2013 annual report A Trusted Partner
For over forty (40) years, the MNRB Group has made its mark as the National Reinsurer and has continued to evolve into being a trusted partner to financial industries.
Over these years, the group has grown and today encompasses the reinsurance, takaful and retakaful businesses. We have also moved beyond Malaysian shores to other parts of Asia as well as the Middle East and Africa and are set to further extend our international footprint as a leading risk solutions provider.
As we venture forth, we will continue to leverage on our robust financial standing, astute business strategies and strong partnerships to leave an imprint and create a sustainable future for the Group and its stakeholders. Contents
MNRB HOLDINGS BERHAD MALAYSIAN REINSURANCE MNRB RETAKAFUL BERHAD BERHAD 004 Corporate Profile 100 Corporate Profile 005 Corporate Milestones 070 Corporate Profile 101 Corporate Information th 010 Notice of 40 071 Corporate Information 102 Directors’ Profile Annual General Meeting 072 Directors’ Profile 105 Shariah Committee 012 Statement Accompanying 076 Senior Management Team Members’ Profile Notice of Annual General Meeting 078 Senior Management Team’s Profile 108 President & 013 Corporate Information 079 Corporate Activities and Services Chief Executive Officer's Profile 014 Board of Directors 081 Malaysian Re’s Portfolio of Business 109 MRT’s Portfolio of Business 016 Directors’ Profile 020 Senior Management Team MALAYSIAN RE (DUBAI) LTD. 022 Senior Management Team’s Profile TAKAFUL IKHLAS SDN. BHD. 025 Group Structure 112 Corporate Profile 026 Chairman’s Statement 084 Corporate Profile 113 Corporate Information 036 Corporate Social Responsibility 085 Corporate Information 114 Directors’ Profile 046 Statement on 086 Directors’ Profile 115 Senior Executive Officer's Profile Corporate Governance 090 Shariah Committee 058 Audit Committee Report Members’ Profile 060 Statement on Risk Management 092 Senior Management Team MMIP SERVICES SDN. BHD. and Internal Control 094 Senior Management Team’s Profile 063 Statement of 096 Takaful IKHLAS’ Portfolio of Business 116 Corporate Profile Directors’ Responsibility in 117 Corporate Information Relation to the Financial Statements 064 Five-Year Financial Highlights 065 Financial Calendar 066 MNRB’s Growth 067 Investors’ Information 118 Calendar of Significant Events 122 Financial Statements 280 Additional Compliance Information 281 Analysis of Shareholdings 285 List of Properties • Proxy Form • Complaint Form of Bursa Malaysia
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CORPORATE PROFILE
In early 1965, the Malaysian Government conceived the idea of forming a national reinsurance company in order to curtail the ever-increasing outflow of reinsurance premiums overseas. A feasibility study on the formation of such a company was undertaken in 1971 and on 30 December 1972, Malaysian National Reinsurance Berhad was incorporated under the Companies Act, 1965, with the company commencing operations on 19 February 1973. Effective 1 April 2005, as part of the restructuring exercise of the MNRB Group, the reinsurance business, reinsurance license and reinsurance assets, up to a net amount of RM400 million, were transferred from Malaysian National Reinsurance Berhad to Malaysian Reinsurance Berhad (Malaysian Re). Pursuant to the restructuring, Malaysian National Reinsurance Berhad became an investment holding company and was renamed MNRB Holdings Berhad (MNRB).
Today, MNRB’s wholly owned subsidiaries are Malaysian Re, a general reinsurance company, Takaful Ikhlas Sdn. Bhd. (Takaful IKHLAS), a takaful operator, as well as MNRB Retakaful Berhad (MRT), a general and family retakaful operator. Subsidiary Malaysian Re (Dubai) Ltd. (MRDL), was incorporated in Dubai in the United Arab Emirates, to underwrite the reinsurance business for Malaysian Re and to service Malaysian Re’s business partners in the Middle East and North Africa (MENA) region. Another subsidiary company, MMIP Services Sdn. Bhd. (MSSB), is the manager of the Malaysian Motor Insurance Pool (MMIP), a pool established by the local insurance industry to provide insurance coverage for vehicle owners who have difficulty in obtaining motor insurance coverage.
In addition, Motordata Research Consortium Sdn. Bhd. (MRC), a company that manages a database of standard motor parts, prices and repairs, is an associate company of MNRB, whilst Labuan Reinsurance (L) Ltd. (Labuan Re), an offshore reinsurance company incorporated in the Labuan International Offshore Financial Centre (IOFC), is an associate company of Malaysian Re.
Backed by a wealth of experience and knowledge in the reinsurance, takaful and retakaful businesses, a sound financial position plus strong support from its substantial shareholders, namely, Permodalan Nasional Berhad (PNB) and the various unit trust schemes of PNB, the MNRB Group continues to grow as a renowned corporation, both locally and internationally.
CAPITAL STRUCTURE
The Company has an Authorised Capital of RM500 million, divided into 500 million ordinary shares of RM1.00 each and a Paid-up Capital of RM213 million, divided into 213 million ordinary shares of RM1.00 each. MNRB Holdings Berhad 005
CORPORATE MILESTONES
1973 - 1975 1982 - 1984
Malaysian National Reinsurance Berhad commenced Paid-up capital increased to RM8,216,004. operations on 19 February 1973. Published the 1st edition of the Malaysian Insurance Voluntary Cessions (VC) to Malaysian National Reinsurance Directory. Berhad commenced four (4) months later. Introduced Common Account Excess of Loss for Began to offer Excess of Loss Treaties to local insurance retrocessionaires. companies.
Began to write Local Facultative business and non- reciprocal inwards overseas business. 1985 - 1987
Formation of the following: • Technical Services Department 1976 - 1978 – To conduct fire surveys including advisory services on risk management with the cost mostly Retroceded part of the VC cessions to the local insurance borne by Malaysian National Reinsurance Berhad. companies for their net account. • Inspection Department Sponsored the 1st Kuala Lumpur Insurance Seminar, – To ensure companies’adherence to the various attended by over four hundred (400) delegates. Inter-Company Agreements.
Commenced writing ten percent (10%) Quota Share of • Rating Committee the Miscellaneous Accidents and Motor businesses. – To determine special rate under the Fire Tariff for Fire and Industrial All Risks Insurances. Increased level of retrocessions from twenty-five percent (25%) to thirty percent (30%) for Fire and Personal Accident businesses. 1988 - 1990
Increased level of retrocession from fifty percent (50%) to fifty-five percent (55%) to shareholding companies of 1979 - 1981 Malaysian National Reinsurance Berhad.
Increased paid-up capital from RM5,200,002 to Implementation of Stage 1 – new levels of VC, Retrocessions RM6,240,003. and other market reinsurance arrangements.
Commenced reciprocal exchange with overseas companies. Began to organise Annual Golf Tournaments and Outward Bound School for the insurance industry. Perbadanan Nasional Berhad’s (PERNAS) fifty percent (50%) share in Malaysian National Reinsurance Berhad was transferred to PNB. 006 annual report 2013
CORPORATE MILESTONES (cont’d)
1991 - 1993 1997 - 1999
Implementation of automatic cessions on Facultative and Commencement of Overseas Facultative business. Treaty business. Launching of Malaysian National Reinsurance Berhad Appointed as the Administration Manager of MMIP. Homepage (http://www.malaysian-re.com.my).
Malaysian-Re International Insurance (L) Ltd. (MIIL) was Launching of MNRB Scholarship Fund of RM1 million. set up as a wholly owned subsidiary. Malaysian National Reinsurance Berhad moved to its own Implementation of Stage II – new levels of VC, Retrocessions building, Bangunan Malaysian Re. and other market reinsurance arrangements. Implementation of new levels of VC, Retrocessions and Malaysian National Reinsurance Berhad and Malaysia other market reinsurance arrangements. National Insurance Berhad (MNI) jointly hosted and organised the 13th General Meeting of the Federation of Afro – Asian Insurers and Reinsurers (F.A.I.R.) attended by over three hundred fifty (350) international and local participants. 2000 - 2001
Awarded the MS ISO 9002:1994 certification.
Appointed as Account Manager for the Sihat Malaysia 1994 - 1996 Scheme.
Bank Negara Malaysia (BNM) appointed Malaysian Injected additional RM1 million to the MNRB Scholarship National Reinsurance Berhad to manage the Scheme for Fund. Insurance of Large and Specialised Risks. Acquired another building, Wisma KT (now known as Appointed as Manager for the Malaysian Energy Risks Bangunan Takaful IKHLAS), Petaling Jaya, Selangor. Consortium.
Launching of the Central Administration Bureau.
Implementation of Stage III – new levels of VC, Retrocessions and other market reinsurance arrangements. 2002 MIIL, now known as Labuan Re, ceased to be a wholly owned subsidiary of Malaysian National Reinsurance Berhad with the equity interest being diluted to twenty Arrangement of terrorism insurance via the Malaysian percent (20%). Terrorism Facility.
Appointed as Manager of the Malaysian Aviation Pool. Received approval in principle from BNM to set up a takaful operation. Malaysian National Reinsurance Berhad was listed on the Main Board of the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad). MNRB Holdings Berhad 007
2003 2006
BNM approved the registration of Takaful IKHLAS on MSSB, was formed to oversee the administration of 21 April 2003 and it commenced operations on 2 July 2003. Malaysian Motor Insurance Pool (MMIP), a pool established by the insurance industry to provide insurance coverage MNRB was granted the approval on certification to the for vehicle owners who find difficulty in obtaining new ISO Standard, MS ISO 9001:2000. coverage.
Implementation of new levels of VC, Retrocession to the MNRB obtained BNM’s approval to establish a retakaful industry ceased with effect from 1 January 2003. operation under the Takaful Act, 1984 to conduct both General and Family Retakaful businesses. The wholly Acquired another building, Block A, Plaza Damansara, owned subsidiary company of MNRB is known as MRT. Kuala Lumpur. MRDL, a wholly owned subsidiary of Malaysian Re was incorporated.
Malaysian Re won the prestigious Reinsurance Industry Contribution Award given by the Asia Insurance Review and the Review Magazine.
2004 Malaysian Re was assigned a Financial Strength Rating (FSR) of ‘A-’ (Excellent) and an Issuer Credit Rating (ICR) of ‘a-’ by A.M. Best Co. Commenced the restructuring exercise of the Group. Malaysian Re was assigned an ‘A-’ Insurer Financial Strength (IFS) rating with stable outlook by Fitch Ratings.
2005
The Group’s restructuring exercise was completed on 1 April 2005 and hereon Malaysian National Reinsurance 2007 Berhad became MNRB. The new holding company is an investment holding company that focuses on business Malaysian Re’s FSR of ‘A-‘ (Excellent) and ICR of ‘a-’ was expansion to broaden the Group’s income base and reaffirmed by A.M. Best Co. further strengthen its financial position. The reinsurance business was then transferred to a newly incorporated Malaysian Re’s IFS rating of ‘A-’ with stable outlook was one hundred percent (100%) subsidiary of MNRB, reaffirmed by Fitch Ratings. Malaysian Reinsurance Berhad (Malaysian Re). The takaful business continues to be undertaken by Takaful IKHLAS, a MRT commenced operations in August 2007 as the first wholly owned subsidiary of MNRB. Labuan Re became an Retakaful operator in Malaysia. associate company of Malaysian Re. 008 annual report 2013
CORPORATE MILESTONES (cont’d)
2008 2009
MRDL was officially launched on 18 March 2008. Malaysian Re’s FSR of ‘A–’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best Co. MRDL was wholly transferred from Malaysian Re to MNRB. Malaysian Re’s IFS rating of ‘A-’ with stable outlook was MNRB acquired nine point ninety-nine percent (9.99%) reaffirmed by Fitch Ratings. stake in Principal Insurance Holdings Limited (PIHL) (formerly known as British Islamic Insurance Holdings Following a recertification audit conducted by SIRIM, Ltd.). Malaysian Re’s MS ISO 9001:2000 Quality Management Systems certification was reaffirmed. MRT was officially launched on 11 August 2008. MRT’s IFS rating of ‘BBB+’ with stable outlook was MRT was assigned an IFS rating of ‘BBB+’ with stable reaffirmed by Fitch Ratings. outlook by Fitch Ratings. Malaysian Re and Labuan Re jointly hosted and organised MRT was awarded “The Most Outstanding Retakaful the 21st F.A.I.R. Conference, attended by over six hundred Operator 2008” at the KL Islamic Finance Forum 2008 (600) delegates including leaders and experts in the (KLIFF 2008). insurance industry.
Malaysian Re’s MS ISO 9001:2000 Quality Management Takaful IKHLAS won “Best Takaful/Retakaful Provider” for Systems certification which was issued in 2003, was the second time at the Islamic Finance News Polls Awards reaffirmed. 2009.
Takaful IKHLAS was awarded “Best Takaful/Retakaful Takaful IKHLAS won The BrandLaureate – SMEs Provider 2008” by Islamic Finance News (IFN). Chapter Award 2009, “Best Brands in Product Branding – Consumer Healthcare Insurance” & The BrandLaureate Takaful IKHLAS won The BrandLaureate – SMEs – SMEs Chapter Award 2009, Corporate Branding – “Best Chapter Award 2008, “Best Brands in Product Branding – Brands in Services – Islamic Protection Services”. Consumer Healthcare Insurance”.
IKHLAS Medic Assist Takaful (IMAT) won the “Most Innovative Product Award” by KLIFF 2008. 2010
Takaful IKHLAS was named the “Best Takaful Provider” at the Euromoney Islamic Finance Awards 2010 organised by Financial magazine, Euromoney.
IKHLAS Medical Assistance Takaful won “Best Takaful Product” by International Takaful Awards 2010.
Takaful IKHLAS moved to its new corporate office, IKHLAS Point, in Bangsar South, Kuala Lumpur. MNRB Holdings Berhad 009
2011 2013
Takaful IKHLAS was awarded The BrandLaureate – SMEs Malaysian Re’s Financial Strength Rating of ‘A-’ (Excellent) Chapter Award 2010 (third consecutive year). and Issuer Credit Rating of ‘a-’ was reaffirmed by A.M. Best Company, with Stable outlook for both ratings. Takaful IKHLAS was named Best Takaful/ Retakaful Provider by Islamic Finance News Polls Awards 2010 (third Malaysian Re’s Insurer Financial Strength (IFS) rating of ‘A’ consecutive year). was reaffirmed by Fitch Ratings, with Stable outlook.
Takaful IKHLAS was awarded for its excellence in Branding MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, by “The BrandLaureate – SMEs Chapter Awards 2010” in with Stable outlook. the categories of The Best Brands in Corporate Branding – Islamic Financial Protection Services (second consecutive Takaful IKHLAS won the Best Takaful Provider – Euromoney year) and The Best Brands in Product Branding – Health Islamic Finance Awards 2013. Insurance Services (Third consecutive year).
Fitch Ratings upgraded Malaysian Re’s Insurer Financial Strength (IFS) from ‘A-’ to ‘A’ with Stable outlook.
2012
Malaysian Re’s Financial Strength Rating of ‘A-’ (Excellent) and Issuer Credit Rating of ‘a-’ was reaffirmed by A.M. Best Company, with Stable outlook for both ratings.
Malaysian Re’s Insurer Financial Strength (IFS) rating of ‘A’ was reaffirmed by Fitch Ratings, with Stable outlook.
MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, with Stable outlook.
Takaful IKHLAS and MRT won the Best Islamic Takaful Provider and Best Re-Takaful Provider awards, respectively, at the Islamic Finance News (IFN) Service Providers Poll 2011 Awards held in Kuala Lumpur.
Takaful IKHLAS won the Best Islamic Takaful Provider at the Euromoney Islamic Finance Awards 2012. 010 annual report 2013
NOTICE OF 40TH ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Fortieth Annual General Meeting of MNRB Holdings Berhad will be held at the Auditorium, 3rd Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 25 September 2013 at 3.00 p.m. for the following purposes:
AS ORDINARY BUSINESS
1. To receive the Audited Financial Statements for the financial year ended 31 March 2013 Please refer to together with the Reports of the Directors and Auditors thereon. Explanatory Note (i)
2. To approve the payment of a First and Final Dividend of thirty-two percent (32%) per share less twenty-five percent (25%) income tax, for the financial year ended 31 March 2013. (Ordinary Resolution 1)
3. To re-elect the following Directors retiring pursuant to Article 86 of the Company’s Articles of Association:
(i) Megat Dziauddin Megat Mahmud (Ordinary Resolution 2)
(ii) Paisol Ahmad (Ordinary Resolution 3)
4. To approve Directors’ fees amounting to RM700,000 for the financial year ended 31 March 2013 (2012: RM695,700). (Ordinary Resolution 4)
5. To re-appoint Messrs Ernst & Young as Auditors and to authorise the Directors to fix their remuneration. (Ordinary Resolution 5)
AS SPECIAL BUSINESS
To consider and if thought fit, to pass the following Ordinary Resolution:
6. Re-appointment of Director retiring in accordance with Section 129(2) of the Companies Act, 1965
“THAT Datuk Mohd Khalil Dato’ Mohd Noor, retiring in accordance with Section 129(2) of the Companies Act, 1965 be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting.” (Ordinary Resolution 6)
7. To transact any other business which may properly be transacted at the Annual General Meeting. MNRB Holdings Berhad 011
NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT
NOTICE IS ALSO HEREBY GIVEN that subject to the approval of the shareholders at the Fortieth Annual General Meeting to be held on 25 September 2013, the First and Final Dividend of thirty-two percent (32%) less twenty-five percent (25%) income tax will be paid on 28 October 2013 to the shareholders whose name appear in the Register of Depositors on 30 September 2013.
A Depositor shall qualify for entitlement only in respect of:
(a) Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 30 September 2013 in respect of ordinary transfers.
(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.
By Order of the Board
NORAZMAN HASHIM (MIA 5817) LENA ABD LATIF (LS 8766) Company Secretaries
Kuala Lumpur 3 September 2013
NOTES:
1. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote on his behalf. A proxy need not be a member of the Company.
2. A member may appoint not more than two (2) proxies to attend the meeting provided the member shall specify in each proxy the proportion of the member’s shareholdings to be represented by each proxy and only one (1) proxy shall be entitled to vote on a show of hands.
3. Where a member is an exempt authorized nominee, which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds.
4. An Instrument appointing a proxy shall be in writing, and in the case of an individual shall be signed by the appointer or by his attorney duly authorized in writing, and in the case of a Corporation shall be either given under its common seal or signed on its behalf by its attorney or an officer of the Corporation so authorised.
5. All proxies must be deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, not less than forty-eight (48) hours before the time set for the Annual General Meeting or any adjournment thereof.
6. Only members registered in the Record of Depositors as at 19 September 2013 shall be eligible to attend the AGM or appoint proxy to attend and vote on his/ her behalf.
7. Payment of First and Final Dividend
Pursuant to Section 8.26 of the Main Market Listing Requirements of Bursa Securities Malaysia Berhad the First and Final Dividend, if approved, will be paid not later than three (3) months from the shareholders’ approval. 012 annual report 2013
NOTICE OF 40TH ANNUAL GENERAL MEETING (cont’d)
8. Explanatory Notes
(i) Item 1 of the Agenda
This item on the Agenda is meant for discussion only. The provision of Section 169(1) of the Companies Act, 1965 requires that the Audited Financial Statements be laid before the Company at its Annual General Meeting and do not require a formal approval of the shareholders. As such, this Agenda item is not a business which requires a resolution to be put to vote by shareholders.
(ii) Ordinary Resolution 6 - Re-appointment of Director pursuant to Section 129(2) of the Companies Act, 1965
Datuk Mohd Khalil Dato’ Mohd Noor, a Director over the age of seventy (70) years, shall retire pursuant to Section 129 of the Companies Act, 1965 at the conclusion of the forthcoming 40th Annual General Meeting. The proposed re-appointment of Datuk Mohd Khalil Dato’ Mohd Noor will require a resolution passed by a majority of not less than three-fourths (3/4) of the members of the Company who are entitled to vote at the forthcoming Annual General Meeting. The proposed resolution will enable Datuk Mohd Khalil Dato’ Mohd Noor to hold office until the conclusion of the next Annual General Meeting of the Company.
Statement Accompanying Notice Of Annual General Meeting Pursuant to Paragraph 8.27(2) of the Bursa Malaysia Main Market Listing Requirements
DIRECTORS STANDING FOR RE-ELECTION AND RE-APPOINTMENT AT THE FORTIETH ANNUAL GENERAL MEETING
The following are Directors retiring pursuant to Article 86 of the Company’s Articles of Association:
Article 86 - Retirement by rotation
• Megat Dziauddin Megat Mahmud • Paisol Ahmad
The following are Directors retiring pursuant to Section 129 of the Companies Act, 1965:
Section 129(2) of the Companies Act, 1965
• Datuk Mohd Khalil Dato’ Mohd Noor
The respective profiles of the above Directors are set out in the Profile of Directors’ section of the Annual Report from pages 016 to 019. MNRB Holdings Berhad 013
CORPORATE INFORMATION
BOARD OF DIRECTORS
Sharkawi Alis Dato’ Syed Ariff Fadzillah Non-Independent Non-Executive Syed Awalluddin Chairman Independent Non-Executive Director
Mohd Din Merican Yusoff Yaacob President & Group Chief Executive Officer Independent Non-Executive Director Non-Independent Executive Director Datuk Mohd Khalil Dato’ Mohd Noor Megat Dziauddin Megat Mahmud Non-Independent Non-Executive Director Senior Independent Non-Executive Director Paisol Ahmad P. Raveenderen Non-Independent Non-Executive Director Non-Independent Non-Executive Director
COMPANY SECRETARIES RISK MANAGEMENT COMMITTEE SHARE REGISTRAR
Norazman Hashim (MIA 5817) • Yusoff Yaacob (Chairman) Symphony Share Registrars Sdn. Bhd. Lena Abd Latif (LS 8766) • P. Raveenderen Level 6, Symphony House • Datuk Mohd Khalil Block D13, Pusat Dagangan Dana 1 Dato’ Mohd Noor Jalan PJU 1A/46 AUDIT COMMITTEE 47301 Petaling Jaya Selangor Darul Ehsan • Megat Dziauddin INVESTMENT COMMITTEE Tel : +603-7841 8000 Megat Mahmud (Chairman) Fax : +603-7841 8008 • Dato’ Syed Ariff Fadzillah • Datuk Mohd Khalil Syed Awalluddin Dato’ Mohd Noor (Chairman) • P. Raveenderen • Megat Dziauddin PRINCIPAL BANKER • Paisol Ahmad Megat Mahmud • Yusoff Yaacob • Paisol Ahmad CIMB Bank Berhad • Mohd Din Merican
NOMINATION COMMITTEE REGISTERED OFFICE AUDITORS • Dato’ Syed Ariff Fadzillah 12th Floor, Bangunan Malaysian Re Syed Awalluddin (Chairman) Ernst & Young No. 17, Lorong Dungun • Sharkawi Alis Level 23A, Menara Millenium Damansara Heights • Yusoff Yaacob Jalan Damanlela 50490 Kuala Lumpur Pusat Bandar Damansara Tel : +603-2096 8000 Damansara Heights Fax : +603-2096 7000 REMUNERATION COMMITTEE 50490 Kuala Lumpur E-mail : [email protected] Tel : +603-7495 8000 Website : www.mnrb.com.my • Megat Dziauddin Fax : +603-2095 5332 Megat Mahmud (Chairman) • Dato’ Syed Ariff Fadzillah STOCK EXCHANGE LISTING Syed Awalluddin • Yusoff Yaacob Bursa Securities – Main Market 014 annual report 2013
BOARD OF DIRECTORS
Megat Dziauddin Megat Mahmud Sharkawi Alis Yusoff Yaacob Senior Independent Independent Non-Executive Director Non-Independent Non-Executive Director Non-Executive Chairman Paisol Ahmad
Non-Independent Non-Executive Director MNRB Holdings Berhad 015
Mohd Din Merican President Dato’ Syed Ariff Fadzillah Datuk Mohd Khalil & Group Chief Executive Officer Syed Awalluddin Dato’ Mohd Noor Non-Independent Executive Director Independent Non-Independent Non-Executive Director Non-Executive Director P. Raveenderen Non-Independent Non-Executive Director 016 annual report 2013
DIRECTORS’ PROFILE
SHARKAWI ALIS, aged sixty-six (66), Malaysian. Non-Independent Non-Executive Chairman since 7 January 2005 and was subsequently appointed as Non- Independent Non-Executive Chairman on 3 September 2007. Member of the Nomination Committee. He is a Barrister-at-Law from Middle Temple, London where he was called in 1971. He served in the Malaysian Judicial and Legal Service in various capacities for eleven (11) years before he was appointed as Group Legal Adviser of Malaysian Mining Corporation Berhad in August 1982. In January 1997, he joined the Securities Commission, Malaysia as Director of Market Supervision and subsequently as Director of Corporate Resources Division till March 2003. Also Chairman of Malaysian Re, Takaful IKHLAS, MRT, Labuan Re and MRDL, Director of MIDF Amanah Asset Management Berhad, Malaysian Industrial Development Finance Berhad, MIDF Amanah Investment Bank Berhad, MIDF Property Berhad and MRC. Not related to any Directors and/or major shareholders of MNRB except by virtue of being a nominee Director of PNB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year.
MOHD DIN MERICAN, aged fifty-one (51), Non-Independent Executive Director with effect from 9 January 2012 and President & Group Chief Executive Officer of the Company. Member of the Investment Committee. Obtained Bachelor of Commerce (Honours) degree from Carleton University, Ottawa, Canada. He is an Associate Member of The Malaysian Insurance Institute since 1991. His more than twenty-eight (28) years experience in the insurance industry began in 1985 when he joined one of Malaysia’s general insurance companies. Since then he has held key management positions in various insurance, insurance broking and reinsurance firms including being the Principal Officer & General Manager of SCOR Switzerland Ltd, Labuan Branch. Prior to joining MNRB, he was the Chief Executive Officer of Etiqa Insurance Berhad. Formerly member of Management Committee of Persatuan Insurans Am Malaysia, National Insurance Association of Malaysia and President of Life Insurance Association of Malaysia. Also a Director of Malaysian Re, MRT, Takaful IKHLAS, Labuan Re, MRDL and MRC. Not related to any Directors and/or major shareholders of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year. MNRB Holdings Berhad 017
MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-seven (67), Malaysian. Independent Non-Executive Director since 24 August 2006 and re-designated as Senior Independent Non-Executive Director on 19 July 2011. Chairman of the Remuneration Committee as well as the Audit Committee and member of the Investment Committee. He holds a Bachelor of Science (Econs.) (Hons.) degree from the Queen’s University of Belfast, Northern Ireland and is a Fellow of the Institute of Chartered Accountants in Ireland as well as a Chartered Accountant with the Malaysian Institute of Accountants. He had served Golden Hope Plantations Berhad as Group Director, Finance, Arab-Malaysian Merchant Bank, first as General Manager - Operations and later as General Manager - Investment, Bank Simpanan Nasional as Finance Manager and the Accountant-General’s Department as Treasury Accountant. Also a Director of Malaysian Re, MRT, Pernec Corporation Bhd, Alliance Financial Group Bhd, Alliance Bank Berhad, Alliance Investment Bank Berhad, Takaful IKHLAS and several other private limited companies. Not related to any Directors and/or shareholders of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year.
P. RAVEENDEREN, aged sixty-eight (68), Malaysian. Appointed as a Director on 11 November 1993 and designated as an Independent Non-Executive Director on 1 September 2003. He was re-designated as Non-Independent Non-Executive Director on 19 July 2011. Member of the Audit Committee and the Risk Management Committee. An Associate of The Chartered Insurance Institute as well as a Chartered Insurer. Was the Chief Executive Officer of Royal Insurance (M) Sdn. Bhd. since 1985 until the Company merged with Sun Alliance Insurance (M) Sdn. Bhd. on 1 September 1999 when he assumed the position of an Executive Director of the merged Royal & Sun Alliance Insurance (M) Bhd. until his retirement on 31 August 2001. Also a Director of Malaysian Re. Not related to any Directors and/or major shareholders of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year. 018 annual report 2013
DIRECTORS’ PROFILE (cont’d)
DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged sixty-nine (69), Malaysian. Non-Independent Non-Executive Director since 31 January 2003 and re-designated as Independent Non-Executive Director on 28 October 2004. Chairman of the Nomination Committee, member of the Audit Committee and the Remuneration Committee. Graduated from the University of Malaya with a Bachelor of Arts degree, then obtained a Diploma in International Relations from University of Oslo, Diploma in Development Administration from London School of Economics and Masters Degree in International Relations from University of New York. Joined the Government service in 1967 and was later posted abroad to serve in Canada, Libya and the United Nations in New York and Indonesia. Was appointed as the Ambassador to Fiji, Republic of Korea and Thailand until his retirement from Government Service in 2001. Also Chairman of DSC Solutions Berhad, Director of Malaysian Re, MRT, EcoFirst Consolidated Bhd. and one (1) other private limited company. Not related to any Directors and/or major shareholders of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year.
YUSOFF YAACOB, aged sixty-five (65), Malaysian. Independent Non-Executive Director since 10 November 2004. Chairman of the Risk Management Committee, member of the Audit Committee, Remuneration Committee and the Nomination Committee. Obtained a Diploma in Insurance Studies & Insurance Management from the University of Nottingham, United Kingdom. A Chartered Insurance Practitioner and a Fellow of the Chartered Insurance Institute, United Kingdom. Started his career as an Insurance Trainee with Malaysia National Insurance Sdn Bhd in 1970 and held the position of Marine Manager until 1979. Joined Petroliam Nasional Berhad (PETRONAS) in 1979 and was the General Manager (Insurance Division) until his retirement in 2003. Also a Director of Malaysian Re. Not related to any Directors and/or major shareholders of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year. MNRB Holdings Berhad 019
DATUK MOHD KHALIL DATO’ MOHD NOOR, aged seventy-two (72), Malaysian. Non-Independent Non-Executive Director since 14 December 2004. Chairman of the Investment Committee and member of the Risk Management Committee. Graduated from the University of Malaya with a Bachelor of Arts degree and then obtained a Diploma in Commercial Policy from GATT Training Institute in Geneva, Switzerland. He was the former Auditor-General of Malaysia from 1994 to 2000. Also the former Secretary of the Foreign Investment Committee, Deputy Secretary General of the Ministry of Trade and Industry and Secretary General of the Ministry of Works. Currently, Chairman of TIME Engineering Berhad, Director of IOI Corporation Berhad, Malaysian Re and MRT. Not related to any Directors and/or major shareholders of MNRB except by virtue of being a nominee Director of PNB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year.
PAISOL AHMAD, aged fifty-nine (59), Malaysian. Non-Independent Non-Executive Director since 11 April 2008. Member of the Audit Committee and the Investment Committee. Obtained Diploma in Accountancy from Universiti Teknologi MARA and a Fellow of the Association of Chartered Certified Accountants, United Kingdom. Also a Chartered Accountant with the Malaysian Institute of Accountants, a Fellow of the Financial Services Institute of Australasia and a Certified Financial Planner with the Financial Planning Association of Malaysia. He was the Senior Accountant of Pernas Charter Management Sdn. Bhd. Then held various positions in Amanah Saham Nasional Berhad before being appointed as its Executive Director/Senior Vice President II. Subsequently, being transferred to PNB and is currently the Senior Vice President I of its Financial Management Audit & Risk Management Division. Also a director of Takaful IKHLAS, KAF Investment Bank Berhad and two (2) other private limited companies. Not related to any Directors and/or shareholders of MNRB except by virtue of being a nominee director and employee of PNB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. Attended all the eight (8) Board Meetings held in the financial year. 020 annual report 2013
SENIOR MANAGEMENT TEAM
Mohd Din Merican Norazman Hashim President & Group Chief Executive Officer Executive Vice President & Group Chief Financial Officer/ Company Secretary
Datuk Ramlan Abdul Rashid Group Chief Operating Officer
Azlan A. Azizee Senior Vice President & Group Chief Information Officer
Ahkter Abdul Manan Senior Vice President & Group Chief Investment Officer MNRB Holdings Berhad 021
Mohd Radzuan Mohamed Senior Vice President & Ahmad Ruhaizad Hashim Group Chief Risk Management & Senior Vice President & Compliance Officer Romie Khalid Group Chief Strategy Officer Senior Vice President & Group Chief Internal Auditor
Dr. Ali Azizan Mohamad Senior Vice President & Head of Human Capital Management
Lena Abd Latif Senior Vice President & Head of Legal & Secretarial/Company Secretary
Sharmini Perampalam Senior Vice President & Head of Finance 022 annual report 2013
SENIOR MANAGEMENT TEAM’S PROFILE
The President & Group Chief Executive Officer, MOHD DIN MERICAN leads the day-to-day operations of MNRB together with the key management staff which includes:
DATUK RAMLAN ABDUL RASHID has NORAZMAN HASHIM is the Executive AHKTER ABDUL MANAN is the been appointed as the Group Chief Vice President & Group Chief Financial Senior Vice President & Group Operating Officer of MNRB with Officer/Company Secretary of MNRB. Chief Investment Officer of MNRB. effect from 1 April 2011. He joined He obtained his Masters degree in He graduated from the University MNRB Retakaful Berhad in March Business Administration from the Science of Malaysia with a Bachelor 2010 as Executive Vice President Cranfield School of Management, of Social Science (Honours) degree & Deputy CEO and has extensive United Kingdom in 1990. He is also majoring in Management and an experience in the insurance/takaful a fellow member of the Association Economics minor. He is responsible industry. of Chartered Certified Accountants for the overall investment, property (ACCA), United Kingdom and a and administration division of MNRB Prior to joining the Group, he member of the Malaysian Institute Group. He started his career in the was the Chief Executive Officer/ of Accountants (MIA). He joined the Investment and Securities Department Executive Director of a leading local then Malaysian National Reinsurance (IVS) of Malaysian International composite insurance company. He Berhad in 1985 and was appointed as Merchant Bankers Berhad (MIMB) in was also the Vice President of Life its Financial Controller and Company 1987 as an Investment Analyst. Insurance Association of Malaysia Secretary in 1994. (LIAM) for 2006/07, a Director of In 1991, he was promoted to Malaysian Insurance Institute as well He was subsequently transferred to Manager, Head of IVS and in 1995 to as Malaysian Life Reinsurance Group Malaysian Re on 1 April 2005 and Assistant General Manager. He was Berhad for 2006/07 and a member promoted to General Manager to subsequently promoted to General of the Management Committee of head the Corporate Services Division, Manager of IVS in 1997. He was PIAM from 2002 to 2007. comprising Administration, then seconded to MIDF Aberdeen Legal & Secretarial, Corporate Asset Management Sdn. Bhd. (MIDF Datuk Ramlan graduated with B.Sc Communications, Human Capital Aberdeen), which he set up in 1998. (Hons) in Mathematics from Universiti Management and Finance On 1 January 2001, he was appointed Sains Malaysia (USM) in 1983 and Departments in June 2005. He was as the Chief Executive Officer Master in Actuarial Science from transferred to MNRB on 1 April 2008 and Executive Director of MIDF Ball State University, Indiana, United and assumed his current position. He Aberdeen. He joined Asia Unit Trust States of America in 1985 under the is also a Director of MSSB and the Berhad (AUTB) on 1 September 2004 sponsorship of the Asia Foundation Company Secretary of Malaysian Re, as Chief Executive Officer following Scholarship. MRT, MRDL and Takaful IKHLAS. the transfer of business of MIDF Aberdeen to Amanah SSCM Asset Management Berhad. He left AUTB on 16 July 2007 to join MNRB on 17 July 2007. In total, he brings along to the Company more than twenty- six (26) years of experience in the Asset Management industry. MNRB Holdings Berhad 023
AZLAN A. AZIZEE is the Senior Vice MOHD RADZUAN MOHAMED is the serving as the Malaysian Re’s RMO. President & Group Chief Information Senior Vice President & Group Chief Subsequently on 1 August 2007, he Officer of MNRB. He graduated with Risk Management and Compliance was transferred back to MNRB and a Bachelor of Science in Computer Officer of MNRB. He graduated in assumed his current position on Science from the University of 1995 with a Bachelor (Honours), 7 August 2007. Wisconsin, Green Bay, USA in 1984 Risk Management from the Glasgow and Masters of Science in Information Caledonian University, Scotland and Systems Technology from The George BBA (Honours) Risk Management DR. ALI AZIZAN MOHAMAD is the Washington University, Washington and Insurance from UiTM in 1994. Senior Vice President & Head of D.C., USA in 1986. He is a member of the Institute of Human Capital Management of Risk Management, UK since 1996. MNRB since 1 December 2011. He is an He joined the then Malaysian His career started in 1997 when he experienced professional with more National Reinsurance Berhad in 1987 joined the then Malaysian National than twenty (20) years of experience as IT Executive. He held positions Reinsurance Berhad as a graduate in Organizational Development, of increasing responsibility in the trainee and promoted to Assistant Human Capital Management ensuing years at the Company Manager of the Technical Services and Leadership Development. He and was also involved in the Department. He served the then has been extensively involved in implementation of IT initiatives for Malaysian National Reinsurance the Design and Development of the insurance industry. Berhad for more than six (6) years Competency-Based HR Applications, until 2003 when he decided to Leadership Development and Talent He is responsible for leadership join Takaful Nasional Sdn. Bhd. Management. He has served as of the Company’s information as Manager, Risk Management feedback coach to Senior Executives technology strategy, management Department. in both private and public sectors and operations. across the Asia Region. His expertise In 2005 he then joined Mayban Fortis lies in designing and facilitating He assumed the current position at Holdings Berhad as an Assistant HR and Leadership Development MNRB on 1 April 2005. Vice President, Risk Mitigation Programs. Dr Ali Azizan spent and Analytics, Operational Risk more than ten (10) years in Senior Management. He later joined Management positions in Human AHMAD RUHAIZAD HASHIM is the Senior Vice President & Group Syarikat Takaful Malaysia Berhad Resources in Telekom Malaysia Chief Strategy Officer of MNRB. He as an Assistant General Manager, Berhad and Maybank. In this role, graduated in 1990 with a Bachelor Risk Management Division from he provided Management Direction of Economics and Accounting 2007 until 2010. He joined MNRB on and Change Leadership on Degree from the University of 3 January 2011. Organizational issues, structure and Leeds, England. He is a member of strategy to meet the Business Unit the Malaysian Institute of Certified Objectives and in implementing Public Accountants (MICPA) since ROMIE KHALID is the Senior Vice Human Resources policies, processes, 1995 as well as a member of the President & Group Chief Internal initiatives and programs. Prior to Malaysian Institute of Accountants Auditor of MNRB. He graduated joining MNRB, he was the Director (MIA). He brings almost twenty (20) in 1996 with a Bachelor of Science of Programs, International Centre for years of experience in corporate (Economics), majoring in Accounting Leadership in Finance (ICLIF). management and advisory services. & Finance from the London School His career started in 1991 when he of Economics & Political Science. He A HR Professional and Leadership joined Arthur Andersen as an auditor. started his career as an auditor with Development Specialist by profession, He served Arthur Andersen for more Arthur Andersen in 1997, where he he graduated with Degrees in than five (5) years until 1996 when served in the financial services group Sciences from Northern Illinois he left to join KUB Malaysia Berhad. of the audit division. In 2003, he University, University of Illinois and He then rejoined Arthur Andersen in joined the then Malaysian National University of Southern California and 1999 to head the Kuala Terengganu Reinsurance Berhad as an Executive in a PhD from Universiti Kebangsaan branch operation. In 2002, he joined the Finance Department. He was then Malaysia. Putrajaya Holdings Sdn. Bhd. as the transferred to the Risk Management Head of the Corporate Planning Department in 2004 to take up Department. He joined MNRB on the role as the Risk Management 2 January 2008. Officer (RMO). On 1 April 2005, he was transferred to Malaysian Re, 024 annual report 2013
SENIOR MANAGEMENT TEAM’S PROFILE (cont’d)
SHARMINI PERAMPALAM is the LENA ABD LATIF is the Senior Senior Vice President & Head of Vice President & Head of Legal & Finance of MNRB. She holds an Secretarial and Company Secretary Honours degree in Accountancy from of MNRB. She holds an Honours Universiti Putra Malaysia and is a Bachelor of Laws degree from the member of the Malaysian Institute International Islamic University, of Accountants. She joined Malaysian Malaysia and has been called to the National Reinsurance Berhad in 1995 Malaysian Bar. She joined Malaysian as an Internal Audit Executive and National Reinsurance Berhad in was promoted to Assistant Manager 2003 as Manager, Legal & Secretarial on 1 April 1998. and was appointed as its Company Secretary in February, 2004. She was promoted to Manager and then transferred to the Finance She was subsequently transferred Department on 1 July 2002. She to Malaysian Re on 1 April 2005. In was subsequently transferred to October 2005, she was promoted as Malaysian Re on 1 April 2005. In Vice President & Head of Legal & October 2005, she was promoted to Secretarial. On 1 May 2008, when the the position of Vice President & Head Group implemented shared services, of Finance. On 1 May 2008 when the she was transferred back to MNRB. Group implemented shared services, She was promoted to her current she was transferred back to MNRB. position in 2011. She was promoted to her current position in 2011. She has over twenty (20) years of working experience in both legal She has over twenty (20) years of practice and corporate firms. She working experience. Prior to joining was employed by Utusan Melayu MNRB, Sharmini worked with Genting (Malaysia) Bhd as its legal advisor in Berhad and BDO Binder Tax KL. 1991 and thereafter, as the General Manager, Corporate Affairs /Group Company Secretary at Land & General Berhad between 1993 and 2000. MNRB Holdings Berhad 025
GROUP STRUCTURE
100% Malaysian Reinsurance Berhad
20% * Labuan Reinsurance (L) Ltd.
100% Takaful Ikhlas Sdn. Bhd.
100% MNRB Retakaful Berhad
100% Malaysian Re (Dubai) Ltd.
100% MMIP Services Sdn. Bhd.
40% * Motordata Research Consortium Sdn. Bhd.
* Associate Company 026 annual report 2013
CHAIRMAN’S STATEMENT
Dear Valued Shareholders,
On behalf of the Board of Directors, it is my privilege and pleasure to present the Annual Report of the MNRB Group for the financial year ended 31 March 2013 (FY2013).
The MNRB Group delivered a commendable performance during the year under review. Despite a challenging operating environment, our key subsidiaries made good progress which enabled the Group to turn in higher revenue and profits. Today, we continue to leverage on our healthy financial standing, astute business strategies and strong partnerships to make our mark in the markets we serve while creating a sustainable future for all our stakeholders.
SHARKAWI ALIS Chairman MNRB Holdings Berhad 027
A MIXED ECONOMIC ENVIRONMENT initiatives such as the 10th Malaysia During the year, Malaysia’s capital Plan, New Economic Model and market saw some RM22.1 billion In 2012, the global economy turned Economic Transformation Programme raised from 17 Initial Public Offerings in a mixed performance with global (ETP) played their part in helping (IPOs) as compared to some GDP growth slowing to some 3.2% spur the nation’s economy. Malaysia’s RM6.0 billion raised from 28 IPOs in (2011: 4.0%). In the US, consumer resilient financial sector, particularly the previous year. Meanwhile, the confidence rose to a five-year its strong banking system and an corporate debt capital market was high as the US recovery gathered active domestic bond market, helped more active with a total issuance momentum. The economic malaise safeguard the economy and enabled of RM123.8 billion in 2012 in in the Eurozone however, lingered domestic financial intermediation to comparison to the RM71.2 billion and dragged down overall global continue uninterrupted. raised a year earlier. growth. Japan’s economy, which had rebounded after the 2011’s The progressive liberalisation of earthquake and tsunami disasters, the country’s financial sector GOOD INDUSTRY GROWTH slowed again amidst weak domestic and greater participation from conditions as well as reduced foreign corporations helped boost On the global insurance front, demand for its exports. The year saw competition in the financial system reinsurance capital grew by more other Asian economies moderating and contributed to increased two- than 10% in 2012 to reach USD500 their monetary stance upon concerns way capital flows and orderly market billion. While the global reinsurance that China’s slowing economy would conditions. Malaysia’s strong growth sector enjoyed three strong quarters not be able to provide a buffer prospects as well as the country’s of capital growth in 2012, the fourth to their own economies. The on- improved rankings in terms of quarter however, saw the sector going economic uncertainties in the competitiveness and cost of doing feeling the brunt of multi-billion advanced economies together with business, continued to attract Foreign dollar Hurricane Sandy claims in the sluggish global growth prospects led Direct Investment (FDI), which was US. Total overall economic losses to sustained volatility in the financial sustained at some RM102.9 billion caused by Hurricane Sandy are now markets over 2012. (2011: RM102.2 billion). The year saw estimated to be in the region of the performance of the Ringgit being USD72 billion while insured losses Amidst this volatility, the Malaysian influenced by global and regional are estimated to be USD30 billion. economy performed better than developments as well as periods of Fortunately, the impact of the expected, recording strong growth heightened volatility in the global Hurricane Sandy losses to the MNRB of 5.6% in 2012 (2011: 5.1%). The financial markets. Despite this, the Group was minimal. stronger performance came on the Ringgit ended the year at RM3.058 back of resilient domestic demand against the US dollar, recording a and investment. Government-initiated year-on-year appreciation of 3.9%.
028 annual report 2013
CHAIRMAN’S STATEMENT (cont’d)
PROFIT BEFORE ZAKAT AND TAX Closer to home, the regional statements were prepared in reinsurance sector grew steadfastly accordance with Financial Reporting in the absence of any major Standards (FRS) in Malaysia. The catastrophes in 2012. In general, financial impact arising from the the strong capital position of our above adoption of the MFRS is 242,907 subsidiaries, our good geographical disclosed in Note 4 of the Financial spread in the region and a well- Statements. diversified portfolio, continue to hold us in good stead and provide us For FY2013, the MNRB Group 194,980 room to grow. registered total revenue amounting to RM2.1 billion, representing an
164,952 increase of 9.8% or RM186.5 million COMMENDABLE GROUP as compared to the RM1.9 billion PERFORMANCE recorded in the preceding financial year. The higher revenue came on This year, and for the first time, the the back of the increase in gross Financial Statements of the Company premiums and contributions by all and the Group for FY2013 have been three operating subsidiaries. The
79,261 prepared in accordance with the Group garnered total investment new Malaysian Financial Reporting income amounting to RM187.0 Standards (MFRS) and First Time million in FY2013. This was a 15.5% Adoption of Malaysian Financial or RM25.1 million higher than the 40,457 Reporting Standards (MFRS-1). In RM162.0 million recorded in FY2012. the previous years, the financial
12111009 13 FRS MFRS MNRB Holdings Berhad 029
The Group’s operating profit before surplus transfer, zakat and tax increased by 24.6% or RM47.9 million to RM242.9 million in FY2013 from RM195.0 million previously. This stronger performance was attributable to improvements in the underwriting results of the reinsurance subsidiary and the associate company as well as from the gains on disposal of quoted shares from the reinsurance subsidiary.
Overall, the Group recorded a profit after tax of RM112.7 million in the year under review, which was 26.1% or RM23.3 million higher than the RM89.4 million registered in the preceding year. At the same time, Its net claims incurred ratio improved As a result of the above, Malaysian Group earnings per share increased from 61.9% in FY2012 to 58.6% Re registered a profit before tax of by 11 sen to 52.9 sen in FY2013 from in FY2013 as a result of better RM165.6 million, representing an 41.9 sen previously. underwriting selection and optimal increase of 8.8% or RM13.4 million retrocession strategies. Malaysian as compared to a profit before tax Re’s earnings were further boosted of RM152.2 million registered in the ROBUST PERFORMANCE BY KEY by the gains on disposal of quoted preceding year. Its profit after tax OPERATING SUBSIDIARIES shares, although it recorded a came in higher at RM124.0 million in decrease of RM1.6 million or 1.8% comparison to the RM113.0 million Malaysian Reinsurance Berhad in total investment income from the recorded previously. (Malaysian Re) previous year.
For FY2013, Malaysian Re registered a total gross premium totalling RM1.25 billion, representing a 6% or RM70.5 million increase in comparison to the RM1.18 billion registered in the preceding year. This was attributable to an increase in gross premiums from all classes of business. Approximately 65% of Malaysian Re’s total business volume during the financial year was from the domestic market, while the remaining 35% was generated from overseas business. 030 annual report 2013
CHAIRMAN’S STATEMENT (cont’d)
Takaful Ikhlas Sdn. Bhd. (Takaful IKHLAS)
Over the last ten years, Takaful IKHLAS has established a strong presence in the takaful industry and today has 12 branches, 1.8 million certificate holders and approximately 6,100 agents nationwide, offering both Family and General Takaful products.
For the year under review, Takaful IKHLAS’ gross earned contribution increased by 2.3% or RM16.4 million to RM724.7 million from RM708.3 million previously. The Family Takaful business accounted for 74.6% of the total gross earned contribution while the General Takaful business accounted for the remaining 25.4%.
Takaful IKHLAS registered a higher operating profit before surplus transfer, zakat and tax of RM103.3 million in FY2013 as compared to RM79.9 million in the preceding year, million previously. The General required under the new Bank representing an increase of 29.3% or Retakaful business accounted for Negara Malaysia ’s Takaful Operators’ RM23.4 million. Its profit after tax 60.9% of the total volume while Framework (“TOF”). The inaugural and zakat however, reduced slightly the remaining 39.1% was generated adoption of the PRAD requirement to RM10.1 million, as compared from the Family Retakaful business. had also contributed to MRT’s to RM11.4 million achieved in the loss position. preceding year due to revision in Despite the higher gross contribution, tax computation relating to prior MRT recorded a loss before zakat years that had been taken-up in the of RM14.1 million as compared to CONTINUOUS STRONG SHOWING current year. profit before zakat of RM5.4 million in the previous year. The General Over the course of the financial year, MNRB Retakaful Berhad (MRT) and Family businesses both saw a MNRB’s reinsurance and retakaful deterioration in the claims incurred subsidiaries had their ratings The year saw MRT experiencing ratio and an increase in Incurred But reaffirmed by the rating agencies, significant growth in total gross Not Reported (IBNR) claims provision. an apt testament to the quality of contribution, which increased by MRT also saw the first time adoption our business and the strength of 59.4% or RM50.7 million to RM136.1 of the Provision of Risk Margin our capital. million as compared to RM85.4 for Adverse Deviation (PRAD) as MNRB Holdings Berhad 031
In October 2012, Fitch Ratings In July 2013, Fitch Ratings further The year in review saw Takaful reaffirmed Malaysian Re’s Insurer reaffirmed Malaysian Re’s Insurer FSR IKHLAS receiving a string of awards Financial Strength Rating (FSR) of ‘A’ and stable outlook, despite the and accolades reflecting its strong of ‘A’ with a stable outlook. This revision on the Country’s sovereign standing as a key takaful player. affirmation underscores the credit rating outlook from stable Takaful IKHLAS was bestowed reinsurer's consistently robust to negative. the title “Best Takaful Provider” financial performance and its strong at the Euromoney Islamic Finance market franchise in Malaysia. It also In December 2012, A.M. Best Co. Awards 2013 in London and the factors in Malaysian Re’s continued reaffirmed the FSR of Malaysian Re “Takaful Leader of the Year” at the sound capital position relative to its with an ‘A- (Excellent)’ rating and International Takaful Award event in business profile. The ‘stable outlook’ issuer credit rating of ‘a–’, both with conjunction with the International is a reflection of Fitch's confidence a stable outlook. The ratings are an Takaful Conference 2012. On top that Malaysian Re will maintain its appropriate reflection of Malaysian of this, the Company was a sound financial fundamentals, given Re's adequate capitalisation, the recipient of the coveted “Industry its heavy emphasis on bottom-line improving trend in its underwriting Leadership Awards” at “The Asset profitability as opposed to purely performance and the consistently Triple A Awards” in the Islamic top-line growth. positive investment income. The Finance category. ratings also acknowledged Malaysian In the same month, Fitch Ratings Re's leading market position reaffirmed MRT’s Insurer FSR of in Malaysia. ‘BBB+’ with a stable outlook. 032 annual report 2013
CHAIRMAN’S STATEMENT (cont’d)
GOOD GOVERNANCE AND RISK MANAGEMENT
Your Board of Directors is committed to proactively upholding and implementing the highest standards of corporate governance, internal control and risk management across the MNRB Group. To ensure the sustainable growth of the Group’s businesses, the preservation of our corporate reputation and continued shareholder value creation, we also subscribe to and effectively apply the principles and best practices laid down in the Malaysian Code on Corporate Governance, the Corporate Governance Guide as well as the Main Market Listing Requirements issued by Bursa Malaysia Securities Berhad.
We recognise that an effective risk management framework is essential for the Group to achieve continued profitability. In 2012, we continued to bolster our existing enterprise- wide risk management framework as well as the risk management end, we view effective corporate Our efforts to elevate the quality of capability across our business units. responsibility as a long-term strategic education in rural areas continues to We also undertook efforts to comply asset and continue to invest in make good headway via the MNRB with regulatory requirements by initiatives that bring tangible benefits Program Lestari Cemerlang, the ensuring our reinsurance subsidiary’s to our stakeholders and contribute Group’s adopt-a-school programme. capital assessment processes are towards the Group’s sustainable Launched in 2011, this initiative aligned with the BNM Guidelines growth. This is part of the Group’s serves to boost the level of education on the Internal Capital Adequacy corporate efforts in providing value in rural schools through activities Assessment Process (ICAAP), which added services to the industry. such as additional classes for PMR took effect on 1 September 2012. We and SPM students, motivational and are also taking the necessary actions In 2012, we continued to make educational talks/camps, as well as to ensure the Group’s compliance good inroads in this area on several computer and library book donations, with the new Financial Services Act fronts. On the education front, we among other activities. 2013 (FSA) and Islamic Financial continued to roll out the MNRB Services Act 2013 (IFSA), which came Scholarship Fund, which provides The Group also continues to into force on 30 June 2013. scholarships to eligible students proactively support several national enrolled in institutions of higher organisations in a variety of ways. learning, both locally and abroad. The details of these initiatives and our RESPONSIBLE CORPORATE Since the initial set-up in December other corporate social responsibility PRACTICES 1998, 357 scholarships amounting to efforts can be found in the relevant
approximately RM10.0 million have section of this Annual Report. As a conscientious corporate citizen, been awarded. These scholarships go the Group’s overall objective is a long way in supporting students to to deliver profits in a responsible pursue courses in Actuarial Science, and sustainable manner. To this Insurance and Risk Management. MNRB Holdings Berhad 033
Since the initial set-up in December 1998, 357 scholarships amounting to approximately RM10 million have been awarded.
GOOD SHAREHOLDER MOVING FORWARD On the domestic front, the pace of VALUE CREATION growth of the Malaysian economy The International Monetary Fund in the first quarter of 2013 (1Q 2013) Capital preservation remains a (IMF) predicts that global growth moderated to 4.1% (4Q 2012: 6.5%, priority for the MNRB Group will remain subdued at slightly 1Q 2012: 5.1%). This was the result of especially in view of the rapidly above 3% in 2013. This scenario is continued contraction in the external increasing regulatory requirements expected to play out primarily as the sector and decelerating private that have come into play. result of slower growth in several investment. Nevertheless, private Nonetheless, in appreciation of our key emerging market economies, consumption remained robust, shareholders’ continued support and as well as a prolonged recession in providing the necessary support in light of FY2013’s strong financial the Eurozone area. While existing for aggregate domestic demand. performance, your Board of Directors downside risks to global growth Continued tightening financial is recommending a first and final prospects remain, new risks have conditions seem to be on the horizon dividend of 32% less 25% income tax emerged. These include the possibility given the signs of rising short-term (FY2012: 17% less 25% income tax). of a longer growth slowdown period, external debt, especially by the The total net dividend payout for the slowing credit and possibly tighter banking sector. year, which will amount to RM51.14 financial conditions if the anticipated million (FY2012: RM27.2 million), unwinding of monetary policy In view of the uncertain external is subject to the shareholders’ stimulus in the US leads to sustained environment as well as the generally approval at the forthcoming capital flow reversals. poor performance of Malaysia's key Annual General Meeting. macroeconomic indicators, domestic 034 annual report 2013
CHAIRMAN’S STATEMENT (cont’d)
demand is expected to moderate severity and frequency of natural from the rising per capita income slightly in 2013, although it will disasters are reshaping insurers’ views of the population as well as new continue to power the growth of the of risk, further demonstrating new and innovative products introduced Malaysian economy. The Malaysian dimensions of risk correlation and by insurance/takaful companies. Institute of Economic Research catastrophe modelling. As they move This bullish outlook is supported (MIER) for one, has revised its 2013 forward, insurers must strategically by growing affluence among the growth forecast for the Malaysian leverage on technology investments middle-income population, healthy economy downwards to 4.8% from to support growth and improve risk consumer spending power, an 5.6% previously. management. At the same time, they under-penetrated market, as well will have to keep pace with mobile as innovative products through For the Asia Pacific Insurance technology and bring into play channels like bancassurance and sector, while significant top-line innovative insurer distribution and agencies. Overall, the continuing growth opportunities exist, insurers service strategies. financial reforms and developments would be more selective about aimed at enhancing financial sector entering or exiting new markets Despite the moderating economic resilience augur well for Malaysia in and would continue to focus on growth, the outlook for the the mid to long-term. tapping distribution channels and Malaysian insurance/takaful industry managing costs, while maintaining remains encouraging for both the Moving forward, your Board productivity. With regulators looking life/family and general insurance/ of Directors remains cautiously to bolster consumer confidence, takaful segments, with premiums/ optimistic of the Group’s prospects insurers must weigh up the far- contributions in both segments for the new financial year. We will reaching implications of changing expected to increase at respectable continue to focus our efforts on regulations on operations, structures rates. The life/family insurance ensuring that our subsidiaries are and business models. The increasing segment is expected to benefit adequately capitalised to meet all regulatory requirements and support business growth. As we set our sights on exploring all opportunities and addressing all challenges, we will continue to adopt a prudent and conservative approach in all that we undertake to ensure shareholders’ value creation remains our top priority.
ACKNOWLEDGEMENTS
On behalf of the Board of Directors, I wish to convey my utmost appreciation to Permodalan Nasional Berhad and all our shareholders for your steadfast support and confidence in MNRB. My heartfelt appreciation goes also to all our loyal customers, business partners, ceding companies and intermediaries as well as Bank Negara Malaysia and the insurance and takaful associations for their support and cooperation. MNRB Holdings Berhad 035
I also wish to thank my fellow Board Last but not least, I wish to also thank members for their commitment, our dedicated and hardworking contributions and wise counsel. employees, who have time and time MNRB is indeed fortunate to have again risen to the task to deliver such committed individuals to serve on their mandate despite the year’s on its Board and I look forward many challenges. Our success to date to their continuous support and is owing to their commitment and dedication in the coming years. worthy efforts and I am confident we can count on them to continue The Board would also like to record exhibiting a spirit of excellence as our sincere gratitude to Dato’ we all work together to realise the Syed Moheeb Syed Kamarulzaman, MNRB Group’s ambitions. who retired as President & Chief Executive Officer of Takaful IKHLAS As the MNRB Group continues on in November 2012 after 10 long its journey towards greater success, years of dedicated service. Takaful we trust that all our stakeholders IKHLAS certainly rose to take its place will continue to lend us their as a key industry player under his unwavering support. As we venture watch. We thank him for his worthy forth to embrace all opportunities accomplishments and wish him the and overcome the many challenges, very best in his future endeavours. we will work hard to leave a lasting imprint and secure a sustainable During the financial year, two future for all. new Chief Executive Officers joined the Group to head two of our subsidiaries. Please join me On behalf of the Board in extending a warm welcome to Mohd Sahimy Man who joined us on Sharkawi Alis 1 October 2012 as the new President Chairman & Chief Executive Officer of MRT. 3 September 2013 We also extend a warm welcome to Ab Latiff Abu Bakar who joined us on 7 January 2013 as the new President & Chief Executive Officer of Takaful IKHLAS. We look forward to their insights and leadership as they work together with their respective teams to take these companies to greater achievements. TRUSTED BY STAKEHOLDERS Our success and sustainable growth these last four (4) decades have been intrinsically linked to the way we conduct ourselves and deal with our stakeholders. We remain deeply committed to even out our economic ambitions with good societal and environmental behaviour so that it continues to make a positive impact on our shareholders, employees, partners, clients, regulators and the nation. MNRB Holdings Berhad 037
CORPORATE SOCIAL RESPONSIBILITY
OUR COMMITMENT TO GOOD CSR PRACTICES
In MNRB’s forty (40) years of existence as a key player in initially the reinsurance sector and then the takaful and retakaful sectors, we have enjoyed strong ties with our stakeholders. The enduring relationships we have cultivated with shareholders, employees, partners, clients, regulators and the Government, have largely materialised as the result of the many good Corporate Social Responsibility (CSR) practices we have undertaken over the years.
We view CSR as a long-term strategic asset and continue to invest in initiatives that bring tangible benefits to our stakeholders and contribute towards the Group’s sustainable growth. Our overall objective as a conscientious corporate citizen is to deliver profits in a responsible and sustainable manner.
In the period under review, we continued to set our sights on growing profitably in a responsible manner by embedding good CSR practices within the areas of the Workplace, Community and Environment.
RESPONSIBLE WORKPLACE PRACTICES
Our workforce is our greatest strategic asset and we endeavor to ensure that our employees grow and succeed under our care. In our quest to provide our employees with a holistic working environment, we implemented a host of training initiatives and health campaigns.
1 Anlene Bone Health Check In collaboration with Anlene Malaysia, the Bone Health 1 Check 2013 Programme was organised to educate our employees on the importance of having healthy bones. This initiative highlighted the importance of taking care of one’s bones to avoid any bone-related diseases. 2 Reopening of Malaysian Re Gymnasium The newly refurbished Malaysian Re Gymnasium (now at the rooftop of Bangunan Malaysian Re) has reopened its doors to employees of the Group. Supporting the Group’s goal of ensuring active and healthy employees, it aims to inculcate a healthy lifestyle among employees, provide new health experiences and strengthen the ties between them. 2
Ergonomic Chairs for All Employees
In line with the Group’s objective of providing a more conducive working environment and increasing productivity by minimising health risks to employees, ergonomic chairs were provided to all employees. Staff were briefed on how to make the best use of the chairs by adopting the correct posture so as to reduce the risk of stress and injury to muscles and joints. 038 annual report 2013
CORPORATE SOCIAL RESPONSIBILITY (cont’d)
3 30th Annual Family Outing The Group’s Annual Family Outing which was held at the Golden Sands Resort, Shangri La in Penang from 15-17 September for some eight hundred fifty (850) staff of the MNRB Group. With the theme “Pirates of the Straits”, the very successful event saw many participants attending the annual dinner dressed as various characters from the hit movie Pirates of the Caribbean.
3 4 Blood Donation Drive 2013 The Group held its 10th Blood Donation Drive at Bangunan Malaysian Re as part of a campaign to help the National Blood Centre (NBC) increase its blood supply especially in view of the coming festive season. This annual event forms part of a Group effort that focuses on the health and general well-being of our employees and the surrounding communities. 4 5 5 MNRB Healthy Heart Awareness Programme 2013 MNRB in collaboration with the Heart Foundation of Malaysia for the MNRB Healthy Heart Awareness Programme, contributed RM20,000 in support of the Foundation’s efforts in educating the public on heart and circulatory diseases. Mohd Din Merican, President & Group Chief Executive Officer of MNRB presented the donation to Tan Sri Kamaruzzaman Shariff, Vice President of the Heart Foundation of Malaysia.
The three-day programme saw employees undergoing free health screenings consisting of blood pressure tests, blood tests to determine the glucose and cholesterol levels, and a health counselling session. Dato’ Dr. Khoo Kah Lin, Director and Cardiologist of the Heart Foundation of Malaysia, also presented a health talk entitled “Healthy Heart”. MNRB Holdings Berhad 039
ENRICHING COMMUNITY PRACTICES
We believe in empowering the communities around us to elevate their lives and ensure a better future for all. For this reason, our community CSR efforts have focused on equipping children as the leaders of tomorrow. Through seminars, workshops, camps and sponsorships, we continue to lay strong foundations for the younger generation in order for them to reach greater heights. In addition to our initiatives for students, our community- based CSR activities also included various food and charity drives for the less fortunate.
6 MNRB Program Gemilang PMR/SPM The Group organised a motivational talk entitled “MNRB Program Gemilang PMR/SPM 2012” for students of Sekolah Menengah Kebangsaan (SMK) Slim who were preparing for their Penilaian Menengah Rendah (PMR) 6 and Sijil Pelajaran Malaysia (SPM) examinations. Held at the Dewan Tan Sri Ghazali Jawi in Slim River, Perak, the talk was given by Dr. Tengku Asmadi Tengku Mohamad, a famous motivational speaker from Map Training & Consultancy Sdn. Bhd. He provided tips on effective studying, highlighted behaviours that encouraged success, and gave advice on how students could further develop their aspirations. 040 annual report 2013
CORPORATE SOCIAL RESPONSIBILITY (cont’d)
7 MINGGU Saham Amanah Malaysia (MSAM) 2012 As part of our aim to promote a better understanding of the many investments that are available in Malaysia, we participated in Minggu Saham Amanah Malaysia (MSAM) 2012 which was held at Stadium Likas, Kota Kinabalu, Sabah. This was the 13th consecutive year in which we participated in such an event organised by Permodalan 7 Nasional Berhad (PNB).
• Sponsorship for Pertandingan Bicara Berirama Sekolah 8 Rendah Peringkat Sabah
In tandem with MSAM 2012 and with the goal of nurturing students to become progressive, creative and knowledgeable individuals , Takaful IKHLAS donated RM30,000 to the Sabah Education Department and the Kota Kinabalu Education Office. The funds were used to sponsor the “Pertandingan Bicara Berirama Sekolah Rendah Peringkat Sabah” with the aim of helping students excel while helping deter them from becoming involved in negative activities. 8 9 9 • MNRB Ringgit–Savvy Programme for Kota Kinabalu Students
As part of our efforts to empower communities, we held a four-session financial-literacy programme called “MNRB Ringgit-Savvy Programme” for some five hundred (500) students in Kota Kinabalu, Sabah. These sessions formed part of our CSR efforts to educate secondary school students on the benefits of money management via technology, creativity and environmental friendly initiatives. The two-day programme which was run in conjunction with MSAM 2012 was divided into three (3) segments, namely the Tech-Ringgit Savvy, Eco-Ringgit Savvy and Creative- Ringgit Savvy segments.
• Takaful IKHLAS Provides Incentives in Sabah
In conjunction with MSAM 2012, Takaful IKHLAS presented incentives amounting to RM18,000 to 10 fortunate bank customers who had enrolled in Takaful IKHLAS policies via participating bank branches. The MSAM event proved to be an opportune platform to reward Takaful IKHLAS’ customers and business partners. MNRB Holdings Berhad 041
• RM50,000 Zakat Contribution to Sabah Islamic 12 MNRB Kem Mutiara Kasih Religious Council To motivate students in the rural areas to become model Takaful IKHLAS contributed zakat (business tithe) scholars, we organised MNRB Kem Mutiara Kasih, a amounting to RM50,000 to the Sabah Islamic Religious motivational camp for forty (40) students of SMK Slim. The Council (SIRC) during MSAM 2012. Aspah Abdullah camp consisted of programmes that exposed participants Sani, Deputy Chairman of the SIRC received the zakat to themes that challenged them and encouraged them contribution from Sharkawi Alis, Chairman of Takaful to become successful students. Participants were provided IKHLAS. The handover ceremony held at the Takaful advice, taught techniques that included tips on organising IKHLAS showcase area was witnessed by TYT Tun their textbooks and speed-reading, as well as accorded Datuk Seri Panglima Juhar Mahiruddin, Yang di-Pertua other guidelines for effective studying-all of which aimed Negeri Sabah. The zakat comprising contributions to help them secure a successful future. from Takaful IKHLAS’ 2011/2012 financial year The camp held at Kem Nadi in Sungkai, Perak, was part (FY2011/2012) was distributed to beneficiaries of the MNRB Program Lestari Cemerlang – a two-year throughout Sabah. educational programme with a sponsorship value of RM60,000. This programme aims to motivate students, instil high moral values in them and raise their self- Health Aid Equipment for the Queen Elizabeth Hospital confidence so that they perform well in the upcoming PMR and SPM examinations. In conjunction with MSAM 2012, Takaful IKHLAS donated ten (10) deluxe wheelchairs, four (4) Littman Combination Classic stethoscopes and Accoson B.P Set-Mercurial Type Y kits amounting to RM10,000 in total to the Queen Elizabeth Hospital.
10 English Language Seminar for Students In its bid to improve the command of the English Language among students, Takaful IKHLAS organised an English Language Seminar as preparation for students sitting for their PMR and SPM examinations. The seminar 11 titled “Learning English Is Fun” was held for two (2) days at the company’s headquarters in Bangsar. Sixty (60) students from Form Three (3) and Five (5) from Sekolah Menengah Kebangsaan Sri Pantai, Kampung Kerinchi took part in the programme supervised by Applied Scholastics Institute. The seminar helped students develop a confidence in speaking the English language through placing an emphasis on their pronunciation and their understanding of the meaning of sentences.
11 MNRB Scholarship Fund Presentation Ceremony 12 Under the MNRB Scholarship Fund, forty-one (41) students were awarded scholarships to pursue various insurance-related courses in national and international institutions. This forms part of our efforts to develop the capacity and skills of the local insurance industry through education. The scholarships were presented by Sharkawi Alis, Chairman of the MNRB Group and MNRB Scholarship Fund at a scholarship presentation ceremony held at Bangunan Malaysian Re in Damansara Heights. 042 annual report 2013
CORPORATE SOCIAL RESPONSIBILITY (cont’d)
13 Towards Achieving Excellence Seminar Takaful IKHLAS organised a one-day preparatory seminar for Ujian Penilaian Sekolah Rendah (UPSR), Penilaian Menengah Rendah (PMR) and Sijil Pelajaran Malaysia (SPM) students titled "Seminar Towards Achieving Excellence" at the company's head office in Bangsar, Kuala Lumpur. Some one hundred fifty (150) students from Asrama Darul Falah Kuala Lumpur, Sekolah Menengah Kebangsaan Sri Pantai, Sekolah Rendah Agama Sri Pantai as 13 well as children of Takaful IKHLAS employees participated in the seminar.
14 Sighting of the New Moon Experience for Asnaf Children A total of thirty (30) asnaf (zakat or tithe recipients) were given the opportunity to attend the sighting of the new moon for Ramadan which determines the beginning of fasting for Muslims in the country. The programme conducted at the Putrajaya International Convention Centre was a collaborative effort between Takaful IKHLAS, the Federal Territory Mufti Office, the 14 Department of Survey and Mapping Malaysia and the Selangor Zakat Board (LZS). The programme provided the opportunity for asnaf children under LZS’ supervision to have a personal experience in the sighting of the new moon for Ramadan, which is rarely experienced by the public.
15 Help for the Poor via Iftar Baraqah Programme As a conscientious corporate entity, Takaful IKHLAS addresses the difficulties faced by the community by conducting various CSR programmes that focused 15 on helping the less fortunate. During the month of Ramadan, Takaful IKHLAS organised a special Iftar Baraqah Programme in aid of the poor and needy around Selangor. In collaboration with the Selangor Zakat Centre, the Takaful IKHLAS team made surprise visits to four (4) homes located in Puchong, Sungai Buloh and Shah Alam. The programme aimed to instil the spirit of helping others in the community as well as nurture empathy towards the less fortunate. MNRB Holdings Berhad 043
16 Iftar and Ramadan Contribution to Anak Yatim dan Miskin Baitu Saidati Khadijah
In conjunction with the month of Ramadan, MNRB organised a Majlis Berbuka Puasa (breaking of fast ) event with employees and their families at our head office in Bangunan Malaysian Re, Kuala Lumpur. At the same time, we conducted our Community Relations Programme for the Pusat Pertubuhan Kebajikan Anak Yatim dan Miskin Baitu Saidati Khadijah, a centre for orphans and children from poor families.
At the ceremony, the Group contributed RM10,000 in cash for the centre’s needs which went towards the purchase 16 of furniture and electrical goods, among other needs. In addition, we also distributed duit raya to all the centre’s children. MNRB’s President & Group Chief Executive Officer, Mohd Din Merican presented the contributions to the centre’s supervisor, Esah Abdullah.
17 Bringing Cheer to Residents of the Al-Ikhlas Home, Kampung Pulau Meranti, Puchong
Takaful IKHLAS had a breaking of fast session with residents of Rumah Jagaan & Rawatan Orang Tua Al-Ikhlas in Kampung Pulau Meranti, Puchong to honour 17 and share the blessings of Ramadan with the needy. Two (2) oxygen tanks and other medical aid were presented to the home. In addition, each resident was presented with a goody bag consisting of food and daily necessities. 044 annual report 2013
18 MNRB Food Drive 2012 MNRB Food Drive was organised during the month of Ramadan. This programme encouraged employees to donate food and essential goods that were then distributed to several orphanages and old folks homes in the Klang Valley. 18 19 Eidul Adha Contribution to 300 Families About three hundred (300) less fortunate families comprising the poor, single mothers, the disabled and their families received various types of assistance from Takaful IKHLAS. This included contributions in the form of qurban meat in conjunction with Eidul Adha celebrations and provisions such as rice, sugar, milk and cooking oil. In addition, Takaful IKHLAS also handed over a business zakat contribution amounting to RM10,000 to the committee of the Kampung Pasir Besar Mosque.
19 20 20 New Library for An Orphanage in Perlis In 2012, Takaful IKHLAS partnered with Islamic Aid Malaysia (IAM) to equip the Darul Falah Ummi Aishah Orphanage in Kampung Behor Masjid, Titi Serong with a library of 1,000 books in Bahasa Melayu and English. Under the Orphanage Library programme, Takaful IKHLAS donated RM33,000 to set up the library and purchase books and computers and bookracks. The partnership with IAM is a continuous venture to develop a caring society under the company’s CSR tagline, “IKHLAS untuk Komuniti” (IKHLAS for the Community). MNRB Holdings Berhad 045
21 Takaful IKHLAS Sponsors School Gear Some fifty (50) children between the ages of eight (8) and thirteen (13) from various schools and welfare homes around Kuala Lumpur and Selangor received school gear from Takaful IKHLAS. The children were taken on an outing to buy school gear at AEON Jusco Bukit Tinggi, Klang. The group comprised orphan children (asnaf or zakat recipients) from the Klang Valley under the administration of the Selangor Zakat Council, as well as children from the Good Samaritan Home, Klang and Pusat Jagaan Kanak-kanak Cacat Klang. 22 Screening for Employees of The Star Publications 21 As part of its aim to raise awareness on healthy living, Takaful IKHLAS organised free health checks for employees of The Star Publications (M) Bhd at Menara Star in Petaling Jaya. Staff were offered tests to screen their blood glucose levels, Body Mass Index (BMI) and blood pressure.
INVESTING HOPE, INSPIRING OTHERS
Going forward, MNRB is determined to continue investing hope into the communities in and around us. Through CSR activities that truly make a difference, we will continue to lend a helping hand to society and inspire others, particularly the younger generation, in order to ensure a brighter future for all. 22 Even as we endeavour to balance out our economic ambitions with good societal and environmental behaviour, we will ensure the delivery of impactful and tangible CSR outcomes in the areas of the Workplace, Community and the Environment. Only then can we hope to create sustainable value for the Group and reinforce our ties with all our stakeholders. 046 annual report 2013
STATEMENT ON CORPORATE GOVERNANCE
The Board of Directors (“Board”) of MNRB is committed towards maintaining high standards of corporate governance and strives to continuously improve the effective application of the principles and best practices as laid down in the following:
• The Malaysian Code on Corporate Governance 2012; • The Corporate Governance Guide issued by Bursa Malaysia Securities Berhad (“Code on Corporate Governance”); • The Bursa Malaysia Securities Berhad Main Market Listing Requirements (“Bursa Malaysia Main Market Listing Requirements”); and • The Green Book published by the Putrajaya Committee on GLC High Performance (“the Green Book”).
MNRB’s policy is to implement these principles and best practices and to uphold high standards of business integrity in all activities undertaken by the Group. This shall include a commitment to emulate good industry examples and to comply with guidelines and recommendations in the conduct of business activities within the Group.
Set out below is a statement on how MNRB has applied the principles and complied with the Best Practices as prescribed under the above Code on Corporate Governance, the Bursa Malaysia Main Market Listing Requirements, and the Green Book during the financial year ended 31 March 2013.
BOARD OF DIRECTORS and annual results, major acquisitions and disposals, major capital expenditures, budgets, business plans and The Board of MNRB is responsible for the proper succession planning for top management, are reserved stewardship of the Group’s resources, the achievement for the Board or its appointed committees to deal with. of Group’s objectives and good corporate citizenship. It discharges this responsibility by complying with all The Board comprises members with a wide range of the relevant Acts and Regulations, including adopting experience in relevant fields such as insurance and the Principles and Best Practices of the above Code on reinsurance, accounting and finance, legal, economic, Corporate Governance, the Bursa Malaysia Main Market investment, international business, banking and business Listing Requirements and the Green Book. operations. Therefore, all Directors have the necessary depth to bring experience and judgment to bear on issues The Board retains full and effective control over the of strategy, performance, resources and ethical standards. Group’s affairs. This includes the responsibility to The profiles of the Directors are provided on pages 016 to determine the Group’s development and overall strategic 019 of this Annual Report. direction. Key matters such as the approval of quarterly MNRB Holdings Berhad 047
Listing Requirements which requires at least two (2) directors or one-third (1/3) of the Board, whichever is the higher, to be independent.
The meetings of the Board are chaired by the Non- Executive Chairman, whose role is clearly separated from the role of the President & Group Chief Executive Officer (“GCEO”). The Chairman is primarily responsible for ensuring the effectiveness and conduct of the Board, whilst the GCEO ensures that Board policies and decisions are implemented accordingly.
The Board members are:
• Sharkawi Alis (Non-Independent Non-Executive Chairman)
• Mohd Din Merican President & Group Chief Executive Officer (Non-Independent Executive Director)
• Megat Dziauddin Megat Mahmud (Senior Independent Non-Executive Director)
• P. Raveenderen (Non-Independent Non-Executive Director)
• Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director)
• Yusoff Yaacob (Independent Non-Executive Director)
• Datuk Mohd Khalil Dato’ Mohd Noor (Non-Independent Non-Executive Director)
• Paisol Ahmad (Non-Independent Non-Executive Director)
BOARD COMPOSITION CONFLICT OF INTEREST
Under the Company’s Articles of Association, the number Directors are required to declare their respective of Directors shall not be less than two (2) or more than shareholdings in the Company and related companies ten (10). and their interests in any contracts with the Company or any of its related companies. Directors are also required The Board currently comprises eight (8) members of to declare their directorships in other companies and whom seven (7) members are Non-Executive Directors, shall abstain from any discussions and decision-making in including the Chairman. Three (3) of these members relation to these companies. are independent. No individual or group of individuals dominate the decision making process of the Board to The Board members’ directorship in companies other than the Company and the Group, are well within the ensure a balanced and objective consideration of issues, restriction of not more than five (5) directorships in public thereby facilitating optimal decision-making. By virtue listed companies as stated in the Bursa Malaysia Main of this composition, the Company is in compliance with Market Listing Requirements. Paragraph 15.02 of the Bursa Malaysia Main Market 048 annual report 2013
STATEMENT ON CORPORATE GOVERNANCE (cont’d)
BOARD MEETINGS (iv) Succession planning, including appointing, training, fixing the compensation of and where appropriate, The Board meeting dates for the ensuing financial year replacing key management; are scheduled in advance before the end of the current financial year so that the Directors are able to plan ahead (v) Developing and implementing an investor/ and schedule these dates into their respective meeting shareholder relations programme or communication schedules. policy for the Group; and
The Board has scheduled meetings at least six (6) times a (vi) Reviewing the adequacy and integrity of the Group’s year, besides the Annual General Meeting (“AGM”). For systems of internal control and of management the year ended 31 March 2013, the Board held eight (8) information. meetings. There is also a financial and business review and discussion All Directors have complied with the requirement to of the Group’s quarterly performance including operating attend at least fifty percent (50%) of Board meetings held performance to date, against the annual budget and during the financial year ended 31 March 2013 pursuant business plan previously approved by the Board for that to the Bursa Malaysia Main Market Listing Requirements. year. The details of attendance of the Directors at Board meetings held during the financial year are as follows: The Board delegates the day-to-day management of the Company’s business to the Management Team, but No. of reserves for its consideration significant matters such as Name of Meetings Percentage the following: Director Attended of Attendance Sharkawi Alis 8/8 100% (i) Approval of financial results and quarterly announcements; Mohd Din Merican 8/8 100% Megat Dziauddin (ii) Material acquisition and disposals of assets; Megat Mahmud 8/8 100% P. Raveenderen 8/8 100% (iii) Related-party transaction of a material nature; Dato’ Syed Ariff Fadzillah (iv) Authority levels for core functions of the Company; Syed Awalluddin 8/8 100% Yusoff Yaacob 8/8 100% (v) Corporate policies on investments (including the use of derivatives) and risk management; Datuk Mohd Khalil 8/8 100% Dato’ Mohd Noor (vi) Outsourcing of core business functions; Paisol Ahmad 8/8 100% (vii) Policies & Procedures;
At each scheduled Board meeting, there is a report on the (viii) Annual Budget; and six (6) elements of responsibility of the Board under the Malaysian Code on Corporate Governance, namely: (ix) Capital Management Plan.
(i) Reviewing/adoption of strategic and business plans for the Group; APPOINTMENTS TO THE BOARD
(ii) Overseeing the conduct of the Group’s business The appointment of new Board members are considered to evaluate whether the business is being properly and properly evaluated by the Nomination Committee. managed; Once completed, the Committee shall recommend the proposed appointment to the Board for its deliberation (iii) Identifying principal risks and ensuring the and approval. In making these recommendations, implementation of appropriate systems to manage the Nomination Committee assesses the suitability of the risks; candidates, taking into account the required mix of skills, MNRB Holdings Berhad 049
knowledge, expertise and experience, professionalism, At the 40th AGM, two (2) Directors are due for re-election integrity including financial integrity, competencies and pursuant to Article 86 of the Articles of Association whilst other qualities, before recommending them to the Board one (1) Director is due to retire pursuant to Section 129 of for appointment. the Companies Act, 1965.
The Nomination Committee and Board will devote sufficient time to review, deliberate and finalise the DIRECTORS’ INDEPENDENCE AND INDEPENDENT NON- selection of directors. In this aspect, the Company EXECUTIVE DIRECTORS Secretary will ensure that all the necessary information was obtained and relevant legal and regulatory The Independent Directors play a pivotal role in corporate requirements are complied with. In this aspect, the Board accountability and provide unbiased and independent is also guided by the criteria outlined in Bank Negara views and judgement to the Board’s deliberation and Malaysia’s (“BNM”) Policy on Fit and Proper for Key decision-making process, which is reflected in their Responsible Persons (“BNM/GP1”). membership of the various Board Committees and attendance of meetings as detailed above. Moving forward, and to be in line with the recently adopted Group’s Policy on Fit and Proper, the Nomination The Board has adopted a nine (9) years with maximum Committee will also conduct a yearly assessment on the of twelve (12) years policy for the tenure of Independent suitability of the present Directors under the said policy. Non-Executive Directors, which is implemented to ensure The fit and proper assessment for the Directors will the continuous effective functioning of the Board. Due include self-declaration and vetting by the Company for to the nature of the Group’s businesses that are deemed the purpose of ensuring they are suitable to continue to specialised, the Board is of the view that the maximum serve as directors of the Company. of twelve (12) years is reasonable considering there are significant advantages to be gained from the long-serving Directors who already possess tremendous insight and RE-ELECTION OF DIRECTORS knowledge of the Group’s/Company’s business affairs. The length of their service on the Board does not in any way In accordance with Article 86 the Company’s Articles of interfere with their exercise of independent judgement Association, one-third (1/3) of the Directors for the time and ability to act in the best interests of the Company. being, or if their number is not a multiple of three (3), then the number nearest to one-third (1/3), shall retire The independence of the Independent Non-Executive from office at each AGM. All retiring Directors can offer Directors of the Company would be periodically assessed themselves for re-election. by the Nomination Committee and affirmed by the Board.
Directors who are appointed by the Board during the financial period before the AGM are also required to retire SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR from office and shall seek re-election by the shareholders at the first opportunity after their appointment. In accordance with the best practices in corporate governance, Megat Dziauddin Megat Mahmud continues to be the Senior Independent Director of the Board to The Articles further provide that all Directors shall retire whom concerns of shareholders and stakeholders may from office at least once in every three (3) years but shall be conveyed. Megat Dziauddin Megat Mahmud is also be eligible for re-election. the Chairman of the Audit Committee as well as the Remuneration Committee. Pursuant to Section 129(2) of the Companies Act, 1965, the office of a Director of over the age of seventy (70) years He can be contacted at his email address at becomes vacant at every AGM unless he is re-appointed by [email protected]. a resolution passed at such an AGM of which no shorter notice than that required for the AGM has been given, and the majority by which such resolution is passed is not less than three-fourths (3/4) of all members present and voting at such an AGM. 050 annual report 2013
STATEMENT ON CORPORATE GOVERNANCE (cont’d)
BOARD AND INDIVIDUAL DIRECTORS’ EFFECTIVENESS Prior to Board meetings, every Director receives a notice of meeting, the agenda and Board papers. Sufficient time The Board members undertake a formal and transparent is given to the Directors to enable them to obtain further process, upon completion of every financial year, to assess explanations, where necessary, so that there will be full the effectiveness of fellow directors, the Board as a whole participation by Directors at the meeting. The Board and the performance of the Executive Director. papers include the following:
The Board and Individual Directors Evaluation are based • Minutes of Board Committee meetings to keep the on answers to a detailed questionnaire. The evaluation Board informed; form is distributed to all Board members and covers topics which include, among others, the responsibilities of the • Reports by the various Board Committees on issues Board in relation to strategic plan, fiscal oversight, risk deliberated at the respective Committee meetings; management, Board composition and training needs. Other areas which are assessed include the contribution • Financial Statements Report on subsidiaries’ of each and every member of the Board at meetings as performance; and well as meeting arrangements. • Compliance reports. The Nomination Committee, having deliberated the findings of the Board and Individual Directors Evaluation, Proper guidelines have been given by the Board pertaining will report to the Board the results and highlight those to the content, presentation style and delivery of papers that require further discussion and direction by the Board. to the Board for each Board meeting to ensure adequate information is disseminated to the Directors.
SUPPLY OF INFORMATION All Directors have direct access to the members of the Senior Management team and the services of the All Directors have full and unrestricted access to all Company Secretary to enable them to discharge their information pertaining to the Group’s business affairs, duties effectively. whether as a full Board or in their individual capacity, to enable them to discharge their duties. The Company Secretary attends and ensures that all Board meetings are properly convened, and that accurate and proper records of the proceedings and resolutions passed are taken and maintained in the statutory register at the registered office of the Company. The Company Secretary works closely with the Management to ensure that there are timely and appropriate information flows within and to the Board and Board Committees, and between the Non-Executive Directors and Management.
The Directors may, if necessary, obtain independent professional advice from external consultants, at the Company’s expense.
Throughout their period in office, Directors are updated on the Group’s business, the competitive and regulatory environments in which it operates and other changes by way of written briefings and meetings with the Senior Management staff. MNRB Holdings Berhad 051
DIRECTORS’ TRAINING
The Company acknowledges that continuous education is vital for the Board members to gain insight into the regulatory updates and market developments to enhance the Directors’ skills and knowledge in discharging their responsibilities.
All new Directors are required to undergo an induction programme whereby they receive information about the Group, the formal statement of the Board’s role, the powers that have been delegated to the Company’s Senior Management and Management committees as well as the latest financial information about the Group. This is to enable them to contribute effectively from the outset of their appointment.
With the repeal of Practice Note 15 on Continuing Education Programme by Bursa Securities, the continuous training needs of the Directors are now vested in the Board.
During the financial year, all Directors attended various seminars and programmes to strengthen their skills sets and knowledge in order to effectively discharge their (v) Tun Ismail Mohamed Ali Memorial Lecture on “The responsibilities, as well as to acquire sound understanding Fall of the West and the Rise of Asia: What are of current issues and developments in the financial and the Mechanisms at Work, and Where is Malaysia’s business environment. Place?”; The Company Secretary facilitates the organising (vi) 26th EAIC Conference – “Transforming the East Asian of internal training programmes and the Directors’ Insurers”; participation in external programmes. The Company Secretary keeps a complete record of the training received (vii) Bursa Training on Sustainability Training for Directors or attended by the Directors. The following are some of and Practitioners; the programmes and seminars attended by the Board members during the financial year: (viii) FIDE Elective Programme : ICAAP Programme; (i) 29th GAIF Conference – “Insurance and the Arab (ix) Global Islamic Finance Forum 2012 – World Reform”; “Internationalisation of Islamic Finance: Bridging Economies”; and (ii) FIDE Forum – “Corporate Governance – Should I Take It Seriously”; (x) Global Islamic Wealth and Asset Management – Capitalising Challenges & Opportunities. (iii) 2012 IIS Seminar – “Insurance Frontiers: Sustainability and Innovation in Emerging Markets”; All Directors have attended the Mandatory Accreditation Programme in accordance with the Bursa Malaysia Main (iv) IMF Talk – “Asia and The Global Economy: The Market Listing Requirements. Promise of Integration”;
052 annual report 2013
STATEMENT ON CORPORATE GOVERNANCE (cont’d)
BOARD COMMITTEES In order to encourage a greater exchange of free and honest views and opinions between the Audit Committee The Board has delegated specific responsibilities to five and External Auditors, meetings between them, without (5) Board Committees, as follows: the executive board member and the Management Team being present, are held twice during the year. i) Audit Committee; The Audit Committee’s duties, as spelt-out in the ii) Nomination Committee; Audit Committee Report on pages 058 to 059 of this Annual Report, include primarily, the duties as spelt out iii) Remuneration Committee; in paragraph 15.12 of the Bursa Malaysia Main Market Listing Requirements. iv) Risk Management Committee; and The Committee met six (6) times during the financial year. v) Investment Committee.
These Committees have their respective Terms of Nomination Committee Reference, which clearly define their duties and obligations in assisting and supporting the Board. The The Nomination Committee comprises exclusively three ultimate responsibility for the final decision on all matters (3) Non-Executive Directors, the majority of whom lies with the entire Board. are independent. The Committee is chaired by an Independent Non-Executive Director in compliance with Paragraph 15.08(1) of the Bursa Malaysia Main Market Audit Committee Listing Requirements.
The Audit Committee comprises five (5) members of whom The members of the Committee are: three (3) are Independent Non-Executive Directors and two (2) are Non-Independent Non-Executive Director. Two • Dato’ Syed Ariff Fadzillah Syed Awalluddin (2) members of the Committee are qualified Accountants Chairman and members of the Malaysian Institute of Accountants. (Independent Non-Executive Director) The members of the Committee are: • Sharkawi Alis • Megat Dziauddin Megat Mahmud (Non-Independent Non-Executive Director) Chairman (Senior Independent Non-Executive Director) • Yusoff Yaacob (Independent Non-Executive Director) • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director) The Committee’s objectives are to establish a documented formal and transparent procedure for the appointment • P. Raveenderen of Directors and key senior officers as well as to assess the (Non-Independent Non-Executive Director) effectiveness of Directors, the Board as a whole and the various committees of the Board on an ongoing basis. The • Paisol Ahmad Committee regularly reviews the profile of the required (Non-Independent Non-Executive Director) mix of skills and attributes of the Directors and is satisfied that the Board has the appropriate balance of expertise • Yusoff Yaacob and ability to discharge its responsibilities. All assessments (Independent Non-Executive Director) and evaluations carried out by the Committee are properly documented and kept by the Company Secretary. The Committee’s Terms of Reference include the review and deliberation of the Financial Statements of the The Committee, following its recent annual review, is Company and the Group, findings of the External and satisfied that the size of the MNRB Board is optimum and Internal Auditors, any related party transactions and that there is the appropriate mix of knowledge, skills, any conflict of interest situation within the Group, as attributes and core competencies in the composition of well as making recommendations to the Board on the appointment/ reappointment of External Auditors. MNRB Holdings Berhad 053
the Board. The Committee is satisfied that all the members of the Board are suitably qualified to hold their positions as Directors of MNRB in view of their respective academic and professional qualifications, experience, knowledge and personal qualities.
The Directors are able to devote full commitment to their roles and responsibilities as Directors of the Company, as they hold either one or only a few directorships in public listed companies as described below:
(i) Holding only one directorship in other public listed company – one (1) Director
(ii) Holding two directorships in other public listed companies – two (2) Directors
The Committee met three (3) times during the financial year. The activities of the Nomination Committee during the financial year include the following: Remuneration Committee (i) Revised the Annual Assessment Form on the Effectiveness of the Board and the Individual Board The Board had established a Remuneration Committee members, and recommended the same for the comprising three (3) Non-Executive Directors. Board’s adoption; The members of the Committee are: (ii) Reviewed the Policy on Independent Directors, which was subsequently approved by the Board; • Megat Dziauddin Megat Mahmud Chairman (iii) Recommended to the Board the adoption of a new (Senior Independent Non-Executive Director) Fit & Proper Policy for all Key Responsible Persons of the Group; • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director) (iv) Assessed the performance of key Senior Management staff prior to the renewal of their contracts; • Yusoff Yaacob (Independent Non-Executive Director) (v) Assessed and made recommendations on the re- election of Directors retiring by rotation at the 40th The Committee’s primary objective is to establish a Annual General Meeting; formal and transparent procedure for developing a remuneration policy for Directors, Executive Directors and (vi) Reviewed the results of the Annual Assessment on key senior officers and ensuring that their compensation the Effectiveness of the Board and the Individual is competitive and consistent with the Company’s culture, Board members, including the assessment on the objectives and strategies. Additionally, the Committee is independence of the Independent Directors; and also responsible for recommending to the Board on the specific remuneration packages for Directors, Executive (vii) Assessed the training needs of the Directors and Directors and key senior officers. ensured that the necessary training was being provided by the Company. The Board as a whole will determine the remuneration of the Non-Executive Directors. Each individual Director will abstain from the Board discussion and decision on his own remuneration.
The Committee met three (3) times during the financial year. 054 annual report 2013
STATEMENT ON CORPORATE GOVERNANCE (cont’d)
Risk Management Committee of the Board Investment Committee
The Board believes that an effective Risk Management The Investment Committee, comprising two (2) Framework is essential to the Group in its quest to achieve Non-Independent Non-Executive Directors, one (1) its corporate objectives, continued profitability and Independent Non-Executive Director and one (1) Non- enhancement of shareholders’ value in today’s rapidly Independent Executive Director, examines strategic changing market environment. investment proposals and makes decisions to optimise the Group’s returns on its investment activities. The members With this in mind, the Board had established a dedicated of the Committee are: Board Committee known as the Risk Management Committee of the Board (“RMCB”) which oversees the • Datuk Mohd Khalil Dato’ Mohd Noor implementation of an enterprise-wide risk management Chairman framework. The Committee comprises three (3) members (Non-Independent Non-Executive Director) and is chaired by an Independent Non-Executive Director. The members of the Committee are: • Megat Dziauddin Megat Mahmud (Senior Independent Non-Executive Director) • Yusoff Yaacob Chairman • Paisol Ahmad (Independent Non-Executive Director) (Non-Independent Non-Executive Director)
• P. Raveenderen • Mohd Din Merican (Non-Independent Non-Executive Director) (Non-Independent Executive Director)
• Datuk Mohd Khalil Dato’ Mohd Noor The Committee met four (4) times during the financial year. (Non-Independent Non-Executive Director)
The RMCB is responsible for: DIRECTORS’ REMUNERATION i) reviewing and recommending risk management Remuneration Policy and Procedure strategies, policies and risk tolerance for the Board’s approval; The Remuneration Committee recommends to the Board the appropriate remuneration packages for the Directors ii) reviewing and assessing the adequacy of risk as well as Executive Director and the key senior officers management policies and framework for identifying, in order to attract, motivate and retain the Directors, measuring, monitoring and controlling risks as well as Executive Director and the key senior officers of the the extent to which these are operating effectively; necessary calibre and quality as required by the Group. The Group’s Remuneration policy is to reward the iii) ensuring adequate infrastructure, resources and Directors and the key senior officers competitively, taking systems are in place for effective risk management i.e. into account performance, market comparisons and ensuring that the staff responsible for implementing competitive pressures in the industry. Whilst not seeking risk management systems perform those duties to maintain a strict market position, the Committee takes independently of the Group’s risk taking activities; into account comparable roles in similar organisations and that may be the same in size, market sector or business complexity. iv) reviewing the management’s periodic reports on risk exposure, risk portfolio composition and risk The Executive Director does not participate in any way in management activities determining his individual remuneration.
The Committee met four (4) times during the financial year. All Non-Executive Directors are paid with Directors’ fees, which are recommended by the Board and approved annually by the shareholders at the Annual General Meeting. MNRB Holdings Berhad 055
The details of the total remuneration of each Director of the Company during the financial year ended 31 March 2013 are as follows:
Executive Director Non-Executive Director Total Directors’ Remuneration RM'000 RM'000 RM'000
Fees – 700 700
Salaries and other emoluments 1,626 139 1,765
Benefits-in-kind 26 31 57
Total 1,652 870 2,522
Number of Directors Directors Remuneration Executive Director Non-Executive Director
Below than RM50,000 – –
RM50,001 to RM100,000 – _
RM100,001 to RM150,000 – 7
RM150,001 to RM200,000 – –
More than RM200,001 1 –
Total 1 7
Indemnification of Directors and Officers WHISTLEBLOWING
Directors and Officers are indemnified under a Directors’ The Group is committed to carrying out its business in and Officers’ Liability Insurance against any liability accordance to the highest standards of professionalism, incurred by them in the discharge of their duties while honesty, integrity and ethics. Accordingly, the Group has holding office as Directors and Officers of the Company. established a Whistleblowing Policy with the following The Directors and Officersshall not be indemnified where objectives: there is any negligence, fraud, breach of duty or breach of trust proven against them. (i) To help develop a culture of accountability and integrity within the Group;
(ii) To provide a safe and confidential avenue for all employees, external parties and other stakeholders to raise concerns about any misconduct; 056 annual report 2013
STATEMENT ON CORPORATE GOVERNANCE (cont’d)
(iii) To reassure whistleblowers that they will be protected information is not just established to comply with the from detrimental action or unfair treatment for requirements of the Bursa Malaysia Main Market Listing disclosing concerns in good faith; and Requirements pertaining to continuing disclosure, but to also align with the best practices as recommended (iv) To deter wrongdoing and promote standards of in the Malaysian Code on Corporate Governance 2012 good corporate practices. with regard to strengthening the engagement and communication with shareholders. This Policy governs the disclosures, reporting and investigation of misconduct within the Group as well The Group’s Annual Report is the main channel of as the protection offered to the persons making those communication between the Group and its stakeholders. disclosures (“whistleblowers”) from detrimental action The Annual Report communicates comprehensive in accordance to Act 711, Whistleblower Protection Act, information of the financial results and activities 2010. undertaken by the Group. As a listed corporation, the contents and disclosure requirements of the Annual It is the Group’s policy to encourage its employees and Report are also governed by the Bursa Malaysia Main external parties to disclose any misconduct, and to fully Market Listing Requirements. investigate reports and disclosures of such misconduct, as well as to provide the whistleblower protection in The Company disseminates its Annual Report, together terms of confidentiality of information and safeguard with an executive summary, to its shareholders either the whistleblower from any act of interference that may in hard copy or in CD ROM media. All information to be detrimental to the whistleblower. The Group assures shareholders is available electronically in the Company’s whistleblowers that all reports will be treated with strict website (www.mnrb.com.my) as soon as it is announced confidentiality and upon verification of genuine cases, or published. prompt investigation will be carried out. The AGM is the principal forum for dialogue with The official avenues for disclosure by the whistleblower shareholders. The Company’s AGM is normally well are via any of the following recipients: attended as it provides the shareholders direct access to the Board as well as gives them an opportunity to i. The Chairman of MNRB Holdings Berhad; participate effectively and to vote. ii. The Chairman of the Audit Committee of MNRB Notice of the AGM and the Annual Report are sent out Holdings Berhad; or to shareholders at least twenty-one (21) days before the date of the meeting. iii. The President & Group Chief Executive Officer. Besides the normal agenda for the AGM, the Chairman of The disclosure of misconduct or wrongdoing shall be made in the Group presents a comprehensive and concise review writing via email to [email protected]. The Policy of the Group’s financial performance and the value and relevant form can be accessed at www.mnrb.com.my. created for shareholders. This review is supported by the presentation of key points and key financial figures. The Chairman also presents the progress and performance of EFFECTIVE COMMUNICATION WITH SHAREHOLDERS the Group in the Annual Report and provides opportunities for shareholders to raise questions pertaining to the The Group recognises the paramount importance of business activities of the Group. All Directors are available shareholder communication as it is a key component to to provide responses to questions from the shareholders upholding the principles and best practices of corporate during this meeting. governance for the Group. Each item of Special Business included in the notice of In maintaining the commitment to effective the meeting will be accompanied by an explanatory communication with shareholders, the Group adopts statement and/or Circular to Shareholders to facilitate full the practice of comprehensive, timely and continuing understanding and evaluation of the issues involved. disclosure of information to its shareholders as well as to the investing public. This practice of disclosure of MNRB Holdings Berhad 057
Apart from the above engagement with shareholders Internal Control and Risk Management through annual reports and general meetings, the Group also makes announcements of its quarterly results and Information on the Group’s internal control and risk other announcements to Bursa Malaysia to provide management is presented in the Group’s Statement on stakeholders with key information which affects their Risk Management and Internal Control as set out on decision making, thus enhancing the level of transparency. pages 060 to 062 of this Annual Report. To promote wider publicity and dissemination of information that is made public, the Group also issues press releases to the Media on all significant corporate Relationship with Auditors developments and business initiatives to keep the investment community and all stakeholders updated on Information on the role of the Audit Committee in the progress and strategic development of the business relation to the External Auditors may be found in the of the Group. Audit Committee Report set out in pages 058 to 059. The Group has always maintained a close and transparent relationship with its auditors in seeking professional INVESTOR RELATIONS advice and ensuring compliance with the approved accounting standards. As part of the initiatives in developing and implementing an investor relations programme, regular briefings are held between the Group with the analysts and investors. Management’s Accountability Presentations based on permissible disclosures are made to explain the Group’s performance and major development The Group has an organisational structure showing programmes. Price-sensitive information about the Group all reporting lines as well as clearly documented job is however, not disclosed at these briefings until after descriptions for all its Management and Executive the prescribed announcement to Bursa Securities has employees and formal performance appraisals are done been made. on a periodic basis.
MNRB also maintains a website which shareholders and Authority limits, as approved by the Board, are clearly the public in general can access to gain information about established and made available to all employees. the Group at www.mnrb.com.my. None of the Directors and Senior Management staff of the Group have any conflict of interest situations as referred ACCOUNTABILITY AND AUDIT to in Sections 54 and 55 of the Insurance Act, 1996.
Financial Reporting STATEMENT ON COMPLIANCE WITH THE BEST PRACTICES Concerning financial reporting through interim quarterly OF THE CODE reports to Bursa Securities and the Annual Report to shareholders, the Directors have a responsibility to present The Group is committed to achieving high standards of a fair assessment of the Group’s position and prospects. corporate governance and the highest level of integrity The Audit Committee assists the Board in scrutinising and ethical standards in all its business dealings. The Board information for disclosure to ensure accuracy, adequacy will continuously strive towards adopting all the Principles and completeness. The Directors are responsible for and Best Practices as set out in the Malaysian Code on ensuring that the accounting records are kept properly Corporate Governance 2012, the Corporate Governance and that the Group’s financial statements are prepared Guide issued by Bursa Securities, the Bursa Malaysia Main in accordance with applicable approved accounting Market Listing Requirements and the Green Book. standards in Malaysia. The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set This Statement on Corporate Governance is made in out on page 063 of this Annual Report. accordance with the resolution of the Board of Directors dated 27 June 2013. 058 annual report 2013
AUDIT COMMITTEE REPORT
MEMBERS OF THE COMMITTEE TERMS OF REFERENCE
Megat Dziauddin Megat Mahmud The main duties of the Committee are: (Chairman & Senior Independent Non-Executive Director) 1. To review and approve the annual audit plan, Dato’ Syed Ariff Fadzillah Syed Awalluddin audit charter, budget, scope of audit procedures, (Independent Non-Executive Director) audit programmes and reports of the internal auditors including actions taken on internal audit Yusoff Yaacob recommendations; (Independent Non-Executive Director) 2. To review the adequacy of the scope, functions, P. Raveenderen competency and resources of the internal audit (Non-Independent Non-Executive Director) functions and that it has the necessary authority to carry out its work; Paisol Ahmad (Non-Independent Non-Executive Director) 3. To review annually with the external auditors, the audit plan and the report including the coordination between the internal and external auditors to prevent MEMBERSHIP duplication of effort; The Audit Committee shall be appointed by the Board and 4. To review the quarterly results and year-end financial comprises at least three (3) members of whom all members statements before approval by the Board including must be non-executive directors and the majority shall the assistance given by the Company’s officers to the be independent directors. At least one member of the auditors; Committee must be a member of the Malaysian Institute of Accountants or eligible for membership. 5. To recommend to the Board the nomination of the external auditors after evaluating their performance The members of the Audit Committee must elect a and to consider the auditors’ remuneration and any Chairman among themselves who is an independent questions of resignation or dismissal; director. 6. To review the external auditors’ management letter The term of office shall be reviewed no less than once in and Management’s response thereto; every two (2) years. 7. To review the disclosure statements in the annual report to be in compliance with Bursa Malaysia AUTHORITY requirements; The Committee is authorised by the Board to undertake 8. To review any related-party transactions and any any activity within its terms of reference and must have conflict of interests situation that may arise within the unlimited access to all information and documents Group; and relevant to its activities, to both the internal and external auditors, as well as to all employees of the Group. 9. To review the allocation of options pursuant to the Company’s Employees’ Share Option Scheme. It must be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the listed MEETINGS issuer, whenever deemed necessary. A quorum shall consist of at least two-thirds of the members It must also have the authority to obtain independent with independent directors forming the majority. legal or other professional advice as it considers necessary. A minimum of four meetings per year is planned. Additional meetings may be called at any time if so requested by any committee member, the Management, the internal or external auditors. MNRB Holdings Berhad 059
The Chairman of the Committee shall invite any person 7. Reviewed the results of the internal audits carried to be in attendance to assist the committee in its out in the year and the adequacy of actions taken by deliberations. Management; and
The minutes of the meetings shall be circulated to the 8. Reviewed the Internal Audit Department’s annual Board after confirmation. audit plan for the year ended 31 March 2013.
The Secretary to the Committee shall be the Company In respect of the Company’s Employees’ Share Option Secretary. Scheme, there was no allocation of options in the year for the Audit Committee to review. For the financial year under review, a total of six (6) Audit Committee Meetings were held. The details of attendance of the Audit Committee members were as follows: INTERNAL AUDIT DEPARTMENT
Name of No. of The Internal Audit Department was set up in-house on Audit Committee Meetings 2 January 1991. It is independent of the activities or Member Attended operations of the operating units. For the financial year ended 31 March 2013, the total costs incurred for the Megat Dziauddin 6/6 Group Internal Audit function were RM1,913,000. Megat Mahmud Dato’ Syed Ariff Fadzillah 6/6 A summary of its activities for the year is as follows: Syed Awalluddin Yusoff Yaacob 6/6 1. Conducted audits of the various business portfolios / departments of the Group; P. Raveenderen 6/6 Paisol Ahmad 5/6 2. Conducted follow-up audits on the implementation of the Audit Committees’ recommendations and Management’s actions taken to improve on issues The main activities that took place during the meetings identified during the audits; and were: 3. Prepared annual audit plans and budget for the 1. Reviewed the quarterly results and year-end financial Audit Committees’ consideration. statements prior to approval by the Board;
2. Considered and recommended to the Board the nomination of the external auditors for the financial year ended 31 March 2013;
3. Reviewed the external auditors’ audit plan for the year ended 31 March 2013;
4. Reviewed the external auditors’ management letter and Management’s response thereto. Meetings without the presence of the Management were also held with the external auditors;
5. Reviewed the disclosure statements in the annual report to be in compliance with Bursa Malaysia requirements;
6. Considered and recommended to the Board the payment of final dividends; 060 annual report 2013
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
RESPONSIBILITY management framework had been put in place and it was operating effectively to manage the risks of The Board acknowledges that it is responsible for the Company for the whole of the financial year the implementation of the Group’s risk management ended 31 March 2013. and internal control system and for reviewing its effectiveness, adequacy and integrity. It recognizes that • Operational Risk Management Committees (“ORMC”) risk management is a continuous process, designed to at the management level were also established to manage rather than eliminate the risk of failure to achieve implement the risk management processes, provide the Group’s business and financial objectives. In pursuing assurance to the Board that the processes have been these objectives, internal control systems can only provide carried out effectively and ensuring a proactive risk reasonable and not absolute assurance against material management culture on an enterprise-wide basis. misstatement or loss. • The Group Chief Risk Management and Compliance The Board has established a robust process for identifying, Officer (“GRMCO”) facilitates the risk management evaluating and managing the significant risks faced by process. The risk management process, structure and the Group. These processes have been in place for the infrastructure are aligned across the subsidiaries whole of the financial year ended 31 March 2013 and through the adoption of the Group’s risk management have continued up to the date on which this Statement framework. was approved. The Board is confident that these processes provide reasonable assurance on the effectiveness and • The Group adopts the Three Lines of Defence model. efficiency of both the financial and operational aspects of Within each entity, Heads of Divisions/Departments the Group. The process is regularly reviewed by the Board are responsible for managing risks and controls and is guided by the Statement on Risk Management & within their respective functions on a day-to-day Internal Control: Guidelines for Directors of Listed Issuers. basis, as well as escalating significant potential risks to the respective ORMC. The Risk Management and Compliance function assumes overall responsibility RISK MANAGEMENT AND INTERNAL CONTROL for the implementation of the risk management STRUCTURE framework and its continued application in the respective entities. Internal Audit function provides The key features that the Board has established in the Audit Committee (“AC”) with reasonable reviewing the adequacy and effectiveness of the risk independent assurance on the effectiveness and management and internal control system include the efficiency of the Framework as part of Group’s system following: of internal controls.
Risk Management Framework Internal Audit Function
• The Board believes that an effective risk management • The Internal Audit function is centralized at Group framework and strong internal control system level and it reports to the respective ACs. is essential to the Group in its quest to achieve its corporate objectives, especially on the continued • The Internal Audit performs regular reviews of the profitability and enhancement of shareholders’ value business processes of the Group to assess the adequacy in today’s rapidly changing market environment. and effectiveness of internal controls as well as to highlight significant risks impacting the Group. • The Board had established dedicated Board Where applicable, it provides recommendations to Committees known as the Risk Management improve on the effectiveness of risk management, Committee of the Board (“RMCB”) at the company control and governance processes. and subsidiary level to oversee the implementation of the risk management framework. As part of • The AC meets on a scheduled basis to review audit Group’s risk governance process, the respective issues and its impact on internal control systems, as RMCB Chairman had provided confirmation to the identified in reports prepared by Internal/External Chairman of MNRB Holdings that the necessary risk Auditors and Regulatory Authorities. MNRB Holdings Berhad 061
• The AC has active oversight on function’s • The Group holds a twenty percent (20%) effective independence, scope of work and resources. Details equity interest in its associated company, Labuan of activities undertaken by the AC during the year Re through its subsidiary, Malaysian Re and is are highlighted in the Audit Committee Report. represented on the Board of Labuan Re by two (2) of its directors. It also has a forty percent (40%) effective equity interest in another associated company, MRC Other Key Elements Of Internal Control and is similarly represented on the Board of MRC by two (2) of its Directors. • The Group has a well-defined organizational structure with clear lines of responsibility and accountability. Other Committees Of The Board • The Underwriting Guidelines of the Reinsurance, Takaful and Retakaful subsidiary companies have Apart from the RMCB and the AC, other Board Committees been put in place to manage risks that are being have also been established at both the company and underwritten. subsidiary levels to assist the Board in performing its oversight function. They consist of the following: • Retrocession and Retrotakaful programs are in place where there is spread of reinsurers and retakaful • The Investment Committee, which is responsible for operators with acceptable ratings from accredited reviewing and approving investment proposals, as agencies. The securities of these reinsurers and well as monitoring the Group’s investment portfolio retakaful companies are reviewed on an annual to ensure conformity with overall business objectives basis. and statutory requirements.
• Departmental manuals are available within the Group • The Nomination Committee, which is responsible and these set out policies and procedures for day-to- to recommend to the Board the appointment of day operations. It specifies relevant authority limits directors and selected senior management personnel to be complied with by each level of management including the CEO. It is also responsible for the annual within the subsidiaries. assessment of the effectiveness of the Board.
• The Group’s financial systems record all transactions • The Remuneration Committee, which is responsible to produce quarterly performance reports that allow to recommend the appropriate remuneration the respective Management to focus on key areas of packages for the directors and selected senior concern. management personnel including the CEO. It also reviews and recommends the bonus and increment • Annual business plans are submitted to the Board for pools for staff. approval.
• A detailed budgeting process has been implemented Assurance From Management in the Group where budgets for the upcoming financial year are approved by the Board. The budget The Board has also received reasonable assurance from is monitored and major variances are followed-up by the President & Group Chief Executive Officer that the the respective Management. Group’s risk management and internal control systems are operating adequately and effectively, in all material • Shariah Committees have also been established respects, based on the risk management framework at each of the takaful and retakaful subsidiary adopted by the Group. companies to provide oversight on Shariah related matters.
• Every employee of the Group is contractually bound to observe prescribed standards of business ethics in the manner of conducting themselves at work and their relationships with external parties such as customers and suppliers. 062 annual report 2013
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d)
Review Of The Statement By External Auditors RPG 5 does not require the external auditors to consider whether the Directors’ Statement on Risk Management The external auditors have reviewed this Statement and Internal Control covers all risks and controls, or on Risk Management and Internal Control for inclusion to form an opinion on the effectiveness of the Group’s in the annual report for the financial year ended risk and control procedures. RPG 5 also does not require 31 March 2013. the external auditors to consider whether the processes described to deal with material internal control aspects The external auditors conducted the review in accordance of any significant matters disclosed in the annual report with the “Recommended Practice Guide 5: Guidance will, in fact, mitigate the risks identified or remedy the for Auditors on the Review of Directors’ Statement on potential problems. Internal Control” (“RPG 5”) issued by the Malaysian Institute of Accountants. The review has been conducted Based on their review, the external auditors have to assess whether the Statement on Risk Management and reported to the Board that nothing had come to their Internal Control is both supported by the documentation attention that causes them to believe that the Statement prepared by or for the Directors and appropriately reflects on Risk Management and Internal Control is inconsistent the processes the Directors had adopted in reviewing the with their understanding of the processes the Board has adequacy and integrity of the system of internal controls adopted in the review of the adequacy and integrity of of the Group. the risk management and internal control of the Group. MNRB Holdings Berhad 063
STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS Pursuant to paragraph 15.26(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad
The Directors are required to prepare financial statements, which give a true and fair view of the state of affairs of the Company and the Group as at the end of each financial year and of their results and their cash flows for that year then ended.
The Directors consider that in preparing the financial statements,
• the Company and the Group have used appropriate accounting policies, which are consistently applied;
• reasonable and prudent judgements and estimates were made; and
• all applicable approved accounting standards in Malaysia have been followed.
The Directors are responsible for ensuring that the Company and the Group maintain accounting records that disclose with reasonable accuracy on the financial position of the Company and the Group, and which enable them to ensure that the financial statements are drawn up in accordance with the requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board and the provisions of the Companies Act, 1965.
The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Company and the Group, in that context, to have proper regard to the establishment of appropriate systems of internal control with a view to prevent and detect fraud and other irregularities.
The Directors consider that they have pursued the actions necessary to meet their responsibilities as set out in this Statement.
This statement is made in accordance with the resolution of the Board of Directors dated 27 June 2013. 064 annual report 2013
FIVE-YEAR FINANCIAL HIGHLIGHTS
2013(1) 2012(1) 2011(2) 2010(2) 2009(2) RM’000 RM’000 RM’000 RM’000 RM’000
Revenue 2,056,811 1,870,326 1,463,262 1,341,798 1,173,819
Profit before zakat and tax 242,907(3) 194,980(3) 164,952 79,261 40,457
Profit after zakat and tax 184,161(3) 146,104(3) 122,942 50,713 26,288
Technical reserves 3,204,985 2,793,864 1,266,110 1,180,750 1,113,062
Total assets 5,643,378 5,048,449 4,467,967 3,845,983 3,378,919
Shareholders’ fund 1,131,944 1,058,488 998,715 892,513 835,646
Paid-up capital 213,070 213,070 213,070 213,070 213,070
Earnings per share (sen) 52.9 41.9 57.7 23.8 12.3
Net assets per share (RM) 5.31 4.97 4.69 4.19 3.92
Profit before zakat and tax to Shareholders’ fund (%) 21.46 18.42 16.50 8.90 4.80
Profit after zakat and tax to Shareholders’ fund (%) 16.27 13.80 12.30 5.70 3.10
Gross Dividends (%) 32.0(4) 17.0 20.0 – 10.0
Net dividends per share (sen) 24.0 13.0 15.0 – 7.5
Remarks
(1) Figures for 2013 were prepared under the new Malaysian Financial Reporting Standards (MFRS). Figures for 2012 have been restated following the MFRS.
(2) Figures from 2009 to 2011 were prepared under the Financial Reporting Standards (FRS).
(3) Under MFRS, profit before/after zakat and tax includes surplus/deficit of the various takaful/retakaful funds.
(4) Subject to approval at the forthcoming Annual General Meeting. MNRB Holdings Berhad 065
FINANCIAL CALENDAR
2011 2012 Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Quarterly Results
1st Quarter Results 22 30
2nd Quarter Results 24
3rd Quarter Results 24
4th Quarter Results 31
AGM
Notice of AGM 3
AGM 25
2012 2013 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Quarterly Results
1st Quarter Results
2nd Quarter Results 30
3rd Quarter Results 28
4th Quarter Results 30
AGM
Notice of AGM 3
AGM 25 066 annual report 2013
MNRB’S GROWTH
RM Million
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year
Total Assets Shareholders' Fund
Year Shareholders’ Fund Total Assets RM’000 RM’000 2002 506,313 1,329,716 2003 564,609 1,427,390 2004 617,010 1,476,021 2005 677,039 1,607,197 2007 808,477 1,963,036 2008 893,919 2,576,247 2009 835,646 3,378,919 2010 892,513 3,845,983 2011 998,715 4,467,967 2012 1,058,488 5,048,449 2013 1,131,944 5,643,378 MNRB Holdings Berhad 067
INVESTORS’ INFORMATION
MNRB HOLDINGS BERHAD – PERFORMANCE OF SHARE
1/4/12-31/3/13 1/4/11-31/3/12 1/4/10-31/3/11 1/4/09-31/3/10 1/4/08-31/3/09 Closing Price (RM) 2.94 2.62 2.63 3.04 2.75 Highest Price (RM) 3.39 3.42 3.04 3.39 4.92 Lowest Price (RM) 2.81 2.33 1.90 2.68 2.60 Total Volume Traded (‘000) 108,017 57,903 9,803 14,614 12,254 Gross Dividend Yield (%) 10.88 6.49 7.60 0 3.64 Price Earning Ratio (x) 5.56 6.65 14.21 13.45 25.7
Source: Bloomberg and Bursa Malaysia @ 14/07/2013
MNRB'S SHARE PRICE AND VOLUME TRADED (JANUARY 2011 – MARCH 2013)
3.2 15000 3.1 12000 3.0
2.9 9000 2.8 2.7 6000
Closing Price (RM) 2.6
3000 ('000') Traded Volume 2.5 2.4 0
Closing Price Volume Traded
PERFORMANCE OF MNRB SHARES AND FBMKLCI (JANUARY 2011 – MARCH 2013)
1750 3.2
1660 3.0
1570 2.8
FBMKLCI 1480
2.6 Closing Price (RM) 1390
1300 2.4
Closing Price of MNRB Shares FBMKLCI
(664194-v)
Trusted BY CUSTOMERS
Over the years, Malaysian Re has been a steadfast partner to local insurance companies helping them enhance their competitiveness and efficiency particularly in the Fire, Engineering, Motor, Marine, and Miscellaneous Accidents segments. Malaysian Re continues to leverage on its breadth and depth of experience and expertise, strong fundamentals and proven track record to strengthen and grow its customer base domestically and abroad. 070 annual report 2013
CORPORATE PROFILE
Malaysian Reinsurance Berhad (Malaysian Re) is a wholly owned subsidiary of MNRB Holdings Berhad. As part of the restructuring exercise of the MNRB Group, the reinsurance business, the reinsurance license and reinsurance assets of MNRB were transferred to Malaysian Re on 1 April 2005.
As the national reinsurer, Malaysian Re will continue to pursue the same primary objective as that successfully achieved by MNRB for almost forty (40) years, that of reducing the outflow of reinsurance premiums overseas. Malaysian Re will also continue to enhance the competitiveness and efficiency of the local insurance companies in an increasingly globalised marketplace through its active involvement in leading and underwriting their reinsurance needs. The classes of business underwritten can broadly be categorised under Fire, Engineering, Motor, Marine, and Miscellaneous Accidents.
Leveraging on its breadth and depth of experience and expertise, strong fundamentals and proven record of accomplishment, Malaysian Re has grown in stature as an international player having established a strong market presence in Asia, the Middle East and Africa.
CAPITAL STRUCTURE
The Company has an Authorised Capital of RM1 billion, divided into 1 billion ordinary shares of RM1.00 each and a Paid-up Capital of RM510 million, divided into 510 million ordinary shares of RM1.00 each. Malaysian Reinsurance Berhad 071
CORPORATE INFORMATION
BOARD OF DIRECTORS
Sharkawi Alis Yusoff Yaacob Non-Independent Non-Executive Chairman Independent Non-Executive Director
Hashim Harun Datuk Mohd Khalil Dato’ Mohd Noor President & Chief Executive Officer Non-Independent Non-Executive Director Non-Independent Executive Director Megat Dziauddin Megat Mahmud P. Raveenderen Independent Non-Executive Director Non-Independent Non-Executive Director Mohd Din Merican Dato’ Syed Ariff Fadzillah Non-Independent Non-Executive Director Syed Awalluddin Independent Non-Executive Director
COMPANY SECRETARIES REMUNERATION COMMITTEE AUDITORS
Norazman Hashim (MIA 5817) • Megat Dziauddin Ernst & Young Lena Abd Latif (LS 8766) Megat Mahmud (Chairman) Level 23A, Menara Millenium • Dato’ Syed Ariff Fadzillah Jalan Damanlela Syed Awalluddin Pusat Bandar Damansara AUDIT COMMITTEE • Yusoff Yaacob Damansara Heights • Mohd Din Merican 50490 Kuala Lumpur • Megat Dziauddin Tel : +603-7495 8000 Megat Mahmud (Chairman) Fax : +603-2095 5332 • Dato’ Syed Ariff Fadzillah RISK MANAGEMENT COMMITTEE Syed Awalluddin • P. Raveenderen • Yusoff Yaacob (Chairman) PRINCIPAL BANKERS • P. Raveenderen • Datuk Mohd Khalil CIMB Bank Berhad NOMINATION COMMITTEE Dato’ Mohd Noor CIMB Islamic Bank Berhad • Mohd Din Merican Malayan Banking Berhad • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) • Sharkawi Alis INVESTMENT COMMITTEE REGISTERED OFFICE • P. Raveenderen • Yusoff Yaacob • Datuk Mohd Khalil 12th Floor, Bangunan Malaysian Re • Datuk Mohd Khalil Dato’ Mohd Noor (Chairman) No. 17, Lorong Dungun Dato’ Mohd Noor • Megat Dziauddin Damansara Heights Megat Mahmud 50490 Kuala Lumpur • Hashim Harun Tel : +603-2096 8000 • Mohd Din Merican Fax : +603-2096 7000 E-mail : [email protected] Website : www.malaysian-re.com.my 072 annual report 2013
DIRECTORS’ PROFILE
SHARKAWI ALIS, aged sixty-six (66), Malaysian. Non-Independent Non-Executive Chairman since 3 September 2007. Member of the Nomination Committee.
Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report.
HASHIM HARUN, aged fifty-nine (59), Malaysian. Non-Independent Executive Director since 1 April 2008. Member of the Investment Committee. Currently, the President & Chief Executive Officer of Malaysian Re. He is the Chairman of Malaysian Insurance Institute (MII), a Director of MRDL, MMIP Services Sdn. Bhd., Financial Park (Labuan) Sdn. Bhd. and Asian Institute of Finance (AIF). Obtained his Bachelor of Arts (Hons.) Degree from the University of Malaya. He started his career at Credit Corporation (M) Berhad, a finance company, in 1977. He served in various capacities and was appointed as General Manager in 1988. In 1996, with the acquisition of Credit Corporation (M) Berhad by the DRB Hicom Group, he was appointed as the General Manager at one of its subsidiaries, Automotive Corporation (M) Sdn. Bhd., assembler and distributor of Isuzu vehicles and the national truck, Hicom. In 1998, he served on the Board of SEA Insurance Berhad (now UNI.Asia General Insurance Berhad) and subsequently appointed as CEO in 1999. He served as a Director at UNI.Asia Capital Berhad and UNI. Asia Life Assurance Berhad from 1999 to 2008. Held the position of Chairman of Central Administration Bureau (CAB) from 2003 to 2005. A Director of Malaysian Rating Corporation Berhad from 2005 to 2007 and he served as the Chairman of Persatuan Insurans Am Malaysia (PIAM) from 2009 to 2012. Malaysian Reinsurance Berhad 073
P. RAVEENDEREN, aged sixty-eight (68), Malaysian. Independent Non-Executive Director since 27 August 2004 and re-designated as Non-Independent Non-Executive Director on 19 July 2011. Member of the Audit Committee, the Risk Management Committee and the Nomination Committee.
Other information on P. Raveenderen is disclosed in the Directors’ Profile section of MNRB on page 017 of this Annual Report.
Dato’ Syed Ariff FADZILLAH SYED AWALLUDDIN, aged sixty-nine (69), Malaysian. Non-Independent Non-Executive Director since 27 August 2004 and re-designated as Independent Non-Executive Director on 28 October 2004. Chairman of the Nomination Committee and member of the Remuneration Committee and the Audit Committee.
Other information on Dato’ Syed Ariff Fadzillah Syed Awalluddin is disclosed in the Directors’ Profile section of MNRB on page 018 of this Annual Report. 074 annual report 2013
DIRECTORS’ PROFILE (cont’d)
YUSOFF YAACOB, aged sixty-five (65), Malaysian. Independent Non-Executive Director since 31 March 2005. Chairman of the Risk Management Committee and member of the Nomination Committee and the Remuneration Committee.
Other information on Yusoff Yaacob is disclosed in the Directors’ Profile section of MNRB on page 018 of this Annual Report.
DATUK MOHD KHALIL DATO’ MOHD NOOR, aged seventy-two (72), Malaysian. Non-Independent Non-Executive Director since 31 March 2005. Chairman of the Investment Committee and member of the Risk Management Committee and the Nomination Committee.
Other information on Datuk Mohd Khalil Dato’ Mohd Noor is disclosed in the Directors’ Profile section of MNRB on page 019 of this Annual Report. Malaysian Reinsurance Berhad 075
MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-seven (67), Malaysian. Independent Non-Executive Director since 24 August 2006. Chairman of the Remuneration Committee, Chairman of the Audit Committee and member of the Investment Committee.
Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 017 of this Annual Report.
Mohd Din Merican, aged fifty-one (51), Malaysian. Non-Independent Non- Executive Director since 2 March 2012. Member of the Investment Committee, the Risk Management Committee and the Remuneration Committee.
Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report. 076 annual report 2013
SENIOR MANAGEMENT TEAM
Hashim Harun President & Chief Executive Officer Paul Ng Wooi Yip Senior Vice President & Chief Underwriter, International Treaties
Rajinder Mohan Senior Vice President & Chief Underwriter, Domestic Treaties
T. Sivapalan Senior Vice President & Chief Underwriter, Facultative & Technical Support Malaysian Reinsurance Berhad 077
Teoh Bee Lan Senior Vice President & Head of Reinsurance Administration
Mili Mohd Yusoff Vice President & Head of Central Administration Bureau and Large & Specialised Risks
Abdul Halim Anuar Sharif Vice President & Head of Market Pools 078 annual report 2013
SENIOR MANAGEMENT TEAM’S PROFILE
The President & Chief Executive Officer, HASHIM HARUN, leads the day-to-day operations of Malaysian Re together with the key management staff which includes:
PAUL NG WOOI YIP is the Senior Vice T. SIVAPALAN is the Senior Vice MILI MOHD YUSOFF is the Vice President & Chief Underwriter of President & Chief Underwriter of President & Head of Central International Treaties Department. Facultative and Technical Support Administration Bureau (CAB) and He graduated with a Bachelor of Division. He graduated with a Bachelor Large & Specialised Risks (LSR) Science (Hons) Degree in Mechanical of Mechanical Engineering (Hons) Department. She was a PERNAS Engineering from the University of from University Malaya. He is also a scholar and obtained her Associateship Salford, Manchester, United Kingdom Chartered Insurer and an Associate of the Chartered Insurance Institute in 1984. He began his career with the member of the Chartered Insurance from the London School of Insurance. then Malaysian National Reinsurance Institute (ACII) and Malaysian Whilst in the UK, she was attached to Berhad as a Risk Engineer in 1984. Insurance Institute (AMII). He has Gil y Carvajal Brokers Pte Ltd where Working up the ranks, he was over twenty (20) years of experience she received training as a junior promoted to Assistant General in the insurance industry, both with reinsurance broker. She subsequently Manager in 1994. He was transferred foreign and local direct insurers as returned to Malaysia in 1987 and to Malaysian Re on 1 April 2005 well as with a foreign reinsurance thereafter, spent a major part of her and assumed his present position in company. He started his career in risk career in insurance broking specializing October 2005. management and had since moved on in Oil & Gas, Marine and Specialised to underwriting, reinsurance, claims, Risks portfolios. She was the Risk and marketing and senior management. Insurance Manager for a major Dutch RAJINDER MOHAN is the Senior Vice Throughout his career, he has served oil company for a short stint before President & Chief Underwriter of in a number of PIAM Sub-Committees returning to the broking fraternity in Domestic Treaties Department. He is and is currently the Chairman of the 2001. In her last broking assignment, a Fellow member of the Chartered Rating Committee. she led her team to successfully secure Insurance Institute, United Kingdom Malaysia’s first deepwater offshore (F.C.I.I) and a Senior Associate construction project. She was also member of the Australian and New TEOH BEE LAN is the Senior Vice the Client Manager for the country’s Zealand Institute of Insurance and President & Head of Reinsurance ‘Angkasawan (Astronaut)’ insurance Finance (A.N.Z.I.I.F). He started his Administration Division (Claims programme. A Fellow of the Chartered career as an Executive with Guardian and Retrocessions). She graduated Insurance Institute (by examination, Royal Exchange in New Zealand in from the University of Malaya with 1994). February 1988 and subsequently a Bachelor of Accounting (Hons) joined the then Malaysian National Degree in 1984. Her work experience Reinsurance Berhad in November encompasses external audit, internal ABDUL HALIM ANUAR SHARIF is the 1988 as an Underwriting Executive. audit, corporate planning and Vice President & Head of Market He was promoted to Assistant compliance before she assumed her Pools. He graduated with a Bachelor General Manager for Business Unit present position in June 2002. She of Science in Mechanical Engineering 2 in April 2002. He was transferred was transferred to Malaysian Re on 1 in 1986 from South Dakota State to Malaysian Re on 1 April 2005 April 2005. University, United States of America. and assumed his present position in He commenced his career with the October 2005. Technical Services Department of the then Malaysian National Reinsurance Berhad as Risk Engineer in 1987. He was transferred to Voluntary Cession Department in 1996, Market Cession & Facultative Department in 1998, Marketing / Underwriting - Business Unit 1 in 2002, Retrocessions / Claims / Pools Department in 2003 and later transferred to Malaysian Re on 1 April 2005. He assumed his present position in May 2010. Malaysian Reinsurance Berhad 079
CORPORATE ACTIVITIES AND SERVICES
Malaysian Re has been actively involved in system, the members of Persatuan Insurans Am Malaysia (PIAM), in 2009, conceptualised the idea of underwriting all classes of general reinsurance developing a centralized coinsurance system (CABCO) business from the Malaysian market. It has which would function on the same operating model as the CABFAC. The CABCO was formally launched expanded its business internationally and is in August 2011 to cater for the coinsurance business actively underwriting business from the Asian, transactions between the local insurers. Middle East and Africa markets. Malaysian Re will continue to provide prompt services and C) INSPECTION will ensure the existing products to be not only Malaysian Re was given the mandate by PIAM to competitive but also meet the requirements of form an Inspection Task Force to conduct inspections its customers. or carry out investigations on the conduct and activities of its members in accordance with the terms and provisions of the various Inter- Company MARKET SERVICES Agreements. With effect from 1 April 1992, the various Inter-Company Agreements had now been Malaysian Re is currently involved in providing various amalgamated into a single agreement called “Inter services to the Malaysian insurance industry. The services Company Agreement on General Insurance Business” amongst others, include the following: (ICAGIB).
A) TECHNICAL SERVICES D) MALAYSIAN MARKET POOLS Surveying and Advisory Services on Risk Management • Malaysian Aviation Pool Malaysian Re provides Property and Engineering Risk Survey services to the local insurance industry Malaysian Re assumed the role as Manager of for the purpose of special rating, underwriting and the Malaysian Aviation Pool (MAP) effective also loss estimation. Property Risk assessment and 1 October 1996. Currently, its membership risk management services tailored to the insured’ comprises six (6) local insurers and four (4) needs are also provided through their insurers reinsurers with a total underwriting capacity when requested. of RM 338 million. The underwriting of risks is by a Committee, nominated by participating companies. The business written by MAP B) CENTRAL ADMINISTRATION BUREAU is primarily Malaysian risks and Malaysian interests abroad. Malaysian Re initiated the establishment of the Central Administration Bureau (CAB) in 1995 to manage the centralized computerised system (CABFAC) for the administration and settlement of facultative reinsurance between CAB members i.e. insurers and reinsurers operating in Malaysia. The elimination of reconciliation problems and the efficient settlement of balances and claims recovery between members were the main drivers for the formation of CAB. The cost of development and operations of the system were jointly funded by its members and since the launching of the webbased system in 2004, reinsurers have experienced a distinct enhancement in the overall performance of the CAB system. Following the success of the CABFAC 080 annual report 2013
CORPORATE ACTIVITIES AND SERVICES (cont’d)
F) SCHEME FOR INSURANCE OF LARGE & SPECIALISED RISKS
The Scheme for Insurance of Large & Specialised Risks (SILSR) was implemented on 1 January 1994 with Malaysian Re appointed as Scheme Manager by Bank Negara Malaysia (BNM). The SILSR was formed with the primary objective of developing and enhancing the level of technical expertise and professionalism within the Malaysian insurance fraternity. In line with this intent, SILSR aimed to promote optimum retention of Malaysian risks with reinsurance placed to the best national advantage. To this end, SILSR’s role would be to facilitate the most favourable cover at internationally competitive terms for the Malaysian risk owners.
G) SIHAT MALAYSIA
The Sihat Malaysia Scheme, which was officially launched on 18 February 2000, was developed by the • Malaysian Energy Risks Consortium National Insurance Association of Malaysia (NIAM). Members of NIAM subscribing to this Scheme Malaysian Energy Risks Consortium (MERIC) was provide a uniformed health insurance programme established in March 1995 with the objective covering health care including cashless admission to optimize national retention, promote wider to hospitals, medical treatments, surgery as well as interest and develop underwriting skills in the emergency assistance to policy holders. Managed specialised class of energy business. MERIC Care Organisation has been appointed under the comprises eleven (11) local insurers and three Scheme to provide specialised services to both the (3) reinsurers with Malaysian Re taking on policy holders and NIAM members. Malaysian Re was the role of Secretariat. It has a capacity to appointed as the Account Manager of the Scheme, underwrite up to a combined single limit of RM which is currently being subscribed to by six (6) NIAM 50 million for upstream and downstream risks. members. The underwriting of risks is by a Committee, nominated by participating companies. The primary portfolio of the business written by H) SPECIAL RATING MERIC is Malaysian risks and Malaysian interests abroad. However, recognising the need to Malaysian Re was appointed by PIAM to form a develop a broader spread of risks and premium Rating Committee specifically for the purpose of base, the portfolio has been extended to include determining special rates for Fire and Industrial All risks within Asia and Pacific regions, Middle East Risks (IAR) insurances, for risks which qualify for and North Africa countries. special rating under the Fire Tariff. This Committee comprises not less than six (6) qualified or experienced insurance underwriters or risk surveyors from among E) MARKET TRAINING PIAM members of whom not more than three (3) shall be from Malaysian Re. The Chairman of the Rating Over the years, Malaysian Re has and will continue to Committee shall be a representative from Malaysian organise various courses/seminars on insurance and Re. By virtue of this appointment, Malaysian Re also reinsurance subjects for staff of insurance companies acts as the Secretariat to this Committee as well as to instill a higher degree of professionalism in handles the day-to-day operations of all matters the industry. pertaining to special rating applications. Malaysian Reinsurance Berhad 081
MALAYSIAN RE’S PORTFOLIO OF BUSINESS
2013 2012 CLASS RM’000 % RM’000 %
Fire 516,635 40 432,927 38
Marine 247,475 19 241,924 21
Motor 197,564 16 188,182 16
Miscellaneous Accident 317,404 25 283,382 25
Total 1,279,078 100 1,146,415 100
25% 25% Miscellaneous Accident Miscellaneous Accident
40% 38% Fire Fire
2013 2012
16% 19% 16% 21% Motor Marine Motor Marine
(593075-u)
TRUSTED BY GENERATIONS
With its ethical approach and customer-oriented service delivery, Takaful IKHLAS continues to solidify its reputation among diverse age groups. Through tapping a fast expanding participants' base, growing distribution/service channels, cutting-edge technology and a comprehensive suite of innovative products, the Company is uniquely placed to capitalise on a host of marketplace opportunities in the takaful arena. 084 annual report 2013
CORPORATE PROFILE
Takaful Ikhlas Sdn. Bhd. (Takaful IKHLAS) was incorporated on 18 September 2002 and is a wholly owned subsidiary of MNRB Holdings Berhad. The Company is principally involved in the provision of Islamic financial protection services, based on principles and rulings of Shariah. Within its ten (10) years of operation, Takaful IKHLAS has established a strong presence in the provision of Islamic financial protection services based on the takaful system, which places an emphasis on a spirit of cooperation and joint responsibility among participants. Takaful IKHLAS’ objective is to be the preferred provider of Islamic financial protection services and it is making a concerted effort to achieve this ambition.
More than 1.8 million individuals and corporations have placed their trust in the Company and become its certificate holders (participants). Takaful IKHLAS’ commitment and adherence to values that are cherished, coupled with the application of cutting-edge technology in conducting its business, have reinforced the Company’s reputation for its ethical approach and service delivery.
The Company offers individuals and commercial enterprises a comprehensive range of Family, Group and General Takaful Plans and Riders, with more being planned in the not too distant future. Its distribution/service channels comprise highly knowledgeable and well-trained people that number more than 6,000 agency personnel, brokers, financial institutions, motor franchise holders, co-operatives and Islamic bodies.
Takaful IKHLAS has a customer service centre at its Corporate Head office in Bangsar South, Kuala Lumpur as well as regional offices in Kedah, Perak, Pahang, Kelantan, Terengganu, Selangor, Putrajaya, Melaka, Johor, Sabah, Sarawak and Negeri Sembilan.
CAPITAL STRUCTURE
Takaful IKHLAS has an Authorised Capital of RM500 million and a Paid-up Capital of RM295 million. TAKAFUL IKHLAS SDN. BHD. 085
CORPORATE INFORMATION
BOARD OF DIRECTORS
Sharkawi Alis Paisol Ahmad Non-Independent Non-Independent Non-Executive Director Non-Executive Chairman Yahaya Besah Ab Latiff Abu Bakar Independent Non-Executive Director President & Chief Executive Officer Non-Independent Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Independent Non-Executive Director Dato’ Othman Hashim Independent Non-Executive Director Mohd Din Merican Non-Independent Non-Executive Director Halim HAJI Din Independent Non-Executive Director Megat Dziauddin Megat Mahmud Independent Non-Executive Director
COMPANY SECRETARIES REMUNERATION COMMITTEE AUDITORS
Norazman Hashim (MIA 5817) • Yahaya Besah (Chairman) Ernst & Young Lena Abd Latif (LS 8766) • Dato’ Othman Hashim Level 23A, Menara Millenium • Halim Haji Din Jalan Damanlela • Paisol Ahmad Pusat Bandar Damansara AUDIT COMMITTEE • Mohd Din Merican Damansara Heights • Megat Dziauddin Megat Mahmud 50490 Kuala Lumpur • Halim Haji Din (Chairman) Tel : +603-7495 8000 • Dato’ Othman Hashim Fax : +603-2095 5332 • Paisol Ahmad RISK MANAGEMENT COMMITTEE • Dr. Syed Musa Syed Jaafar Alhabshi • Yahaya Besah • Dato’ Othman Hashim (Chairman) PRINCIPAL BANKERS • Megat Dziauddin Megat Mahmud • Paisol Ahmad • Dr. Syed Musa Syed Jaafar Alhabshi Maybank Islamic Berhad • Yahaya Besah CIMB Islamic Bank Berhad SHARIAH COMMITTEE • Mohd Din Merican Bank Islam Malaysia Berhad EONCAP Islamic Bank Berhad • Prof. Dr. Ahmad Hidayat Buang AmIslamic Bank Berhad (Chairman) INVESTMENT COMMITTEE • Datuk Nik Moustpha Haji Nik Hassan • Prof. Madya Dr. Shamsiah • Paisol Ahmad (Chairman) REGISTERED OFFICE Mohamad • Dr. Syed Musa Syed Jaafar Alhabshi • Dr. Muhammad Naim Omar • Halim Haji Din 9th Floor, IKHLAS Point • Dr. Syed Musa Syed Jaafar Alhabshi • Mohd Din Merican Tower 11A, Avenue 5 • Megat Dziauddin Megat Mahmud Bangsar South • Ab Latiff Abu Bakar No. 8, Jalan Kerinchi NOMINATION COMMITTEE 59200, Kuala Lumpur Tel : +603-2723 9999 • Dr. Syed Musa Fax : +603-2723 9998 Syed Jaafar Alhabshi (Chairman) E-mail : [email protected] • Sharkawi Alis Website : www.takaful-ikhlas.com.my • Halim Haji Din • Dato’ Othman Hashim • Mohd Din Merican 086 annual report 2013
DIRECTORS’ PROFILE
SHARKAWI ALIS, aged sixty-six (66), Malaysian. Non-Independent Non-Executive Chairman of Takaful IKHLAS since 3 January 2008. Member of the Nomination Committee.
Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report.
AB LATIFF ABU BAKAR, aged fifty-three (53), Malaysian. Non-Independent Executive Director with effect from 7 January, 2013 and President & Chief Executive Officer of the Company. Member of the Investment Committee. He graduated with a Bachelor Degree of Business Administration from University of Portland, Oregon, USA. He has more than twenty (20) years of experience in insurance and Takaful industry which began in 1989 when he joined Malaysian Assurance Alliance Bhd. Since then he has held senior and key management positions in various Insurance and Takaful companies including being an Acting Chief Operating Officer of Takaful Nasional Sdn Bhd until June 2006. He was appointed as Executive Vice President / Head of Agency at Etiqa Insurance & Takaful until September 2008. In October 2008, he was appointed as Chief Executive Officer of Hong Leong Tokio Marine Takaful (now known as Hong Leong MSIG Takaful) until April 2011. Prior joining Takaful Ikhlas Sdn Bhd, he was the Head of Takaful for Tokio Marine Asia Pte Ltd until 6 January 2013.
DATO’ OTHMAN HASHIM, aged sixty-one (61), Malaysian. Independent Non- Executive Director since 23 April 2003. Chairman of the Risk Management Committee. Member of the Audit Committee, the Remuneration Committee and the Nomination Committee. Graduated from the Royal Military College, Sungai Besi. Obtained his Degree in Law from London and qualified as a Barrister-at- Law from Council of Legal Education, London. He was among the first batch of lecturers to teach Diploma in Law at the Mara Institute of Technology. In 1983, he set up his partnership legal practice, Messrs. Othman Hashim, Chen & Co. In 1990, he moved on and set up his own legal practice, Messrs. Othman Hashim & Co. He is also a Director of Dynaura Trading Sdn. Bhd. TAKAFUL IKHLAS SDN. BHD. 087
HALIM HAJI DIN, sixty-seven (67), Malaysian. Independent Non-Executive Director since 11 July 2003. Chairman of the Audit Committee. Member of the Nomination Committee, the Remuneration Committee and the Investment Committee. He is a Chartered Accountant who spent more than thirty (30) years working for multinational corporations and international consulting firms. He accumulated eighteen (18) years of experience working in the Oil and Gas Industry – six (6) years of which as a Board member of Caltex/Chevron, responsible for financial management before engaging in the consulting business. He was the Managing Partner of the Consulting Division of Ernst & Young Malaysia. He later became the Vice President of Cap Gemini Ernst & Young Consulting when Cap Gemini of France merged with Ernst & Young Consulting. In 2003, he, together with two (2) partners took over the consulting business of Cap Gemini Ernst & Young, Malaysia and rebranded it as Innovation Associates where he is currently the Group Managing Director. He is also an independent member of the Board of Wah Seong Corporation Berhad, Kris Assets Holdings Berhad and BNP Paribas Malaysia Berhad.
PAISOL AHMAD, aged fifty-nine (59), Malaysian. Non-Independent Non- Executive Director of Takaful IKHLAS since 6 August 2008. Chairman of the Investment Committee. Member of the Audit Committee, the Remuneration Committee and the Risk Management Committee.
Other information on Paisol Ahmad is disclosed in the Directors’ Profile section of MNRB on page 019 of this Annual Report. 088 annual report 2013
DIRECTORS’ PROFILE (cont’d)
YAHAYA BESAH, aged sixty-one (61), Malaysian. Independent Non-Executive Director since 20 August 2009. Chairman of the Remuneration Committee. Member of the Audit Committee and the Risk Management Committee. He is also a Director of MRT.
Graduated from Universiti Sains Malaysia with a Bachelor Degree in Social Science. He was a Director at the Office of the Director General of Insurance, Federal Treasury from 1975 until 1988. Joined BNM in 1988 and had served in various insurance related departments throughout his length of service. He was the former Director in the Insurance Supervision Division from 1995 until 1998 and also Director Internal Audit of BNM from 1998 until 2005. His last position in BNM was Director Special Projects (Deposit Insurance) before he retired in 2006.
DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-three (53), Malaysian. Independent Non-Executive Director since 20 August 2009. Chairman of the Nomination Committee. Member of the Audit Committee, the Risk Management Committee, the Investment Committee and the Shariah Committee. He is also a Director of MRT.
Obtained a Diploma in Business Studies from Ngee Ann Polytechnic, Singapore in 1984, a Bachelor of Business Administration (Hons.) Degree from the International Islamic University Malaysia (IIUM) in 1989 and a Doctorate in Business Administration majoring in Accounting and Finance from University of Strathclyde, Glasgow, United Kingdom in 1994.
He began his career with Coopers & Lybrand, Singapore as an Audit Assistant in 1984. From 1989 until 1994, he joined IIUM as an Assistant Lecturer and upon completion of doctoral degree he became an Assistant Professor and held various academic administrative positions in the University. He joined Universiti Tun Abdul Razak in 2000 as an Associate Professor and appointed Head of Centre for Graduate Studies in 2001. He later served as Dean of Faculty of Business in 2005. In 2006, he joined Amanie Business Solutions Sdn Bhd and is currently attached as a fellow Consultant of International Institute of Islamic Finance Inc. (IIIF) with the company. In 2009 he resumed his academic career as Associate Professor with Universiti Tun Abdul Razak and appointed Dean of Graduate School of Business in 2010. Since October 2012, he is the Associate Professor of IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia. He currently sits on the Shariah Committees of Bank of Tokyo - Mitsubishi UFJ (Malaysia) Berhad and MRT. TAKAFUL IKHLAS SDN. BHD. 089
MOHD DIN MERICAN, aged fifty-one (51), Malaysian. Non-Independent Non- Executive Director since 2 March 2012. Member of the Investment Committee, the Risk Management Committee, the Nomination Committee and the Remuneration Committee.
Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report.
MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-seven (67), Malaysian. Independent Non-Executive Director since 17 April 2012. Member of the Audit Committee, the Investment Committee and the Remuneration Committee.
Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 017 of this Annual Report. 090 annual report 2013
SHARIAH COMMITTEE MEMBERS’ PROFILE
PROF. DR. AHMAD HIDAYAT BUANG, aged fifty (50). Shariah Committee member of Takaful IKHLAS since 26 December 2002 and appointed as Shariah Committee Chairman with effect from 23 July 2013. Professor of the Academy of Islamic Studies at University of Malaya. Previously, he was a Director for the Academy of Islamic Studies from October 2007 until January 2011. Holds a Bachelor in Shariah from the University of Malaya. Completed his Master in Law and Doctorate from University of London (specialising in Islamic Contracts). Former member of OCBC Bank Berhad and CIMB Shariah Council.
DATUK NIK MOUSTPHA HAJI NIK HASSAN, aged sixty (60). Shariah Committee member of Takaful IKHLAS since 26 December 2002. Currently he is the Director General, Institute of Islamic Understanding Malaysia (IKIM) since August 2009. He studied Business and Economics at Ohio University, United States of America. Prior to Joining IKIM, he was the Dean of Kulliyyah Economics and, subsequently, Dean of Kulliyyah Post Graduate Studies at the International Islamic University of Malaysia. In 1989, he used to serve as visiting Scholar at Oxford Centre for Islamic Studies, United Kingdom for one (1) academic year. TAKAFUL IKHLAS SDN. BHD. 091
PROF. MADYA DR. SHAMSIAH MOHAMAD, aged forty-six (46). Shariah Committee member of Takaful Ikhlas since 2009. Currently, she is a Senior Researcher at International Shari'ah Research Academy for Islamic Finance (ISRA) since May 2013. Previously, she was an Associate Professor at the Department of Fiqh and Usul, Academy of Islamic Studies of University of Malaya. Currently, she is a member of Shariah Committee of the Standard Chartered Saadiq Berhad and also a member of Shariah Advisory Council of Securities Commission Malaysia and Shariah Advisory Council of Bursa Malaysia. Besides that, she is also a member of Shariah Expert Panel of Jabatan Kemajuan Islam Malaysia (JAKIM) and a member of Shariah Advisory Council of Association of Islamic Banking Institutions Malaysia (AIBIM). Both of her degree and Master are from University of Malaya. She received her PhD from University of Jordan. Her expertise is in Fiqh Muamalat and Fiqh Mawarith.
DR. MUHAMMAD NAIM OMAR, aged forty-five (45). Shariah Committee member of Takaful IKHLAS since 1 April 2009. He is an Assistant Professor of Islamic Law at Ahmad Ibrahim Kulliyyah of Laws, International Islamic University of Malaysia and also OCBC Al Amin Shariah Committee Member. Graduated with a degree in Shariah Law from Al-Azhar University in 1992. In 1999, he received a Master degree from Cairo University in Shariah Law and later received his PhD from the University of Wales, Lampeter, in 2006.
DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-three (53). Shariah Committee member of Takaful IKHLAS since 1 September 2012. Independent Non- Executive Director since 20 August 2009.
Other information on Dr. Syed Musa Syed Jaafar Alhabshi is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 088 of this Annual Report. 092 annual report 2013
SENIOR MANAGEMENT TEAM
Ab Latiff Abu Bakar President & Chief Executive Officer
Muhammad Jamalul Alam Mohd Isa @ Jeffery Zain Appointed Actuary & Head of Actuarial Services
Zainurin Julaihi Senior Vice President & Chief Financial Officer Yong Way En Senior Vice President & Chief Information Officer Information System & Services TAKAFUL IKHLAS SDN. BHD. 093
Yushida Husin Senior Vice President & Rozhan Yusof Chief Corporate Services Officer Senior Vice President & Head of Family Operations
Wan Rosli Shaharuddin Wan Yaacob Senior Vice President & Head of Family Agency
Zarina Mohd Sahim Senior Vice President & Head of General Operations 094 annual report 2013
SENIOR MANAGEMENT TEAM’S PROFILE
Ab Latiff Abu Bakar is the a brief stint as Research Fellow at In 2009, he joined Ambank Berhad as President & Chief Executive Officer, the National University of Malaysia the Program Director of Group MIS Malaysian, graduated with a Bachelor where he supervised and delivered Capability, responsible to craft out Degree of Business Administration the Actuarial Science Degree course the MIS Capability program scope, from University of Portland, Oregon, for undergraduates, he joined ASH business case and subsequently USA. He has more than twenty (20) Resources Sdn. Bhd., a freelance design and implementation. After years of experience in insurance and management consulting firm, where the implementation commenced in takaful industry which began in 1989 he carried out contract actuarial early 2011, he was appointed as Head when he joined Malaysian Assurance consulting work for numerous of Enterprise Data Warehouse / MIS Alliance Bhd. Since then he has held major insurance corporations, both to manage both programs as well senior and key management positions conventional and takaful. as the Business-As-Usual team. He in various insurance and Takaful joined Takaful IKHLAS as the Chief companies including being an Acting Information Officer in August 2012. Chief Operating Officer of akafulT ZAINURIN JULAIHI is the Senior Vice Nasional Sdn Bhd until June 2006. President & Chief Financial Officer He was appointed as Executive Vice of Takaful IKHLAS. He obtained his YUSHIDA HUSIN is the Senior Vice President / Head of Agency at Etiqa Master in Business Administration President & Chief Corporate Services Insurance & Takaful until September from UiTM. He is a member of the Officer of Takaful IKHLAS. Graduated 2008. In October 2008, he was MIA and Member of the Institute of with a Bachelor of Science in appointed as Chief Executive Officer Bankers Malaysia (MIBM). Prior to Statistics Degree from the University of Hong Leong Tokio Marine Takaful his current appointment, he was the of Illinois at Urbana-Champaign. (now known as Hong Leong MSIG Vice President, Policy and Control Before joining Takaful IKHLAS, she Takaful) until April 2011. Prior to with Bumiputra Commerce Finance served six (6) years with a multi- joining Takaful IKHLAS as its President Berhad. He joined Takaful IKHLAS in national consultancy firm Accenture & Chief Executive Officer on 7 January September 2004. (previously known as Andersen 2013, he was the Head of Takaful Consulting) where she was involved in for Tokio Marine Asia Pte Ltd until both local and international business 6 January 2013. Yong Way En is the Senior Vice process re-engineering and system President & Chief Information Officer. implementation projects for insurance Graduated with a Master degree of as well as other financial institutions MUHAMMAD JAMALUL ALAM MOHD Business Administration in Finance and in the Asian region. She was also ISA @ JEFFERY ZAIN is the Appointed MIS from Texas A&M University. His involved in several government Actuary and Head of Actuarial career began at Accenture (previously initiatives by the Economic Planning Services Takaful IKHLAS since October Andersen Consulting) after graduation Unit and Malaysia Administrative 2009. Graduated with a Bachelor where he spent fourteen (14) years and Modernisation Planning Unit of Science in Actuarial Science and working with Financial Institutions (MAMPU). She was one of the pioneer later with a MBA in Finance, both regionally with vast of experiences, members involved in the formation from St John’s University, New York, especially in strategic planning and of Takaful IKHLAS. She joined Takaful United States of America. He has over delivery services. In addition, he has IKHLAS in January 2003. twenty-two (22) years of practical also involved in business development experience in the insurance and during his last 4-5 years as Senior financial services industry and is a Manager at Accenture. In 2006, he Fellow of the Society of Actuaries. He joined SCOPE International (M) Sdn served a stint with BNM’s Insurance Bhd (subsidiary of Standard Chartered Regulation Department before Bank PLC (UK)) as the Head of Retail joining Malaysia National Insurance Banking – Hogan. His main role was to Berhad where he stayed for ten (10) ensure the unit provides and maintains years. He then joined IPP Advisors a stable core banking application in Sdn. Bhd., a financial planning six (6) countries to support Standard firm as Executive Director. After Chartered Bank’s consumer banking operations. TAKAFUL IKHLAS SDN. BHD. 095
ROZHAN YUSOF is the Senior Vice Malaysia National Insurance In 1994, her takaful experience President & Head of Family Operations Berhad (Total Quality Management started when she joined Syarikat of Takaful IKHLAS. Graduated with a Department) and AMI Insurans Takaful Malaysia Bhd for eighteen (18) Bachelor of Economics (1986) from Berhad (Internal Audit Department). years. Her last position was Head of Macquarie University, Australia and Prior to his current appointment, he Operations – General Takaful where is an Associate of the Society of served BNM and was attached to the she was responsible in managing Actuaries, United States of America. Insurance Examination Department. the entire operations of General He started his career with MCIS He was a Member of the PIAM Motor Takaful Division. Prior joining Takaful Berhad (now known as MCIS ZURICH Sub- Committee (2001 – 2002). He IKHLAS, she was at Hong Leong MISG Insurance Berhad) in 1986. His joined Takaful IKHLAS in October 2002. Takaful for a few months as Head working experience in the insurance of General Operations. She joined and takaful covered various areas Takaful IKHLAS as the Senior such as actuarial, operations and Zarina Mohd Sahim is the Vice President & Head of General product/business development. He Senior Vice President & Head of Operations in October 2012. joined Takaful IKHLAS in June 2004. General Operations. Graduated with a Bachelor degree of Business Administration (Insurance) from WAN ROSLI SHAHARUDDIN WAN Mara University of Technology (UiTM) YAACOB is the Senior Vice President and has over twenty-five (25) years & Head of Family Agency of Takaful of extensive experience in insurance IKHLAS. Graduated with a Bachelor of and takaful industry. Her career Science (Business Administration) and began at Malaysia National Insurance Master in Business Administration Sdn Bhd after graduation where she from the United States International spent five (5) years as an Executive, University (USIU), San Diego, United Fire Department. In 1991, she joined States of America, respectively. He Hong Leong Assurance Sdn Bhd as has eighteen (18) years experience in an Executive, Fire Underwriting for the insurance industry, having served Corporate Clients. in The People’s Insurance Co. (M) Berhad (Technical Service Division), 096 annual report 2013
TAKAFUL IKHLAS’ PORTFOLIO OF BUSINESS
(A) GENERAL TAKAFUL
2013 2012 CLASS RM’000 % RM’000 %
Fire 28,824 14 29,260 15
Marine 388 1 2,668 2
Motor 144,656 70 137,967 71
Miscellaneous Accident 31,208 15 23,838 12
Total 205,076 100 193,733 100
15% 12% Miscellaneous Accident 14% Miscellaneous Accident Fire 15% Fire
2013 2012
70% 1% 71% 2% Motor Marine Fire Marine TAKAFUL IKHLAS SDN. BHD. 097
(B) FAMILY TAKAFUL
2013 2012 CLASS RM’000 % RM’000 %
Individual 240,248 44 226,602 45
Mortgage 103,217 19 95,904 19
Group 178,883 33 136,754 27
Investment-Linked 19,995 4 43,186 9
Total 542,343 100 501,636 100
4% 9% Investment-Linked Investment-Linked
44% 45% Individual Individual
2013 2012
33% 19% 27% 19% Group Mortgage Group Mortgage
(757635-u)
TRUSTED PROTECTION PROVIDER
Through MNRB Retakaful, the Group is offering a second layer of protection to takaful players and entrenching itself as a significant player in the global takaful industry. These efforts are also lending support to Malaysia’s aspirations to be an international hub for the development of Islamic financial services. 100 annual report 2013
CORPORATE PROFILE
MNRB Retakaful Berhad (MRT), a wholly owned subsidiary of MNRB Holdings Berhad, was incorporated in December 2006 and registered by Bank Negara Malaysia as the first retakaful operator in Malaysia on 1 August 2007. MRT is involved in the Family and General retakaful businesses. The setting up of MRT is another effort by the MNRB Group to entrench itself as a significant player in the global takaful industry and to help promote Malaysia as a leading centre for the development of the Islamic finance industry.
CAPITAL STRUCTURE
MRT has an Authorised Capital of RM500 million and a Paid-up Capital of RM100 million. MNRB RETAKAFUL BERHAD 101
CORPORATE INFORMATION
BOARD OF DIRECTORS
Sharkawi Alis Datuk Mohd Khalil Dato’ Mohd Noor Non-Independent Non-Executive Non-Independent Non-Executive Director Chairman Yahaya Besah Dato’ Syed Ariff Fadzillah Independent Non-Executive Director Syed Awalluddin Independent Non-Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Independent Non-Executive Director Megat Dziauddin Megat Mahmud Independent Non-Executive Director Mohd Din Merican Non-Independent Non-Executive Director
PRESIDENT & CHIEF EXECUTIVE NOMINATION COMMITTEE INVESTMENT COMMITTEE OFFICER • Dato’ Syed Ariff Fadzillah • Datuk Mohd Khalil Dato’ Mohd Noor Mohd Sahimy Man Syed Awalluddin (Chairman) (Chairman) • Sharkawi Alis • Megat Dziauddin Megat Mahmud • Datuk Mohd Khalil • Mohd Din Merican COMPANY SECRETARIES Dato’ Mohd Noor • Dr. Syed Musa Syed Jaafar Alhabshi Norazman Hashim (MIA 5817) AUDITORS • Mohd Din Merican Lena Abd Latif (LS 8766) Ernst & Young RISK MANAGEMENT COMMITTEE Level 23A, Menara Millenium AUDIT COMMITTEE Jalan Damanlela • Yahaya Besah (Chairman) Pusat Bandar Damansara • Megat Dziauddin Megat • Dato’ Syed Ariff Fadzillah Damansara Heights Mahmud (Chairman) Syed Awalluddin 50490 Kuala Lumpur • Dato’ Syed Ariff Fadzillah • Datuk Mohd Khalil Tel : +603-7495 8000 Syed Awalluddin Dato’ Mohd Noor Fax : +603-2095 5332 • Yahaya Besah • Mohd Din Merican • Dr. Syed Musa Syed Jaafar Alhabshi PRINCIPAL BANKER REMUNERATION COMMITTEE SHARIAH COMMITTEE CIMB Islamic Bank Berhad • Dr. Syed Musa Syed Jaafar Alhabshi • Ir. Dr. Muhamad Fuad Abdullah (Chairman) (Chairman) REGISTERED OFFICE • Megat Dziauddin Megat Mahmud • Assoc. Prof. Dr. Said Bouheraoua • Dato’ Syed Ariff Fadzillah • Dr. Syed Musa Syed Jaafar Alhabshi 9th Floor, Bangunan Malaysian Re Syed Awalluddin • Datuk Nik Moustpha Haji No.17, Lorong Dungun • Yahaya Besah Nik Hassan Damansara Heights • Dr. Mohamed Fairooz 50490 Kuala Lumpur, Malaysia Abdul Khir Tel : +603 2096 7007 Fax : +603 2096 8007 E-mail : [email protected] Website : www.mnrb-retakaful.com.my 102 annual report 2013
DIRECTORS’ PROFILE
SHARKAWI ALIS, aged sixty-six (66), Malaysian. Non-Independent Non-Executive Chairman of MNRB Retakaful Berhad since 24 December 2007. Member of the Nomination Committee.
Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report.
DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 6 August 2007. Chairman of the Nomination Committee. Member of the Audit Committee, the Remuneration Committee and the Risk Management Committee.
Other information on Dato’ Syed Ariff Fadzillah Syed Awalluddin is disclosed in the Directors’ Profile section of MNRB on page 018 of this Annual Report.
MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-seven (67), Malaysian. Independent Non-Executive Director since 6 August 2007. Chairman of the Audit Committee and member of the Remuneration Committee and Investment Committee.
Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 017 of this Annual Report. MNRB RETAKAFUL BERHAD 103
DATUK MOHD KHALIL Dato’ Mohd Noor, aged seventy-two (72), Malaysian. Non-Independent Non-Executive Director since 21 March 2008. Chairman of the Investment Committee. Member of the Nomination Committee and the Risk Management Committee.
Other information on Datuk Mohd Khalil Dato’ Mohd Noor is disclosed in the Directors’ Profile section of MNRB on page 019 of this Annual Report.
Yahaya Besah, aged sixty-one (61), Malaysian. Independent Non-Executive Director since 4 July 2008. Chairman of the Risk Management Committee. Member of the Audit Committee and the Remuneration Committee.
Other information on Yahaya Besah is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 088 of this Annual Report. 104 annual report 2013
DIRECTORS’ PROFILE (cont’d)
Dr. Syed Musa Syed Jaafar Alhabshi, aged fifty-three (53), Malaysian. Independent Non-Executive Director since 23 July 2008. Chairman of the Remuneration Committee. Member of the Audit Committee, the Nomination Committee and the Shariah Committee.
Other information on Dr. Syed Musa Syed Jaafar Alhabshi is disclosed in the Directors’ Profile section of Takaful IKHLAS. on page 088 of this Annual Report.
Mohd Din Merican, aged fifty-one (51), Malaysian. Non-Independent Non- Executive Director since 2 March 2012. Member of the Investment Committee, the Risk Management Committee and the Nomination Committee.
Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report. MNRB RETAKAFUL BERHAD 105
SHARIAH COMMITTEE MEMBERS’ PROFILE
IR. DR. MUHAMAD FUAD ABDULLAH, aged sixty (60). Shariah Committee member of MRT since 1 June 2011. Obtained his Bachelor Degree in Electrical Engineering from Southampton University in 1977. In 1982, he obtained his Masters Degree in Electrical Engineering from the same university and in 1994, obtained his second Bachelor Degree in Shariah from Jordan University. In 1996, he completed his Ph.D in Muslim Civilisation from Aberdeen University in Scotland.
He started his career with Jabatan Kerja Raya Malaysia as an Electrical Engineer in 1977. He then joined Uniphone Sdn. Bhd. as an engineering logistics manager from 1983 to 1992 after which he became an academic staff member of Universiti Kebangsaan Malaysia (UKM). He left UKM in 1996 for a short stint with Kolej Uniti of Negeri Sembilan before becoming a Director in an engineering consultancy firm Five-H Associates Sdn. Bhd. until he left as its Managing Director in 2006. He is currently the Chairman of the Shariah Advisory Committee of MNRB Retakaful Bhd and Chairman of the Shariah Committee of MIDF Group of Companies in addition to being a member of the BIMB Securities Sdn Bhd Shariah Advisory Committee. He is a registered Shariah Adviser with the Securities Commission (SC) which qualifies him to advise on Shariah-compliant products and services regulated by the SC. He is a registered Shariah lawyer with Majlis Agama Islam Perak since 2007 and was a member of the Board of Studies of the BA (Fiqh and Usul Fiqh) Programme of the International Islamic University of Malaysia (IIUM) in 2007-2010. He is a member of the Majlis Agama Islam Wilayah Persekutuan (MAIWP) and sits on the boards of several companies namely Malaysian Industrial Development Finance (MIDF) Berhad, MIDF Property Berhad, Mesiniaga Berhad, ARZ Consulting Engineers Sdn. Bhd, Hospital Pusrawi Sdn. Bhd and MIEL Logistics Sdn. Bhd, the last two of which he chairs. On 4 February 2013, he was appointed a Director of the Boards of Sime Darby Berhad and Sime Darby Property Berhad. He also serves as a Board member of Institut Kefahaman Islam Malaysia (IKIM).
He is a Fellow of the Institution of Engineers Malaysia (FIEM) and a professional engineer (PEng) registered with the Board of Engineers Malaysia (BEM). He is also an ASEAN Chartered Professional Engineer (ACPE), International Professional Engineer (IntPE), and APEC Engineer (APECEng). For a number of years he has served the engineering profession through several committees of IEM and BEM. He has been an interviewer for the IEM Professional Interview and a panel evaluator for the Engineering Accreditation Council (EAC) of BEM for many years. He had served as a member of the Industry Advisory Panels (IAPs) of the electrical engineering faculties of UiTM, MMU, and UNITEN. In March 2013, he was appointed an adjunct staff member of Universiti Putra Malaysia (UPM) and is attached to its Department of Electrical and Electronic Engineering. 106 annual report 2013
SHARIAH COMMITTEE MEMBERS’ PROFILE (cont’d)
ASSOC. PROF. DR. SAID BOUHERAOUA, aged forty-six (46). Shariah Committee member of MRT since 1 April 2011. Holds a Bachelor Degree in Fiqh and Usul Al- Fiqh from University of Algiers in 1991. In 1998, he obtained his Masters Degree from the International Islamic University of Malaysia (IIUM) and in 2002, he completed his Ph.D from the Department of Fiqh and Usul al-Fiqh of the same university.
He started his career with University Sains Islam Malaysia (USIM) as a Lecturer in 2003. After two (2) years, he became an Assistant Professor Dr. & Associate Professor Dr. at the Ahmad Ibrahim Kulliyyah of Laws in IIUM, from year 2004 to 2009. He then resumed his career path as a Senior Researcher at the International Shari’ah Research Academy (ISRA) for Islamic Finance. He is also a member of the Shari’ah Committee for Affin Islamic Bank since March 2008. He is also member of Shari’ah Committee of ISRA Consultancy institute, since April 2011 and a registered Shariah Adviser with Securities Commission Malaysia since March 2012.
Dr Said is the editor-in-chief of ISRA International Journal of Islamic Finance. He has published three books, five chapters in books and several articles in refereed journals. He has also presented several papers in international conferences including the International Fiqh Academy of the OIC and Islamic Fiqh Academy of Muslim World League. He developed the curricula in Islamic law for four courses at IIUM and conducted several training sessions in Islamic law Islamic banking and finance in Malaysia and abroad.
Prior to his achievements and contributions towards the industry, he had won the Lamya al-Faruqi Award for Academic Excellence in 1999, organised by International Institute of Islamic Thought and the International Islamic University Malaysia.
DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-three (53). Shariah Committee member of MRT since 1 June 2011. Independent Non-Executive Director since 23 July 2008.
Other information on Dr. Syed Musa Syed Jaafar Alhabshi is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 088 of this Annual Report. MNRB RETAKAFUL BERHAD 107
DATUK NIK MOUSTPHA HAJI NIK HASSAN, aged sixty (60). Shariah Committee member of MRT since 1 April 2012.
Other information on Datuk Nik Moustpha Haji Nik Hassan is disclosed in the Shariah Committee Member’s Profile section of Takaful IKHLAS on page 090 of this Annual Report.
DR. MOHAMED FAIROOZ ABDUL KHIR, aged thirty-eight (38). Shariah Committee member of MRT since 1 April 2013. Holds a B.A in Islamic Revealed Knowledge and Human Sciences (Fiqh & Usul Fiqh) from International Islamic University Malaysia in 2000. Obtained his M.A in Shariah from University of Malaya, Kuala Lumpur, Malaysia in 2005 and completed his Ph.D in Islamic Finance from the same university in 2011.
He started his career with IIUM Centre for Foundation Studies since 2002 as a lecturer in the Department of Islamic Revealed Knowledge and Human Sciences. After eight (8) years in service, he resumed his career path as a Researcher at the International Shari’ah Research Academy for Islamic Finance (ISRA). He is also a member of the Shari’ah Committee for Malaysian Industrial Development Finance (MIDF) since May 2011 and a member of the Shari’ah Committee for AGRO Bank since August 2012. Actively involved in research works, writing books, and presentation of research papers at various local and international conferences and forums. He had been conferred Excellence Award by University of Malaya for early completion of his Ph.D study. 108 annual report 2013
PRESIDENT & CHIEF EXECUTIVE OFFICER'S PROFILE
Mohd Sahimy Man President & Chief Executive Officer
MOHD SAHIMY MAN, was appointed as the President & Chief Executive Officer of MRT on 1 October 2012. He has thirty- four (34) years experience in general insurance and reinsurance industry and has held various senior positions in leading local and international insurance and reinsurance companies. He had also served as the Senior Executive Officer of MRDL from 2006 to 2011. Prior to joining MRDL in October 2006, he was the Senior Manager/Alternate Chief Executive Officer of Swiss Reinsurance Company, Kuala Lumpur Branch and the General Manager of Etiqa Offshore Insurance (L) Ltd. (formerly known as MNI Offshore Insurance (L) Limited). MNRB RETAKAFUL BERHAD 109
MRT’S PORTFOLIO OF BUSINESS
(A) GENERAL RETAKAFUL
2013 2012 CLASS RM’000 % RM’000 %
Fire 56,600 72 35,130 60
Marine 6,784 9 10,095 17
Motor 6,977 9 4,982 9
Miscellaneous Accident 8,423 10 7,892 14
Total 78,784 100 58,099 100
10% 14% 9% Miscellaneous Accident 9% Miscellaneous Accident Motor Motor
72% 60% Fire Fire
2013 2012
9% 17% Marine Marine
(B) FAMILY RETAKAFUL
2013 2012 RM’000 RM’000
53,246 26,000
(CL0306) TRUSTED ABROAD
The success of Malaysian Re (Dubai) Ltd. or MRDL in the Middle East and North Africa (MENA) region underscores the confidence that the Group’s partners in this region have in us. The on-going good growth expected from MRDL reflects the Group’s ambition to extend its international footprint and derive new revenue streams. 112 annual report 2013
CORPORATE PROFILE
Malaysian Re (Dubai) Ltd. (MRDL), a wholly owned subsidiary of MNRB Holdings Berhad, was incorporated on 7 December 2006. MRDL is licensed under the laws of the Dubai International Financial Centre (DIFC) and regulated by the Dubai Financial Services Authority (DFSA).
Since its inception, MRDL has been primarily focusing its efforts on developing Malaysian Re’s business in the Middle East and North Africa (MENA) region. It functions primarily to develop relationships with clients in these regions as well as provide servicing and underwriting support for them. All reinsurance businesses of MRDL are fully underwritten by Malaysian Re, an ‘a-’ (Excellent) rated company by A.M. Best Co and ‘A’ by Fitch Ratings.
MRDL will continue to expand its market presence in the MENA region and is committed in being at the forefront of strong leadership in the region.
CAPITAL STRUCTURE
MRDL has an Authorised Capital of USD5 million and a Paid-up Capital of USD2 million. MALAYSIAN RE (DUBAI) LTD. 113
CORPORATE INFORMATION
BOARD OF DIRECTORS
Sharkawi Alis Non-Independent Non-Executive Chairman
Hashim Harun Non-Independent Non-Executive Director
Mohd Din Merican Non-Independent Non-Executive Director
SENIOR EXECUTIVE OFFICER PRINCIPAL BANKER
Zaini Abdul Aziz Standard Chartered Bank Precinct Building 1 DIFC Branch COMPANY SECRETARY Dubai, United Arab Emirates Tel : +971 4 5083612 Norazman Hashim (MIA 5817) Fax : +971 4 4282502
AUDITORS REGISTERED OFFICE
Moore Stephens Unit 101, Level 1 Chartered Accountants Gate Village 4, The Gate District Suite M5-A, Zalfa Building Dubai International Financial Centre Al Garhoud Area P. O. Box 506571 P. O. Box 28817 Dubai, United Arab Emirates Dubai, United Arab Emirates Tel : +971 4 3230388 Tel : +971 4 2820811 Fax : +971 4 3230288 Fax : +971 4 2820812 Website : www.malaysian-re.com.my 114 annual report 2013
DIRECTORS’ PROFILE
SHARKAWI ALIS, aged sixty-six (66), Malaysian. Non-Independent Non-Executive Chairman since 17 December 2007.
Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 016 of this Annual Report.
HASHIM HARUN, aged fifty-nine (59), Malaysian. Non-Independent Non- Executive Director since 29 June 2010.
Other information on Hashim Harun is disclosed in the Directors’ Profile section of Malaysian Re on page 072 of this Annual Report.
MOHD DIN MERICAN, aged fifty-one (51), Malaysian. Non-Independent Non- Executive Director since 5 February 2012.
Other information on Mohd Din Merican is disclosed in the Director’s Profile section of the MNRB on page 016 of this Annual Report. MALAYSIAN RE (DUBAI) LTD. 115
SENIOR EXECUTIVE OFFICER'S PROFILE
Zaini Abdul Aziz Senior Executive Officer
ZAINI ABDUL AZIZ, is the Senior Executive Officer of MRDL. Prior to this, he served as Vice President, International Treaties Department of Malaysian Re, a sister company of MRDL. He has been with Malaysian Re for twenty (20) years, and comes to the role with extensive on-the ground client-facing experience. He joined Malaysian Re as a Risk Surveyor upon obtaining his Bachelor of Business from Temple University, Philadelphia, in 1992. He has had a successful career with Malaysian Re in various departments where he gained his knowledge and experience in the many aspects of reinsurance business. 116 annual report 2013
MMIP SERVICES SDN. BHD. (727804-h)
CORPORATE PROFILE
The Malaysian Motor Insurance Pool (MMIP) was collectively set up in 1992 by the local insurance companies to provide motor insurance to vehicle owners who are unable to obtain insurance protection for their vehicles. Malaysian Re was then appointed as the Administration Manager for the pool.
MMIP Services Sdn. Bhd. (MSSB), a subsidiary of MNRB Holdings Berhad, was incorporated on 23 March 2006. Following its incorporation, the duties and functions of the Administration Manager were transferred from Malaysian Re to MSSB on 12 April 2006.
The duties and functions of MSSB, include inter alia, dealing with the administrative, financial and investment elements of the MMIP's fund as well as claims settlements. MMIP SERVICES SDN. BHD. 117
CORPORATE INFORMATION
BOARD OF DIRECTORS
Hashim Harun Director
Norazman Hashim Director
COMPANY SECRETARY PRINCIPAL BANKER
Lena Abd Latif (LS 8766) CIMB Bank Berhad
AUDITORS REGISTERED OFFICE
Ernst & Young 6th Floor, Bangunan Malaysian Re Level 23A, Menara Millenium No. 17, Lorong Dungun Jalan Damanlela Damansara Heights Pusat Bandar Damansara 50490 Kuala Lumpur Damansara Heights Tel : +603-2096 8006 50490 Kuala Lumpur Fax : +603-2096 7006 Tel : +603 7495 8000 Fax : +603 2095 5332 118 annual report 2013
CALENDAR OF SIGNIFICANT EVENTS
20 April 2012 Launch of IKHLAS P.A. Permata Takaful
Takaful IKHLAS launched its new personal accident product, IKHLAS P.A. Permata Takaful in conjunction with the opening of Minggu Saham Amanah Malaysia (MSAM) 2012 in Kota Kinabalu. Incorporating comprehensive Takaful-based accident protection benefits, this innovative product provides one-year coverage for those aged between 18 and 60. The scheme will contribute RM38 million to Takaful IKHLAS.
28 April 2012 1 Takaful IKHLAS-Perodua Collaboration Generates RM20 Million 1 In collaboration with franchise agent Perodua, Takaful IKHLAS successfully generated a premium contribution of RM20 million for FY2011/2012. This was the highest amount ever garnered by both companies since they teamed up in 2005. It represented a 400% increment over Perodua’s first year contribution of RM5 million. To commemorate the good relationship between both parties, Takaful IKHLAS organised a special ceremony to recognise its biggest franchise business. 2 11 June 2012 2 Retirement of President & CEO of MRT
Ismail Mahbob, aged sixty-one (61) years, retired as the President & CEO of MRT upon the expiration of his contract on 15 May 2012. Having joined MRT in May 2007 as the company’s first President & CEO, he had spearheaded many initiatives to enhance and promote takaful and retakaful activities at the national and international levels.
14 July 2012 3 Takaful IKHLAS' 8th Agent Awards Night Ceremony 2011/2012 3 To celebrate the achievements of its agents for FY2011/2012, Takaful IKHLAS held its 8th Agent Awards Night Ceremony at the Kuala Lumpur Convention Centre. Attended by over one thousand (1,000) agents, the evening served as a platform to honour the diligence and persistence of these agents in accomplishing their annual targets. To date, Takaful IKHLAS has more than six thousand (6,000) agents throughout the country who are promoting the company’s certificates. MNRB Holdings Berhad 119
11 & 17 July 2012 Takaful IKHLAS' President & CEO Gains International Recognition
Former President & CEO of Takaful IKHLAS, Dato’ Syed Moheeb Syed Kamarulzaman gained international recognition when he was named “Takaful Leader of The Year” at the International Takaful Award event. At The Asset Triple A Awards event, Dato’ Syed Moheeb was awarded an “Industry Leadership Award” in the Islamic Finance category. He was one of four distinguished figures in Islamic finance presented with the award.
6 September 2012 4 Takaful IKHLAS and LAT Collaborate on Group Term 4 Takaful Scheme
Takaful IKHLAS and LAT Holdings Bhd signed an agreement to launch the Group Term Takaful scheme in September 2012. The scheme promoted by LAT Holdings Bhd involves charging a small annual subscription fee to policyholders who have participated since birth. Takaful IKHLAS in return will provide 24-hour protection to policyholders aged 18-59 years. Targeting the non-Malay market, the collaboration will generate an additional RM8 million for 5 the non-Muslim business segment.
25 September 2012 5 MNRB 39th Annual General Meeting
At the Group’s 39th Annual General Meeting, shareholders were informed that MNRB recorded an operating revenue of RM1.43 billion, as compared to RM1.46 billion in the preceding year. MNRB’s shareholders also approved the declaration of a first and final dividend of 17% less 25% tax to be paid on 26 October 2012.
22 October 2012 Fitch Ratings Affirms MRT’s ‘BBB+‘ Rating
Fitch Ratings affirmed MRT’s ‘BBB+‘ Insurer Financial Strength (IFS) rating and accorded it a stable outlook. The rating reflects operational support from the MNRB Group, given MRT’s importance to the Group's strategy of developing its retakaful business. It also underscores MRT’s sound capitalisation relative to business growth, plus its conservative investment strategy. 120 annual report 2013
CALENDAR OF SIGNIFICANT EVENTS (cont’d)
23 October 2012 Fitch Ratings Affirms Malaysian Re’s ‘A‘ Ratings
Fitch Ratings affirmed Malaysian Re's ‘A‘ IFS rating and accorded it a stable outlook. This affirmation reflects Malaysian Re’s consistently robust financial performance and its strong market franchise in Malaysia. It also factors in the company’s continued sound capital position relative to its business profile.
24 October 2012 6 New President & CEO for MRT
MRT announced the appointment of Mohd Sahimy Man as its new President & CEO effective 1 October 2012. 6 He takes over from Ismail Mahbob who retired in May 2012. Mohd Sahimy Man brings to MRT more than thirty (30) years of experience in the insurance industry, having held various positions in direct, reinsurance broking and reinsurance companies. His last posting was as the Senior Executive Officer of MRDL, a sister company of MRT. 7 1 November 2012 Retirement of President & CEO of Takaful Ikhlas 7 Dato' Syed Moheeb Syed Kamarulzaman, aged sixty (60), retired as the President & Chief Executive Officer (CEO) of Takaful IKHLAS on 1 November 2012. Under his leadership, spanning a period of almost ten (10) years, Takaful IKHLAS has grown to become one of the nation’s largest takaful operators.
12 December 2012 8 MoU between Takaful Ikhlas and IJN
Takaful IKHLAS signed a memorandum of understanding (MoU) with the National Heart Institute or Institut Jantung Negara (IJN) and several other hospitals to reach 8 the target audience for its ChoicePlus product. Under the MoU, IJN will function as a strategic partner and panel hospital for the medical card offered by Takaful IKHLAS under the ChoicePlus brand. The collaboration will see IJN working with Takaful IKHLAS and undertaking promotional activities which include health talks and check-ups. MNRB Holdings Berhad 121
14 December 2012 A.M. Best Affirms Malaysian Re’s Ratings
A.M. Best Co. affirmed Malaysian Re’s financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of ‘a-‘ as well as accorded a stable outlook for both ratings. 9 7 January 2013 New President & CEO of Takaful IKHLAS
Takaful IKHLAS announced the appointment of Ab Latiff Abu Bakar as its new President & Chief Executive Officer effective 7 January 2013. He brings to the table more than twenty (20) years of experience having held various senior management positions in insurance and takaful 9 companies. Prior to joining Takaful IKHLAS, Ab Latiff was Head of Takaful at one of the international insurance companies where he was instrumental in establishing and developing a new takaful company for them within the Asia Pacific region.
20 February 2013 10 Takaful Ikhlas Launches ChoicePlus Product
In its efforts to enhance the services that it offers the 10 public, Takaful IKHLAS launched a comprehensive Group Hospitalisation & Surgical product known as ChoicePlus. Sharkawi Alis officially launched the product in February 2013. ChoicePlus is designed for companies to cover their employees against hospital and surgical expenses in a number of panel hospitals and clinics nationwide.
Financial Statements
124 Directors’ Report 128 Statement by Directors 128 Statutory Declaration 129 Independent Auditors’ Report 131 Income Statements 132 Statements of Comprehensive Income 133 Statements of Financial Position 134 Statements of Changes in Equity 135 Statements of Cash Flows 137 Notes to the Financial Statements 124 annual report 2013
DIRECTOR’S REPORT
The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 March 2013.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and provision of management services to its subsidiaries.
The principal activities of the subsidiaries have been disclosed in Note 18 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year.
RESULTS
Group Company RM’000 rM’000
Net profit for the year 112,665 24,532
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.
In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than the effects arising from the first-time adoption of Malaysian Financial Reporting Standards (“MFRS”) and changes in accounting policies as disclosed in Note 4 to the financial statements.
DIVIDENDS
The amount of dividends paid by the Company since the end of the previous financial year was as follows:
RM’000
In respect of the financial year ended 31 March 2012: First and final dividend of 17% (less 25% tax), paid on 26 October 2012 27,166
At the forthcoming Annual General Meeting, a first and final dividend in respect of the current financial year ended 31 March 2013 of 32% less 25% tax based on the issued and paid-up share capital of 213,069,500 ordinary shares at the date of this report, amounting to a total dividend of RM51,136,000, will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in the shareholders’ equity as an appropriation of retained profits in the next financial year ending 31 March 2014. MNRB Holdings Berhad 125
DIRECTORS
The names of the directors of the Company in office since the date of the last report and at the date of this report are:
Sharkawi bin Alis Mohd Din bin Merican P. Raveenderen Dato’ Syed Ariff Fadzillah bin Syed Awalluddin Yusoff bin Yaacob Datuk Mohd Khalil bin Dato’ Mohd Noor Megat Dziauddin bin Megat Mahmud Paisol bin Ahmad
In accordance with Article 86 of the Articles of Association of the Company, Megat Dziauddin bin Megat Mahmud and Paisol bin Ahmad retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.
Datuk Mohd Khalil bin Dato’ Mohd Noor retires pursuant to Section 129 of the Companies Act, 1965 and a resolution is being proposed for his re-appointment as director under the provision of Section 129(2) of the said Act to hold office until the next Annual General Meeting of the Company.
DIRECTORS’ BENEFITS
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in the Company or any other body corporate.
Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Notes 10, 11 and 34 to the financial statements as well as the fixed salary and benefits receivable as a full-time employee of the Company) by reason of a contract made by the Company with any 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.
DIRECTORS’ INTERESTS
According to the register of directors’ shareholdings, the interest of directors in office at the end of the financial year in shares of the Company during the financial year were as follows:
Number of ordinary shares of RM1.00 each 1 April 31 March 2012 acquired Sold 2013
Direct Interest: P. Raveenderen 10,000 – – 10,000 Datuk Mohd Khalil bin Dato’ Mohd Noor 5,000 – – 5,000
Other than as stated above, none of the directors in office at the end of the financial year had any interest in shares in the Company or in its related corporations during the financial year. 126 annual report 2013
DIRECTOR’S REPORT (cont’d)
SIGNIFICANT AND SUBSEQUENT EVENTS
The significant events during the financial year are as disclosed in Note 41 to the financial statements. There were no subsequent events after the end of the financial year.
OTHER STATUTORY INFORMATION
(a) Before the income statements and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps:
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts, and had satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.
(b) At the date of this report, the directors are not aware of any circumstances which would render:
(i) the amount written off as bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and
(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.
(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or in the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.
(e) As at the date of this report, there does not exist:
(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or
(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. MNRB Holdings Berhad 127
(f) In the opinion of the directors:
(i) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet its obligations when they fall due; and
(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.
For the purpose of paragraphs (e)(ii) and (f)(i) above, contingent or other liabilities do not include liabilities arising from reinsurance, takaful and retakaful contracts underwritten in the ordinary course of business of the reinsurance, takaful and retakaful subsidiaries and associate companies.
AUDITORS
The auditors, Ernst & Young, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the directors dated 27 June 2013.
Sharkawi bin Alis Mohd Din bin Merican
Kuala Lumpur, Malaysia 128 annual report 2013
STATEMENT BY DIRECTORS Pursuant to Section 169(15) of the Companies Act, 1965
We, Sharkawi bin Alis and Mohd Din bin Merican, being two of the directors of MNRB Holdings Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 131 to 279 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia, so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2013 and of the results and the cash flows of the Group and of the Company for the year then ended.
Signed on behalf of the Board in accordance with a resolution of the directors dated 27 June 2013.
Sharkawi bin Alis Mohd Din bin Merican
Kuala Lumpur, Malaysia
STATUTORY DECLARATION Pursuant to Section 169(15) of the Companies Act, 1965
I, Norazman bin Hashim, being the officer primarily responsible for the financial management of MNRB Holdings Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 131 to 279 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by ) the abovenamed Norazman bin Hashim ) at Kuala Lumpur in Wilayah Persekutuan ) on 27 June 2013 ) Norazman bin Hashim
Before me, MNRB Holdings Berhad 129
INDEPENDENT AUDITORS’ REPORT to the members of MNRB Holdings Berhad
Report on the financial statements
We have audited the financial statements of MNRB Holdings Berhad, which comprise the statements of financial position as at 31 March 2013 of the Group and of the Company, the income statements, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 131 to 278.
Directors’ responsibility for the financial statements
The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 March 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. 130 annual report 2013
INDEPENDENT AUDITORS’ REPORT (cont’d) to the members of MNRB Holdings Berhad
Report on other legal and regulatory requirements
In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 18 to the financial statements, being financial statements that have been included in the consolidated financial statements.
(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
(d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and in respect of the subsidiaries incorporated in Malaysia, did not include any comment required to be made under Section 174(3) of the Act.
Other reporting responsibilities
The supplementary information set out in Note 43 on page 279 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
Other matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Ernst & Young Gloria Goh Ewe Gim AF: 0039 No. 1685/04/15(J) Chartered Accountants Chartered Accountant
Kuala Lumpur, Malaysia 27 June 2013 MNRB Holdings Berhad 131
INCOME STATEMENTS for the year ended 31 March 2013
Group Company Note 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Gross earned premiums/contributions 5(a) 2,090,350 1,954,522 – – Premiums/contributions ceded to reinsurers/retakaful 5(b) (251,477) (275,147) – –
Net earned premiums/contributions 1,838,873 1,679,375 – –
Investment income 6 151,922 138,366 48,184 51,086 Realised gains and losses 7 30,458 22,203 (394) ( 7) Fair value gains and losses 8 4,514 1,205 2,745 (356) Fee and commission income 9 25,076 24,473 27,715 29,213 Other operating revenue 5,968 4,704 64 237
Other revenue 217,938 190,951 78,314 80,173
Gross claims and benefits paid (1,088,643) (919,269) – – Claims ceded to reinsurers/retakaful 243,339 137,587 – – Gross change in contract liabilities (244,293) (526,930) – – Change in contract liabilities ceded to reinsurers/retakaful (67,536) 216,987 – –
Net claims and benefits (1,157,133) (1,091,625) – –
Fee and commission expense 9 (445,853) (385,601) – – Management expenses 10 (172,813) (149,022) (31,093) (24,605) Finance cost (14,422) (12,169) (16,063) (14,544) Other operating expenses 12 (21,282) (7,219) (15) (4) Change in expense liabilities (3,709) 400 – –
Other expenses (658,079) (553,611) (47,171) (39,153)
Share of results of associates 1,308 (30,110) – –
Operating profit before surplus transfer, zakat and tax 242,907 194,980 31,143 41,020 Zakat (400) (400) – – Tax expense 13 (58,346) (48,476) (6,611) (10,432)
Net profit before surplus transfer 184,161 146,104 24,532 30,588 Surplus atttributable to takaful participants (71,496) (56,735) – –
Net profit for the year attributable to equity holders of the Company 112,665 89,369 24,532 30,588
Basic earnings per share attributable to equity holders of the Company (sen): 31 52.9 41.9
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 132 annual report 2013
STATEMENTS OF COMPREHENSIVE INCOME for the year ended 31 March 2013
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Net profit for the year 112,665 89,369 24,532 30,588
Other comprehensive (loss)/income:
Effects of post acquisition foreign exchange translation reserve on investment in associate 765 1,049 – –
Effects of foreign exchange translation reserve on investment in subsidiary (463) 269 – –
Revaluation of land and buildings 5,284 11,914 – – Deferred tax relating to revaluation of land and buildings (423) (1,439)
Net (loss)/gain on Available-for-sale (“AFS”) financial assets: (Loss)/gain on fair value changes (3,082) 37,656 (574) 186 Realised (gains)/loss transferred to income statement (19,699) (20,961) 395 – Deferred tax relating to net loss/(gain) on AFS financial assets 2,919 (2,471) 45 (47)
Other comprehensive loss/(income) attributable to participants 2,656 (5,111) – –
Total comprehensive income for the year 100,622 110,275 24,398 30,727
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. MNRB Holdings Berhad 133
STATEMENTS OF FINANCIAL POSITION As At 31 March 2013
Group Company
Note 31.3.2013 31.3.2012 1.4.2011 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Assets
Property, plant and equipment 14 237,965 237,927 229,450 2,206 1,558 1,469 Investment properties 15 6,200 5,600 28,600 – – – Intangible assets 16 13,189 13,970 12,970 2,239 2,074 1,231 Deferred tax assets 17 10,955 11,636 12,535 1,469 1,844 3,098 Investment in subsidiaries 18 – – – 904,501 904,501 794,501 Investment in associates 19 88,456 86,383 117,542 1,957 1,957 1,957 Financial assets: Financial assets at fair value through profit or loss (FVTPL”) 20(a) 129,167 137,463 104,904 – – – Held-to-maturity (“HTM”) investments 20(b)(i) 786,653 432,223 406,353 – 5,059 6,967 AFS financial assets 20(c) 1,789,502 1,757,978 1,368,059 494 1,173 2,602 Loans and receivables (“LAR”) 20(d) 1,698,605 1,448,076 1,304,234 16,464 23,127 10,759 Reinsurance/retakaful assets 21 387,976 432,881 215,829 – – – Insurance/takaful receivables 22 404,059 331,663 288,482 – – – Tax recoverable 15,923 15,477 11,438 9,623 11,679 8,379 Cash and bank balances 74,728 80,571 122,944 2,932 11 75 Non-current assets held for sale 23 – 56,601 34,173 – – –
Total assets 5,643,378 5,048,449 4,257,513 941,885 952,983 831,038
Liabilities and Participants’ funds
Participants’ funds 24 234,155 170,536 108,690 – – – Borrowings 25 320,000 270,000 150,000 320,000 320,000 200,000 Insurance/takaful contract liabilities 21 3,592,961 3,226,745 2,767,973 – – – Insurance/takaful payables 26 211,724 178,101 112,989 – – – Other payables 27 116,975 110,574 122,289 8,774 17,104 13,926 Deferred tax liabilities 17 12,579 14,231 12,494 – – – Provision for taxation 22,525 19,384 2,332 – – – Provision for zakat 515 390 573 – – –
Total liabilities and participants’ funds 4,511,434 3,989,961 3,277,340 328,774 337,104 213,926
Equity
Share capital 28 213,070 213,070 213,070 213,070 213,070 213,070 Reserves 918,874 845,418 767,103 400,041 402,809 404,042
Total equity attributable to equity holders of the Company 1,131,944 1,058,488 980,173 613,111 615,879 617,112
Total liabilities, participants’ funds and equity 5,643,378 5,048,449 4,257,513 941,885 952,983 831,038
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 134 annual report 2013
STATEMENTS OF CHANGES IN EQUITY for the year ended 31 March 2013
Attributable to equity holders of the company
Reserves
Non–distributable Distributable
Foreign exchange Avalaible- Share Share translation for-sale revaluation retained capital premium reserve reserve reserve profits total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
At 1 April 2011 213,070 105,051 15,108 11,704 23,369 611,871 980,173 Total comprehensive income for the year – – 1,318 9,113 10,475 89,369 110,275 Dividend paid during the year (Note 30) – – – – – (31,960) (31,960)
At 31 March 2012 213,070 105,051 16,426 20,817 33,844 669,280 1,058,488 Total comprehensive (loss)/income for the year – – 302 (12,345) – 112,665 100,622 Dividend paid during the year (Note 30) – – – – – (27,166) (27,166) Transferred to retained profits upon disposal of assets held for sale (Note 23) – – – – (3,184) 3,184 –
At 31 March 2013 213,070 105,051 16,728 8,472 30,660 757,963 1,131,944
Company
At 1 April 2011 213,070 105,051 – – – 298,991 617,112 Total comprehensive income for the year – – – 139 – 30,588 30,727 Dividend paid during the year (Note 30) – – – – – (31,960) (31,960)
At 31 March 2012 213,070 105,051 – 139 – 297,619 615,879 Total comprehensive (loss)/income for the year – – – (134) – 24,532 24,398 Dividend paid during the year (Note 30) – – – – – (27,166) (27,166)
At 31 March 2013 213,070 105,051 – 5 – 294,985 613,111
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. MNRB Holdings Berhad 135
STATEMENTS OF CASH FLOWS for the year ended 31 March 2013
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Cash flows from operating activities
Profit before surplus transfer, zakat and tax 242,907 194,980 31,143 41,020 Adjustments for: Net fair value gains on financial assets at FVTPL (4,702) (1,408) – – Impairment loss/(reversal of impairment loss) on AFS financial assets 819 469 (2,745) 356 Reversal of impairment loss on HTM investments (31) (266) – – (Reversal of impairment loss)/impairment loss on property (300) 1,465 – – Impairment loss on/(reversal of impairment loss) on insurance/takaful receivables 14,068 (2,525) – – Depreciation of property, plant and equipment 9,850 10,012 784 812 Amortisation of intangible assets 3,045 2,904 350 189 Property, plant and equipment written off – 60 – 11 Gain on fair value adjustments of investment properties (600) – – – (Gain)/loss on disposal of property, plant and equipment (83) (62) (1) 7 Increase/(decrease) in net premium and contribution liabilities 35,590 (49,067) – – Interest/profit income (142,078) (122,311) (3,168) (751) Dividend income (6,504) (9,949) (45,018) (50,337) Rental income (7,398) (7,788) – – Finance cost 14,422 12,169 16,063 14,544 Gain/(loss) on disposal of investments (26,293) (22,141) 395 – Gain on disposal of non-current assets held for sale (4,082) – – – Net amortisation of premiums/(accretion of discounts) on investments 1,169 (357) – –
Balance carried forward 129,799 6,185 (2,197) 5,851
Balance brought forward 129,799 6,185 (2,197) 5,851 Share of (profits)/losses of associates (1,308) 30,110 – – Net surplus attributable to takaful participants 71,496 56,735 – –
Profit/(loss) from operations before changes in operating assets and liabilities 199,987 93,030 (2,197) 5,851 (Increase)/decrease in placements with licensed financial institutions, Islamic investment accounts and marketable securities (230,478) (135,808) 11,111 (11,691) Net (purchase of)/proceeds from disposal of investments (160,358) (237,774) 7,909 3,165 Decrease in staff loans 2,001 1,391 430 – Increase in insurance/takaful receivables (85,252) (40,656) – – Decrease in other receivables (12,513) (2,955) (1,606) (244) Net change in balances with subsidiaries – – (10,639) 6,921 Increase in net claims liabilities 132,376 67,526 – – Increase/(decrease) in expense liabilities 3,709 (401) – – Increase in insurance/takaful payables 33,623 65,112 – – Increase/(decrease) in other payables 6,401 (11,715) 506 (3,821)
(110,504) (202,250) 5,514 181 Taxes and zakat paid (54,401) (37,320) (4,135) (23) Interest/profit received 96,855 86,790 3,217 716 Dividend received 41,788 38,570 45,337 37,517 Rental received 7,798 8,218 – –
Net cash (used in)/generated from operating activities (18,464) (105,992) 49,933 38,391 136 annual report 2013
STATEMENTS OF CASH FLOWS (cont’d) for the year ended 31 March 2013
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Cash flows from investing activities
Subscription of shares in subsidiaries – – – (110,000) Purchase of property, plant and equipment (4,314) (8,665) (1,432) (1,391) Purchase of intangible assets (2,264) (3,904) (515) (1,032) Purchase of investment properties – (310) – – Proceeds from disposal of non-current assets held for sale 60,683 – – – Proceeds from disposal of property, plant and equipment 104 627 1 472
Net cash generated from/(used in) investing activities 54,209 (12,252) (1,946) (111,951)
Cash flow from financing activities
Proceeds from borrowings 320,000 120,000 320,000 120,000 Repayment of borrowings (320,000) – (320,000) – Interest paid (14,422) (12,169) (17,900) (14,544) Dividends paid (27,166) (31,960) (27,166) (31,960)
Net cash (used in)/ generated from financing activities (41,588) 75,871 (45,066) 73,496
Cash and bank balances
Net (decrease)/increase during the year (5,843) (42,373) 2,921 (64) At beginning of year 80,571 122,944 11 75
At end of year 74,728 80,571 2,932 11
The accompanying accounting policies and explanatory notes form an integral part of the financial statements. MNRB Holdings Berhad 137
NOTES TO THE FINANCIAL STATEMENTS - 31 March 2013
1. CORPORATE INFORMATION
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at 12th Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia.
The principal activities of the Company are investment holding and provision of management services to its subsidiaries.
The principal activities of the subsidiaries have been disclosed in Note 18 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year.
The number of employees in the Group and in the Company at the end of the financial year were 814 and 191 (2012: 814 and 189) respectively.
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 27 June 2013.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act, 1965 in Malaysia. These are the Group’s and the Company’s first annual financial statements prepared in accordance with MFRS and MFRS 1 First-Time Adoption of Malaysian Financial Reporting Standards (“MFRS 1”) has been applied.
In previous financial years, the financial statements of the Group and of the Company were prepared in accordance with Financial Reporting Standards (“FRSs”) in Malaysia. The financial impact arising from transition to MFRS is disclosed in Note 4.
The financial statements of the Group and of the Company have been prepared under the historical cost convention, unless otherwise stated in the accounting policies. The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.
2.2 accounting period
For the general reinsurance business, the Group adopts quarterly accounting periods ending on 31 March, 30 June, 30 September and 31 December, insofar as the underwriting income and outgo for Market Cessions business is concerned. This is to correspond with the ceding companies’ accounting periods.
Underwriting income and outgo in respect of other business classes and all other income and expenditure are for the 12 months ended 31 March 2013. 138 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.3 Subsidiaries, associates and basis of consolidation
(i) Subsidiaries
Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in the income statement.
(ii) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses resulting from intragroup transactions are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.
Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.
Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement.
(iii) takaful and retakaful operations and funds
Under the concept of takaful/retakaful, individuals/cedants make contributions to a pool which is managed by a third party with the overall aim of using the monies to aid fellow participants in times of need. Accordingly, the takaful and retakaful subsidiaries of the Company manage the general and family takaful and retakaful funds in line with the principles of Wakalah (agency), which is the main business model used by the takaful and retakaful subsidiaries. Under the Wakalah model, the takaful/retakaful operator is not a participant in the fund but manages the funds (including the relevant assets and liabilities) towards the purpose outlined above.
In accordance with the Takaful Act 1984, the assets and liabilities of the takaful and retakaful funds are segregated from those of the takaful and retakaful subsidiaries: a concept known as segregation of funds. Accordingly, in prior years, the aggregated assets, liabilities and participants’ funds of the takaful and retakaful operations were presented separately in the Group’s statement of financial position as line items and whilst the income statement and statement of comprehensive income of the Group did not include the income and expenses of the takaful and retakaful funds. This was intended to clearly segregate the assets, liabilities, income and expenses of the Group from those of the takaful and retakaful funds which the Group manages but does not own.
Effective this year, the assets, liabilities, income and expenses of the takaful and retakaful funds are consolidated with those of the takaful and retakaful subsidiaries to represent the control possessed by the operator over the financial and operating policies of the respective funds. MNRB Holdings Berhad 139
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.3 Subsidiaries, associates and basis of consolidation (cont’d)
(iii) takaful and retakaful operations and funds (cont’d)
In preparing the Group financial statements, the balances and transactions of the shareholders’ funds of the takaful and retakaful subsidiaries were amalgamated and combined with those of the takaful and retakaful funds respectively. Interfund balances, transactions and unrealised gains or losses are eliminated in full during amalgamation and consolidation.
The takaful and retakaful funds of the takaful and retakaful subsidiaries are consolidated and amalgamated from the date of control and continue to be consolidated until the date such control ceases which will occur when the takaful and retakaful subsidiaries’ licences to manage takaful and retakaful businesses respectively are withdrawn or surrendered.
(iv) Associates
Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies.
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the net profit or loss of the associate is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes.
In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associates.
Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.
When the Group’s share of losses in associates equals or exceeds its interest in the associate, including any long-term interests that, in substance, form part of the Group’s net investment in the associates, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates.
The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is derived from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting polices are adopted for like transactions and events in similar circumstances.
In the Company’s separate financial statements, investments in associates are stated at cost less any accumulated impairment losses.
On disposal of such investments, the difference between net disposal proceeds and the carrying amount is included in the income statement. 140 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 General reinsurance underwriting results
The general reinsurance underwriting results are determined for each class of business after taking into account premiums, movements in premium liabilities and claims liabilities and acquisition costs.
(i) premium recognition
Gross premiums are recognised in a financial period in respect of risks assumed during the particular financial period. Gross premium income include premium income in relation to inwards facultative business, inwards proportional treaty reinsurance and inwards non-proportional treaty reinsurance.
Inwards facultative reinsurance premiums are recognised in the financial period in respect of the facultative risk assumed during the particular financial period, as in the case of direct policies, following individual risks’ inception dates.
Inwards proportional treaty reinsurance premiums are recognised on the basis of periodic advices received from cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured at various inception dates of these risks and contractually accounted for under the terms of the proportional reinsurance treaty.
Premium income on inward non-proportional treaties, which cover losses occurring during a specified treaty period, are recognised based on the contractual premiums already established at the start of the treaty period under the terms and conditions of each contract.
(ii) premium liabilities
Premium liabilities represent the reinsurance subsidiary’s future obligations on insurance contracts as represented by premiums received for risks that have not yet expired. The movement in premium liabilities is released over the term of the insurance contracts and is recognised as premium income.
Premium liabilities are reported at the higher of the aggregate of the unearned premium reserves (“UPR”) for all lines of business or the best estimate value of the reinsurance subsidiary’s unexpired risk reserves (“URR”) and a provision of risk margin for adverse deviation (“PRAD”) calculated at 75% confidence level at the end of the financial year.
(a) unexpired risk reserves
The URR is a prospective estimate of the expected future payments arising from future events insured under policies in force as at the end of the financial year and also includes allowance for expenses, including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and expected future premium refunds.
URR is estimated via an actuarial valuation performed by a qualified actuary, using a mathematical method of estimation similar to incurred but not reported claims (“IBNR”). MNRB Holdings Berhad 141
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 General reinsurance underwriting results (cont’d)
(ii) premium liabilities (cont’d)
(b) unearned premium reserves
The UPR represent the portion of the net premiums of reinsurance policies written that relate to the unexpired periods of the policies at the end of the financial year. The methods of computation of UPR are as follows:
– For inward proportional treaty business, UPR is computed on the 1/8th method commencing from the quarter corresponding to the reporting quarter of the treaty statement;
– For inward non proportional treaty business, UPR is computed at 1/2 of the last quarter Minimum Deposit Premiums received; and
– For inward facultative policies, UPR is computed on the 1/8th method commencing from the date of inception.
(iii) Claims liabilities
The amount of outstanding claims is the best estimate value of claim liabilities, which include provision for claims reported, claims incurred but not enough reserved (“IBNER”), claims incurred but not reported (“IBNR”) together with related expenses less recoveries to settle the present obligation as well as a PRAD calculated at 75% confidence level at the end of the financial year. Liabilities for outstanding claims are recognised as advised by the ceding companies. IBNER and IBNR claims are based on an actuarial valuation by a qualified actuary, using a mathematical method of estimation based on, amongst others, actual claims development pattern.
(iv) liability adequacy test
At each reporting date, the Group reviews all insurance contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the Group, contractual or otherwise, with respect to insurance contracts issued. In performing this review, the Group compares all contractual cash flows against the carrying value of insurance contract liabilities. Any deficiency is recognised in the income statement.
(v) acquisition cost
The cost of acquiring and renewing reinsurance business net of income derived from ceding reinsurance premiums is recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. 142 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.5 General takaful fund
The general takaful fund is maintained in accordance with the Takaful Act 1984 and consists of AFS reserves and the accumulated surplus/deficit in the fund. Underwriting deficit will be made good by the shareholder’s fund via a loan or Qard.
Surplus distributable to the participants is determined after deducting retakaful costs, commissions, changes in takaful contract liabilities, wakalah fees, expenses and taxation. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts.
General takaful revenue consists of gross takaful contributions and investment income. Revenue is accounted for on an accrual basis as approved by the takaful subsidiary’s Shariah Committee. Unrealised income is deferred and receipts in advance are treated as liabilities in the statement of financial position.
(i) takaful contribution income
Contribution from direct and facultative inwards are recognised as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah. Contributions are recognised in a financial period in respect of risks assumed during that particular financial period. Inward treaty retakaful contributions are recognised on the basis of periodic advices received from ceding takaful operators.
(ii) takaful contribution liabilities
Contribution liabilities represent the general takaful fund’s future obligations on takaful contracts as represented by contributions received for risks that have not yet expired. The movement in contribution liabilities is released over the terms of the takaful contracts and recognised as contribution.
Contribution liabilities are reported at the higher of the aggregate of the unearned contribution reserves (“UCR”) for all lines of business or the best estimate value of the takaful fund’s unexpired risk reserves (“URR”) and a provision of risk margin for adverse deviation (“PRAD”) calculated at 75% confidence level at the end of the financial year.
(a) unearned contribution reserves
The Unearned Contribution Reserves (“UCR”) represent the portion of net contribution income of takaful contracts written that relate to the unexpired periods of the contracts at the end of the reporting period. The UCR is calculated on net contribution income with a further deduction for Wakalah fee expenses to reflect the Wakalah business principle. In determining the UCR at the end of the financial year, the method that most accurately reflects the actual unearned contribution is used as follows:
– Time apportionment method for all classes of general takaful business within Malaysia except Marine and Aviation Cargo; and
– 25% method for Marine and Aviation Cargo. MNRB Holdings Berhad 143
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.5 General takaful fund (cont’d)
(ii) takaful contribution liabilities (cont’d)
(b) unexpired risk reserves
URR is a prospective estimate of the expected future payments arising from future events expected to be incurred as at the end of the financial year and also includes cost of retakaful, expected to be incurred during the unexpired period in administering these certificates and settling the relevant claims, and expected future return contributions.
In estimating the best estimate URR, the resulting loss ratio based on best estimate claims incurred but not reported is applied to the corresponding UCR as the prospective assessment of the amount that needs to be set aside in order to provide for claims and allocated claim costs that will result out of unexpired future periods of cover.
(iii) Claims liabilities
Claims and settlement costs that are incurred during the financial year are recognised when a claimable event occurs and/or the takaful subsidiary is notified. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries to settle the obligation at the end of the financial year.
Claims liabilities are valued at the best estimate which include provision for claims reported, claims incurred but not enough reserved (“IBNER”) and claims incurred but not reported together with related claims handling costs and reduction for the expected value of salvage and other recoveries and a PRAD which is calculated at 75% confidence level.
Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the end of the financial year.
The liability is calculated by a qualified actuary at the end of the financial year using a range of standard actuarial claim projection techniques based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the certificates expires, are discharged or are cancelled.
(iv) liability adequacy test
At each reporting date, the Group reviews all general takaful contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the Group, contractual or otherwise, with respect to general takaful contract issued. In performing this review, the Group compares all contractual cash flows against the carrying value of general takaful contract liabilities. Any deficiency is recognised in the income statement.
(v) Commission earned
Commission earned net of expense paid from retakaful in the course of ceding / accepting contributions to / from retakaful operators are recognised in the income statement, as incurred and properly allocated to the periods in which it is probable they give rise to income. This is in accordance with the principles of Wakalah as approved by the Shariah Committee and as agreed between the participants and the takaful subsidiary. 144 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.6 Family takaful fund
The family takaful fund is maintained in accordance with the requirements of the Takaful Act, 1984 and includes the amount attributable to participants.
The family takaful fund surplus / deficit is determined by an annual actuarial valuation of the family takaful fund. Any actuarial deficit in the family takaful fund will be made good by the shareholder’s fund via a loan or Qard. Surplus distributable to the participants is determined after deducting benefits paid and payable, retakaful, provisions, reserves, wakalah fees, taxation and surplus administration charges transferred to the shareholder’s fund. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions prescribed by the Shariah Committee of the takaful subsidiary.
Family takaful revenue consists of gross takaful contributions and investment income. Revenue is accounted for on an accrual basis and as approved by the takaful subsidiary’s Shariah Committee. Unrealised income is deferred and receipts in advance are treated as liabilities on the statement of financial position.
(i) takaful contribution income
Takaful contribution is recognised as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah. First year contribution is recognised on assumption of risks and subsequent takaful contributions are recognised on due dates. Takaful contributions outstanding at the reporting date is recognised as income for the period provided they are within the grace period allowed for payment and there are sufficient funds available in the participants’ accounts to cover such contributions due.
(ii) provision for outstanding claims
Claims and settlement costs that are incurred during the financial year are recognised when a claimable event occurs and/or the takaful subsidiary is notified.
Claims and provisions for claims arising on family takaful contracts, including settlement costs, are accounted for using the case basis method, and for this purpose, the benefits payable under a takaful certificate are recognised as follows:
(a) maturity or other certificate benefit payments due on specified dates are treated as claims payable on due dates; and
(b) death, surrender and other benefits without due dates are treated as claims payable on receipt of intimation of death of the certificate holder or occurrence of contingency covered.
(iii) Creation/cancellation of units
Amounts received for units created represent contributions paid by participants or unitholders as payment for new contracts or subsequent payments to increase the amount of the contracts. Creation/cancellation of units are recognised in the financial statements at the next valuation date, after the request to purchase/sell units are received from the unitholders. MNRB Holdings Berhad 145
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.6 Family takaful fund (cont’d)
(iv) Investments of the investment-linked funds
All investments of the investment-linked funds are stated at bid prices or indicative market prices as at financial year end.
Any increase or decrease in value of investments is taken into the investment linked funds income statement.
(v) Family takaful contract liabilities
Family takaful contract liabilities are recognised when contracts are in-force and contributions are charged.
For a one year family certificate or a one year extension to a family certificate covering contingencies other than life or survival, the liability for such family takaful certificates comprises contribution and claim liabilities with an appropriate allowance for PRAD from the expected experience.
The family takaful certificates liabilities are derecognised when the certificates expire, are discharged or are cancelled. At each reporting date, an assessment is made of whether the recognised family takaful certificates liabilities are adequate by performing a liability adequacy test as disclosed in Note 2.6(vi).
Liabilities of family takaful business are determined in accordance with valuation guidelines for takaful operators issued by Bank Negara Malaysia (“BNM”). All family takaful liabilities have been valued using a prospective actuarial valuation based on the sum of the present value of future benefits and expenses less future gross considerations arising from the certificates, discounted at the appropriate risk discount rate. This method is known as the gross contribution valuation method.
In respect of the family takaful risk fund, the expected future cash flows of benefits are determined using best estimate assumptions with an appropriate allowance for PRAD from expected experience such that an overall level of sufficiency of certificate reserves at a 75% confidence level is secured. In the case of investment-linked business, the fund value (or the net asset value attributable to unitholders) is treated as a liability.
Surplus arising from the difference between the value of the family fund and the liabilities, including accumulated surplus, will be distributed to the participants after deduction for surplus administration charges, as appropriate.
If the difference between the value of the family fund and the liabilities results in a deficit, the deficit is made good via a Qard from the takaful subsidiary which will be repaid when the fund returns to a surplus position.
(vi) liability adequacy test
At each reporting date, the Group reviews all family takaful contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the Group, contractual or otherwise, with respect to family takaful contracts issued. In performing this review, the Group compares all contractual cash flows against the carrying value of family takaful contract liabilities. Any deficiency is recognised in the income statement. 146 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.7 Shareholder’s fund of takaful subsidiary
(i) Commission expenses
Commission expenses, which are costs directly incurred in securing contributions on takaful contracts, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Commission expenses are borne by the shareholder’s fund in the shareholder’s fund income statement at an agreed percentage for each certificate underwritten. This is in accordance with the principles of Wakalah as approved by the Shariah Committee and as agreed between the participants and the takaful subsidiary.
(ii) expense liabilities
The expense liabilities of the shareholder’s fund consist of expense liabilities of the general takaful fund and the family takaful fund which are based on estimations performed by a qualified actuary. The movement in expense liabilities is released over the term of the takaful contracts and recognised as wakalah fees.
(a) expense liabilities of general takaful fund
The expense liabilities of the general takaful fund are reported at the higher of the aggregate of the reserve for unearned wakalah fees (“UWF”) or the best estimate value of the provision for unexpired expense reserve (“UER”) at the end of the financial year.
Reserve for unearned wakalah fees
The UWF represents the portion of wakalah fee income allocated for management expenses of general takaful contracts that relate to the unexpired periods of contracts at the end of the reporting period. The method used in computing UWF is consistent with the calculation of UCR under Note 2.5(ii)(a).
Unexpired expense reserve
The UER is determined based on the expected future expenses payable by the shareholder’s fund in managing the general takaful fund for the full contractual obligation of the takaful contracts as at the end of the financial year, less any expected cash flows from future wakalah fee income, and any other income due to the shareholder’s fund that can be determined with reasonable certainty, calculated at 75% confidence level. The method used to value the UER is consistent with the method used in estimating the URR as disclosed in Note 2.5(ii)(b).
(b) expense liabilities of family takaful fund
The UER is determined based on the expected future expenses payable by the shareholder’s fund in managing the family takaful fund for the full contractual obligation of the takaful contracts as at the end of the financial year, less any expected cash flows from future wakalah fee income, and any other income due to the shareholder’s fund that can be determined with reasonable certainty. The method used to value expense liabilities is consistent with the method used to value takaful liabilities of the corresponding family takaful contracts as disclosed in Note 2.6(v).
(c) liability adequacy test
At each reporting date, the takaful subsidiary reviews the expense liabilities to ensure that the carrying amount is sufficient or adequate to cover the obligations of the shareholder’s fund for all managed takaful contracts. In performing this review, the takaful subsidiary considers all contractual cash flows and compares this against the carrying value of expense liabilities. Any deficiency is recognised in the income statement. MNRB Holdings Berhad 147
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.8 General retakaful fund
The general retakaful fund is maintained in accordance with the Takaful Act 1984 and consists of AFS reserves and the accumulated surplus/deficit in the fund. Any underwriting deficit will be made good by the shareholder’s fund via a loan or Qard.
Surplus distributable to the participants is determined after deducting retrotakaful costs, commissions, contribution liabilities, net claims incurred, wakalah fees, expenses and taxation. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts.
Revenue of the general retakaful fund consists of gross retakaful contributions and investment income. Unrealised income is deferred and receipts in advance are treated as liabilities in the statement of financial position.
(i) retakaful contribution income
Contributions are recognised in respect of risks assumed during a particular financial period. Inward treaty retakaful contributions are recognised on the basis of statements received from ceding companies.
Inwards facultative retakaful contributions are recognised in the financial period in respect of the facultative risk assumed during the particular financial period, as in the case of direct policies, following individual risks’ inception dates.
Inwards proportional treaty retakaful contributions are recognised on the basis of periodic advices received from cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured at various inception dates of these risks and contractually accounted for under the terms of the proportional retakaful treaty.
Contribution income on inward non-proportional treaties, which cover losses occurring during a specified treaty period, are recognised based on the contractual contributions already established at the start of the treaty period under the terms and conditions of each contract.
(ii) Contribution liabilities
Contribution liabilities represent the general retakaful fund’s future obligations on takaful contracts as represented by contributions received for risks that have not yet expired. The movement in contribution liabilities is released over the term of the takaful contracts and recognised as contribution. Contribution liabilities are reported at the higher of the aggregate of the unearned contribution reserves (“UCR”) for all lines of business or the best estimate value of the retakaful fund’s unexpired risk reserves (“URR”) and a PRAD at 75% confidence level at the end of the financial year.
(a) unexpired risk reserves
The URR is a prospective estimate of the expected future payments arising from future events insured under contracts in force as at the end of the reporting period and also includes allowance for expenses, including overheads and costs of retakaful, expected to be incurred during the unexpired period in administering these contracts and settling the relevant claims, and expected future contribution refunds. The URR is estimated via an actuarial valuation performed by a qualified actuary, using a mathematical method of estimation similar to IBNR claims.
(b) unearned contribution reserves
The UCR represent the portion of the net contribution of retakaful business written that relate to the unexpired periods of the contracts at the end of the reporting period. In determining the UCR as at the reporting date, the method that most accurately reflects the actual liability is used. The UCR is computed using the 1/8th method, applied to contributions with a deduction for actual wakalah fees. 148 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.8 General retakaful fund (cont’d)
(iii) Claim liabilities
The amount of outstanding claims is the best estimate value of claim liabilities, which include provision for claims reported, IBNER claims and IBNR claims. The estimation includes a provision of risk margin for adverse deviation (“PRAD”) at a 75% confidence level.
Liabilities for outstanding claims are recognised as advised by ceding companies. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries to settle the obligation at the end of the financial year.
IBNR claims are based on an actuarial valuation by a qualified actuary, using a mathematical method of estimation based on, amongst others, actual claims development patterns.
(iv) liability adequacy test
At each reporting date, the retakaful subsidiary reviews all general retakaful contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the fund, contractual or otherwise, with respect to general retakaful contracts issued. In performing this review, the retakaful subsidiary compares all contractual cash flows against the carrying value of general retakaful contract liabilities. Any deficiency is recognised in the income statement.
(v) Commission expenses
Commission expenses, which are costs directly incurred in securing contributions on retakaful business, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income.
Commission expenses are borne by the general retakaful fund in the general retakaful income statement at an agreed percentage of the gross contribution.
2.9 Family retakaful fund
The family retakaful fund is maintained in accordance with the requirements of the Takaful Act 1984 and consists of AFS reserves and the accumulated surplus/deficit in the fund.
The family retakaful fund surplus/deficit is determined by an annual actuarial valuation of the family retakaful fund. Any actuarial deficit in the family retakaful fund will be made good by the shareholder’s fund via a loan or Qard. Surplus distributable to the participants is determined after deducting benefits paid and payable, retrotakaful, provisions, reserves, commissions, wakalah fee, taxation and any surplus administration charges transferred to the shareholder’s fund. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts.
Revenue of the family retakaful fund consists of gross retakaful contributions and investment income. Unrealised income is deferred and receipts in advance are treated as liabilities in the statement of financial position. MNRB Holdings Berhad 149
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.9 Family retakaful fund (cont’d)
(i) retakaful contribution income
Contributions are recognised in respect of risks assumed during a particular financial period. Inward treaty retakaful contributions are recognised on the basis of statements received from ceding companies.
(ii) Benefits payable and actuarial liabilities
Liabilities for benefits payable are recognised as advised by ceding companies. The actuarial liabilities of the family retakaful fund is the best estimate of the expenditure required together with related expenses less recoveries to settle the obligation at the end of the financial year. The estimation includes a PRAD at a 75% confidence level. The valuation of the actuarial liabilities is performed by a qualified actuary using a mathematical method of estimation based on, amongst others, actual claims development patterns.
(iii) liability adequacy test
At each reporting date, the retakaful subsidiary reviews all family retakaful contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the fund, contractual or otherwise, with respect to family retakaful contracts issued. In performing this review, the retakaful subsidiary compares all contractual cash flows against the carrying value of family retakaful contract liabilities. Any deficiency is recognised in the income statement.
(iv) Commission expenses
Commission expenses, which are costs directly incurred in securing contributions on retakaful business, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income.
Commission expenses are borne by the family retakaful fund in the family retakaful income statement at an agreed percentage of the gross contribution.
2.10 Shareholder’s fund of retakaful subsidiary
Expense liabilities
The expense liabilities of the shareholder’s fund consists of expense liabilities of the general retakaful fund and the family retakaful fund which are based on estimations performed by a qualified actuary. The movement in expense liabilities is released over the term of the retakaful contracts and recognised as wakalah fees.
(i) expense liabilities of general retakaful fund
The expense liabilities of the general retakaful fund are reported at the higher of the aggregate of the reserve for unearned wakalah fees (“UWF”) or the best estimate value of the provision for unexpired expense reserves (“UER”) and a PRAD at a 75% confidence level at the end of the financial year. 150 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.10 Shareholder’s fund of retakaful subsidiary (cont’d)
Expense liabilities (cont’d)
(i) expense liabilities of general retakaful fund (cont’d)
(a) reserve for unearned wakalah fees
The UWF represents the portion of wakalah fee income allocated for expenses expected to be incurred in managing general retakaful contracts that relate to the unexpired periods of the contracts at the end of the reporting period. In determining the UWF, the method used is consistent with the methods used in the calculation of the UCR of the general retakaful fund as disclosed in Note 2.8(ii)(b).
(b) unexpired expense risk
The UER is determined based on the expected future expenses payable by the shareholder’s fund in managing the general retakaful fund for the full contractual obligation of unexpired retakaful contracts as at the end of the reporting period. The method used to value the UER is consistent with the method used in estimating the URR as disclosed in Note 2.8(ii)(a).
(ii) expense liabilities of family retakaful fund
The valuation of expense liabilities in relation to contracts of the family retakaful fund is conducted separately by the Appointed Actuary in the shareholder’s fund. The method used to value expense liabilities is consistent with the method used to value retakaful liabilities of the corresponding family retakaful contracts. In valuing the expense liabilities, the present value of expected future expenses payable by the shareholder’s fund in managing the retakaful fund for the full contractual obligation of the retakaful contracts less any expected cash flows from future wakalah fee income, and any other income due to the shareholder’s fund that can be determined with reasonable certainty, are taken into consideration. The estimation includes a PRAD at a 75% confidence level.
(iii) liability adequacy test
At each reporting date, the retakaful subsidiary reviews the expense liabilities to ensure that the carrying amount is sufficient or adequate to cover the obligations of the shareholder’s fund for all managed retakaful contracts. In performing this review, the retakaful subsidiary considers all contractual cash flows and compares this against the carrying value of expense liabilities. Any deficiency is recognised in the income statement. MNRB Holdings Berhad 151
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.11 product classification
Financial risk is the risk of a possible future change in one or more of a specified interest/profit rate, financial instrument price, commodity price, foreign exchange rate, index of price or rate, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance/underwriting risk is the risk other than financial risk.
An insurance/takaful contract is a contract under which the reinsurance, takaful and retakaful subsidiaries have accepted significant insurance/underwriting risk from another party by agreeing to compensate the party if a specified uncertainfuture event adversely affects the party. As a general guideline, the reinsurance, takaful and retakaful subsidiaries determine whether significant insurance/underwriting risk has been accepted by comparing claims/benefits paid on the occurrence of an insured event with claims/benefits payable if the event had not occurred.
Conversely, investment contracts are those contracts that transfer financial risk with no significant insurance/ underwriting risk.
Once a contract has been classified as an insurance/takaful contract, it remains an insurance/takaful contract for the remainder of its life-time, even if the insurance/underwriting risk reduces significantly during the period, unless all rights and obligations are extinguished or expire.
Based on the definition above and the product classification review performed by the Group, all contracts issued during the year fall under the classification of insurance/takaful contracts as at the reporting date.
2.12 Reinsurance/retakaful
The reinsurance, takaful and retakaful subsidiaries cede insurance/underwriting risk in the normal course of business. Ceded reinsurance/retakaful arrangements do not relieve the reinsurance, takaful and retakaful subsidiaries from their obligations to cedants/participants. For both ceded and assumed reinsurance/retakaful, premiums/contributions and claims/benefits are presented on a gross basis.
Reinsurance/retakaful arrangements entered into by the reinsurance, takaful and retakaful subsidiaries that meet the classification requirements of insurance/takaful contracts as described in Note 2.11 are accounted for as noted below. Arrangements that do not meet these classification requirements are accounted for as financial assets. As at the reporting date, all reinsurance/retakaful arrangements entered into by the reinsurance, takaful and retakaful subsidiaries during the year met the classification requirements of insurance/takaful contracts.
Reinsurance/retakaful assets represent amounts recoverable from reinsurers/retakaful operators for insurance/ takaful contract liabilities which have yet to be settled at the reporting date. Amounts recoverable from reinsurers/retakaful operators are measured consistently with the amounts associated with the underlying insurance/takaful contracts and the terms of the relevant reinsurance/retakaful arrangement.
At each reporting date, the reinsurance, takaful and retakaful subsidiaries assess whether objective evidence exists that reinsurance/retakaful assets are impaired. Objective evidence of impairment for reinsurance/retakaful assets are similar to those noted for insurance/takaful receivables. If any such evidence exists, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in the income statement. Reinsurance/retakaful assets are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party. 152 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.13 property, plant and equipment and depreciation
(i) recognition and measurement
All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, plant and equipment are stated at cost less accumulated depreciation and impairment losses, whilst properties are stated at revalued amount less subsequent accumulated depreciation and subsequent impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. On disposal of property, plant and equipment, the difference between net proceeds and the carrying amount is recognised in the income statement and the unutilised portion of the revaluation surplus on that item is taken directly to retained profits.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.
(iii) Depreciation
Freehold land has an unlimited useful life and therefore is not depreciated. Leased properties are depreciated over the shorter of the lease term and their useful lives.
Work in progress are also not depreciated as these assets are not available for use. When work in progress is completed and the asset is available for use, it is reclassified to the relevant category of property, plant and equipment and depreciation of the asset begins. During the period in which the asset is not yet in use, it is tested for impairment annually.
Depreciation of other property, plant and equipment is provided for on a straightline basis to write off the cost of each asset to its residual value over its estimated useful life, at the following annual rates:
Buildings 2% to 4% Computer equipment 20% to 33.3% Office equipment 5% to 15% Furniture and fittings 3.3% to 15% Motor vehicles 20% Significant parts of buildings 5% to 20%
The residual values, useful life and depreciation method are reviewed at the end of each reporting period to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. MNRB Holdings Berhad 153
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.14 Investment properties
Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value.
Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued.
Gains and losses arising from changes in the fair values of investment properties are recognised in the income statement in the year in which they arise.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year in which they arise.
Transfers are made to or from investment property only when there is a change in use. For a transfer from owner-occupied property to investment property, any excess of the property’s carrying value over its fair value is accounted for as a revaluation surplus which is recognised in other comprehensive income. Any deficit between the property’s carrying value and its fair value is recognised as an impairment loss in income statement. Subsequent to the date of change in use, the property is measured similar to other investment properties. Any revaluation surplus previously recognised in other comprehensive income is transferred to the income statement only upon disposal of the property.
2.15 Intangible assets
All intangible assets are initially recorded at cost. Subsequent to recognition, intangible assets are stated at cost less accumulated amortisation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.
On disposal of intangible assets, the difference between net proceeds and the carrying amount is recognised in the income statement.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed annually at the end of each reporting period.
Amortisation is charged to the income statement.
Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefinite life is also reviewed annually to determine whether the useful life assessment continues to be supportable. 154 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.15 Intangible assets (cont’d)
(i) Software development in progress
Software development in progress are tested for impairment annually and represent development expenditure on software. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future use. During the period in which the asset is not yet in use, it is tested for impairment annually.
(ii) Computer software and licences
The useful lives of computer software and licences are considered to be finite because computer software and licences are susceptible to technological obsolescence.
The acquired computer software and licences are amortised using the straight line method over their estimated useful lives not exceeding 6 years. Impairment is assessed whenever there is indication of impairment and the amortisation period and method are also reviewed annually at the end of each reporting period.
2.16 Financial assets
(i) Initial recognition and measurement
Financial assets are recognised in the financial statements when, and only when, the Group and the Company become a party to the contractual provisions of the instrument.
A financial asset is recognised initially, at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.
An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with the policy applicable to the nature of the host contract.
(ii) Classification and subsequent measurement
The Group and the Company determine the classification of its financial assets at initial recognition and this depends on the purpose for which the investments were acquired or originated. The following classifications are used by the Group and the Company in categorising its financial assets:
(a) Financial assets at FVTPL
Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.
Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Any gains or losses arising from changes in fair value are recognised in the income statement. Net gains or net losses on FVTPL do not include exchange differences, interest and dividend income. Interest and dividend income on financial assets at FVTPL are recognised in the income statement as part of investment income. MNRB Holdings Berhad 155
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.16 Financial assets
(ii) Classification and subsequent measurement
(b) HTM investments
Financial assets with fixed or determinable payments and fixed maturity are classified as HTM when the Group and the Company have the positive intention and ability to hold the investments to maturity.
Subsequent to initial recognition, HTM investments are measured at amortised cost using the effective interest / yield method. Gains and losses are recognised in the income statement when the HTM investments are derecognised or impaired, and through the amortisation process.
(c) loans and receivables
Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest / yield method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, and through the amortisation process.
(d) aFS financial assets
AFS financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.
After initial recognition, AFS financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognisedin other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest / yield method are recognised in the income statement. The cumulative gain or loss previously recognised is reclassified from other comprehensive income to the income statement as a reclassification adjustment when the financial asset is derecognised. Interest / profit income calculated using the effective interest / yield method is recognised in the income statement.
Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less accumulated impairment losses.
(iii) Derecognition
A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in the income statement. 156 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.17 Fair value of financial instruments
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices for assets and offer prices for liabilities, at the close of business at the end of each reporting period.
The fair value of investments in unit and real estate investment trusts is determined by reference to published bid prices.
For financial assets where an active market may not exist, the fair value is determined by using valuation techniques. Such techniques include using recent arm’s length transactions, reference to the current market value of another asset which is substantially the same, discounted cash flow analysis and / or option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. For discounted cash flow techniques, estimated future cash flows are based on management’s best estimates and the discount rate used is a market related rate for a similar asset. Certain financial assets are valued using pricing models that consider, among other factors, contractual and market prices, co-relation, time value of money, credit risk, yield curve volatility factors and / or prepayment rates of the underlying positions. The use of different pricing models and assumptions could produce materially different estimates of fair values.
The fair value of floating rate and over-night deposits with financial institutions is their carrying value. The carrying value is the cost of the deposit/placement and accrued interest/profit. The fair value of fixed interest/ profit/yield-bearing deposits is estimated using discounted cash flow techniques. Expected cash flows are discounted at current market rates for similar instruments at the reporting date.
If the fair value of a financial asset cannot be measured reliably, the asset is measured at cost, being the fair value of the consideration paid for the acquisition of the asset. All transaction costs directly attributable to the acquisition are also included in the cost of the financial asset.
2.18 Impairment of assets
(i) Financial assets
The Group and the Company assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
(a) Financial assets carried at amortised cost
The Group and the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The impairment assessment is performed at the end of each reporting period.
If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate / yield. The carrying amount of the asset is reduced and the loss is recorded in the income statement. MNRB Holdings Berhad 157
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.18 Impairment of assets (cont’d)
(i) Financial assets (cont’d)
(a) Financial assets carried at amortised cost (cont’d)
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
(b) aFS financial assets
Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as AFS financial assets are impaired.
If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from other comprehensive income to the income statement.
Impairment losses on AFS equity investments are not reversed in the income statement in subsequent periods. An increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For AFS debt investments, impairment losses are subsequently reversed in the income statement if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in the income statement.
(ii) non-financial assets
The carrying amounts of assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.
158 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.18 Impairment of assets (cont’d)
(ii) non-financial assets (cont’d)
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised.
2.19 non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary.
Immediately before classification as held for sale, the non-current assets are measuredin accordance with applicable MFRSs. On initial classification as held for sale, noncurrent assets are then measured at the lower of its carrying amount and fair value less costs to sell. Any difference is included in the income statement. Non- current assets classified as held for sale are not depreciated.
2.20 Measurement and impairment of Qard
Any deficits arising in the takaful / retakaful funds are made good via a loan, or Qard, granted by the shareholder’s funds to the takaful / retakaful funds. The Qard is stated at cost less any impairment losses at the shareholder’s funds. In the takaful / retakaful funds, the Qard is stated at cost.
The Qard shall be repaid from future surpluses of the takaful/retakaful funds.
The Qard is tested for impairment on an annual basis via an assessment of the estimated surpluses or cash flows from the takaful / retakaful funds to determine whether there is objective evidence of impairment. If the Qard is impaired, an amount comprising the difference between its cost and its recoverable amount, less any impairment loss previously recognised, is recognised in the income statement.
Impairment losses are subsequently reversed in the income statement if objective evidence exists that the Qard is no longer impaired.
2.21 Share capital and dividend expenses
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. MNRB Holdings Berhad 159
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.22 Cash and cash equivalents
Cash and cash equivalents include cash in hand and at banks, excluding fixed and call deposits with licensed financial institutions, which have an insignificant risk of changes in value. The statement of cash flows has been prepared using the indirect method.
2.23 Insurance and takaful receivables
Insurance/takaful receivables are amounts receivable under the contractual terms of an insurance/takaful contract. On initial recognition, insurance/takaful receivables are measured at fair value based on the consideration receivable. Subsequent to initial recognition, insurance/takaful receivables are measured at amortised cost, using the effective yield method.
Insurance/takaful receivables are assessed at each reporting date for objective evidence of impairment. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the insurance/takaful receivable’s original effective yield rate. The impairment loss is recognised in the income statement. The basis for recognition of such impairment loss is as described in Note 2.18(i)(a).
Insurance/takaful receivables are derecognised when the rights to receive cash flows from them have expired or when they have been transferred and the Group has also transferred substantially all risks and rewards of ownership.
2.24 Islamic medium terms notes (“IMTN”)
The IMTN are recognised at the amount of proceeds received less directly attributable transaction costs. The IMTN are classified as financial liabilities in the statement of financial position and the profits payable are recognised as finance costs in the income statement in the period in which they are incurred.
2.25 leases
(i) Classification
A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases, with the following exceptions:
(a) Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a case-by-case basis and, if classified as investment property, is accounted for as if held under a finance lease, as disclosed in Note 2.14; and
(b) Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. 160 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.25 leases (cont’d)
(ii) Finance leases - the group as lessee
Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the statement of financial position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Group and the Company’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.
Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.
The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2.13(iii).
(iii) operating leases - the group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values of leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.
(iv) operating leases - the group as lessor
Assets leased out under operating leases are presented on the statement of financial position according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease, as disclosed in Note 2.31(ii). Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. MNRB Holdings Berhad 161
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.26 Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.
Financial liabilities, within the scope of MFRS 139 Financial Instruments: Recognition and Measurement, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
(i) Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in the income statement. Net gains or losses on derivatives include exchange differences.
The Group and the Company have not designated any financial liabilities as at FVTPL nor were there any financial liabilities held for trading.
(ii) other financial liabilities
The Group and the Company’s other financial liabilities include insurance/takaful payables and other payables.
Insurance/takaful and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest/yield method.
For other financial liabilities, gains and losses are recognised in the income statement when the liabilities are derecognised, and through the amortisation process.
A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.
2.27 Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of provision is the present value of the expenditure expected to be required to settle the obligation. 162 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.28 Income tax
Income tax on profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the end of the reporting period.
Deferred tax is provided for, using the liability method, on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the end of the financial year. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in other comprehensive income, in which case the deferred tax is also charged or credited directly in other comprehensive income.
2.29 employee benefits
(i) Short-term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated balances. Short-term nonaccumulating compensated absences such as sick leave are recognised when the absences occur.
(ii) Defined contribution plan
As required by law, the Group makes contributions to the national pension scheme, the Employees Provident Fund (“EPF”). The Group also makes additional contributions to the EPF for eligible employees by reference to their length of service and earnings. Such contributions are recognised as an expense in the income statement as incurred.
(iii) employees’ terminal benefits
As required by law in the United Arab Emirates, the Group makes provision for terminal benefits for employees of its Dubai subsidiary, based on the employees’ salaries and number of years of service. The terminal benefits are paid to the employees on termination or completion of their terms of employment. MNRB Holdings Berhad 163
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.30 Foreign currencies
(i) Functional and presentation currency
The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.
(ii) Foreign currency transactions
In preparing the financial statements, transactions in currencies other than the functional currency (“foreign currencies”) are recorded in the functional currency using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising from the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period except for exchange differences arising on monetary items that form part of the Company’s net investment in foreign operations. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operations, where that monetary item is denominated in either the functional currency of the reporting entity or the foreign operation, are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in the income statement. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operations, where that monetary item is denominated in a currency other than the functional currency of the Company or the foreign operation, are recognised in the income statement for the period. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operations, regardless of the currency of the monetary item, are recognised in the income statement.
Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. Exchange differences arising from such non-monetary items are also recognised directly in other comprehensive income. 164 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.30 Foreign currencies (cont’d)
(iii) Foreign operations
The results and financial position of foreign operations that have a functional currency different from the presentation currency of the consolidated financial statements are translated into RM as follows:
(a) Assets and liabilities for each statement of financial position presented are translated at the closing rate prevailing at the reporting date;
(b) Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions;
(c) All resulting exchange differences are taken to the foreign currency translation reserve within equity; and
(d) The results of an associate, Labuan Reinsurance (L) Limited, are translated at the closing rate prevailing at the reporting date with respect to the carrying amount of investments in associate, and at the exchange rate at the date of the transactions with respect to the share of profits or losses. All resulting translation differences are included in the foreign exchange translation reserve in shareholders’ equity.
2.31 other revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits flow to the Group and the Company and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.
(i) Interest and profit income are recognised using the effective interest/yield method.
(ii) Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.
(iii) Dividend income is recognised when the right to receive payment is established.
(iv) Management fees are recognised when services are rendered.
(v) Wakalah fees are recognised as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah.
2.32 Zakat
Zakat represents an obligatory amount payable by the takaful and retakaful subsidiaries to comply with the principles of Shariah. Zakat for the takaful subsidiary is computed using the “net-asset” method, whilst zakat for the retakaful subsidiary is computed based on 2.5% of profit before tax, as approved by the respective Shariah Committee. Only the zakat that is attributable to the individual Muslim shareholders of the holding company was provided for in the financial statements. The zakat computation is reviewed by the Shariah Committee. The Board has the discretion to pay additional zakat above the obligatory amount payable. MNRB Holdings Berhad 165
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.33 transition to MFRS and the application of MFRS 1
These are the Group’s and the Company’s first annual financial statements prepared in accordance with MFRS. In previous financial years, the financial statements of the Company were prepared in accordance with FRS in Malaysia.
The accounting policies set out in Notes 2.1 to 2.32 have been applied in preparing the financial statements of the Group and the Company for the financial year ended 31 March 2013, the comparative information presented in these financial statements for the financial year ended 31 March 2012 and in the preparation of the opening statement of financial position at 1 April 2011 (which is also the Group’s and the Company’s date of transition). The impact arising from the application of MFRS 1 is disclosed below:
(i) redesignation of previously recognised financial instruments
MFRS 1 allows first-time adopters to designate a previously recognised financial asset as a financial asset at FVTPL or AFS. The Group had elected to utilise this exemption and certain HTM investments were designated as AFS financial assets. This redesignation was applied retrospectively from the date of transition to MFRS and the impact arising from the redesignation is disclosed in Note 4.
(ii) Consistent application of revaluation model for self-occupied properties
In the prior financial year, in its financial statements prepared in accordance with FRS in Malaysia, the Group had changed from the cost model to the revaluation model in respect of its self-occupied properties. Under FRS, this change had been accounted for prospectively and the impact adjusted against the carrying value of self-occupied properties and the asset revaluation reserve.
MFRS 1 requires entities to apply the same accounting policies in its opening MFRS statement of financial position and throughout all periods presented in its first MFRS annual financial statements. Accordingly, upon adoption of MFRS, the carrying amount of the Group’s self-occupied properties on the date of transition were revalued in accordance with the requirements of MFRS 116 Property, Plant and Equipment. The impact arising from the revaluation is disclosed in Note 4.
2.34 Guidelines on valuation of liabilities of family takaful business issued by Bank Negara Malaysia
BNM/RH/GL-004-20 Guidelines on Valuation Basis for Liabilities of Family Takaful Business, issued by BNM in December 2010 and effective for financial periods beginning on or after 1 July 2011, stipulates the valuation bases for liabilities of family takaful business. Amongst its requirements is the need for the valuation of the family takaful contract liabilities based on the gross contribution valuation method as further discussed in Note 2.6(v). The requirements of this Guideline was effective for the Group beginning 1 April 2012.
In line with the requirements of MFRS 1 for entities to apply the same accounting policies in its opening MFRS statement of financial position and throughout all periods presented in its first MFRS annual financial statements, the carrying amount of the Group’s family takaful contract liabilities on the date of transition were revalued in accordance with the requirements of the Guideline. The impact arising from the revaluation is disclosed in Note 4. 166 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.35 Standards issued but not yet effective
The Standards and Interpretations that are issued but not yet effective up to the date of issuance 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 they become effective.
Effective for annual periods beginning on or after 1 July 2012
MFRS 101 Presentation of Items of Other Comprehensive Income (Amendments to MFRS 101)
Effective for annual periods beginning on or after 1 January 2013
Amendments to MFRS 101 Presentation of Financial Statements (Annual Improvements 2009 - 2011 Cycle) MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) MFRS 10 Consolidated Financial Statements MFRS 11 Joint Arrangements MFRS 12 Disclosure of interests in Other Entities MFRS 13 Fair Value Measurement MFRS 119 Employee Benefits MFRS 127 Separate Financial Statements MFRS 128 Investment in Associate and Joint Ventures MFRS 127 Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December 2003) Amendment to IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments (Annual Improvements 2009 - 2011 Cycle) IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine Amendments to MFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards - Government Loans Amendments to MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards - Annual Improvements 2009 - 2011 Cycle) Amendments to MFRS 116 Property, Plant and Equipment (Annual Improvements 2009 - 2011 Cycle) Amendments to MFRS 132 Financial Instruments: Presentation (Annual Improvements 2009 - 2011 Cycle) Amendments to MFRS134 Interim Financial Reporting (Annual Improvements 2009 - 2011 Cycle) Amendments to MFRS 10 Consolidated Financial Statements: Transition Guidance Amendments to MFRS 11 Joint Arrangements: Transition Guidance Amendments to MFRS 12 Disclosure of Interests in Other Entities: Transition Guidance Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities
Effective for annual periods beginning on or after 1 January 2014
Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 10, MFRS 12 and MFRS 127 Investment Entities
Effective for annual periods beginning on or after 1 January 2015
MFRS 9 Financial Instruments MNRB Holdings Berhad 167
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.35 Standards issued but not yet effective (cont’d)
The Directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below:
(i) MFRS 9 Financial Instruments (“MFRS 9”)
MFRS 9 reflects the first phase of the work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Group’s and the Company’s financial assets. The Group and the Company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.
(ii) MFRS 10 Consolidated Financial Statements (“MFRS 10”)
MFRS 10 replaces part of MFRS 127 Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation - Special Purpose Entities.
Under MFRS 10, an investor controls an investee when (a) the investor has power over an investee, (b) the investor has exposure, or rights, to variable returns from its involvement with the investee, and (c) the investor has ability to use its power over the investee to affect the amount of the investor’s returns. Under MFRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
MFRS 10 includes detailed guidance to explain when an investor has control over the investee. MFRS 10 requires the investor to take into account all relevant facts and circumstances. The Group and the Company is currently assessing the impact that this Standard will have on the financial statements of the Group and the Company but based on preliminary analyses performed, no material impact is expected.
(iii) MFRS 12 Disclosure of Interests in Other Entities (“MFRS 12”)
MFRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and is expected to have no significant impact on the Group’s and the Company’s financial position or performance.
(iv) MFRS 13 Fair Value Measurement (“MFRS 13”)
MFRS 13 establishes a single source of guidance under MFRS for all fair value measurements. 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 when fair value is required or permitted. The Group and the Company is currently assessing the impact that this Standard will have on the financial statements of the Company but based on preliminary analyses performed, no material impact is expected. 168 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group and the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.
3.1 Critical judgement made in applying accounting policies
The following is the judgement made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements. Judgements are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Classification between investment properties and property, plant and equipment
The Group has developed certain criteria based on MFRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Depreciation and amortisation
Depreciation and amortisation is based on management’s estimates of the future estimated average useful lives and residual values of property, plant and equipment and intangible assets. Estimates may change due to technological developments, expected level of usage, competition, market conditions and other factors, and could impact the estimated average useful lives and the residual values of these assets.
This may result in future changes in the estimated useful lives and in the depreciation or amortisation expenses. Accordingly, at the end of each reporting period, the residual values and estimated useful lives of property, plant and equipment and intangible assets are assessed to determine that they continue to be consistent as disclosed in Notes 2.13(iii) and 2.15, respectively.
As at the reporting date, management has determined that the estimated useful lives of property, plant and equipment and intangible assets of the Group and of the Company remain consistent and there are no residual values.
MNRB Holdings Berhad 169
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
3.2 Key sources of estimation uncertainty (cont’d)
(b) General reinsurance business
The principal uncertainty in the general reinsurance business arises from the technical provisions which include the provisions of premium and claim liabilities. Premium liabilities are recorded as the higher of UPR or URR while claim liabilities mainly comprise of provision for claims reported, IBNER and IBNR.
Generally, claim liabilities are determined based upon previous claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past experience with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. It is certain that actual future premium and claim liabilities will not exactly develop as projected and may vary from the reinsurance subsidiary’s projection.
The estimates of premium and claim liabilities are therefore sensitive to various factors and uncertainties. The establishment of technical provisions is an inherently uncertain process and, as a consequence of this uncertainty, the eventual settlement of premium and claim liabilities may vary from the initial estimates.
At each reporting date, the estimates of premium and claim liabilities are reassessed for adequacy by an appointed actuary and changes will be reflected as adjustments to these liabilities. The appointment of the actuary is approved by BNM.
(c) General takaful and retakaful business
The principal uncertainty in the general takaful and retakaful businesses arises from the technical provisions which include the contribution liabilities and claims liabilities.
There may be significant reporting lags between the occurrence of an insured event and the actual time of event. Following the identification and notification of an insured loss, there may still be uncertainty as to the magnitude of the claim.
Generally, claim liabilities on reported claims or case reserves are estimated based upon historical claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past experience of similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. It is certain that final claim liabilities may vary from current projection. The uncertainty is also inherent in the projected contribution liabilities as it is correlated to the projected claim liabilities.
The estimates of contribution and claim liabilities are therefore sensitive to various factors and uncertainties. The establishment of technical provisions is an inherently uncertain process and, as a consequence of this uncertainty, the eventual settlement of contribution and claim liabilities may vary from the initial estimates. At the end of each reporting period, the estimates are re-assessed for adequacy by an appointed actuary and changes will be reflected as adjustments to these liabilities. The appointment of the actuary is approved by BNM. 170 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
3.2 Key sources of estimation uncertainty (cont’d)
(d) Family takaful and retakaful business
The estimation of the ultimate liability arising from claims made under the family takaful and retakaful businesses is a critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimation of the liabilities that the family takaful and retakaful funds will ultimately be required to pay as claims.
For family takaful and retakaful contracts, estimates are made for future deaths, disabilities, maturities, investment returns, voluntary terminations and expenses in accordance with contractual and regulatory requirements. The Family takaful and retakaful funds base the estimate of expected number of deaths on statutory mortality tables, adjusted where appropriate to reflect the funds’ unique risk exposures. The estimated number of deaths determines the value of possible future benefits to be paid out, which will be factored into ensuring sufficient cover by reserves, which in return is monitored against current and future contributions.
For those contracts that cover risks related to disability, estimates are made based on recent past experience and emerging trends. However, epidemics as well as wide ranging changes to life style, could result in significant changes to the expected future exposures.
All of these will give rise to estimation uncertainties of projected ultimate liability of the family takaful and retakaful funds.
At each reporting date, these estimates are reassessed for adequacy and changes will be reflected as adjustments to the liability.
(e) Impairment of non-financial assets
Assets are tested for impairment when indications of potential impairment exist. Indicators of impairment which could trigger an impairment review include evidence of obsolescence or physical damage, significant fall in market values, significant underperformance relative to historical or projected future operating results, significant changes in the use of assets or the strategy of the business, significant adverse industry or economic changes. Recoverable amounts of assets are based on management’s estimates and assumptions of the net realisable value, cash flows arising from the future operating performance and revenue generating capacity of the assets and CGUs, and future market conditions. Changes in circumstances may lead to changes in estimates and assumptions, and result in changes to the recoverable amounts of assets and impairment losses needed.
It is also recognised that an initial decline in fair value of investments in new startup investee companies, which is deemed temporary, may arise due to development and operational losses in the initial years. Based on an assessment performed at the reporting date, the Board of Directors and Management of the Company are of the opinion that there is no further indication of impairment in the Company’s investment in unquoted corporations at this juncture. MNRB Holdings Berhad 171
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
3.2 Key sources of estimation uncertainty (cont’d)
(f) Impairment of unquoted equity investments
The Group and the Company follows the guidance of the applicable MFRS in determining whether there is a decline other than temporary in the fair value of its investment in unquoted corporations. This determination requires significant judgement. In making this judgement, the Group and the Company evaluates the quantitative and qualitative factors affecting the market position of the investee including the regulatory support it receives and its longer term business outlook and financial standing. Appropriate considerations are given to the investee’s financial gestation period, financial projections, business prospects and the proprietary technology involved.
(g) Impairment of insurance/takaful receivables and reinsurance/retakaful assets
The Group reviews its insurance and takaful receivables on a regular basis to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of impairment required. Such estimates are necessarily based on assumptions about the probability of default and probable losses in the event of default, the value of the underlying security, and realisation costs.
These estimates are revisited by management on a frequent basis, at least once a year, to determine if certain assumptions continue to be reasonable. As at the reporting date, the impairment losses recognised on insurance/takaful receivables and reinsurance/retakaful assets reflect the expected recoverable values of these assets.
(h) Deferred tax
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies.
Assumptions about generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statement of financial position and the amount of unrecognised tax losses and unrecognised temporary differences.
The judgements and assumptions used in the estimates of deferred tax liabilities / assets are reassessed at least once a year to determine that they continue to be appropriate.
The total carrying value of recognised temporary differences of the Group and unrecognised temporary deductible differences of the retakaful subsidiary are disclosed in Note 17 to the financial statements.
Management is of the view that recognised deferred tax assets represent a fair estimate of the Group’s deductible temporary differences. 172 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
4. FINANCIAL EFFECTS ARISING FROM ADOPTION OF MFRS FRAMEWORK, CHANGES IN ACCOUNTING POLICIES AND CONSOLIDATION OF TAKAFUL AND RETAKAFUL FUNDS
Statement of Financial Position
The following is the reconciliation of the statement of financial position of the Group as at 31 March 2012 from FRS in Malaysia to MFRS:
Consolidation of takaful FRS as at note note note and retakaful MFRS as at 31.3.2012 2.33 (i) 2.33 (ii) 2 .34 funds 31.3.2012 RM’000 RM’000 rM’000 rM’000 rM’000 rM’000
Assets Property, plant and equipment 135,989 – 207 – 101,731 237,927 Investment properties 5,600 – – – – 5,600 Intangible assets 13,970 – – – – 13,970 Deferred tax 5,109 – – – 6,527 11,636 Investment in associates 86,383 – – – – 86,383 Financial assets: Financial assets at FVTPL 17,953 – – – 119,510 137,463 HTM investment 337,597 (230,134) – – 324,760 432,223 AFS financial assets 951,979 234,014 – – 571,985 1,757,978 LAR 1,016,498 – – – 431,578 1,448,076 Reinsurance/retakaful assets 357,636 – – – 75,245 432,881 Insurance/takaful receivables 150,100 – – – 181,563 331,663 Tax recoverable 3,508 – – – 11,969 15,477 Cash and bank balances 2,760 – – – 77,811 80,571 Non-current asset held for sale 56,601 – – – – 56,601
Total general insurance business and shareholders’ fund assets 3,141,683 3,880 207 – 1,902,679 5,048,449 General takaful fund assets 345,285 – – – (345,285) – Family takaful fund assets 1,606,924 – – – (1,606,924) – General retakaful fund assets 89,302 – – – (89,302) – Family retakaful fund assets 12,873 – – – (12,873) –
Total assets 5,196,067 3,880 207 – (151,705) 5,048,449 MNRB Holdings Berhad 173
4. FINANCIAL EFFECTS ARISING FROM ADOPTION OF MFRS FRAMEWORK, CHANGES IN ACCOUNTING POLICIES AND CONSOLIDATION OF TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Statement of Financial Position (cont’d)
Consolidation of takaful FRS as at note note note and retakaful MFRS as at 31.3.2012 2.33 (i) 2.33 (ii) 2 .34 funds 31.3.2012 RM’000 RM’000 rM’000 rM’000 rM’000 rM’000
Liabilities and Participants’ funds Participants’ funds – 2,166 – 29,423 138,947 170,536 Borrowings 270,000 – – – – 270,000 Insurance/takaful contract liabilities 1,638,443 – – (29,423) 1,617,725 3,226,745 Insurance/takaful payables 88,110 – – – 89,991 178,101 Other payables 48,356 – – – 62,218 110,574 Deferred tax liabilities – 668 5,296 – 8,267 14,231 Provision for taxation – – – – 19,384 19,384 Provision for zakat 390 – – – – 390
Total liabilities and participants’ funds 2,045,299 2,834 5,296 – 1,936,532 3,989,961 General takaful fund liabilities 336,189 – – – (336,189) – Family takaful fund liabilities 1,359,775 – – – (1,359,775) – General retakaful fund liabilities 89,302 – – – (89,302) – Family retakaful fund liabilities 11,571 – – – (11,571) –
Total liabilities 3,842,136 2,834 5,296 – 139,695 3,989,961
EQUITY Share capital 213,070 – – – – 213,070 Reserves 883,314 1,046 (5,089) – (33,853) 845,418
Total equity attributable to equity holders of the Company 1,096,384 1,046 (5,089) – (33,853) 1,058,488
Participants’ funds 257,547 – – – (257,547) –
Total liabilities, participants’ funds and equity 5,196,067 3,880 207 – (151,705) 5,048,449 174 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
4. FINANCIAL EFFECTS ARISING FROM ADOPTION OF MFRS FRAMEWORK, CHANGES IN ACCOUNTING POLICIES AND CONSOLIDATION OF TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Statement of Financial Position (cont’d)
The following is the reconciliation of the statement of financial position of the Group as at 1 April 2011 from FRS in Malaysia to MFRS:
Consolidation of takaful FRS as at note note note and retakaful MFRS as at 1.4.2011 2.33 (i) 2.33 (ii) 2 .34 funds 1.4.2011 RM’000 RM’000 rM’000 rM’000 rM’000 rM’000
Assets Property, plant and equipment 101,887 – 24,042 – 103,521 229,450 Investment properties 28,600 – – – – 28,600 Intangible assets 12,970 – – – – 12,970 Deferred tax 5,474 – – – 7,061 12,535 Investment in associates 117,542 – – – – 117,542 Financial assets: Financial assets at FVTPL 14,912 – – – 89,992 104,904 HTM investment 329,758 (212,767) – – 289,362 406,353 AFS financial assets 736,632 214,659 – – 416,768 1,368,059 LAR 1,034,574 – – – 269,660 1,304,234 Reinsurance/retakaful assets 146,597 – – – 69,232 215,829 Insurance/takaful receivables 138,173 – – – 150,309 288,482 Tax recoverable 11,476 – – – (38) 11,438 Cash and bank balances 9,483 – – – 113,461 122,944 Non-current asset held for sale 34,173 – – – – 34,173
Total general insurance business and shareholders’ fund assets 2,722,251 1,892 24,042 – 1,509,328 4,257,513 General takaful fund assets 350,198 – – – (350,198) – Family takaful fund assets 1,301,690 – – – (1,301,690) – General retakaful fund assets 76,853 – – – (76,853) – Family retakaful fund assets 16,976 – – – (16,976) –
Total assets 4,467,968 1,892 24,042 – (236,389) 4,257,513 MNRB Holdings Berhad 175
4. FINANCIAL EFFECTS ARISING FROM ADOPTION OF MFRS FRAMEWORK, CHANGES IN ACCOUNTING POLICIES AND CONSOLIDATION OF TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Statement of Financial Position (cont’d)
Consolidation of takaful FRS as at note note note and retakaful MFRS as at 1.4.2011 2.33 (i) 2.33 (ii) 2 .34 funds 1.4.2011 RM’000 RM’000 rM’000 rM’000 rM’000 rM’000
Liabilities and Participants’ funds Participants’ funds – 1,019 – 2,768 104,903 108,690 Borrowings 150,000 – – – – 150,000 Insurance/takaful contract liabilities 1,412,707 – – (2,768) 1,358,034 2,767,973 Insurance/takaful payables 65,394 – – – 47,595 112,989 Other payables 94,862 – – – 27,427 122,289 Deferred tax liabilities – 328 3,857 – 8,309 12,494 Provision for taxation – – – – 2,332 2,332 Provision for zakat 573 – – – – 573
Total liabilities and participant’s fund 1,723,536 1,347 3 ,857 – 1,548,600 3,277,340 General takaful fund liabilities 339,706 – – – (339,706) – Family takaful fund liabilities 1,109,886 – – – (1,109,886) – General retakaful fund liabilities 76,783 – – – (76,783) – Family retakaful fund liabilities 15,630 – – – (15,630) –
Total liabilities 3,265,541 1,347 3,857 – 6,595 3,277,340
EQUITY Share capital 213,070 – – – – 213,070 Reserves 785,645 545 20,185 – (39,272) 767,103
Total equity attributable to equity holders of the Company 998,715 545 20,185 – (39,272) 980,173
Participants’ funds 203,712 – – – (203,712) –
Total liabilities, participants’ funds and equity 4,467,968 1,892 24,042 – (236,389) 4,257,513 176 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
4. FINANCIAL EFFECTS ARISING FROM ADOPTION OF MFRS FRAMEWORK, CHANGES IN ACCOUNTING POLICIES AND CONSOLIDATION OF TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Income Statement
The following is the reconciliation of the income statement of the Group for the year ended 31 March 2012 from FRS in Malaysia to MFRS:
Consolidation FRS for the of takaful MFRS for the year ended note and retakaful year ended 31.3.2012 2.33 (ii) funds 31.3.2012 RM’000 rM’000 rM’000 rM’000
Gross earned premiums/contributions 1,178,499 – 776,023 1,954,522 Premium/contributions ceded to reinsurers/retakaful (206,053) – (69,094) (275,147)
Net earned premiums and contributions 972,446 – 706,929 1,679,375
Investment income 88,176 – 50,190 138,366 Realised gains and losses 9,951 – 12,252 22,203 Fair value gains and losses (1,301) – 2,506 1,205 Fee and commission income 225,193 – (200,720) 24,473 Other operating revenue 4,900 – (196) 4,704
Other revenue 326,919 – (135,968) 190,951
Gross claims and benefits paid (610,705) – (308,564) (919,269) Claims ceded to reinsurers/retakaful 39,547 – 98,040 137,587 Gross change in contract liabilities (258,221) – (268,709) (526,930) Change in contract liabilities ceded to reinsurers/retakaful 227,893 – (10,906) 216,987
Net claims and benefits (601,486) – (490,139) (1,091,625)
Fee and commission expense (371,760) – (13,841) (385,601) Management expenses (153,807) (83) 4,868 (149,022) Finance cost (12,169) – – (12,169) Other operating expenses (6,223) – (996) (7,219) Change in expense liabilities 2,404 – (2,004) 400
Other expenses (541,555) (83) (11,973) (553,611)
Share of results of associates (30,110) – – (30,110)
Operating profit before surplus transfer, zakat and tax 126,214 (83) 68,849 194,980 Zakat (400) – – (400) Tax expense (41,799) – (6,677) (48,476)
Net profit before surplus transfer 84,015 (83) 62,172 146,104 Surplus attributable to takaful participants – – (56,735) (56,735)
Net profit for the year attributable to equity holders of the Company 84,015 (83) 5,437 89,369 MNRB Holdings Berhad 177
4. FINANCIAL EFFECTS ARISING FROM ADOPTION OF MFRS FRAMEWORK, CHANGES IN ACCOUNTING POLICIES AND CONSOLIDATION OF TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Statement of Comprehensive Income
The following is the reconciliation of the statement of comprehensive income of the Group for the year ended 31 March 2012 from FRS in Malaysia to MFRS:
Consolidation FRS for the of takaful MFRS for the year ended note Note and retakaful year ended 31.3.2012 2.33 (i) 2.33 (ii) funds 31.3.2012 RM’000 RM’000 rM’000 rM’000 rM’000
Net profit for the year 84,015 – (83) 5,437 89,369
Other comprehensive income:
Effects of post acquisition foreign exchange translation reserve on investment in associate 1,263 – – (214) 1,049
Effects of foreign exchange translation reserve on investment in subsidiary 27 – – 242 269
Revaluation of land and building 35,666 – (23,752) – 11,914 Deferred tax relating to revaluation of land and buildings – – (1,439) – (1,439)
Net gain on Available-for-sale (“AFS”) financial assets:
Gain on fair value changes 19,820 501 – 17,335 37,656 Realised gains transferred to income statement (9,395) – – (11,566) (20,961) Deferred tax relating to net gain on AFS financial assets (1,767) – – (704) (2,471)
Other comprehensive income attributable to participants – – – (5,111) (5,111)
Total comprehensive income for the year 129,629 501 (25,274) 5,419 110,275 178 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
5. net EARNED PREMIUMS/CONTRIBUTIONS
Group 2013 2012 RM’000 RM’000
(a) Gross earned premiums/contributions
Insurance and takaful contracts 2,137,247 1,905,520 Change in premium/contribution liabilities (46,897) 49,002
2,090,350 1,954,522
(b) premiums/contributions ceded to reinsurers and retakaful operators
Insurance and takaful contracts (262,784) (275,212) Change in premium/contribution liabilities 11,307 65
(251,477) (275,147)
Net earned premiums/contributions 1,838,873 1,679,375
6. INVESTMENT INCOME
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Financial assets at FVTPL Profit income – 149 – – Dividend income: - quoted shares in Malaysia 599 453 – – - unit and property trusts 246 191 – – HTM investments Interest / profit income 31,850 24,737 2,546 122 AFS financial assets Interest / profit income 66,491 51,970 – – Dividend income: - quoted shares in Malaysia 3,358 7,010 18 17 - unquoted shares in Malaysia 123 410 – – - unit trusts in Malaysia 842 610 – – Loans and receivables Interest / profit income 43,737 45,455 622 629 Dividend income on institutional trusts 1,336 1,275 – – Dividend income from subsidiaries – – 45,000 50,000 Dividend income from associate – – – 320 Rental income 7,398 7,788 – – Net (amortisation of premiums)/accretion of discounts on investments (1,169) 357 – – Investment expenses (2,889) (2,039) (2) (2)
151,922 138,366 48,184 51,086 MNRB Holdings Berhad 179
7. realISED GAINS AND LOSSES
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Property, plant and equipment Realised gains 83 69 1 – Realised losses – (7) – (7) Financial assets at FVTPL Realised gains on quoted shares in Malaysia 1,385 118 – – Unquoted Islamic private debt securities – 55 – – Shariah approved unit trust funds 4,422 1,008 – – HTM investments Realised gains/(losses) 787 (1) – – AFS financial assets Realised gains / (losses): Quoted shares in Malaysia 11,885 13,911 – – Unquoted shares in Malaysia (395) – (395) – Unquoted corporate debt securities 3,373 1,807 – – Shariah approved unit trust funds (183) (355) – – Unquoted Islamic private debt securities 5,019 5,598 – – Assets held for sale Realised gains 4,082 – – –
30,458 22,203 (394) (7)
8. FAIR VALUE GAINS AND LOSSES
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Fair value gains on investment properties (Note 15) 600 – – – Financial assets at FVTPL 4,702 1,408 – – Reversal of impairment loss on HTM investments 31 266 – – (Impairment loss)/reversal of impairment loss on AFS financial assets (819) (469) 2,745 (356)
4,514 1,205 2,745 (356) 180 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
9. FEE AND COMMISSION
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Group
Fee and commission income Management fees 4,213 3,275 27,715 29,213 Commission income 20,863 21,198 – –
25,076 24,473 27,715 29,213
Fee and commission expense Commission expense (443,299) (383,989) Brokerage (2,554) (1,612)
(445,853) (385,601)
10. MANAGEMENT EXPENSES
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Staff costs: Salaries, bonus and other related costs 77,031 63,999 18,764 13,248 Directors’ remuneration (Note 11) 7,752 6,990 3,436 2,082 Pension costs - EPF 9,928 8,120 2,465 1,579 Social security costs 437 427 109 100 Retirement benefits 420 361 82 151 Short term accumulating compensated absences (47) (252) 17 13
95,521 79,645 24,873 17,173 Auditors’ remuneration: - statutory audit 640 440 65 39 - audit-related 42 27 3 3 - other services 50 59 6 6 Depreciation of property, plant and equipment 9,850 10,012 784 812 Amortisation of intangible assets 3,045 2,904 350 189 Property, plant and equipment written off – 60 – 11 Insurance / takaful levies and taxes 3,464 2,532 – – Share of acquisition costs on quota share retakaful 1,970 2,877 – – Agency expenses 6,340 5,531 – – Marketing and promotional costs 10,741 11,105 803 461 Electronic data processing costs 6,252 4,104 – – Office rental 4,095 4,021 1,193 1,149 Professional and legal fees 5,110 6,990 167 847 Contributions and donations 2,842 2,143 1 4 Other management expenses 22,851 16,572 2,848 3,911
172,813 149,022 31,093 24,605 MNRB Holdings Berhad 181
11. DIRECTORS’ REMUNERATION
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Non-executive directors:
Fees 2,370 2,168 700 696 Allowances 629 526 139 160 Benefits-in-kind 31 31 31 31
3,030 2,725 870 887
Executive directors:
Salaries and bonus 3,255 2,848 1,376 151 Pension costs - EPF 511 399 234 26 Social security costs 1 – 1 – Allowances 15 – 15 – Benefits-in-kind 150 183 26 –
3,932 3,430 1,652 177
Director of a subsidiary:*
Salaries and bonus 732 795 732 795 Pension costs - EPF 119 129 119 129 Social security costs 1 1 1 1 Allowances 119 124 119 124 Benefits-in-kind 10 49 10 49
981 1,098 981 1,098
Total directors’ remuneration 7,943 7,253 3,503 2,162
Total directors’ remuneration excluding benefits-in-kind 7,752 6,990 3,436 2,082
* The director of a subsidiary refers to management personnel who is employed by the holding company. In the previous year, there were two such directors.
12. otHER OPERATING EXPENSES
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Gain on foreign exchange 5,970 2,848 15 4 (Reversal of)/impairment loss on self-occupied properties (300) 1,465 – – Impairment losses on/(reversal of impairment losses) on insurance/ takaful receivables 14,068 (2,525) – – Sundry expenses 1,544 5,431 – –
21,282 7,219 15 4 182 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
13. taXATION
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Income tax: Malaysian income tax 56,426 46,041 6,124 9,225 Under provision in prior years 395 3,709 67 –
56,821 49,750 6,191 9,225
Deferred tax: Relating to origination and reversal of temporary differences 1,525 (1,274) 420 1,207
58,346 48,476 6,611 10,432
Domestic income tax for general business and shareholders’ fund is calculated at the Malaysian statutory tax rate of 25% (2012: 25%) of the estimated assessable profit for the year. Income tax on the Group’s family takaful business is calculated at a preferential tax rate of 8% (2012: 8%). Income tax on the Group’s offshore insurance / takaful business is calculated at a tax rate of 5% (2012: 5%) of the estimated assessable profit on the Group’s offshore insurance / takaful business for the year. A reconciliation of income tax expenses applicable to profit before zakat and tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Profit before zakat and tax 242,907 194,980 31,143 41,020
Taxation at Malaysian statutory tax rate of 25% 60,727 48,745 7,786 10,255 Effects of different tax rate in respect of family takaful business (10,722) (9,458) – – Effects of different tax rate in respect of offshore insurance (2,839) (3,887) – – Income not subject to tax (140,378) (119,667) (1,895) (1,030) Expenses not deductible for tax purposes 146,588 122,693 233 – Transfer from deferred taxation 1,525 (1,274) 420 1,207 Current year losses for which no deferred tax asset was recognised 3,418 274 – – Utilisation of brought forward unabsorbed business loss – (391) – – Deferred tax asset not recognised (41) 204 – – Under provision of tax expense in prior years 395 3,709 67 – Share of results of associates (327) 7,528 – –
Tax expense for the year 58,346 48,476 6,611 10,432 MNRB Holdings Berhad 183
14. propertY, PLANT AND EQUIPMENT
Furniture, fittings Capital Freehold Computer and office Motor work-in land Buildings equipment equipment vehicles progress total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Cost
At 1 April 2011 24,500 186,170 10,902 32,534 3,730 1,128 258,964 Additions – 3,745 1,395 2,054 763 708 8,665 Disposals – – – – (1,141) – (1,141) Reclassification – – – 120 – (120) – Revaluation surplus 6,160 5,754 – – – – 11,914 Elimination of accumulated depreciation on revaluation – (2,474) – – – – (2,474) Written off – – (3) (58) – – (61)
At 31 March 2012 30,660 193,195 12,294 34,650 3,352 1,716 275,867 Additions – 1,183 506 1,463 840 322 4,314 Disposals – – (245) (48) (984) – (1,277) Reclassification – 1,550 – – – (1,550) – Revaluation surplus – 5,285 – – – – 5,285 Elimination of accumulated depreciation on revaluation – (4,242) – – – – (4,242)
At 31 March 2013 30,660 196,971 12,555 36,065 3,208 488 279,947
Accumulated depreciation and impairment loss At 1 April 2011 – 530 8,756 18,307 1,921 – 29,514 Depreciation charge for the year – 4,669 1,698 3,092 553 – – 10,012 Disposals – – – – (576) – (576) Elimination of accumulated depreciation on revaluation – (2,474) – – – – (2,474) Written off – – (1) – – – (1) Impairment loss for the year – 1,465 – – – – 1,465 At 31 March 2012 – 4,190 10,453 21,399 1,898 – 37,940 Depreciation charge for the year – 4,673 1,345 3,110 722 – 9,850 Disposals – – (245) (48) (963) – (1,256) Elimination of accumulated depreciation on revaluation – (4,242) – – – – (4,242) Reversal of impairment losses during the year – (310) – – – – (310)
At 31 March 2013 – 4,311 11,553 24,461 1,657 – 41,982
Net Carrying Amount
At 31 March 2013 30,660 192,660 1,002 11,604 1,551 488 237,965
At 31 March 2012 30,660 189,005 1,841 13,251 1,454 1,716 237,927
At 31 March 2011 24,500 185,640 2,146 14,227 1,809 1,128 229,450 184 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
14. propertY, PLANT AND EQUIPMENT (CONT’D)
Revaluation of freehold land and buildings
Freehold land and buildings have been revalued based on valuations performed by an accredited independent valuer having an appropriate recognised professional qualification. The valuations are based on the investment and comparison method.
The investment method entails the determination of the probable gross annual rental the property is capable of producing and deducting therefrom the outgoings to arrive at the annual net income. The comparison method entails critical analyses of recent evidence of values of comparable properties in the neighbourhood and making adjustments for differences.
If the freehold land and buildings were measured using the cost model, the carrying amounts would be as follows:
Freehold land Buildings total RM’000 rM’000 rM’000
Cost
At 1 April 2011 15,886 164,890 180,776 Additions – 4,453 4,453
At 31 March 2012 15,886 169,343 185,229 Additions – 1,505 1,505
At 31 March 2013 15,886 170,848 186,734
Accumulated depreciation
At 1 April 2011 – 13,600 13,600 Charge for the year – 4,669 4,669
At 31 March 2012 – 18,269 18,269 Charge for the year – 4,673 4,673
At 31 March 2013 – 22,942 22,942
Net carrying amount
At 31 March 2013 15,886 147,906 163,792
At 31 March 2012 15,886 151,074 166,960
At 31 March 2011 15,886 151,290 167,176 MNRB Holdings Berhad 185
14. propertY, PLANT AND EQUIPMENT (CONT’D)
Furniture, fittings Computer and office Motor equipment equipment vehicles total Company rM’000 rM’000 rM’000 rM’000
Cost
At 1 April 2011 3,447 1,850 1,331 6,628 Additions 775 20 596 1,391 Disposals – – (796) (796) Written off – (11) – (11)
At 31 March 2012 4,222 1,859 1,131 7,212 Additions 211 544 677 1,432 Disposals (180) – – (180)
At 31 March 2013 4,253 2,403 1,808 8,464
Accumulated depreciation
At 1 April 2011 3,004 1,591 564 5,159 Charge for the year 530 52 230 812 Disposals – – (317) (317)
At 31 March 2012 3,534 1,643 477 5,654 Charge for the year 411 35 338 784 Disposals (180) – – (180)
At 31 March 2013 3,765 1,678 815 6,258
Net carrying amount
At 31 March 2013 488 725 993 2,206
At 31 March 2012 688 216 654 1,558
At 31 March 2011 443 259 767 1,469
15. INVESTMENT PROPERTIES
Group 31.3.2013 31.3.2012 RM’000 RM’000 At fair value:
At beginning of the year 5,600 28,600 Fair value gains recognised in income statement (Note 8) 600 – Transfer to non-current asset held for sale (Note 23) – (23,000)
At end of the year 6,200 5,600 186 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
16. INTANGIBLE ASSETS
Software Computer development software in and progress licenses total Group rM’000 rM’000 rM’000
Cost
At 1 April 2011 4,668 27,144 31,812 Additions 3,053 851 3,904 Reclassification (7) 7 –
At 31 March 2012 7,714 28,002 35,716 Additions 1,101 1,163 2,264 Reclassification (126) 126 –
At 31 March 2013 8,689 29,291 37,980
Accumulated amortisation
At 1 April 2011 – 18,842 18,842 Amortisation for the year – 2,904 2,904
At 31 March 2012 – 21,746 21,746 Amortisation for the year – 3,045 3,045
At 31 March 2013 – 24,791 24,791
Net carrying amount
At 31 March 2013 8,689 4,500 13,189
At 31 March 2012 7,714 6,256 13,970
At 31 March 2011 4,668 8,302 12,970 MNRB Holdings Berhad 187
16. INTANGIBLE ASSETS (CONT’D)
Software Computer development software in and progress licenses total Company rM’000 rM’000 rM’000
Cost
At 1 April 2011 900 5,974 6,874 Additions 672 360 1,032
At 31 March 2012 1,572 6,334 7,906 Additions 265 250 515
At 31 March 2013 1,837 6,584 8,421
Accumulated amortisation
At 1 April 2011 – 5,643 5,643 Amortisation for the year – 189 189
At 31 March 2012 – 5,832 5,832 Amortisation for the year – 350 350
At 31 March 2013 – 6,182 6,182
Net carrying amount
At 31 March 2013 1,837 402 2,239
At 31 March 2012 1,572 502 2,074
At 31 March 2011 900 331 1,231 188 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
17. DEFERRED TAX (LIABILITIES)/ASSETS
Group 31.3.2013 31.3.2012 RM’000 RM’000
At beginning of year (2,595) 41 Recognised in income statement (1,525) 1,274 Recognised in other comprehensive income 2,496 (3,910)
At end of year (1,624) (2,595)
Presented as follows: - Deferred tax assets 10,955 11,636 - Deferred tax liabilities (12,579) (14,231)
(1,624) (2,595)
Company 31.3.2013 31.3.2012 RM’000 RM’000
At beginning of year 1,844 3,098 Recognised in income statement (420) (1,207) Recognised in other comprehensive income 45 (47)
At end of year 1,469 1,844
Presented after appropriate offsetting as follows: - Deferred tax assets 1,872 2,258 - Deferred tax liabilities (403) (414)
1,469 1,844 MNRB Holdings Berhad 189
17. DEFERRED TAX (LIABILITIES)/ASSETS (CONT’D)
Deferred tax assets have not been recognised in respect of the following items of the retakaful subsidiary as the probability of recognition cannot be determined with certainly given the recent history of losses recorded.
Group 31.3.2013 31.3.2012 1.4.2011 rM’000 rM’000 rM’000
Unutilised business losses 10,004 6,624 7,656 Temporary differences: - net accretion of discounts 334 16 15 - net amortisation of premiums 37 5 3 - contribution liabilities – 63 102 - impairment of investments – 11 – - impairment loss on takaful receivables 75 280 391 - provisions 81 113 161 - financial assets 20 18 38
10,551 7,130 8,366
The components and movements of deferred tax assets / (liabilities) during the financial year are as follows:
Unabsorbed property, Impairment revaluation capital plant and premium losses on Financial of land and allowances equipment receivables liabilities investments assets buildings others total RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Group
2013
At 1 April 2012 594 (1,420) 7,636 560 798 (6,111) (6,700) 2,048 (2,595) Recognised in: Income statement (189) 199 (933) (1,589) 578 (14) – 423 (1,525) Other comprehensive income – – – – – 2,919 (423) – 2,496
At 31 March 2013 405 (1,221) 6,703 (1,029) 1,376 (3,206) (7,123) 2,471 (1,624)
2012
At 1 April 2011 594 (3,461) 7,053 18 1,466 (3,772) (5,261) 3,404 41 Recognised in: Income statement – 2,041 583 542 (668) 132 – (1,356) 1,274 Other comprehensive income – – – – – (2,471) (1,439) – (3,910)
At 31 March 2012 594 (1,420) 7,636 560 798 (6,111) (6,700) 2,048 (2,595) 190 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
17. DEFERRED TAX (LIABILITIES)/ASSETS (CONT’D)
The components and movements of deferred tax assets / (liabilities) during the financial year are as follows: (cont’d)
unabsorbed property, Impairment capital plant and losses on Financial allowances equipment receivables investments assets others total rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Company
2013
At 1 April 2012 594 (367) 4 307 (47) 1,353 1,844 Recognised in: Income statement (189) (34) – (307) – 110 (420) Other comprehensive income – – – – 45 – 45
At 31 March 2013 405 (401) 4 – (2) 1,463 1,469
2012
At 1 April 2011 594 (413) 52 218 – 2,647 3,098 Recognised in: Income statement – 46 (48) 89 – (1,294) (1,207) Other comprehensive income – – – – (47) – (47)
At 31 March 2012 594 (367) 4 307 (47) 1,353 1,844
18. INVESTMENT IN SUBSIDIARIES
Company 31.3.2013 31.3.2012 1.4.2011 rM’000 rM’000 rM’000
Unquoted shares, at cost: In Malaysia 905,000 905,000 795,000 Less: Impairment loss (6,869) (6,869) (6,869)
898,131 898,131 788,131 Outside Malaysia 6,370 6,370 6,370
904,501 904,501 794,501 MNRB Holdings Berhad 191
18. INVESTMENT IN SUBSIDIARIES (CONT’D)
Details of the subsidiaries are as follows:
Name of Country of E effective Subsidiaries incorporation principal activities ownership interest 31.3.2013 31.3.2012 1.4.2011 % % %
Malaysian Reinsurance Malaysia Underwriting of all classes of 100 100 100 Berhad general reinsurance business
Takaful Ikhlas Sdn. Bhd. Malaysia Management of family, general 100 100 100 and takaful investment linked business
MNRB Retakaful Berhad Malaysia Management of family and 100 100 100 general retakaful business
MMIP Services Sdn. Bhd. Malaysia Managing the Malaysian Motor 100 100 100 Insurance Pool which provides motor insurance to vehicle owners who are unable to obtain insurance protection
Malaysian Re Dubai, Marketing and promotional 100 100 100 (Dubai) Ltd.* United Arab activities and servicing of Emirates clients on behalf of Malaysian Re
* Audited by a firm of chartered accountants other than Ernst & oung.Y
The impairment loss of RM6,869,000 was made in respect of the retakaful subsidiary, which had recorded a net loss in the prior years, due mainly to the impairment of Qard provided to the general retakaful fund. The impairment loss also resulted in the total shareholder’s equity of the retakful subsidiary being lower than its issued and paid-up share capital. 192 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
19. INVESTMENT IN ASSOCIATES
Group 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Unquoted shares in Malaysia, at cost 77,615 77,615 77,615 Share of post acquisition retained profits (6,306) (7,614) 24,808 Post acquisition foreign exchange translation reserve* 17,147 16,382 15,119
88,456 86,383 117,542
Represented by share of net assets 88,456 86,383 117,542
Company 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Unquoted shares in Malaysia, at cost 1,957 1,957 1,957
Details of the associates which are all incorporated in Malaysia are as follows:
Name of P proportion of ownership interest associates Year end principal activities and voting power 31.3.2013 31.3.2012 1.4.2011 % % %
Held by the Company:
Motordata Research 31 December Development and provision 40 40 40 Consortium Sdn. Bhd. of a centralised motor parts price database for the Malaysian insurance industry
Held by Malaysian Re:
Labuan Reinsurance 31 December Underwriting of all classes of 20 20 20 (L) Ltd. (“Labuan Re”) general reinsurance business in the Federal Territory of Labuan
* This is in respect of retranslation of the cost of the investment in Labuan Re at the rate of exchange prevailing at the reporting date.
The financial statementsof the above associates are not co-terminous with those of the Group. For the purpose of applying the equity method of accounting, the audited financial statements of the associates for the year ended 31 December 2012 and management financial statements to the end of the accounting period of 31 March 2013 have been used. MNRB Holdings Berhad 193
19. INVESTMENT IN ASSOCIATES (CONT’D)
The summarised financial information of the associates are as follows:
31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Assets and liabilities:
Current assets 1,641,561 1,783,150 1,481,973 Non-current assets 54,377 52,050 36,965
Total assets 1,695,938 1,835,200 1,518,938
Current liabilities 74,199 231,806 24,213 Non-current liabilities 1,151,881 1,144,462 907,387
Total liabilities 1,226,080 1,376,268 931,600
Results: Revenue 710,522 855,669 773,901 Profit/(loss) for the year 6,882 (148,079) 32,671
20. FINANCIAL ASSETS
The following table summarises the carrying values of financial assets of the Group and the Company:
Group Company
31.3.2013 31.3.2012 1.4.2011 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
At carrying value:
Malaysian government securities 79,131 49,513 100,738 – – – Government investment issues 583,107 410,985 314,900 – – – Islamic BNM monetary notes – 1,988 4,996 – – – Debt securities 1,780,728 1,535,521 1,210,923 – 5,059 6,967 Equity securities 118,783 181,373 148,253 494 1,173 2,602 Institutional trust deposit 84,848 80,933 77,187 – – – Shariah approved unit trust funds 138,079 135,988 87,487 – – – Structured products 5,494 12,296 12,019 – – – Fixed and call deposits 686,972 563,343 560,810 7,607 15,664 4,069 Islamic investment accounts 750,463 706,517 450,407 855 3,909 3,813 Islamic repo placements 68,093 9,105 135,686 – – – Other loans and receivables 108,229 88,178 80,144 8,002 3,554 2,877
4,403,927 3,775,740 3,183,550 16,958 29,359 20,328 194 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
20. FINANCIAL ASSETS (CONT’D)
Group 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
(a) Financial assets at FVTPL
At fair value:
Quoted shares in Malaysia: Shariah approved equities 6,537 7,494 14,641 Others – 1,578 – Structured products 5,494 12,296 12,019 Warrants 42 27 45 Shariah approved unit trust funds 117,094 116,068 73,014 Government investment issues – – 698 Quoted debt securities – – 4,487
129,167 137,463 104,904
Group Company
31.3.2013 31.3.2012 1.4.2011 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
(b) HTM investments
(i) At amortised cost / cost:
Islamic BNM monetary notes – 1,988 4 ,996 – – – Malaysian government securities 79,131 5,805 56,832 – – – Unquoted corporate debt securities: 149,756 167,384 187,339 – 5,059 6,967 Government investment issues 542,884 220,679 139,660 – – – Commercial papers 14,882 36,367 17,526 – – –
786,653 432,223 406,353 – 5,059 6,967
(ii) At fair value:
Islamic BNM monetary notes – 1,988 4,996 – – – Malaysian government securities 80,812 6,148 56,937 – – – Unquoted corporate debt securities: 152,317 170,141 187,128 – 5,059 6,967 Government investment issues 549,977 224,806 141,032 – – – Commercial papers 14,877 36,363 17,538 – – –
797,983 439,446 407,631 – 5,059 6,967 MNRB Holdings Berhad 195
20. FINANCIAL ASSETS (CONT’D)
Group Company
31.3.2013 31.3.2012 1.4.2011 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
(c) aFS financial assets
At cost:
Unquoted shares in Malaysia(i) 44,503 45,003 46,152 – 500 1,649
At fair value:
Malaysian government securities – 43,708 43,906 – – – Unquoted debt securities 1,616,090 1,331,770 1,005,360 – – – Golf club memberships 228 228 228 50 50 50 Quoted shares in Malaysia 67,267 126,744 86,846 444 623 903 Quoted shares outside Malaysia 193 224 341 – – – Warrants 13 75 – – – – Shariah approved unit trust funds 20,985 19,920 14,473 – – – Government investment issues 40,223 190,306 170,753 – – –
1,789,502 1,757,978 1,368,059 494 1,173 2,602
(d) loans and receivables
At amortised cost / cost / fair value:
Fixed and call deposits with licensed: Commercial banks 166,118 132,546 129,776 975 8,266 3,069 Investment banks 520,854 430,797 431,034 6,632 7,398 1,000 Islamic investment accounts with licensed: Co-operative bank 49,791 61,344 85,069 – – – Islamic banks 507,677 445,491 264,157 855 3,909 3,813 Investment banks 27,608 40,427 1,507 – – – Development bank 137,284 153,424 91,405 – – – Building society 28,103 5,831 8,269 – – – Institutional trust deposit 84,848 80,933 77,187 – – – Islamic repo placements 68,093 9,105 135,686 – – – Secured staff loans 9,226 11,227 12,618 1,879 2,309 2,334 Amounts due from subsidiaries (ii) – – – 4 ,177 537 459 Income due and accrued 39,183 29,644 23,174 12 381 26 Due from Insurance Pool accounts 32,134 19,969 19,533 – – – Other receivables and deposits 27,686 27,338 24,819 1,934 327 58
1,698,605 1,448,076 1,304,234 16,464 23,127 10,759 196 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
20. FINANCIAL ASSETS (CONT’D)
(d) loans and receivables (cont’d)
(i) The pertinent information of the investments in unquoted shares in Malaysia are as follows:
Group 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
– 27,500,000 ordinary shares of RM1.00 each of Financial Park (Labuan) Sdn. Bhd. (“FPL”), representing an equity shareholding of 9%. 28,283 28,283 28,283 Less: Impairment loss (4,759) (4,759) (4,759)
23,524 23,524 23,524 20,000,000 redeemable preference shares of RM1.00 each of FPL 20,569 20,569 20,569
44,093 44,093 44,093
– 410,000 ordinary shares of Malaysian Rating Corporation Berhad (“MARC”) of RM1.00 each, representing an equity shareholding of 4%. 410 410 410
– Others – 500 1,649
44,503 45,003 46,152
(ii) These amounts are non-trade in nature, are unsecured, not subject to any interest/profit elements and repayable on demand. MNRB Holdings Berhad 197
21. INSURANCE/TAKAFUL CONTRACT LIABILITIES
31.3.2013 31.3.2012 1.4.2011
Reinsurance/ reinsurance/ reinsurance/ Gross retakaful net Gross retakaful net Gross retakaful net RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
General reinsurance/ takaful/ retakaful fund (Note (a)) 2,048,080 (292,651) 1,755,429 1,993,784 (406,321) 1,587,463 1,757,320 (188,316) 1,569,004 Family takaful/ retakaful fund (Note (b)) 1,520,942 (95,325) 1,425,617 1,212,731 (26,560) 1,186,171 990,023 (27,513) 962,510 Shareholders’ fund (Note (c)) 23,939 – 23,939 20,230 – 20,230 20,630 – 20,630
Total 3,592,961 (387,976) 3,204,985 3,226,745 (432,881) 2,793,864 2,767,973 (215,829) 2,552,144
31.3.2013 31.3.2012 1.4.2011
Reinsurance/ reinsurance/ reinsurance/ Gross retakaful net Gross retakaful net Gross retakaful net RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
(a) General reinsurance/ takaful/retakaful funds
Claims liabilities (Note (i)) 1,671,998 (260,411) 1,411,587 1,664,599 (385,388) 1,279,211 1,379,133 (167,448) 1,211,685 Premium/contribution liabilities (Note (ii)) 376,082 (32,240) 343,842 329,185 (20,933) 308,252 378,187 (20,868) 357,319
2,048,080 (292,651) 1,755,429 1,993,784 (406,321) 1,587,463 1,757,320 (188,316) 1,569,004
31.3.2013 31.3.2012 1.4.2011
Reinsurance/ reinsurance/ reinsurance/ Gross retakaful net Gross retakaful net Gross retakaful net RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
(i) Claims liabilities
At beginning of year 1,664,599 (385,388) 1,279,211 1,379,133 (167,448) 1,211,685 1,258,707 (149,374) 1,109,333 Claims incurred in the current accident year 243,977 (44,631) 199,347 515,204 (214,640) 300,564 312,561 (50,610) 261,951 Adjustment to claims incurred in prior accident years due to changes in IBNR and PRAD 22,602 3,051 25,652 60,336 (28,076) 32,260 (17,075) 1,898 (15,177) Movements in claims incurred in prior accident years 566,906 (49,943) 516,963 467,870 (28,009) 439,861 538,630 (17,404) 521,226 Claims paid during the year (826,086) 216,500 (609,586) (757,944) 52,785 (705,159) (713,690) 48,042 (665,648)
At end of year 1,671,998 (260,411) 1,411,587 1,664,599 (385,388) 1,279,211 1,379,133 (167,448) 1,211,685 198 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
21. INSURANCE/TAKAFUL CONTRACT LIABILITIES (CONT’D)
31.3.2013 31.3.2012 1.4.2011
Reinsurance/ reinsurance/ reinsurance/ Gross retakaful net Gross retakaful net Gross retakaful net RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
(a) General reinsurance/ takaful/retakaful funds
(ii) premium/ contribution liabilities
At beginning of the year 329,185 (20,933) 308,252 378,187 (20,868) 357,319 339,818 (44,310) 295,508 Premiums/ contributions written in the year 1,562,938 (259,797) 1,303,141 1,398,248 (240,204) 1,158,044 1,440,353 (144,014) 1,296,339 Premiums/ contributions earned during the year (1,516,041) 248,490 (1,267,551) (1,447,250) 240,139 (1,207,111) (1,401,984) 167,456 (1,234,528)
At end of the year 376,082 (32,240) 343,842 329,185 (20,933) 308,252 378,187 (20,868) 357,319
(b) Family takaful/ retakaful funds
Provision for claims reported by certificate holders 41,695 (9,664) 32,031 36,440 (10,840) 25,600 33,668 (5,639) 28,029 Participants’ Account (“PA”) 1,275,542 (5,482) 1,270,060 1,036,655 (1,864) 1,034,791 827,591 (656) 826,935 Participants’ Special Account (“PSA”) 96,859 (80,179) 16,680 33,181 (13,856) 19,325 49,309 (21,218) 28,091 NAV attributable to unitholders 106,846 – 106,846 106,455 – 106,455 79,455 – 79,455
1,520,942 (95,325) 1,425,617 1,212,731 (26,560) 1,186,171 990,023 (27,513) 962,510 MNRB Holdings Berhad 199
21. INSURANCE/TAKAFUL CONTRACT LIABILITIES (CONT’D)
31.3.2013 31.3.2012 1.4.2011
Reinsurance/ reinsurance/ reinsurance/ Gross retakaful net Gross retakaful net Gross retakaful net RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Family takaful/ retakaful fund
At beginning of year 1,212,731 (26,560) 1,186,171 990,023 (27,513) 962,510 794,678 (106,472) 688,206 Net earned contributions 542,343 (14,607) 527,736 465,617 (48,302) 417,315 494,213 (44,403) 449,810 Net creation of units 14,872 – 14,872 36,473 – 36,473 – – – Liabilities paid for death, maturities, surrenders, benefits and claims (265,041) 56,254 (208,787) (151,476) (344) (151,820) (128,903) 608 (128,295) Net cancellation of units (21,259) – (21,259) (9,849) – (9,849) – – – Benefits and claims experience variation – – – 2,772 (5,201) (2,429) 3,655 (16,540) (12,885) Fees deducted (142,502) 1,176 (141,326) (144,516) – (144,516) (157,132) – (157,132) Other revenue and expenses 6,778 – 6,778 376 – 376 – – – Transfer to shareholder’s fund (11,135) – (11,135) ( 4,575) – ( 4,575) (4,378) – (4,378) Increase/(decrease) in reserve 242,783 (111,588) 131,195 79,026 54,800 133,826 11,752 (4,258) 7,494 Transfer to special fund reserve (11,083) – (11,083) (18,915) – (18,915) – – – Transfer to unallocated surplus (47,545) – (47,545) (5,570) – (5,570) – – – Increase in PA reserve – – – – – – 233,121 (31,755) 201,366 Decrease in participants’ risk fund – – – (26,655) – (26,655) (256,983) 175,307 (81,676)
At end of year 1,520,942 (95,325) 1,425,617 1,212,731 (26,560) 1,186,171 990,023 (27,513) 962,510
31.3.2013 31.3.2012 1.4.2011 Gross/net Gross/net Gross/net rM’000 RM’000 RM’000
(c) Shareholders’ fund
At beginning of the year 20,230 20,630 20,110 General takaful and retakaful funds: - Wakalah fee received during the year 60,036 55,356 65,522 - Wakalah fee earned during the year (59,627) (56,514) (64,161) - Movement in provision for expense deficiency 2,410 108 1,630 Family takaful and retakaful funds: - Movement in provision for UER 890 650 (2,471)
At end of the year 23,939 20,230 20,630 200 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
22. INSURANCE AND TAKAFUL RECEIVABLES
Group 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Due contributions including agents’ balances 93,266 94,648 118,313 Amounts due from brokers and ceding companies 337,448 250,814 186,493 Less: Allowance for impairment (26,655) (13,799) (16,324)
404,059 331,663 288,482
Included in amounts due from brokers and ceding companies is an amount of RM584,048 (2012: RM862,000) due from an associate, Labuan Reinsurance (L) Ltd. The amount receivable is subject to settlement terms stipulated in the reinsurance contracts.
23. non-CURRENT ASSETS HELD FOR SALE
Group 31.3.2013 31.3.2012 RM’000 RM’000
Freehold land and buildings: At beginning of the year 56,601 34,173 Transfer from investment properties (Note 15) – 23,000 Less: Costs to sell – (572) Less: Disposal (56,601) –
At end of the year – 56,601
(i) On 31 October 2011, the Group’s reinsurance subsidiary had entered into a sale and purchase agreement to dispose of an investment property, a five storey commercial building in Kuala Lumpur; and
(ii) On 30 November 2011, the Group’s reinsurance subsidiary had entered into a sale and purchase agreement to dispose of an investment property, a six storey factory/office building and a leasehold land in Petaling Jaya.
The purchase considerations for the two investment properties had been received during the financial year and the sale had been completed. Upon completion of the disposal, revaluation reserves amounting to RM3.184 million were reclassified to retained earnings. MNRB Holdings Berhad 201
24. partICIPANTS’ FUNDS
31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Takaful/retakaful funds and Company
General takaful fund (Note (a)) 20,346 9,622 10,728 Family takaful fund (Note (b)) 213,799 159,458 105,700 General retakaful fund (Note (c)) – – 70 Family retakaful fund (Note (d)) – 1,302 1,346
234,145 170,382 117,844 Less : Qard elimination (74,928) (52,933) (62,969)
159,217 117,449 54,875 Recognised in income statement 74,828 53,087 53,815 Recognised in other comprehensive income 110 – –
234,155 170,536 108,690
(a) General takaful fund
31.3.2013 31.3.2012 1.4.2011 RM’000 RM’000 rM’000
Accumulated deficit (Note (i)) 19,760 7,784 (2,889) Qard (Note (ii)) – – 12,043 AFS reserves (Note (iii)) 586 1,838 1,574
20,346 9,622 10,728
(i) accumulated surplus
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of year 7,784 (2,889) Net surplus of the general takaful fund 17,197 10,673 Hibah paid and payable to participants (5,221) –
At end of the year 19,760 7,784 202 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
24. partICIPANTS’ FUNDS (CONT’D)
(a) General takaful fund (cont’d)
(ii) Qard
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year – 12,043 Increase in Qard – (12,043)
At end of the year – –
(iii) aFS reserves
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 1,838 1,574 Net gain on fair value changes (737) 2,828 Realised gain transferred to income statement (932) (2,477) Deferred tax on fair value changes 417 (87)
At end of the year 586 1,838
(b) Family takaful fund
31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Accumulated surplus (Note (i)) 185,382 129,856 80,815 AFS reserves (Note (ii)) 7,416 13,462 8,745 Revaluation surplus (Note (iii)) 21,001 16,140 16,140
213,799 159,458 105,700
(i) accumulated surplus
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of year 129,856 80,815 Net surplus of the family takaful fund 11,083 18,915 Hibah paid and payable to participants 44,443 30,126
At end of the year 185,382 129,856 MNRB Holdings Berhad 203
24. partICIPANTS’ FUNDS (CONT’D)
(b) Family takaful fund (cont’d)
(ii) aFS reserves
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 13,462 8,745 Net (loss)/gain on fair value changes (385) 14,022 Realised gain transferred to income statement (6,187) (8,902) Deferred tax on fair value changes 526 (403)
At end of the year 7,416 13,462
(iii) revaluation surplus
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 16,140 16,140 Recognised in other comprehensive income 5,284 – Deferred tax on revaluation surplus (423) –
At end of the year 21,001 16,140
(c) General retakaful fund
31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Accumulated deficit (Note (i)) (63,522) (53,087) (50,926) Qard (Note (ii)) 63,632 52,933 50,926 AFS reserves (Note (iii)) (110) 154 70
– – 70
(i) accumulated deficit
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of year (53,087) (50,926) Net deficit of the general retakaful fund (10,435) (2,161)
At end of the year (63,522) (53,087) 204 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
24. partICIPANTS’ FUNDS (CONT’D)
(c) General retakaful fund (cont’d)
(ii) Qard
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 52,933 50,926 Increase in Qard 10,699 2,007
At end of the year 63,632 52,933
(iii) aFS reserves
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 154 70 Net (loss)/gain on fair value changes (147) 225 Realised gain transferred to income statement (205) (113) Deferred tax on fair value changes 88 (28)
At end of the year (110) 154
Qard is a loan provided by the shareholder’s fund to make good the current year underwriting deficit experienced by the general retakaful fund. It does not have any profit elements, is unsecured and is repayable out of future surpluses of the fund.
(d) Family retakaful fund
31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Accumulated (deficit)/surplus (Note (i)) (11,306) 1,227 1,317 Qard (Note (ii)) 11,296 – – AFS reserves (Note (iii)) 10 75 29
– 1,302 1,346 MNRB Holdings Berhad 205
24. partICIPANTS’ FUNDS (CONT’D)
(d) Family retakaful fund (cont’d)
(i) accumulated (deficit)/surplus
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 1,227 1,317 Net deficit of the family retakaful fund (12,533) (90)
At end of the year (11,306) 1,227
(ii) Qard
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year – – Increase in Qard 11,296 –
At end of the year 11,296 –
(iii) aFS reserves
31.3.2013 31.3.2012 RM’000 RM’000
At beginning of the year 75 29 Net (loss)/gain on fair value changes (23) 137 Realised gain transferred to income statement (63) (75) Deferred tax on fair value changes 21 (16)
At end of the year 10 75
Qard is a loan provided by the shareholder’s fund to make good the current year underwriting deficit experienced by the family retakaful fund. It does not have any profit elements, is unsecured and is repayable out of future surpluses of the fund. 206 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
25. BORROWINGS
Group Company
31.3.2013 31.3.2012 1.4.2011 31.3.2013 31.3.2012 1.4.2011 RM’000 RM’000 rM’000 RM’000 rM’000 rM’000
Islamic medium term notes (“IMTN”) – 150,000 150,000 – 200,000 200,000 Short term revolving credit facility – 120,000 – – 120,000 – Islamic revolving credit facility (“RC-i Facility”) 200,000 – – 200,000 – – Sukuk Mudharabah programme 120,000 – – 120,000 – –
320,000 270,000 150,000 320,000 320,000 200,000
Company 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
IMTN held by subsidiaries:
Malaysian Reinsurance Berhad – 40,000 40,000 MNRB Retakaful Berhad – 10,000 10,000
– 50,000 50,000
On 5 April 2012, the Company had obtained an Islamic revolving credit facility (“RC-i Facility”), amounting to RM200 million and denominated in Ringgit Malaysia. The RC-i Facility is unsecured and carries a floating profit rate that is reviewed quarterly.
On 9 October 2012, the Company had obtained approval from the Securities Commission of Malaysia for the establishment of a Sukuk Mudharabah Programme (“Sukuk Programme”) with a full nominal value up to RM150 million. The Sukuk Programme is based on the Islamic financing principle of Mudharabah, has a tenure of 5 years from the date of the first issue and is unrated and unsecured. Profit is payable semi-annually in arrears from the date of issue and will be determined prior to issuance.
On 10 December 2012, a full drawdown of the RC-i Facility was made and utilised towards the redemption of the IMTN. The profit rate for the amount drawn as at 31 March 2013 was 5.71% per annum and is repayable on 10 December 2017, five years from the date of drawdown. On the same date, the Company also issued RM120 million under its Sukuk Programme. The issued Sukuk carries a fixed profit rate of 5.4% per annum and has a final redemption date on 10 December 2017. MNRB Holdings Berhad 207
26. INSURANCE AND TAKAFUL PAYABLES
Group 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Due to brokers and retrocessionaires 110,072 78,922 57,153 Due to agents, retakaful operators and brokers 101,652 99,179 55,836
211,724 178,101 112,989
Included in amount due to brokers and retrocessionaires is an amount of RM276,919 (2012: RM1,639,000) due to an associate, Labuan Reinsurance (L) Ltd. The amount payable is subject to settlement terms stipulated in the reinsurance contracts.
27. otHER PAYABLES
Group 31.3.2013 31.3.2012 1.4.2011 RM’000 rM’000 rM’000
Advance contributions 2,989 2,593 4,871 Deposit contributions 28,801 33,452 30,572 Outstanding commissions 11,509 6,888 15,457 Provisions 29,264 21,098 31,108 Sundry payables and accruals 44,412 46,543 40,281
116,975 110,574 122,289
Company 31.3.2013 31.3.2012 1.4.2011 RM’000 RM’000 rM’000
Provisions 5,858 5,371 10,562 Amount due to subsidiaries – 6,999 – Sundry payables and accruals 2,916 4,734 3,364
8,774 17,104 13,926
28. SHARE CAPITAL
Number of ordinary shares of RM1.00 each amount 31.3.2013 31.3.2012 31.3.2013 31.3.2012 ‘000 ‘000 rM’000 RM’000
Authorised 500,000 500,000 500,000 500,000
Issued and fully paid: At beginning and end of the year 213,070 213,070 213,070 213,070 208 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
29. retaINED PROFITS
Prior to the year of assessment 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividends paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders (“single tier system”). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances.
Companies also have an irrevocable option to disregard their accumulated tax credits under Section 108 of the Income Tax Act, 1967 (“Section 108 balance”) and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the Section 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.
The Company did not elect for the irrevocable option to disregard the Section 108 balance. Accordingly, during the transitional period, the Company may utilise the credits in the Section 108 balance as at 31 December 2007 to distribute cash dividend payments to ordinary shareholders as defined under the Finance Act 2007. The Company also has tax exempt income available for distribution of approximately RM60,251,000 (2012: RM60,588,000) as at 31 March 2013. As at 31 March 2013, the Company has tax credits in the Section 108 balance amounting to RM148,175,000, which are sufficient to pay franked dividends out of its entire retained earnings.
30. DIVIDENDS
Amount Net dividend per share 2013 2012 2013 2012 RM’000 rM’000 Sen Sen
Recognised during the year:
Dividend paid in respect of the financial year ended 31 March 2011: Final dividend of 20% less 25% tax – 31,960 – 15.0
Dividend paid in respect of the financial year ended 31 March 2012: First and final dividend of 17% less 25% tax * 27,166 – 12.7 –
27,166 31,960 12.7 15.0
* At the forthcoming Annual General Meeting, a first and final dividend in respect of the current financial year ended 31 March 2013 of 32% less 25% tax based on the issued and paid-up share capital of 213,069,500 ordinary shares at the date of this report, amounting to a total dividend of RM51,136,000, will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in the shareholders’ equity as an appropriation of retained profits in the next financial year ending 31 March 2014. MNRB Holdings Berhad 209
31. earnINGS PER SHARE
The basic earnings per share (EPS) is calculated by dividing the net profit for the year by the number of ordinary shares in issue during the year.
Group Company 2013 2012 2013 2012
Net profit for the year (RM’000) 112,665 89,369 24,532 30,588
Number of ordinary shares in issue (‘000) 213,070 213,070 213,070 213,070 Basic EPS (sen) 52.9 41.9 11.5 14.4
32. operatING LEASE ARRANGEMENTS
(a) the Group as lessee
The Group has entered into non-cancellable operating lease agreements for the use of office premises. This lease is for a period of 5 years and subject to review every 2 years. There are no restrictions placed upon the Group by entering into this lease.
The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the reporting date but not recognised as liabilities, are as follows:
Group 31.3.2013 31.3.2012 RM’000 RM’000
Future minimum rental payments:
Not later than 1 year 1,068 1,153 Later than 1 year and not later than 5 years 925 1,405
1,993 2,558
Company 31.3.2013 31.3.2012 RM’000 RM’000
Future minimum rental payments:
Not later than 1 year 1,097 1,097 Later than 1 year and not later than 5 years – 1,097
1,097 2,194 210 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
32. operatING LEASE ARRANGEMENTS (CONT’D)
(b) the Group as lessor
The Group has entered into non-cancellable operating lease agreements on its portfolio of investment properties. These leases have remaining non-cancellable lease terms of between 5 and 10 years. All leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions and certain contracts include contingent rental arrangements computed based on sales achieved by tenants.
The future minimum lease payments receivable under non-cancellable operating leases contracted for as at the reporting date but not recognised as receivables, are as follows:
Group 31.3.2013 31.3.2012 RM’000 RM’000
Future minimum rental receipts:
Not later than 1 year 3,765 5,033 Later than 1 year and not later than 5 years 2,013 4,856
5,778 9,889
33. COMMITMENTS
The commitments of the Group and of the Company as at the financial year-end are as follows:
Group Company 31.3.2013 31.3.2012 31.3.2013 31.3.2012 RM’000 rM’000 rM’000 rM’000
Authorised and contracted for: - Tangible assets 1,797 2,310 431 – - Intangible assets* 365 1,094 – –
2,162 3,404 431 –
Authorised but not contracted for: - Tangible assets 204 – – – - Intangible assets* 8,340 9,735 – –
8,544 9,735 – –
* Relating to purchases and enhancement of the takaful and retakaful subsidiaries’ computer systems. MNRB Holdings Berhad 211
34. relateD PARTY DISCLOSURE
For the purposes of these financial statements, parties are considered to be related to the Group and the Company if the Group and the Company have the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel include all the Directors of the Group and the Company, and certain members of senior management of the Group and the Company.
(a) the significant transactions with related parties are as follows:
Group Company 2013 2012 2013 2012 Income/(expenses): rM’000 rM’000 rM’000 rM’000
Transactions with subsidiaries: Management fees received 36,452 35,983 28,264 29,213 Net dividend received 35,000 37,500 35,000 37,500 Rental paid (1,411) (1,391) (1,170) (1,104) Profit on IMTN payable (1,642) (2,375) (1,642) (2,375)
Transactions with takaful funds of a subsidiary: Takaful contributions paid (618) (321) – – Net reinsurance inwards 17,948 14,896 – –
Transactions with retakaful funds of a subsidiary: Net reinsurance inwards 1,457 2,267 – – Net reinsurance outwards (21) (507) – –
Transactions with an associate, Labuan Reinsurance (L) Ltd: Net reinsurance inwards 2,219 1,742 – – Net reinsurance outwards – (135) – – Rental received 938 839 – –
Transactions with an associate, Motordata Research Consortium Sdn Bhd: Net dividend received – – – 320
The Group’s related party transactions disclosed above provide an indication of the intercompany transactions between subsidiaries within the Group that have been eliminated upon consolidation.
The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.
Outstanding balances arising from the transactions above as at 31 March have been disclosed in Notes 22 and 26 of the financial statements as well as on the face of statements of financial position. 212 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
34. relateD PARTY DISCLOSURE (CONT’D)
(b) the key management personnel compensations are as follows:
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Non-executive directors’ fees 2,370 2,115 700 696 Non-executive directors’ allowances 629 526 139 160 Non-executive directors’ benefits-in-kind 31 31 31 31 Executive directors and director of a subsidiary’s remuneration: Salaries and bonus 3,987 3,643 2,108 946 Pension costs - EPF 630 528 353 155 Social security cost 2 1 2 1 Allowances 134 124 134 124 Benefits-in-kind 160 232 36 49
Other key management personnel’s remuneration: Salaries and bonus 9,328 9,516 3,849 4,109 Pension costs - EPF 1,578 1,607 665 687 Social security cost 6 7 5 6 Allowances 941 985 486 650 Benefits-in-kind 323 416 58 115
20,119 19,731 8,566 7,729
35. SEGMENT INFORMATION
Investment Reinsurance takaful retakaful Holding Business operator operator elimination Consolidated Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
2013
Results Net earned premiums and contributions – 1,067,936 653,893 117,044 – 1,838,873 Interest / profit income 3,168 69,511 66,121 4,919 (1,641) 142,078 Other revenue 75,146 47,774 31,226 2,918 (81,204) 75,860 Net claims – (626,208) (421,012) (109,913) – (1,157,133) Other expenses (i) (29,973) (387,781) (220,175) (29,022) 36,188 (630,763) Depreciation (785) (3,341) (5,642) (82) – (9,850) Amortisation (350) (1,656) (1,036) (2) – (3,044) Finance cost (16,063) – – – 1,641 (14,422) Share of results of associates 229 1,079 – – – 1,308
Operating profit/(loss) before surplus transfer, zakat and tax 31,372 167,314 103,375 (14,138) (45,016) 242,907 Zakat – – (400) – – (400) Tax expense (6,611) (41,602) (20,133) – 10,000 (58,346)
Net profit/(loss) before surplus transfer 24,761 125,712 82,842 (14,138) (35,016) 184,161 Surplus attributable to takaful participants – – (72,723) 1,227 – (71,496)
Net profit/(loss) for the year 24,761 125,712 10,119 (12,911) (35,016) 112,665 MNRB Holdings Berhad 213
35. SEGMENT INFORMATION (CONT’D)
Investment Reinsurance takaful retakaful Holding Business operator operator elimination Consolidated Group (Cont’d) RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
2012
Results Net earned premiums and contributions – 972,446 636,503 70,426 – 1,679,375 Interest / profit income 751 64,581 54,971 4,383 (2,375) 122,311 Other revenue 79,422 52,926 25,095 2,849 (91,652) 68,640 Net claims – (601,486) (438,403) (51,736) – (1,091,625) Other expenses (i) (23,608) (332,428) (191,361) (20,486) 39,357 (528,526) Depreciation (812) (3,359) (5,746) (95) – (10,012) Amortisation (189) (1,601) (1,112) (2) – (2,904) Finance cost (14,544) – – – 2,375 (12,169) Share of results of associates 741 (30,851) – – – (30,110)
Operating profit before surplus transfer, zakat and tax 41,761 120,228 79,947 5,339 (52,295) 194,980 Zakat – – (400) – – (400) Tax expense (10,432) (39,220) (11,324) – 12,500 (48,476)
Net profit before surplus transfer 31,329 81,008 68,223 5,339 (39,795) 146,104 Surplus attributable to takaful participants – – (56,825) 90 – (56,735)
Net profit for the year 31,329 81,008 11,398 5,429 (39,795) 89,369
31.3.2013
Assets Segment assets (i) 939,928 2,747,850 2,580,774 192,293 (905,923) 5,554,922 Investment in associates 1,957 75,658 – – – 77,615 Add: Consolidation adjustments 1,170 9,671 – – – 10,841
943,055 2,833,179 2,580,774 192,293 (905,923) 5,643,378
Liabilities and Participants’ funds Segment liabilities Participants’ funds – – 234,145 10 – 234,155 Borrowings 320,000 – – – – 320,000 Insurance and takaful contract liabilities – 1,643,324 1,826,830 122,807 – 3,592,961 Other liabilities 8,774 125,005 211,793 20,168 (1,422) 364,318
328,774 1,768,329 2,272,768 142,985 (1,422) 4,511,434
Equities Segment equities (i) 613,111 1,055,179 308,006 49,308 (904,501) 1,121,103 Add: Consolidation adjustments 1,170 9,671 – – – 10,841
614,281 1,064,850 308,006 49,308 (904,501) 1,131,944
Total liabilities, participants’ funds and equity 943,055 2,833,179 2,580,774 192,293 (905,923) 5,643,378 214 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
35. SEGMENT INFORMATION (CONT’D)
Investment Reinsurance takaful retakaful Holding Business operator operator elimination Consolidated Group (Cont’d) RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
31.3.2012
Assets Segment assets (i) 951,026 2,624,042 2,184,451 161,742 (959,195) 4,962,066 Investment in associates 1,957 75,658 – – – 77,615 Add: Consolidation adjustments 941 7,827 – – – 8,768
953,924 2,707,527 2,184,451 161,742 (959,195) 5,048,449
Liabilities and Participants’ funds Segment liabilities Participants’ funds – – 169,080 1,456 – 170,536 Borrowings 320,000 – – – (50,000) 270,000 Insurance/takaful contract liabilities - 1,618,214 1,518,237 90,294 – 3,226,745 Other liabilities 17,104 109,664 193,082 7,434 (4,604) 322,680
337,104 1,727,878 1,880,399 99,184 (54,604) 3,989,961
Equities Segment equities (i) 615,879 971,822 304,052 62,558 (904,591) 1,049,720 Add: Consolidation adjustments 941 7,827 – – – 8,768
616,820 979,649 304,052 62,558 (904,591) 1,058,488
Total liabilities, participants’ funds and equity 953,924 2,707,527 2,184,451 161,742 (959,195) 5,048,449
1.4.2011
Assets Segment assets (i) 829,081 2,261,832 1,745,845 146,029 (842,816) 4,139,971 Investment in associates 1,957 75,658 – – – 77,615 Add: Consolidation adjustments 520 39,407 – – – 39,927
831,558 2,376,897 1,745,845 146,029 (842,816) 4,257,513
Liabilities and Participants’ funds Segment liabilities Participants’ funds – – 107,274 1,416 – 108,690 Borrowings 200,000 – – – (50,000) 150,000 Insurance and takaful contract liabilities – 1,392,077 1,294,408 81,488 – 2,767,973 Other liabilities 13,926 75,985 152,638 6,202 1,926 250,677
213,926 1,468,062 1,554,320 89,106 (48,074) 3,277,340
Equities Segment equities (i) 617,112 869,428 191,525 56,923 (794,742) 940,246 Add: Consolidation adjustments 520 39,407 – – – 39,927
617,632 908,835 191,525 56,923 (794,742) 980,173
Total liabilities, participants’ funds and equity 831,558 2,376,897 1,745,845 146,029 (842,816) 4,257,513 MNRB Holdings Berhad 215
35. SEGMENT INFORMATION (CONT’D)
(i) Included in segment assets is a Qard granted to the general and family retakaful funds by the shareholder’s fund of the retakaful subsidiary, amounting to RM74.9 million (31.3.2012: RM52.9 million; 1.4.2011: RM50.9 million). Qard represents a loan to the general family retakaful funds to make good any underwriting deficit experienced during a financial period. These balances, including the impairment recognised thereon (31.3.2013: RM29.3 million; 31.3.2012: RM19.2 million; 1.4.2011: RM14.6 million), have been eliminated in full upon consolidation.
36. rISK MANAGEMENT FRAMEWORK
(a) risk governance framework
The Group’s Risk Management Framework is designed to determine the level of risk acceptable to the Group relating to its core operations by setting the appropriate Board approved limits for adherence by management after taking into account the risk parameters, the nature, the size, mix and complexity of business and operations. An enterprise risk management process is adopted to identify and evaluate key business risks that may affect the organisation and to establish and implement an appropriate system of internal controls to manage these risks while ensuring full and effective control over significant strategic, financial, organisational and compliance matters.
The key objectives of the risk management framework are to:
(i) provide information on risk governance and accountabilities; (ii) provide guidance to a standard approach to managing risks; (iii) create a risk awareness culture; and (iv) enhance professionalism, increase profitability and value for shareholders.
The Risk Management Governance structure is as follows:
(i) The Board had established a dedicated Board Committees known as the Risk Management Committee of the Board (“RMCB”) at the company and subsidiary level to oversee the implementation of the risk management framework;
(ii) The Operational Risk Management Committee (“ORMC”) which comprises the President/Group Chief Executive Officer and senior management implement the risk management processes, provide assurance to the Board that the processes have been carried out effectively and ensures that a proactive risk management culture exists on an enterprise-wide basis;
(iii) The Group Chief Risk Management and Compliance Officer (“GRMCO”) and Group Risk Management & Compliance Division establishes the infrastructure and facilitates the risk management process across the subsidiaries through the adoption of the Group’s risk management framework;
(iv) At the operational level the implementation of risk management process is consistent with the risk management framework and aligned with day-to-day operations; and
(v) The Line Managers of each Department in the Group are responsible for using the various components of the risk management framework as an integral part of their normal processes and procedures.
The Group has an Investment Committee to further manage risks associated with investments and asset allocation. 216 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
36. rISK MANAGEMENT FRAMEWORK (CONT’D)
(b) Capital Management Objectives, Policies and Approach
The Capital Management Plan (“CMP”) is designed and implemented at the subsidiary level to ensure an effective management of the subsidiaries’ capital. The CMP is expected to maximise the Group’s value by optimising capital structure and enhancing capital efficiency. It is also designed to address the funding requirements of the Group to meet its various financial obligations.
Under the CMP, the subsidiaries measure and monitor their respective capital position mainly via the Capital Adequacy Ratio (“CAR”) or Solvency Margin Ratio (“SMR”).
The CMP identifies certain trigger points of the CAR or SMR position and further describes a set of corrective action plans that will be implemented towards maintaining an adequate level of capital. It is intended that capital will be utilised more efficiently in a controlled manner so that the subsidiaries will be able to manage their capital position above the internal target.
Capital Management Objectives
The main objective of capital management is to monitor and maintain, at all times, an appropriate level of capital which is commensurate with the subsidiaries’ business operations and the resultant risk profile. The key objective of the CMP is to trigger appropriate action plans to be taken by the Board and the management of the subsidiaries in event of internal capital levels falling below the internal target requirement. This includes remedial actions that must be undertaken by the subsidiaries’ Board and the management to improve the capital position.
Capital Management Policies
The key capital management policies are as follows:
(i) Ensure the Group has adequate capital within a range that supports stakeholders’ objectives; and
(ii) Establish responsibility of the subsidiaries’ Board and management in developing an internal capital adequacy assessment process and setting capital targets that commensurate with its business operations and the resultant risk profile and control environment.
Approach to capital management
The subsidiaries conduct stress tests on their CAR or SMR in compliance with BNM/RH/GL 003-23: Guidelines of Stress Testing for Insurer and BNM/RH/GL 004-16: Guidelines of Stress Testing for Takaful Operators. The impact of the adverse scenarios on the capital position of the subsidiaries and the Group on the CAR or SMR is assessed quarterly and is focused on short to medium term views.
(c) regulatory framework
The reinsurance subsidiary and the takaful and retakaful subsidiaries are required to comply with the Insurance Act and Regulations 1996 and the Takaful Act 1984, respectively, which are administered by Bank Negara Malaysia. BNM is primarily interested in protecting the rights of policyholders and participants and monitoring the subsidiaries closely to ensure prudent management of its business operations. At the same time, BNM is also interested in ensuring that the subsidiaries maintain an appropriate solvency position to meet unforeseen liabilities arising from economic cycle or natural disasters.
In addition, the Company is required to comply with the Listing Requirements of Bursa Malaysia Securities Berhad, Guidelines issued by the Securities Commission and the Capital Markets and Services Act 2007 as a result of its status as a listed company on the Main Market of Bursa Malaysia Securities Berhad. MNRB Holdings Berhad 217
37. unDERWRITING RISK
(a) General reinsurance
(i) nature of risk
The reinsurance subsidiary principally underwrites the following main classes of general reinsurance business: Fire, Motor, Marine, and Miscellaneous. Risks under these contracts usually cover a twelve month duration other than some long term contracts which may cover up to 3 years or more. For general reinsurance, the most significant risks arise from adverse development of the loss ratios and catastrophic loss events. These risk vary significantly in relation to economic conditions and territories from which the risk originates.
The above risks are mitigated by diversification across a large portfolio of business to ensure a balanced mix and spread of business as required by underwriting policies. Diversification through the implementation of underwriting strategies and claim management policies reduces the volatility of risks and improves the overall portfolio experience, and also ensures that conservative estimates are secured on its insurance contract liabilities.
The reinsurance subsidiary also manages its loss exposure through the use of retrocession programmes which are reviewed annually by the ORMC and RMCB, and subsequently approved by the Board. Prudent standards are applied in the assessment of the security of the Company’s key retrocessionaires. To manage its underwriting risk, the reinsurance subsidiary also complies with guidelines imposed by BNM in conducting the underwriting of business.
(ii) Concentration of risk by type of business
The table below measures the concentration of contracts by liabilities exposure:
Retro- Gross cession Net RM’000 rM’000 rM’000
31.3.2013
Fire 693,255 (90,259) 602,996 Motor 371,712 (60,571) 311,141 Marine 254,908 (57,732) 197,176 Miscellaneous 323,449 (16,154) 307,295
1,643,324 (224,716) 1,418,608
Local 1,075,918 (151,447) 924,471 Overseas 567,406 (73,269) 494,137
1,643,324 (224,716) 1,418,608 218 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(ii) Concentration of risk by type of business (cont’d)
Retro- Gross cession Net RM’000 rM’000 rM’000
31.3.2012
Fire 691,210 (250,046) 441,164 Motor 387,389 (7,477) 379,912 Marine 233,623 (72,640) 160,983 Miscellaneous 305,992 (27,473) 278,519
1,618,214 (357,636) 1,260,578
Local 1,054,897 (146,348) 908,549 Overseas 563,317 (211,288) 352,029
1,618,214 (357,636) 1,260,578
1.4.2011
Fire 457,190 (41,635) 415,555 Motor 424,694 120 424,814 Marine 211,699 (94,162) 117,537 Miscellaneous 298,494 (10,920) 287,574
1,392,077 (146,597) 1,245,480
Local 1,083,270 (144,333) 938,937 Overseas 308,807 (2,264) 306,543
1,392,077 (146,597) 1,245,480
(iii) reserving risk
The reinsurance subsidiary’s claim liabilities, and consequently some of the inputs used in determining its premium liabilities, are based upon previous claims experience, existing knowledge of events, the terms and conditions of relevant policies and interpretation of circumstances. Upon notification of a claim by its cedants, the reinsurance subsidiary sets aside reserves to meet the expected ultimate loss arising from this claim. These claim reserves are updated periodically for further developments via advice from cedants.
At each reporting date, the reinsurance subsidiary performs a test on the adequacy of its liabilities via the services of an independent qualified external actuary engaged for the purpose of ensuring that claim and premium liabilities are objectively assessed and adequately provided for. Any such deficiency is recognised in the financial statements. MNRB Holdings Berhad 219
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(iv) Impact on liabilities, profit and equity
Key Assumptions
Liabilities are determined based upon previous claims experience, existing knowledge of events, the terms and conditions of the relevant contracts and interpretation of circumstances. Particularly relevant are past experiences with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions.
The inherent uncertainties in estimating liabilities can arise from a variety of factors such as the range and quality of data available, underlying assumptions made and random volatility in future experience.
Sensitivity analysis
As a general reinsurer, the insurance contract liabilities of the reinsurance subsidiary are sensitive to various key factors which are both internal and external. External factors to which the reinsurance subsidiary is sensitive to include:
(i) Claims practices of ceding companies; (ii) Frequency and severity of claims incurred by cedants; (iii) Changes in premium rates in insurance and reinsurance markets; and (iv) Legislative and regulatory changes.
In general, due to the number of cedants providing business to the reinsurance subsidiary, the impact of changes to such variables cannot be reliably predicted. Accordingly, management believes that an analysis to provide an accurate reflection of the sensitivity of the general reinsurance business to changes in these factors cannot be reliably performed.
The main internal factors to which the reinsurance subsidiary is sensitive to pertain to the loss ratios observed from its claims experience. The most significant component of this would be large or catastrophic claims reported by cedants to the reinsurance subsidiary. Based on historical trends and claims performance, large losses reported by cedants are increasing in terms of frequency and severity. Accordingly, the sensitivity analysis is performed by determining the estimated large losses that management believes would reasonably occur over the next 12 months as noted below.
This analysis assumes that other factors relevant, but not significant, to the valuation of claim liabilities are constant.
Impact on Impact Impact Gross on Net on Profit Impact on Liabilities liabilities before Tax equity* RM’000 rM’000 rM’000 rM’000
31.3.2013
Fire 62,920 20,890 20,890 15,668 Marine 15,702 5,778 5,778 4,334 Motor 1,659 1,659 1,659 1,244 Miscellaneous 12,211 4,332 4,332 3,249
92,492 32,659 32,659 24,495 220 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(iv) Impact on liabilities, profit and equity (cont’d)
Sensitivity analysis (cont’d)
Impact on Impact Impact Gross on Net on Profit Impact on Liabilities liabilities before Tax equity* RM’000 rM’000 rM’000 rM’000
31.3.2012
Fire 50,565 17,687 17,687 13,265 Marine 19,149 7,157 7,157 5,368 Motor 1,185 1,185 1,185 889 Miscellaneous 16,639 6,156 6,156 4,617
87,538 32,185 32,185 24,139
1.4.2011 Fire 26,799 14,543 14,543 10,908 Marine 16,656 9,039 9,039 6,779 Motor 91 91 91 69 Miscellaneous 6,297 3,418 3,418 2,563
49,843 27,091 27,091 20,319
* The impact on the equity reflects the after tax impact.
The method used in performing the sensitivity analysis did not change from the previous year.
(v) Claims development table
The following tables show the estimate of cumulative ultimate incurred claims, including both claims provisions and IBNR for each successive underwriting year at each financial year end, along with cumulative claim payments to-date.
In setting provisions for claims, the reinsurance subsidiary relies on advice by its cedants and exercises discretion where the claim may develop more adversely than advised. An estimate will be made in the absence of a reported figure or in the event the loss is still preliminary and has not been fully assessed.
The estimates of the ultimate incurred claims are subject to a great deal of uncertainty in the early stages as claims are still being intimated and developed, particularly so for large and catastrophic claims. These uncertainties reduce over time as the claims develop and progress towards the ultimate cost.
Beginning 1 April 2009, the methodology used in the valuation of general reinsurance liabilities was changed. This change involved a more granular segregation of the business of the reinsurance subsidiary into specific portfolios with the intention of achieving greater accuracy in the estimation process. Accordingly, data pertaining to the gross general reinsurance liabilities prior to underwriting year 2009 was not available and hence only post underwriting year 2009 developments in gross general reinsurance liabilities are disclosed. MNRB Holdings Berhad 221
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(v) Claims development table (cont’d)
The following tables have excluded the impact of specific large losses and other claims that management believes are not relevant for purposes of establishing claims development trends.
Gross General Reinsurance Contract Liabilities for 2013:
Before Sub Underwriting Year 2005 2005 2006 2007 2008 2009 2010 2011 2012 total RM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000
At the end of accident year 418,389 573,070 640,777 643,911 663,610 One year later 408,945 496,009 570,029 603,851 722,113 Two year later 403,736 448,593 493,161 573,383 671,472 Three year later 334,075 417,448 464,785 492,705 633,549 Four year later 338,991 399,937 457,881 576,942 Five year later 326,336 395,525 555,322 Six year later 324,864 438,867 Seven year later 359,307
Current estimate of booked ultimate claims incurred (a) 359,242 438,594 554,849 574,103 625,871 650,143 664,583 385,874
At the end of accident year 45,677 42,356 53,719 63,614 92,548 81,664 72,602 45,707 One year later 178,766 217,724 224,029 256,339 301,430 304,808 457,413 Two year later 240,126 294,220 333,537 358,844 430,566 489,316 Three year later 265,782 335,359 379,990 411,516 544,943 Four year later 290,901 355,014 403,432 515,279 Five year later 303,512 369,071 517,164 Six year later 310,509 420,704 Seven year later 350,143
Cumulative payments to-date (b) 350,143 420,704 517,164 515,279 544,943 489,316 457,413 45,707
Expected claim liabilities (a) - (b) 35,245 9,099 17,890 37,685 58,824 80,928 160,827 207,170 340,167 947,835
Other portfolios 330,973
Best Estimate of Claim Liabilities 1,278,808 Claim handling expenses 3,067 Fund PRAD at 75% Confidence Interval 102,842
Gross General Reinsurance Claim Liabilities 1,384,717 222 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(v) Claims development table (cont’d)
Net General Reinsurance Contract Liabilities for 2013:
Before Sub Accident year 2005 2005 2006 2007 2008 2009 2010 2011 2012 total RM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000
At the end of accident year 310,464 305,287 317,442 496,557 537,097 579,366 556,166 631,329 One year later 309,925 328,514 418,288 480,442 545,681 557,852 707,118 – Two year later 316,181 366,752 439,019 476,158 549,676 626,114 – – Three year later 331,467 371,474 441,390 479,882 593,617 – – – Four year later 325,088 350,446 437,100 546,688 – – – – Five year later 309,576 344,994 519,346 – – – – – Six year later 307,374 382,902 – – – – – – Seven year later 337,577 – – – – – – –
Current estimate of booked ultimate claims incurred (a) 337,557 382,674 518,916 543,984 586,788 607,270 649,371 369,785
At the end of accident year 44,469 40,581 52,635 62,609 91,038 70,948 72,009 45,219 One year later 172,437 194,490 219,484 251,249 296,382 291,065 451,089 – Two year later 230,790 257,795 324,757 350,613 415,719 471,728 – – Three year later 255,442 288,807 368,751 402,025 526,099 – – – Four year later 276,466 307,552 390,048 501,521 – – – – Five year later 288,622 320,957 497,241 – – – – – Six year later 295,205 369,377 – – – – – – Seven year later 330,728 – – – – – – –
Cumulative payments to-date (b) 330,728 369,377 497,241 501,521 526,099 471,728 451,089 45,219
Expected claim liabilities (a) - (b) 26,683 6,829 13,297 21,675 42,463 60,689 135,542 198,282 324,566 830,026
Other portfolios 262,861
Best Estimate of Claim Liabilities 1,092,887 Claim handling expenses 3,067 Fund PRAD at 75% Confidence Interval 84,595 Less: Retrocession recoveries (13,992)
Net General Reinsurance Claim Liabilities 1,166,557 MNRB Holdings Berhad 223
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(v) Claims development table (cont’d)
Gross General Reinsurance Contract Liabilities for 2012:
Before Sub Underwriting Year 2004 2004 2005 2006 2007 2008 2009 2010 2011 total RM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000
At the end of accident year – – – – 418,389 573,070 640,777 643,911 One year later – – – 408,945 496,009 570,029 603,851 – Two year later – – 403,736 448,593 493,161 573,383 – – Three year later – 334,075 417,448 464,785 492,705 – – – Four year later 352,998 338,991 399,937 457,881 – – – – Five year later 357,333 326,336 395,525 – – – – – Six year later 345,542 324,864 – – – – – – Seven year later 343,972 – – – – – – –
Current estimate of booked ultimate claims incurred (a) 343,959 324,776 395,184 456,141 487,436 560,570 567,276 321,985
At the end of accident year 69,606 45,677 42,356 53,719 63,614 92,548 81,664 72,602 One year later 210,770 178,766 217,724 224,029 256,339 301,430 304,808 – Two year later 263,625 240,126 294,220 333,537 358,844 430,566 – – Three year later 291,312 265,782 335,359 379,990 411,516 – – – Four year later 308,433 290,901 355,014 403,432 – – – – Five year later 321,954 303,512 369,071 – – – – – Six year later 331,801 310,509 – – – – – – Seven year later 337,629 – – – – – – –
Cumulative payments to-date (b) 337,629 310,509 369,071 403,432 411,516 430,566 304,808 72,602
Expected claim liabilities (a) - (b) 56,075 6,330 14,267 26,113 52,709 75,920 130,004 262,468 249,383 873,269
Other portfolios 413,672
Best Estimate of Claim Liabilities 1,286,941 Claim handling expenses 2,156 Fund PRAD at 75% Confidence Interval 100,563
Gross General Reinsurance Claim Liabilities 1,389,660 224 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(v) Claims development table (cont’d)
Net General Reinsurance Contract Liabilities for 2012:
Before Sub Accident year 2004 2004 2005 2006 2007 2008 2009 2010 2011 total RM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000
At the end of accident year 310,161 310,464 305,287 317,442 496,557 537,097 579,606 556,166 One year later 313,641 309,925 328,514 418,288 480,442 545,438 557,852 – Two year later 305,092 316,181 366,752 439,019 476,491 549,676 – – Three year later 304,165 331,467 371,474 441,533 479,882 – – – Four year later 333,395 325,088 350,415 437,100 – – – – Five year later 332,761 309,569 344,994 – – – – – Six year later 320,117 307,374 – – – – – – Seven year later 319,605 – – – – – – –
Current estimate of booked ultimate claims incurred (a) 319,596 307,294 344,768 435,391 474,801 537,454 524,077 302,725
At the end of accident year 67,623 44,469 40,581 52,635 62,609 91,038 70,948 72,009 One year later 199,078 172,437 194,490 219,484 251,249 296,382 291,065 – Two year later 246,603 230,790 257,795 324,757 350,613 415,719 – – Three year later 269,840 255,442 288,807 368,751 402,025 – – – Four year later 286,358 276,466 307,552 390,048 – – – – Five year later 299,224 288,622 320,957 – – – – – Six year later 308,687 295,205 – – – – – – Seven year later 314,072 – – – – – – –
Cumulative payments to-date (b) 314,072 295,205 320,957 390,049 402,025 415,719 291,065 72,009
Expected claim liabilities (a) - (b) 47,792 5,524 12,089 23,811 45,342 72,776 121,735 233,012 230,716 792,797
Other portfolios 197,236
Best Estimate of Claim Liabilities 990,033 Claim handling expenses 2,156 Fund PRAD at 75% Confidence Interval 79,887 Less: Retrocession recoveries (38,510)
Net General Reinsurance Claim Liabilities 1,033,566 MNRB Holdings Berhad 225
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(v) Claims development table (cont’d)
Gross General Reinsurance Contract Liabilities for 2011:
Before Sub Underwriting Year 2003 2003 2004 2005 2006 2007 2008 2009 2010 Total RM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000
At the end of accident year – – – – – 418,389 573,070 640,777 One year later – – – – 408,945 496,009 570,029 – Two year later – – – 403,736 448,593 493,161 – – Three year later – – 334,075 417,448 464,785 – – – Four year later – 352,998 338,991 399,937 – – – – Five year later 322,570 357,333 326,336 – – – – – Six year later 288,868 345,542 – – – – – – Seven year later 271,056 – – – – – – –
Current estimate of booked ultimate claims incurred (a) 271,053 345,528 326,144 399,062 461,086 483,090 533,575 365,939
At the end of accident year 42,452 69,606 45,677 42,356 53,719 63,614 92,548 81,664 One year later 139,587 210,770 178,766 217,724 224,029 256,339 301,430 - Two year later 200,142 263,625 240,126 294,220 333,537 358,844 – – Three year later 219,409 291,312 265,782 335,359 379,990 – – – Four year later 232,395 308,433 290,901 355,014 – – – – Five year later 246,072 321,954 303,512 – – – – – Six year later 255,423 331,801 – – – – – – Seven year later 261,529 – – – – – – –
Cumulative payments to-date (b) 261,529 331,801 303,512 355,014 379,990 358,844 301,430 81,664
Expected claim liabilities (a) - (b) 68,314 9,524 13,727 22,632 44,048 81,096 124,246 232,145 284,275 880,007
Other portfolios 164,327
Best Estimate of Claim Liabilities 1,044,334 Claim handling expenses 3,657 Fund PRAD at 75% Confidence Interval 83,448
Gross General Reinsurance Claim Liabilities 1,131,439 226 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(a) General reinsurance (cont’d)
(v) Claims development table (cont’d)
Net General Reinsurance Contract Liabilities for 2011:
Before Sub Accident year 2003 2003 2004 2005 2006 2007 2008 2009 2010 total RM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000 rM‘000
At the end of accident year 325,527 310,161 310,464 305,287 317,442 496,557 537,097 579,606 One year later 315,177 313,641 309,925 328,514 418,288 480,442 545,438 – Two year later 315,154 305,092 316,181 366,752 439,019 476,491 – – Three year later 293,606 304,165 331,467 371,474 441,533 – – – Four year later 295,676 333,395 325,088 350,415 – – – – Five year later 259,441 332,761 309,569 – – – – – Six year later 259,935 320,117 – – – – – – Seven year later 248,997 – – – – – – –
Current estimate of booked ultimate claims incurred (a) 248,994 320,103 309,402 349,553 438,230 467,130 510,989 320,132
At the end of accident year 41,485 67,623 44,469 40,581 52,635 62,609 91,038 70,948 One year later 132,552 199,078 172,437 194,490 219,484 251,249 296,382 – Two year later 183,084 246,603 230,790 257,795 324,757 350,613 – – Three year later 201,411 269,840 255,442 288,807 368,751 – – – Four year later 213,811 286,358 276,466 307,552 – – – – Five year later 227,010 299,224 288,622 – – – – – Six year later 235,949 308,687 – – – – – – Seven year later 241,768 – – – – – – –
Cumulative payments to-date (b) 241,768 308,687 288,622 307,552 368,751 350,613 296,382 70,948
Expected claim liabilities (a) - (b) 59,673 7,226 11,416 20,780 42,001 69,479 116,517 214,607 249,184 790,883
Other portfolios 148,489
Best Estimate of Claim Liabilities 939,372 Claim handling expenses 3,657 Fund PRAD at 75% Confidence Interval 75,260 Less: Retrocession recoveries (15,051)
Net General Reinsurance Claim Liabilities 1,003,238 MNRB Holdings Berhad 227
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund
(i) nature of risk
The takaful subsidiary principally issues the following types of general takaful certificates: motor, household and commercial fire, business interruption, personal accident, and other miscellaneous commercial contracts. Risks under these certificates usually cover a twelve month duration other than long term fire which may be extended up to thirty years or more. For general takaful certificates, the most significant risk arise from accident frequency and severity of the accident. These risks do vary significantly in relation to location of risk, the type of risk covered and the industry.
The above risks are mitigated by diversification across a large portfolio of business and careful selection of risks. The variability of risks is designed to improve the portfolio experience by implementation of underwriting strategies and claim management policies which attempt to minimise losses.
The takaful subsidiary also manages its loss exposure by the use of retakaful arrangements. The retakaful treaty arrangements are reviewed annually by RMCB and approved by the Board.
Stress Testing (“ST”) is performed twice a year. The purpose of the ST is to test the solvency of the general takaful fund under the various scenarios according to regulatory guidelines, simulating drastic changes in major parameters such as new business volume and investment environment.
(ii) Concentration of risk by type of certificates
The table below sets out the concentration of takaful certificates liabilities by class:
Gross Retakaful Net RM’000 rM’000 rM’000
31.3.2013
Fire 40,940 (7,890) 33,050 Motor 212,858 (49,705) 163,154 Marine, Aviation & Transit 900 (508) 392 Miscellaneous 46,854 (4,809) 42,045
301,553 (62,912) 238,641
31.3.2012
Fire 35,638 (3,396) 32,242 Motor 213,980 (20,429) 193,551 Marine, Aviation & Transit 1,531 (606) 925 Miscellaneous 42,561 (17,725) 24,836
293,710 (42,156) 251,554 228 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(ii) Concentration of risk by type of certificates(cont’d)
Gross retakaful net RM’000 rM’000 rM’000
1.4.2011
Fire 30,727 (5,443) 25,284 Motor 217,398 (2,594) 214,804 Marine, Aviation & Transit 5,217 (1,785) 3,432 Miscellaneous 38,391 (24,529) 13,862
291,733 (34,351) 257,382
All business of the general takaful fund is derived from participants in Malaysia; accordingly, disclosure of concentration risk by geographical region is not relevant to the general takaful fund.
(iii) Impact on liabilities, profit and equity
Key Assumptions
The principal assumptions underlying the estimation of liabilities is that the takaful subsidiary’s future claims development will follow a similar pattern to past claims development experience.
Additional qualitative judgments are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrence, changes in market factors such as public attitude to claims notification and reporting, economic conditions, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures. Judgment is further used to assess the extent to which external factors, such as judicial decisions and government legislation affect the estimates.
Other key circumstances affecting the reliability of assumptions include variation in profit rates and delays in settlement.
Sensitivity analysis
The general takaful claim liabilities are sensitive to the key assumptions shown below. It has not been possible to quantify the sensitivity of certain assumptions, such as, legislative changes or uncertainty in the estimation process.
The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claim liabilities. To demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non-linear.
Sensitivity has been applied to the motor classes only (comprising Motor Act and Motor Others) by considering the ultimate loss ratio with an extra charge for the provision in adverse deviation. MNRB Holdings Berhad 229
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iii) Impact on liabilities, profit and equity (cont’d)
Sensitivity analysis (cont’d)
Change in Impact on assumption Impact Impact Impact on General of Ultimate on Gross on Net Surplus takaful Claims Liabilities Liabilities before Tax fund* Ratio rM’000 rM’000 rM’000 rM’000
31.3.2013
Motor Act Average Severity +10% 18,758 16,559 (16,559) (12,419) Motor Others Expected Loss Ratio +10% 32,560 19,801 (19,801) (14,851)
31.3.2012
Motor Act Average Severity +10% 12,330 15,766 (15,766) (11,825) Motor Others Expected Loss Ratio +10% 20,535 24,130 (24,130) (18,098)
1.4.2011
Motor Act Average Severity +5% 85,673 69,312 (69,312) (51,984) Motor Others Expected Loss Ratio +10% 21,424 21,095 (21,095) (15,821)
* The impact on participants’ fund reflects the after tax impact.
The method used for deriving sensitivity information and significant assumption did not change from the previous period.
(iv) Claims development table
The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each financial year end, together with cumulative payments to-date.
In setting provision for claims, the takaful subsidiary gives consideration to the probability and magnitude of future experience being more adverse than assumed and exercises a degree of caution in setting reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience in an accident year is greatest when the accident year is at an early stage of development and the margin necessary to ensure adequacy of provision is relatively at its highest. As the claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. 230 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iv) Claims development table (cont’d)
Gross General Takaful Certificate Liabilities for 2013:
Accident year 2006 2007 2008 2009 2010 2011 2012 2013 Total RM’000 rM’000 rM’000 rM’000 rM’000 RM’000 rM’000 rM’000 rM’000
At the end of accident year 29,337 36,388 50,997 100,090 125,472 144,938 150,396 108,384 One year later 27,311 36,179 51,290 93,740 142,627 146,833 140,864 – Two year later 26,773 35,120 51,483 89,887 134,623 137,705 – – Three year later 26,178 33,672 51,708 86,452 128,689 – – – Four year later 25,494 33,695 50,301 82,702 – – – – Five year later 24,949 32,743 50,507 – – – – – Six year later 24,732 32,433 – – – – – – Seven year later 24,550 – – – – – – –
Current estimate of cumulative claims incurred 24,550 32,433 50,507 82,702 128,689 137,705 140,864 108,384
At the end of accident year 8,984 13,366 17,599 29,070 43,215 48,128 49,128 41,749 One year later 18,976 25,083 34,059 64,212 83,077 95,317 88,890 – Two year later 20,128 27,784 39,159 72,939 100,539 112,994 – – Three year later 21,967 30,245 44,893 77,825 105,741 – – – Four year later 23,560 31,292 47,722 78,729 – – – – Five year later 24,474 31,975 49,488 – – – – – Six year later 24,522 32,280 – – – – – – Seven year later 24,551 – – – – – – –
Cumulative payments to-date 24,551 32,280 49,488 78,729 105,741 112,994 88,890 41,749
Gross general takaful certificates liabilities per Statement of Financial Position:
Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) (1) 153 1,019 3,973 22,948 24,711 51,974 66,635 171,412 Fund PRAD at 75% 26,203
Total 197,615 MNRB Holdings Berhad 231
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iv) Claims development table (cont’d)
Net General Takaful Certificate Liabilities for 2013:
Accident year 2006 2007 2008 2009 2010 2011 2012 2013 total RM’000 rM’000 rM’000 rM’000 RM’000 rM’000 rM’000 rM’000 rM’000
At the end of accident year 27,944 33,895 47,452 83,588 114,632 134,955 139,773 77,044 One year later 26,062 34,140 47,361 81,492 119,456 131,893 126,239 – Two year later 25,794 33,195 47,903 78,446 124,071 125,246 – – Three year later 24,073 31,470 47,484 76,773 120,563 – – – Four year later 23,420 31,341 45,894 72,883 – – – – Five year later 23,128 30,328 45,091 – – – – – Six year later 22,817 29,987 – – – – – – Seven year later 22,941 – – – – – – –
Current estimate of cumulative claims incurred 22,941 29,987 45,091 72,883 120,563 125,246 126,239 77,044
At the end of accident year 8,449 11,984 16,968 27,670 40,682 44,669 46,245 29,181 One year later 18,433 23,420 32,665 56,446 79,471 88,779 81,802 – Two year later 19,585 26,016 37,569 64,216 94,614 103,862 – – Three year later 21,143 28,197 41,845 69,165 99,156 – – – Four year later 22,760 29,089 43,721 69,505 – – – – Five year later 22,866 29,631 44,519 – – – – – Six year later 22,913 29,847 – – – – – – Seven year later 22,941 – – – – – – –
Cumulative payments to-date 22,941 29,847 44,519 69,505 99,156 103,862 81,802 29,181
Net general takaful certificates liabilities per Statement of Financial Position:
Best Estimate of Claims Liabilities (incl. ALAE) – 140 572 3,378 21,407 21,384 44,437 47,863 139,181 Fund PRAD at 75% 20,692
Total 159,873 232 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iv) Claims development table (cont’d)
Gross General Takaful Certificate Liabilities for 2012:
Accident year 2005 2006 2007 2008 2009 2010 2011 2012 total RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 RM’000 rM’000 rM’000
At the end of accident year 11,728 29,337 36,388 50,997 100,090 125,472 144,938 150,395 One year later 10,898 27,311 36,179 51,290 93,740 142,627 146,833 – Two year later 9,936 26,773 35,120 51,483 89,887 134,623 – – Three year later 9,683 26,178 33,672 51,708 86,452 – – – Four year later 8,396 25,494 33,695 50,301 – – – – Five year later 7,951 24,949 32,743 – – – – – Six year later 7,900 24,732 – – – – – – Seven year later 7,861 – – – – – – –
Current estimate of cumulative claims incurred 7,861 24,732 32,743 50,301 86,452 134,623 146,833 150,395
At the end of accident year 3,957 8,984 13,366 17,599 29,070 43,215 48,128 49,127 One year later 6,632 18,976 25,083 34,059 64,212 83,077 95,317 – Two year later 7,123 20,128 27,784 39,159 72,939 100,539 – – Three year later 7,436 21,967 30,245 44,893 77,825 – – – Four year later 7,728 23,560 31,292 47,722 – – – – Five year later 7,807 24,474 31,975 – – – – – Six year later 7,826 24,522 – – – – – – Seven year later 7,851 – – – – – – –
Cumulative payments to-date 7,851 24,522 31,975 47,722 77,825 100,539 95,317 49,127
Gross general takaful certificates liabilities per Statement of Financial Position:
Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) 10 210 768 2,579 8,627 34,084 51,516 101,268 199,062 Fund PRAD at 75% 11,607
Total 210,669 MNRB Holdings Berhad 233
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iv) Claims development table (cont’d)
Net General Takaful Certificate Liabilities for 2012:
Accident year 2005 2006 2007 2008 2009 2010 2011 2012 total RM’000 rM’000 rM’000 rM’000 rM’000 rM’000 RM’000 rM’000 rM’000
At the end of accident year 9,974 27,944 33,895 47,452 83,588 114,632 134,955 138,880 One year later 9,613 26,062 34,140 47,361 81,492 119,456 131,893 – Two year later 8,675 25,794 33,195 47,903 78,446 124,071 – – Three year later 8,488 24,073 31,470 47,484 76,773 – – – Four year later 7,398 23,420 31,341 45,894 – – – – Five year later 6,978 23,128 30,328 – – – – – Six year later 6,903 22,817 – – – – – – Seven year later 7,482 – – – – – – –
Current estimate of cumulative claims incurred 7,482 22,817 30,328 45,894 76,773 124,071 131,893 138,880
At the end of accident year 3,724 8,449 11,984 16,968 27,670 40,682 44,669 45,352 One year later 6,253 18,433 23,420 32,665 56,446 79,471 88,779 – Two year later 6,745 19,585 26,016 37,569 64,216 94,614 – – Three year later 7,057 21,143 28,197 41,845 69,165 – – – Four year later 7,349 22,760 29,089 43,721 – – – – Five year later 7,428 22,866 29,631 – – – – – Six year later 7,448 22,913 – – – – – – Seven year later 7,473 – – – – – – –
Cumulative payments to-date 7,473 22,913 29,631 43,721 69,165 94,614 88,779 45,352
Net general takaful certificates liabilities per Statement of Financial Position:
Best Estimate of Claims Liabilities (incl. ALAE) 9 (96) 697 2,173 7,608 29,457 43,114 93,528 176,490 Fund PRAD at 75% 10,643
Total 187,133 234 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iv) Claims development table (cont’d)
Gross General Takaful Certificate Liabilities for 2011:
Accident year 2004 2005 2006 2007 2008 2009 2010 2011 total RM’000 rM’000 rM’000 RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
At the end of accident year 1,027 11,728 29,337 36,388 50,997 100,090 125,472 144,938 One year later 875 10,898 27,311 36,179 51,290 93,740 142,627 – Two year later 855 9,936 26,773 35,120 51,483 89,887 – – Three year later 806 9,683 26,178 33,672 51,708 – – – Four year later 790 8,396 25,494 33,695 – – – – Five year later 787 7,951 24,949 – – – – – Six year later 735 7,900 – – – – – – Seven year later 740 – – – – – – –
Current estimate of cumulative claims incurred 740 7,900 24,949 33,695 51,708 89,887 142,627 144,938
At the end of accident year 203 3,957 8,984 13,366 17,599 29,070 43,215 48,128 One year later 610 6,632 18,976 25,083 34,059 64,212 83,077 – Two year later 614 7,123 20,128 27,784 39,159 72,939 – – Three year later 687 7,436 21,967 30,245 44,893 – – – Four year later 714 7,728 23,560 31,292 – – – – Five year later 730 7,807 24,474 – – – – – Six year later 730 7,826 – – – – – – Seven year later 734 – – – – – – –
Cumulative payments to-date 734 7,826 24,474 31,292 44,893 72,939 83,077 48,128
Gross general takaful certificates liabilities per Statement of Financial Position:
Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) 6 74 475 2,403 6,815 16,948 59,550 96,810 183,081 Fund PRAD at 75% 10,031
Total 193,112 MNRB Holdings Berhad 235
37. unDERWRITING RISK (CONT’D)
(b) General takaful fund (cont’d)
(iv) Claims development table (cont’d)
Net General Takaful Certificate Liabilities for 2011:
Accident year 2004 2005 2006 2007 2008 2009 2010 2011 total RM’000 rM’000 rM’000 RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
At the end of accident year 923 9,974 27,944 33,895 47,452 83,588 114,632 134,955 One year later 791 9,613 26,062 34,140 47,361 81,492 119,456 – Two year later 786 8,675 25,794 33,195 47,903 78,446 – – Three year later 736 8,488 24,073 31,470 47,484 – – – Four year later 737 7,398 23,420 31,341 – – – – Five year later 721 6,978 23,128 – – – – – Six year later 671 6,903 – – – – – – Seven year later 674 – – – – – – –
Current estimate of cumulative claims incurred 674 6,903 23,128 31,341 47,484 78,446 119,456 134,955
At the end of accident year 203 3,121 8,406 11,984 16,995 27,613 40,682 44,714 One year later 544 5,636 18,391 23,422 32,713 56,404 79,479 – Two year later 548 6,128 19,542 26,017 37,616 64,559 – – Three year later 621 6,440 21,101 28,199 42,202 – – – Four year later 648 6,732 22,694 29,091 – – – – Five year later 665 6,811 22,968 – – – – – Six year later 665 6,831 – – – – – – Seven year later 668 – – – – – – –
Cumulative payments to-date 668 6,831 22,968 29,091 42,202 64,559 79,479 44,714
Net general takaful certificates liabilities per Statement of Financial Position:
Best Estimate of Claims Liabilities (incl. ALAE) 6 72 160 2,250 5,282 13,887 39,977 90,241 151,875 Fund PRAD at 75% 8,827
Total 160,702 236 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(c) Family takaful fund
(i) nature of risk
The takaful subsidiary principally issues the following types of family takaful certificates: Family Takaful Plans, Mortgage Takaful Plans, Group Takaful Plans and Investment-linked Takaful Plans.
Family takaful underwriting risk arises from the pricing and the pool of risks in the participants’ risk fund arising from family takaful certificates. The risks arise when actual claims experience is different from the assumptions used in setting the prices for products and establishing the technical provisions and liabilities for claims. Sources of risk include certificate lapses and certificate claims such as mortality, morbidity and expenses.
The takaful subsidiary utilises retakaful to manage the mortality and morbidity risks. The Company’s retakaful management strategy and policy are reviewed by the RMCB, and approved by the Board. Retakaful structures are set based on the type of risks to be recovered.
The takaful subsidiary reviews the actual experience of mortality, morbidity, lapses and surrenders, as well as expenses to ensure that appropriate policies, guidelines and limits put in place to manage these risks remain adequate and appropriate.
The Family Takaful funds are participating in nature. In the event of volatile investment climate and/or unusual claims experience, the investment profit and surplus distribution to the participants may be reduced.
For investment-linked funds, the risk exposure for the participant’s risk fund is limited only to the underwriting aspect as all investment risks are borne by the participant.
Stress Testing is performed twice a year. The purpose of the ST is to test the solvency of the family takaful fund under the various scenarios according to regulatory guidelines, simulating drastic changes in major parameters such as new business volume, investment environment, mortality/morbidity patterns and lapse rates. MNRB Holdings Berhad 237
37. unDERWRITING RISK (CONT’D)
(c) Family takaful fund (cont’d)
(ii) Concentration of risk by type of certificates
Gross retakaful net RM’000 rM’000 rM’000
31.3.2013
Family takaful plans 535,924 – 535,924 Investment-linked takaful plans 1,617 – 1,617 Mortgage takaful plans 487,607 (49,359) 438,248 Group credit takaful plans 305,807 (19,222) 286,585 Others 23,741 (11,598) 12,143
1,354,696 (80,179) 1,274,517
31.3.2012
Family takaful plans 378,245 – 378,245 Investment-linked takaful plans 1,010 – 1,010 Mortgage takaful plans 425,344 (75,351) 349,993 Group credit takaful plans 168,145 (8,416) 159,729 Risk Fund 62,351 (13,856) 48,495 Special Fund 86,860 – 86,860 Others 33,515 (7,221) 26,294
1,155,470 (104,844) 1,050,626
1.4.2011
Family takaful plans 255,843 – 255,843 Investment-linked takaful plans 772 – 772 Mortgage takaful plans 368,534 (68,936) 299,598 Group credit takaful plans 126,764 (8,986) 117,778 Risk Fund 78,272 (21,218) 57,054 Special Fund 68,192 – 68,192 Others 67,799 (13,848) 53,951
966,176 (112,988) 853,188
All business of the family takaful fund is derived from participants in Malaysia; accordingly, disclosure of concentration risk by geographical region is not relevant to the family takaful fund. 238 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(c) Family takaful fund (cont’d)
(iii) Key assumptions
Material judgement is required in determining the liabilities of the family takaful fund and in the selection of assumptions. Assumptions used are based on past experience, current internal data, external market indices and benchmarks which reflect current observable market prices and other published information. Assumptions and prudent estimates are determined at the date of valuation and no credit is taken for possible beneficial effects of voluntary withdrawals. Assumptions are further evaluated on a continuous basis in order to ensure realistic and reasonable valuations.
The key assumptions to which the estimation of liabilities is particularly sensitive are as follows:
Mortality and Morbidity rates
Assumptions on mortality rates are based on those rates detailed in the Actuarial Certificate submitted to Bank Negara Malaysia. They reflect the historical experience in the market and are adjusted, when appropriate, to reflect the Participants’ own experience. Assumptions are differentiated by gender, occupational class and product group.
An increase in rates will lead to a larger number of claims (as claims could occur sooner than anticipated), which will reduce the surplus from the Risk Fund and subsequently reduce profits for the shareholders in terms of lower surplus administration charge income.
Discount rates
Family takaful liabilities of credit-related products (Mortgage Reducing Term Takaful (“MRTT”) and Group Credit Takaful (“GCT”)) are determined as the sum of the discounted value of the expected benefits less the discounted value of the expected tabarru’ (risk charge) that would be required to meet these future cash outflows. Discount rates are based on the Family Fund’s historical investment performance and adjusted downwards for conservatism.
A decrease in the discount rate will increase the value of the family takaful liability and therefore reduce profits for the shareholders in terms of lower surplus administration charge income.
The assumptions that have a significant effect on the statement of financial position and income statement of the family takaful fund are listed below by portfolio assumptions impacting net liabilities:
2013/2012 2012/2011 2011/2010 Type of Mortality and morbidity Discount Discount Discount Busines rates rates rates rates
Credit related Base mortality1 3% 3% 3% (MRTT and GCT) and adjusted for retakaful rates2
Other Base mortality 3% 3% 3%
1 These rates are obtained from the various industry mortality and morbidity experience tables that were used to determine the contribution rates.
2 Retakaful rates are derived from the fund’s retakaful arrangements with respect to the MRTT and GCT business. MNRB Holdings Berhad 239
37. unDERWRITING RISK (CONT’D)
(c) Family takaful fund (cont’d)
(iv) Sensitivity analysis
The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, profit before tax and equity. The correlations of assumptions will have a significant effect in determining the ultimate claim liabilities. To demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are nonlinear. Sensitivity information will also vary according to the current economic
Impact on Impact Impact Impact Family Change in on Gross on Net on Profit takaful Assumptions liabilities liabilities Before Tax fund* % rM’000 rM’000 RM’000 rM’000
31.3.2013
Mortality/morbidity + 10% 605 605 (605) (605) Discount rates + 1% (329) (329) 329 329
31.3.2012
Mortality / morbidity + 10% 1,957 1,957 (1,957) (1,957) Discount rates + 1% (1,247) (1,247) 1,247 1,247
1.4.2011
Mortality / morbidity + 10% 9,548 9,548 (9,548) (9,548) Discount rates + 1% (1,378) (1,378) 1,378 1,378
* Impact on family takaful fund reflects adjustments for tax, where applicable.
The method used and significant assumptions made for deriving sensitivity information did not change from the previous period.
(d) General retakaful fund
(i) nature of risk
The retakaful subsidiary principally underwrites facultative and proportional and non proportional treaty business accepted from takaful and retakaful operators. Portfolios are segregated by class and by domestic and overseas businesses.
For general retakaful, the most significant risks arise from adverse development of the loss ratios and catastrophic loss events. These risks vary significantly in relation to economic conditions and territories from which the risk originates.
The retakaful subsidiary also manages its loss exposure by the use of retrotakaful arrangements. The retrotakaful arrangements are reviewed annually by the RMCB and approved by the Board. 240 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(d) General retakaful fund (cont’d)
(ii) Concentration of risk
The table below sets out the concentration of takaful contract liabilities by classes of business and by local and overseas:
Gross retakaful net RM’000 rM’000 rM’000
31.3.2013
Fire 50,026 (1,846) 48,180 Motor 16,458 (18) 16,440 Marine, Aviation & Transit 15,426 (2,926) 12,500 Miscellaneous 21,293 (233) 21,060
103,203 (5,023) 98,180
Local 75,537 (2,164) 73,373 Overseas 27,666 (2,859) 24,807
103,203 (5,023) 98,180
31.3.2012
Fire 43,712 (4,083) 39,629 Motor 9,301 – 9,301 Marine, Aviation & Transit 12,022 (2,411) 9,611 Miscellaneous 16,825 (35) 16,790
81,860 (6,529) 75,331
Local 54,515 (3,933) 50,582 Overseas 27,345 (2,596) 24,749
81,860 (6,529) 75,331
1.4.2011
Fire 40,921 (4,580) 36,341 Motor 5,197 – 5,197 Marine, Aviation & Transit 9,365 (2,686) 6,679 Miscellaneous 18,027 (102) 17,925
73,510 7,368 66,142
Local 47,685 (1,346) 46,339 Overseas 25,825 (6,022) 19,803
73,510 (7,368) 66,142 MNRB Holdings Berhad 241
37. unDERWRITING RISK (CONT’D)
(d) General retakaful fund (cont’d)
(iii) Impact on liabilities, profit and equity
Key Assumptions
Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrences, changes in market factors such as public attitude to claims notification and reporting, economic conditions, as well as internal factors, such as portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors, such as judicial decisions and government legislation affect the estimates.
Other key circumstances affecting the reliability of assumptions include variation in profit rates and delays in settlement.
Sensitivity analysis
The general retakaful fund’s claim liabilities are sensitive to changes in the loss ratio especially in the event of large or catastrophic claims. However, as the business is still relatively new, the amount of information available to conduct a sensitivity analysis is limited.
Due to limited information, the analysis below is carried out by assuming the IBNR provision is insufficient and that the ultimate loss requires a 5% top-up. The top-up is applied to all classes of business and does not have any impact on the retrotakaful programme.
This analysis assumes all other parameters are held constant.
Impact on Impact Impact Impact on General on Gross on Net Surplus retakaful Liabilities liabilities before Tax fund* RM’000 rM’000 rM’000 rM’000 31.3.2013
Fire 7 ,244 6,994 6 ,994 6,994 Motor 1 ,097 1,097 1 ,097 1,097 Marine, Aviation & Transit 330 372 372 372 Miscellaneous 1 ,868 1,866 1 ,866 1,866
31.3.2012
Fire 4,172 3,746 3,746 3,746 Motor 560 560 560 560 Marine, Aviation & Transit 667 649 649 649 Miscellaneous 1,268 1,268 1,268 1,268
1.4.2011
Fire 1,544 1,544 1,544 1,544 Motor 288 288 288 288 Marine, Aviation & Transit 259 259 259 259 Miscellaneous 968 968 968 968
* The impact on the general retakaful fund reflects the after tax impact. 242 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(d) General retakaful fund (cont’d)
(iv) Claims Development table
As this is only the sixth financial year since the incorporation of the retakaful subsidiary, it is not meaningful to present the claims development table in the financial statements.
(e) Family retakaful fund
(i) nature of risk
The retakaful subsidiary principally underwrites the following types of family retakaful treaties: Individual Family Retakaful Plans, Group Family Retakaful Plans, Individual Medical Retakaful Plans and Retakaful Individual Facultative.
Family Retakaful underwriting risk relates to the pricing and loss ratios arising from family Retakaful products. The risks arise when actual claims experience is different from the assumptions used in setting the yearly renewable term fees for retakaful products. Deviations in actual claims experience compared to the assumptions used may be due to deviations in actual mortality, morbidity and expense experience.
The retakaful subsidiary utilises retrotakaful to manage mortality and morbidity risks. The retakaful subsidiary’s retrotakaful strategy and policy are reviewed annually by the ORMC and RMCB, and approved by the Board.
The retakaful subsidiary reviews the actual experience of mortality, morbidity and expense experience to ensure that appropriate policies, guidelines and limits put in place to manage these risks remain adequate and appropriate.
ST is performed twice a year. The purpose of the ST is to test the solvency of the family retakaful fund under various scenarios. These scenarios are based on regulatory guidelines and simulate drastic changes in major parameters such as new business volume, investment environment and mortality / morbidity patterns. MNRB Holdings Berhad 243
37. unDERWRITING RISK (CONT’D)
(e) Family retakaful fund (cont’d)
(ii) Concentration of risk
The table below sets out the concentration of retakaful contract liabilities by local and overseas treaties:
Gross Retakaful net rM’000 RM’000 RM’000
31.3.2013
Local Treaties 17,398 (5,357) 12,041 Overseas Treaties 307 (125) 182
17,705 (5,482) 12,223
31.3.2012
Local Treaties 4,544 (1,611) 2,933 Overseas Treaties 810 (253) 557
5,354 (1,864) 3,490
1.4.2011
Local Treaties 2,265 (619) 1,646 Overseas Treaties 229 (37) 192
2,494 (656) 1,838
Business of the family retakaful fund is derived from Malaysia and overseas risks. Accordingly, liabilities of the family retakaful fund are mainly spread along these regions namely Malaysia, Brunei and Indonesia.
(iii) Impact on liabilities, profit and equity
Key Assumptions
Material judgement is required in determining the liabilities and in the choice of assumptions. Assumptions in use are based on past experience, current internal data, external market indices and benchmarks which reflect current observable market prices and other published information. Assumptions and prudent estimates are determined at the date of valuation and no credit is taken for possible beneficial effects of voluntary withdrawals. Assumptions are further evaluated on a continuous basis in order to ensure realistic and reasonable valuations.
The estimation of liabilities is particularly sensitive to the assumption of loss ratios due to the nature of the pricing of family retakaful products which are based on yearly renewable terms. 244 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
37. unDERWRITING RISK (CONT’D)
(e) Family retakaful fund (cont’d)
(iii) Impact on liabilities, profit and equity (cont’d)
Sensitivity analysis
Impact on Impact on Change in Surplus actuarial assumptions before Tax reserve RM’000 RM’000
31.3.2013
Loss ratio -20% (2,715) (2,715) Loss ratio +20% 2,840 2,840
31.3.2012
Loss ratio -20% (751) (751) Loss ratio +20% 1,371 1,371
1.4.2011
Loss ratio -20% (430) (430) Loss ratio +20% 650 650
38. FINANCIAL RISK
Transactions in financial instruments may result in the Group assuming financial risks. These include credit risk, liquidity risk and market risk. This note presents information about the Group’s exposure to each of the above risks and the Group’s objectives, policies and processes for measuring and managing such risks.
(a) Credit Risk
Credit risk is the risk of financial loss resulting from the failure of counterparties to reinsurance, takaful, retakaful and investment transactions to meet their contractual obligations.
Credit risk includes the following major elements:
(i) Investment credit risk which is the risk of financial loss arising from a change in the value of an investment due to a rating downgrade, default, or widening of credit spreads. Changes in credit spreads are largely driven by the different economic cycles and operating cycles while the less liquid securities tend to be priced at a wider spread. The liquidity of the securities is directly determined by its bid-to-ask spread.
(ii) Derivative counterparty risk which is the risk of financial loss arising from a derivative counterparty’s default, or the deterioration of the derivative counterparty’s financial position. As at the reporting date, the Group does not transact in derivatives and is not exposed to this risk; and MNRB Holdings Berhad 245
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
(iii) Reinsurance/retakaful counterparty risk which is the risk of financial loss arising from a default by the retrocessionaire/retakaful operator, or the deterioration of the solvency position of the retrocessionaire/ retakaful operator.
The Group is exposed to investment credit risk on its investment portfolio, primarily from investments in corporate bonds. A creditworthiness assessment for new and existing investments is undertaken by the Group in accordance with the Investment Policy as approved by the Investment Committee. In addition, the credit ratings of the bond portfolio are regularly monitored and any downgrade in credit ratings will be evaluated to determine the required actions. As at the reporting date, the Group’s bond portfolio has no material exposure below investment grade.
The Group is exposed to reinsurance/retakaful counterparty risks of three different types:
(i) as a result of recoveries owing from the retrocessionaire/retakaful operators for claims;
(ii) from the advance settlement of premiums/contributions to the reinsurer/retakaful operator; and
(iii) as a result of reserves held by the reinsurer/retakaful operator which would have to be met by the reinsurance/ takaful/ retakaful subsidiary in the event of default.
Management of credit risk
In order to manage and mitigate credit risk, the following policies and procedures were set in place:
(i) Investment policies prescribe the minimum credit rating for bonds that may be held. In addition, the policies are further aimed at investing in a diverse portfolio of bonds in order to reduce the potential impact that may arise from individual companies defaulting;
(ii) Counterparty limits are set for investments, cash deposits and foreign exchange trade exposure to ensure that there is no concentration of credit risk;
(iii) The Group’s investment portfolio is managed to ensure diversification and focuses on high quality investment grade fixed income securities. For the financial year ended 31 March 2013, the average credit quality of the Group’s investment portfolio was AAA as determined by Rating Agency Malaysia (“RAM”) or Malaysian Rating Corporation Berhad (“MARC”); and
(iv) To mitigate reinsurance/retakaful counterparty risk, the Group will give due consideration to the credit quality of a reinsurer/retakaful operator. To facilitate this process, a list of acceptable reinsurers/retakaful operators based on their rating is maintained within the Group. The Group regularly reviews the financial security of its reinsurers/retakaful operators. 246 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Credit exposure by credit rating for 2013
The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the Group’s credit ratings of counterparties.
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Group RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
Financial assets at FVTPL Quoted shares in Malaysia: – – – 6,537 – 6,537 Structured products – – – – 5,494 5,494 Warrants – – – 42 – 42 Shariah approved unit trust funds – – – 117,094 – 117,094
HTM investments Malaysian government securities 79,131 – – – – 79,131 Unquoted corporate debt securities 129,486 20,004 266 – – 149,756 Government investment issues 542,884 – – – – 542,884 Short term commercial papers – 14,882 – – – 14,882
AFS financial assets Unquoted shares in Malaysia – – – 44,503 – 44,503 Unquoted secured corporate debt securities 264,734 1,344,565 – – 6,791 1,616,090 Government investment issues 40,223 – – – – 40,223 Golf club memberships – – – 228 – 228 Quoted shares in Malaysia – – – 67,267 – 67,267 Quoted shares outside Malaysia – – – 193 – 193 Shariah approved unit trust funds – – – 20,985 – 20,985 Warrants – – – 13 – 13
Loans and receivables Fixed and call deposits with licensed: Commercial banks – 166,118 – – – 166,118 Investment banks – 520,854 – – – 520,854 Islamic investment accounts with licensed: Co-operative bank – 49,791 – – – 49,791 Islamic banks – 338,539 – – 169,138 507,677 Investment banks – – – – 27,608 27,608 Development bank – 100,846 – – 36,438 137,284 Building society – 28,103 – – – 28,103 MNRB Holdings Berhad 247
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Credit exposure by credit rating for 2013 (cont’d)
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Group RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
Loans and receivables (cont’d) Institutional trust deposit 57,165 – – – 27,683 84,848 Islamic repo placements – 43,426 – – 24,667 68,093 Staff loans – – – – 9,226 9,226 Income due and accrued – – – – 39,183 39,183 Due from insurance Pool accounts – – – – 32,134 32,134 Other receivables, deposits and prepayments – – – – 27,686 27,686 Reinsurance/retakaful assets – 93,581 – – 287,324 380,905 Insurance/takaful receivables – 58,549 – – 345,510 404,059 Cash and bank balances – 65,131 – 24 9,573 74,728
1,113,623 2,844,389 266 256,886 1,048,455 5,263,619
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Company RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
2013
AFS financial assets
Golf club memberships – – – 50 – 50 Quoted Shariah approved equities in Malaysia – – – 444 – 444
Loans and receivables
Fixed and call deposits with licensed: Commercial banks – 975 – – – 975 Investment banks – 6,632 – – – 6,632 Islamic investment accounts with licensed Islamic banks – 855 – – – 855 Staff loans – – – – 1,879 1,879 Income due and accrued – – – – 12 12 Amounts due from subsidiaries – 2,452 – – 1,725 4,177 Other receivables and deposits – – – – 1,934 1,934 Cash and bank balances – 2,932 – – – 2,932
– 13,846 – 494 5,550 19,890 248 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Credit exposure by credit rating for 2012
The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the Group’s credit ratings of counterparties.
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Group RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
Financial assets at FVTPL Quoted shares in Malaysia: Shariah approved equities – – – 7,494 – 7,494 Others – – – 1,578 – 1,578 Structured products – – – – 12,296 12,296 Warrants – – – 27 – 27 Shariah approved unit trust funds – – – 116,068 – 116,068
HTM investments Islamic BNM Monetary notes 1,988 – – – – 1,988 Malaysian government securities 5,805 – – – – 5,805 Unquoted corporate debt securities 124,314 37,054 279 – 5,737 167,384 Government investment issues 220,679 – – – – 220,679 Commercial papers – 36,367 – – – 36,367
AFS financial assets Unquoted shares in Malaysia – – – 45,003 – 45,003 Unquoted secured corporate debt securities 88,933 1,242,837 – – – 1,331,770 Malaysian government securities 43,708 – – – – 43,708 Government investment issues 190,306 – – – – 190,306 Golf club memberships – – – 228 – 228 Quoted shares in Malaysia: – – – 126,744 – 126,744 Quoted shares outside Malaysia – – – 224 – 224 Shariah approved unit trust funds – – – 19,920 – 19,920 Warrants – – – 75 – 75
Loans and receivables Fixed and call deposits with licensed: Commercial banks – 132,546 – – – 132,546 Investment banks – 430,797 – – – 430,797 Islamic investment accounts with licensed: Co-operative bank – 61,344 – – – 61,344 Islamic banks – 243,422 – – 202,069 445,491 Investment banks – 10,412 – – 30,015 40,427 MNRB Holdings Berhad 249
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Credit exposure by credit rating for 2012 (cont’d)
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Group RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
Loans and receivables (cont’d) Development bank – 80,535 – – 72,889 153,424 Building society – 5,831 – – – 5,831 Institutional trust deposit 54,529 – – – 26,404 80,933 Islamic repo placements – 3,456 – – 5 ,649 9,105 Staff loans – – – – 11,227 11,227 Income due and accrued – – – – 29,644 29,644 Due from insurance Pool accounts – – – – 19,969 19,969 Other receivables, deposits and prepayments – – – – 27,338 27,338 Reinsurance/retakaful assets – 195,930 – – 235,409 431,339 Insurance/takaful receivables – 53,482 – – 278,181 331,663 Cash and bank balances – 77,477 – – 3,094 80,571
730,262 2,611,490 279 317,361 959,921 4,619,313
Not Government BBB subject to guaranteed to AAA C to BB credit risk not Rated total Company RM’000 RM’000 RM’000 rM’000 rM’000 rM’000
2012
HTM investments Unquoted secured corporate debt securities – – – – 5,059 5,059
AFS financial assets Unquoted shares in Malaysia – – – 500 – 500 Golf club memberships – – – 50 – 50 Shariah approved equities – – – 623 – 623
Loans and receivables Fixed and call deposits with licensed: Commercial banks – 8,266 – – – 8,266 Investment banks – 7,398 – – – 7,398 Islamic investment accounts with licensed Islamic banks – 3,909 – – – 3,909 Staff loans – – – – 2,309 2,309 Income due and accrued – – – – 381 381 Due from subsidiaries – – – – 537 537 Other receivables and deposits – – – – 327 327 Cash and bank balances – 11 – – – 11
– 19,584 – 1,173 8,613 29,370 250 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Credit exposure by credit rating for 2011
The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the Group’s credit ratings of counterparties.
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Group RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
Financial assets at FVTPL Quoted shares in Malaysia – – – 14,641 – 14,641 Structured products – – – – 12,019 12,019 Warrants – – – 45 – 45 Shariah approved unit trust funds – – – 73,014 – 73,014 Government investment issues 698 – – – – 698 Unquoted corporate debt securities 251 4,236 – – – 4,487
HTM investments Islamic BNM Monetary notes 4,996 – – – – 4,996 Malaysian government securities 56,832 – – – – 56,832 Unquoted corporate debt securities 119,195 55,114 385 – 12,645 187,339 Government investment issues 139,660 – – – – 139,660 Commercial papers – 17,526 – – – 17,526
AFS financial assets Unquoted shares in Malaysia – – – 46,152 – 46,152 Unquoted corporate debt securities 26,129 979,231 – – – 1,005,360 Malaysian government securities 43,906 – – – – 43,906 Government investment issues 170,753 – – – – 170,753 Golf club memberships – – – 228 – 228 Quoted shares in Malaysia – – – 86,846 – 86,846 Quoted shares outside Malaysia – – – 341 – 341 Shariah approved unit trust funds – – – 14,473 – 14,473
Loans and receivables Fixed and call deposits with licensed: Commercial banks – 129,776 – – – 129,776 Investment banks – 381,032 – – 50,002 431,034 Islamic investment accounts with licensed: Co-operative bank – 85,069 – – – 85,069 Islamic banks – 174,691 – – 89,466 264,157 Investment banks – 1,507 – – – 1,507 Development bank – 57,764 – – 33,641 91,405 Building society – 8,269 – – – 8,269 Institutional trust deposit 52,003 – – – 25,184 77,187 Islamic repo placements – 114,310 – – 21,376 135,686 MNRB Holdings Berhad 251
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Credit exposure by credit rating for 2011 (cont’d)
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Group RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
Loans and receivables (cont’d) Staff loans – – – – 12,618 12,618 Income due and accrued – – – – 23,174 23,174 Due from insurance Pool accounts – – – – 19,533 19,533 Other receivables, deposits and prepayments – – – – 24,819 24,819 Reinsurance/retakaful assets – 22,150 – – 175,283 197,433 Insurance/takaful receivables – 16,949 – – 271,533 288,482 Cash and bank balances – 122,097 – – 847 122,944
614,423 2,169,721 385 235,740 772,140 3,792,409
Not Government BBB subject to guaranteed to AAA C to BB credit risk not rated total Company RM’000 rM’000 rM’000 RM’000 rM’000 rM’000
2011
HTM investments Unquoted secured corporate debt securities – – – – 6,967 6,967
AFS financial assets Unquoted secured corporate debt securities – – – – – – Unquoted shares in Malaysia – – – 1,649 – 1,649 Golf club memberships – – – 50 – 50 Quoted shares in Malaysia: Shariah approved equities – – – 903 – 903
Loans and receivables Fixed and call deposits with licensed: Commercial banks – 3,069 – – – 3,069 Investment banks – 1,000 – – – 1,000 Islamic investment accounts with licensed: Islamic banks – 3,813 – – – 3,813 Staff loans – – – – 2,334 2,334 Income due and accrued – – – – 26 26 Due from subsidiaries – 235 – – 224 459 Other receivables and deposits – – – – 58 58 Cash and bank balances – 75 – – – 75
– 8,192 – 2,602 9,609 20,403 252 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(a) Credit Risk (cont’d)
Loan
The fair values of loans receivable are equivalent to their carrying value as they are either receivable within 12 months from the date of recognition or are issued at interest rates comparable to those for similar instruments in the market.
Movement of allowance for impairment losses on receivables
31.3.2013 31.3.2012 1.4.2011 Group rM’000 rM’000 rM’000
At beginning of year 13,799 16,324 18,548 Charge/(recoveries) for the year 14,068 (2,525) (2,224) Written off during the year (1,212) – –
At end of year 26,655 13,799 16,324
(b) liquidity Risk
Liquidity risk is the risk that the Group will not have available sufficient cash resources to meet its payment obligations without incurring material additional costs.
The Group assesses its liquidity risk by ensuring the following:
(i) the Group is able to meet its payment obligations under normal and stressed operating environments without suffering any loss; (ii) additions/withdrawals from the Group’s investment funds are managed efficiently; and (iii) appropriate measures are in place to respond to liquidity risk.
As part of its liquidity management strategy, the Group has in place a framework capable of measuring and reporting on:
(i) daily cash flows; (ii) minimum liquidity holdings; (iii) cash flow forecasts covering a minimum period of 2 months and up to a maximum of one year; (iv) the composition and market values of company’s investment portfolios, including liquid holdings; and (v) the holding of liquid assets in the respective reinsurance, takaful and retakaful funds.
In order to manage the liquidity of the reinsurance/takaful/retakaful funds, the investment mandate requires that a certain proportion of the fund is maintained as liquid assets. Accordingly, the Group is required to maintain a minimum holding of low risk assets between 10% and 15% and no maximum limit on its placements in fixed and call deposits. MNRB Holdings Berhad 253
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity Profiles
The table below summarises the maturity profile of the financial assets and liabilities of the Group based on remaining undiscounted contractual obligations, including interest payable and receivable.
For takaful, retakaful certificates and reinsurance contracts liabilities and assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance/takaful liabilities.
Unearned premiums/contributions and the reinsurers’/retakaful operator’s share of unearned premiums/ contributions have been excluded from the analysis as they are not contractual obligations.
Maturity profiles for 2013
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Financial assets at FVTPL Quoted shares in Malaysia: 6,537 – – – 6,537 6,537 Structured products 5,494 5,494 – – – 5,494 Warrants 42 – – – 42 42 Shariah approved unit trust funds 117,094 – – – 117,094 117,094
HTM investments Malaysian government securities 79,131 3,285 13,115 110,444 – 126,844 Unquoted corporate debt securities: 149,756 50,216 77,945 47,537 – 175,698 Government investment issues 542,884 31,032 85,109 610,079 – 726,220 Commercial papers 14,882 14,882 – – – 14,882
AFS financial assets Unquoted shares in Malaysia – – – – 44,503 44,503 Unquoted corporate debt securities 1,616,090 149,242 719,317 1,265,127 – 2,133,686 Government investment issues 40,223 1,446 5,775 44,234 – 51,455 Golf club memberships 228 – – – 228 228 Quoted shares in Malaysia 67,267 – – – 67,267 67,267 Quoted shares outside Malaysia 193 – – – 193 193 Warrants 13 – – – 13 13 Shariah approved unit trust funds 20,985 – – – 20,985 20,985 254 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2013 (cont’d)
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Loans and receivables Fixed and call deposits with licensed: Commercial banks 166,118 166,920 – – – 166,920 Investment banks 520,854 522,775 – – – 522,775 Islamic investment accounts with licensed: Co-operative bank 49,791 50,240 – – – 50,240 Islamic banks 507,677 512,653 – – – 512,653 Investment banks 27,608 27,873 – – – 27,873 Development bank 137,284 137,121 – – – 137,121 Building society 28,103 28,334 – – – 28,334 Institutional trust deposit 84,848 65,233 24,417 – – 89,650 Islamic repo placements 68,093 68,145 – – – 68,145 Staff loans 9,226 2,779 4,414 2,033 – 9,226 Income due and accrued 39,183 39,183 – – – 39,183 Due from insurance Pool accounts 32,134 32,134 – – – 32,134 Other receivables, deposits and prepayments 27,686 27,686 – – – 27,686 Reinsurance/retakaful assets 355,736 122,499 121,221 81,385 30,630 355,735 Insurance/takaful receivables 404,059 404,059 – – – 404,059 Cash and bank balances 74,728 74,728 – – – 74,728
Total financial and insurance assets 5,193,947 2,537,959 1,051,313 2,160,839 287,492 6,037,603
Borrowings (320,000) (17,900) (379,715) – – (397,615) Insurance/takaful contract liabilities (3,202,940) (837,773) (862,753) (1,287,208) (215,206) (3,202,940) Insurance and takaful payables (211,724) (211,724) – – – (211,724) Other payables (116,975) (116,975) – – – (116,975)
Total financial and insurance liabilities (3,851,639) (1,184,372) (1,242,468) (1,287,208) (215,206) (3,929,254) MNRB Holdings Berhad 255
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2013 (cont’d)
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Company RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
AFS financial assets Golf club memberships 50 – – – 50 50 Quoted shares in Malaysia 444 – – – 444 444
Loans and receivables Fixed and call deposits with licensed: Commercial banks 975 975 – – – 975 Investment banks 6,632 6,634 – – – 6,634 Islamic investment accounts with licensed: Islamic banks 855 857 – – – 857 Staff loans 1,879 851 1,028 – – 1,879 Amounts due from subsidiaries 4,177 4,117 4,117 Income due and accrued 12 12 – – – 12 Other receivables, deposits and prepayments 1,934 1,934 – – – 1,934 Cash and bank balances 2,932 2,932 – – – 2,932
Total financial and insurance assets 19,890 18,312 1,028 – 494 19,834
Borrowing (320,000) (17,900) (379,715) – – (397,615) Other payables (8,774) (8,774) – – – (8,774)
Total financial and insurance liabilities (328,774) (26,674) (379,715) – – (406,389) 256 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2012
The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the Group’s credit ratings of counterparties.
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Financial assets at FVTPL Quoted shares in Malaysia 9,072 – – – 9,072 9,072 Structured products 12,296 6,828 – – 5,468 12,296 Warrants 27 – – – 27 27 Shariah approved unit trust funds 116,068 – – – 116,068 116,068
HTM investments Islamic BNM Monetary notes 1,988 1,988 – – – 1,988 Malaysian government securities 5,805 255 1,276 7,858 – 9,389 Unquoted corporate debt securities 167,384 21,200 88,938 62,031 – 172,169 Government investment issues 220,679 23,474 44,320 223,005 – 290,799 Commercial papers 36,367 36,367 – – – 36,367
AFS financial assets Unquoted shares in Malaysia 45,003 – – – 45,003 45,003 Unquoted corporate debt securities 1,331,770 142,940 798,291 793,833 – 1,735,064 Malaysian government securities 43,708 31,860 14,234 – – 46,094 Government investment issues 190,306 22,024 108,357 87,758 – 218,139 Golf club memberships 228 – – – 228 228 Quoted shares in Malaysia 126,744 – – – 126,744 126,744 Quoted shares outside Malaysia 224 – – – 224 224 Warrants 75 – – – 75 75 Shariah approved unit trust funds 19,920 – – – 19,920 19,920
Loans and receivables Fixed and call deposits with licensed: Commercial banks 132,546 133,109 – – – 133,109 Investment banks 430,797 432,652 – – – 432,652 Islamic investment accounts with licensed: Co-operative bank 61,344 61,653 – – – 61,653 Islamic banks 445,491 450,300 – – – 450,300 Investment banks 40,427 41,228 – – – 41,228 Development bank 153,424 157,122 – – – 157,122 Building society 5,831 5,975 – – – 5,975 MNRB Holdings Berhad 257
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2012 (cont’d)
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Loans and receivables (cont’d) Institutional trust deposit 80,933 4,056 85,503 – – 89,559 Islamic repo placements 9,105 9,273 – – – 9 ,273 Staff loans 11,227 4,481 6,746 – – 11,227 Income due and accrued 29,644 29,644 – – – 29,644 Due from insurance Pool accounts 19,969 19,969 – – – 19,969 Other receivables, deposits and prepayments 27,338 27,338 – – – 27,338 Reinsurance/retakaful assets 411,948 161,367 194,600 10,765 45,216 411,948 Insurance/takaful receivables 331,663 331,663 – – – 331,663 Cash and bank balances 80,571 80,571 – – – 80,571
Total financial and insurance assets 4,599,922 2,237,337 1,342,265 1,185,250 368,045 5,132,897
Borrowings (270,000) (278,711) – – – (278,711) Insurance/takaful contract liabilities (2,887,330) (687,036) (872,829) (1,226,903) (100,562) (2,887,330) Insurance/takaful payables (178,101) (178,101) – – – (178,101) Other payables (110,574) (110,574) – – – (110,574)
Total financial and insurance liabilities (3,446,005) ( 1,254,422) (872,829) (1,226,903) (100,562) (3,454,716) 258 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2012 (cont’d)
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Company RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
HTM investments Unquoted corporate debt securities 5,059 5,077 – – – 5,077
AFS financial assets Unquoted shares in Malaysia 500 – – – 500 500 Golf club memberships 50 – – – 50 50 Quoted shares in Malaysia 623 – – – 623 623
Loans and receivables Fixed and call deposits with licensed: Commercial banks 8,266 8,292 – – – 8,292 Investment banks 7,398 7,430 – – – 7,430 Islamic investment accounts with licensed: Islamic banks 3,909 3,922 3,922 Staff loans 2,309 2,309 2,309 Amount due from subsidiaries 537 537 – – – 537 Income due and accrued 381 381 – – – 381 Other receivables, deposits and prepayments 327 327 – – – 327 Cash and bank balances 11 11 11
Total financial and insurance assets 29,370 28,286 – – 1,173 29,459
Borrowing (320,000) (314,253) – – – (314,253) Other payables (17,104) (17,104) – – – (17,104)
Total financial and insurance liabilities (337,104) (331,357) – – – (331,357) MNRB Holdings Berhad 259
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2011
The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the Group’s credit ratings of counterparties.
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Financial assets at FVTPL Quoted shares in Malaysia 14,641 – – – 14,641 14,641 Structured products 12,019 – 12,019 – – 12,019 Warrants 45 – – – 45 45 Shariah approved unit trust funds 73,014 – - – 73,014 73,014 Government investment issues 698 28 108 768 – 904 Quoted debt securities 4,487 218 2,411 3,079 – 5,708
HTM investments Islamic BNM Monetary notes 4,996 5,000 – – – 5,000 Malaysian government securities 56,832 57,508 – – – 57,508 Unquoted corporate debt securities 187,339 56,787 92,605 94,550 – 243,942 Government investment issues 139,660 22,779 46,536 80,221 – 149,536 Commercial papers 17,526 18,002 – – – 18,002
AFS financial assets Unquoted shares in Malaysia 46,152 – – – 46,152 46,152 Unquoted secured corporate debt securities 1,005,360 124,582 632,637 485,727 – 1,242,946 Malaysian government securities 43,906 1,778 46,291 – – 48,069 Government investment issues 170,753 6,788 116,498 80,063 – 203,349 Golf club memberships 228 – – – 228 228 Quoted shares in Malaysia 86,846 – – – 86,846 86,846 Quoted shares outside Malaysia 341 – – – 341 341 Shariah approved unit trust funds 14,473 – – – 14,473 14,473 260 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2011 (cont’d)
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Group RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
Loans and receivables Fixed and call deposits with licensed: Commercial banks 129,776 130,102 – – – 130,102 Investment banks 431,034 432,689 – – – 432,689 Islamic investment accounts with licensed: Co-operative bank 85,069 85,542 – – – 85,542 Islamic banks 264,157 262,242 3,587 – – 265,829 Investment banks 1,507 1,517 – – – 1,517 Development bank 91,405 92,368 – – – 92,368 Building society 8,269 8,404 – – – 8,404 Institutional trust deposit 77,187 3,869 85,413 – – 89,282 Islamic repo placements 135,686 135,851 – – – 135,851 Staff loans 12,618 7,578 5,040 – – 12,618 Income due and accrued 23,174 23,174 – – – 23,174 Due from insurance Pool accounts 19,533 1,164 18,369 – – 19,533 Other receivables, deposits and prepayments 24,819 24,819 – – – 24,819 Reinsurance/retakaful assets 195,492 77,125 79,502 30,132 8,733 195,492 Insurance/takaful receivables 288,482 288,482 – – – 288,482 Cash and bank balances 122,944 122,944 – – – 122,944
Total financial and insurance assets 3,790,468 1,991,340 1,141,016 774,540 244,473 4,151,369
Borrowings (150,000) (7,125) (154,958) – – (162,083) Insurance/takaful contract liabilities (2,379,156) (613,755) (647,748) (873,602) (244,051) (2,379,156) Insurance/takaful payables (112,989) (112,989) – – – (112,989) Other payables (122,289) (122,289) – – – (122,289)
Total financial and insurance liabilities (2,764,434) (856,158) (802,706) (873,602) (244,051) (2,776,517) MNRB Holdings Berhad 261
38. FINANCIAL RISK (CONT’D)
(b) liquidity Risk (cont’d)
Maturity profiles for 2011 (cont’d)
No Carrying up to 1 - 5 over maturity value 1 year years 5 years date Total Company RM’000 rM’000 rM’000 rM’000 rM’000 rM’000
HTM investments Unquoted corporate debt securities: 6,967 130 7,011 – – 7,141
AFS financial assets Unquoted shares in Malaysia 1,649 – – – 1,649 1,649 Golf club memberships 50 – – – 50 50 Quoted shares in Malaysia 903 – – – 903 903
Loans and receivables Fixed and call deposits with licensed: Commercial banks 3,069 3,069 – – – 3,069 Investment banks 1,000 1,000 – – – 1,000 Islamic investment accounts with licensed: Islamic banks 3,813 3,813 – – – 3,813 Staff loans 2,334 2,334 – – – 2,334 Amount due from subsidiaries 459 459 – – – 459 Income due and accrued 26 26 – – – 26 Other receivables, deposits and prepayments 58 – – – 58 58 Cash and bank balances 75 75 – – – 75
Total financial and insurance assets 20,403 10,906 7,011 – 2,660 20,577
Borrowing (200,000) (9,500) (209,500) – – (219,000) Other payables (13,926) (13,926) – – – (13,926)
Total financial and insurance liabilities (213,926) (23,426) (209,500) – – (232,926) 262 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(c) Market Risk
Market risk is the risk of loss arising from a change in the values of, or the income from, assets. A risk of loss also arises from volatility in asset prices, interest/profit rates, or exchange rates. Market risk includes the following elements:
(i) Equity price risk which is the risk of fluctuations in the fair value or future cash flows of a financial instrument arising from stock market dynamics impacting equity prices;
(ii) Foreign exchange risk which is the risk of fluctuations in the fair value or future cash flows of a financial instrument arising from a movement of or volatility in exchange; and
(iii) Interest/profit rate risk which is the risk of fluctuations in the fair value or future cash flows of a financial instrument arising from variability in interest/profit rates.
Equity risk
Equity price risk is the risk that the fair value of future cash flows of a financial instrument fluctuates because of changes in market prices (other than those arising from interest rate/profit yield risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting similar financial instruments traded in the market.
The Group’s equity risk exposures relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices.
The Group’s price risk policy requires it to manage such risks by setting and monitoring objectives and constraints on investments, diversification plans, limits on investments in each country, sector, market and issuer, having regard also to such limits as stipulated by BNM for its reinsurance, takaful and retakaful subsidiaries. The Group complied with such limits as stipulated by BNM during the financial year and has no significant concentration of price risk.
The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax and equity (inclusive of the impact on other comprehensive income). The correlation of variables have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, changes in variables are considered individually. It should be noted that movements in these variables are non-linear. MNRB Holdings Berhad 263
38. FINANCIAL RISK (CONT’D)
(c) Market Risk (cont’d)
Equity risk (cont’d)
Sensitivity analysis
Impact on Changes profit/ Impact on in market Surplus Equity/ indices before Tax Funds RM’ 000 rM’ 000
2013
Group Price + 5% 604 2,219 Price - 5% (958) (2,219)
2012
Group Price +5% 914 5,979 Price -5% (918) (5,917)
2011
Group Price +5% 1,229 6,751 Price -5% (1,233) (6,852)
Management is of the opinion that the Company is not subject to significant equity price risk and, hence, a sensitivity analysis has not been performed.
Foreign exchange risk/currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to volatility in foreign exchange rates.
As the Group’s business is conducted primarily in Malaysia, the Group’s functional and presentation currency is Malaysian Ringgit. The Group’s main foreign exchange risk from recognised assets and liabilities are resulting from reinsurance and retakaful transactions of the reinsurance and retakaful subsidiaries. These balances are expected to be settled and realised on net basis within 12 months; accordingly, the impact arising from sensitivity in foreign exchange rates is deemed to be minimal. 264 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
38. FINANCIAL RISK (CONT’D)
(c) Market Risk (cont’d)
Equity risk (cont’d)
Interest/Profit rate risk
The Group is exposed to fair value interest/profit rate risk where changes to interest/profit rates result in changes to fair values rather than cash flows on assets such as fixed interest income assets. Conversely, floating rate loans expose the Group to cash flow interest/profit rate risk.
The earnings of the Group are affected by changes in market interest/profit rates due to the impact such changes have on interest/profit income from cash and cash equivalents, including investments in fixed/Islamic deposits. Fixed Income portfolio is inversely related to profit rates hence it is the source of portfolio volatility.
The Group manages its interest/profit rate risk by matching, where possible, the duration and profile of assets and liabilities to minimise the impact of mismatches between the value of assets and liabilities from interest/ profit rate movements.
The nature of the Group’s exposure to interest/profit rate risk and its objectives, policies and processes for managing interest/profit rate risk have not changed significantly from the previous financial year.
The following tables set out the carrying amount, by maturity, of the Group’s financial instruments that are exposed to interest/profit rate risk.
Sensitivity analysis
A change of 25 basis points (“bp”) in interest/profit rates at the reporting date would have increased/(decreased) the value of the portfolio of fixed-income investment by the amounts shown below.
Impact on Changes Equity/ in variable Funds RM’000
2013
Group Interest/profit rates +25 bp (21,609) Interest/profit rates -25 bp 21,609
2012
Group Interest/profit rates +25 bp (16,706) Interest/profit rates -25 bp 17,157
2011
Group Interest/profit rates +25 bp (14,503) Interest/profit rates -25 bp 13,890 MNRB Holdings Berhad 265
39. otHER RISKS
(a) property Risk
Property risk is the risk associated with the Group’s investment in property or real estate for own occupancy, investment or rental purpose. The Operational Risk of the Group’s Property is controlled by having detailed operation manual. The manual describes the responsibilities in relation to management of the properties to maintain quality and satisfied tenants.
The financial risk of declining tenants are managed through careful selection of properties, having quality tenants with long term tenancies and continuously maintaining and upgrading facilities.
The Group has no significant exposure of property risk.
(b) operational Risk
Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Group cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Group is able to manage risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, staff education and assessment processes, including the use of internal audit. Business risks such as changes in environment, technology and the industry are monitored through the Group’s strategic planning and budgeting process.
(c) Shariah Non-Compliance Risk
Shariah non-compliance risk refers to possible failure to meet the obligation of Shariah principles. When controls fail to perform, Shariah non-compliance risk can cause reputational and operational damage, have regulatory implications or can even lead to financial loss. The takaful and retakaful subsidiaries mitigate such risk by initiating, monitoring and responding to a robust Shariah control framework which includes the establishment of a Shariah Committee for monitoring and oversight purposes.
(d) Compliance Risk
Compliance risk is the risk arising from violations of, or non conformance with business principles, internal policies and procedures, related laws, rules and regulations governing the Group’s products, services and activities.
Consequently, the exposure to this risk can damage the Group’s reputation, lead to legal or regulatory sanctions and/or financial loss.
The Group has established a Compliance Division at the Group and subsidiary level to oversee and monitor all compliance aspects in observing regulatory requirements. In this respect, it has developed internal policies and procedures to ensure compliance with all applicable laws and guidelines issued by the regulatory authorities. 266 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS
Consolidated Income Statement by Fund
(i) For the year ended 31 March 2013
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Gross earned premiums/contributions 1,249,025 184,179 542,343 82,837 53,246 (21,280) 2,090,350 Premiums/contributions ceded to reinsurers/ retakaful (181,089) (56,169) (14,607) (11,232) (7,807) 19,427 (251,477)
Net earned premiums and contributions 1,067,936 128,010 527,736 71,605 45,439 (1,853) 1,838,873
Investment income 139,661 10,403 51,231 2,491 450 (52,314) 151,922 Realised gains and losses 16,831 1,896 11,424 244 63 – 30,458 Fair value gains and losses 113 9 5,483 (47) (2) (1,042) 4 ,514 Fee and commission income 290,917 10,806 (75) 1,093 191 (277,856) 25,076 Other operating revenue 5,082 – – 744 41 101 5 ,968
Other revenue 452,604 23,114 68,063 4,525 743 (331,111) 217,938
Gross claims and benefit paid (686,707) (107,394) (165,843) (31,985) (49,584) (47,130) (1,088,643) Claims and benefit ceded to reinsurers/retakaful 193,490 21,648 21,167 1,362 5,672 – 243,339 Gross change in contract liabilities 4,943 24,378 (282,997) (25,396) (12,351) 47,130 (244,293) Change in contract and certificate liabilities ceded to reinsurers/ retakaful (137,934) 2,882 65,147 (1,249) 3,618 – (67,536)
Net claims and benefits (626,208) (58,486) (362,526) (57,268) (52,645) – (1,157,133) MNRB Holdings Berhad 267
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Income Statement by Fund (cont’d)
(i) For the year ended 31 March 2013 (cont’d)
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Fee and commission expense (426,127) (67,441) (158,892) (28,727) (6,070) 241,404 (445,853) Management expenses (214,647) – – – – 41,834 (172,813) Finance cost (16,063) – – – – 1,641 (14,422) Other operating expenses (19,031) (282) (11,309) (569) – 9,909 (21,282) Changes in expenses liability (3,709) – – – – – (3,709)
Other expenses (679,577) (67,723) (170,201) (29,296) (6,070) 294,788 (658,079)
Share of results of associates – – – – – 1,308 1,308
Operating profit before surplus transfer, zakat and tax 214,755 24,915 63,072 (10,434) (12,533) (36,868) 242,907
Zakat (400) – – – – – (400) Tax expenses (56,267) (7,718) (4,444) – – 10,083 (58,346)
Net profit after surplus transfer 158,088 17,197 58,628 (10,434) (12,533) (26,785) 184,161
Surplus attributable to takaful participants – (17,197) (58,628) – 1,227 3,102 (71,496)
Net profit/(loss) for the year attributable to equity holders of the Company 158,088 – – (10,434) (11,306) (23,683) 112,665 268 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Income Statement by Fund (cont’d)
(ii) For the year ended 31 March 2012
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Gross earned premiums/contributions 1,178,499 209,314 501,636 59,437 26,000 (20,364) 1,954,522 Premiums/contributions ceded to reinsurers/ retakaful (206,053) (23,451) (48,302) (10,634) (4,377) 17,670 (275,147)
Net earned premiums and contributions 972,446 185,863 453,334 48,803 21,623 (2,694) 1,679,375
Investment income 144,254 10,782 41,902 1,223 487 (60,282) 138,366 Realised gains and losses 9,951 2,580 9,461 131 80 – 22,203 Fair value gains and losses 165 (133) 1,172 1 – – 1 ,205 Fee and commission income 261,177 7,278 70 1,120 108 (245,280) 24,473 Other operating revenue 7,923 – – 476 – (3,695) 4 ,704
Other revenue 423,470 20,507 52,605 2,951 675 (309,257) 190,951
Gross claims and benefit paid (610,705) (122,249) (141,537) (24,990) (19,788) – (919,269) Claims and benefit ceded to reinsurers and retakaful operators 39,547 10,205 82,374 3,033 2,428 – 137,587 Gross change in contract liabilities (258,221) (17,557) (238,604) (9,688) (2,860) – (526,930) Change in contract and certificate liabilities ceded to reinsurers and retakaful operators 227,893 (8,874) (2,161) (1,079) 1,208 – 216,987
Net claims and benefits (601,486) (138,475) (299,928) (32,724) (19,012) – (1,091,625) MNRB Holdings Berhad 269
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Income Statement by Fund (cont’d)
(ii) For the year ended 31 March 2012 (cont’d)
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Fee and commission expense (371,761) (54,486) (144,516) (20,793) (3,342) 209,297 (385,601) Management expenses (191,195) – – – – 42,173 (149,022) Finance cost (14,544) – – – – 2,375 (12,169) Other operating expenses (8,775) (466) (5,857) (398) (34) 8,311 (7,219) Change in expense liabilities 400 – – – – – 400
Other expenses (585,875) (54,952) (150,373) (21,191) (3,376) 262,156 (553,611)
Share of results of associates – – – – – (30,110) (30,110)
Operating profit before surplus transfer, zakat and tax 208,555 12,943 55,638 (2,161) (90) (79,905) 194,980
Zakat (400) – – – – – (400) Tax expenses (54,208) (2,270) (4,498) – – 12,500 (48,476)
Net profit after surplus transfer 153,947 10,673 51,140 (2,161) (90) (67,405) 146,104
Surplus attributable to takaful participants – (10,673) (51,140) – 90 4 ,988 (56,735)
Net profit/(loss) for the year attributable to equity holders of the Company 153,947 – – (2,161) – (62,417) 89,369 270 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Statement of Financial Position by Fund
(i) as at 31 March 2013
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Assets Property, plant and equipment 132,773 – – – – 105,192 237,965 Investment properties 6,200 – 105,192 – – (105,192) 6,200 Intangible assets 13,189 – – – – – 13,189 Deferred tax assets 7,906 317 – 37 – 2,695 10,955 Investment in associates 77,615 – – – – 10,841 88,456 Financial assets: Financial assets at fair value through profit or loss (“FVTPL”) 7,317 1,153 120,194 480 23 – 129,167 Held-to-maturity (“HTM”) investments 339,005 74,621 352,546 16,719 3,762 – 786,653 AFS financial assets 1,030,206 82,117 644,184 28,081 4,914 – 1,789,502 Loans and receivables (“LAR”) 1,253,679 123,093 409,891 39,402 11,351 (138,811) 1,698,605 Reinsurance and retakaful assets 224,716 62,912 89,843 5,023 5,482 – 387,976 Insurance and takaful receivables 229,470 28,804 121,439 23,283 1,063 – 404,059 Tax recoverable 15,909 – – 8 6 – 15,923 Cash and bank balances 10,131 32,549 32,026 13 9 – 74,728
Total assets 4,252,617 405,566 1,875,315 113,046 26,610 (1,029,776) 5,643,378 MNRB Holdings Berhad 271
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Statement of Financial Position by Fund (cont’d)
(i) as at 31 March 2013 (cont’d)
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Liabilities and Participants’ funds Participants’ funds – 20,346 214,339 – – (530) 234,155 Borrowings 320,000 – – – – – 320,000 Insurance and takaful contract liabilities 1,667,263 301,553 1,513,237 103,203 17,705 (10,000) 3,592,961 Insurance and takaful payables 107,428 20,299 65,253 9,843 8,901 – 211,724 Other payables 67,386 57,515 75,214 – – (83,140) 116,975 Deferred tax liabilities 6,655 – 2,685 – 4 3,235 12,579 Provision for taxation 12,085 5,853 4,587 – – – 22,525 Provision for zakat 515 – – – – – 515
Total liabilities and participant’s funds 2,181,332 405,566 1,875,315 113,046 26,610 (90,435) 4,511,434
EQUITY Share capital 1,124,569 – – – – (911,499) 213,070 Reserves 946,716 – – – – (27,842) 918,874
Total equity attributable to equity holders of the Company 2,071,285 – – – – (939,341) 1,131,944
Total liabilities, participants’ funds and equity 4,252,617 405,566 1,875,315 113,046 26,610 (1,029,776) 5,643,378 272 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Statement of Financial Position by Fund (cont’d)
(ii) as at 31 March 2012
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Assets Property, plant and equipment 136,198 – – – – 101,729 237,927 Investment properties 5,600 – 103,828 – – (103,828) 5,600 Intangible assets 13,970 – – – – – 13,970 Deferred tax assets 7,596 1,195 – – – 2,845 11,636 Investment in associates 77,615 – – – – 8,768 86,383 Financial assets: Financial assets at fair value through profit or loss (“FVTPL”) 17,953 1,049 118,423 38 – – 137,463 Held-to-maturity (“HTM”) investments 239,965 43,717 133,349 11,491 3,701 – 432,223 AFS financial assets 1,101,127 139,601 548,757 14,748 3,865 (50,120) 1,757,978 Loans and receivables (“LAR”) 1,025,882 70,418 401,663 33,199 993 (84,079) 1,448,076 Reinsurance and retakaful assets 357,636 42,156 24,696 6,529 1,864 – 432,881 Insurance and takaful receivables 150,100 25,463 130,382 23,281 2,437 – 331,663 Tax recoverable 15,466 – – 7 4 – 15,477 Cash and bank balances 2,760 22,212 55,581 9 9 – 80,571 Non-current asset held for sale 56,601 – – – – – 56,601
Total assets 4,112,970 345,811 1,516,679 89,302 12,873 (1,029,186) 5,048,449 MNRB Holdings Berhad 273
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Statement of Financial Position by Fund (cont’d)
(ii) as at 31 March 2012 (cont’d)
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Liabilities and Participants’ funds Participants’ funds – 9,622 161,757 – 1,302 (2,145) 170,536 Borrowings 320,000 – – – – (50,000) 270,000 Insurance and takaful contract liabilities 1,638,444 293,710 1,217,377 81,860 5,354 (10,000) 3,226,745 Insurance and takaful payables 88,110 13,827 69,774 4,069 2,321 – 178,101 Other payables 57,740 26,075 59,943 3,322 3,871 (40,377) 110,574 Deferred tax liabilities 8,162 – 2,978 51 25 3,015 14,231 Provision for taxation 11,957 2,577 4,850 – – – 19,384 Provision for zakat 390 – – – – – 390
Total liabilities and participants’ funds 2,124,803 345,811 1,516,679 89,302 12,873 (99,507) 3,989,961
EQUITY Share capital 1,124,569 – – – – (911,499) 213,070 Reserves 863,598 – – – – (18,180) 845,418
Total equity attributable to equity holders of the Company 1,988,167 – – – – (929,679) 1,058,488
Total liabilities, participants’ funds and equity 4,112,970 345,811 1,516,679 89,302 12,873 (1,029,186) 5,048,449 274 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Statement of Financial Position by Fund (cont’d)
(iii) as at 1 April 2011
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Assets Property, plant and equipment 125,932 – – – – 103,518 229,450 Investment properties 28,600 – 103,518 – – (103,518) 28,600 Intangible assets 12,970 – – – – – 12,970 Deferred tax assets 8,188 1,492 – – – 2,855 12,535 Investment in subsidiaries 794,501 – – – – (794,501) – Investment in associates 77,615 – – – – 39,927 117,542 Financial assets: Financial assets at fair value through profit or loss (“FVTPL”) 14,912 1,105 88,782 70 35 – 104,904 Held-to-maturity (“HTM”) investments 236,965 42,657 119,019 4,004 3,708 – 406,353 AFS financial assets 880,466 130,071 397,820 6,369 3,648 (50,315) 1,368,059 Loans and receivables (“LAR”) 1,037,605 60,449 305,503 45,093 7,824 (152,240) 1,304,234 Reinsurance and retakaful assets 146,597 34,351 26,857 7,368 656 – 215,829 Insurance and takaful receivables 138,173 32,798 102,662 13,929 920 – 288,482 Tax recoverable 11,428 – – 6 4 – 11,438 Cash and bank balances 9,482 47,511 65,756 14 181 – 122,944 Non-current asset held for sale 34,173 – – – – – 34,173
Total assets 3,557,607 350,434 1,209,917 76,853 16,976 (954,274) 4,257,513 MNRB Holdings Berhad 275
40. INSURANCE, TAKAFUL AND RETAKAFUL FUNDS (CONT’D)
Consolidated Statement of Financial Position by Fund (cont’d)
(iii) as at 1 April 2011 (cont’d)
General reinsurance & General Family General Family elimination shareholders’ takaful takaful retakaful Retakaful & fund fund fund fund fund adjustment Consolidated RM’000 rM’000 rM’000 RM’000 rM’000 RM’000 rM’000
Liabilities and Participants’ funds Participants’ funds – (1,315) 105,900 70 1,346 2,689 108,690 Borrowings 200,000 – – – – (50,000) 150,000 Insurance and takaful contract liabilities 1,412,707 291,733 997,529 73,510 2,494 (10,000) 2,767,973 Insurance and takaful payables 65,394 7,932 34,406 3,250 2,007 – 112,989 Other payables 97,847 51,520 67,748 – 11,120 (105,946) 122,289 Deferred tax liabilities 6,915 – 2,566 23 9 2,981 12,494 Provision for taxation – 564 1,768 – – – 2,332 Provision for zakat 573 – – – – – 573
Total liabilities and participants’ funds 1,783,436 350,434 1,209,917 76,853 16,976 (160,276) 3,277,340
EQUITY Share capital 1,014,569 – – – – (801,499) 213,070 Reserves 759,602 – – – – 7,501 767,103
Total equity attributable to equity holders of the Company 1,774,171 – – – – (793,998) 980,173
Total liabilities, participants’ funds and equity 3,557,607 350,434 1,209,917 76,853 16,976 (954,274) 4,257,513
41. SIGNIFICANT EVENTS
During the year, the Company settled its Islamic Medium Term Notes and its short term revolving credit facility amounting to RM200 million and RM120 million respectively via the issuance of Sukuk Mudharabah amounting to RM120 million and a drawdown of its Islamic revolving credit facility amounting to RM200 million. The details of these transactions are further disclosed in Note 25. 276 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
42. FAIR VALUES OF FINANCIAL INSTRUMENTS
FRS 7 Financial Instruments: Disclosures requires the classification of financial instruments held at fair value according to a hierarchy that reflects the significance of inputs used in making the measurements, in particular, whether the inputs used are observable or unobservable. The following levels of hierarchy are used for determining and disclosing the fair value of the Group and of the Company’s financial instruments:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - Inputs that are based on observable market data, either directly or indirectly
Level 3 - Inputs that are not based on observable market data
As at the reporting date, the Group and the Company held the following financial assets that are measured at fair value:
Level 1 level 2 level 3 total Group rM’000 rM’000 rM’000 rM’000
31.3.2013
(a) Financial assets at FVTPL
Quoted shares in Malaysia 6,537 – – 6,537 Structured products 5,494 – – 5,494 Warrants 42 – – 42 Shariah approved unit trust funds 117,094 – – 117,094
129,167 – – 129,167
(b) aFS financial assets
Unquoted debt securities – 1,616,090 – 1,616,090 Golf club memberships – – 228 228 Quoted shares in Malaysia 67,267 – – 67,267 Quoted shares outside Malaysia 193 – – 193 Warrants 13 – – 13 Shariah approved unit trust funds 20,985 – – 20,985 Government investment issues – 40,223 – 40,223
88,458 1,656,313 228 1,744,999 MNRB Holdings Berhad 277
42. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONT’D)
Level 1 level 2 level 3 total Group (cont’d) rM’000 rM’000 rM’000 rM’000
31.3.2012
(a) Financial assets at FVTPL
Quoted shares in Malaysia 9,072 – – 9,072 Structured products – 12,296 – 12,296 Warrants 27 – – 27 Shariah approved unit trust funds 116,068 – – 116,068
125,167 12,296 – 137,463
(b) aFS financial assets
Malaysian government securities – 43,708 – 43,708 Unquoted debt securities – 1,331,770 – 1,331,770 Golf club memberships – – 228 228 Quoted shares in Malaysia 126,744 – – 126,744 Quoted shares outside Malaysia 224 – – 224 Warrants 75 – – 75 Shariah approved unit trust funds 19,920 – – 19,920 Government investment issues – 190,306 – 190,306
146,963 1,565,784 228 1,712,975
1.4.2011
(a) Financial assets at FVTPL
Quoted shares in Malaysia 14,641 – – 14,641 Structured products – 12,019 – 12,019 Warrants 45 – – 45 Shariah approved unit trust funds 73,014 – – 73,014 Government investment issues – 698 – 698 Quoted debt securities 4,487 – – 4,487
92,187 12,717 – 104,904
(b) aFS financial assets
Malaysian government securities – 43,906 – 43,906 Unquoted debt securities – 1,005,360 – 1,005,360 Golf club memberships – – 228 228 Quoted shares in Malaysia 86,846 – – 86,846 Quoted shares outside Malaysia 341 – – 341 Shariah approved unit trust funds 14,473 – – 14,473 Government investment issues – 170,753 – 170,753
101,660 1,220,019 228 1,321,907 278 annual report 2013
NOTES TO THE FINANCIAL STATEMENTS (cont’d) - 31 March 2013
42. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONT’D)
Level 1 level 2 level 3 total Company rM’000 rM’000 rM’000 rM’000
31.3.2013
AFS financial assets
Golf club memberships – – 50 50 Quoted shares in Malaysia 444 – – 444
444 – 50 494
31.3.2012
AFS financial assets
Golf club memberships – – 50 50 Quoted shares in Malaysia 623 – – 623
623 – 50 673
1.4.2011
AFS financial assets
Golf club memberships – – 50 50 Quoted shares in Malaysia 903 – – 903
903 – 50 953 MNRB Holdings Berhad 279
43. SUPPLEMENTARY INFORMATION - BREAKDOWN OF RETAINED PROFITS INTO REALISED AND UNREALISED PROFITS OR LOSSES
The breakdown of the retained profits of the Group and of the Company as at 31 March 2013 into realised and unrealised profits or losses is presented in accordance with the directives issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and 20 December 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.
Group Company 2013 2012 2013 2012 RM’000 rM’000 rM’000 rM’000
Realised and unrealised profits / (losses) of the Company and its subsidiaries: - Realised 759,885 669,843 293,561 295,728 - Unrealised 1,892 3,251 1,424 1,891
761,777 673,094 294,985 297,619
Share of accumulated losses from associated companies: - Realised (6,306) (7,614) – – - Unrealised – – – –
755,471 665,480 294,985 297,619
Less: Consolidation adjustments 2,492 3,800 – –
Total retained profits 757,963 669,280 294,985 297,619 280 annual report 2013
ADDITIONAL COMPLIANCE INFORMATION
The information set out below is disclosed in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities):
(1) utilisations of proceeds raised from corporate proposal On 10 December 2012, MNRB Holdings Berhad (“MNRB” or “company”) issued a RM120 million Sukuk Mudharabah via direct placement to MIDF Amanah Investment Bank Berhad under the Sukuk Mudharabah Programme. The proceeds were utilised towards refinancing the existing Short Term Revolving Credit Facility of RM120 million.
In addition to the above, on 10 December 2012, the company made a drawdown of RM200 million from the revolving credit-i facility of RM200 million (“RC-i Facility”) obtained from Standard Chartered Saadiq Berhad. The proceeds were wholly utilized towards redeeming the Islamic Medium Term Notes (“IMTN”) Programme of RM200 million.
(2) Share buy–back There was no proposal by the Company to carry out a share buy-back during the financial year ended 31 March 2013.
(3) options or convertible securities No options or convertible securities were issued by the Company during the financial year ended 31 March 2013 and there are no options or convertible securities outstanding and exercisable at the end of the financial year ended 31 March 2013.
(4) Depository receipt programme The Company did not sponsor any depository receipt programme during the financial year ended 31 March 2013.
(5) Sanctions and/or penalties During the year, one of the subsidiaries of MNRB, MMIP Services Sdn. Bhd. (“MSSB”) had incurred service tax and stamp duty penalties amounting to RM3,668,125 and RM424,898 respectively arising from late payment. The service charge penalty is being made in installments where to date a total of RM915,572 had been made to the Royal Malaysian Customs Department and RM424,898 had been settled to the Lembaga Hasil Dalam Negeri Malaysia. MSSB, with the assistance of its tax agents had made an appeal on the penalties and is awaiting response.
(6) non–audit fees The amount of non–audit fees paid to external auditors by the Group and the Company for the financial year ended 31 March 2013 amounted to RM50,000 and RM6,000 respectively.
(7) Variation in results There were no significant variations between the audited results for the financial year ended 31 March 2013 and the unaudited results previously announced.
There were no profit estimate, forecast or projection issued by the Company and its subsidiary companies during the financial year ended 31 March 2013.
(8) profit guarantee There was no profit guarantee given by the Company and its subsidiary companies during the financial year ended 31 March 2013.
(9) Material contracts There were no material contracts entered into by the Company and its subsidiary companies involving directors’ and major shareholders’ interests, which subsisted at the end of the financial year ended 31 March 2013 or, if not then subsisting, entered into since the end of the previous financial year.
(10) Recurrent related party transaction of revenue or trading nature MNRB is not required to seek any mandate from its shareholders under Paragraph 10.09(2)(b), Part E of Chapter 10 of the Listing Requirements of Bursa Securities as the recurrent related party transactions of a revenue or trading nature entered into by the MNRB Group qualified as exempted transactions as defined under Paragraph 10.08(11)(e), Part E of Chapter 10 of the Listing Requirements of Bursa Securities. MNRB Holdings Berhad 281
ANALYSIS OF SHAREHOLDINGS AS AT 31 JULY 2013
SHARE CAPITAL
Authorised capital : 500,000,000 ordinary shares
Issued and fully paid-up : 213,069,500 ordinary shares of RM1.00 each
No. of shareholders : 5,622
Class of shares : RM1.00 ordinary shares
Voting rights : 1 vote per ordinary share
ANALYSIS BY SIZE OF SHAREHOLDINGS AS AT 31 JULY 2013
Share Capital No. of Holders percentage of percentage of Size of Shareholdings Shareholders Shareholders no. of Shares Share Capital (%) (%) less than 100 176 3.13 2,002 0.00 100 to 1,000 1,803 32.07 1,634,701 0.77 1,001 to 10,000 2,648 47.10 11,912,005 5.59 10,001 to 100,000 866 15.40 28,343,000 13.30 100,001 to less than 5% of issued shares 127 2.26 44,597,292 20.93 5% and above of issued shares 2 0.04 126,580,500 59.41
TOTAL 5,622 100.00 213,069,500 100.00
LIST OF SUBSTANTIAL SHAREHOLDERS (5% AND ABOVE) AS AT 31 JULY 2013
Names Shareholdings percentage (%)
1. AMANAHRAYA TRUSTEES BERHAD 99,395,400 46.65
2. PERMODALAN NASIONAL BERHAD 27,185,100 12.76 282 annual report 2013
ANALYSIS OF SHAREHOLDINGS (cont’d) AS AT 31 JULY 2013
LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 31 JULY 2013
Names Shareholdings percentage (%)
1 AMANAHRAYA TRUSTEES BERHAD 99,395,400 46.65
2 PERMODALAN NASIONAL BERHAD 27,185,100 12.76
3 AMANAHRAYA TRUSTEES BERHAD 5,851,800 2.75
4 JOHAN ENTERPRISE SDN. BHD. 2,230,000 1.05
5 AMANAHRAYA TRUSTEES BERHAD 2,001,200 0.94
6 HONG LEONG ASSURANCE BERHAD 1,992,149 0.93
7 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN. BHD. 1,606,600 0.75
8 CITIGROUP NOMINEES (ASING) SDN. BHD. 1,460,100 0.69
9 NEOH CHOO EE & COMPANY, SDN BERHAD 1,080,000 0.51
10 CHONG YIEW ON 878,100 0.41
11 CITIGROUP NOMINEES (ASING) SDN. BHD. 717,300 0.34
12 HSBC NOMINEES (ASING) SDN. BHD. 666,400 0.31
13 PUBLIC NOMINEES (TEMPATAN) SDN. BHD. 620,000 0.29
14 THONG SU – F’NG 606,700 0.28
MNRB Holdings Berhad 283
LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 31 JULY 2013 (CONT’D)
Names Shareholdings percentage (%)
15 CITIGROUP NOMINEES (ASING) SDN. BHD. 587,600 0.28
16 HLB NOMINEES (TEMPATAN) SDN. BHD. 554,000 0.26
17 HONG LEONG ASSURANCE BERHAD 550,000 0.26
18 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN. BHD. 547,700 0.26
19 HSBC NOMINEES (ASING) SDN. BHD. 543,300 0.25
20 CHUA HIN BEE 510,000 0.24
21 GAN CHUN HUI 454,300 0.21
22 LEE KOK HAI 421,000 0.20
23 CHEN CHIN PENG 400,000 0.19
24 PUBLIC NOMINEES (TEMPATAN) SDN. BHD. 400,000 0.19
25 MULTI-PURPOSE INSURANS BHD 369,753 0.17
26 LEONG SOO HA @ LEONG CHOON YIN 365,000 0.17
27 LIM TEAN KAU 360,000 0.17
28 PROMSERV SDN. BHD. 355,000 0.17
29 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN. BHD. 350,400 0.16
30 CHEANG HON SANG 347,000 0.16
TOTAL 153,405,902 72.00 284 annual report 2013
ANALYSIS OF SHAREHOLDINGS (cont’d) AS AT 31 JULY 2013
MNRB HOLDINGS BERHAD INFORMATION ON DIRECTORS’ SHAREHOLDINGS AS AT 31 JULY 2013
Names of Directors Shareholdings percentage (%)
1. SHARKAWI ALIS 0 0.00
2. MOHD DIN MERICAN 0 0.00
3. MEGAT DZIAUDDIN MEGAT MAHMUD 0 0.00
4. P. RAVEENDEREN 10,000 0.01
5. DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN 0 0.00
6. YUSOFF YAACOB 0 0.00
7. DATUK MOHD KHALIL DATO’ MOHD NOOR 5,000 0.00
8. PAISOL AHMAD 0 0.00
CATEGORY OF SHAREHOLDERS AS AT 31 JULY 2013
Type of Ownership Shareholders percentage Shareholdings percentage (%) (%)
Government Agencies 1 0.02 10 0.00 Individual 4,670 83.06 43,780,917 20.55 Companies 122 2.17 145,392,455 68.23 Nominees Company 829 14.75 23,896,118 11.22
GRAND TOTAL 5,622 100.00 213,069,500 100.00 MNRB Holdings Berhad 285
LIST OF PROPERTIES 31 March 2013
tenure/ land area net Book Existing use/ (sq.ft) value as at Date of Date of Description of age of Build-up area 31/3/2013 Address Acquisition revaluation properties buildings (sq.ft.) (RM)
INVESTMENT PROPERTIES
No. 15, Jalan Sri Hartamas 7 14 July 1984 13 May 2010 1 unit of Freehold/ 1,600/ 3,000,000 Taman Sri Hartamas 4 storey rented out/ 6,150 50480 Kuala Lumpur shophouse 29 years
No. 17, Jalan Sri Hartamas 7 14 July 1984 13 May 2010 1 unit of Freehold/ 1,600/ 3,200,000 Taman Sri Hartamas 4 storey rented out/ 6,150 50480 Kuala Lumpur shophouse 29 years
Total Investment Properties 6,200,000
SELF OCCUPIED PROPERTIES
Ikhlas Point, Tower 11 22 December 2008 24 February 2011 1 unit of Leasehold/ strata 37,292,000 Avenue 5, Bangsar South 11 storey office premise/ No. 8, Jln Kerinchi intermediate rented out/ 59200 Kuala Lumpur office building 5 years
Ikhlas Point, Tower 11A 19 November 2008 24 February 2011 1 unit of Leasehold/ strata 66,160,000 Avenue 5, Bangsar South 10 storey office premise/ No. 8, Jln Kerinchi corner office occupied/ 59200 Kuala Lumpur building 5 years
No. C420 26 August 1982 31 January 2013 1 unit of Freehold/ Not 115,200 Tanjung Biru Condominium apartment staff & guest applicable/ Port Dickson holiday 820 Negeri Sembilan accommodation/ 29 years
No. D130 4 April 1984 31 January 2013 1 unit of Freehold/staff & Not 115,200 Tanjung Biru Condominium apartment guest holiday applicable/ Port Dickson accommodation/ 820 Negeri Sembilan 31 years
No. 30, Ground Floor 2 June 1984 31 January 2013 1 unit of Freehold/store/ 2,000/ 1,296,000 Jalan SS6/8, Kelana Jaya 4 storey 29 years 7,160 47301 Petaling Jaya shophouse Selangor
No. 17, Lorong Dungun 17 February 1995 26 April 2012 1 unit of Freehold/Office 61,300/ 112,756,494 Damansara Heights 12 storey premises/ 366,409 50490 Kuala Lumpur building rented out/ car park with 2 storey 18 years basement car park 286 annual report 2013
LIST OF PROPERTIES (cont’d) 31 March 2013
tenure/ land area net Book Existing use/ (sq.ft) value as at Date of Date of Description of age of Build-up area 31/3/2013 Address Acquisition revaluation properties buildings (sq.ft.) (RM)
SELF OCCUPIED PROPERTIES (CONT’D)
Lot 528, Section 6 7 September 2010 8 March 2013 4 Storey Leasehold/ Not 1,650,000 Kuching Town Land District intermediate office premise/ applicable/ No.11C, Jalan Kulas terraced occupied 1,200 93732 Kuching shop house 3 years Selangor
No. F41 & F45 18 June 1984 31 January 2013 2 unit of Leasehold Not 460,800 Frasers Pine Resort apartments expiring in applicable/ Frasers Hill May 2082/ 3,585 Pahang Darul Makmur staff & guest holiday accommodation/ 29 years
Manchester Tower 28 July 2008 19 March 2012 1 unit of Freehold/ Not 1,043,475 Apartment 2406 apartment occupied applicable/ Dubai Marina by staff/ 1,011 Dubai, UAE 6 years
Apt. 507 29 July 2008 19 March 2012 1 unit of Freehold/ Not 886,953 Marina Diamond 5 apartment occupied applicable/ Dubai Marina by staff/ 1,084 Dubai, UAE 6 years
Yansoon 4 30 September 2010 18 March 2012 1 unit of Freehold/ Not 1,543,878 Apartment 204 apartment occupied applicable/ Burj Khalifa by staff/ 1,475 Dubai Downtown 3 years UAE
Total Self Occupied Properties 223,320,000 PROXY FORM No. of Shares Held
I/We of being a member/members of MNRB HOLDINGS BERHAD hereby appoint of or failing him of as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at the Auditorium, 3rd Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 25 September 2013 at 3.00 p.m. and at any adjournment thereof, on the following resolutions referred to in the Notice of Annual General Meeting.
NO. RESOLUTIONS For aGAINST orDINARY BUSINESS 1. To approve the payment of a First and Final Dividend 2. To re-elect Megat Dziauddin Megat Mahmud as Director 3. To re-elect Paisol Ahmad as Director 4. To approve the payment of Directors’ fees 5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorize the Directors to fix their remuneration SPECIAL BUSINESS 6. To re-appoint Datuk Mohd Khalil Dato’ Mohd Noor as Director
(Please indicate with a cross (X) in the space provided whether you wish your votes to be cast for or against the resolutions above. In the absence of specific instructions, your proxy will vote or abstain as he/they may think fit.)
Dated day of 2013. Signed
NOTE
A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote in his behalf. A proxy need not be a member of the Company. A member may appoint not more than two (2) proxies to attend the meeting provided the member shall specify in each proxy the proportion of the member’s shareholdings to be represented by each proxy and only one (1) proxy shall be entitled to vote on a show of hands. Where a member is an exempt authorized nominee, which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds. An Instrument appointing a proxy shall be in writing, and in the case of an individual shall be signed by the appointer or by his attorney duly authorized in writing, and in the case of a Corporation shall be either given under its common seal or signed on its behalf by its attorney or an officer of the Corporation so authorised. All proxies must be deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, not less than forty-eight (48) hours before the time set for the Annual General Meeting or any adjournment thereof. Only members registered in the Record of Depositors as at 19 September 2013 shall be eligible to attend the AGM or appoint proxy to attend and vote on his/her behalf. 1st fold
Please affix Stamp
Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor
2nd fold COMPLAINT AGAINST PUBLIC LISTED COMPANY
This form is intended to facilitate the lodgement of complaints with the Bursa Malaysia Berhad (Bursa Malaysia), by investors against Public Listed Companies (PLCs) in Malaysia. Investors are encouraged, in the first instance, to amicably settle any differences directly with the PLC concerned.
1. How to lodge a complaint? 3. What happens after a complaint is filed? You can lodge a complaint by downloading and completing Each complaint will be reviewed and evaluated for referral the Complaint Form and faxing or sending it to: to the appropriate unit within Bursa Malaysia. Where a possible violation is detected, the matter will be referred Customer Care Centre to the Investigation Department. Investigation into a Bursa Malaysia Berhad complaint would be made on a conTdential basis to preserve Lower Ground Floor the investigative process and would not be disclosed to the Bukit Kewangan complainant. 50200 Kuala Lumpur 4. What is the timeframe for resolution? 2. What should be in the complaint? The investigation into your complaint may take any time from Complainant should furnish information that enable proper a few days to several months, depending on the complexity evaluation of the complaint which includes the following: of the case. Towards ensuring speedy resolutions, please ensure that all available documentation with regard to your • Name of the complainant, address, email and telephone number. complaint is enclosed with the standard complaint form. • The name, address, email, telephone number and Complainants are encouraged to call Customer Care Hotline website address (if any) of the party(ies) mentioned in at 03–2732 0067 should you have any queries in the interim. the complaint. • Specific details of how, why and when the subject matter of complaint occurred.
COMPLAINT FORM
A. particulars of Complainant Name : (As per NRIC/Passport/ Registration document) Old NRIC No. : New NRIC No. : Nationality : Registered Address : (As per NRIC/Passport/ Registration document)
Correspondence Address :
Telephone No. (Home) : Telephone No. (OfTce) : Handphone No. : Fax No. : E–mail :
B. nature of Complaint (Cross (X) where applicable) Against Stock/Futures Broking Companies Against Bursa Malaysia Against Dealers/Remisiers Against Share Registrars/Issuing House Against Public Listed Companies Others, please specify C. action Taken (Cross (X) where applicable) Have you lodged a report or complaint to the police, other government agency or statutory/regulatory authority? No Yes, I have lodged a complaint/report with:
Police Date: Report ref. no.:
Registrar of Companies Date: Report ref. no.:
Stock/Futures Broking Company : (please indicate)
Company: Date: Report ref. no.:
Bursa Malaysia Date: Report ref. no.:
Others: (please indicate)
Date: Report ref. no.:
D. Supporting Documents (Cross (X) where applicable) Do you have any documents or letters in support of your complaint? No Yes, I will forward them to Bursa Malaysia in due course Yes, the following documents are attached with this complaint form:
i) v)
ii) vi)
iii) vii)
iv) viii)
E. particulars of Complaint
Complaint Against :
Details of Complaint :
Notes : i. Please attach supporting documents, if available. ii. Please continue in other sheet if there is insufficient space.
Signature :
Date :
Please forward this form and any additional information to:
Customer Care Centre Bursa Malaysia Berhad Lower Ground Floor FOR OFFICE USE ONLY Bukit Kewangan 50200 Kuala Lumpur Received by: Date: Tel : 03–2732 0067 Fax : 03–2732 5258 E–mail : [email protected] [email protected]