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Strategic Review Profiles Corporate Governance Financial Statements Other Information 078 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHAD ANNUAL REPORT 2018 Directors’ Report for the year ended 31 December 2018 The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2018. Principal activities The Company is principally engaged in managing family and general takaful businesses. On 1 June 2018, the Company transferred its general takaful business to a subsidiary as required by Islamic Financial Services Act 2013. The principal activities of the subsidiaries are as stated in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year. Ultimate holding company The Directors regard Lembaga Tabung Haji, a statutory body established under the Tabung Haji Act 1995 (Act 535), as the Company's ultimate holding corporation during the financial year until the date of this report. Conversion of Composite Licence to Single Licences and Change of Company's Name In line with the requirements of the Islamic Financial Services Act 2013, the Company had on 1 June 2018 successfully completed the conversion of the composite licence to single licences and surrendered the composite licence in exchange for the two single licences. Consequently, the Company changed its name to Syarikat Takaful Malaysia Keluarga Berhad (STMKB) and is principally engaged in the underwriting of family takaful business while a new company by the name of Syarikat Takaful Malaysia Am Berhad (STMAB), a wholly- owned subsidiary of STMKB is principally engaged in the underwriting of general takaful business. Results Group Company RM’000 RM’000 Profit for the year attributable to: Owners of the Company 294,924 230,106 Non-controlling interests (2,307) - 292,617 230,106 Reserves and provisions There were no material transfers to or from reserves and provisions during the financial year under review, except as disclosed in the financial statements. Dividends Since the end of the previous financial year, the Company: i) paid an interim single tier dividend of 15.00 sen per ordinary share totalling RM123,471,851 in respect of the financial year ended 31 December 2017 on 19 January 2018; and ii) declared an interim single tier dividend of 15.00 sen per ordinary share totalling RM123,632,726 in respect of the financial year ended 31 December 2018 on 11 December 2018 which was paid on 11 January 2019. No final dividend is recommended to be paid for the year under review by the Directors. Directors of the Company Directors who served since the date of the last report are: Tan Sri Dato' Ahmad Fuzi Haji Abdul Razak Dato’ Othman Abdullah Datin Sri Azlin Arshad Mahadzir Azizan Zakaria Ismail Mohd Tarmidzi Ahmad Nordin Datuk Rozaida Omar (Ceased office on 15 May 2018)

Directors’ Report - malaysiastock.biz The Directors regard Lembaga Tabung Haji, a statutory body established under the Tabung Haji Act 1995 (Act 535), as the Company's ultimate holding

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    078 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Directors Reportfor the year ended 31 December 2018

    The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2018.

    Principal activities

    The Company is principally engaged in managing family and general takaful businesses. On 1 June 2018, the Company transferred its general takaful business to a subsidiary as required by Islamic Financial Services Act 2013. The principal activities of the subsidiaries are as stated in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

    Ultimate holding company

    The Directors regard Lembaga Tabung Haji, a statutory body established under the Tabung Haji Act 1995 (Act 535), as the Company's ultimate holding corporation during the financial year until the date of this report.

    Conversion of Composite Licence to Single Licences and Change of Company's Name

    In line with the requirements of the Islamic Financial Services Act 2013, the Company had on 1 June 2018 successfully completed the conversion of the composite licence to single licences and surrendered the composite licence in exchange for the two single licences. Consequently, the Company changed its name to Syarikat Takaful Malaysia Keluarga Berhad (STMKB) and is principally engaged in the underwriting of family takaful business while a new company by the name of Syarikat Takaful Malaysia Am Berhad (STMAB), a wholly-owned subsidiary of STMKB is principally engaged in the underwriting of general takaful business.

    Results Group Company RM000 RM000

    Profit for the year attributable to:Owners of the Company 294,924 230,106 Non-controlling interests (2,307) -

    292,617 230,106

    Reserves and provisions

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

    Dividends

    Since the end of the previous financial year, the Company:

    i) paid an interim single tier dividend of 15.00 sen per ordinary share totalling RM123,471,851 in respect of the financial year ended 31 December 2017 on 19 January 2018; and

    ii) declared an interim single tier dividend of 15.00 sen per ordinary share totalling RM123,632,726 in respect of the financial year ended 31 December 2018 on 11 December 2018 which was paid on 11 January 2019.

    No final dividend is recommended to be paid for the year under review by the Directors.

    Directors of the Company

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

    Tan Sri Dato' Ahmad Fuzi Haji Abdul Razak Dato Othman Abdullah Datin Sri Azlin Arshad Mahadzir Azizan Zakaria Ismail Mohd Tarmidzi Ahmad NordinDatuk Rozaida Omar (Ceased office on 15 May 2018)

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    079SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Directors Reportfor the year ended 31 December 2018

    Directors of the Company (continued)

    In accordance with Rule 74 of the Companys Constitution, Dato Othman Abdullah and Tan Sri Dato' Ahmad Fuzi Haji Abdul Razak will retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

    List of Directors of subsidiaries

    Pursuant to Section 253 of the Companies Act 2016 in Malaysia, the list of Directors of the subsidiaries during the financial year and up to the date of this report is as follows:

    Syarikat Takaful Malaysia Am Berhad

    Tan Sri Dato' Ahmad Fuzi Haji Abdul Razak Mahadzir Azizan Dato Haji Che Pee Samsudin (Appointed on 30 August 2018) Datin Dr. Nik Sarina Lugman Hashim (Appointed on 30 August 2018) Abdul Rahman Talib (Appointed on 30 August 2018) P.T. Syarikat Takaful Indonesia and P.T. Asuransi Takaful Keluarga

    Dato Sri Mohamed Hassan Kamil Mahadzir Azizan Tri Djoko Santoso Ibrahim Ali Shoukry (Appointed on 16 October 2018)Imran Nahar (Appointed on 1 August 2018) Muhamed Zaffarullah Sathar (Ceased office on 16 October 2018)Mohamad Harris (Ceased office on 1 August 2018) Directors interests in shares None of the Directors holding office as at 31 December 2018 had any interest in the shares and options over shares of the Company and of its related corporations during the financial year.

    Issue of shares and debentures

    During the financial year, the Company allotted and issued 1,072,500 new ordinary shares, pursuant to the Companys Performance Share Plan under the Long Term Incentive Plan.

    The new ordinary shares issued during the financial year ended 31 December 2018 rank pari passu in all respects with the existing ordinary shares of the Company.

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

    There were no debentures issued during the financial year.

    Long Term Incentive Plan

    At the Extraordinary General Meeting held on 24 July 2013, the Companys shareholders approved the establishment of a Long Term Incentive Plan (LTIP), which comprises a Restricted Share Plan (RSP) and a Performance Share Plan (PSP), of not more than 10% of issued and paid-up share capital of the Company (excluding treasury shares) to eligible employees and the executive director of the Company. The LTIP was effected on 25 July 2013 following the submission of the By-Laws for the LTIP to Bursa Malaysia Securities Berhad, the receipt of all required approvals and the compliance with the requirements pertaining to the LTIP.

    The salient features of the LTIP are as disclosed in Note 14 to the financial statements.

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    080 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Long Term Incentive Plan (continued)

    As at the date of this Report, the shares granted under LTIP are as follows:

    Number of ordinary shares At At 1 January 31 December 2018 Granted Exercised Forfeited 2018

    Performance Share Plan 6,387,000 3,123,900 (1,072,500) (770,500) 7,667,900

    Options granted over unissued shares

    Other than for LTIP, no options were granted to any person to take up unissued shares of the Company during the financial year.

    Directors benefits

    Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

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

    Indemnity and takaful coverage costs

    The following disclosure on particulars of indemnity given, to, or takaful coverage effected for, any Director or officer of the Company is made pursuant to Section 289(7) of the Companies Act 2016: Amount paid Sum covered RM000 RM000

    Directors and Officers Liability takaful coverage 56 35,000

    To the extent permitted by law, the Company has agreed to indemnify its auditors as part of the terms of its non-audit engagement against claims by third parties arising from the non-audit engagement. No payment has been made to indemnify the auditors during the financial year.

    Statement on corporate governance and internal controls

    (a) Board responsibilities

    The Board of Directors (the Board) is ultimately responsible for the proper stewardship of the Groups and Companys resources, the achievement of corporate objectives and good corporate citizenship and discharges this responsibility through compliance with the Islamic Financial Services Act 2013 and Bank Negara Malaysias (BNM) Guidelines on Corporate Governance and other directives, in addition to adopting other best practices on corporate governance.

    The Board currently comprises six Non-Executive Directors to enable a balanced and objective consideration of issues, hence facilitating optimal decision making. The Group Chief Executive Officer adds value to the decision making process by providing a management and operational perspective to issues placed before the Board.

    (b) Management accountability

    The Group and the Company have an organisational structure showing all reporting lines as well as clearly documented job descriptions for all management and executive employees.

    Authority limits, as approved by the Board, are clearly established and made available to all employees.

    Directors Reportfor the year ended 31 December 2018

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    081SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Statement on corporate governance and internal controls (continued)

    (c) Corporate independence

    The Group and the Company have complied with BNMs Guidelines on Related Party Transactions for Takaful Operators (BNM/RH/GL 004-7). Necessary disclosures have been made to the Board and when required, prior Boards approval has been obtained. All material related party transactions have been disclosed in Note 39 to the financial statements.

    (d) Internal controls and operational risk management

    The Board has overall oversight responsibility to ensure that the Group and the Company maintain an adequate system of internal controls, effective and efficient operations, and risk management, as well as procedures to ensure compliance with laws, regulations, internal guidelines and requirements to safeguard the assets of the Group and the Company and stakeholders interests.

    The Company established the Enterprise Risk Management Framework to ensure an ongoing process of identifying, evaluating, monitoring and managing the significant risk exposures surrounding its business strategies and operations.

    All new Takaful products are governed by the Companys Product Development Framework.

    Whistle Blowing Policy & Fraud and Integrity Policy, Shariah Governance Framework and Assets and Liabilities Management Framework are also in place to provide basic structure and further strengthen the existing control mechanism underlying the business activities.

    Business Continuity Management is consistently practiced and tested twice a year (BCP test is once a year and DRP test is twice a year) to safeguard the lives of the employees and others in the office premises and ensure the business is up and running at all times.

    The Board, Group Chief Executive Officer and Management Committee are consciously committed to the risk culture and ensure Board Risk Committee perform as required.

    (e) Public accountability

    As custodian of public funds, the Groups and the Companys dealings with the public are always conducted fairly, honestly and professionally.

    (f) Financial reporting

    The Group and the Company have maintained proper accounting records and the Groups and the Companys financial statements are prepared in accordance with Malaysian Financial Reporting Standards (MFRS) issued by the Malaysian Accounting Standards Board (MASB), International Financial Reporting Standards (IFRS), the requirements of the Companies Act 2016, the Islamic Financial Services Act 2013 and Takaful Guidelines / Circulars issued by BNM and Principles of Shariah.

    Other statutory information

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

    i) all known impaired debts have been written off and adequate impairment allowance made for impaired debts,

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

    iii) there was adequate provision for incurred claims, including Incurred But Not Reported (IBNR) claims.

    Directors Reportfor the year ended 31 December 2018

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    082 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Other statutory information (continued)

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

    i) that would render the amount written off for impaired debts or the amount of the allowance for impaired debts and provision for incurred claims including IBNR claims of the Group and of the Company inadequate to any substantial extent, or

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

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

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

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

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

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

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

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

    In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December 2018 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of the financial year and the date of this report.

    Auditors

    The auditors, Messrs KPMG Desa Megat PLT, do not seek for re-appointment. The auditors remuneration is disclosed in Note 26 to the financial statements.

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

    ..................Tan Sri Dato Ahmad Fuzi Haji Abdul Razak

    ..................Mahadzir Azizan

    Kuala Lumpur

    Date: 24 January 2019

    Directors Reportfor the year ended 31 December 2018

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    083SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Shariah Advisory Bodys Report

    We have reviewed the principles and the contracts relating to the products introduced by Syarikat Takaful Malaysia Keluarga Berhad (STMKB) during the period ended 31 December 2018. We have also conducted our review to form an opinion as to whether STMKB has complied with the Shariah principles and with the Shariah rulings issued by the Shariah Advisory Council of Bank Negara Malaysia.

    The management of STMKB is responsible for ensuring that the conduct of its businesses is in accordance with Shariah principles. It is our responsibility to form an independent opinion, based on our review of the operations of STMKB.

    We have assessed the work carried out by Shariah review and Shariah audit which included examining, on a test basis, relevant transactions, documentation and procedures adopted by STMKB. We performed our review so as to obtain all the information and explanations which we considered necessary in order to provide us sufficient evidence to give reasonable assurance that there are no violations of the Shariah principles.

    In our opinion:

    1. the contracts and related documentation used by STMKB during the year ended 31 December 2018 that we have reviewed are in compliance with the Shariah principles;

    2. the allocation of profit between shareholders fund and participants investment funds conform to the basis that had been approved by us in accordance with Shariah principles;

    3. the calculation of zakat is in compliance with Shariah principles;

    4. all Shariah non-compliance incidences have been rectified according to the plans that were approved by us and the Board of Directors. The incidences were duly reported to Bank Negara Malaysia (BNM) in accordance with the Shariah non-compliance reporting requirements imposed by BNM; and

    5. all earnings that have been realized from sources or by means prohibited by the Shariah principles have been considered for disposal to charitable purposes.

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    084 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    We, the members of the Shariah Advisory Body of STMKB, do hereby confirm that the operations of STMKB for the year ended 31 December 2018 have been conducted in conformity with the Shariah principles.

    We bear witness only to what we know, and we could not well guard against the unseen! (surah Yusuf, verse: 81)

    Chairman of STMKB's SAB : Prof. Dr. Muhamad Rahimi Osman

    Member of STMKB's SAB : Dr. Ahmad Suffian Che Abdullah

    Kuala Lumpur

    Date: 24 January 2019

    Shariah Advisory Bodys Report

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    085SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Statements of Financial Positionas at 31 December 2018

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Group Operator Takaful Takaful Group Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    ASSETS

    Property and equipment 3 44,254 - - 277,164 39,639 - - 273,156 Investment properties 4 11,295 247,235 10,615 36,235 11,403 233,305 24,940 36,131 Intangible assets 5 93,368 - - 93,368 47,832 - - 47,832 Other investments 7 623,032 4,372,110 444,082 5,403,121 577,477 3,910,047 412,829 4,861,657 Retakaful assets 8 - 202,223 334,914 537,137 - 211,459 294,137 505,596 Deferred tax assets 9 39,386 - - 39,386 31,202 - - 31,202 Current tax assets 45,732 - - 45,732 32,024 - - 32,024 Loans and receivables,excluding takaful receivables 10 362,986 867,237 165,894 1,354,547 339,043 927,584 116,839 1,313,705 Takaful receivables 11 - 76,216 62,879 139,095 - 77,441 94,676 172,117 Cash and cash equivalents 12 321,533 567,466 116,792 1,005,791 205,265 594,175 121,740 921,180

    TOTAL ASSETS 1,541,586 6,332,487 1,135,176 8,931,576 1,283,885 5,954,001 1,065,161 8,194,600

    EQUITY AND LIABILITIES

    Share capital 13 185,352 - - 185,352 179,371 - - 179,371 Reserves 13 798,281 - - 798,281 639,337 - - 639,337

    Total equity attributable toowners of the Company 983,633 - - 983,633 818,708 - - 818,708 Non-controlling interests 28,525 - - 28,525 14,746 - - 14,746

    TOTAL EQUITY 1,012,158 - - 1,012,158 833,454 - - 833,454

    LIABILITIES

    Takaful contract liabilities 15 - 6,147,597 1,016,084 7,127,578 - 5,811,342 936,866 6,709,512 Expense reserves 16 251,806 - - 251,806 196,655 - - 196,655 Takaful payables 17 20,137 51,553 42,577 114,267 18,280 27,701 61,002 106,983 Other payables 18 255,219 119,501 73,523 406,673 233,202 100,983 64,551 328,975 Current tax liabilities 2,266 13,836 2,992 19,094 2,294 13,985 2,742 19,021

    TOTAL LIABILITIES 529,428 6,332,487 1,135,176 7,919,418 450,431 5,954,011 1,065,161 7,361,146

    TOTAL EQUITY AND LIABILITIES 1,541,586 6,332,487 1,135,176 8,931,576 1,283,885 5,954,011 1,065,161 8,194,600

    The notes on pages 97 to 323 are an integral part of these financial statements.

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    086 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Company Operator Takaful Takaful Company Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    ASSETSProperty and equipment 3 19,966 - - 229,716 22,513 - - 240,553 Investment properties 4 11,295 232,040 - 33,585 11,275 217,370 24,940 35,545 Intangible assets 5 93,368 - - 93,368 47,832 - - 47,832 Investments in subsidiaries 6 136,393 - - 136,393 49,376 - - 49,376Other investments 7 505,564 4,145,154 - 4,614,615 551,960 3,678,264 412,829 4,604,357 Retakaful assets 8 - 178,790 - 178,790 - 190,090 294,137 484,227 Deferred tax assets 9 2,001 - - 2,001 29,504 - - 29,504 Current tax assets 43,936 - - 43,936 32,024 - - 32,024 Loans and receivables,excluding takaful receivables 10 242,582 855,457 - 1,065,994 335,081 916,902 116,839 1,299,102 Takaful receivables 11 - 68,007 - 68,007 - 72,969 94,676 167,645 Cash and cash equivalents 12 218,801 432,682 - 651,483 177,121 444,794 121,740 743,655

    TOTAL ASSETS 1,273,906 5,912,130 - 7,117,888 1,256,686 5,520,389 1,065,161 7,733,820

    EQUITY AND LIABILITIES

    Share capital 13 185,352 - - 185,352 179,371 - - 179,371Reserves 13 747,665 - - 747,665 639,038 - - 639,038

    Total equity attributable to owners of the Company 933,017 - - 933,017 818,409 - - 818,409

    LIABILITIES

    Takaful contract liabilities 15 - 5,738,914 - 5,702,811 - 5,383,000 936,866 6,281,170 Expense reserves 16 99,240 - - 99,240 191,808 - - 191,808 Takaful payables 17 8,999 47,511 - 56,510 17,167 25,302 61,002 103,471Other payables 18 232,650 111,869 - 312,474 229,302 98,102 64,551 322,235Current tax liabilities - 13,836 - 13,836 - 13,985 2,742 16,727

    TOTAL LIABILITIES 340,889 5,912,130 - 6,184,871 438,277 5,520,389 1,065,161 6,915,411

    TOTAL EQUITY AND LIABILITIES 1,273,906 5,912,130 - 7,117,888 1,256,686 5,520,389 1,065,161 7,733,820

    Statements of Financial Positionas at 31 December 2018

    The notes on pages 97 to 323 are an integral part of these financial statements.

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    087SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Group Operator Takaful Takaful Group Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    Operating revenue 19 45,130 1,859,701 737,976 2,639,065 39,272 1,488,225 616,678 2,139,160

    Takaful operator income 903,840 - - - 711,024 - - -

    Gross earned contributions 20(i) - 1,608,527 685,759 2,294,334 - 1,264,496 554,244 1,818,938 Contributions cededto retakaful 20(ii) - (90,408) (262,388) (352,796) - (56,178) (241,398) (297,576)

    Net earned contributions 20(iii) - 1,518,119 423,371 1,941,538 - 1,208,318 312,846 1,521,362

    Administrative income - 2,501 72,441 74,942 - 6,018 74,847 80,865 Investment income 21 45,130 251,544 28,690 321,574 39,272 241,969 29,334 305,362 Realised gains and (losses) 22 369 1,870 47 2,286 1,665 19,165 2,247 23,077 Fair value gains and (losses) 23 (9,143) (71,057) (2,826) (80,549) 1,246 (2,328) 630 (7,472) Reversal of impairment losseson financial instruments 449 2,546 2,922 5,917 - 1,264 - 1,264Other operating income 24 14,043 - 255 2,607 13,531 1,081 165 2,783

    Other income 50,848 187,404 101,529 326,777 55,714 267,169 107,223 405,879

    Gross benefits and claims paid 25 - (850,944) (270,206) (1,112,580) - (763,320) (248,319) (1,005,307)Claims ceded to retakaful 25 - 59,156 101,059 160,215 - 55,347 108,649 163,996 Gross change to contractliabilities 25 - (17,962) (70,757) (88,719) - 26,781 7,830 34,611 Change to contract liabilities ceded to retakaful 25 - 6,612 35,201 41,813 - 8,662 (14,125) (5,463)

    Net benefits and claims 25 - (803,138) (204,703) (999,271) - (672,530) (145,965) (812,163)

    Wakalah fee expense - (524,875) (321,985) - - (366,587) (263,445) - Administrative fees (184,149) - - (184,149) (146,154) (68) - (146,222)Expense reserves 16 (52,260) - - (52,260) (37,897) - - (37,897)Management expenses 26 (367,160) - - (368,534) (312,931) - - (313,634)Impairment losses onfinancial instruments - - - - - (499) (1,432) (1,931)Other operating expenses 28 (14,115) (2,716) (360) (15,831) (14,693) (10,168) (3,611) (23,532)

    Other expenses (617,684) (527,591) (322,345) (620,774) (511,675) (377,322) (268,488) (523,216)

    Total profit / (loss) for the year 337,004 374,794 (2,148) 648,270 255,063 425,635 5,616 591,862

    Profit attributable to the Takaful Operator / participants - (374,794) 2,148 (311,266) - (425,635) (5,616) (338,209)

    Profit before zakat and taxation 337,004 - - 337,004 255,063 - - 253,653 Zakat (1,021) - - (1,021) (1,075) - - (1,075)Tax expense 29 (43,366) - - (43,366) (47,843) - - (47,505)

    Profit for the year 292,617 - - 292,617 206,145 - - 205,073

    The notes on pages 97 to 323 are an integral part of these financial statements.

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    088 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Group Operator Takaful Takaful Group Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    Profit for the year 292,617 - - 292,617 206,145 - - 205,073

    Other comprehensive income / (expense), net of taxItems that will not be reclassified subsequently to profit or lossRemeasurement of defined benefit liability (302) - - (302) (315) - - (315) Revaluation of propertyand equipment 3,608 - - 10,599 3,322 - - 16,445 Other comprehensive incomeattributable to participants - - - (6,991) - - - (12,051)

    3,306 - - 3,306 3,007 - - 4,079

    Items that may be reclassified subsequently to profit or lossDebt investments measured atfair value through othercomprehensive income (FVOCI)- net change in fair value 3,443 42,555 3,346 3,443 - - - - - reclassified to profit or loss (281) (1,870) (47) (281) - - - - Fair value change of available-for-sale financial assets - - - - 5,822 23,667 3,549 5,822 Foreign currency translationdifferences for foreignoperations (3,235) 1,565 - (3,235) (8,518) 1,411 - (8,518) Other comprehensive incomeattributable to participants - (42,250) (3,299) - - (25,078) (3,549) -

    (73) - - (73) (2,696) - - (2,696)

    Total other comprehensiveincome for the year 30 3,233 - - 3,233 311 - - 1,383

    Total comprehensive income for the year 295,850 - - 295,850 206,456 - - 206,456

    The notes on pages 97 to 323 are an integral part of these financial statements.

    Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018

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    089SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Group Operator Takaful Takaful Group Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    Profit / (Loss) for the year attributable to:Owners of the Company 294,924 - - 294,924 207,771 - - 206,699 Non-controlling interests (2,307) - - (2,307) (1,626) - - (1,626)

    292,617 - - 292,617 206,145 - - 205,073

    Total comprehensive income / (expense) for the year attributable to:Owners of the Company 297,863 - - 297,863 206,727 - - 206,727 Non-controlling interests (2,013) - - (2,013) (271) - - (271)

    295,850 - - 295,850 206,456 - - 206,456

    Basic earnings per ordinary share (sen) 31 35.79 25.13

    Diluted earnings per ordinary share (sen) 31 35.66 25.04

    The notes on pages 97 to 323 are an integral part of these financial statements.

    Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018

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    090 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Company Operator Takaful Takaful Company Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    Operating revenue 19 37,633 1,728,631 325,329 2,087,904 36,689 1,340,249 619,314 1,991,293

    Takaful operator income 699,672 - - - 679,962 - - -

    Gross earned contributions 20(i) - 1,490,446 288,313 1,778,759 - 1,133,942 552,383 1,686,168Contributions ceded toretakaful 20(ii) - (70,873) (105,617) (176,490) - (41,465) (239,898) (281,363)

    Net earned contributions 20(iii) - 1,419,573 182,696 1,602,269 - 1,092,477 312,485 1,404,805

    Administrative income - - 26,361 26,361 - 3,795 74,861 78,656 Investment income 21 37,633 237,058 11,401 282,403 36,689 226,188 28,321 286,396 Realised gains and (losses) 22 378 1,870 47 2,295 1,452 17,909 2,247 21,608 Fair value gains and (losses) 23 (7,974) (60,463) (2,945) (68,839) 275 12,046 630 6,256 Reversal of impairment losseson financial instruments 455 2,546 - 2,536 - 1,264 - 1,264Other operating income 24 10,625 - 148 1,963 6,591 786 95 1,196

    Other income 41,117 181,011 35,012 246,719 45,007 261,988 106,154 395,376

    Gross benefits and claims paid 25 - (758,059) (115,192) (867,221) - (668,523) (242,291) (907,478)Claims ceded to retakaful 25 - 45,760 43,404 89,164 - 44,176 107,564 151,740 Gross change to contractliabilities 25 - (17,680) (2,329) (20,009) - 27,915 4,441 32,356 Change to contract liabilitiesceded to retakaful 25 - 6,770 (12,330) (5,560) - 7,728 (13,158) (5,430)

    Net benefits and claims 25 - (723,209) (86,447) (803,626) - (588,704) (143,444) (728,812)

    Wakalah fee expense - (500,259) (147,994) - - (337,452) (265,182) - Administrative fees (136,981) (130) - (137,111) (131,018) (68) - (131,086)Expense reserves 16 (38,014) - - (38,014) (37,950) - - (37,950)Management expenses 26 (283,629) - - (282,793) (287,236) - - (285,161)Impairment losseson financial instruments - - (465) - - - (1,432) (1,432)Other operating expenses 28 (24,724) (1,997) (71) (25,432) (11,833) (8,520) (1,593) (19,375)

    Other expenses (483,348) (502,386) (148,530) (483,350) (468,037) (346,040) (268,207) (475,004)

    Total profit / (loss) for the year 257,441 374,989 (17,269) 562,012 256,932 419,721 6,988 596,365

    Profit attributable to theTakaful Operator / participants - (374,989) 17,269 (304,571) - (419,721) (6,988) (340,843)

    Profit before zakat and taxation 257,441 - - 257,441 256,932 - - 255,522 Zakat (600) - - (600) (1,000) - - (1,000)Tax expense 29 (26,735) - - (26,735) (47,192) - - (46,854)

    Profit for the year 230,106 - - 230,106 208,740 - - 207,668

    Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018

    The notes on pages 97 to 323 are an integral part of these financial statements.

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    091SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018

    The notes on pages 97 to 323 are an integral part of these financial statements.

    2018 2017 Takaful Family General Takaful Family General Operator Takaful Takaful Company Operator Takaful Takaful Company Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    Profit for the year 230,106 - - 230,106 208,740 - - 207,668

    Other comprehensive income / (expense), net of tax

    Items that will not be reclassified subsequently to profit or lossRevaluation of propertyand equipment 10 - - 2,980 10 - - 9,620 Other comprehensive incomeattributable to participants - - - (2,970) - - - (8,538)

    10 - - 10 10 - - 1,082

    Items that may be reclassified subsequently to profit or lossDebt investments measured atfair value through othercomprehensive income (FVOCI)- net change in fair value 2,588 40,684 (2,708) 2,588 - - - -- reclassified to profit or loss (281) (1,870) (47) (281) - - - -Fair value change of available-for-sale financial assets - - - - 4,608 20,969 3,549 4,608 Other comprehensive (income) /expense attributable to participants - (38,814) 2,755 - - (20,969) (3,549) -

    2,307 - - 2,307 4,608 - - 4,608

    Total other comprehensiveincome for the year 30 2,317 - - 2,317 4,618 - - 5,690

    Total comprehensive income for the year 232,423 - - 232,423 213,358 - - 213,358

    Profit for the year attributable to:Owners of the Company 230,106 - - 230,106 208,740 - - 207,668

    Total comprehensive income for the year attributable to:Owners of the Company 232,423 - - 232,423 213,358 - - 213,358

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    092 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Distributable Non- Share Share Translation Revaluation Fair value LTIP Retained controlling Total capital premium reserve reserve reserve reserve earnings Total interests equityGroup Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    At 1 January 2017 164,189 12,332 3,178 12,226 2,363 7,638 526,200 728,126 15,017 743,143 Remeasurement of defined benefit liability 30 - - - - - - (235) (235) (80) (315)Revaluation ofproperty andequipment 30 - - - 2,937 - - - 2,937 1,457 4,394 Fair value ofavailable-for-salefinancial assets 30 - - - - 5,330 - - 5,330 492 5,822 Foreign currencytranslationdifferences for foreign operations 30 - - (8,004) - - - - (8,004) (514) (8,518)

    Other comprehensive(expense) / incomefor the year - - (8,004) 2,937 5,330 - (235) 28 1,355 1,383 Profit for the year - - - - - - 206,699 206,699 (1,626) 205,073

    Total comprehensive (expense) / income for the year - - (8,004) 2,937 5,330 - 206,464 206,727 (271) 206,456

    Contributions by anddistributionsto ownersof the Company

    - LTIP exercised 14 2,850 - - - - (2,850) - - - -- Share-based payment transactions 14 - - - - - 7,327 - 7,327 - 7,327 - Dividends to owners of the Company 32 - - - - - - (123,472) (123,472) - (123,472)

    Total transactions with owners of the Company 2,850 - - - - 4,477 (123,472) (116,145) - (116,145)Transfer in accordance with Section 618(2) of the Companies Act 2016 13 12,332 (12,332) - - - - - - - -

    At 31 December 2017 179,371 - (4,826) 15,163 7,693 12,115 609,192 818,708 14,746 833,454

    Note 13 Note 13 Note 13 Note 13 Note 13 Note 13

    The notes on pages 97 to 323 are an integral part of these financial statements.

    Statements of Changes in Equity for the year ended 31 December 2018

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    093SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    The notes on pages 97 to 323 are an integral part of these financial statements.

    Statements of Changes in Equity for the year ended 31 December 2018

    Distributable Non- Share Share Translation Revaluation Fair value LTIP Retained controlling Total capital premium reserve reserve reserve reserve earnings Total interests equityGroup Note RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

    At 31 December 2017 179,371 - (4,826) 15,163 7,693 12,115 609,192 818,708 14,746 833,454Adjustment on initial application of MFRS 9 - - - - (7,703) - 3,574 (4,129) 169 (3,960)Reclassification - - - - - - (15,623) (15,623) 15,623 -

    At 1 January 2018, restated 179,371 - (4,826) 15,163 (10) 12,115 597,143 798,956 30,538 829,494 Remeasurement of defined benefit liability 30 - - - - - - (226) (226) (76) (302)Revaluation ofproperty andequipment 30 - - - 2,025 - - - 2,025 1,583 3,608 Fair value ofdebt investmentsmeasured at FVOCI 30 - - - - 3,162 - - 3,162 - 3,162 Foreign currencytranslationdifferences for foreign operations 30 - - (2,022) - - - - (2,022) (1,213) (3,235)

    Other comprehensive(expense) / incomefor the year - - (2,022) 2,025 3,162 - (226) 2,939 294 3,233 Profit for the year - - - - - - 294,924 294,924 (2,307) 292,617

    Total comprehensive (expense) / income for the year - - (2,022) 2,025 3,162 - 294,698 297,863 (2,013) 295,850

    Contributions by anddistributionsto ownersof the Company

    - LTIP exercised 14 5,981 - - - - (5,981) - - - -- Share-based payment transactions 14 - - - - - 10,447 - 10,447 - 10,447 - Dividends to owners of the Company 32 - - - - - - (123,633) (123,633) - (123,633)

    Total transactions with owners of the Company 5,981 - - - - 4,466 (123,633) (113,186) - (113,186)

    At 31 December 2018 185,352 - (6,848) 17,188 3,152 16,581 768,208 983,633 28,525 1,012,158

    Note 13 Note 13 Note 13 Note 13 Note 13 Note 13

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    094 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Distributable Share Share Revaluation Fair value LTIP Retained Total capital premium reserve reserve reserve earnings equityCompany Note RM000 RM000 RM000 RM000 RM000 RM000 RM000

    At 1 January 2017 164,189 12,332 1,972 3,615 7,638 531,450 721,196

    Revaluation of property and equipment 30 - - 1,082 - - - 1,082 Fair value of available-for-sale financial assets 30 - - - 4,608 - - 4,608

    Other comprehensive income for the year 30 - - 1,082 4,608 - - 5,690 Profit for the year - - - - - 207,668 207,668

    Total comprehensive income for the year - - 1,082 4,608 - 207,668 213,358

    Contributions by and distributions to ownersof the Company

    - LTIP exercised 14 2,850 - - - (2,850) - - - Share-based payment transactions 14 - - - - 7,327 - 7,327 - Dividends to owners of the Company 32 - - - - - (123,472) (123,472)

    Total transactions with owners of the Company 2,850 - - - 4,477 (123,472) (116,145)Transfer in accordance with Section 618(2) of the Companies Act 2016 13 12,332 (12,332) - - - - -

    At 31 December 2017 179,371 - 3,054 8,223 12,115 615,646 818,409Adjustment on initial application of MFRS 9 - - - (8,233) - 3,604 (4,629)

    At 1 January 2018, restated 179,371 - 3,054 (10) 12,115 619,250 813,780

    Revaluation of property and equipment 30 - - 10 - - - 10 Debt investments measured at FVOCI 30 - - - 2,307 - - 2,307

    Other comprehensive income for the year 30 - - 10 2,307 - - 2,317 Profit for the year - - - - - 230,106 230,106

    Total comprehensive income for the year - - 10 2,307 - 230,106 232,423

    Contributions by and distributions to ownersof the Company

    - LTIP exercised 14 5,981 - - - (5,981) - - - Share-based payment transactions 14 - - - - 10,447 - 10,447 - Dividends to owners of the Company 32 - - - - - (123,633) (123,633)

    Total transactions with owners of the Company 5,981 - - - 4,466 (123,633) (113,186)

    At 31 December 2018 185,352 - 3,064 2,297 16,581 725,723 933,017

    Note 13 Note 13 Note 13 Note 13 Note 13 Note 13

    The notes on pages 97 to 323 are an integral part of these financial statements.

    Statements of Changes in Equity for the year ended 31 December 2018

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    095SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Statements of Cash Flows for the year ended 31 December 2018

    Group Company 2018 2017 2018 2017 RM000 RM000 RM000 RM000

    Cash flows from operating activitiesProfit before zakat and taxation 337,004 253,653 257,441 255,522 Adjustments for:Amortisation of intangible assets 22,464 13,115 22,464 13,115 Depreciation 19,378 17,221 9,853 10,515 Equity settled share-based payment 10,447 7,327 10,447 7,327 Fair value change of investment properties (253) (1,236) (240) (1,220)Fair value change of fair value through profit or loss financial assets 80,802 8,708 69,079 (5,036)Profit from financing receivables (3,435) (3,552) (3,435) (3,552)Profit from Islamic debt securities and investment accounts (300,663) (279,807) (262,295) (260,981)Profit from Malaysian Government Islamic papers (11,995) (10,667) (11,347) (10,667) Dividend income from Shariah approved shares (10,375) (16,018) (9,414) (15,583)Gains from disposal of debt investments at fair value through other comprehensive income (2,287) - (2,287) -Gains on disposal of available-for-sale financial assets - (23,135) - (21,603)Losses / (Gains) on disposal of property and equipment 6 58 (8) (5)Gains on disposal of investment properties (5) - - -Losses on disposal of a subsidiary - 2,396 - -Write-off of property and equipment - 1 - 1 Amortisation of premiums, net of accretion of discounts 7,843 7,875 7,087 7,875 Reversal of impairment losses on financial instruments (5,917) - (2,536) -Impairment loss of financial assets - 8,092 - 7,593 Impairment loss of investment in subsidiaries - - 12,983 -

    Operating profit / (loss) before changes in working capital 143,014 (15,969) 97,792 (16,699)

    Profit received from Islamic debt securities, investment accounts and Malaysian Government Islamic papers 298,626 279,535 261,063 260,709 Dividend income from Shariah approved shares 10,375 16,018 9,414 15,583 Purchase of investments (1,136,286) (2,392,588) (945,841) (1,588,366)Proceeds from sale of investments 726,413 1,906,300 665,982 1,137,755 Maturity of other investments 191,691 119,362 154,537 100,904 (Increase) / Decrease in retakaful assets (32,511) (41,010) 17,165 (35,924)Increase in receivables (362,480) (14,396) (257,194) (8,702)Increase in Takaful contract liabilities 377,054 316,715 305,975 320,389 Increase in payables 136,613 37,691 54,494 38,168

    352,509 211,658 363,387 223,817 Zakat paid (500) (300) (500) (300)Income taxes paid (68,000) (81,092) (45,000) (80,761)

    Net cash generated from operating activities 284,009 130,266 317,887 142,756

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    096 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Statements of Cash Flows for the year ended 31 December 2018

    Group Company 2018 2017 2018 2017 RM000 RM000 RM000 RM000

    Cash flows from investing activities

    Acquisition of intangible assets (68,000) (17,000) (68,000) (17,000)Acquisition of general takaful business 14,585 - - -Acquisition of a subsidiary - - (100,000) -Transferred of general takaful business to a subsidiary - - (107,229) -Purchase of property and equipment (14,372) (3,004) (11,429) (2,325)Proceeds from sale of property and equipment 81 59 71 9 Proceeds from sale of investment properties 126 - - -Net outflow from disposal of a subsidiary - (11,029) - -

    Net cash used in investing activities (67,580) (30,974) (286,587) (19,316)

    Cash flows from financing activity

    Dividends paid to owners of the Company (123,472) (98,514) (123,472) (98,514)

    Net cash used in financing activity (123,472) (98,514) (123,472) (98,514)

    Net increase / (decrease) in cash and cash equivalents 92,957 778 (92,172) 24,926 Effect of exchange rate fluctuations on cash held (8,346) (21,207) - -Cash and cash equivalents at 1 January 921,180 941,609 743,655 718,729

    Cash and cash equivalents at 31 December 1,005,791 921,180 651,483 743,655

    Cash and cash equivalents

    Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:

    Group Company 2018 2017 2018 2017 RM000 RM000 RM000 RM000

    Cash and bank balances and fixed and call deposits with licenced financial institutions with maturity less than three months- Takaful Operator (Note 12) 321,533 205,265 218,801 177,121 - Family Takaful Fund (Note 12) 567,466 594,175 432,682 444,794 - General Takaful Fund (Note 12) 116,792 121,740 - 121,740

    1,005,791 921,180 651,483 743,655

    The notes on pages 97 to 323 are an integral part of these financial statements.

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    097SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    Syarikat Takaful Malaysia Keluarga Berhad (formerly known as Syarikat Takaful Malaysia Berhad) is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the principal place of business and registered office of the Company is as follows: 26th Floor, Annexe Block Menara Takaful Malaysia No. 4, Jalan Sultan Sulaiman 50000 Kuala Lumpur

    The consolidated financial statements of the Company as at and for the financial year ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as the Group and individually referred to as "Group entities"). The financial statements of the Company as at and for the financial year ended 31 December 2018 do not include other entities. The Company is principally engaged in managing family and general takaful businesses. On 1 June 2018, the Company transferred its general takaful business to a subsidiary as required by Islamic Financial Services Act 2013. The principal activities of the subsidiaries are as stated in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

    The immediate holding company during the financial year is BIMB Holdings Berhad, a company incorporated in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The ultimate holding corporation of the Company during the financial year is Lembaga Tabung Haji, a statutory body established under the Tabung Haji Act 1995 (Act 535). The financial statements were authorised for issue by the Board of Directors on 24 January 2019.

    1. Basis of preparation

    (a) Statement of compliance

    The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRSs), International Financial Reporting Standards, the Companies Act 2016, Islamic Financial Services Act 2013, Takaful Guidelines / Circulars issued by Bank Negara Malaysia (BNM) and Principles of Shariah.

    A Takaful Operator is required to present consolidated financial statements for itself and the Takaful funds it manages and controls in accordance with the requirements of MFRS 10, Consolidated Financial Statements. The statements of financial position and the statements of profit or loss and other comprehensive income of the Takaful Operator, Family Takaful Fund and General Takaful Fund are supplementary financial information presented in accordance with the requirements of BNM and Islamic Financial Services Act 2013 in Malaysia to segregate assets, liabilities, income and expenses of Takaful funds from its own. The statements of financial position and profit or loss and other comprehensive income of the Takaful Operator include only assets, liabilities, income and expenses of the Takaful Operator, excluding the Takaful funds managed by it. The statements of financial position and profit or loss and other comprehensive income of the Family and General Takaful Fund include only the assets, liabilities, income and expenses of the family solidarity fund and General Takaful Fund that is set up, managed and controlled by the Takaful Operator.

    In preparing the Company-level consolidated financial statements, the balances and transactions of the Takaful Operator are amalgamated and combined with those of the takaful funds. Interfund assets and liabilities, income and expenses relating to transactions between the funds are eliminated in full during amalgamation. The accounting policies adopted for the Takaful Operator and takaful funds are uniform for like transactions and events in similar circumstances.

    The takaful fund are consolidated and amalgamated from the date of control and continue to be consolidated until the date such control ceases which occur when the Groups and the Companys licence to manage takaful business is withdrawn or surrendered.

    Notes to the Financial Statements

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    098 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    1. Basis of preparation (continued)

    (a) Statement of compliance (continued)

    The following are accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (MASB) but have not been adopted by the Group and the Company:

    MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019 MFRS 16, Leases IC Interpretation 23, Uncertainty over Income Tax Treatments Amendments to MFRS 3, Business Combinations (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 9, Financial Instruments Prepayment Features with Negative Compensation Amendments to MFRS 11, Joint Arrangements (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 112, Income Taxes (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 123, Borrowing Costs (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 128, Investments in Associates and Joint Ventures Long-term Interests in Associates and Joint

    Ventures

    MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2020 Amendments to MFRS 3, Business Combination - Definition of a Business Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes in

    Accounting Estimates and Errors - Definition of Material

    MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2021 MFRS 17, Insurance Contracts

    MFRSs, Interpretations and amendments effective for a date yet to be confirmed Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint

    Ventures Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

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

    from the annual period beginning on 1 January 2019 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January 2019, except for Amendments to MFRS 11, Amendments to MFRS 123 and Amendments to MFRS 128 which are not applicable to the Group and the Company;

    from the annual period beginning on 1 January 2020 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January 2020; and

    from the annual period beginning on 1 January 2021 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January 2021.

    The initial application of the abovementioned standards, amendments and interpretations are not expected to have any material impacts to the financial statements of the Group and the Company except as mentioned below:

    MFRS 16, Leases

    MFRS 16 replaces existing leases guidance, including MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC Interpretation 115 Operating Leases - Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

    Notes to the Financial Statements

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    099SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    1. Basis of preparation (continued) (a) Statement of compliance (continued)

    MFRS 16, Leases (continued)

    The Group and the Company are required to adopt MFRS 16 Leases from 1 January 2019. The Group and the Company have assessed the estimated impact that initial application of MFRS 16 will have on the consolidated financial statements, as described below. The actual impacts of adopting the standard on 1 January 2019 may change because the new accounting policies are subject to change until the Group and the Company present their first financial statements that include the date of initial application.

    MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items.

    Lessor accounting remains similar to the current standard - i.e. lessors continue to classify leases as finance or operating leases.

    (i) Leases in which the Group and the Company are lessee

    The Group and the Company will recognise new assets and liabilities for its operating leases. The nature of expenses related to those leases will now change because the Group and the Company will recognise a depreciation charge for right-of-use assets and profit expense on lease liabilities.

    Previously, the Group and the Company recognised operating lease expense on a straight-line basis over the term of lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

    The Group and the Company plan to apply MFRS 16 on 1 January 2019, using modified retrospective approach. The Group and the Company choose to measure the right-of-use asset equals to the lease liability at 1 January 2019 with no restatement of comparative information.

    Based on the information available, the Group and the Company estimate that it will recognise lease liabilities and right-of-use of RM1,575,000 as at 1 January 2019. The Group and the Company do not expect the adoption of MFRS 16 to impact its ability to comply with the regulatory capital requirements described in Note 42.

    (ii) Leases in which the Group and the Company are lessor

    No significant impact is expected for leases in which the Group and the Company are lessor.

    MFRS 17, Insurance Contracts

    MFRS 17 was issued by MASB in August 2017. The standard will replace the existing MFRS 4 and establishes the principles for recognition, measurement, presentation and disclosure of insurance contracts. The Group is currently assessing the financial impact of adopting MFRS 17.

    (b) Basis of measurement

    The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2.

    Notes to the Financial Statements

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    100 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    1. Basis of preparation (continued)

    (c) Functional and presentation currency

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

    (d) Use of estimates and judgements

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

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

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

    Note 2(g) and Note 4 Investment properties Note 2(c) and Note 36 Financial instruments Note 2(o) and Note 16 - Computation of expense reserves Note 2(m), (n), Note 8 and Note 15 Provision for outstanding claims including IBNR claims and actuarial liabilities

    2. Summary of significant accounting policies

    The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by Group entities, unless otherwise stated. This is the first set of the Groups and the Companys annual financial statements in which MFRS 9, Financial Instruments have been applied. The effect of the changes in accounting policies arising from adoption of MFRS 9 are disclosed in Note 40.

    (a) Basis of consolidation

    (i) Subsidiaries

    Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

    The Group controls an entity when it is exposed, 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. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee's return.

    Investments in subsidiaries are measured in the Companys statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

    Notes to the Financial Statements

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    101SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (a) Basis of consolidation (continued)

    (ii) Business combinations

    Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

    The Group measures the cost of goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

    When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

    For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquirees identifiable net asset at the acquisition date.

    Transaction costs, other than those associated with the issue of Islamic debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

    (iii) Acquisition of non-controlling interests

    The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Groups share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

    (iv) Loss of control

    Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

    (v) Non-controlling interests

    Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

    Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

    (vi) Transactions eliminated on consolidation

    Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

    Notes to the Financial Statements

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    102 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (b) Foreign currency

    (i) Foreign currency transactions

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

    Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.

    Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

    Foreign currency differences arising are generally recognised in the profit and loss. However, foreign currency differences arising from the translation of an investment in equity securities designated as at fair value through other comprehensive income (FVOCI) are recognised in other comprehensive income (OCI) (2017: available-for-sale equity securities (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss)).

    In the consolidated financial statements, when settlement of a monetary item receivables from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve (FCTR) in equity.

    (ii) Operations denominated in functional currencies other than Ringgit Malaysia

    The assets and liabilities of operations denominated in functional currencies other than RM and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions.

    Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve (FCTR) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal.

    When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

    (c) Financial instruments

    (i) Recognition and initial measurement

    A financial assets or a financial liabilities is recognised in the statement of financial position when and only when, the Group and the Company become a party to the contractual provisions of the instrument.

    Notes to the Financial Statements

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    103SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (c) Financial instruments (continued)

    (i) Recognition and initial measurement (continued)

    A financial assets (unless it is a takaful receivables without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A takaful receivables without a significant financing component is initially measured at the transaction price.

    (ii) Classification and subsequent measurement

    Financial assets - Policy applicable from 1 January 2018

    On initial recognition, a financial asset is classified as measured at: amortised cost, fair value through other comprehensive income (FVOCI) - debt investments; FVOCI - equity instrument; or FVTPL.

    Financial assets are not reclassified subsequent to their initial recognition unless the Group and the Company change its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

    Amortised cost

    A financial assets measure at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

    - it is held within a business model whose objective is to hold assets to collect contractual cash flows; and- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest

    on the principal amount outstanding. FVOCI - debt investments

    A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

    - it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

    - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

    FVOCI - equity instrument

    On initial recognition of an equity investment that is not held for trading, the Group and the Company may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.

    FVTPL

    All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group and the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

    Notes to the Financial Statements

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    104 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (c) Financial instruments (continued)

    (ii) Classification and subsequent measurement (continued)

    Financial assets - Policy applicable from 1 January 2018 (continued)

    FVTPL (continued)

    All financial assets, except for those measured at FVTPL and equity investments measured at FVOCI, are subject to impairment assessment (see Note 2(i)(i)).

    Financial assets - Business model assessment: Policy applicable from 1 January 2018

    The Group and the Company make an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

    - the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual profit income, maintaining a particular profit rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

    - how the performance of the portfolio is evaluated and reported to the Group's and the Company's management;

    - the risks that affect the performance of the business model (and the financial assets held within the business model) and how those risks are managed;

    - how managers of the business are compensated - e.g. whether compensation is based on fair value of the assets management or the contractual cash flows collected; and

    - the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and

    expectations about future sales activity.

    Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group's and the Company's continuing recognition of the assets.

    Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

    Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from 1 January 2018

    For the purpose of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition.

    'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

    Notes to the Financial Statements

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    105SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (c) Financial instruments (continued)

    (ii) Classification and subsequent measurement (continued)

    Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from 1 January 2018 (continued)

    In assessing whether the contractual cash flows are solely payments of principal and interest, the Group and the Company consider the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group and the Company consider:

    - contingent events that would change the amount or timing of cash flows;- terms that may adjust the contractual coupon rate, including variable-rate features;- prepayment and extension features; and - terms that limit the Group's and Company's claim to cash flows from specified assets (e.g. non-recourse

    features).

    A prepayment feature is consistent with the 'solely payments of principal and interest' criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

    Financial assets - Subsequent measurement and gains and losses: Policy applicable from 1 January 2018

    Financial assets at FVTPL

    These assets are subsequently measure at fair value. Net gains and losses, including any profit or dividend income, are recognised in profit or loss.

    Financial assets at amortised cost

    These assets are subsequently measured at amortised cost using the effective profit method. The amortised cost is reduced by impairment losses. Profit income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Profit income is recognised by applying effective profit rate to the gross carrying amount except for credit impaired financial assets (see Note 2(i)(i)) where the effective profit rate is applied to the amortised cost.

    Debt investments at FVOCI

    These assets are subsequently measured at fair value. Profit income calculated using the effective profit methods, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. Profit income is recognised by applying effective profit rate to the gross carrying amount except for credit impaired financial assets (see Note 2(i)(i)) where the effective profit rate is applied to the amortised cost.

    Equity investments at FVOCI

    These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are not reclassified to profit or loss.

    Notes to the Financial Statements

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    106 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (c) Financial instruments (continued)

    (ii) Classification and subsequent measurement (continued)

    Financial assets - Policy applicable before 1 January 2018

    The Group and the Company classified its financial assets into one of the following categories: loans and receivables; held-to-maturity; available-for-sale; and at FVTPL, and within this category as: - held for trading; or - designated as at FVTPL.

    Financial assets - Subsequent measurement and gains and losses: Policy applicable before 1 January 2018

    Financial assets at FVTPL

    Measured at fair value and changes therein, including any profit or dividend income, were recognised in profit or loss.

    Held-to-maturity financial assets

    Measured at amortised cost using the effective profit method.

    Loans and receivables Measured at amortised cost using the effective profit method.

    Available-for-sale financial assets

    Measured at fair value and changes therein, other than impairment losses, profit income and foreign currency differences on debt instruments, were recognised in OCI and accumulated in the fair value reserve. When these assets were derecognised, the gain or loss accumulated in equity was reclassified to profit or loss.

    Financial liabilities - Classification, subsequent measurement and gains and losses

    Financial liabilities are classified as measured at amortised cost using effective profit method. Profit expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

    (iii) Derecognition

    Financial assets

    The Group and the Company derecognise a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial assets are transferred or in which the Group and the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

    The Group and the Company enter into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

    Notes to the Financial Statements

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    107SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (c) Financial instruments (continued) (iii) Derecognition (continued) Financial assets (continued)

    On derecognition of a financial assets, the difference between the carrying amount of the financial assets and the sum of consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.

    Financial liabilities

    The Group and the Company derecognise a financial liability when the contractual obligations are discharged or cancelled, or expire. The Group and the Company also derecognise a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

    On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

    (iv) Offsetting

    Financial assets and financial liabilities are offset and the net amount presented in statement of financial position when, and only when, the Group and the Company currently have a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

    (d) Property and equipment

    (i) Recognition and measurement

    The land and buildings are stated at cost / valuation less any accumulated depreciation and any accumulated impairment losses. Items of equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses.

    The Group and the Company revalue their land and buildings annually and at shorter intervals whenever the fair values of the revalued assets are expected to differ materially from their carrying value. Additions subsequent to their revaluation are stated in the financial statements at cost until the next revaluation exercise.

    An external independent valuation company, having the appropriate recognised professional qualifications, values the Groups land and buildings on an annual basis. The revalued amounts are based on market value, being the estimated amount for which a property could be exchanged between a willing buyer and a willing seller in an arms length transaction.

    Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of any previous surpluses recognised for the same property. In all other cases, a decrease in carrying amount is charged to profit or loss.

    Notes to the Financial Statements

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    108 SYARIKAT TAKAFUL MALAYSIA KELUARGA BERHADANNUAL REPORT 2018

    2. Summary of significant accounting policies (continued)

    (d) Property and equipment (continued)

    (i) Recognition and measurement (contin