axa-com-my.cdn.axa-contento-118412.eu...AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT DIRECTORS Tan Sri Hashim bin Meon General Tan Sri Ahmad Saruji

Company No.

23820 W

AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)

STATUTORY FINANCIAL STATEMENTS

31 DECEMBER 2019

Company No.

23820 W


CONTENTS

Page(s)

CORPORATE INFORMATION ii

DIRECTORS’ REPORT 1 - 11

STATEMENT BY DIRECTORS 12

STATUTORY DECLARATION 12

INDEPENDENT AUDITORS' REPORT 13 - 16

FINANCIAL STATEMENTS

STATEMENTS OF FINANCIAL POSITION 17

STATEMENTS OF INCOME 18

STATEMENTS OF COMPREHENSIVE INCOME 19

STATEMENTS OF CHANGES IN EQUITY 20

STATEMENTS OF CASH FLOWS 21 - 22

NOTES TO THE FINANCIAL STATEMENTS 23 - 102

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Company No.

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CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Director

Jean, Paul, Dominique, Louis Drouffe

Non-Executive Directors

Tan Sri Hashim bin Meon

Yu Choong Cheong

Datin Zaimah Binti Zakaria

SECRETARIES

Aisah Bevi binti Abdul Rahman

Nor Hakimah binti Haji Abdul Latiff

AUDITORS

PricewaterhouseCoopers PLT

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS

Ground Floor, Wisma Boustead

71, Jalan Raja Chulan

50200 Kuala Lumpur

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Company No.

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DIRECTORS’ REPORT

DIRECTORS


General Tan Sri Ahmad Saruji bin Che Rose, RMAF (Retired) (resigned w.e.f. 3 June 2019)


Yu Choong Cheong


Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019 and resigned w.e.f. 2 March 2020)

PRINCIPAL ACTIVITY

FINANCIAL RESULTS

Group Company

RM'000 RM'000

Net profit for the financial year 73,145 70,871

DIVIDENDS

ISSUE OF SHARES

No shares were issued by the Company during the financial year.

The Directors have pleasure in submitting their report together with the audited financial statements of the

Group and Company for the financial year ended 31 December 2019.

The Directors in office during the financial year and during the period from the end of the financial year to the

date of the report are:

The Group and Company are principally engaged in the underwriting of all classes of general insurance

business. There have been no significant changes in the nature of this activity of the Group and Company

during the financial year.

No dividend has been paid or declared by the Company since the end of the previous financial year. The

Directors do not recommend any dividend in respect of the financial year ended 31 December 2019.

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DIRECTORS’ REPORT (CONTINUED)

RESERVES AND PROVISIONS

INSURANCE LIABILITIES

BAD AND DOUBTFUL DEBTS

CURRENT ASSETS

VALUATION METHODS

Before the financial statements of the Group and Company were made out, the Directors took reasonable

steps to ascertain that there was adequate provision for insurance liabilities in accordance with the valuation

methods specified in Part D of the Risk-Based Capital Framework (“RBC Framework”) issued by Bank

Negara Malaysia (“BNM”) for insurers.

All material transfers to or from reserves or provisions during the financial year are as disclosed in the

financial statements.


steps to ascertain that proper action had been taken in relation to the writing off of impaired debts and the

making of impairment allowance for impaired debts, and satisfied themselves that all known impaired debts

had been written off and adequate allowance had been made for impaired debts.

At the date of this report, the Directors are not aware of any circumstances that would render the amount

written-off for impaired debts or the amount of the impairment allowance for impaired debts in the financial

statements of the Group and Company inadequate to any substantial extent.


steps to ascertain that any current assets, other than debts, which were unlikely to realise in the ordinary

course of business, their values as shown in the accounting records of the Group and Company have been

written down to amounts which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances which would render the values

attributed to the current assets in the financial statements of the Group and Company misleading.

At the date of this report, the Directors are not aware of any circumstances which have arisen which render

adherence to the existing methods of valuation of assets or liabilities of the Group and Company misleading

or inappropriate.

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CONTINGENT AND OTHER LIABILITIES

At the date of this report, other than as disclosed above, there does not exist:

(a)

(b)

CHANGE OF CIRCUMSTANCES

ITEMS OF AN UNUSUAL NATURE

any charge on the assets of the Group and Company which has arisen since the end of the financial

year which secures the liabilities of any other person, or

any contingent liability in respect of the Group and Company that has arisen since the end of the

financial year.

Other than as disclosed above, no contingent or other liability of the Group and Company 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

Company to meet their obligations when they fall due.

For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising from contracts

of insurance underwritten in the ordinary course of business of the Group and Company.

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this

report or the financial statements of the Group and Company, which would render any amount stated in the

financial statements misleading.

There has not arisen in the interval between the end of the financial year and the date of this report any item,

transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect

substantially the results of the operations of the Group and Company for the financial year in which this

report is made.

The results of the operations of the Group and Company for the financial year were not, in the opinion of the

Directors, substantially affected by any item, transaction or event of a material and unusual nature.

In August 2016, Malaysia Competition Commission (“MyCC”) had commenced investigation under Section

15(1) of the Competition Act, 2010 (“the Act”) against PIAM (Malaysian General Insurance Association) and

22 member companies with regards to an alleged infringement of Section 4(2)(a) of the Act in relation to an

agreement to fix parts trade discount and labour rates for 6 vehicle makes. On 22 February 2017, MyCC

issued a proposed decision to all 22 member companies, proposing to impose collective penalty of RM213

million on the general insurance industry. PIAM and its members (including the Company) had submitted

their respective Written Representation to MyCC in April 2017. The first oral representation was completed in

January 2018. However, there was a change of government after the 14th general election. The Competition

Committee (new Chairman was appointed) decided to review this case. A new oral representation was

agreed to be held. The case management was held on 21 February 2019 and the oral representation from all

relevant insurers (represented by counsels) was held on 13 and 14 May 2019 and 17 and 18 June 2019

respectively. Decision is expected to be issued in 2020.

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CORPORATE GOVERNANCE

Composition of the Board of Directors (“the Board”)

The composition of the Board during the period since the date of the last report is as follows:


General Tan Sri Ahmad Saruji bin Che Rose, RMAF (Retired) (resigned w.e.f. 3 June 2019)


Yu Choong Cheong


Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019 and resigned w.e.f. 2 March 2020)

The Board comprises individuals with a wide range of professional skills and operational experience:


Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired)

Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) holds a Masters' Degree in Defence Studies

and an Advanced Diploma in Defence Resources Management. He was the Chief of the Royal Malaysian

Air Force from 1996 to 2001, and was an Independent Director of a number of defence related companies

namely, Airod Sdn Bhd, SME Aerospace Sdn Bhd and Aerospace Technology System Corporation (ATSC).

After retirement from government service in 2001, he served as Chairman of BH Insurance (M) Bhd

(formerly Royal & Sun Alliance Insurance Bhd.). He was appointed as an Independent Director of the

Company on 2 June 2010 and officially resigned on 3 June 2019.

The Board and management have reviewed the Group's and Company’s corporate governance structures

and procedures with reference to Policy Document BNM/RH/PD/029-09 on Corporate Governance issued by

BNM and are satisfied that the Group and Company has complied with all the prescriptive applications in the

Framework. Where applicable, best practices are adopted to improve the standard of the Group's and

Company’s corporate governance. There is no departure from the Framework principles applicable to

general insurance business.

Tan Sri Hashim bin Meon graduated from University of Malaya in 1970 with honours degree in Arts. He also

holds a Master of Public Administration degree from University of Southern California, Los Angeles, USA,

and has held several senior government positions during his long career. He was Selangor State Secretary

(1995 – 1999) and then Secretary General, Ministry of Defence until he retired in 2003. He now sits on the

Board of a number of local companies, and also the Board of Trustees of several Non-Governmental

Organisations (“NGOs”). He was appointed a Director of the Company since January 2006 and assumed

chairmanship in 2018.

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CORPORATE GOVERNANCE (CONTINUED)

Composition of the Board of Directors (“the Board”) (continued)


Yu Choong Cheong

Dato' Dr. Nirmala Menon a/p Y B Menon


Dato' Dr. Nirmala holds a Bachelor of Medical Science and Doctor of Medicine (BSc. MD) from Mysore

University, India in 1983. She has 9 years of experience as medical practitioner and 27 years of experience

in insurance industry both in life and health insurance. She held several senior positions during her long

career and her last position prior to her retirement in 2016 was the Executive Vice President, Head of

Designated Markets & Health Asia at Metlife Asia Pacific Ltd. (Insurance) based in Hong Kong. Currently,

she is an independent director of Nestle Malaysia Berhad and Sime Darby Berhad. She was appointed to the

Board of the Company on 15 July 2019 and resigned on 2 March 2020.

Datin Zaimah Zakaria holds a Bachelor of Science in Agribusiness from University Putra Malaysia (UPM) in

1981 and Master in Business Administration (Finance) from International Islamic University Malaysia (IIUM)

in 2003. She has held several senior positions in the banking sector during her long career and her last

position prior to her retirement in 2015 was as the Executive Vice President at RHB Bank, Kuala Lumpur.

Datin Zaimah has vast experience in financial industry. Currently, she is an occasional speaker on

International Social Etiquette covering personal grooming, art of communication and entertaining including

dining etiquette and also guest speaker on Investment Banking and Treasury related products. She is also

an independent director of Malaysian Reinsurance Berhad and Bank Simpanan Nasional.

Mr Jean Drouffe is currently a Chief Executive Officer of AXA Singapore. After completing his studies in

Economics and Applied Mathematics at Ecole Polytechnique, France, he graduated from ENSAE and

became a Qualified Actuary of the French Institute IAF. He started his career at Arthur Andersen, Paris as an

Actuarial Consultant. He then joined AXA GIE, Paris where he was in charge of launching and leading the

economic capital for AXA Group.

Mr. Yu Choong Cheong graduated in 1975 from University of Malaya with an Honours Degree in Economics

(Business Administration). He has vast experience in investment management, project studies and

management and general financial management. He was appointed as Financial Controller of Affin Holdings

Berhad (AHB) when the company was listed on Bursa Malaysia in 1991. He was then promoted to General

Manager in 2001 and was the Executive Director of AHB from year 2004 to May 2013. He started his career

with Lembaga Tabung Angkatan Tentera (LTAT), which is the ultimate holding body corporate of AHB in

1975 and retired in 2007 as a General Manager (Investment). He was conferred Kesatria Mangku Negara in

1995 and Johan Setia Mahkota in 2004. Currently he is a non-executive director of Union Harvest Sdn Bhd

and Union Harvest (M) Sdn Bhd.

He spent 9 years in AXA UK in London, initially as Chief Risk Officer and then as Chief Finance Officer in

AXA Insurance and subsequently became Chief Finance Officer of AXA UK Group. He then relocated to

Paris and took the responsibility of Chief Executive Office of AXA France West Region, leading the AXA

business for retail and SME business for the Western quadrant of France until December 2015. He is

currently a director of four (4) AXA entities.

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Attendance at Board Meeting

Directors’ Training

Audit Committee ("AC")

The composition of the AC is as follows:

Datin Zaimah Binti Zakaria Chairperson (Independent)

General Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired)

(resigned w.e.f. 3 June 2019) Member (Independent)

Yu Choong Cheong Member (Independent)

Tan Sri Hashim bin Meon Member (Non-Independent)

Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019

and resigned w.e.f. 2 March 2020) Member (Independent)

The responsibilities of the AC include, but are not limited to the following:

(i)

(ii)

(iii) Select independent auditors for appointment by the Company’s Board each year.

(iv) Consider the appointment, appraisal, resignation and dismissal of the Internal Auditor.

All existing Directors have attended the “FIDE Programme” as required by Bank Negara Malaysia. The

Directors also participated in other briefings/programs to better equip themselves to effectively discharge

their duties.

The Board holds regular meetings, with additional meetings being convened as necessary. All members

complied with the minimum attendance requirements for the Board meetings during the financial year ended

31 December 2019.

Review the overall condition, in particular, the financial status of the Company, its internal controls and

audit programme.

Review with external auditors, the scope of their audit and audit reports, including their findings and any

action to be taken.

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Audit Committee (continued)

Nomination and Remuneration Committee (“NRC”)

The composition of the NRC is as follows:

Datin Zaimah Binti Zakaria Chairperson (Independent)

General Tan Sri Ahmad Saruji bin Che Rose (RMAF) (Retired)


Yu Choong Cheong Member (Independent)

Tan Sri Hashim bin Meon Member (Non-Independent)



The primary responsibilities of the NRC are as follows:

(i)

(ii)

(iii)

(iv)

(v)

(vi)

Overseeing the overall composition of the Board in terms of the appropriate size and mix of skills, the

balance between executive, non-executive and independent Directors and other core competencies

required.

Examine and recommend the Directors’ fees and allowances in accordance with market practice or as

prescribed by the shareholders of the Company.

There were four (4) meetings held in the current financial year and all members attended these meetings.

Recommending and assessing the nominees for directorship, the Directors to fill Board committees as

well as nominees for the CEO position including assessment and recommendation on the Directors to

be re-appointed at the Annual General Meeting of the Company.

Overseeing the appointment, management succession planning and performance evaluation of key

senior officers.

There were four (4) meetings held in the current financial year and all members attended these meetings.

On an annual basis, review and evaluate the effectiveness of the Board as a whole, the contribution by

each Director to the effectiveness of the Board, the contribution of the Board’s various committees and

the performance of the CEO.

Develop a policy on remuneration of Directors and senior executives, and determine the remuneration

packages of individual Directors under conditions of objectivity and full transparency in accordance with

Policy Document BNM/RH/PD/029-9 on Corporate Governance issued by BNM.

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Risk Management Committee (“RMC”)

The composition of the RMC is as follows:

Yu Choong Cheong Chairman (Independent)

General Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired)


Datin Zaimah Binti Zakaria Member (Independent)

Tan Sri Hashim bin Meon Member (Non-independent)



The primary responsibilities of the RMC are as follows:

(i)

(ii)

(iii)

There were five (5) meetings held in the current financial year and all members attended these meetings.

Review and recommend risk management strategies, policies and risk tolerance for the Board’s

approval.

Review and assess the adequacy of risk management policies and framework for identifying,

measuring, monitoring and controlling risks as well as the extent to which these are operating

effectively.

Ensure adequate infrastructure, resources and systems are in place for an effective risk management,

for example ensuring that staff responsible for implementing risk management system, perform their

duties independently of the Company’s risk taking activities.

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DIRECTORS’ BENEFITS

DIRECTORS’ INTERESTS

At At

01.01.2019 Acquired Disposed 31.12.2019

The ultimate holding corporation, AXA

Jean, Paul, Dominique, Louis Drouffe 31,534 13,464 (1,503) 43,495

During and at the end of the financial year, no arrangements subsisted to which the Group and Company are

parties, with the object or objects of enabling Directors of the Group and Company to acquire benefits by

means of the acquisition of shares in or debentures of the Group and Company or any other body corporate,

other than the AXA Group Share Plan scheme which applies to all employees of the Group and Company

and the options over the shares in the ultimate holding corporation as disclosed in this report.

Since the end of the previous financial year, no Director of the Group and Company has received or

becomes entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments

received or due and receivable by the Directors disclosed in Note 24 to the financial statements) by reason of

a contract made by the Group and Company or a related corporation with a Director or with a firm of which

he is a member, or with a company in which the Director has a substantial financial interest, except that

certain Directors receive remuneration as Directors/Executives of the related corporations.

According to the register of Directors’ shareholdings required to be kept under Section 59 of the Companies

Act 2016, the interest of the Directors in office at the end of the financial year in shares in the Company or its

subsidiaries or its holding company or subsidiaries of the holding company during the financial year were as

follows:

Number of ordinary shares of 2.29 Euros each

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DIRECTORS’ INTERESTS (CONTINUED)

Options over shares in the ultimate holding corporation, AXA, granted to the Directors are as follows:

At At

01.01.2019 Granted Exercised Forfeited 31.12.2019

Jean, Paul, Dominique, Louis

Drouffe 134,100 - (37,933) - 96,167

DIRECTORS’ REMUNERATION

Details of Directors’ remuneration are set out in Note 24 to the financial statements.

SHARE OPTION SCHEME

No Share Option Scheme was offered during the financial year.

SUBSIDIARIES

Details of subsidiaries are set out in Note 9 to the financial statements.

AUDITORS REMUNERATION

Details of auditors’ remuneration are set out in Note 24 to the financial statements.

HOLDING CORPORATION

Options over ordinary shares of 2.29 Euros each

Other than the above, none of the other Directors in office at the end of the financial year held any interest in

shares in, or debentures of, the Company or its related corporations during the financial year.

The immediate and ultimate holding companies are AXA Asia and AXA S.A. (hereinafter referred to as

“AXA”), respectively, both are incorporated in France.

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AUDITORS

TAN SRI HASHIM BIN MEON DATIN ZAIMAH BINTI ZAKARIA

DIRECTOR DIRECTOR

Kuala Lumpur

This report was approved by the Board of Directors on 13 May 2020. Signed on behalf of the Board of

Directors:-

The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their

willingness to accept re-appointment as auditors.

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STATEMENT BY DIRECTORS

PURSUANT TO SECTION 251 (2) OF THE COMPANIES ACT 2016

Signed on behalf of the Board of Directors in accordance with their resolution dated 13 May 2020.

TAN SRI HASHIM BIN MEON DATIN ZAIMAH BINTI ZAKARIA

DIRECTOR DIRECTOR

Kuala Lumpur.

STATUTORY DECLARATION

PURSUANT TO SECTION 251 (1) OF THE COMPANIES ACT 2016

EMMANUEL JEAN LOUIS NIVET

COMMISSIONER FOR OATHS

I, Emmanuel Jean Louis Nivet, the officer primarily responsible for the financial management of AXA Affin

General Insurance Berhad, do solemnly and sincerely declare that the financial statements set out on

pages 17 to 102 are, in my opinion, correct, and I make this solemn declaration conscientiously believing

the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named Emmanuel Jean Louis Nivet at Kuala Lumpur in

Malaysia on 13 May 2020, before me.

We, Tan Sri Hashim bin Meon and Datin Zaimah binti Zakaria, being two of the Directors of AXA Affin

General Insurance Berhad, do hereby state that, in the opinion of the Directors, the financial statements

set out on pages 17 to 102 are drawn up so as to give a true and fair view of the financial position of the

Group and Company as at 31 December 2019 and of the financial performance and cash flows of the

Group and Company for the financial year ended 31 December 2019 in accordance with Malaysian

Financial Reporting Standards, International Financial Reporting Standards and the provisions of the

Companies Act 2016.

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STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

2018

Note Group Company Company

RM'000 RM'000 RM'000

Assets

Property, plant and equipment 5 24,304 24,304 27,313

Intangible asset – software 6 30,953 30,953 22,914

Goodwill 7 165,822 165,822 165,822

Investments 8 2,797,622 2,657,366 2,593,022

Available-for-sale (“AFS”) financial

assets 1,134,518 1,617,994 1,569,330

Loans and receivables 1,663,104 1,039,372 1,023,692

Right-of-use assets 10 13,510 13,510 -

Reinsurance assets 11 292,523 292,523 320,905

Insurance receivables 12 232,633 232,633 282,948

Other receivables and prepayments 13 68,627 67,097 89,796

Deferred tax assets 16 3,372 3,378 13,846

Tax recoverable 17,971 17,971 -

Cash and cash equivalents 68,975 68,953 48,542

Total assets 3,716,312 3,574,510 3,565,108

Equity and liabilities

Share capital 14 190,645 190,645 190,645

Retained earnings 14 992,111 992,259 921,388

AFS reserve 28,606 28,588 7,813

Revaluation reserve 13,181 13,181 13,175

Share option reserve 4,801 4,801 4,801

Total equity 1,229,344 1,229,474 1,137,822

Insurance contract liabilities 15 1,854,356 1,854,356 1,892,278

Borrowing 17 70,025 70,025 130,100

Insurance payables 18 261,691 261,691 233,892

Other payables 19 286,979 145,047 165,921

Lease liabilities 10 13,917 13,917 -

Tax payable - - 5,095

Total liabilities 2,486,968 2,345,036 2,427,286

Total equity and liabilities 3,716,312 3,574,510 3,565,108

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

2019

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STATEMENTS OF INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

2018


RM'000 RM'000 RM'000

Gross earned premiums 20(a) 1,371,369 1,371,369 1,436,564

Premiums ceded to reinsurers 20(b) (214,589) (214,589) (232,347)

Net earned premiums 1,156,780 1,156,780 1,204,217

Investment income 21 117,546 114,678 103,795

Realised gains and losses 22 3,378 3,378 14,901

Realised and unrealised foreign

exchange gains 1,866 1,866 635

Reinsurance commission

income 41,954 41,954 49,948

Other operating revenue 371 371 815

Other revenue 165,115 162,247 170,094

Gross claims paid 15(a) (907,100) (907,100) (971,661)

Claims ceded to reinsurers 15(a) 98,960 98,960 194,106

Gross change to claims liabilities 15,700 15,700 59,130

Change to claims liabilities ceded

to reinsurers (27,234) (27,234) (81,581)

Net claims incurred (819,674) (819,674) (800,006)

Commission expense (153,634) (153,634) (171,097)

Fair value losses 23 - - (462)

Management expenses 24(a) (253,104) (252,510) (248,522)

Finance costs 24(b) (8,323) (8,323) (14,227)

Other expenses (415,061) (414,467) (434,308)

Profit before taxation 87,160 84,886 139,997

Taxation 25 (14,015) (14,015) (39,652)

Net profit for the financial year 73,145 70,871 100,345

Attributable to:

Equity holders of the parent 70,723 70,871 100,345

Non-controlling interests 2,422 - -

73,145 70,871 100,345

Basic earnings per share (sen) 26 60 84


2019

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STATEMENTS OF COMPREHENSIVE INCOME


2018


RM'000 RM'000 RM'000

Net profit for the financial year 73,145 70,871 100,345

Other comprehensive income

Items that may be subsequently

reclassified to the statement of

income:

Available-for-sale reserve:

Net gain arising during the

period (Note 8(c)) 30,767 30,743 3,325

Net realised gain transferred to

income statement (Note 8(c)) (3,377) (3,377) (14,897)

Tax effect thereon (Note 16) (6,597) (6,591) 2,777

20,793 20,775 (8,795)

Items that will not be reclassified

to the statement of income:

Revaluation reserve:

Surplus arising during the

financial year 6 6 6

Tax effect thereon (Note 16) - - -

6 6 6

Total comprehensive income

for the financial year 93,944 91,652 91,556

Attributable to:

Equity holders of the parent 91,522 91,652 91,556

Non-controlling interests 2,422 - -

93,944 91,652 91,556


2019

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STATEMENTS OF CHANGES IN EQUITY


Distributable

Share Revaluation Share option AFS Retained

capital reserve reserve reserve earnings Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group

At 1 January 2019 190,645 13,175 4,801 7,813 921,388 1,137,822

Total comprehensive income for the

financial year - 6 - 20,793 70,723 91,522

At 31 December 2019 190,645 13,181 4,801 28,606 992,111 1,229,344

Non-distributable Distributable

Share Revaluation Share option AFS Retained

capital reserve reserve reserve earnings Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Company

At 1 January 2019 190,645 13,175 4,801 7,813 921,388 1,137,822


financial year - 6 - 20,775 70,871 91,652

At 31 December 2019 190,645 13,181 4,801 28,588 992,259 1,229,474

At 1 January 2018 190,645 13,169 4,801 16,608 821,043 1,046,266


financial year - 6 - (8,795) 100,345 91,556

At 31 December 2018 190,645 13,175 4,801 7,813 921,388 1,137,822


Non-distributable

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STATEMENTS OF CASH FLOWS


2018

Group Company Company

RM'000 RM'000 RM'000

Operating ActivitiesNet profit for the financial year 73,145 70,871 100,345

Investment income (117,546) (114,678) (103,795)

Finance costs 8,323 8,323 14,227

Realised gains and losses (3,378) (3,378) (14,901)

Fair value losses - - 462

Taxation 14,015 14,015 39,652

Purchase of AFS financial assets (277,006) (760,506) (306,052)

Proceeds from disposal of AFS financial assets 535,180 535,180 204,302

Proceeds from maturity of AFS financial assets 206,700 206,700 230,000

Interest on lease liabilities 769 769 -

Non-cash items:

Depreciation of property, plant and equipment 5,714 5,714 5,902

Depreciation of right-of-use assets 4,915 4,915 -

Amortisation of intangible asset - software 9,852 9,852 7,093

Realised and unrealised foreign exchange gain (1,866) (1,866) (635)

Allowance for impairment of insurance receivables 4,870 4,870 1,601

Changes in working capital:

Increase in loans and receivables (637,546) (13,814) (152,753)

Decrease in reinsurance assets 28,382 28,382 75,174

Decrease/(increase) in insurance receivables 45,445 45,445 (53,093)

Decrease in other receivables 21,169 22,699 2,722

Decrease in insurance contract liabilities (37,922) (37,922) (33,391)

Increase/(decrease) in insurance payables 27,799 27,799 (7,530)

(Decrease)/increase in other payables (18,041) (20,874) 18,560

Cash (used in)/generated from operating activities (107,027) 32,496 27,890

Dividend income received 9,590 16,115 15,550

Interest income received 108,661 99,268 89,089

Income tax paid (33,204) (33,204) (50,477)

Net cash (outflows)/inflows from operating activities (21,980) 114,675 82,052

Investing Activities

Proceeds from disposal of property, plant and equipment 2 2 6

Purchase of property, plant and equipment (2,700) (2,700) (1,854)

Non-controlling interests on acquisition of subsidiary 136,677 - -

Purchase of intangible assets - software (17,891) (17,891) (11,291)

Net cash inflows/(outflows) from investing activities 116,088 (20,589) (13,139)

2019

21

Company No.

23820 W


STATEMENTS OF CASH FLOWS (CONTINUED)


2018


RM'000 RM'000 RM'000

Financing Activities

Interest paid on borrowings (8,398) (8,398) (15,494)

Repayment of borrowing (60,000) (60,000) (70,000)

Payment of lease liabilities (5,277) (5,277) -

Net cash outflows from financing activities (73,675) (73,675) (85,494)

Net increase/(decrease) in cash and cash equivalents 20,433 20,411 (16,581)

Cash and cash equivalents at

the beginning of the financial year 48,542 48,542 65,123

Cash and cash equivalents at

the end of the financial year 68,975 68,953 48,542

Cash and cash equivalents comprise:

Cash and bank balances 68,975 68,953 48,542

Reconciliation of liabilities arising from financing activities

Group and Company

Principal

Interest

payable Principal

Interest

payable

RM'000 RM'000 RM'000 RM'000

Subordinated loans

As at 1 January 130,000 100 200,000 1,367

Cash flows (60,000) (8,398) (70,000) (15,494)

Finance costs - 8,323 - 14,227

As at 31 December 70,000 25 130,000 100

2019

RM'000

Lease liabilities

As at 1 January 2019 18,425

Interest expense 769

Cash flows (5,277)

As at 31 December 2019 13,917


2019

2019 2018

22

Company No.

23820 W


NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019

1 PRINCIPAL ACTIVITIES AND GENERAL INFORMATION

2 BASIS OF PREPARATION

(a)

• MFRS 16 ‘Leases’

• Amendments to MFRS 9 ‘Prepayment Features with Negative Compensation’

• Amendments to MFRS 128 ‘Long-term Interests in Associates and Joint Ventures’

• Amendments to MFRS 119 ‘Plan Amendment, Curtailment or Settlement’

• Annual Improvements to MFRSs 2015 – 2017 Cycle

The Company, a public limited company incorporated and domiciled in Malaysia, is principally engaged

in the underwriting of all classes of general insurance business. There has been no significant changes

in the nature of the activities during the financial year.

The financial statements of the Group and Company have been prepared under the historical cost

convention except as disclosed in this summary of significant accounting policies, and comply with

Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and

the requirements of the Companies Act 2016 in Malaysia.

The Company has met the minimum capital requirements as prescribed by the RBC Framework and

the Guidelines on Internal Capital Adequacy Assessment Process (“ICAAP”) for Insurers as at the date

of the statements of financial position.

The preparation of financial statements in conformity with MFRS requires the use of certain critical

accounting estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities at the date of the statement of financial position and the

reported amounts of revenues and expenses during the reported financial year. It also requires the

Directors to exercise their judgement in the process of applying the Group's and Company’s

accounting policies. Although these estimates and judgement are based on the Directors’ best

knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and

estimates are significant to the financial statements, are disclosed in Note 4 to the financial statements.

Standards, amendments to published standards and interpretations that are applicable to the

Group and Company that are effective

On 1 January 2019, the Group and Company applied the following standards and amendments

for the first time for the financial year beginning on 1 January 2019:

The immediate and ultimate holding companies are AXA Asia and AXA S.A. (hereinafter referred to as

“AXA”), respectively, both are incorporated in France.

The financial statements were authorised for issue by the Board of Directors in accordance with a

resolution of the Directors on 13 May 2020.

23

Company No.

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NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)

2 BASIS OF PREPARATION (CONTINUED)

(a)

•

(i)

(ii)

Amendments to MFRS 4 - Applying MFRS 9 “Financial Instruments” with MFRS 4

“Insurance Contracts”.

The amendments allow entities to avoid temporary volatility in profit or loss that might result

from adopting MFRS 9 before the forthcoming new insurance contracts standard. This is

because certain financial assets have to be measured at fair value through profit or loss

under MFRS 9; whereas, under MFRS 4, the related liabilities from insurance contracts are

often measured on amortised cost basis.

The amendments provide 2 different approaches for entities:


Group and Company that are effective (continued)

The Group and Company have adopted MFRS 16 for the first time in the 2019 financial

statements, which resulted in changes in accounting policies. The Group and Company have

applied MFRS 16 with the date of initial application of 1 January 2019 by applying the simplified

retrospective transition method. Under the simplified retrospective transition method, the 2018

comparative information was not restated and the cumulative effects of initial application of

MFRS 16 where the Group and Company is a lessee were recognised as an adjustment to the

opening balance of retained earnings as at 1 January 2019. The comparative information

continued to be reported under the previous accounting policies governed under MFRS 117

‘Leases’ and IC Interpretation 4 ‘Determining whether an Arrangement Contains a Lease’. The

detailed impact of change in accounting policies are set out in Note 10 to the financial

statements.

Other than that, the adoption of other amendments listed above did not have any impact on the

current period or any prior period and is not likely to affect future periods.

a temporary exemption from MFRS 9 for entities that meet specific requirements; and

the overlay approach.

Both approaches are optional.

24

Company No.

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(a)

•

(b)

•

Based on the analysis performed, the Company was eligible to apply the temporary

exemption as the predominance ratio reflecting the share of liabilities connected to

insurance to total liabilities exceeded 90 percent. No reassessment of eligibility was

required during subsequent annual periods up to and including 2019 as there is no

significant change in the activities performed by the Company. Due to the strong interaction

between underlying assets held and the measurement of insurance contracts, the Company

decided to use the option to defer the full implementation of MFRS 9 until MFRS 17

“Insurance Contracts” becomes effective on 1 January 2021.

For further information on the effects from MFRS 9, Note 33 shows the fair value and fair

value movement of financial assets separately between financial assets with contractual

cash flows that are solely payments of principal and interest (“SPPI”) and other financial

assets. Other financial assets consist of assets with contractual cash flows that are not

SPPI and assets measured at fair value through profit or loss under MFRS 139.


Group and Company that are effective (continued)

The temporary exemption enables eligible entities to defer the implementation date of

MFRS 9 for annual periods beginning before 1 January 2021 at the latest. An entity may

apply the temporary exemption from MFRS 9 if its activities are predominantly connected

with insurance whilst the overlay approach allows an entity to adjust profit or loss for eligible

financial assets by removing any accounting volatility to other comprehensive income that

may arise from applying MFRS 9.

Standards, amendments to published standards and interpretations to existing standards that are

applicable and relevant to the Group and Company but not yet effective

Amendments to MFRS 4 - Applying MFRS 9 “Financial Instruments” with MFRS 4

“Insurance Contracts” (continued).

MFRS 17 “Insurance Contracts” replaces MFRS 4 “Insurance Contracts”.

MFRS 17 applies to insurance contracts issued, to all reinsurance contracts and to

investment contracts with discretionary participating features if an entity also issues

insurance contracts. For fixed-fee service contracts whose primary purpose is the provision

of services, an entity has an accounting policy choice to account for them in accordance

with either MFRS 17 or MFRS 15 “Revenue from Contracts with Customers”. An entity is

allowed to account financial guarantee contracts in accordance with MFRS 17 if the entity

has asserted explicitly that it regarded them as insurance contracts. Insurance contracts,

(other than reinsurance) where the entity is the policyholder are not within the scope of

MFRS 17. Embedded derivatives and distinct investment and service components should

be “unbundled” and accounted for separately in accordance with the related MFRSs.

Voluntary unbundling of other components are prohibited.

25

Company No.

23820 W




(b)

•

Alternative measurement models are provided for the different insurance coverages:

-

-

The Company plans to adopt the new standard on the required effective date. A Project

Steering Committee has been formally set up by the Group and Company to steer decisions

and oversees the implementation of MFRS 17. Major enhancements on the accounting and

actuarial systems have been completed. From year 2020 onward, the focus would primarily

be on finalising the implementation efforts and analysing the effects of MFRS 17 on the

financial statements.

Standards, amendments to published standards and interpretations to existing standards that are

applicable and relevant to the Group and Company but not yet effective (continued)

Simplified Premium Allocation Approach if the insurance coverage period is a year or

less; and

Variable Fee Approach should be applied for insurance contracts that specify a link

between payments to the policyholder and the returns on the underlying items

The requirements of MFRS 17 align the presentation of revenue with other industries.

Revenue is allocated to the periods in proportion to the value of the expected coverage and

other services that the insurer provides in the period, and claims are presented when

incurred. Investment components are excluded from revenue and claims.

Insurers are required to disclose information about amounts, judgements and risks arising

from insurance contracts.

All other new amendments to the published standards and interpretations to existing standards

issued by the MASB effective for financial periods subsequent to 1 January 2019 are not relevant

to the Group and Company.

On 17 March 2020, the International Accounting Standards Board tentatively decided to

defer the effective date of IFRS 17 “Insurance Contracts” and the temporary exemption of

the adoption of IFRS 9 for insurers to annual reporting periods beginning on or after 1

January 2023. The Board expects to issue the amendments to IFRS 17 in the second

quarter of 2020.

MFRS 17 “Insurance Contracts” replaces MFRS 4 “Insurance Contracts” (continued).

MFRS 17 requires a current measurement model where estimates are remeasured at each

reporting period. The measurement is based on the building blocks of discounted,

probability-weighted cash flows, a risk adjustment and a contractual service margin (“CSM”)

representing the unearned profit of the contract. An entity has a policy choice to recognise

the impact of changes in discount rates and other assumptions that related to financial risks

either in profit or loss or in other comprehensive income.

26

Company No.

23820 W



3 SIGNIFICANT ACCOUNTING POLICIES

(a) Subsidiaries

(b) Investment in a subsidiary

Subsidiaries are all entities (including structured entities) over which the Group has control. The

Group controls an entity when the Group is exposed to, or has rights to, variable returns from its

involvement with the entity and has the ability to affect those returns through its power over the

entity.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition

method of accounting, subsidiaries are fully consolidated from the date on which control is

transferred to the Group and are de-consolidated from the date that control ceases. The cost of

an acquisition is measured as the fair value of the assets given, equity instruments issued and

liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the

acquisition.

Inter-company transactions, balances and unrealised gains on transactions between Group

companies are eliminated. Unrealised losses are also eliminated. This may indicate an

impairment of the asset transferred. Accounting policies of subsidiaries have been changed

where necessary to ensure consistency with the policies adopted by the Group.

The gain or loss on disposal of a subsidiary which is the difference between net disposal

proceeds and the Group’s share of its net assets as of the date of disposal including the

cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the

statement of income attributable to the parent.

In the Group’s separate financial statements, investment in a subsidiary is stated at cost less

accumulated impairment losses. Where an indication of impairment exists, the carrying amount

of the investment is assessed and written down immediately to its recoverable amount. See

accounting policy Note 3(g) to the financial statements on impairment of financial assets. The

amount due from subsidiary of which the Company does not expect repayment in the foreseeable

future are considered as part of the Company’s investments in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business

combination are measured initially at their fair values at the acquisition date, irrespective of the

extent of any minority interest. The excess of the cost of acquisition over the fair value of the

Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as

goodwill. See accounting policy Note 3(d) to the financial statements on goodwill. If the cost of

acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the

gain is recognised directly in the statement of income.

27

Company No.

23820 W



3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Property, plant and equipment

Freehold building 50 years

Motor vehicles 5 - 6 years

Office and computer equipment 3 - 5 years

Furniture, fixtures and fittings 5 - 10 years

When the land and buildings are revalued, any accumulated depreciation at the date of

revaluation is eliminated against the gross carrying amount of the asset. The net amount is then

restated as the revalued amount of the asset.

The surplus arising on revaluation is credited to an asset revaluation reserve account except that

a surplus, to the extent that such surplus is related to and not greater than a deficit arising on

revaluation previously recorded as an expense, is credited to the income statement. A deficit

arising on revaluation is recognised as an expense except that, to the extent that such a deficit is

related to a surplus which was previously recorded as a credit to the asset revaluation reserve

account and which has not been subsequently reversed or utilised, it is charged directly to that

account.

Land and buildings are initially stated at cost and subsequently revalued by the Directors, based

on independent valuation of the open market value on the existing use basis carried out by

professional valuers. The valuation of the land and buildings is carried out once in every three

years or earlier if the carrying values of the revalued assets are materially higher and/or lower

than the market values.

Land and buildings, which are substantially occupied by the Company for their operations, are

classified under property, plant and equipment.

Freehold land is not depreciated as it has infinite life. Depreciation of property and equipment is

provided for on a straight-line basis to write off the cost of each asset to its residual value over

the following estimated useful lives:

The residual values and useful lives of property, plant and equipment are reviewed, and adjusted

if appropriate, at each date of the statement of financial position.

Property and equipment are stated at cost less accumulated depreciation and any accumulated

impairment losses.

All items of property and equipment are initially stated at cost. Subsequent costs are included in

the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is

probable that future economic benefits associated with the item will flow to the Group and

Company and the cost of the item can be measured reliably. The carrying amount of the replaced

part is derecognised. All other repairs and maintenance are charged to the income statement

during the financial year in which they are incurred.

Subsequent costs recognition, property and equipment are stated at cost less accumulated

depreciation and any accumulated impairment losses.

28

Company No.

23820 W




(c) Property, plant and equipment (continued)

(d) Goodwill

(e) Intangible assets - software

Goodwill is tested annually for impairment and carried at cost less accumulated impairment

losses. Impairment losses on goodwill are not reversed. See accounting policy Note 3(h) to the

financial statements on impairment of non-financial assets.

The Company allocates goodwill to the combined general insurance business as a whole, which

has been identified as a cash-generating unit.

Where computer software is not an integral part of a related item of computer hardware, the

software is treated as an intangible asset. Capitalised internal-use software costs include external

direct costs of materials and services consumed in developing or obtaining the software, payroll

and payroll-related costs for employees who are directly associated with and who devote

substantial time to the project. Capitalisation of these costs ceases no later than the point at

which the project is substantially completed and ready for its intended purpose. These costs are

amortised over their expected useful life of 3 - 5 years on a straight-line basis, with the useful

lives being reviewed annually.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The

allocation is made to each of the cash-generating units ("CGUs"), or groups of CGUs that is

expected to benefit from the synergies of the combination.

Gains and losses on disposals are determined by comparing proceeds with carrying amounts and

are credited or charged in the statement of income.

Goodwill represents the excess of the cost of acquisition of the subsidiary over the fair value of

the Company's share of the identifiable net assets at the date of acquisition.

At each date of the statement of financial position, the Group and Company assess whether there

is any indication of impairment. If such indications exist, an analysis is performed to assess

whether the carrying amount of the asset is fully recoverable. A write-down is made if the carrying

amount exceeds the recoverable amount. See accounting policy Note 3(h) to the financial

statements on impairment of non-financial assets.

29

Company No.

23820 W




(f) Investments and financial assets

(i) LAR

(ii) AFS

(g) Impairment of financial assets

AFS financial assets are investments that are not classified as fair value through profit or

loss, held-to-maturity or loans and receivables. AFS financial assets initially recorded at fair

value. After initial measurement, the AFS financial assets are re-measured at fair value.

Interest from AFS financial assets calculated using the effective interest method, is

recognised in the statement of income. Any gains or losses arising from a change in fair

value, net of income tax, are recognised directly in statement of comprehensive income,

except for impairment losses. When the AFS financial assets are derecognised, the

cumulative fair value gains or losses previously recognised in other comprehensive income

are transferred to the statement of income as net realised gains or losses on AFS financial

assets.

The Group and Company assess at each date of the statement of financial position whether there

is objective evidence that a financial asset or a group of financial assets is impaired. A financial

asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of

impairment as a result of one or more events that occurred after the initial recognition of the asset

(a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows

of the financial asset that can be reliably estimated.

The Group and Company classify their investments into loans and receivables (“LAR”) or

available-for-sale (“AFS”) financial assets. Classification of the financial assets is determined at

initial recognition.

LAR are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. These financial assets are initially recognised at fair value plus

all transaction costs directly attributable to the acquisition. After initial measurement, LAR

are measured at amortised cost, using the effective yield method, less allowance for

impairment. Gains and losses are recognised in the statement of income when the financial

assets are derecognised or impaired, as well as through the amortisation process.

30

Company No.

23820 W




(g) Impairment of financial assets (continued)

(i) Financial assets carried at amortised cost

(ii) Financial assets carried at cost

(iii) Financial assets carried at fair value

If there is objective evidence that an impairment loss on financial asset carried at amortised

cost has been incurred, the amount of the loss is measured as the difference between the

asset’s carrying amount and the present value of estimated future cash flows discounted at

the financial asset’s original effective interest rate. The carrying amount of the asset is

reduced through the use of an allowance account and the amount of the loss is recognised

in the statement of income.

If, in a subsequent period, the fair value of a debt instrument classified as AFS increases

and the increase can be objectively related to an event occurring after the impairment loss

was recognised in the statement of income, the impairment loss is reversed through the

statement of income. Impairment losses previously recognised in the statement of income

on equity instruments are not reversed through the statement of income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease

can be related objectively to an event occurring after the impairment was recognised, the

previously recognised impairment loss is reversed by adjusting the allowance account. The

amount of the reversal is recognised in the statement of income.

If there is objective evidence that an impairment loss on securities carried at cost (e.g.

equity instruments or which there is no active market or whose fair value cannot be reliably

measured) has been incurred, the amount of the loss 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 similar securities. Such impairment

losses shall not be reversed.

In the case of AFS financial assets, a significant or prolonged decline in the fair value of the

financial asset below its cost is considered in determining whether the assets are impaired.

If any such evidence exists for financial asset held at AFS, the cumulative loss, measured

as the difference between the acquisition cost and the current fair value, less any

impairment loss on that financial asset previously recognised in the statement of income is

removed from statement of comprehensive income and recognised in the statement of

income.

31

Company No.

23820 W




(h) Impairment of other non-financial assets

An impairment loss is charged to the income statement immediately.

(i) Insurance receivables

(j) Cash and cash equivalents

(k) Share capital

(l) Earning per share

Basic earning per share

-

-

The carrying values of assets that are subject to amortisation are reviewed for impairment when

there is an indication that the assets might be impaired. Impairment is measured by comparing

the carrying values of the assets with their recoverable amounts. The recoverable amount is the

higher of the fair value less cost to sell and the value in use, which is measured by reference to

discounted cash flows. Recoverable amounts are estimated for individual assets, or, if it is not

possible, for the cash-generating unit. Non-financial assets that suffered impairment are

reviewed for possible reversal of impairment at each reporting date.

Insurance receivables are recognised when due and measured on initial recognition at the fair

value. 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 and Company

reduce the carrying amount of the insurance receivable accordingly and recognise that

impairment loss in the statement of income. The Group and Company gather the objective

evidence that an insurance receivable is impaired using the same processes adopted for financial

assets carried at amortised cost. The impairment loss is calculated under the same method used

for these financial assets.

A subsequent increase in the recoverable amount of an asset is treated as a reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset that

would have been determined (net of amortisation and depreciation) had no impairment loss been

recognised. The reversal is recognised in the statement of income immediately. Impairment loss

on goodwill is not reversed.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of

new shares and options are shown in equity as a deduction, net of tax, from the proceeds.

Cash and cash equivalents consist of cash and bank balances, excluding fixed and call deposits

which are held for investment purpose.

Basic earnings per share is calculated by dividing:

the profit attributable to owners of the Company, excluding any costs of servicing equity

other than ordinary shares

by the weighted average number of ordinary shares outstanding during the financial year,

adjusted for bonus elements in ordinary shares issued during the year and excluding

treasury shares.

32

Company No.

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(m) Borrowings

(n) Insurance product classification

The Group and Company issue contracts that transfer insurance risk.

(o) General insurance underwriting results

Premium income

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are

subsequently stated at amortised costs, any difference between the proceeds (net of redemption

cost) and the redemption value is recognised in the deferments of income over the period of the

borrowings using the effective interest yield. All other borrowing costs are recognised in

statement of income in the period which they are incurred.

Insurance contracts are those that transfer significant insurance risk. An insurance contract is a

contract under which the Group and Company (the insurer) have 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 and Company determine whether they have significant insurance

risk, by comparing claims payable on the occurrence of an insured event with claims payable if

the insured event had not occurred.

The general insurance underwriting results are determined for each class of business after taking

into account reinsurances, commissions, unearned premiums and claims incurred.

Premiums are recognised in a financial year in respect of the risks assumed during that particular

financial year. Premiums from direct business are recognised during the financial year upon the

issuance of debit notes or policies. Premiums in respect of risks incepted for which debit notes or

policies have not been raised as of the date of the statement of financial position are accrued at

that date as pipeline premiums.

Inward treaty reinsurance premiums are recognised on the basis of periodic advices received

from ceding insurers.

Outward reinsurance premiums are recognised in the same accounting period as the original

policy to which the reinsurance relates.

33

Company No.

23820 W




(o) General insurance underwriting results (continued)

Premium liabilities

Premium liabilities refer to the higher of:

(i) the aggregate of the unearned premium reserves (“UPR”); or

(ii)

(i) 25% method for marine cargo, aviation cargo and transit business;

(ii)

(iii)

Acquisition costs

the best estimate value of the insurer’s unexpired risk reserves (“URR”) at the valuation

date and the Provision of Risk Margin for Adverse Deviation (“PRAD”) calculated at the

overall Company level. The best estimate value is a prospective estimate of the expected

future payments arising from future events insured under policies in force as at valuation

date and also includes allowance for the insurer’s expenses, including overheads and cost

of reinsurance, expected to be incurred during the unexpired period in administering these

policies and settling the relevant claims, and shall allow for expected future premium

refunds.

UPR represent the portion of the net premiums of insurance policies written that relate to the

unexpired periods of the policies at the end of the financial period.

In determining UPR at the date of the statement of financial position, the method that most

accurately reflected the actual unearned premium is used, as follows:

time apportionment method for non-annual policies reduced by the percentage of accounted

gross direct business commissions to the corresponding premiums, not exceeding limits

specified by BNM; and

1/365th method for all other classes of general business in respect of Malaysian policies,

reduced by the corresponding percentage of accounted gross direct business commission

to the corresponding premium, not exceeding limits specified by BNM.

The 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.

34

Company No.

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Claims liabilities

Reinsurance

A liability for outstanding claims is recognised in respect of both direct insurance and inward

reinsurance.

Provision for claims liabilities is made for the estimated costs of all claims together with related

expenses less reinsurance recoveries, in respect of claims notified but not settled at the date of

the statement of financial position. Provision is also made for the cost of claims, together with

related expenses, incurred but not reported at the date of the statement of financial position,

based on an actuarial valuation.

Throughout the course of the financial year, management regularly re-assesses claims and

provision both on an individual and class basis, based on independent professional advice and

reports, other available information and management’s own assessment of the claims and

provisions.

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. Reinsurance

liabilities represent balances due to reinsurance companies. Amount payable are estimated in a

manner consistent with the related insurance contract.

The Group and Company also assume reinsurance risk in the normal course of business for

general insurance contracts when applicable.

Gains or losses on buying reinsurance are recognised in the statement of income immediately at

the date of purchase and are not amortised.

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 and Company may not receive all outstanding amounts due under the terms

of the contract and the event has a reliably measurable impact on the amounts that the Group

and Company will receive from the reinsurer. The impairment loss is recorded in the statement of

income.

Ceded reinsurance arrangements do not relieve the Group and Company from their obligations to

policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed

reinsurance.

The Group and Company cede insurance risk in the normal course of business for all of 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.

35

Company No.

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Reinsurance (continued)

Insurance contract liabilities

These liabilities comprise claims liabilities and premiums liabilities.

Reinsurance contracts that do not transfer significant insurance risk are accounted for directly

through the statement 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. Investment income on these contracts is accounted for

using the effective yield method when accrued.

Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or

expire or when the contract is transferred to another party.

General insurance contract liabilities are recognised when contracts are entered into and

premiums are charged.

Claims liabilities are based on the estimated ultimate cost of all claims incurred but not settled at

the date of the statement of financial position, 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 date of the statement of

financial position. The liability is calculated at the reporting date using a range of standard

actuarial claim projection techniques based on empirical data and current assumptions that may

include a margin for adverse deviation. The liability is not discounted for the time value of money.

No provision for equalisation or catastrophe reserve is recognised. The liabilities are

derecognised when the contract expires, is discharged or is cancelled.

The provision for unearned premiums represents 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.

At each reporting date, the Group and Company review the unexpired risks and a liability

adequacy test is performed to determine whether there is any overall excess of expected claims

and associated expenses (policy administration and claims handing) incurred in future over

unearned premiums. This calculation uses current estimates of future contractual cash flows

(taking into consideration current loss ratio and general policy administration and claims handling

expense ratios) expected to be paid out, loaded with a risk margin to cope with the uncertainty

surrounding the estimates. If these estimates show that the carrying amount of the unearned

premiums is inadequate, the deficiency is recognised in the statement of income by setting up a

provision for liability adequacy.

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(p) Other revenue recognition

Dividend income is recognised when the right to receive payment is established.

(q) Income tax

Gains or losses arising on disposal of financial assets are credited or charged to the statement of

income.

Rental income is recognised on a time proportion basis except where default in payment of rent

has already occurred and the rent due remains outstanding, in which case recognition of rental

income is suspended. Subsequent to suspension, rental income is recognised on receipt basis

until all arrears have been paid.

Other interest income, including amortisation of premiums or accretion of discounts, is

recognised on a time proportion basis that takes into account the effective yield of the asset.

When a loan and receivable is impaired, the Group and Company reduce the carrying amount to

its recoverable amount, being the estimated future cash flow discounted at the original effective

interest rate of the instrument, and continue unwinding the discount as interest income. Interest

income on impaired loan and receivables are recognised using the original effective interest rate.

Interest income is recognised using the effective interest method. The effective interest rate is the

rate that discounts estimated future cash receipts or payments through the expected life of the

financial instrument or, when appropriate, a shorter period to its carrying amount. The calculation

includes significant fees and transaction costs that are integral to the effective interest rate, as

well as premiums or discounts.

Deferred tax is recognised in the statement of income except when it arises from a transaction

which is recognised in other comprehensive income, in which case, the deferred tax is also

charged or credited to other comprehensive income.

Deferred tax is determined using tax rates that have been enacted or substantively enacted by

the date of the statement of financial position and are expected to apply when the related

deferred tax asset is realised or deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be

available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is recognised in full, using the liability method, on temporary differences arising

between the amounts attributed to assets and liabilities for tax purpose and their carrying

amounts in the financial statements. However, deferred tax is not accounted if it arises from initial

recognition of an asset or liability in a transaction other than a business combination that at the

time of the transaction affects neither accounting nor taxable profit or loss.

Current tax expense is determined according to the tax laws in Malaysia and includes all taxes

based upon the taxable profits and is measured using the tax rates that have been enacted at the

reporting date. Current tax is recognised in the statement of income.

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(r) Employees’ benefits

(i) Short-term employees’ benefits

(ii) Post-employment benefits

(iii) Termination benefits

(iv) Share-based compensation

The Group and Company contribute to the Employees’ Provident Fund (“EPF”), a defined

contribution plan. The Group’s and Group and Company’s contributions to the defined

contribution plan are charged to the income statement in the financial year to which they

relate. Once the contributions have been paid, the Group and Company have no further

payment obligations.

The Group and Company also operate a defined contribution retirement gratuity scheme

based on a percentage of basic staff salary, less contributions made to the EPF.

Termination benefits are payable whenever an employee’s employment is terminated before

the normal retirement date or whenever an employee accepts voluntary redundancy in

exchange for these benefits. The Group and Company recognise termination benefits when

it is demonstrably committed to either terminate the employment of current employees

according to a detailed formal plan without possibility of withdrawal or to provide termination

benefits as a result of an offer made to encourage voluntary redundancy.

AXA, the ultimate holding corporation, offers certain eligible employees of the Group and

Company options to purchase ordinary shares of AXA, pursuant to the share options plan

maintained by AXA, at a fixed price. The fair value of the employee services received in

exchange for the grant of the options is recognised as an expense. The total amount to be

expensed over the vesting period is determined by reference to the fair value of the options

granted, excluding the impact of any non-market vesting conditions (for example,

profitability and premium income growth targets). Non-market vesting conditions are

included in assumptions about the number of options that are expected to become

exercisable. At each date of the statement of financial position, the Group and Company

revise the estimates of the number of options that are expected to become exercisable. It

recognises the impact of the revision of original estimates, if any, in the statement of

income, and a corresponding adjustment to equity over the remaining vesting period.

Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits are

accrued in the financial year in which the associated services are rendered by employees of

the Group and Company.

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(s) Foreign currencies

(t) Insurance payables and other payables

(u) Provisions

(v) Leases

(i) Accounting policies applied from 1 January 2019

Insurance payables and other payables are recognised when due and measured on initial

recognition at the fair value of the consideration less directly attributable transaction costs.

Subsequent to the initial recognition, they are measured at amortised cost using the effective

yield method.

Provisions are recognised when the Group and Company have a present obligation as a result of

a past event and it is probable that an outflow of resources embodying economic benefits will be

required to settle the obligation, and a reliable estimate of the amount can be made.

Items included in the financial statements of the Group and Company are measured using the

currency of the primary economic environment in which the entity operates (the “functional

currency”). The financial statements are presented in Ringgit Malaysia, which is the Group’s and

Group and Company’s functional and presentation currency.

All transactions in a currency other than the functional currency (“foreign currency”) are converted

into Ringgit Malaysia at the rates of exchange prevailing on the transaction dates. Foreign

currency monetary assets and liabilities at the date of the statement of financial position are

translated at the rates of exchange prevailing at that date. Exchange differences arising from the

settlement of foreign currency transactions and from the translation of foreign currency monetary

assets and liabilities are included in the statement of income.

Contracts may contain both lease and non-lease components. The Group and Company

allocates the consideration in the contract to the lease and non-lease components based on

their relative stand-alone prices. However, for leases of properties for which the Group and

Company is a lessee, it has elected the practical expedient provided in MFRS 16 not to

separate lease and non-lease components. Both components are accounted for as a single

lease component and payments for both components are included in the measurement of

lease liability.

From 1 January 2019, leases are recognised as right-of-use (‘ROU’) asset and a

corresponding liability at the date on which the leased asset is available for use by the

Group and Company (i.e. the commencement date).

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(v) Leases (continued)

(i) Accounting policies applied from 1 January 2019 (continued)

Lease term

ROU assets

ROU assets are initially measured at cost comprising the following:

- The amount of the initial measurement of lease liability;

- Any lease payments made at or before the commencement date less any lease

incentive received;

- Any initial direct costs; and

- Decommissioning or restoration costs.

ROU assets that are not investment properties are subsequently measured at cost, less

accumulated depreciation and impairment loss (if any). The ROU assets are generally

depreciated over the shorter of the asset’s useful life and the lease term on a straight-line

basis. If the Group and Company is reasonably certain to exercise a purchase option, the

ROU asset is depreciated over the underlying asset’s useful life. In addition, the ROU

assets are adjusted for certain remeasurement of the lease liabilities.

While the Group and Company revalue land and building (presented as part of property,

plant and equipment) that it owns, it has chosen not to revalue the ROU building held by the

Group and Company.

The Group and Company reassess the lease term upon the occurrence of a significant

event or change in circumstances that is within the control of the Group and the Group and

Company and affects whether the Group and Company is reasonably certain to exercise an

option not previously included in the determination of lease term, or not to exercise an

option previously included in the determination of lease term. A revision in lease term

results in remeasurement of the lease liabilities. See accounting policy below on

reassessment of lease liabilities.

In determining the lease term, the Group and Company consider all facts and

circumstances that create an economic incentive to exercise an extension option, or not to

exercise a termination option. Extension options (or periods after termination options) are

only included in the lease term if the lease is reasonably certain to be extended (or not to be

terminated).

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(i) Accounting policies applied from 1 January 2019 (continued)

Lease liabilities

-

-

-

-

-

Short term leases and leases of low value assets

Amounts expected to be payable by the Group and Company under residual value

guarantees;

Lease liabilities are initially measured at the present value of the lease payments that are

not paid at that date. The lease payments include the following:

Payments of penalties for terminating the lease, if the lease term reflects the Group

and Company exercising that option.

The exercise price of a purchase and extension options if the group is reasonably

certain to exercise that option; and

Variable lease payments that are based on an index or a rate, initially measured using

the index or rate as at the commencement date;

Fixed payments (including in-substance fixed payments), less any lease incentive

receivable;

Lease payments are discounted using the interest rate implicit in the lease. If that rate

cannot be readily determined, which is generally the case for leases in the Group and

Company, the lessee’s incremental borrowing is used. This is the rate that the individual

lessee would have to pay to borrow the funds necessary to obtain an asset of similar value

to the ROU in a similar economic environment with similar term, security and conditions.

Lease payments are allocated between principal and finance cost. The finance cost is

charged to profit or loss over the lease period so as to produce a constant periodic rate of

interest on the remaining balance of the liability for each period.

Variable lease payments that depend on sales are recognised in profit or loss in the period

in which the condition that triggers those payments occurs.

The Group and Company present the lease liabilities as a separate line item in the

statement of financial position. Interest expense on the lease liability is presented within the

finance cost in statement of income.

Short-term leases are leases with a lease term of 12 months or less. Low-value assets

comprise IT equipment and small items of office furniture and equipment. Payments

associated with short-term leases of equipment and vehicles and all leases of low-value

assets are recognised on a straight-line bases as an expense in profit or loss.

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(ii) Accounting policies on lessee accounting applied until 31 December 2018

(w) Dividends

(x) Contingent liabilities and contingent assets

Dividends are recognised as liabilities when the obligation to pay is established in which the

dividends are declared and approved by BNM and the Company’s shareholders. No provision is

made for a proposed dividend.

The Group and Company do not recognise a contingent liability but disclose its existence in the

financial statements. A contingent liability is a possible obligation that arises from past events

whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain

future events beyond the control of the Group and Company or a present obligation that is not

recognised because it is not probable that an outflow of resources will be required to settle the

obligation. A contingent liability also arises in the extremely rare case where there is a liability that

cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be

confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond

the control of the Group and Company. The Group and Company do not recognise a contingent

asset but disclose its existence where inflows of economic benefits are probable, but not virtually

certain.

When an operating lease is terminated before the lease period has expired, any payment

required to be made to the lessor by way of penalty is recognised as an expense in the

financial year in which termination takes place.

Leases of assets where a significant portion of the risks and rewards of ownership are

retained by the lessor are classified as operating leases. Payments made under operating

leases are charged to the statement of income on a straight line basis over the period of the

lease.

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(y) Fair value estimation for disclosure purpose

The basis of estimation of fair values for financial instruments is as follows:

(i)

(ii)

(iii)

(iv)

Level 1 -

Level 2 -

Level 3 -

A level is assigned to each fair value measurement based on the lowest level input significant to

the fair value measurement in its entirety. The three-level hierarchy is defined as follows:

Fair value measurements that reflect unadjusted, quoted prices in active markets for

identical assets and liabilities that the Group and Company have the ability to access

at the measurement date. Valuations are based on quoted prices reflecting market

transactions involving assets or liabilities identical to those being measured.

Fair value measurements using significant non market observable inputs. These

include valuations for assets and liabilities that are derived using data, some or all of

which is not market observable, including assumptions about risk.

Fair value measurements using inputs other than quoted prices included within Level

1 that are observable for the asset or liability, either directly or indirectly. Those

include quoted prices for similar assets and liabilities in active market markets, quoted

prices for identical assets and liabilities in inactive markets, inputs that are observable

that are not prices (such as interest rates, credit risks, etc) and inputs that are derived

from or corroborated by observable market data.

Fair value measurements are classified using a fair value hierarchy based on the observability of

the inputs used in the fair value measurement.

The carrying amounts for other financial assets and liabilities with a maturity period of less

than one year are assumed to approximate their fair values.

The fair values of fixed rate loans are estimated by discounting future expected cash flows,

taking into consideration market conditions and contractual terms of these loans.

The fair values of Malaysian Government securities and unquoted corporate debt securities

are based on the indicative market prices.

The fair values of quoted equity securities and real estate investment trusts (“REITs”) are

based on quoted market prices.

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(z) Business combination under common control

The transfer of business from the subsidiary has been accounted for as business combination

under common control using the predecessor method of accounting. Under the predecessor

method of accounting, the consolidated statements of income include the results of each of the

combining entities from the date of the combinations. The assets and liabilities of the combining

entities are accounted for based on the carrying amounts from the perspective of the common

controlling party or the combining entities if the common controlling party does not prepare

consolidated financial statements. The excess of the cost of acquisition over the aggregate

carrying amounts of assets and liabilities as of the date of the combination is taken to equity.

A similar treatment applies in the Company’s separate financial statements when assets and

liabilities representing the underlying businesses under common control are directly acquired by

the Company. In accounting for the business combination in the Company’s separate financial

statements, the excess of the cost of acquisition over the aggregate carrying amounts of assets

and liabilities as of the date of the combination is taken to equity.

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Company No.

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4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

(a) Critical accounting estimates and assumptions

Claims liabilities

Impairment of goodwill

(b) Critical judgement in applying the entity’s accounting policies

In determining and applying accounting policies, judgement is often required in respect of items

where the choice of specific accounting policy could materially affect the reported results and

financial position of the Group and Company. However, the Directors are of the view that there

are currently no accounting policies which require significant judgement to be exercised in their

application.

The Group and Company assess the impairment of goodwill on an annual basis in accordance

with its accounting policy in Note 3(d) to the financial statements. The recoverable amount of the

goodwill is assessed based on its value-in-use. Value-in-use is determined using the present

value of estimated future cash flows expected to be generated from future new business, using

the estimates and key assumptions as disclosed in Note 7 to the financial statements.

Estimates and judgements are continually evaluated by the Directors and are based on historical

experience and other factors, including expectations of future events that are believed to be reasonable

under the circumstances.

The Group and Company make estimates and assumptions concerning the future. The resulting

accounting estimates will, by definition, rarely equal the related actual results. The estimates and

assumptions that have a significant risk of causing a material adjustment to the carrying amounts

of assets and liabilities within the next financial year are outlined below.

The key assumptions and the sensitivity analysis of claims liabilities are disclosed in Note 31 to

the financial statements.

A risk margin for uncertainty is added to the central estimate of outstanding claims. A central

estimate is an estimate of the level of claims provision that is intended to contain no intentional

under or over estimation. In simple terms, the central estimate i.e. equally likely to be too high

(more than adequate) or too low (inadequate) and is commonly described as providing a 50%

probability of adequacy. As the Group and Company require a higher degree of certainty that

estimates will be adequate over time, a risk margin is added to the central estimate of

outstanding claims.

Estimation of the ultimate cost of certain liabilities claims is a complex process. The Group and

Company apply the AXA Group “Analyse” tool or use an external actuary, to determine the liability

within the chain ladder model. Some factors that affect the liability estimation process are the

inconsistent court resolutions and jurisprudence that has broadened the intent and scope

coverage of the protections offered in the insurance contracts issued by the Group and Company.

The estimation of the ultimate liability arising from claims made under insurance contracts is the

Group's and Group and Company’s most critical accounting estimate. There are several sources

of uncertainty that need to be considered in the estimate of the liability that the Group and

Company will ultimately pay for such claims.

45

Company No.

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5 PROPERTY, PLANT AND EQUIPMENT

Office and Furniture,

Freehold Freehold Motor computer fixtures and

land building vehicles equipment fittings Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

Cost

At 1 January 2019 16,790 280 515 29,703 9,888 57,176

Additions - - - 1,692 1,008 2,700

Disposals - - - (228) (1) (229)

Revaluation surplus 6 - - - - 6

At 31 December 2019 16,796 280 515 31,167 10,895 59,653

Cost - - 515 31,167 10,895 42,577

Valuation 16,796 280 - - - 17,076

At 31 December 2019 16,796 280 515 31,167 10,895 59,653

Accummulated depreciation

At 1 January 2019 - 70 155 23,995 5,643 29,863

Charge for the financial year

(Note 24(a)) - 6 101 4,075 1,532 5,714

Disposals - - - (227) (1) (228)

At 31 December 2019 - 76 256 27,843 7,174 35,349

Net book value

At 31 December 2019 16,796 204 259 3,324 3,721 24,304

46

Company No.

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5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Office and Furniture,

Freehold Freehold Motor computer fixtures and

land building vehicles equipment fittings Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Company

Cost

At 1 January 2018 16,784 280 521 28,249 9,547 55,381

Additions - - - 1,513 341 1,854

Disposals - - (6) (59) - (65)

Revaluation surplus 6 - - - - 6

At 31 December 2018 16,790 280 515 29,703 9,888 57,176

Cost - - 515 29,703 9,888 40,106

Valuation 16,790 280 - - - 17,070

At 31 December 2018 16,790 280 515 29,703 9,888 57,176

Accummulated depreciation

At 1 January 2018 - 64 60 19,732 4,168 24,024

Charge for the financial year

(Note 24(a)) - 6 101 4,320 1,475 5,902

Disposals - - (6) (57) - (63)

At 31 December 2018 - 70 155 23,995 5,643 29,863

Net book value

At 31 December 2018 16,790 210 360 5,708 4,245 27,313

47

Company No.

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5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Recurring fair value measurements

6 INTANGIBLE ASSET - SOFTWARE

2019 2018

RM'000 RM'000

Group and Company

Cost

At 1 January 59,454 48,163

Additions 17,891 11,291

At 31 December 77,345 59,454

Accumulated amortisation

At 1 January 36,540 29,447

Amortisation during the financial year (Note 24(a)) 9,852 7,093

At 31 December 46,392 36,540

Net book value

At 31 December 30,953 22,914

7 GOODWILL

2019 2018

RM'000 RM'000

Group and Company

Cost/Net book value

At 31 December 165,822 165,822

The freehold land and freehold building, which are used as the Company’s training facilities, were last

revalued in 2019 by an independent professional valuer, James Wong Kwong Onn, member of the

Institution of Surveyors, Malaysia of VPC Alliance (KL) Sdn Bhd at open market value on an existing

use basis.

The net book value of the revalued land and building had these assets been carried at cost less

accumulated depreciation is not disclosed due to the absence of historical records.

The freehold land and building, which fair value is under Level 2 of the fair value hierarchy, is measured

using the sales comparison approach. Sales prices of comparable land and buildings in close proximity

are adjusted for differences in key attributes such as land area and location and time factor. The most

significant input into this valuation approach is price per square foot.

The goodwill has been allocated to the cash generating unit, being the combined general insurance

business as a whole. The recoverable amount of the goodwill has been determined based on value-in-

use calculations using cash flow projections based on the strategic plan 2020 - 2023 approved by

senior management covering a four years period. The projected cash flows beyond four years are

determined on the assumptions that earnings level will remain fairly stable for the period covering years

2024 to 2029. The projected cash flows are determined by budgeted profitability based on past

performance and management’s expectations of market developments.

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Company No.

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7 GOODWILL (CONTINUED)

The key assumptions used in the value-in-use calculation are as follows:

(a)

(b)

(c)

(d)

(e) Terminal value is determined based on the present value of the net assets at the end of 2019.

Based on the assessment of value-in-use for the cash generating unit, the Company do not expect that

any reasonable change in the key assumptions will cause the carrying amount of the goodwill to exceed

its recoverable amount, resulting in impairment of goodwill.

Loss ratios have been projected after taking into account management’s strategy for premium

growth as well as past developments with respect to loss development patterns.

Premium growth rates have been projected on the basis of management’s expectations of market

developments.

A discount rate of 9.8% (2018: 9.6%) has been considered based on the weighted cost of capital

of the Company.

The expense projections including projection of acquisition cost/commission have been done after

taking into account the projected inflation over the strategic business plan period as well as

projected portfolio growth. The projected portfolio mix has also been considered in determining

the projection of acquisition cost/commission.

49

Company No.

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8 INVESTMENTS

2018


RM'000 RM'000 RM'000

AFS financial assets 1,134,518 1,617,994 1,569,330

LAR 1,663,104 1,039,372 1,023,692

2,797,622 2,657,366 2,593,022

(a) AFS financial assets

2018


RM'000 RM'000 RM'000

At fair value

Malaysian Government Securities

- unquoted in Malaysia 210,158 210,158 357,021

Corporate debt securities

- unquoted in Malaysia 879,216 879,216 768,533

Equity securities

- quoted in Malaysia 226 226 230

- unquoted in Malaysia 250 250 250

Wholesale unit trust fund 44,668 528,144 443,296

1,134,518 1,617,994 1,569,330

Maturing within 12 months 42,602 42,602 192,260

Maturing after 12 months 1,046,772 1,046,772 933,294

1,089,374 1,089,374 1,125,554

(b) LAR

2018


RM'000 RM'000 RM'000

At amortised cost

Loans 684 684 862

Fixed and call deposits 1,662,420 1,038,688 1,022,830

1,663,104 1,039,372 1,023,692

Loans maturing within 12 months 684 684 559

Loans maturing after 12 months - - 303

684 684 862

The fixed and call deposits mature within 12 months and the carrying amounts approximate the

fair values at the date of the statements of financial position.

2019

2019

2019

50

Company No.

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8 INVESTMENTS (CONTINUED)

(c) Carrying value of financial instruments

AFS LAR Total

RM'000 RM'000 RM'000

Group

At 1 January 2019 1,569,330 1,023,692 2,593,022

Purchases 277,006 2,443,008 2,720,014

Maturities (206,700) (1,803,056) (2,009,756)

Disposals (531,803) - (531,803)

Net gain recorded in other comprehensive

income 30,767 (851) 29,916

Net realised gain transferred to income statement (3,377) 511 (2,866)

Amortisation adjustment (Note 21) (1,206) - (1,206)

Movement in interest income accrued 501 (200) 301

At 31 December 2019 1,134,518 1,663,104 2,797,622

Company

At 31 December 2017/1 January 2018 1,695,561 870,304 2,565,865

Purchases 306,052 4,147,188 4,453,240

Maturities (230,000) (3,994,863) (4,224,863)

Disposals (189,405) - (189,405)


income 3,325 - 3,325

Net realised gain transferred to income statement (14,897) - (14,897)

Net gain on foreign exchange - 507 507

Movement in impairment allowance (Note 23) (462) - (462)


Movement in interest income accrued 444 556 1,000

At 31 December 2018/1 January 2019 1,569,330 1,023,692 2,593,022

Purchases 760,506 4,059,710 4,820,216

Maturities (206,700) (4,043,489) (4,250,189)

Disposals (531,803) - (531,803)


income 30,743 (851) 29,892

Net realised gain transferred to income statement (3,377) 511 (2,866)


Movement in interest income accrued 501 (200) 301

At 31 December 2019 1,617,994 1,039,372 2,657,366

51

Company No.

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8 INVESTMENTS (CONTINUED)

(d) Fair value of financial instruments

Recurring fair value measurements

2018


RM'000 RM'000 RM'000

Level 1 226 226 230

Level 2 1,134,042 1,617,518 1,568,850

Level 3 250 250 250

1,134,518 1,617,994 1,569,330

9 CONTROLLED STRUCTURED ENTITY

Name of fund Principal activities

2019 2018

76% -

The following tables show financial instruments recorded at fair value analysed by the different

hierarchy of fair value:

2019

During the financial year ended 31 December 2019, the Company acquired units in a wholesale unit

trust fund which is established in Malaysia and managed by an external fund manager. Details of the

investment in the wholesale unit trust fund are as follow:

% of ownership interest

held by the Company

Invest in deposits with financial institutions

and money market instruments

Principal

Deposit Fund 2

The Company determined that its investment in the wholesale unit trust fund amounting to

RM476,814,796 as at 31 December 2019 as disclosed in Note 8 to the financial statements as

investment in structured entity (“investee fund”). The investee fund was managed by Principal Asset

Management Berhad.

As at 31 December 2019, the Company held 76% of units in Principal Deposit Fund 2 and thus had

control over the investee fund. The Company was exposed to, or had rights to variable returns from its

involvement with the entity and has the ability to affect those returns through its power over the entity.

This investee fund was classified as AFS financial asset and the change in fair value of the investee

fund is included in the statement of other comprehensive income in the Company’s separate financial

statements.

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Company No.

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9 CONTROLLED STRUCTURED ENTITY (CONTINUED)

2019

RM'000

Deposits with licensed financial institutions 475,945

Cash and cash equivalents 16

Receivables 1,167

Payables (313)

476,815

The investee fund is audited by PricewaterhouseCoopers PLT.

As at 31 December 2019, the Company’s maximum exposure to loss from its interests in the investee

fund was equal to the fair value of its investment in the investee fund.

As the Company had control over the investee fund which is considered controlled structured entity, the

structured entity is consolidated at Group level. The underlying assets of the structured entity were duly

consolidated in 2019 as shown in Note 8 to the financial statements.

The Company’s exposure to investments in the investee fund is disclosed below.

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Company No.

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10 LEASES

Right-of-use Lease

assets liabilities

RM'000 RM'000

Group and Company

As at 1 January 2019 18,425 (18,425)

Interest expense - (769)

Depreciation charge (4,915) -

Rental paid - 5,277

As at 31 December 2019 13,510 (13,917)

2019

RM'000

Expense related to short-term leases -

Expense relating to lease of low-value assets 593

593

11 REINSURANCE ASSETS

2019 2018

RM'000 RM'000

Group and Company

Claims liabilities (Note 15) 235,656 262,890

Premium liabilities (Note 15) 56,867 58,015

292,523 320,905

Receivable within 12 months 171,738 192,643

Receivable after 12 months 120,786 128,261

292,524 320,905

The Company is applying MFRS 16 for the first time for the year commencing 1 January 2019.

MFRS 16 allows two methods of initial application: (1) full retrospective application with the restatement

of comparatives and (2) modified retrospective approach without the restatement of comparatives and

with certain simplifications available upon adoption. The Company has elected to use the second

approach by implementing the standard retrospectively in relation to all leases in which the Company is

a lessee without restating comparatives. The implementation of MFRS 16 will not affect total equity.

The Company has various lease contracts. All contracts are either short term leases (12 months and

below) or with low value of underlying assets, except for rental of properties.

54

Company No.

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12 INSURANCE RECEIVABLES

2019 2018

RM'000 RM'000

Group and Company

Due premiums including agents, brokers and

co-insurers balances 184,515 232,808

Due from reinsurers and cedants 76,781 73,933

261,296 306,741

Allowance for impairment (28,663) (23,793)

232,633 282,948

Receivable within 12 months 232,633 282,948

Receivable after 12 months - -

232,633 282,948

Movement in allowance for impairment:

At 1 January 23,793 22,192

Allowance for impairment (Note 24(a)) 4,870 1,601

At 31 December 28,663 23,793

The carrying amounts approximate the fair values at the date of the statements of financial position.

Offsetting financial assets and financial liabilities

Gross Net

amounts of amounts

recognised of financial

financial assets

Gross liabilities presented

amounts of set off in the in the

recognised statements statements

financial of financial of financial

assets position position

RM'000 RM'000 RM'000

Group and Company

2019

Insurance receivables 419,604 (158,308) 261,296

2018

Insurance receivables 475,407 (168,666) 306,741

The following financial assets are subject to offsetting, enforceable master netting arrangements and

similar agreements:

There are no financial instruments received as collateral, nor any cash collateral pledged or received as

at 31 December 2019 (2018: Nil).

55

Company No.

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13 OTHER RECEIVABLES AND PREPAYMENTS

2018


RM'000 RM'000 RM'000

Malaysian Motor Insurance Pool (“MMIP”) 49,062 49,062 51,727

- Cash calls paid to MMIP 34,360 34,360 34,360

- Assets held under MMIP 14,702 14,702 17,367

Due from AXA regional offices (Note 29) 6,308 6,308 6,377

Other receivables, deposits and prepayments 13,257 11,727 31,692

68,627 67,097 89,796


14 SHARE CAPITAL AND RETAINED EARNINGS

No. of No. of

Amount shares Amount shares

RM'000 000 RM'000 000

Group and Company

Issued and fully paid share capital

At 1 January / 31 December 190,645 190,645 190,645 190,645

MMIP as at 31 December 2019 is a net receivable of RM15,742,363 (2018: net receivable of

RM12,170,301) after setting-off the amount receivable from MMIP against the Company’s share of

claims and premium liabilities amounting to RM33,320,478 (2018: RM39,557,552) included in Note 15

to the financial statements.

2019 2018

The Company may distribute single-tier tax exempt dividends to its shareholders out of its retained

earnings. Pursuant to Section 51(1) of the Financial Services Act, 2013, the Company is required to

obtain BNM’s written approval prior to declaring or paying any dividend. Pursuant to the RBC

Framework, the Company shall not pay dividends if its Capital Adequacy Ratio position is less than its

internal target capital level or if the payment of dividends would impair its Capital Adequacy Ratio

position to below its internal target.

The amounts due from AXA regional offices are unsecured, interest free and have no fixed terms of

repayment.

2019

56

Company No.

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15 INSURANCE CONTRACT LIABILITIES

Gross Reinsurance Net Gross Reinsurance Net

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

Provision for claims reported

by policyholders 941,048 (175,122) 765,926 974,346 (203,031) 771,315

Provision for IBNR claims 351,625 (60,534) 291,091 334,027 (59,859) 274,168

Claims liabilities (a) 1,292,673 (235,656) 1,057,017 1,308,373 (262,890) 1,045,483

Premium liabilities (b) 561,683 (56,867) 504,816 583,905 (58,015) 525,890

1,854,356 (292,523) 1,561,833 1,892,278 (320,905) 1,571,373

Within 12 months 977,393 (171,738) 805,655 1,013,051 (192,643) 820,408

After 12 months 876,963 (120,785) 756,178 879,227 (128,261) 750,965

1,854,356 (292,523) 1,561,833 1,892,278 (320,905) 1,571,373

20182019

57

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15 INSURANCE CONTRACT LIABILITIES (CONTINUED)

(a) Claims liabilities


RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

At 1 January 1,308,373 (262,890) 1,045,483 1,367,503 (344,471) 1,023,032

Claims incurred in the current

accident year before provision

of risk margin for adverse

deviation (“PRAD”) and claims

handling expenses (“CHE”) 938,983 (121,566) 817,417 974,048 (154,653) 819,395

Movements in claims incurred in

prior accident years before

PRAD and CHE (44,321) 47,613 3,292 (59,277) 36,687 (22,590)

Movement in PRAD of claims

liabilities at 75% confidence level (3,403) 2,227 (1,176) (3,631) 5,441 1,810

Movement in claims handling

expenses 141 - 141 1,391 - 1,391

Claims paid during the financial year (907,100) 98,960 (808,140) (971,661) 194,106 (777,555)

At 31 December 1,292,673 (235,656) 1,057,017 1,308,373 (262,890) 1,045,483

Within 12 months 818,370 (162,153) 656,217 849,861 (182,622) 667,239

After 12 months 474,303 (73,503) 400,800 458,512 (80,268) 378,244

1,292,673 (235,656) 1,057,017 1,308,373 (262,890) 1,045,483

2019 2018

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15 INSURANCE CONTRACT LIABILITIES (CONTINUED)

(b) Premium liabilities


RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

At 1 January 583,905 (58,015) 525,890 558,166 (51,608) 506,558

Premiums written in the financial

year (Note 20) 1,349,147 (213,441) 1,135,706 1,462,303 (238,754) 1,223,549

Premiums earned during the

financial year (Note 20) (1,371,369) 214,589 (1,156,780) (1,436,564) 232,347 (1,204,217)

At 31 December 561,683 (56,867) 504,816 583,905 (58,015) 525,890


2019 2018

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Company No.

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16 DEFERRED TAXATION

2018


RM'000 RM'000 RM'000

Deferred tax assets 3,372 3,378 13,846

At 1 January 13,846 13,846 3,391

Movement during the financial

year recognised in:

Statement of income (Note 25) (3,877) (3,877) 7,678

Other comprehensive income

- AFS reserve (6,597) (6,591) 2,777

At 31 December 3,372 3,378 13,846

Deferred tax assets:

- to be recovered after more than

12 months - - 821

- to be recovered within 12 months 14,646 14,646 17,497

14,646 14,646 18,318

Deferred tax liabilities:

- to be settled after more than

12 months (11,274) (11,268) (4,472)

Deferred tax assets (net) 3,372 3,378 13,846

At 1 Charged/ At 31

January (credited) December

RM'000 RM'000 RM'000

2019

Group

Recognised in statement of income

Excess of capital allowance over depreciation (1,356) (198) (1,554)

AFS financial assets 595 (208) 387

Impairment on equities 226 (105) 121

Provisions and accruals 17,504 (2,914) 14,590

Unrealised foreign exchange loss - (452) (452)

Recognised in AFS reserve

AFS financial assets (2,052) (6,904) (8,956)

Unit Trust - Wholesale fund (374) 307 (67)

Recognised in revaluation reserve

Self-occupied property (697) - (697)

13,846 (10,474) 3,372

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax

assets against current tax liabilities and when the deferred taxes relate to the same tax authority.

2019

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Company No.

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16 DEFERRED TAXATION (CONTINUED)

At 1 Charged/ At 31

January (credited) December

RM'000 RM'000 RM'000

2019 (continued)

Company


Excess of capital allowance over depreciation (1,356) (198) (1,554)



Provisions and accruals 17,504 (2,914) 14,590

Unrealised foreign exchange loss - (452) (452)


AFS financial assets (2,052) (6,904) (8,956)

Unit Trust - Wholesale fund (374) 313 (61)



13,846 (10,468) 3,378

2018

Company


Excess of capital allowance over depreciation (2,493) 1,137 (1,356)



Provisions and accruals 10,120 7,384 17,504

Unrealised foreign exchange loss - - -


AFS financial assets (5,391) 3,339 (2,052)

Unit Trust - Wholesale fund 188 (562) (374)



3,391 10,455 13,846

61

Company No.

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17 BORROWING

2019 2018

RM'000 RM'000

Group and Company

Subordinated loan 70,000 130,000

Interest payable on loan 25 100

70,025 130,100

Payable within 12 months 25 100

Payable after 12 months 70,000 130,000

70,025 130,100

Fair value 55,949 103,660

Subordinated loan - RM150,000,000

Subordinated loan - RM130,000,000

On 28 March 2018, with the approval from BNM, the Company received RM130 million subordinated loan

from AXA S.A. and Affin Holdings Berhad for the Company's working capital purposes.

This subordinated loan has a tenor of not exceeding 10 years from the drawdown date of 28 March 2017.

Interest on the subordinated loan is at the rate of 6.5% and payable every 3 months.

The Company has obtained approval from BNM for a partial early redemption of the subordinated loan.

RM60 million was paid by the Company on 10 December 2019.

The fair value is calculated at a discount rate of 9.8% (2018: 9.6%) based on the weighted cost of capital of

the Company, and is within Level 3 of the fair value hierarchy.

On 28 April 2010, with the approval from BNM, the Company received RM150 million subordinated loan

from AXA S.A. and Affin Holdings Berhad for its acquisition of AMS.

This subordinated loan has a tenor of not exceeding 10 years from the drawdown date of 28 April 2010.

Interest of 8% per annum for 5 years and 10% per annum after the fifth year is charged and deemed

payable every 3 months. An additional charge of 2% per annum above the prescribed rate will be imposed

if the interest remained unpaid when it is ought to be paid.

The subordinated loan was fully settled by the Company on 15 October 2018.

The Company has obtained approval from BNM to make prepayment of the loan in stages over the

remaining last 5 years to its shareholders, AXA S.A. and Affin Holdings Berhad.

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17 BORROWING (CONTINUED)

Non-cash

At 1 charges At 31

January 2019 Cash flows Finance cost December 2019RM'000 RM'000 RM'000 RM'000

Group and Company

Subordinated loans 130,000 (60,000) - 70,000

Finance cost payable on loan 100 (8,398) 8,323 25

130,100 (68,398) 8,323 70,025

Non-cash

At 1 charges At 31

January 2018 Cash flows Finance cost December 2018RM'000 RM'000 RM'000 RM'000

Group and Company

Subordinated loans 200,000 (70,000) - 130,000

Finance cost payable on loan 1,367 (15,494) 14,227 100

201,367 (85,494) 14,227 130,100

18 INSURANCE PAYABLES

2019 2018

RM'000 RM'000

Group and Company

Due to agents and intermediaries 63,469 60,478

Due to reinsurers and cedants 176,916 152,108

Deposits received from reinsurers (Note 29) 21,306 21,306

261,691 233,892


There were no other issuances, cancellations, repurchases, resale and repayments of debt and equity

securities by the Company during the financial period under review.

63

Company No.

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18 INSURANCE PAYABLES (CONTINUED)

Offsetting financial assets and financial liabilities

Gross Net

amounts of amounts

recognised of financial

financial liabilities

Gross assets set presented

amounts of off in the in the

recognised statements statements

financial of financial of financial

liabilities position position

RM'000 RM'000 RM'000

Group and Company

2019

Insurance payables 419,999 (158,308) 261,691

2018

Insurance payables 402,558 (168,666) 233,892

19 OTHER PAYABLES

2018


RM'000 RM'000 RM'000

Accrued expenses 12,406 12,406 25,252

Provision for staff bonus 19,076 19,076 26,443

Other payables 193,009 51,077 62,714

Due to AXA regional offices (Note 29) 62,488 62,488 51,512

286,979 145,047 165,921


The following financial liabilities are subject to offsetting, enforceable master netting arrangements and

similar agreements:

2019

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20 NET EARNED PREMIUMS

2019 2018

RM'000 RM'000

Group and Company

(a) Gross earned premiums

Gross premiums (Note 15(b)) 1,349,147 1,462,303

Change in premium liabilities 22,222 (25,739)

Gross earned premiums

(Note 15(b)) 1,371,369 1,436,564

(b) Premiums ceded

Reinsurance premiums ceded

(Note 15(b)) (213,441) (238,754)

Change in premium liabilities (1,148) 6,407

Premiums ceded to reinsurers

(Note 15(b)) (214,589) (232,347)

Net earned premiums 1,156,780 1,204,217

65

Company No.

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21 INVESTMENT INCOME

2018


RM'000 RM'000 RM'000

AFS financial assets

- interest income 53,730 53,730 52,864

- dividend income 9,590 16,115 15,550

- amortisation of premiums,

net of accretion (Note 8(c)) (1,206) (1,206) (1,288)

LAR

- interest income from fixed

and call deposits 51,167 41,774 33,988

Others 4,265 4,265 2,681

117,546 114,678 103,795

22 REALISED GAINS AND LOSSES

2019 2018

RM'000 RM'000

Group and Company

Property, plant and equipment

Realised gains 1 4


Realised gains from disposal of

- equity securities quoted in

Malaysia 22 14,688

- debt securities unquoted

in Malaysia 3,340 -

- wholesale unit trust fund 15 209

3,378 14,901

23 FAIR VALUE LOSSES

2019 2018

RM'000 RM'000

Group and Company


- impairment loss on equities

quoted in Malaysia (Note 8(c)) - 462

2019

66

Company No.

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24 MANAGEMENT EXPENSES AND FINANCE COSTS

(a) Management expenses

2018


RM'000 RM'000 RM'000

Staff salaries and bonus 88,943 88,943 94,392

Defined contribution plans 13,720 13,720 13,613

Other employee benefits 11,295 11,295 9,797

Staff costs 113,958 113,958 117,802

Chief Executive Officer

- salaries and bonus 1,758 1,758 1,603

- other emoluments 603 603 524


- fees 393 393 351

- other emoluments 77 77 70

Directors' remuneration 2,831 2,831 2,548

Auditor's remuneration*

- statutory audit 372 368 304

- audit related services 9 9 9

- tax related service 82 80 73

Depreciation of property,

plant and equipment (Note 5) 5,714 5,714 5,902

Depreciation of right-of-use assets 4,915 4,915 -

Amortisation of intangible asset

- software (Note 6) 9,852 9,852 7,093

Rental of offices 515 515 5,759

EDP expenses 37,510 37,510 32,499

(Writeback of bad debts)/Bad debts written off (3,870) (3,870) 45

Allowance for impairment of

insurance receivables (Note 11) 4,870 4,870 1,601

Advertising and promotion 12,089 12,089 14,227

Bank charges 11,808 11,807 9,845

Telemarketing 924 924 1,099

Administrative service fee 5,181 5,181 2,770

Management fees 5,605 5,183 4,100

Other expenses 40,739 40,574 42,846

136,315 135,721 128,172

Total management expenses 253,104 252,510 248,522

* There was no indemnity given or insurance effected for any auditor of the Group and Company

during the current financial year and its comparative financial year.

2019

67

Company No.

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24 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED)

(a) Management expenses (continued)

Key management personnel compensation

The total remuneration (including benefits-in-kind) of the Chief Executive Officer & Directors are as follows:-

Benefits-in-

Fees Salary Bonus Others kind Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

2019


- Emmanuel Jean Louis Nivet - 1,063 695 572 31 2,361


- Tan Sri Hashim bin Meon 111 - - 19 - 130

- Gen. Tan Sri Ahmad Saruji bin Che Rose 40 - - 8 - 48

- Datin Zaimah binti Zakaria 100 - - 19 - 119

- Yu Choong Cheong 98 - - 24 - 122

- Dato' Dr. Nirmala Menon a/p Y B Menon 44 - - 7 - 51

393 1,063 695 649 31 2,831

68

Company No.

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(a) Management expenses (continued)

Key management personnel compensation (continued)

Benefits-in-

Fees Salary Bonus Others kind Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

2018


- Emmanuel Jean Louis Nivet - 1,068 535 493 31 2,127


- Tan Sri Hashim bin Meon 97 - - 18 - 115

- Gen. Tan Sri Ahmad Saruji bin Che Rose 83 - - 17 - 100

- Datin Zaimah binti Zakaria 87 - - 17 - 104

- Yu Choong Cheong 84 - - 18 - 102

351 1,068 535 563 31 2,548

There were no indemnity given or insurance effected for any Director and officer during the current financial year and its comparative financial year.

The remuneration, including benefits-in-kind, attributable to the Chief Executive Officer of the Group and Company during the financial year amounted

to RM2,361,000.00 (2018: RM2,127,000.00).

69

Company No.

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(b) Finance costs

2019 2018

RM'000 RM'000

Group and Company

Interest expense on subordinated loan 8,323 14,227

(c) AXA Share Option Scheme

-

- valid for a maximum term of 10 years; and

-

(i) In respect of the employees of the Company

Average Average

exercise exercise

price in Euro price in Euro

per share Options per share Options

Group and Company

At 1 January 14.35 4,500 14.09 7,896

Granted - - - -

Exercised/expired - (250) - (3,396)

At 31 December 14.32 4,250 14.35 4,500

Pursuant to the Share Option Scheme operated by AXA, the ultimate holding corporation of the

Company, Directors and eligible employees of the Company are granted options to purchase

ordinary shares of AXA. While the precise terms and conditions of each option grant may vary,

current options are:

granted at a price not less than the average closing price of the ordinary share on the Paris

Stock Exchange during the 20 trading days preceding the date of grant;

becomes exercisable in instalments of 33.33% per year on each of the second, third and

fourth anniversaries of the grant date which is generally end of March.

The Black-Scholes option pricing model was used by AXA in determining the fair values of the

AXA share options.

Movements in the number of share options held by the employees of the Company and

their related weighted average exercise prices are as follows:

2019 2018

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Company No.

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(c) AXA Share Option Scheme (continued)

(i) In respect of employees of the Company (continued)

Exercise

price in Euro

Expiry date per share 2019 2018

21.3.2020 15.43 1,125 1,125

18.3.2021 14.73 2,125 2,375

16.3.2022 12.22 1,000 1,000

Total number of options 4,250 4,500

Expiry date 2019 2018

21.3.2020 1,125 1,125

18.3.2021 2,125 2,375

16.3.2022 1,000 1,000

Total number of options 4,250 4,500

Weighted average exercise price in Euro per share 14.32 14.35

Share options outstanding at the end of the financial year held by the employees of the

Company have the following expiry dates and exercise prices:

Outstanding options

Exercisable share options at the end of the financial year held by the employees of the

Company have the following expiry dates:

Exercisable options

71

Company No.

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(c) AXA Share Option Scheme (continued)

(ii) In respect of the Executive Director of the Company only

(d) AXA Miles

The cumulative fair value of AXA Miles for eligible employees as at 31 December 2019

amounted to RM2,284,000.00 (2018: RM2,284,000.00).

These 50 AXA Miles will be converted to 50 AXA shares at the end of the acquisition period

which for the grant made on 16 March 2012 will be 16 March 2016 (4 years from the grant of

AXA Miles), i.e. 4 years vesting period with no subsequent restriction period.

The Executive Director has resigned on 23 May 2018 and the new appointed Executive

Director does not hold any Company's share option scheme. There is no related share

option scheme to be reported as at end of 2018 and 2019.

In 2007, AXA, the ultimate holding corporation of the Company introduced the “AXA Miles

Program”. The AXA Miles Program entitles all eligible employees of AXA worldwide as at 1 July

2007 to 50 AXA Miles subject to the employee meeting certain eligibility conditions.

72

Company No.

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25 TAXATION

2018


RM'000 RM'000 RM'000

Current tax

Current financial year 18,876 18,876 45,349

(Over) / Under provision in

prior financial years (8,738) (8,738) 1,981

10,138 10,138 47,330

Deferred tax (Note 16)

Origination and reversal of

temporary differences 3,877 3,877 (7,678)

14,015 14,015 39,652

2018


RM'000 RM'000 RM'000

Profit before taxation 87,160 84,886 139,997

Tax calculated at the statutory

rate of 24% (2018: 24%) 20,918 20,373 33,599

Tax effect of expenses not

deductible for tax purposes 7,039 7,039 10,405

Non-taxable income (5,204) (4,659) (5,464)

Different tax rate for offshore

insurance business - - (869)

(Over) / Under provision in

in prior financial years (8,738) (8,738) 1,981

14,015 14,015 39,652

The income tax for the Shareholders’ and General funds are calculated based on the tax rate of 24%

(2018: 24%) of the estimated assessable profit for the financial year.

A reconciliation of taxation applicable to profit before taxation at the statutory income tax rate to tax at

the effective tax rate is as follows:

2019

On 1 January 2017, the Company early adopted IC Interpretation 23 for financial year beginning on or

after 1 January 2017. The IFRS Interpretations Committee developed IFRIC 23 to clarify the

accounting for uncertainties in income taxes. This interpretation is to be applied to the determination of

taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is

uncertainty over income tax treatments under MFRS 112. This interpretation is effective for annual

reporting periods beginning on or after 1 January 2019. However, earlier application is permitted.

2019

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Company No.

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25 TAXATION (CONTINUED)

i)

ii)

iii)

iv)

26 EARNINGS PER SHARE

2019 2018

Company Company

RM'000 RM'000

Net profit for the financial year 70,871 100,345

Weighted average number of

ordinary shares in issue 119,048 119,048

Basic earnings per share (sen) 60 84

Basic earnings per share is calculated by dividing the net profit for the financial year attributable to

ordinary equity holders of the Group and Company by the weighted average number of ordinary

shares in issue during the financial year:

Upon consulting its legal counsel, the Company is of the view that there are reasonable grounds and

strong justifications to challenge the basis and validity of the notices of additional assessment raised

and the penalty imposed by the IRB.

The Ministry of Finance (MOF), in its letter dated 22 November 2019, agreed that PRAD is an

allowable expense for tax deduction from YA 2009 onwards for general insurance and general takaful

business.

The tax recoverable amount of RM15,993,549 was similarly accounted for as a tax recoverable,

offsetting the accrued position above.

Taxing the dividend income received under section 60(8) instead of Section 4(c) of the ITA;

Disallowing the tax deduction on interest expenses;

Disallowing the tax deduction on Risk-Based Capital (RBC) certification; and

Disallowing the tax deduction on movement of Provision of Risk Margin for Adverse Deviation

(PRAD) as part of the net claims incurred.

The amount payable to the IRB, inclusive of penalty, of RM6,843,909 was made in January 2019.

The amount payable to the IRB of RM9,909,147 has been made in January 2018.

The Inland Revenue Board (“IRB”) had on 22 December 2017, issued to the Company notices of

additional assessment (Form JA) for the years of assessment (“YA”) 2011 and 2012, taxing the

dividend income received under section 60(8) instead of Section 4(c) of the Income Tax Act (“ITA”)

and disallowing the tax deduction on interest expenses and management expenses. The additional tax

payable by the Company, inclusive of penalty, was RM9,909,147 and similarly accrued in the financial

statements.

Subsequently on 8 January 2019, the Company received another Form JA dated 28 December 2018

for YA 2013 from the IRB for the following tax adjustments:

74

Company No.

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27 OPERATING LEASE COMMITMENTS

2019 2018

RM'000 RM'000

Group and Company

Not later than 1 year - 5,539

Later than 1 year and not later than 5 years - 524

- 6,063

28 CAPITAL COMMITMENTS

2019 2018

RM'000 RM'000

Group and Company

Capital expenditure approved but not contracted for:

Property, plant and equipment - -

Intangible asset – software 13,197 8,121

13,197 8,121

29 RELATED PARTY TRANSACTIONS

The Company (as lessee) have entered into non-cancellable operating lease agreements on the rental

of offices for branch operations. These leases have remaining non-cancellable lease terms not later

than 5 years.

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below

are other related party disclosures. In the normal course of business, the Group and Company

undertake various transactions with other companies deemed related parties by virtue of them being

members of Affin Holdings Berhad group of companies (“Affin Group”) and AXA group of companies

(“AXA Group”) on agreed terms and conditions.

From 1 January 2019, the Group and Company have recognised right-of-use (ROU) assets for the

leases, except for short term and low value leases, see Note 10 to the financial statements for further

information.

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29 RELATED PARTY TRANSACTIONS (CONTINUED)

The related parties of, and their relationship with the Group and Company, are as follows:

Country of

Name of company incorporation Relationship

AXA S.A. France Ultimate holding corporation

Affin Holdings Berhad Malaysia Entity which has significant influence

in the Company

AXA Asia France Immediate holding corporation

Axa Group Operations

Hong Kong Limited Hong Kong Company within AXA Group

AXA Global P&C France Subsidiary of Ultimate holding corporation

GIE AXA France Subsidiary of Ultimate holding corporation

Maxis GBN S.A.S. France Affiliate

AXA Regional Services S.A.U. Spain Company within AXA Group

AXA Group Solutions Asia

Limited Hong Kong Company within AXA Group

AXA Group Operations S.A.S France Company within AXA Group

Related party balances

2019 2018

RM'000 RM'000

Receivables

Outstanding premiums due from Affin Group 5,742 10,368

Other receivables due from other subsidiaries of AXA Group

(Note 13) 6,308 6,377

Reinsurance balances due from AXA Global P&C 4,631 16,621

Cash and bank balances

Bank balances with a licensed bank of Affin Group 19,701 3,951

Investments

Fixed deposits placed with a licensed bank of Affin Group 160,285 168,724

Payables

Reinsurance balances due to:

- Other subsidiaries of AXA Group (13,086) (9,948)

Reinsurance deposits due to AXA Global P&C (Note 18) (21,306) (21,306)

Other payables due to other subsidiaries of AXA Group (Note 19) (62,488) (51,512)

The following is a summary of significant related party balances, which were carried out in the normal

course of the business:

76

Company No.

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Significant related party transactions

2019 2018

RM'000 RM'000

Transactions with AXA Global P&C:

Reinsurance premiums ceded (65,316) (67,148)

Reinsurance claims recovered 26,264 78,259

Commissions received 15,246 17,563

Transactions with Maxis GBN S.A.S.:




Transactions with other subsidiaries of AXA Group:




Transactions with GIE AXA:

Management expenses incurred 460 (502)

Transactions with AXA Regional Services S.A.U.:

Management expenses incurred (1,102) (6,553)

Transactions with AXA Group Solutions Asia Limited:

Management expenses incurred - (1,525)

Transactions with AXA Group Operations S.A.S:

Management expenses incurred (91) (1,113)

Transactions with AXA Asia:

Interest expense on subordinated loan (4,647) (4,718)

Management expenses incurred (2,490) 2,971

Transactions with AXA Group Operations Hong Kong Limited:

Management expenses incurred (25,444) (26,093)

Transactions with AXA S.A:

Interest expense on subordinated loan - (3,412)

Significant related party transactions of the Group and Company with the related parties during the

financial year are as follows:

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Significant related party transactions (continued)

2019 2018

RM'000 RM'000

Transactions with Affin Group:

Interest expense on subordinated loan (3,676) (6,097)

Interest income earned 8,900 4,591

Gross premiums received 1,585 1,979

Commissions paid (3,973) (4,546)

(a)

(b)

(c)

The total remuneration of the Directors is disclosed in Note 24 to the financial statements.

2019 2018

RM'000 RM'000

Salaries and other remuneration 9,961 8,839

Benefits-in-kind 31 31

9,992 8,870

The Company has reinsurance agreements (treaty and facultative) with a number of fellow

subsidiaries of AXA under which the Company agrees to cede and assume premiums and

liabilities in accordance with specific reinsurance schedules. Commissions are paid and received

on such arrangements. Such reinsurance agreements with fellow subsidiaries are entered into in

the Company’s normal course of business.

The Company entered into management service agreements with fellow subsidiaries, AXA Asia

and GIE AXA, an economic interest group whereby the fellow subsidiaries undertake to provide

certain management services set out in the service agreements.

Key management personnel are those people defined as having authority and responsibility for

planning, directing and controlling the activities of the Group and Company, either directly or indirectly,

including any director (Executive or Non-Executive).

The compensation of the other key management personnel (including Executive Directors) is as

follows:

The Company has a credit facility with Affin Bank Berhad. This facility has not been drawn down

during the current financial year ended 31 December 2019.

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30 RISK MANAGEMENT FRAMEWORK

Insurance risks

(i) Underestimation of the frequency and/or severity of the claims;

(ii) Change in legal/economic environment;

(iii) Change in insured’s behavior; or

(iv) Change in reinsurance rates etc.

(i) Documented underwriting guidelines and underwriting authorities;

(ii) Risk management engineering and risk accumulation limits;

(iii) Reinsurance is placed to minimize certain insurance risks within approved limits and security;

(iv)

(v) Regular internal audit reviews are performed to ensure compliance with the Group's and

Company's guidelines and standards.

The Group and Company underwrite various types of general insurance contracts, where majority of

contracts are having annual coverage and premium, with the exception of short term policies in Travel

and Marine Cargo (single trip and single shipment policies respectively) and multi-year policies in

Construction and Contractor’s All Risks (project policies).

For the current financial year ended 31 December 2019, Motor and Fire classes constitute 66.8%

(2018: 65.5%) of the Company’s business.

Insurance contracts transfer the risk from the policyholders to the Group and Company. The Group

and Company receive a premium and are then liable for all the claims (as per wording) occurring

between the inception date and the expiry date of the insurance contract arising from random events.

Underestimation of this insurance risk leads to financial consequences for the Group and Company as

the premium might not be enough to cover the costs. The causes of underestimation can be various

such as:

Due to the nature of the business, all the above mentioned elements are assessed and the following

procedures are in place to mitigate the risks:

Claims approval and settlement authorities are clearly defined for prudent control on financial

exposure; and

The Group and Company issue contracts that transfer Insurance risk. This section summarises these

risks and the way the Group and Company manage them.

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30 RISK MANAGEMENT FRAMEWORK (CONTINUED)

Insurance risks (continued)

The table below sets out the concentration of the Group's and Company’s premiums by classes of business:


RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

Motor 748,032 (22,885) 725,147 784,212 (26,540) 757,672

Fire 152,799 (89,206) 63,593 174,321 (91,944) 82,377

Marine, aviation and transit 52,001 (27,652) 24,349 57,767 (29,500) 28,267

Miscellaneous 396,315 (73,697) 322,618 446,003 (90,770) 355,233

1,349,147 (213,440) 1,135,707 1,462,303 (238,754) 1,223,549

(a) Key assumptions

2019 2018

The principal assumption underlying the estimation of liabilities is the future claims development will follow a similar pattern to the past claims

development experience. This includes assumptions in respect of ultimate loss ratios, case reserve, provision of risk margin for adverse deviation

(“PRAD”) and claims handling expenses.

Additional qualitative judgements are used to assess the extent to which the 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. Judgement is further used to assess the extent to which external factors, such as judicial decisions and government

legislation affect the estimates.

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(b) Sensitivity analysis

Impact on Impact on Impact on

Change in gross net profit Impact on

assumptions liabilities liabilities before tax equity

RM'000 RM'000 RM'000 RM'000

Group and Company

2019

Loss ratios for last 3 years +10% 323,903 272,344 (272,344) (206,982)

Case reserve +10% 98,255 79,531 (79,531) (60,444)

PRAD +10% 8,065 6,541 (6,541) (4,971)

Claims handling expenses +10% 1,493 1,493 (1,493) (1,135)

2018

Loss ratios for last 3 years +10% 319,164 264,950 (264,950) (201,362)

Case reserve +10% 101,469 79,711 (79,711) (60,580)

PRAD +10% 8,406 6,648 (6,648) (5,052)

Claims handling expenses +10% 1,479 1,479 (1,479) (1,124)

The insurance claim liabilities calculation is based on key assumptions. Variation of these

assumptions may vary the amount of claim liabilities and impact significantly the results. As

illustrated below, sensitivity analyses are carried out in order to understand how key assumptions

(i.e. ultimate loss ratios of the last 3 accident years, case reserve, PRAD and claims handling

expenses) impact the claim liability. It is worth mentioning that these 4 assumptions do not

represent an exhaustive list but are likely to be the most important.

The analysis below is performed for reasonably possible movements in key assumptions with all

other assumptions held constant, showing the impact on gross liabilities, net liabilities, profit

before tax and equity (profit after tax).

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(c) Claims development tables

The following tables show estimates of cumulative incurred claims including both claims notified

(settled or not yet settled) and IBNR for each successive accident year at each date of the

statement of financial position, together with cumulative payments to-date. The past year claims

pattern is used to assess future claims pattern and therefore estimating the ultimate claims for

each accident year. Actuarial methods such as Chain Ladder but also other quantitative

information (such as market loss ratio benchmarks) and qualitative information (such as

underwriter’s and claim manager’s feedback) are taken into account in the assessments.

In setting provisions for claims, the Group and Company assess the future experience and adjust

the level of reserve to cover future uncertainties such as civil law changes and general claims

inflation. Risk margin is also provided to cope with this uncertainty. The higher the uncertainty,

the higher the risk margin is. This uncertainty depend on the line of business (short tail or long

tail), the nature of the risks (high sum insured or low sum insured) as well as the accident year

(the more recent the accident year is, the higher the uncertainty associated with the ultimate

claims experience is).

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(c) Claims development tables (continued)

Group and Company

Gross claims liabilities for 2019:

Accident Year 2012 & prior 2013 2014 2015 2016 2017 2018 2019 Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At the end of accident year 4,496,214 567,571 658,522 772,979 915,328 1,109,642 1,023,437 982,536

1 Year Later 4,452,665 599,057 733,577 861,265 880,322 1,091,576 995,815

2 Years Later 4,376,830 512,581 654,133 811,504 890,519 1,071,674

3 Years Later 4,314,054 488,362 639,181 768,086 886,127

4 Years Later 4,263,313 489,567 610,448 759,725

5 Years Later 4,250,029 479,151 604,935

6 Years Later 4,229,552 459,528

7 Years Later 4,223,830

4,223,830 459,528 604,935 759,725 886,127 1,071,674 995,815 982,536

At the end of accident year (3,879,295) (178,996) (235,090) (266,619) (324,455) (378,897) (369,645) (393,524)

1 Year Later (4,080,338) (347,515) (468,230) (532,526) (608,803) (782,648) (686,614)

2 Years Later (4,159,936) (394,959) (530,475) (631,676) (733,530) (903,107)

3 Years Later (4,184,606) (418,419) (555,993) (679,305) (780,332)

4 Years Later (4,198,747) (433,796) (571,344) (698,010)

5 Years Later (4,203,577) (440,149) (574,247)

6 Years Later (4,207,775) (443,973)

7 Years Later (4,211,689)

Cumulative payments to-date (4,211,689) (443,973) (574,247) (698,010) (780,332) (903,107) (686,614) (393,524)

12,141 15,555 30,688 61,715 105,795 168,567 309,201 589,012 1,292,674

Gross claims liabilities as per

statement of financial position

Current Estimate of Cumulative

Claims Incurred

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Group and Company

Net claims liabilities for 2019:



At the end of accident year 3,273,792 455,531 546,602 677,873 799,911 818,888 860,395 854,482

1 Year Later 3,246,324 498,415 627,210 759,168 765,359 840,806 856,164

2 Years Later 3,171,989 417,280 552,285 733,969 782,131 844,744

3 Years Later 3,136,518 398,120 539,904 690,597 781,003

4 Years Later 3,098,988 395,559 512,399 684,128

5 Years Later 3,088,223 385,353 508,281

6 Years Later 3,070,232 368,340


3,064,447 368,340 508,281 684,128 781,003 844,744 856,164 854,482


1 Year Later (2,964,715) (291,651) (385,926) (474,713) (552,030) (605,769) (606,086)

2 Years Later (3,016,629) (326,529) (441,889) (553,253) (666,310) (707,294)

3 Years Later (3,037,395) (344,777) (464,722) (596,734) (709,041)

4 Years Later (3,050,595) (354,318) (477,771) (613,887)

5 Years Later (3,054,372) (359,461) (480,524)

6 Years Later (3,057,444) (362,641)



5,509 5,699 27,757 70,241 71,962 137,450 250,078 488,321 1,057,017

Net claims liabilities as per



Claims Incurred

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Group and Company

Gross claims liabilities for 2018:



At the end of accident year 4,028,969 484,595 567,571 658,522 772,979 915,328 1,109,642 1,023,437

1 Year Later 4,011,619 489,768 599,057 733,577 861,265 880,322 1,091,576

2 Years Later 3,962,897 443,461 512,581 654,133 811,504 890,519

3 Years Later 3,933,369 430,949 488,362 639,181 768,086

4 Years Later 3,883,105 412,156 489,567 610,448

5 Years Later 3,851,157 409,859 479,151

6 Years Later 3,840,170 396,466


3,833,086 396,466 479,151 610,448 768,086 890,519 1,091,576 1,023,437


1 Year Later (3,715,680) (304,717) (347,515) (468,230) (532,526) (608,803) (782,648)

2 Years Later (3,775,621) (358,185) (394,959) (530,475) (631,676) (733,530)

3 Years Later (3,801,751) (373,143) (418,419) (555,993) (679,305)

4 Years Later (3,811,463) (381,575) (433,796) (571,344)

5 Years Later (3,817,172) (386,447) (440,149)

6 Years Later (3,817,130) (387,938)



13,249 8,528 39,002 39,104 88,781 156,989 308,928 653,792 1,308,373

Gross claims liabilities as per



Claims Incurred

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Group and Company

Net claims liabilities for 2018:



At the end of accident year 2,877,204 398,493 455,531 546,602 677,873 799,911 818,888 860,395

1 Year Later 2,875,299 411,824 498,415 627,210 759,168 765,359 840,806

2 Years Later 2,834,500 360,512 417,280 552,285 733,969 782,131

3 Years Later 2,811,477 350,361 398,120 539,904 690,597

4 Years Later 2,786,157 333,741 395,559 512,399

5 Years Later 2,765,247 331,565 385,353

6 Years Later 2,756,658 318,775


2,751,457 318,775 385,353 512,399 690,597 782,131 840,806 860,395


1 Year Later (2,665,433) (254,939) (291,651) (385,926) (474,713) (552,030) (605,769)

2 Years Later (2,709,776) (287,423) (326,529) (441,889) (553,253) (666,310)

3 Years Later (2,729,206) (300,269) (344,777) (464,722) (596,734)

4 Years Later (2,737,126) (309,033) (354,318) (477,771)

5 Years Later (2,741,562) (312,712) (359,461)

6 Years Later (2,741,660) (314,112)



8,125 4,663 25,892 34,628 93,863 115,821 235,037 527,454 1,045,483


Claims Incurred

Net claims liabilities as per


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Financial risks

Credit risk

- Reinsurer’s share of insurance liabilities

- Amounts due from reinsurers’ in respect of claims already paid

- Amounts due from insurance contract holders

- Amounts due from insurance intermediaries, and

- Counterparty risk with respect to derivative transactions and custodian

Concentration of credit risk exists when changes in geographic, economic or industry factors similarly

affect groups of counterparties whose aggregate credit exposure is material in relation to the Group's

and Company’s total exposures. The Group's and Company’s portfolio of financial assets is diversified

along geographic, industry and product sectors. The Group and Company have been monitoring the

concentration risk by adopting appropriate risk control measures, such as setting limit on exposures to

individual counterparty.

The Group and Company are exposed to financial risks through their financial assets, reinsurance

assets and insurance liabilities. In particular, the key financial risk is that the proceeds from the

financial assets and reinsurance assets are not sufficient to fund the obligations arising from the

insurance contracts. The important components of these financial risks are interest rate risk, equity

price risk, credit risk, liquidity risk and currency risk.

The Group and Company have exposures to credit risk, which is the risk that a counterparty will not be

able to pay amounts in full when due. Key areas where the Group and Company are exposed to credit

risks are:

The Group and Company structure the levels of credit risk they accept by placing limits on the

exposure to a single counterparty, or group of counterparties. Such risks are subject to regular review

by the management.

The Group and Company entered into custodial agreements with Standard Chartered Bank Malaysia

Berhad and AmFunds Management Berhad, whose credit rating is AAA and AA respectively whereby

both companies provide safekeeping services for the Company’s investment assets (equities and

bonds).

Reinsurance is used to manage insurance risk. This does not, however, discharge the Group's and

Company’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group and

Company remain liable for the payment to the policyholder. The creditworthiness of reinsurers is

considered on a regular basis by reviewing their financial strength prior to finalisation of any contract.

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Credit risk (continued)

Not

subject to

AAA AA A BBB BB to B Non-rated credit risk Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group

2019

AFS financial assets 256,034 596,393 - - - 281,865 226 1,134,518

Loans and receivables - 73,513 1,066,677 522,230 - 684 - 1,663,104

Reinsurance assets 8 71,327 145,813 1,193 1,795 72,387 - 292,523

Insurance receivables - 12,807 56,949 111 11 162,755 - 232,633

Other receivables - - - - - 63,443 - 63,443

Cash and cash equivalents - 245 43,514 19,701 5,495 20 - 68,975

256,042 754,285 1,312,953 543,235 7,301 581,154 226 3,455,196

The table below provides information regarding the credit risk exposure of the Group and Company by classifying assets according to the recognised local

or international rating agencies’ credit ratings of counterparties. AAA is the highest possible rating. Rated assets that fall outside the range of AAA to BBB

are classified as speculative grade and thus are considered as non-investment grade.

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Not

subject to

AAA AA A BBB BB to B Non-rated credit risk Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Company

2019


Loans and receivables - 73,513 659,343 305,832 - 684 - 1,039,372

Reinsurance assets 8 71,327 145,813 1,193 1,795 72,387 - 292,523

Insurance receivables - 12,807 56,949 111 11 162,755 - 232,633



256,042 754,285 905,597 326,837 7,301 1,063,100 226 3,313,388

2018


Loans and receivables - 351,496 296,523 371,672 3,139 862 - 1,023,692

Reinsurance assets 10 88,771 152,896 630 1,724 76,874 - 320,905

Insurance receivables 11 15,420 51,125 1,009 287 215,096 - 282,948



259,638 939,430 540,833 377,262 9,038 1,200,934 480 3,327,615

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Neither past Not past Past Not

due nor due but due and subject to

impaired impaired impaired credit risk Total

RM'000 RM'000 RM'000 RM'000 RM'000

Group

2019

AFS financial assets 1,134,042 - - 476 1,134,518

Loans and receivables 1,663,104 - - - 1,663,104

Reinsurance assets 292,523 - - - 292,523

Insurance receivables 75,196 84,102 101,998 - 261,296

Allowance for impairment - (152) (28,511) - (28,663)

Other receivables 63,443 - - - 63,443

Cash and cash

equivalents 68,975 - - - 68,975

3,297,283 83,950 73,487 476 3,455,196

Company

2019







Cash and cash

equivalents 68,953 - - - 68,953

3,155,475 83,950 73,487 476 3,313,388

To manage the credit risks of insurance receivables, the Group and Company have established credit

policies that govern credit approval, review and monitoring processes and impairment assessment

processes. The credit policies also lay down the actions to be taken to handle debts overdue for a

certain period of time. There are also monthly management reports showing the ageing analysis of

balance overdue, and the management will monitor the ageing analysis on a regular basis.

The following table summarizes the credit quality of financial assets and reinsurance assets at the date

of the statement of financial position.

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Neither past Not past Past Not

due nor due but due and subject to

impaired impaired impaired credit risk Total

RM'000 RM'000 RM'000 RM'000 RM'000

Company

2018







Cash and cash

equivalents 48,542 - - - 48,542

3,135,682 88,508 102,945 480 3,327,615

The ageing analysis of insurance receivables is as follows:

Neither past Not past Past Past

due nor due but due and due and

impaired impaired impaired impaired

0-2 months 0-2 months 2-6 months >6 months Total

RM'000 RM'000 RM'000 RM'000 RM'000

Group and Company

2019

Insurance receivables 75,196 84,102 55,251 46,747 261,296

Allowance for impairment - (152) (1,727) (26,784) (28,663)

75,196 83,950 53,524 19,963 232,633

2018

Insurance receivables 91,495 88,599 39,158 87,489 306,741

Allowance for impairment - (91) (1,438) (22,264) (23,793)

91,495 88,508 37,720 65,225 282,948

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Liquidity risk

The Group and Company are exposed to daily calls on its available cash resources mainly from claims arising from short-term insurance contracts.

Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable time.

The Group and Company manage liquidity risk by holding sufficient liquid assets (e.g. cash and debt securities) of appropriate quality to ensure that short

term funding requirements are covered within prudent times. In addition, the Group and Company regularly conduct stress-tests on its liquidity position.

The tables below summarise the estimated maturity profile of the financial assets, financial liabilities, reinsurance assets and claim liabilities based on

remaining undiscounted contractual obligations.

For insurance contract liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the

recognised insurance liabilities. Premium liabilities and the reinsurers’ share of premium liabilities have been excluded from the analysis as they do not

contain any contractual obligations.

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Liquidity risk (continued)

Carrying Up to More than No maturity

Value a year 1 - 3 years 3 - 5 years 5 years date Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group

2019

AFS financial assets 1,134,518 133,940 246,050 456,783 494,896 476 1,332,145

Loans and receivables 1,663,104 1,663,104 - - - - 1,663,104

Right-of-use assets 13,510 8,761 4,370 185 - - 13,316

Reinsurance assets - claims liabilities 235,656 162,153 67,037 6,236 230 - 235,656

Insurance receivables 232,633 232,633 - - - - 232,633

Other receivables 63,443 63,443 - - - - 63,443

Cash and cash equivalents 68,975 68,975 - - - - 68,975

Total 3,411,839 2,333,009 317,457 463,204 495,125 476 3,609,272

Insurance contract liabilities - claims liabilities 1,292,673 818,370 406,036 63,687 4,580 - 1,292,673

Borrowing 70,025 4,550 9,100 9,100 80,222 - 102,972

Insurance payables 261,691 261,691 - - - - 261,691

Other payables 286,979 286,979 - - - - 286,979

Lease liabilities 13,917 9,192 4,675 183 - - 14,050

Total 1,925,285 1,380,782 419,811 72,970 84,802 - 1,958,365

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RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Company

2019


Loans and receivables 1,039,372 1,039,372 - - - - 1,039,372

Right-of-use assets 13,510 8,761 4,370 185 - - 13,316





Total 3,270,031 2,191,201 317,457 463,204 495,125 476 3,467,464


Borrowing 70,025 4,550 9,100 9,100 80,222 - 102,972


Other payables 145,047 145,047 - - - - 145,047

Lease liabilities 13,917 9,192 4,675 183 - - 14,050

Total 1,783,353 1,238,850 419,811 72,970 84,802 - 1,816,433

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RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Company (continued)

2018


Loans and receivables 1,023,692 1,023,389 23 - 280 - 1,023,692





Total 3,269,600 2,303,157 246,188 337,698 610,942 480 3,498,465


Borrowing 130,100 8,450 16,923 16,900 157,456 - 199,729


Other payables 165,921 165,921 - - - - 165,921

Total 1,838,286 1,258,124 412,498 74,456 162,837 - 1,907,915

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Equity price risk

Impact on Impact Impact on Impact

statement on statement on

of income equity* of income equity*

RM'000 RM'000 RM'000 RM'000

Group and Company

Change in market price

+10% - 17 - 17

-10% - (17) - (17)

* Impact on equity reflects adjustments for tax, when applicable.

Interest-rate risk

Foreign currency risk

The Group's and Company’s interest rate risk mainly arises from investment in AFS debt securities

which are recorded at fair value. The impact on profit before tax at +/- 50 basis point change in the

interest rate, with all other variables held consistent, is insignificant to the Group and Company given

that there are minimal floating rate financial instruments.

As the Group's and Company’s business is conducted primarily in Malaysia, the financial assets are

also primarily maintained in Malaysia and denominated in the local currency as its insurance contract

liabilities.

As the Group's and Company’s main foreign currency risk from recognised assets and liabilities arises

from reinsurance transactions for which the balances are expected to be settled and realised in less

than a year, the impact arising from sensitivity in foreign currency exchange rates is deemed minimal

as the Group and Company have no significant concentration of foreign currency risk.

The Group's and Company’s equity risk position arises from the holdings of certain equity securities

listed in the Bursa Malaysia Securities Berhad. The Group and Company have been monitoring its

concentration risk by adopting appropriate risk control measures.

The analysis below is performed for reasonably possible movements in equity price with all other

variables held constant, showing the impact of statement of income and equity (due to changes in fair

value of AFS financial assets).

2019 2018

Short term insurance liabilities are not directly sensitive to the level of market interest rates, as they

are undiscounted and contractually non-interest-bearing. However, due to the time value of money and

impact of interest rates on the level of bodily injury and certain liability claims incurred by the Group's

and Company’s insurance contract holders (where an increase of interest rates would normally

produce a higher insurance liability), the Group and Company match the liabilities by using portfolios of

debt securities with mean duration of 2 - 3 years.

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31 CAPITAL MANAGEMENT PLAN AND STRUCTURE

Capital Management Plan (“CMP”)

Stress testing

The results and proposed action plan would be incorporated into the Company’s capital management

plan and be used to determine the extent by which capital will be eroded by the threats identified and

the impact on the Company’s financial health, the actions that will be required to mitigate the threats

identified and the future financial resilience of the Company.

As per the RBC Framework issued by BNM, the Company is required to assess their capital profiles

and develop appropriate plans towards developing internal capital target/plans. In line with this

requirement, management had developed a CMP that takes into account the Company’s strategic

business direction and changing business environment, and adequate processes to monitor and

ensure the maintenance of an appropriate level of capital which commensurate with the current risk

profile of the Company. The Board had approved and adopted the CMP for implementation with effect

from 1 January 2009.

The Risk Management Committee is responsible for the oversight of the Company’s capital

management. All proposals for any deviation from capital targets or capital raising exercise must be

approved by the Risk Management Committee prior to recommendation to the Board of Directors for

approval and implementation.

Stress tests and scenario analyses are important components of a risk management framework. The

Company are required to perform stress tests at least twice a year on the financial performance of the

Company to detect possible sources of vulnerability. The objective is to ensure that management can

identify problems early so that pre-emptive measures can be implemented at an early stage.

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31 CAPITAL MANAGEMENT PLAN AND STRUCTURE (CONTINUED)

Capital structure

2019 2018

RM'000 RM'000

Eligible Tier 1 capital

Share capital (paid-up) 190,645 190,645

Retained earnings 992,259 921,388

1,182,904 1,112,033

Tier 2 capital

AFS reserve 28,588 7,813

Revaluation reserve 13,181 13,175

Share option reserve 4,801 4,801

Subordinated loan * 70,000 130,000

116,570 155,789

Deductions

Goodwill and intangible assets (196,775) (188,736)

Deferred tax assets (3,378) (13,846)

(200,153) (202,582)

Total capital available 1,099,321 1,065,240

* Excluded accrued interest of RM25,000 (2018: RM107,000).

The capital structure of the Company as at 31 December 2019, as prescribed under the RBC

Framework is provided below:

98

Company No.

23820 W



32 CONTINGENT LIABILITY

33 ADDITIONAL DISCLOSURES ON MFRS 9

As a % of

total liabilities RM'000

(a) Liabilities arising from contracts within the scope

of MFRS 4 87.8% 1,777,148

(b) Liabilities that arise from issuance or fulfilment of

obligations arising from contracts above:

- Subordinated loan included as Tier 2 capital under

the RBC Framework

6.4% 130,000

94.2% 1,907,148

The Company’s business activity is predominantly insurance as the liabilities connected with the

Company’s insurance businesses made up of more than 90% of the Company’s total liabilities. Hence,

the Company qualifies for the temporary exemption from applying MFRS 9 and will defer and adopt

MFRS 9 together with MFRS 17, Insurance Contracts for the financial year beginning on or after 1

January 2021.

The details of the Company's liabilities connected with insurance as at 31 December 2015 are as

follows:

In August 2016, Malaysia Competition Commission (“MyCC”) had commenced investigation under

Section 15(1) of the Competition Act, 2010 (“the Act”) against PIAM (Malaysian General Insurance

Association) and 22 member companies with regards to an alleged infringement of Section 4(2)(a) of

the Act in relation to an agreement to fix parts trade discount and labour rates for 6 vehicle makes. On

22 February 2017, MyCC issued a proposed decision to all 22 member companies, proposing to

impose collective penalty of RM213 million on the general insurance industry. PIAM and its members

(including the Company) had submitted their respective Written Representation to MyCC in April 2017.

The first oral representation was completed in January 2018. However, there was a change of

government after the 14th general election. The Competition Committee (new Chairman was

appointed) decided to review this case. A new oral representation was agreed to be held. The case

management was held on 21 February 2019 and the oral representation from all relevant insurers

(represented by counsels) was held on 13 and 14 May 2019 and 17 and 18 June 2019 respectively.

Decision is expected to be issued in 2020.

99

Company No.

23820 W



33 ADDITIONAL DISCLOSURES ON MFRS 9 (CONTINUED)

Fair value Fair value

as at movement

31.12.2019

RM'000 RM'000

(a) Financial assets with contractual terms

that give rise on specified dates to

cash flows that are solely payments of

principal and interest on the principal

amount outstanding

At fair value


- unquoted in Malaysia 210,158 6,874


- unquoted in Malaysia 879,216 25,058

At amortised cost

Loans 684 -

Fixed and call deposits 1,038,688 -

Cash and cash equivalents 68,953 -

(b) Financial assets other than the above

At fair value

Equity securities

- quoted in Malaysia 226 127

- unquoted in Malaysia 250 -

Wholesale unit trust fund 528,144 (1,316)

The fair value of the Company's financial assets as at 31 December 2019 and the amount of change

in the fair value during that period are as follows:

100

Company No.

23820 W



33 ADDITIONAL DISCLOSURES ON MFRS 9 (CONTINUED)

AAA AA A BBB BB to B Non-rated Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At fair value


- unquoted in Malaysia - - - - - 210,158 210,158


- unquoted in Malaysia 256,034 596,393 - - - 26,789 879,216

Equity securities

- quoted in Malaysia - - - - - 226 226

- unquoted in Malaysia - - - - - 250 250

Wholesale unit trust fund - - - - - 528,144 528,144

At amortised cost

Loans - - - - - 684 684

Fixed and call deposits - 73,513 659,343 305,832 - - 1,038,688

Cash and cash equivalents - 245 43,492 19,701 5,495 20 68,953

256,034 670,151 702,835 325,533 5,495 766,271 2,726,319

101

Company No.

23820 W



34 SUBSEQUENT EVENTS

Coronavirus (Covid-19)

In the first quarter 2020, the rapid spread of the Covid-19 has been declared a pandemic. Globally,

increasing measures are being taken to contain it and these have led to a significant volatility in the

financial markets and resulting in an adverse impact on the global business and economic activity.

There is an increasing likelihood that the Covid-19 and the continuous efforts could have an impact on

the Malaysian economy. The Company is closely monitoring the developing situation and the potential

impact of the spread of Covid-19 on its operations.

102

Sungai Petani86 1st Floor Jalan Legenda 1Legenda Heights 08000 Sungai Petani Kedah Tel: (604) 423 8680Fax: (604) 423 8660

Ipoh7 & 9 Persiaran Greentown 5 Greentown Business Centre30450 Ipoh PerakTel: (605) 254 8034 (605) 241 3477Fax: (605) 253 7078

Seremban77B & 77B-1 Lorong Haruan 5/3Oakland Commerce Square70300 Seremban Negeri Sembilan Tel: (606) 633 3366Fax: (606) 633 2882

MelakaGround Floor 61 Jalan Melaka Raya 8Taman Melaka Raya 75000 Melaka Tel: (606) 287 8588Fax: (606) 283 6023

Johor Bahru67 & 67A Jalan Molek 1/29 Taman Molek81100 Johor Bahru JohorTel: (607) 352 7551 (607) 352 7552 (607) 352 7553Fax: (607) 352 7554 / (607) 353 9596

Kuantan B-8008 2nd & 3rd FloorSri Kuantan SquareJalan Telok Sisek25000 Kuantan PahangTel: (609) 517 7509 (609) 516 3708Fax: (609) 514 3489

Batu Pahat35 Ground Floor Jalan Flora Utama 5Taman Flora Utama 83000 Batu Pahat JohorTel: (607) 431 3569 (607) 431 3577 (607) 431 3598Fax: (607) 431 3605

Mentakab66 1st Floor Jalan Orkid28400 Mentakab Pahang Tel: (609) 277 2002 / (609) 277 2003Fax: (609) 277 2008

Kota BharuPT227 Ground & 1st FloorJalan Kebun Sultan 15350 Kota Bharu KelantanTel: (609) 748 2054Fax: (609) 744 4585

Kuala Terengganu18-A Dataran Panji Panji Curve Business Park Jalan Panji Alam 21100 Kuala Terengganu, TerengganuTel: (609) 628 5340Fax: (609) 628 5345

KuchingGround & 1st Floor Sublot 3Lot 68-71 Jalan Green 93150 Kuching SarawakTel: (6082) 24 8300 Fax: (6082) 42 8148

MiriLot 582 Ground & 1st FloorPelita Commercial CentreMiri Pujut Road 98000 Miri SarawakTel: (6085) 41 6661Fax: (6085) 41 9600

Sibu20 Ground Floor Jalan Wong King Huo96000 Sibu SarawakTel: (6084) 32 6993 / (6084) 32 6992Fax: (6084) 31 0128

Kota KinabaluLot 27-1 & 27-2 Ground & 1st Floor Block DKepayan Perdana Commercial CentreJalan Lintas 88200 Kota Kinabalu SabahTel: (6088) 41 3240Fax: (6088) 41 3270

TawauTB 281 Tingkat 1 Blok 29Fajar Komplex Jalan Haji KarimTown Extension II 91000 Tawau SabahTel: (6089) 75 6475 / (6089) 75 6476Fax: (6089) 75 6473

Head O�iceAXA A�in General Insurance Berhad (197501002042)Ground Floor, Wisma Boustead, 71 Jalan Raja Chulan, 50200 Kuala Lumpur.Tel: (603) 2170 8282 Fax: (603) 2031 7282 E-mail: [email protected]: www.axa.com.my

Branch O�icesCheras165 & 165-1 Jalan LancangTaman Seri Bahtera 56100 Cheras Kuala LumpurTel: (603) 9130 5688Fax: (603) 9130 5788

Klang28 Jalan Tiara 2A/KU1 Pusat Perniagaan Bandar Baru Klang41150 Klang SelangorTel: (603) 3341 7808 (603) 3342 7808Fax: (603) 3341 6505

Petaling Jaya46B Jalan SS21/35Damansara Utama 47400 Petaling Jaya SelangorTel: (603) 7727 8962Fax: (603) 7727 9057

PuchongGF-09 IOI Business ParkPersiaran Puchong Jaya Selatan47170 Puchong Jaya SelangorTel: (603) 8079 0892 (603) 8079 0893Fax: (603) 8079 0901

PenangGround & 1st Floor Wisma AXA1E Lebuh Penang 10200 PenangTel: (604) 261 6935 (604) 261 1595 (604) 261 1981Fax: (604) 261 0688

Bukit Mertajam2996 Jalan MajuTaman Sri Maju14000 Bukit Mertajam PenangTel: (604) 539 6808 (604) 539 7808Fax: (604) 530 6308

Subang Jaya113 Ground Floor Jalan SS15/5A47500 Subang Jaya SelangorTel: (603) 5632 3535Fax: (603) 5632 7177

Documents

axa-com-my.cdn.axa-contento-118412.eu...AXA AFFIN GENERAL INSURANCE BERHAD (Incorporated in Malaysia) DIRECTORS’ REPORT DIRECTORS Tan Sri Hashim bin Meon General Tan Sri Ahmad Saruji