As a Trusted Partner Standing Strong As a Trusted Partner

ANNUAL REPORT 2015 STANDING STRONG AS A TRUSTED PARTNER STANDING STRONG AS A TRUSTED PARTNER

Amidst the challenges of an evolving global insurance landscape, the MNRB Group continues to stand strong as a trusted partner to financial industries. Via the Group’s reinsurance, takaful and retakaful businesses in Malaysia, and abroad, we are steadfastly protecting client investments and enabling economic growth. Being a knowledge company and a thought leader, we have devoted substantial resources to understanding current and future risks by considering every number, statistic, segment and variable of every reinsurance, takaful and retakaful activity that we undertake. As we venture forth into a highly challenging market environment, we will continue to leverage on astute business strategies and enduring partnerships to deliver a robust performance. By balancing out our good economic performance with responsible corporate practices, we are confident of delivering resilient and sustainable growth. 066 INSIDE 66 MALAYSIAN REINSURANCE BERHAD 67 Corporate Profile 002 68 Corporate Information THIS 2 MNRB HOLDINGS 69 Directors’ Profile ANNUAL REPORT BERHAD 74 Senior Management Team 3 Corporate Profile 75 Senior Management Team’s Profile 4 Corporate Milestones 77 Corporate Activities and Services 5 Notice of 42nd Annual General Meeting 79 Malaysian Re’s Portfolio of Business 8 Statement Accompanying Notice of Annual General Meeting 9 Corporate Information 10 Group Structure for more information 11 Chairman’s Statement Please scan the QR Code to 19 Board of Directors redirect to the official website: 22 Directors’ Profile 080 www.mnrb.com.my 26 Senior Management Team 80 TAKAFUL IKHLAS BERHAD 28 Senior Management Team’s Profile 81 Corporate Profile 30 Five-Year Financial Highlights 82 Corporate Information 32 Financial Calendar 2015 83 Directors’ Profile 33 MNRB’s Growth 88 Profile of Shariah Committee Members 34 Investors’ Information 90 Senior Management Team 35 Sustainability Report 104 91 Senior Management Team’s Profile 46 Event Highlights 104 MALAYSIAN RE 93 Takaful IKHLAS’ Portfolio of Business (DUBAI) LTD. 48 Statement on Corporate Governance 105 Corporate Profile 59 Audit Committee Report 106 Corporate Information 61 Statement on Risk Management and 107 Directors’ Profile Internal Control 109 Senior Executive Officer’s Profile 64 Statement of Directors’ Responsibility in Relation to the Financial Statements 65 Additional Compliance Information 094 111 Financial Statements 94 MNRB RETAKAFUL 237 Analysis of Shareholdings BERHAD 240 List of Properties 95 Corporate Profile • Proxy Form 96 Corporate Information 97 Directors’ Profile 110 110 MMIP SERVICES 100 Profile of Shariah Committee Members SDN. BHD. 102 President & CEO’s Profile 110 Corporate Profile 103 MRT’s Portfolio of Business 110 Corporate Information A RESILIENT PARTNER By remaining resilient amidst industry challenges and consistently delivering on our promises to our partners, MNRB continues to explore new areas of growth opportunity. The strong foundations we have laid and long-term partnerships we have fostered continue to hold us in good stead. As we build upon these, we are extending our reach and opening up new avenues of opportunity. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MNRB HOLDINGS BERHAD PROFILE

Authorised Capital of RM500 million Paid-up Capital of RM213 million

Malaysian National Reinsurance Berhad, the country’s national reinsurer was set up in 1972 to limit the outflow of reinsurance premiums overseas. The Company commenced operations on 9 February 1973.

In 2005, as a result of a restructuring exercise as a takaful operator. Its reinsurance subsidiary within the MNRB Group, the Company’s stands tall among the top reinsurers in the reinsurance license, business and assets region, writing lines of general businesses were transferred to its subsidiary company, locally and abroad. In Malaysia, its takaful Malaysian Reinsurance Berhad. Pursuant to the operator vies with the leaders in the provision restructuring, Malaysian National Reinsurance of Islamic financial protection services based Berhad became an investment holding company on the takaful system. and changed its name to MNRB Holdings Berhad (MNRB). Today, MNRB is listed on the CAPITAL STRUCTURE Malaysian Bourse (Bursa Malaysia). Its market capitalisation stood at RM803.26 million as at The Company has an Authorised Capital 31 July 2015. of RM500 million, divided into 500 million ordinary shares of RM1.00 each and a The MNRB Group comprises leading wholesale Paid-up Capital of RM213 million, divided into providers of reinsurance and retakaful as well 213 million ordinary shares of RM1.00 each. 3 MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLD- INGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD//MNRB HOLDINGS∙ MNRB BERHADHOLDINGS BERHAD //ANNUAL REPORT 2015 ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB 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//ANNUAL REPORT 2015 CORPORATE MNRB HOLDINGS BERHAD MILESTONES

• MSSB was formed to oversee the administration of Malaysian • MNRB obtained BNM’s approval to establish a retakaful Motor Insurance Pool (MMIP), a pool established by the operation under the Takaful Act, 1984 to conduct both 2006 insurance industry to provide insurance coverage for vehicle General and Family Retakaful businesses. The wholly owned owners who find difficulty in obtaining coverage. subsidiary company of MNRB is known as MRT. • MRDL, a wholly owned subsidiary of Malaysian Re was incorporated. • The Group’s restructuring exercise was completed on • Malaysian Re won the prestigious Reinsurance Industry 1 April 2005 and here on Malaysian National Reinsurance Contribution Award given by the Asia Insurance Review and Berhad became MNRB. The new holding company is an 2006 the Review Magazine. investment holding company that focuses on business expansion to broaden the Group’s income base and further • Malaysian Re was assigned a Financial Strength Rating (FSR) strengthen its financial position. The reinsurance business was of ‘A-’ (Excellent) and an Issuer Credit Rating (ICR) of ‘a-’ by 2005 then transferred to a newly incorporated one hundred percent A.M. Best. (100%) subsidiary of MNRB, Malaysian Reinsurance Berhad • Malaysian Re was assigned an ‘A-’ Insurer Financial Strength (Malaysian Re). The takaful business continues to be undertaken (IFS) rating with Stable outlook by Fitch Ratings. by Takaful IKHLAS, a wholly owned subsidiary of MNRB. Labuan Re became an associate company of Malaysian Re. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best. • Commenced the restructuring exercise of the Group. • Malaysian Re’s IFS rating of ‘A-’ with Stable outlook was 2004 2007 reaffirmed by Fitch Ratings. • MRT commenced operations in August 2007 as the first • BNM approved the registration of Takaful IKHLAS on Retakaful operator in Malaysia. 21 April 2003 and it commenced operations on 2 July 2003. • MNRB was granted the approval on certification to the new 2003 ISO Standard, MS ISO 9001:2000. • MRDL was officially launched on 18 March 2008. • Implementation of new levels of VC, Retrocession to the • MRDL was wholly transferred from Malaysian Re to MNRB. industry ceased with effect from 1 January 2003. • MRT was officially launched on 11 August 2008. • MRT was assigned an IFS rating of ‘BBB+’ with Stable outlook • Arrangement of terrorism insurance via the Malaysian by Fitch Ratings. Terrorism Facility. 2002 • MRT was awarded “The Most Outstanding Retakaful Operator • Received approval in principle from BNM to set up a takaful operation. 2008” at the KL Islamic Finance Forum 2008 (KLIFF 2008). 2008 • Malaysian Re’s MS ISO 9001:2000 Quality Management Systems 2000 • Awarded the MS ISO 9002:1994 certiication. certification which was issued in 2003, was reaffirmed. • Appointed as Account Manager for the Sihat Malaysia Scheme. • Takaful IKHLAS was awarded “Best Takaful/Retakaful Provider — 2008” by Islamic Finance News (IFN). • Injected additional RM1 million to the MNRB Scholarship Fund. 2001 • Takaful IKHLAS won The BrandLaureate – SMEs Chapter Award 2008, “Best Brands in Product Branding – Consumer Healthcare Insurance”. • Commencement of Overseas Facultative business. • IKHLAS Medic Assist Takaful (IMAT) won the “Most • Launching of Malaysian National Reinsurance Berhad Innovative Product Award” by KLIFF 2008. Homepage (http://www.malaysian-re.com.my). 1997 • Launching of MNRB Scholarship Fund of RM1 million. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was — • Malaysian National Reinsurance Berhad moved to its own reaffirmed by A.M. Best. 1999 building, Bangunan Malaysian Re. • Malaysian Re’s IFS rating of ‘A-’ with Stable outlook was • Implementation of new levels of VC, Retrocessions and other reaffirmed by Fitch Ratings. market reinsurance arrangements. • Following are certification audit conducted by SIRIM, Malaysian Re’s MS ISO 9001:2000 Quality Management • Bank Negara Malaysia (BNM) appointed Malaysian National Systems certification was reaffirmed. Reinsurance Berhad to manage the Scheme for Insurance of • MRT’s IFS rating of ‘BBB+’ with Stable outlook was reaffirmed Large and Specialised Risks. by Fitch Ratings. • Appointed as Manager for the Malaysian Energy Risks Consortium. 2009 • Malaysian Re and Labuan Re jointly hosted and organised the 21st • Launching of the Central Administration Bureau. F.A.I.R. Conference, attended by over six hundred (600) delegates • Implementation of Stage III – new levels of VC, Retrocessions including leaders and experts in the insurance industry. 1994 and other market reinsurance arrangements. • Takaful IKHLAS won “Best Takaful/Retakaful Provider” for the — • MIIL, now known as Labuan Re, ceased to be a wholly owned second time at the Islamic Finance News Polls Awards 2009. 1996 subsidiary of Malaysian National Reinsurance Berhad with the • Takaful IKHLAS won The BrandLaureate – SMEs Chapter equity interest being diluted to twenty percent (20%). Award 2009, “Best Brands in Product Branding • Appointed as Manager of the Malaysian Aviation Pool. – Consumer Healthcare Insurance” & The BrandLaureate – SMEs Chapter Award 2009, Corporate Branding – • Malaysian National Reinsurance Berhad was listed on the “Best Brands in Services – Islamic Protection Services”. Main Board of the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad). • Takaful IKHLAS was named the “Best Takaful Provider” at the Euromoney Islamic Finance Awards 2010 organised by • Implementation of automatic cessions on Facultative and financial magazine, Euromoney. Treaty business. • IKHLAS Medical Assistance Takaful won “Best Takaful • Appointed as the Administration Manager of MMIP. 2010 Product” by International Takaful Awards 2010. • Malaysian-Re International Insurance (L) Ltd. (MIIL) was set • Takaful IKHLAS moved to its new corporate office, IKHLAS up as a wholly owned subsidiary. 1991 Point, in Bangsar South, Kuala Lumpur. • Implementation of Stage II – new levels of VC, Retrocessions — and other market reinsurance arrangements. • Takaful IKHLAS was awarded The BrandLaureate – SMEs 1993 • Malaysian National Reinsurance Berhad and Malaysia National Chapter Award 2010 (third consecutive year). Insurance Berhad (MNI) jointly hosted and organised the 13th General Meeting of the Federation of Afro – Asian Insurers • Takaful IKHLAS was named Best Takaful/Retakaful Provider by and Reinsurers (F.A.I.R.) attended by over three hundred fifty Islamic Finance News Polls Awards 2010 (third consecutive year). (350) international and local participants. • Takaful IKHLAS was awarded for its excellence in Branding by “The 2011 BrandLaureate – SMEs Chapter Awards 2010” in the categories of • Increased level of retrocession from fifty percent (50%) The Best Brands in Corporate Branding – Islamic Financial Protection to fifty-five percent (55%) to shareholding companies of Services (second consecutive year) and The Best Brands in Product 1988 Malaysian National Reinsurance Berhad. Branding – Health Insurance Services (third consecutive year). • Implementation of Stage 1 – new levels of VC, Retrocessions • Fitch Ratings upgraded Malaysian Re’s IFS rating from ‘A-’ to — and other market reinsurance arrangements. ‘A’ with Stable outlook. 1990 • Began to organise Annual Golf Tournaments and Outward Bound School for the insurance industry. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best, with Stable outlook for both ratings. Formation of the following:- • Malaysian Re’s IFS rating of ‘A’ was reaffirmed by Fitch • Technical Services Department Ratings, with Stable outlook. – To conduct fire surveys including advisory services on risk management with the cost mostly borne by • MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, 1985 Malaysian National Reinsurance Berhad. 2012 with Stable outlook. — • Inspection Department • Takaful IKHLAS and MRT won the Best Islamic Takaful – To ensure companies’ adherence to the various Inter- Provider and Best Re-Takaful Provider awards, respectively, 1987 Company Agreements. at the Islamic Finance News (IFN) Service Providers Poll 2011 • Rating Committee Awards held in Kuala Lumpur. – To determine special rate under the Fire Tariff for Fire • Takaful IKHLAS won the Best Islamic Takaful Provider at the and Industrial All Risks Insurances. Euromoney Islamic Finance Awards 2012.

• Paid-up capital increased to RM8,216,004. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ 1982 • Published the 1st edition of the Malaysian Insurance Directory. was reaffirmed by A.M. Best, with Stable outlook for both ratings. — • Introduced Common Account Excess of Loss for 1984 retrocessionaires. • Malaysian Re’s IFS rating of ‘A’ was reaffirmed by Fitch 2013 Ratings, with Stable outlook. • Increased paid-up capital from RM5,200,002 to RM6,240,003. • MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, with Stable outlook. 1979 • Commenced reciprocal exchange with overseas companies. • Takaful IKHLAS won the Best Takaful Provider – Euromoney • Perbadanan Nasional Berhad’s (PERNAS) fifty percent — Islamic Finance Awards 2013. (50%) share in Malaysian National Reinsurance Berhad was 1981 transferred to Permodalan Nasional Berhad (PNB). • A.M. Best revised Malaysian Re’s outlook to Positive from Stable and reaffirmed the FSR of ‘A-’ (Excellent) • Retrocede part of the VC cessions to the local insurance and ICR of ‘a-’. companies for their net account. • Sponsored the 1st Kuala Lumpur Insurance Seminar, attended • Fitch Ratings reaffirmed Malaysian Re’s IFS rating of ‘A’ with 1976 by over four hundred (400) delegates. Stable outlook. — • Commenced writing ten percent (10%) Quota Share of the 2014 • MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, Miscellaneous Accidents and Motor businesses. with Stable outlook. 1978 • Increased level of retrocessions from twenty-five percent • Takaful IKHLAS was named “Best Takaful House” in the 2014 (25%) to thirty percent (30%) for Fire and Personal Islamic Finance Awards by Euromoney. Accident businesses. • Takaful IKHLAS won Malaysian Best Takaful Operator 2013 – Global Banking & Finance Review. • Malaysian National Reinsurance Berhad commenced operations on 19 February 1973. • Malaysian Re’s Financial Strength Rating of ‘A-’ • Voluntary Cessions (VC) to Malaysian National Reinsurance (Excellent) and Issuer Credit Rating of ‘a-’ was 1973 Berhad commenced four (4) months later. reaffirmed by A.M. Best, with Positive outlook for — • Began to offer Excess of Loss Treaties to local insurance 20 both ratings. 1975 companies. • Began to write Local Facultative business and non-reciprocal 15 • Malaysian Re’s Insurer Financial Strength rating of ‘A’ inwards overseas business. was reaffirmed by Fitch Ratings, with Stable outlook. //MNRB HOLDINGS BERHAD ND //ANNUAL REPORT 2015 NOTICE OF 42 MNRB HOLDINGS BERHAD ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Forty-Second Annual General Meeting of the Company will be held at the Auditorium, 3rd Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 30 September 2015 at 2.00 p.m. for the following purposes:-

AS ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 March 2015 together with the Reports Please refer to of the Directors and Auditors thereon. Explanatory Note (i)

2. To re-elect the following Directors retiring pursuant to Article 86 of the Company’s Articles of Association:-

(i) Yusoff Yaacob (Ordinary Resolution 1) (ii) Paisol Ahmad (Ordinary Resolution 2)

3. To re-elect Hijah Arifakh Othman, retiring pursuant to Article 92 of the Company’s Articles of Association, as Director of the Company. (Ordinary Resolution 3)

4. To approve Directors’ fees amounting to RM804,000 for the financial year ended 31 March 2015 (2014: RM700,000). (Ordinary Resolution 4)

5. To re-appoint Messrs Ernst & Young as Auditors and to authorise the Directors to fix their remuneration. (Ordinary Resolution 5)

6. Continuing in Office as Independent Non-Executive Director.

“THAT approval be and is hereby given to the following Directors who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years, to continue to serve as an Independent Non-Executive Directors of the Company, in accordance with the Malaysian Code on Corporate Governance 2012.”

(i) Yusoff Yaacob (Ordinary Resolution 6) (ii) Megat Dziauddin Megat Mahmud (Ordinary Resolution 7)

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following Ordinary Resolution:-

7. Re-appointment of a Director retiring in accordance with Section 129 of the Companies Act, 1965:-

“THAT P. Raveenderen, retiring in accordance with Section 129 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 8)

8. To transact any other business which may properly be transacted at the Annual General Meeting.

By Order of the Board

NORAZMAN HASHIM (MIA 5817) LENA ABD LATIF (LS 8766) Company Secretaries Kuala Lumpur 18 August 2015 5 ND (Cont’d) //MNRB HOLDINGS BERHAD NOTICE OF 42 ANNUAL GENERAL MEETING //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

NOTES:

1. 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.

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(ies) 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 authorized.

5. An Instrument appointing a proxy(ies) must be deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, 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 21 September 2015 shall be eligible to attend the AGM or appoint proxy(ies) to attend and vote on his/her behalf.

7. 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 and 7 – Continuing in Office as Independent Non-Executive Director

The proposed Ordinary Resolutions 6 and 7 are to seek the shareholders’ approval to retain Yusoff Yaacob and Megat Dziauddin Megat Mahmud who have served on the Board for a cumulative term of more than nine (9) years, as Independent Non-Executive Directors of the Company. The Board has via the Nomination Committee, assessed the Independence of Yusoff Yaacob and Megat Dziauddin Megat Mahmud and recommended them to continue to serve as Independent Non-Executive Directors based on the following justifications:-

Ordinary Resolution 6: Yusoff Yaacob

(a) Yusoff Yaacob has been an Independent Non-Executive Director for nine (9) years.

(b) Notwithstanding the long tenure, Yusoff Yaacob is considered to still fulfill the criteria under the definition of “Independent Director” as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

(c) Yusoff Yaacob has performed his duties diligently and in the best interest of the Company without being subject to influence of the management.

(d) Yusoff Yaacob has devoted sufficient time in attending Board meetings and has participated in Board discussions.

6 ND (Cont’d) //MNRB HOLDINGS BERHAD NOTICE OF 42 ANNUAL GENERAL MEETING //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

(e) Yusoff Yaacob who is the Chairman of the Risk Management Committee, has the relevant industry background and experience which enables him to provide constructive advice, expertise and independent judgment.

(f) This assessment is based on the Directors’ Evaluation exercise that was performed yearly amongst Board members.

Ordinary Resolution 7: Megat Dziauddin Megat Mahmud

(a) Megat Dziauddin Megat Mahmud has been an Independent Non-Executive Director for nine (9) years.

(b) Notwithstanding the long tenure, Megat Dziauddin Megat Mahmud is considered to still fulfill the criteria under the definition of “Independent Director” as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

(c) Megat Dziauddin Megat Mahmud has performed his duties diligently and in the best interest of the Company without being subject to influence of the management.

(d) Megat Dziauddin Megat Mahmud has devoted sufficient time in attending Board meetings and has participated in board discussions.

(e) Megat Dziauddin Megat Mahmud who is the Chairman of the Audit Committee and Remuneration Committee, has the relevant industry background and experience which enables him to provide constructive advice, expertise and independent judgment.

(f) This assessment is based on the Directors’ Evaluation exercise that was performed yearly amongst Board members.

(iii) Ordinary Resolution 8 – Re-appointment of Directors pursuant to Section 129 of the Companies Act, 1965

(a) P. Raveenderen, who is over the age of seventy (70) years, shall retire pursuant to Section 129 of the Companies Act, 1965 at the conclusion of the forthcoming 42nd Annual General Meeting. The proposed re-appointment of P. Raveenderen will require a resolution passed by a majority of not less than three-fourths (3/4) of members of the Company who are entitled to vote at the forthcoming Annual General Meeting. The proposed resolution will enable P. Raveenderen, to hold office until the conclusion of the next Annual General Meeting of the Company.

(b) Dato’ Syed Ariff Fadzillah Syed Awalluddin shall retire pursuant to Section 129 of the Companies Act, 1965 at the conclusion of the forthcoming 42nd Annual General Meeting and does not wish to seek re-election.

7 //MNRB HOLDINGS BERHAD STATEMENT ACCOMPANYING //ANNUAL REPORT 2015 NOTICE OF ANNUAL GENERAL MEETING MNRB HOLDINGS BERHAD Pursuant to Paragraph 8.27(2) of the Bursa Malaysia Main Market Listing Requirements

Directors standing for re-election and re-appointment at the Forty-Second Annual General Meeting

The following are Directors retiring pursuant to Article 86 of the Company’s Articles of Association:-

1. Yusoff Yaacob 2. Paisol Ahmad

The following is the Director retiring pursuant to Article 92 of the Company’s Articles of Association – Retirement after appointment to fill casual vacancy:-

1. Hijah Arifakh Othman

The following is the Director retiring pursuant to Section 129 of the Companies Act, 1965:-

Section 129 of the Companies Act, 1965

1. P. Raveenderen

The respective profile of the above Directors is set out in the Profile of Directors’ section of the Annual Report from pages 23 to 25.

8 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MNRB HOLDINGS BERHAD INFORMATION

Registered Office Board of 12th Floor, Bangunan Malaysian Re No. 17, Lorong Dungun Stock Exchange Damansara Heights Listing 50490 Kuala Lumpur Bursa Securities Tel : +603-2096 8000 – Main Market Sharkawi Alis Fax : +603-2096 7000 NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN E-mail: [email protected] Website: www.mnrb.com.my Mohd Din Merican President & Group Chief Executive Officer Non-Independent Executive Director Company Secretaries Megat Dziauddin Megat Mahmud Senior Independent Non-Executive Director Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766) P. Raveenderen Non-Independent Non-Executive Director

Dato’ Syed Ariff Fadzillah Syed Awalluddin Audit Committee Independent Non-Executive Director Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Yusoff Yaacob P. Raveenderen Independent Non-Executive Director Paisol Ahmad Yusoff Yaacob Paisol Ahmad Non-Independent Non-Executive Director Nomination Committee Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) Hijah Arifakh Othman Sharkawi Alis Non-Independent Non-Executive Director Yusoff Yaacob Paisol Ahmad Megat Dziauddin Megat Mahmud Auditors Share Registrar Remuneration Committee Symphony Share Registrars Ernst & Young Megat Dziauddin Megat Mahmud (Chairman) Sdn. Bhd. Dato’ Syed Ariff Fadzillah Syed Awalluddin Level 23A, Menara Millenium Level 6, Symphony House Yusoff Yaacob Jalan Damanlela Pusat Dagangan Dana 1 Pusat Bandar Damansara Jalan PJU 1A/46 Risk Management Committee Damansara Heights 47301 Petaling Jaya Yusoff Yaacob (Chairman) 50490 Kuala Lumpur Selangor Darul Ehsan P. Raveenderen Tel : +603-7495 8000 Tel : +603-7841 8000 Hijah Arifakh Othman Fax : +603-2095 5332 Fax : +603-7841 8008 Investment Committee Hijah Arifakh Othman (Chairman) Principal Bankers Megat Dziauddin Megat Mahmud Standard Chartered Bank Paisol Ahmad Malayan Banking Berhad Mohd Din Merican CIMB Bank Berhad

9 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 GROUP MNRB HOLDINGS BERHAD STRUCTURE

(13487-A)

Malaysian * Labuan Reinsurance Berhad Reinsurance (L) Ltd. 100% 20%

Takaful Ikhlas Berhad 100%

MNRB Retakaful Berhad 100%

Malaysian Re (Dubai) Ltd. 100%

MMIP Services Sdn. Bhd. 100%

* Motordata Research Consortium Sdn. Bhd. 40%

* Associate Company 10 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CHAIRMAN’S MNRB HOLDINGS BERHAD STATEMENT

SHARKAWI ALIS Chairman

DEAR VALUED SHAREHOLDERS 11 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

A MIXED ECONOMIC ENVIRONMENT rate of 7.1% on the back of stable labour market conditions and this was seen as a mitigating factor of the downside risk brought on by the decline The global economy expanded at a moderate pace in 2014, posting in global oil prices. real Gross Domestic Product (GDP) growth of 3.4%, the same level registered in 2013. Economic divergence persisted with the developed The end of Quantitative Easing (QE) in the US was followed by market economies continuing to be the main pillar of growth. The US economy expectations of an interest rate hike by the US Federal Reserve. Such an grew 2.4% over the same period from the 2.2% growth recorded in the expectation triggered capital outflows from the emerging markets with previous year as its unemployment rate fell to 5.6%, the lowest level RM6.9 billion of foreign selling seen in the local stock market for the since 2008. The Eurozone saw its GDP growing 0.8% after contracting whole of 2014. This also put downward pressure on emerging market 0.4% in 2013. Economic growth in the United Kingdom was also higher currencies and the ringgit was not spared as investors started to price at 2.9% compared to the 1.7% growth registered in the previous year. in USD-favourable interest rate differentials. Downward pressure on the However, there was still the lingering effect of the sovereign debt crisis local currency raised concerns about additional costs among corporations in the Eurozone, particularly in Greece, and this made the task quite with forex exposure in their balance sheets. The challenging environment challenging for European policymakers. An uneven global growth path also affected the primary equity capital market. There were only 14 new was seen in the 0.1% GDP contraction in Japan despite steep policy easing listings on Bursa Malaysia Securities Berhad in comparison to 18 listings by the Bank of Japan (BoJ). Further to that, the International Monetary in 2013. These initial public offerings (IPOs) collectively raised funds Fund (IMF) reported that GDP among the emerging economies grew amounting to RM5.9 billion, down 28.0% from the RM8.2 billion raised at a slower rate of 4.6% in 2014 as compared to 5.0% in the previous in 2013. Meanwhile, the FBM KLCI hit an all-time high of 1,892.65 points year. Economic growth in China decelerated further to 7.4% from 7.7% on 8 July 2014 but moderated to close the year at 1,761.3 points, 5.7% previously as structural economic reforms continued to take place, lower than the preceding year-end’s 1,866.96 points. underscoring global economic divergence in the present cycle.

The significant correction in the price of oil is a concern within the MODERATE INDUSTRY GROWTH context of the Malaysian economy as the country is a net exporter of crude oil, gas and petroleum products. The combined value of these Global general insurance premiums registered 2.5% real growth in 2014, exports was RM163.1 billion in 2014, while government revenue from lower than the 3.1% growth in 2013. In the advanced economies, premium this segment via petroleum tax, royalty and dividend income makes up growth slowed to 1.7% from 1.9% in the previous year and the same about RM63.0 billion or 24.5% of the total government revenue. Due outcome was observed among the emerging economies where premium to the sharp correction in oil prices, the Government revised its budget growth slowed from 8.2% in 2013 to 5.5% in 2014. For the takaful deficit-to-GDP estimate for 2015 upwards to 3.2% from its initial industry, global gross takaful contributions for both general and family are estimate of 3.0% (with an oil price assumption of USD55.0 per barrel). estimated to have grown by 15.6% in 2014 as compared to 15.0% in 2013 The revised estimate, however, was still more favourable than the 3.5% with Saudi Arabia and Malaysia as the largest takaful markets. deficit recorded in 2014. In 2014, natural disasters globally caused economic losses amounting Despite the negative development in global oil prices, the Malaysian to USD132.0 billion; however, this was some 37.0% below the economy posted higher growth of 6.0% in 2014 (2013: 4.7%). This was 10-year average of USD211.0 billion. Furthermore, the year’s disasters due to better-than-expected exports performance during the first half caused insurance losses of USD39.0 billion, which was 38.0% below of 2014 which cushioned the negative effect of the lower oil price to the the 10-year average of USD63.0 billion. These losses were the lowest economy in general. Overseas shipments gained 8.3% in 1H2014 before insured total loss since 2009, translating into the second consecutive moderating in 2H2014 due to factors such as the economic slowdown year of below-normal catastrophe losses. Notable disasters during the in Japan, China and the Eurozone, while lower commodity prices during year included major flooding incidents in India, Pakistan, China, and the second half of the year affected the value of exports. Additionally, Southeast Europe; billion-dollar convective thunderstorm events in the private consumption remained relatively robust with an annual growth US, France and Germany; as well as winter storms in Japan and the US. 12 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

In Malaysia, we had the East Coast floods that affected the states of Meanwhile, the life insurance industry recorded healthy growth in Kelantan, Terengganu and Pahang which caused widespread destruction 2014 with premiums from new business growing 9.6% to RM8.9 billion. of property and belongings. Investment-linked products were the main drivers of growth recording an 18.0% increase in 2014 to RM3.9 billion as compared to RM3.3 billion Developments in takaful are likely to accelerate in key domiciles such in 2013. The family takaful industry on the other hand saw contributions as the key Gulf Cooperation Council (GCC) countries as well as highly from new business declining 2.9% to RM3.5 billion in 2014. populated Muslim countries, such as Indonesia and Pakistan, where takaful is gaining popularity. In Pakistan, for example, recent changes to regulations allow conventional insurers to establish takaful windows, STEADFAST GROUP PERFORMANCE which should spur growth in the country’s nascent takaful market. Meanwhile, the concept of takaful and Islamic finance continues to gain The difficult global economic backdrop coupled with a few large interest and we should expect more new entrants mainly from African claims, including the East Coast floods, created a challenging business and Asian countries. environment for insurance and takaful operators in the country. Despite this difficult operating environment, the MNRB Group posted revenue In Malaysia, the general insurance industry sustained a robust growth of RM2.4 billion in FY2015, equivalent to FY2014’s revenue. Gross trend, registering gross written premiums of RM16.9 billion, an increase written premiums and contributions amounted to RM2.2 billion. The of 6.1% from 2013. The growth pace recorded was about identical to Group garnered total investment income amounting to RM199.5 million, the country’s economic growth of 6.0% seen over the same period. a 14.5% or RM25.3 million increase over the RM174.2 million recorded The motor insurance segment which makes up about 47.0% of total in FY2014. gross written premiums in the industry grew at a lower rate of 5.6% (2013: 8.7%). The non-motor segment on the other hand saw premiums The Group’s net profit for FY2015 was RM139.1 million, a reduction of growing at 6.6% in 2014 compared to the 5.4% growth recorded in the 10.8% from RM156.0 million, translating into Earnings Per Share (EPS) previous year. In the general takaful segment, gross contributions rose of 65.3 sen as compared to 73.2 sen previously. This performance was 13.3% in 2014 to RM2.2 billion with major business classes registering achieved despite the provisions that the Group had made for a few large double-digit growth. claims that impacted its reinsurance, takaful and retakaful subsidiaries, including claims related to the East Coast floods towards the end of 2014.

13 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

PERFORMANCE OF KEY OPERATING SUBSIDIARIES

Malaysian Reinsurance Berhad (Malaysian Re)

Over the course of the financial year, Malaysian Re’s total gross premiums remained stable at RM1.3 billion. Approximately 59.0% of Malaysian Re’s total business volume was from the domestic market as compared to 62.0% in the previous year, whilst the remaining 41.0% was generated from its overseas business in comparison to 38.0% recorded previously. Malaysian Re continues to draw closer to achieving its target of having equal contributions in terms of gross premiums for both its local and overseas portfolios for the financial year ending 31 March 2017.

Malaysian Re registered a profit before tax of RM196.0 million as compared to RM213.1 million in the preceding year, a reduction of 8.0%. This commendable performance was registered despite the large losses reported during the year such as the recent East Coast Floods, strikes and riots in Vietnam, and a major shipping disaster in Korea. Investment income grew by RM7.1 million or 8.2% to RM92.7 million in FY2015 from RM85.6 million previously. Malaysian Re recorded an overall profit after tax of RM152.1 million in comparison to RM160.7 million previously. MRT registered a higher loss of RM17.7 million in FY2015 as compared to a loss of RM1.2 million in FY2014 mostly due to lower gross contributions Takaful Ikhlas Berhad (Takaful IKHLAS) arising from business portfolio consolidation and an increase in provision for claim liabilities of the General Retakaful fund. In FY2015, Takaful IKHLAS’s gross contributions increased by 7.3% from RM769.6 million to RM826.0 million. The Family Takaful business accounted for 66.8% of total gross contributions and grew by 1.1% MAINTAINING OUR STRONG SHOWING over the previous year. The General Takaful business accounted for the remaining 33.2% and grew by 22.7% over the previous year. Over the course of the financial year, Malaysian Re had its ratings reaffirmed by the rating agencies, which is apt testament to the quality The shareholder’s fund registered a profit before tax and zakat of of the Company’s business and the strength of its capital. RM27.8 million, a growth of 33.3% as compared to RM20.9 million in the preceding year. Fitch Ratings reaffirmed Malaysian Re’s Insurer Financial Strength Rating (IFS) of 'A' with a stable outlook. The rating takes into consideration The shareholder's fund recorded a net profit after tax and zakat of Malaysian Re's healthy financial fundamentals, as demonstrated by its RM19.4 million, a growth of 20.1% as compared to the preceding sustained premium growth, consistently healthy financial performance, year’s RM16.1 million. The favourable variance was partly due to higher solid market franchise in Malaysia, and highly liquid profile of its wakalah fee income from higher gross contributions and higher surplus investment portfolio. At the same time, A.M Best also reaffirmed administrative charges from the General Takaful business. Malaysian Re’s IFS rating of ‘A-’ with a stable outlook. The ratings considered Malaysian Re’s strong operating performance and excellent The ongoing transformation of the business is already showing positive risk-adjusted capitalisation. results and we are optimistic that the performance will continue to improve in the coming years. GOVERNANCE AND RISK MANAGEMENT PRACTICES MNRB Retakaful Berhad (MRT) The Board remains committed to upholding high standards of corporate MRT saw its gross contribution for FY2015 reduced by 45.5% from governance throughout the Group. We strive to continuously improve RM117.2 million to RM63.9 million. The General Retakaful business the effective application of the principles and best practices as laid accounted for 44.1% of the total business while the remaining 55.9% down by the Malaysian Code on Corporate Governance, the Corporate was generated from the Family Retakaful business. Governance Guide as well as the Main Market Listing Requirement issued by Bursa Malaysia Securities Berhad. MNRB’s policy is to implement 14 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

these principles and best practices as well as to uphold high standards In 2014, we continued to roll out the MNRB Scholarship Fund, which of business integrity in all activities undertaken by the Group. This shall aims to encourage and promote education in the fields of insurance and include a commitment to emulate good industry examples and to comply takaful, actuarial science and risk management. Our community efforts with the respective guidelines and recommendations in the conduct of to date focus on equipping the younger generation to become leaders the business activities of the Group. of tomorrow through scholarship programmes, seminars, workshops, study camps and sponsorships. All these initiatives are helping lay strong The Board recognises that an effective risk management framework is foundations for the younger generation in order for them to attain essential for the Group in our quest to achieve our corporate objectives, greater heights in the future. especially with regard to our continued profitability and enhancement of shareholder value in today’s rapidly changing market. Further details Back in 2011, we created the Program Lestari Cemerlang MNRB, where of our Governance and Risk Management policies can be found in the the MNRB Group adopted a school as part of our effort to enhance relevant sections of this Annual Report. the quality of education in rural areas. This programme, a two-year partnership between the MNRB Group and its selected school, aims to improve the academic achievements of students through extra RESPONSIBLE CORPORATE PRACTICES educational activities and the setting up of learning facilities. The selected schools are typically secondary schools located in rural areas The Group continues to make good inroads by way of its corporate and the programme has benefited 2,634 students to date. responsibility (CR) efforts on the Workplace, Marketplace, Community and Environment fronts. As a conscientious corporate citizen and a key As mentioned in last year’s Annual Report, on the professional front and player in the reinsurance, takaful and retakaful sectors, we continue in line with our aim of strengthening the capabilities of the local industry, to integrate responsible and sustainable practices into our total Malaysian Re has developed a flood model for Malaysia which will allow business operations. companies to perform data analytics and flood simulations. We have called this model Re.Banjir. Companies that use the model will be able to Our CR agenda sees us undertaking sustainable activities that focus on perform flood simulations, loss estimations and make informed decisions education, knowledge and human capital development. This is helping to on their business portfolio as well as their reinsurance programming. This ensure a continuous pool of talent in the Group and industry, as well as is the way we are contributing to the market and this shall benefit the the cultivation of dynamic insurance and takaful professionals. Through Malaysian insurance and takaful industry. The detail of these initiatives these efforts, we are not only helping develop the local insurance and and the Group’s other corporate responsibility efforts can be found in takaful industry but are also contributing towards our nation’s growth. the relevant section of this Annual Report.

15 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

NEW DEVELOPMENT – ESTABLISHMENT OF RETAKAFUL Changes are also taking place in other jurisdictions. In China, the soon DIVISION AT MALAYSIAN RE to be introduced China Risk Oriented Solvency System (C-ROSS) aims to link capital requirements closely to underwritten risks and promote On 22 April 2015, the Board of Directors of MNRB announced that sound risk management practices across the industry. We have seen Malaysian Re had received approval from Bank Negara Malaysia (BNM) a move to shift placements with onshore reinsurers or international to conduct general and family retakaful businesses under Section 10 reinsurers with better ratings. Local insurer and reinsurers also have of the Islamic Financial Services Act 2013 (IFSA) via the establishment started to ask offshore reinsurers to provide collateral for reinsurance of a retakaful division. Malaysian Re plans to commence underwriting assets as this measure is also part of the C-ROSS regime. Regulatory its retakaful business once the operating license is granted by BNM. changes are also taking place in Indonesia where the regulator aims at Arising from this new development, MRT would focus on consolidating optimising reinsurance capacity within the country. This new regulation and subsequently running-off its business until such time deemed will increase local retentions considerably from 10% to a minimum of appropriate for it to surrender its operating license to BNM. Moving 25% for all lines of business and would translate into lower market share forward, the retakaful business of the MNRB Group will be offered via for international and offshore reinsurers. These developments require the Retakaful Division at Malaysian Re. Malaysian Re to re-strategise its approach into these markets.

The establishment of Retakaful division would enable the business Under the Financial Services Act 2013 (FSA), MNRB Holdings Berhad to utilize the higher IFS ratings of ‘A’ (Fitch) and ‘A-’ (A.M. Best) from (MNRB) has been designated as a Financial Holding Company (FHC) Malaysian Re to gain access to business which otherwise would not have with effect from 1 July 2015. Section 115 of the FSA provides for BNM been accessible due to the lower rating of ‘BBB+’ (Fitch) given to MRT in to specify standards on prudential matters to MNRB and its subsidiaries, the past. In addition, the growth in Retakaful business volume has not which include but not limited to capital adequacy, liquidity and corporate been in tandem with the corresponding double digit growth in Takaful governance while Section 116 of FSA provides BNM the power to issue business due to the nature of the Takaful portfolio which demands much written directions to MNRB and its subsidiaries in relation to the Group’s less Retakaful cover as compared to conventional reinsurance. Hence, business affairs. the lack of Retakaful volume makes having a full-fledged stand-alone Retakaful operation difficult to sustain in the longer term. Despite the The effect of the implementation of the Goods and Services Tax (GST) lack of Retakaful volume currently, we do see the future potential of effective 1 April 2015 on the Insurance and Takaful industry is expected the business albeit at a slower pace and we are in full support of the to be manageable although the impact on product pricing has not yet Government’s efforts to make Malaysia as an International Islamic been seen. Life and Family products, with the exception of riders, are Finance Marketplace. exempted from GST. The Group has put in place proper infrastructure and processes to handle GST compliance. This division shall leverage on the proven technical expertise, IT systems and operations whereby combined resources would immediately provide While the aforementioned key developments will pose challenges to better economies of scale. It also creates more efficient, consistent the MNRB Group, we have taken the necessary steps to ensure that we and cost-effective approach to the business. In terms of geographical are able to meet these challenges and at the same time meet regulatory diversification strategy, Retakaful business will be able to reach into the compliance. We will endeavour to be conscious of market developments Middle East and North African (MENA) region through our subsidiary and be able to take advantage of business opportunities as they arise. Malaysian Re (Dubai) Ltd (MRDL) in Dubai.

SHAREHOLDER VALUE CREATION A CHALLENGING BUSINESS LANDSCAPE We have consistently maintained that capital preservation is a priority Both fire and motor classes are currently governed by tariffs and plans for the MNRB Group and we continue to propagate the importance of to gradually abolish the tariffs are expected to take place on a staggered maintaining that principle. The need to further strengthen the capital basis in 2016. Customers would then be charged premium/contribution position of the Group is more significant now as MNRB carries the role rates reflective of the risks. Insurers and Takaful operators are gearing and responsibilities of a financial holding company which means MNRB towards this market liberalisation and this is a move towards risk-based has to maintain a certain level of capital adequacy and liquidity. pricing. Abolition of the tariff would also encourage more product innovation and price differentiation, giving customers more choice Strengthening the capital position is part of the Group's strategy in offerings based on price and risk factors. To this end, Takaful IKHLAS is facing the challenging operating environment and dynamic regulatory gearing itself towards its readiness to meet these challenges. landscape ahead. Furthermore, increasing industry competitiveness globally have seen more mergers and acquisitions taking place, resulting 16 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

in players with stronger capital base, larger international network and looking at an acceleration of growth to 3.8% the year after. The downside wider expertise. As such, it is crucial to strengthen the capital so that risk to global growth is seen coming from China with the People’s Bank we can continue to support our subsidiaries to stay competitive in the of China surprising the market with a few unexpected monetary policy industry and hence sustaining the Group’s presence. easing to boost the economy.

Against this backdrop, the Board is not recommending the payment of On the domestic front, the Malaysian economy is anticipated to grow any dividend in respect of FY2015. Nevertheless, the Board remains between 4.5% and 5.0% with a central tendency forecast of 4.7% committed to provide better returns to your dedicated investment in the in 2015, well within the Government’s GDP forecast of 4.5%–5.5%. forthcoming years. While domestic demand is key to anchoring the economy in this challenging environment, household spending is likely to be affected Looking back five years ago when the risk-based capital (RBC) framework by the implementation of GST that came into effect on 1 April 2015. was first adopted, MNRB had taken a similar decision in favour of capital The weakening of the local currency may provide a boost to Malaysia preservation for our subsidiary, Malaysian Re. Now, the Board is pleased export’s competitiveness but this view should also be balanced by to note that the decision has paid off as Malaysian Re has grown stronger external developments given that economic forecasts across major in terms of its capital base. The Board believes that MNRB is now at a trading partners are not identical. With regard to the 11th Malaysia Plan, similar juncture and that the same prudent approach should be taken for the Government has highlighted that it remains committed to fiscal the Group’s corporate sustainability and until there is further clarity on consolidation and the budget deficit is expected to narrow to 0.6% the operating environment. of GDP by the year 2020 which should be positive for the Malaysian economy in the long-run. The downside risk to the ringgit remains as the current account surplus is likely to narrow and the likelihood of policy LOOKING AHEAD normalisation in the US would narrow any positive influence the ringgit may have. The inflationary effect from GST implementation should be Divergence in growth should continue to be the case for the world’s partly offset by lower energy prices and BNM is forecasting headline economies with the US economy expected to play a crucial role in inflation to be in the 2.0%–3.0% range in 2015 (2014: 3.1%). supporting global growth. The International Monetary Fund in July 2015 cut its 2015 global GDP forecast from 3.5% to 3.3% and the fund is

17 (CONT’D) //MNRB HOLDINGS BERHAD CHAIRMAN’S STATEMENT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Although insurers in Asia-Pacific are likely to face deteriorating three new Board members, Puan Hijah Arifakh Othman, Encik Mustaffa economic conditions in 2015, growth prospects remain firm for life and Ahmad and Encik Md Adnan Md Zain. Puan Hijah Arifakh Othman was general insurance products. Rising real estate and financial asset values appointed to the Board of MNRB, while Encik Mustaffa Ahmad and Encik are enabling insurers throughout the region to produce higher premium Md Adnan Md Zain were appointed to the Board of Malaysian Re with volume from increased protection levels. Prospects for commercial lines effect from 1 June 2015. My heartfelt thanks also go to my colleagues insurance remain strong, given the region’s elevated catastrophe risk, on the Board for their dedication, contributions and wise counsel. The the rise in infrastructure and home building across much of Asia-Pacific, Group and its subsidiaries are indeed fortunate to have such committed as well as a low insurance penetration rate. This should have a positive individuals to serve on the respective Boards and I certainly look forward impact on Malaysian Re as its overseas business averaged approximately to their untiring support. 40% of its total revenue over the last two years. Nonetheless, the volatile foreign exchange rate in the current environment is a risk factor The Board would like to record our sincere gratitude to Encik Mohd to Malaysian Re’s overseas operations. Sahimy Man, the former President & Chief Executive Officer (CEO) of MRT whose contract expired on 30 September 2014 and to Encik Despite the slower GDP growth forecast, prospects for Malaysia’s Hashim Harun, who retired as the President & CEO of Malaysian Re on insurance and takaful sectors are expected to remain stable in 2015 even 31 March 2015. We thank these gentlemen for their worthy contributions as regulatory changes and market liberalisation set in. Ongoing premium and wish them every success in their future endeavours. expansion, sound capital buffers and stable underwriting margins will continue to support the risk profiles of most insurers and takaful We would like to extend a warm welcome to Encik Ahmad Ruhaizad operators. The growth potential of the takaful segment is likely to remain Hashim who has been appointed as the new President & CEO of MRT on despite new regulations, supported by a growing range of products and 2 January 2015 and Encik Zainudin Ishak who joined us on 1 April 2015 wider distribution coverage. Against this backdrop, Takaful IKHLAS shall as the new President & CEO of Malaysian Re. We look forward to their position itself to capitalise on any business opportunities. insights and leadership.

Moving forward, the Board of Directors remains positive of the Group’s Last but not least, I wish to convey my utmost gratitude to our loyal prospects for the financial year and recognises the challenging operating management team and employees who continue to work hard and landscape that lies ahead. exhibit a spirit of excellence in all that they do. We have come thus far because of the staunch commitment and resolute effort of our team and I am confident they will continue to help us to attain greater heights. ACKNOWLEDGEMENTS As the MNRB Group continues to make strong stride forward amidst a On behalf of the Board of Directors, I would like to express my heartfelt challenging marketplace, we look to all our stakeholders to lend us their gratitude to the many parties who have rendered us their worthy continuous support as we leverage on all opportunities and overcome all support. We sincerely thank our valued shareholders for their unwavering challenges to ensure a strong and sustainable future for all. support and confidence in the MNRB Group. My deep gratitude 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 steadfast support and cooperation. On behalf of the Board

I would also like to thank YBhg. Datuk Mohd Khalil Dato’ Mohd Noor, who retired from the Board on 1 June 2015 and YBhg. Dato’ Syed Ariff Sharkawi Alis Fadzillah Syed Awalluddin, who will not be seeking re-election at the Chairman forthcoming Annual General Meeting. We sincerely thank them for their guidance, dedication and worthy contributions to the Group during their time on the Board. Please join me in extending a warm welcome to the

18 MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLD- INGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD//MNRB ∙ HOLDINGSMNRB HOLDINGS BERHAD BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB//ANNUAL HOLDINGS REPORT BERHAD 2015 ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRBMNRB HOLDINGS HOLDINGS BERHAD BERHAD ∙ MNRB HOLD- INGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB 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HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLD- INGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS19 BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLD- //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 BOARD OF MNRB HOLDINGS BERHAD DIRECTORS

Dato’ Syed Ariff Megat Dziauddin Paisol Ahmad Fadzillah Syed Sharkawi Alis Megat Mahmud Awalluddin

20 (CONT’D) //MNRB HOLDINGS BERHAD BOARD OF DIRECTORS //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Mohd Din Merican P. Raveenderen Yusoff Yaacob Hijah Arifakh Othman

21 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 DIRECTORS’ MNRB HOLDINGS BERHAD PROFILE

Board meeting 10/10 attended SHARKAWI ALIS Non-Independent Non-Executive Chairman

SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Director 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 Malaysia 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, a Director of MIDF Amanah Asset Management Berhad, Malaysian Industrial Development Finance Berhad, MIDF Amanah Investment Bank Berhad, MIDF Property Berhad, Permodalan Satok Berhad and Motordata Research Consortium Sdn. Bhd. Not related to any Director and/or major shareholder 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.

Board meeting MOHD DIN MERICAN 10/10 attended Non-Independent Executive Director

MOHD DIN MERICAN, aged fifty-three (53), 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 of The Malaysian Insurance Institute (AMII) since 1991. He has thirty (30) years experience in the insurance industry and 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 a member of the 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 Motordata Research Consortium Sdn. Bhd. Not related to any Director and/or major shareholder 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.

22 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Board meeting MEGAT DZIAUDDIN MEGAT 10/10 attended

MAHMUD Senior Independent Non-Executive Director

MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), 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. Member of the Investment Committee and the Nomination Committee. He obtained 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 the Chairman of Alliance Islamic Bank Berhad and a Director of Malaysian Re, MRT, Pernec Corporation Berhad, Alliance Financial Group Berhad, Takaful IKHLAS and several other private limited companies. Not related to any Director and/or shareholder 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.

Board meeting 10/10 attended P. RAVEENDEREN Non-Independent Non-Executive Director

P. RAVEENDEREN, aged seventy (70), 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 a 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. He 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 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 Director and/or major shareholder 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.

23 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Board meeting 10/10 attended DATO’ SYED ARIFF FADZILLAH

Independent Non-Executive Director SYED AWALLUDDIN

DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged seventy-one (71), Malaysian. Appointed as a Director on 31 January 2003 and re-designated as an 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 the University of Oslo, a Diploma in Development Administration from the London School of Economics and a Master’s in International Relations from the 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 the Chairman of Berjaya Auto Berhad, a Director of Malaysian Re, MRT, EcoFirst Consolidated Bhd. and one (1) other private limited company. Not related to any Director and/or major shareholder 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.

Board meeting YUSOFF YAACOB 10/10 attended Independent non-Executive Director

YUSOFF YAACOB, aged sixty-seven (67), Malaysian. Appointed as a Director on 10 November 2004 and re-designated as an Independent Non-Executive Director on 23 March 2006. Chairman of the Risk Management Committee, member of the Audit Committee, the 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 Director and/or major shareholder 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.

24 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Board meeting PAISOL AHMAD 10/10 attended non-Independent Non-Executive Director

PAISOL AHMAD, aged sixty-one (61), Malaysian. Non-Independent Non-Executive Director since 11 April 2008. Member of the Audit Committee, the Investment Committee and the Nomination Committee. Obtained a Diploma in Accountancy from Universiti Teknologi MARA and thereafter became 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. He then held various positions in Amanah Saham Nasional Berhad before being appointed as its Executive Director/Senior Vice President II. He was subsequently transferred to PNB and is currently the Senior Vice President, Internal Assurance Division. Also a Director of Takaful IKHLAS, KAF Investment Bank Berhad and two (2) other private limited companies. Not related to any Director and/or shareholder 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.

Board meeting N/A attended HIJAH ARIFAKH OTHMAN Non-Independent Non-Executive Director

HIJAH ARIFAKH OTHMAN, aged fifty-five (55), Malaysian. Non-Independent Non-Executive Director since 1 June 2015. Chairman of the Investment Committee and member of the Risk Management Committee. She obtained a Degree in Mathematics and Computer Science from City University of London. She began her career in Bank Negara Malaysia (BNM) in 1984 where she served in various divisions including in senior positions as the Managers/Head of Fixed Income Portfolio Management of the External Reserves and Assistant General Manager/Head of Treasury of Danamodal from 1989 to 2000. She had served as the Director/Head of Asian Fixed Income in Standard Chartered Bank Malaysia and subsequently also served as the Executive Vice President/Head of Group Treasury Business in Malayan Banking Berhad from 2006 to 2009. She was appointed as the Managing Director/ Chief Executive Officer of Hong Leong Islamic Bank from 2009 to 2011. She has been a Director of KAF Investment Bank Berhad since 2012. Not related to any Director and/or shareholder 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.

25 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR MNRB HOLDINGS BERHAD MANAGEMENT TEAM

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:

Mohd Din Merican

Norazman Ahkter Azlan Hashim Abdul Manan A. Azizee 26 (CONT’D) //MNRB HOLDINGS BERHAD SENIOR MANAGEMENT TEAM //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Ahmad Ruhaizad Romie Sharmini Hashim Khalid Perampalam

Raja zalman tuah iszatul Lena Abd Latif Raja izzaham mashani ishak 27 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR MANAGEMENT MNRB HOLDINGS BERHAD TEAM’S PROFILE

Norazman Hashim Azlan A. Azizee EXECUTIVE VICE PRESIDENT & SENIOR VICE PRESIDENT & GROUP CHIEF INFORMATION OFFICER GROUP CHIEF FINANCIAL OFFICER/ COMPANY SECRETARY

AZLAN A. AZIZEE is the Senior Vice President & Group Chief NORAZMAN HASHIM is the Executive Vice President & Group Information Officer of MNRB. He graduated with a Bachelor of Science Chief Financial Officer/Company Secretary of MNRB. He obtained his in Computer Science from the University of Wisconsin, Green Bay, Masters degree in Business Administration from the Cranfield School USA in 1984 and received a Masters of Science in Information Systems of Management, United Kingdom in 1990. He is also a fellow member Technology from The George Washington University, Washington D.C., of the Association of Chartered Certified Accountants (ACCA), United USA in 1986. Kingdom and a member of the Malaysian Institute of Accountants (MIA). In 1987, he joined the then Malaysian National Reinsurance Berhad as an He joined the then Malaysian National Reinsurance Berhad in 1985 and IT Executive. He held positions of increasing responsibility in the ensuing was appointed as its Financial Controller and Company Secretary in years at the Company and was involved in the implementation of IT 1994. He was subsequently transferred to Malaysian Re in April 2005 initiatives for the insurance industry. Having assumed his current position and promoted to General Manager of the Corporate Services Division on 1 April 2005, he is today responsible for directing the Company’s in June 2005 where he oversaw the, Administration, Legal & Secretarial, information technology strategy, management and operations. Corporate Communications, Human Capital Management and Finance Departments. On 1 April 2008, he was transferred to MNRB where he assumed his current position. Norazman Hashim is also a Director Ahmad Ruhaizad Hashim of MSSB and the Company Secretary of Malaysian Re, MRT, MRDL and SENIOR VICE PRESIDENT & GROUP CHIEF STRATEGY OFFICER Takaful IKHLAS.

AHMAD RUHAIZAD HASHIM is the Senior Vice President & Group Ahkter Abdul Manan Chief Strategy Officer of MNRB. He graduated in 1990 with a Bachelor SENIOR VICE PRESIDENT & GROUP CHIEF INVESTMENT OFFICER of Economics and Accounting from the University of Leeds, England. He has been a member of the Malaysian Institute of Certified Public Accountants (MICPA) since 1995 as well as a member of the Malaysian AHKTER ABDUL MANAN is the Senior Vice President & Group Chief Institute of Accountants (MIA). Investment Officer of MNRB. He graduated from the University of Science, Malaysia with a Bachelor of Social Science (Honours) degree He brings almost twenty-one (21) years of experience in corporate majoring in Management with a minor in Economics. He is responsible management and advisory services to the table. His began his career in for the overall investment, property and administrative functions of the 1991 when he joined Arthur Andersen as an auditor. He served Arthur MNRB Group. Andersen for more than five (5) years until 1996 when he left to join KUB Malaysia Berhad. He then re-joined Arthur Andersen in 1999 He started his career in the Investment and Securities Department (IVS) to head its Kuala Terengganu branch operation. In 2002, he joined of Malaysian International Merchant Bankers Berhad (MIMB) in 1987 Putrajaya Holdings Sdn. Bhd. as the Head of the Corporate Planning as an Investment Analyst. In 1991, he was promoted to Manager, Head Department. He then joined MNRB on 2 January 2008. In addition to of IVS and in 1995 to Assistant General Manager. He was subsequently his current role, he is also the President & CEO of MRT, a wholly owned promoted to General Manager of IVS in 1997. He was then seconded subsidiary of MNRB. to MIDF Aberdeen Asset Management Sdn. Bhd. (MIDF Aberdeen), which he set up in 1998. In January 2001, he was appointed the Chief Executive Officer and Executive Director of MIDF Aberdeen. He joined Asia Unit Trust Berhad (AUTB) in September 2004 as Chief Executive Officer following the transfer of the business of MIDF Aberdeen to Amanah SSCM Asset Management Berhad. He left AUTB in July 2007 to join MNRB on 17 July 2007. In total, he brings to the Company more than twenty-seven (27) years of experience in the Asset Management industry.

28 (CONT’D) //MNRB HOLDINGS BERHAD SENIOR MANAGEMENT TEAM PROFILE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Land & General Berhad between 1993 and 2000. She joined the then Romie Khalid Malaysian National Reinsurance Berhad in 2003 as Manager, Legal & SENIOR VICE PRESIDENT & GROUP CHIEF INTERNAL AUDITOR Secretarial and was appointed as its Company Secretary in February 2004. She was promoted to her current position as Senior Vice President & Head of Legal & Secretarial in 2011. She is also the Company Secretary ROMIE KHALID is the Senior Vice President & Group Chief Internal of Malaysian Re, MRT, Takaful IKHLAS and MSSB. Auditor of MNRB. He graduated in 1996 with a Bachelor of Science (Economics), majoring in Accounting & Finance from the London School of Economics & Political Science. RAJA ZALMAN TUAH He began his career as an auditor with Arthur Andersen in 1997, where Raja Izzaham he served in the financial services group of the audit division. In 2003, he SENIOR VICE PRESIDENT & GROUP Chief RISK MANAGEMENT joined the then Malaysian National Reinsurance Berhad as an Executive in AND COMPLIANCE OFFICER the Finance Department. He was then transferred to the Risk Management Department in 2004 to take up the role as the Risk Management Officer (RMO). On 1 April 2005, he was transferred to Malaysian Re where he RAJA ZALMAN TUAH Raja Izzaham is the Senior Vice President & served as RMO to Malaysian Re. Subsequently, he was transferred back to Group Chief Risk Management and Compliance Officer of MNRB. He is MNRB and assumed his current position on 7 August 2007. a fellow member of the Association of Chartered Certified Accountants (ACCA), United Kingdom and a member of the Malaysian Institute of Sharmini Perampalam Accountants (MIA). SENIOR VICE PRESIDENT & HEAD OF FINANCE He joined MNRB in 2006 as an Executive in the Internal Audit Department. He held positions of increasing responsibility in the ensuing years at the Company before being promoted as the Deputy Group Chief SHARMINI PERAMPALAM is the Senior Vice President & Head of Finance Internal Auditor in 2011. He assumed his current position on 9 October of MNRB. She holds an Honours degree in Accountancy from Universiti 2014 and has over fifteen (15) years of working experience. Putra Malaysia and is a member of the Malaysian Institute of Accountants.

She joined the then Malaysian National Reinsurance Berhad in 1995 as ISZATUL MASHANI ISHAK an Internal Audit Executive and moved up the ranks to Manager before SENIOR VICE PRESIDENT & HEAD OF HUMAN CAPITAL MANAGEMENT being transferred to the Finance Department. She was promoted to her current position as Senior Vice President & Head of Finance in 2011. Having been with the MNRB Group for more than eighteen (18) years, ISZATUL MASHANI ISHAK is the Senior Vice President & Head of she brings to the table a wealth of experience from financial and audit Human Capital Management, MNRB. She graduated in 1996 with a procedures to corporate and operations management. degree in Information Technology from the University of Queensland, Australia.

LENA ABD LATIF She began her career as an Analyst Programmer with Mayban Life Senior Vice President & Head of Legal & Secretarial/ Assurance Berhad (now known as Etiqa Insurance Berhad). In 2006, Company Secretary she decided on a career change and embarked on her Human Resource journey as a Recruitment Specialist with Scicom (MSC) Berhad. As a self-learner, she obtained more experience as a Human Resource LENA ABD LATIF is the Senior Vice President, Head of Legal & Generalist and a manager over the next few years with Accenture and Secretarial and the Company Secretary of MNRB. She holds a Bachelor Labuan Financial Services Authority. Prior to joining MNRB, she was the of Laws (Honours) degree from the International Islamic University, Section Head, Talent Management & Staff Engagement with RHB Banking Malaysia and has been called to the Malaysian Bar. Group specialising predominantly in Performance Management, Talent Development, Succession Planning and Employee Engagement. She joined She has over twenty-one (21) years of working experience in both legal MNRB on 2 September 2014 as Vice President, Learning & Development practice and corporate firms. She was employed by Utusan Melayu and was promoted to her current position on 1 January 2015. (Malaysia) Berhad as its legal advisor in 1991 and thereafter, as the General Manager, Corporate Affairs/Group Company Secretary at 29 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FIVE-YEAR MNRB HOLDINGS BERHAD FINANCIAL HIGHLIGHTS

2015 2014 2013 2012 2011 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 2,383,957 2,381,378 2,293,382 1,870,326 1,463,262

Profit before zakat and tax 190,705 214,728 159,332 188,212 164,952

Profit after zakat and tax 139,148 155,986 112,665 89,369 122,942

Technical reserves 3,784,625 3,612,476 3,204,985 2,793,864 1,266,110

Total assets 6,476,711 6,136,097 5,642,265 5,048,449 4,467,967

Shareholders’ fund 1,349,474 1,223,469 1,131,944 1,058,488 998,715

Paid-up capital 213,070 213,070 213,070 213,070 213,070

Earnings per share (sen) 65.3 73.2 52.9 41.9 57.7

Net assets per share (RM) 6.3 5.7 5.3 5.0 4.7

Profit before zakat and tax to Shareholders’ fund (%) 14.1 17.6 14.1 18.4 16.5

Profit after zakat and tax to Shareholders’ fund (%) 10.3 12.8 10.0 13.8 12.3

Gross Dividends (%) - - 32.0 17.0 20.0

Net dividends per share (sen) - 16.5 24.0 13.0 15.0

30 (CONT’D) //MNRB HOLDINGS BERHAD FIVE-YEAR FINANCIAL HIGHLIGHTS //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

2011: 1,463 2011: 165 2012: 1,870 2012: 188 2013: 2,293 2013: 159 2014: 2,381 2014: 215 2015: 2,384 2015: 191

Revenue Profit before (RM’000) zakat and tax (RM’000)

2011: 4,468 2011: 999 2012: 5,048 2012: 1,058 2013: 5,642 2013: 1,132 2014: 6,136 2014: 1,223 2015: 6,477 2015: 1,349

total assets Shareholders’ fund (RM’000) (RM’000)

2011: 57.7 2011: 4.7 2012: 41.9 2012: 5.0 2013: 52.9 2013: 5.3 2014: 73.2 2014: 5.7 2015: 65.3 2015: 6.3

Earnings per share Net assets per share (sen) (rm) 31 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL MNRB HOLDINGS BERHAD CALENDAR 2015

4th Quarter Results Announcement date 29 May 2015

4th Quarter Results Reported as at 31 March 2015

2nd Quarter Results Announcement date 27 November 2014 Reported as at

Announcement date 2nd Quarter Results Reported as at Notice of AGM 30 September 2014 AGM date

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

2014 2015 2016

1st Quarter Results Reported as at 30 June 2014

1st Quarter Results Announcement date 28 August 2014

3rd Quarter Results Reported as at 31 December 2014

3rd Quarter Results Announcement date 17 February 2015

The 42nd Annual General Meeting Date of Notice of AGM 18 August 2015

The 42nd Annual General Meeting Annual General Meeting date 30 September 2015

32 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB’S MNRB HOLDINGS BERHAD GROWTH

RM Million 7,000

6,500 Total Assets

Shareholders’ Fund

6,000

5,500

Year Shareholders’ Fund Total Assets 5,000

2002 506,313 1,329,716 4,500

2003 564,609 1,427,390

4,000 2004 617,010 1,476,021

3,500 2005 677,039 1,607,197

2006 747,803 1,772,311 3,000 2007 808,477 1,963,036

2,500 2008 893,919 2,576,247

2009 835,646 3,378,919 2,000

2010 892,513 3,845,983

1,500 2011 998,715 4,467,967

1,000 2012 1,058,488 5,048,449

2013 1,131,944 5,642,265 500 2014 1,223,469 6,136,097

2015 1,349,474 6,476,711 2010 2014 2011 2013 2012 2002 2003 2007 2015 2005 2008 2009 2006 2004 33 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 INVESTORS’ MNRB HOLDINGS BERHAD INFORMATION

MNRB HOLDINGS BERHAD – PERFORMANCE OF SHARE

1/4/14–31/3/15 1/4/13–31/3/14 1/4/12–31/3/13 1/4/11–31/3/12 1/4/10 –31/3/11

Closing Price (RM) 3.58 3.72 2.94 2.62 2.63 Highest Price (RM) 4.9 4.24 3.39 3.42 3.04 Lowest Price (RM) 3.53 2.81 2.81 2.33 1.90 Total Volume Traded (‘000) 31,178 63,856 59,886 57,903 9,803 Gross Dividend Yield (%) 0.00 4.44 10.88 6.49 7.60 Price Earning Ratio (x) 5.48 5.08 5.56 6.25 14.21

Source: Bloomberg @ 20/5/2015

SHARE PRICES AND VOLUME TRADED (JANUARY 2013 – MARCH 2015) Closing Price (RM) Volume Traded (‘000) 5.00 12,500 11,500 4.50 10,500 9,500 4.00 8,500 7,500 3.50 6,500 5,500 3.00 4,500 3,500 2.50 2,500 1,500 2.00 500 Jul 14 Jul 13 Jan 14 Jan 13 Jan 15 Jun 14 Jun 13 Feb 14 Feb 13 Feb 15 Apr 14 Apr 13 Sep 14 Sep 13 Oct 14 Oct 13 Dec 14 Dec 13 Aug 14 Aug 13 Mar 14 Mar 13 Mar 15 Nov 14 Nov 13 May 14 May 13

Closing Price (RM) Volume Traded (’000)

PERFORMANCE OF SHARES (JANUARY 2013 – MARCH 2015) Closing Price (RM) Kuala Lumpur Composite Index 5.00 1,900

4.50 1,850

4.00 1,800

3.50 1,750

3.00 1,700

2.50 1,650

2.00 1,600 Jul 14 Jul 13 Jan 14 Jan 13 Jan 15 Jun 14 Jun 13 Feb 14 Feb 13 Feb 15 Apr 14 Apr 13 Sep 14 Sep 13 Oct 14 Oct 13 Dec 14 Dec 13 Aug 14 Aug 13 Mar 14 Mar 13 Mar 15 Nov 14 Nov 13 May 14 May 13

Closing Price of MNRB Share (RM) Kuala Lumpur Composite Index 34 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SUSTAINABILITY MNRB HOLDINGS BERHAD REPORT

(13487-A)

WORKPLACE MARKETPLACE

COMMUNITY ENVIRONMENT

OUR COMMITMENT TO SUSTAINABLE PRACTICES

Being a conscientious corporate citizen and To this end, the Group undertakes sustainable In this manner, we are not only helping develop a key player in the reinsurance, takaful and activities that focus on education, knowledge the local insurance and takaful industries but retakaful sectors, MNRB recognises the need building and human capital development. This also contributing towards our nation’s growth. to go beyond mere profit. As such, we continue is to ensure a sustainable pool of talent in the to embed responsible and sustainable practices Group, the industry as well as the cultivation into our total business operations within of dynamic insurance and takaful professionals. the areas of the Workplace, Marketplace, Community and Environment. 35 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

strengthening our workplace

36 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

STRENGTHENING OUR WORKPLACE customized in-house leadership programmes For the past year, the MNRB Group had embarked were designed and developed. on Career Ladder. Its main purpose is to provide As a key player in an industry that is a structured career and personal development continuously evolving, MNRB has set its Via the MNRB Leadership Enhancement whilst climbing up one’s career ladder. sights on developing a solid pipeline of talent Programme (LEaP), 34 of our Senior and building a highly motivated workforce to Management underwent over 20-learning days A skills competency matrix was developed for ensure we keep our competitive edge. spanning a period of 18 months and completed each identified Job Family within the Group. the programme in June 2014. This programme Varying degree of competencies for four job To this end, we continue to implement serves to strengthen the Group’s leadership team. levels consisting of Individual Contributor, sustainable workplace initiatives to further Functional Expert, Organisation Expert and strengthen the knowledge and the development In addition, 47 of our Middle Management Industry Expert were mapped out depending on of our employees. completed the High Impact Group Leadership their respective competency matrix. Individuals (HIGH) programme in early 2014, designed Training and Development Opportunities primarily to enhance personal and team effectiveness. To enhance the capabilities of our employees, ensure they keep abreast of industry trends and The front-line managers’ programme also known perform to the best of their abilities, we provide as Future Leader in You (FLY) was launched them with a variety of training opportunities. in November 2014 and will develop over 60 potential future leaders throughout 2015. Both Through various training initiatives, we introduce programmes aim to enhance self-awareness and our employees to the fundamentals of the confidence around one’s personal capabilities Company’s business, the insurance and takaful and preferences in becoming a successful leader. industries, the legal and regulatory environment, as well as technical and soft skills training. In continuation from the LEaP and HIGH programs, leaders are being selected and sent to Our employees participate in workshops, relevant Leadership Development Programmes seminars and conferences, both locally and conducted by top executive-education providers. overseas. All these initiatives help them to be the best they can be, as well as bolstering their career This type of learnings addresses specific pathways and lending to their personal growth. leadership competencies and will expose them to best practices as well as provide them with As part of the Group’s Top Talent Development networking opportunities by accessing other and Succession Planning Framework, several global leaders. 37 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

were then assessed according to their job family and current professional level to determine their competency gaps. Given these information, Management and the individuals are able to ascertain the development requirements.

The Career Ladder is still in its development stage and has vast potential to enhance the professional development of our employees in a structured manner. It provides our employees with the opportunity to be responsible and take accountability of their development and subsequently their professional career.

The Education Assistance Programme (EAP), is a testament to the Group’s commitment to strengthen our employees and to create a continuous learning culture. This is also in line with our aspirations in becoming a high performing organization.

For Takaful IKHLAS’ agents, a variety of training programmes continue to be rolled out to ensure that our agents are of a high calibre, continue to conduct themselves in a professional manner, and have the necessary knowledge to serve our customers effectively. Held in January 2015, the objective of the MNRB also observes mutual respect and In addition, Takaful IKHLAS also implemented programme was for the employees to have maintains a cordial relationship with the a series of Shariah Compliance Activities (SCA) better understanding of Family Takaful/ National Union of Commercial Workers comprising Shariah training and awareness Retakaful business and increase their expertise, to foster good employee relations in the programmes for its agents and employees, particularly those handling Family Takaful/ organisation. Such good rapport has allowed shariah research, risk management and audits. Retakaful operations. relevant issues to be resolved amicably.

An in-house training programme on Family In addition to the above mentioned, MNRB, Employee Safety and Health Initiatives Takaful/Retakaful was organised by MNRB in its efforts to gain the strength of its diverse in collaboration with our External Auditors. workforce, has also undertaken the following We continue to implement a host of initiatives initiatives:- throughout the length and breadth of the organisation to keep our employees safe and • Provides fair and equitable employment healthy and ensure they live a balanced lifestyle. terms regardless of gender, ethnicity or age; MNRB’s annual educational programme on • Gives equal opportunities for career heart disease prevention, the Healthy Heart advancement based on merit. This Awareness Campaign, is a tie-up with the is supported by a well-developed Heart Foundation of Malaysia. This campaign performance appraisal system which is emphasises on the importance of preserving a link to rewards; and work-life balance and educates the employees on all aspects of health especially pertaining • Awarding representation of women in to the heart disease. This campaign comprises management and senior management of free health screening packages, health talks positions. and a bone health check to measure employees’ calcium intake and bone health. 38 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

elevating the marketplace

39 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

ELEVATING THE MARKETPLACE

We are conscious of the responsibility we have as a leading player in the reinsurance/takaful/ retakaful industries via our subsidiaries and (13487-A) are committed to instilling a higher degree of professionalism in the marketplace by helping develop more industry professionals.

At the same time, we are focused on enriching the knowledge of underwriters to mitigate exposure of their portfolios by according them a flood risk analysis tool.

The Malaysian Flood Model (Re.Banjir) effects of flooding on their portfolios, derive programmes serve as platforms for participants Flooding is one of the most significant natural the Probable Maximum Loss (PML) to their to exchange ideas and update themselves with perils in Malaysia in terms of frequency portfolios for different return periods, quantify the latest industry developments. and severity. Malaysian Re is committed to the financial implications and enable them to developing a Malaysian flood risk analysis make informed decisions in relation to their Malaysian Re annually conducts Technical tool, named Re.Banjir, for use by members of reinsurance programming. Courses in Fire Risk Assessment and Special/ Persatuan Insurans Am Malaysia (PIAM) and Self Rating for underwriting and marketing the Malaysian Takaful Association (MTA). Stage 1 of the Flood Model, which covers the staff of insurance companies. At the end of Klang Valley, was launched on 23 September the training, these staff would be expected Re.Banjir is based on a software developed 2013. Stage 2 of the Flood Model will cover to conduct risk surveys and determine fire using the most detailed data and methodology the whole of Peninsular Malaysia, while Stage 3 premium rates for certain types of risks. available. It includes rainfall and river gauge will cover Sabah & Sarawak. Stage 2, which was data spanning many years. This data had been initially expected to be completed in 2014, will In September 2014, the 2014 Programme for processed and developed using state-of-the-art be launched in 2015 and the necessary work Insurance Executive Development (PIED), hydrological solutions and programming tools. for Stage 3 is expected to commence soon. was organised for Malaysian Re’s domestic Re.Banjir is able to simulate a range of potential and international clients in Kuala Lumpur. The insurance losses from mild local flooding to floods Market Training Programmes 21st PIED covered four classes of insurance, in excess of the 1-in-250-years return period. namely Fire, Marine Hull & Cargo, Engineering Over the years, Malaysian Re and MRT have and Liability. The programme was designed Re.Banjir would allow Malaysian insurance and implemented various training programmes on for executives with at least two years’ working takaful companies to estimate flood exposure insurance/reinsurance and takaful/retakaful for experience in the insurance industry and who of their own portfolios. In addition, it would staff of insurance/takaful companies to enhance were well versed with theoretical knowledge also allow them to better understand the their professionalism within the industry. These of insurance in these four classes of insurance. The programme adopted a highly interactive approach, including illustrated case studies, to enable the participants to appreciate the practical application of what they have learnt.

In March 2015, the annual Cedants’ Seminar was held by Malaysian Re in Ho Chi Minh City, Vietnam. This seminar was specially tailored to provide a technical and interactive session for senior reinsurance officers in the insurance industry to understand better the aspects of “Run-off Management” and “Finance for Reinsurance Underwriters.” 40 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Enriching Communities

41 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

ENRICHING COMMUNITIES Since 2007, as part of our efforts and Since the onset of our partnership with MII, commitment to develop young talent within MNRB has offered a total of 191 scholarships. We believe in enriching the communities the insurance/takaful industry, MNRB via the The knowledge that our scholarships are helping around us to elevate lives and ensure a better Fund had been collaborating with the Malaysian to produce more competent and qualified future for all. As such, our community efforts Insurance Institute or MII to extend its professionals in the Malaysian insurance and focussed on equipping the younger generation scholarship programme to working adults takaful industries shows our emphasis on to become leaders of tomorrow through within the insurance and takaful industries. education and human capital development. It scholarship programmes, seminars, workshops, reflects our unwavering commitment towards study camps and sponsorships. These efforts These scholarships are offered to staff of the continuous growth of not only our people, are helping lay solid foundations for the insurance and takaful companies who are keen but also all those within the industry. younger generation in order for them to attain to pursue professional insurance qualifications, greater heights in the future. such as the Associateship of the MII (AMII) and Diploma of the MII (DMII), on part-time basis. MNRB Scholarship Programme

The MNRB Scholarship Programme is an initiative to encourage and promote education in the fields of Insurance/Takaful, Actuarial Science and Risk Management. It also serves to increase the pool of qualified and well-trained professionals in the Malaysian insurance and takaful industries.

The MNRB Scholarship Fund (the Fund) was established in 1998 with an initial start-up fund of RM1 million. Since its commencement, the Fund has awarded a total of 389 scholarships to deserving Malaysians to further their undergraduate studies in both public and private institutions of higher learning. 42 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Program Lestari Cemerlang MNRB Minggu Saham Amanah Malaysia (MSAM) Petrosains Visit for Asnaf (Zakat recipients) Kids

The Program Lestari Cemerlang MNRB was MSAM event is one of the largest national A visit to Petrosains is an annual event created in 2011 to show support to our local investment education events in Malaysia organised by Takaful IKHLAS for 30 asnaf education system. This programme is a two- organized by Permodalan Nasional Berhad children between 7 to 12 years old for year partnership between MNRB Group and (PNB) with the objective to help educate them to experience science in the practical its selected school with the aims of improving Malaysians on the importance of implementing way of learning. The children participate in the academic achievement through extra prudent ﬁnancial planning for the past 15 years. 2 workshops at Petrosains during this visit and educational activities and contribution of at the end of the session, the Company hands learning facilities. The selected schools are The MNRB Group has been a ﬁrm supporter over school items and cash contribution to typically secondary schools located in rural of MSAM activities and PNB’s initiative in assist them for the upcoming school term. areas with the majority of students coming educating the Malaysian public on making from lower-income families. smart investments. The Group is also proud to be in involved in MSAM activities and will A total of RM60,000 is allocated for this 2-year continue to support PNB’s noble cause. programme to cover various activities such as additional tuition classes, motivational talks, In addition to this, MSAM is also an avenue for study camps and computer-aided learning the MNRB Group to share with the investors section in the school’s library. The MNRB Group and public, on its subsidiaries, businesses and also contributed to the construction of the products. This helps to promote and enhance school’s Drug Prevention Education Path (PPDa) MNRB’s image and presence as a public listed as well as to the upgrade of the school’s ‘surau’. company. 43 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

conserving our environment

44 (CONT’D) //MNRB HOLDINGS BERHAD SUSTAINABILITY REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

CONSERVING OUR ENVIRONMENT and the importance of saving as well as Rehabilitation of the Raja Musa exposing the students on the creative thinking Forest Reserve Our sustainable efforts extend to undertaking process when undertaking investment and initiatives that seek to educate various target wealth management activities. As an effort to educate our employee on the audiences about environmental conservation importance of conserving the environment, as well as mitigating the impact of our business MNRB invited the National Cultural Arts MNRB participated in PIAM’s planting of activities on the environment. Trainers to motivate students to be financially 600 saplings on 1 hectare of the peat swamp savvy through environmental friendly activities. area under the Rehabilitation of the Raja MNRB Ringgit-Savvy Programme The students were introduced to the concept Musa Forest Reserve project. This initiative of recycling and taught to construct musical has encouraged our employees to value the A supplement to the MSAM exhibition, the instruments using recycled items. environment and to protect it for the benefit of MNRB Ringgit-Savvy Programme, which was our future generations to come. commenced in 2012, educates the primary and Guest artistes were also invited to inspire and secondary students on money management share valuable tips on saving to the students. This project is a collaboration with the Global Environment Centre, an NGO active in addressing environmental issue with tree planting at the peat swamp forest as the main focus.

MOVING FORWARD

As MNRB continues to set its sights on growing profitably in a responsible manner, we will continue to ensure the delivery of impactful and tangible sustainable activities in the areas of the Workplace, Marketplace, Community and Environment.

Only then can we hope to truly create sustainable value for the Group in a holistic manner, reinforce our ties with all stakeholders and stand out as a model for responsible corporate behaviour. 45 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 EVENT MNRB HOLDINGS BERHAD HIGHLIGHTS

TAKAFUL IKHLAS AGENCY WORKFORCE FACILITATE CUSTOMERS BUSINESS TRANSACTIONS WITH PLUG N PAY BY CIMB 8 APRIL 2014

Takaful IKHLAS provides Plug n Pay by CIMB Bank (Plug n Pay) payment device facility to Takaful IKHLAS agency workforce throughout Malaysia in an effort to ease mobile payment transactions with its customers.

TAKAFUL IKHLAS REGIONAL OFFICE IN KELANTAN MINGGU SAHAM OPERATING FROM NEW PREMISES FOR THE AMANAH MALAYSIA 2014 CONVENIENCE OF CUSTOMERS 19–27 APRIL 2014 19 APRIL 2014 Both MNRB and its takaful subsidiary, Takaful After operating for 9 years in Kelantan, Takaful IKHLAS relocated to a new office. The Kelantan IKHLAS, supported Permodalan Nasional Regional Office is the second asset bought by the Company subsequent to Sarawak Regional Berhad’s (PNB) effort in educating Malaysians Office in 2013. The ceremony was officiated by the Chairman of MNRB Group, Encik Sharkawi on smart investment and prudent financial bin Alis and attended by Takaful IKHLAS President & CEO, Ab Latiff Abu Bakar. management by being event partners at Minggu Saham Amanah 2014 (MSAM 2014) held at Kota Bharu, Kelantan. MNRB was once again one of the ‘Rakan Utama’ and Takaful IKHLAS took on the role as ‘Rakan Program Keagamaan’.

46 (CONT’D) //MNRB HOLDINGS BERHAD EVENT HIGHLIGHTS //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

MNRB SCHOLARSHIP PRESENTATION MNRB 41st ANNUAL GENERAL MEETING CEREMONY 18 SEPTEMBER 2014 4 JUNE 2014 At the Group’s 41st Annual General Meeting, shareholders were MNRB awarded scholarships to thirty-four (34) students to pursue informed that MNRB recorded total revenue of RM2.4 billion in their studies in various insurance-related courses under the MNRB Financial Year Ended 31 March 2014 (FYE2014), as compared to Scholarship Fund. En Mohd Din Merican, MNRB Holding’s President RM2.3 billion recorded in the preceding year. MNRB’s shareholders also & GCEO and also Member of the Board of Trustee of the MNRB approved the declaration of a First and Final Single-Tier Dividend of Scholarship Fund presented the scholarships at a ceremony held at 16.5% per ordinary share to be paid on 29 October 2014. Bangunan Malaysian Re in Damansara Heights.

FITCH RATINGS AFFIRMS ‘A’ RATINGS OF MALAYSIAN REINSURANCE BERHAD 29 OCTOBER 2014

Fitch Ratings affirmed Malaysian Reinsurance Berhad’s (Malaysian Re) Insurer Financial Strength rating (IFS) at ‘A’. Fitch Ratings also confirmed the Outlook is Stable. The affirmation reflects Malaysian Re’s well-maintained healthy financial fundamentals and sustained premium growth, coupled with strong capitalisation to support its market franchise leadership in Malaysia.

A.M. BEST AFFIRMS MALAYSIAN RE’S POSITIVE OUTLOOK MALAYSIAN RE’S 24th ANNUAL GOLF 12 DECEMBER 2014 TOURNAMENT A.M. Best Asia-Pacific Limited (A.M. Best) has affirmed Malaysian 2 SEPTEMBER 2014 Reinsurance Berhad’s (Malaysian Re) financial strength rating of A- (Excellent) and the issuer credit rating of “a-”. A.M. Best also affirmed Malaysian Re organised a friendly golf tournament for its clients and that the outlooks for both ratings are positive. business partners at Palm Garden Golf Club. 120 golfers participated in this tournament. 47 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 STATEMENT ON MNRB HOLDINGS BERHAD CORPORATE GOVERNANCE

• The Malaysian Code on Corporate Governance 2012 (“the Code” or “MCCG 2012”); and

• Bursa Malaysia Securities Berhad’s Main Market Listing Requirements (“Listing Requirements”).

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 MCCG 2012 and the Listing Requirements during the financial year ended 31 March 2015.

BOARD OF DIRECTORS BOARD COMPOSITION

The Board of MNRB is responsible for the proper stewardship of the The Board comprises members with relevant expertise and experience Group’s resources, the achievement of the Group’s objectives and good drawn from business, financial and technical fronts which strengthened corporate citizenship. It discharges this responsibility by complying with leadership and management. all the relevant Acts and Regulations, including adopting the principles and best practices of the MCCG 2012 and the Listing Requirements. The Board currently comprises eight (8) members of whom seven (7) members are Non-Executive Directors, including the Chairman. The Board retains full and effective control over the Group’s affairs. This Three (3) of these members are Independent Non-Executive Directors, includes the responsibility to determine the Group’s development and four (4) are Non-Independent Non-Executive Directors and one (1) is a overall strategic direction. Key matters such as the approval of quarterly Non-Independent Executive Director (the GCEO). and annual results, major acquisitions and disposals, major capital expenditures, budgets, business plans and succession planning for top As at the date of this report, the percentage of the Board composition management, are reserved for the Board or its appointed committees is as follows:- to deal with. Executive Director 1 out of 8 The meetings of the Board are chaired by the Non-Executive Chairman, (Also the GCEO) 12.5% whose role is clearly separated from the role of the President & Group Chief Executive Officer (“GCEO”), who ensures that Board policies and Independent Non-Executive Directors 3 out of 8 decisions are implemented accordingly. 37.5% Non-Independent Non-Executive Directors 4 out of 8 (including the Chairman) 50%

By virtue of this composition, the Company is in compliance with Paragraph 15.02 of the Listing Requirements which requires at least two (2) directors or one-third (1/3) of the Board, whichever is the higher, to be independent.

48 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

The Board takes cognizance of the recommendation to ensure that the DIRECTORS’ CODE OF ETHICS majority of its Directors are Independent Directors as well as to have diversity in terms of gender, ethnicity and age in the Board. The Directors observe a code of ethics in accordance with the code of conduct expected of Directors of a holding company of financial service The Board is committed to fulfilling the above but it faces constraints in providers. terms of the number of members that are to be on the Board. Under the Company’s Articles of Association, the number of Directors shall not be The Chairman is primarily responsible for the effective conduct and more than ten (10) and the Board currently comprises eight (8) Directors. workings of the Board. The Chairman leads the Board in the oversight of the Management and in setting strategic business plans, goal and key Notwithstanding this, the Board is making efforts to identify suitable policies for the Group to ensure the sustainability of long-term returns. candidates who can assist in fulfilling the above recommendations.

The Board, following the resignation of Datuk Mohd Khalil Dato’ Mohd STRATEGIES PROMOTING SUSTAINABILITY Noor, Non-Independent Non-Executive Director, had appointed a lady member on 1 June 2015 i.e. Hijah Arifakh Othman. This reflects the The Board is committed to implementing responsible and sustainable Board's effort to observe the recommendations on diversity. corporate practices. MNRB, as a conscientious corporate citizen, has embraced good corporate responsibility practices in the areas of The Directors bring to the Board, a wide range of knowledge and stakeholder engagement, the community, workplace, marketplace experience in relevant fields such as insurance and reinsurance, and environment. Every business decision the Group makes accounting and finance, legal, economic, investment, international pertaining to growth and profitability is consistent with its social and business, banking and business operations. Therefore, all Directors have environmental goals for sustainability. The corporate responsibility the necessary depth to bring experience and judgment to bear on issues initiatives undertaken by MNRB for the financial year ended of strategy, performance, resources and ethical standards. The Board 31 March 2015 are disclosed in the Sustainability Report of this Annual is of the opinion that its current composition and size constitute an Report. A summary of the Corporate Responsibility Activities is also effective Board for the Company. available on the Company’s website at www.mnrb.com.my.

In accordance with the Listing Requirement, none of the members of the Board holds more than five (5) directorships in listed companies. DIRECTORS’ INDEPENDENCE AND INDEPENDENT NON-EXECUTIVE DIRECTORS The profiles of the Directors are provided on pages 22 to 25 of this Annual Report. The Independent Directors play a pivotal role in corporate accountability and provide unbiased and independent views and judgement in relation to the Board’s deliberation and decision-making BOARD CHARTER process. This is reflected in their membership of the various Board Committees and attendance at meetings. The Board had formalised a Board Charter setting out the duties, responsibilities and functions of the Board in accordance with the All the Independent Directors have demonstrated to the Board that principles of good corporate governance set by the regulatory they have exercised impartial and independent judgment, protecting the authorities. This Board Charter, if necessary, will be periodically interests of the Group and the minority shareholders. reviewed, to incorporate updates and enhancements to the existing rules and regulations as and when necessary. The Board Charter is The Non-Executive Directors do not participate in the day-to-day available on the Company’s website at www.mnrb.com.my. management of the Company and do not engage in any business dealing or other relationships with the Company (other than in situations permitted by the applicable regulations) in order that they remain truly capable of exercising independent judgment and act in the best interests of the Group and its shareholders. The Board is also satisfied that no individual or group of individuals dominate the decision-making process of the Board to ensure a balanced and objective consideration of issues, thereby facilitating optimal decision-making.

49 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

DIRECTORS’ INDEPENDENCE POLICY APPOINTMENTS TO THE BOARD

The Board has adopted a nine (9) years with maximum of twelve (12) The appointment of new Board members are considered and properly years policy for the tenure of Independent Non-Executive Directors, evaluated by the Nomination Committee. Upon completing this process, which is implemented to ensure the continuous effective functioning the Committee shall recommend the proposed appointment to the Board of the Board. Due to the nature of the Group’s businesses that are for its deliberation and approval. In making these recommendations, the considered specialised, the Board is of the view that the maximum Nomination Committee assesses the suitability of candidates, taking into of twelve (12) years is reasonable considering there are significant account the required mix of skills, knowledge, expertise and experience, as advantages to be gained from long-serving Directors who already well as professionalism, integrity including financial integrity, competencies possess tremendous insight and knowledge of the Group’s/Company’s and other qualities, before recommending them to the Board for appointment. business affairs. The Nomination Committee and Board will devote sufficient time to The Board feels that the length of their service on the Board does not review, deliberate and finalise the selection of Directors. In this aspect, the in any way interfere with their exercise of independent judgment and Company Secretary will ensure that all the necessary information is obtained ability to act in the best interests of the Company. and relevant legal and regulatory requirements are complied with. In this aspect, the Board is also guided by the Group’s Fit and Proper Policy for Key In assessing independence, the Board evaluates the following criteria:- Responsible Persons.

• The ability to challenge the assumptions, beliefs or viewpoints The Nomination Committee conducts a yearly assessment on the suitability of of others with intelligent questioning, constructive and rigorous the present Directors under the abovementioned Fit and Proper Policy for Key debating, and dispassionate decision for the good of MNRB; Responsible Persons. The fit and proper assessment for the Directors includes self-declaration and vetting by the Company for the purpose of ensuring • A willingness to stand-up and defend their own views, beliefs and that they are suitable to continue serving as Directors of the Company. opinions for the ultimate good of MNRB; and The following aspects would be considered by the Board in appointing/ reappointing Directors:- • An understanding of MNRB’s business activities in order to appropriately provide responses on the various strategic and • Probity, personal integrity and reputation – the person must have key technical issues brought before the Board. qualities such as honesty, independence of mind, integrity, diligence and fairness. The Board considers that both Yusoff Yaacob and Megat Dziauddin Megat Mahmud who had served as Independent Directors for more • Competence and capability – the person must have the necessary skills, than nine (9) years still meet the abovementioned criteria and that ability and commitment to carry out the role. their long tenure do not affect their assessment and responsibilities as Independent Directors. • Financial integrity – the person must manage their debts and financial affairs prudently.

SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR RE-APPOINTMENT AND RE-ELECTION OF DIRECTORS In accordance with the best practices in corporate governance, Megat Dziauddin Megat Mahmud continues to be the Senior Independent In accordance with Article 86 the Company’s Articles of Association, Non-Executive Director of the Board to whom the concerns of shareholders one-third (1/3) of the Directors for the time being, or if their number and stakeholders may be conveyed. Megat Dziauddin Megat Mahmud is is not a multiple of three (3), then the number nearest to one-third also the Chairman of the Audit Committee as well as the Remuneration (1/3), shall retire from office at each Annual General Meeting (AGM). Committee. All retiring Directors can offer themselves for re-election.

He can be contacted at his email address at [email protected]. Directors who are appointed by the Board during the financial period before the AGM are also required to retire from office and seek re-election by the shareholders at the first opportunity after their appointment.

50 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

The Articles further provide that all Directors shall retire from office at ROLES AND RESPONSIBILITIES OF THE CHAIRMAN least once every three (3) years but shall be eligible for re-election. AND GCEO

Pursuant to Section 129 of the Companies Act, 1965, the office of a The roles and responsibilities of the Chairman and the GCEO are separated Director of over the age of seventy (70) years becomes vacant at every with a clear division of responsibilities as defined in the Board Charter. AGM unless he is re-appointed by a resolution passed at such an AGM of which no shorter notice than that required for the AGM has been given, This distinction is to provide better understanding and distribution of and the majority by which such resolution is passed is not less than jurisdictional responsibilities and accountabilities. three-fourths (3/4) of all members present and voting at such an AGM. The Chairman leads the Board and is also responsible for its performance. At the 42nd AGM, two (2) Directors are due for re-election pursuant Together with the rest of the Board members, the Chairman sets the policy to Article 86 and one (1) Director is due for re-election pursuant to framework and strategies to align the business activities driven by the Article 92 of the Articles of Association. Two (2) Directors are due to Senior Management Team with the Group’s vision and mission. retire pursuant to Section 129 of the Companies Act, 1965. However, one of them i.e. Dato’ Syed Ariff Fadzillah Syed Awalluddin, has The GCEO is mainly accountable for the day-to-day management to expressed his intention not to seek re-election. ensure the smooth and effective running of the Group. He is also responsible for the implementation of policies and Board decisions as well as coordinating the development and implementation of business BOARD AND INDIVIDUAL DIRECTORS’ EFFECTIVENESS corporate strategies.

The Board members undertake a formal and transparent process, upon The GCEO also ensures that the financial management practice is at completion of every financial year, to assess the effectiveness of their the highest level of integrity and transparency for the benefit of the fellow directors, the Board as a whole and the performance of the shareholders and the affairs of the Company be performed in an ethical Executive Director. manner.

The Board and Individual Directors Evaluation is based on answers to a detailed questionnaire. The evaluation form is distributed to all BOARD MEETINGS Board members and covers topics which include, among others, the responsibilities of the Board in relation to strategic plan, fiscal oversight, The Board meeting dates for the ensuing financial year are scheduled in risk management, Board composition and training needs. advance before the end of the current financial year so that the Directors are able to plan ahead and schedule these dates into their respective Other areas which are assessed include the contribution of each and every meeting schedules. member of the Directors at meetings as well as meeting arrangements. The Board has scheduled meetings at least six (6) times a year, besides The Nomination Committee, having deliberated the findings of the the AGM. For the financial year ended 31 March 2015, the Board held Board and Individual Directors Evaluation, will report to the Board the ten (10) meetings. results and highlight those matters that require further discussion and direction by the Board. Technology and information technology are effectively used in Board meetings and communications with the Board. Board meeting materials The Board members’ directorship in companies other than the are shared electronically and where required, Directors may participate Company and the Group, are well within the restriction of not more in meetings via video conference. than five (5) directorships in public listed companies as stated in the Listing Requirements. All Directors have complied with the requirement to attend at least fifty percent (50%) of Board meetings held during the financial year ended 31 March 2015 pursuant to the Listing Requirements.

51 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

The details of attendance of the Directors at Board meetings held during The Board delegates the day-to-day management of the Company’s the financial year are as follows:- business to the Senior Management Team, but reserves for its consideration significant matters such as the following:- No. of Meetings Percentage of Name of Director Attended Attendance • Approval of financial results and quarterly announcements;

Sharkawi Alis 10/10 100% • Material acquisition and disposals of assets; Mohd Din Merican 10/10 100% • Related party transactions of a material nature; Megat Dziauddin Megat Mahmud 10/10 100%

P. Raveenderen 10/10 100% • Authority levels for core functions of the Company; Dato’ Syed Ariff Fadzillah Syed Awalluddin 10/10 100% • Corporate policies on investments (including the use of derivatives) Yusoff Yaacob 10/10 100% and risk management; Datuk Mohd Khalil Dato’ Mohd Noor 8/10 80% • Outsourcing of core business functions; Paisol Ahmad 10/10 100% Hijah Arifakh Othman - - • Policies and Procedures; (Appointed w.e.f. 1 June 2015) • Annual Budget; and At each scheduled Board meeting, there is a report on the six (6) elements of responsibility of the Board under the MCCG 2012, namely:- • Capital Management Plan.

• Reviewing/adoption of strategic and business plans for the Group; DIRECTORS’ REMUNERATION • Overseeing the conduct of the Group’s business to evaluate whether the business is being properly managed; Remuneration Policy and Procedure

• Identifying principal risks and ensuring the implementation of The Remuneration Committee recommends to the Board the appropriate appropriate systems to manage the risks; remuneration packages for the Directors as well as Executive Director and the key senior officers in order to attract, motivate and retain the Directors, • Succession planning, including appointing, training, fixing the Executive Director and the key senior officers of the necessary calibre and compensation of and where appropriate, replacing key management; quality as required by the Group. The Group’s remuneration policy is to reward the Directors and the key senior officers competitively, taking into • Developing and implementing an investor/shareholder relations account performance, market comparisons and competitive pressures in programme or communication policy for the Group; and the industry. Whilst not seeking to maintain a strict market position, the Committee takes into account comparable roles in similar organisations • Reviewing the adequacy and integrity of the Group’s systems of that may be the same in size, market sector or business complexity. internal control and of management information. The Executive Director does not participate in any way in determining his There is also a financial and business review and discussion of the Group’s individual remuneration. quarterly performance including operating performance to date, against the annual budget and business plan previously approved by the Board All Non-Executive Directors are paid Directors’ fees, which are for that year. recommended by the Board and approved annually by the shareholders at the AGM. The respective Board Committee’s reports and recommendations are also presented and discussed at Board meetings. All proceedings of The details of the total remuneration of each Director of the Company Board meetings are duly recorded in the minutes of each meeting and during the financial year ended 31 March 2015 are disclosed on signed minutes of each Board meeting are properly retained by the pages 154 and 155 of this Annual Report. Company Secretary. 52 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Indemnification of Directors and Officers The Company Secretary also serves notices to the Directors and all staff on the closed periods for trading in MNRB shares, in accordance with Directors and Officers are indemnified under a Directors’ and Officers’ the black-out periods for dealing in the Company’s securities pursuant to Liability Insurance against any liability incurred by them in the discharge Chapter 14 of the Listing Requirements. of their duties while holding office as Directors and Officers of the Company. The Directors and Officers shall not be indemnified where The Directors may, if necessary, obtain independent professional advice there is any negligence, fraud, breach of duty or breach of trust proven from external consultants, at the Company’s expense. against them. Throughout their period in office, Directors are updated on the Group’s business, the competitive and regulatory environments in which it SUPPLY OF INFORMATION operates and other changes by way of written briefings and meetings with the Senior Management staff. All Directors have full and unrestricted access to all information pertaining to the Group’s business affairs, whether as a full Board or in their individual capacity, to enable them to discharge their duties. CONFLICT OF INTEREST

Prior to Board meetings, every Director receives a notice of meeting, Directors are required to declare their respective shareholdings in the the agenda and Board papers. Sufficient time is given to the Directors Company and related companies and their interests in any contracts with to enable them to obtain further explanations, where necessary, so that the Company or any of its related companies. Directors are also required there will be full participation by Directors at the meeting. The Board to declare their directorships in other companies and shall abstain from papers include the following:- any discussions and decision-making in relation to these companies.

• Minutes of Board Committee meetings to keep the Board informed; DIRECTORS’ TRAINING • Reports by the various Board Committees on issues deliberated at the respective Board Committee meetings; The Company acknowledges that continuous education is vital for the Board members to gain insight into the regulatory updates and • Financial Statements Report on the Group and subsidiaries’ market developments to enhance the Directors’ skills and knowledge in performance; and discharging their responsibilities.

• Compliance reports. All new Directors are required to undergo an induction programme whereby they receive information about the Group, the formal Proper guidelines have been given by the Board pertaining to the statement of the Board’s role, the powers that have been delegated to content, presentation style and delivery of papers to the Board for each the Company’s Senior Management and Management committees as Board meeting to ensure adequate information is disseminated to the well as the latest financial information about the Group. This is to enable Directors. them to contribute effectively from the outset of their appointment.

All Directors have direct access to the members of the Senior With the repeal of Practice Note 15 on Continuing Education Programme Management Team and the services of the Company Secretary to enable by Bursa Securities, the continuous training needs of the Directors are them to discharge their duties effectively. now vested in the Board. During the financial year, all Directors attended various seminars and programmes to strengthen their skills set and The Company Secretary attends and ensures that all Board meetings knowledge in order to effectively discharge their responsibilities, as well are properly convened, and that accurate and proper record of the as to acquire sound understanding of current issues and developments in proceedings and resolutions passed are taken and maintained in the the financial and business environment. statutory register at the registered office of the Company. The Company Secretary works closely with Management to ensure that there are Pursuant to the requirements of Bursa Malaysia, a newly appointed timely and appropriate information flows within and to the Board and Director is required to attend the Mandatory Accreditation Programme Board Committees, and between the Non-Executive Directors and (“MAP”) and obtain a certificate from a programme organizer approved Management. by Bursa Malaysia. Hijah Arifakh Othman had attended MAP on 29 July 2015 and 30 July 2015.

53 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

The Company Secretary facilitates the organization of internal training BOARD COMMITTEES programmes and the Directors’ participation in external programmes. The Company Secretary keeps a complete record of the training received The Board has delegated specific responsibilities to five (5) Board or attended by the Directors. Committees, as follows:-

The following are some of the programmes and seminars attended by the • Audit Committee; Board members during the financial year:- • Nomination Committee; • Corporate Governance - Great Companies Deserve Great Boards and Great Boards • Remuneration Committee; Leading the Way for Highly Innovative Companies; - Nominating Committee Programme; • Risk Management Committee; and - Recovery and Resolution Plan in Financial Institutions: Board Leading the Way; and • Investment Committee. - Lean Management System. These Board Committees have their respective Terms of Reference, • Reinsurance Business which clearly define their duties and obligations in assisting and - The Impact of Science and Technology on the Insurance Industry; supporting the Board. The ultimate responsibility for the final decision - Reinsurance Overview; on all matters lies with the entire Board. - 20th Indonesian Rendezvous – Robust Indonesian Reinsurance Company Forthcoming the Asean Economic Community; Audit Committee - Overview of Compulsory Automobile Liability Insurance (“CALI”) in Japan; and The Audit Committee comprises five (5) members of whom three (3) are - Detariffication and Actuarial Liabilities for General and Family Independent Non-Executive Directors and two (2) are Non-Independent Takaful Business and Responsibilities of the Board on Actuarial Non-Executive Director. Two (2) members of the Committee are qualified Matters. Accountants and members of the Malaysian Institute of Accountants.

• Economics, Finance, Capital Market and Exchange • Megat Dziauddin Megat Mahmud - Global Competitiveness and the Malaysian Experience; Chairman (Senior Independent Non-Executive Director) - Islamic Corporate Banking: Products & Instruments; and - Anti-Money Laundering and Anti-Terrorism Financing. • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director)

DIRECTORS’ FEES • P. Raveenderen (Non-Independent Non-Executive Director) All Non-Executive Directors are paid Directors’ fees which have been approved by the shareholders at the AGM based on the Board’s • Paisol Ahmad recommendation. (Non-Independent Non-Executive Director)

The remuneration structure of Non-Executive Directors of the Company • Yusoff Yaacob is as follows:- (Independent Non-Executive Director)

• Fees for duties as Director and as member of the various committees The Committee’s Terms of Reference include the review and deliberation of the Board as well as additional fees for undertaking responsibilities of the Financial Statements of the Company and the Group, findings as Chairman of the Board and the various Board Committees. of the External and Internal Auditors, any related party transactions and any conflict of interest situation within the Group, as well as • Meeting allowance for each meeting attended. making recommendations to the Board pertaining to the appointment/ re-appointment of External Auditors. The fees for Non-Executive Directors are recommended by the Board to the shareholders after deliberating the recommendations by the Remuneration Committee. The meeting allowance for all Non-Executive Directors is also determined by the Board. 54 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

In order to encourage a greater exchange of free and honest views and The Directors are able to devote full commitment to their roles and opinions between the Audit Committee and External Auditors, meeting responsibilities as Directors of the Company, as no directors hold more between them, without the executive board member and the Senior than five directorships in other public listed companies. Management Team being present, was held during the year. The Committee met six (6) times during the financial year. The Audit Committee’s duties, as spelt-out in the Audit Committee Report on pages 59 and 60 of this Annual Report, include primarily, the duties as In accordance with prescribed Corporate Governance best practices, spelt out in paragraph 15.12 of the Listing Requirements. the Nomination Committee undertook these key activities during the financial year:- The Committee met six (6) times during the financial year. • Assessed the performance of key Senior Management staff prior to Nomination Committee the renewal of their contracts;

The Nomination Committee comprises five (5) Non-Executive Directors, • Assessed and made recommendations on the re-election of the majority of whom are independent. The Committee is chaired by Directors retiring by rotation at the 42nd AGM; an Independent Non-Executive Director in compliance with Paragraph 15.08A(1) of the Listing Requirements. • Reviewed the results of the Annual Assessment on the Effectiveness of the Board and the Individual Board members, including the The members of the Committee are:- assessment on the independence of the Independent Directors;

• Dato’ Syed Ariff Fadzillah Syed Awalluddin • Assessed the training needs of the Directors and ensured that the Chairman (Independent Non-Executive Director) necessary training was being provided by the Company;

• Sharkawi Alis • Assessed the Directors and key Senior Management compliance (Non-Independent Non-Executive Director) with the fit and proper criteria approved by the Board which are consistent with the Financial Services Act, 2013 and the Policy • Yusoff Yaacob Document on Fit and Proper Criteria; (Independent Non-Executive Director) • Assessed and made recommendations on the appointment of new • Paisol Ahmad Director; and (Non-Independent Non-Executive Director) • Training required by Board members. • Megat Dziauddin Megat Mahmud (Senior Independent Non-Executive Director) Remuneration Committee

The Committee’s objectives are to establish a documented formal and The Board has established a Remuneration Committee comprising transparent procedure for the appointment of Directors and key senior three (3) Non-Executive Directors. officers as well as to assess the effectiveness of Directors, the Board as a whole and the various committees of the Board on an ongoing basis. The members of the Committee are:- The Committee regularly reviews the profile of the required mix of skills and attributes of the Directors and is satisfied that the Board has the • Megat Dziauddin Megat Mahmud appropriate balance of expertise and ability to discharge its responsibilities. Chairman (Senior Independent Non-Executive Director) All assessments and evaluations carried out by the Committee are properly documented and kept by the Company Secretary. • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director) The Committee, following its recent annual assessment review, is satisfied that the size of the MNRB Board is optimum and that there is the • Yusoff Yaacob appropriate mix of knowledge, skills, attributes and core competencies in (Independent Non-Executive Director) the composition of 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. 55 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

The Committee’s primary objective is to establish a formal and transparent The members of the Committee are:- procedure for developing a remuneration policy for Directors, Executive Directors and key senior officers and to ensure that their compensation • Yusoff Yaacob is competitive and consistent with the Company’s culture, objectives Chairman (Independent Non-Executive Director) and strategies. Additionally, the Committee is also responsible for recommending to the Board the specific remuneration packages for • P. Raveenderen Directors, Executive Directors and key senior officers to ensure that they (Non-Independent Non-Executive Director) commensurate with the scope of responsibilities held, and as well as to review and recommend changes to the Board whenever necessary. • Hijah Arifakh Othman (Non-Independent Non-Executive Director) The Board as a whole will determine the remuneration of the Non-Executive Directors. Each individual Director will abstain from the The RMCB is responsible for:- Board discussion and decision on his own remuneration. • Reviewing and recommending risk management strategies, policies The Committee met seven (7) times during the financial year. and risk tolerance for the Board’s approval;

During the year, the Remuneration Committee had reviewed and • Reviewing and assessing the adequacy of risk management policies deliberated the following matters:- and framework for identifying, measuring, monitoring and controlling risks as well as the extent to which these are operating effectively; • The performance of the Balanced Scorecard/KPI for the bonus and performance of staff for the financial year ended 31 March 2015; • Ensuring adequate infrastructure, resources and systems are in place for effective risk management i.e. ensuring that the staff • The proposed Balanced Scorecard/KPI and linkages to annual responsible for implementing risk management systems perform increment and bonus for financial year ending 31 March 2016; those duties independently of the Group’s risk taking activities; and

• The starting salaries for all new graduates joining the MNRB Group • Reviewing the management’s periodic reports on risk exposure, risk of Companies; portfolio composition and risk management activities.

• The existing Anniversary Increment policy for new staff; The Committee met four (4) times during the financial year.

• Travel Guidelines for the MNRB Group; Investment Committee

• Directors’ Fees and Directors’ meeting allowance; and The Investment Committee, comprising two (2) Non-Independent Non-Executive Directors, one (1) Independent Non-Executive Director • The Education Assistance Programme for staff to further study. and one (1) Non-Independent Executive Director, examines strategic investment proposals and makes decisions to optimise the Group’s Risk Management Committee returns on its investment activities. The members of the Committee are:-

The Board believes that an effective Risk Management Framework is • Hijah Arifakh Othman essential for the Group in its quest to achieve its corporate objectives, Chairman (Non-Independent Non-Executive Director) continued profitability and enhancement of shareholders’ value in today’s rapidly changing market environment. • Megat Dziauddin Megat Mahmud (Senior Independent Non-Executive Director) With this in mind, the Board had established a dedicated Board Committee known as the Risk Management Committee of the Board • Paisol Ahmad (“RMCB”) which oversees the implementation of an enterprise-wide risk (Non-Independent Non-Executive Director) management framework. The Committee comprises three (3) members and is chaired by an Independent Non-Executive Director. • Mohd Din Merican (Non-Independent Executive Director)

The Committee met four (4) times during the financial year. 56 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

WHISTLEBLOWING EFFECTIVE COMMUNICATION WITH SHAREHOLDERS

The Group is committed to carrying out its business in accordance with The Group recognises the paramount importance of shareholder the highest standards of professionalism, honesty, integrity and ethics. communication as it is a key component to upholding the principles and Accordingly, the Group has established a Whistleblowing Policy with the best practices of corporate governance for the Group. following objectives:- In maintaining the commitment to communicate effectively with • To help develop a culture of accountability and integrity within the shareholders, the Group adopts the practice of comprehensive, timely Group; and continuing disclosure of information to its shareholders as well as to the investing public. This practice of disclosure of information is not just • To provide a safe and confidential avenue for all employees, established to comply with the requirements of the Listing Requirements external parties and other stakeholders to raise concerns about any pertaining to continuing disclosure, but to align with the best practices misconduct; as recommended in the Code with regard to strengthening engagement and communication with shareholders. • To reassure whistleblowers that they will be protected from detrimental action or unfair treatment for disclosing concerns in good The Group’s Annual Report is the main channel of communication faith; and between the Group and its stakeholders. The Annual Report communicates comprehensive information of the financial results and • To deter wrongdoing and promote standards of good corporate activities undertaken by the Group. As a listed corporation, the contents practices. and disclosure requirements of the Annual Report are also governed by the Listing Requirements. This Policy governs the disclosures, reporting and investigation of misconduct within the Group as well as the protection offered to the The Company disseminates its Annual Report to its shareholders either persons making those disclosures (“whistleblowers”) from detrimental in hard copy or in CD-ROM media. All information to shareholders is action in accordance with Act 711, Whistleblower Protection Act, 2010. available electronically in the Company’s website (www.mnrb.com.my) as soon as it is announced or published. It is the Group’s policy to encourage its employees and external parties to disclose any misconduct, and to fully investigate reports and The AGM is the principal forum for dialogue with shareholders. The disclosures of such misconduct, as well as to provide the whistleblower Company’s AGM is normally well attended as it provides the shareholders protection in terms of confidentiality of information, and to safeguard direct access to the Board as well as give them an opportunity to the whistleblower from any act of interference that may be detrimental participate effectively and to vote. to the whistleblower. The Group assures whistleblowers that all reports will be treated with strict confidentiality and upon verification of genuine Notice of the AGM and the Annual Report are sent out to shareholders cases, prompt investigation will be carried out. at least twenty-one (21) days before the date of the meeting.

The official avenues for disclosure by the whistleblower are via any of the Besides the normal agenda for the AGM, the Chairman of the Group following recipients:- presents a comprehensive and concise review of the Group’s financial performance and the value created for shareholders. This review is • The Chairman; supported by the presentation of key points and key financial figures. The Chairman also presents the progress and performance of the Group • The Chairman of the Audit Committee of MNRB Holdings Berhad; or in the Annual Report and provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. All Directors • The GCEO. are available to provide responses to questions from the shareholders during this meeting. The disclosure of misconduct or wrongdoing shall be made in writing via email to [email protected]. The Policy and relevant form can be Each item of Special Business included in the notice of the meeting accessed at the Company's website www.mnrb.com.my. will be accompanied by an explanatory statement and/or Circular to Shareholders to facilitate full understanding and evaluation of the issues involved.

57 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON CORPORATE GOVERNANCE //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Apart from the abovementioned engagement with shareholders position and prospects. The Audit Committee assists the Board in through annual reports and general meetings, the Group also makes scrutinising information for disclosure to ensure accuracy, adequacy announcements of its quarterly results and other announcements to and completeness. The Directors are responsible for ensuring that the Bursa Malaysia to provide stakeholders with key information that affects accounting records are kept properly and that the Group’s financial their decision-making, thus enhancing the level of transparency. To statements are prepared in accordance with applicable approved promote wider publicity and dissemination of information that is made accounting standards in Malaysia. The Statement by Directors pursuant public, the Group also issues press releases to the Media on all significant to Section 169 of the Companies Act, 1965 is set out on page 116 of this corporate developments and business initiatives to keep the investment Annual Report. community and all stakeholders updated on the progress and strategic development of the business of the Group. Internal Control and Risk Management

Information on the Group’s internal control and risk management is POLL VOTING presented in the Group’s Statement on Risk Management and Internal Control as set out on pages 61 to 63 of this Annual Report. The Chairman, at the commencement of a general meeting, informs shareholders of their right to vote by poll. This is in line with MNRB’s Relationship with Auditors Articles of Association. Information on the role of the Audit Committee in relation to the External Poll voting will be adopted if there is/are substantive resolution(s) to be Auditors may be found in the Audit Committee Report set out in pages put forth for shareholders’ approval at the general meetings. 59 and 60. The Group has always maintained a close and transparent relationship with its auditors in seeking professional advice and ensuring Polling slips are prepared in the event shareholders request for poll compliance with the approved accounting standards. voting on any resolution tabled at the general meeting. Management’s Accountability

INVESTOR RELATIONS The Group has an organisational structure showing all reporting lines as well as clearly documented job descriptions for all its Management and As part of the initiatives in developing and implementing an investor Executive employees and formal performance appraisals are done on a relations programme, regular briefings are held between the Group with periodic basis. analysts and investors. Authority limits, as approved by the Board, are clearly established and Presentations based on permissible disclosures are made to explain made available to all employees. the Group’s performance and major development programmes. Price-sensitive information about the Group is however, not disclosed at these briefings until after the prescribed announcement to Bursa STATEMENT ON COMPLIANCE WITH THE BEST PRACTICES Securities has been made. OF THE CODE

MNRB also maintains a website, which shareholders and the public The Group is committed to achieving high standards of corporate in general can access to gain information about the Group at governance and the highest level of integrity and ethical standards in www.mnrb.com.my. all its business dealings. The Board will continuously strive towards adopting all the Principles and Best Practices as set out in the MCCG 2012, the CG Guide and the Listing Requirements. ACCOUNTABILITY AND AUDIT This Statement on Corporate Governance is made in accordance with the Financial Reporting resolution of the Board of Directors dated 31 July 2015.

For financial reporting through interim quarterly reports to Bursa Malaysia and the Annual Report to shareholders, the Directors have a responsibility to present a fair assessment of the Group’s

58 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 AUDIT COMMITTEE MNRB HOLDINGS BERHAD REPORT

MEMBERS OF THE COMMITTEE TERMS OF REFERENCE

Megat Dziauddin bin Megat Mahmud The main duties of the Committee are:- (Chairman & Senior Independent Non-Executive Director) 1. To review and approve the annual audit plan, audit charter, budget, Dato’ Syed Ariff Fadzillah bin Syed Awalluddin scope of audit procedures, audit programmes and reports of (Independent Non-Executive Director) the internal auditors including actions taken on internal audit recommendations; Yusoff bin Yaacob (Independent Non-Executive Director) 2. To review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the P. Raveenderen necessary authority to carry out its work; (Non-Independent Non-Executive Director) 3. To review annually with the external auditors, the audit plan and the Paisol Ahmad report including the coordination between the internal and external (Non-Independent Non-Executive Director) auditors to prevent duplication of effort;

4. To review the quarterly results and year-end financial statements MEMBERSHIP before approval by the Board including the assistance given by the Company’s officers to the auditors; The Audit Committee shall be appointed by the Board and comprises at least three (3) members of whom all members must be Non-Executive 5. To recommend to the Board the nomination of the external auditors Directors and the majority shall be Independent Directors. At least one after evaluating their performance and to consider the auditors’ member of the Committee must be a member of the Malaysian Institute remuneration and any questions of resignation or dismissal; of Accountants or eligible for membership. 6. To review the external auditors’ management letter and The members of the Audit Committee must elect a Chairman among Management’s response thereto; themselves who is an Independent Director. 7. To review the disclosure statements in the annual report to be in The term of office shall be reviewed no less than once in every two (2) years. compliance with Bursa Malaysia requirements;

8. To review any related-party transactions and any conflict of interests AUTHORITY situation that may arise within the Group; and

The Committee is authorised by the Board to undertake any activity 9. To review the allocation of options pursuant to the Company’s within its terms of reference and must have unlimited access to all Employees’ Share Option Scheme. information and documents relevant to its activities, to both the internal and external auditors, as well as to all employees of the Group. MEETINGS It must be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors A quorum shall consist of at least two-thirds of the members with and employees of the listed issuer, whenever deemed necessary. independent directors forming the majority.

It must also have the authority to obtain independent legal or other A minimum of four meetings per year is planned. Additional meetings professional advice as it considers necessary. may be called at any time if so requested by any committee member, the Management, the internal or external auditors.

The Chairman of the Committee shall invite any person to be in attendance to assist the committee in its deliberations.

59 (CONT’D) //MNRB HOLDINGS BERHAD AUDIT COMMITTEE REPORT //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

The minutes of the meetings shall be circulated to the Board after INTERNAL AUDIT DEPARTMENT confirmation. The Internal Audit Department was set up in-house on January 2, 1991. The Secretary to the Committee shall be the Company Secretary. It is independent of the activities or operations of the operating units. For the financial year ended March 31, 2015, the total costs incurred for For the financial year under review, a total of 6 Audit Committee the Group Internal Audit function were RM2,413,000. Meetings were held. The details of attendance of the Audit Committee members were as follows:- A summary of its activities for the year is as follows:-

Name of Audit No. of Meetings 1. Conducted audits of the various business portfolios/departments of Committee member Attended the Group; i. Megat Dziauddin Megat Mahmud 6/6 2. Conducted follow-up audits on the implementation of the Audit Committees’ recommendations and Management’s actions taken to ii. Dato’ Syed Ariff Fadzillah Syed Awalluddin 6/6 improve on issues identified during the audits; and iii. Yusoff Yaacob 6/6 iv. P. Raveenderen 6/6 3. Prepared annual audit plans and budget for the Audit Committees’ consideration. v. Paisol Ahmad 6/6

The main activities that took place during the meetings were:-

1. Reviewed the quarterly results and year-end financial 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 2015;

3. Reviewed the external auditors’ audit plan for the year ended 31 March 2015;

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;

7. Reviewed the results of the internal audits carried out in the year and the adequacy of actions taken by Management; and

8. Reviewed the Internal Audit Department’s annual audit plan for the year ended 31 March 2015.

In respect of the Company’s Employees’ Share Option Scheme, there was no allocation of options in the year for the Audit Committee to review.

60 //MNRB HOLDINGS BERHAD STATEMENT ON RISK MANAGEMENT //ANNUAL REPORT 2015 AND INTERNAL CONTROL MNRB HOLDINGS BERHAD

RESPONSIBILITY • To further complement the enterprise risk management framework of the Group, dedicated Management Committees known as The Board acknowledges that it is responsible to oversee the the Operational Risk Management Committee (“ORMC”) at the implementation of the Group’s risk management and internal control operational level were also established to assist the RMCBs in system and for reviewing its effectiveness, adequacy and integrity. implementing the risk management framework and ensuring It recognises that risk management is a continuous process, designed to inculcation of a proactive risk management culture on an manage the risk of failure to achieve the Group’s business objectives. enterprise-wide basis. A Risk Management & Compliance Division In pursuing these objectives, internal control system can only provide was formed to provide the infrastructure and carry out the risk reasonable and not absolute assurance against material misstatement management process. or loss. • The Audit Committee (“AC”) complements the role of the Board The Board has established a robust process for identifying, evaluating by providing an independent assessment of the adequacy and and managing the significant risks faced by the Group (Enterprise reliability of the risk management process, and compliance with Risk Management Framework). These processes have been in place the risk policies and regulatory guidelines. The AC is assisted by an for the whole of the financial year ended 31 March, 2015 and have independent Internal Audit Department in performing its role. continued up to the date on which this Statement was approved. The Board is confident that these processes provide reasonable assurance • The Group Chief Risk Management and Compliance Officer on the effectiveness and efficiency of both the strategic, financial and (“GCRMCO”) oversees the risk governance across the Group. The operational aspects of the Group. The process is regularly reviewed risk governance structure is aligned across the subsidiaries of the by the Board and is guided by the Statement on Risk Management & Group through the adoption of the Enterprise Risk Management Internal Control: Guidelines for Directors of Listed Issuers. Framework and structures in order to embed and enhance the risk management & compliance culture.

RISK MANAGEMENT AND INTERNAL CONTROL STRUCTURE • The Group adopts the three lines of Defence model: Operating Units, Management Oversight and Independent Assurance. Within The key features that the Board has established in reviewing the each entity, Heads of Divisions/Departments are responsible adequacy and effectiveness of the risk management and internal control for managing risks and system of internal controls within their system include the following:- respective functions on day-to-day basis, as well as escalating significant potential risks to the respective ORMC via the risk Enterprise Risk Management Framework management function. The risk management and compliance function assumes overall responsibility for the implementation of the • The Board of MNRB believes that an effective enterprise risk Risk Management Framework and its continued application in the management framework and strong internal control system is respective entities. Internal Audit provides the AC with reasonable essential to the Group in its quest to achieve its corporate objectives, independent assurance on the effectiveness and efficiency of the especially on the continued profitability and enhancement of Framework as part of Group’s system of internal controls. shareholders’ value in today’s rapidly changing market environment. Internal Audit Function • With this in mind, the Board had established dedicated Board Committees known as the Risk Management Committee of the • The internal audit function of the Company and its subsidiaries Board (“RMCB”) at the holding company and each of its subsidiary (via outsourcing arrangements) is undertaken by the Internal Audit companies to oversee the implementation of an enterprise-wide risk Department at the holding company level. The department has management framework in each company. As part of risk governance a functional reporting line to the respective ACs set up at each process, Chairman of the respective RMCBs had provided their company level. confirmation to the Chairman of MNRB that the necessary risk management framework had been put in place and it is operating • The Internal Audit Department performs regular reviews of the effectively to manage the risks of the company for the whole of the business processes of the Group in an effort to assess the adequacy financial year ended 31 March, 2015. and effectiveness of internal controls and to highlight significant risks impacting the Group.

61 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

• Where applicable, it provides recommendations to improve on • Annual business plans are submitted to the Board for approval. the effectiveness of risk management, control and governance processes. Management will accordingly follow through and review • A detailed budgeting process has been implemented in the Group the resolution status of recommendations made. Audit reviews are where each department prepares a budget for the upcoming carried out on units that are identified on a risk-based approach, financial year for the approval of the Board. The budget is monitored in the context of the Group’s evolving business and its regulatory and major variances are followed-up by the respective Management. environment, while also taking into consideration inputs of Senior Management and the Board. • Shariah Committees have also been established at each of the takaful and retakaful subsidiary companies to provide oversight on • The AC meets on a scheduled basis to review matters identified Shariah related matters. in reports prepared by Internal Audit, the External Auditors, and Regulatory Authorities and further evaluates the effectiveness • Every employee of the Group is contractually bound to observe and adequacy of the Group’s internal control system. The AC has prescribed standards of business ethics in their conduct at work active oversight on Internal Audit’s independence, scope of work and their relationships with external parties such as customers and resources. It also reviews the scope of the annual audit plan and and suppliers. The Group expects each employee to conduct him/ frequency of the internal audit activities. The activities undertaken by herself with integrity and objectivity and not to place him/herself the AC during the year are highlighted in the Audit Committee Report. in a position of conflict of interest. The competence of personnel is maintained through a structured recruitment process, a performance Other Key Elements of Internal Control measurement and rewarding system and a wide variety of training and development programmes. • The Group has a well-defined organisational structure with clear lines of responsibility and accountability. • MNRB holds a 20% effective equity interest in its associated company, Labuan Reinsurance (L) Limited (“Labuan Re”) through its • The Board has also adopted communication policies to ensure that subsidiary, Malaysian Reinsurance Berhad and is represented on the all decisions made are communicated promptly to staff of all levels Board of Labuan Re by two (2) of its directors. It also has a 40% within the Group and vice versa where feedbacks and suggestions effective equity interest in another associated company, Motordata on improvements could be communicated to the Board and Research Consortium Sdn. Bhd. (“MRC”) and is similarly represented Management. on the Board of MRC by two (2) of its directors.

• The Underwriting Guidelines of the Reinsurance, Takaful and Other Committees of the Board Retakaful subsidiary companies have been put in place to manage risks that are being underwritten. Apart from the RMCB and the AC, other Board Committees have also been established at both the Group and subsidiary levels to assist the • Reinsurance and retrotakaful programs exist where there is a spread Board in performing its oversight function. They consist of the following:- of reinsurers with acceptable ratings from accredited agencies. The securities of these reinsurers and retakaful companies are reviewed • The Investment Committee, which is responsible for reviewing and on an annual basis. approving investment proposals, as well as monitoring the Group’s investment portfolio to ensure conformity with overall business • Departmental manuals are available within the Group and these objectives and statutory requirements. set out policies and procedures for day-to-day operations and act as guidance to employees on the necessary steps to be taken in a • The Nomination Committee, which is responsible to recommend given set of circumstances. The manuals enable tasks to be carried to the Board the appointment of directors, CEOs and Board out with minimal supervision. It also specifies relevant authority appointees. The Nomination Committee is also responsible for the limits to be complied with by each level of management within the annual assessment of the effectiveness of the Board. subsidiaries. There is an ongoing process in place currently to review and update the manuals, where applicable. • The Remuneration Committee, which is responsible to recommend the appropriate remuneration for the directors, CEOs and Board • The Group’s financial systems record all transactions to produce appointees. performance reports that are submitted to the respective Management within internally stipulated timelines.

62 (CONT’D) //MNRB HOLDINGS BERHAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD

Assurance from Management

The Board has also received full assurance from the President & Group Chief Executive Officer (“GCEO”) and the Group Chief Financial Officer (“GCFO”) that the Group’s risk management and internal control system are operating adequately and effectively, in all material respects, based on the risk management framework adopted by the Group. To facilitate this process, the Group undertakes a risk assurance process to ensure that the risk management and internal control system are adequate and effective at all level of the organisation.

Review of the Statement by External Auditors

The external auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report for the financial year ended 31 March 2015.

The external auditors conducted the review in accordance with the “Recommended Practice Guide 5 (Revised): Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report” (“RPG 5 (Revised)”) issued by the Malaysian Institute of Accountants. The review has been conducted to assess whether the Statement on Risk Management and Internal Control is both supported by the documentation prepared by or for the Directors and appropriately reflects the processes the Directors had adopted in reviewing the adequacy and integrity of the system of internal controls of the Group.

RPG 5 (Revised) does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the effectiveness of the Group’s risk and control procedures. RPG 5 (Revised) also does not require the external auditors to consider whether the processes described to deal with material internal control aspects of any significant matters disclosed in the annual report will, in fact, mitigate the risks identified or remedy the potential problems.

Based on their review, the external auditors have reported to the Board that nothing had come to their attention that causes them to believe that the Statement on Risk Management and Internal Control is inconsistent with their understanding of the processes the Board has adopted in the review of the adequacy and integrity of the risk management and internal control of the Group.

63 //MNRB HOLDINGS BERHAD STATEMENT OF DIRECTORS’ RESPONSIBILITY //ANNUAL REPORT 2015 IN RELATION TO THE FINANCIAL STATEMENTS MNRB HOLDINGS BERHAD pursuant to paragraph 15.26(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad

64 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 ADDITIONAL COMPLIANCE MNRB HOLDINGS BERHAD 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 There was no corporate proposal and proceeds raised by the Company during the financial year ended 31 March 2015.

(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 2015.

(3) options or convertible securities No options or convertible securities were issued by the Company during the financial year ended 31 March 2015 and there are no options or convertible securities outstanding and exercisable at the end of the financial year ended 31 March 2015.

(4) Depository receipt programme The Company did not sponsor any depository receipt programme during the financial year ended 31 March 2015.

(5) Sanctions and/or penalties There was no sanction and/or penalty imposed on the Company and its subsidiary companies, directors or management by the relevant regulatory bodies during the financial year ended 31 March 2015.

(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 2015 amounted to RM116,180 and RM9,000 respectively.

(7) Variation in results There were no significant variations between the audited results for the financial year ended 31 March 2015 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 2015.

(8) Profit guarantee There was no profit guarantee given by the Company and its subsidiary companies during the financial year ended 31 March 2015.

(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 2015 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.

65 A STRATEGIC PARTNER Over the years, Malaysian Re has proven its worth as a strategic partner that is committed to strengthening local insurance companies. Be it the development of a flood risk analysis tool for industry players or the roll out of training programmes for staff of insurance companies, Malaysian Re continues to leverage on its strong fundamentals, experience and expertise as well as proven record of accomplishment to elevate industry professionalism and standards. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MALAYSIAN REINSURANCE BERHAD PROFILE

Authorised Capital of RM1 billion Paid-up Capital of RM510 million

Malaysian Reinsurance Berhad, (MALAYSIAN RE) is a wholly owned subsidiary of mnrb holdings berhad.

As the national reinsurer, Malaysian Re CAPITAL STRUCTURE continues to enhance the competitiveness and efficiency of the local insurance companies The Company has an Authorised Capital of in an increasingly globalised marketplace RM1 billion, divided into 1 billion ordinary through its active involvement in leading and shares of RM1.00 each and a Paid-up Capital underwriting their reinsurance needs. of RM510 million, divided into 510 million ordinary shares of RM1.00 each. 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.

67 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MALAYSIAN REINSURANCE BERHAD INFORMATION

Registered Office Auditors Board of 12th Floor, Bangunan Malaysian Re Ernst & Young No. 17, Lorong Dungun Level 23A, Menara Millenium Damansara Heights Jalan Damanlela 50490 Kuala Lumpur Pusat Bandar Damansara Tel : +603-2096 8000 Damansara Heights Sharkawi Alis Fax : +603-2096 7000 50490 Kuala Lumpur NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN E-mail: [email protected] Tel : +603-7495 8000 Website: www.malaysian-re.com.my Fax : +603-2095 5332 Zainudin Ishak President & Chief Executive Officer Non-Independent Executive Director

P. Raveenderen Non-Independent Non-Executive Director Audit Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Dato’ Syed Ariff Fadzillah Syed Awalluddin Independent Non-Executive Director P. Raveenderen

Yusoff Yaacob Independent Non-Executive Director Nomination Committee Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) Megat Dziauddin Megat Mahmud Sharkawi Alis Independent Non-Executive Director P. Raveenderen Yusoff Yaacob Mohd Din Merican Mustaffa Ahmad Non-Independent Non-Executive Director Remuneration Committee Mustaffa Ahmad Megat Dziauddin Megat Mahmud (Chairman) Independent Non-Executive Director Dato’ Syed Ariff Fadzillah Syed Awalluddin Yusoff Yaacob Md Adnan Md Zain Mohd Din Merican Independent Non-Executive Director Risk Management Committee Yusoff Yaacob (Chairman) P. Raveenderen Company Secretaries Mohd Din Merican Norazman Hashim (MIA 5817) Mustaffa Ahmad Lena Abd Latif (LS 8766) Investment Committee Md Adnan Md Zain (Chairman) Principal Bankers Megat Dziauddin Megat Mahmud Standard Chartered Bank Mohd Din Merican Malayan Banking Berhad Zainudin Ishak CIMB Bank Berhad

68 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 DIRECTORS’ MALAYSIAN REINSURANCE BERHAD PROFILE

Board meeting 9/9 attended SHARKAWI ALIS Non-Independent Non-Executive Chairman

SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Director since 31 March 2005 and was subsequently appointed as Non-Independent Non-Executive Chairman on 3 September 2007. Member of the Nomination Committee.

Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report.

Board meeting ZAINUDIN ISHAK N/A attended Non-Independent Executive Director

ZAINUDIN ISHAK, aged forty-eight (48), Malaysian. Non-Independent Executive Director since 1 April 2015. Member of the Investment Committee. An Associate member of Malaysian Insurance (AMII) since 1994. He started his career as Executive at Trust International Insurance Sdn Bhd in 1989. He joined Commerce Assurance Berhad (now CIMB Aviva Takaful Berhad) in 1994 and appointed CEO in 2006. In 2009, he then joined HSBC Amanah Takaful Berhad as Executive Director & Chief Executive Officer. He served as Chairman of Malaysian Takaful Association until early 2015. Also a Director of Malaysian Re (Dubai) Ltd., Financial Park (Labuan) Sdn Bhd and MMIP Services Sdn Bhd.

69 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD

Board meeting P. RAVEENDEREN 9/9 attended Non-Independent Non-Executive Director

P. RAVEENDEREN, aged seventy (70), 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 23 of this Annual Report.

Board meeting 9/9 attended DATO’ SYED ARIFF FADZILLAH

Independent Non-Executive Director SYED AWALLUDDIN

DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged seventy-one (71), 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. Member of the Audit Committee and the Remuneration Committee.

Other information on Dato’ Syed Ariff Fadzillah Syed Awalluddin is disclosed in the Directors’ Profile section of MNRB on page 24 of this Annual Report.

70 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD

Board meeting 9/9 attended YUSOFF YAACOB Independent Non-Executive Director

YUSOFF YAACOB, aged sixty-seven (67), Malaysian. Non-Independent Non-Executive Director since 31 March 2005 and re-designated as Independent Non-Executive Director on 23 March 2006. Chairman of the Risk Management Committee. Member of the Remuneration Committee and the Nomination Committee.

Other information on Yusoff Yaacob is disclosed in the Directors’ Profile section of MNRB on page 24 of this Annual Report.

Board meeting MEGAT DZIAUDDIN 9/9 attended

MEGAT MAHMUD Independent Non-Executive Director

MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 24 August 2006. Chairman of the Remuneration Committee and the Audit Committee. Member of the Investment Committee.

Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 23 of this Annual Report.

71 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD

Board meeting MOHD DIN MERICAN 9/9 attended Non-Independent Non-Executive Director

MOHD DIN MERICAN, aged fifty-three (53), 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 22 of this Annual Report.

Board meeting N/A attended MUSTAFFA AHMAD Independent Non-Executive Director

MUSTAFFA AHMAD, aged fifty-nine (59), Malaysian. Independent Non-Executive Director since 1 June 2015. Member of the Risk Management Committee and Nomination Committee. He graduated with a Bachelor of Science (Honours) degree in Statistics from the Heriot-Watt University, Edinburgh, Scotland in 1978. He had worked for several insurance companies since 1978 and then joined Malaysian National Reinsurance Berhad as Senior Manager in 1989. He assumed various other roles whilst he was in Malaysian National Reinsurance Berhad. Following the MNRB Group restructuring exercise in 2005, he was transferred to Malaysian Re and was appointed the Chief Operating Officer until 2010. He currently sits as Director in two (2) other companies, MIDF Amanah Investment Bank Berhad and Amanah International Finance Sdn Bhd.

72 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTOR’S PROFILE //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD

Board meeting N/A attended MD ADNAN MD ZAIN Independent Non-Executive Director

MD ADNAN MD ZAIN, aged fifty-eight (58), Malaysian. Independent Non- Executive Director since 1 June 2015. Chairman of the Investment Committee. He obtained a Bachelor of Economics degree from University Putra Malaysia and is a Registered Financial Planner from Malaysian Financial Planning Council. He began his career in the banking industry with Standard Chartered Bank in 1981 where he served in various operations including senior positions as the Regional Manager and the Head, Global Electronic Banking. He was appointed as the CEO of MCIS Zurich Insurance Berhad in 2006 and was elected as President of Life Insurance Association of Malaysia for (2) terms in 2009/2010 and 2010/2011. He was the Chairman of Malaysian Life Reinsurance Berhad and currently a Director of Malaysian Rating Corporation Berhad, Kuwait Finance House Berhad and Malaysian Insurance Institute.

73 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR MALAYSIAN REINSURANCE BERHAD MANAGEMENT TEAM

Paul Ng Wooi Yip Rajinder Mohan

Zainudin ishak President & CEO MILI MOHD YUSOFF ABDUL HALIM ANUAR SHARIF

AHMAD NASARUDDIN ISHAUDIN Lua Tiong Aik Tony Tan chee yew 74 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR MANAGEMENT MALAYSIAN REINSURANCE BERHAD TEAM’S PROFILE

PAUL NG WOOI YIP MILI MOHD YUSOFF Chief operating officer Vice President & Head of Retakaful Division and the Large & Specialised Risks (LSR) Department

PAUL NG WOOI YIP is the Chief Operating Officer. He graduated with a Bachelor of Science (Hons) degree in Mechanical Engineering MILI MOHD YUSOFF assumed the position as Vice President & Head of from the University of Salford, Manchester, United Kingdom in 1984. Retakaful Division and the Large & Specialised Risks (LSR) Department He began his career with the then Malaysian National Reinsurance in June 2015. She obtained her Associateship of the Chartered Insurance Berhad as a Risk Engineer in 1984. He was promoted to Assistant Institute from the London School of Insurance. Whilst in the UK, she General Manager in 1994. He was transferred to Malaysian Re on was attached to Gily Carvajal Brokers Pte Ltd where she received 1 April 2005 and assumed the position of Senior Vice President & training as a junior reinsurance broker. She subsequently returned to Chief Underwriter of International Treaties. He was promoted to the Malaysia in 1987 and thereafter, spent a major part of her career in position of Chief Operating Officer in June 2015. insurance broking specialising in Oil & Gas, Marine and Specialised Risks portfolios. She was the Risk and Insurance Manager for a major Dutch oil company for a short stint before returning to the broking fraternity RAJINDER MOHAN in 2001. In her last broking assignment, she led her team to successfully Senior Vice President & Chief Underwriter of secure Malaysia’s first deepwater offshore construction project. Business Region 1 She was also the Client Manager for the country’s ‘Angkasawan (Astronaut)’ insurance programme. A Fellow of the Chartered Insurance Institute (by examination, 1994). RAJINDER MOHAN is the Senior Vice President & Chief Underwriter of Business Region 1. He is a Fellow member of the Chartered Insurance Institute, United Kingdom (F.C.I.I.) and a Senior Associate member ABDUL HALIM ANUAR SHARIF of the Australian and New Zealand Institute of Insurance and Finance Vice President & Head of Market Services (A.N.Z.I.I.F.). He started his career as an Executive with Guardian Royal Exchange in New Zealand in February 1988 and subsequently joined the then Malaysian National Reinsurance Berhad in November 1988 as an ABDUL HALIM ANUAR SHARIF is the Vice President & Head Underwriting Executive. He was promoted to Assistant General Manager of Market Services. He graduated with a Bachelor of Science in for Business Unit 2 in April 2002. He was transferred to Malaysian Re on Mechanical Engineering in 1986 from South Dakota State University, 1 April 2005 and assumed his present position on 1 June 2015. USA. He commenced his career with the 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, transferred to Malaysian Re on 1 April 2005 and Head of Market Pools Department in May 2010. He assumed his present position in June 2015.

75 (CONT’D) //MNRB HOLDINGS BERHAD SENIOR MANAGEMENT TEAM’S PROFILE //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD

AHMAD NASARUDDIN TONY TAN Chee Yew ISHAUDIN Vice President & Head of Actuarial Services Vice President & Head of Claims Department

TONY TAN is the Vice President & Head of Actuarial Services. He AHMAD NASARUDDIN ISHAUDIN is the Vice President & Head graduated with a Bachelor of Science (Hons) degree in Mathematics, of Claims Department. He has 23 years of working experience in the Operational Research, Statistics and Economics from Warwick insurance fraternity including takaful. He holds an engineering degree University, UK, and holds a Master Degree in Actuarial Science from City in mechanical from University of Malaya in 1986 and has worked as University, UK. He started his career as an actuarial analyst in a local an engineer for Lembaga Letrik Negara at Tuanku Jaafar Power Plant, consulting firm and subsequently joined Malaysian Re in June 2010 to Port Dickson. He is an Associate member of the Malaysian Institute start up the Actuarial Services Department. He assumed his present of Insurance. He started his long career in the insurance industry as a position in January 2013. loss adjuster. His working experience then expands as a reinsurance facultative underwriter, general claims examiner and risk surveyor. He has experience in all classes of general insurance, with specialisation in fire and engineering. In 2008, he joined Takaful IKHLAS Berhad as a Risk Surveyor and on 1 June 2015 he was transferred to Malaysian Re and assumed his current position.

Lua Tiong Aik Vice President & Head of Facultative Department

Lua Tiong Aik is the Vice President & Head of Facultative Department. He graduated with a Bachelor of Engineering in Industrial Engineering from the University of Melbourne, Australia in 1985. He commenced his insurance career as a direct underwriter in 1990 and had since held several underwriting and broking portfolios before joining Malaysian Reinsurance Berhad as a treaty underwriter in his capacity as Vice President of Business Unit 2 in October 2009. He assumed his current position in June 2015.

76 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE ACTIVITIES MALAYSIAN REINSURANCE BERHAD AND SERVICES

Malaysian Re has been actively involved in underwriting all classes of general reinsurance business from the Malaysian market. It has expanded its business internationally and is actively underwriting business from the Asian, Middle East and Africa markets. Malaysian Re will continue to provide prompt services and will ensure the existing products to be not only competitive but also meet the requirements of its customers.

MARKET SERVICES

Malaysian Re is currently involved in providing various services to the Malaysian insurance industry. The services amongst others include the following:-

A. maLAYSIAN MARKET POOLS

• Malaysian Aviation Pool

Malaysian Re assumed the role as Manager of the Malaysian Aviation Pool (MAP) effective 1 October 1996. Currently, its membership comprises six (6) local insurers and two (2) reinsurers with a total underwriting capacity of RM338 million. The underwriting of risks is by a Committee, nominated by participating companies. The business written by MAP is primarily Malaysian risks and Malaysian interests abroad.

• Malaysian Energy Risks Consortium

Malaysian Energy Risks Consortium (MERIC) was established in March 1995 with the objective to optimise national retention, promote wider interest and develop underwriting skills in the specialised class of energy business. MERIC comprises eleven (11) local insurers and two (2) reinsurers with Malaysian Re taking on the role of Secretariat. It has a capacity to underwrite up to a combined single limit of RM50 million for upstream and downstream risks. The underwriting of risks is by a Committee, nominated by participating companies. The primary portfolio of the business written by MERIC is Malaysian risks and Malaysian interests abroad.

B. CENTRAL ADMINISTRATION BUREAU

Malaysian Re initiated the establishment of the Central Administration Bureau (CAB) in 1995 to manage the centralised computerised and web-based 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 then, and still are, being jointly funded by its members. Following the success of the CABFAC system, the members of Persatuan Insurans Am Malaysia (PIAM), in 2009 conceptualised the idea of developing a centralised coinsurance system (CABCO) which would function on the same operating model as the CABFAC. The CABCO was formally launched in August 2011 to cater for the coinsurance business transactions between the local insurers.

C. teCHNICAL SERVICES

Surveying and Advisory Services on Risk Management

Malaysian Re provides Property and Engineering Risk Survey services to the local insurance industry for the purpose of special rating, underwriting and also loss estimation. Property Risk assessment and risk management services tailored to the insureds’ needs are also provided through their insurers when requested.

77 (CONT’D) //MNRB HOLDINGS BERHAD CORPORATE ACTIVITIES AND SERVICES //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD

D. SPECIAL RATING

Malaysian Re was appointed by PIAM to form a Rating Committee specifically for the purpose of determining special rates for Fire and Industrial All Risks (IAR) insurances, for risks which qualify for special rating under the Fire Tariff. This Committee comprises not less than six (6) qualified or experienced insurance underwriters or risk surveyors from among PIAM members of whom not more than three (3) shall be from Malaysian Re. The Chairman of the Rating Committee shall be a representative from Malaysian Re. By virtue of this appointment, Malaysian Re also acts as the Secretariat to this Committee as well as handles the day-to-day operations of all matters pertaining to special rating applications.

E. INSPECTION

Malaysian Re was given the mandate by PIAM to form an Inspection Task Force to conduct inspections or carry out investigations on the conduct and activities of its members in accordance with the terms and provisions of the various Inter-Company Agreements. With effect from 1 April 1992, the various Inter-Company Agreements had now been amalgamated into a single agreement called “Inter Company Agreement On General Insurance Business (ICAGIB)”.

Thus, the Inspection Department has been entrusted to provide practical, reliable and timely inspection on the General Insurance Companies’ compliance with provisions embodied in the “ICAGIB” on matters pertaining to:-

a. Dealing with Agents; b. Motor Tariff; c. Fire Tariff; and d. Bond Insurance.

F. SIHAT MALAYSIA

The Sihat Malaysia Scheme, which was officially launched on 18 February 2000, was developed by the National Insurance Association of Malaysia (NIAM). Members of NIAM subscribing to this Scheme provide a uniformed health insurance programme covering health care including cashless admission to hospitals, medical treatments, surgery as well as emergency assistance to policy holders. Managed Care Organisation has been appointed under the Scheme to provide specialised services to both the policy holders and NIAM members. Malaysian Re was appointed as the Account Manager of the Scheme, which is currently being subscribed to by four (4) NIAM members.

G. marKET TRAINING

Over the years, Malaysian Re has and will continue to organise various training courses and seminars on insurance/reinsurance related topics in addition to market updates for staff of insurance companies to instil a higher degree of professionalism in the industry.

H. 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 addition to this, SILSR’s function is to facilitate the most favourable cover at internationally competitive terms for the Malaysian risk owners. To this end, SILSR’s crucial role is to promote the optimum retention of Malaysian risks with reinsurance placed to the best national advantage.

78 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN RE’S MALAYSIAN REINSURANCE BERHAD PORTFOLIO OF BUSINESS

2015 2014

Class RM’000 % RM’000 %

Fire 538,176 41 558,542 41

Marine 222,587 17 226,842 17

Motor 226,334 17 214,282 16

Miscellaneous Accident 323,906 25 345,260 26

Total 1,311,003 100 1,344,926 100

Miscellaneous Accident Fire Miscellaneous Accident Fire 25% 41% 26% 41%

2015 2014 Motor Motor 17% 16%

Marine Marine 17% 17%

79 A PRINCIPLED PARTNER Takaful IKHLAS continues to cultivate sound partnerships through principled, caring and innovative means. Whether it is through its ethical approach or customer-oriented service delivery, its agent-focussed training programmes, or host of innovative programmes such as Malaysia’s first Diploma in Takaful and a host of Shariah-related courses, Takaful IKHLAS continues to go all out to ensure its partners benefit in tangible ways from its efforts. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE TAKAFUL IKHLAS BERHAD PROFILE

Authorised Capital of RM500 million Paid-up Capital of RM295 million

TAKAFUL IKHLAS Berhad (Takaful IKHLAS) was incorporated on 18 September 2002 as Takaful Ikhlas Sdn. Bhd. and is a wholly owned subsidiary of MNRB Holdings Berhad.

Subsequently on 5 May 2014, it converted and adherence to Shariah values, coupled with Takaful IKHLAS has 13 regional offices in Kuala its status to a public company and be known the application of cutting-edge technology in Lumpur, Kedah, Perak, Selangor, Putrajaya, as Takaful Ikhlas Berhad. The Company conducting its business, have reinforced the Negeri Sembilan, Melaka, Johor, Pahang, is principally involved in the provision of Company’s reputation for its ethical approach Terengganu, Kelantan, Sabah and Sarawak. Islamic Financial protection services, based and service delivery. on principles and rulings of Shariah. Takaful Takaful Ikhlas Berhad is registered under Islamic IKHLAS has established a strong presence in The Company offers individuals and commercial Financial Services Act 2013 and regulated by the provision of Islamic Financial protection enterprises a comprehensive range of Individual Bank Negara Malaysia. services based on the takaful system, which Family, Group Family, General Retail and places an emphasis on a spirit of cooperation Commercial Takaful products. Its distribution and joint responsibility among participants. channels comprise highly knowledgeable and CAPITAL STRUCTURE well-trained people that number more than More than 2.0 million individuals and 5,000 agents, brokers, financial institutions, Takaful IKHLAS has an Authorised Capital corporations have placed their trust in the motor franchise holders, co-operatives and of RM500 million and a Paid-up Capital of Company and become its certificate holders Islamic bodies. RM295 million. (participants). Takaful IKHLAS’ commitment

81 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE TAKAFUL IKHLAS BERHAD INFORMATION

Company Secretaries Board of Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766)

Audit Committee Sharkawi Alis Halim Haji Din (Chairman) NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Dato’ Othman Hashim Paisol Ahmad Ab Latiff Abu Bakar Yahaya Besah President & Chief Executive Officer Non-Independent Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Megat Dziauddin Megat Mahmud Dato’ Othman Hashim Independent Non-Executive Director Shariah Committee Prof. Dr. Ahmad Hidayat Buang (Chairman) Halim Haji Din Datuk Haji Nik Moustpha Haji Nik Hassan Independent Non-Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Dr. Muhammad Naim Omar Paisol Ahmad Dr. Mohamed Fairooz Abdul Khir Non-Independent Non-Executive Director Nomination Committee Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi (Chairman) Independent Non-Executive Director Sharkawi Alis Dato’ Othman Hashim Dr. Syed Musa Syed Jaafar Alhabshi Independent Non-Executive Director Halim Haji Din Mohd Din Merican Mohd Din Merican Non-Independent Non-Executive Director Remuneration Committee Yahaya Besah (Chairman) Megat Dziauddin Megat Mahmud Dato’ Othman Hashim Independent Non-Executive Director Halim Haji Din Paisol Ahmad Mohd Din Merican Megat Dziauddin Megat Mahmud Auditors Registered Office Ernst & Young 9th Floor, IKHLAS Point Risk Management Committee Level 23A, Menara Millenium Tower 11A, Avenue 5, Bangsar South Dato’ Othman Hashim (Chairman) Jalan Damanlela No. 8, Jalan Kerinchi Paisol Ahmad Pusat Bandar Damansara 59200 Kuala Lumpur Yahaya Besah Damansara Heights Tel : +603-2723 9999 Dr. Syed Musa Syed Jaafar Alhabshi 50490 Kuala Lumpur Fax : +603-2723 9998 Mohd Din Merican Tel : +603-7495 8000 E-mail: [email protected] Fax : +603-2095 5332 Website: www.takaful-ikhlas.com.my Investment Committee Paisol Ahmad (Chairman) Dr. Syed Musa Syed Jaafar Alhabshi Principal Bankers Halim Haji Din Maybank Islamic Berhad Mohd Din Merican Bank Islam Malaysia Berhad Megat Dziauddin Megat Mahmud CIMB Islamic Bank Berhad Ab Latiff Abu Bakar 82 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 DIRECTORS’ TAKAFUL IKHLAS BERHAD PROFILE

Board meeting 9/9 attended SHARKAWI ALIS Non-Independent Non-Executive Chairman

SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Chairman 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 22 of this Annual Report.

Board meeting AB LATIFF ABU BAKAR 9/9 attended Non-Independent Executive Director

AB LATIFF ABU BAKAR, aged fifty-five (55), Malaysian. Non-Independent Executive Director since 7 January 2013. Member of the Investment Committee. He graduated with a Bachelor of Business Administration from the University of Portland, Oregon, USA. He has more than twenty-two (22) years’ 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 to joining Takaful IKHLAS, he was the Head of Takaful for Tokio Marine Asia Pte Ltd until 6 January 2013.

83 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD

Board meeting DATO’ OTHMAN HASHIM 9/9 attended Independent Non-Executive Director

DATO’ OTHMAN HASHIM, aged sixty-three (63), 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.

Board meeting 7/9 attended HALIM HAJI DIN Independent Non-Executive Director

HALIM HAJI DIN, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 24 July 2003. Chairman of the Audit Committee. Member of the Nomination Committee, the Remuneration Committee and the Investment Committee. Halim is a Chartered Accountant who spent more than thirty-two (32) 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. Prior to his appointment as a Board member of Caltex Malaysia, Halim served as Regional Financial Advisor for Caltex Petroleum Corporation Dallas, Texas overseeing investment viability of the Corporation’s Asian subsidiaries.

Halim also had extensive experience in corporate recovery when he worked for Ernst & Whinney, London, United Kingdom in mid-1980s. He was appointed as Managing Partner of the Consulting Division of Ernst & Young Malaysia from 1995. He later became the Country Advisor of Cap Gemini Ernst & Young Consulting Malaysia when Cap Gemini of France merged with Ernst & Young Consulting. In 2003, he with two (2) partners took over the consulting business of Cap Gemini Ernst & Young Malaysia through a MBO and rebranded it as Innovation Associates, currently known as The IA Group, where he is currently the Chairman of the Group.

Halim was also a Council Member of the Malaysian Institute of Certified Public Accountants from 1994 to 2003. He also served as a Board Member of Employees Provident Fund (KWSP) for four (4) years from April 2009 till May 2013. Halim is also an independent member of the Board of Wah Seong Corporation Berhad, BNP Paribas Malaysia Berhad, IGB REIT Management Sdn. Bhd, Kwasa Land Sdn. Bhd. and several other private limited companies. 84 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD

Board meeting 9/9 attended PAISOL AHMAD Non-Independent Non-Executive Director

PAISOL AHMAD, aged sixty-one (61), Malaysian. Non-Independent Non-Executive Director since 6 August 2008. Chairman of the Investment Committee and member of the Audit Committee, the Risk Management Committee and the Remuneration Committee.

Other information on Paisol Ahmad is disclosed in the Directors’ Profile section of MNRB on page 25 of this Annual Report.

Board meeting YAHAYA BESAH 9/9 attended Independent Non-Executive Director

YAHAYA BESAH, aged sixty-three (63), 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.

85 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD

Board meeting DR. SYED MUSA SYED 9/9 attended

JAAFAR ALHABSHI Independent Non-Executive Director

DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), 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. He currently sits on the Shariah Committees of Bank of Tokyo - Mitsubishi UFJ (Malaysia) Berhad and 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 his doctorate he became an Assistant Professor and held various academic administrative positions in IIUM till 2000. He joined Universiti Tun Abdul Razak in 2000 as an Associate Professor and became Head of Centre for Graduate Studies. He later served as Dean of Faculty of Business in 2004. In 2006, he joined Amanie Business Solutions Sdn Bhd as a Principal Consultant until 2009 and as a Fellow Consultant from 2010 to 2012. 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 Institute of Islamic Banking and Finance (IIiBF). Currently, he is Dean of IIiBF, IIUM.

Board meeting 9/9 attended MOHD DIN MERICAN Non-Independent Non-Executive Director

Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report.

86 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD

Board meeting 9/9 attended MEGAT DZIAUDDIN

Independent Non-Executive Director MEGAT MAHMUD

MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), 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 23 of this Annual Report.

87 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 PROFILE OF SHARIAH TAKAFUL IKHLAS BERHAD COMMITTEE MEMBERS

PROF. DR. AHMAD HIDAYAT BUANG

SHARIAH COMMITTEE CHAIRMAN Shariah committee 6/6 meeting attended PROF. DR. AHMAD HIDAYAT BUANG, aged fifty-three (53). 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 2006 until February 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 Al-Amin Bank Berhad and CIMB Islamic Bank Berhad’s Shariah Council. A Shariah Committee member of Bank Islam Malaysia Berhad since 2011.

DR. MOHAMED FAIROOZ ABDUL KHIR

SHARIAH COMMITTEE MEMBER Shariah committee 5/6 meeting attended DR. MOHAMED FAIROOZ ABDUL KHIR, aged thirty-nine (39). Shariah Committee member of Takaful IKHLAS since 1 April 2014. Holds a B.A in Islamic Revealed Knowledge and Human Sciences (Fiqh & Usul Fiqh) from IIUM 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 a member of the Shari’ah Committee for Maybank Islamic Berhad since July 2013. He is also a member of the Shariah 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. Also a Shariah Committee member of MRT.

88 (CONT’D) //MNRB HOLDINGS BERHAD PROFILE OF SHARIAH COMMITTEE MEMBERS //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD

DR. MUHAMMAD NAIM OMAR

SHARIAH COMMITTEE Member Shariah committee 5/6 meeting attended DR. MUHAMMAD NAIM OMAR, aged forty-seven (47). 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 Bank Berhad’s 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.

DATUK Haji NIK MOUSTPHA HAJI NIK HASSAN

SHARIAH COMMITTEE MEMBER Shariah committee 6/6 meeting attended DATUK HAJI NIK MOUSTPHA HAJI NIK HASSAN, aged sixty-two (62). 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 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.

DR. SYED MUSA SYED JAAFAR ALHABSHI

SHARIAH COMMITTEE Member Shariah committee 6/6 meeting attended DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), 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 86 of this Annual Report.

89 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR TAKAFUL IKHLAS BERHAD MANAGEMENT TEAM

Nazrul Hisham Kau Kong Hoi Abdul Hamid

Ab latiff Abu Bakar President & CEO Fauziah Md Hasan Yushida Husin

Wan Rosli Shaharuddin Wan Yaacob Zarina Mohd Sahim 90 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR MANAGEMENT TAKAFUL IKHLAS BERHAD TEAM’S PROFILE

Kau Kong Hoi FAUZIAH MD HASAN Senior vice President & Head of Actuarial Services Senior Vice President & Chief Financial officer

Kau Kong Hoi is the Senior Vice President & Head of Actuarial Services. FAUZIAH MD HASAN is the Senior Vice President & Chief Financial Graduated with a Bachelor of Science in Actuarial Science from Universiti Officer of Takaful IKHLAS. Graduated with a Bachelor of Accounting Kebangsaan Malaysia and has obtained the Fellowship qualification from from Universiti Kebangsaan Malaysia (UKM) and has over twenty the Society of Actuaries, USA (FSA) in 2008 and Malaysia (FASM) in (20) years of working experience in various accounting and financial 2011 respectively. He has more than 12 years of actuarial services and management functions in both insurance and takaful industry. After financial reporting experiences in both conventional insurance business graduation, her career began at Ernst & Young as an Auditor. After three and takaful business across major international and domestic insurers in (3) years, she joined Talasco Insurance Sdn. Bhd. (Talasco) as an Executive Asia Pacific countries. and subsequently promoted to Assistant General Manager, Finance. Her working experience with Talasco was for nine (9) years. Her career at He joined Takaful Ikhlas on 17 November 2014. His main responsibility Takaful industry began when she joined Takaful Nasional Bhd (Takaful is to certify the valuation of actuarial and other certificate liabilities in Nasional) where she was there for six (6) years. She joined as a Manager, accordance with the generally accepted actuarial principles and practices. Credit Control and subsequently promoted to Vice President, Corporate Accounts. After the merger exercise between Takaful Nasional and Maybank Takaful, she was responsible to oversee the Finance Department NAZRUL HISHAM ABDUL HAMID of both entities. Prior to joining Takaful IKHLAS on 3 August 2008, she Senior Vice President & Chief Business Operations Officer was the Assistant General Manager, Finance at Syarikat Takaful Malaysia Bhd. She joined Takaful IKHLAS as an Assistant Vice President, Finance & Account. She was re-designated as Vice President and Head of Finance – NAZRUL HISHAM ABDUL HAMID is the Senior Vice President & Chief General on 1 February 2010 and subsequently appointed as Senior Vice Business Operations Officer. Graduated with a Degree in Accounting and President & Chief Financial Officer effective 1 November 2013. Finance from University of Hull, United Kingdom and Master of Business and Administration from Mara University of Technology (UiTM). He is also the Chartered member of Institute of Internal Auditors Malaysia YUSHIDA HUSIN (IIAM) and has over twenty (20) years of extensive experience in various Senior Vice President & Chief Corporate Services Officer industries and public listed companies holding senior managerial positions. YUSHIDA HUSIN is the Senior Vice President & Chief Corporate His involvement in takaful industry started in June 2007, of which he Services Officer of Takaful IKHLAS. Graduated with a Bachelor of Science was appointed as the Chief Internal Auditor / Group General Manager in Statistics Degree from the University of Illinois at Urbana-Champaign. for Syarikat Takaful Malaysia Berhad. He was aggressively involved Before joining Takaful IKHLAS, she served six (6) years with a multi- in revamping the business process, internal control system and risk national consultancy firm Accenture (previously known as Andersen management of the company. He was later appointed as the General Consulting) where she was involved in both local and international Manager of Operations responsible in managing the Underwriting, business process re-engineering and system implementation projects Retakaful, Certificate Processing, Claims, Customer Service and Branch for insurance as well as other financial institutions in the Asian region. Operations. She was one of the pioneer members involved in the formation of Takaful IKHLAS. She joined Takaful IKHLAS in January 2003. He joined Takaful IKHLAS on 9 June 2014.

91 (CONT’D) //MNRB HOLDINGS BERHAD SENIOR MANAGEMENT TEAM'S PROFILE //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD

WAN ROSLI SHAHARUDDIN ZARINA MOHD SAHIM WAN YAACOB Senior Vice President & Head, General Operations Senior Vice President & Head, AGENCY

ZARINA MOHD SAHIM is the Senior Vice President & Head, WAN ROSLI SHAHARUDDIN WAN YAACOB is the Senior Vice General Operations. Graduated with a Bachelor degree of Business President & Head, Agency of Takaful IKHLAS. Graduated with a Administration (Insurance) from Mara University of Technology (UiTM) Bachelor of Science (Business Administration) and Master of Business and has over twenty-five (25) years of extensive experience in insurance Administration from the United States International University (USIU), and takaful industry. Her career began at Malaysia National Insurance San Diego, United States of America, respectively. He has eighteen Sdn Bhd after graduation where she spent five (5) years as an Executive, (18) years experience in the insurance industry, having served in The Fire Department. In 1991, she joined Hong Leong Assurance Sdn Bhd as People’s Insurance Co. (M) Berhad (Technical Service Division), Malaysia an Executive, Fire Underwriting for Corporate Clients. National Insurance Berhad (Total Quality Management Department) and AMI Insurans Berhad (Internal Audit Department). Prior to his current In 1994, her takaful experience started when she joined Syarikat Takaful appointment, he served Bank Negara Malaysia and was attached to the Malaysia Berhad for eighteen (18) years. Her last position was Head of Insurance Examination Department. He was a Member of the PIAM Operations – General Takaful where she was responsible in managing Motor Sub-Committee (2001–2002). He joined Takaful IKHLAS in the entire operations of General Takaful Division. Prior to joining October 2002. Takaful IKHLAS, she was at Hong Leong MISG Takaful for a few months as Head of General Operations. She joined Takaful IKHLAS in October 2012.

92 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS’ TAKAFUL IKHLAS BERHAD PORTFOLIO OF BUSINESS

(A) GENERAL TAKAFUL (B) FAMILY TAKAFUL

2015 2014 2015 2014

Class RM’000 % RM’000 % Class RM’000 % RM’000 %

Fire 36,415 13 31,951 14 Individual 233,742 42 239,021 44

Marine 244 1 258 1 Mortgage 128,976 23 119,993 22

Motor 192,646 70 162,765 72 Group 138,160 25 158,402 29

Miscellaneous Accident 45,859 16 29,328 13 Investment-Linked 53,077 10 30,545 5

Total 275,164 100 224,302 100 Total 553,955 100 547,961 100

Fire Individual Miscellaneous Accident 13% Investment-Linked 16% Marine 10% 42% 1% Group Motor 25% 70% 2015 2015

Mortgage 23%

Investment-Linked Fire Individual Miscellaneous Accident 5% 13% 14% 44% Marine 1% Group Motor 29% 72% 2014 2014

Mortgage 22%

93 A COMMITTED PARTNER MNRB Retakaful continues to commit to its diverse generations of stakeholders and acts as a second layer of protection to takaful players. Through its Family and General retakaful businesses MNRB Retakaful is helping Malaysia achieve its ambition of transforming into an international hub for the development of Islamic financial services. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MNRB RETAKAFUL BERHAD PROFILE

Authorised Capital of RM500 million Paid-up Capital of RM102 million

MNRB Retakaful Berhad (MRT), a wholly owned subsidiary of MNRB Holdings Berhad, is involved in the Family and General retakaful businesses.

MRT was incorporated in December 2006 and CAPITAL STRUCTURE registered by Bank Negara Malaysia as the first retakaful operator in Malaysia on 1 August 2007. MRT has an Authorised Capital of RM500 million and a Paid-up Capital of RM102 million. With the setting up of MRT, the MNRB Group has entrenched itself as a significant player in the global takaful industry and is helping to promote Malaysia as a leading centre for the development of the Islamic finance industry.

95 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MNRB RETAKAFUL BERHAD INFORMATION

Company Secretaries Board of Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766)

Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Audit Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Dato’ Syed Ariff Fadzillah Syed Awalluddin Independent Non-Executive Director Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi Megat Dziauddin Megat Mahmud Independent Non-Executive Director Shariah Committee Ir. Dr. Muhamad Fuad Abdullah (Chairman) Yahaya Besah Assoc. Prof. Dr. Said Bouheraoua Independent Non-Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Datuk Haji Nik Moustpha Haji Nik Hassan Dr. Syed Musa Syed Jaafar Alhabshi Dr. Mohamed Fairooz Abdul Khir Independent Non-Executive Director

Mohd Din Merican Nomination Committee Non-Independent Non-Executive Director Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) Sharkawi Alis Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi President & Chief Executive Officer Mohd Din Merican Ahmad Ruhaizad Hashim Risk Management Committee Yahaya Besah (Chairman) Auditors Registered Office Dato’ Syed Ariff Fadzillah Syed Awalluddin th Ernst & Young 9 Floor, Bangunan Malaysian Re Mohd Din Merican Level 23A, Menara Millenium No. 17, Lorong Dungun Jalan Damanlela Damansara Heights Remuneration Committee Pusat Bandar Damansara 50490 Kuala Lumpur Dr. Syed Musa Syed Jaafar Alhabshi (Chairman) Damansara Heights Tel : +603 2096 7007 Megat Dziauddin Megat Mahmud 50490 Kuala Lumpur Fax : +603 2096 8007 Dato’ Syed Ariff Fadzillah Syed Awalluddin Tel : +603-7495 8000 Email: [email protected] Yahaya Besah Fax : +603-2095 5332 Website: www.mnrb-retakaful.com.my Investment Committee Megat Dziauddin Megat Mahmud (Chairman) Principal Bankers Yahaya Besah Standard Chartered Bank Mohd Din Merican Malayan Banking Berhad CIMB Bank Berhad

96 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 DIRECTORS’ MNRB RETAKAFUL BERHAD PROFILE

Board meeting 8/8 attended SHARKAWI ALIS Non-Independent Non-Executive Chairman

SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Chairman since 24 December 2007. Member of Nomination Committee.

Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report.

Board meeting DATO’ SYED ARIFF FADZILLAH 8/8 attended

SYED AWALLUDDIN Independent Non-Executive Director

DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged seventy-one (71), 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 24 of this Annual Report.

97 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD

Board meeting MEGAT DZIAUDDIN 8/8 attended

MEGAT MAHMUD Independent Non-Executive Director

MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 6 August 2007. Chairman of the Audit Committee and the Investment Committee. Member of the Remuneration Committee.

Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 23 of this Annual Report.

Board meeting 8/8 attended YAHAYA BESAH Independent Non-Executive Director

YAHAYA BESAH, aged sixty-three (63), Malaysian. Independent Non-Executive Director since 4 July 2008. Chairman of the Risk Management Committee. Member of the Audit Committee, the Investment Committee, the Nomination Committee and the Remuneration Committee.

Other information on Yahaya Besah is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 85 of this Annual Report.

98 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD

Board meeting 7/8 attended DR. SYED MUSA SYED

Independent Non-Executive Director JAAFAR ALHABSHI

DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), 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 86 of this Annual Report.

Board meeting MOHD DIN MERICAN 8/8 attended Non-Independent Non-Executive Director

Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report.

99 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 PROFILE OF SHARIAH MNRB RETAKAFUL BERHAD COMMITTEE MEMBERS

IR. DR. MUHAMAD FUAD ABDULLAH

SHARIAH COMMITTEE CHAIRMAN Shariah committee 6/6 meeting attended IR. DR. MUHAMAD FUAD ABDULLAH, aged sixty-two (62). Shariah Committee member since 1 June 2011 and subsequently appointed as Chairman of Shariah Committee on 28 October 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 Bachelor Degree in Shariah from Jordan University. In 1996, he completed his Ph.D. in Muslim Civilisation from Aberdeen University in Scotland.

He is the Chairman of the Shariah Committee of MIDF Group of Companies in addition to being a Shariah Advisory Committee member of BIMB Securities Sdn. Bhd. 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 Malaysian Industrial Development Finance (MIDF) Berhad, MIDF Property Berhad, Mesiniaga Berhad, Sime Darby Berhad, and Sime Darby Property Berhad. He also serves as a Board member of Institut Kefahaman Islam Malaysia (IKIM).

ASSOC. PROF. DR. SAID BOUHERAOUA

Shariah committee SHARIAH COMMITTEE MEMBER 6/6 meeting attended

ASSOC. PROF. DR. SAID BOUHERAOUA, aged forty-eight (48). 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 Shariah 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 four (4) books, six (6) 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 (4) 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 IIUM. 100 (CONT’D) //MNRB HOLDINGS BERHAD PROFILE OF SHARIAH COMMITTEE MEMBERS //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD

DR. SYED MUSA SYED JAAFAR ALHABSHI

SHARIAH COMMITTEE Member Shariah committee 6/6 meeting attended DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), 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 86 of this Annual Report.

DATUK Haji NIK MOUSTPHA HAJI NIK HASSAN

SHARIAH COMMITTEE MEMBER Shariah committee 5/6 meeting attended DATUK HAJI NIK MOUSTPHA HAJI NIK HASSAN, aged sixty-two (62). Shariah Committee member of MRT since 1 April 2012.

Other information on Datuk Haji Nik Moustpha Haji Nik Hassan is disclosed in the Shariah Committee Member’s Profile section of Takaful IKHLAS on page 89 of this Annual Report.

DR. MOHAMED FAIROOZ ABDUL KHIR

SHARIAH COMMITTEE Member Shariah committee 6/6 meeting attended DR. MOHAMED FAIROOZ ABDUL KHIR, aged thirty-nine (39). Shariah Committee member of MRT since 1 April 2013.

Other information on Dr. Mohamed Fairooz Abdul Khir is disclosed in the Shariah Committee Member’s Profile section of Takaful IKHLAS on page 88 of this Annual Report.

101 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 PRESIDENT & CEO’S MNRB RETAKAFUL BERHAD PROFILE

AHMAD RUHAIZAD HASHIM

President & CEO

AHMAD RUHAIZAD HASHIM is the President & CEO and also Senior Vice President & Group Chief Strategy Officer of MNRB. He graduated in 1990 with a Bachelor of Economics and Accounting Degree from the University of Leeds, England. He is a member of the Malaysian Institute of Certified Public Accountants (MICPA) since 1995 as well as a member of the Malaysian Institute of Accountants. He brings almost twenty-one (21) years of experience in corporate management and advisory services. His career started in 1991 when he joined Arthur Andersen as an auditor. He served Arthur Andersen for more than five (5) years until 1996 when he left to join KUB Malaysia Berhad. He then rejoined Arthur Andersen in 1999 to head the Kuala Terengganu branch operation. In 2002, he joined Putrajaya Holdings Sdn. Bhd. as the Head of the Corporate Planning Department. He joined MNRB on 2 January 2008. Appointed as the President & CEO with effect from 1 January 2015.

102 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MRT’S MNRB RETAKAFUL BERHAD PORTFOLIO OF BUSINESS

(A) GENERAL RETAKAFUL

2015 2014

Class RM’000 % RM’000 %

Fire 14,882 53 42,301 66

Marine 3,836 14 8,332 13

Motor 4,478 16 5,372 8

Miscellaneous Accident 4,956 17 8,074 13

Total 28,152 100 64,079 100

Miscellaneous Accident Fire Miscellaneous Accident Fire 17% 53% 13% 66%

Motor Motor 8% 16% 2015 2014 Marine 13%

Marine 14%

(B) FAMILY RETAKAFUL

2015 2014

RM’000 RM’000

35,711 53,071

103 A NURTURING PARTNER Malaysian Re (Dubai) Ltd. or MRDL continues to make good headway in its role as a nurturing reinsurance partner to clients in the Middle East and North Africa (MENA) region. Through the provision of high quality reinsurance services and underwriting support to its clientele in the MENA region, MRDL is developing solid relationships with them as well as paving the way for future growth in that part of the world. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MALAYSIAN RE (DUBAI) LTD. PROFILE

Authorised Capital of USD5 million Paid-up Capital of USD2 million

Malaysian Re (Dubai) Limited (MRDL), a wholly owned subsidiary of MNRB Holdings Berhad, was incorporated on 7 December 2006 in Dubai, the United Arab Emirates.

Its office is situated within the strategic All businesses of MRDL are fully underwritten Dubai International Financial Centre (DIFC) by Malaysian Re, an ‘a-’ (Excellent) rated and regulated by the Dubai Financial Services company by A.M. Best and ‘A’ by Fitch Ratings. Authority (DFSA). MRDL will continue to expand its market presence in the MENA region and is committed MRDL is engaged in developing business for its to being at the forefront of the reinsurance sister company, Malaysian Reinsurance Berhad segment within the region. (Malaysian Re) in the Middle East and North Africa (MENA) region. Its primary functions CAPITAL STRUCTURE are to develop relationships with clients around the MENA region as well as provide services MRDL has an authorised Capital of USD5 and underwriting support to them. Its close million and a Paid-up Capital of USD2 million. proximity to this target market gives MRDL an edge when servicing its clients.

105 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MALAYSIAN RE (DUBAI) LTD. INFORMATION

Company Secretary Board of Norazman Hashim (MIA 5817)

Senior Executive Officer Zaini Abdul Aziz

Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Principal Banker Zainudin Ishak Standard Chartered Bank Non-Independent Non-Executive Director Precinct Building 1 DIFC Branch Mohd Din Merican Dubai, United Arab Emirates Non-Independent Non-Executive Director Tel : +971 4 5083612 Fax : +971 4 4282502

Auditors Registered Office Moore Stephens Chartered Unit 101, Level 1 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

106 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 DIRECTORS’ MALAYSIAN RE (DUBAI) LTD. PROFILE

Board meeting 2/2 attended SHARKAWI ALIS Non-Independent Non-Executive Chairman

SHARKAWI ALIS, aged sixty-eight (68), 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 22 of this Annual Report.

Board meeting ZAINUDIN ISHAK N/A attended Non-Independent Non-Executive Director

ZAINUDIN ISHAK, aged forty-eight (48), Malaysian. Non-Independent Non-Executive Director since 23 April 2015.

Other information on Zainudin Ishak is disclosed in the Directors’ Profile section of Malaysian Re on page 69 of this Annual Report.

107 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ PROFILE //ANNUAL REPORT 2015 MALAYSIAN RE (DUBAI) LTD.

Board meeting MOHD DIN MERICAN 2/2 attended Non-Independent Non-Executive Director

MOHD DIN MERICAN, aged fifty-three (53), Malaysian. Non-Independent Non-Executive Director since 5 February 2012.

Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report.

108 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 SENIOR EXECUTIVE MALAYSIAN RE (DUBAI) LTD. OFFICER’S PROFILE

ZAINI ABDUL AZIZ Board meeting 2/2 attended

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 many aspects of reinsurance business.

109 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 CORPORATE MALAYSIAN MOTOR PROFILE INSURANCE POOL (MMIP) 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 overall administrative and financial functions of the MMIP as well as Bodily Injury claims administration.

CORPORATE INFORMATION

Senior Vice President Board of S. Manogaran

Company Secretary Lena Abd Latif (LS 8766)

Zainudin Ishak DIRECTOR Auditors Ernst & Young Registered Office Norazman Hashim Level 23A, Menara Millenium 6th Floor, Bangunan Malaysian Re DIRECTOR Jalan Damanlela No. 17, Lorong Dungun Pusat Bandar Damansara Damansara Heights Damansara Heights 50490 Kuala Lumpur 50490 Kuala Lumpur Tel : +603 2096 8006 Tel : +603-7495 8000 Fax : +603 2096 7006 Principal Banker Fax : +603-2095 5332 CIMB Bank Berhad

110 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS

Directors’ Report 112 Statement by Directors 116 Statutory Declaration 116 Independent Auditors’ Report 117 FINANCIAL Income Statements 119 STATEMENTS Statements of Comprehensive Income 120 Statements of Financial Position 121 Statements of Changes in Equity 122 Statements of Cash Flows 123 Notes to the Financial Statements 125 //MNRB HOLDINGS BERHAD DIRECTORS’ //ANNUAL REPORT 2015 REPORT FINANCIAL STATEMENTS

Directors’ 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 2015.

Principal Activities

The Company is an investment holding company, principally engaged in the provision of management services to its subsidiaries.

The principal activities of the subsidiaries have been disclosed in Note 17 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 139,148 11,539

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.

Dividend

The amount of dividend 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 2014: First and final single-tier dividend of 16.5%, paid on 29 October 2014 35,156

The Directors do not recommend the payment of any dividend in respect of the current financial year.

112 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ REPORT //ANNUAL REPORT 2015 FINANCIAL STATEMENTS

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 (Resigned with effect from 1 June 2015) Megat Dziauddin bin Megat Mahmud Paisol bin Ahmad Hijah Arifakh binti Othman (Appointed with effect from 1 June 2015)

In accordance with Article 86 of the Company’s Articles of Association, Yusoff bin Yaacob and Paisol bin Ahmad will be retiring by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with Article 92 of the Company’s Articles of Association, Hijah Arifakh binti Othman retires and, being eligible offers herself for re-election.

P. Raveenderen, who will be retiring pursuant to Section 129 of the Companies Act, 1965 at the forthcoming Annual General Meeting, offers himself for re-appointment as Director in accordance with Section 129 of the said Act to hold office until the conclusion of the next Annual General Meeting of the Company.

Dato’ Syed Ariff Fadzillah bin Syed Awalluddin who will be also retiring pursuant to Section 129 of the Companies Act 1965 at the forthcoming Annual General Meeting, had informed that he would not be seeking re-election.

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 or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors from the Company or the fixed salary and benefits receivable as a full-time employee of the Company as disclosed in Notes 9, 10 and 32 to the financial statements or benefits receivable from related corporations) by reason of a contract made by the Company or a related corporation with the 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 are as follows:

Number of ordinary shares of RM1.00 each As at As at 1 April 2014 Acquired Sold 31 March 2015

Direct Interests: P. Raveenderen 10,000 - - 10,000 Datuk Mohd Khalil bin Dato’ Mohd Noor (Resigned with effect from 1 June 2015) 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 of the Company or its related corporations during the financial year. 113 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ REPORT //ANNUAL REPORT 2015 FINANCIAL STATEMENTS

Significant and Subsequent Events

The significant events during the financial year are as disclosed in Note 39 to the financial statements. The Board of the Company had on 22 April 2015, announced that the Company’s reinsurance subsidiary, Malaysian Re, had been granted an approval from Bank Negara Malaysia (“BNM”), vide its letter dated 16 April 2015, to conduct General and Family retakaful business under Section 10 of the Islamic Financial Services Act, 2013 (“IFSA”) via the establishment of a retakaful division. Following this, the MNRB Group plans to undertake an internal restructuring exercise for its retakaful business, the details of which will be announced at a later date.

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 satisfied themselves that there were no known bad debts 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) it necessary to write off any 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 other than those arising in the normal course of business of the Group and of the Company.

114 (CONT’D) //MNRB HOLDINGS BERHAD DIRECTORS’ REPORT //ANNUAL REPORT 2015 FINANCIAL STATEMENTS

Other Statutory Information (CONT’D)

(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 their 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 retiring auditors, Messrs. Ernst & Young, have expressed their willingness to accept re-appointment.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 July 2015.

Sharkawi bin Alis Mohd Din bin Merican

Kuala Lumpur, Malaysia

115 //MNRB HOLDINGS BERHAD STATEMENT BY //ANNUAL REPORT 2015 DIRECTORS FINANCIAL STATEMENTS 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 119 to 235 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 2015 and of the results and the cash flows of the Group and of the Company for the year then ended.

In the opinion of the Directors, the information set out in Note 41 and page 236 of the financial statements has been compiled in accordance with the Guidance On Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” issued by the Malaysian Institute of Accountants on 20 December 2010, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 July 2015.

Sharkawi bin Alis Mohd Din bin Merican

Kuala Lumpur, Malaysia

Statutory declaration Pursuant to Section 169(16) 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 119 to 236 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 31 July 2015 ) Norazman bin Hashim

Before me,

116 //MNRB HOLDINGS BERHAD Independent auditors’ //ANNUAL REPORT 2015 report FINANCIAL STATEMENTS to the members of MNRB Holdings Berhad (Incorporated in Malaysia)

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 2015 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 119 to 235.

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 2015 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.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 (“the Act”) 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’ report of the subsidiary of which we have not acted as auditors, which are indicated in Note 17 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. 117 (CONT’D) //MNRB HOLDINGS BERHAD independent auditors’ REPORT //ANNUAL REPORT 2015 to the members of MNRB Holdings Berhad (Incorporated in Malaysia) FINANCIAL STATEMENTS

Other reporting responsibilities

The supplementary information set out in Note 41 on page 236 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 Dato’ Abdul Rauf bin Rashid AF: 0039 No. 2305/05/16(J) Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia 31 July 2015

118 //MNRB HOLDINGS BERHAD income //ANNUAL REPORT 2015 statements FINANCIAL STATEMENTS for the year ended 31 march 2015

Group Company Note 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Gross earned premiums/contributions 4(a) 2,191,597 2,182,962 - - Premiums/contributions ceded to reinsurers/retakaful operators 4(b) (244,266) (199,524) - -

Net earned premiums/contributions 1,947,331 1,983,438 - -

Investment income 5 199,507 174,235 62,164 105,787 Net realised gains/(losses) 6 9,733 21,056 (85) (763) Net fair value (losses)/gains 7 (5,839) 3,796 - 794 Fee and commission income 8 35,737 24,574 33,868 31,072 Other operating revenue 10,471 12,242 101 53

Other revenue 249,609 235,903 96,048 136,943

Gross claims and benefits paid (1,240,681) (1,064,335) - - Claims ceded to reinsurers/retakaful operators 154,687 151,356 - - Gross change in contract liabilities (147,847) (380,014) - - Change in contract liabilities ceded to reinsurers/ retakaful operators (36,130) 11,737 - - Net claims and benefits (1,269,971) (1,281,256) - -

Fee and commission expense 8 (435,399) (451,224) - - Management expenses 9 (209,555) (195,411) (36,866) (35,898) Finance costs (18,123) (17,916) (18,123) (17,916) Other operating expenses 11 (7,680) (5,154) (30,330) (32,474) Change in expense liabilities (10,764) (18,637) - - Tax borne by participants 12 (13,265) (13,992) - -

Other expenses (694,786) (702,334) (85,319) (86,288)

Share of results of associates 4,157 2,437 - -

Operating profit before surplus attributable to takaful participants, zakat and taxation 236,340 238,188 10,729 50,655 Surplus attributable to takaful participants 23(a) (45,635) (23,460) - -

Operating profit before zakat and taxation 190,705 214,728 10,729 50,655 Zakat (960) (400) - - Taxation 12 (50,597) (58,342) 810 (25,616)

Net profit for the year attributable to equity holders of the Parent 139,148 155,986 11,539 25,039

Basic and diluted earnings per share attributable to equity holders of the Parent (sen): 29 65.3 73.2

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 119 //MNRB HOLDINGS BERHAD statements of //ANNUAL REPORT 2015 comprehensive income FINANCIAL STATEMENTS for the year ended 31 march 2015

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Net profit for the year 139,148 155,986 11,539 25,039

Other comprehensive income/(losses)

Other comprehensive income/(losses) to be reclassified to income statement in subsequent periods:

Effects of post-acquisition foreign exchange translation reserve on investment in associate 9,689 5,160 - -

Effects of foreign exchange translation reserve on investment in subsidiary 1,101 369 - -

Net gain/(loss) on Available-for-sale (“AFS”) financial assets: Gain/(loss) on fair value changes 44,155 (50,487) - (770) Realised (gains)/losses transferred to income statement (Note 6) (7,378) (13,626) - 763 Deferred tax relating to net (gain)/loss on AFS financial assets (3,389) 8,646 - 2

Other comprehensive (gains)/losses attributable to participants (Note 23(b)) (27,120) 34,915 - -

Other comprehensive income not to be reclassified to income statement in subsequent periods:

Revaluation of land and buildings 8,032 4,749 - -

Deferred tax relating to revaluation of land and buildings (937) (141) - -

Other comprehensive income attributable to participants (Note 23(c)) (2,140) (2,909) - -

Total comprehensive income for the year 161,161 142,662 11,539 25,034

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 120 //MNRB HOLDINGS BERHAD statements of //ANNUAL REPORT 2015 financial position FINANCIAL STATEMENTS as at 31 march 2015

Group Company Note 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Assets Property, plant and equipment 13 237,495 236,936 2,907 2,610 Investment properties 14 7,100 6,900 - - Intangible assets 15 14,632 14,519 3,797 2,497 Deferred tax assets 16 11,484 24,180 2,313 1,503 Investments in subsidiaries 17 - - 843,705 872,032 Investments in associates 18 110,567 96,053 1,957 1,957 Financial assets: Financial assets at fair value through profit or loss (“FVTPL”) 19(a) 137,934 139,478 - - Held-to-maturity (“HTM”) investments 19(b) 722,356 718,597 - - AFS financial assets 19(c) 2,530,716 2,303,023 50 50 Loans and receivables (“LAR”) 19(d) 1,917,938 1,783,211 37,071 26,927 Reinsurance/retakaful assets 20 374,653 399,787 - - Insurance/takaful receivables 21 303,918 369,611 - - Tax recoverable 25,216 5,462 - 5,461 Cash and bank balances 82,702 36,644 2,877 2,904 Non-current assets held for sale 22 - 1,696 - -

Total assets 6,476,711 6,136,097 894,677 915,941

Liabilities and Participants’ funds Participants’ funds 23 286,726 217,476 - - Borrowings 24 320,000 320,000 320,000 320,000 Insurance/takaful contract liabilities 20 4,159,278 4,012,263 - - Insurance/takaful payables 25 169,424 169,865 - - Other payables 26 170,807 157,393 9,203 8,933 Deferred tax liabilities 16 7,676 8,298 - - Provision for taxation 12,455 26,965 2,083 - Provision for zakat 871 368 - -

Total liabilities and participants’ funds 5,127,237 4,912,628 331,286 328,933

Equity Share capital 27 213,070 213,070 213,070 213,070 Reserves 1,136,404 1,010,399 350,321 373,938

Total equity attributable to equity holders of the Parent 1,349,474 1,223,469 563,391 587,008

Total liabilities, participants’ funds and equity 6,476,711 6,136,097 894,677 915,941

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 121 //MNRB HOLDINGS BERHAD statements of //ANNUAL REPORT 2015 changes in equity FINANCIAL STATEMENTS for the year ended 31 march 2015

Attributable to equity holders of the Company Reserves Non-distributable Distributable Foreign exchange Share Share translation AFS Revaluation Retained capital premium reserve reserve reserve profits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

At 1 April 2013 213,070 105,051 16,728 8,472 30,660 757,963 1,131,944 Net profit for the year - - - - - 155,986 155,986 Other comprehensive income/(loss) for the year - - 5,529 (20,552) 1,699 - (13,324) Total comprehensive income/(loss) for the year - - 5,529 (20,552) 1,699 155,986 142,662 Dividend paid during the year (Note 28) - - - - - (51,137) (51,137) Reclassification upon disposal of property - - - - (115) 115 -

At 31 March 2014 213,070 105,051 22,257 (12,080) 32,244 862,927 1,223,469 Net profit for the year - - - - - 139,148 139,148 Other comprehensive income for the year - - 10,790 6,268 4,955 - 22,013 Total comprehensive income for the year - - 10,790 6,268 4,955 139,148 161,161 Dividend paid during the year (Note 28) - - - - - (35,156) (35,156)

At 31 March 2015 213,070 105,051 33,047 (5,812) 37,199 966,919 1,349,474

Company

At 1 April 2013 213,070 105,051 - 5 - 294,985 613,111 Net profit for the year - - - - - 25,039 25,039 Other comprehensive loss for the year - - - (5) - - (5) Total comprehensive (loss)/income for the year - - - (5) - 25,039 25,034 Dividend paid during the year (Note 28) - - - - - (51,137) (51,137)

At 31 March 2014 213,070 105,051 - - - 268,887 587,008 Net profit and total comprehensive income for the year - - - - - 11,539 11,539 Dividend paid during the year (Note 28) - - - - - (35,156) (35,156)

At 31 March 2015 213,070 105,051 - - - 245,270 563,391

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 122 //MNRB HOLDINGS BERHAD statements of //ANNUAL REPORT 2015 cash flows FINANCIAL STATEMENTS for the year ended 31 march 2015

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities Profit before zakat and taxation 190,705 214,728 10,729 50,655 Adjustments for: Net fair value losses/(gains) on financial assets at FVTPL 4,266 (3,987) - - Impairment loss/(reversal of impairment loss) on AFS financial assets 2,043 1,229 - (794) (Reversal of impairment loss)/impairment loss on HTM investments (54) 139 - - Reversal of impairment loss on properties (216) (477) - - Impairment loss on other receivables 32 425 - - Impairment loss/(reversal of impairment loss) on insurance/ takaful receivables 6,947 (2,575) - - Depreciation of property, plant and equipment 8,310 10,726 441 955 Amortisation of intangible assets 3,950 3,352 75 552 Fair value gains on investment properties (200) (700) - - Net losses/(gains) on disposals of property, plant and equipment 81 (149) 85 - (Decrease)/increase in gross premium and contribution liabilities (11,596) 20,651 - - Impairment loss on investment in subsidiary - - 30,327 32,469 Interest/profit income (184,589) (162,749) (1,164) (789) Dividend income (15,122) (11,578) (61,000) (105,000) Rental income (4,888) (5,436) - - Finance cost 18,123 17,916 18,123 17,916 Realised (gains)/losses on disposals of investments (9,761) (20,907) - 763 Realised gains on disposals of non-current assets held for sale (53) - - - Net amortisation of premiums on investments 3,579 3,315 - - Share of results of associates (4,157) (2,437) - -

Profit/(loss) from operations before changes in operating assets and liabilities 7,400 61,486 (2,384) (3,273) Increase in placements with licensed financial institutions, Islamic investment accounts and marketable securities (147,007) (128,744) (9,657) (10,042) Net (purchase)/disposal of investments (171,646) (448,067) - 453 Increase in staff loans (1,294) (1,976) (135) (1,447) Decrease in insurance/takaful receivables 58,746 37,023 - - (Increase)/decrease in other receivables (7,413) (12,439) 388 280 Net change in balances with subsidiaries - - (147) 1,312 Increase in gross claim and actuarial liabilities 147,847 380,014 - - Increase in expense liabilities 10,764 18,637 - - Increase in participants’ funds 45,635 23,459 - - Decrease/(increase) in reinsurance/retakaful assets 25,134 (11,811) - - Decrease in insurance/takaful payables (441) (41,859) - - Increase/(decrease) in other payables 13,414 40,418 (288) (382) Taxes and zakat (paid)/refunded (78,615) (52,884) 7,544 2,514 Interest/profit received 172,406 162,327 1,129 764 Dividends received 24,118 11,536 61,000 81,000 Rental received 4,175 4,534 - -

Net cash generated from operating activities 103,223 41,654 57,450 71,179 123 (CONT’D) //MNRB HOLDINGS BERHAD statements of cash flows //ANNUAL REPORT 2015 for the year ended 31 march 2015 FINANCIAL STATEMENTS

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Cash flows from investing activities Subscription of shares in subsidiary - - (2,000) - Purchase of property, plant and equipment (2,413) (6,438) (1,094) (1,359) Purchase of intangible assets (3,503) (4,682) (1,375) (810) Proceeds from disposal of intangible assets 2 - - - Proceeds from disposal of non-current assets held for sale 1,749 - - - Proceeds from disposal of property, plant and equipment 279 420 271 -

Net cash used in investing activities (3,886) (10,700) (4,198) (2,169)

Cash flows from financing activities Profit paid (18,123) (17,901) (18,123) (17,901) Dividend paid (35,156) (51,137) (35,156) (51,137)

Net cash used in financing activities (53,279) (69,038) (53,279) (69,038)

Cash and bank balances Net increase/(decrease) during the year 46,058 (38,084) (27) (28) At beginning of the year 36,644 74,728 2,904 2,932

At end of the year 82,702 36,644 2,877 2,904

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 124 //MNRB HOLDINGS BERHAD notes to the //ANNUAL REPORT 2015 financial statements FINANCIAL STATEMENTS – 31 March 2015

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 th12 Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia.

The Company is an investment holding company, principally engaged in the provision of management services to its subsidiaries.

The number of employees in the Group and in the Company at the end of the financial year were 893 and 193 (2014: 862 and 196) respectively.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 31 July 2015.

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 (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the requirements of the Companies Act, 1965 in Malaysia.

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 2015.

2.3 subsidiaries, associates and basis of consolidation

(i) Subsidiaries

A subsidiary is an entity over which the Group has all the following:

(a) power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

(b) exposure, or rights, to variable returns from its investment with the investee; and

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

125 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.3 subsidiaries, associates and basis of consolidation (cont’d)

(i) subsidiaries (cont’d)

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;

(b) rights arising from other contractual arrangements; and

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less any accumulated 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 acquisition method. The acquisition 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 IFSA 2013 and, previously, the Takaful Act 1984, the assets and liabilities of the takaful funds are segregated from those of the takaful operator: a concept known as segregation of funds. However, in compliance with MFRS 10 Consolidated Financial Statements, 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 takaful/retakaful operator over the respective funds. 126 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

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 investments in associates are 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 associates. The Group’s share of the net profit or loss of the associates is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associates, the Group recognises its share of such changes.

In applying the equity method, unrealised gains and losses on transactions between the Group and the associates are eliminated to the extent of the Group’s interest in the associates. 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 investments in the associates. The investments in associates are accounted for using the equity method from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associates or the investments become subsidiaries.

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 associates’ identifiable assets, liabilities and contingent liabilities over the cost of the investments is excluded from the carrying amount of the investments and is instead included as income in the determination of the Group’s share of the associates’ profit or loss in the period in which the investments are acquired.

When the Group’s share of losses in associates equal or exceed its interest in the associates, 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 co-terminous 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.

127 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.4 General reinsurance, takaful and retakaful underwriting results

The general reinsurance, takaful and retakaful underwriting results are determined after taking into account premiums/contributions, reinsurance/retakaful/retrotakaful costs, commissions, movements in premium/contribution liabilities, net claims incurred and wakalah fees.

The general takaful and retakaful funds are maintained in accordance with the IFSA 2013 and consist of AFS reserves and the accumulated surplus/deficit in the funds. Any deficit will be made good by the shareholder’s fund via a loan or Qard.

In general takaful and retakaful funds, the surplus distributable to the participants is determined after deducting retakaful/retrotakaful costs, movements in contribution liabilities, commissions, net claims incurred, wakalah fees, expenses, taxation and surplus administration charges. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts or prescribed by the Shariah Committee.

(i) premium and contribution recognition

Gross premiums/contributions are recognised in a financial period in respect of risks assumed during the particular financial period. Gross premiums/contributions include premium/contribution income in relation to direct general business, inwards facultative business, inwards proportional treaty reinsurance/retakaful and inwards non-proportional treaty reinsurance/retakaful.

Contributions from direct businesses 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.

Inwards facultative premiums/contributions are recognised in the financial period in respect of the facultative risk assumed during the particular financial period following individual risks’ inception dates.

Inwards proportional treaty premiums/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/covered at various inception dates of these risks and contractually accounted for under the terms of the proportional reinsurance/retakaful treaty.

Premium/contribution income on inward non-proportional treaties, which cover losses occurring during a specified treaty period, are recognised based on the contractual premiums/contributions already established at the start of the treaty period under the terms and conditions of each contract.

(ii) premium and contribution liabilities

Premium/contribution liabilities represent the future obligations on insurance/takaful contracts as represented by premiums/ contributions received for risks that have not yet expired. The movement in premium/contribution liabilities is released over the term of the insurance/takaful contracts and recognised as earned premium/contribution income.

Premium/contribution liabilities are reported at the higher of the aggregate of the unearned premium reserves (“UPR”)/unearned contribution reserves (“UCR”) respectively for all lines of business or the best estimate value of the 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.

128 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.4 General reinsurance, takaful and retakaful underwriting results (cont’d)

(ii) premium and contribution liabilities (cont’d)

(a) unexpired risk reserves

The URR is a prospective estimate of the expected future payments arising from future events insured or covered under policies or contracts in force and expected to be incurred as at the end of the financial year and also includes allowance for expenses, including overheads and costs of reinsurance/retakaful, expected to be incurred during the unexpired period in administering these policies or contracts and settling the relevant claims, and shall allow for expected future premium/contribution 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 (“IBNR”) claims.

(b) unearned premium and contribution reserves

The UPR/UCR represent the portion of the net premiums/contributions of insurance/takaful contracts written that relate to the unexpired periods of the contracts at the end of the financial year. The UCR is calculated on net contribution income with a further deduction for wakalah fee expenses to reflect the wakalah business principle. The methods of computation of UPR/UCR are as follows:

- For inwards proportional treaty reinsurance/retakaful business, UPR/UCR are computed on the 1/8th method commencing from the quarter corresponding to the reporting quarter of the treaty statement;

- For inwards non-proportional treaty reinsurance/retakaful business, UPR/UCR is computed at 1/2 of the last quarter Minimum Deposit Premiums/Contributions received;

- For inwards facultative reinsurance/retakaful business, UPR/UCR is computed on the 1/8th method commencing from the date of inception;

- 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.

(iii) claim 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”) and IBNR claims 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 when a claimable event occurs and/or as advised/notified. 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 patterns.

129 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.4 General reinsurance, takaful and retakaful underwriting results (cont’d)

(iv) liability adequacy test

At each reporting date, the Group reviews all insurance/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 insurance/takaful contracts issued. In performing this review, the Group compares all contractual cash flows against the carrying value of insurance/takaful contract liabilities. Any deficiency is recognised in the income statement.

The estimation of claim/benefit and premium/contribution liabilities performed at the reporting date is part of the liability adequacy tests performed by the Group.

(v) acquisition costs and commission expense

The acquisition costs and commission expenses, which are costs directly incurred in acquiring and renewing reinsurance/takaful/ retakaful business, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income.

2.5 family takaful and retakaful underwriting results

The family takaful and retakaful underwriting results are determined after taking into account contributions, retakaful/retrotakaful costs, commissions, net benefits incurred and wakalah fees.

The family takaful and retakaful funds are maintained in accordance with the requirements of the IFSA 2013 and consist of AFS reserves and the accumulated surplus/deficit in the funds. The family takaful and retakaful fund surplus/deficit is determined by an annual actuarial valuation of the funds. Any actuarial deficit in the family takaful and retakaful funds will be made good by the shareholder’s fund via a loan or Qard.

In family takaful and retakaful funds, the surplus distributable to the participants is determined after deducting retakaful/retrotakaful costs, net benefits incurred, wakalah fees, expenses, taxation and surplus administration charges. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts or prescribed by the Shariah Committee.

(i) contribution recognition

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 the 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.

Retakaful contributions are recognised in respect of risks assumed during a particular financial period. Inwards treaty retakaful contributions are recognised on the basis of statements received from ceding companies.

130 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.5 family takaful and retakaful underwriting results (cont’d)

(ii) contract liabilities

Family takaful contract liabilities are recognised when contracts are in-force and contributions are charged. Liabilities of benefits payable of the family retakaful fund are recognised as advised by ceding companies.

For a one year family contract or a one year extension to a family contract covering contingencies other than life or survival, the liability for such family takaful contracts comprises contribution and claim liabilities with an appropriate allowance for PRAD from the expected experience.

The family takaful contract liabilities are derecognised when the contracts expire, are discharged or are cancelled. At each reporting date, an assessment is made of whether the recognised family takaful contract liabilities are adequate by performing a liability adequacy test as disclosed in Note 2.5(iv).

Liabilities of family takaful business are determined in accordance with valuation guidelines for takaful operators issued by 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 contracts, discounted at the appropriate risk discount rate. This method is known as the gross contribution valuation method. In the case of a family contract where a part of, or the whole of, the contributions are accumulated in a fund, the accumulated amount as declared to the participants are set as the liabilities. Zerorisation is applied at contract level and no contract is treated as an asset under the valuation method adopted.

In respect of the family takaful and retakaful 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 contract reserves at a 75% confidence level is secured. In the case of investment-linked business, the fund value is treated as a liability.

Surpluses 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 aQard from the takaful subsidiary which will be repaid when the fund returns to a surplus position.

(iii) creation/cancellation of units of family takaful fund

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 participants or unitholders.

(iv) liability adequacy test

131 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.6 shareholder’s fund of takaful and retakaful subsidiaries

(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 recognised in the income statement at an agreed percentage for each contract 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 and retakaful funds and the family takaful and retakaful funds which are based on estimations performed by qualified actuaries. The movement in expense liabilities is released over the term of the takaful contracts and recognised in the income statement.

(a) expense liabilities of general takaful and retakaful funds

The expense liabilities of the general takaful and retakaful funds are reported at the higher of the aggregate of the reserves for unearned wakalah fees (“UWF”) and 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.

Unexpired expense reserves

The UER is determined based on the expected future expenses payable by the shareholder’s fund in managing the general takaful and retakaful funds for the full contractual obligation of the takaful and retakaful 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 2.4(ii)(a).

Reserves for unearned wakalah fees

The UWF represent the portion of wakalah fee income allocated for management expenses of general takaful and retakaful contracts that relate to the unexpired periods of contracts at the end of the financial year. The method used in computing UWF is consistent with the calculation of UCR under Note 2.4(ii)(b).

(b) expense liabilities of family retakaful and takaful fund

The valuation of expense liabilities in relation to contracts of the family retakaful and takaful fund is conducted separately by the Appointed Actuaries. The method used to value expense liabilities is consistent with the method used to value retakaful liabilities of the corresponding family retakaful/takaful 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/takaful 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.

At each reporting date, the Group reviews the expense liabilities to ensure that the carrying amount is sufficient or adequate to cover the obligations of the Group for all managed takaful contracts. In performing this review, the Group considers all contractual cash flows and compares this against the carrying value of expense liabilities. Any deficiency is recognised in the income statement. 132 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.7 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 uncertain future 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 payable 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 expire or are extinguished.

2.8 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 2.7 are accounted for as noted below. Arrangements that do not meet these classification requirements are accounted for as financial assets.

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/profit rate. The impairment loss is recognised in the income statement. Reinsurance/retakaful assets are derecognised when the contractual rights expire or are extinguished or when the contract is transferred to another party.

2.9 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 any impairment losses, whilst properties are stated at revalued amounts less subsequent accumulated depreciation and subsequent impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

In respect of freehold land and buildings, valuations are performed with sufficient frequency to ensure that the carrying amount does not differ materially from the fair value of the freehold land and buildings at the reporting date. 133 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.9 property, plant and equipment and depreciation (cont’d)

(i) recognition and measurement (cont’d)

Any revaluation surplus is recognised in other comprehensive income and accumulated in equity under the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount 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 is also not depreciated as it is 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 available for use, it is tested for impairment annually.

Depreciation of other property, plant and equipment is provided for on a straight-line 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 10% to 33.3% Office equipment 10% to 33.3% Furniture and fittings 10% to 15% Motor vehicles 20%

The residual values, useful lives and depreciation method are reviewed at the end of each financial year 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.

134 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.10 investment properties

Investment properties are properties which are held either to earn rental income and/or for capital appreciation. 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 or 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 properties are permanently withdrawn from use and no future economic benefit is expected from the disposals. 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 the 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.

2.11 intangible assets

All intangible assets are initially recorded at cost. Subsequent to recognition, intangible assets are stated at cost less any accumulated amortisation and any 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 assets 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.

(i) software development in progress

Software development in progress 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. When development is complete and the asset is available for use, it is reclassified to computer software and amortisation of the asset begins. It is amortised over the period of expected future use. During the period in which the asset is not yet available for use, it is tested for impairment annually.

135 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.11 intangible assets (cont’d)

(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 an indication of impairment and the amortisation period and method are also reviewed annually at the end of each financial year.

2.12 financial assets

(i) initial recognition and measurement

Financial assets 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 instrument.

A financial asset is recognised initially, at its fair value plus, in the case of a financial asset not at FVTPL, 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 FVTPL. 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 financial assets at FVTPL do not include exchange differences, interest and dividend income. Exchange differences and interest and dividend income on financial assets at FVTPL are recognised in the appropriate categories of income and expenses in the income statement.

136 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.12 financial assets (cont’d)

(ii) classification and subsequent measurement (cont’d)

(b) htM investments

Financial assets with fixed or determinable payments and fixed maturities 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 less any accumulated impairment losses. Gains and losses are recognised in the income statement when the HTM investments are derecognised or impaired, and through the amortisation process.

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 subsequently measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest/profit 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 or the Group and the Company have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full. 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.

(iv) offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 137 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.13 fair value measurement

The Group and the Company measure financial instruments, such as, financial assets at FVTPL, and non-financial assets such as investment properties, at fair value at each reporting date. The fair values of financial instruments measured at amortised cost are disclosed in Notes 19 and 40.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(i) In the principal market for the asset or liability; or

(ii) In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group and the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

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; and

Level 3 - Inputs that are not based on observable market data.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group and the Company determine whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The fair value hierarchy of financial instruments is disclosed in Note 40.

138 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.14 impairment of assets

(i) financial assets

The Group and the Company assess 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 assess 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.

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 losses previously recognised in the income statement, is transferred from equity to the income statement.

Impairment losses on AFS equity investments are not reversed in the income statement in subsequent periods. Increases 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.

139 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.14 impairment of assets (cont’d)

(ii) non-financial assets

The carrying amounts of non-financial 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 (or groups of units) on a pro rata basis.

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 losses have decreased or no longer exist.

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 period in which the reversals are recognised.

2.15 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 measured in accordance with applicable MFRSs. On initial classification as held for sale, non-current 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.

2.16 Measurement and impairment of Qard

Any deficits 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 in 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 any 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. 140 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.17 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.

2.18 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.

2.19 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 interest/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 interest/yield rate. The impairment loss is recognised in the income statement. The basis for recognition of such impairment loss is as described in Note 2.14(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 substantially transferred all risks and rewards of ownership.

2.20 Borrowings

All borrowings are classified as other financial liabilities and are recognised initially at fair value plus directly attributable transaction costs. The profits payable are recognised as finance costs in the income statement in the period in which they are incurred.

After initial recognition, profit-bearing borrowings are subsequently measured at amortised cost using the effective profit rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective profit rate method.

2.21 Leases

(i) Classification

A lease is recognised as a finance lease if it substantially transfers 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 substantially transfer all 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 2.10; 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. 141 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.21 leases (cont’d)

(ii) finance leases - the Group as lessee

Assets acquired by way of hire purchase or finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at the inception of the lease, 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/profit rate implicit in the lease, when it is impracticable 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 2.9(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 upfront 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 payments represent 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 in 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 2.27(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.

2.22 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.

142 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.22 financial liabilities (cont’d)

(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 during and at the end of the financial year.

(ii) other financial liabilities

The Group and the Company’s other financial liabilities include borrowings, 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.

2.23 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.

2.24 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 financial year.

Deferred tax is provided for, using the liability method, on temporary differences at the end of the financial year 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.

143 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.24 income tax (cont’d)

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.

2.25 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 non-accumulating 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.

2.26 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 on the settlement of monetary items or on translating monetary items at the reporting date are recognised in income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised intially in other comprehensive income and accumulated under the foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to the income statement of the Group on disposal of the foreign operation. 144 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.26 foreign currencies (cont’d)

(ii) foreign currency transactions (cont’d)

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.

(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;

(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 the investment 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.

2.27 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.

(vi) Premiums/contributions are recognised in accordance with the policies stated in Note 2.4(i) and 2.5(i).

2.28 Zakat

Zakat represents an obligatory amount payable by the takaful and retakaful subsidiaries to comply with the principles of Shariah. Zakat is computed using the “net-asset” method at a rate of 2.5%, as approved by the Shariah Committee. Only the zakat that is attributable to the individual and corporate 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 quantum above the obligatory amount payable. 145 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.29 changes in Accounting Policies

The accounting policies adopted by the Group and the Company are consistent with those of the previous financial year except for the following:

adoption of Amendments to MFRSs and Issues Committee (“IC”) Interpretation

At the beginning of the current financial year, the Group and the Company had adopted all Amendments to MFRSs and IC Interpretation mandatory for annual periods beginning on or after 1 January 2014 as follows:

Effective for annual periods Description beginning on or after

Amendments to MFRS 10, MFRS 12 and MFRS 127: Investment Entities 1 January 2014 Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014 Amendments to MFRS 136: Recoverable Amount Disclosures for Non-Financial Assets 1 January 2014 Amendments to MFRS 139: Novation of Derivatives and Continuation of Hedge Accounting 1 January 2014 IC Interpretation 21 Levies 1 January 2014

The adoption of the above Amendments to MFRSs and IC Interpretation did not have any significant effect on the financial statements of the Group and the Company.

2.30 standards issued but not yet effective

The standards and amendments to standards 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 and amendments to standards, if applicable, when they become effective:

Effective for annual periods Description beginning on or after

Amendments to MFRS 119 Defined Benefit Plans: Employee Contributions 1 July 2014 Annual Improvements to MFRS 2010 - 2012 Cycle 1 July 2014 Annual Improvements to MFRS 2011 - 2013 Cycle 1 July 2014 MFRS 14 Regulatory Deferral Accounts 1 January 2016 Amendments to MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 1 January 2016 Amendments to MFRS 10, MFRS 12 and MFRS 128 Investment Entities: Applying the Consolidation Exception 1 January 2016 Amendments to MFRS 11 Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 101 Disclosure Initiative 1 January 2016 Amendments to MFRS 116 and MFRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141 Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 127 Equity Method in Separate Financial Statements 1 January 2016 Annual Improvements to MFRS 2012 - 2014 Cycle 1 January 2016 MFRS 15 Revenue from Contracts with Customers 1 January 2017 MFRS 9 Financial Instruments 1 January 2018

146 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

2. significant accounting policies (cont’d)

2.30 standards issued but not yet effective (cont’d)

The Directors expect that the adoption of the above standards and amendments to standards are not expected to have material impact on the financial statements in the period of initial application except as discussed below:

MFRS 9 Financial Instruments (“MFRS 9”)

In November 2014, MASB issued the final version of MFRS 9 which reflects all phases of the financial instruments project and replaces MFRS 139 and all previous versions of MFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The adoption of MFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities. The Directors are in the process of assessing the financial implications for adopting the new standard.

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 are the judgements 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 Investment Property in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals and/or for capital appreciation. 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.

impairment of AFS financial assets

The Company reviews its debt securities classified as AFS financial assets at each reporting date to assess whether they are impaired. The Company also records impairment charges on AFS equity investments when there has been a significant or prolonged decline in the fair value below their cost.

The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Company evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost.

147 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

3. significant accounting estimates and judgements (cont’d)

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 are based on management’s estimates of the future estimated average useful lives and residual values of property, plant and equipment and intangible assets respectively. 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 and correspondingly, may result in future changes in 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 2.9(iii) and 2.11, respectively.

As at the reporting date, management has determined that the estimated useful lives and residual values of property, plant and equipment and intangible assets of the Group and of the Company remain consistent.

(b) General reinsurance, takaful and retakaful business

The principal uncertainty in the general reinsurance, takaful and retakaful business arises from the technical provisions which include the estimation of premium/contribution and claim liabilities. Premium/contribution liabilities are recorded as the higher of UPR/UCR and URR while claim liabilities mainly comprise provision for claims reported and IBNER and IBNR claims.

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/contribution and claim liabilities will not exactly develop as projected and may vary from the projection.

The estimates of premium/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 premium/contribution and claim liabilities may vary from the initial estimates.

At each reporting date, the estimates of premium/contribution and claim liabilities 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.

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/benefits.

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.

148 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

3. significant accounting estimates and judgements (cont’d)

3.2 Key sources of estimation uncertainty (cont’d)

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 lifestyle, could result in significant changes to the expected future exposures.

All of these will give rise to estimation uncertainties of the projected ultimate liabilities of the family takaful and retakaful funds.

At each reporting date, these estimates are re-assessed for adequacy and changes will be reflected as adjustments to the liabilities by an appointed actuary. The appoinment of the actuary is approved by BNM.

(d) 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 and 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. As at the reporting date, management has determined that recognised cumulative impairment losses as at the reporting date are appropriate.

(e) 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 evaluate 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.

It is also recognised that an initial decline in fair value of investments in new start-up 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 Group and the Company are of the opinion that there is no further indication of impairment of the Group and the Company’s investment in unquoted corporations at this juncture.

(f) impairment of insurance/takaful receivables and reinsurance/retakaful assets

The Group reviews its insurance/takaful and reinsurance/retakaful assets on a regular basis to assess whether impairment losses should be recognised 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 amounts of these assets.

149 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

3. significant accounting estimates and judgements (cont’d)

3.2 Key sources of estimation uncertainty (cont’d)

(g) Deferred tax

Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and unused tax 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 the 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 in the interpretation and 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 statements of financial position and the amount of unrecognised tax losses and unrecognised temporary differences.

The judgements and assumptions used in the estimation of deferred tax liabilities/assets are re-assessed 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 are disclosed in Note 16 to the financial statements.

As at the reporting date, recognised deferred tax assets represent a fair estimate of the Group’s deductible temporary differences and deferred tax liabilities reflect a fair estimate of the Group’s taxable temporary differences.

150 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

4. net earned premiums/contributions

Group 2015 2014 RM’000 RM’000

(a) Gross earned premiums/contributions Insurance and takaful contracts 2,180,001 2,203,613 Change in premium/contribution liabilities 11,596 (20,651)

2,191,597 2,182,962

(b) premiums/contributions ceded to reinsurers and retakaful operators Insurance and takaful contracts (255,262) (199,598) Change in premium/contribution liabilities 10,996 74

(244,266) (199,524)

Net earned premiums/contributions 1,947,331 1,983,438

5. investment income

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Financial assets at FVTPL Dividend income: - quoted shares in Malaysia 176 171 - - - unit trust funds 4,410 4,256 - - HTM investments Interest/profit income 28,507 29,023 - - AFS financial assets Interest/profit income 93,590 65,660 - - Dividend income: - quoted shares in Malaysia 9,554 5,578 - - - unquoted shares in Malaysia 82 156 - - - unit and real estate investment trusts in Malaysia - 6 - - Loans and receivables Interest/profit income 62,492 68,066 1,164 789 Dividend income from institutional trust funds 900 1,411 - - Dividend income from subsidiaries - - 61,000 105,000 Rental income 4,888 5,436 - - Net amortisation of premiums on investments (3,579) (3,315) - - Investment expenses (1,513) (2,213) - (2)

199,507 174,235 62,164 105,787

151 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

6. net realised gains/(losses)

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment Net realised (losses)/gains (81) 149 (85) - Financial assets at FVTPL Net realised (losses)/gains: - quoted shares in Malaysia (471) 163 - - - Shariah approved unit trust funds 2,854 6,595 - - - Structured products - 519 - - HTM investments Realised gains - 4 - - AFS financial assets Quoted shares in Malaysia 7,643 11,636 - (763) Quoted shares outside Malaysia (651) - - - Unquoted corporate debt securities (225) 758 - - Shariah approved unit trust funds - 367 - - Government investment issues 611 - - - Unquoted Islamic private debt securities - 865 - - Net realised gains/(losses) 7,378 13,626 - (763) Non-current assets held for sale Realised gains 53 - - -

9,733 21,056 (85) (763)

7. net fair value (losses)/gains

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Fair value gain on investment property (Note 14) 200 700 - - Net fair value (losses)/gains on financial assets at FVTPL (4,266) 3,987 - - Reversal of impairment losses/(impairment losses) on HTM investments 54 (139) - - Reversal of impairment losses on properties 216 477 - - (Impairment losses)/reversal of impairment losses on AFS financial assets (2,043) (1,229) - 794 (5,839) 3,796 - 794

152 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

8. fee and commission income/(expense)

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Fee and commission income Management fees 4,449 3,530 33,868 31,072 Commission income 31,288 21,044 - - 35,737 24,574 33,868 31,072

Fee and commission expense Commission expense (434,627) (449,489) Brokerage (772) (1,735) (435,399) (451,224)

9. Management expenses

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Staff costs: Salaries, bonus and other related costs 88,368 81,540 22,317 22,145 Directors’ remuneration (Note 10) 9,181 8,407 4,179 3,480 Shariah Committee members’ remuneration 249 256 - - Pension costs - EPF 12,076 11,178 2,983 2,804 Social security costs 489 462 110 111 Retirement benefits 577 714 317 120 Short term accumulating compensated absences 255 142 16 15 111,195 102,699 29,922 28,675 Auditors’ remuneration: Statutory auditors of the Group - statutory audit 811 815 73 73 - audit-related 65 59 5 5 - other services 115 158 9 9 Component auditors of a foreign subsidiary 30 29 - - Depreciation of property, plant and equipment 8,310 10,726 441 955 Amortisation of intangible assets 3,950 3,352 75 552 Property, plant and equipment written off 623 - - - Share of acquisition costs on quota share retakaful 945 589 - - Agency expenses 6,360 6,209 - - Marketing and promotional costs 15,519 14,267 770 855 Electronic data processing costs 17,748 7,550 - - Office rental 4,188 3,937 1,623 1,237 Professional and legal fees 6,679 8,312 971 331 Contributions and donations 610 820 - 20 Other management expenses 32,407 35,889 2,977 3,186 209,555 195,411 36,866 35,898 153 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

10. Directors’ remuneration

Group Company 2015 2014 2015 2014

Number of non-executive directors 12 12 7 7

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Executive directors: Salaries and bonus 3,805 3,854 1,648 1,485 Pension costs - EPF 623 655 280 253 Social security costs 1 1 1 1 Allowances 255 12 255 12 Benefits-in-kind 184 108 57 60 Others 67 - - -

4,935 4,630 2,241 1,811

Non-executive directors: Fees 2,729 2,421 804 700 Meeting allowances 677 560 167 125 Benefits-in-kind 24 31 24 31

3,430 3,012 995 856

Director of a subsidiary*: Salaries and bonus 810 726 810 726 Pension costs - EPF 130 118 130 118 Social security costs 1 1 1 1 Other allowances 83 59 83 59 Benefits-in-kind 55 72 55 72

1,079 976 1,079 976

Total directors’ remuneration 9,444 8,618 4,315 3,643

Total directors’ remuneration excluding benefits-in-kind 9,181 8,407 4,179 3,480

* Director of a subsidiary refers to management personnel who is employed by the holding company.

154 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

10. Directors’ remuneration (cont’d)

The number of non-executive directors of the Company whose total remuneration, borne by the Company and Group, during the financial year fell within the following bands is analysed below.

Number of Directors Group Company 2015 2014 2015 2014

Executive director: RM1,800,001 to RM1,850,000 - 1 - 1 RM2,200,001 to RM2,250,000 1 - 1 -

Non-executive directors: RM100,001 to RM150,000 - - 5 7 RM150,001 to RM200,000 - - 2 - RM200,001 to RM250,000 - 3 - - RM250,001 to RM300,000 3 1 - - RM300,001 to RM350,000 1 1 - - RM350,001 to RM400,000 1 1 - - RM400,001 to RM450,000 - 1 - - RM450,001 to RM500,000 2 - - -

11. other operating expenses

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Loss on foreign exchange - 86 3 3 Impairment losses on insurance/takaful receivables 6,947 - - - Impairment loss on other receivables 32 425 - - Impairment loss on investment in subsidiary - - 30,327 32,469 Sundry expenses 701 4,643 - 2

7,680 5,154 30,330 32,474

155 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

12. Taxation

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Malaysian income tax: Tax expense for the year 54,074 64,652 - 22,919 (Over)/under provision in prior years(i) (10,180) 2,565 - 2,729

43,894 67,217 - 25,648 Deferred tax: Relating to origination and reversal of temporary differences (Note 16) 6,703 (8,875) (810) (32)

50,597 58,342 (810) 25,616

Domestic income tax for general business and shareholders’ fund is calculated at the Malaysian statutory tax rate of 25% (2014: 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% (2014: 8%). Income tax on the Group’s offshore insurance/takaful business is calculated at a tax rate of 5% (2014: 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 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Profit before zakat and tax 190,705 214,728 10,729 50,655

Taxation at Malaysian statutory tax rate of 25% 47,676 53,682 2,682 12,664 Effects of different tax rate in respect of offshore insurance (3,541) (3,392) - - Income not subject to tax(ii) (41,300) (10,052) (16,060) (2,282) Expenses not deductible for tax purposes(ii) 55,950 14,990 12,465 11,679 Unutilised current year business loss carried forward 2,929 407 - - Deferred tax assets not recognised 103 751 103 826 (Over)/under provision of tax in prior year(i) (10,180) 2,565 - 2,729 Share of results of associates (1,040) (609) - -

Tax expense for the year 50,597 58,342 (810) 25,616

(i) The tax expense from YA 2010 to YA 2014 of the takaful subsidiary, which represents the open tax periods on which the subsidiary is entitled to claim tax refunds under the Income Tax Act 1967, had been revised and the resultant changes had been recognised as an overprovision of tax in the current financial year. The details are as described in Note 39.

(ii) Following the enactment of Finance (No. 2) Act 2014, effective from YA 2015, wakalah fee income received by the shareholder’s fund of the takaful subsidiary from its family takaful fund is no longer subject to tax and accordingly, the commission and management expenses incurred by the shareholder’s fund in connection with the management of the family takaful fund is also not deductible for tax purposes. Therefore, the deferred tax assets previously recognised for the expenses liability and management expenses in connection with the family fakaful fund were derecognised in the financial year.

156 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

12. taxation (cont’d)

Tax borne by participants

Group 2015 2014 RM’000 RM’000

Current year’s provision 13,533 13,696 (Over)/under provision of tax expense in prior years (1,313) 422 Deferred tax relating to origination and reversal of temporary differences 1,045 (126)

Tax expense for the year 13,265 13,992

13. property, plant and equipment

Furniture, fittings Capital Freehold Computer and office Motor work-inland 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 2013 30,660 196,971 12,555 36,065 3,208 488 279,947 Additions - 1,923 1,007 2,688 446 374 6,438 Disposals - (284) (193) (54) (409) - (940) Reclassification - 90 - - - (90) - Revaluation surplus 1,600 3,149 - - - - 4,749 Elimination of accumulated depreciation on revaluation - (2,355) - - - - (2,355) Transfer to non-current assets held for sale (Note 22) - (1,696) - - - - (1,696)

At 31 March 2014 32,260 197,798 13,369 38,699 3,245 772 286,143 Additions - 8 304 1,929 100 72 2,413 Disposals - - (94) (502) (670) - (1,266) Write-offs - (623) (890) (1,627) - - (3,140) Reclassification - - - 303 - (303) - Revaluation surplus 1,740 6,292 - - - - 8,032 Elimination of accumulated depreciation on revaluation - (4,718) - - - - (4,718) Adjustments - - - - - (247) (247) Transfer to intangible assets - - (562) - - - (562)

At 31 March 2015 34,000 198,757 12,127 38,802 2,675 294 286,655

157 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

13. property, plant and equipment (cont’d)

Furniture, fittings Capital Freehold Computer and office Motor work-inland Buildings equipment equipment vehicles progress Total Group (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation and impairment loss

At 1 April 2013 - 4,311 11,553 24,461 1,657 - 41,982 Depreciation charge for the year - 5,030 979 4,204 513 - 10,726 Disposals - (16) (192) (53) (408) - (669) Elimination of accumulated depreciation on revaluation - (2,355) - - - - (2,355) Reversal of impairment losses during the year - (477) - - - - (477)

At 31 March 2014 - 6,493 12,340 28,612 1,762 - 49,207 Depreciation charge for the year - 4,255 538 3,086 431 - 8,310 Disposals - - (96) (501) (309) - (906) Write-offs - - (890) (1,627) - - (2,517) Elimination of accumulated depreciation on revaluation - (4,718) - - - - (4,718) Reversal of impairment losses during the year - (216) - - - - (216)

At 31 March 2015 - 5,814 11,892 29,570 1,884 - 49,160

Net carrying amount

At 31 March 2015 34,000 192,943 235 9,232 791 294 237,495

At 31 March 2014 32,260 191,305 1,029 10,087 1,483 772 236,936

158 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

13. property, plant and equipment (cont’d)

Revaluation of freehold land and buildings

Freehold land and buildings in Malaysia have been revalued based on valuations performed by an accredited independent valuer having an appropriate recognised professional qualification. The valuations are based on the income approach.

The income approach 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.

Freehold buildings outside Malaysia have been revalued based on their value-in-use and a discount rate of 7% (2014: 7%) is applied, being the prevailing rental yield in the country where the buildings are located. During the financial year, the impairment losses on two of the buildings outside Malaysia were being reversed. The recoverable amount of these two buildings is RM2.963 million (2014: RM2.442 million).

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 2013 15,886 175,246 191,132 Additions - 1,923 1,923 Disposals - (230) (230) Reclassification from capital work-in-progress - 90 90 Transfer to non-current asset held for sale - (1,696) (1,696)

At 31 March 2014 15,886 175,333 191,219 Additions - 8 8 Write-offs - (623) (623)

At 31 March 2015 15,886 174,718 190,604

Accumulated depreciation

At 1 April 2013 - 26,589 26,589 Depreciation charge for the year - 4,554 4,554 Disposals - (16) (16) Reversal of impairment losses during the year - (477) (477)

At 31 March 2014 - 30,650 30,650 Depreciation charge for the year - 4,265 4,265 Reversal of impairment losses during the year - (216) (216)

At 31 March 2015 - 34,699 34,699

Net carrying amount

At 31 March 2015 15,886 140,019 155,905

At 31 March 2014 15,886 144,683 160,569 159 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

13. 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 2013 4,253 2,403 1,808 8,464 Additions 170 1,189 - 1,359 Disposals (103) - - (103)

At 31 March 2014 4,320 3,592 1,808 9,720 Additions 79 1,010 5 1,094 Disposals - (149) (596) (745)

At 31 March 2015 4,399 4,453 1,217 10,069

Accumulated depreciation

At 1 April 2013 3,765 1,678 815 6,258 Charge for the year 442 243 270 955 Disposals (103) - - (103)

At 31 March 2014 4,104 1,921 1,085 7,110 Charge for the year 193 71 177 441 Disposals - (148) (241) (389)

At 31 March 2015 4,297 1,844 1,021 7,162

Net carrying amount

At 31 March 2015 102 2,609 196 2,907

At 31 March 2014 216 1,671 723 2,610

14. investment property

Group 2015 2014 RM’000 RM’000

At beginning of the year 6,900 6,200 Fair value gain (Note 7) 200 700

At end of the year 7,100 6,900

160 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

14. investment property (cont’d)

The rental income and operating expenses in relation to the investment properties are as disclosed below:

Group 2015 2014 RM’000 RM’000

Rental Income 300 257 Operating Expenses (32) (32)

268 225

15. intangible assets

Software Computer development software in progress and licences Total Group RM’000 RM’000 RM’000

Cost

At 1 April 2013 8,689 29,291 37,980 Additions 3,798 884 4,682 Reclassification (714) 714 -

At 31 March 2014 11,773 30,889 42,662 Additions 2,808 695 3,503 Disposal (2) - (2) Transfer from property, plant and equipment 562 - 562 Reclassification (7,049) 7,049 -

At 31 March 2015 8,092 38,633 46,725

Accumulated amortisation

At 1 April 2013 - 24,791 24,791 Amortisation for the year - 3,352 3,352

At 31 March 2014 - 28,143 28,143 Amortisation for the year - 3,950 3,950

At 31 March 2015 - 32,093 32,093

Net carrying amount

At 31 March 2015 8,092 6,540 14,632

At 31 March 2014 11,773 2,746 14,519

161 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

15. intangible assets (cont’d)

Software Computer development software in progress and licences Total Company RM’000 RM’000 RM’000

Cost

At 1 April 2013 1,837 6,584 8,421 Additions 210 600 810

At 31 March 2014 2,047 7,184 9,231 Additions 772 603 1,375

At 31 March 2015 2,819 7,787 10,606

Accumulated amortisation

At 1 April 2013 - 6,182 6,182 Amortisation for the year - 552 552

At 31 March 2014 - 6,734 6,734 Amortisation for the year - 75 75

At 31 March 2015 - 6,809 6,809

Net carrying amount

At 31 March 2015 2,819 978 3,797

At 31 March 2014 2,047 450 2,497

16. Deferred taxation

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

At beginning of year 15,882 (1,624) 1,503 1,469 Recognised in: Income statement (Note 12) (6,703) 8,875 810 32 Participants’ fund (3,744) 3,236 - - Other comprehensive income (1,627) 5,395 - 2

At end of year 3,808 15,882 2,313 1,503

These comprise the following: - Deferred tax assets 11,484 24,180 2,313 1,902 - Deferred tax liabilities (7,676) (8,298) - (399)

3,808 15,882 2,313 1,503 162 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

16. Deferred taxation (cont’d)

The components and movements of deferred tax assets/(liabilities) during the financial year are as follows:

Unabsorbed/ Provisions accelerated Impairment Premium/ Impairment AFS Revaluation and capital losses on Expense losses on financial of land and payables allowances receivables liabilities investments assets buildings Others Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2015

At 1 April 2014 3,211 (1,034) 1,175 9,814 1,544 5,524 (7,264) 2,912 15,882 Recognised in: Income statement (Note 12) (2,106) 1,559 - (5,580) 355 - - (931) (6,703) Participants’ fund - - (74) (1,513) - (2,513) (186) 542 (3,744) Other comprehensive income - - - - - (876) (751) - (1,627) At 31 March 2015 1,105 525 1,101 2,721 1,899 2,135 (8,201) 2,523 3,808

2014

At 1 April 2013 2,190 (816) 846 2,638 1,376 (3,122) (7,123) 2,387 (1,624) Recognised in: Income statement (Note 12) 1,021 (218) - 7,176 168 - - 728 8,875 Participants’ fund - - 329 - - 3,363 (253) (203) 3,236 Other comprehensive income - - - - - 5,283 112 - 5,395 At 31 March 2014 3,211 (1,034) 1,175 9,814 1,544 5,524 (7,264) 2,912 15,882

Unabsorbed Accelerated AFS capital capital Loans and financial allowances allowances receivables assets Others Total Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2015

At 1 April 2014 415 (399) 4 - 1,483 1,503 Recognised in: Income statement (Note 12) 272 539 - - (1) 810 At 31 March 2015 687 140 4 - 1,482 2,313

2014

At 1 April 2013 405 (401) 4 (2) 1,463 1,469 Recognised in: Income statement (Note 12) 10 2 - - 20 32 Other comprehensive income - - - 2 - 2 At 31 March 2014 415 (399) 4 - 1,483 1,503 163 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

16. Deferred taxation (cont’d)

Deferred tax assets have not been recognised in respect of the following items of the Company and its retakaful subsidiary as the probability of recognition cannot be determined with certainty given the lack of assessable profits in current and prior years.

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Unutilised business losses 21,040 18,008 6,423 6,320 Other temporary differences: - net contribution and expense liabilities 1,315 363 - - - net accretion of discounts (21) 376 - - - financial assets 157 90 - - - others 125 93 - -

22,616 18,930 6,423 6,320

17. investments in subsidiaries Company 2015 2014 RM’000 RM’000

Unquoted shares, at cost: In Malaysia 907,000 905,000 Less: Impairment loss (69,665) (39,338)

837,335 865,662 Outside Malaysia 6,370 6,370

843,705 872,032

Details of the subsidiaries are as follows:

Name of Country of Effective subsidiaries incorporation Principal activities ownership interest 2015 2014 % %

Malaysian Reinsurance Berhad Malaysia Underwriting of all classes of general reinsurance business 100 100 Takaful Ikhlas Berhad (formerly Malaysia Management of family, general and investment-linked 100 100 known as Takaful Ikhlas Sdn. Bhd.) takaful business MNRB Retakaful Berhad Malaysia Management of family and general retakaful business 100 100 MMIP Services Sdn. Bhd. Malaysia Management of the Malaysian Motor Insurance Pool which 100 100 provides motor insurance to vehicle owners who are unable to obtain insurance protection for their vehicles Malaysian Re (Dubai) Ltd.* Dubai, United Marketing and promotional activities and servicing of clients 100 100 Arab Emirates on behalf of Malaysian Re AmIslamic Cash 1 Malaysia Investment in money market instruments and Sukuk 100 - AmIslamic Cash 2 Malaysia Investment in Shariah compliant money market instruments 100 -

* Audited by a firm of chartered accountants other than Messrs. Ernst & Young. 164 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

17. investments in subsidiaries (cont’d)

(a) investment in retakaful subsidiary

The cumulative impairment loss of RM69,665,000 (2014: RM39,338,000) was made in respect of the retakaful subsidiary, which had recorded a net loss in the prior years, mainly due to the losses incurred by the general and family retakaful funds.

On 31 March 2015, the Company increased its investment in its retakaful subsidiary by RM2 million via the issuance of 2,000,000 new ordinary shares of RM1.00 each in the retakaful subsidiary at an issue price of RM1.00 per share, to meet regulatory capital requirements.

With the above subscription, the issued and paid-up capital of the retakaful subsidiary has increased from RM100 million to RM102 million, comprising 102,000,000 ordinary shares of RM1.00 each.

(b) investment in wholesale unit trust funds

There were no significant changes in the composition of the Group during the current financial year ended 31 March 2015 other than the reinsurance and takaful subsidiaries’ acquisition of 100% interest in two wholesale unit trust funds.

During the financial year ended 31 March 2015, the Company’s reinsurance and takaful subsidiaries acquired all units in two wholesale unit trust funds which are managed by an external fund manager. The principal activities of these funds are to invest in Shariah compliant money market instruments and Sukuk. As at the reporting date, the Company’s subsidiaries have an effective direct interest of 100% in the funds. The Company’s subsidiaries have assessed and determined that they have control over these two wholesale unit trust funds. Hence, these two wholesale unit trust funds would need to be consolidated in full. In accordance with the exemption provisions under MFRS 10 Consolidated Financial Statements, the financial statements of the funds are consolidated with the Group’s consolidated financial statements from the date of control and continue to be consolidated until the date such control ceases.

18. investments in associates Group 2015 2014 RM’000 RM’000

Unquoted shares in Malaysia, at cost 77,615 77,615 Share of post-acquisition accumulated losses (3,456) (3,923) Share of post-acquisition AFS reserve 1,660 992 Post-acquisition foreign exchange translation reserve* 34,748 21,369

110,567 96,053

Represented by share of net assets 110,567 96,053

Company 2015 2014 RM’000 RM’000

Unquoted shares in Malaysia, at cost 1,957 1,957

* 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.

165 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

18. investments in associates (cont’d)

Details of the associates which are all incorporated in Malaysia are as follows:

Name of Proportion of ownership associates Year end Principal activities interest and voting power 2015 2014 % %

Held by the Company:

Motordata Research Consortium 31 December Development and provision of a centralised motor parts 40 40 Sdn. Bhd. price database for the Malaysian insurance industry

Held by Malaysian Re:

Labuan Reinsurance (L) Ltd 31 December Underwriting of all classes of general reinsurance business 20 20 (“Labuan Re”)

The financial statements of 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 2014 and management financial statements to the end of the accounting period of 31 March 2015 have been used.

The summarised financial information of the associates are as follows:

2015 2014 RM’000 RM’000

Assets and liabilities: Current assets 1,883,386 1,646,295 Non-current assets 55,508 50,273

Total assets 1,938,894 1,696,568

Current liabilities 336,059 222,223 Non-current liabilities 1,057,867 999,676

Total liabilities 1,393,926 1,221,899

Equity 544,968 474,669

Results: Revenue 892,255 744,621 Profit for the year 21,355 13,674

166 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

19. financial assets

The following table summarises the carrying values of financial assets of the Group and the Company:

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

At carrying value: Financial assets at FVTPL 137,934 139,478 - - HTM investments 722,356 718,597 - - AFS financial assets 2,530,716 2,303,023 50 50 Loans and receivables 1,917,938 1,783,211 37,071 26,927

5,308,944 4,944,309 37,121 26,977

Malaysian government securities 128,212 108,217 - - Government investment issues 731,967 725,015 - - Debt securities 2,051,056 1,934,814 - - Equity securities 293,184 209,546 - - Unquoted shares 44,796 44,796 50 50 Institutional trust deposit - 24,855 - - Shariah approved unit trust funds 133,955 131,889 - - Real estate investment trusts 7,836 6,821 - - Fixed and call deposits 611,987 731,957 20,282 16,925 Uncallable negotiable Islamic deposits - 18,743 - - Islamic investment accounts 1,169,292 747,288 7,879 1,579 Islamic repo placements - 136,284 - - Other loans and receivables 136,659 124,084 8,910 8,423

5,308,944 4,944,309 37,121 26,977

Group 2015 2014 RM’000 RM’000

(a) financial assets at FVTPL

At fair value: Quoted shares in Malaysia 3,951 7,527 Warrants 28 62 Shariah approved unit trust funds 133,955 131,889

137,934 139,478

167 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

19. financial assets (cont’d)

Group 2015 2014 RM’000 RM’000

(b) htM investments

At amortised cost/cost: Malaysian government securities 78,734 78,936 Unquoted corporate debt securities 100,030 95,344 Government investment issues 543,592 544,317

722,356 718,597

At fair value: Malaysian government securities 77,817 75,558 Unquoted corporate debt securities 100,578 95,167 Government investment issues 537,841 529,137

716,236 699,862

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

At cost: Unquoted shares in Malaysia(i) 44,796 44,796 50 50

At fair value: Malaysian government securities 49,478 29,281 - - Unquoted corporate debt securities 1,951,026 1,839,470 - - Quoted shares in Malaysia 289,064 201,485 - - Quoted shares outside Malaysia - 280 - - Warrants 141 192 - - Real estate investment trusts 7,836 6,821 - - Government investment issues 188,375 180,698 - -

2,530,716 2,303,023 50 50

168 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

19. financial assets (cont’d)

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

(d) loans and receivables

At amortised cost/fair value: Fixed and call deposits with licensed: Commercial banks 190,482 310,491 8,373 15,464 Investment banks 421,505 421,466 11,909 1,461 Islamic investment accounts with licensed: Co-operative bank 28,939 28,824 - - Islamic banks 1,079,194 618,210 7,879 1,579 Investment banks 1,996 - - - Development bank 58,907 91,043 - - Building society 256 9,211 - - Institutional trust deposit - 24,855 - - Uncallable negotiable Islamic deposits - 18,743 - - Islamic repo placements - 136,284 - - Secured staff loans 12,496 11,202 3,461 3,326 Amounts due from subsidiaries(ii) - - 4,111 3,406 Income due and accrued 44,523 40,623 72 37 Amount due from Insurance Pool accounts 26,290 35,266 - - Other receivables and deposits* 53,350 36,993 1,266 1,654

1,917,938 1,783,211 37,071 26,927

* Included in other receivables and deposits are monies recoverable from the Inland Revenue Board as detailed in Note 39.

(i) The pertinent information of the investments in unquoted shares in Malaysia are as follows:

Group 2015 2014 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 Less: Impairment loss (4,759) (4,759) 23,524 23,524 - 20,000,000 redeemable preference shares of RM1.00 each of FPL 20,569 20,569 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 - Others 293 293 44,796 44,796

(ii) These amounts are non-trade in nature, are unsecured, not subject to any interest/profit elements and repayable on demand.

169 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

20. insurance/takaful contract liabilities

2015 2014 Reinsurance/ Reinsurance/ Gross retakaful Net Gross retakaful Net RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

General reinsurance/takaful/retakaful funds (Note (a)) 2,184,154 (337,177) 1,846,977 2,145,644 (253,361) 1,892,283 Family takaful/retakaful funds (Note (b)) 1,921,784 (37,476) 1,884,308 1,824,043 (146,426) 1,677,617 Shareholder’s funds (Note (c)) 53,340 - 53,340 42,576 - 42,576

Total 4,159,278 (374,653) 3,784,625 4,012,263 (399,787) 3,612,476

(a) General reinsurance/takaful/retakaful funds

Claim liabilities (Note (i)) 1,799,017 (293,867) 1,505,150 1,748,911 (221,047) 1,527,864 Premium/contribution liabilities (Note (ii)) 385,137 (43,310) 341,827 396,733 (32,314) 364,419

2,184,154 (337,177) 1,846,977 2,145,644 (253,361) 1,892,283

(i) claim liabilities

At beginning of the year 1,748,911 (221,047) 1,527,864 1,671,998 (260,411) 1,411,587 Claims incurred in the current underwriting/accident year 278,715 (76,270) 202,445 284,345 (58,518) 225,827 Adjustment to claims incurred in prior underwriting/accident years due to changes in IBNR and PRAD (32,339) 23,092 (9,247) (1,349) 20,138 18,789 Movements in claims incurred in prior underwriting/accident years 776,126 (126,647) 649,479 620,517 (53,895) 566,622 Claims paid during the year (972,396) 107,005 (865,391) (826,600) 131,639 (694,961)

At end of the year 1,799,017 (293,867) 1,505,150 1,748,911 (221,047) 1,527,864

(ii) premium/contribution liabilities

At beginning of the year 396,733 (32,314) 364,419 376,082 (32,240) 343,842 Premiums/contributions written in the year 1,614,319 (228,497) 1,385,822 1,633,307 (179,820) 1,453,487 Premiums/contributions earned during the year (1,625,915) 217,501 (1,408,414) (1,612,656) 179,746 (1,432,910)

At end of the year 385,137 (43,310) 341,827 396,733 (32,314) 364,419

170 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

20. insurance/takaful contract liabilities (cont’d)

2015 2014 Reinsurance/ Reinsurance/ Gross retakaful Net Gross retakaful Net RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

(b) family takaful/retakaful funds

Provision for claims reported by contract holders 70,619 (20,720) 49,899 37,148 (13,212) 23,936 Participants’ Account (“PA”) 1,540,257 (7,260) 1,532,997 1,488,985 (6,888) 1,482,097 Participants’ Special Account (“PSA”) 190,140 (9,496) 180,644 179,232 (126,326) 52,906 Net asset value attributable to unitholders 120,768 - 120,768 118,678 - 118,678

1,921,784 (37,476) 1,884,308 1,824,043 (146,426) 1,677,617

At beginning of the year 1,824,043 (146,426) 1,677,617 1,520,942 (95,325) 1,425,617 Net earned contributions 530,416 (39,205) 491,211 528,624 (40,375) 488,249 Net creation of units 23,539 - 23,539 19,337 - 19,337 Liabilities paid for death, maturities, surrenders, benefits and claims (268,285) 47,682 (220,603) (237,735) 19,717 (218,018) Net cancellation of units (24,231) - (24,231) (20,262) - (20,262) Benefits and claims experience variation 33,471 (7,508) 25,963 (4,547) (3,548) (8,095) Fees deducted (143,299) - (143,299) (153,368) - (153,368) Other revenue and expenses 2,782 - 2,782 12,757 - 12,757 Transfer to shareholder’s fund (9,249) - (9,249) (11,741) - (11,741) (Decrease)/increase in reserve (47,403) 107,981 60,578 170,036 (26,895) 143,141

At end of the year 1,921,784 (37,476) 1,884,308 1,824,043 (146,426) 1,677,617

2015 2014 Gross/net Gross/net RM’000 RM’000

At beginning of the year 42,576 23,939 General takaful and retakaful funds: - Wakalah fee received during the year 88,326 62,994 - Wakalah fee earned during the year (79,141) (62,567) - Movement in provision for expense deficiency (5,160) 3,172 Family takaful and retakaful funds: - Movement in provision for UER 6,739 15,038

At end of the year 53,340 42,576

171 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

21. insurance/takaful receivables

Group 2015 2014 RM’000 RM’000

Due contributions including agents’ balances 69,606 125,691 Amounts due from brokers and ceding companies 265,339 268,000 Less: Allowance for impairment (31,027) (24,080)

303,918 369,611

Offsetting insurance/takaful receivables and insurance/takaful payables Gross amounts of recognised insurance/takaful receivables 670,687 592,134 Less: Gross amounts of recognised insurance/takaful payables set off in the statement of financial position (335,742) (198,443) Net amounts of insurance/takaful receivables presented in the statement of financial position 334,945 393,691

Included in amounts due from brokers and ceding companies is an amount of RM764,512 (2014: RM275,000) due from an associate, Labuan Reinsurance (L) Ltd. The amount receivable is subject to settlement terms stipulated in the reinsurance contracts.

22. non-current assets held for sale

Group 2015 2014 RM’000 RM’000

Freehold land and buildings: At beginning of the year 1,696 - Transfer from property, plant and equipment (Note 13) - 1,696 Less: Disposal (1,696) -

At end of the year - 1,696

The disposals of non-current assets held for sale were completed during the financial year.

172 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

23. participants’ funds

Group 2015 2014 RM’000 RM’000

Participants’ funds comprise the following: Accumulated surplus (Note (a)) 260,459 220,469 AFS reserves (Note (b)) 217 (26,903) Revaluation surplus (Note (c)) 26,050 23,910

286,726 217,476

(a) accumulated surplus At beginning of year 220,469 205,142 Net surplus of the general and family takaful funds 45,635 23,460 Hibah paid and payable to participants (5,645) (8,133)

At end of the year 260,459 220,469

(b) afs reserves At beginning of the year (26,903) 8,012 Net gain on fair value changes 34,032 (29,466) Realised gain transferred to income statement (4,399) (8,812) Deferred tax on fair value changes (2,513) 3,363 Net change in AFS reserves attributable to participants 27,120 (34,915)

At end of the year 217 (26,903)

(c) revaluation surplus At beginning of the year 23,910 21,001 Recognised in other comprehensive income 2,326 3,162 Deferred tax on revaluation surplus (186) (253) Net change in revaluation surplus attributable to participants 2,140 2,909

At end of the year 26,050 23,910

173 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

24. Borrowings

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Islamic revolving credit facility (“RC-i Facility”) 200,000 200,000 200,000 200,000 Sukuk Mudharabah Programme 120,000 120,000 120,000 120,000

320,000 320,000 320,000 320,000

The salient terms and conditions of the borrowings of the Group and the Company are as follows:

(a) islamic Revolving Credit Facility (“RC-i Facility”)

On 10 December 2012, the Company obtained an Islamic revolving credit facility (“RC-i Facility”) from Standard Chartered Saadiq Berhad, 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. This floating profit rate credit facility has a tenure of 5 years from the date it was obtained and is repayable on 10 December 2017. The profit rates for the financial year ended 31 March 2015 range from 5.45% to 5.85% per annum (2014: 5.45% to 5.71% per annum).

(b) sukuk Mudharabah Programme

On 10 December 2012, the Company issued RM120 million of Sukuk under the Sukuk Mudharabah Programme to MIDF Amanah Investment Bank Berhad. The issued Sukuk carries a fixed profit rate of 5.4% per annum with a tenure of 5 years and has a final redemption date on 10 December 2017.

25. insurance/takaful payables

Group 2015 2014 RM’000 RM’000

Due to brokers and retrocessionaires 108,528 113,310 Due to agents, retakaful operators and brokers 60,896 56,555

169,424 169,865

Offsetting insurance/takaful receivables and insurance/takaful payables Gross amounts of recognised insurance/takaful payables 505,166 368,308 Less: Gross amounts of recognised insurance/takaful receivables set off in the statement of financial position (335,742) (198,443)

Net amounts of insurance/takaful payables presented in the statement of financial position 169,424 169,865

Included in amounts due to brokers and retrocessionaires is an amount of RM6,321 (2014: RM9,000) due to an associate, Labuan Reinsurance (L) Ltd. The amount payable is subject to settlement terms stipulated in the reinsurance contracts.

174 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

26. other payables

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Advance contributions - 4,620 - - Deposit contributions 36,895 30,920 - - Outstanding commissions 10,636 13,741 - - Provisions 44,906 37,142 6,267 5,932 Amount due to subsidiaries - - 1,099 541 Sundry payables and accruals 78,370 70,970 1,837 2,460

170,807 157,393 9,203 8,933

27. share capital

Number of ordinary shares of RM1.00 each Amount 2015 2014 2015 2014 ‘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

28. Dividends

Amount Net dividend per share 2015 2014 2015 2014 RM’000 RM’000 Sen Sen

Recognised during the year:

Dividend paid in respect of the financial year ended 31 March 2013: First and final dividend of 32% less 25% tax - 51,137 - 24.0

Dividend paid in respect of the financial year ended 31 March 2014: First and final single-tier dividend of 16.5% 35,156 - 16.5 -

35,156 51,137 16.5 24.0

The Directors do not recommend the payment of any dividend in respect of the current financial year.

175 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

29. earnings per share

The basic and diluted 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 2015 2014 2015 2014

Net profit for the year (RM’000) 139,148 155,986 11,539 25,039

Number of ordinary shares in issue (‘000) 213,070 213,070 213,070 213,070

Basic and diluted EPS (sen) 65.3 73.2 5.4 11.8

30. 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 Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Future minimum rental payments:

Not later than 1 year 5,577 5,242 1,612 1,097 Later than 1 year and not later than 5 years 14,220 12,856 1,612 4,388

19,797 18,098 3,224 5,485

176 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

30. 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 2015 2014 RM’000 RM’000

Future minimum rental receipts:

Not later than 1 year 5,273 4,560 Later than 1 year and not later than 5 years 4,938 3,710

10,211 8,270

31. Commitments

The commitments of the Group and of the Company as at the financial year end are as follows:

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Authorised and contracted for: - Property, plant and equipment 2,697 1,476 325 333 - Intangible assets* 8,485 1,505 1,171 149

11,182 2,981 1,496 482

Authorised but not contracted for: - Property, plant and equipment 324 - - - - Intangible assets* 4,409 18,599 - 370

4,733 18,599 - 370

* Relating to purchases and enhancement of the reinsurance and takaful subsidiaries’ computer systems.

177 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

32. related party disclosures

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 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Income/(expenses):

Transactions with subsidiaries: Management fees received - - 33,868 31,072 Net dividend received - - 61,000 81,000 Rental paid - - (1,623) (1,237)

Transactions with takaful funds of a subsidiary: Takaful contributions paid - - (881) (821)

Transactions with an associate, Labuan Reinsurance (L) Ltd: Net reinsurance inwards (229) 192 - -

178 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

32. related party disclosures (cont’d)

(a) the significant transactions with related parties are as follows: (cont’d)

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 the reporting date have been disclosed in Notes 21 and 25 of the financial statements as well as on the face of statements of financial position.

(b) the key management personnel compensations are as follows:

Group Company 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Non-executive directors: Fees 2,729 2,421 804 700 Meeting allowances 677 560 167 125 Benefits-in-kind 24 31 24 31

Director of a subsidiary: Salaries and bonus 810 726 810 726 Pension costs - EPF 130 118 130 118 Social security costs 1 1 1 1 Other allowances 83 59 83 59 Benefits-in-kind 55 72 55 72

Other key management personnel’s remuneration: Salaries and bonus 10,300 11,197 4,579 5,054 Pension costs - EPF 1,463 1,572 688 751 Social security costs 6 6 5 5 Allowances 455 425 61 42 Benefits-in-kind 609 534 319 381

22,277 22,352 9,967 9,876

179 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

33. segment information

Adjustments Investment Reinsurance Takaful Retakaful and holding business operator operator eliminations Consolidated Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2015

Results Net earned premiums/contributions - 1,213,056 683,640 51,516 (881) 1,947,331 Interest/profit income 1,164 83,614 94,466 5,345 - 184,589 Other revenue 94,884 44,119 31,579 884 (106,446) 65,020 Net claims - (744,156) (468,060) (57,755) - (1,269,971) Other expenses(i) (66,680) (397,581) (259,259) (17,690) 76,807 (664,403) Depreciation (441) (2,279) (5,577) (13) - (8,310) Amortisation (75) (495) (3,348) (32) - (3,950) Finance costs (18,123) - - - - (18,123) Share of results of associates (228) 4,385 - - - 4,157 Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation 10,501 200,663 73,441 (17,745) (30,520) 236,340 Surplus attributable to takaful participants - - (45,635) - - (45,635) Operating profit/(loss) before zakat and taxation 10,501 200,663 27,806 (17,745) (30,520) 190,705 Zakat - - (960) - - (960) Taxation 810 (43,930) (7,477) - - (50,597) Net profit/(loss) for the year 11,311 156,733 19,369 (17,745) (30,520) 139,148

2014

Results Net earned premiums/contributions - 1,237,520 645,839 100,900 (821) 1,983,438 Interest/profit income 789 79,308 77,145 5,507 - 162,749 Other revenue 136,154 31,458 48,032 1,816 (144,306) 73,154 Net claims - (725,029) (472,574) (83,653) - (1,281,256) Other expenses(i) (66,865) (403,044) (247,517) (25,510) 72,596 (670,340) Depreciation (955) (4,022) (5,639) (110) - (10,726) Amortisation (552) (1,660) (971) (169) - (3,352) Finance costs (17,916) - - - - (17,916) Share of results of associates (438) 2,875 - - - 2,437 Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation 50,217 217,406 44,315 (1,219) (72,531) 238,188 Surplus attributable to takaful participants - - (23,460) - - (23,460) Operating profit/(loss) before zakat and taxation 50,217 217,406 20,855 (1,219) (72,531) 214,728 Zakat - - (400) - - (400) Taxation (25,616) (52,402) (4,324) - 24,000 (58,342) Net profit/(loss) for the year 24,601 165,004 16,131 (1,219) (48,531) 155,986 180 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

33. segment information (cont’d)

Adjustments Investment Reinsurance Takaful Retakaful and holding business operator operator eliminations Consolidated Group (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2015

Assets Segment assets(i) 892,720 3,024,712 3,103,548 194,865 (849,161) 6,366,684 Investments in associates 1,957 75,658 - - 32,412 110,027 894,677 3,100,370 3,103,548 194,865 (816,749) 6,476,711

Liabilities and Participants’ funds Segment liabilities Participants’ funds - - 286,726 - - 286,726 Borrowings 320,000 - - - - 320,000 Insurance and takaful contract liabilities - 1,739,442 2,276,856 142,980 - 4,159,278 Other liabilities 11,285 118,730 217,514 19,695 (5,991) 361,233 331,285 1,858,172 2,781,096 162,675 (5,991) 5,127,237

Equities Segment equities(i) 563,392 1,242,198 322,452 32,190 (810,758) 1,349,474 Total liabilities, participants’ funds and equity 894,677 3,100,370 3,103,548 194,865 (816,749) 6,476,711

2014

Assets Segment assets(i) 913,984 2,898,968 2,883,053 214,123 (870,084) 6,040,044 Investments in associates 1,957 75,658 - - 18,438 96,053 915,941 2,974,626 2,883,053 214,123 (851,646) 6,136,097

Liabilities and Participants’ funds Segment liabilities Participants’ funds - - 217,475 1 - 217,476 Borrowings 320,000 - - - - 320,000 Insurance and takaful contract liabilities - 1,718,028 2,151,032 143,203 - 4,012,263 Other liabilities 8,933 126,239 202,206 23,568 1,943 362,889 328,933 1,844,267 2,570,713 166,772 1,943 4,912,628

Equities Segment equities(i) 587,008 1,130,359 312,340 47,351 (853,589) 1,223,469 Total liabilities, participants’ funds and equity 915,941 2,974,626 2,883,053 214,123 (851,646) 6,136,097

(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 RM100.2 million (2014: RM96.3 million). Qard represents a loan to the general and family retakaful funds to make good any underwriting deficit experienced during a financial period. These balances, including the impairment losses recognised thereon amounting to RM88.1 million (2014: RM83.2 million), have been eliminated in full upon consolidation. 181 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

34. 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 and the 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 Risk Management Framework aims to serve as a guide for the effective management of risk throughout the Group. The Framework is intended to provide guidance to the Group in performing its risk management roles and responsibilities and ultimately aims to support the achievement of the Group’s strategic and financial objectives.

The key objectives of the risk management framework are to:

(i) provide information on risk governance and accountabilities; (ii) provide guidance on a standard approach to managing risks; (iii) create a risk aware and compliance culture; and (iv) enhance professionalism and increase profitability and value for shareholders.

In pursuit of the above objectives, it is the Group’s policy to implement good governance, risk management and compliance principles and best practices, and to uphold high standards of business practices in all the activities undertaken by the Group.

The Risk Management Governance structure is as follows:

(i) The Board had established a dedicated Board Committee known as the Risk Management Committee of the Board (“RMCB”) at MNRB Holdings Berhad level to oversee the implementation of an enterprise-wide risk management framework. This is also replicated at each of the subsidiary companies;

(ii) The Board had established a dedicated Investment Committee at MNRB Holdings Berhad level to further oversee risk associated with investments and assets allocation. This is also replicated at each of the subsidiary companies;

(iii) The Operational Risk Management Committee (“ORMC”) which comprises the President/Chief Executive Officer and senior management, implements the risk management processes, provides assurance to the Board that the processes have been carried out effectively and inculcates a risk management and compliance culture on an enterprise-wide basis;

(iv) The Group Chief Risk Management and Compliance Officer (“GCRMCO”) and Group Risk Management and Compliance Division establish the infrastructure and facilitate the risk management and compliance process in the Company and across the subsidiaries through the adoption of the Group’s risk management framework;

(v) At the operational level, the implementation of risk management and compliance process in the day to day operations of the Group is consistent with the risk management framework; and

(vi) The Line Managers of each department within the Group are responsible for using the various components of the risk management framework as an integral part of the business processes and procedures.

182 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

34. 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.

Under the CMP, the subsidiaries measure and monitor their respective capital position mainly via the Capital Adequacy Ratio (“CAR”).

The CMP identifies certain trigger points of the CAR 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 relevant Board and the management of the subsidiaries in the event of internal capital levels falling below the internal target requirement. This includes remedial actions that must be undertaken by the subsidiaries’ Board and 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 the 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 are commensurate with its business operations and the resultant risk profile and control environment.

Approach to capital management

The reinsurance, retakaful and takaful subsidiaries conduct stress tests on its CAR in compliance with BNM/RH/GL 003-23: Guideline on Stress Testing for Insurers and BNM/RH/GL 004-16: Guideline on Stress Testing for Takaful Operators. The impact of the adverse scenarios on the capital position of the subsidiaries is assessed quarterly focusing on short to medium term views.

The reinsurance, retakaful and takaful subsidiaries are required to comply with the Financial Services Act (“FSA”) 2013 and IFSA 2013, respectively, which are administered by BNM. 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 actively manage the capital adequacy by taking into account the potential impact on the subsidiaries business strategies, risk profile and the overall resilience of the Company.

In addition, the Company is required to comply with Bursa Malaysia Securities Berhad’s (“Bursa”) Risk Management and Internal Control System, the Listing Requirements of Bursa, 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.

183 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk

(a) General reinsurance

(i) nature of risk

The reinsurance subsidiary principally underwrites all classes of general reinsurance business. 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 claims and catastrophic loss events. These risks vary significantly in relation to economic conditions and territories from which the risks are underwritten.

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 are adequate.

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 relevant guidelines imposed by BNM in the underwriting of business.

(ii) concentration of risk by type of business

The table below measures the concentration of contracts by liabilities exposure for the main classes of the business and by local and overseas risks as follows:

Gross Retrocession Net RM’000 RM’000 RM’000

2015

Fire 725,095 (70,780) 654,315 Motor 364,964 (14,607) 350,357 Marine 262,311 (52,448) 209,863 Miscellaneous 387,072 (58,842) 328,230 1,739,442 (196,677) 1,542,765

Local 1,187,892 (186,920) 1,000,972 Overseas 551,550 (9,757) 541,793 1,739,442 (196,677) 1,542,765

2014

Fire 725,638 (19,954) 705,684 Motor 379,442 (35,930) 343,512 Marine 252,319 (56,767) 195,552 Miscellaneous 360,629 (37,564) 323,065 1,718,028 (150,215) 1,567,813

Local 1,129,808 (137,117) 992,691 Overseas 588,220 (13,098) 575,122 1,718,028 (150,215) 1,567,813 184 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(a) General reinsurance (cont’d)

(iii) reserving risk

The reinsurance subsidiary’s claim liabilities, and consequently some of the inputs used in determining its premium liabilities, are based upon claims experience, existing knowledge of the 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 income statement.

(iv) impact on liabilities, profit and equity

Key assumptions

Liabilities are determined based upon 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 arises from a variety of factors such as the range and quality of data available, underlying assumptions made and random volatility of 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.

The sensitivity analysis was applied to the ultimate loss ratio of the Company by increasing the said ratio of the most recent underwriting year by 5%. The table below shows the impact on the Company’s gross and net claim liabilities, profit before tax and equity should the ultimate loss ratio be increased by 5%:

Impact on gross Impact on net Impact on profit Impact liabilities liabilities before tax on equity* RM’000 RM’000 RM’000 RM’000

2015

Fire 16,187 16,186 16,186 13,553 Marine 5,230 4,593 4,593 4,060 Motor 7,031 6,961 6,961 5,295 Miscellaneous 8,525 8,532 8,532 6,893

36,973 36,272 36,272 29,801 185 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(a) General reinsurance (cont’d)

(iv) impact on liabilities, profit and equity (cont’d)

sensitivity analysis (cont’d)

Impact on gross Impact on net Impact on profit Impact liabilities liabilities before tax on equity* RM’000 RM’000 RM’000 RM’000

2014

Fire 17,403 17,400 17,400 14,433 Marine 5,507 4,534 4,534 3,913 Motor 7,195 7,195 7,195 5,477 Miscellaneous 9,571 9,566 9,566 7,644

39,676 38,695 38,695 31,467

* The impact on equity reflects the after tax impact.

This analysis assumes that other factors relevant, but not significant, to the valuation of claim liabilities remain constant.

(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 Company 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 financial year ended 31 March 2009 was not available and hence only developments in gross general reinsurance liabilities for financial year ended 31 March 2009 onwards are disclosed.

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.

186 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(a) General reinsurance (cont’d)

(v) claims development table (cont’d)

Gross general reinsurance contract liabilities for 2015:

Before Underwriting year 2007 2007 2008 2009 2010 2011 2012 2013 2014 Sub 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 underwriting year - 418,389 573,070 640,777 643,911 663,610 712,406 690,348 One year later 408,945 496,009 570,029 603,851 722,113 642,522 746,746 - Two years later 448,593 493,161 573,383 671,472 794,395 645,558 - - Three years later 464,785 492,705 633,550 674,073 841,767 - - - Four years later 457,881 576,942 633,211 669,536 - - - - Five years later 555,322 571,554 627,195 - - - - - Six years later 544,131 564,373 ------Seven years later 538,486 ------

Current estimate of booked ultimate claims incurred (a) 538,250 563,819 625,900 666,201 833,626 626,374 680,370 392,353

At the end of underwriting year 53,719 63,614 92,548 81,664 72,602 45,707 65,738 50,329 One year later 224,029 256,339 301,430 304,808 457,413 322,956 439,662 - Two years later 333,537 358,844 430,566 489,316 650,735 461,369 - - Three years later 379,990 411,516 544,944 569,484 758,933 - - - Four years later 403,432 515,279 574,075 617,380 - - - - Five years later 517,164 529,417 594,717 - - - - - Six years later 521,617 539,381 ------Seven years later 526,247 ------

Cumulative payments to-date (b) 526,247 539,381 594,717 617,380 758,933 461,369 439,662 50,329

Expected claim liabilities (a) - (b) 29,927 12,003 24,438 31,183 48,821 74,693 165,005 240,708 342,024 968,802

Other portfolios 396,779 Best estimate of claim liabilities 1,365,581 Claim handling expenses 7,385 Fund PRAD at 75% confidence interval 109,805

Gross general reinsurance claim liabilities 1,482,771

187 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(a) General reinsurance (cont’d)

(v) claims development table (cont’d)

Net general reinsurance contract liabilities for 2015:

Before Underwriting year 2007 2007 2008 2009 2010 2011 2012 2013 2014 Sub 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 underwriting year 317,442 496,557 537,097 579,366 556,166 631,329 706,648 685,728 One year later 418,288 480,442 546,681 557,852 707,118 624,620 731,426 - Two years later 439,019 476,158 549,676 626,114 779,122 617,389 - - Three years later 441,390 479,882 593,617 627,273 827,433 - - - Four years later 437,100 546,688 597,410 628,890 - - - - Five years later 519,346 546,771 599,731 - - - - - Six years later 515,127 546,212 ------Seven years later 514,038 ------

Current estimate of booked ultimate claims incurred (a) 513,842 545,705 598,548 626,008 819,497 601,338 666,931 388,589

At the end of underwriting year 52,635 62,609 91,038 70,948 72,009 45,218 65,738 50,328 One year later 219,484 251,249 296,382 291,065 451,089 319,123 435,537 - Two years later 324,757 350,613 415,719 471,728 642,608 454,603 - - Three years later 368,751 402,025 526,099 545,602 748,462 - - - Four years later 390,048 501,521 554,187 578,564 - - - - Five years later 497,241 515,394 574,402 - - - - - Six years later 501,625 525,129 ------Seven years later 506,000 ------

Cumulative payments to-date (b) 506,000 525,129 574,402 578,564 748,462 454,603 435,537 50,328

Expected claim liabilities (a) - (b) 24,990 7,842 20,576 24,146 47,444 71,035 146,735 231,394 338,261 912,423

Other portfolios 306,713 Best estimate of claim liabilities 1,219,136 Claim handling expenses 7,385 Fund PRAD at 75% confidence interval 97,673 Less: Retrocession recoveries (32,351)

Net general reinsurance claim liabilities 1,291,843

188 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(a) General reinsurance (cont’d)

(v) claims development table (cont’d)

Gross general reinsurance contract liabilities for 2014:

Before Underwriting year 2006 2006 2007 2008 2009 2010 2011 2012 2013 Sub 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 underwriting year - - 418,389 573,070 640,777 643,911 663,610 712,406 One year later - 408,945 496,009 570,029 603,851 722,113 642,522 - Two years later 403,736 448,593 493,161 573,383 671,472 794,395 - - Three years later 417,448 464,785 492,705 633,549 674,073 - - - Four years later 399,937 457,881 576,942 633,211 - - - - Five years later 395,525 555,322 571,554 - - - - - Six years later 438,867 544,131 ------Seven years later 434,488 ------

Current estimate of booked ultimate claims incurred (a) 434,473 543,980 570,863 630,635 664,078 771,790 585,640 415,425

At the end of underwriting year 42,356 53,719 63,614 92,548 81,664 72,602 45,707 65,738 One year later 217,724 224,029 256,339 301,430 304,808 457,413 322,956 - Two years later 294,220 333,537 358,844 430,566 489,316 650,735 - - Three years later 335,359 379,990 411,516 544,944 569,484 - - - Four years later 355,014 403,432 515,279 574,075 - - - - Five years later 369,071 517,164 529,417 - - - - - Six years later 420,704 521,617 ------Seven years later 423,366 ------

Cumulative payments to-date (b) 423,366 521,617 529,417 574,075 569,484 650,735 322,956 65,738

Expected claim liabilities (a) - (b) 28,586 11,107 22,363 41,446 56,560 94,594 121,055 262,684 349,687 988,082

Other portfolios 356,386 Best estimate of claim liabilities 1,344,468 Claim handling expenses 3,235 Fund PRAD at 75% confidence interval 101,365

Gross general reinsurance claim liabilities 1,449,068

189 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(a) General reinsurance (cont’d)

(v) claims development table (cont’d)

Net general reinsurance contract liabilities for 2014:

Before Underwriting year 2006 2006 2007 2008 2009 2010 2011 2012 2013 Sub 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 underwriting year 305,287 317,442 496,557 537,097 579,366 556,166 631,329 706,648 One year later 328,514 418,288 480,442 546,681 557,852 707,118 624,620 - Two years later 366,752 439,019 476,158 549,676 626,114 779,122 - - Three years later 371,474 441,390 479,882 598,507 627,273 - - - Four years later 350,446 437,100 551,447 597,410 - - - - Five years later 344,994 522,621 546,771 - - - - - Six years later 384,365 515,127 ------Seven years later 381,387 ------

Current estimate of booked ultimate claims incurred (a) 381,373 515,006 546,114 594,882 619,691 755,835 566,362 412,402

At the end of underwriting year 40,581 52,635 62,609 91,038 70,948 72,009 45,218 65,738 One year later 194,490 219,484 251,249 296,382 291,065 451,089 319,122 - Two years later 257,795 324,757 350,613 415,719 471,728 642,608 - - Three years later 288,807 368,751 402,025 526,099 545,602 - - - Four years later 307,552 390,048 501,521 554,187 - - - - Five years later 320,957 497,241 515,394 - - - - - Six years later 369,377 501,625 ------Seven years later 371,930 ------

Cumulative payments to-date (b) 371,930 501,625 515,394 554,187 545,602 642,608 319,122 65,738

Expected claim liabilities (a) - (b) 22,853 9,443 13,381 30,720 40,695 74,089 113,227 247,240 346,664 898,312

Other portfolios 330,354 Best estimate of claim liabilities 1,228,666 Claim handling expenses 3,235 Fund PRAD at 75% confidence interval 89,394 Less: Retrocession recoveries (17,106)

Net general reinsurance claim liabilities 1,304,189

190 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund

(i) nature of risk

The takaful subsidiary principally issues the following types of general takaful contract: motor, household and commercial fire, business interruption, personal accident, and other miscellaneous commercial contracts. Risks under these contracts usually cover a twelve- month duration other than long term fire which may be extended up to thirty years or more and Contractors All Risks and Erection All Risks which may be extended up to five years including maintenance period. For general takaful contracts, the most significant risks arise from accident frequency and severity of the accident. These risks vary significantly in relation to the location of risk, type of risk covered and 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 the RMCB and approved by the Board.

Stress Testing (“ST”) is performed on a quarterly basis and submitted to BNM on a half-yearly basis. 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) reserving risk

The general takaful fund’s claim liabilities, and consequently some of the inputs used in determining its contribution liabilities, are based upon claims experience, existing knowledge of the events, the terms and conditions of relevant certificates and interpretation of circumstances. Upon notification of a claim, the takaful subsidiary sets aside case and technical reserves to meet the expected ultimate loss arising from this claim. These claim reserves are updated periodically for further developments.

At each reporting date, the takaful subsidiary performs a valuation of liabilities that is certified by the Signing Actuary for the purpose of ensuring that claim and contribution liabilities are objectively assessed and adequately provided for. Any deficiency is recognised in the income statement.

191 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund (cont’d)

(iii) concentration of risk by type of contracts

The table below sets out the concentration of takaful contracts liabilities by classes of business:

Gross Retakaful Net RM’000 RM’000 RM’000

2015

Fire 70,651 (20,093) 50,558 Motor 204,383 (78,217) 126,166 Marine, Aviation & Transit 358 (174) 184 Miscellaneous 60,788 (13,149) 47,639

336,180 (111,633) 224,547

2014

Fire 65,488 (13,476) 52,012 Motor 200,857 (55,696) 145,161 Marine, Aviation & Transit 445 (224) 221 Miscellaneous 53,762 (10,893) 42,869

320,552 (80,289) 240,263

All business of the general takaful fund is derived in Malaysia; accordingly, disclosure of concentration risk by geographical region is not relevant to the general takaful fund.

(iv) impact on liabilities, profit and equity

Key assumptions

The principal assumption underlying the estimation of liabilities is that the takaful subsidiary’s future claims development will follow a pattern similar to the historical trend experience.

Additional qualitative judgements 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. 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 delays in settlement.

192 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund (cont’d)

(iv) impact on liabilities, profit and equity (cont’d)

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 on possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, surplus before tax and general takaful fund. The correlation of assumptions will have a significant effect in determining the ultimate claim liabilities, however, to demonstrate the impact due to changes in assumptions, only individual factor is changed, while other assumptions are held constant. It should be noted that movements in these assumptions are non-linear.

The sensitivity analysis has been performed for the main classes of business which are Motor Act and Motor Others. Motor Act is stressed using changes in claim severity; while Motor Others is tested by considering a stressed ultimate loss ratio level.

Change in Impact Impact Impact Impact assumption on gross on net on surplus on general of ultimate claims liabilities liabilities before tax takaful fund* ratio RM’000 RM’000 RM’000 RM’000

2015

Motor Act Average Severity +10% 20,157 15,798 (15,798) (11,849) Motor Others Expected Loss Ratio +10% 28,406 15,301 (15,301) (11,476)

2014

Motor Act Average Severity +10% 21,236 17,696 (17,696) (13,272) Motor Others Expected Loss Ratio +10% 38,323 21,603 (21,603) (16,202)

* The impact on general takaful fund reflects the after tax impact.

The method used in performing the sensitivity analysis is consistent with the prior year.

(v) claims development table

The following tables show the estimate of cumulative incurred claims, including both claims reported and IBNR (including IBNER) for each successive accident year at each reporting date, together with cumulative payments to-date.

In setting provisions for claims, the takaful subsidiary gives consideration to the probability and magnitude of future experience at best estimate level with a degree of caution in setting reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience for an accident year is greatest when the claim is at an early stage of development; hence the provision for risk margin for adverse deviation is relatively higher than the provision for claims at a later development period. As the claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease.

193 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund (cont’d)

(iv) claims development table (cont’d)

Gross general takaful contract liabilities for 2015:

Accident year 2008 2009 2010 2011 2012 2013 2014 2015 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 50,997 100,090 125,472 144,938 150,396 108,384 141,258 176,570 One year later 51,290 93,740 142,627 146,833 140,864 106,221 125,098 - Two years later 51,483 89,887 134,623 137,705 132,409 97,322 - - Three years later 51,708 86,452 128,689 129,564 125,201 - - - Four years later 50,301 82,702 122,290 126,078 - - - - Five years later 50,507 80,849 122,147 - - - - - Six years later 50,166 80,259 ------Seven years later 50,035 ------

Current estimate of cumulative claims incurred 50,035 80,259 122,147 126,078 125,201 97,322 125,098 176,570

At the end of accident year 17,599 29,070 43,215 48,128 49,128 41,750 52,986 72,444 One year later 34,059 64,212 83,077 95,317 88,890 70,150 89,882 - Two years later 39,159 72,939 100,539 112,994 106,834 81,392 - - Three years later 44,893 77,825 105,741 119,507 113,031 - - - Four years later 47,722 78,729 107,734 121,220 - - - - Five years later 49,488 79,468 108,720 - - - - - Six years later 49,775 79,896 ------Seven years later 49,967 ------

Cumulative payments to-date 49,967 79,896 108,720 121,220 113,031 81,392 89,882 72,444

Gross general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) 68 363 13,427 4,858 12,170 15,930 35,216 104,126 186,158 Fund PRAD at 75% 24,181

Total 210,339

194 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund (cont’d)

(iv) claims development table (cont’d)

Net general takaful contract liabilities for 2015:

Accident year 2008 2009 2010 2011 2012 2013 2014 2015 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 47,452 83,588 114,632 134,955 139,773 77,046 89,101 104,072 One year later 47,361 81,492 119,456 131,893 126,239 74,561 80,459 - Two years later 47,903 78,446 124,071 125,246 119,387 66,794 - - Three years later 47,484 76,773 120,563 117,605 111,481 - - - Four years later 45,894 72,883 114,108 114,720 - - - - Five years later 45,091 71,266 114,400 - - - - - Six years later 44,591 70,735 ------Seven years later 44,410 ------

Current estimate of cumulative claims incurred 44,410 70,735 114,400 114,720 111,481 66,794 80,459 104,072

At the end of accident year 16,968 27,670 40,682 44,669 46,245 29,182 35,402 45,182 One year later 32,665 56,446 79,471 88,779 81,802 49,605 58,337 - Two years later 37,569 64,216 94,614 103,862 96,453 55,605 - - Three years later 41,845 69,165 99,156 109,008 100,801 - - - Four years later 43,721 69,505 100,448 110,484 - - - - Five years later 44,519 70,071 101,372 - - - - - Six years later 44,223 70,386 ------Seven years later 44,353 ------

Cumulative payments to-date 44,353 70,386 101,372 110,484 100,801 55,605 58,337 45,182

Net general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. ALAE) 57 349 13,028 4,236 10,680 11,189 22,122 58,890 120,551 Fund PRAD at 75% 15,659

Total 136,210

195 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund (cont’d)

(iv) claims development table (cont’d)

Gross general takaful contract liabilities for 2014:

Accident year 2007 2008 2009 2010 2011 2012 2013 2014 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 36,388 50,997 100,090 125,472 144,938 150,396 108,384 141,258 One year later 36,179 51,290 93,740 142,627 146,833 140,864 106,221 - Two years later 35,120 51,483 89,887 134,623 137,705 132,409 - - Three years later 33,672 51,708 86,452 128,689 129,564 - - - Four years later 33,695 50,301 82,702 122,290 - - - - Five years later 32,743 50,507 80,849 - - - - - Six years later 32,433 50,166 ------Seven years later 32,212 ------

Current estimate of cumulative claims incurred 32,212 50,166 80,849 122,290 129,564 132,409 106,221 141,258

At the end of accident year 13,366 17,599 29,070 43,215 48,128 49,128 41,750 52,987 One year later 25,083 34,059 64,212 83,077 95,317 88,890 70,150 - Two years later 27,784 39,159 72,939 100,539 112,994 106,834 - - Three years later 30,245 44,893 77,825 105,741 119,507 - - - Four years later 31,292 47,722 78,729 107,733 - - - - Five years later 31,975 49,488 79,468 - - - - - Six years later 32,280 49,775 ------Seven years later 32,163 ------

Cumulative payments to-date 32,163 49,775 79,468 107,733 119,507 106,834 70,150 52,987

Gross general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) 49 391 1,381 14,557 10,057 25,575 36,071 88,271 176,352 Fund PRAD at 75% 25,167

Total 201,519

196 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(b) General takaful fund (cont’d)

(iv) claims development table (cont’d)

Net general takaful contract liabilities for 2014:

Accident year 2007 2008 2009 2010 2011 2012 2013 2014 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 33,895 47,452 83,588 114,632 134,955 139,773 77,046 89,101 One year later 34,140 47,361 81,492 119,456 131,893 126,239 74,561 - Two years later 33,195 47,903 78,446 124,071 125,246 119,387 - - Three years later 31,470 47,484 76,773 120,563 117,605 - - - Four years later 31,341 45,894 72,883 114,108 - - - - Five years later 30,328 45,091 71,267 - - - - - Six years later 29,987 44,591 ------Seven years later 29,777 ------

Current estimate of cumulative claims incurred 29,777 44,591 71,267 114,108 117,605 119,387 74,561 89,101

At the end of accident year 11,984 16,968 27,670 40,682 44,669 46,245 29,182 35,402 One year later 23,420 32,665 56,446 79,471 88,779 81,802 49,605 - Two years later 26,016 37,569 64,216 94,614 103,862 96,453 - - Three years later 28,197 41,845 69,165 99,156 109,008 - - - Four years later 29,089 43,721 69,505 100,447 - - - - Five years later 29,631 44,519 70,071 - - - - - Six years later 29,847 44,223 ------Seven years later 29,730 ------

Cumulative payments to-date 29,730 44,223 70,071 100,447 109,008 96,453 49,605 35,402

Net general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. ALAE) 47 368 1,196 13,661 8,597 22,934 24,956 53,699 125,458 Fund PRAD at 75% 22,136

Total 147,594

197 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(i) nature of risk

The takaful subsidiary principally issues the following types of family takaful certificate: Ordinary Takaful Plans, Mortgage Takaful Plans, Group Takaful Plans and Investment-linked Takaful Plans.

Family takaful underwriting risk exists from the anti-selection and adequacy of tabarru’ to meet future claims 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 and morbidity and experience.

The takaful subsidiary utilises retakaful arrangement to manage the mortality and morbidity risks. 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 effective.

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 participants.

Stress Testing (“ST”) is performed on a quarterly basis and submitted to BNM on a half-yearly basis. 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.

(ii) concentration of risk by type of contracts

The table below shows the concentration of actuarial liabilities by type of contract:

Gross Retakaful Net RM’000 RM’000 RM’000

2015

Family takaful plans 708,684 (4,221) 704,463 Investment-linked takaful plans 21,880 (5,275) 16,605 Mortgage takaful plans 649,960 - 649,960 Group credit takaful plans 219,846 - 219,846 Others 101,257 - 101,257 1,701,627 (9,496) 1,692,131

198 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(ii) concentration of risk by type of contracts (cont’d)

Gross Retakaful Net RM’000 RM’000 RM’000

2014

Family takaful plans 735,055 (10,424) 724,631 Investment-linked takaful plans 23,624 (1,299) 22,325 Mortgage takaful plans 501,924 (101,812) 400,112 Group credit takaful plans 284,220 (12,791) 271,429 Others 89,511 - 89,511

1,634,334 (126,326) 1,508,008

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.

(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 are based on mortality rates as set out in the Actuarial Certificate submitted to BNM. They reflect the historical local experience 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. To the extent that mortality/morbidity is worse than that priced for, profitability of shareholder’s fund may be affected and may in a worst case scenario, lead to possible Risk Fund deficit. This is mitigated with adequate retakaful arrangement as well as contract design (in some circumstances) that builds in repricing mechanisms.

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. The valuation of liabilities will be discounted to valuation date using the government investment issues zero coupon spot yields which are obtained from the Bond Pricing Agency Malaysia rates as prescribed in the valuation guidelines.

A decrease in the discount rate will increase the value of the family takaful liabilities and therefore reduce profits for the shareholders in terms of lower surplus administration charge income. 199 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(iii) Key assumptions (cont’d)

The assumptions that have significant effects on the financial position and financial performance of the family takaful fund are listed below:

2015 2014 Type of business Mortality and morbidity rates Discount rates Discount rates

Credit related (MRTT and GCT) Base mortality1, adjusted for retakaful rates2 4% 4% Others Base mortality1 N/A N/A

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.

(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, surplus before tax and family takaful fund. The correlations of assumptions will have a significant effect in determining the ultimate family takaful liabilities but to demonstrate the impact due to changes in assumptions, assumptions are changed on an individual basis. It should be noted that movements in these assumptions are non-linear. Sensitivity information will also vary according to the current economic assumptions.

Impact Impact Impact Impact Change in on gross on net on profit on family assumptions liabilities liabilities before tax takaful fund* % RM’000 RM’000 RM’000 RM’000

2015

Mortality/morbidity + 10% 87,579 82,703 (82,703) (82,703) Discount rates + 1% (21,906) (12,413) 12,413 12,413

2014

Mortality/morbidity + 10% 43,773 3,979 (3,979) (3,979) Discount rates + 1% (7,640) (1,144) 1,144 1,144

* The impact on the family takaful fund reflects the after tax impact which is presumed to be nil as the family takaful fund is taxed only on investment income.

The method used in performing the sensitivity analysis is consistent with the prior year.

200 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund

During the financial year ended 31 March 2015, the Management has decided to undergo a consolidation exercise and to review its business portfolio. This would include temporarily not writing and renewing the general business, as well as cleaning up the outstanding contributions and claims balances. This decision was taken with a view to further strengthen the retakaful subsidiary’s capital position.

(i) nature of risk

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 the general retakaful fund’s loss exposure via the use of retrotakaful arrangements. The retrotakaful arrangements are reviewed annually by the RMCB and approved by the Board.

Stress testing is performed on a quarterly basis and submitted to BNM twice a year. The purpose of the stress testing is to test the solvency of the general retakaful fund under various scenarios. These scenarios are based on regulatory guidelines and simulate drastic changes in major parameters such as new business volume, claims experience and investment environment.

(ii) reserving risk

The general retakaful fund’s claim liabilities, and consequently some of the inputs used in determining its contribution liabilities, are based upon claims experience, existing knowledge of the events, the terms and conditions of relevant certificates and interpretation of circumstances. Upon notification of a claim, the retakaful subsidiary sets aside case and technical reserves to meet the expected ultimate loss arising from this claim. These claim reserves are updated periodically for further developments.

At each reporting date, the retakaful 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 income statement.

(iii) concentration of takaful contract liabilities

The table below sets out the concentration of takaful contract liabilities by class of business and by local and overseas:

Gross Retakaful Net RM’000 RM’000 RM’000

2015

Fire 40,193 (8,820) 31,373 Motor 25,813 (1) 25,812 Marine, Aviation & Transit 5,490 80 5,570 Miscellaneous 37,036 (20,127) 16,909

108,532 (28,868) 79,664

Local 75,855 (28,737) 47,118 Overseas 32,677 (131) 32,546

108,532 (28,868) 79,664 201 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund (cont’d)

(iii) concentration of takaful contract liabilities (cont’d)

Gross Retakaful Net RM’000 RM’000 RM’000

2014

Fire 49,801 (7,555) 42,246 Motor 20,879 (3) 20,876 Marine, Aviation & Transit 4,286 (89) 4,197 Miscellaneous 32,098 (15,211) 16,887

107,064 (22,858) 84,206

Local 83,553 (22,369) 61,184 Overseas 23,511 (489) 23,022

107,064 (22,858) 84,206

(iv) 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.

202 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund (cont’d)

(iv) impact on liabilities, profit and equity (cont’d)

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.

The sensitivity analysis was applied to the ultimate loss ratio of the general retakaful fund by increasing the said ratio by 5%. The ultimate loss ratios of Fire and Marine, Aviation & Transit classes of business for the most recent underwriting year and the ultimate loss ratios of Motor and Miscellaneous classes of business for all underwriting years were increased by 5%. The table below shows the impact on the general retakaful fund’s gross and net claim liabilities, surplus before tax and general retakaful fund should the ultimate loss ratio be increased by 5%:

Impact Impact Impact Impact on gross on net on surplus on general liabilities liabilities before tax retakaful fund* RM’000 RM’000 RM’000 RM’000

2015

Fire 654 635 635 635 Motor 1,678 1,678 1,678 1,678 Marine, Aviation & Transit 167 150 150 150 Miscellaneous 2,756 2,577 2,577 2,577

5,255 5,040 5,040 5,040

2014

Fire 2,457 2,167 2,167 2,167 Motor 1,479 1,479 1,479 1,479 Marine, Aviation & Transit 331 326 326 326 Miscellaneous 2,742 2,698 2,698 2,698

7,009 6,670 6,670 6,670

* The impact on the general retakaful fund reflects the after tax impact which is presumed to be nil based on the current tax position of the fund.

This analysis assumes all other parameters are held constant.

203 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund (cont’d)

(v) claims development table

In setting provisions for claims, the Company relies on advice by the 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.

Gross general retakaful claim liabilities for 2015:

Underwriting year 2007 2008 2009 2010 2011 2012 2013 2014 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At the end of underwriting year - - - - 9,284 15,171 42,843 19,642 One year later - - - 27,915 33,682 56,646 32,126 - Two years later - - 21,520 35,220 36,964 57,574 - - Three years later - 17,641 18,780 41,994 42,744 - - - Four years later 9,441 18,864 19,282 47,230 - - - - Five years later 11,149 28,583 19,143 - - - - - Six years later 8,983 30,340 ------Seven years later 8,826 ------

Current estimate of booked ultimate claims incurred (a) 8,826 30,340 19,138 47,140 42,508 56,615 30,265 14,283

At the end of underwriting year (3,196) (8,238) (392) (3,293) 1,506 2,524 676 135 One year later 7,045 4,950 8,483 13,468 11,500 14,017 11,191 - Two years later 8,036 14,171 12,669 25,419 21,355 23,897 - - Three years later 6,005 16,391 14,145 30,745 27,968 - - - Four years later 6,186 20,578 14,923 39,120 - - - - Five years later 8,030 24,807 16,528 - - - - - Six years later 8,220 27,548 ------Seven years later 8,360 ------

Cumulative payments to-date (b) 8,360 27,548 16,528 39,120 27,968 23,897 11,191 135

Expected claim liabilities (a) - (b) 466 2,792 2,610 8,020 14,540 32,718 19,074 14,148 94,368

Other portfolios 981 Best estimate of claim liabilities 95,349 Fund PRAD at 75% confidence interval 10,558

Gross general retakaful claim liabilities 105,907 204 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund (cont’d)

(v) claims development table (cont’d)

Net general retakaful claim liabilities for 2015:

Underwriting year 2007 2008 2009 2010 2011 2012 2013 2014 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At the end of underwriting year - - - - 9,284 15,171 38,790 19,642 One year later - - - 27,915 33,682 55,371 32,126 - Two years later - - 21,520 35,220 36,935 57,574 - - Three years later - 17,641 18,780 41,994 42,744 - - - Four years later 9,441 18,864 19,282 47,230 - - - - Five years later 11,149 28,583 19,143 - - - - - Six years later 8,983 30,340 ------Seven years later 8,826 ------

Current estimate of booked ultimate claims incurred (a) 8,826 30,319 19,121 47,113 42,450 56,241 29,643 14,142

Cumulative payments to-date (b) 8,360 27,548 16,528 39,120 27,968 23,897 11,191 135

Expected claim liabilities (a) - (b) 466 2,771 2,593 7,993 14,482 32,344 18,452 14,006 93,107

Other portfolios 870 Best estimate of claim liabilities 93,977 Fund PRAD at 75% confidence interval 8,025 Less: Retrotakaful recoveries (24,906)

Net general retakaful claim liabilities 77,096

205 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund (cont’d)

(v) claims development table (cont’d)

Gross general retakaful claim liabilities for 2014:

Underwriting year 2007 2008 2009 2010 2011 2012 2013 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At the end of underwriting year - - - - 9,284 15,171 42,843 One year later - - - 27,915 33,682 56,646 - Two years later - - 21,520 35,220 36,964 - - Three years later - 17,641 18,780 41,994 - - - Four years later 9,441 18,864 19,282 - - - - Five years later 11,149 28,583 - - - - - Six years later 8,983 ------Seven years later ------

Current estimate of booked ultimate claims incurred (a) 8,985 28,567 19,245 41,878 36,594 51,860 16,275

At the end of underwriting year (3,196) (8,238) (392) (3,293) 1,506 2,524 676 One year later 7,045 4,950 8,346 13,468 11,500 14,017 - Two years later 8,036 14,171 12,669 25,419 21,355 - - Three years later 6,005 16,391 14,145 30,745 - - - Four years later 6,186 20,578 14,923 - - - - Five years later 8,030 24,807 - - - - - Six years later 8,220 ------Seven years later ------

Cumulative payments to-date (b) 8,220 24,807 14,923 30,745 21,355 14,017 676

Expected claim liabilities (a) - (b) 765 3,760 4,322 11,133 15,239 37,843 15,599 88,661

Other portfolios 456 Best estimate of claim liabilities 89,117 Fund PRAD at 75% confidence interval 9,207

Gross general retakaful claim liabilities 98,324

206 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(d) General retakaful fund (cont’d)

(v) claims development table (cont’d)

Net general retakaful claim liabilities for 2014:

Underwriting year 2007 2008 2009 2010 2011 2012 2013 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At the end of underwriting year - - - - 9,284 15,171 38,790 One year later - - - 27,915 33,682 55,371 - Two years later - - 21,520 35,220 36,935 - - Three years later - 17,641 18,780 41,994 - - - Four years later 9,441 18,864 19,282 - - - - Five years later 11,149 28,583 - - - - - Six years later 8,983 ------Seven years later ------

Current estimate of booked ultimate claims incurred (a) 8,985 28,567 19,245 41,877 36,574 51,062 15,982

Cumulative payments to-date (b) 8,220 24,807 14,923 30,745 21,355 14,017 676

Expected claim liabilities (a) - (b) 765 3,760 4,322 11,132 15,219 37,045 15,306 87,549

Other portfolios 449 Best estimate of claim liabilities 87,998 Fund PRAD at 75% confidence interval 7,350 Less: Retrotakaful recoveries (19,268)

Net general retakaful claim liabilities 76,080

207 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(e) family retakaful fund

During the financial year ended 31 March 2015, the Management has decided to undergo a consolidation exercise and to review its business portfolio. This would include temporarily not writing and renewing the family business, as well as cleaning up the outstanding contributions and claims balances. This decision was taken with a view to further strengthen the retakaful subsidiary’s capital position.

(i) nature of risk

The retakaful subsidiary principally underwrites the following types of family retakaful business: 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 and morbidity experience. The retakaful subsidiary utilises retrotakaful to manage mortality and morbidity risks.

The retakaful subsidiary reviews the actual experience of mortality and morbidity to ensure that appropriate policies, guidelines and limits put in place to manage these risks remain adequate and appropriate.

Stress testing is performed on a quarterly basis and submitted to BNM on a half-yearly basis. The purpose of the stress testing 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.

(ii) concentration of takaful contract liabilities

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

2015

Local 26,706 (6,647) 20,059 Overseas 2,064 (613) 1,451

28,770 (7,260) 21,510

2014

Local 32,417 (6,269) 26,148 Overseas 1,466 (619) 847

33,883 (6,888) 26,995

Business of the family retakaful fund is derived from Malaysian and overseas risks. Liabilities of the family retakaful fund are mainly spread within Malaysia, Brunei and Indonesia.

208 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

35. underwriting risk (cont’d)

(e) family retakaful fund (cont’d)

(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.

sensitivity analysis

The family retakaful fund’s claim liabilities are sensitive to changes in loss ratios. 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 sensitivity analysis was applied to the ultimate loss ratio of the family retakaful fund by increasing the said ratio by 20%. The table below shows the impact on the family retakaful fund’s gross and net liabilities, surplus before tax and family retakaful fund should the ultimate loss ratio be increased by 20%:

Impact Impact Impact Impact Change in on gross on net on surplus on family assumptions liabilities liabilities before tax retakaful fund* % RM’000 RM’000 RM’000 RM’000

2015

Loss ratio -20% (18,145) (18,145) (18,145) (18,145) Loss ratio +20% 29,889 29,889 29,889 29,889

2014

Loss ratio -20% (20,248) (20,248) (20,248) (20,248) Loss ratio +20% 34,695 34,695 34,695 34,695

* The impact on the family retakaful fund reflects the after tax impact which is presumed to be nil based on the current tax position of the fund.

The method used in performing the sensitivity analysis is consistent with the prior year.

209 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk

Transactions in financial instruments may result in the Group and the Company assuming financial risks. These include credit risk, liquidity risk and market risk. This note presents information about the Group’s and the Company’s exposure to each of the above risks and the Group’s and the Company’s objectives, policies and processes for measuring and managing such risks.

The following tables summarise the financial assets and financial liabilities of the Group and the Company, and their carrying value and fair values, which are considered by management in monitoring and managing of its financial risks.

2015 2014 Carrying Fair Carrying Fair value value value value RM’000 RM’000 RM’000 RM’000

Group

Financial and insurance assets Financial assets at FVTPL (Note 19) 137,934 137,934 139,478 139,478 HTM investments (Note 19) 722,356 716,236 718,597 699,862 AFS financial assets (Note 19) 2,530,716 2,530,716 2,303,023 2,303,023 Loans and receivables* (Note 19) 1,917,938 1,917,938 1,783,211 1,783,211 Reinsurance/retakaful assets 374,653 374,653 399,787 399,787 Insurance/takaful receivables* 303,918 303,918 369,611 369,611 Cash and bank balances 82,702 82,702 36,644 36,644

6,070,217 6,064,097 5,750,351 5,731,616

Financial and insurance liabilities Borrowings 320,000 318,637 320,000 319,798 Insurance/takaful contract liabilities 4,159,278 4,159,278 4,012,263 4,012,263 Insurance/takaful payables* 169,424 169,424 169,865 169,865 Other payables and provisions* 170,807 170,807 157,393 157,393

4,819,509 4,818,146 4,659,521 4,659,319

Company

Financial and insurance assets AFS financial assets (Note 19) 50 50 50 50 Loans and receivables* (Note 19) 37,071 37,071 26,927 26,927 Cash and bank balances 2,877 2,877 2,904 2,904

39,998 39,998 29,881 29,881

Financial and insurance liabilities Borrowings 320,000 318,637 320,000 319,798 Other payables and provisions* 9,203 9,203 8,933 8,933

329,203 327,840 328,933 328,731

* The carrying values of these loans and receivables, insurance receivables, insurance payables and other payables and provisions approximate their fair values due to their short term nature. 210 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(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) An 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) A 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

(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 amounts due from ceding companies; and

(iii) as a result of reserves held by the reinsurers and/or retakaful operators which would have to be met by the reinsurance and/or retakaful subsidiaries 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 and cash deposits 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 and equity with good fundamentals. For the financial year ended 31 March 2015, the credit rating of the Group’s fixed income portfolio was dominated by securities rated AAA as determined by Rating Agency Malaysia (“RAM”) and/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 the 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. 211 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(a) credit Risk (cont’d)

Unearned premium and contribution reserves and reserves for unearned wakalah fees have been excluded from the analysis as they are not contractual obligations.

The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the credit ratings of counterparties.

Credit exposure by credit rating for 2015:

Not Government AAA subject to guaranteed to BBB BB to C credit risk Not rated Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Financial assets at FVTPL quoted shares in Malaysia - - - 3,951 - 3,951 Warrants - - - 28 - 28 Shariah approved unit trust funds - - - 133,955 - 133,955

HTM investments Malaysian government securities 78,734 - - - - 78,734 Unquoted corporate debt securities 99,779 - 251 - - 100,030 Government investment issues 543,592 - - - - 543,592

AFS financial assets Unquoted shares in Malaysia - - - 44,796 - 44,796 Malaysian government securities 49,478 - - - - 49,478 Unquoted corporate debt securities 478,750 1,472,276 - - - 1,951,026 quoted shares in Malaysia - - - 289,064 - 289,064 Warrants - - - 141 - 141 Real estate investment trusts - - - 7,836 - 7,836 Government investment issues 188,375 - - - - 188,375

Loans and receivables Fixed and call deposits with licensed: Commercial banks - 190,482 - - - 190,482 Investment banks 500 421,005 - - - 421,505

212 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(a) credit Risk (cont’d)

Credit exposure by credit rating for 2015: (cont’d)

Not Government AAA subject to guaranteed to BBB BB to C credit risk Not rated Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group (cont’d)

Loans and receivables (cont’d) Islamic investment accounts with licensed: Co-operative bank - 28,939 - - - 28,939 Islamic banks - 489,526 - 294,632 295,036 1,079,194 Investment banks - 1,996 - - - 1,996 Development bank - 43,312 - - 15,595 58,907 Building society - 256 - - - 256 Secured staff loans - - - - 12,496 12,496 Income due and accrued - - - - 44,523 44,523 Amount due from Insurance Pool accounts - - - - 26,290 26,290 Other receivables and deposits - - - - 53,350 53,350 Reinsurance/retakaful assets - 199,406 67 - 131,870 331,343 Insurance/takaful receivables - 74,390 69 - 229,459 303,918 Cash and bank balances - 79,329 - - 3,373 82,702

1,439,208 3,000,917 387 774,403 811,992 6,026,907

Company

AFS financial assets Unquoted shares in Malaysia - - - 50 - 50

Loans and receivables Fixed and call deposits with licensed: Commercial banks - 8,373 - - - 8,373 Investment banks 500 11,409 - - - 11,909 Islamic investment accounts with licensed Islamic banks - 7,879 - - - 7,879 Secured staff loans - - - - 3,461 3,461 Amounts due from subsidiaries - 2,974 - - 1,137 4,111 Income due and accrued - - - - 72 72 Other receivables and deposits - - - - 1,266 1,266 Cash and bank balances - 2,877 - - - 2,877

500 33,512 - 50 5,936 39,998 213 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(a) credit Risk (cont’d)

Credit exposure by credit rating for 2014:

Not Government AAA subject to guaranteed to BBB BB to C credit risk Not rated Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Financial assets at FVTPL quoted shares in Malaysia - - - 7,527 - 7,527 Warrants - - - 62 - 62 Shariah approved unit trust funds - - - 131,889 - 131,889

HTM investments Malaysian government securities 78,936 - - - - 78,936 Unquoted corporate debt securities 95,089 - 255 - - 95,344 Government investment issues 544,317 - - - - 544,317

AFS financial assets Unquoted shares in Malaysia - - - 44,796 - 44,796 Malaysian government securities 29,281 - - - - 29,281 Unquoted corporate debt securities 438,733 1,394,622 - - 6,115 1,839,470 quoted shares in Malaysia - - - 201,485 - 201,485 quoted shares outside Malaysia - - - 280 - 280 Warrants - - - 192 - 192 Real estate investment trusts - - - 6,821 - 6,821 Government investment issues 180,698 - - - - 180,698

Loans and receivables Fixed and call deposits with licensed: Commercial banks - 310,491 - - - 310,491 Investment banks - 421,466 - - - 421,466

214 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(a) credit Risk (cont’d)

Credit exposure by credit rating for 2014: (cont’d)

Not Government AAA subject to guaranteed to BBB BB to C credit risk Not rated Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group (cont’d)

Loans and receivables (cont’d) Islamic investment accounts with licensed: Co-operative bank - 28,824 - - - 28,824 Islamic banks - 510,581 - - 107,629 618,210 Development bank - 71,606 - - 19,437 91,043 Building society - 9,211 - - - 9,211 Institutional trust deposit - - - - 24,855 24,855 Uncallable negotiable Islamic deposits - 18,743 - - - 18,743 Islamic repo placements - 98,110 - - 38,174 136,284 Secured staff loans - - - - 11,202 11,202 Income due and accrued - - - - 40,623 40,623 Amount due from Insurance Pool accounts - - - - 35,266 35,266 Other receivables and deposits - 600 - - 36,393 36,993 Reinsurance/retakaful assets - 240,746 1,219 - 125,508 367,473 Insurance/takaful receivables - 56,363 214 - 313,034 369,611 Cash and bank balances - 31,324 - - 5,320 36,644

1,367,054 3,192,687 1,688 393,052 763,556 5,718,037

Company

AFS financial assets Unquoted shares in Malaysia - - - 50 - 50

Loans and receivables Fixed and call deposits with licensed: Commercial banks - 15,464 - - - 15,464 Investment banks - 1,461 - - - 1,461 Islamic investment accounts with licensed Islamic banks - 1,579 - - - 1,579 Secured staff loans - - - - 3,326 3,326 Amounts due from subsidiaries - 2,159 - - 1,247 3,406 Income due and accrued - - - - 37 37 Other receivables and deposits - - - - 1,654 1,654 Cash and bank balances - 2,904 - - - 2,904

- 23,567 - 50 6,264 29,881 215 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(a) credit Risk (cont’d)

Movement of allowance for impairment losses on receivables

Group Individually Collectively impaired impaired Total RM’000 RM’000 RM’000

2015

At beginning of the year 16,722 7,358 24,080 (Reversal of impairment losses)/impairment losses for the year (91) 7,038 6,947

At end of the year 16,631 14,396 31,027

2014

At beginning of the year 19,142 7,513 26,655 Reversal of impairment losses for the year (2,420) (155) (2,575)

At end of the year 16,722 7,358 24,080

Liquidity risk is the risk that the Group will not have sufficient cash resources available to meet its payment obligations without incurring material additional costs.

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) the composition and market values of company’s investment portfolios, including liquid holdings; and (iv) 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.

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 insurance and takaful contract liabilities and reinsurance and retakaful assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance/takaful liabilities. Unearned premium and contribution reserves and reserves for unearned wakalah fees have been excluded from the analysis as they are not contractual obligations.

216 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(b) liquidity Risk (cont’d)

Maturity profiles for 2015

Carrying Up to 1 - 5 Over No maturity value 1 year years 5 years date Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Financial assets at FVTPL quoted shares in Malaysia 3,951 - - - 3,951 3,951 Warrants 28 - - - 28 28 Shariah approved unit trust funds 133,955 - - - 133,955 133,955

HTM investments Malaysian government securities 78,734 3,276 13,115 103,505 - 119,896 Unquoted corporate debt securities 100,030 23,188 68,031 25,525 - 116,744 Government investment issues 543,592 21,353 165,733 501,292 - 688,378

AFS financial assets Unquoted shares in Malaysia 44,796 - - - 44,796 44,796 Malaysian government securities 49,478 1,674 42,608 9,944 - 54,226 Unquoted corporate debt securities 1,951,026 256,897 940,052 1,368,624 - 2,565,573 quoted shares in Malaysia 289,064 - - - 289,064 289,064 Warrants 141 - - - 141 141 Real estate investment trusts 7,836 - - - 7,837 7,837 Government investment issues 188,375 13,078 61,296 195,288 - 269,662

Loans and receivables Fixed and call deposits with licensed: Commercial banks 190,482 192,971 - - - 192,971 Investment banks 421,505 416,629 6,582 - - 423,211 Islamic investment accounts with licensed: Co-operative bank 28,939 28,967 - - - 28,967 Islamic banks 1,079,194 789,806 - - 294,632 1,084,438 Investment banks 1,996 1,997 - - - 1,997 Development bank 58,907 59,059 - - - 59,059 Building society 256 260 - - - 260 Secured staff loans 12,496 6,976 5,520 - - 12,496 Income due and accrued 44,523 44,523 - - - 44,523 Amount due from Insurance Pool accounts 26,290 26,290 - - - 26,290 Other receivables and deposits 53,350 53,350 - - - 53,350 Reinsurance/retakaful assets 331,343 132,260 145,388 40,333 13,362 331,343 Insurance/takaful receivables 303,918 303,810 108 - - 303,918 Cash and bank balances 82,702 82,702 - - - 82,702

Total financial and insurance assets 6,026,907 2,459,066 1,448,433 2,244,511 787,766 6,939,776

217 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(b) liquidity Risk (cont’d)

Maturity profiles for 2015 (cont’d)

Carrying Up to 1 - 5 Over No maturity value 1 year years 5 years date Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group (cont’d)

Loans and receivables (cont’d) Borrowings (320,000) (19,480) (342,335) - - (361,815) Insurance/takaful contract liabilities (3,720,801) (765,847) (1,008,010) (1,826,581) (120,363) (3,720,801) Insurance/takaful payables (169,424) (169,424) - - - (169,424) Other payables (170,807) (170,807) - - - (170,807)

Total financial and insurance liabilities (4,381,032) (1,125,558) (1,350,345) (1,826,581) (120,363) (4,422,847)

Company

AFS financial assets Unquoted shares in Malaysia 50 - - - 50 50

Loans and receivables Fixed and call deposits with licensed: Commercial banks 8,373 8,409 - - - 8,409 Investment banks 11,909 11,970 - - - 11,970 Islamic investment accounts with licensed Islamic banks 7,879 7,944 - - - 7,944 Secured staff loans 3,461 3,461 - - - 3,461 Amounts due from subsidiaries 4,111 4,111 - - - 4,111 Income due and accrued 72 72 - - - 72 Other receivables and deposits 1,266 1,266 - - - 1,266 Cash and bank balances 2,877 2,877 - - - 2,877

Total financial assets 39,998 40,110 - - 50 40,160

Borrowings (320,000) (19,480) (342,335) - - (361,815) Other payables (9,203) (9,203) - - - (9,203)

Total financial liabilities (329,203) (28,683) (342,335) - - (371,018)

218 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(b) liquidity Risk (cont’d)

Maturity profiles for 2014

Carrying Up to 1 - 5 Over No maturity value 1 year years 5 years date Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Financial assets at FVTPL quoted shares in Malaysia 7,527 - - - 7,527 7,527 Warrants 62 - - - 62 62 Shariah approved unit trust funds 131,889 - - - 131,889 131,889

HTM investments Malaysian government securities 78,936 3,276 13,115 106,983 - 123,374 Unquoted corporate debt securities 95,344 3,994 91,199 26,416 - 121,609 Government investment issues 544,317 21,356 179,090 507,454 - 707,900

AFS financial assets Unquoted shares in Malaysia 44,796 - - - 44,796 44,796 Malaysian government securities 29,281 1,011 22,180 10,145 - 33,336 Unquoted corporate debt securities 1,839,470 170,174 938,968 1,402,094 - 2,511,236 quoted shares in Malaysia 201,485 - - - 201,485 201,485 quoted shares outside Malaysia 280 - - - 280 280 Warrants 192 - - - 192 192 Real estate investment trusts 6,821 - - - 6,821 6,821 Government investment issues 180,698 7,748 56,251 220,060 - 284,059

Loans and receivables Fixed and call deposits with licensed: Commercial banks 310,491 311,862 - - - 311,862 Investment banks 421,466 422,307 - - - 422,307 Islamic investment accounts with licensed: Co-operative bank 28,824 28,908 - - - 28,908 Islamic banks 618,210 620,837 - - - 620,837 Development bank 91,043 91,907 - - - 91,907 Building society 9,211 9,311 - - - 9,311 Institutional trust deposit 24,855 24,855 - - - 24,855 Uncallable negotiable Islamic deposits 18,743 18,846 - - - 18,846 Islamic repo placements 136,284 136,414 - - - 136,414 Secured staff loans 11,202 11,202 - - - 11,202 Income due and accrued 40,623 40,623 - - - 40,623 Amount due from Insurance Pool accounts 35,266 35,266 - - - 35,266 Other receivables and deposits 36,993 36,993 - - - 36,993

219 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

(b) liquidity Risk (cont’d)

Maturity profiles for 2014 (cont’d)

Carrying Up to 1 - 5 Over No maturity value 1 year years 5 years date Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group (cont’d)

Loans and receivables (cont’d) Reinsurance/retakaful assets 367,473 103,058 109,120 130,920 24,375 367,473 Insurance/takaful receivables 369,611 369,489 122 - - 369,611 Cash and bank balances 36,644 36,644 - - - 36,644

Total financial and insurance assets 5,718,037 2,506,081 1,410,045 2,404,072 417,427 6,737,625

Borrowings (320,000) (17,900) (361,815) - - (379,715) Insurance/takaful contract liabilities (3,572,954) (746,267) (895,347) (1,664,149) (267,191) (3,572,954) Insurance/takaful payables (169,865) (169,865) - - - (169,865) Other payables (157,393) (157,393) - - - (157,393)

Total financial and insurance liabilities (4,220,212) (1,091,425) (1,257,162) (1,664,149) (267,191) (4,279,927)

Company

AFS financial assets Unquoted shares in Malaysia 50 - - - 50 50

Loans and receivables Fixed and call deposits with licensed: Commercial banks 15,464 15,464 - - - 15,464 Investment banks 1,461 1,461 - - - 1,461 Islamic investment accounts with licensed Islamic banks 1,579 1,579 - - - 1,579 Secured staff loans 3,326 3,326 - - - 3,326 Amounts due from subsidiaries 3,406 3,406 - - - 3,406 Income due and accrued 37 37 - - - 37 Other receivables and deposits 1,654 1,654 - - - 1,654 Cash and bank balances 2,904 2,904 - - - 2,904

Total financial assets 29,881 29,831 - - 50 29,881

Borrowings (320,000) (17,900) (361,815) - - (379,715) Other payables (8,933) (8,933) - - - (8,933)

Total financial liabilities (328,933) (26,833) (361,815) - - (388,648)

220 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

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 rates; 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 price risk

Equity price risk is the risk that the fair value 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 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. The equities under the investment-linked fund were excluded from the sensitivity analysis as the risks associated with the fluctuations in market prices of the equities are borne by the unitholders.

221 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

Sensitivity analysis

Changes in Impact on Impact on market indices profit before tax equity* RM’000 RM’000

2015

Group Price + 5% 199 12,647 Price - 5% (1,273) (12,647)

2014

Group Price + 5% 380 9,285 Price - 5% (1,423) (9,285)

* The impact on equity reflects the after tax impact.

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.

The Group’s business is conducted primarily in Malaysia and the Group’s functional and presentation currency is Malaysian Ringgit. As the growth of business outside Malaysia increases, the Group’s main foreign exchange risk arises primarily from recognised assets and liabilities 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 manageable.

interest/profit rate risk

The Group is exposed to interest/profit rate risk as follows: (i) fair values of fixed interest/profit-bearing assets would move inversely to changes in interest/profit rates; and (ii) future cash flows of variable interest/profit-bearing assets would move in direct proportion to changes in rates.

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. The fixed income portfolio is inversely related to profit rates and, 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. 222 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

36. financial risk (cont’d)

interest/profit rate risk (cont’d)

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.

Changes Impact on in variable equity* RM’000

2015

Group Interest/profit rates +25 bp (30,714) Interest/profit rates -25 bp 21,654

2014

Group Interest/profit rates +25 bp (26,420) Interest/profit rates -25 bp 26,420

* The impact on equity reflects the after tax impact.

37. 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 detailed in operational manuals that describe the responsibilities in relation to management of the properties to maintain quality and satisfied tenants.

The financial risk arising from a delinquent or loss of tenants are managed at the outset through careful selection of properties with high tenancy including tenants with long term tenancies and a continuous maintenance and upgrade of facilities.

The Group has no significant exposure to property risk.

(b) operational Risk

Operational risk is the risk of loss arising from process and system failure, human error, specific loss events or external events. When controls fail to perform, operational risks can cause damage to the reputation of the Group, 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 minimise risks to an acceptable level. Controls include effective segregation of duties, effective access controls, authorisation and reconciliation procedures, continuous staff education and appropriate assessment processes, including the use of internal audit. 223 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

37. other risks (cont’d)

Shariah risk is defined as potential Shariah non-compliance that contributes to adverse reputation, financial losses and opportunity costs resulting from ineffective governance, incompetent employees and improper transactional and operational execution. The Group mitigates such risk by initiating, monitoring and responding to a robust Shariah control framework which includes the establishment of a Shariah Committee, Shariah Department and/or Shariah Compliance Officer for monitoring and oversight purposes.

The framework is guided by the Shariah Governance Framework issued by BNM which is designed to meet the following objectives:

(i) sets out the expectations of BNM on the Group’s Shariah governance structures, processes and arrangements to ensure that all its operations and business activities are in accordance with Shariah;

(ii) provides a comprehensive guidance to the Board, Shariah Committee and management of the Group in discharging its duties in matters relating to Shariah; and

(iii) outlines the functions relating to Shariah review, Shariah Audit, Shariah Risk management and Shariah research.

(d) compliance Risk

Compliance risk is the risk arising from violations of, or non conformance with, business principles, internal policies and procedures, related laws and 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.

224 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

38. insurance, takaful and retakaful funds

(i) consolidated income statement by fund

for the year ended 31 March 2015

General reinsurance and General Family General Family Eliminations shareholders’ takaful takaful retakaful retakaful and fund fund fund fund fund adjustments Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Gross earned premiums/ contributions 1,323,292 268,356 553,955 34,267 35,711 (23,984) 2,191,597 Premiums/contributions ceded to reinsurers/retakaful operators (110,236) (96,352) (39,205) (10,913) (7,549) 19,989 (244,266)

Net earned premiums/ contributions 1,213,056 172,004 514,750 23,354 28,162 (3,995) 1,947,331

Investment income 167,126 12,712 81,851 3,456 905 (66,543) 199,507 Net realised gains 2,648 865 6,068 112 40 - 9,733 Net fair value gains/(losses) 4,668 (761) (9,557) (171) (18) - (5,839) Fee and commission income 315,953 26,563 - 495 425 (307,699) 35,737 Other operating revenue 9,864 950 - 264 81 (688) 10,471

Other revenue 500,259 40,329 78,362 4,156 1,433 (374,930) 249,609

Gross claims and benefit paid (809,894) (130,098) (243,079) (39,934) (43,301) 25,625 (1,240,681) Claims ceded to reinsurers/ retakaful operators 53,392 48,788 57,121 12,356 8,655 (25,625) 154,687 Gross change in contract liabilities (33,703) (8,820) (102,854) (7,583) 5,113 - (147,847) Change in contract liabilities ceded to reinsurers/retakaful operators 46,049 20,204 (109,322) 6,567 372 - (36,130)

Net claims and benefits (744,156) (69,926) (398,134) (28,594) (29,161) - (1,269,971)

225 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

38. insurance, takaful and retakaful funds (Cont’d)

(i) consolidated income statement by fund (cont’d)

for the year ended 31 March 2015 (cont’d)

Fee and commission expense (431,092) (103,942) (152,548) (9,096) (4,376) 265,655 (435,399) Management expenses (246,679) (3,439) (8,609) - - 49,172 (209,555) Finance costs (18,123) - - - - - (18,123) Other operating expenses (35,782) - (7,621) (405) - 36,128 (7,680) Changes in expense liabilities (10,764) - - - - - (10,764) Tax borne by participants - (8,508) (4,757) - - - (13,265)

Other expenses (742,440) (115,889) (173,535) (9,501) (4,376) 350,955 (694,786)

Share of results of associates - - - - - 4,157 4,157

Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation 226,719 26,518 21,443 (10,585) (3,942) (23,813) 236,340 Surplus attributable to takaful participants - (26,518) (21,443) - - 2,326 (45,635)

Operating profit/(loss) before zakat and taxation 226,719 - - (10,585) (3,942) (21,487) 190,705 Zakat (960) - - - - - (960) Taxation (50,597) - - - - - (50,597)

Net profit/(loss) for the year attributable to equity holders of the Parent 175,162 - - (10,585) (3,942) (21,487) 139,148

226 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

38. insurance, takaful and retakaful funds (Cont’d)

(i) consolidated income statement by fund (cont’d)

for the year ended 31 March 2014

Gross earned premiums/ contributions 1,334,573 209,206 547,961 68,876 53,071 (30,725) 2,182,962 Premiums/contributions ceded to reinsurers/retakaful operators (97,053) (68,259) (40,375) (14,433) (6,614) 27,210 (199,524)

Net earned premiums/ contributions 1,237,520 140,947 507,586 54,443 46,457 (3,515) 1,983,438

Investment income 203,709 11,035 66,420 3,196 476 (110,601) 174,235 Net realised gains 5,257 1,559 13,904 281 55 - 21,056 Net fair value gains/(losses) 665 27 4,119 (95) - (920) 3,796 Fee and commission income 296,874 15,181 101 1,158 2 (288,742) 24,574 Other operating revenue 12,697 2,506 (1,585) 118 26 (1,520) 12,242

Other revenue 519,202 30,308 82,959 4,658 559 (401,783) 235,903

Gross claims and benefit paid (685,322) (108,745) (185,325) (32,533) (52,410) - (1,064,335) Claims ceded to reinsurers/ retakaful operators 97,925 31,679 14,767 2,035 4,950 - 151,356 Gross change in contract liabilities (64,351) (3,904) (286,923) (8,658) (16,178) - (380,014) Change in contract liabilities ceded to reinsurers/retakaful operators (73,281) 16,183 49,694 17,735 1,406 - 11,737

Net claims and benefits (725,029) (64,787) (407,787) (21,421) (62,232) - (1,281,256)

227 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

38. insurance, takaful and retakaful funds (Cont’d)

(i) consolidated income statement by fund (cont’d)

for the year ended 31 March 2014 (cont’d)

Fee and commission expense (436,966) (73,632) (165,109) (23,111) (6,135) 253,729 (451,224) Management expenses (233,465) (2,290) (7,157) - - 47,501 (195,411) Finance costs (17,916) - - - - - (17,916) Other operating expenses (86,458) (425) - (622) (9) 82,360 (5,154) Changes in expense liabilities (18,637) - - - - - (18,637) Tax borne by participants - (7,172) (6,894) - - 74 (13,992)

Other expenses (793,442) (83,519) (179,160) (23,733) (6,144) 383,664 (702,334)

Share of results of associates - - - - - 2,437 2,437

Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation 238,251 22,949 3,598 13,947 (21,360) (19,197) 238,188 Surplus attributable to takaful participants - (22,949) (3,598) - - 3,087 (23,460)

Operating profit/(loss) before zakat and taxation 238,251 - - 13,947 (21,360) (16,110) 214,728 Zakat (400) - - - - - (400) Taxation (82,342) - - - - 24,000 (58,342)

Net profit/(loss) for the year attributable to equity holders of the Parent 155,509 - - 13,947 (21,360) 7,890 155,986

228 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

38. insurance, takaful and retakaful funds (cont’d)

(ii) consolidated statement of financial position by fund

as at 31 March 2015

Assets Property, plant and equipment 130,573 - - - - 106,922 237,495 Investment properties 7,100 - 106,922 - - (106,922) 7,100 Intangible assets 14,632 - - - - - 14,632 Deferred tax assets 7,835 - - 95 - 3,554 11,484 Investments in subsidiaries 843,705 - - - - (843,705) - Investments in associates 77,615 - - - - 32,952 110,567 Financial assets: Financial assets at FVTPL 886 724 135,972 341 11 - 137,934 HTM investments 281,578 71,941 337,163 19,211 12,463 - 722,356 AFS financial assets 1,532,603 173,158 1,084,084 30,075 18,661 (307,865) 2,530,716 LAR 1,131,858 73,782 469,808 38,710 3,748 200,032 1,917,938 Reinsurance/retakaful assets 196,676 111,633 30,216 28,868 7,260 - 374,653 Insurance/takaful receivables 218,963 29,296 44,233 14,825 2,642 (6,041) 303,918 Tax recoverable 24,856 - 360 - - - 25,216 Cash and bank balances 16,044 24,116 42,523 9 10 - 82,702

Total assets 4,484,924 484,650 2,251,281 132,134 44,795 (921,073) 6,476,711

Liabilities and Participants’ funds Participants’ funds - 55,340 232,291 3,173 - (4,078) 286,726 Borrowings 320,000 - - - - - 320,000 Insurance/takaful contract liabilities 1,792,782 336,180 1,903,014 108,532 28,770 (10,000) 4,159,278 Insurance/takaful payables 105,713 21,797 32,131 10,273 5,551 (6,041) 169,424 Other payables 84,021 66,919 81,750 10,156 10,465 (82,504) 170,807 Deferred tax liabilities 1,470 420 2,095 - 9 3,682 7,676 Provision for taxation 8,461 3,994 - - - - 12,455 Provision for zakat 871 - - - - - 871

Total liabilities and participants’ funds 2,313,318 484,650 2,251,281 132,134 44,795 (98,941) 5,127,237

Equity Share capital 1,126,570 - - - - (913,500) 213,070 Reserves 1,045,036 - - - - 91,368 1,136,404

Total equity attributable to equity holders of the Parent 2,171,606 - - - - (822,132) 1,349,474

Total liabilities, participants’ funds and equity 4,484,924 484,650 2,251,281 132,134 44,795 (921,073) 6,476,711 229 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

38. insurance, takaful and retakaful funds (cont’d)

(ii) consolidated statement of financial position by fund (cont’d)

as at 31 March 2014

Assets Property, plant and equipment 130,014 - - - - 106,922 236,936 Investment properties 6,900 - 106,922 - - (106,922) 6,900 Intangible assets 14,519 - - - - - 14,519 Deferred tax assets 21,846 1,155 - 215 - 964 24,180 Investments in subsidiaries 872,032 - - - - (872,032) - Investments in associates 77,615 - - - - 18,438 96,053 Financial assets: Financial assets at FVTPL 1,841 1,372 135,626 616 23 - 139,478 HTM investments 290,927 72,033 332,336 19,243 4,058 - 718,597 AFS financial assets 1,213,832 93,341 958,347 31,250 6,253 - 2,303,023 LAR 1,342,899 163,957 337,568 54,640 19,850 (135,703) 1,783,211 Reinsurance/retakaful assets 150,214 80,289 139,538 22,858 6,888 - 399,787 Insurance/takaful receivables 228,906 32,274 88,964 16,121 3,346 - 369,611 Tax recoverable 5,461 - - 1 - - 5,462 Cash and bank balances 15,911 7,551 13,140 33 9 - 36,644 Non-current assets held for sale 1,696 - - - - - 1,696

Total assets 4,374,613 451,972 2,112,441 144,977 40,427 (988,333) 6,136,097

Liabilities and Participants’ funds Participants’ funds - 33,850 184,344 13,415 - (14,133) 217,476 Borrowings 320,000 - - - - - 320,000 Insurance/takaful contract liabilities 1,760,604 320,552 1,800,160 107,064 33,883 (10,000) 4,012,263 Insurance/takaful payables 102,005 16,580 28,417 16,319 6,544 - 169,865 Other payables 83,689 79,183 98,987 8,179 - (112,645) 157,393 Deferred tax liabilities 6,504 - 112 - - 1,682 8,298 Provision for taxation 24,737 1,807 421 - - - 26,965 Provision for zakat 368 - - - - - 368

Total liabilities and participants’ funds 2,297,907 451,972 2,112,441 144,977 40,427 (135,096) 4,912,628

Equity Share capital 1,124,570 - - - - (911,500) 213,070 Reserves 952,136 - - - - 58,263 1,010,399

Total equity attributable to equity holders of the Parent 2,076,706 - - - - (853,237) 1,223,469

Total liabilities, participants’ funds and equity 4,374,613 451,972 2,112,441 144,977 40,427 (988,333) 6,136,097 230 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

39. significant events

The Company, in the previous financial year, had made disclosures on the notices of assessment and notices of additional assessment (i.e. Form J and Form JA) for the years of assessment 2006, 2007, 2008 and 2009, issued by the Inland Revenue Board (“IRB”) to its wholly owned subsidiary Takaful IKHLAS Berhad (“Takaful IKHLAS”), disallowing Family business’ commission expenses as deductions against the earning of wakalah fee income. The additional tax payable by Takaful IKHLAS under the said notices was RM48,982,970. In addition, the IRB had also imposed a penalty of RM22,042,336 as the tax returns by Takaful IKHLAS for those years were regarded as incorrect.

Takaful IKHLAS received a confirmation from the Ministry of Finance (“MOF”) subsequently, granting an exemption of tax on the wakalah fee income of the shareholder’s fund received from the family takaful fund for the years of assessment 2004 to 2014.

With MOF’s above exemption, the total instalment payments made to date to the IRB which amounted to RM18,239,672 would be receivable from the IRB. This amount has been reduced following the set off made against the tax payable for the previous year of assessment amounting to RM7,323,348. Takaful IKHLAS is currently pursuing the recovery of the remaining balance from the IRB through the Special Commissioners of Income Tax.

In addition to the amount receivable from IRB of RM10,916,324, the Takaful IKHLAS had revised the tax computations for years of assessment 2010 to 2014 based on the letter from MOF. This had resulted in tax recoverable of RM12,200,831 from the IRB which had been recognised in the current financial year. Takaful IKHLAS is pursuing this matter with the IRB.

40. fair values of assets

MFRS 7 Financial Instruments: Disclosures (“MFRS 7”) requires the classification of financial instruments measured 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. MFRS 13 Fair Value Measurement requires similar disclosure requirements as MFRS 7, but extended these requirements to include all assets and liabilities measured and/or disclosed at fair value. The following levels of hierarchy are used for determining and disclosing the fair value of the Group and of the Company’s assets:

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

The fair values of the Group and Company’s assets are determined as follows:

(i) The carrying amounts of financial assets and financial liabilities, such as loans and receivables, insurance/takaful receivables, cash and bank balances, insurance/takaful payables and other payables, are reasonable approximation of their fair values due to the relatively short term maturity of these balances;

(ii) The fair values of quoted equities are based on quoted market prices as at the reporting date;

(iii) The fair values of Malaysian government securities, government investment issues and unquoted corporate debt securities are based on indicative market prices from the Bond Pricing Agency of Malaysia (“BPAM”);

(iv) The fair values of investments in mutual funds, unit trust funds and real estate investment trusts are valued based on the net asset values of the underlying funds as at the reporting date; and

(v) Freehold land and buildings and investment property have been revalued based on valuations performed by an accredited independent valuer having an appropriate recognised professional qualification. The valuations are based on the income method. In arriving at the fair value of the assets, the valuer had also taken into consideration the future developments in terms of infrastructure in the vicinity of the properties. 231 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

40. fair values of assets (cont’d)

Description of significant unobservable inputs:

Valuation Significant unobservable technique inputs Range

2015

Property, plant and equipment Office building Income approach Yield 6.0% to 6.25% Rental per square foot RM4.50

Investment properties Shoplots Income approach Rental per square metre RM2.00

2014

Property, plant and equipment Office building Income approach Yield 6.0% to 6.5% Rental per square foot RM4.50

Investment properties Shoplots Income approach Rental per square metre RM2.00

AFS financial assets Unquoted corporate debt securities Income approach Estimated haircut based on 45% projected performance

A significant increase or decrease in the unobservable inputs used in the valuation would result in a correspondingly higher or lower fair value.

There have been no transfers between Level 1 and Level 2 during the financial year.

232 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

40. fair values of assets (cont’d)

As at the reporting date, the Group and the Company held the following assets that are measured and/or disclosed at fair value under Levels 1, 2 and 3 of the fair value hierarchy:

Level 1 Level 2 Level 3 Total Group RM’000 RM’000 RM’000 RM’000

2015

Assets measured at fair value:

(a) Property, plant and equipment Freehold land - - 34,000 34,000 Buildings - - 192,943 192,943

- - 226,943 226,943

(b) Investment property - - 7,100 7,100

(c) Financial assets at FVTPL Quoted shares in Malaysia 3,951 - - 3,951 Warrants 28 - - 28 Shariah approved unit trust funds 133,955 - - 133,955

137,934 - - 137,934

(d) AFS financial assets Malaysian government securities - 49,478 - 49,478 Unquoted corporate debt securities - 1,951,026 - 1,951,026 Quoted shares in Malaysia 289,064 - - 289,064 Quoted shares outside Malaysia - - - - Warrants 141 - - 141 Real estate investment trusts 7,836 - - 7,836 Government investment issues - 188,375 - 188,375

297,041 2,188,879 - 2,485,920

Assets for which fair values are disclosed:

HTM investments Malaysian government securities - 77,817 - 77,817 Unquoted corporate debt securities - 100,578 - 100,578 Government investment issues - 537,841 - 537,841

- 716,236 - 716,236

233 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

40. fair values of assets (cont’d)

Level 1 Level 2 Level 3 Total Group (cont’d) RM’000 RM’000 RM’000 RM’000

2014

Assets measured at fair value:

(a) Property, plant and equipment Freehold land - - 32,260 32,260 Buildings - - 191,305 191,305

- - 223,565 223,565

(b) Investment property - - 6,900 6,900

(c) Financial assets at FVTPL Quoted shares in Malaysia 7,527 - - 7,527 Warrants 62 - - 62 Shariah approved unit trust funds 131,889 - - 131,889

139,478 - - 139,478

(d) AFS financial assets Malaysian government securities - 29,281 - 29,281 Unquoted corporate debt securities - 1,833,355 6,115 1,839,470 Quoted shares in Malaysia 201,485 - - 201,485 Quoted shares outside Malaysia 280 - - 280 Warrants 192 - - 192 Real estate investment trusts 6,821 - - 6,821 Government investment issues - 180,698 - 180,698

208,778 2,043,334 6,115 2,258,227

234 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

40. fair values of assets (cont’d)

Level 1 Level 2 Level 3 Total Group (cont’d) RM’000 RM’000 RM’000 RM’000

2014

Assets for which fair values are disclosed:

HTM investments Malaysian government securities - 75,558 - 75,558 Unquoted corporate debt securities - 95,167 - 95,167 Government investment issues - 529,137 - 529,137

- 699,862 - 699,862

reconciliation of Level 3 fair value hierarchy

2015 2014 Group RM’000 RM’000

AFS financial assets At beginning of year 6,115 - Unquoted corporate debt securities transferred from Level 2 - 6,115 Reversal of impairment loss 4,990 - Fair value gain 769 - Unquoted corporate debt securities transferred to Level 2 (11,874) -

At end of year - 6,115

235 (CONT’D) //MNRB HOLDINGS BERHAD notes to the financial statements //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS

41. 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 2015 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 2015 2014 2015 2014 RM’000 RM’000 RM’000 RM’000

Realised and unrealised profits of the Company and its subsidiaries: - Realised 997,424 890,944 245,270 267,385 - Unrealised 4,913 11,450 - 1,502

1,002,337 902,394 245,270 268,887 Share of accumulated losses from associated companies (3,456) (3,923) - -

998,881 898,471 245,270 268,887 Less: Consolidation adjustments (31,962) (35,544) - -

Total retained profits 966,919 862,927 245,270 268,887

236 //MNRB HOLDINGS BERHAD ANALYSIS OF SHAREHOLDINGS //ANNUAL REPORT 2015 AS AT 28 JULY 2015

SHARE CAPITAL

Authorised Capital : RM500,000,000 ordinary shares

Issued and Fully Paid-up Capital : 213,069,500 ordinary shares of RM1.00 each

No. of shareholders : 5,652

Class of Shares : RM1.00 ordinary shares

Voting Rights : 1 vote per ordinary share

ANALYSIS BY SIZE OF SHAREHOLDINGS

Share Capital No. of Holders Percentage of Percentage of Size of Shareholdings Shareholders Shareholders No. of Shares Share Capital (%) (%)

Less than 100 305 5.40 2,813 0.00 100 – 1,000 1,895 33.53 1,618,387 0.76 1,001 – 10,000 2,501 44.25 11,075,651 5.20 10,001 – 100,000 809 14.31 26,445,100 12.41 100,001 to less than 5% of issued shares 140 2.48 48,125,449 22.59 5% and above of issued shares 2 0.03 125,802,100 59.04

Total 5,652 100.00 213,069,500 100.00

LIST OF SUBSTANTIAL SHAREHOLDERS (5% AND ABOVE) AS AT 28 JULY 2015

No. Name of Substantial Shareholders Shareholdings Percentage (%)

1 AMANAHRAYA TRUSTEES BERHAD 98,617,000 46.28

2 PERMODALAN NASIONAL BERHAD 27,185,100 12.76

LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 28 JULY 2015

No. Name of Shareholders No. of Shares Percentage (%)

1 AMANAHRAYA TRUSTEES BERHAD 98,617,000 46.28

2 PERMODALAN NASIONAL BERHAD 27,185,100 12.76

3 AMANAHRAYA TRUSTEES BERHAD 2,300,000 1.08

237 (CONT’D) //MNRB HOLDINGS BERHAD ANALYSIS OF SHAREHOLDINGS //ANNUAL REPORT 2015 AS AT 28 JULY 2015

LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 28 JULY 2015 (CONT’D)

No. Name of Shareholders No. of Shares Percentage (%)

4 JOHAN ENTERPRISE SDN. BHD. 2,230,000 1.05

5 CITIGROUP NOMINEES (ASING) SDN BHD 1,702,600 0.80

6 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,694,800 0.80

7 HSBC NOMINEES (TEMPATAN) SDN BHD 1,556,300 0.73

8 MAYBANK NOMINEES (ASING) SDN BHD 1,545,000 0.73

9 HONG LEONG ASSURANCE BERHAD 1,191,449 0.56

10 NEOH CHOO EE & COMPANY, SDN. BERHAD 1,080,000 0.51

11 CITIGROUP NOMINEES (ASING) SDN BHD 958,900 0.45

12 HSBC NOMINEES (TEMPATAN) SDN BHD 930,000 0.44

13 HSBC NOMINEES (ASING) SDN BHD 875,900 0.41

14 CIMB GROUP NOMINEES (TEMPATAN) SDN BHD 850,300 0.40

15 PUBLIC NOMINEES (TEMPATAN) SDN BHD 850,000 0.40

16 CITIGROUP NOMINEES (ASING) SDN BHD 811,400 0.38

17 THONG SU-F’NG 644,200 0.30

18 HSBC NOMINEES (ASING) SDN BHD 629,900 0.30

19 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 626,600 0.29

20 AFFIN HWANG NOMINEES (TEMPATAN) SDN. BHD. 606,500 0.28

21 HLB NOMINEES (TEMPATAN) SDN BHD 602,500 0.28

22 NAHOORAMMAH A/P SITHAMPARAM PILLAY 580,000 0.27 238 (CONT’D) //MNRB HOLDINGS BERHAD ANALYSIS OF SHAREHOLDINGS //ANNUAL REPORT 2015 AS AT 28 JULY 2015

LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 28 JULY 2015 (CONT’D)

No. Name of Shareholders No. of Shares Percentage (%)

23 CHUA HIN BEE 550,000 0.26

24 HONG LEONG ASSURANCE BERHAD 550,000 0.26

25 LEE KOK HAI 521,700 0.24

26 GAN KHO @ GAN HONG LEONG 513,000 0.24

27 MAYBANK NOMINEES (TEMPATAN) SDN BHD 468,000 0.22

28 LEONG SOO HA @ LEONG CHOON YIN 451,000 0.21

29 HA SAU KIN 426,900 0.20

30 MENG HIN HOLDINGS SDN BHD 409,300 0.19

Total 151,958,349.00 71.32

MNRB HOLDINGS BERHAD INFORMATION ON DIRECTORS’ SHAREHOLDINGS AS AT 28 JULY 2015

No. Name of Directors Shareholdings Percentage (%)

1 Sharkawi Alis - - 2 Mohd Din Merican - - 3 P. Raveenderen 10,000 0.00 4 Dato’ Syed Ariff Fadzillah Syed Awalluddin - - 5 Yusoff Yaacob - - 6 Megat Dziauddin Megat Mahmud - - 7 Paisol Ahmad - - 8 Hijah Arifakh Othman - -

CATEGORY OF SHAREHOLDERS AS AT 28 JULY 2015

Type of Ownership Shareholders Percentage (%) Shareholdings Percentage (%)

Government Agencies 1 0.02 10 0.00 Individual 4,852 85.84 46,645,368 21.89 Companies 118 2.09 137,986,949 64.76 Nominees Company 681 12.05 28,437,173 13.35

Grand Total 5,652 100.00 213,069,500 100.00 239 //MNRB HOLDINGS BERHAD LIST OF PROPERTIES //ANNUAL REPORT 2015 31 MARCH 2015

Tenure/Existing Land Area (sq.ft.) Net Book Value Date of Date of Description of Use/Age of Build-Up Area as at 31/3/2015 Address Acquisition Revaluation Properties Buildings (sq.ft.) (RM)

Investment Properties

No. 15, Jalan Sri Hartamas 7 14 July 1984 31 March 2015 1 unit of 4 storey Freehold/rented 1,600/6,150 3,500,000 Taman Sri Hartamas shophouse out/31 years 50480 Kuala Lumpur

No. 17, Jalan Sri Hartamas 7 14 July 1984 31 March 2015 1 unit of 4 storey Freehold/rented 1,600/6,150 3,600,000 Taman Sri Hartamas shophouse out/31 years 50480 Kuala Lumpur

Total Investment Properties 7,100,000

Self Occupied Properties

Ikhlas Point, Tower 11 22 December 2008 10 March 2015 1 unit of Leasehold/ strata 37,562,000 Avenue 5, Bangsar South 11 storey office premise/ No. 8, Jln Kerinchi intermediate rented out/ 59200 Kuala Lumpur office building 7 years

Ikhlas Point, Tower 11A 19 November 2008 10 March 2015 1 unit of Leasehold/ strata 66,560,000 Avenue 5, Bangsar South 10 storey corner office premise/ No. 8, Jln Kerinchi office building occupied/ 59200 Kuala Lumpur 7 years

No. 17, Lorong Dungun 17 February 1995 31 March 2015 1 unit of 12 storey Freehold/ 61,300/ 115,300,000 Damansara Heights building with 2 office premise/ 366,409 50490 Kuala Lumpur storey basement rented out/ car park 20 years

Lot 528, Section 6 7 September 2010 10 March 2015 4 Storey Leasehold/ Not applicable/ 1,800,000 Kuching Town Land District intermediate office premise/ 1,200 No. 11C, Jalan Kulas terraced occupied/5 years 93732 Kuching, Sarawak shophouse

Manchester Tower 28 July 2008 31 March 2014 1 unit of Freehold/ Not applicable/ 1,408,000 Apartment 2406, Dubai Marina apartment occupied by staff/ 1,011 Dubai, UAE 7 years

Apt. 507 29 July 2008 31 March 2014 1 unit of Freehold/ Not applicable/ 1,555,000 Marina Diamond 5 apartment occupied by staff/ 1,084 Dubai Marina 7 years Dubai, UAE

Yansoon 4, Apartment 204 30 September 2010 31 March 2014 1 unit of Freehold/ Not applicable/ 1,758,000 Burj Khalifa, apartment occupied by staff/ 1,475 Dubai Downtown, UAE 5 years

Pejabat Wilayah Kelantan 31 January 2013 10 March 2015 3 storey Leasehold/ Not applicable/ 1,000,000 PT 483, Jalan Jambatan Sultan Yahya shophouse office premise/ 4,680 KB waterfront, Seksyen 17 occupied/2 years 15000 Kota Bahru, Kelantan

Total Self Occupied Properties 226,943,000 240 (13487-A) 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, 30 September 2015 at 2.00 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 re-elect Yusoff Yaacob, who retires pursuant to Article 86 of the Company’s Articles of Association 2. To re-elect Paisol Ahmad, who retires pursuant to Article 86 of the Company’s Articles of Association 3. To re-elect Hijah Arifakh Othman, who retires pursuant to Article 92 of the Company’s Articles of Association 4. To approve the payment of Directors’ fees 5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration 6. To approve the continuing in office of Yusoff Yaacob as an Independent Non-Executive Director 7. To approve the continuing in office of Megat Dziauddin Megat Mahmud as an Independent Non-Executive Director SPECIAL BUSINESS 8. To re-appoint P. Raveenderen, who retires pursuant to Section 129 of the Companies Act, 1965

(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 2015. 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 authorised nominee, who 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 authorised nominee may appoint in respect of each omnibus account it holds. An instrument appointing a proxy(ies) shall be in writing, and in the case of an individual shall be signed by the appointer or by his attorney duly authorised 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. An instrument appointing a proxy(ies) must be deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, 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 21 September 2015 shall be eligible to attend the AGM or appoint proxy(ies) to attend and vote on his/her behalf. 1st FOLD

Please affix Stamp

Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor

2nd FOLD

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