Annual Report 2010 - KSK Group · Annual Report 2010 Kurnia Asia Berhad 539435-K 25th Floor, Menara Kurnia Block B4, Pusat Dagang Setia Jaya (Leisure Commerce Square) No.9, Jalan

Annual Report 2010

Kurnia Asia Berhad 539435-K

25th Floor, Menara KurniaBlock B4, Pusat Dagang Setia Jaya(Leisure Commerce Square)No.9, Jalan PJS 8/946150 Petaling JayaSelangor Darul Ehsan

T: 603 7877 6622F: 603 7874 8646E: [email protected]

www.kurnia.com

Kurnia A

sia Berhad

539435-KA

NN

UA

L RE

PO

RT 2010

Your Shelter of Protection

Life, as we know it, is never without its fair share of challenges and obstacles. But when you’re prepared with the right support and protection, life can be a walk in the park. That is why at Kurnia Asia Berhad, we are constantly committed to help our customers brave through stormy weathers, so they can fully take pleasure in what life has to offer.

Contents02 Notice of Annual General Meeting

04 Corporate Information

06 Branch Network

08 Financial Highlights

10 Corporate Milestones

12 Chairman’s Statement

16 Board of Directors’ Profile

19 Management Team

20 Statement on Corporate Governance

24 Audit Committee Report

27 Statement on Internal Control

30 Products & Services

34 Analysis on the Financial Statements

37 Financial Statements

127 Additional Compliance Information

128 List of Top 10 Properties

130 Analysis of Shareholdings

135 Form of ProxyVISION & MISSIONTO BE A LEADING FINANCIAL SERVICES GROUP IN THE ASEAN REGION

To expand regionally into neighbouring countries and become a leading insurer in the ASEAN region

To provide quality services to customers

To generate reasonable returns to shareholders consistently

2Kurnia Asia Berhad annual report 2010

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the TENTH ANNUAL GENERAL MEETING of Kurnia Asia Berhad (“KAB”) will be held at 9th Floor, Training Auditorium, Menara Kurnia, Block B4, Leisure Commerce Square, No. 9 Jalan PJS 8/9, 46150 Petaling Jaya, Selangor Darul Ehsan on Thursday, 16 June 2011 at 10.00 a.m. to transact the following businesses:-

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2010 and the Reports of Directors and Auditors thereon.

Ordinary Resolution 1

2. To re-elect the following Directors who retire pursuant to Article 110 of the Company’s Articles of Association:-

(a) Dato’ Quah Teong Moo Ordinary Resolution 2

(b) Leow Ming Fong @ Leow Min Fong Ordinary Resolution 3

3. To re-appoint Messrs. KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration.


4. AUTHORITY TO ISSUE SHARES Ordinary Resolution 5

As Special Business to consider and if thought fit, to pass the following Ordinary Resolution, with or without modifications:-

“THAT subject always to the Companies Act, 1965 (“the Act”) and the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby authorised pursuant to Section 132D of the Act to issue shares in the Company at any time until the conclusion of the next Annual General Meeting upon such terms and conditions and for such purposes that the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed 10% of the issued share capital of the Company for the time being.”

5. To transact any other business for which due notice shall have been received.

BY ORDER OF THE BOARD

CHUNG PEI PEISEOW FEI SANSecretaries

SELANGOR DARUL EHSAN25 May 2011


Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a Member of the Company and a Member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. A Member shall be entitled to appoint not more than three (3) proxies to attend and vote at the Annual General Meeting. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless the Member specifies the proportions of his holding to be represented by each proxy.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a corporation, either under its Common Seal or under the hand of its attorney duly authorised.

4. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a notarially certified copy thereof, must be deposited at the Registered Office of the Company at 25th Floor, Menara Kurnia, Block B4, Pusat Dagang Setia Jaya (Leisure Commerce Square), No. 9, Jalan PJS 8/9, 46150 Petaling Jaya, Selangor Darul Ehsan not less than forty eight (48) hours before the time for holding the Annual General Meeting or any adjournment thereof.

5. Explanatory Notes on Special Business:


Authority to Issue Shares

At last year’s Annual General Meeting (“AGM”), mandate was given to Directors to issue not more than 10% of the issued share capital of the Company. However, the mandate was not utilised and accordingly will lapse at this forthcoming AGM. As such, the Board would like to seek for a renewal of the mandate.

The proposed Ordinary Resolution 5, if passed, will empower the Directors of the Company to issue not more than 10% of the issued share capital of the Company subject to the approvals of all the relevant governmental and/or other regulatory bodies and for such purposes as the Directors consider would be in the interest of the Company.

The authority will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions.

This authorisation will, unless revoked or varied by the Company in a general meeting, expire at the next AGM of the Company.


Corporate Information

Board of Directors

Tan Sri Dato’ Paduka Kua Sian KooiExecutive Chairman/Non-Independent Executive Director

Datuk Kua Chung SenDeputy Executive Chairman/Non-Independent Executive Director

Dato’ Quah Teong MooNon-Independent Non-Executive Director

Dato’ Wira Othman bin AbdulIndependent Non-Executive Director

Leow Ming Fong @ Leow Min FongIndependent Non-Executive Director

Dato’ Dr. Sharifuddin bin Abdul WahabIndependent Non-Executive Director

Audit Committee

Leow Ming Fong @ Leow Min FongChairman

Dato’ Wira Othman bin AbdulMember

Dato’ Dr. Sharifuddin bin Abdul WahabMember

Company Secretary

Chung Pei Pei (F) (MAICSA 7014594)

Seow Fei San (F) (MAICSA 7009732)

Registered Office

Kurnia Asia Berhad 25th Floor, Menara Kurnia, Block B4 Pusat Dagang Setia Jaya(Leisure Commerce Square) No. 9, Jalan PJS 8/9 46150 Petaling Jaya Selangor Darul Ehsan

Tel 603 7874 6622 Fax 603 7874 8646E-mail [email protected] www.kurnia.com

Principal Banker

Malayan Banking BerhadBandar Sunway BranchNo. 31-32, Jalan PJS 11/28ABandar Sunway46150 Petaling JayaSelangor Darul Ehsan

Tel 603 5637 0871Fax 603 5637 0869

Auditors

KPMG (Firm No. AF0758)Chartered AccountantsKPMG TowerNo. 8 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan

Tel 603 7721 3388Fax 603 7721 3399

Registrar

Symphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul Ehsan

Tel 603 7841 8000Fax 603 7840 8008

Protecting you while you establish solid structuresEnsuring an engineering project goes according to plan and schedule is taxing enough, not to mention the many risks allied with them. With Kurnia Engineering Insurance, a heavy burden is lifted from your shoulders as you enjoy a comprehensive coverage for unwanted misfortunes, from construction calamities to machinery mishaps.


Branch Network

KURNIA ASIA BERHAD (539435-K)

25th Floor, Menara KurniaBlock B4 Pusat Dagang Setia Jaya(Leisure Commerce Square)No. 9, Jalan PJS 8/946150 Petaling JayaSelangor Darul Ehsan, Malaysia

Tel 603 7877 6622 Fax 603 7874 8646E-mail [email protected] www.kurnia.com

KURNIA INSURANS (MALAYSIA) BERHAD (44191-P)

Menara KurniaNo. 9, Jalan PJS 8/946150 Petaling JayaSelangor Darul Ehsan, Malaysia

Tel 603 7875 3333Fax 603 7875 9933E-mail [email protected] www.kurnia.com

PT. KURNIA INSURANCE INDONESIA

Plaza GRI, 12th FloorJI. H. R. Rasuna SaidBlok X-2, No. 1 Jakarta12950 Indonesia

Tel (62) 21 520 3003 Fax (62) 21 520 3002Web www.kurnia.com/indonesia

KURNIA INSURANCE (THAILAND) CO., LTD.

9th-10th FL., Vorawat Building849, Silom RoadSilom, BangrakBangkok 10500

Tel 0 2635 1555Fax 0 2635 1298 9Web www.kurnia.com/thailand

ALOR SETARWisma KurniaNo. 18, Lebuhraya Darul Aman05100 Alor Setar, Kedah

Tel 04 731 1320Fax 04 731 0888

BATU PAHATNo. 12, Jalan Maju BaratTaman Maju83000 Batu Pahat, Johor

Tel 07 432 6199Fax 07 432 5396

BUTTERWORTHNo. 9, Jalan Todak 1Pusat Bandar Sunway13700 Seberang JayaPrai, Butterworth, Penang

Tel 04 397 5085Fax 04 397 8226

CENTRALMenara KurniaNo. 9, Jalan PJS 8/946150 Petaling Jaya, Selangor Tel 03 7875 3333Fax 03 7875 9933

IPOHNo. 16 & 18, Persiaran Greentown 6Pusat Perdagangan Greentown30450 Ipoh, Perak

Tel 05 255 4097 Fax 05 255 6020

JOHOR BAHRUNo. 12, 12A & 12B, Jalan Padi SatuBandar Baru Uda81200 Johor Bahru, Johor

Tel 07 238 9872Fax 07 238 7625

JOHOR JAYANo. 110, Jalan Ros Merah 2/17Taman Johor Jaya81100 Johor Bahru, Johor

Tel 07 355 2970 Fax 07 358 4754

KAJANGNo. 31, Jalan Ria Satu (1)Kawasan Perindustrian RiaOff Jalan Semenyih43000 Kajang, Selangor

Tel 03 8737 9236Fax 03 8734 1467

KANGARNo. 58, Jalan PenjaraMedan Syed Alwi01000 Kangar, Perlis

Tel 04 976 8905Fax 04 977 3636

KEPONGNo. 4-G To 4-3, Block B, Lot B2Jalan Prima 5, Pusat Niaga Metro Prima52100 Kuala LumpurWilayah Persekutuan

Tel 03 6257 7623Fax 03 6257 8249

KLANGNo. 27, Jalan Tiara 3Bandar Baru Klang41150 Klang, Selangor

Tel 03 3341 0559 Fax 03 3342 6890

KLUANGNo. 8, Jalan Persiaran Yayasan86000 Kluang, Johor

Tel 07 772 2182 Fax 07 773 3993


KOTA BHARULot 358 & 359, Seksyen 27Jalan Sri Cemerlang15300 Kota Bharu, Kelantan

Tel 09 744 3312 Fax 09 744 9633

KOTA KINABALULot 47, Lrg Bandaran Berjaya 5Bandaran Berjaya, Jalan Padang88000 Kota Kinabalu, Sabah

Tel 088 232 200 Fax 088 232 204

KUALA LUMPURBangunan KurniaNo. 32, Jalan Yap Ah Shak50300 Kuala LumpurWilayah Persekutuan

Tel 03 2693 2937 Fax 03 2693 8431

KUALA TERENGGANUNo. 26, Jalan Sultan Mahmud20400 Kuala Terengganu, Terengganu

Tel 09 624 6561 Fax 09 624 6531

KUANTANB-344, Jalan Beserah25300 Kuantan, Pahang

Tel 09 566 4527 Fax 09 566 1164

KUCHINGNo. 246 & 247Jalan Datuk Wee Kheng Chiang93450 Kuching, Sarawak

Tel 082 247 288 Fax 082 422 914

MELAKANo. 162, Jalan Taman Melaka Raya75000, Melaka

Tel 06 281 3707 Fax 06 288 3090

MIRILot 665, Jalan Permaisuri98000 Miri, Sarawak

Tel 085 420 102Fax 085 420 924

PENANG2F, Lorong Selamat10400, Penang

Tel 04 229 7181 Fax 04 228 9191

SEGAMATNo. 55, Jalan Genuang Kampung85000 Segamat, Johor

Tel 07 932 9303 Fax 07 932 1701

SELANGORWisma Kurnia, No. 149-151Jalan Maharajalela50150 Kuala LumpurWilayah Persekutuan

Tel 03 2148 1528 Fax 03 2145 9949

SEREMBANNo. 32, Beta Ria Business CentreJalan Durian Emas 4Off Jalan Dato’ Siamang Gagap70100 Seremban, Negeri Sembilan

Tel 06 767 2158 Fax 06 763 8462

SIBULot 438, Block 51st Floor, Town DistrictNo. 16-E, Lane 4, Lanang Road96000 Sibu, Sarawak

Tel 084 348 333 Fax 084 317 766

SITIAWANNo. 11, Taman Sentosa DuaJalan Lumut32000 Sitiawan, Perak

Tel 05 691 0515 Fax 05 691 2341

SUNGAI PETANI No. 8 & 9, Jalan Cempaka 1/1Bandar Aman Jaya08000 Sungai Petani, KedahTel 04 442 8218 Fax 04 442 8217

TAIPING No. 408, Taman SaujanaJalan Kamunting34600 KamuntingTaiping, Perak

Tel 05 807 2254 Fax 05 808 8922

TAWAU TB311, 1st FloorBlock 36, Fajar ComplexJalan Haji Karim91000 Tawau, Sabah

Tel 089 762 633 Fax 089 762 533

TEMERLOH 27, Jalan Sudirman 3Bandar Sri Semantan28000 Temerloh, Pahang

Tel 09 296 0933 Fax 09 296 6933


Financial Highlights

For the 6 months ended

31 December

For the financial year ended

31 December Kurnia Asia Berhad For the financial year ended 30 June

2007 2008 2009 2009 2010

RM Million

Gross premium written 1,107.7 1,120.0 1,052.1 473.9 1,058.8

Net premium 1,019.5 1,009.5 923.6 416.2 838.4

Earned premium 1,018.7 1,013.9 983.1 435.4 852.3

Underwriting (deficit) / surplus (178.0) (377.3) (4.3) 3.6 (51.0)

Investment & other income 182.0 93.2 47.8 58.9 115.7

Profit / (Loss) before tax 2.9 (290.0) 14.0 51.3 29.6

Profit / (Loss) for the year / period (8.0) (277.4) 31.9 43.1 15.0

Total assets 2,223.2 2,115.3 2,296.9 2,580.6 2,584.4

Insurance contract liabilities 1,618.9 1,807.2 1,519.7 1,775.4 1,669.2

Shareholders’ fund 514.6 226.1 255.9 300.1 327.8

Restated1

Prior year figures have been restated to reflect the effect of change in accounting policies in respect of insurance claims liabilities arising from the adoption of the Risk-Based Capital Framework by the Malaysian insurance subsidiary.

Restated2

31 December 2009 figures have been restated to conform with FRS 4 Insurance Contracts, whereby the element of deferred acquisition cost has been excluded from the earned premium in income statements; and reinsurance recovery of insurance contract liabilities were reclassed to be presented as reinsurance assets in statement of financial position. Prior years (financial year ended 30 June 2007 to 2009) were not restated as it is impractical to carry out recomputation.

Restated1 Restated2


Gross PremiumRM Million

1,058.8

473.9

1,052.1

1,120.0

1,107.7

10**

09*

09Δ

08Δ

07Δ

Net PremiumRM Million

838.4

416.2

923.6

1,009.5

1,019.5

10**

09*

09Δ

08Δ

07Δ

Total AssetsRM Million

2,584.4

2,580.6

2,296.9

2,115.3

2,223.2

10**

09*

09Δ

08Δ

07Δ

Shareholders’ FundRM Million

327.8

300.1

255.9

226.1

514.6

10**

09*

09Δ

08Δ

07Δ

Profit/(Loss) Before TaxRM Million

29.6

51.3

14.0

(290.0)

2.9

10**

09*

09Δ

08Δ

07Δ

Profit/(Loss) For The Year/PeriodRM Million

15.0

43.1

31.9

(277.4)

(8.0)

10**

09*

09Δ

08Δ

07Δ

D For 12 months ended 30 June* For 6 months ended 31 December 2009** For 12 months ended 31 December 2010


Corporate Milestones

KURNIA INSURANS (MALAYSIA) BERHAD KURNIA ASIA BERHAD

1991 Assumed present name as Kurnia Insurans (Malaysia) Berhad

1993 Gross premium surpassed RM200 million

1995 Total assets surpassed RM500 million

1996 Pre-tax profit surpassed RM100 million; Attained MS ISO 9002

1997 Gross premium surpassed RM500 million

1998 Paid-up capital increased to RM100 million

1999 Total assets surpassed RM1 billion; “A” Rating for Claims Paying Ability by MARC

2000 Launch of Kurnia Auto Assist (KAA)

2001 Paid-up capital increased to RM200 million; Corporate Head Office moved to the 25-storey Menara Kurnia

2002 “A” Rating for General Insurance Financial Strength, accredited by MARC; Attained MS ISO 9000:2000

Assumed present name as Kurnia Asia Berhad

2003 Total assets surpassed RM1.5 billion; Launch of Kurnia Express (KE)

2004 Gross premium surpassed RM1 billion; “A+” Rating for General Insurance Financial Strength, upgraded by MARC; Launch of MediGuard and MediGuard Express

Acquisition of Kurnia Insurans (Malaysia) Berhad; Formation of Kurnia Asia Berhad Group

2005 Listing on the then Main Board of Bursa Securities (KURASIA 5097); Inclusion in the MSCI Malaysia Index; Inclusion in the then Kuala Lumpur Composite Index (KLCI)

2006 “A” Rating for General Insurance Financial Strength re-affirmed by MARC; Launch of 2 new divisions - Property & Casualty Division & Motor Division; Launched 8 new medical insurance policies - MediGuard Junior, Grads, Family, Senior, Biz, Lady, Premier and Value

Declaration of Interim Dividend of 9.027 sen per share for Financial Year Ended 30 June 2006

2007 Total assets surpassed RM2 billion Completed acquisition of effective 100% equity interest in PT. Kurnia Insurance Indonesia; Launch of TOP (Transformation of Operations & Performance) Programme

2008 Launch of “Auto Shield” plan; Awarded Malaysia’s Most Valuable Brand (MMVB) 2007; Partnership with Microsoft Malaysia to become the first user of Microsoft Dynamics CRM 4.0; Won Bronze in Brand Leadership Award under Life and General Insurance Category by Malaysia Brand Equity

Further capitalisation of existing subsidiaries, Kurnia Insurans (Malaysia) Berhad and PT. Kurnia Insurance Indonesia (KII); Acquisition of 25% of Kurnia Insurance Thailand (KIT)

2009 Launch of “Perfect 10” personal accident plan, KAA Riders & enhanced KE services; Introduced Compensation for Assessed Repair Time (CART) extension service; SMS alerts & notifications; Awarded MMVB 2008 and 2009; Launch of “Perfect Rider”; Launch of “One Touch Campaign”; Upgraded compliance certification to MS ISO 9001:2008

KII was awarded 2009 Third Best Insurer with equity below IDR 50 billion by Media Asuransi

2010 Launch of “Perfect 10 Plus”, “Pet Insurance” and “Student Personal Accident” plans; KAA Riders service extended to Johor, Penang and Malacca; Launch of KurniaInsurance Facebook and Twitter pages; First general insurer to adopt the Insurance Services Malaysia (ISM) – Automotive Business Intelligence system, which is an independent vehicle valuation system; Integrated its sales systems with the ISM – No Claims Discount (NCD) system for reference of eligible NCD for motor insurance

Incorporated Kurnia (Cambodia) Incorporated Co., Ltd (KCI) with 60% equity interest in KCI; Further capitalisation of associated company, KIT

Covering you throughout your important voyagesLost items. Damaged goods. Unexpected liabilities. These unpredictable circumstances during cargo transportation are not known to be new. However, with Kurnia’s Marine Insurance coverage, you can feel more at ease; knowing your goods are insured, whether they are being transported by air, sea or land.


Chairman’s Statement

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Kurnia Asia Berhad (KAB or Group) for the financial year ended 31 December 2010 (FYE 2010).

FINANCIAL REVIEW

Strong Non-Motor Growth

We are pleased to announce that our gross premium written for the FYE 2010 increased by 8% to RM1.1 billion compared to RM977.2 million in the corresponding period last year. This increase was fueled mainly by strong growth in the non-motor business derived from our main subsidiary, Kurnia Insurans (Malaysia) Berhad (KIMB). For the year under review, KIMB recorded an impressive year-on-year growth of 27% in non-motor gross premium and in tandem, increased the proportion of its non-motor business to overall business portfolio from 15% to 18%. This is positive validation that KIMB is on the right track to achieve its internal target of 30% non-motor contribution by 2012.

We achieved a profit before tax of RM29.6 million compared to RM102.4 million recorded in the last corresponding period. The decline in profit was mainly due to an increase in net claims incurred as a result of our on-going initiatives to strengthen case reserves and accelerate claims settlement, where our key objectives are to control claims quantum from escalating over time as well as to reduce the quantum of outstanding claims liabilities for better capital management purposes. Concurrently, we are continuously improving our risk selection and enhancing our claims processes and services to reduce leakages and to improve customers’ experience.

Since the inception of our transformation programmes, namely Transformation of Operations and Performance (TOP) and Mission 15, we have seen notable and positive changes to our overall business operations. We continue to see such positive results during the financial year under review.

One of our transformation initiatives under TOP was to practice more stringent business risk selection. In this respect, KIMB continued to reduce its exposure to unprofitable third party motor policies by 44% year-on-year such that the third party policies represented only 5% of its total motor gross premium for the FYE 2010. In contrast, KIMB’s comprehensive motor policies increased by 18% year-on-year - this is testimony of the company’s dedicated and disciplined action plan to re-balance and improve the quality of its motor portfolio without compromising the overall gross premium income. By the same token, KIMB’s average premium per policy also improved by 11% year-on-year, and the company strives to further improve its average premium.

Another rewarding success of our transformation initiatives to improve cost management can be seen where our management expense ratio (on gross premium written) for the FYE 2010 decreased from 19.2% to 16.6% year-on-year.

Based on the foregoing, we have delivered a commendable set of results for the year under review. The strategies identified and the execution of our action plans in the previous years are clearly paying off. To this end, we remain committed towards continuous improvements in our business structure to ensure our Group’s sustainability and long-term creation of shareholders’ value. With more robust operating procedures, expertise and processes already in place, coupled with the emerging opportunities in our markets, we are optimistic that we will deliver the desired results in 2011 and in the financial years to come.

OPERATIONAL REVIEW

Transformation of Operations

We have been faithfully serving the Malaysian market for the past 19 years together with over 5,400 agents and 30 branches nationwide and now have a presence in Indonesia and Thailand. The Kurnia brand is rated as one of Malaysia’s Top 30 Most Valuable Brands, and it is our long-term commitment to continue serving our policyholders and business partners. We will not rest on our laurels and will continue to focus, transform and grow our business. We will do this through continuous assessment of our operations, and of the opportunities and challenges ahead of us.


Claims and Cost Management

KIMB is the first general insurer in Malaysia to have centralised all major backroom processes, including submission and processing of documents and payment to a single centralised hub (Hub) for all motor policies. The Hub is also equipped with a modern customer and agent care call center to handle enquiries through phone or email, defining a new service standard for the industry. With the Hub, KIMB has greater control over risks, benefits from cost efficiency and offers all agents a higher standard of service. The establishment of the Hub also complements the Group’s planned IT and systems investments going forward.

In 2010, KIMB launched one of its claims initiatives to improve customer service - the personal accident express claims service to approve claims with amounts less than RM5,000 within an hour. Currently, about 90% of KIMB’s non-motor claims are approved within 7 days. As a testimony of its commitment to fast claims service to policyholders, KIMB issued the first batch of interim and final payments to policyholders affected by the flood in Northern Malaysia totaling over 50 cases in less than 2 weeks.

Non-Motor Growth

During the first half of 2010, KIMB launched 3 non-motor products: Perfect 10 Plus (personal accident insurance), Pet Insurance and Student Personal Accident insurance. The Perfect 10 Plus and a previously launched product, Perfect Rider, continued to receive strong positive response from the public. In addition, KIMB partnered with the renowned International SOS to provide overseas medical evacuation and repatriation for Perfect 10 Plus policyholders. KIMB also launched a marine cargo insurance programme, catering to its commercial partners, in the later part of the year.

KIMB deploys various distribution channels to grow its non-motor business. The company continues to develop its 2,000-strong non-motor agency force and is planning to recruit more agents. KIMB also won several key corporate accounts during the first half of the year and managed to partner with some new brokers during the year, which reflects its growing credibility in the non-motor segment.

However, non-motor will not only be KIMB’s key growth area but also for the Group’s operations in Indonesia and Thailand. In relation to this, the overseas operations have established several key partnerships with local brokers, financial institutions and other corporate accounts to fuel growth.

Other Tactical Initiatives

On 8 March 2010, KIMB became the first general insurer in Malaysia to adopt the Insurance Services Malaysia Berhad (ISM)-Automotive Business Intelligence (ABI) system online for underwriting motor insurance. The ISM-ABI is an independent vehicle valuation system approved by both Bank Negara Malaysia and Persatuan Insurans Am Malaysia.The reference system provides indicative value of customers’ vehicles upon purchasing or renewing their comprehensive motor insurance. The new ISM-ABI vehicle valuation system is not only a value-added service for KIMB’s customers but also helps the company in its underwriting control in overcoming issues of over and under-insuring of vehicles. It is a win-win situation for KIMB and its agents in ensuring the best service to their customers. Further, policyholders stand to benefit from this system as well as it reduces uncertainty and promotes transparency.

Effective 1 July 2010, KIMB integrated its sales systems with the ISM - No Claim Discount (NCD) system for reference of eligible NCD for motor insurance. The integration of the various motor insurance point-of-sales systems has enabled better service for consumers and better underwriting control.

Training and Development for Employees and Agents

In preparation for a more liberalised insurance market, the need to enhance the skill set and knowledge of our employees and agency force has become even more significant. Rigorous training programmes, road shows, seminars and workshops were conducted all year round for all our agents and employees to motivate them, improve business acumen and to enable them to execute our business strategies and provide superior customer service.


Chairman’s Statement

Enhancement of Customer Service

In line with the company’s mission to provide excellent service to customers, KIMB enhanced its Kurnia Auto Assist (“KAA”) service, which is a free 24-hour roadside assistance service provided for Kurnia’s private car motor comprehensive insurance policyholders, with the deployment of KAA Riders on motorcycles in the Klang Valley, Penang, Johor Bahru and Melaka as well. These riders aim to arrive at the scene of breakdown within 15 to 30 minutes to provide assistance and carry out minor repairs, where possible. As the company has received overwhelming and positive response from the launch of this service, it is inevitable that we will seek to extend the KAA Riders service to other major towns in Malaysia to further enhance the customer service experience.

As we are constantly striving to provide the best customer service to our customers, KIMB recently launched its very own mobile application for iPhone users called Kurnia Mobile, which will offer ease and convenience to customers and agents alike. KIMB is the first general insurer in the country to do so. Kurnia Mobile can be downloaded for free from the Apple iPhone App Store. It is a mobile insurance application that allows agents and customers to access KIMB’s services on-the-go via their iPhone.

In November 2010, in order to serve its customers better, KIMB launched its own Facebook (search for “Kurnia Insurance” in Facebook) and Twitter (http://www.twitter.com/KurniaInsurance) accounts. By embracing technology, we are now only a click away from our customers. We can communicate and listen better to our customers through our social media network sites. Furthermore, we can now update and reach out to customers instantly on news about our company, products, services and the industry.

Internally, KIMB has strengthened the technical capabilities and knowledge of its underwriting team. It has also improved the service level in the delivery process, for example, the implementation of SMS claims notification to update the insured on their non-motor claims status.

KIMB has also enhanced its IT system to enable its agents to issue e-policies for selected small commercial risks. This

has shortened the turnaround time for non-motor insurance policy issuance and has thus improved the service level to both business partners and customers. In the pipeline are plans for system and process enhancements aimed at improving efficiency and turnaround time, such as the said internal e-initiatives.

Investor Relations and Corporate Social Responsibility (CSR) Activities

We are committed to the welfare and development of the community because we believe that society plays a key part in our company’s success as a corporate entity. Hence, we always find ways to serve and support the community by running events and campaigns, which will increase the public’s awareness of our brand and commitment to serve the public.

To increase our brand’s awareness and as part of our investor relations activities, we actively participate in talks and seminars where we get to reach out to retail and corporate investors alike. For example, on 6 March 2010 we participated in a corporate presentation to retail investors in Kuala Lumpur at CIMB’s Financial Market Outlook Seminar (Banking & Insurance Sector). We also participated in the inaugural Malaysia Gems 2010, a cross-border investor roadshow, in Singapore on 8 May 2010, which was jointly organised by Share Investor and Business Times. The main objective of the full day road show was to give an overview of the capital market in Malaysia and to boost the confidence of Singapore investors to invest in Malaysia.

In appreciation of the continuous strong support and outstanding achievements of our agents nationwide, KIMB held its Agency Convention at Berjaya Beach & Spa Resort in Langkawi on 16-18 April 2010. The 3 days 2 nights event was well attended by about 600 people, including members of our management team, selected marketing teams and KIMB’s agents throughout the country.

KIMB once again co-hosted the Kurnia Saujana Amateur Golf Championship with Saujana Golf & Country Club (SGCC) for the second consecutive year. The 3-day 54-hole golf championship was held from 25-27 May 2010 at the SGCC


Palm Course in Glenmarie, Subang Jaya. As part of our CSR efforts, KIMB believes in giving back to the golfing fraternity to further strengthen, discover and develop emerging talent through such an activity. Through various golfing events, KIMB is now one of the major players in the golf-related insurance business.

KIMB was the sponsor for a first-of-its-kind airstrip vintage and classic car competition called Show, Sprint and Slalom on 12 June 2010 at the Bernam River Airfield (BRA) in conjunction with the BRA fly-in weekend. The Sprint was divided into the vintage, classic, modern classic and special interest categories, with 30 challenge trophies. About 60 classic car owners, who are all members of the Royal Malaysia Vintage and Classic Car Club, and some who are also part of other classic car clubs in the country, were vying for the highly sought-after “Sprint King” title. The event was a success, where members of the press from Malaysia, Singapore and other neighbouring Asean countries were also present to provide publicity for the event.

OUTLOOK FOR THE YEAR AHEAD

In 2011, global growth will be led by the developing Asian economies with better economic fundamentals and stronger domestic demand. According to Bank Negara Malaysia, the Malaysian economy is expected to grow between 5% to 6% in 2011. The economic growth is expected to be more robust in the later part of 2011, underpinned by strong domestic demand, emanating primarily from private consumption and investment. Meanwhile, the public sector will remain supportive of domestic growth. Although the global outlook is concerned with rising commodity prices and global inflation, the Malaysian government has set in place a series of key measures as stated in Budget 2011, the Tenth Malaysia Plan and the Economic Transformation Programme, where more aggressive efforts to attract investments have been proposed and are being implemented, which will help strengthen domestic demand and spur economic growth.

Product and service innovation is going to be a key platform to remain important in the market. As part of KIMB’s non-motor initiatives, more new products will be launched in 2011. Meanwhile, we are actively beefing up our overseas

businesses in Indonesia and Thailand, which have high growth potential, by expanding our distribution channels and forging new partnerships with brokers and banks while enhancing the IT system for ease of processing and settlement of claims.

Bank Negara Malaysia has also announced that they will implement a new motor insurance premium framework in 2012, where they will introduce gradual increases in motor insurance premiums. Customers will then be expecting more from insurance companies. At our Group, our customers are at the heart of our business, and we place care, emphasis and dedication to ensure long-term relationships with our customers. We are confident that we will be able to provide superior customer service and genuine value-added services to retain our existing customers as well as to attract new customers. To achieve this, we will continue to gain deeper understanding of our customers, and introduce innovative products and services and improve our internal capabilities to strengthen our branding and market position.

APPRECIATION

On behalf of the Board of Directors, I would like to take this opportunity to extend my heartfelt and deepest gratitude to all our loyal shareholders, valued policyholders, agents, brokers, business associates, reinsurers and media for their continuous support and faith in our Group. We also extend our gratitude to Bank Negara Malaysia, Persatuan Insurans Am Malaysia (PIAM) and all other relevant authorities for their continuous support and guidance.

Finally, I would also like to express my sincere appreciation to all our employees, who are in fact our greatest resource. Thanks to your hard work, team spirit and commitment, we are able to continue riding on the wave of transformation and growth. I look forward to a bright future, celebrating our success together in the years to come.

Tan Sri Dato’ Paduka Kua Sian KooiExecutive ChairmanKurnia Asia Berhad20 May 2011


Board of Directors’ Profile

Tan Sri Dato’ Paduka Kua Sian KooiExecutive Chairman/Non-Independent Executive Director

Tan Sri Dato’ Paduka Kua Sian Kooi, Malaysian, 58 years of age was appointed as Director of Kurnia Asia Berhad (“KAB”) on 12 April 2004 and is currently the Executive Chairman of KAB.

Tan Sri Dato’ Paduka Kua is also currently a Director of Kurnia Insurans (Malaysia) Bhd (“KIMB”), a subsidiary of KAB, which underwrites general insurance. He has over 30 years of vast insurance experience and in the later years appointed as the director and chairman of KIMB. Through determination and diligence, he engineered the transformation of KIMB into the indisputable leader of the general insurance industry in Malaysia, whether measured in terms of profits, policyholders, premiums or assets. His other directorship in a public company is Kurnia Foundation.

Tan Sri Dato’ Paduka Kua has attended all of the five (5) Board meetings held during the financial year. Save for Datuk Kua Chung Sen and Dato’ Quah Teong Moo, who are his brothers, he has no other relationships with any Directors of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Datuk Kua Chung SenDeputy Executive Chairman/Non-Independent Executive Director

Datuk Kua Chung Sen, Malaysian, 51 years of age was appointed as Director of KAB on 12 April 2004. He is currently the Deputy Executive Chairman of KAB and also serves as a member of the Remuneration Committee.

Together with Tan Sri Dato’ Paduka Kua Sian Kooi, he has served in the top management position of KIMB since 1991 when the then present management took over which was then an insolvent insurer, Industrial & Commercial Insurance (M) Bhd. He was also instrumental in turning around the company into the leader in the general insurance industry. He was responsible for overseeing the establishment and strengthening of the financial and investment division of KIMB in the early years. He also led in the re-engineering of operational procedures of critical processes. Following that, he spearheaded the implementation of ISO procedures, resulting in KIMB being ISO accredited in 1996. He is also very much involved in the strategic direction of the company as well as in ensuring that business strategies are accurately and effectively implemented. Under his guidance, KIMB has strengthened all aspects of its operations. His other directorship in a public company is Kurnia Foundation.

Datuk Kua has attended all of the five (5) Board meetings held during the financial year. Save for Tan Sri Dato’ Paduka Kua Sian Kooi and Dato’ Quah Teong Moo, who are his brothers, he has no other relationships with any Directors of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.


Dato’ Wira Othman bin AbdulIndependent Non-Executive Director

Dato’ Wira Othman bin Abdul, Malaysian, 60 years of age was appointed Director of KAB on 13 April 2004. He serves as the Chairman of the Nominating and Remuneration Committee and is also a member of the Audit Committee. He was the Chairman of KIMB from March 2005 to June 2008 and served as a member of the Audit Committee of KIMB until June 2008.

Dato’ Wira Othman is an alumnus of University Kebangsaan Malaysia, majoring in sociology. Upon graduation in 1978, he served with the Family Planning Board and the Kedah State Development Corporation. From 1980 to 1983, he was the Assistant District Officer of Pendang. He was elected as a Member of Parliament from April 1983 to 2004 and has 10 years of experience as a Parliamentary Secretary in the Prime Minister’s Department. He was appointed as MARA’s Chairman from 1995 to 1997. Subsequently, he was also Chairman of Westport from 1996 to 1998. During the same period from 1996 to 1998, he was also the Director for MBF Cards Services Sdn Bhd, MBF Discount Card and MBF Pacific Rent-A-Car Sdn Bhd.

Dato’ Wira Othman has attended all of the five (5) Board meetings held during the financial year. He has no family relationship with any Director and/or major shareholder of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Dato’ Quah Teong MooNon-Independent Non-Executive Director

Dato’ Quah Teong Moo, Malaysian, 55 years of age was appointed Director of KAB on 29 June 2004.

Dato’ Quah was a director of KIMB from April 2004 until June 2008 before he was appointed to his current post as Advisor to KIMB. Dato’ Quah has over 15 years of insurance experience, starting his career with KIMB as an entry-level executive, and has been steadily promoted through the ranks to senior management position. During this period, he has accumulated vast marketing experience and an in-depth knowledge of the general insurance industry in Malaysia.

Dato’ Quah has attended four (4) out of the five (5) Board meetings held during the financial year. Save for Tan Sri Dato’ Paduka Kua Sian Kooi and Datuk Kua Chung Sen, who are his brothers, he has no other relationships with any Directors of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.


Leow Ming Fong @ Leow Min FongIndependent Non-Executive Director

Leow Ming Fong @ Leow Min Fong, Malaysian, 61 years of age was appointed Director of KAB on 16 June 2006. He is the Chairman of the Audit Committee and a member of the Remuneration Committee and Nominating Committee.

Leow Min Fong brings with him over more than 30 years of experience in the accounting/auditing field, having served as an audit partner and concurring partner for several portfolio of clients including several public listed companies and multinational companies. Upon graduation, he commenced his articleship with a firm of Chartered Accountants in London, United Kingdom. Prior to his appointment with the company, he joined KPMG Malaysia until his retirement as one of the senior partners after a period of 32 years. During his KPMG experience, he has been posted to various KPMG branches as audit partner inclusive of short-term assignments in Singapore, British Guinea in South America and Vietnam. He has also acted as partner in charge of KPMG Cambodia for 3 1/2 years from late 1995 to early 1999. In addition, he has been involved in special work for fraud investigation, due diligence for merger and acquisitions, reporting accountant for various corporate exercises for public listed companies.

He is a fellow of the Institute of Chartered Accountants in England and Wales and member of the Malaysian Institute of Certified Public Accountants and Malaysian Institute of Chartered Accountants. His other directorships in public listed companies in Malaysia are Nam Fatt Corporation Berhad and Focus Point Holdings Berhad. He is also a director in NagaCorp Limited, a company listed in Hong Kong and Canadia Bank PLC, a bank incorporated in Cambodia.

Leow Min Fong has attended all of the five (5) Board meetings held during the financial year. He has no family relationship with any Director and/or major shareholder of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Dato’ Dr. Sharifuddin bin Abdul WahabIndependent Non-Executive Director

Dato’ Dr. Sharifuddin bin Abdul Wahab, Malaysian, 55 years of age was appointed Director of KAB on 7 May 2010. He is also a member of the Audit, Remuneration and Nominating Committee.

Dato’ Dr. Sharifuddin started his career in the education field as a lecturer in University Pertanian Malaysia in 1982. Besides lecturing, he was also active in various research and development work. Subsequently, he left the education field in 1989 and joined Schmidt Scientific Sdn Bhd from 1989 to 2005. In 1995, he was appointed the Executive Director of Schmidt Vietnam Co. Ltd and later appointed as the Regional Managing Director of Schmidt Singapore & Malaysia in 1999 to 2000. He was promoted to head the newly restructured organisation of Schmidt BioMedTech Asia Ltd in April 2000 as the President and CEO. During his stint with Schmidt group of companies, he has demonstrated continous growth, achievements and remarkable leadership in the management of complex activities within the Bio Science, Technology and Medical field. He left Schmidt BioMedTech Asia Ltd in 2007 and joined Naim Holdings Berhad in 2008 as Deputy Managing Director. He was also assigned to head the overseas business development operations in Naim, until his resignation in January 2010.

Dato’ Dr. Sharifuddin holds a doctorate in Veterinary Medicine from the University of Agriculture, Faisalabad, Pakistan and a Masters of Science in Animal Reproduction from University Pertanian Malaysia. For his achievement in the animal reproduction research work, he was given a commendation award from the former Prime Minister, Tun Dr. Mahathir Mohammad. He was also awarded the Darjah Utama Yang Amat Mulia Bintang Kenyalang Sarawak which carries the title Pegawai Bintang Kenyalang (PBK) in 2009 from Tuan Yang Terutama Tun Datuk Patinggi Abang Haji Muhammad Salahuddin. He was recently awarded the Darjah Dato’ Paduka Mahkota Perak, DPMP which carries the title Dato’ by His Royal Highness, Paduka Sultan Perak Darul Ridzuan, Sultan Azlan Muhibbudin Shah ibni Almarhum Sultan Yussuf Izzuddin Shah Ghafarullahu-lah on 19 April 2010.

Dato’ Dr. Sharifuddin has attended all the three (3) Board meetings held since the date of his appointment. He has no family relationship with any Director and/or major shareholder of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Board of Directors’ Profile


Management Team

KURNIA ASIA BERHAD (KAB)

Board of Directors

Tan Sri Dato’ Paduka Kua Sian KooiGroup Executive Chairman

Datuk Kua Chung Sen

Dato’ Quah Teong Moo

Dato’ Wira Othman bin Abdul

Leow Ming Fong @ Leow Min Fong

Dato’ Dr. Sharifuddin bin Abdul Wahab

Executive Committee (EXCO)

Tan Sri Dato’ Paduka Kua Sian Kooi

Datuk Kua Chung Sen

Looi Kok Leong

Joanne Kua Ying Fei

Management Team

Tan Sri Dato’ Paduka Kua Sian KooiExecutive Chairman

Datuk Kua Chung SenDeputy Executive Chairman

Joanne Kua Ying FeiDirector, Group Executive Chairman’s Office

Rachel HoDirector, Corporate Finance / Strategy & Planning / Operations

Chung Pei PeiCompany Secretary

Belinda Cheah Sze YunAssociate Director, Accounts

KURNIA INSURANS (MALAYSIA) BERHAD (KIMB)

Board of Directors

Dato’ Dr. Sharifuddin bin Abdul WahabChairman


Raymond Fam Chye Soon

Paul Frankland

Lian Gee Meng

Wong Kim Teck

PT KURNIA INSURANCE INDONESIA (KII)

Board of Commissioners

Datuk Kua Chung SenPresident Commissioner

Kua Sian Ten

Benny Haryanto Djie

KURNIA INSURANCE THAILAND (KIT)

Board of Directors


Eugene Foong Jun Seong

Pol Gen Watcharapol Prasarnrajkit

Norawat Suwan

Kitti Pusittisak

Rawat Bhudhatham

Chaweng Tatha

Theodor Schupbach


Statement on Corporate Governance

The Board of Directors of Kurnia Asia Berhad (“KAB”) is committed to ensure that the highest standard of corporate governance is practiced throughout the Group as a fundamental objective of protecting and enhancing the interest of all stakeholders.

The Board is pleased to report to shareholders the manner in which the Principles of corporate governance contained in the Malaysian Code on Corporate Governance (“Code”) are applied and the extent of compliance thereof during the financial year under review.

A. BOARD OF DIRECTORS

Board Balance

The Board currently has six (6) members comprising an Executive Chairman, a Deputy Executive Chairman, three (3) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director. The Board composition is in line with Bursa Malaysia Securities Berhad (“Bursa Securities”) Main Market Listing Requirements (“Main LR”) that requires one-third (1/3) of the Board members to be Independent Directors to ensure independence of judgement.

The present size and composition of the Board is optimum and well balanced. As presently constituted, the Board has the stability, continuity and commitment as well as capacity to discharge its responsibilities effectively.

At the Company’s level, the Executive Chairman is primarily responsible for the working of the Board and at Group level he is responsible to oversee the group’s business and performance.

Decisions of the Board of Directors are based upon majority decisions and no single Board member can make decisions for and on behalf of the Board unless duly authorised by the Board of Directors. This is to ensure that no individual or small group of individuals can dominate the Board’s decision making. The involvement and participation of Independent Non-Executive Directors further provide an element of independent judgement to bear on the issues of strategy, performance, resources and standards of conduct in the Board’s decision making and deliberation. Furthermore, the three (3) Independent

Directors in effect represent minority shareholders’ interests in the Company by virtue of their roles and responsibilities as Independent Directors.

Board Meetings

During the financial year under review from 1 January 2010 to 31 December 2010, the Board met on five (5) occasions where it deliberated upon and considered a variety of matters including Group’s policy, corporate proposals, Group’s financial results and strategic decisions and the business plans and directions of the Group.

Prior to each Board meeting, the Board members are given appropriate documentation in advance of each meeting. These documents include the agenda and reports covering the areas of corporate, financial and operational matters. The Board has full access to the senior management of the Group and the advice and services of the company secretary. In addition, the Directors, whether as a full board or in their individual capacity, in furtherance of their duties may seek independent professional advice at the Company’s expense.

The attendance of the Directors at the Board meetings is set out in the Director’s Profile, which appear on pages 16 to 18 of this Annual Report.

Appointment of Directors

The appointment of new directors is under the purview of the Nominating Committee comprised exclusively of non-executive directors, majority of whom are independent which is responsible for identifying and proposing new candidates for the Board and for assessing directors on an on-going basis. Any new appointment to the Board must be upon recommendation by the Nominating Committee after assessment is done with the consideration of mix skills, experiences and other qualities that the new candidate should bring to the Board. As a holding company of an insurance company, Bank Negara Malaysia’s approval is sought after approval from the Board is obtained for any new appointment to the Board of the Company.


Re-election of Directors

In accordance with the Company’s Articles of Association, one-third (1/3) or the number nearest to one-third (1/3) shall retire from office at each Annual General Meeting. A retiring Director is eligible for re-appointment. Article 100 of the Company’s Articles of Association provides that any new or additional Director appointed by the Board during the year shall hold office until the next Annual General Meeting and shall then be eligible for re-election. The election of each Director is voted on separately.

Directors’ Training

The Directors have participated in and benefitted from conferences, seminars and training programmes on areas pertinent to the enhancement of their roles and responsibilities as Directors. During the financial year ended 31 December 2010, the Directors in office had attended the following conferences, seminars and training:

Members of the Board Conferences, seminars and training

Tan Sri Dato’ Paduka Kua Sian Kooi – Corporate Social Responsibility for Malaysian Business

Datuk Kua Chung Sen – Boardroom Agenda for PLC’s Directors

Dato’ Wira Othman bin Abdul – 2010 Board Challenges

Dato’ Quah Teong Moo – Bank Negara Malaysia Financial Institutions Directors’ Education (FIDE) Programme: Module 1 - 4

Leow Ming Fong @ Leow Min Fong – The Challenges of Implementing FRS 139

– IFRS 9 & Updates on Accounting for Financial Instrument

– 2010 18th World Congress of Accountants

Dato’ Dr. Sharifuddin bin Abdul Wahab – Bank Negara Malaysia Financial Institutions Directors Education (FIDE) Programme: Module 1 – 4

– Financial Industry Conference 2010

– Boardroom Agenda for PLC’s Directors

Board Committees

In discharging its fiduciary duties, the Board has delegated certain responsibility to the following committees and each committee operates under their respective approved terms of reference.

a. Audit Committee

The Committee members are as follows:

Chairman Leow Ming Fong @ Leow Min Fong Independent Non-Executive Director

Members Dato’ Wira Othman bin Abdul Independent Non-Executive Director

Terms of reference of the Committee are disclosed in the Audit Committee Report which appear on pages 24 to 26 of this Annual Report.

Dato’ Dr. Sharifuddin bin Abdul WahabIndependent Non-Executive Director (appointed w.e.f 7 May 2010)


Statement on Corporate Governance

b. Nominating Committee

The Committee appointed by the Board of Directors consists of not less than 2 members comprising exclusively of independent non-executive directors.

The Committee’s members are as follows:

• Dato’WiraOthmanbinAbdul(Chairman) • LeowMingFong@LeowMinFong • Dato’Dr.SharifuddinbinAbdulWahab

The primary functions of the Nominating Committee are as follows:

a. To recommend the nomination of a person or persons for all directorships to be filled by the shareholders or the board;

b. To consider, in making its recommendations, candidates for directorships proposed by the Managing Director/Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any director or shareholder;

c. To recommend to the board, directors to fill the seats on board committees;

d. To identify, evaluate and recommend candidates for appointment as Company Secretary;

e. To assess annually the effectiveness of the board as a whole, the committees of the board and the contribution of each existing individual director and thereafter, recommend its findings to the board; and

f. To review annually the required mix of skills and experience and other qualities, including core competencies which non-executive directors should bring to the board and thereafter, recommend its findings to the board.

c. Remuneration Committee

The Committee appointed by the Board of Directors consists of not less than two (2) members comprising mainly of non-executive directors.

The Committee’s members are as follows:

• Dato’WiraOthmanbinAbdul(Chairman) • DatukKuaChungSen • LeowMingFong@LeowMinFong • Dato’Dr.SharifuddinbinAbdulWahab

The Committee is responsible for recommending to the Board the remuneration packages of managing directors, executive directors and senior management of the Company in all its forms, drawing from outside advice as necessary. The remuneration packages of non-executive directors shall be determined by the Board of Directors as a whole.

The number of directors of the Company who served during the financial year ended 31 December 2010 whose remuneration falls into the following bands:-

Range of Remuneration No. of Directors

ExecutiveNon-

Executive

RM10,000 – RM50,000 - 1

RM50,001 – RM100,000 - 1

RM100,001 – RM150,000 - 1

RM150,001 – RM400,000 - -

RM400,001 – RM450,000 - 1

RM450,001 – RM500,000 - -

RM550,001 – RM1,800,000 - -

RM1,800,001 – RM1,850,000 1 -

RM1,850,001 – RM3,950,000 - -

RM3,950,001 – RM4,000,000 1 -

Aggregate Remuneration of the Director of the Company receivable from the group for serving on the Board of the Company:-

Executive Directors(RM’000)

Non-Executive Directors(RM’000)

Directors Fee - 219

Salaries and other emoluments

5,821 425


B. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS RELATION

The Board appreciates feedback from their valued shareholders and consistent with this, it is the intention of the Board that the shareholders are well informed of all major developments that have an impact on the Group.

Announcements of quarterly financial results, corporate proposals and other required announcements were released on time to ensure fast and efficient dissemination of information to the shareholders. The Company’s website, www.kurnia.com provides a comprehensive avenue for up-to-date information dissemination, such as dedicated sections on corporate information including financial information, press releases and company news.

The Annual General Meeting is used as another forum to inform the shareholders of current developments with an opportunity for shareholders to seek clarifications and provide feedback and comments to the Directors and Management for consideration. Regular dialogue and presentation take place throughout the year with institutional investors.

C. ACCOUNTABILITY AND AUDIT

Financial Reporting

In submitting the annual audited financial statements, the Board is aware of its responsibilities and the requirement to present a balanced, clear as well as meaningful assessment of the Group’s performance and future prospects. The Company’s Financial Statements are prepared in accordance with the requirements of the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

In discharging its responsibilities, the Board is assisted by the Audit Committee in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements is set out on page 38 of this Annual Report.

Internal Control

The Board recognises that it is responsible for the Group’s internal control systems and for reviewing its effectiveness. The Board also maintains a sound internal control system to safeguard the shareholders’ investments and the Group’s assets. The overview of the state of the Group’s internal control is spelt out in the Statement on Internal Control set out on pages 27 to 28 of this Annual Report.

Relationship with the Auditors

The Board through the Audit Committee has an appropriate and transparent relationship with the external auditors and the external auditors are given access to books and records of the Group.

A summary of the activities of the Audit Committee during the year are set out under the Audit Committee Report on this Annual Report.

The amount of non-audit fees paid to the external auditors and it’s affiliated company during the financial year for tax services and review of RBC forms was RM22,717.

Compliance with the Code

The Board strives to ensure that the Company complies with the Principles and Best Practices of the Code. The Board will endeavour to improve and enhance the procedures from time to time. The Group has complied with the Best Practice of the Code.

D. BOARD COMMITTEES OF SUBSIDIARY COMPANY

As a measure of good corporate governance, Kurnia Insurans (Malaysia) Berhad, the subsidiary of the Company has formed the following committees:-

• AuditCommittee • RiskManagementCommittee • RemunerationCommittee • NominatingCommittee


Audit Committee Report

MEMBERSHIP AND ATTENDANCE

During the financial year ended 31 December 2010, a total of five (5) Audit Committee meetings were held. The Committee comprises the following members and details of attendance of each member at the Committee meetings held during the period are as follows:-

Composition of Audit Committee

Number of Committee meetings

attended


Chairman/Independent Non-Executive Director

5/5

Dato’ Wira Othman bin Abdul

Member/Independent Non-Executive Director

5/5

Dato’ Dr. Sharifuddin bin Abdul Wahab

Member/Independent Non-Executive Director

3*/3

* Dato’ Dr. Sharifuddin bin Abdul Wahab was appointed as a

member on 7 May 2010.

Composition

The Audit Committee shall be appointed by the directors from amongst themselves which fulfils the following requirements:-

1. The Audit Committee shall be composed of no fewer than three (3) members and all members must be non-executive directors, with a majority of whom shall be independent non-executive directors;

2. A majority of the Audit Committee must be independent directors and at least one (1) member;

a. must be a member of the Malaysian Institute of Accountants; or

b. if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working experience and:-

i. he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

ii. he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or

iii. fulfils such other requirements as prescribed or approved by the Exchange.

3 The Chairman of the Audit Committee shall be an independent director;

4. The Chief Executive Officer shall not be a member of the Audit Committee;

5. The Audit Committee shall fulfil such other requirements as prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”); and

6. The Audit Committee shall not consist of any alternate director of the Company.

Retirement and Resignation

In the event of any vacancy in the audit committee, the Company must fill the vacancy within 3 months.

Rights

The Audit Committee shall in accordance with the procedure determined by the Board and at the cost of the Company:-

a. have authority to investigate any matter within its terms of reference;

b. have the resources which are required to perform its duties;


c. have full and unrestricted access to any information pertaining to the Company;

d. have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any);

e. be able to obtain independent professional or other advice; and

f. be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of the executive members of the Company, whenever deemed necessary.

Functions and Duties

The Committee shall:-

1. Review the following and report the same to the Board of Directors;

a. with the external auditor, the audit plan, the evaluation of the system of internal controls and the audit report;

b. the assistance given by the employees of the Company to the external auditors;

c. the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work;

d. the internal audit plan the results of the internal audits or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

e. the quarterly results and year end financial statements, prior to the approval by the board of directors, focusing particularly on:-

i. changes in or implementation of major accounting policy changes;

ii. significant and unusual events; and

iii. compliance with accounting standards and other legal requirements.

f. any related party transaction and conflict of interest situation that may arise within the company or group including any transaction, procedure or course of conduct that raises questions of management integrity;

g. any letter of resignation from the external auditors of the Company; and

h. whether there is reason (supported by grounds) to believe that the Company’s external auditor is not suitable for reappointment.

2. Recommend the nomination of a person or persons as external auditors; and

3. Report promptly to Bursa Securities where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements.

Meetings

1. The committee shall meet at least four (4) times in a year or more frequently as circumstances required with due notice of issues to be discussed and shall record its conclusions in discharging its duties and responsibilities.

2. A minimum of two (2) independent members present shall form the quorum.

3. Upon the request of any member of the Committee, the external auditors or the internal auditors, the Chairman of the Committee shall convene a meeting of the Committee to consider matters which should be brought to the attention of the directors or shareholders.

4. The external auditors and internal auditors have the right to appear and be heard at any meeting of the Committee and shall appear before the Committee when required to do so by the Committee.


Audit Committee Report

5. The Committee may invite any Board member or any member of management or any employee of the Company who the Committee thinks fit to attend its meetings to assist and to provide pertinent information as necessary.

6. The Company must ensure that other directors and employees attend any particular Audit Committee meeting only at the Audit Committee’s invitation, specific to the relevant meeting.

7. At least twice a year, the Committee shall meet with the external auditors, the internal auditors or both without the senior management present.

Procedure of Audit Committee

The Audit Committee may regulate its own procedures, in particular:-

a. the calling of meetings;b. the notice to be given of such meetings;c. the voting and proceedings of such meetings;d. the keeping of minutes; ande. the custody, production and inspection of such minutes.

Secretary

The Company Secretary or other appropriate senior official shall be the Secretary to the Audit Committee.

Summary of Activities

During the financial year, the Audit Committee carried out its duties in accordance with its terms of reference. These include:-

a. Reviewed the external auditors’ scope of work and audit plans for the year;

b. Reviewed the financial statements of the Group on a quarterly basis;

c. Reviewed the internal audit reports, audit recommendation and management response to these recommendations; and

d. Met with the external auditors and internal auditors twice during the financial year without the presence of the executive Board members and management.

The Internal Audit Function

The principal subsidiary company, Kurnia Insurans (Malaysia) Berhad has a well-established Internal Audit Department (“IAD”), which reports to the Audit Committee (“AC”) in monitoring and managing risks and internal controls.

The IAD is independent of the activities or operations of other departments and is guided by its Audit Charter. Audit assignments are prioritised based on audit risk assessment where the audit plan is reviewed and approved by the AC. The IAD also performs ad-hoc assignments as directed by the AC.

The IAD’s primary role is to assist the AC to discharge its duties and responsibilities by independently reviewing and reporting:

• ontheadequacyandintegrityofthecompany’ssystemof internal controls on various departments;

• to provide reasonable assurance that such systemcontinue to operate satisfactorily and effectively; and

• on the compliance with the established policies andprocedures as well as relevant statutory requirements.

Upon completion of each audit, audit reports together with the recommended action plans and its implementation status are presented to the Management and AC. The IAD will monitor closely the implementation progress of its audit recommendations to obtain assurance that all major risk and controls have been addressed by the Management. The IAD also follow-up on the findings reported by the Bank Negara Malaysia/External Auditors.

The Head of the IAD has regular meetings with the AC during the financial year in order for the audit findings to be raised and addressed promptly.

The cost of the IAD in respect of the financial year ended 31 December 2010 is RM448,977.00.


Statement on Internal Control

The Malaysian Code on Corporate Governance stipulates that the Board of Directors of listed companies should maintain a sound system of internal control to safeguard shareholders’ investments and Group assets. The Statement on Internal Control is prepared under the requirement of Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and in accordance with the “Statement on Internal Control: Guidance for Directors of Public Listed Companies” issued by the Institute of Internal Auditors Malaysia and as adopted by Bursa Malaysia Securities Berhad. The Board recognises the importance of a sound system of internal control to safeguard shareholders’ investments and the Group’s assets, enhance accountability and monitoring function, minimise fraud and ensure the accuracy and reliability of information reporting to management.

Responsibility

The Board affirms its overall responsibility for the Group’s system of internal control. This includes reviewing the adequacy and integrity of financial, operational and compliance controls and risk management procedures. In view of the limitations that are inherent in any system of internal control, this system is designed to manage rather than eliminate the risk of failure to achieve business objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or error.

The Group Structure

The Group comprises Kurnia Asia Berhad (KAB), its subsidiaries, Kurnia Insurans (Malaysia) Berhad (KIMB), PT. Kurnia Insurance Indonesia, Kurnia Auto Assist Sdn. Bhd., Kurnia Asia Pte. Ltd., Kurnia (Cambodia) Incorporated Co. Ltd. and its associate, Kurnia Insurance (Thailand) Co. Ltd. Kurnia Auto Assist Sdn. Bhd. and Kurnia (Cambodia) Incorporated Co. Ltd. are dormant companies and Kurnia Asia Pte. Ltd. is an investment holding company.

The principal operating subsidiary of the Group, KIMB, is regulated by Bank Negara Malaysia. KIMB’s internal control processes constitute a major part of the Group’s system of internal control. In addition, two committees were established at the holding company, KAB level, namely, an Executive Committee (EXCO) and an Audit Committee to enhance the internal control function of the Group as a whole.

Key Internal Control Processes

The key processes that have been established in reviewing the adequacy of the system of internal controls of the Group include the following:

At holding company level,

• KAB’sEXCOwasestablishedbytheBoardtoimplementpolicy decisions made by the Board and to monitor the Group‘s business direction formulated by the Board. The EXCO is also to set corporate philosophy/direction, strategy, goals and targets for the Group, and to review the performance of the Group on a monthly basis, together with other functions as stipulated in its terms of reference. The EXCO receives monthly reports on the performance of the respective subsidiaries and associate company.

• TheAuditCommittee of KAB, togetherwith theAuditCommittee of KIMB, are responsible for reviewing the internal control issues identified by the Internal Audit Department and the external auditors, as well as to improve the Group’s business efficiency, the quality of the accounting function, the system of internal controls and internal audit function. The committee’s function also includes reviewing the annual and quarterly financial results and making appropriate recommendation to the KAB Board for its approval. During the financial year, the Audit Committee of KAB met 5 times. Further details of the activities undertaken by the Audit Committee are set out in the Audit Committee Report.

At the principal insurance subsidiary, KIMB level,

• TheAuditCommitteeofKIMBisresponsibleforreviewingthe internal control issues identified by the Internal Audit Department and the external auditors, and their recommendations to improve the company’s business efficiency, the quality of the accounting function, the system of internal controls and internal audit function. It is also responsible for reviewing the adequacy of the scope, functions and resources of the Internal Audit Department. The Audit Committee of KIMB held 8 meetings during the financial year ended 31 December 2010 and had met with the external auditors twice during the year without the presence of the management.


• The Internal Audit Department of KIMB reviewscompliances with selected operational policies and procedures and the effectiveness of the internal control systems and highlights significant findings in respect of any non-compliance. Audits are carried out on the selected operating units and branches as approved by the Audit Committee, focusing on their critical operational and management activities. The frequency of the audits is determined by the level of risk assessed. The annual audit plan is reviewed and approved by the Audit Committee of KIMB and the findings of the audits are submitted to the Audit Committee of KIMB for review at its regular meetings.

• TheRiskManagementCommitteeofKIMBisresponsiblefor reviewing and approving the company’s Risk Management Policy and Framework annually so that they remain relevant and effective. The Committee is also responsible for overseeing the implementation of the risk management process. The Committee met 6 times during the financial year to receive and review reports on risk management activities of the company as submitted by the Enterprise Risk Management Department, which is independent from the management or operational units. The Committee also reviews and monitors the related risk exposures and ensures that there are appropriate and adequate internal controls to actively manage these risks.

• An Investment Committee is also in place with thefollowing responsibilities:-

o to review KIMB’s portfolio and strategic investments and supervise KIMB’s Investment Department on investment strategies, evaluate and recommend major investment decisions;

o to determine the investment objectives of each fund and appropriate benchmarks to evaluate investment performance;

Statement on Internal Control

o to establish investment guidelines from time to time that aimed at establishing a framework for the prudent management of investment funds of KIMB;

o to monitor the performance returns of the fund;

o to approve all counter party risk exposures – stockbrokers, counter party, financial institutions and depository banks;

o As necessary, to enter into any agreements with third parties that have appropriate skills and experience to provide direct or ancillary services relating to the investment arrangement of the investment funds of the company;

o to undertake and decide on any matters pertaining to the prudent management of the funds; and

o to be mindful of the impact on KIMB’s Capital Adequacy Ratio for each and every investment decision.

• AnnualbusinessplansarepreparedbytheManagementand reviewed and approved by the Board of Directors of KIMB. Year-to-date performance and results are periodically presented at the KIMB Board meetings.

• There are Human Resource management guidelineswithin KIMB for hiring and terminating of staff, formal training programs and annual performance appraisals to ensure that staffs are competent and appropriately motivated in carrying out their responsibilities.

• Policies and procedures for compliance with internalcontrols and the relevant laws and regulations are set out in the various operations manuals of KIMB. These are updated as and when the need arises.

Securing you when the unexpected happensYou can never predict when an accident or an illness will befall you, but you can always prepare for the worst, in the event that they do. With Kurnia’s Personal Accident and Medical Insurance coverage, you and your loved ones can be assured of 24-hour worldwide protection and medical expense reimbursements when you face an accident anywhere around the world, along with hassle-free admission and discharge at any panel hospitals.


Products & Services

At Kurnia Insurans, we anticipate the needs of our extensive customer base through a diverse range of general insurance products and services. We are committed to fulfilling the needs of our customers by providing them with the best possible financial protection tools.

MotorWhen you buy a motor vehicle, you need to have a motor insurance. Kurnia’s basic motor policy protects against losses or damages to vehicles, third party bodily injuries and properties. Kurnia’s Private Car Comprehensive policy includes Kurnia Auto Assist (KAA), a free 24-hour service for breakdowns and accidents and Kurnia Express (KE), a 1-hour motor claims service, where you will receive immediate settlement* at our designated Kurnia Express Centers. This service is extended to windscreen claim for policyholders who have their insurance coverage for windscreen. The KAA service is also further enhanced with the deployment of ‘KAA Riders’ on motorcycles in the Klang Valley. These riders will arrive at breakdown scene within 15 minutes in the Klang Valley area to carry out repair if possible. Otherwise, alternative arrangements will be made through the KAA call center. The ‘KAA Riders’ service is also available in the major towns of Penang, Johore and Malacca.

Under the KAA service, policyholders are entitled to a free towing service up to 30km, while for policyholders who purchase the Personal Accident plan, ‘Perfect Rider’ will enjoy free towing service for unlimited distance. For motorcyclists, Kurnia’s Motorcyclist Personal Accident policy provides 24-hour worldwide coverage against accidental death or total permanent disablement.

In 2009, Kurnia launched a product extension, Compensation for Assessed Repair Time (CART), which provides compensation to policyholder for the number of days the car is being repaired at the workshop according to the loss adjuster’s assessment.

Last year, Kurnia has introduced the “Agreed Value” concept for vehicles below 10 years. The car models include Perodua, Proton, Toyota, Honda, Nissan and Mitsubishi. The “Agreed Value” concept is deemed the best avenue, as the car owners need not worry about underinsurance or overinsurance, and will be compensated as per the agreed Sum Insured.

* Cheque or direct deposit into your bank account

Personal AccidentKurnia offers a wide range of Personal Accident products that cater to the different needs and demands of our customers. Personal Accident insurance provides compensation in the event of death or disablement caused by accidental, violent, external and visible means. Coverage is available for individual, family or on group basis by employers, associations, clubs and similar groups. In general, the period of insurance coverage is on annual basis.

Engineering Kurnia’s various engineering insurance protection plans are designed to cover projects involving construction and other civil engineering works, and includes comprehensive protection for machinery and equipment.

HomeInsures home, property and personal effects against fire, theft, natural disasters and accidental physical loss or damage. Available to private dwellings, houses, flats, garages and out-buildings depending on the type of coverage. Kurnia’s home protection plans include Fire Insurance, Houseowner and Householder Insurance as well as Householder Plus Insurance. Insurance for maids is also available to cover personal accident, repatriation expenses, hospital and surgical expenses, weekly benefits for temporary total disablement, fidelity guarantee and personal liability.



Fire with Risk ManagementKurnia’s fire insurance plans protect your property against material damage caused by fire or lightning. In fact, it is more than just fire insurance. With an additional premium, it also protects you against damages resulting from other causes, such as riot, strike, malicious damage, flood and landslide. Kurnia also conducts Fire Risk Management Surveys to assess the fire hazards, standard of fire safety and evaluation of loss potential of the insured property with a view to recommend measures for loss control and risk management.

MedicalProper healthcare is no longer a privilege, but a right for everyone as health insurance coverage is one of the key components of a sound financial plan and a necessity in view of the escalating medical cost. Kurnia’s MediGuard medical policy guarantees hassle-free admission and discharge for a covered condition at any of our panel hospitals nationwide. Alternatively, insured can opt for the reimbursement plan, with a lower premium, where the insured settles the bill upon discharge and submit for reimbursement for a covered condition. Kurnia has individual medical insurance products that are specially designed for everyone and anyone from all walks of life. In addition, Kurnia also customise Group Medical Insurance plan to cover employees’ medical expenses that suit the needs of the company.

Products & Services


TravelKurnia Care Travel and Traveller’s Personal Accident safeguard the insured while they are on a vacation, excursion or a business trip. The policies extend from local activities to overseas travels, be it individually or in groups.

BizGuardYour business is your achievement and pride. But should a fire, theft or any unfortunate event occur, you could lose everything that you have established in a single instant. Kurnia BizGuard is a comprehensive insurance package that allows you to find the best solution from 3-easy plans; allowing you to focus on growing your business.

Employee BenefitsThe policy gives protection to an employer against any compensation amount they may be liable to pay to any employee or their dependents for personal injuries sustained by accident or disease arising out of and in the course of his employment.

MarineMarine Cargo Insurance policies provides cover against physical loss or damage to cargoes whilst in the course of transit by air, sea and/or overland. Generally the cover ceases once the cargoes are delivered to the final destination. Whereas, Goods In Transit Insurance policies provides cover for goods conveyed by land whether by lorry, train or other mode of land conveyance licensed to carry goods throughout the year.

LiabilityKurnia’s range of liability insurance policies indemnifies the insured in respect of its legal liability to pay compensation for accidental bodily injury to or accidental property damage of Third Party caused by or through the negligence of the insured or his/her employees. The policies also pay for legal fees and litigation expenses incurred with the written consent of the Company.


Analysis on the Financial Statements

STATEMENT OF FINANCIAL POSITION

Total Assets

The Group’s total assets stayed relatively stable at RM2.584 billion as at 31.12.2010, as compared with RM2.581 billion as at 31.12.2009. Investments made up 65.9% (31.12.2009: 65.2%) of the Group’s total assets, followed by reinsurance assets and property and equipment which accounted for 14.4% and 7.8% (31.12.2009: 13.1% and 8.3%) respectively.

Net Assets Value (NAV)

The Group’s net assets value (NAV) improved to RM327.8 million as at 31.12.2010 (31.12.2009: RM300.1 million) due to net profit recorded for the financial year. This translates into NAV per share of 22.02 sen at 31.12.2010 (31.12.2009: 20.16 sen).

Investments

The Group’s investment portfolio stood at RM1.703 billion as at 31.12.2010 (31.12.2009: RM1.683 billion), and the composition is as follows:

501,

836

490,

685

Fixed & CallDeposits

399,

300

876,

078

Private DebtsSecurities

727,

789

150,

633

Unit Trust

10,1

79

49,7

99

GovernmentSecurities

20,3

22

22,7

05

Others

43,4

20

93,5

04

Equities

31.12.2010 (RM’000)

Total: 1,702,846

31.12.2009 (RM’000)

Total: 1,683,404

975,

928

(57.

3%)

924,

856

(54.

9%)

Available for sales

63,2

78(3

.7%

)

85,2

24(5

.1%

)

Held-to-maturity

522,

158

(30.

7%)

513,

390

(30.

5%)

Loan & receivables(excluding insurance assets)

141,

482

(8.3

%)

159,

934

(9.5

%)

Held for trading

31.12.2010 (RM’000)

Total: 1,702,846

31.12.2009 (RM’000)

Total: 1,683,404


Reinsurance Assets

As at 31.12.2010, the Group’s reinsurance assets which consist of reinsurers share of provision for outstanding claims and provision for unearned premium increased by RM33.6 million or 9.9% to RM372.8 million from RM339.2 million as at 31.12.2009. The increase was mainly driven by higher gross premium written and reinsurance outwards during the current financial year.

Insurance Receivables

The Group’s insurance receivables rose by 6.4% or RM3.2 million to RM52.9 million from RM49.7 million as at 31.12.2009. The increase was mainly attributed to growth in gross premium written during the current financial year.

Cash and Cash Equivalents

The Group’s cash and cash equivalents comprise cash in hand, bank balances and fixed deposits placed with licensed financial institutions with maturities of three months or less. The Group’s cash and cash equivalents decreased by RM40.2 million or 23.6% to RM129.6 million from RM169.8 million as at 31.12.2009, mainly due to a reduction in fixed deposit placements with maturities of three months or less.

Total Liabilities

The Group’s total liabilities reduced by 1.0% or RM23.9 million to RM2,256.6 million from RM2,280.5 million as at 31.12.2009. This decrease was primarily due to lower provision of outstanding claims resulted from faster settlement. Total insurance contract liabilities accounted for 74.0% (31.12.2009: 77.9%) of the Group’s total liabilities.

Insurance Contract Liabilities

The Group’s insurance contract liabilities consist of:

- gross provision for outstanding claims of RM1,155.8 million (31.12.2009: RM1,314.7 million); and

- gross provision for unearned premium of RM513.4 million (31.12.2009: RM460.7 million).

Total insurance contract liabilities decreased by RM106.2 million or 6.0% mainly due to the accelerated claims settlement initiatives.

Other Financial Liabilities

The Group’s other financial liabilities increased by 6.6% or RM27.1 million to RM435.3 million from RM408.2 million as at 31.12.2009, being the net effect of an increase in the deposits received from reinsurer that amounted to RM68.6 million and a reduction in term loan of RM40 million following the scheduled repayment in September 2010.

Other Payables

The Group’s other payables increased by 95.0% or RM44.2 million to RM90.7 million from RM46.5 million as at 31.12.2009, mainly due to an advance from shareholder of RM22.0 million, increase in commutation of reinsurance balances of RM12.8 million and accrual of RM6.8 million.

INCOME STATEMENT

The Group changed its financial year-end from 30 June to 31 December during the previous financial period, and issued an audited financial statement for the 6 months financial period ended 31.12.2009. The figures in the current audited financial statements being results for 12 months ended 31.12.2010 is therefore comparable to the results of the previous reporting period in terms of ratio performance only.

The Group’s results are mainly derived from its insurance subsidiary in Malaysia, Kurnia Insurans (M) Berhad (“KIMB”). The contribution of PT Kurnia Insurance Indonesia (“KII”) and the equity-accounted associated company, Kurnia Insurance (Thailand) Company Limited (“KIT”) to the performance of the Group were insignificant.

The Group recorded net profit of RM15.0 million for the financial year ended 31.12.2010 (financial period ended 31.12.2009: RM43.1 million).


Analysis on the Financial Statements

The Group’s underwriting experience for the financial period is depicted in the performance indicators tabled below:

Underwriting Performance Indicators 01.01.2010 to 31.12.2010 01.07.2009 to 31.12.2009

Retention ratio 79.2% 87.8%

Net commission ratio 9.5% 10.7%

Net claims incurred ratio 75.9% 71.0%

Management expense ratio 21.0% 18.7%

Underwriting margin -6.0% 0.8%

Business Portfolio

During the financial year under review, the Group derived 80.8% (01.07.2009 to 31.12.2009: 81.5%) of its gross premium income from Motor business and 19.2% (01.07.2009 to 31.12.2009: 18.5%) from Non-Motor business.

Net Commission Ratio

The Group recorded net commission over net premium ratio of 9.5% during the current financial year (01.07. 2009 to 31.12.2009: 10.7%) as a result of higher commission received from a higher level of reinsurance ceded out.

Net Claims Incurred Ratio

The Group’s claims ratio increased to 75.9% (01.07.2009 to 31.12.2009: 71.0%) mainly due to the lower earned premium in the current financial year ended 31.12.2010 (compared to the annualised earned premium for 6 months ended 31.12.2009).

Management Expense Ratio

The management expense ratio of the Group increased to 21.0% (01.07.2009 to 31.12.2009: 18.7%) mainly due to higher personnel expenses incurred.

Net Investment Income (Insurance Fund)

During the financial year ended 31.12.2010, the Group recorded net investment income (including realised and unrealised gain/(loss) recognised in income statement) of RM115.7 million (01.07.2009 to 31.12.2009: RM58.9 million). This improvement is due to the recovery of the equity market which enabled the Group to write back some of the mark-to-market losses recorded in the previous financial periods. The Group achieved net investment yield of 6.3% p.a. (01.07.2009 to 31.12.2009: annualised 6.3% p.a.).

1,058,753

473,938

01.01.2010to 31.12.2010(RM’000)

01.07.2009to 31.12.2009(RM’000)

Motor01.01.2010 to 31.12.2010 855,564 (80.8%)

01.07.2009 to 31.12.2009 386,279 (81.5%)

Non-Motor01.01.2010 to 31.12.2010 203,189 (19.2%)

01.07.2009 to 31.12.2009 87,659 (18.5%)

Fire 47,979 (23.6%)

Marine 16,067 (7.9%)

Miscellaneous 40,912 (20.1%)

Personal Accident 58,203 (28.6%)

Engineering 15,960 (7.9%)

Medical 24,068 (11.8%)

Total: 203,189

01.01.2010 to 31.12.2010 (RM’000)

Non-Motor

Fire 21,287 (24.3%)

Marine 11,404 (13.0%)

Miscellaneous 18,642 (21.3%)

Personal Accident 23,570 (26.9%)

Engineering 4,987 (5.7%)

Medical 7,769 (8.9%)

Total: 87,659

01.07.2009 to 31.12.2009 (RM’000)

Non-Motor

Financial Statements38 Statement of Directors’ Responsibility

39 Directors’ Report

43 Statements of Financial Position

45 Income Statements

46 Statements of Comprehensive Income

47 Statements of Changes in Equity

48 Cash Flow Statements

50 Notes to the Financial Statements

122 Statement by Directors

123 Statutory Declaration

124 Independent Auditors’ Report


Statement of Directors’ Responsibilitypursuant to paragraph 15.26(a) of the Listing Requirements of Bursa Malaysia Securities Berhad

The Directors are responsible for ensuring that the audited financial statements of the Group and the Company are drawn up in accordance with the requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board, the provisions of the Companies Act, 1965, Bank Negara Malaysia’s Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad.

The Directors are also responsible for ensuring that the audited financial statements of the Group and the Company are prepared with reasonable accuracy from the accounting records of the Group and the Company so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2010, and of the results of their operations and cash flows for the year ended on that date.

In preparing the audited financial statements, the Directors and Management have:

• applied the appropriate and relevant accounting policies on a consistent basis;

• made judgements and estimates that are reasonable and prudent; and

• prepared the annual audited financial statements on a going concern basis.

The Directors and Management are also responsible for ensuring that the Group and the Company maintain proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and the Company.

The Directors and Management also have a general responsibility for taking reasonable steps to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.


Directors’ Reportfor the year ended 31 December 2010

The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2010.

Principal Activities

The Company is principally engaged in investment holding whilst the principal activities of the subsidiaries are stated in Note 7.2 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

Results

Group CompanyRM’000 RM’000

Profit / (Loss) for the year 15,012 (10,976)

Reserves and Provisions

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.

Dividend

No dividend was paid during the financial year and the Directors do not recommend any dividend to be paid for the financial year ended 31 December 2010.

Directors of the Company

Directors who served since the date of the last report are:


Datuk Kua Chung Sen

Dato’ Wira Othman Bin Abdul

Dato’ Quah Teong Moo


Dato’ Dr. Sharifuddin Bin Abdul Wahab (appointed on 7 May 2010)


Directors’ Interests

The interests and deemed interests in the ordinary shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at year end (including the interests of the spouses and children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares at RM0.25 eachAt 1.1.2010 Bought Sold At 31.12.2010

Tan Sri Dato’ Paduka Kua Sian KooiInterest in the Company• Own 765,646,824 - - 765,646,824• Others # 5,000,000 - - 5,000,000

Datuk Kua Chung SenInterest in the Company• Own 12,702,000 - - 12,702,000Deemed interest in the Company 60,000,000 - - 60,000,000

Dato’ Wira Othman Bin AbdulInterest in the Company• Own 32,857,400 - - 32,857,400• Others # 334,600 - - 334,600

Dato’ Quah Teong MooInterest in the Company• Own 17,867,300 - - 17,867,300

# Includes the spouse of Tan Sri Dato’ Paduka Kua Sian Kooi and children of Dato’ Wira Othman Bin Abdul respectively. In accordance with Section 134(12)(c) of the Companies Act, 1965, the interests and deemed interests of the spouses and children of the Directors in the shares of the Company and of its related corporations (other than wholly-owned subsidiaries) shall be treated as the interests of the Directors respectively.

Leow Ming Fong @ Leow Min Fong and Dato’ Dr. Sharifuddin Bin Abdul Wahab did not have any interest in the ordinary shares of the Company and of its related corporations during the financial year.

Directors’ Benefits

Since the end of the previous financial period, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements of the Company and its related companies) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest except for those disclosed in Note 35 to the financial statements.

There were no arrangements during and at the end of the financial year, which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in the Company or any other body corporate.

Directors’ Reportfor the year ended 31 December 2010 (Cont’d)


Issue of Shares

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

Options Granted Over Unissued Shares

No options were granted to any person to take up unissued shares of the Company during the financial year.

Other Statutory Information

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i. all known bad debts have been written off and adequate provision had been made for doubtful debts;

ii. any current assets, which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise; and

iii. there was adequate provision for insurance contract liabilities in the Group in accordance with the valuation methods specified in Part D of the Risk-Based Capital (“RBC”) Framework issued by Bank Negara Malaysia (“BNM”).

At the date of this report, the Directors are not aware of any circumstances:

i. that would render the amount written off for bad debts, or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or

ii. that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

iii. which have arisen which render adherence to the existing method of valuation of assets and liabilities of the Group and of the Company misleading or inappropriate, or

iv. not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

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

i. any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

ii. any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liabilities or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due.

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

In the opinion of the Directors, the financial performance of the Group and of the Company for the year ended 31 December 2010 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of the financial year and the date of this report.


Change of Financial Year End

The Company changed its financial year end from 30 June to 31 December in the previous financial period.

The comparatives for income statements, statements of comprehensive income, statements of changes in equity and cash flow statements as well as the comparatives in the notes to the financial statements relating to the income statements for the previous six (6) months ended 31 December 2009 hence are not comparable to that for the current twelve (12) months ended 31 December 2010.

Auditors

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:


Datuk Kua Chung Sen

Petaling Jaya, Selangor25 April 2011

Directors’ Reportfor the year ended 31 December 2010 (Cont’d)


Statements of Financial Positionas at 31 December 2010

GroupNote 31.12.2010 31.12.2009 01.07.2009

RM’000 RM’000 RM’000Restated Restated

Assets Property and equipment 4 202,236 213,108 214,328Goodwill 5 - 5,061 4,654Investment property 6 7,500 7,500 7,500Investments 9 1,702,846 1,683,404 1,754,107

Held-to-maturity 63,278 85,224 85,349Available-for-sale 975,928 924,856 1,016,745Held for trading 141,482 159,934 124,482Loans and receivables 522,158 513,390 527,531

Investment in associate 8 13,279 16,537 16,403Reinsurance assets 10 372,759 339,190 346,135Insurance receivables 11 52,851 49,676 49,972Other receivables, deposits and prepayments 12 35,187 31,170 35,982Deferred acquisition costs 13 36,275 36,825 36,019Deferred tax assets 20 1,172 8,919 17,025Current tax assets 30,613 19,386 17,941Cash and cash equivalents 14 129,632 169,786 180,897

Total assets 2,584,350 2,580,562 2,680,963

EquityShare capital 21 375,000 375,000 375,000Reserves 22 10,938 (211) (1,346)Accumulated losses (58,147) (74,704) (117,779)

Total equity attributable to owners of the Company 327,791 300,085 255,875

Non-controlling interests 6 - -

Total equity 327,797 300,085 255,875

LiabilitiesInsurance contract liabilities 15 1,669,152 1,775,416 1,901,864Deferred tax liabilities 20 5,928 - -Other financial liabilities 16 435,322 408,194 408,771Insurance payables 17 29,630 26,305 31,582Current tax liabilities 249 237 -Other payables 18 90,728 46,540 61,679Provision for retirement benefits 19 25,544 23,785 21,192

Total liabilities 2,256,553 2,280,477 2,425,088

Total equity and liabilities 2,584,350 2,580,562 2,680,963

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


CompanyNote 31.12.2010 31.12.2009 01.07.2009

RM’000 RM’000 RM’000Restated Restated

Assets Property and equipment 4 414 132 173Investments in subsidiaries 7 731,852 736,225 736,225Other receivables, deposits and prepayments 12 265 576 365Current tax assets - 548 71Cash and cash equivalents 14 3,272 26,546 29,254

Total assets 735,803 764,027 766,088

EquityShare capital 21 375,000 375,000 375,000Reserves 22 607 607 607Accumulated losses (30,358) (19,382) (16,470)

Total equity attributable to owners of the Company 345,249 356,225 359,137

LiabilitiesOther financial liabilities 16 360,000 400,000 400,000Current tax liabilities 195 195 -Other payables 18 28,115 5,541 5,180Provision for retirement benefits 19 2,244 2,066 1,771

Total liabilities 390,554 407,802 406,951

Total equity and liabilities 735,803 764,027 766,088


Statements of Financial Positionas at 31 December 2010 (Cont’d)


Income Statements for the year ended 31 December 2010

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to toNote 31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Operating revenue 23 1,096,936 540,825 21,538 9,364

Gross written premiums 15.2 1,058,753 473,938 - -Change in unearned premiums provision (52,666) 22,423 - -

Gross earned premiums 15.2 1,006,087 496,361 - -

Gross written premiums ceded to reinsurers 15.2 (220,387) (57,742) - -Change in unearned premiums provision 66,575 (3,203) - -

Premiums ceded to reinsurers 15.2 (153,812) (60,945) - -

Net earned premiums 15.2 852,275 435,416 - -

Investment income 24 90,849 44,464 21,538 9,364Realised gains and losses 25 14,356 5,050 - -Fair value gains and losses 26 10,544 9,391 - -Commission income 27 48,848 11,927 - -Other operating income 28 358 130 - -

Other income 164,955 70,962 21,538 9,364

Gross claims paid 29 (858,953) (459,051) - -Claims ceded to reinsurers 29 86,092 49,486 - -Gross change in contract liabilities 29 158,930 104,025 - -Change in contract liabilities ceded to reinsurers 29 (33,006) (3,742) - -

Net claims incurred 29 (646,937) (309,282) - -

Commission expense 27 (128,772) (56,407) - -Management expenses 30 (187,912) (80,297) (9,052) (2,281)Finance costs (21,193) (9,120) (21,193) (9,120)

Other expenses (337,877) (145,824) (30,245) (11,401)

Share of (loss) / profit of equity accounted associate (2,780) 49 - -

Profit / (loss) before tax 29,636 51,321 (8,707) (2,037)Tax expense 32 (14,624) (8,246) (2,269) (875)

Net profit / (loss) for the year / period 15,012 43,075 (10,976) (2,912)



Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to toNote 31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Net profit / (loss) for the year / period 15,012 43,075 (10,976) (2,912)

Other comprehensive incomeForeign currency translation differences

for foreign operations (1,686) 1,135 - -Fair value of available-for-sale financial assets 9.5 7,844 - - -

6,158 1,135 - -Tax effect thereon (1,961) - - -

Other comprehensive income for the year / period, net of tax 4,197 1,135 - -

Total comprehensive income for the year / period 19,209 44,210 (10,976) (2,912)

Profit / (loss) attributable to:Owners of the Company 15,012 43,075 (10,976) (2,912)

Total comprehensive income attributable to:Owners of the Company 19,209 44,210 (10,976) (2,912)

Earnings per share (sen)Basic 33 1.01 2.89


Statements of Comprehensive Income for the year ended 31 December 2010


Statements of Changes in Equity for the year ended 31 December 2010

Attributable to owners of the CompanyNon-Distributable Distributable

Non-Share Treasury Share Fair value Translation Accumulated controlling Total

Group capital shares premium reserve reserve losses interest equityRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2009 375,000 (11,971) 12,578 - (1,953) (117,779) - 255,875Total comprehensive income for the period - - - - 1,135 43,075 - 44,210

At 31 December 2009 / 1 January 2010, as previously stated 375,000 (11,971) 12,578 - (818) (74,704) - 300,085Effect of adopting FRS 139 - - - 6,952 - 1,545 - 8,497

At 31 December 2009 / 1 January 2010 - restated 375,000 (11,971) 12,578 6,952 (818) (73,159) - 308,582Total comprehensive income for the year - - - 5,883 (1,686) 15,012 - 19,209Issuance of shares for newly incorporated subsidiary - - - - - - 6 6

At 31 December 2010 375,000 (11,971) 12,578 12,835 (2,504) (58,147) 6 327,797

Note 21 Note 22.2 Note 22.3 Note 22.1

Attributable to owners of the CompanyNon-Distributable Distributable

Share Treasury Share Accumulated TotalCompany capital shares premium losses equity

RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2009 375,000 (11,971) 12,578 (16,470) 359,137Total comprehensive income for the period - - - (2,912) (2,912)

At 31 December 2009 375,000 (11,971) 12,578 (19,382) 356,225Total comprehensive income for the year - - - (10,976) (10,976)

At 31 December 2010 375,000 (11,971) 12,578 (30,358) 345,249

Note 21 Note 22.2



Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Operating activitiesProfit / (loss) before tax 29,636 51,321 (8,707) (2,037)Investment income (90,849) (44,464) (21,538) (9,364)Realised gains recorded in income statement (14,356) (5,050) - -Fair value gains recorded in income statement (10,544) (9,391) - -Purchase of held-for-trading financial investments (82,534) (48,207) - -Proceeds from sale of held-for-trading financial investments 122,233 23,659 - -Purchase of available-for-sale financial investments (690,313) (131,586) - -Proceeds from sale of available-for-sale financial investments 568,771 152,446 - -Maturity of available-for-sale financial investments 92,647 74,501 - -Maturity of held-to-maturity financial investments 21,701 157 - -(Increase) / decrease in loans and receivables (8,976) 15,787 - -

(62,584) 79,173 (30,245) (11,401)

Non-cash items:Depreciation of property and equipment 16,312 10,238 108 41Gain on disposal of property and equipment (920) (373) (130) (57)Impairment loss on property and equipment 1,383 - - -Allowance for doubtful debts - 1,690 - -Reversal of allowance for doubtful debts (10,066) - - -Bad debts written off 6,601 343 - -Bad debts recovered (29) (8) - -Retirement benefits expense 3,011 2,593 246 295Impairment loss on goodwill 4,373 - - -Impairment loss on investment 2,394 - 4,373 -Share of (loss) / profit on equity accounted associate 2,780 (49) - -Finance costs 21,193 9,120 21,193 9,120

Total non-cash items 47,032 23,554 25,790 9,399

Changes in working capital:(Increase) / decrease in reinsurance assets (33,569) 6,945 - -Decrease / (increase) in insurance receivables 319 (1,729) - -(Increase) / decrease in other receivables (11,213) 3,695 287 (216)Decrease / (increase) in deferred acquisition costs 550 (806) - -Decrease in insurance contract liabilities (106,264) (126,448) - -Increase / (decrease) in other financial liabilities 67,128 (577) - -Increase / (decrease) in insurance payables 3,325 (5,277) - -Increase / (decrease) in other payables 44,015 (15,596) 22,225 72

Net changes in working capital (35,709) (139,793) 22,512 (144)

Cash (used in) / generated from operating activities (51,261) (37,066) 18,057 (2,146)


Cash Flow Statementsfor the year ended 31 December 2010


Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Cash (used in) / generated from operating activities (51,261) (37,066) 18,057 (2,146)Dividend income received 44,122 6,748 - -Interest income received 52,936 38,339 - -Retirement benefits paid (1,252) - (68) -Income tax paid (16,513) (1,292) (1,721) (1,157)

Net cash flows from / (used in) operating activities 28,032 6,729 16,268 (3,303)

Investing activitiesProceeds from disposal of property and equipment 2,914 480 130 57Purchase of property and equipment (8,900) (9,039) (390) -Interest received 371 250 21,563 9,369Investment in associate (2,206) - - -

Net cash flows (used in) / from investing activities (7,821) (8,309) 21,303 9,426

Financing activitiesProceeds from issuance of shares in subsidiary 6 - - -Term loan interest paid (20,845) (8,831) (20,845) (8,831)Repayment of term loan (40,000) - (40,000) -

Net cash flows used in financing activities (60,839) (8,831) (60,845) (8,831)

Net decrease in cash and cash equivalents (40,628) (10,411) (23,274) (2,708)Effect of exchange rate fluctuations on cash held 474 (700) - -Cash and cash equivalents at beginning of year / period 169,786 180,897 26,546 29,254

Cash and cash equivalents at end of year / period 129,632 169,786 3,272 26,546

Cash and cash equivalents comprise:Cash and bank balances 38,818 34,703 3,272 5,741Fixed and call deposits

(with maturity of less than three months):

Licensed financial institutions in Malaysia 90,814 133,096 - 20,805Financial institutions outside Malaysia - 1,987 - -

Cash and cash equivalents 129,632 169,786 3,272 26,546



Notes to the Financial Statements

1. Principal Activity and General Information

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the registered office and principal place of business of the Company is located at:

Menara Kurnia Block B4, Pusat Dagang Setia Jaya Leisure Commerce Square No. 9, Jalan PJS 8/9 46150 Petaling Jaya Selangor

The consolidated financial statements of the Company as at and for the year ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as the Group) and the Group’s interest in an associate. The financial statements of the Company as at and for the year ended 31 December 2010 do not include other entities.

The Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are stated in Note 7.2 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

The financial statements were approved by the Board of Directors on 25 April 2011.

2. Basis of Preparation

2.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRSs”) as modified by Bank Negara Malaysia Guidelines, generally accepted accounting principles in Malaysia, the Companies Act, 1965 and the Insurance Act and Regulations, 1996.

The following accounting standards, interpretations and amendments have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective:

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 March 2010

- Amendments to FRS 132, Financial Instruments: Presentation – Classification of Rights Issues

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010

- FRS 1, First-time Adoption of Financial Reporting Standards (revised)

- FRS 3, Business Combinations (revised)

- FRS 127, Consolidated and Separate Financial Statements (revised)

- Amendments to FRS 2, Share-based Payment

- Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations

- Amendments to FRS 138, Intangible Assets

- IC Interpretation 12, Service Concession Agreements


2. Basis of Preparation (Cont’d)

2.1 Statement of compliance (Cont’d)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010 (Cont’d)

- IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation

- IC Interpretation 17, Distributions of Non-cash Assets to Owners

- Amendments to IC Interpretation 9, Reassessment of Embedded Derivatives

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2011

- Amendments to FRS 1, First-time Adoption of Financial Reporting Standards

- Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters

- Additional Exemptions for First-time Adopters

- Amendments to FRS 2, Group Cash-settled Share-based Payment Transactions

- Amendments to FRS 7, Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments

- IC Interpretation 4, Determining whether an Arrangement Contains a Lease

- IC Interpretation 18, Transfers of Assets from Customers

- Improvements to FRSs (2010)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2011

- IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments

- Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirement

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012

- FRS 124, Related Party Disclosures (revised)

- IC Interpretation 15, Agreements for the Construction of Real Estate

The Group and the Company plan to adopt the abovementioned standards, interpretations and amendments:

- from the annual period beginning 1 January 2011 for those standards, interpretations and amendments that will be effective for annual periods beginning on or after 1 March 2010, 1 July 2010 and 1 January 2011, except for FRS 1 (revised), Amendments to FRS 2, Amendments to FRS 1, IC Interpretations 12, 16, and 18 which are not applicable to the Group and the Company.

The initial application of the aforesaid applicable standards, interpretations and amendments are not expected to have any material impact on the financial statements of the Group and of the Company upon their first adoption.

Following the announcement made by the Malaysian Accounting Standards Board on 1 August 2008, the Group’s and the Company’s financial statements will be prepared in accordance with the International Financial Reporting Standards framework for annual period beginning on 1 January 2012.


2. Basis of Preparation (Cont’d)

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except as disclosed in the notes to the financial statements, on the assumption that the Group and the Company are going concerns.

The Company incurred a net loss of RM10,976,000 during the year ended 31 December 2010, and as of that date, the Company’s current liabilities exceeded its current assets by RM84,773,000 which may indicate the existence of a significant uncertainty about the Company’s ability to continue as a going concern.

The Company has considered prospective cash flow information and events that may occur in the next twelve months and the possible actions to be taken by the Company. The Company considered its obligations to repay a significant portion of its borrowings within the next twelve months, as shown in the Company’s Statement of Financial Position. As part of its financial and corporate planning, the Company has embarked on various initiatives to address its obligations, which includes refinancing the loan.

The validity of the going concern assumption in the preparation of financial statements is dependent on the successful outcome of the various initiatives being undertaken by the Company and the Company achieving future profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, and relating to amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

General business assets and liabilities relate to both general insurance fund and shareholders’ fund.

2.3 Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

2.4 Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have a significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

• Note 3.7 – fair value estimation of financial instruments

• Note 3.18 – valuation of general insurance contract liabilities

• Note 5 – measurement of the recoverable amount of cash-generating unit

• Note 19 – valuation for retirement benefits

Notes to the Financial Statements (Cont’d)


3. Significant Accounting Policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by the Group entities, unless otherwise stated. Certain comparative figures have been reclassified to conform with current year’s presentation (see Note 41).

3.1 Basis of consolidation

3.1.1 Subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting.

Under the purchase method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Investments in subsidiaries are stated in the Company’s statement of financial position at cost less any impairment losses. Investment in Irredeemable Convertible Subordinated Debt (“ICSD”) issued by the subsidiary of the Company is treated as cost of investment in the subsidiary as the ICSD is non-redeemable and convertible during the tenure of the ICSD. ICSD which has not been converted will be fully converted on maturity date.

3.1.2 Associates

Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies.

Associates are accounted for in the consolidated financial statements using the equity method less any impairment losses. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the equity accounted associates, after adjustments, if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

3.1.3 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.


3. Significant Accounting Policies (Cont’d)

3.2 Foreign currency

3.2.1 Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical cost in a foreign currency are retranslated to the functional currency at the exchange rates at the date of transactions. Foreign currency differences arising on retranslation are recognised in the income statements.

3.2.2 Operations denominated in functional currencies other than Ringgit Malaysia (“RM”)

The assets and liabilities of operations in functional currencies other than RM, including goodwill and fair value adjustments, are translated to RM at exchange rates at the end of the reporting period, except for goodwill and fair value adjustments arising from business combinations before 1 January 2006 which are reported using the exchange rates at the dates of the acquisitions. The income and expenses of foreign operations in functional currencies other than RM, are translated to RM at exchange rates at the dates of the transactions. Foreign exchange differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve.

On disposal of such operations, the accumulated translation differences are recognised in the consolidated income statements as part of the gain or loss on disposal.

3.3 Property and equipment

3.3.1 Recognition and measurement

Items of property and equipment except for property under construction are stated at cost less any accumulated depreciation and any accumulated impairment losses. Property under construction is stated at cost.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognised net within “management expenses” in the income statements.




3.3 Property and equipment (Cont’d)

3.3.2 Subsequent costs

The cost of replacing part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised to income statements. The costs of the day-to-day servicing of property and equipment are recognised in the income statements as incurred.

3.3.3 Depreciation

Depreciation is recognised in the income statements on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. Freehold land is not depreciated. Property and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Leasehold land 50 - 94 years

Buildings 50 years

Office improvements 3 - 5 years

Furniture and fittings 10 years

Office equipment and computers 3 - 10 years

Motor vehicles 5 years

Depreciation methods, residual values and useful lives are reassessed at the end of the reporting period.

3.4 Leased assets - operating lease

Leases, where the Group does not assume substantially all the risk and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the Group’s statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property.

In previous years, a leasehold land that normally had an indefinite economic life and title was not expected to pass to the lessee by the end of the lease term was treated as an operating lease. The payment made on entering into or acquiring a leasehold land that was accounted for as an operating lease represents prepaid lease payments, except for leasehold land classified as investment property.

The Group has adopted the amendment made to FRS 117, Leases in 2010 in relation to the classification of lease of land. Leasehold land which in substance is a finance lease has been reclassified and measured as such retrospectively.

Payments made under operating leases are recognised in the income statements on a straight-line basis over the term of the lease. Lease incentives received are recognised in income statements as an integral part of the total lease expense, over the term of the lease.



3.5 Intangible asset

3.5.1 Goodwill

Goodwill arises on business combinations and is measured at cost less any accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any assets, including goodwill, that forms part of the carrying amount of the equity accounted investee.

For acquisitions prior to 1 July 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair values of the net identifiable assets and liabilities.

For business acquisition beginning from 1 July 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Any excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in income statements.

3.6 Investment properties

Investment properties are properties which are owned or held under leasehold interest to earn rental income or for capital appreciation or for both. These include land held for a currently undetermined future use.

Investment properties are measured initially at cost less any accumulated depreciation and any impairment losses. Depreciation is charged to the income statements. Freehold land is not depreciated.

3.7 Financial instruments

Arising from the adoption of FRS 139, Financial Instruments: Recognition and Measurement, with effect from 1 January 2010, financial instruments are categorised and measured using accounting policies as mentioned below. Before 1 January 2010, different accounting policies were applied. Significant changes to the accounting policies are discussed in Note 40.

3.7.1 Initial recognition and measurement

A financial instrument is recognised in the financial statements when, and only when, the Group and the Company become a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract, and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.




3.7 Financial instruments (Cont’d)

3.7.2 Financial instrument categories and subsequent measurement

The Group and the Company categorise and measure financial instruments as follows:

Financial assets

3.7.2.1 Financial assets at fair value through profit or loss (“FVTPL”)

Fair value through profit or loss category comprises financial assets that are held for trading (“HFT”) or financial assets that are specifically designated into this category upon initial recognition.

A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing in the near term or it is part of a portfolio of identified securities that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking.

Financial assets classified as HFT are subsequently measured at their fair values and any gain or loss arising from a change in the fair value will be recognised in the income statements.

3.7.2.2 Held-to-maturity investments (“HTM”)

HTM investments category comprises debt instruments that are quoted in an active market and the Group and the Company have the positive intention and ability to hold to maturity.

Financial assets categorised as HTM investments are subsequently measured at amortised cost using the effective interest method.

3.7.2.3 Loans and receivables (“LAR”)

Loans and receivables category comprises debt instruments that are not quoted in an active market, trade and other receivables, and cash and cash equivalents.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

Prior to the adoption of FRS 139, receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.

The change in accounting policies does not have any material impact on the financial statements.




3.7.2 Financial instrument categories and subsequent measurement (Cont’d)

3.7.2.4 Available-for-sale financial assets (“AFS”)

AFS category comprises investments in equity and debt securities that are not held for trading or held-to-maturity.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets classified as AFS are subsequently measured at their fair values and any gain or loss arising from a change in the fair value will be recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses arising from monetary items which are recognised in the income statements. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity into income statements. Interest calculated for a debt instrument using the effective interest method is recognised in the income statements.

3.7.2.5 Insurance receivables

Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective yield method.

If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in income statements. The Group gathers the objective evidence that an insurance receivable is impaired using the same process adopted for financial assets carried at amortised cost. The impairment loss is calculated under the same method used for these financial assets. These processes are described in Note 3.9.

Insurance receivables are derecognised when the derecognition criteria for financial assets, as described in Note 3.7.5, have been met.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 3.9).

3.7.3 Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market place concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

- the recognition of an asset to be received and the liability to pay for it on the trade date; and

- derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

All the financial assets are recognised using trade date except for debt instruments which are recognised using settlement date.





3.7.4 Financial liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are held for trading, derivative (except for derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Other financial liabilities categorised as fair value through profit or loss is subsequently measured at their fair values with the gain or loss recognised in income statements.

3.7.5 Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the income statements.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the income statements.

3.8 Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value with original maturities of three (3) months or less.

Cash and cash equivalents are categorised and measured as loans and receivables in accordance with policy Note 3.7.2.3.

3.9 Impairment

3.9.1 Financial assets, excluding insurance receivables

All financial assets (except for financial assets categorised as fair value through profit or loss, and fixed and call deposits) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised.

For an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment.



3.9 Impairment (Cont’d)

3.9.1 Financial assets, excluding insurance receivables (Cont’d)

3.9.1.1 Held-to-maturity (“HTM”)

An impairment loss in respect of HTM investments is measured as the difference between the financial asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate. The amount of the impairment loss is recognised in the income statements.

Subsequent reversal in the impairment loss is recognised when the decrease can be objectively related to an event occurring after the impairment was recognised, to the extent that the financial asset’s carrying amount does not exceed its amortised cost if no impairment had been recognised. The reversal is recognised in the income statements.

3.9.1.2 Available-for-sale (“AFS”)

An impairment loss in respect of available-for-sale financial assets is recognised in the income statements and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised to income statements.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in income statements and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in income statements for an investment in an equity instrument is not reversed through the income statements.

If, in the subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in income statements, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the income statements.

3.9.1.3 Loans and receivables (“LAR”)

An impairment loss in respect of loans and receivables is recognised in income statements and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.





3.9.2 Insurance receivables

Insurance receivables are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the assets. Losses expected as a result of future events, no matter how likely, are not recognised. An objective evidence of impairment is deemed to exist where the principal or interest, or both for insurance receivables is past due for more than 90 days or 3 months, as prescribed in the Guidelines on Financial Reporting for Insurers issued by Bank Negara Malaysia.

Prior to adoption of FRS 139, known bad debts are written off and specific allowances are made for insurance receivables as follows:

i. motor premiums which remain outstanding for more than 30 days from the date on which they become receivable;

ii. non-motor premiums, including agents or reinsurance balances, which remain outstanding for more than six (6) months from the date on which they become receivable; and

iii. all debts which are considered doubtful.

An impairment loss in respect of insurance receivables is recognised in income statements and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

If, in subsequent period, the fair value of insurance receivable increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in income statements, the impairment loss is reversed, to the extent that the insurance receivables’ carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the income statements.

The change in the impairment policy for insurance receivables does not have any material impact on the financial statements.

3.9.3 Other assets

The carrying amounts of other assets (except for deferred tax assets) are reviewed at each reporting period to determine whether there is any indication of impairment.

When indication of impairment exists, the asset’s recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash flows of other assets or groups of assets (the “cash-generating unit”).





3.9.3 Other assets (Cont’d)

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

Impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

3.9.4 Non-financial assets

Impairment losses recognised in prior periods are assessed at the end of each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to income statements in the year in which the reversals are recognised.

3.10 Product classification

The Group issues contracts that transfer insurance risk.

Insurance contracts are those contracts that transfer significant insurance risk. An insurance contract is a contract under which the Group (the insurer) has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. As a general guideline, the Group determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.

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

3.11 Reinsurance

The Group cedes the insurance risk in the normal course of business for all its businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contracts.



3.11 Reinsurance (Cont’d)

Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.

Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the event has reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recorded in income statements.

The Group also assumes reinsurance risk in the normal course of business for general insurance contracts when applicable.

Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract.

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

Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statements of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured.

3.12 Commission agency expenses

Gross commission and agency expenses, which are cost directly incurred in securing premium on insurance policies, and income derived from reinsurers in the course of ceding of premiums to reinsurers, are charged to income statements in the period in which they are incurred or deferred where appropriate as set out in Note 3.17.3.

3.13 Equity instruments

All equity instruments are stated at cost on initial recognition and are not remeasured subsequently.

3.13.1 Issue expenses

Incremental costs directly attributable to the issue of equity instruments are recognised as a deduction from equity.

3.13.2 Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity and is not re-valued for subsequent changes in the fair value or market price of shares. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity.




3.13 Equity instruments (Cont’d)

3.13.2 Repurchase of share capital (Cont’d)

Where treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reduction of the share premium account or distributable reserves, or both.

Where treasury shares are reissued by re-sale in the open market, the difference between the sales consideration net of directly attributable costs and the carrying amount of the treasury shares is recognised in equity.

3.14 Employee benefits

3.14.1 Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

The Group’s and the Company’s contributions to the Employees’ Provident Fund are charged to the income statements in the period to which they relate. Once the contributions have been paid, the Group and the Company have no further payment obligations.

3.14.2 Defined benefit plan

The Group’s and the Company’s net obligation in respect of the defined benefit retirement plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value. Any unrecognised past service costs and the fair value of the plan assets are deducted. The discount rate is the yield at the end of the reporting period on high quality corporate bonds or government bonds that have maturity dates approximating the terms of the Group’s and the Company’s obligation and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group and the Company, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

When the benefits of the plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statements on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statements.

In calculating the Group’s and the Company’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds ten percent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, if any, that portion is recognised in the income statements over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.

The latest actuarial valuation on the Group’s and the Company’s obligations for their defined benefit plans was carried out on 22 February 2011.



3.15 Provisions

A provision is recognised if, as a result of a past event, the Group and the Company have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of discount is recognised as finance cost.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. Contingent liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Group and the Company.

3.16 Other financial liabilities and insurance payables

Other financial liabilities and payables are recognised when due and measured on initial recognition at the fair value of the consideration received less directly attributable transactions costs.

3.17 General insurance underwriting results

The general insurance underwriting results are determined for each class of business after taking into account inter alia reinsurances, commissions, unearned premiums and claims incurred.

3.17.1 Premium income

Premium is recognised in a financial period in respect of risks assumed during that particular financial period except for inwards treaty reinsurance premiums which are recognised on the basis of periodic advices / accounts received from ceding insurers.

3.17.2 Insurance contract liabilities

These liabilities comprise provision for unearned premiums and provision for outstanding claims.

3.17.2.1 Provision for unearned premiums

Provision for unearned premiums is the higher of the aggregate of the Unearned Premium Reserves (“UPR”) for all lines of business and the best estimate value of the Unexpired Risk Reserves (“URR”) at the required risk margin for adverse deviation.

Unearned premium reserves

The UPR represents the premiums received for risks that have not yet expired. Generally, the reserve is released over the term of the contract and is recognised as premium income.

In determining the UPR at the end of the reporting period, the method that most accurately reflects the actual unearned premium reserves is as follows:




3.17 General insurance underwriting results (Cont’d)

3.17.2 Insurance contract liabilities (Cont’d)

3.17.2.1 Provision for unearned premiums (Cont’d)

Unearned premium reserves (Cont’d)

- 25% method for marine cargo, aviation cargo and transit business of annual Malaysian general policies business

- 1/24th method for all other classes of annual Malaysian general policies business

- 1/8th method for all other classes of annual overseas inward business

- non-annual policies are time-apportioned over the period of the risks

The UPR is adjusted for additional UPR in respect of premiums ceded to overseas reinsurers as required under the guidelines issued by BNM.

Unexpired risk reserves

At each reporting date, the Group reviews its unexpired risks and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows (taking into consideration current loss ratios) after taking account of the investment return expected to arise on assets relating to the relevant general insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums less related deferred acquisition costs is inadequate, the deficiency is recognised in income statements by setting up a provision for liability adequacy.

3.17.2.2 Provision for outstanding claims

Outstanding claims provision are based on the estimated ultimate cost of all claims incurred but not settled at the end of the reporting period, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the end of the reporting period. The liability is calculated at the reporting date by an independent actuarial firm using projection techniques as set out in Note 3.18 that included a regulatory risk margin for adverse deviation. The liability is discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled.

3.17.3 Acquisition costs and deferred acquisition cost (“DAC”)

The gross cost of acquiring and renewing insurance policies net of income derived from ceding reinsurance premiums is recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Acquisition costs or ceding income which are not recoverable, or not payable in the event of a termination of the policy to which they relate, are not deferred but are recognised in the period in which they occur.



3.17 General insurance underwriting results (Cont’d)

3.17.3 Acquisition costs and deferred acquisition cost (“DAC”) (Cont’d)

Those costs are deferred to the extent that these costs are recoverable out of future premiums. All other acquisition costs are recognised as an expense when incurred.

Subsequent to initial recognition, these costs are amortised on a straight-line basis based on the term of expected future premiums. Amortisation is recognised in income statements.

An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. When the recoverable amount is less than the carrying value, an impairment loss is recognised in income statements. DAC is also considered in the liability adequacy test for each accounting period.

DAC is derecognised when the related contracts are either settled or disposed of.

3.18 Valuation of general insurance contract liabilities

For general insurance contracts, estimates have to be made for both the expected ultimate cost of claims reported at the end of the reporting period and for the expected ultimate cost of claims incurred but not yet reported (“IBNR”) at the end of the reporting period.

It can take a significant period of time before the ultimate claims costs can be established with certainty and for some type of policies, IBNR claims form the majority of the statements of financial position liability. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornhueutter-Ferguson methods.

The main assumption underlying these techniques is that a company’s past claims development experience can be used to project future claims development and hence, the ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claims numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by significant business lines and claims type. Large claims are usually separately addressed, either by being reserved at the face value of loss adjustor estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding their future rates of claims inflation or loss ratios. Instead the assumptions used are implicit in the historic claims development data on which the projections are based.

Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example, to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, level of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome for the range of possible outcomes, taking account of all the uncertainties involved.



3.19 Other revenue recognition

3.19.1 Interest income

Interest income is recognised as it accrues, using the effective interest method except where an interest bearing investments is considered non-performing, i.e. where repayments are in arrears for more than six months, in which case recognition of such interest is suspended. Subsequent to suspension, interest income is recognised on the receipt basis until all arrears have been paid.

3.19.2 Dividend income

Dividend income represents gross dividends from quoted and unquoted investments and is recognised in the income statements when the right to receive payment is established.

3.19.3 Rental income

Rental income is recognised on an accrual basis except where default in payment of rent has already occurred and rent due remains outstanding for over six months, in which case recognition of rental income is suspended. Subsequent to suspension, rental income is recognised on the receipt basis until all arrears have been paid.

3.19.4 Realised gains and losses on investment

Realised gains and losses recorded in income statements on investments include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised costs and are recorded on occurrence of the sale transaction.

3.20 Tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statements except to the extent that it relates to items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to apply to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting date and are reduced to the extent that it is no longer probable that the related benefit will be realised.




3.21 Earnings per share

The Group presents basic earnings per shares (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. No diluted EPS is disclosed in these financial statements as there are no dilutive potential ordinary shares.

3.22 Operating segments

In the previous years, a segment was a distinguishable component of the Group that was engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which was subject to risks and rewards that were different from those of other segments.

Following the adoption of FRS 8, Operating Segments, an operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in the case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.



4. Property and equipment

OfficeLong-term Office Furniture equipment

Group Freehold leasehold improve- and and Motor Underland land Buildings ments fittings computers vehicles construction Total

Cost RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2009, restated 17,123 33,137 137,341 8,929 37,438 72,921 9,876 4,071 320,836Additions - - - 112 286 5,663 - 2,978 9,039Disposals - - - - - (2,691) (925) - (3,616)Effect of movements in exchange rates - - 26 1 14 86 62 - 189At 31 December 2009 / 1 January 2010, restated 17,123 33,137 137,367 9,042 37,738 75,979 9,013 7,049 326,448Additions - - - 27 352 1,601 1,066 5,854 8,900Disposals - (312) (1,460) (7) (6) (1,451) (2,748) - (5,984)Effect of movements in exchange rates - - (31) (1) (17) (101) (71) - (221)At 31 December 2010 17,123 32,825 135,876 9,061 38,067 76,028 7,260 12,903 329,143

DepreciationAt 1 July 2009, restated - 1,971 13,176 5,843 20,468 53,369 6,647 - 101,474Depreciation for the period - 209 1,483 472 1,845 5,567 662 - 10,238Disposals - - - - - (2,688) (821) - (3,509)Effect of movements in exchange rates - - 3 - 7 43 50 - 103At 31 December 2009 / 1 January 2010, restated - 2,180 14,662 6,315 22,320 56,291 6,538 - 108,306Depreciation for the year - 417 2,955 854 3,580 7,619 887 - 16,312Disposals - (27) (283) (2) (5) (1,418) (2,243) - (3,978)Effect of movements in exchange rates - - (4) (2) (9) (61) (62) - (138)At 31 December 2010 - 2,570 17,330 7,165 25,886 62,431 5,120 - 120,502

Impairment lossAt 1 July 2009 / 1 January 2010, restated - - 1,867 577 1,974 616 - - 5,034Impairment loss for the year 460 105 818 - - - - - 1,383Disposal - - - - - (12) - - (12)At 31 December 2010 460 105 2,685 577 1,974 604 - - 6,405

Carrying amountsAt 1 July 2009, restated 17,123 31,166 122,298 2,509 14,996 18,936 3,229 4,071 214,328At 31 December 2009 / 1 January 2010, restated 17,123 30,957 120,838 2,150 13,444 19,072 2,475 7,049 213,108At 31 December 2010 16,663 30,150 115,861 1,319 10,207 12,993 2,140 12,903 202,236


4. Property and equipment (Cont’d)

MotorCompany vehicles Total

RM’000 RM’000

CostAt 1 July 2009 / 1 January 2010 1,308 1,308Additions 390 390Disposals (415) (415)

At 31 December 2010 1,283 1,283

DepreciationAt 1 July 2009 1,135 1,135Depreciation for the period 41 41

At 31 December 2009 / 1 January 2010 1,176 1,176Depreciation for the year 108 108

Disposals (415) (415)

At 31 December 2010 869 869

Carrying amounts

At 1 July 2009 173 173

At 31 December 2009 / 1 January 2010 132 132

At 31 December 2010 414 414

5. Goodwill

GroupCarrying amounts 31.12.2010 31.12.2009

RM’000 RM’000

At 1 January / 1 July 5,061 4,654Impairment loss (4,373) -Effect of movements in exchange rates (688) 407

At 31 December - 5,061

The entire carrying amount of goodwill was allocated to the general insurance business unit in Indonesia, PT Kurnia Insurance Indonesia (“KII”), which represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.

During the financial year, after management considered the past historical financial track record of the cash-generating unit and the uncertainties over the profitability of the cash-generating unit in the immediate future, an impairment loss of RM4,373,000 was recognised.



6. Investment property

31.12.2010 31.12.2009Group Cost Fair value Cost Fair value

RM’000 RM’000 RM’000 RM’000

Freehold land 7,500 7,713 7,500 7,713

The fair value of the investment property is the estimated market value of the property derived using the market value of properties in the vicinity and past transactions prices. The determination of the fair value involves a degree of judgement. As such, the fair value of the investment property may be different from its actual market price.

The following are recognised in the income statements in respect of investment property:

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Rental income 65 33

Direct operating expenses (31) (16)

7. Investments in subsidiaries

Company31.12.2010 31.12.2009

RM’000 RM’000

Unquoted ordinary shares, at cost 511,225 511,225Less: Accumulated impairment losses (9,373) (5,000)

501,852 506,225

Irredeemable Convertible Subordinated Debt 7.1 230,000 230,000

731,852 736,225

7.1 On 10 September 2008, the Company subscribed for RM400,000,000 nominal value of Irredeemable Convertible Subordinated Debt (“ICSD”) issued by the Company’s subsidiary, Kurnia Insurans (Malaysia) Berhad (“KIMB”).

The ICSD has a tenure of 5 years from the date of issuance, and bears interest at the rate of 1.5% per annum above the cost of fund of CIMB Bank Berhad or such other amended rates at the discretion of the Company.

The ICSD shall be convertible into fully paid ordinary shares of KIMB at the conversion price of RM1.00 per ordinary share (“Conversion Price”) at any time during the tenure of the ICSD. All ICSD not converted during the tenure of the ICSD shall be automatically converted on the maturity date.

On 19 September 2008, RM400,000,000 nominal value of ICSD was issued to the Company, and on even date, RM170,000,000 nominal value of ICSD was converted into ordinary shares of KIMB at the Conversion Price.


7. Investments in subsidiaries (Cont’d)

7.2 Details of the subsidiaries are as follows:

Name of subsidiaryCountry of

incorporation Principal activitiesEffective ownership

interest2010 2009

Kurnia Insurans (Malaysia) Berhad Malaysia Underwriting of general insurance 100% 100%

Kurnia Asia Pte. Ltd. # Singapore Investment holding 100% 100%

PT Kurnia Insurance Indonesia # Indonesia Underwriting of general insurance 100% 100%

Kurnia Auto Assist Sdn. Bhd. # Malaysia Dormant 100% 100%

Kurnia Cambodia Incorporated Co. Ltd. # Cambodia Dormant 60% -

# Not audited by KPMG

8. Investment in associate

Group31.12.2010 31.12.2009

RM’000 RM’000

Unquoted shares outside Malaysia, at cost 19,235 17,319

Less: Accumulated impairment losses (2,394) -

16,841 17,319

Share of post acquisition loss (3,562) (782)

13,279 16,537

Summary financial information for associate, not adjusted for the percentage ownership held by the Group:

Country ofEffective

ownership Revenue Loss Total assets Total liabilitiesincorporation interest (100%) (100%) (100%) (100%)

RM’000 RM’000 RM’000 RM’000

Kurnia Insurance (Thailand) Co. Ltd. Thailand 25% 50,193 11,118 57,584 46,515



9. Investments

The Group’s investments are categorised as follow:

31.12.2010 31.12.2009 01.07.2009RM’000 RM’000 RM’000

Malaysian government securities 10,179 49,799 64,804Cagamas bonds 1,012 12,000 47,000Government guaranteed bonds 20,177 25,036 25,034Government investment issues - - 4,949Corporate debt securities 378,111 839,042 876,756Equity securities 43,420 93,504 64,308Unit and property trust funds 727,789 150,633 143,725Loans and receivables 522,158 513,390 527,531

1,702,846 1,683,404 1,754,107

The following investments mature after 12 months:

31.12.2010 31.12.2009 01.07.2009RM’000 RM’000 RM’000

Held-to-maturity financial assets 63,278 63,572 83,585Available-for-sale financial assets 900,378 842,002 924,155Loans and receivables 516,173 501,628 510,677

1,479,829 1,407,202 1,518,417

9.1 Held-to-maturity

Group31.12.2010 31.12.2009 01.07.2009Amortised Carrying Carrying

cost amount amount RM’000 RM’000 RM’000

Corporate debt securities

- Unquoted in Malaysia 63,278 85,224 85,349

Fair valueCorporate debts securities- Unquoted in Malaysia 60,531 77,647 78,767


9. Investments (Cont’d)

9.2 Available-for-sale

Group31.12.2010 31.12.2009 01.07.2009

Fair Carrying Carryingvalue amount amount

RM’000 RM’000 RM’000

Equity securities- Unquoted in Malaysia 1,430 1,430 1,430- Unquoted outside Malaysia 31 33 31Quoted unit and property trust funds 628,266 82,740 82,090Malaysian government securities 10,179 49,799 64,804Corporate debt securities- Unquoted in Malaysia 336,022 790,854 868,390

975,928 924,856 1,016,745

9.3 Held-for-trading

Group31.12.2010 31.12.2009 01.07.2009

Fair Carrying Carryingvalue amount amount

RM’000 RM’000 RM’000

Quoted equity securities 41,959 92,041 62,847Unit and property trust funds 99,523 67,893 61,635

141,482 159,934 124,482



9.4 Loans and receivables

Group31.12.2010 31.12.2009 01.07.2009Amortised Carrying Carrying

cost amount amount RM’000 RM’000 RM’000

Fixed and call deposits- Licensed banks 472,427 461,990 474,273Negotiable Instrument of Deposits 29,409 28,695 28,320Commercial loans- Performing loan 6,590 6,590 7,590- Non-performing loan 6,000 6,000 6,000Mortgage loans 7,683 10,082 11,310Other loans 49 33 38

522,158 513,390 527,531

Fair value

Fixed and call deposits

- Licensed banks 472,427 461,990 474,273

Negotiable Instrument of Deposits 29,409 28,695 28,320

Commercial loans

- Performing loan 6,590 6,590 7,590

- Non-performing loan 6,000 6,000 6,000

Mortgage loans 7,683 10,082 11,310

Other loans 49 33 38

522,158 513,390 527,531




9.5 Carrying values of financial instruments

GroupHTM LAR AFS HFT TOTAL

RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2009 85,349 527,531 1,016,745 124,482 1,754,107Purchases - - 131,586 48,207 179,793Maturity (157) (15,787) (74,501) - (90,445)Disposals - - (152,446) (23,659) (176,105)Realised gains recorded in: - Income statements - - 3,538 1,512 5,050Fair value gains recorded in: - Income statements - - - 9,391 9,391 - Other comprehensive income - - - - -Amortisation net of accretion (70) 375 (70) - 235Translation difference 102 1,271 4 1 1,378

At 31 December 2009 85,224 513,390 924,856 159,934 1,683,404Effect of adopting FRS 139 - - 9,269 1,545 10,814Purchases - 16,213 690,313 82,534 789,060Maturity (21,701) - (92,647) - (114,348)Disposals - (7,237) (568,771) (122,233) (698,241)Realised gains recorded in: - Income statements - - 5,195 9,161 14,356Fair value gains recorded in: - Income statements - - - 10,544 10,544 - Other comprehensive income - - 7,844 - 7,844Amortisation net of accretion (187) 714 40 - 567Translation difference (58) (922) (171) (3) (1,154)

At 31 December 2010 63,278 522,158 975,928 141,482 1,702,846




9.6 Estimation of fair value

The fair values of quoted shares of corporations and unit, and property trust funds are based on quoted closing market prices at the end of the reporting period.

The fair values of Malaysian government securities (“MGS”), Cagamas bonds, government guaranteed bonds and Negotiable Instrument of Deposits are based on their indicative market prices.

The estimated fair values of unquoted corporate debt securities are based on the average indicative market yields obtained from three financial institutions which involve projections of the market yields based on past transactions. There are elements of significant uncertainty in projecting the expected market yield and these uncertainties arise from changes in the underlying risk and overall economic conditions. As such, the projected market yields may be different from the actual market yields in future.

The carrying amount of secured short-term loans and fixed and call deposits with a maturity period less than one year are assumed to approximate their fair values.

For mortgage and other loans with fixed rates, fair values are derived by discounting future cash flows, using interest rates for similar instruments, where applicable, taking into consideration the nature and contracted terms of these loans. Based on management’s assessment as at 31 December 2010, the estimated fair values of the loans approximate their carrying values.

It was not practical to estimate the fair value of the Company’s investment in unquoted shares of corporations due to the lack of comparable quoted market price and the inability to estimate fair value without incurring excessive costs.

10. Reinsurance assets

Group31.12.2010 31.12.2009 01.07.2009

Note RM’000 RM’000 RM’000

Reinsurance of insurance contracts- Claims liabilities 15.1 250,759 283,765 287,507- Premium liabilities 15.2 122,000 55,425 58,628

372,759 339,190 346,135


11. Insurance receivables

Group31.12.2010 31.12.2009

RM’000 RM’000

Due premiums including agents / brokers and co-insurers balance 59,288 61,075Allowance for impairment (22,689) (27,195)

36,599 33,880

Due from reinsurers and cedants 23,684 28,788Allowance for impairment (7,432) (12,992)

16,252 15,796

52,851 49,676

Allowance for impairment

During the year, doubtful debts of RM6,601,000 (31 December 2009: RM343,000) was written off against the allowance for impairment.

12. Other receivables, deposits and prepayments

Group Company31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Income due and accrued 9,492 14,612 - 25Other receivables, deposits and prepayments 18,704 13,452 229 243Amount due from subsidiaries - - 36 308Malaysian Institute of Insurance bond 200 200 - -Advance premium ceded to reinsurers 5,194 1,582 - -Commission paid to agents on advance premium 1,597 1,324 - -

35,187 31,170 265 576

The amount due from subsidiaries is unsecured, interest-free and repayable on demand.

Estimation of fair values

The fair values of other receivables were determined to approximate the carrying amounts as these are immaterial in the context of the financial statements.



13. Deferred acquisition costs

Group31.12.2010 31.12.2009 01.07.2009

RM’000 RM’000 RM’000

Gross of reinsuranceAt 1 January / 1 July 43,151 43,187 45,595Movement during the year / period (1,505) (36) (2,408)

At 31 December 41,646 43,151 43,187

ReinsuranceAt 1 January / 1 July (6,326) (7,168) (7,022)Movement during the year / period 955 842 (146)

At 31 December (5,371) (6,326) (7,168)

Net of reinsuranceAt 1 January / 1 July 36,825 36,019 38,573Movement during the year / period (550) 806 (2,554)

At 31 December 36,275 36,825 36,019

14. Cash and cash equivalents

Group Company31.12.2010 31.12.2009 01.07.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000 RM’000

Cash and bank balances 38,818 34,703 32,459 3,272 5,741Deposits placed with licensed banks in Malaysia 90,814 133,096 146,460 - 20,805Deposits placed with financial institutions outside Malaysia - 1,987 1,978 - -

129,632 169,786 180,897 3,272 26,546

The carrying amounts approximate their fair values due to the relatively short-term nature of these financial instruments.


15. Insurance contract liabilities

General insurance contract liabilities consist of:

31.12.2010 31.12.2009 01.07.2009Gross Reinsurance Net Gross Reinsurance Net Gross Reinsurance Net

Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Provision for claims reported by policyholders 861,845 (170,555) 691,290 965,549 (170,628) 794,921 1,050,479 (198,851) 851,628

Provision for incurred but not reported claims (“IBNR”) 293,947 (80,204) 213,743 349,173 (113,137) 236,036 368,268 (88,656) 279,612

Provision for outstanding claims 15.1 1,155,792 (250,759) 905,033 1,314,722 (283,765) 1,030,957 1,418,747 (287,507) 1,131,240

Provision for unearned premium 15.2 513,360 (122,000) 391,360 460,694 (55,425) 405,269 483,117 (58,628) 424,489

1,669,152 (372,759) 1,296,393 1,775,416 (339,190) 1,436,226 1,901,864 (346,135) 1,555,729

15.1 Provision for outstanding claims


Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January / 1 July 1,314,722 (283,765) 1,030,957 1,418,747 (287,507) 1,131,240 1,507,931 (127,520) 1,380,411

Claims incurred in the current accident year / period (direct and facultative) 587,820 (67,842) 519,978 343,762 (66,057) 277,705 717,036 (153,875) 563,161

Adjustment to claims incurred in prior accident years (direct and facultative) 108,898 14,756 123,654 11,423 20,313 31,736 149,935 (76,930) 73,005

Claims incurred during the year / period (treaty inwards claims) 3,305 - 3,305 (159) - (159) 554 (132) 422

Claims paid during the year / period (858,953) 86,092 (772,861) (459,051) 49,486 (409,565) (956,709) 70,950 (885,759)

At 31 December / 30 June 1,155,792 (250,759) 905,033 1,314,722 (283,765) 1,030,957 1,418,747 (287,507) 1,131,240



15. Insurance contract liabilities (Cont’d)

15.2 Provision for unearned premium



At 1 January / 1 July 460,694 (55,425) 405,269 483,117 (58,628) 424,489 547,749 (61,022) 486,727

Premiums written in the year / period 1,058,753 (220,387) 838,366 473,938 (57,742) 416,196 1,052,081 (128,449) 923,632

Premium earned during the year / period (1,006,087) 153,812 (852,275) (496,361) 60,945 (435,416) (1,116,713) 130,843 (985,870)

At 31 December / 30 June 513,360 (122,000) 391,360 460,694 (55,425) 405,269 483,117 (58,628) 424,489

16. Other financial liabilities

Group CompanyNote 31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Deposits received from reinsurers 68,614 - - -Performance bond deposits 16.1 6,708 8,194 - -Term loan 16.2 360,000 400,000 360,000 400,000

435,322 408,194 360,000 400,000

16.1 Performance bond deposits

Performance bond deposits are collateral deposits received from policyholders for guarantees issued on behalf of policyholders.

The carrying amounts disclosed above approximate fair values at the end of the reporting period. All amounts, except for term loan, are payable within one year.

16.2 Term loan

16.2.1 Security

On 11 September 2008, the Company entered into an agreement with CIMB Bank Berhad for a term loan facility of up to RM400,000,000 for a tenure of 5 years from the date of first drawing. The term loan facility is for the purpose of subscribing for RM400,000,000 nominal value Irredeemable Convertible Subordinated Debt (“ICSD”) of its subsidiary, Kurnia Insurans (Malaysia) Berhad (“KIMB”).

The term loan is secured by the entire issued and paid up share capital and the entire ICSD of KIMB held by the Company.


16. Other financial liabilities (Cont’d)

16.2 Term loan (Cont’d)

16.2.2 Term and repayment schedule

Group and CompanyYear of

maturityCarrying amount Under 1 year 1 - 2 years 2 - 5 yearsRM’000 RM’000 RM’000 RM’000

31 December 2010Term loan 2011 to 2013 360,000 80,000 140,000 140,000

31 December 2009Term loan 2011 to 2013 400,000 40,000 80,000 280,000

The effective interest rate on the term loan during the year is 5.40% per annum (31 December 2009: 4.56%).

17. Insurance payables

Group31.12.2010 31.12.2009

RM’000 RM’000

Due to agents / brokers and insured 10,890 9,210Due to reinsurers / ceding companies and co-insurers 18,740 17,095

29,630 26,305

18. Other payables

Group CompanyNote 31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Accrued expenses and deposits 18,487 14,400 177 340Advance premium 14,356 12,493 - -Commission received on advance premium ceded to reinsurers 687 369 - -Other payables 34,380 18,514 27 60Term loan interest 783 764 783 764Amount due to a shareholder 18.1 22,035 - 22,035 -Amount due to a subsidiary - - 5,093 4,377

90,728 46,540 28,115 5,541

Amount due to a subsidiary is unsecured, interest-free and repayable on demand.

The carrying amounts disclosed above approximate fair values at the end of the reporting period.

All amounts, except for the amount due to a shareholder, are payable within one year.



18. Other payables (Cont’d)

18.1 Amount due to a shareholder

Included in the amount due to a shareholder is a loan amounting to RM20,000,000 extended by Tan Sri Dato’ Paduka Kua Sian Kooi to the Company, for the purpose of enabling the Company to meet its obligation under the term loan, to repay CIMB Bank Berhad (“CIMB”). The loan from the shareholder is unsecured and subordinated to the term loan from CIMB (Note 16.2).

The effective interest rate on the loan during the year is 5.67% per annum (31 December 2009: nil).

19. Provision for retirement benefits

The movements in the present value of the defined benefit obligation recognised in the statements of financial position are as follows:

Group Company31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Defined benefit obligation at 1 January / 1 July 23,785 21,192 2,066 1,771Benefits paid (1,252) - (68) -Current service costs and interest (see below) 3,011 2,593 246 295

31 December 25,544 23,785 2,244 2,066

Group Company31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Present value of unfunded obligation 25,544 23,785 2,244 2,066

Recognised liability for defined benefit obligation 25,544 23,785 2,244 2,066

Expenses recognised in income statements as retirement benefits (Note 30):

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Current service cost 1,941 1,486 153 169Interest cost 1,070 1,107 93 126

3,011 2,593 246 295


19. Provision for retirement benefits (Cont’d)

Actuarial assumptions

Principal actuarial assumptions at the end of the reporting period (expressed as weighted average):

Group Company31.12.2010 31.12.2009 31.12.2010 31.12.2009

Discount rate at 31 December (per annum) 4.50% 6.00% 4.50% 6.00%Future salary increases (per annum) 6.00% 6.00% 6.00% 6.00%

The discount rate used is based on market yields at the end of the reporting period on high quality corporate bonds. The amount and terms of the corporate bonds are consistent with the current and estimated future of the post-employment benefit obligation.

Assumption regarding future mortality is based on the experience of Malaysian insured lives between 1983 and 1988 with allowance for improvement in mortality rates allowed for by applying a 25% reduction to the standard rate. The average life expectancy of an individual retiring at the age 56 years is 13.07 years.

Calculation of the unfunded defined retirement benefits involves the projection of the present value for unfunded obligations using certain principal actuarial assumptions such as the rate of interest at which to discount the future retirement benefits payments at the valuation date and the assumed rate of growth of liabilities, namely the rate of salary escalation. There are elements of uncertainty on the assumptions used and thus the projected future retirement benefits payable may be different from the actual retirement benefits paid.

Under the scheme, eligible employees who have completed a minimum of 10 years of service are entitled to retire at 56 years of age or optional retirement age of 50 years. Employees who leave before the attainment of the normal retirement age or optional retirement age, are not entitled to the benefit.



20. Deferred tax assets / (liabilities)

20.1 Recognised deferred tax assets and liabilities are attributable to the following:

Assets Liabilities NetGroup 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property and equipment - - (5,139) (6,865) (5,139) (6,865)Provisions 3,830 6,525 - - 3,830 6,525Unutilised tax losses carry forward 811 9,184 - - 811 9,184Other items 20 75 - - 20 75

4,661 15,784 (5,139) (6,865) (478) 8,919

Deferred tax on AFS - - (4,278) - (4,278) -

4,661 15,784 (9,417) (6,865) (4,756) 8,919

Off-set (3,489) (6,865) 3,489 6,865 - -

Net tax assets / (liabilities) 1,172 8,919 (5,928) - (4,756) 8,919

20.2 Movement in temporary differences during the year / period:

Recognised Effect of Recognised Recognised Effect ofin income movements in income in equity movements

At statements in exchange At statements statements in exchange AtGroup 01.07.2009 (Note 32) rates 31.12.2009 (Note 32) (Note 32) rates 31.12.2010

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property and equipment (5,442) (1,424) 1 (6,865) 1,797 - (71) (5,139)

Provisions 9,002 (2,492) 15 6,525 (2,695) - - 3,830

Unutilised tax losses carry forward 13,505 (4,361) 40 9,184 (8,373) - - 811

Other items (40) 115 - 75 (55) - - 20

Tax assets / (liabilities) 17,025 (8,162) 56 8,919 (9,326) - (71) (478)

Deferred tax on AFS reserve - - - - - (4,278) - (4,278)

Net tax assets / (liabilities) 17,025 (8,162) 56 8,919 (9,326) (4,278) (71) (4,756)


20. Deferred tax assets / (liabilities) (Cont’d)

The estimation of the recognised deferred tax assets involves the projection of the Group’s future profits. There are elements of uncertainty in the projection, which comprise of global economic condition and market volatility, among others. Thus the projected future profits may be different from its actual profits.

21. Share capital

Group and Company31.12.2010 31.12.2009

No. of shares Amount No. of shares Amount’000 RM’000 ’000 RM’000

Authorised: Ordinary shares of RM0.25 each 5,000,000 1,250,000 5,000,000 1,250,000

Issued and fully paid: Ordinary shares of RM0.25 each 1,500,000 375,000 1,500,000 375,000

22. Reserves

22.1 Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

22.2 Treasury shares

In 2008, the Company repurchased 11,577,400 of its issued shares from the open market. The average price paid for the shares purchased was approximately RM1.03 per ordinary share. The repurchase transactions were financed by internal funds. The repurchased shares are held as treasury shares and carried at cost.

As at 31 December 2010, the Company held 11,577,400 of the Company’s shares. The number of outstanding shares in issue after deducting treasury shares held was 1,488,422,600 ordinary shares of RM0.25 each.

There were no shares repurchased during the financial year ended 31 December 2010.

22.3 Fair value reserve

The fair value reserve is in respect of unrealised gains on securities available-for-sale, net of deferred taxation.



23. Operating revenue

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Gross earned premium 1,006,087 496,361 - -Investment income 90,849 44,464 21,538 9,364

1,096,936 540,825 21,538 9,364

24. Investment income

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Rental income from investment properties 637 257 - -Financial assets at FVTPL – Held for trading Dividend / distribution income

- equity securities quoted in Malaysia 2,758 1,787 - -- equity securities quoted outside Malaysia 7 - - -- unit and property trust funds 6,513 2,477 - -

Held-to-maturity financial assets Interest income 4,999 1,474 - - Amortisation of premiums, net of accretion of discounts (187) (70) - -

Available-for-sale financial assets Interest income 18,623 24,637 - - Dividend / distribution income - equity securities unquoted in Malaysia 98 49 - - - unit and property trust funds 35,091 2,275 - -

Loans and receivables Interest income 998 524 - -

Cash and cash equivalents Interest income 21,312 11,054 345 244

Irredeemable Convertible Subordinated Debt Interest income - - 21,193 9,120

Total investment income 90,849 44,464 21,538 9,364


25. Realised gains and losses

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Held for trading financial assetsRealised gains - equity securities quoted in Malaysia 6,910 1,512 - unit and property trust fund quoted in Malaysia 2,251 -

9,161 1,512

Available-for-sale financial assetsRealised gains - unit and property trust fund quoted in Malaysia 129 - - debt securities quoted in Malaysia 4,897 3,538 - debt securities quoted outside Malaysia 169 -

5,195 3,538

14,356 5,050

26. Fair value gains and losses

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Financial investment – held for trading purposes 10,544 9,391


27. Commission income / expense

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Commission incomeCommission income 47,893 11,085Movement in deferred acquisition costs 955 842

48,848 11,927

Commission expenseCommission expense (127,267) (56,371)Movement in deferred acquisition costs (1,505) (36)

(128,772) (56,407)

28. Other operating income

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Transfer fees and other contract fees 315 130Other income 43 -

358 130



29. Net claims incurred

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Gross claims paid less salvage 858,953 459,051Claims ceded to reinsurers (86,092) (49,486)

Net claims paid 772,861 409,565

Gross change in contract liabilities At 31 December 1,155,792 1,314,722 At 1 January / 1 July (1,314,722) (1,418,747)

(158,930) (104,025)

Change in contract liabilities ceded to reinsurers At 31 December (250,759) (283,765) At 1 January / 1 July 283,765 287,507

33,006 3,742

646,937 309,282



30. Management expenses

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Personnel expenses (including key management personnel): Contributions to Employee Provident Fund 8,730 2,560 116 31 Expenses related to defined benefit plan 3,011 2,593 246 295 Wages, salaries and others 88,491 29,754 1,476 1,033Auditors’ remuneration KPMG Malaysia – current year 375 300 50 30 – prior year (1) 43 20 13 Subsidiaries’ auditors 46 42 - -(Reversal) / allowance for doubtful debts (10,066) 1,690 - -Bad debt written off 6,601 343 - -Bad debt recovered (29) (8) - -Depreciation of property and equipment 16,312 10,238 108 41Rental of office and premises 1,215 633 - -IGSF levies 2,572 1,129 - -Advertisement expenses 2,023 2,309 - -Bank charges 10,684 3,902 - -Gain on disposal of property and equipment (920) (373) (130) (57)Impairment loss on other receivables - 720 - -Impairment loss on property and equipment 1,383 - - -Impairment loss on investment 2,394 - 4,373 -Impairment loss on goodwill 4,373 - - -Other expenses 50,718 24,422 2,793 895

Total management expenses 187,912 80,297 9,052 2,281


31. Key management personnel compensation

The key management personnel compensations are as follows:

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Executive Directors Remuneration 4,676 1,581 385 103 Other short-term employee benefits

(including estimated monetaryvalue of benefits-in-kind) 1,145 715 197 76

5,821 2,296 582 179

Non-Executive Directors Fees 943 649 579 510 Other short-term employee benefits

(including estimated monetaryvalue of benefits-in-kind) 140 92 65 66

1,083 741 644 576

Total short-term employee benefits 6,904 3,037 1,226 755

Other key management personnel comprise persons other than the Directors of the Group, having authority and responsibility for planning, directing and controlling the activities of the entities either directly or indirectly.

The Group and the Company provide non-cash benefits to Executive Directors and other key management personnel. The estimated non-cash benefits received by Executive Directors of the Group and of the Company amounted to RM280,000 (31 December 2009: RM426,000) and RM28,000 (31 December 2009: RM70,000) respectively.

In addition to their non-cash benefits, Executive Directors and other key management personnel in Malaysia are also eligible to the Group’s and the Company’s retirement benefits as disclosed in Note 19.



32. Tax expense

32.1 Recognised in the income statements

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Current tax expense - Current year 4,178 875 2,096 875 - Under / (over) provision in prior years 1,120 (791) 173 -

5,298 84 2,269 875

Deferred tax expense Origination and reversal of temporary differences 9,326 8,162 - -

Total tax expense 14,624 8,246 2,269 875

32.2 Recognised directly in other comprehensive income

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

At 1 January / 1 July - -Effect of adopting FRS139 2,317 -Net gain arising from change in fair value 1,961 -

At 31 December 4,278 -


32. Tax expense (Cont’d)

32.3 Reconciliation of tax expense

Group Company01.01.2010 01.07.2009 01.01.2010 01.07.2009

to to to to31.12.2010 31.12.2009 31.12.2010 31.12.2009

RM’000 RM’000 RM’000 RM’000

Profit / (loss) before tax 29,636 51,321 (8,707) (2,037)

Tax at Malaysian tax rate of 25% 7,409 12,830 (2,177) (509)Non-deductible expenses 8,602 3,073 4,028 1,384Tax exempt income (9,001) (1,395) - -Recognition of previously unrecognised deferred tax assets - (10,249) - -Non-deductible interest expense on ICSD 5,298 2,280 - -Others 1,196 2,498 245 -

13,504 9,037 2,096 875Under / (over) provision in prior years 1,120 (791) 173 -

14,624 8,246 2,269 875

With effect from year of assessment 2009, the corporate tax rate is at 25%. Consequently, deferred tax assets and liabilities are measured using this tax rate.

33. Basic earnings per ordinary share

Basic earnings per ordinary share is calculated based on the profit for the period ended 31 December 2009 and for the year ended 31 December 2010 of RM43,075,000 and RM15,012,000 respectively divided by the weighted average number of ordinary shares in issue of 1,488,422,600 during the period / year respectively.

Group01.01.2010 01.07.2009

to to31.12.2010 31.12.2009

RM’000 RM’000

Profit for the year / period attributable to ordinary shareholders 15,012 43,075

Weighted average number of ordinary shares: Issued ordinary shares at beginning of the year / period 1,500,000,000 1,500,000,000 Effect of treasury shares (11,577,400) (11,577,400)

Weighted average number of ordinary shares 1,488,422,600 1,488,422,600

Sen Sen

Basic earnings per ordinary share 1.01 2.89

Diluted earnings per share are not presented as there were no dilutive potential ordinary shares as at the end of the reporting period.

There have been no other transactions involving ordinary shares between the reporting date and the date of completion of these financial statements.



34. Capital and other commitments

Capital expenditure and other commitments approved by the Directors but not provided for in the financial statements amounted to approximately:

Group31.12.2010 31.12.2009

RM’000 RM’000

Property and equipment Contracted but not provided for 7,600 11,909

35. Related parties

Identity of related parties

For the purpose of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or whether the Group and the Company or the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group or the Company either directly or indirectly. The key management personnel include all the Directors of the Group and the Company, and certain members of senior management of the Group and the Company.

The significant transactions and balances with related parties are as follows:

01.01.2010 to 31.12.2010 01.07.2009 to 31.12.2009Transaction Balance Transaction Balance

Group amount outstanding amount outstandingRM’000 RM’000 RM’000 RM’000

A company in which Tan Sri Dato’ Paduka Kua Sian Kooi is a common director and has direct interest:

Reinsurance inwards premium (169) 33 (66) 12Reinsurance inwards claims - - 22 -

A company in which Dato’ Wira Othman bin Abdul is a common director and Dato’ Wira Othman bin Abdul and Tan Sri Dato’ Paduka Kua Sian Kooi have indirect interest:

Rental expense 52 - 54 -


35. Related parties (Cont’d)

Identity of related parties (Cont’d)

01.01.2010 to 31.12.2010 01.07.2009 to 31.12.2009Transaction Balance Transaction Balance

Company amount outstanding amount outstandingRM’000 RM’000 RM’000 RM’000

SubsidiariesShare of common expenses (10,466) 20 (3,752) 227ICSD coupon payment (21,193) (1,112) (9,120) -Loan - (4,001) - (4,377)

(31,659) (5,093) (12,872) (4,150)

The terms and conditions for the above transactions are based on normal trade terms or on a negotiated basis. No allowance for doubtful debts was made during the year / period.

36. Operating segments

The Group has one reportable segment, namely the general insurance business in Malaysia, for which the Group Executive Chairman reviews internal management reports on at least a monthly basis. Other non-reportable segments comprise general insurance business unit in Indonesia and investment holdings.

Performance is measured based on segment profit before tax, interest, depreciation and amortisation, as included in the internal management reports that are reviewed by the Group Executive Chairman, who is the Group’s chief operating decision maker. Segment profit / loss is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Segment assets and liabilities

The total of segment assets and liabilities is measured based on all assets and liabilities of a segment, as included in the internal management reports that are reviewed by the Group Executive Chairman. Segment total assets and liabilities are used to measure financial health of the segment.



36. Operating segments (Cont’d)

General insurance in

Malaysia Others Consolidated RM’000 RM’000 RM’000

01.01.2010 to 31.12.2010

Segment revenue 1,063,301 33,635 1,096,936

Segment results 68,797 (36,381) 32,416

Operating profit / (loss) before finance cost 68,797 (15,188) 53,609Finance costs - (21,193) (21,193)

Operating profit / (loss) 68,797 (36,381) 32,416Share of loss of equity accounted associate - (2,780) (2,780)

Profit / (Loss) before tax 68,797 (39,161) 29,636

Tax expense (14,624)

Profit for the year 15,012

01.07.2009 to 31.12.2009

Segment revenue 514,895 25,930 540,825

Segment results 63,017 (11,745) 51,272

Operating profit / (loss) before finance cost 63,017 (2,625) 60,392Finance costs - (9,120) (9,120)

Operating profit / (loss) 63,017 (11,745) 51,272Share of profit of equity accounted associate - 49 49

Profit / (Loss) before tax 63,017 (11,696) 51,321

Tax expense (8,246)

Profit for the period 43,075


36. Operating segments (Cont’d)

General insurance in

Malaysia Others Consolidated RM’000 RM’000 RM’000

31.12.2010Segment assets 2,492,965 59,600 2,552,565Unallocated assets 31,785

Total assets 2,584,350

Segment liabilities 1,829,110 421,266 2,250,376Unallocated liabilities 6,177

Total liabilities 2,256,553

31.12.2009Segment assets 2,436,327 115,930 2,552,257Unallocated assets 28,305

Total assets 2,580,562

Segment liabilities 1,827,778 452,462 2,280,240Unallocated liabilities 237

Total liabilities 2,280,477

01.01.2010 to 31.12.2010Capital expenditure – property and equipment 8,460 440 8,900Depreciation of property and equipment 15,849 463 16,312Amortisation of premiums net of accretion of discounts (187) - (187)Fair value gains and losses 10,544 - 10,544Impairment loss on property and equipment 1,383 - 1,383Impairment loss on goodwill - 4,373 4,373Impairment loss on investment - 2,394 2,394Retirement benefits expense 2,765 246 3,011Reversal for doubtful debts (9,796) (270) (10,066)

01.07.2009 to 31.12.2009Capital expenditure – property and equipment 9,028 11 9,039Depreciation of property and equipment 9,992 246 10,238Amortisation of premiums net of accretion of discounts (70) - (70)Fair value gains and losses 9,391 - 9,391Impairment loss on other receivables 720 - 720Retirement benefits expense 2,298 295 2,593Allowance / (reversal) for doubtful debts 1,826 (136) 1,690



37. Risk management framework

Risk management overview

The Board is committed to implement Enterprise Risk Management (“ERM”) to drive towards maintaining good governance and internal control system. The role of risk management is to ensure the risks are properly identified, evaluated and managed as to protect and increase the Group’s long-term value to its shareholders and other stakeholders.

Risk management strategy

The risk management strategy formulated by the Risk Management Committee (“RMC”) and approved by the Board, serves to ensure the risk management framework, processes and internal control system are in place to identify, monitor, evaluate and manage the material risk consistently across all activities.

Role and responsibility

The RMC’s responsibility is to oversee the activities in risk management and legal compliance. These include matters relating to the identification, assessment, monitoring and management of risks associated with the operations of the Group.

The focus of the RMC is to support the Board to fulfil its duties in oversight of activities in risk and business continuity management and legal compliance.

The role of the RMC is:

• To approve risk management strategies and policies, monitor their implementation and review them at least once a year, to ensure they remain relevant and effective;

• Periodically assess the adequacy of these risk management policies and framework, inclusive of Business Continuity Management and Compliance Management framework;

• To define the risk appetite or the level of risk tolerance of the Group based on internal capacity and business objectives;

• To monitor the risk exposures regularly to ensure there is satisfactory level of internal control;

• To ensure that all significant risk factors and impact have been duly considered before approving new business initiatives or strategic changes;

• To ensure that the infrastructure is adequate and resources are sufficiently in place for ERM personnel to perform their roles effectively;

• To ensure ERM personnel are adequately trained and are performing their duties independently from the Group’s risk taking activities;

• To monitor compliance risk with regards to legal and regulatory requirements; and

• To receive reports on risk management activities, review them and make recommendation to the Board when necessary.


37. Risk management framework (Cont’d)

Capital Management Plan

The RBC Framework came into effect on 1 January 2009. Under the RBC Framework, insurance companies need to maintain a capital adequacy level that commensurate with their risk profiles. All insurance companies are required to maintain a minimum Capital Adequacy Ratio (“CAR”) of 130%.

The insurance subsidiary of the Group has met its regulatory requirements.

38. Insurance risk

The General Insurance contracts written by the Group are mostly on annual coverage and annual premium basis, with the exception of short term policies such as Travel Insurance which cover only the travel period and Marine cargo which covers the duration in which the cargo is being transported.

The majority of the general insurance business is motor insurance. Other insurance business includes Fire, Marine, Personal Accident, Engineering, Liabilities, Workmen Compensation and Employer Liabilities and other miscellaneous classes.

The objectives of managing insurance risks are to enhance the financial performance of the business and limit any excessive variability of the insurance results.

Insurance risk includes the risk of incurring higher claims cost than expected owing to the random nature of claims and their frequency and severity and the risk of change in legal or economic conditions of insurance or reinsurance cover. This may result in the insurer having either received too little premium for the risks it has agreed to underwrite and hence has not enough funds to invest and pay claims, or that claims are in excess of those expected.

Underwriting insurance contracts involves the pooling of a large number of uncorrelated risks to reduce relative variability. The Group adopts the following measures to manage the general insurance risk:

• Underwriting standards, by performing risk selection to control the exposure in accordance to the Group’s established guidelines;

• Claims management, to pay claims fairly and control claims leakages and fraud;

• Pricing and reserve standards, to ensure adequate premium charge for risk and valuation of insurance liabilities;

• Reinsurance protection, to limit exposure to large insurance contracts and catastrophe exposure.

Concentration risk is particularly relevant in the case of natural disasters and other catastrophes. The Group’s concentration risk is negligible as the Group’s insurance contracts mostly cover perils and risks in Malaysia and Malaysia is hardly exposed to natural disasters.



38. Insurance risk (Cont’d)

The table below sets out the concentration of General Insurance business by type of product.

01.01.2010 to 31.12.2010 01.07.2009 to 31.12.2009Gross Reinsurance Net Gross Reinsurance Net

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Motor 855,564 (146,925) 708,639 386,279 (21,575) 364,704Fire 47,979 (29,564) 18,415 21,287 (13,848) 7,439Marine Cargo, Aviation Cargo and Transit 16,067 (10,457) 5,610 11,404 (8,759) 2,645Miscellaneous 139,143 (33,441) 105,702 54,968 (13,560) 41,408

1,058,753 (220,387) 838,366 473,938 (57,742) 416,196

The table below sets out the concentration of General Insurance contract liabilities by type of product.

01.01.2010 to 31.12.2010 01.07.2009 to 31.12.2009Gross Reinsurance Net Gross Reinsurance Net

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Motor 996,940 (139,994) 856,946 1,146,774 (157,209) 989,565Fire 65,663 (57,272) 8,391 91,055 (80,823) 10,232Marine Cargo, Aviation Cargo and Transit 14,941 (10,052) 4,889 18,119 (11,950) 6,169Miscellaneous 78,248 (43,441) 34,807 58,774 (33,783) 24,991

1,155,792 (250,759) 905,033 1,314,722 (283,765) 1,030,957

38.1 Insurance contract liabilities for General Insurance

The insurance contract liabilities comprised claims and premium liabilities and are computed in accordance with sound actuarial principles and regulatory guidelines.

These liabilities comprise:

• best estimate of the premium liabilities;

• best estimate of the claims liabilities; and

• margins for adverse deviation with no less than a 75% probability of adequacy.

38.1.1 Valuation methodology

Various actuarial techniques are used to project the provision for claims and loss adjustment expenses and provision for unexpired risk (claims and premium liabilities). These methods include:

• paid chain-ladder method (inflation and non-inflation adjusted, operational time and standard time, Bornhuetter Ferguson (BF) adjustments);



38.1 Insurance contract liabilities for General Insurance (Cont’d)

38.1.1 Valuation methodology (Cont’d)

• reported chain ladder method (operational time and standard time, Bornhuetter Ferguson (BF) adjusted);

• projected case estimates; and

• frequency / severity method.

The valuation process involves using the Group’s gross claims and policies data and net claims and policies data to estimate future claims experience. These insurance liabilities have been derived on a gross basis and are subsequently adjusted for reinsurance and other recoveries for a net basis.

38.1.2 Key assumptions

The principal assumptions underlying the estimation of liabilities is that the Group’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim cost, claim handling costs, claims inflation factors and average number of claims for each accident year.

Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrence, changes in market factors such as public attitude to claiming, economic conditions, as well as internal factors, such as, portfolio mix, policy conditions and claims handling procedures.

Other key circumstances affecting the reliability of assumptions include variation of interest rates, delays in settlement and changes in foreign currency rates.

The key assumptions of the actuarial valuation models include:

• chain-ladder claim development factors

• loss ratios

• expense ratios

• reinsurance recovery ratios

These assumptions are based on the Group’s historical underwriting experience.

For the valuation as at 31 December 2010, the basis of liability valuation assumptions have not been changed as compared to 31 December 2009.





38.1.3 Margin for adverse deviation

In accordance with the insurance regulations, the insurance liabilities include a risk margin with no less than a 75% probability of adequacy.

The risk margin is determined to allow for the uncertainty and volatility of the claims experience. Effects of diversification on the risk margin, arising from writing diversified lines of business, are also taken into account.

38.1.4 Discounting

The insurance liabilities have been discounted using the risk-free discount rate derived from a yield curve as follows:

• for durations of less than 15 years, zero-coupon spot yield of MGS with matching duration, and

• for durations of 15 years or more, zero-coupon spot yield of MGS with 15 years term to maturity.

38.1.5 Sensitivities

The general insurance claim liabilities are sensitive to key assumptions shown below. It has not been possible to quantify the sensitivity of certain assumptions, such as, legislative changes or uncertainty in the estimation process.

The analysis below is performed for reasonable possible movements in key assumptions with all other assumptions held constant, showing the impact on Gross and Net liabilities, Profit before tax and Equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that the movements in these assumptions are non-linear.




38.1.5 Sensitivities (Cont’d)

Change inassumptions

Impact on gross

liabilitiesImpact on

net liabilities

Impact on profit

before taxImpact on

equity*RM’000 RM’000 RM’000 RM’000

31 December 2010Average claims cost +5% 55,485 43,890 (43,890) (32,918)Average claims cost -5% (55,485) (43,890) 43,890 32,918Average number of claims +5% 55,485 43,890 (43,890) (32,918)Average number of claims -5% (55,485) (43,890) 43,890 32,918Average claim settlement period

Improved by 6 months 22,640 18,793 (18,793) (14,095)

31 December 2009Average claims cost +5% 63,662 51,052 (51,052) (38,289)Average claims cost -5% (63,662) (51,052) 51,052 38,289Average number of claims +5% 63,662 51,052 (51,052) (38,289)Average number of claims -5% (63,662) (51,052) (51,052) (38,289)Average claim settlement period

Improved by 6 months 27,394 22,708 (22,708) (17,031)

* Impact on equity reflects adjustments for tax, where applicable

38.1.6 Claims development table

The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each end of the reporting period, together with cumulative payment to-date.

While the information in the tables provides a historical perspective on the adequacy of the unpaid claims estimate established in previous years, users of these financial statements are cautioned against extrapolating redundancies or deficiencies of the past on current unpaid loss balances.

The management of the Group believes that the estimates of total claims outstanding as of 31 December 2010 are adequate. However, due to the inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate.





38.1.6 Claims development table (Cont’d)

38.1.6.1 Gross general insurance contract liabilities as at 31 December 2010

Before2003 2004 2005 2006 2007 2008 2009 2010 Total


Accident yearAt end of accident year 663,968 664,659 704,096 714,005 714,090 550,563 315,665One year later 655,059 667,901 746,667 739,971 685,359 558,182 -Two years later 710,219 734,156 759,160 752,893 700,271 - -Three years later 802,193 758,703 767,344 794,151 - - -Four years later 829,047 766,774 801,187 - - - -Five years later 835,954 789,393 - - - - -Six years later 843,514 - - - - - -

Current estimate of cumulative claims incurred 843,514 789,393 801,187 794,151 700,271 558,182 315,665

At end of accident year 170,398 225,294 208,159 227,428 231,694 195,324 54,237One year later 431,743 408,732 453,396 510,721 447,033 325,491 -Two years later 520,056 530,978 582,933 618,576 513,448 - -Three years later 639,950 627,750 661,444 687,887 - - -Four years later 722,556 687,083 711,071 - - - -Five years later 777,466 718,077 - - - - -Six years later 797,952 - - - - - -

Cumulative payments to-date 797,952 718,077 711,071 687,887 513,448 325,491 54,237

Gross general insurance contract liabilities (direct and facultative) 54,374 45,562 71,316 90,116 106,264 186,823 232,691 261,428 1,048,574

Gross general insurance outstanding liabilities (treaty inward) 7,219

Best estimates of claims liabilities 1,055,793Claims handling expenses 26,059PRAD at 75% confidence level 127,204

Discounting (71,251)

General insurance contract liabilities pertaining to principal subsidiary in Malaysia 1,137,805

General insurance contract liabilities pertaining to other subsidiary 17,987

General insurance contract liabilities per statements of financial position 1,155,792

The diagonal for 2010 is based on 6 months analysis as at 31 December.





38.1.6.2 Net general insurance contract liabilities as at 31 December 2010

Before2003 2004 2005 2006 2007 2008 2009 2010 Total


Accident yearAt end of accident year 617,260 624,235 655,256 657,041 591,616 513,610 262,109 One year later 607,753 625,951 697,404 673,463 595,726 512,005 - Two years later 656,338 688,259 706,513 688,001 618,062 - - Three years later 740,069 709,799 711,499 728,591 - - -Four years later 761,650 715,780 736,879 - - - -Five years later 769,077 726,516 - - - - - Six years later 772,147 - - - - - -


At end of accident year 160,445 213,797 194,711 210,745 217,937 185,150 51,430 One year later 404,911 386,246 427,179 466,726 414,407 301,221 - Two years later 483,939 502,076 549,154 568,581 476,720 - -Three years later 593,489 593,127 620,381 633,727 - - - Four years later 668,615 648,437 663,747 - - - - Five years later 718,218 677,685 - - - - - Six years later 736,615 - - - - - -


Net general insurance contract liabilities (direct and facultative) 29,950 35,532 48,831 73,132 94,864 141,342 210,784 210,679 845,114

Net general insurance outstanding liabilities (treaty inward) 7,219

Best estimates of claims liabilities 852,333Claims handling expenses 21,396PRAD at 75% confidence level 86,786Discounting (57,726)

Net general insurance contract liabilities pertaining to principal subsidiary in Malaysia 902,789Net general insurance contract liabilities pertaining to other subsidiary 2,244

Net general insurance contract liabilities per statements of financial position 905,033







38.1.6.3 Gross general insurance contract liabilities as at 31 December 2009

Before2002 2003 2004 2005 2006 2007 2008 2009 Total


Accident yearAt end of accident year 551,957 623,205 571,008 731,606 684,323 714,090 286,269One year later 599,984 654,826 685,461 707,249 739,971 694,191 -Two years later 684,178 709,966 725,563 759,160 756,004 - - Three years later 688,259 801,906 758,703 772,325 - - - Four years later 735,190 829,047 768,429 - - - - Five years later 754,006 836,199 - - - - - Six years later 753,891 - - - - - -


At end of accident year 203,239 170,398 170,398 225,294 208,159 227,428 59,607 One year later 398,247 431,743 431,743 408,732 453,396 383,470 -Two years later 474,183 520,056 520,056 530,978 575,612 - -Three years later 549,376 639,950 639,950 627,806 - - -Four years later 629,117 722,556 661,268 - - - -Five years later 683,255 753,087 - - - - -Six years later 703,585 - - - - - -


Gross general insurance contract liabilities (direct and facultative) 75,139 50,306 83,112 107,161 144,519 180,392 310,721 226,662 1,178,012

Gross general insurance outstanding liabilities (treaty inward) 6,138

Best estimates of claims liabilities 1,184,150Claims handling expenses 23,656PRAD at 75% confidence level 156,376Discounting (74,115)

Gross general insurance contract liabilities pertaining to principal subsidiary in Malaysia 1,290,067Gross general insurance contract liabilities pertaining to other subsidiary 24,655

Gross general insurance contract liabilities per statements of financial position 1,314,722






38.1.6.4 Net general insurance contract liabilities as at 31 December 2009

Before2002 2003 2004 2005 2006 2007 2008 2009 Total


Accident yearAt end of accident year 506,984 579,604 624,235 655,256 657,041 591,616 268,316 One year later 547,416 607,753 625,951 697,404 673,463 596,706 -Two years later 624,235 656,338 688,259 706,513 684,914 - - Three years later 625,951 740,069 709,799 713,485 - - -Four years later 668,386 761,650 713,816 - - - -Five years later 678,525 769,498 - - - - - Six years later 684,481 - - - - - -


At end of accident year 190,044 160,464 213,797 194,711 210,745 217,937 56,830 One year later 367,505 404,911 386,246 427,179 466,726 356,849 -Two years later 437,582 483,939 502,076 549,154 528,432 - -Three years later 503,765 593,489 593,127 588,933 - - -Four years later 576,464 668,615 624,756 - - - -Five years later 624,979 696,285 - - - - -Six years later 643,511 - - - - - -


Net general insurance contract liabilities (direct and facultative) 46,650 40,970 73,213 89,060 124,552 156,482 239,857 211,486 982,270

Net general insurance outstanding liabilities (treaty inward) 6,138

Best estimates of claims liabilities 988,408Claims handling expenses 19,422PRAD at 75% confidence level 85,729Discounting (66,162)

Net general insurance contract liabilities pertaining to principal subsidiary in Malaysia 1,027,397Net general insurance contract liabilities pertaining to other subsidiary 3,560

Net general insurance contract liabilities per statements of financial position 1,030,957




39. Financial risk

39.1 Financial risk management objectives and policies

Exposure to credit, liquidity, market (currency risk, interest rate risk and price risk) and operational risk arises in the normal course of the Group’s business. The Board of Directors assumes overall responsibility for the Group’s financial risk management and has established certain committees to address these risks on an ongoing basis.

39.2 Credit risk

Credit risk represents the potential losses that may result due to the inability of the counterparties to insurance, reinsurance and investment transactions in meeting their contractual obligations.

The Group has a credit control department and a credit policy in place and the exposure of credit risk is monitored on an ongoing basis. Investments are made based on appropriate evaluations, in accordance with Guidelines / Circulars issued by BNM, whereby all bond investments must carry a minimum rating of BBB or P3 by rating agencies established in Malaysia.

At the end of the reporting period, there were no significant concentrations of credit risk. The maximum exposure to credit risk for the Group is represented by the carrying amount of each financial asset.

The Group considers rating BBB and above as investment grades. Financial assets which are not rated by rating agencies are classified as not rated.

39.3 Credit exposure

The table below shows the maximum exposure to credit risks for the financial assets components on the statements of financial position.

Group 31.12.2010 31.12.2009RM’000 RM’000

HTM financial investments Debt securities 63,278 85,224Loans and receivables Loans 20,322 22,705 Fixed and call deposits 501,836 490,685AFS financial investments Equity securities 1,461 1,463 Debt securities 346,201 840,653 Quoted unit and property trust funds 628,266 82,740HFT financial investments Equity securities 41,959 92,041 Quoted unit and property trust funds 99,523 67,893Reinsurance assets 372,759 339,190Insurance receivables 52,851 49,676Cash and cash equivalents 129,632 169,786

2,258,088 2,242,056


39. Financial risk (Cont’d)

39.3 Credit exposure (Cont’d)

39.3.1 Credit exposure by credit rating

The table below provides information regarding the credit risk exposure of the Group by classifying assets according to the Group’s credit rating of counterparties.

Neither past due nor

impaired /investment Past-due but

Group grade Not rated not impaired TotalRM’000 RM’000 RM’000 RM’000

31 December 2010HTM financial investments Debt securities 63,278 - - 63,278Loans and receivables 29,410 492,748 - 522,158AFS financial investments Equity securities - 1,461 - 1,461 Debt securities 346,201 - - 346,201 Quoted unit and property trust funds - 628,266 - 628,266HFT financial investments Equity securities - 41,959 - 41,959 Quoted unit and property trust funds - 99,523 - 99,523Reinsurance assets 138,748 234,011 - 372,759Insurance receivables 7,035 32,466 13,350 52,851Cash and cash equivalents - 129,632 - 129,632

584,672 1,660,066 13,350 2,258,088

31 December 2009HTM financial investments Corporate debt securities 83,515 1,709 - 85,224Loans and receivables 28,695 484,695 - 513,390AFS financial investments Equity securities - 1,463 - 1,463 Corporate debt securities 840,653 - - 840,653 Quoted unit and property trust funds - 82,740 - 82,740HFT financial investments Equity securities - 92,041 - 92,041 Quoted unit and property trust funds - 67,893 - 67,893Reinsurance assets 132,166 207,024 - 339,190Insurance receivables 5,777 31,381 12,518 49,676Cash and cash equivalents - 169,786 - 169,786

1,090,806 1,138,732 12,518 2,242,056





39.3.2 Credit exposure by credit rating

The table below provides information regarding the credit risk exposure of the Group by classifying assets according to the Rating Agency of Malaysia’s (“RAM”) or MARC’s credit ratings of counterparties. AAA is the highest possible rating.

Group AAA AA A BBB Not rated TotalRM’000 RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2010HTM financial investments Corporate debt securities 14,777 43,516 - 4,985 - 63,278LAR Loans - - - - 20,322 20,322 Fixed and call deposits 29,410 - - - 472,426 501,836AFS financial investments Equity securities - - - - 1,461 1,461 Corporate debt securities 88,165 247,946 10,090 - - 346,201 Quoted unit and property trust funds - - - - 628,266 628,266Financial investments at FVTPL Equity securities - - - - 41,959 41,959 Quoted unit and property trust funds - - - - 99,523 99,523Reinsurance assets 8,078 33,346 96,761 563 234,011 372,759Insurance receivables 691 1,005 5,339 - 45,816 52,851Cash and cash equivalents - - - - 129,632 129,632

141,121 325,813 112,190 5,548 1,673,416 2,258,088




39.3.2 Credit exposure by credit rating (Cont’d)

Group AAA AA A BBB Not rated TotalRM’000 RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2009HTM financial investments Corporate debt securities 34,672 43,790 - 5,053 1,709 85,224LAR Loans - - - - 22,704 22,704 Fixed and call deposits 28,695 - - - 461,991 490,686AFS financial investments Equity securities - - - - 1,463 1,463 Corporate debt securities 196,598 468,504 175,551 - - 840,653 Quoted unit property and trust funds - - - - 82,740 82,740Financial investments at FVTPL Equity securities - - - - 92,041 92,041 Quoted unit property and trust funds - - - - 67,893 67,893Reinsurance assets 8,130 30,368 93,483 185 207,024 339,190Insurance receivables 98 4,221 1,458 - 43,899 49,676Cash and cash equivalents - - - - 169,786 169,786

268,193 546,883 270,492 5,238 1,151,250 2,242,056

39.3.3 Age analysis of financial assets past-due but not impaired

Group < 30 days31 to

60 days61 to

90 days91 to

180 days TotalRM’000 RM’000 RM’000 RM’000 RM’000

31 December 2010

Insurance receivables 7,398 - 2,360 3,592 13,350

< 30 days31 to

60 days61 to

90 days91 to

180 days TotalRM’000 RM’000 RM’000 RM’000 RM’000

31 December 2009

Insurance receivables 6,996 - 2,729 2,793 12,518





39.3.4 Impaired financial assets

At 31 December 2010, based on collective assessment of receivables, there are impaired insurance receivables of RM30,121,000 (31 December 2009: RM40,187,000). No collateral is held as security for any past due or impaired assets. The Group records impairment allowance for loans and receivables and insurance receivables in separate Allowance for Impaired Debts accounts. A reconciliation of the allowance for impairment losses for loans and receivables and insurance receivables is as follows:

GroupInsurance receivables

31.12.2010 31.12.2009RM’000 RM’000

At 1 January / 1 July 40,187 38,497Movement during the year / period (10,066) 1,690

At 31 December 30,121 40,187

39.4 Liquidity risk

Liquidity risk is the risk whereby the Group entities are unable to meet their obligations at a reasonable cost or at any time. The Group manages this risk by monitoring its daily and monthly estimated and actual cash flows. It also holds a sufficient quantity of liquid investments that can be readily converted to cash.

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

• The Group sets guidelines on asset allocations, portfolio limit structures and maturity profiles of the assets, in order to ensure sufficient funding is available to meet insurance and investment contracts obligations.

• The Group monitors its liquidity risk and maintains a level of cash and cash flow deemed adequate by management to finance its operations and to mitigate the effect of fluctuations in cash requirements.

• The Group’s catastrophe excess-of-loss reinsurance contracts contain clauses permitting the immediate draw down of funds to meet claims payments should claim events exceed a certain amount.

39.4.1 Maturity profiles

The table below summarises the maturity profile of the financial liabilities of the Group and the Company based on remaining undiscounted contractual obligations, including interest / profit payable.

For insurance contracts liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities.

Unearned premium and the reinsurers’ share of unearned premiums have been excluded from the analysis as they are not contractual obligations.



39.4 Liquidity risk (Cont’d)

39.4.1 Maturity profiles (Cont’d)

Carrying Up to a 1 – 3 3 – 5 5 – 15 Over 15No

maturityValue year years years years years date Total

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2010Insurance contract liabilities 1,155,792 498,481 401,264 196,364 122,345 - - 1,218,454Other financial liabilities 435,322 174,450 299,328 - - - - 473,778Insurance payables 29,630 29,630 - - - - - 29,630Other payables 90,728 71,862 2,268 20,000 - - - 94,130

Total liabilities 1,711,472 774,423 702,860 216,364 122,345 - - 1,815,992



Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2009Insurance contract liabilities

1,314,722 454,971 509,629 272,453 151,233 - - 1,388,286

Other financial liabilities

408,194 67,550 248,777 144,999 - - - 461,326

Insurance payables 26,305 26,305 - - - - - 26,305Other payables 46,540 46,540 - - - - - 46,540

Total liabilities 1,795,761 595,366 758,406 417,452 151,233 - - 1,922,457



Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

31 December 2010Other financial liabilities

360,000 99,128 299,328 - - - - 398,456

Other payables 28,115 9,249 2,268 20,000 - - - 31,517

Total liabilities 388,115 108,377 301,596 20,000 - - - 429,973

31 December 2009Other financial liabilities

400,000 62,038 252,764 145,692 - - - 460,494

Other payables 5,541 5,541 - - - - - 5,541

Total liabilities 405,541 67,579 252,764 145,692 - - - 466,035




39.5 Market risk

The Group’s investment portfolio is generally exposed to fluctuation in market prices. Risk and returns are constantly monitored and reviewed by the Investment Committee Members.

39.6 Foreign currency risk

The Group and the Company are exposed to foreign currency risk on gross direct premium, reinsurance outwards, claims and intra-group borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities. The currencies giving rise to this risk are primarily Singapore Dollar (SGD), Indonesian Rupiah and Thai Baht.

In respect of monetary assets and liabilities held in currencies other than RM, the Group ensures that the net exposure is kept to an acceptable level. The exposure to currency risk of the Group is not material, and hence sensitivity analysis is not presented.

39.7 Interest rate risk / Profit yield risk

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

Floating rate / yield instruments expose the Group and the Company to cash flow interest / profit risk, whereas fixed rate / yield instruments expose the Group and the Company to fair value interest / profit risk.

The Group’s earnings are affected by changes in market interest rates as the impact of such changes has an effect on interest income from deposit placements and fixed income securities. To mitigate the interest rate risk, the deposit placements are made with various financial institutions at varying maturity dates and rates.

The analysis below is performed for reasonably possible movements in key variables with all other variable held constant, showing the impact on Profit before tax (due to changes in fair value of floating rate / yield financial instruments) and Equity (that reflects adjustments to Profit before tax and re-valuing fixed rate / yield AFS financial assets). The correlation of variables will have a significant effect in determining the ultimate impact on interest rate / profit yield risk but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear.



39.7 Interest rate risk / Profit yield risk (Cont’d)

31 December 2010 31 December 2009

GroupChange in variables

Impact on profit

before taxImpact on

equity*

Impact on profit

before taxImpact on


31 December 2010Parallel shift in yield curves + 100 basis

points(3,574) (8,087) (3,887) (23,038)

Parallel shift in yield curves - 100 basis points

(3,574) 8,289 3,887 24,123

* impact on equity reflects adjustments for tax, where applicable

39.8 Price risk

Equity price risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from interest /profit yield risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting similar financial instruments traded in the market.

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

The Group’s price risk policy requires it to manage such risk by setting and monitoring objectives and constraints on investments, diversification plans, limits on investments in each country, sector, market and issuer, having regard also to such limits stipulated by BNM. The Group complies with BNM stipulated limits during the financial year and has no significant concentration of price risk.




39.8 Price risk (Cont’d)

The analysis below is performed for reasonable possible movements in key variables with all other variables held constant, showing the impact on profit before tax (due to changes in fair value of financial assets and liabilities whose changes in fair value are recorded in Income Statements) and equity (that reflects adjustments to profit before tax and changes in fair value of AFS financial assets). The correlation of variables will have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear.

31 December 2010 31 December 2009

GroupChange in variables

Impact on profit

before taxImpact on

equity*

Impact on profit

before taxImpact on


Market price +5% 3,874 25,186 5,981 6,438Market price -5% (3,874) (25,186) (5,981) (6,438)

* impact on equity reflects adjustments for tax, where applicable.

39.9 Operational risks

Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risk can cause damage to reputation, have legal or regulatory implications or can lead to financial loss.

The Group cannot expect to eliminate all operational risks but by initiating a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, staff training and evaluation procedures, including the use of Internal Audit.

Business risks, such as changes in environment, technology and the industry are monitored through the Group’s strategic planning and budgeting process.

40. Significant changes in accounting policies

FRS 8, Operating Segments

As of 1 January 2010, the Group determines and presents operating segments based on the information that internally is provided to the Chief Executive Chairman, who is the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of FRS 8. Previously, operating segments were determined and presented in accordance with FRS 1142004, Segment Reporting.

Comparative segment information has been re-presented. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share.


40. Significant changes in accounting policies (Cont’d)

FRS 101 (revised), Presentation of Financial Statements

The adoption of FRS 101 (revised) effective for the financial year ended 31 December 2010 resulted in the following:

i. income statements for the year ended 31 December 2009 have been re-presented as two statements, namely income statements and statements of comprehensive income. All non-owner changes in equity that were presented in the statements of changes in equity are now included in the statements of comprehensive income as other comprehensive income. Consequently, components of comprehensive income are not presented in the statements of changes in equity; and

ii. a statement of financial position at the beginning of the earliest comparative period, i.e. 1 July 2009 have been included following the change in the comparative figures for 31 December 2009 to conform with current year’s presentation.

FRS 117, Leases

The Group has adopted the amendment to FRS 117. The Group has reassessed and determined that all leasehold land of the Group are in substance finance leases and has reclassified the leasehold land to property and equipment. The change in accounting policy has been made retrospectively in accordance with the transitional provisions of the amendment. The reclassification does not affect the basic and diluted earnings per ordinary share for the current and prior periods.

FRS 139, Financial Instruments: Recognition and Measurement

The adoption of FRS 139 has resulted in changes to accounting policies relating to classification and measurement of financial assets of the Group and of the Company. The changes in accounting policies relating to these financial assets are disclosed in Note 3.7.

FRS 139 is applied prospectively upon first application of the standards, following the transitional provisions of the said standard. The financial impact of adopting FRS 139 to the financial assets of the Group is as follows:

GroupFair value Retained

reserve earnings31.12.2010 31.12.2010

RM’000 RM’000

At 1 January, as previously stated - (74,704)Adjustment arising from adopting FRS 139 Fair value of financial assets classified as held-for-trading - 1,545 Fair value of financial assets classified as available-for-sale 6,952 -

At 31 December 6,952 (73,159)



41. Comparative figures

The following comparative figures as at 31 December 2009 have been reclassified to conform with current year’s presentation pursuant to the adoption of the FRS 4, Insurance Contracts and FRS 7, Financial Instruments: Disclosure, and FRS 117, Leases.

GroupAs As previously

restated statedRM’000 RM’000

Statement of financial positionProperty and equipment 213,108 182,151Prepaid lease payments - 30,957Investments in debts and securities - 1,785,580Held-to-maturity financial assets 85,224 -Available-for-sale financial assets 924,856 -Held for trading financial assets 159,934 -Loans and receivables financial assets 513,390 -Reinsurance assets 339,190 -Insurance receivables 49,676 -Other receivables, deposits and prepayments 31,170 -Loans (secured) - 10,114Receivables, deposits and prepayments - 77,960Deferred acquisition costs 36,825 -Cash and cash equivalents 169,786 57,496Insurance contract liabilities (1,775,416) -Insurance premium liabilities - (368,444)Insurance claims liabilities - (1,030,957)Other financial liabilities (408,194) -Insurance payables (26,305) -Loans and borrowings - (400,000)Other payables (46,540) -

Payables and accruals - (78,153)

Prior to the adoption of FRS 4, income and expenses from reinsurance contracts are offset against the income or expenses from the related insurance contracts for disclosure purposes. Following the adoption of FRS 4, the income and expenses from reinsurance contracts are presented on gross basis. The income statement for the year ended 31 December 2009 has been restated to comply with the requirements of FRS 4.


42. Supplementary information on the breakdown of realised and unrealised profit

On 25 March 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the unappropriated profits or accumulated losses as at the end of the reporting period, in realised and unrealised profits or losses.

On 20 December 2010, Bursa Malaysia further issued another directive on the disclosure and the prescribed format of presentation.

The breakdown of the retained profits of the Group and of the Company as at 31 December 2010, into realised and unrealised profits, pursuant to the directive, is as follows:

Group CompanyRM’000 RM’000

Total retained profits of Kurnia Asia Berhad and its subsidiaries - realised (65,334) (30,358) - unrealised 10,749 -

(54,585) (30,358)Total share of retained profits from associates - realised (3,616) - - unrealised 54 -

Total retained profits as per statements of financial position (58,147) (30,358)

The determination of realised and unrealised profits is based on the Guidance of Special Matter No.1, Determination of Realised and Unrealised Profit or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.


Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 43 to 120 are drawn up in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia Guidelines and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company at 31 December 2010 and of their financial performance and cash flows for the financial year then ended.

In the opinion of the Directors, the information set out in Note 42 to the financial statements has been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:


Datuk Kua Chung Sen



Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965

I, Belinda Cheah Sze Yun, the officer primarily responsible for the financial management of Kurnia Asia Berhad, do solemnly and sincerely declare that the financial statements set out on pages 43 to 121 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Petaling Jaya, Selangor on 25 April 2011

Belinda Cheah Sze Yun

Before me:

Radziah binti Abdul Rahman Commissioner for Oaths


Independent Auditors’ Report to the members of Kurnia Asia Berhad

We have audited the financial statements of Kurnia Asia Berhad, which comprise the statements of financial position as at 31 December 2010 of the Group and of the Company, and the income statements, statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 43 to 120.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia Guidelines and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia Guidelines and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2010 and of their financial performance and cash flows for the year then ended.


Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2.2 in the financial statements which discloses the premise upon which the Company has prepared its financial statements by applying the going concern assumption.

The validity of the going concern assumption in the preparation of financial statements is dependent on the successful outcome of the various initiatives being undertaken by the Company and the Company achieving future profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, and relating to amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

Report on Other Legal and Regulatory Requirements

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

a. In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiary of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

b. We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 7.2 to the financial statements.

c. We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

d. The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 42 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements and is not required by the Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance of Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.


Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG Foong Mun KongFirm Number: AF 0758 Approval Number: 2613/12/12(J)Chartered Accountants Chartered Accountant


Independent Auditors’ Reportto the members of Kurnia Asia Berhad (Cont’d)


Additional Compliance Information

1. Share Buy-Back

There was no share buy-back by the Company during the financial year.

2. Option, warrants or convertible securities

The Company did not issue any options, warrants or convertible securities during the financial year.

3. American Depository Receipt (ADR) or Global Depository Receipt (GDR)

The Company did not sponsor an ADR or GDR programme during the financial year.

4. Imposition of sanctions and / or penalties.

There were no material public sanction and / or penalty imposed on the Company and / or its subsidiaries, Directors or the Management by the relevant regulatory bodies during the financial year.

5. Variation in results

There were no variation of 10% or more in results for the fourth quarter and year ended 31 December 2010.

6. Profit guarantee

There was no profit guarantee given by the Company during the financial year.

7. Revaluation policy on landed properties

The Group did not revalue its landed properties classified as Property and Equipment as well as those classified as Investment Property. Freehold lands are stated at cost. Leasehold lands are stated at cost less accumulated depreciation and accumulated impairment losses, if any.

8. Material contracts

During the year, the Company entered into an agreement with its major shareholder, Tan Sri Dato’ Paduka Kua Sian Kooi for a loan amounting to RM20,000,000, with effective interest rate of 5.67% per annum. The proceeds from the loan were for the purpose of enabling the Company to meet its obligation under the term loan, to repay CIMB Bank Berhad (“CIMB”) during the financial year. The loan is unsecured and subordinated to the term loan from CIMB.

Save as disclosed above, there was no material contract entered into by the Company and / or its subsidiaries involving Directors’ and major shareholders’ interest which were still subsisting as at the end of the financial year or if not then subsisting, entered into since the end of the previous financial period.


List of Top 10 Properties

No. LocationExisting

use TenureLand area

(Sq.meters)Type of

buildingAge of

building

Latest date of revaluation(#)

/ acquisition

Carrying amounts

as at 31.12.2010

(RM)

1 Menara Kurnia, No. 9, Jalan PJS 8/9, 46150 Petaling Jaya held under issue document of title H.S. (D) 63219, P.T. No. 54435, Mukim Damansara, Daerah Petaling, Selangor Darul Ehsan.

Office Leasehold Expiring-

17 July 2091

26,759.66 25-storey office building

10+ 14 March 1997 91,889,526.96

2 No. 32, Jalan Yap Ah Shak, Bangunan Kurnia, 50300 Kuala Lumpur held under issue document of title Grant No. 42162 Lot 2485 Seksyen 41, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur.

Office Freehold 682.00 9 ½ -storey terraced corner office building

Not available

30 June 1997 (#)

15,150,517.01

3 Lot No. 14, Jalan Teknologi Taman Sains Selangor 1, Kota Damansara, Daerah Petaling, Selangor Darul Ehsan.

Archive Storage

Leasehold Expiring-11 September

2062

21,811.84 A data information

resource centre consisting of a 3-storey office

building

Not available

6 July 2007 11,871,742.90

4 No. 18, 18A, 18B, 18C, 18D, 18E & 18F, Leboh Raya Darul Aman, 05100 Alor Setar, Kedah held under issue document of title H.S. (D) 5/94, P.T. 1785 Mukim Kota Setar, Daerah Kota Setar, Kedah Darul Aman.

Office Freehold 2,521.01689 1 unit 6-storey terraced corner

office block, 5 units 3-storey

terraced intermediate shoplots & 1 unit 3-storey

terraced end-lot shoplots

8+ 10 December 2001

8,928,961.01

5 Lot 1246 to 1255, Seksyen 41, Lorong Haji Hussein 2, 50300 Kuala Lumpur on Grant No. 26312, 26313, 26314, 26315, 28311 to 28316, Lot No.1246 to 1255, Section 41, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur.

Investment (Currently

rented out as parking

facilities)

Freehold 2,047.24 10 pieces of land

Not applicable

6 September 2007 (#)

7,500,000.00


No. LocationExisting

use TenureLand area

(Sq.meters)Type of

buildingAge of

building

Latest date of revaluation(#)

/ acquisition

Carrying amounts

as at 31.12.2010

(RM)

6 No. 2F, Lorong Selamat, 10400 Pulau Pinang held under issue document of title Grant No. 61391, Lot No. 1296, Section 16 Daerah Timor Laut, Bandar George Town, Pulau Pinang.

Office Freehold 342.00 9-storey terraced corner office building

12+ 30 September 1997

5,683,971.59

7 No. 28, 30, 32 & 34, Jalan Kamunting, 50300 Kuala Lumpur on Grant No. 29792, 29793, 29794 & 29795, Lot No. 575 to 578, Seksyen 41, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur.

Private parking for staff

Freehold 594.56 4 pieces of land Not applicable

23 January 1996

4,021,780.00

8 No. 246 & 247, Jalan Datuk Wee Kheng Chiang, 93450 Kuching held under issue document of title Lot 468 and 469, Section 62, Kuching Town Land District, Sarawak.

Office Leasehold Expiring-31 December

2797

285.10 1 unit 3-storey terraced

intermediate shophouse & 1 unit 3-storey

terraced corner shophouse

Not available

26 January 2011(#)

2,600,000.00

9 No. 149-151, Jalan Maharajalela, Wisma Kurnia, 50150 Kuala Lumpur, held under issue document of title Grant No. 4594 & 4595, Lot 956 & 957 Seksyen 69, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur.

Office Freehold 251.30 4 ½-storey terraced

intermediate shophouse

Not available

27 June 1997(#)

2,432,243.41

10 No. 12, 12a & 12b, Jalan Padi Satu, Bandar Baru Uda, 81200 Tampoi held under issue document of title H.S. (D) 50559, PTB 11103, Bandar & Daerah Johor Bahru, Johor Darul Ta’zim.

Office Leasehold Expiring-

6 February 2081

289.9504 3-storey terraced corner

shophouse

17+ 21 February 2000

1,676,681.99


Analysis of Shareholdings as at 29 April 2011

Authorised Share Capital : RM1,250,000,000Issued & Paid Up Share Capital : RM375,000,000Class of Shares : Ordinary shares of RM0.25 eachVoting rights : One vote per ordinary share

Size of Holdings No. of Holders No. of Holdings %M’sian Foreign M’sian Foreign M’sian Foreign

1 - 99 14 1 491 10 0.00 0.00100 – 1,000 804 3 750,500 2,300 0.05 0.001,001 – 10,000 3,738 31 20,751,259 164,900 1.39 0.0110,001 – 100,000 2,116 40 71,864,000 1,782,400 4.83 0.12100,001 – 74,421,129* 321 13 570,584,287 56,875,629 38.33 3.8274,421,130 and above** 2 0 765,646,824 0 51.44 0.00

Total 6,995 88 1,429,597,361 58,825,239 96.05 3.95

No. of Holders No. of Holdings % of Holdings

Grand Total 7,083 1,488,422,600*** 100.00

Remark: * - Less than 5% of Issued Holdings ** - 5% and above of Issued Holdings *** - Excluding 11,577,400 treasury shares

Top Thirty Securities Account Holders as at 29/04/2011

No. NameNo. of

Shares Held %

1. Kua Sian Kooi 413,999,600 27.812. Cimsec Nominees (Tempatan) Sdn Bhd CIMB for Kua Sian Kooi (PB) 351,647,224 23.633. C S Kua Sdn Bhd 60,000,000 4.034. Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Epic

Portfolio Sdn Bhd51,353,600 3.45

5. Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Damai Asset Management Sdn Bhd

42,966,068 2.89

6. Cimsec Nominees (Tempatan) Sdn Bhd Siew Lee Guan 37,000,000 2.497. Cartaban Nominees (Asing) Sdn Bhd Government of Singapore Investment

Corporation Pte Ltd for Government of Singapore (C)34,616,000 2.33

8. Othman bin Abdul 32,857,400 2.219. Modal Sekata Sdn Bhd 31,959,400 2.1510. Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for

Damai Asset Management Sdn Bhd30,711,400 2.06

11. JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Harta Rigap Sdn Bhd (Margin)

27,496,800 1.85

12. Quah Teong Moo 17,867,300 1.20

13. Cimsec Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Law Ah Moy (Penang-CL)

17,759,519 1.19

14. Modal Sekata Sdn Bhd 15,403,200 1.03


No. NameNo. of

Shares Held %

15. Cartaban Nominees (Asing) Sdn Bhd Government of Singapore Investment Corporation Pte Ltd for Monetary Authority of Singapore (H)

13,510,129 0.91

16. Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Modal Sekata Sdn Bhd

13,036,100 0.88

17. Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Harta Rigap Sdn Bhd

12,904,800 0.87

18 Harta Rigap Sdn Bhd 12,710,500 0.8519. Kua Chung Sen 12,702,000 0.8520. Yeoh Yih An 8,000,000 0.5421. Cimsec Nominees (Tempatan) Sdn Bhd CIMB Bank for Harta Rigap Sdn Bhd (MP0117) 7,000,300 0.4722. Cimsec Nominees (Tempatan) Sdn Bhd CIMB Bank for

Modal Sekata Sdn Bhd (MP0116)7,000,000 0.47

23. JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Teh Yean Teong (Margin)

5,794,200 0.39

24. JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Teh Siew Wah (Margin)

5,574,500 0.37

25. Siew Toh Ee 5,000,000 0.3426. M.I.T Nominees (Tempatan) Sdn Bhd Pledged Securities Account for

Ong Saw Peng (MG0067-188)4,000,000 0.27

27. Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Foong Chee Leong

3,543,600 0.24

28. HRH Sultan Hj Abdul Halim Muadzam Shah 3,046,400 0.2029. Kong Shu Yin 3,000,000 0.2030. Citigroup Nominees (Asing) Sdn Bhd CBNY for DFA

Emerging Markets Small Cap Series2,485,800 0.17

Directors’ Direct and Indirect Interest in the Company and its related corporations

Direct Interest Indirect InterestName No. of Shares Held % No. of Shares Held %

Tan Sri Dato’ Paduka Kua Sian Kooi 765,646,824 51.44 5,000,000 0.33Datuk Kua Chung Sen 12,702,000 0.85 60,000,000 4.03Dato’ Wira Othman bin Abdul 32,857,400 2.21 334,600 0.02

Dato’ Quah Teong Moo 17,867,300 1.20 - -Dato’ Dr. Sharifuddin bin Abdul Wahab - - - -Leow Ming Fong @ Leow Min Fong - - - -

Substantial Shareholders

Direct Interest Indirect Interest Total InterestName No. of Shares Held % No. of Shares Held % No. of Shares Held %

Tan Sri Dato’ Paduka Kua Sian Kooi 765,646,824 51.44 5,000,000 0.33 770,646,824 51.77

Top Thirty Securities Account Holders as at 30/03/2011 (Cont’d)

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Form of Proxy

I/We (Full name in block capitals)

of (Full address)

being *a member(s) of KURNIA ASIA BERHAD (539435-K) (“KAB”) , hereby appoint(s)

of

or failing him

of

as my/our proxy to attend and vote for me/us on my/our behalf at the Tenth Annual General Meeting of the Company to be held at 9th Floor, Training Auditorium, Menara Kurnia, Block B4, Leisure Commerce Square, No. 9, Jalan PJS 8/9, 46150 Petaling Jaya, Selangor Darul Ehsan on Thursday, 16 June 2011 at 10.00 a.m. or any adjournment thereof.

Please indicate with an “X” in the space provided below as to how you wish your votes to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his/her discretion.

Resolutions For Against

Resolution 1 To receive the Audited Financial Statements for the financial year ended 31 December 2010 and the Reports of Directors and Auditors thereon.

Resolution 2 To re-elect Dato’ Quah Teong Moo who retires by rotation pursuant to Article 110 of the Company’s Articles of Association as Director.

Resolution 3 To re-elect Leow Ming Fong @ Leow Min Fong who retires by rotation pursuant to Article 110 of the Company’s Articles of Association as Director.

Resolution 4 To re-appoint Messrs. KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 5 Authority to issue shares.

Dated this 2011

Signature / Common Seal of Member(s)

Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a Member of the Company and a Member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. A Member shall be entitled to appoint not more than three (3) proxies to attend and vote at the Annual General Meeting. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless the Member specifies the proportions of his holding to be represented by each proxy.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a corporation, either under its Common Seal or under the hand of its attorney duly authorised.

4. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a notarially certified copy thereof, must be deposited at the Registered Office of the Company at 25th Floor, Menara Kurnia, Block B4, Pusat Dagang Setia Jaya (Leisure Commerce Square), No. 9, Jalan PJS 8/9, 46150 Petaling Jaya, Selangor Darul Ehsan not less than forty eight (48) hours before the time for holding the Annual General Meeting or any adjournment thereof.

No. of Shares Held

Kurnia Asia Berhad (539435-K)

25th Floor, Menara Kurnia, Block B4, Pusat Dagang Setia Jaya, (Leisure Commerce Square), No. 9, Jalan PJS 8/9, 46150 Petaling Jaya, Selangor Darul Ehsan.

Stamp

Fold this flap to seal

1st fold here

2nd fold here

Your Shelter of Protection

Life, as we know it, is never without its fair share of challenges and obstacles. But when you’re prepared with the right support and protection, life can be a walk in the park. That is why at Kurnia Asia Berhad, we are constantly committed to help our customers brave through stormy weathers, so they can fully take pleasure in what life has to offer.

Annual Report 2010

Kurnia Asia Berhad 539435-K

25th Floor, Menara KurniaBlock B4, Pusat Dagang Setia Jaya(Leisure Commerce Square)No.9, Jalan PJS 8/946150 Petaling JayaSelangor Darul Ehsan

T: 603 7877 6622F: 603 7874 8646E: [email protected]

www.kurnia.com

Kurnia A

sia Berhad

539435-KA

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RT 2010

Documents

Annual Report 2010 - KSK Group · Annual Report 2010 Kurnia Asia Berhad 539435-K 25th Floor, Menara Kurnia Block B4, Pusat Dagang Setia Jaya (Leisure Commerce Square) No.9, Jalan