VISION Bangkok Insurance aims to be the preferred non-life insurer in Thailand We will strive to progress with: • Quality products and services that meet our customers’ needs • Fast and responsive service to maximize our customers’ satisfactions • Exceptional personnel with superior the insurance expertise • Tradition and culture of corporate integrity 2 CONTENTS VISION 2 FINANCIAL HIGHLIGHTS 5 PRIDE IN 2017 6 MESSAGE FROM THE CHAIRMAN OF THE ADVISORY BOARD 8 MESSAGE FROM THE CHAIRMAN 10 REPORT OF THE COMPANY’S OPERATIONS 13 INVESTMENT INCOME 18 INVESTMENT 19 INVESTMENTS IN SECURITIES 20 SHAREHOLDING IN OTHER COMPANIES 21 REVENUE STRUCTURE 22 SUMMARY OF QUARTERLY FINANCIAL RESULTS 23 FIVE YEARS REVIEW 24 POLICY ON AND THE OVERALL BUSINESS TRANSACTION 26 TYPE OF BUSINESS TRANSACTIONS 30 RISK FACTORS 37 ADVISORY BOARD 43 BOARD OF DIRECTORS AND BOARD OF DIRECTORS PROFILE 44 MANAGEMENT COMMITTEE AND MANAGEMENT COMMITTEE PROFILE 52 CORPORATE SOCIAL RESPONSIBILITY 61 REPORT OF THE AUDIT COMMITTEE 82 REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE 83 REPORT OF THE CORPORATE GOVERNANCE COMMITTEE 84 REPORT ON THE BOARD OF DIRECTOR’S RESPONSIBILITY FOR FINANCIAL STATEMENTS 85 REPORT OF INDEPENDENT AUDITOR 86 STATEMENTS OF FINANCIAL POSITION 90 STATEMENTS OF COMPREHENSIVE INCOME 92 STATEMENTS OF CASH FLOWS 94 STATEMENTS OF CHANGES IN OWNERS’ EQUITY 96 NOTES TO FINANCIAL STATEMENTS 98 COMPANY’S FINANCIAL STATUS 144 FINANCIAL RATIO 148 RELATED PARTIES TRANSACTIONS 149 ORGANIZATION STRUCTURE 151 MANAGEMENT STRUCTURE 152 SHAREHOLDINGS STRUCTURE 161 PRINCIPLES OF GOOD CORPORATE GOVERNANCE 164 INTERNAL CONTROL AND RISK MANAGEMENT 183 GENERAL INFORMATION 186 LINES OF BUSINESS 191 3 4 FINANCIAL HIGHLIGHTS 2017 2016 Change 2017 (Baht’000) (Baht’000) % (USD’000) For The Year Premium Written 15,940,907 16,031,324 (0.6) 487,774 Underwriting Income 2,386,593 2,553,177 (6.5) 73,027 Operating Expenses 986,582 1,012,932 (2.6) 30,188 Finance Costs 3,618 3,768 (4.0) 111 Net Profits from Underwriting 1,396,393 1,536,477 (9.1) 42,728 Net Investment Revenue 1,365,909 1,285,418 6.3 41,795 Profits before Income Tax Expenses 2,762,302 2,821,895 (2.1) 84,523 Income Tax Expenses 359,205 396,107 (9.3) 10,991 Net Profits 2,403,097 2,425,788 (0.9) 73,532 At Year - end Unearned Premium Reserve 7,340,161 7,399,141 (0.8) 224,601 Shareholders’ Equity 35,145,442 33,253,729 5.7 1,075,412 Per Share (Baht) (Baht) Basic Earnings Per Share 22.57 22.78 (0.9) - Ordinary Share (Shares) 106.47 Million 106.47 Million - - Dividends 14.00 14.00 - - Book Value 330.10 312.33 5.7 - Market Price (High-Low) 368-345 366-335 - - Market Price at Year-end 358 344 4.1 - USD 1 = Baht 32.6809 GBP 1 = Baht 43.9865 EUR 1 = Baht 39.0273 JPY 100 = Baht 28.9806 5 PRIDE IN 2017 It is Bangkok Insurance Public Company Limited’s pride and mark of success to be presented with honorable awards from various leading domestic and foreign organizations. These reflect the Company’s sound service quality and fine reputation, which have been recognized internationally, emphasizing its leadership in the non-life insurance industry. In 2017, the Company received the following awards. Honorable Award The “Excellence of the Year for Leadership” award from the 26th Le Fonti - IAIR Insurance Awards, organized by International Alternative Investment Review. The award was presented to the Company for its sound service standard and ceaseless effort to develop the organization toward excellence in all respects, all under a work management system of international-standard quality, as well as giving top priority to providing the best service to the Company’s customers, emphasizing honesty and fair treatment throughout the more than 70 years of its operating performance. In this connection, the Company has continuously received the “Excellence in Insurance Thailand” award, or an award of excellence in the non-life insurance industry, from such an event. The Company is the only non-life insurance company in Thailand to receive the award 4 consecutive times, and it is regarded as an emphasis of the consistent achievement of its robust and long-standing business transaction. Received 2 outstanding awards from the Best Thailand Contact Center Awards 2017 - “The Best Effective Technology Contact Center” award, or an award for investment in excellent contact center technology. - “The Best Professional Management Contact Center” award, or an award for excellent contact center management. The two awards, organized by the Thai Contact Center Trade Association, were presented to the Company for its introduction of contact center technology and innovations to the development of efficient and international standard call services for customers reporting an accident or inquiring about details of products and claims. In addition, the Company also has an obvious management and service structure system, apart from capable and knowledgeable personnel ready constantly to provide round-the-clock services to its customers. 6 International Quality Standard Bangkok Insurance was certified with the ISO 9001:2015 for all work systems of the organization from British Standards Institution (BSI), reflecting its strong determination to constantly preserve the standards of a quality work management system and work procedure in compliance with international standards. To ensure maximum customers ‘satisfaction Financial Strength Rating Bangkok Insurance derived, on January 12, 2018, Financial Strength Rating of A- /Stable from the Standard and Poor’s Institution (S&P), a leading global credit rating organization, reflecting the Company’s leadership in the non-life insurance industry having competitiveness, with sound operating results and stable funds and assets, apart from possessing a fund management at a satisfactory level. Additionally, the A.M. Best Company, another leading global credit rating organization, had ranked, on May 31, 2017, the Company’s Financial Strength Rating with the score of A- (Excellent), reflecting its stable funds and financial stability. Financial Strength Rating Standard & Poor's January 12, 2018 Counterparty Credit Rating Local Currency A- (Strong) Financial Strength Rating Local Currency A- (Strong) Outlook Stable A.M. Best Company May 31, 2017 Financial Strength Rating A- (Excellent) Financial Strength Rating Outlook Stable Issuer Credit Rating a- (Excellent) Issuer Credit Rating Outlook Stable 7 MESSAGE FROM THE CHAIRMAN OF THE ADVISORY BOARD Mr. Chatri Sophonpanich Over the past year, the overall global economy has witnessed the highest expansion in nearly ten years since the Sub-prime crisis, with a continuous economic growth of the United States, Europe, Japan and China having a positive impact on the Thai economy’s recovery beyond expectations, despite the damage from floods in many areas. Numerous factors, whether the exports sector’s growth, the private sector’s investment increase in compliance with the government sector’s investment clearness, particularly in large-scale projects such as the Eastern Economic Corridor (EEC) project and other mega projects, or tourism having a trend of expansion, have all significantly contributed to a driving force of and support to the Thai economy’s expansion continued to 2018. Nevertheless, Thailand still has a risk to consider, both from internal and external factors, for instance, increasing interest rates, Baht currency fluctuation, problems of a high level of the household sector’s debts, the SME’s ability to pay debts, which may influence a decision to buy and purchasing power, apart from problems of more and more violent natural catastrophes causing a loss of life and property, and Thailand’s entering into a transitional period of an aging society, all having an impact on the economic system, whether the production, investment or savings. Another issue the non-life insurance industry has to keep a close watch on and give importance to is the entry into a digital era, which has been both an opportunity and challenge for business having to adapt itself in order to keep pace with the dynamic of technology that will alter the pattern of business transactions and, in many cases, become creative destruction. 8 Throughout the past 70 years and as a performance guideline for the following year, Bangkok Insurance Public Company Limited has given priority to an adjustment of its strategies in line with a change in the business transaction context, systematically developed and stored the customer data base for an analysis leading to the development of insurance products and services preferred by customers and in conformity with goals, and had professional risk management, all aimed at retaining sound operating results. In addition, the Company has also given importance to the development of its work procedure by integrating technology with all work systems, whether the underwriting work, claims work or supporting business lines, with an aim to generate the greatest satisfaction for customers and business partners, apart from staff development so that they have knowledge and expertise, and encouraging work performance based on the principle of good corporate governance, having transparency, fairness and responsibility to society and the environment. On behalf of the Chairman of the Advisory Board of Bangkok Insurance Public Company Limited, I would like to extend my sincere thanks to our shareholders, customers, business partners, business allies and stakeholders for their constant and staunch trust in the Company’s insurance products and services. Finally, I would also like