 1.1.2012RM RM RM RM RM RM


EQUITY AND LIABILITIES

Share capital 10 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000Reserves 11 100,614,004 90,206,156 78,906,800 100,681,473 89,799,047 77,527,651

200,614,004 190,206,156 178,906,800 200,681,473 189,799,047 177,527,651Non-controlling interests 2,142,829 2,084,863 2,513 - - -TOTAL EQUITY 202,756,833 192,291,019 178,909,313 200,681,473 189,799,047 177,527,651

Insurance contract liabilities 12 263,641,708 234,494,576 197,656,883 263,641,708 234,494,576 197,656,883Deferred tax liabilities 7 - 1,570,438 1,389,399 - 1,570,438 1,699,478Other financial liabilities 13 41,899,815 44,448,404 40,649,757 41,899,815 44,448,404 40,649,757Insurance payables 14 27,980,688 40,723,874 56,012,459 27,980,688 40,723,874 56,012,459Other payables 15 5,663,124 4,747,056 5,302,987 5,621,650 4,692,936 5,256,242TOTAL LIABILITIES 339,185,335 325,984,348 301,011,485 339,143,861 325,930,228 301,274,819

TOTAL EQUITY AND LIABILITIES 541,942,168 518,275,367 479,920,798 539,825,334 515,729,275 478,802,470

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

Group Company

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INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2013

Note 2013 2012 2013 2012RM RM RM RM

(Restated)

Operating revenue 16 188,883,661 172,117,634 188,702,243 172,680,120

Gross written premiums 12(ii) 175,642,808 160,862,983 175,642,808 160,862,983Change in unearned premiums provision (6,892,022) (3,107,848) (6,892,022) (3,107,848)Gross earned premiums 12(ii) 168,750,786 157,755,135 168,750,786 157,755,135

Gross written premiums ceded to reinsurers 12(ii) (75,593,407) (73,239,779) (75,593,407) (73,239,779)Change in unearned premiums provision 1,394,291 (3,603,083) 1,394,291 (3,603,083)Premiums ceded to reinsurers 12(ii) (74,199,116) (76,842,862) (74,199,116) (76,842,862)

Net earned premiums 94,551,670 80,912,273 94,551,670 80,912,273

Investment income, net 17 12,899,389 11,143,462 12,717,971 11,705,948Realised gains and losses 20 10,206,995 4,826,251 10,303,587 4,415,766Fair value gains and losses 21 (2,121,914) 2,730,832 (956,143) 2,851,633Commission income 17,671,233 15,619,456 17,671,233 15,619,456Other operating income 22 3,442,542 2,824,833 3,442,542 2,824,833Other income 42,098,245 37,144,834 43,179,190 37,417,636

Gross claims paid (72,880,236) (57,749,842) (72,880,236) (57,749,842)Claims ceded to reinsurers 26,045,455 24,510,956 26,045,455 24,510,956Gross change in contract liabilities (22,255,110) (33,729,845) (22,255,110) (33,729,845)Change in contract liabilities ceded to reinsurers (3,673,373) 10,630,412 (3,673,373) 10,630,412Net claims incurred 23 (72,763,264) (56,338,319) (72,763,264) (56,338,319)

Commission expenses (23,256,522) (19,643,677) (23,256,522) (19,643,677)Management expenses 18 (26,571,495) (23,675,483) (26,282,870) (23,402,884)Other expenses (49,828,017) (43,319,160) (49,539,392) (43,046,561)

CompanyGroup

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INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTD.)

Note 2013 2012 2013 2012RM RM RM RM


Profit before taxation 14,058,634 18,399,628 15,428,204 18,945,029Taxation 24 2,561,640 (4,100,000) 2,561,640 (4,100,000)Net profit for the year 16,620,274 14,299,628 17,989,844 14,845,029

Earnings per ordinary share (sen) - basic and

diluted 25 16.6 14.3 18.0 14.8

Attributable to:Equity holder of the

company 16,566,092 14,216,705Non-controlling interests 54,182 82,923

16,620,274 14,299,628


Group Company

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STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013

Note 2013 2012 2013 2012RM RM RM RM

(Restated)

Net profit for the year 16,620,274 14,299,628 17,989,844 14,845,029

Other comprehensive income/(loss)

Items that may be reclassified toincome statements insubsequent periods:

Fair value change on AFS financial assets: (Loss) / gain on fair value (178,751) 62,041 (1,127,925) 95,678

changes Transferred to profit or loss

upon disposal (380,162) (152,611) (380,162) (152,611)Deferred tax 7 119,419 23,221 119,419 333,300

Other comprehensive (loss)/ income for the year, net of

tax (439,494) (67,349) (1,388,668) 276,367

Total comprehensive income for the year 16,180,780 14,232,279 16,601,176 15,121,396

Total comprehensive income for the year attributable to: Equity holder of the company 16,126,598 14,149,356 16,601,176 15,121,396 Non-controlling interests 54,182 82,923 - -

16,180,780 14,232,279 16,601,176 15,121,396


Group Company

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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2013

Group

Non-distributable Distributable

Property Available for Non-Share revaluation sale ("AFS") Retained controlling Total

capital reserve reserve earnings Total Interests equityRM RM RM RM RM RM RM

Note 8

At 1 January 2012 as previously stated 100,000,000 2,617,432 756,539 70,211,696 173,585,667 2,513 173,588,180Effect of MMIP adjustment (Note 2.6) - - - 5,321,133 5,321,133 - 5,321,133Balance at 1 January 100,000,000 2,617,432 756,539 75,532,829 178,906,800 2,513 178,909,313 2012 restatedTotal comprehensive (loss)/ income for the year - - (67,349) 14,216,705 14,149,356 82,923 14,232,279Dividends paid during the year (Note 26) - - - (2,850,000) (2,850,000) - (2,850,000)Net creation of units in wholesale unit trust funds - - - - - 1,999,427 1,999,427At 31 December 2012 100,000,000 2,617,432 689,190 86,899,534 190,206,156 2,084,863 192,291,019

At 1 January 2013 as previously stated 100,000,000 2,617,432 689,190 81,983,586 185,290,208 2,084,863 187,375,071Effect of MMIP adjustment (Note 2.6) - - - 4,915,948 4,915,948 - 4,915,948Balance at 1 January 100,000,000 2,617,432 689,190 86,899,534 190,206,156 2,084,863 192,291,019 2013 restatedTotal comprehensive (loss)/income for the year - - (439,494) 16,566,092 16,126,598 54,182 16,180,780Dividends paid during the year (Note 26) - - - (5,718,750) (5,718,750) - (5,718,750)Net creation of units in wholesale unit trust funds - - - - - 3,784 3,784At 31 December 2013 100,000,000 2,617,432 249,696 97,746,876 200,614,004 2,142,829 202,756,833


Attributable to owners of the Company

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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2013

Company

Non-distributable Distributable

Property Available forShare revaluation sale ("AFS") Retained Total

capital reserve reserve earnings equityRM RM RM RM RM

Note 8

At 1 January 2012 100,000,000 2,617,432 1,686,775 67,902,311 172,206,518 as previously statedEffect of MMIP adjustment (Note 2.6) - - - 5,321,133 5,321,133Balance at 1 January 100,000,000 2,617,432 1,686,775 73,223,444 177,527,651 2012 restatedTotal comprehensive income for the year - - 276,367 14,845,029 15,121,396Dividends paid during the year (Note 26) - - - (2,850,000) (2,850,000)At 31 December 2012 100,000,000 2,617,432 1,963,142 85,218,473 189,799,047

At 1 January 2013 as previously stated 100,000,000 2,617,432 1,963,142 80,302,525 184,883,099Effect of MMIP adjustment (Note 2.6) - - - 4,915,948 4,915,948Balance at 1 January 100,000,000 2,617,432 1,963,142 85,218,473 189,799,047 2013 restatedTotal comprehensive (loss)/ income for the year - - (1,388,668) 17,989,844 16,601,176Dividends paid during the year (Note 26) - - - (5,718,750) (5,718,750)Balance at 31 December 2013 100,000,000 2,617,432 574,474 97,489,567 200,681,473


Attributable to owners of the Company

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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013

2013 2012RM RM

Cash flow from operating activitiesProfit before taxation 14,058,634 18,399,628Investment income/(loss) and cash flows:

Interest income (10,710,223) (9,597,376)Dividend income (3,364,975) (2,609,079)Realised loss recorded in income statement (10,206,995) (4,826,251)Fair value loss/(gain) recorded in income statement 2,356,975 (2,730,832)Purchase of AFS financial assets (33,897,041) (27,252,674)Proceeds from disposal of AFS financial assets 7,380,480 19,290,216Purchase of FVTPL financial assets (132,864,340) (48,251,333)Proceeds from disposal of FVTPL financial assets 139,223,917 51,985,705

Non-cash items: Depreciation of property, plant and equipment 1,177,009 1,010,867 Net amortisation of discounts 834,345 951,803 (Reversal of)/allowance for impairment of insurance receivables (363,470) 674,943 Allowance for impairment of reinsurance assets 2,000,000 - Impairment of AFS financial assets 250,000 - Property, plant and equipment written off - 666 Gain on disposal of property, plant and equipment - (121,020)Changes in working capital: Increase in loans and receivables (25,477,362) (10,385,213) Decrease in insurance assets and liabilities 27,928,350 20,864,566 Decrease in insurance receivables 6,664,311 14,940,423 Increase in insurance contract liabilities 5,498,626 8,945,799 Decrease/(Increase) in fixed and call deposits 19,709,875 (21,789,914) Decrease in insurance payables (12,743,186) (17,936,146) (Decrease)/Increase in other payables (1,615,720) 5,898,947Cash generated from operating activities (4,160,790) (2,536,275)Income tax paid (3,326,497) (4,582,248)Net cash generated from operating activities (7,487,287) (7,118,523)

Investing ActivitiesProceeds from disposal of property, plant and equipment - 141,139Purchase of property, plant and equipment (1,008,534) (1,239,712)Interest received 11,216,512 10,114,967Dividend received 3,299,114 2,876,808Net cash used in investing activities 13,507,092 11,893,202

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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTD.)

2013 2012RM RM

Financing ActivitiesDividends paid to shareholders, representing net

cash used in financing activity (5,718,750) (2,850,000)Proceeds from creation of units to non-controlling interests 79,509 2,024,861Payment for cancellation of units to non-controlling interests - (1,865)Distribution paid to non-controlling interests (75,725) (23,569)Net cash used in financing activities (5,714,966) (850,573)

Net increase in cash and cash equivalents 304,839 3,924,106Cash and cash equivalents at beginning of year 8,549,025 4,624,919Effect of movement in exchange ratesCash and cash equivalents at end of year 8,853,864 8,549,025


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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013

2013 2012RM RM

(Restated)

Cash flow from operating activitiesProfit before taxation 15,428,204 18,945,029Investment income/(loss) and cash flows:

Interest income (9,833,524) (6,648,837)Dividend income (3,364,975) (2,609,079)Realised gains recorded in income statement (10,303,587) (4,415,766)Fair value losses/(gains) recorded in income statement 1,191,204 (2,851,633)Purchase of AFS financial assets (34,757,670) (28,294,761)Proceeds from disposal of AFS financial assets 17,580,480 20,151,020Purchase of FVTPL financial assets (56,929,142) (21,721,325)Proceeds from disposal of FVTPL financial assets 59,216,467 23,865,905

Non-cash items: Depreciation of property, plant and equipment 1,177,009 1,010,867 Net amortisation of discounts 139,064 8,761 (Reversal of)/allowance for impairment of insurance receivables (363,470) 674,943 Allowance for impairment of reinsurance assets 2,000,000 Impairment of AFS financial assets 250,000 - Property, plant and equipment written off - 666 Gain on disposal of property, plant and equipment - (121,020)Changes in working capital: Increase in loans and receivables (25,478,235) (10,686,650) Decrease in insurance assets and liabilities 25,928,350 20,864,566 Decrease in insurance receivables 8,664,311 14,940,423 Increase in insurance contract liabilities 5,498,626 8,945,798 Decrease/(Increase) in fixed and call deposits 15,174,481 (17,591,008) Decrease in insurance payables (12,743,186) (17,936,146) (Decrease)/Increase in other payables (1,619,874) 5,882,902Cash generated from operating activities (3,145,467) 2,414,655Income tax paid (3,326,497) (4,582,248)Net cash generated from operating activities (6,471,964) (2,167,593)

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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTD.)

2013 2012RM RM

(Restated)

Investing ActivitiesProceeds from disposal of property, plant and equipment - 141,139Purchase of property, plant and equipment (1,008,534) (1,239,712)Interest received 10,211,900 7,166,428Dividend received 3,299,114 2,876,808Net cash used in investing activities 12,502,480 8,944,663

Financing ActivityDividends paid to shareholders, representing net cash used in financing activity (5,718,750) (2,850,000)

Net increase in cash and cash equivalents 311,766 3,927,070Cash and cash equivalents at beginning of year 8,518,342 4,591,272Cash and cash equivalents at end of year 8,830,108 8,518,342


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NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2013

1. CORPORATE INFORMATION

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

(a) Statement of Compliance

The financial statements are presented in Ringgit Malaysia (RM), which is theGroup's functional currency.

The Company is a limited liability company, incorporated and domiciled in Malaysia. Theregistered office of the Company is located at 7th Floor, Wisma Perkasa, Jalan Gaya, 88845Kota Kinabalu, Sabah and the principal place of business of the Company is located at 6th, 9thand 10th Floors, Plaza Berjaya, No. 12 Jalan Imbi, 55100 Kuala Lumpur.

The financial statements of the Group and of the Company are authorised for issue by theBoard of Directors in accordance with a resolution of the directors on 20 March 2014.

The financial statements of the Group and of the Company have been prepared inaccordance with Malaysian Financial Reporting Standard ("MFRS"), InternationalFinancial Reporting ("IFRS") Standards and the requirements of the Companies Act,1965 in Malaysia.

There are some new pronouncements that have been issued by the MalaysianAccounting Standards Board ("MASB") that have been adopted by the Group andCompany. The effects arising from the adoption of these pronouncements aredisclosed in Note 2.4.

The financial statements of the Group and of the Company have also been preparedon a historical cost basis, except as disclosed in the accounting policies below.

The Company has met the minimum capital requirements as prescribed by the Risk-Based Capital Framework for insurers ("the Framework") issued by BNM as at thereporting date.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

2.1 Basis of Preparation (Contd.)

(b) Basis of Consolidation

•

•

•

(i)

(ii)

(iii)

When the Company has less than a majority of the voting rights of an investee, theCompany considers the following in assessing whether or not the Company's votingrights in an investee are sufficient to give it power over the investee:

The size of the Company's holding of voting rights relative to the size anddispersion of holdings of the other voteholders;

Potential voting rights held by the Company, other vote holders or other parties;

Rights arising from other contractual arrangements; and

The consolidated financial statements are prepared if the control is achieved whenthe Company:

Subsidiaries are consolidated from the date of acquisition, being the date on whichthe Company obtains control and continue to be consolidated until the date that suchcontrol effectively ceases.

has the ability to use its power to affect its returns.

is exposed, or has rights, to variable returns from its involvement with theinvestee; and

has power over the investee;

The consolidated financial statements comprise the financial statements of theCompany and its subsidiaries as at 31 December 2013. The financial statements ofCompany’s subsidiaries are prepared using consistent accounting policies to thetransactions and events in similar circumstances.

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(b) Basis of Consolidation (Contd.)

(iv)

The Company reassesses whether or not it controls an investee if facts andcircumstances indicate that there are changes to one or more of the three elements ofcontrol listed earlier.

Consolidation of a subsidiary begins when the Company obtains control over thesubsidiary and ceases when the Company loses control of the subsidiary.Specifically, income and expenses of a subsidiary acquired or disposed of during theyear are included in the consolidated statement of profit or loss and othercomprehensive income from the date the Company gains control until the date whenthe Company ceases to control the subsidiary.

Any additional facts and circumstances that indicate that the Company has, ordoes not have, the current ability to direct the relevant activities at the time thatdecisions need to be made, including voting patterns at previous shareholders'meetings.

When necessary, adjustments are made to the financial statements of the wholesaleunit trust funds to bring its accounting policy in line with the Group's accountingpolicies.All intragroup assets and liabilities, equity, income, expenses and cash flows relatingto transactions between members of the Group are eliminated in full onconsolidation.

Losses within a subsidiary are attributed to the non-controlling interests even if thatresults in a deficit balance.

Profit or loss and each component of other comprehensive income are attributed tothe owners of the Company and to the non-controlling interests. Total comprehensiveincome of the subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having adeficit balance.

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(b) Basis of Consolidation (Contd.)

2.2 Summary of Significant Accounting Policies

(a) Foreign Currency Transactions

Transactions in foreign currencies are measured in the functional currency of theGroup and of the Company and are recorded on initial recognition in the functionalcurrency at exchange rates approximating those ruling at the transaction dates.Monetary assets and liabilities denominated in foreign currencies are translated at therate of exchange ruling at the reporting date. Non-monetary items denominated inforeign currencies that are measured at historical cost are translated using theexchange rates as at the dates of the initial transactions. Non-monetary itemsdenominated in foreign currencies measured at fair value are translated using theexchange rates at the date when the fair value was determined.

When the Company loses control of a asubsidiary, a gain or loss calculated as thedifference between (i) the aggregate of the fair value of the consideration receivedand the fair value of any retained interest and (ii) the previous carrying amount of theassets and liabilities of the subsidiaries and any non-controlling interest, isrecognised in profit or loss. The subsidiary's cumulative gain or loss which has beenrecognised in other comprehensive income and accumulated in equity are reclassifiedto profit or loss or where applicable, transferred directly to retained earnings. The fairvalue of any investment retained in the former subsidiary at the date control is lost isregarded as the cost on initial recognition of the investment.

Changes in the Company's ownership interests in subsidiaries that do not result in theCompany losing control over the subsidiaries are accounted for as equitytransactions. The carrying amounts of the Company's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in thesubsidiaries. The resulting difference is recognised directly in equity and attributed toowners of the Company.

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2.2 Summary of Significant Accounting Policies (Contd.)

(a) Foreign Currency Transactions (Contd.)

(b) Premium income

(c) Claims expenses

(d) Commission expenses

Claim expenses represent amounts incurred by the Group and the Company as aresult of an insured event occurring as defined in the terms of each insurancecontract. Claim expenses include the amounts paid or payable to the policyholderupon the occurrence of an insured event as well as related expenses. Claim expensesare recognised in profit or loss upon notification of the occurrence of an insuredevent or events or as a result of a liability adequacy test performed at each reportingdate.

The cost of acquiring and renewing insurance policies is recognised as incurred andallocated to the periods in which it is probable they give rise to income.

Premiums are recognised in the same financial period when risks are assumed.Premium in respect of risks assumed for which billings have yet to be raised as at thereporting date are accrued to the extent that they can be reliably estimated.

Inward treaty reinsurance premiums are recognised on the basis of periodic advicesreceived from ceding insurers.

Exchange differences arising on the settlement of monetary items or on translatingmonetary items at the reporting date are recognised in profit or loss. Exchangedifferences arising on the translation of non-monetary items carried at fair value areincluded in profit or loss for the period except for the differences arising on thetranslation of non-monetary items in respect of which gains and losses are recogniseddirectly in equity. Exchange differences arising from such non-monetary items arealso recognised directly in equity.

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(e) Reinsurance

Reinsurance assets are derecognised when the contractual rights are extinguished orexpire or when the contract is transferred to another party.

At each reporting date, or more frequently, the Group and the Company assesswhether objective evidence exists that reinsurance assets are impaired. Reinsuranceassets are reviewed for impairment at each reporting date or more frequently unlessan indication of impairment arises during the reporting period.

Impairment occurs when there is objective evidence as a result of an event thatoccured after initial recognition of the reinsurers asset that the Group and theCompany may not receive all outstanding amounts due under the terms of thecontract and the event has a reliably measurable impact on the amounts that thecompany will receive from the reinsurer. The impairment loss is recorded in theincome statement.

Reinsurance assets represent amounts recoverable from reinsurers for insurancecontract liabilities which have yet to be settled at the reporting date. Amountsrecoverable from reinsurers are measured consistently with the amounts associatedwith the underlying insurance contract and the terms of the relevant reinsurancearrangement.

Reinsurance arrangements entered into by the Group and the Company that meet theclassification requirements of insurance contracts as described in Note 2.2(q) areaccounted for as noted below. Arrangements that do not meet these classificationrequirements are accounted for as financial assets. As at the reporting date, allreinsurance arrangements entered into by the Group and the Company during theyear met the classification requirements of insurance contracts.

The Group and the Company cede insurance risk in the normal course of business forall its business. Ceded reinsurance arrangements do not relieve the Group and theCompany from their obligations to policyholders. For both ceded and assumedreinsurance, premiums and claims are presented on a gross basis.

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(f) Other Revenue Recognition

(i) Interest Income

(ii) Dividend Income

(iii) Rental Income

(g) Income Tax

Income tax on profit or loss for the year comprises current and deferred tax.

(i) Current Tax

Revenue is recognised to the extent that it is probable that the economic benefits willflow to the Group and the Company and the revenue can be measured reliably. Thefollowing specific recognition criteria must also be met before the revenue isrecognised:

Current tax assets and liabilities are measured at the amount expected to berecovered from or paid to the tax authorities. The tax rates and tax laws used tocompute the amount are those that are enacted or substantively enacted by thereporting date.

Interest income is recognised using the effective interest method.

Rental income is accounted for on a straight-line basis over the lease terms. Theaggregate costs of incentives provided to lessees are recognised as a reduction ofrental income over the lease term on a straight-line basis.

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

Current taxes are recognised in profit or loss except to the extent that the taxrelates to items recognised outside profit or loss, either in other comprehensiveincome or directly in equity.

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(g) Income Tax (Contd.)

(ii) Deferred tax

Deferred tax is provided using the liability method on temporary differences atthe reporting date between the tax bases of assets and liabilities and theircarrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences anddeferred tax assets are recognised for all deductible temporary differences,unused tax losses and unused tax credits to the extent that it is probable thattaxable profit will be available against which the deductible temporarydifferences, unused tax losses and unused tax credits can be utilised. Deferredtax is not recognised if the temporary difference arises from the initialrecognition of an asset or liability in a transaction which is not a businesscombination and at the time of the transaction, affects neither accounting profitnor taxable profit.

At each reporting date, the carrying amount of deferred tax assets is reviewedand reduced to the extent that it is no longer probable that sufficient taxableprofit will be available to allow all or part of the deferred tax asset to be utilised.Unrecognised deferred tax assets are reassessed at each reporting date and arerecognised to the extent that it has become probable that future taxable profitwill allow the deferred tax assets to be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the periodwhen the asset is realised or the liability is settled, based on tax rates that havebeen enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceableright exists to set off current tax assets against current tax liabilities and thedeferred taxes relate to the same taxable entity and the same taxation authority.

Deferred tax shall be recognised outside profit or loss if the tax relates to itemsthat are recognised, in the same or a different period, outside profit or loss.Therefore, deferred tax that relates to items that are recognised, in the same or adifferent period (i) in other comprehensive income, shall be recognised in othercomprehensive income (ii) directly in equity, shall be recognised directly inequity.

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(h) Employee Benefits

(i) Short Term Benefits

(ii) Defined Contribution Plans

(i) Property, Plant and Equipment

Defined contribution plans are post-employment benefit plans under which theGroup and the Company pay fixed contributions into separate entities or fundsand will have no legal or constructive obligation to pay further contributions ifany of the funds do not hold sufficient assets to pay all employee benefitsrelating to employee services in the current and preceding financial years. Suchcontributions are recognised in profit or loss as incurred. As required by law, theGroup and the Company make such contributions to the Employees ProvidentFund (“EPF”).

All items of property, plant and equipment are initially recorded at cost. Subsequentcosts are included in the asset's carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated withthe item will flow to the Group and the Company and the cost of the item can bemeasured reliably. The carrying amount of the replaced part is derecognised. Allother repairs and maintenance are charged to profit or loss during the financial periodin which they are incurred.

Wages, salaries, bonuses and social security contributions are recognised as anexpense in the year in which the associated services are rendered by employees.Short-term accumulating compensated absences such as paid annual leave arerecognised when services are rendered by employees that increase theirentitlement to future compensated absences. Short-term non-accumulatingcompensated absences such as sick leave are recognised when the absencesoccur.

Subsequent to recognition, property, plant and equipment except for freehold andleasehold office lots are stated at cost less accumulated depreciation and anyaccumulated impairment losses.

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(i) Property, Plant and Equipment (Contd.)

Freehold and leasehold office lots 50 - 78 yearsOffice equipment 4 - 7 yearsFurniture, fixtures and fittings 10 yearsMotor vehicles 5 yearsOffice renovation 5 yearsSoft furnishing 5 years

Any accumulated depreciation as at the revaluation date is eliminated against thegross carrying amount of the asset and the net amount is restated to the revaluedamount of the asset. The revaluation surplus included in the asset revaluation reservein respect of an asset is transferred directly to retained earnings on retirement ordisposal of the asset.

Freehold and leasehold office lots are stated at revalued amounts, which is the fairvalue at the date of the revaluation less any accumulated impairment losses. Fairvalue is determined based on the comparison method of valuation that is undertakenby professionally qualified independent valuers. Revaluations are performed withsufficient regularity, at least once in five years with additional valuations in theintervening years where market conditions indicate that the carrying values of therevalued assets are materially different from the market values.

Depreciation of property, plant and equipment is provided on a straight-line basis, towrite-off the cost of each asset to its residual value over its estimated useful life asfollows:

Any revaluation surplus is recognised in other comprehensive income andaccumulated in equity under the asset revaluation reserve, except to the extent that itreverses a revaluation decrease of the same asset previously recognised in profit orloss, in which case the increase is recognised in profit or loss. A revaluation deficit isrecognised in profit or loss, except to the extent that it offsets an existing surplus onthe same asset carried in the asset revaluation reserve.

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(i) Property, Plant and Equipment (Contd.)

(j) Impairment of Non-Financial Assets

An asset’s recoverable amount is the higher of an asset’s fair value less costs to selland its value in use. For the purpose of assessing impairment, assets are grouped atthe lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)). In assessing value in use, the estimated future cash flowsexpected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of moneyand the risks specific to the asset. Where the carrying amount of an asset exceeds itsrecoverable amount, the asset is written down to its recoverable amount. Impairmentlosses recognised in respect of a CGU is allocated first to reduce the carrying amountof any goodwill allocated to those units or groups of units and then, to reduce thecarrying amount of the other assets in the unit on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arisesexcept for assets that were previously revalued where the revaluation was taken tocomprehensive income. In this case, the impairment is also recognised incomprehensive income up to the amount of any previous revaluation.

The residual values, useful lives and depreciation methods are reviewed at eachfinancial year end to ensure that the amount, method and period of depreciation areconsistent with previous estimates and the expected pattern of consumption of thefuture economic benefits embodied in the items of property and equipment.

An item of property, plant and equipment is derecognised upon disposal or when nofuture economic benefits are expected from its use or disposal. Any gain or loss onderecognition is recognised in profit or loss in the year the asset is derecognised.

The Group and the Company assesses at each reporting date whether there is anindication that an asset may be impaired. If any such indication exists, or when anannual impairment assessment for an asset is required, the Group and the Companymakes an estimate of the asset’s recoverable amount.

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(j) Impairment of Non-Financial Assets (Contd.)

(k) Financial assets

(i) Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held fortrading or are designated as such upon initial recognition. Financial assets heldfor trading are derivatives (including separated embedded derivatives) orfinancial assets acquired principally for the purpose of selling in the near term.

An assessment is made at each reporting date as to whether there is any indicationthat previously recognised impairment losses may no longer exist or may havedecreased. A previously recognised impairment loss is reversed only if there has beena change in the estimates used to determine the asset’s recoverable amount since thelast impairment loss was recognised. If that is the case, the carrying amount of theasset is increased to its recoverable amount. That increase cannot exceed the carryingamount that would have been determined, net of depreciation, had no impairmentloss been recognised previously. Such reversal is recognised in profit or loss unlessthe asset is measured at revalued amount, in which case the reversal is treated as arevaluation increase.

Financial assets are recognised in the statements of financial position when, and onlywhen, the Group and the Company become a party to the contractual provisions ofthe financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus,in the case of financial assets not at fair value through profit or loss, directlyattributable transaction costs.

The Group and the Company determine the classification of financial assets at initialrecognition, and the categories include financial assets at fair value through profit orloss ("FVTPL"), loans and receivables ("LAR") and available-for-sale ("AFS")financial assets. The classification depends on the purpose for which the investmentswere acquired or originated.

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(k) Financial assets (Contd.)

(i) Financial assets at FVTPL (Contd.)

-

-

(ii) LAR

Financial assets with fixed or determinable payments that are not quoted in anactive market are classified as LAR. Subsequent to initial recognition, LAR aremeasured at amortised cost using the effective interest method. Gains and lossesare recognised in profit or loss when the LAR are derecognised or impaired, andthrough the amortisation process.

Subsequent to initial recognition, financial assets at FVTPL are measured at fairvalue. Any gains or losses arising from changes in fair value are recognised inprofit or loss. Net gains or net losses on financial assets at FVTPL do notinclude exchange differences, interest and dividend income. Exchangedifferences, interest and dividend income on financial assets at FVTPL arerecognised separately in profit or loss as part of other expenditure or otherincome or investment income.

the assets and liabilities are part of a group of financial assets, financialliabilities or both which are managed and their performance are evaluated ona fair value basis, in accordance with a documented risk management orinvestment strategy.

the designation eliminates or significantly reduces a measurement orrecognition inconsistency treatment that would otherwise arise frommeasuring assets or liabilities or recognising the gains or losses on them ondifferent bases, or

Financial assets are designated as financial assets at FVTPL if they fulfill thefollowing conditions:

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(k) Financial assets (Contd.)

(iii) AFS financial assets

AFS financial assets are financial assets that are designated as available for saleor are not classified in any of the other financial assets categories.

All regular purchases and sales of financial assets are recognised on the trade datewhich is the date that the Group and the Company commit to purchase or sell theasset. Regular purchases or sales of financial assets require delivery of assets withinthe period generally established by regulation or convention in the market place.

After initial recognition, AFS financial assets are measured at fair value. Anygains or losses from changes in fair value of the financial assets are recognisedin other comprehensive income, except that impairment losses, foreignexchange gains and losses on monetary instruments and interest calculated usingthe effective interest method are recognised in profit or loss. The cumulativegain or loss previously recognised in other comprehensive income is reclassifiedfrom equity to profit or loss as a reclassification adjustment when the financialasset is derecognised. Interest income calculated using the effective interestmethod is recognised in profit or loss. Dividends on an AFS equity instrumentare recognised in profit or loss when the Group's right to receive payment isestablished.

A financial asset is derecognised when the contractual right to receive cash flowsfrom the asset has expired. On derecognition of a financial asset in its entirety, thedifference between the carrying amount and the sum of the consideration receivedand any cumulative gain or loss that had been recognised in other comprehensiveincome is recognised in profit or loss.

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(l) Impairment of financial assets

(i) Financial assets carried at amortised cost

The Group and the Company assess at each reporting date whether there are anyobjective evidence that a financial asset is impaired.

The Group and the Company first assess whether objective evidence ofimpairment exists individually for financial assets that are individuallysignificant, and individually or collectively for financial assets that are notindividually significant. If it is determined that no objective evidence ofimpairment exists for an individually assessed financial asset, whethersignificant or not, the asset is included in a group of financial assets with similarcredit risk characteristics and the group of financial assets is collectivelyassessed for impairment. Assets that are individually assessed for impairmentand for which an impairment loss is or continues to be recognised are notincluded in a collective assessment of impairment. The impairment assessmentis performed at each reporting date.

If any such evidence exists, the amount of impairment loss is measured as thedifference between the asset's carrying amount and the present value ofestimated future cash flows discounted at the financial asset's original effectiveinterest rate. The impairment loss is recognised in profit or loss.

To determine whether there are objective evidence that an impairment loss onfinancial assets have incurred, the Group and the Company consider factors suchas the probability of insolvency or significant financial difficulties of the debtorand default or significant delay in payments. For certain categories of financialassets, such as insurance receivables, objective evidence of impairment ofinsurance receivables could include the Group's past experience of collectingpayments, an increase in the number of delayed payments in the portfolio pastthe average credit period and observable changes in national or local economicconditions that correlate with default on receivables.

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(l) Impairment of financial assets (Contd.)

(ii) AFS financial assets

(m) Insurance receivables

Insurance receivables are amounts receivable under the contractual terms of aninsurance contract. On initial recognition, insurance receivables are measured at fairvalue based on the consideration received or receivable. Subsequent to initialrecognition, insurance receivables are measured at amortized cost using effectiveinterest method. Receivables are assessed as and when or at each reporting datewhether there is objective evidence of impairment as a result of one or more eventshaving an impact on the receivables amounts.

Impairment losses on AFS equity investments are not reversed in profit or lossin the subsequent periods. Increase in fair value, if any, subsequent toimpairment loss is recognised in other comprehensive income. For AFS debtinvestments, impairment losses are subsequently reversed in profit or loss if anincrease in the fair value of the investment can be objectively related to an eventoccurring after the recognition of the impairment loss in profit or loss.

If an AFS financial asset is impaired, an amount comprising the differencebetween its cost (net of any principal payment and amortisation) and its currentfair value, less any impairment loss previously recognised in profit or loss, istransferred from equity to profit or loss.

Significant or prolonged decline in fair value below cost, significant financialdifficulties of the issuer or obligor, and the disappearance of an active tradingmarket are considerations to determine whether there is objective evidence thatinvestment securities classified as AFS financial assets are impaired.

If any such evidence exists, the amount of impairment loss is measured as thedifference between the asset's carrying amount and the present value of estimatedfuture cash flows discounted at the insurance receivable's original effective interestrate. The impairment loss is recognised in profit or loss.

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(m) Insurance receivables (Contd.)

(n) Cash and Cash Equivalents

(o) Product classification

For the purpose of the Statements of Cash Flows, cash and cash equivalents consistof cash and bank balances.

The Statements of Cash Flows are prepared using the indirect method.

Financial risk is the risk of a possible future change in one or more of a specifiedinterest rate, financial instrument price, commodity price, foreign exchange rate,index of price or rate, credit rating or credit index or other variable, provided in thecase of a non-financial variable that the variable is not specific to a party to thecontract. Insurance risk is the risk other than financial risk.

Once a contract has been classified as an insurance contract, it remains an insurancecontract for the remainder of its life-time, even if the insurance risk reducessignificantly during the period, unless all rights and obligations are extinguished orexpire.

An insurance contract is a contract under which the Group and the Company (theinsurer) has accepted significant insurance risk from another party (the policyholder)by agreeing to compensate the policyholder if a specified uncertain future event (theinsured event) adversely affects the policyholder. As a general guideline, the Groupand the Company determines whether significant insurance risk has been accepted bycomparing benefits paid on the occurrence of an insured event with benefits payableif the insured event had not occurred.

Conversely, investment contracts are those contracts that transfer financial risk withno significant insurance risk. Based on this definition, all policies issued by theGroup and the Company have been assessed to be insurance contracts as at thereporting date.

Insurance receivables are derecognised when the rights to receive cash flows fromthem have expired or when they have been transferred and the Group and theCompany have also transferred substantially all risks and rewards of ownership.

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(p) Insurance payable

(q) Insurance contract liabilities

(i) Claim liabilities

Insurance payable are recognised when due and measured on initial recognition at thefair value of the consideration payable less directly attributable transaction costs.Subsequent to initial recognition, they are measured at amortised cost using theeffective interest method.

Claim liabilities represent the Group's obligations, whether contractual orotherwise, to make future payments in relation to all claims that have beenincurred as at reporting date. Claim liabilities are the estimated cost of all claimsincurred but not settled at the reporting date, whether reported or not, togetherwith related claims handling costs and other recoveries. Claim liabilitiescomprise liabilities for outstanding claims - being the cost of claims incurredand reported to the Group and the - as well as a reserve for claims incurred butnot reported ("IBNR") and a provision of risk margin for adverse deviation("PRAD") calculated at 75% confidence level at the overall Group andCompany level.

Liabilities for outstanding claims are recognised as advised by policyholders.IBNR claims are estimated via an actuarial valuation performed by a qualifiedactuary, using a mathematical method of estimation based on, amongst others,actual claim development patterns.

Insurance contract liabilities are recognised and measured in accordance with theterms and conditions of the respective insurance contracts and are also based onregulatory guidelines, specifically, the Risk-Based Capital ("RBC") Framework forinsurers issued by BNM.

The insurance contract liabilities of the Group and the Company comprise claimliabilities and premium liabilities.

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(q) Insurance contract liabilities (Contd.)

(ii) Premium liabilities

•

URR is estimated via an actuarial valuation performed by a qualified actuary,using a mathematical method of estimation similar to IBNR claims.

Premium liabilities represent the Group's future obligations on insurancecontracts as represented by premiums received for risks that have not yetexpired. The movement in premium liabilities is released over the term of theinsurance contracts and is recognised as premium income.

In accordance with the valuation requirements of the RBC Framework, premiumliabilities are reported at the higher of the aggregate of the unearned premiumreserves ("UPR") for all lines of business or the best estimate value of thereinsurer's unexpired risk reserves ("URR") at the end of the financial year and aPRAD calculated at 75% confidence level at the overall Company level.

The URR is a prospective estimate of the expected future payments arisingfrom future events insured under policies in force as at the end of thefinancial year and also includes allowance for expenses, including overheadsand cost of reinsurance, expected to be incurred during the unexpired periodin administering these policies and settling the relevant claims, and expectedfuture premium refunds.

Unexpired risk reserves

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(ii) Premium liabilities (Contd.)

•

-

-

Motor, bond, group medical insurance andforeign workers compensation 10%

Fire, engineering, marine hull, aviation and individual medical insurance 15%Other classes 25%

-

-

(iii) Liability adequacy test

1/8th method for all other classes of overseas inward treaty business with adeduction of 20% for acquisition costs.

Non-annual policies are time-apportioned over the period of the risks.

1/24th method for all other classes of general business in respect ofMalaysian policies, reduced by the lower of the following commission ratesor actual commission incurred:

25% method for marine and aviation cargo and transit

Unearned premium

The UPR represents the portion of the net premiums of insurance policieswritten that relate to the unexpired periods of the policies at the end of thefinancial period. The methods of computation of UPR are as follows:

At each reporting date, the Group and the Company reviews all insurancecontract liabilities to ensure that the carrying amount of the liabilities issufficient or adequate to cover the obligations of the Group and of the Company,contractual or otherwise, with respect to insurance contracts issued. Inperforming this review, the Group and the Company discount all contractualcash flows and compares this against the carrying value of insurance contractliabilities. Any deficiency is recognised in profit or loss.

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(iii) Liability adequacy test (Contd.)

(r) Provisions

(s) Financial liabilities

The estimation of claim liabilities and premium liabilities performed atreporting date is part of the liability adequacy tests performed by the Group andthe Company. Based on this, all insurance contract liabilities as at reporting dateare deemed to be adequate.

Provisions are recognised when the Group and the Company have a presentobligation (legal or constructive) as a result of a past event, it is probable that anoutflow of resources embodying economic benefits will be required to settle theobligation and the amount of the obligation can be measured reliably. If it is nolonger probable that an outflow of economic resources will be required to settle theobligation, the provision is reversed. If the effect of the time value of money ismaterial, provisions are discounted using a current pre tax rate that reflects, whereappropriate, the risks specific to the liability.

Financial liabilities classified as other financial liabilities are recognised in thestatements of financial position when the Group and the Company becomes a partyto the contractual provisions of the financial instrument. Other financial liabilitiesinclude cash collateral deposits received from policyholders. Insurance and otherpayables are recognised when due and measured on initial recognition at the fairvalue of the consideration received less directly attributable transaction costs.Subsequent to initial recognition, they are measured at amortized cost using theeffective interest method.

Gain and losses are recognised in the income statement when the liabilities arederegonise and through the amortisation process.

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(t) Share capital

(u) Leases

(i) Classification

(ii) Operating Leases - the Group and the Company as lessee

(v) Contingent Liabilities and Contingent Assets

Operating lease payments are recognised as an expense on a straight-line basisover the term of the relevant lease.

A contingent liability or asset is a possible obligation or asset that arises from pastevents and whose existence is confirmed only by the occurrence or non-occurrence ofuncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised in the statements of financialposition of the Group.

An equity instrument is any contract that evidences a residual interest in the assets ofthe Group and of the Company after deducting all of its liabilities. Ordinary sharesare equity instruments.

Ordinary shares are recorded at the proceeds received, net of directly attributableincremental transaction costs. Dividends on ordinary shares are recognised in equityin the period in which they are declared.

A lease is recognised as a finance lease if it transfers substantially to the Groupand the Company all the risks and rewards incidental to ownership. Leases ofland and buildings are classified as operating or finance leases in the same wayas leases of other assets. All leases that do not transfer substantially all the risksand rewards are classified as operating leases.

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2.3 Uncertainty in Accounting Estimates for General Insurance Business

The preparation of financial statements requires the use of certain significant accountingestimates. It also requires management to exercise its judgement in the process ofapplying the Group's accounting policies. These are areas involving a higher degree ofjudgement or complexity, or areas where assumptions and estimates are significant to thefinancial statements.

There may be significant reporting lags between the occurrence of an insured event andthe time it is reported to the Group and the Company. Following the identification andnotification of an insured loss, the quantum of loss may not be reasonably ascertained asyet and there may still be uncertainty as to the magnitude of the claim. There are manyfactors that will determine the level of uncertainty such as inflation, inconsistent judicialinterpretations, legislative changes and claims handling procedures.

Estimates and judgements are continually evaluated and are based on historical experienceand other factors, including expectation of future events that are believed to be reasonableunder the circumstances.

The principal uncertainty in the Group's general insurance business arises from thetechnical provisions which include the provisions of premiums and claims liabilities. Thepremium liabilities comprise unexpired risk reserves while claim liabilities compriseprovision for outstanding claims and IBNR.

Generally, premiums and claims liabilities are determined based upon previous claimsexperience, existing knowledge of events, the terms and conditions of the relevant policiesand interpretation of circumstances. Particularly relevant is past experience with similarcases, historical claims development trends, legislative changes, judicial decisions andeconomic conditions. It is certain that actual future premiums and claims liabilities willnot exactly develop as projected and may vary from the Group's projections.

The estimates of premiums and claims liabilities are therefore sensitive to various factorsand uncertainties. The establishment of technical provisions is an inherently uncertainprocess and the eventual settlement of premiums and claims liabilities may vary fromtheir initial estimates.

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2.4 Changes in accounting policies

Effective forannual periods

Description beginning on orafter

1 July 2012

1 January 2013

1 January 2013MFRS 10 Consolidated Financial Statements 1 January 2013MFRS 11 Joint Arrangements 1 January 2013MFRS 12 Disclosure of Interests in Other Entities 1 January 2013MFRS 13 Fair Value Measurement 1 January 2013MFRS 119 Employee Benefits (IAS 19 as amended by IASB 1 January 2013in June 2011)

1 January 2013

1 January 2013IC Interpretation 20 Stripping Costs in the Production Phase of aSurface Mine 1 January 2013

1 January 2013Annual Improvements 2009-2011 Cycle 1 January 2013Amendments to MFRS 1: Government Loans 1 January 2013

1 January 2013

MFRS 3 Business Combinations (IFRS 3 Business Combinationsissued by IASB in March 2004)MFRS 127 Consolidated and Separate Financial Statements (IAS 27revised by IASB in December 2003)

MFRS 127 Separate Financial Statements (IAS 27 as amended byIASB in May 2011)

Amendments to MFRS 10, MFRS 11 and MFRS 12: ConsolidatedFinancial Statements, Joint Arrangements and Disclosure of Interestsin Other Entities: Transition Guidance

The accounting policies adopted are consistent with those of the previous financial yearexcept as follows:

On 1 January 2013, the Group and the Company adopted the following new andamended MFRS and IC Interpretations mandatory for annual financial periodsbeginning on or after 1 January 2013.

MFRS 128 Investement in Associate and Joint Ventures (IAS 28 asamended by IASB in May 2011)

Amendments to MFRS 7: Disclosures - Offsetting Financial Assetsand Financial Liabilities

Amendments to MFRS 101: Presentation of Items of OtherComprehensive Income

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2.4 Changes in accounting policies (Contd.)

2.4 (a) Application of MFRS 10 Consolidated Financial Statements

Changes in accounting treatment for the investments in wholesale unit trust funds havebeen applied in accordance with the relevant transitional provisions under MFRS 10.

Adoption of the above standards and interpretations did not have any effect on thefianancial performance or position of the Group and the Company except for thosediscussed below:

MFRS 10 replaces the parts of MFRS 127 Consolidated and Separate FinancialStatements that deal with consolidated financial statements and SIC-12 Consolidation -Special Purpose Entities . MFRS 10 changes the definition of control such that aninvestor has control over an investee when a) it has power over the investee, b) it isexposed, or has rights, to variable returns from its involvement with the investee and c)has the ability to use its power to affect its returns. All three of these criteria must bemet for an investor to have control over an investee. Previously, control was defined asthe power to govern the financial and operating policies of an entity so as to obtainbenefits from its activities.

The Company invests in wholesale unit trust funds which are managed by external fundmanagers. These wholesale unit trust funds include Hwang Institutional Bond Fund andAmIncome Select Fund, of which the Company has effective direct interests of 96.71%and 100% as at 31 December 2013 and on which the Company has concluded that thedefinition of control has been met. Accordingly, in compliance with MFRS 10, theCompany has consolidated the financial statements of wholesale unit trust funds fromthe date that control commences and will continue to do so until the date that controlceases.

Prior to the adoption of MFRS 10 on 1 January 2013, no consolidated financialstatements were prepared. The Group applied the standard retrospectively in the currentyear, and hence consolidated financial statements and accompanying notes have beenpresented for the comparative year ended 31 December 2012.

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2.4 (a) Application of MFRS 10 Consolidated Financial Statements (contd.)

(i)

Company MFRS 10 Group1 January 2012 adjustments 1 January 2012

RM RM RM

ASSETSInvestments: 206,477,362 (3,810,281) 202,667,081- Available-for-sale ("AFS") financial assets 147,317,245 (113,957,181) 33,360,064- Financial assets at fair value through profit or loss ("FVTPL") 59,160,117 110,146,900 169,307,017

Loans and other receivables 119,614,122 4,894,962 124,509,084Cash and cash equivalents 4,591,272 33,647 4,624,919

EQUITY AND LIABILITIESReserves 77,527,651 1,379,149 78,906,800Non-controlling interests - 2,513 2,513Deferred tax liabilities 1,699,478 (310,079) 1,389,399Other payables 5,256,242 46,745 5,302,987

Impact of the application of this standard on the assets, liabilities and equity of theGroup as at 1 January 2012 and 31 December 2012 are as follow:

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2.4 (a) Application of MFRS 10 Consolidated Financial Statements (contd.)

(i)

Company Group31 December MFRS 10 31 December

2012 adjustments 2012RM RM RM

ASSETSInvestments: 219,678,229 (6,268,353) 213,409,876- Available-for-sale ("AFS") financial assets 155,733,888 (114,172,103) 41,561,785- Financial assets at fair value through profit or loss ("FVTPL") 63,944,341 107,903,750 171,848,091

Loans and other receivables 147,006,460 8,783,762 155,790,222Cash and cash equivalents 8,518,342 30,683 8,549,025

EQUITY AND LIABILITIESReserves 89,799,047 407,109 90,206,156Non-controlling interests - 2,084,863 2,084,863Other payables 4,692,936 54,120 4,747,056

Impact of the application of this standard on the assets, liabilities and equity of theGroup as at 1 January 2012 and 31 December 2012 are as follow: (Cont'd.)

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2.4 (a) Application of MFRS 10 Consolidated Financial Statements (Contd.)

(ii)

Company Group31 December MFRS 10 31 December

2012 adjustments 2012RM RM RM

Operating revenue 188,702,243 181,418 188,883,661

Other incomeInvestment income, net 12,717,971 181,418 12,899,389Realised gains and losses 10,303,587 (96,592) 10,206,995Fair value gains and losses (956,143) (1,165,771) (2,121,914)

Management expenses (26,282,870) (288,625) (26,571,495)

2.4 (b) Application of MFRS 13 Fair Value Measurement

●

●

● Level 3 inputs are unobservable inputs for the asset or liability.

Fair value measurements are categorised into Level 1, 2 or 3 based on the degree towhich the inputs to the fair value measurements are observable and the significance ofthe inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assetsor liabilities that the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices included within Level 1, that areobservable for the asset or liability, either directly or indirectly; and

Impact of the application of this standard on the components of income statementsof the Group as at 31 December 2012 are as follow:

MFRS 13 establishes a single source of guidance under MFRS for all fair valuemeasurement. MFRS 13 does not change when an entity is required to use fair value,but rather provides guidance on how to measure fair value under MFRS 13 defines fairvalue as an exit price. As a result of the guidance in MFRS 13, the Group re-assessedits policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. MFRS 13 also requiresadditional disclosures.

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2.4 (b) Application of MFRS 13 Fair Value Measurement (Contd.)

2.4 (c) Application of MFRS 101 Presentation of Items of Other Comprehensive Income

2.5 Standards Issued but not yet Effective



Amendments to MFRS 132 Offsetting Financial Assets and Financial 1 January 2014LiabilitiesAmendments to MFRS 10, MFRS 12 and MFRS 127: InvestmentEntities 1 January 2014Amendments to MFRS 136 Recoverable Amount Disclosuresfor Non-Financial Assets 1 January 2014Amendments to MFRS 139 Novation of Derivatives andContinuation of Hedge Accounting 1 January 2014IC Interpretation 21 Levies 1 January 2014

Application of MFRS 13 has not materially impacted the fair value measurement of theGroup. Additional disclosures where required, are provided in the individual notesrelating to the assets and liabilities whose fair values were determined.

The standards and interpretations that are issued but not yet effective up to the date ofissuance of the Group's and the Company's financial statements are disclosed below.The Group and the Company intend to adopt these standards, if applicable, when theybecome effective.

The fair value of the freehold office lots was determined based on the market approachthat reflects recent transaction prices for similar properties. There has been no changeto the valuation technique during the year.

The amendments to MFRS 101 introduce a grouping of items presented in othercomprehensive income. Items that will be reclassified ("recycled") to profit or loss at afuture point in time (eg. Net loss or gain on available-for-sale financial assets) have tobe presented separately from items that will not be reclassified (eg. revaluation of landand buildings). The amendments affects presentation only and have no impact on theGroup's financial position or performance.

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2.5 Standards Issued but not yet Effective (Contd.)



Amendments to MFRS 119 Defined Benefit Plans: EmployeeContributions 1 July 2014Annual Improvements to MFRSs 2010-2012 Cycle 1 July 2014Annual Improvements to MFRSs 2011-2013 Cycle 1 July 2014MFRS 9 Financial Instruments (IFRS 9 issued by IASB inNovember 2009) To be announcedMFRS 9 Financial Instruments (IFRS 9 issued by IASB inOctober 2010) To be announcedMFRS 9 Financial Instruments Hedge Accounting and amendmentsto MFRS 9, MFRS 7 and MFRS 139 To be announced

MFRS 9 Financial Instruments.

2.6 Adjustment for share of MMIP's assets and liabilities

MFRS 9 replaces the guidance in MFRS 139 Financial Statement : Recognition andMeasurement on classification and measurement of the financial assets. Uponadoption of MFRS 9, there is an impact on the classification and measurement offinancial assets and liabilities. The Company is currently assessing the financial impactof adopting this standard.

During the current financial year, Company adjusted the opening balance of its share ofthe assets and liabilities of MMIP and thereon, the effects on retained earnings as at 1January 2012 and for the comparative year ended 31 December 2012. The adjustmentarose as a result of a reconciliation exercise that was performed against the financialstatements of MMIP.

The directors expect that the adoption of the above standards and interpretations willhave no material impact on the financial statements in the period of initial applicationexcept as disclosed below :

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2.6 Adjustment for share of MMIP's assets and liabilities (contd.)

Statement of financial position as at 1 January 2012

As previously As restatedstated as at Effect of as at

1 January 2012 Adjustment 1 January 2012RM RM RM

ASSETSLoans and other receivables 110,792,267 8,821,855 119,614,122

EQUITY AND LIABILITIESRetained earnings 67,902,311 5,321,133 73,223,444Insurance payable 52,511,737 3,500,722 56,012,459

Statement of financial position as at 31 December 2012

As previouslystated As restated as

31 December Effect of at 31 December2012 Adjustment 2012RM RM RM

ASSETSLoans and other receivables 136,120,700 10,885,760 147,006,460

EQUITY AND LIABILITIESRetained earnings 80,302,525 4,915,948 85,218,473Insurance contract liabilities 234,673,047 (178,471) 234,494,576Insurance payable 34,575,591 6,148,283 40,723,874

The effects of the adjustment on the asset, liabilities and equity on the statement offinancial position of the Company as at 1 January 2012 and 31 December 2012 and onthe components of income statement for the year ended 31 December 2012 is presentedbelow.

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2.6 Adjustment for share of MMIP's assets and liabilities (contd.)

Income statement for the year ended 31 December 2012

As previouslystated As restated as

31 December Effect of at 31 December2012 Adjustment 2012RM RM RM

Gross written premiums 160,862,983 - 160,862,983Change in unearned premiums provision (5,521,186) 2,413,338 (3,107,848)Gross earned premiums 155,341,797 2,413,338 157,755,135

Gross change in contract liabilities (31,494,978) (2,234,867) (33,729,845)

Other operating income 3,408,489 (583,656) 2,824,833

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3. PROPERTY, PLANT AND EQUIPMENT

Group/Company At Valuation At CostLong-term Furniture,

Freehold Leasehold Office Fixtures Motor Office Soft TotalOffice Lots Office Lots Equipment & Fittings Vehicles Renovation Furnishing 2013

RM RM RM RM RM RM RM RM

VALUATION/COSTAt 1 January 2013 6,500,000 3,598,000 6,718,574 1,084,931 1,182,029 1,208,878 178,111 20,470,523Additions - - 886,387 22,147 100,000 - - 1,008,534At 31 December 2013 6,500,000 3,598,000 7,604,961 1,107,078 1,282,029 1,208,878 178,111 21,479,057

ACCUMULATED DEPRECIATIONAt 1 January 2013 260,000 151,600 5,979,081 810,229 547,401 749,138 175,640 8,673,089Charge for the year 130,000 71,800 514,206 76,901 256,265 126,552 1,285 1,177,009At 31 December 2013 390,000 223,400 6,493,287 887,130 803,666 875,690 176,925 9,850,098

NET BOOK VALUEAt 31 December 2013 6,110,000 3,374,600 1,111,674 219,948 478,363 333,188 1,186 11,628,959

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3. PROPERTY, PLANT AND EQUIPMENT

Group/Company At Valuation At CostLong-term Furniture,

Freehold Leasehold Office Fixtures Motor Office Soft TotalOffice Lots Office Lots Equipment & Fittings Vehicles Renovation Furnishing 2012

RM RM RM RM RM RM RM RM

VALUATION/COSTAt 1 January 2012 6,500,000 3,598,000 6,351,866 1,090,476 1,074,651 795,693 178,111 19,588,797Additions - - 424,317 31,385 370,825 413,185 - 1,239,712Disposals - - (46,895) (25,342) (263,447) - - (335,684)Write-offs - - (10,714) (11,588) - - - (22,302)At 31 December 2012 6,500,000 3,598,000 6,718,574 1,084,931 1,182,029 1,208,878 178,111 20,470,523

ACCUMULATED DEPRECIATIONAt 1 January 2012 130,000 79,800 5,679,348 764,985 556,579 620,546 168,165 7,999,423Charge for the year 130,000 71,800 357,335 79,399 236,266 128,592 7,475 1,010,867Disposals - - (46,892) (23,229) (245,444) - - (315,565)Write-offs - - (10,710) (10,926) - - - (21,636)At 31 December 2012 260,000 151,600 5,979,081 810,229 547,401 749,138 175,640 8,673,089

NET BOOK VALUEAt 31 December 2012 6,240,000 3,446,400 739,493 274,702 634,628 459,740 2,471 11,797,434

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3. PROPERTY, PLANT AND EQUIPMENT (CONTD.)

(i)

The strata titles to the freehold office lots have yet to be issued by the relevant authorities.

(ii)

(iii)

31.12.2013 31.12.2012RM RM

Freehold office lots 3,005,278 3,155,542Long-term leasehold office lots 2,058,909 2,124,830

5,064,187 5,280,372

Group/Company

The Group's freehold and leasehold office lots are stated at their revalued amounts, beingthe fair value at the date of revaluation, less any subsequent accumulated depreciation andsubsequent accumulated impairment loss. The freehold and leasehold office lots wererevalued as at 29 December 2011 by the Directors based on the valuation carried out byindependent professional valuers, Mr. Tee Chin An (RISM) and Mr. Rayner B.L. Molikun(RISM) of JS Valuers Property Consultants Sdn. Bhd. and JS Valuers PropertyConsultants (E.M.) Sdn. Bhd. respectively on an open market value basis.

The valuers above are independent valuers not related to the Group and they are themembers of the Royal Institution of Surveyors Malaysia (RISM) and they haveappropriate qualifications and recent experience in the fair value measurement ofproperties in the relevant location.

A desktop review has been performed by the Management and Directors to ascertain if thefair values of the freehold and leasehold office lots are reflective of the current marketconditions.

Included in the property, plant and equipment of the Group and of the Company is the costof fully depreciated assets amounting to RM6,626,181 (2012: RM6,282,352) which arestill in use.

The carrying amounts of the revalued properties had they been stated at cost lessaccumulated depreciation and impairment would be as follows:

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4. INVESTMENTS

(a) AFS Financial Assets

31.12.2013 31.12.2012 1.1.2012RM RM RM

Malaysian Government Securities 462,950 - 518,850Corporate debt securities 57,271,907 41,561,785 32,841,214Total 57,734,857 41,561,785 33,360,064

31.12.2013 31.12.2012 1.1.2012RM RM RM

Malaysian Government Securities 462,950 - 518,850Corporate debt securities 57,271,907 41,561,785 32,841,214Wholesale unit trust funds (Note ( c )) 104,004,006 114,172,103 113,957,181Total 161,738,863 155,733,888 147,317,245

(b) Financial Assets at FVTPL

31.12.2013 31.12.2012 1.1.2012RM RM RM

Held for trading: Corporate debt securities 101,994,300 107,903,750 110,146,900 Unit trust funds 18,912,109 16,472,468 17,519,599 Equity securities 60,696,053 47,471,873 41,640,518Total 181,602,462 171,848,091 169,307,017

31.12.2013 31.12.2012 1.1.2012RM RM RM

Held for trading: Unit trust funds 18,912,109 16,472,468 17,519,599 Equity securities 60,696,053 47,471,873 41,640,518Total 79,608,162 63,944,341 59,160,117

Group

Group

Company

Company

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4. INVESTMENTS (CONTD.)

(c) Investment in subsidiaries - Wholesale unit trust funds

Established in Malaysia

31.12.2013 31.12.2012 1.1.2012

Hwang Institutional Bond Fund* 96.71% 96.79% 99.99%

AmIncome Select Fund 100% 100% 100%

Hwang Institutional Bond Fund*

AmIncome Select Fund

* Audited by a firm of chartered accountants other than Ernst & Young.

5. REINSURANCE ASSETS

Note 31.12.2013 31.12.2012 1.1.2012RM RM RM

Reinsurance of insurance contracts Claim liabilities 12 (i) 69,342,922 73,016,295 62,385,883 Premium liabilities 12 (ii) 21,264,863 19,870,572 23,473,655

90,607,785 92,886,867 85,859,538Allowance for impairment (2,000,000) - -

88,607,785 92,886,867 85,859,538

Unit Trust Fund holding investments in FixedIncome Securities/Sukuk

Effective Direct Interests

Principal Activities

Unit Trust Fund holding investments in FixedIncome Securities

With the adoption of MFRS 10, the Company has consolidated the financial statements ofthe wholesale unit trust funds restropectively as at 31 December 2012 and 1 January 2012,as described in Note 2.4(a).

Group/Company

63

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6. LOANS AND OTHER RECEIVABLES

31.12.2013 31.12.2012 1.1.2012RM RM RM

Other receivables: Other receivables, deposits and prepayments 1,439,313 784,666 1,114,981 Income due and accrued 2,427,272 2,968,432 4,299,252

* Share of the asset held by MMIP 51,987,078 26,190,805 16,193,983 Amounts owing from sale of shares/ matured bonds 933,843 1,577,743 422,206

56,787,506 31,521,646 22,030,422Fixed and call deposits with: Licensed banks in Malaysia 65,558,701 85,268,576 63,478,662 Other financial institutions 39,000,000 39,000,000 39,000,000

104,558,701 124,268,576 102,478,662Total loans and other receivables 161,346,207 155,790,222 124,509,084

Company31.12.2013 31.12.2012 1.1.2012

RM RM RM(Restated) (Restated)

Other receivables: Other receivables, deposits and prepayments 1,439,313 784,666 1,114,981 Income due and accrued 1,402,700 1,798,276 2,818,990

Share of the asset held by MMIP * 51,987,078 26,190,805 16,193,983 Amounts owing from sale of shares/

matured bonds 933,843 1,577,743 422,20655,762,934 30,351,490 20,550,160

Fixed and call deposits with: Licensed banks in Malaysia 62,480,489 77,654,970 60,063,962 Other financial institutions 39,000,000 39,000,000 39,000,000

101,480,489 116,654,970 99,063,962Total loans and other receivables 157,243,423 147,006,460 119,614,122

Group

64

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6. LOANS AND OTHER RECEIVABLES (CONTD.)

*

7. DEFERRED TAX (ASSETS)/LIABILITIES

2013 2012 2013 2012RM RM RM RM

At 1 January 1,570,438 1,389,399 1,570,438 1,699,478Recognised in profit or loss (Note 24) (1,573,780) 204,260 (1,573,780) 204,260Recognised in other comprehensive income (119,419) (23,221) (119,419) (333,300)At 31 December (122,761) 1,570,438 (122,761) 1,570,438

31.12.2013 31.12.2012 1.1.2012RM RM RM

Deferred tax assets 2,812,171 3,365,438 2,543,399Deferred tax liabilities (2,934,932) (1,795,000) (1,154,000)

(122,761) 1,570,438 1,389,399

31.12.2013 31.12.2012 1.1.2012RM RM RM

Deferred tax assets 2,812,171 3,365,438 2,853,478Deferred tax liabilities (2,934,932) (1,795,000) (1,154,000)

(122,761) 1,570,438 1,699,478

Presented after appropriate offsetting as follow:

Group

Company

Company

The weighted average effective interest rates of the fixed and call deposits as at 31 December2013 were 3.25% (2012: 3.06%).

Group

The share of net assets of MMIP includes the Company's cash contribution of RM17,989,134made to MMIP, pursuant to cash calls made by the MMIP during the current financial year.The cash contributions were made in respect of the Company's share of MMIP's accumulatedlosses up to 31 December 2012.

Included in the fixed and call deposits are cash collaterals received from policyholders ofRM40,234,060 (2012: RM42,880,299) for guarantees issued on behalf of policyholders (Note13).

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7. DEFERRED TAXATION (CONTD.)

Group Fair valuegains on

Accelerated Property financialcapital revaluation assets at AFS

allowances reserve FVTPL reserve TotalRM RM RM RM RM

At 1 January 2013 315,000 785,738 2,035,000 229,700 3,365,438Recognised in: Profit or loss (114,737) (61,602) (271,842) 14,333 (433,848) Other comprehensive income - - - (119,419) (119,419)At 31 December 2013 200,263 724,136 1,763,158 124,614 2,812,171

At 1 January 2012 150,000 818,478 1,322,000 252,921 2,543,399Recognised in: Profit or loss 165,000 (32,740) 713,000 - 845,260 Other comprehensive income - - - (23,221) (23,221)At 31 December 2012 315,000 785,738 2,035,000 229,700 3,365,438

The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows:

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Group Accretion ofImpaired discounts

AFS net of Unutilised Unabsorbedfinancial amortisation Premium business capital

Provision assets of premiums liabilities losses allowance TotalRM RM RM RM RM RM RM

At 1 January 2013 (496,400) (1,250,000) 6,500 (55,100) - - (1,795,000)Recognised in profit or loss (120,050) (62,500) (19,030) 69,397 (744,776) (262,973) (1,139,932)At 31 December 2013 (616,450) (1,312,500) (12,530) 14,297 (744,776) (262,973) (2,934,932)

At 1 January 2012 - (1,250,000) 3,000 93,000 - - (1,154,000)Recognised in profit or loss (496,400) - 3,500 (148,100) - - (641,000)At 31 December 2012 (496,400) (1,250,000) 6,500 (55,100) - - (1,795,000)

67

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Company Fair valuegains on

Accelerated Property financialcapital revaluation assets at AFS

allowances reserve FVTPL reserve TotalRM RM RM RM RM

At 1 January 2013 315,000 785,738 2,035,000 229,700 3,365,438Recognised in: Profit or loss (114,737) (61,602) (271,842) 14,333 (433,848) Other comprehensive income - - - (119,419) (119,419)At 31 December 2013 200,263 724,136 1,763,158 124,614 2,812,171

At 1 January 2012 150,000 818,478 1,322,000 563,000 2,853,478Recognised in: Profit or loss 165,000 (32,740) 713,000 - 845,260 Other comprehensive income - - - (333,300) (333,300)At 31 December 2012 315,000 785,738 2,035,000 229,700 3,365,438

68

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Company Accretion ofImpaired discounts

AFS net of Unutilised Unabsorbedfinancial amortisation Premium business capital

Provision assets of premiums liabilities losses allowance TotalRM RM RM RM RM RM RM

At 1 January 2013 (496,400) (1,250,000) 6,500 (55,100) - - (1,795,000)Recognised in profit or loss (120,050) (62,500) (19,030) 69,397 (744,776) (262,973) (1,139,932)At 31 December 2013 (616,450) (1,312,500) (12,530) 14,297 (744,776) (262,973) (2,934,932)

At 1 January 2012 - (1,250,000) 3,000 93,000 - - (1,154,000)Recognised in profit or loss (496,400) - 3,500 (148,100) - - (641,000)At 31 December 2012 (496,400) (1,250,000) 6,500 (55,100) - - (1,795,000)

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8. INSURANCE RECEIVABLES

31.12.2013 31.12.2012 1.1.2012RM RM RM

Due premiums including agents/brokersand co-insurers balances 26,090,860 28,314,216 50,040,354

Due from reinsurers and cedants 4,373,695 10,792,144 4,043,03030,464,555 39,106,360 54,083,384

Less: Allowance for impairment (4,141,611) (4,482,576) (3,844,233)26,322,944 34,623,784 50,239,151

9. CASH AND CASH EQUIVALENTS

31.12.2013 31.12.2012 1.1.2012RM RM RM

Cash and bank balances 8,853,864 8,549,025 4,624,919

31.12.2013 31.12.2012 1.1.2012RM RM RM

Cash and bank balances 8,830,108 8,518,342 4,591,272

10. SHARE CAPITAL

No. of shares RM No. of shares RM

At beginning/end of year

Authorised 100,000,000 100,000,000 100,000,000 100,000,000

Issued and fully paid up 100,000,000 100,000,000 100,000,000 100,000,000

31.12.2013 31.12.2012

Group/Company

Group

Company

Group/Company

70

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11. RESERVES

Reserves of the Company relates to the following :

(a) Property revaluation reserve

(b) AFS reserve

(c) Retained earnings

The Company did not elect for the irrevocable option to disregard the Section 108balance. Accordingly, during the transitional period, the Company utilised the credit in theSection 108 balance to distribute cash dividend payments to ordinary shareholders asdefined under the Finance Act 2007. As at 31 December 2012, the Company hadsufficient credit in the Section 108 balance to pay franked dividends out of its entireretained earnings. Any Section 108 balance which has not been utilised as at 31 December2013 is now disregarded. The Company may now distribute dividends out of its entireretained earnings under the single tier system.

Prior to the year of assessment 2008, Malaysian companies adopted the full imputationsystem. In accordance with the Finance Act 2007 which was gazetted on 28 December2007, companies shall not be entitled to deduct tax on dividends paid, credited ordistributed to its shareholders, and such dividends will be exempted from tax in the handsof the shareholders ("single tier system"). However, there was a transitional period of sixyears, which expired on 31 December 2013, to allow companies to pay franked dividendsto their shareholders under limited circumstances. Companies also had an irrevocableoption to disregard the Section 108 balance and opt to pay dividends under the single tiersystem. The change in the tax legislation also provided for the Section 108 balance to belocked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.

The AFS reserve is in respect of unrealised gains on AFS financial assets net of deferredtaxation.

The property revaluation reserve represents the surplus on revaluation of properties and isnot distributable as cash dividends until its realisation.

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12. INSURANCE CONTRACT LIABILITIES

Group/CompanyGross Reinsurance Net Gross Reinsurance Net

RM RM RM RM RM RM(Restated)

Provision for claims reported by policyholders 138,378,008 (59,499,800) 78,878,208 126,193,208 (62,924,782) 63,268,426Provision for incurred but not reported claims ("IBNR") 35,523,911 (4,507,233) 31,016,678 29,305,906 (3,132,601) 26,173,305Claims handling expenses 1,386,684 - 1,386,684 1,272,206 - 1,272,206Provision of risk margin for adverse deviations ("PRAD") 15,898,936 (5,335,889) 10,563,047 12,161,109 (6,958,912) 5,202,197Claim liabilities (i) 191,187,539 (69,342,922) 121,844,617 168,932,429 (73,016,295) 95,916,134Premiums liabilities (ii) 72,454,169 (21,264,863) 51,189,306 65,562,147 (19,870,572) 45,691,575

263,641,708 (90,607,785) 173,033,923 234,494,576 (92,886,867) 141,607,709

31.12.2013 31.12.2012

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12. INSURANCE CONTRACT LIABILITIES (CONTD.)



(i) Claims LiabilitiesAt 1 January as previously stated 166,697,562 (73,016,295) 93,681,267 135,202,584 (62,385,883) 72,816,701Effect of MMIP adjustment

(Note 2.6) 2,234,867 - 2,234,867 2,234,867 - 2,234,867Balance at 1 January restated 168,932,429 (73,016,295) 95,916,134 137,437,451 (62,385,883) 75,051,568Claims incurred in the current accident year 142,076,158 (23,551,098) 118,525,060 125,981,593 (40,706,373) 85,275,220Movements in claims incurred in prior accident years (46,940,812) 1,179,016 (45,761,796) (36,736,773) 5,565,005 (31,171,768)Claims paid during the year

(Note 23) (72,880,236) 26,045,455 (46,834,781) (57,749,842) 24,510,956 (33,238,886)At 31 December 191,187,539 (69,342,922) 121,844,617 168,932,429 (73,016,295) 95,916,134

31.12.201231.12.2013

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12. INSURANCE CONTRACT LIABILITIES (CONTD.)



(ii) Premium LiabilitiesAt 1 January as previously stated 67,975,485 (19,870,572) 48,104,913 62,454,299 (23,473,655) 38,980,644Effect of MMIP adjustment

(Note 2.6) (2,413,338) - (2,413,338) - - -Balance at 1 January restated 65,562,147 (19,870,572) 45,691,575 62,454,299 (23,473,655) 38,980,644Premiums written in the year 175,642,808 (75,593,407) 100,049,401 160,862,983 (73,239,779) 87,623,204Premiums earned during the year (168,750,786) 74,199,116 (94,551,670) (157,755,135) 76,842,862 (80,912,273)At 31 December 72,454,169 (21,264,863) 51,189,306 65,562,147 (19,870,572) 45,691,575

31.12.2013 31.12.2012

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13. OTHER FINANCIAL LIABILITIES

31.12.2013 31.12.2012 1.1.2012RM RM RM

Cash collateral deposits received fromfrom policyholders (Note 6) 40,234,060 42,880,299 39,207,552

Interest on cash collateral depositsreceived from policyholders 1,665,755 1,568,105 1,442,205

41,899,815 44,448,404 40,649,757

14. INSURANCE PAYABLES

31.12.2013 31.12.2012 1.1.2012RM RM RM


Due to reinsurers and cedants 25,356,255 38,704,922 52,473,072Due to agents/brokers, co-insurers and insureds 2,624,433 2,018,952 3,539,387

27,980,688 40,723,874 56,012,459

15. OTHER PAYABLES

31.12.2013 31.12.2012 1.1.2012RM RM RM

Other payables 5,497,510 4,582,223 5,182,744Accrued expenses 165,614 164,833 120,243

5,663,124 4,747,056 5,302,987

31.12.2013 31.12.2012 1.1.2012RM RM RM

Other payables 5,456,036 4,528,103 5,135,999Accrued expenses 165,614 164,833 120,243

5,621,650 4,692,936 5,256,242

Group/Company

Group/Company

Group

Company

75

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16. OPERATING REVENUE

2013 2012 2013 2012RM RM RM RM

Gross Premium 175,642,808 160,862,983 175,642,808 160,862,983Investment income before investment expenses (Note 17) 13,240,853 11,254,651 13,059,435 11,817,137

188,883,661 172,117,634 188,702,243 172,680,120

17. INVESTMENT INCOME, NET

2013 2012 2013 2012RM RM RM RM

Financial assets at FVTPL

Dividend income:Equity securities quoted 2,153,803 1,870,701 2,153,803 1,870,701 in MalaysiaUnit trust funds 1,211,172 738,377 1,211,172 738,377

AFS financial assets

Interest/profit income:Malaysian government securities 1,309,989 656,232 2,934 -Corporate debt securities 5,888,981 6,130,668 2,661,496 1,802,981

Amortisation of premiumnet of accretion

of discountof discounts (834,345) (951,803) (139,064) (8,761)Distribution income from wholesale unit trust funds - - 3,878,718 4,845,856Interest/profit income from fixed and call deposits 3,511,253 2,810,476 3,290,376 2,567,983Investment income before investment expenses (Note 16) 13,240,853 11,254,651 13,059,435 11,817,137Less: Investment (341,464) (111,189) (341,464) (111,189)

expenses 12,899,389 11,143,462 12,717,971 11,705,948

Group Company

Group Company

76

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18. MANAGEMENT EXPENSES

2013 2012 2013 2012RM RM RM RM

Employee benefits expenses 15,902,271 14,278,436 15,902,271 14,278,436Non-executive directors remuneration: - Fees 338,000 159,000 338,000 159,000 - Other emoluments 13,700 13,700 13,700 13,700Auditors' remuneration - Audit fees 120,000 102,000 120,000 102,000 - Regulatory related

fees 20,000 18,000 20,000 18,000 - Non audit fees 12,000 11,500 12,000 11,500Management/survey fees 941,548 1,143,054 716,939 934,605(Net reversal of)/allowancefor impairment of :

- insurance receivables (323,372) 767,141 (323,372) 767,141- reinsurance asset 2,000,000 - 2,000,000 -

Bad debts recovered (40,098) (92,198) (40,098) (92,198)Depreciation (Note 3) 1,177,009 1,010,867 1,177,009 1,010,867Operating leases: - Minimum lease payments

for premises 311,679 268,163 311,679 268,163 - Minimum lease payments

for office equipment 44,363 46,324 44,363 46,324Perbadanan Insurans Deposit

Malaysia ("PIDM") levies 75,000 173,483 75,000 173,483Other expenses 5,979,395 5,776,013 5,915,379 5,711,863Total management expense 26,571,495 23,675,483 26,282,870 23,402,884

CompanyGroup

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18. MANAGEMENT EXPENSES (CONTD.)

Employee benefits expenses

2013 2012RM RM

Wages, salaries and bonusesSocial security contributions 96,611 87,790Contribution to Employees Provident Fund 2,101,712 2,032,156Short term accumulating compensated absence 40,512 (126,236)Other benefits 13,663,436 12,284,726

15,902,271 14,278,436

19. DIRECTORS' REMUNERATION

2013 2012RM RM

Executive Director - Salary 464,970 658,016 - Allowance 90,000 60,000 - Defined contribution plans 152,278 371,256 - Bonus 320,547 304,005Total salary costs (Note 18) 1,027,795 1,393,277Benefits-in-kind 45,349 44,820

1,073,144 1,438,097

Non-Executive Directors - Fees 338,000 159,000 - Other emoluments 13,700 13,700

351,700 172,7001,424,844 1,610,797

Company

Group/Company

Included in employee benefits expenses is the executive director's/chief executive officer'sremuneration amounting to RM1,027,795 (2012: RM1,393,277) as disclosed in Note 19.

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20. REALISED GAINS AND LOSSES

2013 2012 2013 2012RM RM RM RM

Financial assets at FVTPL: Equity securities 9,923,425 4,263,155 9,923,425 4,263,155 Corporate debt securities (96,592) 410,485 - -AFS financial assets: Corporate debt securities 349,749 131,543 349,749 131,543 Malaysian Government

Securities 30,413 21,068 30,413 21,06810,206,995 4,826,251 10,303,587 4,415,766

21. FAIR VALUE GAINS AND LOSSES

2013 2012 2013 2012RM RM RM RM

Fair value (losses)/gains on financial assets at FVTPL (2,356,975) 2,730,832 (1,191,204) 2,851,633Write back impairment loss on AFS financial assets 485,061 - 485,061 -Impairment loss on AFS

financial assets (250,000) - (250,000) -(2,121,914) 2,730,832 (956,143) 2,851,633

Group Company

Group Company

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22. OTHER OPERATING INCOME

2013 2012RM RM

(Restated)

Policy transfer fees 1,920 2,618Realised gain/(losses) on foreign exchange 175,909 (45,298)Rental income 23,400 18,000Sundry income 2,961,669 1,956,835Service charges 279,644 771,658Gain on disposal of plant and equipments - 121,020

3,442,542 2,824,833

23. NET CLAIMS INCURRED

2013 2012RM RM

(Restated)

Gross claims paid less salvage 72,880,236 57,749,842Claims ceded to reinsurers (26,045,455) (24,510,956)Net claims paid 46,834,781 33,238,886

Gross change in contract liabilities: At 31 December 191,187,539 168,932,429 At 1 January (168,932,429) (135,202,584)

22,255,110 33,729,845

Change in contract liabilities ceded to reinsurers: At 31 December (69,342,922) (73,016,295) At 1 January 73,016,295 62,385,883

3,673,373 (10,630,412)72,763,264 56,338,319

Group/Company

Group/Company

80

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24. TAXATION

2013 2012RM RM

Current income tax - 4,449,269Over provision of income tax in prior years (987,860) (553,529)

(987,860) 3,895,740Deferred tax (Note 7)

- relating to origination and reversal of temporary differences (1,581,248) 600,519

Effect on opening defered tax due to changes in income tax rates 7,468 -

Over provision of deferred tax in prior years - (396,259)(1,573,780) 204,260(2,561,640) 4,100,000

2013 2012RM RM

Profit before taxation 14,058,634 18,945,029

Taxation at Malaysian statutory tax rate of 25% 3,514,659 4,736,257Effect on opening defered tax due to changes in income tax rates 7,468 -Income not subject to tax (1,687,218) (509,488)Expenses not deductible for tax purposes 1,006,247 716,072Restriction on tax deductible 74,153 98,429Non-permitted expenses for tax purposes 6,307 6,522Permitted expenses not used and not available for future year 1,888 1,996Over provison of income tax in prior years (987,860) (553,529)Over provision of deferred tax in prior years - (396,259)Additional tax deduction in respect of cash contributions made to MMIP * (4,497,284) -Taxation for the year (2,561,640) 4,100,000

A reconciliation of income tax expense applicable to profit before taxation at the statutoryincome tax rate to income tax expense at the effective tax rate of the Group and of theCompany is as follows:

Group

Group/Company

81

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24. TAXATION (CONTD.)

2013 2012RM RM

Profit before taxation 15,428,204 19,350,214

Taxation at Malaysian statutory tax rate of 25% 3,857,051 4,837,554Effect on opening defered tax due to changes in income tax rates 7,468 -Income not subject to tax (1,749,416) (497,556)Expenses not deductible for tax purposes 808,401 709,790Over provison of income tax in prior years (987,860) (553,529)Over provision of deferred tax in prior years - (396,259)Additional tax deduction in respect of cash contributions made to MMIP * (4,497,284) -Taxation for the year (2,561,640) 4,100,000

*

25. EARNINGS PER ORDINARY SHARE

In accordance with P.U.(A) 419, Income Tax Act 1967, the Ministry of Finance hasgranted a double tax deduction relief for all insurance companies' contributions to theMMIP. In the current financial year the Company made a total cash contribution ofRM17,989,134 to MMIP.

Company

The basic earnings per ordinary share is calculated based on the net profit for the year of theGroup of RM16,620,274 (2012: RM14,299,628) and of the Company of RM17,989,844(2012: RM14,845,029) and the number of ordinary shares in issue during the year of100,000,000 (2012: 100,000,000).

There was no dilutive potential effects of ordinary shares in issue at the end of financial year.

On 25 October 2013, the 2014 Malaysia Budget stated that the corporate tax rate will bereduced by 1 % from the current rate of 25% to 24%, with effect from year assessment 2016onwards.

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26. DIVIDENDS

Recognised in Year2013 2012RM RM

In respect of financial year:

2013: Final dividend of 7.60% less 25% taxation on 100,000,000 ordinary shares (5.7 sen net per ordinary share) 5,718,750 - 2012: Final dividend of 3.80% less 25% taxation on 100,000,000 ordinary shares (2.9 sen net per ordinary share) - 2,850,000

27. OPERATING LEASE ARRANGEMENTS

The Group and the Company as lessee

Future minimum rental payments:2013 2012RM RM

Not later than 1 year 64,991 37,536Later than 1 year and not later than 5 years 210,890 388,373

275,881 425,909

At this forthcoming Annual General Meeting, a final single-tier dividend in respect of thefinancial year ended 31 December 2013 of 7.7% on 100,000,000 ordinary shares amounting toa total dividend payable of RM7,714,100 (7.7 sen per ordinary share) will be proposed forshareholders' approval. This dividend, if approved by the shareholders, will be accounted forin shareholders' equity as an appropriation of retained earnings in the financial year ending 31December 2014.

The Group and the Company have entered into non-cancellable operating lease arrangementsfor the use of certain office premises. These leases have an average life of between 1 and 5years with certain contracts carrying renewal options in the contracts. These contracts includefixed rentals over the tenure of the lease period.

The Group and the Company also leases office equipment under non-cancellable operatinglease agreements with an automatic yearly renewal option unless a written termination noticeis served by either party.

The future aggregate minimum lease payments under non-cancellable operating leasescontracted for as at reporting date but not recognised as liabilities are as follows:

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28. RELATED PARTY DISCLOSURES

(a)

2013 2012RM RM

Wholesale unit trust funds:Income distribution 4,282,568 5,259,931

2013 2012RM RM

Fellow subsidiaries:Sabah Development Bank

Fixed deposits 5,000,000 5,000,000Interest income 180,000 180,493

2013 2012RM RM

Related Companies:Gross premium 6,854,777 5,641,199Gross claim paid (1,726,107) (1,094,682)Commission (481,958) (412,523)

Group/Company

Group/Company

The transactions between the Company and its related parties were based on normalcommercial terms and conditions and made on terms equivalent to those that prevail in arm’slength transactions.

Company

For the purpose of these financial statements, parties are considered to be related to the Groupand the Company if the Group and the Company have the ability, directly or indirectly, tocontrol the party or exercise significant influence over the party in making financial andoperating decisions, or vice versa, or where the Group and the Company and the party aresubject to common control or common significant influence. Related parties may beindividuals or other entities.

The Group and the Company had the following significant transactions and balances withrelated parties during the year:

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28. RELATED PARTY DISCLOSURES (CONTD.)

(b)

29. CAPITAL COMMITMENTS

2013 2012RM RM

Authorised but not contracted for 4,104,900 6,641,530

30. RISK MANAGEMENT FRAMEWORK

Processes Parties ResponsibleBoard of DirectorsRisk Management Committee (RMC)

Dedicated Committee· Risk Management Work Group (RMWG)

Risk management forms an integral part of the Group's core business processes and theBoard, with the assistance of the management, had implemented risk management processeswithin the Group and the Company that sets out the overall business strategies and the generalrisk management philosophy. The Group and the Company are exposed to operational,financial and general risks.

Investments in subsidiaries - Wholesale unit trust funds is exposed to a variety of risks whichinclude market risk, credit risk, liquidity risk, capital risk and early liquidation risk.

The key management of the Company comprise the Chief Executive Officer who is alsothe Executive Director and the Directors. The remuneration of key management isdisclosed in Note 19.

tolerance

Financial risk management in wholesale unit trust funds is carried out through internal controlprocesses adopted by the fund manager and adherence to the investment restrictions asstipulated by the Securities Commission's Guidelines on wholesale unit trust funds.

The risk management infrastructure of the Group and the Company set out clearaccountability and responsibility for the risk management processes which underlines theoversight, principal risk management and control responsibilities:

risk appetite and risk tolerance

structure, policies, risk appetiteFormulate and implement risk

Approval of risk management

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30. RISK MANAGEMENT FRAMEWORK (CONTD.)

Processes Parties ResponsibleIndependent Risk Management· Internal Audit Department· Compliance Unit

Implementation and compliance Business Units· Business Development Department, and Branches

procedures · Underwriting Department· Claims Department· Management Information Systems Department· Human Resource Department· Accounts & Finance and Investment Department

The formalised risk management framework of the Group and of the Company are as follows:

The Risk Management Committee ("RMC") was established to provide oversight on the riskmanagement initiatives and drive the risk management processes in identifying principalbusiness risks and the implementation of appropriate systems to manage these risks. TheRMC is supported by the Risk Management Work Group ("RMWG").

The RMWG, headed by the Chief Executive Officer, is responsible to identify detailed riskmanagement activities undertaken by the senior management team and communicate to theRMC on critical risks (present and potential) in terms of likelihood of exposures, the impacton the Group’s business and the management action plans to manage and mitigate these riskson a continuing basis.

The risk management policies are subject to review to ensure that they remain relevant andeffective in managing the associated risks due to change in the market and regulatoryenvironments.

The independent risk management review under the Internal Audit Department providessupport to the dedicated Audit and Examination Committee ("AEC") and is responsible toascertain that the risk policies are implemented and complied with.

Independent monitoring and

The Board of Directors are responsible for the Group's risk appetite/risk tolerance, capitalmanagement framework and risk management policies.

with risk management policies and

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Capital Management Plan

Under the ICAAP Guidelines, there are six (6) key elements tabulated as below:

- Board and Senior Management Oversight- Comprehensive Risk Assessment- Individual Target Capital Level ("ITCL")- Stress Testing- Sound Capital Management- Monitoring, Reporting and Review of ICAAP

The CMP takes into account how adverse scenarios are likely to affect the Group's riskmanagement activities and sets out thresholds that act as triggers for corrective actions. Theintensity of corrective actions increases with the extent of which threshold level is breached.The CMP ensures that an appropriate level of capital is maintained at all times.

The objective of the CMP is to optimise the efficiency and effective use of resources in orderto maximise the returns and provide an appropriate level of capital protection topolicyholders. The possible sources of vulnerabilities that can impact directly or indirectly onthe operations and financial resilience of the Group and of the Company whilst complyingwith rules and regulations issued by the relevant authorities are taken into account.

The management of capital is guided by the CMP which is driven by the Group’s businessstrategies and plan and organisational requisites which take into account the business andregulatory environment in which the Group and the Company operates.

The Company has updated its Capital Management Plan (CMP) in compliance with theGuidelines on Internal Capital Adequacy Assessment Processes (ICAAP) issued by BNM forInsurers with effect from 1 September 2012.

The role of the AEC, supported by the Internal Audit Department, is to provide anindependent assessment of the adequacy, effectives and reliability of the risk managementprocesses and system of internal controls and compliance with risk processes, laws, internalpolicies and regulatory guidelines.

The Business Units are responsible for identifying, mitigating and managing risks within theirrespective lines of business and ensure that their day-to-day business activities are carried outin accordance with the established risk management policies, procedures and limits.

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Capital Management Plan (Contd.)

Stress Testing

Insurance risk

The Company's stress testing process complies with the Guidelines of Stress Testing forInsurers issued by BNM. The results of the stress test are submitted to BNM on a half yearlybasis.

The Board and Management participate actively in providing feedback and participating in thediscussion on the methodology, assumptions and results of each stress testing exercise.

The Board and Management recognise stress testing as an effective risk management tool toidentify potential threats due to exceptional but adverse plausible events.

The stress testing process has been designed to suit business environment and risk profile andis commensurate with the nature, complexity and sophistication of its business activities.Assumptions underlying the stress tests are consistent with the results of the comprehensiverisk assessment to ensure that they are relistic. Challenging scenarios are incorporated into thestress testing exercise and will be continuously reviewed with the changing businessenvironment. The stress testing process helps determine the extent by which capital may beeroded from exceptional but adverse plausible events.

The stress tests results together with the counter measures taken are tabled for the Board'sdeliberation and recommendation prior to submission to BNM.

Disclosure of the Company's regulatory capital requirements and compliance with the RBCFramework are at Notes 32 and 2.1.

The Group and the Company underwrite various classes of general insurance contracts. Themajor classes of the insurance business written are Fire, Motor, Marine, Bond andEngineering, Workmen's Compensation and Liabilities, Personal Accident and otherMiscellaneous classes.

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Insurance risk (Contd.)

The Group’s objectives of managing insurance risk are to improve the long-term financialperformance of the business and to achieve sustainable growth in profitability, strong assetquality and to continually optimise shareholders’ value. The Group and the Company seek towrite those risks that it understand and provide reasonable opportunity to earn acceptableprofit.

Insurance risk comprise both actuarial and underwriting risks resulting from pricing andacceptance processes and the inherent uncertainty regarding the occurrence, amount andtiming of insurance liabilities. Insurance contracts transfer risks of the policyholders byindemnifying them against adverse effects arising from the occurrence of specified uncertainfuture events. The principal risk of the Group and the Company under insurance contracts isthat the actual claims and benefits payment differ from expectations and assumption used inthe product pricing, risks that arise from fluctuations in timing, frequency and severity ofclaims as well as the adequacy of insurance liability reserves.

The Group and the Company are also exposed to risks arising from climate changes, naturaldisasters and terrorism activities. There is also inflation risk for longer tailed exposures thattake some years to settle. The Group and the Company work closely with reinsurance brokersand reinsurers and have in place a prudent underwriting process. In addition, the Group'sreinsurance structure, strategy and policy are reviewed annually by management and approvedby the Board. Reinsurance structures are designed based on the type of risks and catastrophecover is obtained to mitigate catastrophic exposures.

Only reinsurers with a minimum rating of A are considered and the Group and the Companylimits its risks to any one reinsurer by ceding different products to different parties on itspanel of reinsures. In those exceptional cases where reinsurers with ratings lower than A areconsidered, a simultaneous payment clause is introduced in the policy to mitigate the risk ofdefault and concentration of exposure.

Risks under general insurance policies usually cover a twelve-month duration with theexception of marine cargo which covers the duration of the voyage and some non-annualpolicies such as bond and engineering, workmen's compensation, etc., with a cover period ofmore than one year. The risk inherent in general insurance contract is reflected in theinsurance liabilities which include the premium and claims liabilities. The premium liabilitiescomprise reserve for unexpired risk while the claims liabilities comprise the loss reserveswhich include both provision for outstanding claims notified and outstanding claims incurredbut not reported.

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Insurance risk (Contd.)

The Group and the Company adopts the following measures to manage its insurance risks:

(i)

(ii)

(iii)

The Group’s underwriting strategy is intended to ensure that the risks underwritten are welldiversified across the classes and type of insurance business and geographical areas. Thevariability of risks is managed by the selection and implementation of underwritingguidelines, which are designed to ensure that risks are diversified in terms of type of risks andlevel of insured benefits.

The Group and the Company adopt an underwriting policy that aims to take advantage ofits competitive strengths while avoiding risks with disruptive volatility to ensureunderwriting profitability. Acceptance of risk is guided by a set of underwritingguidelines with set limits on the type of risks underwritten, underwriting capacity andauthority of individuals to underwrite risks based on their specific expertise.

The Group and the Company have in place a claims management and control system topay claims and claim overpayment or fraud. The Group and the Company have claimreview policies to access new and ongoing claims. Review of claims handling proceduresand investigation of possible fraudulent claims are put in place to reduce the riskexposure of the Group and the Company. The Group and the Company further enforces apolicy of actively managing and promptly pursuing claims, in order to reduce itsexposure to unpredictable future developments that may negatively impact thebusiness. Inflation risk is mitigated by taking anticipated inflation into account whenestimating insurance contract liabilities.

The Group and the Company purchase reinsurance protection as part of its risksmitigation programme. The objectives of purchasing reinsurance are to provide capacityfor the Group and the Company while protecting its financial position and optimising theGroup’s capital efficiency. Reinsurance is ceded on a facultative, quota share,proportional and non-proportional basis. The Group’s placement of reinsurance isdiversified such that it is neither dependent on a single reinsurer nor are the operations ofthe Group and the Company substantially dependent upon any single reinsurancecontract.

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Key assumptions

The table below sets out the concentration of the Group’s gross and net written premium bytypes of product.

The principal assumptions underlying the estimation of insurance liabilities are determined onthe basis that the Group's future claims development will follow a similar pattern to pastclaims experience. This includes assumptions in respect of average claims costs, claimshandling costs and historical claims development trend. Additional qualitative judgments areused to assess the extent to which past trends may not apply in the future, for example, one-off occurrence as well as internal factors such as portfolio mix, policy conditions and claimshandling procedures, legislative changes, judicial decisions and economic conditions. Theactual claims and premium liabilities are not likely to develop exactly as projected and arelikely to vary from initial estimates.

No discounting is made to the recommended claims and premium liability provisions as aprudent measure and no explicit inflation adjustment has been made to claims payable in thefuture. However, implicit inflation is allowed for future claims to the extent that it is evidentin past claims development.

The table below sets out the concentration of the Group’s insurance contract liabilities bytypes of product.

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Sensitivities

* The effect on equity is shown after tax impact.

The Company has based its risk margin for adverse deviation for its URR and claim liabilitiesat a 75% confidence level in accordance with the requirements prescribed under the RBCFramework issued by BNM.

The Group and the Company engaged an independent actuarial firm to run a sensivity analysisof the liabilities and comparison of past valuation results. An analysis of sensitivity aroundvarious scenarios provides an indication of the adequacy of the Group's estimation processin respect of its insurance contracts. The table presented below demonstrates the sensitivityof the insurance contract liabilities to a change in the assumptions used in the estimationprocess.

The analysis below is performed for a change in one variable with all other variablesremaining constant and ignores the values of the related assets, showing the impact on grossand net liabilities, profit before tax and equity. The variables include average claim costs,average number of claims and average claims settlement period for each accident year. Theimpact on the Group's claim liabilities arising from changes in key variables as well as thecorresponding impact on profit before tax and equity are shown in the table below and theresults show that the movements are non-linear.

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Claims development table

The following tables show estimated cumulative incurred claims of the Group`s motor andnon-motor businesses, including both claims notified and IBNR for each successive accidentyear at the end of each reporting period, together with cumulative payments to date. While theinformation in the tables provides a historical perspective on the adequacy of the unpaidclaims estimate established in previous years, users of these financial statements arecautioned against extrapolating redundancies or deficiencies arising from the past claimsdevelopment on current unpaid loss balances.

The Group and the Company believes that the estimated claim liabilities as at reporting dateare adequate. However, due to the inherent uncertainties in the reserving process, it cannot befully assured that such balances will ultimately prove to be adequate. The disclosure onclaims development aims to compare the results of past valuations to the development ofactual claims and the tables below summarise the analysis of claims development in total on anet of reinsurance and gross of reinsurance basis.

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2013 Claims development table - Group and Company

Analysis of Claims Development - Gross of Reinsurance (RM'000)Total Gross Business Within Malaysia

2006 2007 2008 2009 2010 2011 2012 2013 TotalUltimate Claims IncurredAt end of accident year 75,700 60,757 82,342 80,888 85,032One year later 45,379 73,059 57,470 79,698 79,812Two years later 35,053 40,885 65,399 54,668 77,393Three years later 43,475 34,528 40,412 64,523 49,665Four years later 41,995 31,751 39,347 61,899Five years later 41,769 31,322 38,116Six years later 41,481 30,552Seven years later 42,998Current estimate of cumulative claims incurred 42,998 30,552 38,116 61,899 49,665 77,393 79,812 85,032 465,467

Cumulative Claims PaidAt end of accident year 16,947 12,780 18,211 17,963 20,195 32,702 21,118 28,730One year later 35,482 24,566 31,935 35,181 42,828 58,368 50,920Two years later 37,904 27,738 34,950 40,535 45,818 64,934Three years later 39,033 28,720 36,184 41,810 45,589Four years later 39,603 29,537 36,608 42,842Five years later 40,814 30,170 36,756Six years later 41,083 30,295Seven years later 40,809Cumulative payments to date 40,809 30,295 36,756 42,842 45,589 64,934 50,920 28,730 340,875

Direct & Fac. Inwards 2,189 257 1,360 19,057 4,076 12,459 28,892 56,302 124,592Treaty Inwards 49,312

Best Estimate of Claim Liabilities 173,904Claim Handling Expenses 1,387Fund PRAD at 75% Confidence Interval 15,897Gross General Insurance Claim Liabilities (Note 12) 191,188

Accident Year

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2013 Claims development table - Group and Company (Contd.)

Analysis of Claims Development - Net of Reinsurance (RM'000)Total Net Business Within Malaysia

2006 2007 2008 2009 2010 2011 2012 2013 TotalUltimate Claims IncurredAt end of accident year 25,513 17,055 26,536 35,356 35,192 37,822 43,789 53,489One year later 24,637 21,275 24,693 34,013 33,759 35,033 44,230Two years later 24,146 19,076 23,990 32,616 32,811 33,925Three years later 24,533 18,544 23,776 31,929 30,541Four years later 23,343 18,184 23,224 30,981Five years later 23,355 17,728 22,642Six years later 23,143 17,561Seven years later 22,834Current estimate of cumulative claims incurred 22,834 17,561 22,642 30,981 30,541 33,925 44,230 53,489 256,203


Direct & Fac. Inwards 657 157 568 2,628 2,230 5,872 13,989 34,483 60,584Treaty Inwards 49,312

Best Estimate of Claim Liabilities 109,896Claim Handling Expenses 1,387Fund PRAD at 75% Confidence Interval 10,562Net General Insurance Claim Liabilities (Note 12) 121,845

Accident Year

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2012 Claims development table - Group and Company

Analysis of Claims Development - Gross of Reinsurance (RM'000)Total Gross Business Within Malaysia

2005 2006 2007 2008 2009 2010 2011 2012 TotalUltimate Claims IncurredAt end of accident year 75,700 60,757 82,342 80,888One year later 45,379 73,059 57,470 79,698Two years later 35,053 40,885 65,399 54,668Three years later 43,475 34,528 40,412 64,523Four years later 52,394 41,995 31,751 39,347Five years later 51,991 41,769 31,322Six years later 51,679 41,481Seven years later 54,713Current estimate of cumulative claims incurred 54,713 41,481 31,322 39,347 64,523 54,668 79,698 80,888 446,640


Direct & Fac. Inwards 2,180 398 1,152 2,739 22,713 8,850 21,330 59,770 119,132Treaty Inwards 36,367

Best Estimate of Claim Liabilities 155,499Claim Handling Expenses 1,272Fund PRAD at 75% Confidence Interval 12,161Gross General Insurance Claim Liabilities (Note 12) 168,932

Accident Year

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2012 Claims development table - Group and Company (Contd.)

Analysis of Claims Development - Net of Reinsurance (RM'000)Total Net Business Within Malaysia

2005 2006 2007 2008 2009 2010 2011 2012 TotalUltimate Claims IncurredAt end of accident year 20,895 25,513 17,055 26,536 35,356 35,192 37,822 43,789One year later 20,581 24,637 21,275 24,693 34,013 33,759 35,033Two years later 20,481 24,146 19,076 23,990 32,616 32,811Three years later 20,601 24,533 18,544 23,776 31,929Four years later 20,187 23,343 18,184 23,224Five years later 20,103 23,355 17,728Six years later 19,842 23,143Seven years later 21,508Current estimate of cumulative claims incurred 21,508 23,143 17,728 23,224 31,929 32,811 35,033 43,789 229,165


Direct & Fac. Inwards 1,183 262 436 1,256 4,575 5,812 11,016 28,535 53,075Treaty Inwards 36,367

Best Estimate of Claim Liabilities 89,442Claim Handling Expenses 1,272Fund PRAD at 75% Confidence Interval 5,202Net General Insurance Claim Liabilities (Note 12) 95,916

Accident Year

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Financial risks

(i) Credit risk

The Group and the Company is exposed to a variety of financial risks that includes credit risk,liquidity risk, market risk and operational risk that arise in the normal course of business. TheGroup and the Company’s overall financial risk management objective is to ensure that theCompany creates value for its shareholders whilst minimising potential exposures to adverseeffects on its financial performance and positions.

The Group and the Company is guided by financial risk management policies and guidelineswhich set out the overall business strategies and the general risk management philosophy andprocesses. The Company has established internal processes to monitor the risks on an ongoingbasis and support the development of Company's business.

Cash and deposits are generally placed with financial institutions licensed under theFinancial Services Act 2013 which are regulated by BNM.

Evaluation of an issuer’s credit risk is undertaken by the Investment Unit within theAccounts and Finance Department. The Group and the Company uses the ratings assignedby external rating agencies to assess issuer’s credit risk. Monitoring of credit andconcentration risk is carried out by the Accounts and Finance Department which reportsto the Investment Committee and the Board of Directors.

The Group’s primary exposure to credit risk arises through its investment in fixed incomesecurities, receivables arising from sales of insurance policies and obligations ofreinsurers through reinsurance contracts. The Group and the Company have put in placeinvestment guidelines and credit policies as part of its overall credit risk managementframework. The Group and the Company manages individual exposures as well asconcentration of credit risks. At end of the reporting period, there were no significantconcentration of credit risks.

Credit risk is the potential financial loss resulting from the failure of counterparties suchas, customers, intermediaries or counterparties to settle its financial and contractualobligations to the Group and the Company as and when they fall due.

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Financial risks (Contd.)

(i) Credit risk (Contd.)

Receivables arising from insurance and reinsurance contracts are monitored by the CreditControl Unit within the Accounts and Finance Department to ensure adherence to theGroup’s credit policy. As part of the overall risk management strategy, the Group and theCompany cedes insurance risk through facultative, quota share, proportional and non-proportional treaty reinsurance arrangements to mitigate concentration and overexposureof risks. The Group and the Company introduced the simultaneous payment clause in thepolicy when the proportion of any one or more foreign reinsurers' share of participation isdeemed significant.

The Group and the Company monitor the credit quality and financial conditions of itsreinsurers on an ongoing basis and reviews its reinsurance arrangements periodically.When selecting its reinsurers, the Group and the Company considers their relativefinancial security, rating and mitigates concentration of risk by having a panel ofreinsures. The security of the reinsurer is assessed based on public rating information andannual reports.

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The following table shows the financial and insurance assets of the Group and of the Company by their credit rating:

Group MalaysianLicencedFinancial Malaysian

Institutions/ GovernmentAAA AA A Insurers Securities D Not-rated TotalRM RM RM RM RM RM RM RM

31 December 2013Investments:

Financial Assets at FVTPL 35,137,800 40,803,200 - - 19,220,600 - 6,832,700 101,994,300AFS financial assets 5,649,130 44,960,824 6,661,952 - 462,950 1 - 57,734,857

Reinsurance assets - 923,602 28,494,351 49,912,563 - - 9,277,268 88,607,784Loans and other receivables, excluding fixed and call deposits - - - - - - 56,787,506 56,787,506Fixed and call deposits - - - 65,558,701 - - 39,000,000 104,558,701Insurance receivables - - 983 26,172,977 - - 148,984 26,322,944Cash and cash equivalents - - - 8,853,864 - - - 8,853,864

40,786,930 86,687,626 35,157,286 150,498,105 19,683,550 1 112,046,458 444,859,956

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Group MalaysianLicencedFinancial Malaysian

Institutions/ GovernmentAAA AA A Insurers Securities B P1 D Not-rated TotalRM RM RM RM RM RM RM RM RM RM


Financial Assets at FVTPL 30,805,000 37,376,150 5,008,500 - 25,728,500 - - - 8,985,600 107,903,750AFS financial assets 5,728,850 22,615,215 11,222,144 - - - 1,995,575 1 - 41,561,785

Reinsurance assets - - 23,212,935 45,169,243 - 1,480 - - 24,503,209 92,886,867Loans and other receivables, excluding fixed and call deposits - - - - - - - - 31,521,646 31,521,646Fixed and call deposits - - - 85,268,576 - - - - 39,000,000 124,268,576Insurance receivables - - 10,887 34,463,543 - - - - 149,354 34,623,784Cash and cash equivalents - - - 8,549,025 - - - - - 8,549,025

36,533,850 59,991,365 39,454,466 173,450,387 25,728,500 1,480 1,995,575 1 104,159,809 441,315,433

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Company MalaysianLicencedFinancial Malaysian

Institutions/ GovernmentAAA AA A Insurers Securities D Not-rated TotalRM RM RM RM RM RM RM RM


AFS financial assets 5,649,130 44,960,824 6,661,952 - 462,950 1 * 104,004,006 161,738,863Reinsurance assets - 923,602 28,494,351 49,912,563 - - 9,277,268 88,607,784

Loans and other receivables, excluding fixed and call deposits - - - - - - 55,762,934 55,762,934Fixed and call deposits - - - 62,480,489 - - 39,000,000 101,480,489Insurance receivables - - 983 26,172,977 - - 148,984 26,322,944Cash and cash equivalents - - - 8,830,108 - - - 8,830,108

5,649,130 45,884,426 35,157,286 147,396,137 462,950 1 208,193,192 442,743,122

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Company MalaysianLicencedFinancial Malaysian

Institutions/ GovernmentAAA AA A Insurers Securities B P1 D Not-rated TotalRM RM RM RM RM RM RM RM RM RM


AFS financial assets 5,728,850 22,615,215 11,222,144 - - - 1,995,575 1 * 114,172,103 155,733,888Reinsurance assets - - 23,212,935 45,169,243 - 1,480 - 24,503,209 92,886,867

Loans and other receivables, excluding fixed and call deposits - - - - - - - - 30,351,490 30,351,490Fixed and call deposits - - - 77,654,970 - - - - 39,000,000 116,654,970Insurance receivables - - 10,887 34,463,543 - - - - 149,354 34,623,784Cash and cash equivalents - - - 8,518,342 - - - - - 8,518,342

5,728,850 22,615,215 34,445,966 165,806,098 - 1,480 1,995,575 1 208,176,156 438,769,341

* This relates to investments in wholesale unit trust funds, which invest mainly in Malaysia Government Securities and corporate debt securities which are rated A and above.

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Credit exposure by credit quality

Group

Neither past Past dueInvestment due nor but not

grade impaired impairment TotalRM RM RM RM

31 December 2013Financial assets at FVTPL 95,161,600 6,832,700 - 101,994,300AFS financial assets 57,734,856 1 - 57,734,857Reinsurance assets 79,330,516 9,277,268 - 88,607,784Loans and other receivables 65,558,701 95,787,506 - 161,346,207Insurance receivables - 26,310,710 12,234 26,322,944Cash and cash equivalent 8,853,864 - - 8,853,864

306,639,537 138,208,185 12,234 444,859,956

31 December 2012Financial assets at FVTPL 98,918,150 8,985,600 - 107,903,750AFS financial assets 39,566,209 1,995,576 - 41,561,785Reinsurance assets 68,382,178 24,504,689 - 92,886,867Loans and other receivables 85,268,576 70,521,646 - 155,790,222Insurance receivables - 29,449,565 5,174,219 34,623,784Cash and cash equivalent 8,549,025 - - 8,549,025

300,684,138 135,457,076 5,174,219 441,315,433

The table below provides information regarding the credit risk exposure of the Groupand of the Company by classifying financial and insurance assets according to theCompany’s credit ratings of counterparties.

<---------Not rated------------>

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Credit exposure by credit quality (Contd.)

CompanyNeither past Past due

Investment due nor but notgrade impaired impaired Total

RM RM RM RM31 December 2013AFS financial assets 57,734,856 104,004,007 * - 161,738,863Reinsurance assets 79,330,516 9,277,268 - 88,607,784Loans and other receivables 62,480,489 94,762,934 - 157,243,423Insurance receivables - 26,310,710 12,234 26,322,944Cash and cash equivalent 8,830,108 - - 8,830,108

208,375,969 234,354,919 12,234 442,743,122

31 December 2012AFS financial assets 39,566,209 116,167,679 * - 155,733,888Reinsurance assets 68,382,178 24,504,689 - 92,886,867Loans and other receivables 77,654,970 69,351,490 - 147,006,460Insurance receivables - 29,449,565 5,174,219 34,623,784Cash and bank balances 8,518,342 - - 8,518,342

194,121,699 239,473,423 5,174,219 438,769,341

Group/Company Months More than6-12 12 months TotalRM RM RM

2013Gross amount 1,241,404 2,899,518 4,140,922Impaired (1,971,516) (2,157,172) (4,128,688)

(730,112) 742,346 12,2342012Gross amount 1,600,961 6,919,716 8,520,677Impaired (455,234) (2,891,224) (3,346,458)

1,145,727 4,028,492 5,174,219

Net (Impairment)/Reversal (1,516,282) 734,052 (782,230)

A financial asset is deemed past due when the counterparty has failed to make paymentwhen the outstanding amount falls due. The gross nominal amount of insurancereceivables and related impairment losses for balances past due but not impaired areprovided below:

<---------Not rated------------>

* This relates to investments in wholesale unit trust funds, which invest mainly inMalaysia Government Securities and corporate debt securities which are rated A andabove.

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Credit exposure by credit quality (Contd.)

Impaired

Individually CollectivelyImpaired Impaired Total

RM RM RMMovement in allowance accounts:

At 1 January 2013 2,010,133 2,472,443 4,482,576Allowance for impairment loss 58,768 - 58,768Write back of impairment loss - (382,140) (382,140)Write off (17,593) - (17,593)At 31 December 2013 2,051,308 2,090,303 4,141,611

At 1 January 2012 1,975,825 1,868,408 3,844,233Allowance for impairment loss 163,106 604,035 767,141Write back of impairment loss - - -Write off (128,798) - (128,798)At 31 December 2012 2,010,133 2,472,443 4,482,576

(ii) Liquidity risk

The Group's insurance receivables that are impaired at the reporting date and themovement of the allowance accounts used to record the impairment are as follows:

Liquidity risk is the risk that the Group and the Company may not have sufficient liquidfinancial resources to meet their obligations when they fall due or any sudden orunplanned increase in demand for payment. In respect of catastrophic event, there is also aliquidity risk associated with the timing of recoveries between gross cash outflows andexpected reinsurance recoveries. As part of the Group’s policy on liquidity management,sufficient levels of financial resources are maintained to meet expected liquidity needsunder normal and stressed conditions.

Group/Company

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(ii) Liquidity risk (Contd.)

Maturity profiles

The following policies and procedures are in place to mitigate the Group’s exposure toliquidity risk:

Investments in quoted equity instruments and funds have been included in "up to a year"category on the assumption that these are highly liquid investments which can be realisedshould the need arise. On the other hand, the maturity groupings for AFS financial assetswhich are debt instruments follow the maturity date of that instruments.

The table below summarises the maturity profile of the financial/insurance assets andliabilities of the Group and of the Company based on remaining undiscounted contractualobligations, including interest/profit payable and receivable.

The Group’s treaty reinsurance contracts contain a “cash call” clause permitting theGroup and the Company to make cash calls on claims and receive immediate payment fora large losses without waiting for the usual periodic payment procedures that willmitigate and ease the funding needs for payment of large claims.

There are guidelines on asset allocations, portfolio limit structures and maturity profilesof assets in order to ensure sufficient funding is available to meet insurance andinvestment contract obligations. As part of its liquidity management, the Group andthe Company maintain sufficient levels of cash and cash equivalents to meet expectedand unexpected payments and funding needs. In the event that there are unexpectedoutflows beyond the normal and stressed conditions, Group and Company can still upliftthe cash and fixed deposits to meet the funding needs.

The Group and the Company have established a Group and a Company-wide liquidity riskmanagement policy setting out the assessment and determination of what constitutesliquidity risk. Compliance with the policy is monitored and reported monthly andexposures and breaches are reported to the Management as soon as possible. TheInvestment Committee, assisted by Management, are responsible for liquiditymanagement based on guidelines approved by the Board.

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Maturity profiles (cont'd.)

GroupCarrying Up to a 1-3 3-5 5-15 Over 15

value year years years years years TotalRM RM RM RM RM RM RM

31 December 2013Financial assets at FVTPL 181,602,462 100,754,762 30,615,600 47,186,800 3,045,300 - 181,602,462AFS financial assets 57,734,857 150,825 24,748,132 13,616,500 11,692,650 7,526,750 57,734,857Reinsurance assets 69,342,922 45,755,369 15,262,137 7,334,166 991,250 - 69,342,922Loans and receivables, excluding fixed and call deposits 56,787,506 56,787,506 - - - - 56,787,506Fixed and call deposits 104,558,701 104,558,701 - - - - 104,558,701Insurance receivables 26,322,944 26,322,944 - - - - 26,322,944Cash and cash equivalent 8,853,864 8,853,864 - - - - 8,853,864Total assets 505,203,256 343,183,971 70,625,869 68,137,466 15,729,200 7,526,750 505,203,256

For insurance contract liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows fromrecognised insurance liabilities. Unearned premiums and the reinsurers’ share of unearned premiums have been excluded from the analysis asthese are not contractual obligations.

Maturity Period

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Group Carrying Up to a 1-3 3-5 5-15 Over 15value year years years years years Total

RM RM RM RM RM RM RM31 December 2013 (Contd.)Insurance contract liabilities 191,187,539 105,996,795 58,777,130 22,581,015 3,832,599 - 191,187,539Other financial liabilities 41,899,815 13,852,746 14,754,469 4,176,031 6,806,072 2,310,497 41,899,815Insurance payables 27,980,688 27,980,688 - - - - 27,980,688Other payables 5,497,510 5,497,510 - - - - 5,497,510Total liabilities 266,565,552 153,327,739 73,531,599 26,757,046 10,638,671 2,310,497 266,565,552

31 December 2012Financial assets at FVTPL 171,848,091 85,075,341 29,641,500 47,097,250 10,034,000 - 171,848,091AFS financial assets 41,561,785 4,160,436 7,409,644 9,728,300 9,634,255 10,629,150 41,561,785Reinsurance assets 73,016,295 47,348,300 9,033,877 9,822,025 6,812,093 - 73,016,295Loans and receivables, excluding fixed and call deposits 31,521,646 31,521,646 - - - - 31,521,646Fixed and call deposits 124,268,576 124,268,576 - - - - 124,268,576Insurance receivables 34,623,784 34,623,784 - - - - 34,623,784Cash and cash equivalent 8,549,025 8,549,025 - - - - 8,549,025Total assets 485,389,202 335,547,108 46,085,021 66,647,575 26,480,348 10,629,150 485,389,202

Insurance contract liabilities 168,932,429 96,054,955 40,318,023 23,095,603 9,463,848 - 168,932,429Other financial liabilities 44,448,404 14,941,121 17,865,723 3,826,080 5,620,108 2,195,372 44,448,404Insurance payables 40,723,874 40,723,874 - - - - 40,723,874Other payables 4,582,223 4,582,223 - - - - 4,582,223Total liabilities 258,686,930 156,302,173 58,183,746 26,921,683 15,083,956 2,195,372 258,686,930

Maturity Period

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Company Carrying Up to a 1-3 3-5 5-15 Over 15value year years years years years Total

RM RM RM RM RM RM RM

31 December 2013Financial assets at FVTPL 79,608,162 79,608,162 - - - - 79,608,162AFS financial assets 161,738,863 104,154,831 24,748,132 13,616,500 11,692,650 7,526,750 161,738,863Reinsurance assets 69,342,922 45,755,369 15,262,137 7,334,166 991,250 - 69,342,922Loans and receivables, excluding fixed and call deposits 55,762,934 55,762,934 - - - - 55,762,934Fixed and call deposits 101,480,489 101,480,489 - - - - 101,480,489Insurance receivables 26,322,944 26,322,944 - - - - 26,322,944Cash and cash equivalent 8,830,108 8,830,108 - - - - 8,830,108Total assets 503,086,422 421,914,837 40,010,269 20,950,666 12,683,900 7,526,750 503,086,422

Insurance contract liabilities 191,187,539 105,996,795 58,777,130 22,581,015 3,832,599 - 191,187,539Other financial liabilities 41,899,815 41,899,815 - - - - 41,899,815Insurance payables 27,980,688 27,980,688 - - - - 27,980,688Other payables 5,456,036 5,456,036 - - - - 5,456,036Total liabilities 266,524,078 181,333,334 58,777,130 22,581,015 3,832,599 - 266,524,078

Maturity Period

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Company Carrying Up to a 1-3 3-5 5-15 Over 15value year years years years years Total

RM RM RM RM RM RM RM

31 December 2012Financial assets at FVTPL 63,944,341 63,944,341 - - - - 63,944,341AFS financial assets 155,733,888 118,332,539 5,309,078 8,782,066 19,702,705 3,607,500 155,733,888Reinsurance assets 73,016,295 47,348,300 9,033,877 9,822,025 6,812,093 - 73,016,295Loans and receivables, excluding fixed and call deposits 30,351,490 30,351,490 - - - - 30,351,490Fixed and call deposits 116,654,970 116,654,970 - - - - 116,654,970Insurance receivables 34,623,784 34,623,784 - - - - 34,623,784Cash and cash equivalent 8,518,342 8,518,342 - - - - 8,518,342Total assets 482,843,110 419,773,766 14,342,955 18,604,091 26,514,798 3,607,500 482,843,110

Insurance contract liabilities 168,932,429 96,054,955 40,318,023 23,095,603 9,463,848 - 168,932,429Other financial liabilities 44,448,404 44,448,404 - - - - 44,448,404Insurance payables 40,723,874 40,723,874 - - - - 40,723,874Other payables 4,528,103 4,528,103 - - - - 4,528,103Total liabilities 258,632,810 185,755,336 40,318,023 23,095,603 9,463,848 - 258,632,810

Maturity Period

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(iii) Market risk

(iv) Currency risk

Market risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in market prices. Market risk comprised three types ofexposures: foreign exchange rates (currency risk), market interest rates (interestrates/profit yield risk) and market prices (price risk).

The Group and the Company have policies and limits to manage market risk throughportfolio diversification and asset allocation. The Group’s policies on asset allocation,portfolio limit structure and diversification benchmark have been set in line with theGroup’s investment policy after taking into consideration the requirements ofmaintenance of liquidity, assets and solvency for RBC purposes. Compliance with thepolicy is monitored and reported periodically to the Investment Committee andBoard.

Currency risk is the risk that the fair value of future cash flows of a financial instrumentwill fluctuate because of changes in foreign exchange rates.

The Group’s primary transactions are carried out in RM and its exposure to foreignexchange risk arises principally with respect to certain risks insured in US Dollar("USD") and some small amounts of foreign currency maintained in USD forreinsurance payment requirements. The payment of reinsurance premium in foreigncurrencies are not hedged as these are paid in USD equivalent based on the prevailingexchange rates at the time of payment.

The Group and the Company is exposed to the risk that the exchange rate of itsfunctional currency ("RM") relative to other foreign currencies may change in a mannerthat has an effect on the value of that portion of the Company’s assets or liabilitiesdenominated in currencies other than RM.

Foreign exchange transaction risk impacting the Group’s income statement arises bothfrom reinsurance and investing activities. Due to insignificant exposure to foreigncurrencies, these currency risk relating to investing and operating activities in the normalcourse of business are generally not hedged, as it has no significant impact on thefinancial position and/or the income statement.

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(iv) Currency risk (Contd.)

2013 2012US Dollar US Dollar

Cash and bank balances 863,984 1,021,548

(v) Interest rate/profit yield risk

Group/Company

Interest rate risk is the risk that the value or future cash flows of a financial instrumentwill fluctuate because of changes in market interest rate/profit yield.

The Group and the Company are exposed to interest rate risk primarily through itsinvestments in fixed income securities. As the wholesale unit trust funds invest mainlyin Corporate Debt Securities and Malaysian Government Securities, the net asset value("NAV") of the funds reported by the Fund Managers would also be sensitive to interestrate movement. The impact of changes in interest rates to the fair value of investmentsheld by the Group and the Company are as shown in the table below.

1.00% 1.25% 1.50% 1.75% 2.00%Increase in interest rates RM'000 RM'000 RM'000 RM'000 RM'000

2013Increase in AFS reserve 2,598 3,218 3,827 4,425 5,013Increase in Profit and loss 3,107 3,861 4,607 5,343 6,071

2012Increase in AFS reserve 2,218 2,740 3,250 3,748 4,235Increase in Profit and loss 3,523 4,374 5,212 6,041 6,856

1.00% 1.25% 1.50% 1.75% 2.00%Increase in interest rates RM'000 RM'000 RM'000 RM'000 RM'000

2013Increase in AFS reserve 5,705 7,079 8,434 9,768 11,084

2012Increase in AFS reserve 5,741 7,114 8,462 9,789 11,091

Company

Group

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(v) Interest rate/profit yield risk (Contd.)

(vi) Price risk

The analysis below is performed for reasonably possible movements in equity prices andthe net asset value ("NAV") of wholesale unit trust funds/unit trust funds prices with allother variables held constant, showing the impact on the profit and loss to the equity andunit trusts.

The Group and the Company are exposed to price risk arising from investments in quotedequities and unit trust funds held by the Group and the Company and which classified inthe statement of financial position as either FVTPL or AFS financial assets.

An equivalent decrease in interest rates shown above would result in an equivalent, butopposite impact.

The Group and the Company’s price risk exposure relates to financial assets and financialliabilities whose values will fluctuate as a result of changes in market prices.

Price risk is the risk that the fair value of future cash flows of a financial instrument willfluctuate because of changes in market prices (other than those arising from interestrate/profit yield risk or currency risk), irregardless whether those changes are caused byfactors specific to the individual financial instruments or its issuer or factors affectingsimilar financial instruments traded in the market.

Impact on Impact Impact on ImpactChanges income on income on

in variable statement equity* statement equity*RM RM RM RM

Equity prices +25% 15,174,013 11,380,510 11,867,968 8,900,976Equity prices -25% (15,174,013) (11,380,510) (11,867,968) (8,900,976)

NAV of funds ^ +2% 4,728,027 3,546,020 329,449 247,087NAV of funds ^ -2% (4,728,027) (3,546,020) (329,449) (247,087)

31 December 2013 31 December 2012

Group/Company

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(vi) Price risk (Contd.)

* Impact on equity is shown after tax impact.

(vii) Operational risk

The Group and the Company’s operational and business units are primarily responsiblefor the management of day-to-day operational risks inherent in their respective businessand functional areas. These units are responsible and have in place policies andoperational manuals to ensure that activities undertaken comply with the Group’soperational risk management framework and oversight by the RMWG, RMC,Investment Committee, AEC and the Board.

The Group and the Company cannot expect to eliminate all operational risks butmitigates them by maintaining a comprehensive internal control framework and bymonitoring and promptly responding to potential risks. Controls include segregation ofduties, access controls, multi-level and combination of authorisation, reconciliationprocedures, staff training, effective communication and evaluation procedures, includingthe use of internal audit, compliance and risk management processes. Business risk,such as changes in environment, technology and the industry are monitored throughthe Group’s strategic planning and budgeting process.

The internal audit team reviews the effectiveness of the internal control system and theircontinued relevance and reports to the AEC and it's recommendations are tabled forBoard's deliberation.

^ Does not include impact on wholesale unit trust funds as the risk arising from thechanges in interest rates have been included in the disclosure for interest rate/profit yieldrisk.

The method used for deriving sensitivity information and significant variables did notchange from the previous period.

Operational risk is the risk of loss arising from system failure, human error, fraud orexternal events. When controls fail to perform, operational risks can potentially impactpartly or fully the achievement of Group's objectives and cause damage to reputation,have legal or regulatory implications or lead to financial losses.

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31. FAIR VALUE ESTIMATION

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2:

Level 3:

Group CarryingValue Level 1 Level 2 Level 3 Total

Property, plant and equipment

Freehold office lots 6,110,000 - 6,370,000 - 6,370,000

Long-term leasehold

office lot 3,374,600 - 3,518,200 - 3,518,2009,484,600 - 9,888,200 - 9,888,200

AFS financial assets:Malaysian Government

Securities 462,950 - 462,950 - 462,950 Corporate debt securities 57,271,907 - 57,271,907 - 57,271,907

57,734,857 - 57,734,857 - 57,734,857

Financial assets at FVTPL: Corporate debt securities 101,994,300 - 101,994,300 - 101,994,300 Unit trust funds 18,912,109 18,912,109 - - 18,912,109 Equity securities 60,696,053 60,696,053 - - 60,696,053

181,602,462 79,608,162 101,994,300 - 181,602,462

inputs for the assets or liabilities that are not based on observable market data(unobservable inputs).

inputs other than quoted prices included within level 1 that are observable for the assetsand liabilities, either directly (i.e. as price) or indirectly (i.e. derived from prices);

The Group uses the following hierarchy for determining and disclosing the fair value of assets byvaluation techniques as:

As at 31 December 2013, the fair value of the Group's investments based on the above hierarchyare as follows:

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31. FAIR VALUE ESTIMATION (CONTD.)

CarryingValue Level 1 Level 2 Level 3 Total

Company

Property, plant and equipment

Freehold office lots 6,110,000 - 6,370,000 - 6,370,000

Long-term leasehold

office lot 3,374,600 - 3,518,200 - 3,518,2009,484,600 - 9,888,200 - 9,888,200

AFS financial assets:Malaysian Government

Securities 462,950 - 462,950 - 462,950 Corporate debt securities 57,271,907 - 57,271,907 - 57,271,907 Wholesale unit trust funds 104,004,006 104,004,006 - - 104,004,006

161,738,863 104,004,006 57,734,857 - 161,738,863

Financial assets at FVTPL: Unit trust funds 18,912,109 18,912,109 - - 18,912,109 Equity securities 60,696,053 60,696,053 - - 60,696,053

79,608,162 79,608,162 - - 79,608,162

The Group did not have any financial instruments carried at fair value using Level 3 valuationtechniques.

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31. FAIR VALUE ESTIMATION (CONTD.)

Company CarryingValue Level 1 Level 2 Level 3 Total

AFS financial assets: Corporate debt securities 41,561,785 - 41,561,785 - 41,561,785 Wholesale unit trust funds 114,172,103 114,172,103 - - 114,172,103

155,733,888 114,172,103 41,561,785 - 155,733,888

Financial assets at FVTPL: Unit trust funds 16,472,468 16,472,468 - - 16,472,468 Equity securities 47,471,873 47,471,873 - - 47,471,873

63,944,341 63,944,341 - - 63,944,341

• Loans and receivables • Other financial liabilities• Insurance receivables • Insurance payables• Cash and bank balances • Other payables (that are financial instruments)

The following financial assets and liabilities are not carried at fair values, but their carrying valueapproximate fair values as they are short term in nature:

The Company did not have any financial instruments carried at fair value using Level 3 valuationtechniques.

As at 31 December 2012, the fair value of the Company's investments based on the abovehierarchy are as follows:

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32. REGULATORY CAPITAL REQUIREMENTS

31.12.2013 31.12.2012RM RM

Eligible Tier 1 CapitalShare capital (paid-up) 100,000,000 100,000,000Retained earnings 97,489,567 80,302,525

Tier 2 CapitalEligible reserves 3,191,906 4,580,574

200,681,473 184,883,099Amount deducted from capital (966,315) (1,773,159)Total capital available 199,715,158 183,109,940

The capital structure of the Company, as prescribed under the RBC Framework is providedbelow:

The Company is required to comply with the mandatory capital requirement prescribed in theRBC Framework which is prescibed in BNM/RH/GL 003-2: Prudential Framework of CorporateGovernance for Insurers issued by BNM. Under the RBC Framework, insurance companies arerequired to satisfy a minimum capital adequacy ratio of 130% and the Group and the Companyhas a capital adequacy ratio in excess of the minimum requirement.

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