The Highest Honor
The Siam Commercial Samaggi Insurance Public Company Limited (SCSMG) hereby would like to express our deep gratitude toward His Majesty the King of Thailand for granting to us by Warrant of Appointment the Royal Insignia (the seal of Garuda) that we can use in our business.
This Royal Insignia (the seal of Garuda) which is granted to us by the Royal Warrant of Appointment truly certifies that we are the insurance company recognized by HM the King for its continuous operation of insurance business with stable financial background, carrying out honest practice while observing the law pertaining to public peace and order. We, the Board of Directors, the management and staff therefore feel greatly indebted for this kind award and proud of the honor of being His Majesty’s most faithful servants, which is a blessing to all of us. We shall uphold our integrity in the course of our operation and shall always pledge our loyalty and allegiance to our beloved King.
Content VISION
History and 60-year Success Story 5 A leading and respected insurance company Financial Overview 6 that adheres to the strictest principles of Message from the Chairman 8 good governance and therefore obtains the utmost trust The Board of Directors 12 and maximum satisfaction from its Organization Chart 16 customers, shareholders and employees. The Executive Officers 17 Risk Factors and Management 22 Outlook Non-life Insurance Industry & Competition 30 Progress and Performance in 2007; Planning for 2008 34 MISSION Corporate Governance’s Report 50 Audit Committee’s Report 74 Aim to provide excellent services. Statement of Directors’ Responsibilities To keep our existing customer base
Concerning the Disclosure of Financial and encourage their loyalty. Reports 78 Aim to enhance new valued-customer base. Report of the Independent Certifies To treat our customers, business partners,
Public Accounts 79 shareholders and employees fairly benefit. Financial Statements and Notes to the To develo new products to meet our Financial Statements 80 customers’ satisfaction. General Information 116
HISTORY AND 60-YEAR SUCCESS STORY
Insurance business era truly began in Thailand in the wake of World War II. Established in 1947, by His Excellency Phraya Manawarajsewi, Samaggi Insurance Co., Ltd. is now an insurance company wholly owned by Thais. In 1983, The Siam Commercial Bank Public Company Limited entered into business relationship with the company by becoming the major shareholder. The Company was listed on the Stock Exchange of Thailand in 1986 and turned public company in 1994. In 2006, it assumed a new name of The Siam Commercial Samaggi Insurance Public Company Limited (SCSMG).
July 28, 2007 is the time for celebrations to mark our diamond anniversary. Our fine performance confirms that we have continued to meet the needs and expectations of our customers. In 2007, our Statement of Operations reflected significant growth in premiums written with highest record. We have been granted the Royal Insignia (the seal of Garuda) by Royal Warrant of Appointment and awarded many prizes:
July 2007: Second Prize for Non-life Insurance Company with Excellent Management, 2006 from the Department of Insurance, the Ministry of Commerce, now known as the Office of Insurance Commission (OIC). The event took place at Santi Mitree Building, Government House, where we received a plaque of honor from General Surayut Chulanont, Prime Minister. Such an award was offered on the basis of effective management, Second Prize Third Prize Second Prize stable financial background, excellent service and social 2004 2005 2006 responsibility. We have already received one of the first three prizes for three consecutive years. August 2007: Best Shareholder Treatment Award 2007 from Thailand Securities Depository Co. Ltd., Thai Listed Companies Association, Thai Investors Association and Thai Investor Relations Club in the Shareholders’ Day. The award was offered on Thai Shareholders Day to listed companies that protect the interests of their shareholders and encourage shareholders to perform their duties in a proper and responsible manner. We were one of the ten companies that received this great honor. August 2007: The Annual General Meeting: AGM 2007 Quality Assessment, We were rated, among 460 listed companies, as one of the nineteen “Excellent” companies scoring over 100. The event was held by Security Exchange Commission in cooperation with Thai Listed Companies and Thai Investors Association. Such achievement is a testimony to the efforts we put in to ensure continuous operation under good corporate governance.
FINANCIAL OVERVIEW
Total Assets Total Liabilities UNIT : MILLION BAHT UNIT : MILLION BAHT 5,000 3,000 4,491 2,475 4,000 3,610 3,296 3,034 3,111 2,000 1,687 3,000 1,474 1,298 1,098 2,000 1,000 1,000
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Shareholders’ Equity Total Premium Written UNIT : MILLION BAHT UNIT : MILLION BAHT 2,500 4,000 2,015 3,300 2,000 1,936 1,813 1,822 1,923 3,000 2,010 1,500 2,000 1,819 1,368 1,493 1,000 1,000 500
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Profit on Underwriting Net Profit UNIT : MILLION BAHT UNIT : MILLION BAHT 600 400 308 452 453 300 286 273 285 405 250 400 306 303 200 100 200
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Financial Position UNIT : MILLION BAHT 2007 2006 Change Total Assets 4,491 3,610 24.4% Investment & Loans & Bank Deposit 3,204 2,563 25.0% Total Liabilities 2,475 1,687 46.7% Issued and paid-up capital 454 447 1.7% Shareholders’ Equity 2,015 1,923 4.8%
Operating Performance UNIT : MILLION BAHT 2007 2006 Change Total Premium Written 3,300 2,010 64.2% Net Premium Written 2,324 1,291 80.0% Net Loss 988 536 84.3% Profit on Underwriting 453 452 0.4% Income on Investment 270 159 69.6% Operating Expense 410 302 35.8% Net Profit 285 273 4.5%
Financial Ratio (%) 2007 2006 Change Return on Assets (Average) 7.0% 7.9% (0.9%) Return on Equity (Average) 14.5% 14.6% (0.1%) Return on Investment (Average) 9.4% 6.5% 2.9% Pay out Ratio * 89.0% -
Per Share UNIT : BAHT 2007 2006 Change Basic Earnings per Share 3.17 3.06 3.5% Book Value per Share 22.17 21.51 2.9% Dividend per Share * 2.70 - * Awaiting approval from the shareholders meeting
MESSAGE FROM THE CHAIRMAN
(Mr.Sivavong Changkasiri) Chairman of the Board
Dear Shareholders, The year 2007 was a particularly auspicious one for Thais because His Majesty King Bhumibol Adulyadej graciously reached his 80th Birthday Anniversary on December 5. We are all proud that His Majesty is the longest-reigning monarch in the world. On behalf of the Board of Directors, the management, and staff, we humbly extend our best wishes to His Majesty. Long live our King. We thank all our shareholders and customers for their continued trust and kind support, as well as the management and staff who this year achieved a record premium collection in our 60 years of business. The year saw a continued economic downturn caused by the ongoing unrest in our three southernmost provinces in its fourth consecutive year, and by the domestic political volatility, which improved somewhat toward the end of the year. Uncertainty is still prevalent among investors, as the newly-elected government has recently sworn in. These negative factors hurt business operations and investment decisions. Meanwhile, the world oil price broke a record in late 2007, with unpredictable prices year-round. As a result, both the cost of living and the inflation rate soared. Incidentally, the appreciation of the Baht dented our export picture and exports’ international competitiveness while the world economic recession contributed to the sluggish expansion in our exports. In sum, the overall picture of the Thai economy was a bleak one, with low 4% growth in GDP.
The general economic downturn certainly hurt the insurance business, with a lower growth rate than the previous year. According to figures published by the Office of Insurance Commission - formerly known as the Department of Insurance - the domestic premiums rose by only 7.4%. Thai Reinsurance PCL projected the total annual premiums of 100.709 billion baht, or a 5.9% rise, compared with 12.6% of the previous year. Taking into account the premiums earned from all types of insurance for the first nine months, it was projected that just about every type of insurance premium would register rises, though somewhat more slowly than the year before. In particular, marine and transportation insurance declined in line with the reduction of exports. Fire insurance achieved dismal growth whereas other types of insurance enjoyed continuous, yet somewhat tempered, growth. Motor, personal accident, and personal health insurance achieve growth rates only because insurance companies became more aggressive for retail customers. Nevertheless, premium cuts among competing insurers represented a factor against the growth in premium collection. In 2008, the new government will be facing assorted daunting issues. The world oil price is expected to remain elevated throughout the year, the baht will remain strong, the world economic recession is here to stay, and the US sub-prime mortgage problems will persist. In the wake of the domestic elections, politics should now become more stable and hopefully the government policies should be made clearer to boost private-sector investments. The implementation of, and public-sector spending on, mega-projects may well attract such investment, leading to greater consumption. It is therefore projected that the economy of 2008 should prove much brighter, with continuous growth achievable and - most important - a healthier growth figure than in 2007. The past year coincided with our diamond anniversary of establishment and our highest honor of winning a Warrant of Appointment of the Royal Insignia (the seal of Garuda) for our business. Despite heated competition in the insurance market and other unfavorable factors, we expanded our business and earned premiums of 3.3 billion baht - a company record. Our premium growth rate of 64.2% topped the industry growth, and by so doing, we moved from No.15 at the end of 2006 to No.6 in industry rankings - based on the figures of September 2007. Meanwhile, all types of insurance enjoyed growth. Motor and personal accident insurance grew by 165.8% and 77.1% respectively. Our direct motor insurance premium ranking and direct personal accident insurance premium ranking improved from No.32 at the end of 2006 to No.9 as of September 2007, and from No.5 to No.3 respectively during the same period.
The proactive marketing strategies used for improvement of motor insurance could still use some improvement. Although we have accounts in Bangkok and other provinces, from which we collected premiums of 1.462 billion baht - or a 165.8% rise - the underwriting expenses soared to 917 million baht, a 133% rise. What was more, the loss ratio rose from 69.5% in 2006 to 72.2% this year - higher than the overall industry figure. We therefore registered only 28 million baht in profits from motor insurance - a 52.7% drop from the previous year - which could stem from our lack of experience in this segment, and the fact that the Company was aiming for continuous growth with economies of scale without looking at any particular segment’s profitability. To tackle this problem, we have a plan for expansion of the motor insurance business through improved procedures for claims and insurance policy renewal, together with the quality of underwriting. We will be expanding our insurance business while reducing operating expenses, with the expectation of achieving stringent control and inspection to cut underwriting expenses and overheads once an economy of scale is achieved. As for our 2007 performance, the 64.2% rise in premiums led to a rise in our underwriting expenses from 759 million baht in 2006 to 1.435 billion baht - an 89% rise. We therefore derived total insurance profits of 453 million baht this year against 452 million baht last year - a 0.4% rise. Our cash flow from investment activities rose from 159 million to 270 million baht this year - 69.6% rise - pretty much in line with the state of the stock exchange. The corresponding rise in the returns on investment (ROI) from 6.5% in 2006 to 9.4% in 2007 therefore resulted in such cash flow making up for the rising operating expenses and the volume of business, from 302 million baht in 2006 to 410 million baht this year. In sum, the Company registered a mild rise of 4.5% in net profits from 273 to 285 million baht. The quantum leap in our total premium collection in 2007 is attributed to the expansion of our motor and individual personal-accident insurance accounts and provision of insurance service to the Siam Commercial Bank PCL and other customers, together with well-known groups of companies in all parts of the country, and certainly the insurance for high-value mega-projects. In 2007, we also launched new insurance products while also improving existing ones in line with customers’ demand and lifestyles. We also established three new branches and six counter-service points while streamlining all business procedures at our head office and all branches to ensure our ability to cope with rising volumes of businesses through speedier services and customers’ satisfaction. Above all, in 2007 we accomplished one of our major missions by reaching the rank of top-five domestic insurers within three years. For 2008, therefore, our main strategy is to maintain our overall growth rate while focusing on the types of insurance that are more profitable. We will strive to cut
10 11 down operating costs by increasing the number of our accounts and improving service quality. Major plans and strategies for 2008 will be implemented, such as the expansion of existing retail accounts through offering more attractive products for each target group in line with their lifestyles. Our other plan aims to completely revamp our business renewal procedures to gear for future expansion and add quality agents to ensure that we can provide international-standard service to meet the satisfaction of our customers. We will be gearing ourselves for risk-based capital change, rule, and regulation revisions in line with the imminent Insurance Act. Such preparation may involve change in our organization chart and the roles of regulating agencies. Finally, on behalf of the Board of Directors, the management and staff, we would like to express the Company’s profound gratitude and condolences on the passing away of Her Royal Highness Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarindra in January 2008.
(Mr.Sivavong Changkasiri) Chairman of the Board
10 11
THE BOARD OF DIRECTORS
Mr.Sivavong Changkasiri Mr.Wiraj Na Songkhla Dr.Oranuj Soongswang Independent Director Vice Chairman Independent Director Chairman of the Board Chairman of the Nomination Committee Chairman of the Audit Committee
Education Education Education - Honorary Doctorate Degree in - Master of Business - Doctor of Business Engineering Chulalongkorn Administration, Temple University, Administration (Information University U.S.A. Systems), Mississippi State - Master of Science in Mechanical - L.L.B., Thammasat University University, U.S.A. Engineering, Massachusetts - Advance Management - Master of Accounting Institute of Technology (MIT), Program, Harvard University, (Information Systems), U.S.A. U.S.A. University of Florida, U.S.A. - Master of Science in Industrial - Master of Accounting, Management, Massachusetts Other Position Ohio State University, U.S.A. Institute of Technology (MIT), - Honorary Chairman of - Bachelor of Accountancy U.S.A. Manabhan. Co.,Ltd. (Honors), Chulalongkorn - Bachelor of Science in Mechanical University Engineering, Massachusetts - Directors Certification Program Institute of Technology (MIT), (DCP) Class 22/2002 U.S.A. - Audit Committee Program - Certificate in Industrial Project (ACP) Class 19/2007 Evaluation, Economic Development - DCP Refresher Course 5/2007 Institute, IBRD - Directors Certification Program Other Position (DCP) Class 18/2002 - Accounting Department - Audit Committee Program Instructor, Faculty of (ACP) Class 11/2006 Commerce and - DCP Refresher Course 4/2007 Accountancy, Chulalongkorn University Other Position - Director of A.I.M.S. Co.,Ltd. - Co Chairman (Thai), Malaysia- - Chairman of Audit Committee Thailand Joint Authority and Director of The Transport - Chairman of C U E L Co.,Ltd. Co.,Ltd. - Chairman of Council of Trustees, Petroleum Institute of Thailand - Chairman, Industrial Development Foundation - Chairman of Gulf Electric Co.,Ltd.
12 13 Mr.Chaisak Saeng-xuto Mrs.Paspun Suwanchinda Mr.Dechapiwat Na Songkhla Independent Director Director Director Chairman of the Human Resource Member of the Human Resource and Compensation Committee and Compensation Committee Member of the Audit Committee Education Education Education - Master of Science in Engineering, - Master of Art in Economics, - Master of Science (National University of California, Berkeley, Middle Tennessee State Development & Project U.S.A. University, U.S.A. Planning), University of - Bachelor of Engineering, - Bachelor of Art (Business Bradford, UK. University of Tokyo, Japan Administration), Kasetsart - Bachelor of Science - Advanced Management University (Mathematics & Economics), Program, Harvard University, - National Defence College, University of Surrey, UK. U.S.A. Joint Public Private Course 18 - Director Accreditation Program - Strategic Marketing (2005) (DAP) Class 45/2005 Management Program, - Director Accreditation Program Stanford University, U.S.A. (DAP) Class 7/2004 Other Position - International Management - Budget Analyst 8, Budget Seminar, Keio University, Japan Other Position Bureau, Office of The Prime - Director Accreditation Program - Executive Vice President, Minister (DAP) Class 9/2004 Division Head, Corporate - Chairman of Manabhan Division 3 The Siam Co.,Ltd. Other Position Commercial Bank PCL. - Director and Chairman of - Director of Executive Committee of Thai Dhanamitr Factoring PCL. Airways International PCL. - Director and Treasurer of - Director and Chairman of Khun Poom Foundation Executive Committee of Thai British Security Printing PCL. - Director and Director of Human Resource and Compensation Committee and Director of Good Governance Committee of KasikornBank PCL. - Director of Sataban Saeng Sawang Foundation
12 13
THE BOARD OF DIRECTORS
Mr.Chanin Roonsamrarn Mr.Sivapron Dardarananda Mr.Praves Suttirat Director Independent Director Director Member of the Human Resource Member of the Audit Committee Member of the Human Resource and Compensation Committee Member of the Nomination Committee and Compensation Committee Member of the Nomination Committee Member of the Nomination Committee Advisor to the Audit Committee Education Education Education - Master of Science (Business - MBA in International Business - Bachelor of Accountancy, Administration), Fort Hays State and Finance, Wharton Chulalongkorn University University, Kansas, U.S.A. Graduate Division, Philadelphia, Pennsylvania, U.S.A. Other Position - Directors Certification Program - Bachelor of Science in (DCP) Class 15/2002 Mechanical Engineering, - Executive Vice President, - Chairman 2000 Class 6/2002 Rensselaer Polytechnic Institute, Bangkok Branch Network - Audit Committee Program Troy, New York, U.S.A. The Siam Commercial Bank (ACP) Class 9/2005 - Director Accreditation Program PCL. (DAP) Class 42/2005 Other Position - Chairman 2000 Class 2/2001 - Chairman, Chairman of the Executive Directors and Other Position Remuneration Committee of - Member-National Legislative Assembly SICCO Securities PCL. - Director of Thai Airways - President and Chief Executive International PCL. Officer of The Siam Industrial - Chairman of Parliamentary Sub Credit PCL. of Committee on Water - Director and Chairman of - Vice-Chairman of TISCO Executive Directors of SICCO Foundation for Charity Advisory Co.,Ltd. - Secretary of General of Rama - Independent Director, Audit 9 Art Museum Foundation Committee, Director of - Member & Spokes Person of Remuneration Committee and Parliamentary Committee on Natural Resources and Director of Nomination Committee Environment of Thai Reinsurance PCL. - Secretary - General, Elephant - Independent Director, Audit Reintroduction Foundation Committee and Director of the - Director of Sasin Graduate Nomination and Remuneration Institute of Business Administration
Committee of Home Product of Chulalongkorn University Center PCL. - Director of Kenan Institute Asia - Director of The Union Mosaic Industry PCL. - Director of Dole Thailand Co.,Ltd.
14 15 Mr.Chiravuthi Bunyasiri Mr.Wirutt Ruttanaporn Mr.Prachitr Yossundara Managing Director Advisor of the Board of Directors Honorary Chairman
Education Education Education - Master of Business Administration, - M.B.A. Michigan State - B.Com, Birmingham University University of Dallas, U.S.A. University, U.S.A. - Bachelor of Commerce - Bachelor of Commerce Other Position (Management), Chulalongkorn (Commercial and Accounting), - Chairman of The Samaggi University Thammasat University Insurance PCL. Since 1984-2003 - Chairman 2000 Class 8/2003 - National Defence College, - Director Accreditation Program Joint Public Private Course 377 (DAP) Class 29/2004 - Directors Certification Program (DCP) Class 22/2002 Other Position - None - Other Position - Chairman of E-Saan Sugar Industry Co.,Ltd. - Chairman of Singburi Sugar
Industry Co.,Ltd. - Director of Fuji Xerox Co.,Ltd. - Director of SCB Asset
Management Co.,Ltd.
14 15 ORGANIZATION CHART
Board of Directors Human Resource and Compensation Audit Committee Committee
Nomination Committee Managing Director Audit 1
Board Secretariate Office Audit 2
Invertment Compliance
Planning Public Relation
Business Group Insurance Group Business Support Group
Bancassurance Broker & Agent Non-Motor Insurance Finance Business Sector Sector Sector Sector
Corporate & SMEs Regional Business Motor Insurance Operations Sector Sector Sector Sector
Business Development Sector Underwrite Legal Human Resource
Actuarial
16 17
THE EXECUTIVE OFFICERS
Mr.Chiravuthi Bunyasiri Mr.Thanad Jeerachaipaisarn Mr.Supachai Piakeaw Managing Director Senior Deputy Managing Director, Assistant Managing Director, Head, Insurance Group Head, Business Group
Education Education Education - Master of Business Administration, - Master of Business - Master of Business University of Dallas, U.S.A. Administration, The National Administration, University of - Bachelor of Commerce Institute of Development New Haven, U.S.A. (Management), Chulalongkorn Administration - Bachelor of Business
University - Bachelor of Arts (Economics), Administration (Accounting), - Chairman 2000 Class 8/2003 Chiang Mai University Krirk University - Director Accreditation Program - Associate of The Insurance (DAP) Class 29/2004 Institute of New Zealand Experience Experience 2006 - Present: Experience - Head, Business Group October 2004 - Present: 2005 - Present: - Managing Director - Head, Insurance Group 2005:
The Siam Commercial - Head, Bancassurance Samaggi Insurance PCL. 2001 - 2004: Business Sector - Senior Deputy Managing 2004 - September 2004: Director 2002 - 2004:
- Executive Vice President, - Assistant Managing Director Special Assets Corporate 1997 - 2000: (Business Development 1) Sector - Deputy Managing Director 2000 - 2002:
The Siam Commercial Bank - Manager, Corporate Business PCL. Department 1999 - 2004: - Senior Vice President, Special 1997 - 2000: Assets Corporate Sector - Manager, Marketing The Siam Commercial Bank Department PCL.
1996 - 1999: - Senior Vice President, International Banking Facilities & Financial Institution The Siam Commercial Bank
PCL.
16 17
THE EXECUTIVE OFFICERS
Mr.Sunchai Viraseranee Mr.Monson Marukatat Mrs.Waraporn Pancharoen Assistant Managing Director, Assistant Managing Director, Assistant Managing Director, Head, Corporate and SMEs Sector Head, Non-Motor Insurance Sector Secretary to Board of Directors
Education Education Education - Master of Business Administration, - Master of Business Administration, - Master of Business Administration, Tarleton State University, U.S.A. Indiana University, U.S.A. The National Institute of - Bachelor of Science (B.S), - Master of Professional Development Administration Kasetsart University Accounting, University of - Bachelor of Science,
Southern Queensland, Australia Mahidol University Experience - Bachelor of Arts (Economics),
2005 - Present: Thammasat University Experience - Head, Corporate and SMEs - Certified Internal Auditor 2005 - Present: Sector Experience - Secretary to Board of 2004 - 2005: Directors - Assistant Managing Director 2005 - Present: 1997 - 2004: (Business Development 2) - Head, Non-Motor Insurance
The Siam Commercial Sector - Assistant Managing Director
Samaggi Insurance PCL. 2003 - 2004: (Operations) 1999 - 2004: - Assistant Managing Director 1992 - 1997:
- Vice President, Branch (Business Administration) - Senior Manager, Information Business Department Development Department System Center UOB Radanasin Bank PCL. 2002 - 2003:
- Senior Manager, Audit Department 2000 - 2001:
- Manager, Planning and System
18 19 Mrs.Wanna Phalajivin Mr.Kriengkrai Tangjarukij Mr.Wachira Chuaychoo Assistant Managing Director, Assistant Managing Director, Assistant Managing Director, Head, Finance Sector Head, Operations Sector Head, Business Development Sector
Education Education Education - Master of Business Administration, - Master of Science in Computer - Master of Public and Private Thammasat University Science (Computer & Engineering Management The National - Bachelor of Accounting, Management), Assumption Institute of Development Thammasat University University Administration - Bachelor of Arts (Economics), - Bachelor of Accountancy,
Experience Thammasat University Chulalongkorn University 2005 - Present: - Head, Finance Sector Experience Experience 2005 - Present: 2007 - Present: 2002 - 2004: - Head, Operations Sector - Head , Business Development
- Manager, Financial Department Sector The Siam Commercial 2002 - 2004: The Siam Commercial Samaggi Insurance PCL. - Manager, Planning and System Samaggi Insurance PCL. 1985 - 2002: Development Department - Manager, Financial and 1997 - 2001: 1997 - 2006:
Accounting Department - Deputy Manager, Planning - SVP, Marketing Dept. 4 Bangkok Union Insurance and System Development The Deves Insurance PCL. PCL. Department 1996 - 1997:
- Fire Insurance Dept. Manager The Deves Insurance PCL. 1992 - 1996:
- Branch Manager The Siam Commercial Bank PCL.
18 19
THE EXECUTIVE OFFICERS
Mr.Suchon Sa-Ingthong Mrs.Worraya Jaruwongpak Mr.Pubesuan Tepsongpattana Head, Regional Business Sector Head, Bancassurance Business Head, Motor Insurance Sector Sector
Education Education Education - Master in Public and Private - Master of Business Administration, - Bachelor of Economics,
Management, The National Kasetsart University Ram Khamhaeng University Institute of Development - Bachelor of Economics,
Administration Chiangmai University Experience - Bachelor of Science (Business
Experience 2006 - Present: Administration), Kasetsart - Head, Motor Insurance
University 2006 - Present: Sector Experience - Head, Bancassurance The Siam Commercial Business Sector Samaggi Insurance PCL. 2006 - Present: - Head, Regional Business 2005: 2004 - 2006:
Sector - Senior Vice President, - Vice President, General Bancassurance & Retail Insurance Department 2005: Business Department Asia Insurance 1950 Co., Ltd. - Senior Vice President, Regional Business 2001 - 2004: 1997 - 2002:
The Siam Commercial - Vice President, Business - Bancassurance Manager Samaggi Insurance PCL. Support Department AXA Insurance PCL. 1995 - 2004: 1998 - 2000: 1993 - 1997:
- Senior Vice President (HR/ - Manager, Financial Division - Assistant Vice President, PR/Marketing) 1997: Business Development The Deves Insurance PCL. - Manager, Motor Underwriting Department Division Safety Insurance PCL.
20 21 Mrs.Eamorn Xuto Head, Broker & Agent Sector
Education - Bachelor of Art (Political Science) 2nd Hons.,
Ramkhamhaeng University Experience 2007 - Present: - Head, Broker & Agent Sector The Siam Commercial Samaggi Insurance PCL. 2004 - 2007:
- Senior Manager Commercial Line Generali Insurance (Thailand)
Co.,Ltd. 1995 - 2004:
- Deputy Manager Bancassurance AXA Insurance PCL. 1985-1995:
- Assistant Manager Marine Underwriting Division Thai Commercial Insurance
PCL.
20 21
RISK FACTORS AND MANAGEMENT
Insurance business involves internal and external risks: operation -- decision on underwriting and reinsurance, financial status, competition, marketing and economic situations, politics and unexpected natural disasters. Having realized potential risks in the course of business operation, we keep abreast of all possible advances and adopt new policies and guidelines for appropriate and timely risk management. We attach importance to the development and adoption of risk management procedures to ensure their efficiency and reduce possible losses so that our organization can remain in competition in the non-life insurance market. The Board of Directors have adopted the policies and guidelines on risk management and assigned the Audit Committee to act as the Risk Management Committee since 2006. Such Committee adopted policies on the management of all the risks such as the risks related to underwriting, reinsurance, investment, liquidity, operation and our image. They also control the risks so that they remain at safety level and report directly to the Board of Directors for the follow up and management of risks as well as finding corrective measures. Although we operate our business with risks already being managed properly and constantly, we also adopted the written policies for the management of risks related to operation, liquidity, and investment transactions by revision of Investment Procedures -- on top of Underwriting and Reinsurance Guidelines. Such policies and guidelines shall be used to define the scope of operation and procedures for the management of risks in various activities to ensure uniformity,
22 23 maximum efficiency and in line with proper business administration based on good governance and international standard. Such policies on the management of risks have been adopted under the risk management policies of the Siam Commercial Bank’s Financial Group for the reason, we belong to this Group. Such policies have been adopted by the Bank as guidelines for all companies within Financial Group on the management of their risks to control the overall risks of the Group and the risks of transactions among the companies within the Group according to the Consolidated Supervision Principle set forth by the Bank of Thailand. The Management & Control of Major Risks 1 Underwriting Risks Decision on underwriting is a major risk in our business; it has a direct impact on our finances and operations. The risks of underwriting are related to internal factors - such as conditions of insurance and competitive premiums - and external factors such as accidents, natural disasters, global warming that result in storms, destructive floods and other severe weather conditions, geological changes that may cause many severe earthquakes, including destructions caused by human such as theft and terrorism. The said factors are high risks that cannot possibly be foretold or accurately determined. The injuries, losses of lives and properties that are insured mean the insurance company has an impact on the amount of claims paid by the company to the insured who suffers from these losses. Guidelines on Risk Avoidance and Mitigation: We have set up “The underwriting committee” and “The motor underwriting committee” to lay down the terms and conditions of insurance, premiums and other measures pursuant to our “Underwriting Manuals”. We has applied prudent underwriting techniques to risk assessment by thoroughly selecting customer base and type of business and also analyzing risk exposures and statistics prior to acceptance. Other underwriting considerations include analysis to geographical area exposed to catastrophic loss, risk accumulation, risk management technique, proper reinsurance arrangement, adequate reserve, and implementation of actuarial science. We make suggestions on ways of avoidance and mitigation of risks based on Risk Engineer Survey Report in favor the insured. The insurance shall be undertaken according to such Underwriting Manuals, which set forth the standard to be acknowledged and applied by all departments and branches throughout our organization. We maintain adequate reserve beyond the amounts set forth by the authority. To maintain the customers’ confidence in our service, we are prepared for change of Risk-based Capital subject to revision of existing Insurance Act or new legislation.
22 23 2 Reinsurance Risks Reinsurance is regarded as essential method of risk management and distribution in non-life insurance business. Article 31 (2) of Non-Life Insurance Act, BE 2535 (1992) states that no insurance company shall undertake insurance of the amount exceeding 10% of its capital, unless otherwise the Registrar’s written permission is obtained. Such clause is regarded as the minimum risk management requirements to be fulfilled by every insurance company. Therefore, when we undertake any insurance of the amount greater than 10% of our capital we shall hedge our liabilities by allocating the risk to both local and oversea reinsurers. However, any reinsurance also involves certain risks of unstable financial strength both in terms of capacity and claim payment ability that could take place afterwards. Guidelines on Risk Avoidance and Mitigation: To effect reinsurance, we have to consider the financial strength and credit rating of both local and overseas reinsures and only those with solid financial background, high liquidity, great potential and highly reliable. This will enable us to cope with liability arising from the large claim payment with slight or without any impact to the financial strength. We allocate & mitigate risk by Treaty Reinsurance and Faculty Reinsurance contract including Catastrophe Excess of Loss. In this way, we maintain our stable financial status by hedging our liabilities for any losses or damages that have to be compensated by hefty sums.
3 Competition Risks Due to fierce competition in non-life insurance market, many local and foreign insurer or joint venture company with local insurer in the market, both large and small, have to do anything they can to remain in business. They resort to reorganization, change of management, merger, introduction of new products, adopting new working procedures, application of new technologies and staging advertising campaigns using pricing strategies such as offering higher discounts or incentives to their agents and brokers. All kinds of strategies are employed to retain existing accounts and find new prospects while increasing or at least maintaining market share. Many non-life insurance companies fail to earn enough premiums to cover the risks undertaken and the increasing operating costs. Large investment made to remain in competition can often incur costs and the risks of running out of cash in the event that large compensations have to be paid. When such events occur there will be a long-term impact directly and indirectly on the non-life insurance industry.
24 25 Guidelines on Risk Avoidance and Mitigation: We usually fix premiums at the rates appropriate to the types of insurance, taking into account possible risks, worthiness and costs. Not only our premiums are competitive they are also fair to our customers. We avoid the risks in competition by placing emphasis on quality, not just quantity. We remain in competition by introducing new products and services to meet the demand of our customers. We employ new technologies in our business to give a cutting edge of effective management and cost reduction while ensure customer’s satisfaction. We continue to improve our before and after sale service. Moreover, we prepare for competition by human resource development. Our staff are given training to ensure that theirs knowledge and skills meet international standard. The training is jointly arranged by us and our partners that are leading overseas reinsurers and brokers.
4 Investment Risks Investment is another major activity in non-life insurance business. Its main aim is to spend the money left from non-life insurance business operation in such way that increases its value. However, there are certain elements of risks and each line of investment involves different kinds of risks. We put such risks into three categories: fluctuation of the values stocks, debentures and units trust. The aforementioned risks may adversely affect our returns on investment. The risk under any category can be attributed to various factors such as macro and micro economy, foreign economy, rates of exchange, interest rates, inflation and national security. Therefore, we make investment wisely, putting safety of capital on the top priority list while observing the limits under the regulations of the Office of Insurance Commission’s regulations that clearly set forth the types of investment and Capital Asset Ratio. Guidelines on Risk Avoidance and Mitigation: We have written regulations on investments that clearly set forth investment policies, objectives, types, sizes and risk management. Our Investment Committee are in charge of investment and operation; they hold a meeting at least once a month. In the management of risks, we shall spread out our investments in line with our activities. We use finance and investment tools and measurements such as standard returns on investment in the market, index of change in returns on investment in ordinary shares as compared with Stock Exchange returns index. And assessment of losses caused by holding the securities in reference to the rate of interest. Such investment operation and risk management are aimed at maximum efficiency, acceptable level of risk and satisfactory returns on investment.
24 25 5 Liquidity Risks An insurance company’s liquidity is at risk when such company is unable to pay claim when such sums become due and payable under its obligations to creditor or the insured due to insufficient fund or failure to convert assets to cash or failure to seek additional fund sufficiently within stipulated period to the extent that such company suffers losses and damages. Such risk depends upon assets and debts structure, allocation of liquid assets and reserves for contingencies as required by law. Failure to allocate sufficient liquid assets or reserves may lead to financial difficulties to the point of capital increase or bankruptcy in the end. Guidelines on Risk Avoidance and Mitigation: We strictly comply with the Office of Insurance Commission’s regulations -- issued by virtue of Non-life Insurance Act, BE 2535 (1982)- pertaining to financial strength such as investment by insurance company in other business, allocation of unearned premiums reserve, allocation loss reserves and outstanding claims, and maintenance of capital not less than 10% of net premiums written in the previous calendar year, which is not below 30 million baht. In 2007, we also adopted the risk management policies related to liquidity with the following details: 1. We invest in the assets with high liquidity in the form of cash, bank deposits, promissory notes, government bonds, Treasury bills, stocks and debentures, most of which are in Thai baht. We expand the scope of investment, long term and short term, in the types of securities that are in demand in the market. 2. Our liquidity risk management policy covers the Financial Contingency Plan. Under such plan, in case of emergency, contingencies or unusual circumstances, there shall be sources of funds readily available at low cost. 3. Certain financial institutions shall grant us credits in case of lack of liquidity.
6. Overdue Premium Collection Risks In the course of insurance business, we undertake insurance through insurance brokers, sales representatives and other outlets. It is necessary to issue insurance policies to the insured first before collection of premiums from such brokers and sales representatives within a fixed period. There are possible risks of nonpayment due to financial problem or lack of liquidity on the part of such brokers and sales representatives. Therefore, we pay special attention to all such risks.
26 27 Guidelines on Risk Avoidance and Mitigation: We adopt measures for proper collection of unpaid premiums. We regularly update our age of debts analysis every month and choose only brokers and sales representatives with financial strength backgrounds, who can put up bank or personal guarantee to reduce the risk of nonpayment. We allow a certain period for payment. If payment of premium is made within specified period, our debt collectors shall proceed according to the guidelines on premium collection. In case of non-payment that we have to write off bad debts, we shall allocate reserve for the whole or take legal actions if necessary.
7 Operational Risks In the course of operation, certain risks can occur due to bad management, lack of good governance or proper control within organization. Such risks may be related to internal factors - such as staff or work system -- or external factors that can cause losses or damages, tangible or intangible, such as loss of reputation or business opportunity. As an our Operational Risk Management Policies, we classified loss event type into 7 categories following Bank for International Settlements (BIS) Guidance such as internal & external fraud, employment practices and workplace safety, clients, products & business practices, damage to physical assets, business disruption and system failure and execution, delivery & process management. Guidelines on Risk Avoidance and Mitigation: Non-life insurance business involves certain kinds of risks, but our tight internal control, proper organization and correct functions can monitor such risk. The Board of Directors assigns the Audit Committee to set forth guidelines on evaluation, management and control of all the risks that our company may face. The Internal Audit units shall also deal with internal risks control and management and submit the reports thereon to the Audit Committee to be approved by the Board of Directors. To manage operational risks according to our policies, we introduced the following tools and procedures in 2007: 1. Key Risk Indicator (KRI): This tool is used for follow up of major risks in our organization. We define the risks that can be measured and assign the KRI to indicate the degree of risk, whether it is at a high, medium or low level. Every month, a report shall be submitted to the management and the Audit Committee for acknowledgment so that preventive and corrective actions can be taken quickly to avoid losses and damages.
26 27 2. Incident Report and Loss Database: An Incident Report is a record of incidents that may cause financial loss, loss of income or damage of reputation, or any liabilities for actions or penalties to the extent that may adversely affect our operation or business. A Loss Database is a collection of data on financial loss or higher cost in the course of normal operation due to certain events; it also includes the near-misses. Loss Database is made up of the details of all the incidents that my cause certain losses and/or damages, which are collected for future reference, studies and management of operation risks. From Loss Database, a Risk Management System Tool can be developed for us. 3. New Product Approval: To launch a new product, all departments shall observe the New Product Approval Procedures as set forth by our Product Development Committee. Such Procedures shall reduce the risks associated with new product development; confidence in new product is built through planning, analysis, identification, assessment, control and prevention of risks in line with our strategies and policies. Doing so, we can also make sure that the new procedures shall be adopted at the right time. 4. Business Continuity Plan (BCP): We have BCP in case one of our units is struck by fire, earthquake, riot, accident or any event of force majors, to the extent that it becomes inoperable. With BCP such unit can have its good working conditions restored quickly with the least damages. We began to make this Plan in 2004 and we shall revise such Plan in accordance with our risk management policies adopted in 2007. We shall also review and rehearsal our Plan every year.
8 Strategic Risks The adoption and implementation of strategies involve certain risks. Certain things could go wrong, for example, improper implementation or inconsistency of strategies, policies, targets, organization structure, competition and our own resources. Therefore, proper working plans and strategies should be adopted, the process of which is quite essential because it helps manage and control the risks of implementing the wrong plans or strategies. The adoption of plans and strategies in line with the current situation shall lead to the success of the operation and the attainment of the targets. Guidelines on Risk Avoidance and Mitigation: To manage and control strategic risks, we make 3-year strategic plan in advance at management level while making annual business plan at sectors/units level. The 3-year strategic plan shall be made through brainstorming sessions of the
28 29 management to give an overall picture of operation. The Siam Commercial Bank Public Company Limited, its affiliates and partners within the same Financial Group also set forth the guidelines on joint operations within the next 3 years to streamline all the working procedures. Such 3-year plan shall always be revised before making an annual plan at sectors/units level. Annual Business Planning: We make annual business plan for each year and during implementation such plan may be revised and adopted the current strategies during the current year. Our Board of Directors and Executive management shall set forth the guidelines on annual business planning in a top-down manner. Such guidelines are made from the 3-year Plan. Then, all the unit/sectors shall make a bottom up plan through brainstorming sessions and present such Plan to the Management for discussion to streamline all the working procedures throughout the entire organization. In the process of annual business planning and target setting, the management shall consider the atmosphere of competition and business landscape during such period to ensure that the most well-thought-out operation plan is adopted. After that, such annual business plan and business targets shall be presented to the Board of Director for approval. The management committee comprising head of sectors up shall hold a Management Meeting twice a month at least to closely follow up the strategic plans and business targets. The first Meeting shall deal with all aspects of business. The second meeting shall deal with the operations. In the event that the operations are not in sync with the plan, the management shall seek proper solutions and change the strategic plans or targets in line with the circumstances. If the strategic plans and business targets have to be changed drastically, the management shall seek from the Board of Directors the approval of plan revision during the year. In the process of setting guidelines and planning, we have a planning unit that serves as a center for the compilation, documentation and facilitator for the management and all units throughout our organization. This is to ensure efficiency in strategic planning, implementation and follow-up by comparison of all the plans in each quarter. Such units shall assist in the strategic planning and revision to ensure that all the plans are effective and up to date.
28 29
OUTLOOK NON-LIFE INSURANCE INDUSTRY & COMPETITION
Non-life Insurance Industry of 2007 In 2007, world economic recession and local unfavorable factors produced great impact upon nearly all business sectors, including non-life insurance. However, local non-life insurance premiums have somewhat increased as compared with last year’s figures. According to the figures published by the Office of Insurance Commission (formerly known as Department of Insurance), the direct premiums for the first nine months of 2007 reached 74,266 million baht, which is accounted for a 7.4% increase--smaller than the figure for the same period last year. Thai Reinsurance PCL projected 100,709 million baht of annual direct premiums, which is accounted for an increase of 5.9%. Such an increase is mostly due to miscellaneous insurance while the growth rate of motor insurance was smaller as compared with last year’s figures. Likewise, fire insurance, marine cargo insurance even achieved smaller growth rates as compared with last year’s figures. Motor insurance: Motor direct premiums were accounted for 60% of all underwriting premiums. For the first nine months of 2007: the total direct premiums within the insurance industry shall be 45,154 million baht, which is accounted for a 10% increase, and the projected for the whole year the Motor Insurance premiums shall amount to approximately 59,993 million baht, which is accounted for an increase of 5.7% -- a smaller growth as compared with last year’s growth of 17.3%. Such small growth rate can be attributed to high oil price and the curbing of spending by consumers which adversely affected the sale of new cars.
30 31 Miscellaneous insurance: Direct premiums of miscellaneous insurance for the first nine months of 2007 came to 20,782 million baht, which is accounted for a 5.3% increase as compared with last year’s figure. Such an increase is attributed to higher amounts of personal accident insurance and health insurance taken by many more people who have become aware of the importance of health and protection against personal accidents. Meanwhile, property insurance and all risk insurance of other types recorded a smaller growth rate in line with the economic situation. Projection for the entire period of 2007: miscellaneous insurance shall enjoy a growth rate of 9.0% with a total premium of approximately 29,755 million baht. Fire insurance: The decline in real estate sector and many unfavorable factors such as higher inflation rate, consumers’ reduced loyalty and higher operating costs adversely affected most industries to the extent that all business sectors have to control and reduce costs. As a result, the amounts of fire insurance for homes, factories and other premises for the first nine months of 2007 were expected to be 5,504 million baht, which is accounted for a very small increase of only 0.7% as compared with the same period last year. The total amount of fire insurance is expected to be approximately 7,160 million baht, which is accounted for a 1.9% decrease, by the end of 2007. Marine Cargo insurance: During the first nine months of the year, the total direct premiums came to 2,825 million baht, which is accounted for a decrease of 2.2% as compared with the same period last year. The total amount of marine cargo insurance is expected to be approximately 3,801 million baht, which is accounted for 1.8% decrease by the year end of 2007. Such decline is attributed to the reduction of Thai export in line with the world economic recession.
Competition in 2007 On September 30, 2007, there were 73 insurance companies left - there were 74 at the end of last year. As a matter of fact, some insurance companies had either gone out of business or suspended operation pursuant to the orders issued by the Department of Insurance. Local insurance companies had to face heated atmosphere of competition continuously that the one with unstable financial background could not survive. Many non-life insurance companies tried to do whatever they could to remain in competition; they adopted many strategies such as undercutting each other in price during the first half of the year. At the second half of the year when one insurance company ran into financial difficulties
30 31 other companies then realized the severe damages caused by undercutting each other in price and began to increase their underwriting premiums to cover costs. In 2007, many insurance companies tried to reach consumers by TV and radio commercials, newspapers, billboards and direct marketing on TV. Many non-life insurance companies have realized the importance of making their presence to gain public recognition, despite high advertising cost and the small chances of evaluating the success of advertising. Such a drastic move was unprecedented. Some non-life insurance companies aimed at improvement of business in various aspects such as management, products, service and outlets. New products were designed and developed to offer new coverage and higher protection to satisfy the demand in the market. All working procedures were streamlined to ensure speedy service. More policies were sold on line and through commercial banks with many branches throughout the country. Many insurance companies formed partnerships with private and government banks to reach individuals customers in many provinces. Many insurance companies resorted to telemarketing. In 2007, many non-life insurance companies evidently tried to find business partners which are financial institutions or even formed join ventures with local or overseas insurance companies to become higher groups or consortiums to acquire higher competition power. In 2007, we successfully expanded all of our existing types of insurance; especially motor insurance enjoyed a rapid growth as compared with other types of non-life insurance. According to the records published by the Office of Insurance Commission (formerly known as Department of Insurance), In the first nine months (January - September) of 2007, our total direct premiums reached 2,407 million baht, which is accounted for an increase of 80.7% as compared with the figures of the same period last year; and the market share of 3.2%, the direct premium ranked at No.6 in the industry as compared with the direct written premiums of 1,332 million baht, a market share of 1.9% and ranked at No.15 in the industry at the end of September 2006. And we also ranked at No. 15 with 1.9% of market share at the end of year 2006. Breakdown of non-life insurance under different categories: during the first nine months of 2007 against our competitors, our motor direct insurance premiums growth reached 217% as compared with the same period last year, moving us from No.34 to No.9 rank with the market share going up from 0.8% to 2.4% Our miscellaneous direct insurance premium moved from No.8 to No.6 rank as compared with the figures in the same period last year with a growth rate of 48.9% and a market share of 4.5%. The increase is mostly attributed to personal accident direct insurance
32 33 premiums that enjoyed a growth rate of 90.9% as compared with the figures in the same period last year, moving our personal accident insurance premium ranking from No.5 to No.3. Fire direct insurance premium in the first nine months of the year our growth increased by 12.5% as compared with last year’s figures, keeping us still on No.6 rank with a market share of 5.2%. Our marine Cargo direct insurance premiums increased and moved us from No.8 to No.7 rank with a growth rate of 5.2% as compared with last year’s figures and a market share of 4.2%. We hope that when the records of the entire insurance industry are published we would be able to maintain our ranking as high as in September 2007.
Trend for 2008 Based on relevant factors in the year 2007, construction of government mega-projects such as Red Line and Purple Line Skytrains, confidence of investor restored by new government, stable interest rate with a downward tendency, the economic outlook should be brighter: GDP should be 4.5%-6.0%. Based on such economic outlook, Thai Reinsurance PCL projected a direct premium growth of 8.0% and continuous growth of miscellaneous insurance and motor insurance. At the same time the non-life insurance companies within the industry should adjust themselves while improving their potential in various aspects to prepare for competition with local and foreign insurance companies. In 2008, Motor insurance is expected to increase; direct premium growth should be approximately 7.7% as compared with 2007. Such an increase can be achieved through the sale of cars which is likely to increase in the beginning of year 2008. As a whole, motor insurance business should enjoy a higher growth rate than last year. Miscellaneous insurance is expected to increase; the direct premium growth should be 10.8%. The amount of property insurance and all risk insurance should increase due to large government construction projects. The amounts of personal accident and health insurance should also continue to increase. Fire insurance should enjoy a growth rate of approximately 2.3%, which is also higher than 2007 figure, due to improvement of real estate business in 2008. Projection of marine cargo insurance: In 2008, the growth rate, as compared with last year, should be approximately 1.2%; due to appreciation of Thai baht, export shall improve only slightly.
32 33
PROGRESS AND PERFORMANCE IN 2007; PLANNING FOR 2008
Overview of Business and Types of Products Overview of Business: We are licensed to operate all types of non-life insurance, namely fire, marine cargo, motor and miscellaneous insurance. We make short-term and long-term investment in many types of securities, namely promissory notes, bonds, stocks, debentures, etc., including deposits with commercial banks and leasing office space in our office building. Types of Products and Service: We provide 4 types of non-life insurance: 1. Fire insurance: This type of insurance offers protection of the insured property such as residential buildings, commercial buildings, factories, other structures, including the machinery and goods therein against fire, lightning and explosion. The exception being that any item of silver bullion, gold bullion, gem, antique or artwork worth beyond 2,000 baht, plans, blueprints, banknotes and other forms of money do not enjoy the insurance coverage. We also undertake additional service such as insurance of consequential damages and lease holding.
34 35 2. Marine Cargo Insurance: This type of insurance offers protection of goods in transit, local and international, by sea, road, rail and air, including the carrier and its fittings and devices against losses and damages.
3. Motor Insurance: This type of insurance offers protection of car and passengers against losses, damages and injuries. It is subdivided into compulsory and comprehensive insurance. The compulsory insurance applies to all vehicles pursuant to the Road Accident Victims Act, BE 2535 (1992). Under such compulsory insurance compensations in the amounts stated in such Act shall be paid in the event of deaths, injuries and disabilities. The voluntary insurance shall offer cover for losses and damages caused by accidents and theft which result in loss of life and damaged to property of the insured and third party. The insured can choose the amount of coverage.
4. Miscellaneous Insurance: This type of insurance offer protections against losses and damages not covered by Fire, Marine cargo and Motor insurance, such as Personal Accident, Travel Accident, Unnamed Passenger, Health, Cancer and Hospital Income Plan. The rest of them are Machinery Breakdown, Erection All Risks, Electronics Equipment, Contractor’s All Risks, Contractor’s Plant and Machinery, Boiler and Pressure Vessel, Burglary, Money, Golf, Public Liability, Neon Sign, Plate Glass, Fidelity, Homeowner, Property All Risks, Business Interruption, Aviation, Workmen’s Compensation, Freedom, Credit Card, Householder, Loss of Income, All Risks Insurance for Mobile Phone, Other Miscellaneous Insurances.
Apart from the 4 types of insurance, we also effect reinsurance to hedge our liabilities pursuant to the Non-life Insurance Act, BE 2535 (1992). In the event that we have too high the liabilities, we shall take out an Outward Reinsurance with other local or overseas insurance companies. There are two types of reinsurance. The first one is Facultative Reinsurance without and fixed terms and conditions. It means the terms and conditions of insurance have to be laid down on individual basis by the inward and outward insurance companies. The second one is Treaty Insurance under an agreement, under which certain terms and conditions are mutually set forth by the inward and outward companies, and the same shall be binding for the period of time stated therein. We also undertake inward reinsurance on individual basis for other non-life insurance companies.
34 35 Progress and Operation in 2007 The highest honor for our Diamond Anniversary Celebrations The year 2007 was the time for our Diamond Anniversary Celebrations and it happened to be the time that we enjoyed the highest honor when we were granted to by Warrant of Appointment the Royal Insignia (the seal of Garuda) that we could use in our business as of February 19, 2007. On March 9, 2007, the Royal Gazette published an announcement saying that Siam Commercial Samaggi Insurance Public Company Limited (SCSMG) has been granted by Warrant of Appointment the Royal Insignia (the seal of Garuda) from His Majesty the King, with such announcement being countersigned by Gen. Surayuth Julanon, the Prime Minister. And on April 9 2007, Mr.Chiravuthi Bunyasiri, Managing Director, and other Directors received such Royal Insignia (the seal of Garuda) from the Royal Household Bureau Secretary-General at the Royal Household Bureau Hall, on behalf of SCSMG. On this auspicious occasion, we put the Royal Insignia (the seal of Garuda) at our Head Office of the Company, Siam Commercial Samaggi Insurance Tower, Northpark Project, Vibhavadi- Rangsit Road, Bangkok. On September 29, 2007. our Board of Directors, Executive, the management and staff held the ceremony to pay homage to the original Royal Insignia (the seal of Garuda) and its reproductions for our other branches.
36 37 To celebrate the Royal Insignia and our Diamond Anniversary, we threw an SCSMG Diamond Anniversary Party entitled ‘Himavanta Night’ on July 27, 2007 at the Plaza Athenee and invited our honorable guests, customers, major partners, shareholders and staff to enjoy the celebration of this memorable event as a token of gratitude for their customs and kind support that are attributed to our great success.
Awards for our success in 2007 The following awards are a testimony to our record of success in our sixtieth year: - Second Prize for Non-life Insurance Company with Excellent Management 2006 from the Department of Insurance, the Ministry of Commerce. - Best Shareholder Treatment Award 2007 from Thailand Securities Depository Co.Ltd., Thai Listed Companies Association, Thai Investors Association and Thai Investor Relations Club in the Shareholders’ Day. - Rated, among 460 listed companies, as one of the nineteen “Excellent” companies scoring over 100 in the Annual General Meeting: AGM 2007 Quality Assessment organized by the Office of the Securities and Exchange Commission, Thai Listed Companies Association and Thai Investors Association.
36 37 Product and Service Development In 2007, many insurance companies engaged in a fierce battle to introduce new insurance products. We also developed and introduced a lot of products and service to enter into the competition in the market. We place emphasis on the development of products and service to meet the demand in the market and to suit our customers’ way of life, taking into account all possible risks. Each product and service had to be approved by our Product Development Committee, which is made up of top executives from all sectors, taking into account the appropriate description of product or service, possible target group, viability, outlets, marketing and all the risks involved. In 2007, we introduced new products such as:- Koom Ka Oon Jai Plan-Motor insurance voluntary type 3 extra, Personal Accident insurance which offers medical costs, Gold Shop insurance, Professional Indemnity Insurance for Building Inspector, Gas Station Insurance and added home flood insurance in Fire insurance type. Network Development To cope with business expansion in 2007, we set up 3 new branches in Lobburi, Khon Kaen and Nakhon Pathom and 6 counter service outlets in Chat Chai Market (Hua Hin), Roi-et, Loei, Surin, Trang and Ko Samui. We also streamlined our working procedures at our Head Office and all branches to ensure speed, efficiency and customer’s satisfaction. As at December 31, 2007, we have 13 branches and 15 counter service outlets; the existing branches should be sufficient for the amount of business for the time being. Apart from setting up new branches and counter service outlets, we also run telemarketing with our own staff and through brokers and agents that are trustworthy and well versed in insurance business. We also form partnerships with many car dealers, financial institutions including 800 Branches of the Siam Commercial Bank PCL and their affiliates all over the country that are regarded as important business network.
38 39 In respect of disaster notification and survey, claim services, car repair and medical treatments, we have many business partners of over 200 surveyor firms, 350 repair garages and 230 hospitals who provide services to our customers in many parts of the country. Human Resource Development We made a quantum leap by establishing many new branches that we had to employ more staff. On December 31, 2007, the number of our employees increased from 306 in 2006 by 93 to 399 in 2007, which hit the highest record of manpower augment-only in some departments where necessary. We take into account the amount of works and requirements of such department, bearing in mind possible improvement of working procedures and efficiency at the time of employing additional staff. The additional staff had to be trained in a long term and short term basis to ensure continuous human resources development which is put on higher priority than technologies. In 2007, we put our staff on new and continuous courses of in-house training and external training jointly designed by us and private and government agencies and organizations to open to our staff at all levels the opportunity to acquire new ski. In 2007, we sent our 905 employees to take 136 courses that the total costs of observation tours and overseas education reached 4.2 million baht, which is accounted for an increase of 69.6% from the previous year.
38 39 Social Activities in 2007 For the past 60 years, we did not only attain our business objectives, but we also make useful contributions to society through our good governance and awareness of our responsibility for the local communities. In this regard, we continued to receive tremendous support from our shareholders. In 2006, No.60 Annual General Meeting of the shareholders decided in favor or allocation of 1% of net profit to public service fund.
Major Social Activities in 2007 We realize the importance of education. Every year, we offer scholarships to students in government universities, who have produced fine performance but lack financial means. Later, we found that the scholarships could benefit only a few students. Therefore, we tried to look at many activities that benefit many more students on a long term basis and came to the conclusion that the advances in science and technology require use of computer equipment and devices. Computers are now essential tools for learning and they have become parts of our daily life. The private and government sector use computers in almost all activities. Schools and training centers use computers for their courses. Local communities also use computers for daily activities. It is therefore necessary that Thai children keep abreast of the advances in computer and information technology. From 2006, we donated computers to government schools in stead of offering scholarships to students. The government schools without budget for education development and unable to buy teaching tools and materials shall be eligible for our donations. When such schools are fully equipped their students and local residents can benefit from the use of computers at the schools. In 2007, we donated computers for the second time; this time, we gave away 26 computers to 6 schools, totaling 156, and donated 1.9 million baht toward the cost of 5 schools. Our Board of Directors donated another 0.4 milion baht to another school making at total of 2.3 million baht. Below are the schools that received our donations:
40 41 1. Bang Phae Phittaya School, Bang Phae district, Ratchaburi province 2. Dan Thab Tako Rat Uphathum School, Chom Bueng district, Ratchaburi province 3. Takua Pah Khiri Khet School, Takua Pah district, Phanga province 4. Bang Krak School, Takua Pah district, Phanga province 5. Khlong Tian Rat Rat Rangsan School, Takua Pah district, Phanga province 6. Si Sawad Phittayakhom School, Si Sawad district, Kanchanaburi province (Donations made by the Board of Directors) After providing the six schools with computers in 2007, we checked up on the five schools in Phitsanulok and Ratchaburi province which we provided with computers in 2006 to ensure that they make the best out of those computers. We asked all teachers concerned to give us the feedback. (85-90% of total student from those schools admit to University in both Bangkok and Up country) We also have a plan to engage those schools in other activities such as holding students gathering. Students from other schools in the same province shall be invited to participate in the events. We shall send our staff to teach basic computer applications to those students and local residents at the weekend.
40 41 Other Social Activities Apart from donation of computers and teaching computer applications, we also made other donations: The Company presented 400,000 baht donation to Her Royal Highness Princess Maha Chakri Sirindhorn for the Chaipattana Foundation; 100,000 baht to Sirindhorn Center for the Medical Rehabilitation toward the purchase of wheelchairs; Educational equipment and lunch to students and Wat Sra Kaew School, Pamok district, Arng Thong province; 4 used computers in good working conditions to Phu Nam Priew School, Si Sawad district, Kanchanaburi province in addition to the existing ones and presented some donation for building library; Cameras to the Rajaprajanigroh Foundation, under the Royal Patronage for education and rescue of victims of disaster. Although our donations are not so large, we are proud to help society in the way that it helps children to initiate creative thinking that they learn how to apply their studies for the benefit of themselves and others.
42 PB Performance in 2007 Financial Position and Operating Results Assets: Our overall business growth made to assets being increased by 24.4% as compared with last year’s figures. As at December 31, 2007, we had a total assets of 4,491 million baht, most of which came from increase of investment in securities - bonds and unit trusts -- by 30.2% as compared with last year’s figures; premiums due and uncollected-net increased by 33% -- 89.9% was not older than 3 months -- as compared with last year’s figures. Liabilities: As at December 31, 2007, we had total liabilities of 2,475 million baht, which is accounted for a 46.7% increase as compared with last year. The major items are unearned premium reserve of 1,106 million baht, which is accounted for a 64.9% increase as compared with the figures in 2006, the reason whereof being only some of the underwriting premiums were realized during the insurance period, but the rest were unearned premium reserve that could not be regarded as earned incomes; however, they should be realized gradually during the period of coverage. The increase of liabilities was also due to loss reserves and outstanding claims increased from 260 million baht in 2006 to 483 million baht, which is accounted for an 85.9% increase subject to the increased amount of business and claims. To ensure our customers that they can claim from us, we provide reserve for paid and unpaid outstanding claim, which included the incurred but not reported claim liabilities. The reserve of such unearned premiums and loss reserves and outstanding claims was subject to Non-life Insurance Act. BE 2535 (1992). Shareholder’s Equity: As at December 31, 2007, the Shareholder’s Equity was 2,015 million baht, which is accounted for a 4.8% increase as compared with last year’s figure; such increase is partly attributed to unappropriated retained earnings that went up from 672 million baht to 715 million baht, which is accounted for a 6.3% increase, and the difference of 13 million baht at the time of deficit on revaluation of investment-net as compared with the difference of 56 million baht in the previous year subject to favorable adjustment of the sums invested. 2007 Performance We made a tremendous success in the expansion of our insurance business. Our underwriting premiums reached 3,300 million baht, which is accounted for a 64.2% increase as compared with last year’s figure. It is the highest record since the time of our company’s establishment. All types of insurance enjoyed this significant growth rate, especially motor insurance went up by 165.8% and personal accident insurance by 77.1%, resulting in our motor underwriting premiums portion going up from 27.4% in 2006 to 44.3% in 2007 -- higher than miscellaneous underwriting premiums portion.
Miscellaneous 13% Fire 18% 5% 47% 38% 8% Marine & Cargo 44% 27% Motor 2006 2007 Premiums 2,010 million baht Premiums 3,300 million baht
PB 43 The increase in our underwriting premiums resulted in the increase of our underwriting expenses -- loss, commission and brokerages fee and others underwriting expenses -- from 759 million baht in 2006 to 1,435 million baht in 2007, which is accounted for an 89% increase. Therefore, we made profit on underwriting of 453 million baht in 2007, which was not far from the previous year’s figure of 452 million baht, which is accounted for a 0.4% increase. Apart from the profit on underwriting, we earned from our other main source of incomes the returns of 270 million baht from investment in the year 2007, an increase from 159 million in 2006 or 69.6% as compared with last year’s figures subject to the market situation. We also earned 34 million baht from the lease of buildings and so on. This figure is decreased by 0.8% as compared with last year.
Investment Income 5% 4%
Other Income 25% 36% 70% 60% Underwriting Profit
2006 2007 Revenue Structure Revenue Structure
Operating Expenses in 2007: Due to a quantum leap in business, we have to increase manpower, set up more branches and counter service, streamline working procedures and run advertising campaigns. Therefore, our operating expenses increased from 302 million baht in 2006 to 410 million baht in 2007, which is accounted for a 35.8% increase. The operating expenses related to staff increased by 24.9%, premises and equipment expenses increased by 38.6%, promotion expenses and advertisement increased by 79.9%. Such operating expenses increased in line with the size of business that needs to expand to remain in competition. Some of the investments involved high cost initially, but the returns can be attractive in the long run. However, after taking into account the operating expenses against underwriting premiums, the rate decreased from 15% in 2006 to 12.4% in 2007. As a result, we made a net profit of 285 million baht, which is accounted for only a 4.5% increase despite a large increase in total underwriting premiums. Still, our balance sheet shows unearned premium reserve and advance payments for long-term policies of 1,106 million baht and 241 million baht respectively. Such earnings shall be realized gradually throughout the term of each policy.
44 45 Underwriting Results: Motor Insurance We had total motor underwriting premiums of 1,462 million baht, which is accounted for an increase of 165.8%. We have the retention ratio at 86.3%; therefore, our net premiums written were 1,262 million baht, which is accounted for an increase of 143.1%. After less unearned premium reserve increase from previous year, the underwriting income came to 945 million baht, which is accounted for an increase of 108.9%. Our underwriting expenses totaled 917 million baht, which is accounted for an increase of 133% with loss ratio as high as 72.2% as compared with 69.5% in 2006. As a result, from motor insurance we made profit on underwriting from motor insurance of only 28 million baht, which is accounted for a decrease of 52.7%. Our proactive marketing strategies on motor insurance by expansion of customer base through agents, brokers, financial institutions, car dealers and our own 13 branches our products received a warm welcome from our customers and partners in Bangkok and all other provinces. Due to our long reputation and well proven performance, many customers took out insurance with us. Some customers, who used our service, came from some insurance company, who closed down at the beginning of the year. However, our expansion of motor insurance cannot be regarded as totally successful because we had loss ratio at 72.2%, which was higher than the figure in the market, and after taking into account the high costs of other types of insurance; we only made a small profit, which could stem from our lack of experience in this segment, and the fact that the Company was aiming for continuous growth with economies of scale without looking at any particular segment’s profitability. To tackle this problem, we have a plan for expansion of the motor insurance business through improved procedures for claims and insurance policy renewal, together with the quality of underwriting. We will be expanding our insurance business while reducing operating expenses, with the expectation of achieving stringent control and inspection to cut underwriting expenses and overheads once an economy of scale is achieved.
44 45 Miscellaneous Insurance We had miscellaneous underwriting premiums of 1,253 million baht, which is accounted for an increase of 34.4%. They include personal accident, health, industrial all risks, engineering and other types of insurance effected by corporate and retail customers. As for retail customers, most of the increase is attributed to the personal accident underwriting premiums that went up from 291 million baht in 2006 to 516 million baht in 2007, which is accounted for a 77.1% increase. Our proactive marketing strategies on personal accident insurance through commercial banks were a great success. As for corporate customers, we wrapped up insurance deals of mega-projects, namely the insurance of Nok Air Airlines for 22,170 million baht and the construction of Mahidol University Research and Medical Service Center for 6,150 million baht. Therefore, our industrial all risk insurance premiums increased by 15.2%, engineering and others 17.3% and after deducting all the reinsurance premiums, we had net premium written of 641 million baht, which is accounted for a 58.8% increase. After less unearned premium reserve increase from previous year, the underwriting income came to 547 million baht, which is accounted for a 35.8% increase. We had underwriting expenses of 316 million baht, which is accounted for a 44.7% increase. As a result, we made from miscellaneous insurance a profit on underwriting of 231 million baht, which is accounted for a 25.3% increase; the miscellaneous insurance loss ratio was only 36.6% as compared with 37.8% last year-- the significant claim for a plane crash in Phuket is already accounted for.
Fire insurance In 2007 our fire insurance premiums reached 416 million baht, which is accounted for a 13.0% increase - very high as compared with the small growth rate in the market and our past performance. Despite a decline in real estate business, we managed an increase in fire insurance effected by retail customers for their homes and corporate or small & medium business customers for factories and business premises. Such an increase can be attributed to improvement of products and extension of coverage such as flood to meet the demand in the market. After deduction of
46 47 reinsurance premiums, we had a net premium written of 332 million baht, which is accounted for a 16.3% increase. After less unearned premium reserve increase from previous year, the underwriting income came to 309 million baht, which is accounted for an 11.4% increase. Our underwriting expenses were 156 million baht, which is accounted for a 55.9% increase. In 2007, we paid huge claim for fire insurance; therefore, the loss ratio increased from 10.7% in 2006 to 23.1%. As a result, we made from fire insurance a profit on underwriting of 153 million baht, which is accounted for a 13.8% decrease as compared with last year’s figures. Marine Cargo Insurance In 2007, our marine cargo insurance premiums were 170 million baht, which is a 6.2% increase. This small increase is attributed to the decline in export. After deducting reinsurance premiums, we had net premiums written of 89 million baht, which is accounted for a 7.1% increase. After less unearned premium reserve increase from previous year, we ended up with underwriting income of 88 million baht, which is accounted for an 11.7% increase. Our underwriting expense was 46 million baht, which was a decrease of 2.3%. In 2007, our loss ratio from marine cargo insurance was 39.5%, which decrease from 50.7% in previous year. After deducting such underwriting expense, we made from marine cargo insurance a profit on underwriting of 42 million baht, which is a 32.9% increase as compared with last year’s figures. Investment Results: As at year ending 2007, our investment in securities reached 2,815 million baht, which is an increase by 653 million baht or 30.2%. Our investments included unit trusts of 1,228 million baht, which is an increase by 442 million baht or 56.2% from previous year; government bonds of 553 million baht, which is an increase by 222 million baht or 67.7%: debentures of 466 million baht, which is an increase by 113 million baht or 32.3%; stocks of 454 million baht, which is an increase by 49 million baht or 12.3% as compared with last year’s figures; notes 114 million baht, which is a decrease by 75 million baht or 39.7%. In 2007, our investment income were 270 million baht, as compared with 159 million baht in 2006 it was an increase of 69.6%. This increase is attributed to the bull stock market. As a result, we made from securities trading a profit of 45 million baht and from dividend 27 million baht, which is proportion 16.7% and 9.9% of total investment income respectively. Under such circumstances, our investment portfolio improved. Our incomes from unit trusts were 135 million baht or 50.1% of the all investment income. The reduction of interest rate by the Bank of Thailand adversely affected our investment income in debt instruments. On bonds, debentures, promissory notes, loans and deposits the returns were only 63 million baht or 23.4% of the all investment income. Therefore, our Return on Investment (ROI) increased from 6.5% in 2006 to 9.4% in 2007.
46 47 STATISTIC KEY PERFORMANCE 5 YEARS
UNIT : MILLION BAHT 2003 2004 2005 2006 2007 Motor-Premium Written 388 456 495 550 1,462 Growth (%) 40.6% 17.7% 8.5% 11.0% 165.8% Market Share (%) 0.9% 0.9% 1.0% 1.0% 2.4%* Loss Ratio (%) 66.0% 67.0% 62.2% 69.5% 72.2% Miscellaneous-Premium Written 571 586 856 932 1,253 Growth (%) 9.3% 2.7% 46.1% 8.8% 34.4% Market Share (%) 2.7% 2.6% 3.2% 3.1% 3.9%* Loss Ratio (%) 42.6% 63.5% 40.0% 37.8% 36.6% Fire-Premium Written 306 335 353 368 416 Growth (%) 6.3% 9.4% 5.6% 4.2% 13.0% Market Share (%) 3.8% 4.2% 4.6% 4.9% 5.5%* Loss Ratio (%) 12.9% 21.3% 11.6% 10.7% 23.1% Marine-Premium Written 103 116 114 160 170 Growth (%) 17.6% 12.6% (2.0%) 40.4% 6.2% Market Share (%) 3.1% 3.0% 2.9% 4.0% 4.4%* Loss Ratio (%) 21.8% 22.9% 31.3% 50.7% 39.5 Total Premium Written 1,368 1,493 1,819 2,010 3,300 Growth (%) 16.6% 9.2% 21.8% 10.5% 64.2% Market Share (%) 1.8% 1.8% 2.0% 2.0% 3.2%* Loss Ratio (%) 43.2% 51.3% 42.4% 44.3% 52.3% Underwriting Profit 306 303 405 452 453 Income on Investment 225 240 98 159 270 Operating Expenses 192 227 228 302 410 Profit before Income Tax 364 344 308 343 348 Net Profit 308 286 250 273 285 Total Assets 3,034 3,111 3,296 3,610 4,491 Total Liabilities 1,098 1,298 1,474 1,687 2,475 Equity 1,936 1,813 1,822 1,923 2,015 Investment & Loan & Bank Deposits 2,215 2,213 2,380 2,563 3,204 Underwriting Profit on Earned Premium (%) 39.5% 34.0% 33.1% 35.0% 19.5% Return on Assets: ROA (%) 11.3% 9.3% 7.8% 7.9% 7.0% Return on Equity: ROE (%) 17.9% 15.3% 13.8% 14.6% 14.5% Returen on Investment: ROI (%) 11.9% 10.8% 4.3% 6.5% 9.4% Debt to Equity Ratio (times) 0.57 0.72 0.81 0.88 1.23 Liability to Asset Ratio (times) 0.36 0.42 0.45 0.47 0.55 Liquidity Ratio (times) 2.48 2.03 1.87 1.79 1.55 Number of Staff 227 215 252 306 399
Remark: *Calculated from Forcasted Market Y2007 by Thai Re
48 49 Plans for 2008 One of our missions was to become one of the first 5 leading non-life insurance companies in Thailand within 3 years. Therefore, we shall maintain our growth rate as previously targeted in 2008 with an exception that we shall increase the types of insurance that are more profitable. We shall also endeavor to cut down operating expenses by increasing the number of our accounts while improving service quality. In 2008, we shall improve the counter service outlet in Nakhon Sawan to be branch and open 3 counter services more in Tak, Mukdahan and Chumphorn province to expand our service coverage. Major plans and strategies shall be implemented such as expansion of existing accounts by offering more attractive products for each target group in line with their way of life. Our next major plan shall be a complete revamp of our working process within our organization to prepare for future expansion and ensure that we can provide service at international standard to the satisfaction of our customers. Furthermore, we shall prepare for risk-based capital changes, rules and regulations revision in line with the Non-life Insurance Act to be amended or newly introduced in the near future. Such preparation may involve change in our organization chart and the roles of regulating agencies.
48 49
CORPORATE GOVERNANCE’S REPORT
The Company has always placed particular value on the principles of good corporate governance. We believe that good governance is fundamental to the strong and sustainable growth of the organization and enables the Company to achieve business success and compete efficiently. We have therefore been committed to operating to the highest ethical standards, respecting the rights and interests of all stakeholders, ensuring complete, accurate and transparent disclosure to shareholders and the public as well as maintaining our responsibility to society. The principled conduct has earned the Company wide recognition as reflected in a number of prestigious awards received during 2007. These accolades are a clear demonstration of the success brought by our continuing commitment to good governance practices:- - We were one of 10 companies that received the grate honor “Best Shareholder Treatment Award 2007” by the Thailand Securities Depository Co. Ltd., Thai Listed Companies Association, Thai Investors Association and Thai Investor Relations Club. - Rated, among 460 listed companies, as one of the nineteen “Excellent” companies scoring over 100 in the Annual General Meeting: AGM 2007 Quality Assessment organized by the Office of the Securities and Exchange Commission, Thai Listed Companies Association and Thai Investors Association. The essentials of the Company’s corporate governance practices in 2007 are set out below. 1 Corporate Governance Policy It is the Company’s policy to adopt “good corporate governance principles” as part of its key long-term policies and guidelines for overall activities. The Board of Directors is responsible for developing such policy and a “Code of Corporate Governance Principles” as guidelines for all Directors as well as members of the Management and staff. In this connection, the Management Committee has been assigned by the Board to implement and comply with the good governance standards prescribed by state agencies. All Directors and senior executives are encouraged to do their utmost to fulfill such duty. The Board also has responsibility for ensuring a prudent governance structure as well as systematic and efficient control of operations by the Management Committee and for maintaining the organization’s transparency, adequate disclosure and accountability to all concerned. Moreover, the Board of Directors has a duty to safeguard all stakeholders against any
50 51 issues arising from conflict of interest, to closely monitor and evaluate performance on a regular basis, while continuously reviewing, adapting and fine-tuning policies and practices to meet the established guidelines. (Details of our “Code of Corporate Governance Principles” can be found at the corporate website: www.scsmg.co.th) 2 Rights and Equitable Treatment of Shareholders and Shareholders’ Meeting The Company has a firm commitment to promoting the rights and equality of all shareholders, major and minor as well as general and institutional. All shareholders shall be treated equally, be able to fully exercise their rights while being provided with all accurate significant information of the Company in a timely, adequate and transparent fashion. The general public can also have access to the Company’s information to support their investment decisions. Shareholders’ Meetings: Shareholders’ Meeting represents one of the channels for shareholders to exercise their rights fully as shareholders of the Company. It is therefore the corporate policy to arrange shareholders’ meetings in accordance with legal requirements and regulatory guidelines. These guidelines require that a minimum of one general meeting of the shareholders is held each year within 4 months of the end of accounting year. When organizing a shareholders’ meeting, the Company always gives primary consideration to such standards and regulations as well as the equitable treatment of all shareholders. In 2007, the 61st Annual General Meeting (AGM) of the Shareholders was held on March 30, 2007 at the Head Office of the Company, Siam Commercial Samaggi Insurance Tower, Northpark Project, Vibhavadi-Rangsit Road, Bangkok. The key elements of the Company’s annual general meeting are as follows: Pre-meeting Arrangements Information and documents: For each meeting, a notice of the meeting together with information and documents relevant to the meeting agenda are delivered, at least 14 days prior to the date of the meeting, to all shareholders whose names appear in the Company’s share register on the closing date for transfers. The Company also places advertisements in newspapers, for 3 consecutive days before the meeting date, notifying the date, time, venue and agenda of the meeting. All documents circulated are aimed at providing the shareholders with sufficient information for their decisions to be taken at each resolution of the meeting, while enabling them to fully exercise their rights. These documents consist of details, facts, rationale and the Board’s opinions for each agenda item, attendance procedures and identification requirements, the Articles of Association relating to the meeting, forms of proxy and shareholder’s instructions as well as other important supporting information, e.g. biographical details of directors nominated to replace those retiring in rotation, bio-data of independent directors appointed as proxy, information about the auditors, etc. Apart from direct dispatch to shareholders and communication through the Stock Exchange of Thailand, the Company also posts the notice of meeting and all supporting documents on its website at least one month in advance of the meeting.
50 51 Opportunities for all shareholders to make comments, suggestions, raise questions and issues as well as proposing candidates for directorship in advance of the meeting: To ensure that the rights of shareholders are equally protected, the Company has offered all shareholders the opportunity to make comments or suggestions, raise questions or matters to the meeting agenda as well as proposing qualified and suitable persons for election as Company Director(s), prior to each shareholders’ meeting. Suggestions and nominations can be sent to the email address of the independent directors at [email protected], or returned directly with the self-addressed envelope/ forms to the Secretary to the Board. These will be compiled and presented to the independent Directors who will screen and submit them to the Board for consideration and inclusion in the agenda of the shareholders’ meeting. The Company invited all shareholders, for the first time, to send in their suggestions and questions or recommendations of agenda items and candidates for directorship prior to the 61st Annual General Meeting of the Shareholders by allowing one month’s time, i.e. January 1-31, 2007. It has since planned to extend the suggestion period to 3 months as a minimum, i.e. from November of each year to the end of January of the year in which the shareholders’ meeting is to be held. Therefore, the period set for receiving suggestions for the 62nd Annual General Meeting of the Shareholders is between November 1, 2007 and January 31, 2008. Appointment of Proxy: The Company facilitates the participation of those shareholders unable to attend the meeting in person by allowing them to either appoint any person as their proxy or to appoint the independent director of the Company to act on their behalf. For the 61st Annual General Meeting of the Shareholders, Dr. Oranuj Soongswang, independent director and Chairman of the Audit Committee, was appointed by the Company as proxy for shareholders. Three forms of proxy, i.e. Forms A, B and C were provided to suit the needs of the shareholders. The forms were sent to all shareholders along the notice of meeting and were also available for download from the corporate website. Furthermore, the Company encourages all shareholders to be aware of their role as Company shareholders and to have more participation in order to exercise and protect their own rights in line with the Code of Best Practice for Shareholders issued by the Stock Exchange of Thailand. Arrangements During Meeting Facilitation of Shareholders’ Attendance: The Company has a policy to equally facilitate the attendance by all shareholders to ensure complete exercise of their rights. In addition to scheduling the date/time and venue convenient for attendance, it has also arranged for shareholders to register two hours in advance of the meeting, by providing sufficient registration facilities in front of the meeting room as well as appropriate souvenirs and refreshments for those attending the meeting. During the 61st Annual General Meeting of the Shareholders held last year, a “barcode system” was introduced to the attendance registration and in the ballots for each resolution to increase convenience and speed at each process. The system was also used for vote counting to ensure accuracy, transparency and accountability.
52 53 Apart from the above facilities, a map of the meeting venue for the 61st Annual General Meeting of the Shareholders was provided with the notice of meeting. The Company arranged for shuttle services between meeting points downtown and the Company’s Head Office which is situated in a development project site with no regular bus service. Parking was also arranged for those shareholders with own vehicles. These facilities were provided to ensure convenient attendance of shareholders. The Company will make improvements to its meeting arrangements based on flaws discovered in the previous meetings and will continue to offer all shareholders the best facilities and arrangements. Participation by Directors, Auditors and Advisory Team: All Directors have always placed high importance on shareholders’ meetings. The 61st Annual General Meeting of the Shareholders was attended by all ten members of the Board, including the Chairman of the Board, the Chairman and members of all Sub Committees, the Managing Director. There was also participation by senior executives and Head of Finance Sector, as chief financial officer of the Company. Moreover, the Company’s Auditors and Legal Advisors, representing external and independent counsel, were invited to attend as observers and to provide response to the relevant areas. The Chairman of the Board, as Chair of the Meeting, started by introducing members of the Board and Management, Auditors and Legal Advisors to all shareholders present. The Chairman also informed the Meeting of important matters, such as the numbers of shareholders attending in person and by proxy, voting and counting methods before conducting the business of the meeting in accordance with legal requirements. Voting and Vote-Counting at Shareholders’ Meeting: During the 61st Shareholders’ Meeting, the Chairman explained to the Meeting the voting and vote-counting methods for each resolution adopted in line with the Stock Exchange of Thailand stipulations on shareholders’ meeting of listed companies. All shareholders were given ballot papers at the time of registration. The ballots were clearly made for each resolution, with separate checkboxes for “Agree” “Disagree” and “Abstain”. A barcode system was also used on the ballots and in the vote counting process with each share representing one vote. Decisions were taken through vote taking and vote counting. The results of the vote for each resolution were disclosed by the Chairman in a transparent fashion. The Company
52 53 ensured that all shareholders were able to exercise their voting rights equally and independently for each resolution and that no one shareholder was restricted his/her rights. All ballots have been kept for scrutiny by shareholders and all concerned for transparency purposes. Furthermore, the Chairman of the Meeting offered all shareholders ample opportunities to express comments and suggestions or to address questions to each agenda item. Sufficient time was allocated for questions and discussions, while information was equally provided. The Chairman of the Meeting and the Management Committee attached importance to every question and provided clarifications and response to all issues raised. Complete and accurate minutes of the Meeting were also taken.
Post-Meeting Arrangements The Company arranges for minutes to be taken for each shareholders’ meeting to keep a complete and accurate record of all resolutions and factual proceedings of the business transacted at the meeting. The minutes are thoroughly reviewed by the Chairman of the Board, who acts as the Chair of the Meeting. The resolutions passed by the Meeting are communicated through the news system of the Stock Exchange of Thailand on the following business day. The minutes are also copied to the Stock Exchange of Thailand and other relevant agencies within 14 days of the meeting date. Moreover, the Company also posts on its website the minutes and video of proceedings at shareholders’ meeting. 3 Stakeholders’ Rights We attach importance on the respect for the rights of all our internal and external stakeholders that include shareholders, employees, executives, customers, business partners, creditors as well as the general public and society at large. In view of the different needs and expectations of each stakeholder group, the Board of Directors has a duty to consider thoroughly the legal rights of the individual groups and ensure that all stakeholders are protected and treated in accordance with the principles of fairness and equality. We also encourage all our stakeholders to play their respective roles in ensuring that our activities are successful and stable and continue to fairly promote the interests of every party.
54 55 Shareholders : The Company respects the basic rights and equitable treatment of shareholders which include the right to attend, vote and express views at shareholders’ meetings as well as the right to fair returns. In consideration of the confidence of shareholders, we aim to deliver maximum satisfaction to all shareholders by achieving strong results, developing service quality, expanding business opportunities and enhancing long-term value of the Company. It is also a corporate policy to distribute annual profits with shareholders and to ensure that information is disclosed to all shareholders in an equal, reliable and transparent manner. Employees : All staff are considered the success factor and valuable asset of the Company. We therefore aim to promote good working culture and environment and provide equal assurance of quality working life as well as fair and appropriate compensation. Recognizing the importance of staff at all levels, the Board has established a Human Resources and Compensation Committee to assume responsibility for developing corporate policy on human resource management, setting organizational structure and staff performance evaluation system and ensuring continuous scheme of staff training and development. Under the corporate Human Resources Management policy, the Company has been able to recruit and retain competent employees. We also aim to enhance staff capacity and skills on a continuing basis by arranging in - and out-of-house training to suit the needs of individual staff. An employee handbook has been produced to give extensive information about the Company, i.e. organizational structure, corporate background, business activities, rules and regulations, performance assessment and benefit systems. The Company provides fair and appropriate remuneration competitive with market standards. Our employee benefits range from in-patient and out- patient medical care, general and housing loans as well as safety welfare consisting of life insurance and accident insurance for staff at all grades and jobs. Other practices maintained to ensure employee safety include annual fire drill, a necessary safety standard for the Company’s head office which is a tall building. Customers : We are committed to creating customer satisfaction and confidence through quality products and services; to constantly developing and innovating product ideas so as to offer a wider range of products that best serve customers’ needs; to providing appropriate and reasonably priced coverage while ensuring fair and prompt payment of claims; and to providing prospective policyholders with complete and accurate information about insurance coverage. A dedicated unit has also been set up to have responsibility for receiving and handling customer complaints. All complaints and suggestions are fairly and carefully fed into the Company’s process for operational improvement.
54 55 Business Partners : The Company aims to forge closer links with business partners in ensuring mutual advantage and to honor all contractual commitments. All dealings with partners shall have no negative impact on corporate reputation and shall be entirely legal and based on business equality and mutual benefit. Competitors : Observing the rule of fair competition, the Company avoids seeking confidential information of competitors by dishonest or improper means, nor will it damage competitors’ reputation by unfounded claim. Creditors : The Company strictly meets its obligations to all creditors. The public : As a part of society, we have always recognized our responsibility toward social and society well being and public interest by supporting and participating in community activities. Details of our community projects in 2007 are given in the Major Social Activities in 2007 section of this report.
4 Leadership, Vision and Responsibilities of the Board The Board of Directors, as representative of all shareholders, is composed of individuals who have nationally recognized knowledge and competencies as well as expertise and experience in varied fields beneficial to the organization. All Directors pursue the highest standards of business ethics and have a good understanding of their roles and responsibilities. The Board is responsible for endorsing corporate vision, mission and strategies and for approving in consultation with the Management Committee the short- and long-term business direction and policies as well as the corporate risk management policy. The Directors also play a vital role in governing the management of the Company. With integrity and prudence, the Board fulfills its duties in accordance with the law and the Company’s objectives and Articles of Association as well as shareholders’ resolutions in protecting the interests of all shareholders and other stakeholders. The Board has also set up three committees, viz: the Audit Committee, the Human Resources and Compensation Committee and the Nomination Committee. The establishment of these committees reflects the Board’s recognition of the significance of the different functions as detailed below. A. Board of Directors The Board of Directors consists of independent directors, directors who are company executives and directors who represent major shareholders. Each member of the Board is appointed for a term of three years and may be re-elected at the end of the term. As at December 31, 2007 there were a total of ten directors serving on the Board as follows:
56 57 1. Mr. Sivavong Changkasiri Chairman of the Board and Independent Director 2. Mr. Wiraj Na Songkhla Vice Chairman 3. Dr. Oranuj Soongswang Independent Director 4. Mr. Chaisak Saeng-xuto Independent Director 5. Mrs. Paspan Suwanchinda Director 6. Mr. Dechapiwat Na Songkhla Director 7. Mr. Chanin Roonsamrarn Director 8. Mr. Sivaporn Dardarananda Independent Director 9. Mr. Praves Suttirat Director 10. Mr. Chiravuthi Bunyasiri Managing Director Mr. Praves Suttirat was appointed a company director by resolution of the Board meeting No. 1/2007 on February 9, 2007 to replace Mr. Wirutt Ruttanaporn who resigned his directorship on January 26, 2007. The Board Meeting also resolved to appoint Mr. Wirutt Ruttanaporn as Advisor to the Board of Directors with effect from February 9, 2007. Authorized Directors Any two of the five directors, i.e. Mr. Wiraj Na Songkhla, Mr. Dechapiwat Na Songkhla, Mrs. Paspan Suwanchinda, Mr. Chiravuthi Bunyasiri and Mr. Praves Suttirat, have the authority to bind the Company by their signature, in conjunction with the Company seal. Roles and responsibilities of the Board of Directors: 1. Determining and endorsing corporate vision and mission as well as business goals and policies defined together with the Management, by taking account of good governance policy and the best interests of the Company. 2. Overseeing and monitoring managerial performance to ensure the established objectives are achieved. 3. Considering and approving the nomination and appointment of executive candidates who have valuable experience and commitment to the organization as well as knowledge and competences required for the respective roles, particularly the five most senior posts. 4. Maintaining an appropriate, adequate and reliable system of internal control to ensure the Company operates with fairness, integrity and transparency and complies with applicable laws and regulations. 5. Appointing the Audit Committee, the Human Resources and Compensation Committee, the Nomination Committee and other board committees to oversee the management and operations of the Company. 6. Endorsing and recommending the remuneration of board committees to the shareholders’ meeting. 7. Endorsing and recommending the audited financial statements to the shareholders’ meeting. 8. Endorsing and proposing the annual dividend payment to the shareholders’ meeting.
56 57 B. Sub Committees The Board has established a number of sub committees to help discharge its responsibility. The committees consider and examine their delegated matters to ensure preliminary objectivity and precision before presenting them to the Board for approval or endorsement. Each of the Company’s three sub committees comprises at least one independent director. Details of the composition, role and responsibilities of each sub committee of the Board are given below: 1. Audit Committee The Audit Committee is appointed for a three-year term and composed of three independent directors and one director-member who act as the Committee Advisor. 1. Dr. Oranuj Soongswang Chairman of the Audit Committee (Independent Director) 2. Mr. Chaisak Saeng-xuto Member of the Audit Committee (Independent Director) 3. Mr. Sivaporn Dardarananda Member of the Audit Committee (Independent Director) 4. Mr. Chanin Roonsamrarn Advisor to the Audit Committee Role and Responsibilities of the Audit Committee The Audit Committee is responsible for reviewing the Company’s financial reporting, adequacy of the internal control and risk management systems as well as compliance with applicable laws and regulations, and for reporting findings or recommendations to the Board for approval or for presentation to the shareholders’ meeting as appropriate. The function of the Committee is: 1. To oversee and ensure appropriate and effective system of internal control. 2. To oversee and ensure objectivity, transparency and reliability of financial reporting. 3. To ensure compliance by the Company’s operations with regulatory requirements. 4. To select and recommend, for the Board meeting’s approval, the appointment of external auditors. 5. To consider and ensure full and accurate disclosure of information regarding any related party transaction or potential conflict of interest. 6. To oversee the organization’s fraud management process. 7. To prepare, for inclusion in the Company’s annual report, a corporate governance report which is to be signed by the Audit Committee Chairman. 8. To perform any other tasks assigned by the Board. In addition to the above functions, the Audit Committee has been assigned by the Board to assume the additional role of Risk Management Committee in charge of the formulation of overall risk management policy which covers underwriting risk, reinsurance risk, operational risk and reputation risk. The Committee is responsible for ensuring the organization’s risks are controlled within an appropriate and secure level, working with the Management to develop measures to prevent and reduce potential risks, as well as monitoring and evaluating the risk management structure and reporting results to the Board of Directors.
58 59 The Committee also provides opinions on the general administration of the Management Committee with respect to issues crucial to the Company’s operations. Particular attention is given to the delegation of authority that ensures checks and balances. Such role is fulfilled through the function of the Audit Units and the Compliance Unit, a key mechanism created to oversee and monitor, as and when necessary, the work and supervision of the Managing Director and the Management Committee, while ensuring there are rules and procedures as well as appropriate delegated authority to be followed by all corporate units.
2. Human Resources and Compensation Committee The Human Resources and Compensation Committee comprises the following four members who each serve a three-year term of appointment. The Chairman of the Committee is an independent director. 1. Mr. Chaisak Saeng-xuto Chairman of the HR and Compensation Committee (Independent Director) 2. Mrs. Paspun Suwanchinda Member of the HR and Compensation Committee 3. Mr. Chanin Roonsamrarn Member of the HR and Compensation Committee 4. Mr. Praves Suttirat Member of the HR and Compensation Committee Mr. Praves Suttirat was appointed to the Human Resources and Compensation Committee by the Board at its meeting No. 2/2007 on February 26, 2007 to replace Mr. Wirutt Ruttanaporn who resigned on January 26, 2007.
Role and Responsibilities of the Human Resources and Compensation Committee The principal responsibility of the Human Resources and Compensation Committee is to endorse the Company’s human resource management policies and to recommend compensation schemes for approval of the Board or the shareholders’ meeting. The Committee is responsible for: 1. Endorsing the corporate policy on human resource management which includes organization structure and staff performance evaluation system. 2. Endorsing and recommending, for approval of the Board, the criteria and schemes for remunerating Directors and members of Board Committees. 3. Endorsing the criteria for annual staff compensation. 4. Recommending, for consideration of the Board, performance-related remuneration of executives at the rank of assistant managing director and above. 5. Endorsing human resource management tools and measures designed to promote staff motivation as an approach to enhancing organizational efficiency and effectiveness.
58 59 3. Nomination Committee The Nomination Committee consists of four members, one of whom is an independent director. Each Committee member is appointed for a three-year term. 1. Mr. Wiraj Na Songkhla Chairman of the Nomination Committee 2. Mr. Chanin Roonsamrarn Member of the Nomination Committee 3. Mr. Sivaporn Dardarananda Member of the Nomination Committee (Independent Director) 4. Mr. Praves Suttirat Member of the Nomination Committee Mr. Praves Suttirat was appointed to the Nomination Committee by the Board at its meeting No. 2/2007 on February 26, 2007 to replace Mr. Wirutt Ruttanaporn who resigned on January 26, 2007. Role and Responsibilities of the Nomination Committee The role of the Nomination Committee is to identify and nominate, for approval of the Board or the shareholders’ meeting, suitable candidates for appointment as directors or managing director. The Committee’s key responsibilities include: 1. To identify suitable candidates for company directorships and to recommend such candidates for the Board’s consideration for further approval and appointment by the meeting of shareholders. 2. To select and nominate, for approval of the Board, suitable candidate for appointment to the post of managing director. 3. To perform any other duties assigned by the Board. 5 Balance of Executive and Non-Executive Directors All Company Directors are individuals who have been approved by the shareholders’ meeting to assume the role and responsibility for governing the corporate affairs and for setting a reliable and transparent structure of management and operational systems. The Board ensures that no one person or one group of persons is given unlimited decision power so as to maintain management efficiency as well as a mechanism of balancing power within the Board structure. To achieve appropriate balance of power, the Board is thus composed of ten Directors, each of whom is required to serve a three-year term of appointment. At least three Directors or more than one-third of the Board membership must be “independent directors” as stipulated by the Office of the Securities and Exchange Commission. All independent Directors are also appointed for a three-year term each. The Company has appointed a total of four independent Directors, three of whom have been appointed by the Board to serve on the Audit Committee. At least one independent Director also sit on each of the committees of the Board. As at December 31, 2007 the Board of the Company was composed of one executive Director, five non-executive Directors and four independent Directors which represented 40% of board membership.
60 61 Definition of independent directors has been set with more rigorous criteria than the minimum requirements of the Office of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET). An independent director is defined as a director who can exercise independent judgment to ensure development and success as well transparency and good governance of the organization, and must possess all of the following qualifications. 1. Having the knowledge, expertise and experience in management, accounting/finance, marketing, business and other areas. 2. Not being an executive, advisor/consultant, staff member or employee of the Company or a stakeholder in the management and business of the Company. 3. Not being a business partner, customer, debtor or creditor of the Company, or any of its provider of professional services, e.g. auditor, legal advisor, lawyer, etc. 4. Not holding more than 0.05% of the Company’s ordinary shares. 5. Not being related to any director, executive, major shareholder, advisor, employee or customer of the Company. 6. Not being a politician. 6 Separation of Board and Management Roles As adherence to the corporate governance principles, the Company requires that all Directors elect one of the non-executive members of the Board as Chairman of the Board of Directors. This means the Chairman of the Board and the Managing Director are two separate posts. The Chairman therefore has no part to play in the routine management of the Company and is not connected in any way with the Management Committee. Although the Managing Director represents the major shareholder who has more than 50% holding in the Company, there is a clear separation of the policy-setting function from the day-to- day management function in line with the principle of separation of supervisory and managerial roles. The Board has also selected those Directors with specialized skills and experience to serve on the three committees of the Board which have been set up to help discharge its responsibilities. The roles of each committee have been clearly defined as described earlier under the topic of “Sub Committees” of Section 4. It can thus be assured that all Directors have performed their duty of representing the shareholders and ensuring proper checks and balances in every area of operations. Role and functions of the Managing Director: The Company’s Articles of Association Article 29 require that the Board appoints one of its members as Managing Director to have responsibilities as deemed appropriate by the Board and to have the binding signatory authority. The duties and responsibilities of the Managing Director are as follows: 1. To manage the Company according to the policies, strategies and goals set by the Board of Directors. 2. To monitor and report to the Board on business conditions and operating performance of the Company on a regular basis and to recommend alternatives and strategies corresponding to corporate policy as well as market and competition situations. 3. To consider, examine and approve matters relating to the Company’s activities as assigned by the Board and in accordance with the delegated authority. 4. To oversee and control the work of corporate functions, e.g. finance, risk management, internal control, operations, human resources and others. The Managing Director monitors and oversees the functional operations through the “Management Committee” which comprises senior executives at the rank of sector head and above. The committee meets at least twice a month to monitor performance against policies and plans.
60 61 5. To represent the Company and to be the authorized point of contact with government or regulatory agencies. 6. To ensure that all communications with the public, shareholders, customers and employees promote the positive image and reputation of the Company. 7. To consider and undertake any other tasks assigned by the Board of Directors or the Committees of the Board. 8. To implement good governance principles across the organization. In additional the role and function above, the responsibility of the Managing Director must be included with the delegation the authorized to other senior executives and/or staff and/or other person as appropriateness. Exceptional cases are below, the Managing Director will receive approval from the Board of Directors before:- 1. Provide or Transfer the land or other property to operate in the Company’ business including the request approval or any activities with the state agencies to operate in the Company’ business. 2. Taking the proprietary right in land or other property, which are the Asset of the Company, to be collateral for individual and/or a body person and/or juristic person and/ or the government services and/or state own enterprises to operate in the Company’ business. 3. Investment in securities, stocks, prefer stocks, units trust, debenture, promissory note, bill of exchange and other lending (excluding loan to employees) which the transaction has up 30 million Baht per the issuer or the borrower, except the Board of Directors approve in advance in the amount not over 80 million Baht per the issuer or the borrower. 4. Open/Close all type of account deposits and request/cancel using all services from Commercial Bank. 5. Employ or lay-off, punishment, adjustment salary and other welfare of Managing Directors and Executive management, who are one step down level from Managing Directors. 6. Approval the new organization, structure of salary, annual planning and annual budgeting. 7 Board of Directors’ Meetings A formal schedule of Board meetings for the entire year is drawn up in advance, with monthly meeting set for the fourth Friday of each month. Special meetings may also be called as appropriate. The Secretary to the Board arranges for the meeting notice together with agenda and supporting documents to reach all Directors beforehand to allow sufficient time for perusal. During such meetings the Directors can express their views freely and a record is kept for every meeting. The minutes of the meetings that have been adopted by the Board are kept for future scrutiny by Board members and all concerned. The meetings of the Board usually takes three to four hours each. The Chairman of the Board encourages all matters to be considered and dealt with in a transparent manner and ensures the Management Committee is given enough time to present details to enable thorough consideration and discussion by the Directors. In 2007, a total of 17 meetings of the Board were held, comprising 12 ordinary meetings and 5 special meetings. During the year the Audit Committee, the Human Resources and Compensation Committee and the Nomination Committee had 8, 7 and 1 meetings respectively. The attendance record for each member of the Board is shown below.
62 63
Name Board of Audit Human Resource and Nomination Directors Committee Compensation Committee Committee (17 meetings (8 meetings (7 meetings (1 meeting in total) in total) in total) in total) 1. Mr.Sivavong Changkasiri 17/17 - - - 2. Mr.Wiraj Na Songkhla 16/17 - - 1/1 3. Dr.Oranuj Soongswang 17/17 8/8 - - 4. Mr.Chaisak Saeng-xuto (1) 16/17 8/8 7/7 - 5. Mrs.Paspun Suwanchinda (1) 16/17 - 6/7 - 6. Mr.Dechapiwat Na Songkhla 16/17 - - - 7. Mr.Chanin Roonsamrarn (1) 17/17 8/8 7/7 1/1 8. Mr.Sivaporn Dardarananda 13/17 6/8 - 1/1 9. Mr.Praves Suttirat (2) 12/14 - 4/5 0/0 10. Mr.Chiravuthi Bunyasiri 17/17 - - - 11. Mr.Wirutt Ruttanaporn (3) 14/17 - 1/1 -
Note: (1) Directors were appointed as a director the 61st Annual General Meeting of the Shareholders on March 30, 2007. (2) Mr.Praves Suttirat was appointed as a Director the 1/2007 Meeting of the Board of Directors on February 9, 2007 and was appointed as a member of the Human Resource and Compensation Committee and member of the Nomination Committee the 2/2007 Meeting of the Board of Directors on February 26, 2007 (3) Mr.Wirutt Ruttanaporn resigned from Director on January 26, 2007 and on February 9, 2007 and was appointed as a advisor to be the Board of Directors by the 2/2007 Meeting of the Board of Directors on February 26, 2007.
8 Evaluation of Board’s Performance There is regular evaluation of the performance of the Board of Directors. The Company arranges for the process to start in January and finish in February of every year. The process allows the Board to conduct a self-appraisal and, based on the appraisal results, to improve its performance in achieving a higher level of efficiency and compliance with good governance principles. The performance reviews are also fed into the Board’s recommendations to the shareholders’ meeting of the following year with respect to the nomination of directors to replace those retiring by rotation. As regards the performance evaluation for 2007, the Secretary to the Board had arranged to send a self-appraisal form to all Directors for the purpose. The Secretary has also compiled the appraisals into a summary and submitted it to the Board for information since January 2008.
62 63 9 Remuneration of Directors and Management It is the policy of the Board to disclose the remuneration of Directors and senior executives in accordance with the requirements of the Public Limited Companies Act and regulatory agencies. The Company’s policy ensures a fair and reasonable system of remuneration for Board and Management members which takes into account the appropriateness and commensurability to the roles and responsibilities, the Company’s financial position as well as comparability to industry practices. Directors’ remuneration, which is determined by the Human Resources and Compensation Committee, consists of two categories of cash remuneration, i.e. meeting attendance fees and annual fees. Directors are also remunerated more for any additional responsibilities assigned to them. Details of the remuneration of Directors and executives for the year 2007 are given below. A. Directors’ Remuneration 1. Monetary Remuneration Board of Directors All ten members of the Board receive remuneration from the Company in two components, i.e. meeting allowance and bonus from the operating results for the year before. During 2007, 17 meetings of the Board were held and the aggregate meeting allowance amount to 3,431,500 Baht. Details of per-meeting allowance for Board members are as follows:
Position Per-meeting allowance (Bath)
Chairman 37,500 Vice Chairman 25,000 Director 19,000
At the 61st Annual General Meeting held on March 30, 2007, the shareholders approved that the basis for allocating bonus of Directors remain unchanged, i.e. at the rate of 3% on annual dividend payout. The meeting of shareholders approved dividend distribution from the 2006 operating results at the rate of 2.70 Baht per share, or totaling 242,737,244 Baht. The bonus of the Directors, computed at the rate of 3% of dividend payout, thus total 7,282,117 Baht. The aggregate monetary remuneration of the Directors, consisting of meeting allowance and bonus, amounts to 10,713,617 Baht.
64 65 Sub Committees The Board of Directors, based upon the recommendation of the Human Resources and Compensation Committee, approves the remuneration of every sub committee established by the Board as described below. Audit Committee During 2007, eight meetings of the Audit Committee were held and the aggregate meeting allowance amount to 370,000 Baht. Details of per-meeting allowance for the Committee are given below. Position Per-meeting allowance (Bath)
Chairman of the Audit Committee 20,000 Member of the Audit Committee 15,000
Human Resources and Compensation Committee During 2007, a total of seven meetings were held by the Committee and the aggregate meeting allowance amount to 328,000 Baht. Details of per-meeting allowance for the Committee are as follows:
Position Per-meeting allowance (Bath) Chairman of the HR and Compensation Committee 16,000 Member of the HR and Compensation Committee 12,000
Nomination Committee During 2007, one meeting was held by the Nomination Committee and the aggregate meeting allowance amount to 40,000 Baht. Details of per-meeting allowance for the Committee are shown below. Position Per-meeting allowance (Bath) Chairman of the Nomination Committee 16,000 Member of the Nomination Committee 12,000
(Meeting fees are only payable to the Directors for every meeting they attend.)
64 65 UNIT : BAHT
Name Board of Audit Human Resource Nomination Total Directors Committee and Compensation Committee Committee Meeting Bonus Meeting Meeting Meeting Allowance Allowance Allowance Allowance
1. Mr.Sivavong Changkasiri 637,500 1,270,661 - - - 1,908,161 2. Mr.Wiraj Na Songkhla 400,000 851,408 - - 16,000 1,267,408 3. Dr.Oranuj Soongswang 323,000 645,006 160,000 - - 1,128,006 4. Mr.Chaisak Saeng-xuto (1) 304,000 645,006 120,000 112,000 - 1,181,006 5. Mrs.Paspun Suwanchinda (1) 304,000 645,006 - 72,000 - 1,021,006 6. Mr.Dechapiwat Na Songkhla 304,000 645,006 - - - 949,006 7. Mr.Chanin Roonsamrarn (1) 323,000 645,006 - 84,000 12,000 1,064,006 8. Mr.Sivaporn Dardarananda 247,000 645,006 90,000 - 12,000 994,006 9. Mr.Praves Suttirat (2) 228,000 - - 48,000 - 276,000 10. Mr.Chiravuthi Bunyasiri 323,000 645,006 - - - 968,006 11. Mr.Wirutt Ruttanaporn (3) 38,000 645,006 - 12,000 - 695,006
Total 3,431,500 7,282,117 370,000 328,000 40,000 11,451,617
Note : (1) Directors were appointed as a director the 61st Annual General Meeting of the Shareholders on March 30, 2007. (2) Mr.Praves Suttirat was appointed as a Director the 1/2007 Meeting of the Board of Directors on February 9, 2007 and was appointed as a member of the Human Resource and Compensation Committee and member of the Nomination Committee the 2/2007 Meeting of the Board of Directors on February 26, 2007 (3) Mr.Wirutt Ruttanaporn resigned from Director on January 26, 2007 and on February 9, 2007 and was appointed as a advisor to be the Board of Directors by the 2/2007 Meeting of the Board of Directors on February 26, 2007
Honorary Chairman Mr. Prachitr Yossundara, who was appointed Honorary Chairman of the Company by the resolution of Board meeting No. 651 held on April 29, 2003, received a total remuneration of 1,720,661 Baht for the year 2007. 2. Other Remuneration Apart from monetary remuneration, no other form of remuneration is made to the Company Directors.
66 67 B. Management Remuneration The remuneration of Senior Management is determined according to the policy and criteria established by the Board, along with other factors such as the operating results and affordability of the Company, the industry’s labor market conditions, non-life insurance business trends, as well as the individual member’s annual performance appraisal. With the above basis, the Human Resources and Compensation Committee sets and recommends the appropriate remuneration packages to the Board for approval. In 2007, there were a total of 13 members in the Management Committee, comprising the Managing Director and senior executives. Their aggregate remuneration, consisting of salaries and bonuses, amounts to 32,520,418 Baht as detailed below. UNIT : BAHT
Remuneration 2007 2006 No.of Executive Amount No.of Executive Amount
Aggregate salaries 13 27,223,383 12 20,758,800 Aggregate bonuses 13 5,297,035 12 6,547,600 Grand Total 13 32,520,418 12 27,306,400
10 Director and Management Development All members of the Board and Senior Management attach importance to continuing training and development. They regularly participate in seminars or training courses beneficial to their responsibilities, or take part in those activities that enable them to gain knowledge and skills relating to their assigned roles. Eight out of ten Directors have received directorship training from the Thai Institute of Directors (IOD), i.e. The Role of the Chairman Program, Directors Certification Program (DCP), Director Accreditation Program (DAP) and Audit Committee Program (ACP). The Company also arranges an induction program for all Directors upon their appointment. This includes briefings on the Company’s business operations and core activities, the role and responsibilities of Directors and the regulatory code of best practice for directors of listed companies. The Board of Directors is responsible for briefing any newly appointed Directors and for ensuring they have all the documents necessary for their duties, i.e. the Company Director Handbook. The Handbook contains important topics ranging from the role, functions, responsibilities and corporate governance policy of Company Directors, delegated authority, statutory restrictions for Company Directors, role and duties of board committees to the Company’s Memorandum and Articles of Association and latest annual report. During 2007, one new Director was appointed to the Board and was duly given the above induction program as well as all relevant documents and information.
66 67 11 Business Ethics It remains a responsibility of the Board of Directors to maintain a system that ensures all activities of the Company adhere to the laws and high ethical standards. A “Code of Conduct for Siam Commercial Samaggi Insurance Employees” has therefore been drawn up to provide staff at all levels with standards and guidelines for professional and ethical conduct in achieving the optimum level of customer trust and satisfaction. The Code is founded on the principle of integrity as the path toward success under the vision of the Company : “to be a leading and respected insurance company that adheres to the strictest principles of good governance and therefore obtains the utmost trust and maximum satisfaction from its customers, shareholders and employees”. 12 Conflict of Interest and Related Party Transactions The Board of Directors has instituted appropriate policy and guidelines governing conflict of interest and related party transactions for strict observance by Directors, executives, employees and all concerned. The aim is to promote transparency and prevent any pursuit of personal gain. Written principles are provided in the Employee Code of Conduct and there is complete disclosure of such matters. The Company has adopted measures to safeguard against the use of inside information by those using or dealing directly with financial or other proprietary information by setting password-controlled access levels. Furthermore, it remains a rigorous practice among the Company Directors, Management members and all concerned to not disclose any information which has not been officially made public in order to prevent any individual from gaining an advantage. In the case where any director has an interest in the matter being considered, he/she shall be excluded from the meeting or from the vote-taking of the meeting. Moreover, the Audit Committee has been assigned by the Board to scrutinize and ensure all related party transactions and transactions with connected persons are compliant with the criteria of the Stock Exchange of Thailand. The Committee is also required to report the transactions to the Board for validation purposes. 13 Internal Control and Audit and Risk Management The Company recognizes the significance of internal control and audit as well as risk management. It has therefore introduced and maintained an adequately efficient and effective system of internal control appropriate to overall activities which takes account of all risk factors involved along the organization’s risk management process. In this regard, the Audit Committee has been assigned by the Board to take responsibility for ensuring that the Company’s internal control system is efficient, adequate and appropriate and that an assessment of the system adequacy is conducted annually. The Committee is also responsible for overseeing the risk management function as described under the topic of “Risk Factors and Management”. Details of the Company’s implementation of internal control and internal audit are set out below.
68 69 A. Internal Control It is the policy of the Company to maintain an efficient and effective system of internal control. All Directors and executives therefore have a direct duty to establish and maintain an internal control system within the organization and to regularly review the effectiveness of the system in ensuring compliance by all activities with applicable laws and regulations. An efficiently managed internal control system can provide added assurance to the Company of its achievement of established goals and objectives. In its 2007 internal control review, the Audit Committee assessed the adequacy of the overall system and concluded as follows: Internal Control System Adequacy Assessment Report In 2007, the Audit Committee, comprising three members and one advisor, carried out a review of the adequacy of the Company’s internal control systems using the self-assessment form/ checklist of the Stock Exchange of Thailand. The review, which has been reported to the Board of Directors for information and comments, covers five key areas as follows: 1. Control Environment In the opinion of the Audit Committee, the Company is aware of the importance of internal control systems. It has maintained an organizational structure and environment that enables efficient control and operations by the Management Committee. Specific and measurable goals are set for business activities and these are reviewed regularly, while policies and procedures are clearly defined in writing. The Company also makes honesty and business ethics its high priority to ensure fairness for all business partners. 2. Risk Management There are regular assessments of problems and risks. Measures and approaches are devised to control and mitigate those risks, and practical instructions issued to give guidelines on efficient running of business. A corporate unit has been assigned to monitor potential risk events and to give warning of such situations to all staff through internal electronic communication systems. In addition, an Audit Unit has been established to conduct internal audits and report its findings directly to the Audit Committee on a quarterly basis as a minimum. 3. Control Activities The scope of authority and duties of each level of management are defined clearly in writing. Rigorous measures are also in place to control the conduct of transactions with major shareholder, directors, executives or any person/party related to them, with the Company’s best interests always taken into account. Such transactions are treated in the same way as those transactions made with external party and are subject to approval by the Audit Committee and/or the Board of Directors, as the case may be.
68 69 4. Information and Communication All Board members have access to financial and other information adequate for their decision-making. The Company also maintains an organized and reliable system for filing complete range of documents, and adopts accounting policies conforming to recognized principles and appropriate to the nature of its business. 5. Monitoring System The Company compares actual results against targets on a regular basis and adapts its activities to the changing situations so as to meet the established objectives. Continuous monitoring of performance allows the Company to take prompt steps to solve problems or remedy weaknesses discovered. The Board of Directors is regularly reported on monitoring results. The Company also maintains an internal audit function which reports all findings directly to the Audit Committee. Overall, the Audit Committee is of the view: “that all five components of the Company’s internal control structure are adequately efficient and appropriate to the business; that no flaw which can materially affect the objectivity of financial statements or the efficient and effective achievement of organizational goals has been found in the internal control system; and that there is in place an adequate system of internal control to govern the conduct of transactions with major shareholder, Directors, executives or any persons connected with them.” Nevertheless, the Committee has encouraged the Management Committee to continuously improve the quality of the systems of internal control and risk management so as to promote the Company’s good governance practices. B. Internal Audit The Audit Unit has responsibility for examining all activities of the Company to provide assurance that the operations are in line with established policies and direction in achieving the desired goals and objectives. The Unit is also responsible for examining compliance with all applicable laws and regulatory requirements. To ensure complete independence of the internal audit function, the Audit Unit is required to report directly to the Audit Committee. Furthermore, Deloitte Touche Tohmatsu Jaiyos Audit Company Limited, the Company’s external and independent auditors, have audited the financial statements for 2007 and undertaken a review of the internal control system. The object of the review is to assess the efficiency of the different areas of internal audit function: appropriateness of staffing levels and employees’ educational background; the internal auditors’ qualifications, independence as well as ability to make judgments and recommendations; the Audit Unit’s setting and implementation of audit plans; the systems of audit reporting and monitoring of Audit Unit’s performance; collaboration and coordination between internal audit staff and external. The overall opinion of the Auditors indicates no material weakness in the Company’s internal control system. The recommendations of the Auditors in the audit report for the previous year have also been implemented by the Company during the course of 2007.
70 71 14 Disclosure and Transparency The corporate disclosure policy is aimed at ensuring that information concerning the Company is fully disclosed to shareholders, investors, customers and the general public in a timely, accurate and transparent manner and in accordance with applicable laws and regulations. This is so that all shareholders and investors can have equal access to extensive information necessary for their investment decisions. The Company also maintains an efficient system of communication with shareholders and the public by providing significant information on its website and keeping all shareholders directly informed through circulars/bulletins. Key disclosure requirements and channels of communication of the Company are described below. 1. Directors’ Report The Board of Directors is responsible for the objectivity of the Company’s financial reporting and financial information shown in the annual report. These financial statements have been prepared in accordance with generally accepted accounting standards in Thailand and are based on appropriate and consistent accounting policies as well as prudent judgment and best estimates. Significant information is also adequately disclosed in the notes to the financial statements. The Statement of Directors’ Responsibilities Concerning the Disclosure of Financial Reports, which cover key topics of the Company’s compliance with the Code of Best Practice for Listed Companies, is presented alongside the Report of the Independenent Certified Public Accountants on page 78 of this annual report. 2. Declaration of Shareholdings The Company requires that all of its Directors and executive officers declare their holdings in the Company to the Office of the Securities and Exchange Commission (SEC). The aim is to avoid any potential conflict of interest and to fulfill the duty of disclosure under good governance principles. Shareholdings by the Company’s Directors and Management members are summarized below. None of the Directors and Management members had during the past accounting year a material interest, directly or indirectly, in any contract with the company.
70 71
AUDIT COMMITTEE’S REPORT
Dear Shareholders At the 61st Annual Genneral Meeting of the Shareholders on March 30, 2007, the shareholders’ meeting resolved to appoint Mr. Chaisak Saeng-xuto as of independent directors and member of the Audit Committee, Mr.Chanin Roonsamrarn as of directors and the Advisor to the Audit Committee, who had completed theirs term of appointment, to be re-elected to directors and the Audit Committee for next term. The Audit Committee which comprises 3 independent directors and 1 the Advisor, namely: 1. Dr. Oranuj Soongswang Chairman of the Audit Committee (Independent Director) 2. Mr. Chaisak Saeng-xuto Member of the Audit Committee (Independent Director) 3. Mr. Sivaporn Dardarananda Member of the Audit Committee (Independent Director) 4. Mr.Chanin Roonsamrarn Advisor to the Audit Committee (Director) In 2007, 8 meetings were held by the Audit Committee to consider the following matters: 1. To consider the external auditors’ recommendations, and to review all audited quarterly and yearly financial statements. 2. To review, in consultation with the internal auditors, the effectiveness and adequacy of internal control system; to review the internal audit findings and the audit plan devised by the Audit unit; and to consider any other matter/task assigned to it. Members of the senior management were also present in every Audit Committee meeting to provide clarification and to be assigned the policy on implementing timely remedy and implement according to the audit recommendations. 3. To review that all activities comply with the laws governing securities and exchange, regulations of the Stock Exchange of Thailand (SET) and the Office of Insurance as well as other applicable laws, such as Securities and Exchange Act, the Non-Life Insurance Act, regulations of the Office of the Securities and Exchange Commission (SEC), Public Limited Companies Act, Revenue Code, Labour Laws and employment contracts, etc. 4. To review and comment on related-party transactions or transactions that may lead to conflicts of interest, and to review compliance with the SET requirements on accurate and complete disclosure. 5. To review the reports on the assessment of the Company’s internal control system and the corporate practices on investment in other businesses, in complying with the reporting requirements of the Registrar’s Notification. 6. To select and recommend the appointment of external auditors and their fees by submitting its comments and proposal to the Board to be presented to the shareholders’ meeting for approval. 7. To supervise the fraud management in the company including consideration and monitoring the key risk indicators of the company’s operational risks. A report for each of the Audit Committee meetings is presented to the Board. Throughout the year 2007, the Committee has performed its duties with prudence. It has been able to exercise independent judgment and expressed objective opinions, without facing any limitation in obtaining information, resources or cooperation from the Company. The Related Party Transactions: A report summarizing all related party transactions has been submitted to the Audit Committee for review. The Committee’s opinions in this regard, expressed as below and report the transactions to the Board for validation purposes. There is also rigorous disclosure of such transactions for this period in the notes to the quarterly financial statements, which the Company’s external and independent auditors, have audited this transaction. Detail of the related party transaction as described below.
74 75 Director and Executive Shareholding Name Position No.of Share as at No.of Share as at Change December 31, December 31, (%) 2007 2006 Director Shareholding 1. Mr.Sivavong Changkasiri Chairman - - - 2. Mr.Wiraj Na Songkhla Vice Chairman, Chairman of - - - the Nomination Committee 3. Dr.Oranuj Soongswang Independent Director - - - Chairman of the Audit Committee 4. Mr.Chaisak Saeng-xuto Independent Director - - - Chairman of the Human Resource and Compensation Committee Member of the Audit Committee 5. Mrs.Paspun Suwanchinda Director - - - Member of the Human Resource and Compensation Committee 6. Mr.Dechapiwat Na Songkhla Director - - - 7. Mr.Chanin Roonsamrarn Director - - - Member of the Human Resource and Compensation Committee Member of the Nomination Committee Advisor to the Audit Committee 8. Mr.Sivaporn Dardarananda Independent Director - - - Member of the Audit Committee Member of the Nomination Committee 9. Mr.Praves Suttirat (1) Director - - - Member of the Human Resource and Compensation Committee Member of the Nomination Committee 10. Mr.Chiravuthi Bunyasiri Managing Director - - - 11. Mr.Wirutt Ruttanaporn (2) Advisor to the Board of Directors - - - Executive Shareholding 1. Mr.Thanad Jeerachaipaisarn Senior Deputy Managing Director 1,047 1,047 0.00 Insurance Group 2. Mr.Supachai Piakeaw Head, Business Group - - - 3. Mr.Sunchai Viraseranee Head, Corporate - - - and SMEs Sector 4. Mr.Monson Marukatat Head, Non-Motor Insurance Sector - - - 5. Mrs.Waraporn Pancharoen Assistant Managing Director - - - Secretary to Board of Directors 6. Mr.Kriengkrai Tungjaruki Head, Operations Sector - - - 7. Mrs.Wanna Phalajivin Head, Finance Sector - - - 8. Mr.Wachira Chuaychoo (3) Head, Business Development Sector - - - 9. Mr.Suchon Sa-Ingthong Head, Regional Business Sector - - - 10. Mrs.Worraya Jaruwongpak Head, Bancassurance - - - Business Sector 11. Mr.Pubesuan Tepsongpattana Head, Motor Insurance Sector - - - 12. Mrs.Eamorn Xuto (4) Head, Broker - - - and Agent Sector 13. Mr.Surasit Toonim (5) Head, Broker - - - and Agent Sector
Note : (1) Mr.Praves Suttirat was appointed as a Director the 1/2007 Meeting of the Board of Directors on February 9, 2007 and was appointed as a member of the Human Resource and Compensation Committee and member of the Nomination Committee the 2/2007 Meeting of the Board of Directors on February 26, 2007 (2) Mr.Wirutt Ruttanaporn resigned from Director on January 26, 2007 and on February 9, 2007 and was appointed as a advisor to be the Board of Directors by the 2/2007 Meeting of the Board of Directors on February 26, 2007. (3) Mr.Wachira Chuaychoo has been started to join with SCSMG since January 3, 2007. (4) Mrs.Eamorn Xuto has been started to join with SCSMG since May 2, 2007. (5) Mr.Surasit Toonim resigned on March 6, 2007.
72 73 3. Investor Relations The Company places importance on timely and transparent disclosure of accurate and comprehensive information on financial, operational and other aspects of its business which the shareholders, investors and all concerned and interested will find useful for their investment decisions. Regular updates on corporate information are available to customers, business partners, shareholders, investors and the interested through various communication channels of the Stock Exchange of Thailand and via the Company’s website at www.scsmg.co.th. The Planning Unit acts as the investor relations function of the Company having responsibility for preparing/publishing corporate information and for ensuring timely disclosure of full and accurate information to investors and the interested public. The Unit liaises with the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission (SEC) and produces reports, for submission to both agencies, on news and information to be communicated to shareholders, investors and those interested. Furthermore, Investor Relations welcomes ideas and suggestions from shareholders as well as existing and potential investors on matters relating to the Company’s operations which can be emailed to [email protected]. Enquiries about corporate information can also be made to this email address. The Secretary to the Board of Directors is assigned the responsibility for liaising with and supplying the Stock Exchange of Thailand with information relating to direct communications from the Board to the shareholders and investors.
(Dr.Oranuj Soongswang) Chairman of the Audit Committee
72 73 1. Nature of Related Party Transactions During the year ended December 31, 2007, a fraction of the Company’s assets, liabilities, income and expenditure represented transactions with parties related to it through cross shareholdings or directorships. These transactions consisted of bills of exchange, bank deposits, premium, interest and dividends income, Net loss, commissions and brokerages, other underwriting expenses. All transactions were made in the ordinary course of business according to normal trade terms in ensuring maximum benefit to the Company. The Management believes the Company has no material influence over any of the related parties. Neither the Company nor its major shareholder nor any affiliates of its major shareholder operate business of relat ed or competing nature. It is therefore neither the Company’s practice nor policy to conduct transactions with parties that might pose a conflict of interest. Significant nature of related party transactions and relationship between the Company and related parties can be summarized as follows:
Related companies Type of business Relationship Related-party transaction
The Siam Commercial Bank Public Bank Parent company Bank deposits Company Limited Premium written Loss Commissions and brokerages Underwriting expenses Interest deposits Siam Commercial Leasing Public Leasing, Subsidiary of Investment in Promissory note Company Limited Hire-purchase the parent Premium written and Factoring company Loss Mahisorn Company Limited Real Estate Subsidiary of Premium written the parent Loss company SCB Securities Company Limited Securities Subsidiary of Premium written the parent Loss company Siam Pitiwat Company Limited Service Subsidiary of Premium written the parent Loss company The Siam Industrial Credit Public Finance Associated Investment in Promissory note Company Limited company of Premium written the parent Loss company Interest received Christiani & Nielsen (Thai) Public Construction Associated Premium written Company Limited company of Loss the parent company Siam Commercial New York Life Insurance Life Insurance Associated Premium written Public Company Limited company of Loss the parent company SCB Leasing Public Company Limited Leasing, Associated Premium written Hire-purchase company of Loss and Factoring the parent Dividend company
74 75 2. Justification for Related Party Transactions All related party transactions during the past year, as disclosed in the Notes to the Financial Statements, represented transactions arisen out of normal business conduct. They were carried out on regular trade terms with the Company’s best interests always taken into account. Pricing policies for such transactions were the same as those applied to general clients. The various forms of investment maintained by the Company, i.e. bank deposits, investments in mutual funds and promissory notes and shareholdings in related companies, represented the Company’s approach to investment management in ensuring a diversified portfolio and maximum returns from investment. Related party transactions on insurance activities generally arose in connection with the Company’s operations, such as premium income, loss/claim payments, commissions/brokerages and underwriting expenses.
3. Related Party Transaction Approval Procedure Decisions concerning transactions with related companies or persons, either on underwriting, deposit or investment activities have to be made with the approval of the Board of Directors and/ or the Investment Committee within delegated authority limits and in accordance with regular business practices and general commercial terms. All transactions have to comply with the laws governing securities and exchange, as well as the rules, notifications, orders and requirements of the Stock Exchange of Thailand. They should also conform to the accounting principles on disclosure of related party transactions and acquisition or disposal of significant asset prescribed by the Federation of Accounting Professions.
4. Policy and Trend of Future Related Transactions All future transactions between the Company and its major shareholder or associated companies or potential related parties will be governed by a policy with stipulations of standard business practices. The Company will conduct all transactions with fairness, transparency and accountability to ensure its best interests. Related party transactions are likely to remain in the future, since the Company continues to aim to expand its retail and corporate customer base and to focus on those investments that deliver highest possible returns with appropriate level of risk. In this regard, the Company’s major shareholder and the affiliates of the major shareholder each represent a business enterprise that answers the Company’s pursuit of established goals.
76 77 In addition to the existing treaty between the Company and the Thai Reinsurance PCL, the Company will have to follow the policy of the Office of Insurance Commission (formerly the Department of Insurance) which requires all insurance operators to make cession to and retrocession from the Thai Reinsurance PCL. Such state policy compliance is considered another form of related party transaction for the Company which is expected to trend upwards in the future. The Audit Committee is of the view that the Company is committed to the guiding policy of good corporate governance. It has maintained an adequately effective system of internal control to ensure that there is no material weakness in its activities, that related party transactions which can lead to potential conflict of interest are all genuine and normal forms of business transactions conducted justifiably according to the corporate policy of maximum benefit, and that no material irregularity has been found in any of these transactions. The Committee is confident of the Company’s compliance with regulatory requirements. The financial reports for the year ended December 31, 2007 reveal no event nor matter which has a material impact on the Company’s financial position. All financial statements have been duly prepared with adequate disclosure of information according to accounting standards.
(Dr.Oranuj Soongswang) Chairman of the Audit Committee
76 77 STATEMENT OF DIRECTORS’ RESPONSIBILITIES CONCERNING THE DISCLOSURE OF FINANCIAL REPORTS
The Board of Directors of the Siam Commercial Samaggi Insurance Public Company Limited have prepared the financial statements which disclose the Company’s 2007 financial status and operation results according to the regulations of the Public Company Limited Act B.E.2535 (1992). The Board of Directors is responsible for the Company’s financial statements as well as financial information presented in the annual report. The said financial statements have been prepared in accordance with generally accepted accounting standards in Thailand. In preparing these reports, the Company has adopted appropriate accounting policies and applied them consistently. For the benefit of shareholders and investors, adequate disclosure of significant information has also been made in a transparent manner in the notes to the financial statements. The Board has ensured that risk management process is in place while proper and effective system of internal control is maintained, so as to achieve reasonable assurance that all financial information is accurate, complete and adequate in safeguarding the Company’s assets and in preventing any fraud or material mismanagement.
In this connection, the Board appointed an audit committee comprising independent directors to be in charge of overseeing the quality of financial reporting and internal control system. The opinions of the Board and the Audit Committee regarding the Company’s internal control system are included in the annual report under the section of Audit Committee’s Report.
(Mr.Sivavong Changkasiri) (Mr.Chiravuthi Bunyasiri) Chairman of the Board Managing Director
78 79
REPORT OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED
We have audited the balance sheets of The Siam Commercial Samaggi Insurance Public Company Limited as at December 31, 2007 and 2006, and the related statements of income, changes in shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management as to their correctness and completeness of the presentation. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of The Siam Commercial Samaggi Insurance Public Company Limited as at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Nachalee Boonyakarnkul Certified Public Accountant (Thailand) BANGKOK Registration No. 3126 January 25, 2008 DELOITTE TOUCHE TOHMATSU JAIYOS AUDIT CO., LTD.
78 79 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED BALANCE SHEETS AS AT DECEMBER 31, 2007 AND 2006
UNIT : BAHT
ASSETS 2007 2006 INVESTMENTS IN SECURITIES (Note 6) Bonds (Note 20) 552,394,675 329,415,570 Treasury bills - 99,934,290 Notes 114,385,040 189,742,290 Stocks 453,808,249 404,236,620 Debentures - net (Note 13) 466,529,731 352,639,622 Unit trusts 1,228,175,303 786,136,644 Total Investments in Securities 2,815,292,998 2,162,105,036 LOANS (Note 7) Security guaranteed loans 297,900 460,989 Other loans 903,212 153,265 Total Loans 1,201,112 614,254 CASH AND DEPOSITS AT FINANCIAL INSTITUTIONS (Note 5.1) 387,169,003 400,721,912 PROPERTY, PLANT AND EQUIPMENT - NET (Note 8) 438,346,249 432,464,823 AMOUNT DEPOSIT ON REINSURANCE TREATIES 1,151,579 895,717 DUE FROM REINSURERS - NET (Note 9) 29,737,186 17,563,169 PREMIUM DUE AND UNCOLLECTED - NET (Note 10) 568,035,365 426,992,627 ACCRUED INCOME ON INVESTMENTS 11,818,044 11,131,472 OTHER ASSETS Deferred tax assets (Note 17) 200,085,122 130,610,946 Receivable from sales of investments-net (Note 11) - 580,963 Deposits 5,893,755 5,449,709 Intangible assets - net (Note 12) 17,570,886 13,207,114 Prepaid expenses 8,251,126 1,987,011 Others 6,075,837 5,349,125 TOTAL ASSETS 4,490,628,262 3,609,673,878
Notes to the financial statements form an integral part of these statements
80 81 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED BALANCE SHEETS (CONTINUED) AS AT DECEMBER 31, 2007 AND 2006
UNIT : BAHT
LIABILITIES AND SHAREHOLDERS’ EQUITY 2007 2006 UNEARNED PREMIUM RESERVE 1,105,625,916 670,370,523 LOSS RESERVES AND OUTSTANDING CLAIMS 482,538,698 259,592,900 AMOUNT WITHHELD ON REINSURANCE TREATIES 260,931,898 167,671,688 DUE TO REINSURERS 144,935,940 144,823,030 UNEARNED REVENUES 241,080,048 227,182,418 ACCRUED COMMISSIONS AND BROKERAGES 99,997,552 65,522,565 OTHER LIABILITIES Accrued corporate income tax 42,547,577 39,897,580 Payable for purchase of investment - 44,320,835 Accrued expenses 33,860,696 14,022,610 Deferred premium 33,839,578 27,330,640 Fixed assets payable 490,038 53,700 Others 29,484,818 26,355,708 TOTAL LIABILITIES 2,475,332,759 1,687,144,197 SHAREHOLDERS’ EQUITY SHARE CAPITAL (Note 14) Authorized share capital 92,400,000 ordinary shares of Baht 5.00 each 462,000,000 462,000,000 Issued and paid-up capital 89,380,947 ordinary shares of Baht 5.00 each - 446,904,735 90,890,431 ordinary shares of Baht 5.00 each 454,452,155 - PREMIUM ON SHARE CAPITAL 412,500,000 412,500,000 DEFICIT ON REVALUATION OF INVESTMENT - NET (Note 5.2.2) (12,628,882) (55,516,163) RETAINED EARNINGS Appropriated Statutory reserve (Note 15) 46,200,000 46,200,000 Other reserve (Note 16) 400,000,000 400,000,000 Unappropriated 714,772,230 672,441,109 TOTAL SHAREHOLDERS’ EQUITY - NET 2,015,295,503 1,922,529,681 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 4,490,628,262 3,609,673,878 Off-balance sheet items - Commitments and contingencies Commitments and contingencies (Note 24) 1,683,058 3,216,402
Notes to the financial statements form an integral part of these statements
80 81 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
UNIT : BAHT
Non-life insuranec Total Fire Marine- Motor Miscellaneous 2007 2006 Cargo UNDERWRITING INCOME Premium written 416,144,514 169,673,270 1,461,848,795 1,252,507,349 3,300,173,928 2,009,959,859 Less Premium ceded (83,655,020) (81,012,169) (200,150,452) (611,590,476) (976,408,117) (718,796,119) Net premium written 332,489,494 88,661,101 1,261,698,343 640,916,873 2,323,765,811 1,291,163,740 Less Unearned premium reserve increase from previous year 23,277,515 875,871 317,221,963 93,880,044 435,255,393 80,096,776 Total underwriting income 309,211,979 87,785,230 944,476,380 547,036,829 1,888,510,418 1,211,066,964 UNDERWRITING EXPENSES Loss incurred 69,598,590 30,040,247 660,319,138 185,995,734 945,953,709 514,165,823 Loss adjustment expenses 1,950,770 4,601,075 21,145,880 14,305,887 42,003,612 21,793,030 Commissions and brokerages 74,890,139 2,165,622 167,966,600 57,727,096 302,749,457 152,567,687 Others 10,016,727 9,325,646 67,385,230 57,716,219 144,443,822 70,794,596 Total underwriting expenses 156,456,226 46,132,590 916,816,848 315,744,936 1,435,150,600 759,321,136 INCOME ON UNDERWRITING 152,755,753 41,652,640 27,659,532 231,291,893 453,359,818 451,745,828 NET INVESTMENT INCOME 198,045,439 124,888,419 GAIN ON INVESTMENT IN SECURITIES 72,267,250 34,475,373 OTHER INCOME Rental income 31,356,804 29,892,234 Others 2,593,580 4,348,005 Total other income 33,950,384 34,240,239
Notes to the financial statements form an integral part of these statements
82 83 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED STATEMENTS OF INCOME (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
UNIT : BAHT
Non-Iife insuranec Total Fire Marine- Motor Miscellaneous 2007 2006 Cargo
OPERATING EXPENSES Personnel expenses 180,553,319 144,605,762 Premises and equipment expenses 108,966,614 78,596,981 Taxes and duties 591,153 612,297 Bad debt and doubtful accounts 4,051,100 5,094,799 Directors’ remuneration 11,495,914 10,363,432 Other expenses Promotional expenses and advertisement 83,060,222 46,160,298 Professional fees 3,847,437 4,379,161 Others 17,438,756 12,203,944 Total operating expenses 410,004,515 302,016,674 INCOME BEFORE INCOME TAX 347,618,376 343,333,185 INCOME TAX EXPENSE (Note 17) (62,550,011) (70,468,408) NET INCOME 285,068,365 272,864,777 BASIC EARNINGS PER SHARE (Note 18) BAHT 3.17 3.06 WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES (Note 18) SHARES 89,937,914 89,090,011 DILUTED EARNINGS PER SHARE (Note 18) BAHT - 3.01 WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES INCLUDING ASSUMED EXERCISE OF WARRANTS (Note 18) SHARES - 90,733,373
Notes to the financial statements form an integral part of these statements
82 83 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
UNIT : BAHT ISSUED AND PREMIUM SURPLUS RETAINED EARNINGS TOTAL PAID-UP ON SHARE (DEFICIT) ON APPROPRIATED UNAPPROPRIATED SHARE CAPITAL CAPITAL REVALUATION STATUTORY OTHER OF INVESTMENTS- RESERVE RESERVE NET
Beginning balance for 2006 335,719,860 412,500,000 4,990,983 46,200,000 400,000,000 622,090,725 1,821,501,568 Changes during the year Conversion of warrants to ordinary share (Note 14) 111,184,875 - - - - - 111,184,875 Surplus on revaluation of investments decrease - net (Note 5.2.2) - - (60,507,146) - - - (60,507,146) Net income - - - - - 272,864,777 272,864,777 Dividends paid (Note 19) - - - - - (222,514,393) (222,514,393) Ending Balance as at December 31, 2006 446,904,735 412,500,000 (55,516,163) 46,200,000 400,000,000 672,441,109 1,922,529,681 Beginning balance for 2007 446,904,735 412,500,000 (55,516,163) 46,200,000 400,000,000 672,441,109 1,922,529,681 Changes during the year Conversion of warrants to ordinary share (Note 14) 7,547,420 - - - - - 7,547,420 Deficit on revaluation of investments decrease - net (Note 5.2.2) - - 42,887,281 - - - 42,887,281 Net income - - - - - 285,068,365 285,068,365 Dividends paid (Note 19) - - - - - (242,737,244) (242,737,244) Ending Balance as 454,452,155 412,500,000 (12,628,882) 46,200,000 400,000,000 714,772,230 2,015,295,503 at December 31, 2007
Notes to the financial statements form an integral part of these statements
84 85 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
UNIT : BAHT 2007 2006 CASH FLOWS PROVIDED BY (USED iN) OPERATING ACTIVITIES Cash received from direct premium 3,061,692,025 1,770,017,737 Cash paid to reinsurer (100,111,395) (91,075,594) Cash paid for losses incurred from direct insurance (1,166,815,005) (800,563,641) Cash paid for loss adjustment expenses from direct insurance (66,963,748) (37,560,835) Cash paid for commissions and brokerages from direct insurance (473,024,269) (274,209,645) Cash paid for other underwriting expenses (135,238,997) (74,263,061) Cash received from income on investment - net 186,296,065 109,148,982 Cash received from other income 32,507,664 31,173,200 Cash paid for operating expenses (376,410,789) (262,397,575) Cash paid for income tax (142,467,200) (63,064,306) Net cash provided by operating activities (Note 5.3) 819,464,351 307,205,262 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES Cash flows provided by Investments in securities Proceeds from sales of investment in securities available for sale - bonds 6,333,000,000 136,000,000 Proceeds from sales of investment in securities available for sale - treasury bills 400,000,000 884,425,743 Proceeds from sales of investment in securities available for sale - stocks 2,154,645,864 1,100,576,943 Proceeds from sales of investment in securities available for sale - debentures 90,207,059 21,775,439 Proceeds from sales of investment in securities available for sale - unit trusts 215,893,684 593,243,053 Proceeds from redemption of investment in securities held to maturity - bonds 30,300,000 20,250,000 Proceeds from redemption of investment in securities held to maturity - debentures 79,000,000 345,000,000 Proceeds from redemption of investment in securities held to maturity - notes with maturity over 3 months 50,000,000 50,000,000 Proceeds from sales of investment in securities for general investment - stocks - 3,200,000 Proceeds received from repayment of loans 413,142 284,791 Proceeds from sales of property, plant and equipment 3,028,616 3,563,918 Cash provided by investing activities 9,356,488,365 3,158,319,887
Notes to the financial statements form an integral part of these statements
84 85 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
UNIT : BAHT 2007 2006 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (CONTINUED) Cash flows used in Investments in securities Purchase of investment in securities available for sale - bonds (6,523,740,006) (202,894,405) Purchase of investment in securities available for sale - treasury bills (298,980,706) (894,442,246) Purchase of investment in securities available for sale - stocks (2,191,995,425) (1,174,123,939) Purchase of investment in securities available for sale - debentures (55,196,965) - Purchase of investment in securities available for sale - unit trusts (587,906,076) (393,230,705) Purchase of investment in securities held to maturity - bonds (52,602,267) (140,255,226) Purchase of investment in securities held to maturity - debentures (225,140,305) (425,699,540) Purchase of investment in securities held to maturity - notes with maturity over 3 months - (50,000,000) Purchase of securities for general investment - stocks (459,600) - Cash paid on loans (1,000,000) (130,000) Deposits at financial institutions with maturity over 3 months (50,000,000) (100,000,000) Cash paid to purchase property, plant and equipment (42,651,702) (38,421,147) Cash used in investing activities (10,029,673,052) (3,419,197,208) Net cash used in investing activities (673,184,687) (260,877,321) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from conversion of warrants (Note 14) 7,547,420 111,184,875 Dividends paid (Note 19) (242,737,244) (222,514,393) Net cash used in financing activities (235,189,824) (111,329,518) Net decrease in cash and cash equivalents (88,910,160) (65,001,577) Cash and cash equivalents as at January 1, 250,471,058 315,472,635 Cash and cash equivalents as at December 31, (Note 5.1) 161,560,898 250,471,058
Notes to the financial statements form an integral part of these statements
86 87 THE SIAM COMMERCIAL SAMAGGI INSURANCE PUBLIC COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
1. BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS AND OPERATION OF THE COMPANY 1.1 Basis for preparation of the financial statements The financial statements have been prepared in accordance with the regulations of the Stock Exchange of
Thailand dated January 22, 2001, regarding the basis, conditions and procedures for the preparation and submission of financial statements and reports for the financial position and results of operations
of listed companies B.E. 2544, and in accordance with the Registrar’s Notification of the Department
of Insurance No. 10/2545 regarding the presentation of the financial statements of insurance company dated March 6, 2002 and in accordance with accounting standards in Thailand. The Company maintains its accounting records in Thai Baht and prepares its statutory financial statements in the Thai language in conformity with accounting standards and practices generally accepted in Thailand. 1.2 Operation of the Company The Company was registered in Thailand on July 28, 1947. The Company’s main business is non-life insurance and was awarded its license to operate all classes of non-life insurance on August 2, 1984. Its
parent company is the Siam Commercial Bank Public Company Limited, a company also existing under Thai laws. The head office is located at 2/4 Siam Commercial Samaggi Insurance Tower, 12th
floor Northpark Project, Vibhavadirangsit Road, Laksi, Bangkok. On April 3, 2006, the ordinary shareholders’ meeting passed a resolution to change the Company’s name from “The Samaggi Insurance Public Company Limited” to “The Siam Commercial Samaggi
Insurance Public Company Limited”. The Company has been approved by the Department of Insurance to change the Company’s name on June 19, 2006, and registered the change of the Company’s name with the Ministry of
Commerce on July 25, 2006. As at December 31, 2007 and 2006, the Company had total staff of 399 persons and 306 persons, respectively, and staff expenses for the years ended December 31, 2007 and 2006 were approximately
Baht 180.55 million and 144.61 million, respectively. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Cash and cash equivalents Cash and cash equivalents include cash on hand and all types of deposits with banks with original
maturities of 3 months or less and investment in securities - notes with original maturities of 3 months or less. In the statement of cash flows, cash, deposts at banks and investment in securities - notes used as collateral or having original term s to maturity of over 3 months are not included in cash and cash equivalents but are presented in investing activities.
86 87
2.2 Recognition of revenues and expenses Premium Premium income is recognised on the date the relevant insurance policy comes into effect, after
deducting premium ceded and cancelled. Reinsurance premium Premium income is recognised when the reinsurer places the reinsurance application or statement of
accounts with the Company. Interest and dividends Interest is recognised as income on an accrual basis. Dividends are recognised as income on
the closing date of shareholders’ register or on the date on which the right to receive the dividend arises. Commissions and brokerages Commissions and brokerages are expensed on an accrual basis. Expenses are recognized on an accrual basis. 2.3 Investment in securities Securities classified as available for sale are stated at fair value. Gain or loss on the change in fair value is recognized as a component of shareholders’ equity, shown net of deferred tax. Securities classified as general investments are stated at cost net of allowance for impairment, if applicable. Debt securities classified as held to maturity are stated at amortized cost. In case an impairment in value of an investment has occurred, a provision for impairment is
recognized in the statements of income and a related allowance for impairment is established. Premiums and discounts on debt securities are amortized and accreted to income as adjustment to interest income by using the effective interest rate method. For equity securities which are listed securities, fair value or market value are estimated using the bidding prices at the Stock Exchange of Thailand on the last business day of the year. Cost of securities sold are determined by the weighted average method. 2.4 Allowance for doubtful accounts and bad debt The allowance for doubtful accounts is provided at the estimated collection losses on premium due and uncollected at the end of the year. Such estimated losses are based on the
Company’s collection experience. 2.5 Property, plant and equipment Land is stated at cost. Premises and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method, based on the estimated useful lives of the assets as follows:
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Building and improvements 15 - 40 years Others 3 - 5 years
2.6 Other assets Other assets consisting of computer software are stated at cost, net of accumulated amortization.
Amortization is calculated by the straight-line method, based on the estimated useful lives of the assets as 5 - 10 years. 2.7 Provident fund The Company has set up a provident fund which is contributory and it has been registered in accordance with the Provident Fund Act B.E. 2530 (1987). The Company contributions to the fund are charged as an expense as they fall due. 2.8 Unearned premium reserve Unearned premium reserve is accrued for in compliance with the methodology as specified in the
Insurance Act B.E. 2535 (1992) as follows:
Fire, motor and miscellaneous - Monthly average basis (the one-twenty fourth method) Marine - Premium written for the last three months Travel accident - Premium written for the last one month
2.9 Loss reserve and outstanding claims Outstanding claims have been provided whenever claims have been submitted at a sum as advised by the insurer. Loss reserve has been provided based on estimates made by the Company’s management. Incurred but not reported claim liabilities have been provided by calculating equal to 2.5% of
retrospective 12 months net premium. 2.10 Income tax expenses The Company has early adopted Thai Accounting Standard No. 56 “Accounting for Income Taxes”.
The policy is as follows: Income tax expense is based on the taxable profit multiplied by the tax rate that has been enacted at the balance sheet date and adjusted by the affect from deferred tax accounting. Deferred tax assets and liabilities have resulted from the temporary differences between the carrying amount of assets or liabilities in the balance sheet and their tax base. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable taxable profit will be available against which deductible temporary differences can
be utilized.
88 89 Deferred tax expenses are charged or credited in the statements of income, except when the temporary differences relate to items credited or charged directly to equity, in which case the
deferred tax is also recorded in equity. Deferred tax assets and liabilities are offset when they relate to income tax levied by the same
taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. 2.11 Foreign currency transactions Transactions during the year denominated in foreign currencies are translated into Baht at the rates of
exchange prevailing at transaction dates. Monetary assets and liabilities at the balance sheet date
denominated in foreign currencies are translated into Baht at the reference exchange rates
established by the Bank of Thailand at that date. Gains and losses on exchange arising on
settlements and translation are recognized as income or expense when incurred. 2.12 Earnings per share Basic earnings per share are calculated by dividing net income by the number of weighted average ordinary shares outstanding at the end of the year. In the case of a capital increase, the number of
shares is weighted according to the time of subscription received for the increase in issued and paid-
up share capital. The diluted earnings per share are calculated from net income for the period divided by the weighted average number of warrants on the assumption the conversion of all warrant
has been made at the beginning of the period or, if later, the date of the issuance of the potential
warrants, even though it is not the exercise date yet. 2.13 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities. The actual
result may differ from such estimates. 3. SIGNIFICANT CHANGE IN ACCOUNTING POLICY For the year ended December 31, 2006, the Company has changed its accounting policy, regarding
unearned premium reserve of ceded premium to foreign reinsurers from the former accounting treatment of
recording this unearned premium reserve to the new accounting treatment of not recording this unearned
premium reserve. The Company believes that this change in the accounting policy is appropriate because
the related risk has been transferred to the reinsurers and this change in accounting policy is in line with
the announcement of the Department of Insurance regarding accounting for unearned premium reserves dated September 7, 2006. Since the effects of the new accounting treatment are not material to the
financial statements for the year ended December 31, 2006, the Company has applied prospectively this accounting treatment in the financial statements for the year ended December 31, 2006 which resulted in decrease in unearned premium reserve increase from previous year of Baht 3.02 million and increase in income tax expenses of Baht 0.76 million for the year ended December 31, 2006. The financial statements for the year ended December 31, 2007 and 2006, do not include additional
unearned premium reserve of ceded premium to foreign reinsurers of Baht 43.95 million and Baht 34.82
million, respectively. Such unearned premium reserve is required to be recorded in the financial report to be
submitted particularly to the Department of Insurance.
90 91 4. RECLASSIFICATION Certain reclassifications have been made to the balance sheet as at December 31, 2006 to conform to the presentation of the balance sheet as at December 31, 2007 in that Prepaid expenses as at December 31,
2006 of Baht 1.99 million, which were previously included in other assets, are separately presented in other
assets - others. 5. ADDITIONAL INFORMATION FOR CASH FLOWS 5.1 Cash and cash equivalents consisted of the following:
UNIT : BAHT As at December 31, 2007 2006
Investment in securities - Notes 114,385,040 189,742,290 Cash and deposits at financial Institutions Deposits at banks - call deposits 137,169,003 200,721,912 Deposits at banks - time deposits 250,000,000 200,000,000 Total cash and deposits at financial institutions 387,169,003 400,721,912 Total cash, deposits at financial institutions and investment in securities - Notes 501,554,043 590,464,202 Less Notes with maturity over 3 months (89,993,145) (139,993,144) Deposits at financial institutions with maturity over 3 months (250,000,000) (200,000,000) Cash and cash equivalents 161,560,898 250,471,058
5.2 Non-cash items 5.2.1 For the year ended December 31, 2007 and 2006, cash paid to purchase property, plant and
equipment are as follows:
UNIT : BAHT
2007 2006 Purchases of plant and equipment 43,088,040 28,062,369 Plus Beginning balances of fixed assets payable 53,700 10,412,478 Less Ending balances of fixed assets payable (490,038) (53,700) Cash paid to purchase property, plant and equipment 42,651,702 38,421,147
90 91 5.2.2 As at December 31, 2007 and 2006, the deficit on revaluation of investment was shown net of deferred tax assets as follows:
UNIT : BAHT 2007 2006
Gross unrealized gain (losses) on investment in securities - Securities available for sale (see Note 6) Gross unrealized gains 55,121,996 2,621,046 Gross unrealized losses (73,163,256) (76,642,596) Net unrealized gain/losses (18,041,260) (74,021,550) Less deferred tax assets (see Note 17) 5,412,378 18,505,387 Deficit on revaluation of investment - net (12,628,882) (55,516,163)
For the year ended December 31, 2007 and 2006, the Company has an increase (decrease) in
the surplus on revaluation of investment as follows:
UNIT : BAHT 2007 2006
Surplus (deficit) on revaluation of investments increase (decrease) 55,980,290 (80,676,195) Less Deferred tax assets (liabilities) 13,093,009 (20,169,049) Surplus (deficit) on revaluation of investments increase (decrease) - net 42,887,281 (60,507,146)
92 93 5.3 Cash flows provided by operating activities Items to reconcile net income to net cash flows provided by (used in) operating activities for the years ended December 31, 2007 and 2006 are as follows: UNIT : BAHT
2007 2006
Cash flows from operating activities Net income 285,068,365 272,864,777 Items to reconcile net income to net cash flows: Depreciation 36,665,161 31,641,983 Amortization of intangible assets 2,710,190 2,389,134 Amortization of discount on investment (11,351,508) (9,447,664) Amortization of premium on investment 288,706 144,496 Gain on sale of assets (2,487,163) (3,135,487) Gain on sale of securities (69,441,394) (37,301,229) Allowance for doubtful accounts 4,051,100 5,094,799 Allowance for impairment of investment (reversal) (2,825,856) 2,825,856 Deferred tax revenue (82,567,185) (20,089,409) Income from operations before changes in operating assets and Liabilities 160,110,416 244,987,256 Operating assets (increase) decrease Amount deposit on reinsurance treaties (255,862) 9,638,116 Due from reinsurers (12,174,017) (16,698,153) Premium due and uncollected (145,093,838) (104,124,823) Accrued income on investments (686,572) (6,436,269) Deposits (444,046) 263,458 Intangible assets (7,073,962) (6,900,191) Prepaid expenses (6,264,115) (899,380) Other assets (726,712) (33,818) Operating liabilities increase (decrease) Unearned premium reserve 435,255,393 80,096,776 Loss reserves and outstanding claims 222,945,798 18,675,539 Amount withheld on reinsurance treaties 93,260,210 10,658,029 Due to reinsurers 112,910 53,921,852
92 93 UNIT : BAHT
2007 2006 Cash flows from operating activities (Continued) Operating liabilities increase (decrease) (Continued) Unearned revenues 13,897,630 2,475,993 Accrued commissions and brokerages 34,474,987 4,958,153 Accrued corporate income tax 2,649,997 27,493,511 Accrued expenses 19,838,086 (14,357,184) Deferred premium 6,508,938 (1,409,432) Other liabilities 3,129,110 4,895,829 Net cash provided by operating activities 819,464,351 307,205,262
6. INVESTMENTS IN SECURITIES Investments in securities as at December 31, 2007, consisted of the following: UNIT : BAHT Book Gross Gross Fair Value Unrealized Unrealized Value Gains Losses Securities available for sale Equity securities Listed securities Ordinary shares 465,682,227 3,564,068 (26,782,336) 442,463,959 Units trusts 1,223,496,261 50,065,132 (45,386,090) 1,228,175,303 1,689,178,488 53,629,200 (72,168,426) 1,670,639,262 Debt securities Bonds 329,793,624 46,797 - 329,840,421 Debentures 184,786,090 1,445,999 (994,830) 185,237,259 514,579,714 1,492,796 (994,830) 515,077,680 Total 2,203,758,202 55,121,996 (73,163,256) 2,185,716,942
Cost Securities for general investment Equity securities Other securities Ordinary shares 11,344,290 Total 11,344,290
94 95 UNIT : BAHT Maturities within Amortized 1 year 2 - 5 year 6 - 10 year Cost Securities held to maturity Debt securities Government bonds and state enterprise bonds 100,409,697 100,539,087 21,605,470 222,554,254 Notes 114,385,040 - - 114,385,040 Debentures 70,081,120 160,992,543 50,299,929 281,373,592 284,875,857 261,531,630 71,905,399 618,312,886 Less Allowance for impairment of investment - Debentures (81,120) - - (81,120) Total 284,794,737 261,531,630 71,905,399 618,231,766 Total value of investment in securities 2,815,292,998
Other information related to securities held to maturity were as follows: UNIT : BAHT Book Gross Gross Fair Value Unrealized Unrealized Value Gains Losses Securities held to maturity Debt securities Government bonds and state enterprise bonds 222,554,254 4,412,933 (1,165,953) 225,801,234 Notes 114,385,040 - - 114,385,040 Debentures 281,292,472 2,921,026 (17,315) 284,196,183 Total 618,231,766 7,333,959 (1,183,268) 624,382,457
Investments in unit trusts consisted of the following: UNIT : BAHT Book Gross Gross Fair Investment Value Unrealized Unrealized Value Income Gains Losses (Loss) Securities available for sale - Units trusts Asset Plus Growth Dividend Fund 330,000,000 25,758,576 - 355,758,576 - Aberdeen Flexible Capital Fund 290,000,000 - (12,716,828) 277,283,172 - The Ruang Khao High Income Fund 150,000,000 22,189,556 - 172,189,556 24,060,856 Quality Houses Property Fund 203,496,261 - (18,996,262) 184,499,999 (56,492) The Krung Thai Emerging Bond Market Fund 100,000,000 - (10,614,000) 89,386,000 - The Krung Thai January Effect Fund1 100,000,000 2,117,000 - 102,117,000 - TISCO China India Dividend Fund 50,000,000 - (3,059,000) 46,941,000 - FIF-Fixed 3M9 Fund - - - - 318,800 1,223,496,261 50,065,132 (45,386,090) 1,228,175,303 24,323,164
94 95 Investments in securities as at December 31, 2006, consisted of the following: UNIT : BAHT Book Gross Gross Fair Value Unrealized Unrealized Value Gains Losses Securities available for sale Equity securities Listed securities Ordinary shares 426,964,402 1,304,322 (34,916,794) 393,351,930 Units trusts 827,160,705 632,295 (41,656,356) 786,136,644 1,254,125,107 1,936,617 (76,573,150) 1,179,488,574 Debt securities Bonds 128,904,047 - (29,171) 128,874,876 Treasury bills 99,974,565 - (40,275) 99,934,290 Debentures 219,781,049 684,429 - 220,465,478 448,659,661 684,429 (69,446) 449,274,644 Less Allowance for impairment of investment - Debentures (2,825,856) - - (2,825,856) Total 1,699,958,912 2,621,046 (76,642,596) 1,625,937,362 Cost Securities for general investment Equity securities Other securities Ordinary shares 10,884,690 Total 10,884,690
UNIT : BAHT Maturities within Amortized 1 year 2 - 5 year 6 - 10 year Cost Securities held to maturity Debt securities Government bonds and state enterprise bonds 30,677,856 169,862,838 - 200,540,694 Notes 139,742,290 50,000,000 - 189,742,290 Debentures 29,081,120 86,000,000 20,000,000 135,081,120 199,501,266 305,862,838 20,000,000 525,364,104 Less Allowance for impairment of investment - Debentures (81,120) - - (81,120) Total 199,420,146 305,862,838 20,000,000 525,282,984 Total value of investment in securities 2,162,105,036
96 97 Other information related to securities held to maturity were as follows: UNIT : BAHT Amortized Gross Gross Fair Cost Unrealized Unrealized Value Gains Losses Securities held to maturity Debt securities Government bonds and state enterprise bonds 200,540,694 957,055 (529,488) 200,968,261 Notes 189,742,290 - (62,619) 189,679,671 Debentures 135,000,000 953,767 (95,811) 135,857,956 Total 525,282,984 1,910,822 (687,918) 526,505,888
Investments in unit trusts consisted of the following:
UNIT : BAHT Book Gross Gross Fair Investment Value Unrealized Unrealized Value Income Gains Losses
Securities available for sale - Units trusts Asset Plus Growth Dividend Fund 290,000,000 - (28,843,400) 261,156,600 21,750,000 Aberdeen Flexible Capital Fund 290,000,000 - (5,328,120) 284,671,880 11,259,830 The Ruang Khao High Income Fund 150,000,000 - (7,484,836) 142,515,164 2,013,446 Quality Houses Property Funds 97,160,705 632,295 - 97,793,000 - 827,160,705 632,295 (41,656,356) 786,136,644 35,023,276
As at December 31, 2007 and 2006, investment in securities held to maturity was deposited with the Registrar in accordance with the Insurance Act B.E. 2535 (1992) (see Note 20) as follows:
UNIT : BAHT 2007 2006 Cost Cost
State enterprise bonds 14,000,000 14,000,000
96 97
As at December 31, 2007 and 2006, investment in securities held to maturity were pledged as collateral as
follows:
UNIT : BAHT 2007 2006 Cost Cost Government bonds Drivers’ lawsuits 7,730,000 4,980,000 Electricity usage 2,000,000 2,000,000 9,730,000 6,980,000 Debentures (see Note 13) Credit line of bank overdrafts and loans 110,000,000 140,000,000
7. LOANS As at December 31, 2007 and 2006, loans consisted of the following:
UNIT : BAHT
2007 2006
Security guaranteed loans Loans to employees 297,900 460,989 Other loans 903,212 153,265 Total loans 1,201,112 614,254
Credit lines of the loans to employees are in accordance with the welfare policy of the Company’s other loans,
with interest rat es of 4.88-5.88 % per annum and 5.75 - 7.25 % per annum for the year ended December 31, 2007 and 2006, respectively.
98 PB
net UNIT : BAHT 1,921,159 2,047,038 25,660,866 38,229,069 222,174,021 148,314,096 438,346,249 equipment- - - (2,910,501) (18,098,408) (139,534,130) (178,800,634) (339,343,673) 2007 - - - - 266,228 Disposal 6,830,068 7,096,296
- - (633,053) Additions (8,342,438) (36,665,161) (12,304,702) (15,384,968) Accumulated Depreciation Property, - - (2,277,448) (16,586,038) (163,415,666) (127,495,656) (309,774,808)
4,831,660 2,047,038 43,759,274 177,763,199 148,314,096 777,689,922 400,974,655 2007 2006 - - - - - Transfer 13,629,894 (13,629,894)
- - - - Cost (329,749) Disposal (7,308,000) (7,637,749)
- 168,000 1,316,600
12,740,169 10,332,283 18,530,988 43,088,040 Additions plant and
36,665,161 31,641,983 2006 5,344,649 4,663,660 38,327,105 148,314,096 742,239,631 145,932,066 399,658,055
2006 the year for Depreciation the Company. but still in use by fully depreciated were at cost of Baht 121,369,927 and Baht 119,695,775, respectively, As of December 31, 2007 and 2006, equipment 2007 the year for Depreciation PROPERTY, - NET PLANT AND EQUIPMENT the followingplant and equipment - net consisted of : 2007 and 2006 property, As at December 31,
Total equipment and office Furniture Other equipment Vehicles inConstruction progress Land Buildings and improvement 8.
99 9. DUE FROM REINSURERS - NET As at December 31, 2007 and 2006, due from reinsurers are as follows: UNIT : BAHT
2007 2006
Due from reinsurers 30,236,856 18,062,839 Less Allowance for doubtful accounts (499,670) (499,670) Total due from reinsurers - net 29,737,186 17,563,169
10. PREMIUM DUE AND UNCOLLECTED - NET As at December 31, 2007 and 2006, premium due and uncollected were classified by aging as follows: UNIT : BAHT
2007 2006
3 months or less 510,404,797 405,124,515 Over 3 months up to 6 months 51,656,152 18,662,087 Over 6 months up to 12 months 9,375,943 5,588,106 More than 12 months 14,594,146 11,562,492 Total premium due and uncollected 586,031,038 440,937,200 Less Allowance for doubtful accounts (17,995,673) (13,944,573) Total premium due and uncollected - net 568,035,365 426,992,627
As at December 31, 2007 and 2006, the premium due and uncollected over 12 months net - of the related accrued commissions and brokerages amounted to Baht 11,107,000 and Baht 8,772,413, respectively. The Company will not pay the commissions and brokerages for uncollectible premium.
11. RECEIVABLE FROM SALES OF INVESTMENTS - NET As at December 31, 2007 and 2006, receivable from sales of investments are as follows: UNIT : BAHT
2007 2006
Receivable from sales of investments 903,779 1,484,742 Less Allowance for doubtful accounts (903,779) (903,779) Total receivable from sales of investments - net - 580,963
100 101 12. INTANGIBLE ASSETS - NET As at December 31, 2007 and 2006 intangible assets consisted of the following: UNIT : BAHT
2007 2006 Computer software Cost 28,464,145 21,390,183 Less Accumulated Amortization (10,893,259) (8,183,069) Total 17,570,886 13,207,114
13. BANK OVERDRAFTS As at December 2007, the Company had credit lines consisting of bank overdrafts of Baht 30 million and loans and/or letter of guarantees of Baht 80 million, total amounting to Baht 110 million from its parent company, which debentures classified as held to maturity amounting to Baht 110 million were pledged as security (see Note 6). As at December 2006, the Company had credit lines consisting of bank overdrafts of Baht 30 million, loans and letter of guarantees of Baht 100 million, total amounting to Baht 130 million from its parent company, which debentures classified as held to maturity amounting to Baht 140 million were pledged as security (see Note 6) and clean credit lines of loans from non-related company of Baht 100 million. As at December 31, 2007 and 2006 Bank overdrafts consisted of the following:
UNIT : BAHT
Interest rate As at December 31, 2007 2006
Credit line of bank overdrafts MOR 30,000,000 30,000,000 Credit line of loans and letter of guarantees Financial Market Condition/MLR 80,000,000 200,000,000 110,000,000 230,000,000
As at December 31, 2007 and 2006, these credit lines were undrawn.
100 101 14. SHARE CAPITAL As at April 2, 2002, the annual ordinary shareholder’s meeting passed resolutions to issue five-year warrants of 30 million units to the shareholders who subscribed for the new shares at a ratio of one new share for one warrant. The warrants were issued free of charge. The warrants have an exercise price of Baht 5 at the rate of one warrant per one ordinary share. As at May 29, 2002, the existing shareholders have subscribed and paid for the increased share capital of 29.72 million shares. As at September 10, 2002, the Company has been approved by the Securities and Exchange Commission for issuing warrants to the existing shareholders who subscribed for such increased share capital. On October 29, 2002, the Board of Directors considered and approved the first exercise date of the warrants which is July 1, 2005 and could be exercised on first business day of January, April, July and October, which the last exercised date will be November 14, 2007. On June 24, 2005, the extra ordinary shareholder’s meeting passed a resolution to change the exercise ratio from one warrant per 1.00 ordinary share to one warrant per 1.05 ordinary share according to the condition of the warrants prospectus to purchase new ordinary shares. On April 20, 2006, the Company has changed the exercise ratio from one warrant per 1.05 ordinary share to one warrant per 1.07 ordinary share according to the condition of the warrants prospectus to purchase new ordinary shares. On April 12, 2007, the Company has changed the exercise ratio from one warrant per 1.07 ordinary share to one warrant per 1.09 ordinary share according to the condition of the warrants prospectus to purchase new ordinary shares. As at December 31, 2007 and 2006, the warrants have been converted into ordinary shares as follows:
Exercise date Number of Number of Cash received Date share capital warrant common shares from exercised registered as received rights paid up units shares Baht
Balance as at December 31, 2005 7,085,288 7,424,964 37,124,820 Transactions during period January 1, 2006 20,342,500 21,317,905 106,589,525 January 16, 2006 April 1, 2006 519,000 543,880 2,719,400 April 11, 2006 July 1, 2006 198,360 211,813 1,059,065 July 26, 2006 October 1, 2006 153,000 163,377 816,885 October 20, 2006 21,212,860 22,236,975 111,184,875
102 103 Exercise date (Continued) Number of Number of Cash received Date share capital warrant common shares from exercised registered as received rights paid up units shares Baht
Balance as at December 31, 2006 28,298,148 29,661,939 148,309,695 Transactions during period January 3, 2007 54,200 57,876 289,380 January 23, 2007 April 2, 2007 434,400 463,860 2,319,300 May 4, 2007 July 1, 2007 47,800 52,061 260,305 July 17, 2007 October 1, 2007 21,400 23,335 116,675 October 26, 2007 November 14, 2007 836,650 912,352 4,561,760 December 11, 2007 1,394,450 1,509,484 7,547,420 Balance as at December 31, 2007 29,692,598 31,171,423 155,857,115
As at December 31, 2006, the remaining unexercised warrants was 1,420,860 warrants. As at November 14, 2007, 26,410 warrants expired without being exercised by the warrantholders
15. STATUTORY RESERVE Pursuant to the Public Limited Companies Act B.E. 2535 (1992), the Company must allocate to a reserve fund from the annual net profit, not less then five percent of the annual net profit deducted by the total accumulated loss brought forward (if any) until the reserve fund reaches an amount of not less than ten percent of the authorized capital. Such reserve fund is not available for distribution as dividend.
16. OTHER RESERVES As at December 31, 2007 and 2006, other reserves amounting to Baht 400 million were established without having any specific purpose.
102 103 17. INCOME TAX EXPENSE For the years ended December 31, 2007 and 2006, income tax expenses consist of the following: UNIT : BAHT
2007 2006
Income tax expense - current tax 145,117,196 90,518,166 Add (Less) Tax effect from deferred income tax Allowance for impairment of investment - Debentures 847,757 (706,464) Allowance for doubtful accounts of premium due and uncollected (1,215,330) (1,273,699) Unearned premium reserve (6,664,369) (13,362,903) Loss reserve (57,542,098) (4,360,550) Allowance for incurred but not reported claims (7,744,515) (416,331) Deferred tax revenue resulting from raise of tax rate from 25% to 30% (9,785,663) - Other (462,967) 70,189 Income tax expense 62,550,011 70,468,408
According to the Royal Decree No. 387 B.E. 2544 issued under the Revenue Code regarding the corporate income tax rate deduction dated August 28, 2001, the corporate income tax for listed companies of the Stock Exchange of Thailand has been reduced from 30% to 25% of net profit which does not exceed Baht 300 million. This will remain in effect for five consecutive accounting periods beginning on or after September 6, 2001. The applicable tax rate for the year ended December 31, 2007 is 30%. The applicable tax rate for the year ended December 31, 2006 is 25% of net profit which does not exceed Baht 300 millions. As at December 31, 2007 and 2006, deferred tax assets which resulted from the temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base are as follows:
UNIT : BAHT 2007 2006 Deferred tax assets resulted from: Impairment of debentures 24,336 726,744 Allowance for doubtful accounts of premium due and uncollected 5,819,737 3,837,005 Unearned premium reserve 52,835,877 38,476,257 Loss reserve 117,009,951 60,086,085 Incurred but not reported claims liabilities 17,428,244 8,069,774 Unrealized loss on the change in value of investment - securities available for sale (Note 5.2.2) 5,412,378 18,505,387 Other 1,554,599 909,694 Total deferred tax assets 200,085,122 130,610,946
104 105 18. EARNINGS PER SHARE As at December 31, 2007, the Company did not have warrants outstanding. As at December 31, 2006, the Company had 1,420,860 warrants outstanding, which have an exercise price of Baht 5 at the rate of one warrant per 1.07 ordinary share (see Note 14). The calculation of the diluted earning per share is based on the assumption the exercise of the warrant holders has been made, the average fair values of the common stock for calculating the diluted earning per share for the year ended December 31, 2006, are Baht 41.65. Diluted earnings per share for the year ended December 31, 2006 are calculated as follows:
Net Weighted Average Earnings Income Number of Per Share Common Share 2006 2006 2006 Million Baht Million Shares Baht Basic earnings per share Net income 272.86 89.09 3.06 Effect of diluted equivalent ordinary shares Warrants - 1.64 Diluted earnings per share Income available to ordinary shareholders assumed exercise of warrants 272.86 90.73 3.01
19. DIVIDENDS PAID On March 30, 2007, the ordinary shareholders’ meeting passed a resolution to pay an annual dividend for the year 2006 of Baht 2.70 per share on 89.90 million shares, totaling Baht 242.74 million. The Company paid such dividend on April 27, 2007. On April 3, 2006, the ordinary shareholders’ meeting passed a resolution to pay an annual dividend for the year 2005 of Baht 2.50 per share on 89.00 million shares, totaling Baht 222.51 million. The Company paid such dividend on April 28, 2006. 20. DEPOSITS WITH THE REGISTRAR As at December 31, 2007 and 2006, investment in securities held to maturity-state enterprise bonds amounting to Baht 14.00 million at cost, is deposited with the Registrar in accordance with the Insurance Act B.E. 2535 (1992) (see Note 6).
104 105
the the are
or UNIT : BAHT over
transactions influence shareholding The by be significant companies. no may Policy Pricing the has by companies. other to has offered
relationship agreed Company The that the rate On the basis of the interest companies. other to Company has offered that the rate On the basis of the interest companies. other to Company has offered same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price others to Company charged same as the the are and conditions Price others to Company charged that the rate On the basis of the interest others to Company charged Company others to Company charged others to Company charged the mutually parties. that
- - 23,638 129,486 379,397 1,632,059 197,551,511 119,832,472 related believes December 31, conditions
with the
- - - 75,352 198,741 on 800,374 99,385,040 135,842,283
management
transactions
determined
from Company’s December 31, 2007 2006 arose The transactions of the parent Subsidiary
of the parent Subsidiary company of the parent Subsidiary company of the parent Subsidiary company Associated company of the parent Company Parent Company Parent
company company company of the parent Subsidiary expenses these
directors.
of or and
effects
Hire-purchase Hire-purchase
Management
revenues
the Business type Relationstp As at As at shareholders
Leasing, and Factoring Service Leasing, and Factoring Finance Banking
Banking Asset
Securities
of reflect liabilities, group
assets, statements
same
the financial
Company’s have The the may of
parties. as follows: were parties balances with related Significant portion
21.1 A PARTIES RELATED WITH TRANSACTIONS companies as follows: related Co., Ltd. Service SCB Capital Leasing Pcl. Commercial Siam Ltd. Co., Pitiwat Siam Bank Pcl. Commercial The Siam Bank Pcl. Commercial The Siam Leasing Pcl. Commercial Siam Pcl. Credit Industrial The Siam SCB Securities Co., Ltd.
21.
issued by Notes Bank deposits uncollected (cancel) due and Premium
106
UNIT : BAHT
the
same as the same as the same as same as the
Policy Pricing others to paid others to paid others to paid others to Company charged others to Company charged others to Company charged others to Company charged others to paid the are and conditions Price others to Company charged the are and conditions Price the are and conditions Price others to Company charged as the Company the same are Conditions others to paid as the Company the same are Conditions as the Company the same are Conditions as the Company the same are Conditions as the Company the same are Conditions the are and conditions Price the same as the are and conditions Price same as the the are and conditions Price
- 1,592 8,000 35,656 94,062 169,702 295,372 357,462 429,000 1,453,811 24,470,104 December 31,
752
- 53,245 74,669 160,331 961,358 335,983 (158,133) 1,136,733 1,137,000 2,455,855
31, December 2007 2006
company of the parent Subsidiary company of the parent Subsidiary company the parent of Subsidiary company company Associated company of the parent company Associated company Associated company Associated company of the parent of the parent Subsidiary company Company Parent of the parent Subsidiary company of the parent Subsidiary company of the parent company of the parent
Hire-purchase
Management
Business type Relationstp As at As at
Service Fund Construction Life Insurance Leasing, and Factoring Finance Estate Real Banking Estate Real Securities
Management Fund
(continued)
(cancel)
uncollected
and
due
Pcl. Insurance
SCB Asset Management Co., Ltd. Mahisorn Co., Ltd SCB Securities Co., Ltd. Ltd. Co., Pitiwat Siam Mahisorn Co., Ltd.. Bank Pcl. Commercial The Siam Life York New Commercial Siam SCB leasing Pcl. Pcl. Credit Industrial The Siam Co., Ltd. SCB Asset Management & Nielsen (Thai) Pcl. Christiani
and outstanding claims Loss reserves
Premium
107
UNIT : BAHT
companies
sub-broker
insurance
to
Policy Pricing
offered
has
others to paid others to paid others to paid others to paid others to paid as the Company the same are Conditions as the Company the same are Conditions others to paid as the Company the same are Conditions as the Company the same are Conditions others to paid that the rate On the basis of the commissions Company as in the contract. are Conditions the same as the Company are Conditions the same as the Company are Conditions as the Company the same are Conditions
- 4,600 2,500 83,232 33,998 435,100 279,006 5,045,175 18,491,615 December 31,
2,239 - 53,336 44,500 468,118 163,966 625,670 21,195,635 14,250,000
31, December 2007 2006
Company Parent company Associated company of the parent company Associated company of the parent of the parent Subsidiary company of the parent Subsidiary company company Associated company Associated company of the parent of the parent Subsidiary Company Parent
company of the parent company
Hire-purchase Hire-purchase
Business type Relationstp As at As at Banking Construction Life Insurance Legal Consultant Service Leasing, and Factoring Finance Leasing, and Factoring Banking
Pcl.
(continued)
Insurance
Life
York
New
Commercial Pcl. Credit Industrial Siam
Bank Pcl. Commercial he Siam
T The Leasing Pcl. Commercial Siam Bank Pcl. Commercial The Siam SCB leasing Pcl. Co., Ltd. Law Office Niti Siam Ltd. Center Co., SCB Training & Nielsen (Thai) Pcl. Christiani Siam
and brokerages Accrued commissions
and outstanding claims Loss reserves underwriting Accrued other expenses
108
UNIT : BAHT
others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged others to Company charged same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price same as the the are and conditions Price the same as the are and conditions Price the same as the are and conditions Price the same as the are and conditions Price same as the the are and conditions Price
88,201 39,936 49,526 84,387 170,677 609,030 900,602 267,275 1,198,612 1,158,919 1,774,783 1,268,864 2,128,870 2,347,102 47,064,184
62,618 35,280 27,806 104,021 571,276 343,340 252,943 1,461,009 (299,951) 1,003,999 2,772,631 1,222,696 2,004,192 31,915,105 5,679,654
company of the parent company company
company Associated company of the parent of the parent Subsidiary company of the parent Subsidiary company Company Parent the parent of Subsidiary the parent of Subsidiary of the parent Subsidiary company of the parent Subsidiary company of the parent Subsidiary company of the parent Subsidiary company of the parent Subsidiary company of the parent Subsidiary company company Associated company of the parent company Associated company of the parent company Associated
December 31, 2007 2006
Hire-purchase Hire-purchase
Business type Relationstp ended the year for Transactions Policy Pricing and Factoring
Finance Service Estate Real Banking Banking Leasing, and Factoring Asset Management Service Legal Consultant Securities Asset Management Management Fund Construction Life Insurance Leasing,
Pcl.
Insurance
Life
York
New
: follows as were companies with related transaction Significant Commercial
21.2 SCB Asset Management Co., Ltd. Chatuchak Asset Management Co., Ltd. Mahisorn Co., Ltd. Siam SCB leasing Pcl. Pcl. Credit Industrial The Siam Ltd. Center Co., SCB Training SCB Securities Co., Ltd. Co., Ltd. Service SCB Capital & Nielsen (Thai) Pcl. Christiani Ltd. Co., Pitiwat Siam Co., Ltd. Law Office Niti Siam Bank Pcl. Commercial The Siam Bank Co., Ltd. Commercial The Cambodian Leasing Pcl. Commercial Siam
cancelled) written (Premium Premium
109
has has has
UNIT : BAHT Company Company Company
the the the
that that that
rate rate rate
interest interest interest
the the the
of of of
basis basis basis
the the the
others to paid companies. other to offered others to paid others to paid
companies. other to offered as the Company the same are Conditions others to paid as the Company the same are Conditions others to paid as the Company the same are Conditions as the Company the same are Conditions as the Company the same are Conditions others to paid as the Company the same are Conditions On On On companies. other to offered 70,840 264,364 545,844 507,970 726,324 695,822 137,308 1,590,860 149,995,380
- 763,411 106,126 114,424 669,417 1,918,344 3,150,958 3,328,728 17,652,227
of the parent Subsidiary of the parent Subsidiary company Company Parent company Associated company of the parent company Associated Company Parent of the parent Subsidiary of the parent Subsidiary company of the parent Subsidiary company
company company company of the parent
December 31, 2007 2006
Hire-purchase Hire-purchase
Business type Relationstp ended the year for Transactions Policy Pricing
Service Securities Banking Finance Leasing, Banking Leasing, and Factoring Service Estate Real
Pcl. Credit Industrial Siam
SCB Securities Co., Ltd. Mahisorn Co., Ltd. Ltd. Co., Pitiwat Siam Bank Pcl. Commercial The Siam Leasing Pcl. Commercial Siam Ltd. Center Co., SCB Training SCB leasing Pcl. and Factoring Bank Pcl. Commercial The Siam The
Claims and dividends received Interest
110
UNIT : BAHT
companies
sub-broker
insurance
to
offered
has
others to paid others to paid others to paid others to paid
as the Company the same are Conditions as the Company the same are Conditions others to paid as the Company the same are Conditions as the Company the same are Conditions that the rate On the basis of the commissions Company as in the contract. are Conditions the same as the Company are Conditions as the Company the same are Conditions others to paid
9,500 21,100 481,712 997,105 1,112,156 1,506,677 50,045,175 113,526,930
- 131,738 5,706,519 2,127,557 9,024,214 2,884,240 57,000,000 184,740,742
Company Parent the parent of Subsidiary company company Associated company of the parent company Associated company Associated company Associated company of the parent of the parent Subsidiary company Company Parent company of the parent company of the parent
December 31, 2007 2006
Hire-purchase
Business type Relationstp ended the year for Transactions Policy Pricing Banking Management Fund Construction Life Insurance Leasing, and Factoring Finance Legal Consultant Banking
(continued) Pcl. Insurance
Bank Pcl. Commercial The Siam Bank Pcl. Commercial The Siam Pcl. Credit Industrial The Siam Co., Ltd. Law Office Niti Siam & Nielsen (Thai) Pcl. Christiani Life York New Commercial Siam SCB leasing Pcl. Co., Ltd. SCB Asset Management
and brokerages Commissions
Claims Other underwriting expenses
111 22. DISCLOSURE OF FINANCIAL INSTRUMENTS The Company has no policy for speculation in or engage in the trading of any derivative financial instruments. 22.1 Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company. The Company has adopted the policy to protect credit risk by having specialists appraise securities and limiting lines of loans up to the securities value in accordance with the investment for other business of non-life companies’ regulation of the Insurance Department. Concentrations of credit risk are limited due to the diversifications of the customers, except for the security guaranteed loans which are few in number. 22.2 Interest rate risk Interest rate risk refers to the risk of changes in interest rates which will affect the interest income from investments. The investments include both short-term and long-term investments that have variable interest rates. The Company manages the risk by considering the risk of investments together with the return on such investments. As at December 31, 2007 and 2006, significant financial assets classified by type of interest rate are as follows :
UNIT : BAHT
Book Value as at December 31, 2007 2006 Variable Fixed Variable Fixed interest rate interest rate interest rate interest rate
Deposits at financial institutions 137,169,003 250,000,000 200,721,912 200,000,000 Investments in securities Bonds - 552,394,675 - 329,415,570 Treasury bills - - - 99,934,290 Notes - 114,385,040 - 189,742,290 Debentures - net 75,759,586 390,770,145 84,827,875 267,811,747 Total 212,928,589 1,307,549,860 285,549,787 1,086,903,897
112 113
The financial instruments carrying interest at fixed rates are classified below on the basis of the length of time from the balance sheet date to the date specified for fixing of a new rate, or to the maturity date (whichever is sooner) as follows: UNIT : BAHT
Book Value as at December 31, 2007 Period specifed for repricing interest rate Average Within 1 year Over 1 year Total Interest Rate Baht Baht Baht %
Deposits at financial institutions 250,000,000 - 250,000,000 3.14% Investments in securities Bonds 430,250,118 122,144,557 552,394,675 3.88% Notes 114,385,040 - 114,385,040 3.29% Debentures - net 110,080,717 280,689,428 390,770,145 4.99% Total 904,715,875 402,833,985 1,307,549,860
UNIT : BAHT
Book Value as at December 31, 2006 Period specifed for repricing interest rate Average Within 1 year Over 1 year Total Interest Rate Baht Baht Baht %
Deposits at financial institutions 200,000,000 - 200,000,000 4.59% Investments in securities Bonds 159,552,732 169,862,838 329,415,570 5.08% Treasury bills 99,934,290 - 99,934,290 4.65% Notes 139,742,290 50,000,000 189,742,290 5.12% Debentures - net 68,284,755 199,526,992 267,811,747 4.96% Total 667,514,067 419,389,830 1,086,903,897
112 113 22.3 Estimated Fair Value of Financial Instruments The fair values have been estimated by the Company using available market information and appropriate valuation methodologies. As at December 31, 2007 and 2006, the carrying amounts of financial assets and financial liabilities which were different from the estimated fair value were as follows: UNIT : BAHT 2007 2006 Carrying Value Fair Value Carrying Value Fair Value
Financial assets Deposits at fnancial institutions 387,169,003 387,349,177 400,721,912 400,693,568 Bonds 552,394,675 555,641,655 329,415,570 329,843,137 Treasury bills - - 99,934,290 99,934,290 Notes 114,385,040 114,385,040 189,742,290 189,679,671 Stocks 453,808,249 499,329,316 404,236,620 438,080,487 Debentures 466,529,731 469,433,442 352,639,622 353,497,578
The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein: Financial assets - The fair values of financial assets for which their remaining terms to maturity are 90 days or less are based on carrying value. For those with remaining terms to maturity greater than 90 days, the fair values are estimated by using a discounted cash flow analysis based on current interest rates and the remaining years to maturities. For marketable securities classified as available for sales securities, the fair values are based on the bidding prices at the Stock Exchange of Thailand on the last business day of the period. For non-marketable securities, the fair values are estimated based on net assets values. Financial liabilities - The fair values for financial liabilities which their remaining terms to maturity are 90 days or less are based on carrying value. For those with remaining terms to maturity greater than 90 days, the fair value are estimated by using a discounted cash flow analysis based on current interest rates for the remaining years to maturities. 23. SIGNIFICANT AGREEMENTS 23.1 Cooperative Memorandum of Bancassurance Project On June 15, 2005, the Company entered into the Cooperative Memorandum of Bancassurance Project with its parent company to support the operation in accordance with such project. The Company and its parent company thus has to comply with the condition and pay service fee as stated in the memorandum. Such condition, services fee, and period shall be subject to revision according to the party entered and attached as appendix enclosed in the memorandum.
114 115 23.2 Service Agreement On October 25, 2006, the Company entered into Service Agreement with other company’s for accommodation to insured and any person under insurance policy’s condition. The Company is committed to pay fee as specified in the agreement. This agreement shall be effective for an undefined period unless expressly terminated by one of the parties by notification in writing at least 90 days before the end of each term. 24. COMMITMENT AND CONTINGENT LIABILITIES As at December 31, 2007 and 2006 , the Company, has capitral commitment to pay as follows: UNIT : BAHT As at December 31, 2007 2006 Baht Baht Capital commitment to pay Construction in progress 1,630,558 1,377,000 Program development expenses 52,500 1,839,402 1,683,058 3,216,402
25. LONG-TERM LEASE AGREEMENT As at December 31, 2007 and 2006 , the Company, as lessee, has long-term lease agreements as follows: UNIT : BAHT Type Rental amount December 31, 2007 December 31, 2006 Within 1 year Within 2 - 5 year Within 1 year Within 2 - 5 year
Building 1,896,036 7,308,971 1,038,156 483,314 Office equipment 1,348,200 1,777,250 1,394,759 1,624,028
26. SUBSEQUENT EVENT AFTER THE FINANCIAL STATEMENT DATE As the Company issued and offered five-year warrants of 29,719,008 units to the shareholders on November 15, 2002, which the warrantholders could exercise their rights in each quarter, on the first business day of January, April, July and October in each year through the maturity date. The first exercised date of warrants was July 1, 2005 and the last exercised date was November 14, 2007. During that period, the warrants were converted into a total of 31,171,423 ordinary shares and there was a remainder of 1,509,569 ordinary shares to accommodate the exercise of the warrants as at December 31, 2007. As a result, the Company has issued and paid up capital of Baht 454,452,155, which is not equal to the authorized share capital of Baht 462,000,000 at the same date. On January 25, 2008, the Board of Directors’ meeting passed a resolution to maintain the authorized share capital of Baht 462,000,000 and not to decrease the authorized share capital until the Company has definite policy to increase or decrease the authorized share capital prior to proposing to the shareholders’ meeting for authorization of further action. 27. AUTHORIZATION OF FINANCIAL STATEMENTS These financial statements have been approved for issuing by the board of directors on January 25, 2008.
114 115 GENERAL INFORMATION
Type of Business Non-Life Insurance Authorized Share Capital 462,000,000 Baht Paid-up Share Capital 454,452,155 Baht
Head Office and Suburb Branch : Bangkok The Siam Commercial Samaggi Insurance Public Company Limited 2/4 Siam Commercial Samaggi Insurance Tower, 12th Floor, Northpark Project, Vibhabadi Rangsit Road, Thung Song Hong, Laksi, Bangkok 10210 Tel : 0-2555-9100 Fax No. : 0-2955-0205 E-mail : [email protected] Website : http://www.scsmg.co.th 24 hr. Emergency Call - Accidential Motor Tel : 0-2255-3400
List of Branches Northern Chiangmai Branch Manager Branch : MRS.JERANUN KANTHA 264/6 Mahidol Road, Tambol Padad, Ampur Muang, Chiangmai 50100 Tel : 0-5328-1213-4, 0-5320-1434-6 Fax No. : 0-5328-1215 Covered Areas : Chiangmai, Chiangrai, Lamphun, Lampang, Phrae, Nan, Phayao, Mae Hong Son E-mail : [email protected]
Phisanulok Branch Manager Branch : MR.PITSANUTAP SANGCHANTRA 5/12-13 Moo 5 Singhawat Road, Tumbol Banklong, Ampur Muang, Phisanulok 65000 Tel : 0-5524-2522-4 Fax No. : 0-5524-2521 Covered Areas : Phisanulok, Sukhothai, Nakhonsawan, Chainat, Kamphaengphet, Tak, Phichit, Uttaradit, Uthai Thani E-mail : [email protected]
116 117 Central Nakhonpathom Branch Manager Branch : MISS.SUREE BUNLUEDEJ 77/7-8 Malaiman Road, Tambol Lumphaya, Ampur Muang, Nakhonpathom 73000 Tel : 0-3427-3038-9 Fax No. : 0-3421-8741 Covered Areas : Nakhonpathom, Sumutsakron, Sumutsongkram,Suphanburi, Ratchaburi, Pecthchaburi, PrachuapkhiriKhan, Kanchanaburi E-mail : [email protected]
Lobburi Branch Manager Branch : MR.THUWAYATSADEE THIPPAYAPIBAN 256/10-11 Moo 2 Phaholyothim Road, Tumbol Tha-Sala, Ampur Muang, Lobburi 15000 Tel : 0-3661-3473-4 Fax No. : 0-3662-6341 Covered Areas : Lobburi, Saraburi, Ayuhthaya, Sing Buri, Angthong, Pecthchabul, Nakhon Nayok E-mail : [email protected]
Northeastern Khonkaen Branch Manager Branch : MRS.PHANITA KHAESING 381/50 Moo 17 Mittraphap Road, Tambol Ni Muang, Ampur Muang, Khonkaen 40000 Tel : 0-4327-1681-3 Fax No. : 0-4327-1684 Covered Areas : Khonkaen, Kalasin, Mahasarakram, Roiet E-mail : [email protected]
Nakonratchasima Branch Manager Branch : MR.CHUTCHAWAL KMOLSIRIPASRIT 751/17 Mittraphap Road, Tambol Ni Muang, Ampur Muang, Nakonratchasima 30000 Tel : 0-4434-2634-5 Fax No. : 0-4434-2633 Covered Areas : Nakonratchasima, Chaiyaphum, Buriram, Surin E-mail : [email protected]
Udonthani Branch Manager Branch : MR.KITTI PHILATON 220/2-3 Moo 8, Udon-Nongkhai Road, Tambol Moomon, Ampur Muang, Udonthani 41000 Tel : 0-4232-5641-3 Fax No. : 0-4232-5640 Covered Areas : Udonthani, Sakonnakhon, Nongbualamphu, Nongkhai, Loei, Nakhon Phanom, Mukdahan E-mail : [email protected]
116 117 Ubonratchathani Branch Manager Branch : MISS.NEERANUCH SORNCHAN 157 Upparat Road, Tambol Naimuang, Ampur Muang, Ubonratchathani 34000 Tel : 0-4526-2846, 0-4526-2849 Fax No. : 0-4526-2565 Covered Areas : Ubonratchathani, Yasothon, Amnatcharoen, Sisaket E-mail : [email protected]
Eastern Pattaya Branch Manager Branch : MR.SANGSOON PATTHANAKUL 206/108 Kiangtale Plaza, Pattayaklang Road, Tambol Nongplue, Ampur Banglamung, Chonburi 20260 Tel : 0-3842-6801-3 Fax No. : 0-3842-7220 Covered Areas : Pattaya, Chachoengsao, Chonburi, Rayong, Chantaburi, Trat, Sa Kaeo, Phrachin Buri E-mail : [email protected]
Southern Surathani Branch Manager Branch : MR.SOMCHAI THAIEIAD 244/15 Moo 1, Surat-Nasarn Road, Tambol Makhamtia, Ampur Muang, Surathani Branch 84000 Tel : 0-7721-8970, 0-7721-9031, 0-7721-9070 Fax No. : 0-7721-8361, 0-7721-9044 Covered Areas : Surathani, Nakhonsithammarat, Chumporn, Trang, Krabi E-mail : [email protected]
Hadyai Branch Manager Branch : MR.SANIT SRIMUANG 591 Supasarnrangsun Road, Tambol Hadyai, Ampur Hadyai, Songkhla 90110 Tel : 0-7436-4782-3 Fax No. : 0-7436-4784 Covered Areas : Hadyai, Songkhla, Phatthalung, Yala, Pattani, Narathiwat E-mail : [email protected]
Phuket Branch Manager Branch : MISS.SUTHANTA CHULLASUP 17 Soi 3, Pattana Road, Tambol Tlard Nua, Ampur Muang, Phuket 83000 Tel : 0-7625-6841-3 Fax No. : 0-7625-6844 Covered Areas : Phuket, Ranong, Phang-Nga E-mail : [email protected]
118 119 List of Counter Services Northern Chiangrai Tel : 08-1700-1181 Lampang Tel : 08-1710-7507 Nakhonsawan Tel : 08-1929-5793 Central Kangkoy Tel : 08-1840-4971 Chatchai Market (HuaHin) Tel : 08-1492-8961 Northeastern Roiet Tel : 08-5911-2993 Loei Tel : 08-5911-7994 Sakonnakhon Tel : 08-5912-0890 Surin Tel : 08-5111-4106 Eastern Bangplasroi Tel : 08-1710-7509 Rayong Tel : 08-1700-1203 Southern Krabi Tel : 08-5912-0891 Nakonsrithammarat Tel : 08-1710-7512 Trang Tel : 08-5111-4107 Koh-Samui Tel : 08-5911-7996
118 119 Shareholding Structure Major Shareholders as at December 31, 2007
Shareholder’s Name Number of Share Percentage (%) 1. The Siam Commercial Bank Public Company Limited 53,499,447 58.86 2 . Gearway Holdings Limited 12,398,948 13.64 3 . Citibank Nominess Singapore PTE Ltd-UBS 3,554,200 3.91 AG London Branch-SNS IPB Client SEG 4. Krungthai Panich Insurance Company Limited 2,017,780 2.22 5. The Bangkok Insurance Public Company Limited 1,119,669 1.23 6. Thai Reinsurance Public Company Limited 712,588 0.78 7. Miss Yupin Lapanukrom 706,488 0.78 8. The Siam Industrial Credit Public Company Limited 700,027 0.77 9 . Miss Ajapim Aroonluck 512,969 0.56 10. The Viriyah Insurance Company Limited 452,300 0.50 11 . Other Shareholders 15,216,015 16.74 Total Issued Share Capital 90,890,431 100.00
As at December 31, 2007, total registered paid-up share capital of the company was 454,452,155 Baht divided into 90,890,431 shares of 5 Baht each. The increase of share capital by 7,547,420 Baht or 1,509,484 shares by comparison with 2006 was the result of 5 times of the exercising of warrants for ordinary shares on the following occasions :
Exercise No. Date Number of Number of ordinary shares Total value warrants exercised issued under the exercise Baht 7. January 3, 2007 54,200 57,876 289,380 8. April 2, 2007 434,400 463,860 2,319,300 9. July 1, 2007 47,800 52,061 260,305 10. October 1, 2007 21,400 23,335 116,675 11. November 14, 2007 836,650 912,352 4,561,760 Total 1,394,450 1,509,484 7,547,420
On November 14, 2007, SCSMG-W1 announced the last exercise date of the warrants to purchase its ordinary shares No.1. In addition, such warrants will no longer be listed securities on the SET since November 15, 2007 onwards.
120 121 Remuneration for auditor
The company paid for remuneration for auditor in 2007 as follows :
UNIT : BAHT Remuneration - Remuneration for an audit 1,105,000 Total 1,105,000
Dividend Payment Policy The Company has a policy to pay an annual dividend to its shareholders at a rate of not less than 50% of the net profit.
120 121 Reference Parties Share Registrar Thailand Securities Depositories Co.,Ltd. 62 The Stock Exchange of Thailand Building, Ratchadapisek Road, Khet Klongtoey, Bangkok 10110 Tel : 0-2229-2000, 0-2656-5656 Fax No. : 0-2654-5649 Auditor Deloitte Touche Tohmatsu Joiyos Audit Co.,Ltd. Rajanakarn Bldg. 25th Fl., 183 South Sathorn Road, Yanawa, Sathorn, Bangkok 10120 Tel : 0-2676-5700 Fax No. : 0-2676-5757 Legal Consultant Siam Niti Law Office Co.,Ltd. 18 SCB Park Plaza Tower 1, 9th B Fl., Ratchadapisek Road, Ladyao, Chatujak, Bangkok 10900 Tel : 0-2937-5000 Fax No. : 0-2937-5001 Commercial Bank The Siam Commercial Bank PCL. : Ngamwongwan Branch 66/7 Moo 2 Ngamwongwan Road, Bangkhen Tambol, Ampur Muang, Nonthaburi 11000 Tel : 0-2589-2375-8 Fax No. : 0-2591-5190 Government Housing Bank : Head Office 63 Rama 9 Road, Huaykwang, Bangkok 10320 Tel : 0-2202-2037 Fax No. : 0-2645-9001
122 PB