Audited Financial Statement 31 March 2011

Transcription

593075-U
Takaful Ikhlas Sdn. Bhd.
(Incorporated in Malaysia)
Contents
Page
Directors' report
1-9
Statement by directors
10
Statutory declaration
10
Independent auditors' report
Report of the shariah committee
11 - 12
13
Statement of comprehensive income
14 - 15
Statement of financial position
16 - 17
Statement of changes in equity
18
General takaful fund statement of comprehensive income
General takaful fund statement of financial position
Family takaful fund statement of comprehensive income
Family takaful fund statement of financial position
19 - 20
21
22 - 23
24
Cash flows statement
25 - 26
Notes to the financial statements
27 - 148
593075-U
Directors' report
The directors have pleasure in submitting their report together with the audited financial
statements of the Company for the financial year ended 31 March 2011.
Principal activities
The Company is engaged principally in the managing of general, family and investment-linked
takaful businesses.
There have been no significant changes in the nature of these activities during the financial year.
Results
RM'000
Net profit for the year
8,941
In the were
There
opinion
no material
of the directors,
transfersthe
to or
results
from of
reserves
the operations
or provisions
of theduring
Company
the financial
during the
year.
financial
Dividends
No dividend has been paid or declared by the Company since the end of the previous financial
year. The directors do not recommend the payment of any final dividend in respect of the current
financial year.
Reserves and provisions
There were no material transfers to or from reserves or provisions during the financial year other
than those disclosed in the financial statements.
Provision for outstanding claims
Before the statement of comprehensive income and statement of financial position were made
out, the directors took reasonable steps to ascertain that there was adequate provision for claims
reported, claims incurred but not enough reserved ("IBNER"), claims incurred but not reported
(“IBNR”) and the actuarial valuation of family takaful liabilities.
1
593075-U
Bad and doubtful debts
out, the directors took reasonable steps to ascertain that action had been taken in relation to the
writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves
that there were no known bad debts and that adequate allowance had been made for doubtful
debts.
At the date of this report, the directors were not aware of any circumstances which would render
the amount of allowance for doubtful debts in the financial statements of the Company
inadequate to any substantial extent.
Current assets
out, the directors took reasonable steps to ensure that any current assets which were unlikely to
realise their values as shown in the accounting records of the Company in the ordinary course of
business had been written down to an amount which they might be expected so to realise.
At the date of this report, the directors were not aware of any circumstances which would render
the values attributed to current assets in the financial statements of the Company misleading.
Valuation methods
At the date of this report, the directors were not aware of any circumstances which had arisen
which would render adherence to the existing method of valuation of assets or liabilities of the
Company misleading or inappropriate.
Contingent and other liabilities
At the date of this report, there did not exist:
(a) any charge on the assets of the Company which had arisen since the end of the financial
year which secures the liabilities of any other person; or
(b) any contingent liability of the Company which had arisen since the end of the financial year
other than those arising in the ordinary course of business of the Company.
No contingent or other liability had 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 Company to meet its obligations as and
when they fall due.
For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising
from contracts of takaful effected/underwritten in the ordinary course of business of the
Company.
2
593075-U
Change of circumstances
At the date of this report, the directors were not aware of any circumstances not otherwise dealt
with in this report or the financial statements of the Company which would render any amount
stated in the financial statements misleading.
Items of an unusual nature
The results of the operations of the Company during 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, other than those arising from the adoption of FRS 4 : Insurance Contracts as disclosed in
Note 2.27 of the financial statements.
There had 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 Company for the financial
year in which this report was made.
Corporate governance
The Company had complied with all the prescriptive requirements of, and adopts management
practices that are consistent with the principles prescribed under BNM/RH/GL/003-1: Minimum
Standards for Prudential Management of Insurers (Consolidated) and BNM/RH/GL/003-2
Prudential Framework of Corporate Governance for Insurers issued by Bank Negara Malaysia,
and the principles of Shariah.
The Board of Directors ("the Board") is committed in ensuring the highest standards of corporate
governance is practised by the Company. This is a fundamental part in discharging their
responsibilities to protect and enhance stakeholders' value and the financial performance of the
Company.
3
593075-U
Corporate governance (cont'd.)
Directors
The directors who served since the date of the last report and at the date of this report are:
Encik Sharkawi bin Alis - Chairman
Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman - President/CEO
Y. Bhg. Dato' Haji Othman bin Hashim
Tuan Haji Halim bin Haji Din
Encik Paisol bin Ahmad
Encik Yahaya bin Besah
Dr Syed Musa Syed bin Syed Jaafar Alhabshi
Tuan Haji Anuar bin Mohd. Hassan (retired on 31 March 2011)
Tuan Haji Yusoff bin Yaacob (resigned on 30 December 2010)
In accordance with Article 96A of the Articles of Association of the Company, Encik Paisol bin
Ahmad and Tuan Haji Halim Haji Din retire by rotation and, being eligible, offer themselves for reelection.
Directors’ benefits
During and at the end of the financial year, no arrangement subsisted to which the Company is a
party with 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 corporate body.
Since the end of the previous financial year, no director has received or become entitled to
receive a benefit (other than benefits included in the aggregate amount of emoluments received
or due and receivable by the directors, or the fixed salary and benefits receivable as a full time
employee of the Company as disclosed in Notes 11, 12 and 34 to the financial statements as well
as the fixed salary and benefits receivable as a full-time employee of the Company) by reason of
a contract made by the Company or a related corporation with any director or with a firm of which
he is a member, or with a company in which he has a substantial financial interest.
Directors’ interests
According to the register of directors' shareholdings, the interest of a director in office at the end
of the financial year in shares in the holding company during the financial year were as follows:
Number of ordinary shares of RM1.00 each
1 April
31 March
2010
Acquired
Sold
2011
Direct Interest:
Tuan Haji Anuar bin Mohd.
Hassan
300,000
-
-
300,000
Other than as stated above, none of the other directors in office at the end of the financial year
had any interest in shares in the Company or its related corporations during the financial year.
4
593075-U
Board of directors
The Board presently has 7 members, comprising 4 independent non-executive directors, 2 nonindependent non-executive directors and a non-independent executive director. Together the
directors bring a wide range of business, financial and management experience relevant in
charting the strategic direction of the Company.
During the financial year, 8 Board meetings were held. Details of the Directors' attendance at the
Board meetings during the financial year are disclosed hereunder:
Directors
Attendance
Encik Sharkawi bin Alis - Chairman
Non-independent, non-executive director
8/8
Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman
Non-independent, executive director
8/8
Non-independent non-executive director
8/8
Independent non-executive director
8/8
8/8
7/8
7/8
Non-independent, non-executive director
8/8
6/6
The Board has delegated specific responsibilities to the Audit, Nomination, Remuneration,
Investment and Risk Management Committees of the Board.
5
593075-U
Audit Committee
The Audit Committee comprises 4 independent non-executive directors and 1 non-independent
non-executive director whereby 2 members of the Committee are qualified accountants and
members of the Malaysian Institute of Accountants.
The terms of reference of the Audit Committee include the review of and deliberation of the
Company's financial statements, findings of the External and Internal Auditors, any related party
transactions and any conflict of interest situation within the Company as well as making
recommendation to the Board on appointment/reappointment of External Auditors.
Whilst
All
As
The
custodian
material
Board
Remuneration
proposed
Board
the takes
Board
also
exercises
comprises
related
ofrisk
responsibility
public
takes
isCommittee,
management
responsible
party
overall
funds,
6 transactions
responsibility
non-executive
in
the
for
responsibility
on
establishing
for
framework
presenting
Company’s
the
creating
in
other
have
establishing
directors
athe
for
hand,
the
dealings
been
forRisk
balanced
the
framework
the
disclosed
isto
Company
Management
with
responsible
Company
and
the
enable
comprehensive
the
Nomination
and
inpublic
would
aNote
policies
internal
Committee
to
balanced
provide
are
comprise
XX
and
always
within
assessment
controls
toand
("RMC").
Remuneration
athe
formal
three
conducted
which
objective
financial
and
of
main
The
and
the
its
The Committee's primary duties are as spelt out in BNM/RH/GL/003-22 : Guidelines on Audit
Committee and Internal Audit Department (Part A) and BNM/RH/GL 013-4 : Guidelines on
Internal Audit Function of Licensed Institutions issued by BNM.
During the financial year, 6 meetings were held. Details of the members of the Committee's
attendance at the meetings held during the financial year are disclosed hereunder:
Directors
Attendance
Tuan Haji Halim bin Haji Din - Chairman
6/6
6/6
6/6
6/6
5/6
4/4
Nomination Committee
The Nomination Committee comprises 3 independent non-executive directors and 1 nonindependent non-executive directors.
The primary objective of this Committee is to establish a documented, formal and transparent
procedure for the appointment of directors, principal officer and key senior officers and to assess
the effectiveness of directors, the Board as a whole and the various committees of the Board, the
principal officer and key senior officers.
6
593075-U
Nomination Committee (cont'd.)
Directors
Attendance
Dr Syed Musa Syed bin Syed Jaafar Alhabshi - Chairman (appointed
on 17 January 2011)
N/A*
4/4
4/4
Encik Sharkawi bin Alis
4/4
4/4
This
The
Remuneration
Committee
considers
Committee
and
comprises
evaluates
the
two
appointment
independent,
of
non-executive
new
Directors
directors
of
the
Company
and
threeand
Chairman:
Tuan
Haji Yusoff bin Yaacob - Chairman (resigned on 30 December 2010)
3/3
* There has been no further meetings held since the date of appointment.
Remuneration Committee
The Remuneration Committee comprises 3 independent non-executive directors and 1 nonindependent non-executive directors.
The primary objective of the Committee is to provide a formal and transparent procedure for
developing a remuneration policy for directors, principal officer and key senior officers and
ensuring that their compensation is competitive and consistent with the Company's culture,
objectives and strategy.
Directors
Attendance
Encik Yahaya Besah - Chairman
En Paisol bin Ahmad
7
3/3
3/3
3/3
3/3
3/3
593075-U
Investment Committee
The Investment Committee comprises 1 independent non-executive directors, 1 non-independent
non-executive directors and 1 non-independent executive director.
This Committee oversees, guides and monitors the investment operations of the Company as
well as approves recommended investment related transactions. The Committee is also
responsible to note and approve specific transactions of a nature that require, by regulation,
awareness of and sanctioning by the Board of Directors.
Directors
Attendance
Encik Paisol bin Ahmad - Chairman (appointed on 25th May 2011)
Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman
Tuan Haji Anuar bin Mohd. Hassan - Chairman (retired on 31 March 2011)
4/4
4/4
2/4
4/4
3/3
Risk Management Committee
The Risk Management Committee comprises 3 independent non-executive directors and a nonindependent non-executive directors.
The Risk Management Committee reviews and recommends risk management strategies,
policies and risk tolerance limits for the Board’s approval. The Committee reviews the progress
and assesses the effectiveness and adequacy of the risk management policies and framework
adopted by the Company for identifying, measuring, monitoring and controlling risks within the
Company. The Committee also reviews the adequacy and effectiveness of the infrastructure,
resources and systems in place to ensure effective and timely reporting of risk management
activities.
Directors
Attendance
Y. Bhg. Dato' Haji Othman bin Hashim - Chairman
En Yahaya bin Besah
8
6/6
6/6
6/6
6/6
6/6
5/5
593075-U
Holding and ultimate holding company
The directors regard MNRB Holdings Berhad, a company incorporated in Malaysia, as the
Company's holding and ultimate holding company.
Auditors
The auditors, Ernst & Young, retire and have expressed their willingness to accept reappointment.
Signed on behalf of the Board in accordance with a resolution of the directors.
Sharkawi
bin
Alis
Halim
bin
Haji
Din
Before
At
the
any
require
render
no
to
date
the
ascertain
ensure
item,
contingent
charge
contingent
balance
of
of
the
any
transaction
this
this
that
on
values
amount
that
report,
report,
liability
the
sheet
any
liability
proper
assets
current
attributed
to
or
and
the
the
the
or
be
event
in
action
directors
directors
income
of
directors
other
written
respect
assets
the
oftohad
liability
Company
a statement
the
material
which
are
off
are
of
are
been
the
not
as
current
not
not
has
bad
were
taken
Company
aware
aware
which
aware
and
of
become
debts
the
assets
unlikely
unusual
in
of
of
of
has
Company
relation
any
or
any
which
any
enforceable
arisen
in
render
circumstances
nature
to
circumstances
circumstances
the
realise
to
has
since
were
financial
the
has
arisen
or
amount
writing
their
the
arisen
made
is since
end
which
likely
not
value
statements
which
out,
in
off
of
of
otherwise
the
the
to
would:
of
the
as
have
become
interval
end
bad
provision
shown
financial
directors
of
arisen
of
debts
dealt
the
in
Kuala Lumpur, Malaysia
25 May 2011
9
593075-U
For the year ended 31 March 2011
Note
2011
RM'000
2010
RM'000
(Restated)
Operating revenue
3
211,910
190,190
Investment income
Realised gains and losses
Fair value gains and losses
Fee income
Other operating revenue
Other revenue
5
6
7
8
9
5,375
464
(309)
213,289
346
219,165
4,091
4,337
(1,899)
194,926
620
202,075
Commission expenses
Management expenses
Change in expenses liability
Other expenses
8
11
13
(115,676)
(89,983)
605
(205,054)
(100,519)
(86,629)
5,739
(181,409)
Profit before taxation
14,111
20,666
Zakat
Taxation
(400)
(4,770)
(385)
(6,509)
8,941
13,772
4.6
7.1
14
Net profit for the year
Earnings per share (sen)
Basic
28
14
593075-U
For the year ended 31 March 2011 (cont'd.)
Note
Net profit for the year (cont'd.)
2011
RM'000
2010
RM'000
(Restated)
8,941
13,772
Other comprehensive income:
Available-for-sale fair value reserves
Net gains on fair value changes
Deferred tax on fair value changes
Realised gain transferred to statement of
comprehensive income
(1,065)
(4,337)
Total comprehensive income for the year
8,780
14,493
802
102
The accompanying notes form an integral part of the financial statements.
15
5,298
(240)
593075-U
Statement of financial position as at 31 March 2011
Note
Assets
Property, plant and equipment
15
Intangible assets
16
Financial instruments:
Financial assets at fair value
through profit and loss
18(a)
Held-to-maturity investments 18(b)
Available-for-sale
financial assets
18(c)
Loans and receivables
18(d)
Deferred tax assets
21
Tax recoverable
Cash and bank balances
Total shareholder's fund assets
Total general takaful fund
assets
Total family takaful fund
assets (page 24)
Total assets
Liabilities
Expenses liabilities
22
Due to agents, retakaful operators
and brokers
Due to related companies
20
Zakat payable
Other payables
25
Provisions
26
Total shareholder's fund liabilities
Total general takaful fund
liabilities and participants'
fund
Total family takaful fund
liabilities (page 24)
Total liabilities
2011
RM'000
2010
RM'000
(Restated)
1.4.2009
RM'000
(Restated)
14,237
4,583
13,663
4,573
5,675
3,479
712
40,450
1,364
24,448
380
26,051
60,888
119,083
5,170
2,128
7,630
254,881
35,873
155,508
6,241
617
1,453
243,740
20,205
156,506
7,038
227
269
219,830
338,155
272,976
185,380
1,300,836
1,893,872
950,777
1,467,493
735,034
1,140,244
15,146
15,750
21,489
13,498
22
573
25,125
6,344
60,708
15,873
1,132
370
14,547
10,675
58,347
11,997
349
93
13,071
1,930
48,929
338,155
272,976
185,380
1,300,836
1,699,699
950,777
1,282,100
735,034
969,343
16
593075-U
Statement of financial position as at 31 March 2011 (cont'd.)
Equity
Share capital
Accumulated losses
Available-for-sale reserves
Total shareholder's equity
Note
2011
RM'000
27
195,000
(1,535)
708
194,173
Total liabilities, shareholder's equity
and participants' funds
1,893,872
2010
RM'000
(Restated)
195,000
(10,476)
869
185,393
1,467,493
17
1.4.2009
RM'000
(Restated)
195,000
(24,247)
148
170,901
1,140,244
593075-U
Statement of changes in equity
Note
At 1 April 2009, previously stated
Effects of adopting FRS 4
At 1 April 2009, restated
At 31 March 2010, restated
At 31 March 2010, previously stated
Effects of adopting FRS 4
At 31 March 2010, restated
At 31 March 2011
2.27(a)
2.27(a)
18
Share
capital
RM'000
Non
distributable
Available-for
sale reserves
RM'000
(Accumulated
losses)/
distributable
retained profits
RM'000
195,000
195,000
195,000
148
148
148
(8,130)
(16,117)
(24,247)
14,493
(9,754)
187,018
(16,117)
170,901
14,493
185,394
195,000
195,000
195,000
869
869
(161)
708
1,336
(11,812)
(10,476)
8,941
(1,535)
197,205
(11,812)
185,393
8,780
194,173
Total
RM'000
593075-U
General takaful statement of comprehensive income
Operating revenue
Gross earned contribution
Earned contribution ceded
to retakaful operators
Net earned contribution
Investment income
Fee and commission income
Other revenue
Note
2011
RM'000
2010
RM'000
(Restated)
3
232,756
223,383
4(a)
210,526
216,319
4(b)
(32,549)
177,977
(25,247)
191,072
5
6
7
8
8,560
2,706
3,035
3,938
18,239
5,764
308
(1,005)
4,505
9,572
(104,436)
6,995
(48,224)
(87,591)
9,360
(40,625)
13,248
(132,417)
(3,605)
(122,461)
(56,157)
(1,770)
(57,927)
(64,026)
(1,376)
(65,402)
5,872
12,781
(1,427)
(2,511)
4,445
10,270
Gross claims paid
Claims ceded to retakaful operators
Gross change to certificate liabilities
Change in certificate liabilities ceded
Net claims
Fee expenses
Other operating expenses
Other expenses
8
9
Surplus before taxation
Taxation
14
Net surplus for the year
19
593075-U
General Takaful Statement of comprehensive income
Note
Net surplus for the year (cont'd.)
2011
RM'000
2010
RM'000
(Restated)
4,445
10,270
2,287
36
2,152
(480)
(2,467)
(230)
4,301
20
11,712
593075-U
General takaful statement of financial position
As at 31 March 2011
Assets
Held-to-maturity investments
Available-for-sale
financial assets
Retakaful certificates assets
Takaful certificates receivables
Deferred tax assets
Total general takaful assets
Liabilities
Takaful certificates liabilities
Takaful certificates payables
Tax payable
Other payables
Total general takaful liabilities
Participants' Fund
General takaful fund
Note
2011
RM'000
2010
RM'000
(Restated)
1.4.2009
RM'000
(Restated)
18(a)
18(b)
1,105
67,268
1,529
40,725
329
32,456
18(c)
18(d)
23
19
21
105,145
60,449
34,351
32,798
1,571
47,511
350,198
52,891
121,481
29,669
36,156
2,342
226
285,019
21,293
93,170
30,842
17,319
3,316
4,698
203,423
23
24
291,733
7,932
566
39,475
339,706
228,254
5,641
2,017
42,915
278,827
184,563
4,786
9
12,143
201,501
10,492
6,192
1,922
350,198
285,019
203,423
25
29
Total general takaful liabilities
and participants' fund
21
593075-U
Family takaful statement of comprehensive income
Operating revenue
Note
2011
RM'000
2010
RM'000
(Restated)
3
519,889
380,004
486,530
(44,244)
442,286
357,610
8,807
366,417
20,220
2,024
27,302
63
49,609
Gross contribution
Contribution ceded to retakaful operators
Net contribution
Investment income
Other revenue
5
6
7
8
31,121
8,073
(8,065)
31,129
Gross benefits paid
Benefits ceded to retakaful operators
Net claims
10
(117,700)
25,303
(3,655)
(92,780)
14,049
(11,607)
16,540
(79,512)
3,246
(87,092)
Fee expenses
Other expenses
8
9
(149,726)
(2,829)
(152,555)
(125,339)
(4,774)
(130,113)
241,348
198,821
Taxation
14
Net surplus for the year
(2,983)
238,365
Surplus/(deficit) from investment-linked business
22
32
(448)
(2,622)
196,199
(2,212)
593075-U
Family Takaful Statement of comprehensive income
Note
Net surplus for the year (cont'd.)
2011
RM'000
2010
RM'000
(Restated)
238,365
196,199
9,482
(175)
3,927
(272)
(7,458)
(523)
240,214
23
199,331
593075-U
Family takaful statement of financial position
As at 31 March 2011
Assets
Investment properties
Held-to-maturity investments
Available-for-sale
financial assets
Investment-linked business assets
Total family takaful assets
Liabilities
Tax payable
Deferred tax liabilities
Other payables
Investment-linked business liabilities
Investment-linked business
participants' fund
Total family takaful liabilities
Note
2011
RM'000
2010
RM'000
(Restated)
1.4.2009
RM'000
(Restated)
17
103,518
110,000
69,966
18(a)
18(b)
1,832
212,387
17,923
205,796
17,090
133,123
18(c)
18(d)
23
19
303,601
302,289
137,383
83,818
62,916
93,092
1,300,836
205,062
221,201
105,811
38,761
2,832
43,391
950,777
143,185
192,668
133,313
30,467
8,559
6,663
735,034
1,104,189
34,406
1,260
2,135
65,754
2,865
846,087
19,464
1,046
2,304
38,485
684
665,983
13,104
205
49,079
399
90,227
1,300,836
42,707
950,777
6,264
735,034
32
23
24
21
25
32
24
593075-U
Note
Operating Activities
Profit before zakat and taxation
Adjustments for:
Depreciation for property, plant and equipment
Amortisation of intangible assets
Property, plant and equipment written off
Net accretion of discounts
Profit on investment accounts
Fair value adjustments of financial assets at FVTPL
Impairment of AFS financial assets
Impairment of HTM financial asset
Gain on disposal of investments
Gain on disposal of property, plant and equipment
Gain on fair value adjustment of investment properties
Impairment of takaful receivables
Increase in contribution liabilities
Increase in expenses liabilities
Results of general takaful fund
Results of family takaful fund
Operating profit before working capital changes
Purchase of financial assets/investments
Decrease/(Increase) in islamic investment accounts
Increase in loans receivable
Increase in trade receivables
Increase in other receivables
Increase in outstanding claims
Increase in trade payables
Increase in other payables
Net change in balance with holding company
Net cash generated/(used in) from operating
activities
Investment income received
Hibah to participants
Income tax paid
Zakat paid
Net cash flows from operating activities
29
30
25
2011
RM'000
2010
RM'000
14,111
20,666
4,101
1,169
(1,297)
(43,759)
(56)
323
(12,077)
834
7,490
(2,418)
23,821
(605)
4,301
238,365
234,303
(199,146)
47,210
(3)
(39,281)
(53,472)
53,464
14,858
32,492
(5,994)
2,250
781
7
(1,265)
(28,810)
(5,028)
371
962
(6,669)
(22,535)
1,832
633
(5,739)
10,270
196,199
163,925
(219,040)
(48,862)
(850)
(28,964)
(6,545)
52,592
11,092
45,283
784
84,431
(30,585)
44,106
(1)
(7,097)
(197)
121,242
33,890
(80)
(6,342)
(123)
(3,240)
593075-U
Note
2011
RM'000
Investing Activities
Proceeds from disposal of property and equipment
Purchase of property and equipment
Purchase of intangibles
Purchase of investment properties
Net cash flows from investing activities
30
2010
RM'000
21
(6,709)
(1,008)
23,847
(10,246)
(1,876)
(17,499)
(7,696)
(5,774)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
113,546
4,511
118,057
(9,014)
13,525
4,511
Cash and bank balances of:
Shareholder's fund
Family takaful fund
7,630
47,511
62,916
118,057
1,453
226
2,832
4,511
26
593075-U
Notes to the financial statements - 31 March 2011
1.
Corporate information
The Company is engaged principally in the managing of general, family and investmentlinked takaful businesses. There were no significant changes in the principal activities of the
Company during the financial year.
The Company is a private limited liability company, incorporated and domiciled in Malaysia.
The registered office of the Company is located at 9th Floor, IKHLAS Point, Tower 11A,
Avenue 5, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia.
The holding and ultimate holding company is MNRB Holdings Berhad, a company
incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia
Securities Berhad.
The number of employees in the Company at the end of the financial year was 470 (2010:
443).
The financial statements were authorised for issue by the Board of Directors in accordance
with a resolution of the directors on 25 May 2011.
2.
Significant accounting policies
2.1 Basis of preparation
The financial statements of the Company comply with the provisions of the Companies
Act, 1965 and Financial Reporting Standards ("FRS") in Malaysia, as modified by Bank
Negara Malaysia ("BNM"). The financial statements of the Company also comply with
the Takaful Act, 1984, the Guidelines and Circulars issued by BNM and where
applicable are modified to comply with the principles of Shariah.
The Company has prepared the financial statements in accordance with item 10.3 of
BNM's Guideline on Financial Reporting for Takaful Operators which was issued on 23
December 2010. The guideline requires takaful operators to present the statements of
financial position, statement of comprehensive income and related explanatory notes by
funds, i.e. the Company's statement of financial position, the Company's statement of
comprehensive income, family takaful statement of financial position, family takaful
statement of comprehensive income, general takaful statement of financial position
and general takaful statement of comprehensive income. This is a modification to FRS
101 : Presentation of Financial Statements which is approved by BNM under Section 41
of the Takaful Act 1984.
At the beginning of the current financial year, the Company had adopted new and
revised FRSs which are mandatory for the financial periods beginning on or after 1 April
2010 as described fully in Note 2.27.
27
593075-U
2.
Significant accounting policies (cont'd.)
2.1 Basis of preparation (cont'd.)
The financial statements of the Company have also been prepared on a historical cost
basis, except for those financial instruments that have been measured at their fair
values.
Financial assets and financial liabilities are offset and the net amount reported in the
statement of financial position only when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis, or to realise the
assets and settle the liability simultaneously. Income and expense will not be offset in
the statement of comprehensive income unless required or permitted by any accounting
standard or interpretation, as specifically disclosed in the accounting policies of the
Company.
The financial statements are presented in Ringgit Malaysia (RM) and all values are
rounded to the nearest thousand (RM'000) except when otherwise indicated.
2.2 Property, plant and equipment and depreciation
(i) Recognition and measurement
All items of property, plant and equipment are initially recorded at cost. Subsequent
to recognition, property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses.
Only assets costing above RM300 will be capitalised. Assets costing RM300 and
below are charged to the statement of comprehensive income in the year of
purchase.
Assets costing more than RM300 up to a maximum of RM1,000 are written down to
RM1 in the year of purchase. The write down is charged to the statement of
comprehensive income as depreciation.
On disposal of property, plant and equipment, the difference between net proceeds
and the carrying amount is recognised in the statement of comprehensive income.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised
in the carrying amount of the item if it is probable that the future economic benefits
embodied within the part will flow to the Company and its cost can be measured
reliably. The costs of the day-to-day servicing of property, plant and equipment are
recognised in the statement of comprehensive income as incurred.
28
593075-U
2.
2.2 Property, plant and equipment and depreciation (cont'd.)
(iii) Depreciation
Depreciation of property, plant and equipment is provided for on a straight-line
basis to write off the cost of each asset to its residual value over its estimated
useful life, at the following annual rates:
Computer equipment
Furniture, fittings and office equipment
Motor vehicles
33 1/3%
15%
20%
The residual values, useful life and depreciation method are reviewed at each
financial year-end to ensure that the amount, method and period of depreciation
are consistent with previous estimates and the expected pattern of consumption of
the future economic benefits embodied in the items of property, plant and
equipment.
2.3 Investment properties
Investment properties are properties which are owned or held under a leasehold
interest to earn rental income or for capital appreciation or for both.
Such properties are measured initially at cost, including transaction costs. Subsequent
to initial recognition, investment properties are stated at fair value.
Fair value is arrived at by reference to market evidence of transaction prices for similar
properties and is performed by registered independent valuers having an appropriate
recognised professional qualification and recent experience in the location and category
of the properties being valued.
Gains or losses arising from changes in fair value of investment properties are
recognised in the statement of comprehensive income in the year in which they arise.
Investment properties are derecognised when either they have been disposed of or
when the investment property is permanently withdrawn from use and no future
economic benefit is expected from its disposal. Any gains or losses on the retirement or
disposal of an investment property are recognised in the statement of comprehensive
income in the year in which they arise.
29
593075-U
2.
2.4 Intangible assets
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised on a straight lines basis over the
estimated economic useful lives and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at least
at each financial year end.
Amortisation is charged to the statement of comprehensive income.
Intangible assets with indefinite useful lives are not amortised but tested for impairment
annually or more frequently if the events or changes in circumstances indicate that the
carrying value may be impaired either individually or at the cash-generating unit level.
The useful life of an intangible asset with an indefinite life is also reviewed annually to
determine whether the useful life assessment continues to be supportable.
Software development in progress
Software development in progress are tested for impairment annually and represent
development expenditure on software. Following the initial recognition of the
development expenditure, the cost model is applied requiring the asset to be carried at
cost less any accumulated impairment losses. Amortisation of the asset begins when
development is complete and the asset is available for use. It is amortised over the
period of expected future use. During the period of which the assets is not yet in use it
is tested for impairment annually.
Computer software and licences
The useful lives of computer software and licenses are considered to be finite because
computer software and licenses are susceptible to technological obsolescence.
The acquired computer software and licenses are amortised using the straight line
method over their estimated useful lives not exceeding 6 years. Impairment is assessed
whenever there is indication of impairment and the amortisation period and method are
also reviewed at least at each financial year end.
30
593075-U
2.
2.5 Impairment of Non-Financial Assets
The carrying amounts of assets other than deferred tax asset and investment properties
are reviewed at each financial year end to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable amount is estimated to
determine the amount of loss.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit
("CGU") fair value less costs to sell and its value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. Impairment losses recognised in respect of a CGU is allocated
first to reduce the carrying amount of any goodwill allocated to those units or groups of
units and then, to reduce the carrying amount of the other assets in the unit on a prorata basis.
An impairment loss is recognised in statement of comprehensive income in the period
in which it arises.
An impairment loss for an asset is reversed if, and only if, there has been a change in
the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. The carrying amount of an asset is increased to its
revised recoverable amount, provided that this amount does not exceed the carrying
amount that would have been determined (net of amortisation or depreciation) had no
impairment loss been recognised for the asset in prior years. A reversal of impairment
loss for an asset other than goodwill is recognised in statement of comprehensive
income.
2.6 Investments and financial assets
The Company
classifies
investments
into
financial
assets
atbeen
fair
value
through
profit
Investment
properties
areits
derecognised
properties
which
when
are
either
held either
they
have
to earn
rental
disposed
income
ofor
orfor
and loss ("FVTPL"), held-to-maturity ("HTM"), loans and other receivables ("LAR") and
available-for-sale-financial assets ("AFS").
The classification depends on the purpose for which the investments were acquired or
originated. Management determines the classification of its investments at initial
recognition and re-evaluates this at every financial year end.
The significant accounting policies by the categories above are as follows :
31
593075-U
2.
2.6 Investments and other financial assets (cont'd.)
FVTPL
Financial assets at FVTPL include financial assets held for trading and those
designated at fair value through profit and loss at inception. Investments typically
bought with the intention to sell in the near future are classified as held-for-trading. For
investments designated as at fair value through profit and loss, the following must be
met:
- the designation eliminates or significantly reduces the inconsistent treatment that
would otherwise arise from measuring the assets or liabilities or recognising gains
or losses on a different basis, or
- the assets and liabilities are part of a group of financial assets, financial liabilities or
both which are managed and their performance evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy.
These investments are initially recorded at fair value. Subsequent to initial recognition
these investments are measured at the fair value. Fair value adjustments and realised
gains and losses are recognised in statement of comprehensive income.
Investments held under the investment-linked funds are designated as FVTPL at
inception as they are managed and evaluated on a fair value basis in accordance with
the respective investment strategies and mandates.
Financial assets classified as FVTPL include shariah approved quoted shares and
warrants.
HTM
Non-derivative financial assets with fixed or determinable payments and fixed maturities
are classified as HTM when the Company has the positive intention and ability to hold
until maturity. These investments are initially recognised at cost, being the fair value of
the consideration paid for the acquisition of the investment. After initial measurement,
HTM financial assets are measured at amortised cost, using the effective yield method,
less provision for impairment. Gains and losses are recognised in statement of
comprehensive income when the investments are derecognised or impaired, as well as
through the amortisation process.
Financial assets classified as HTM include unquoted Islamic government guaranteed
and unsecured private debt securities and government investment issues.
32
593075-U
2.
2.6 Investments and other financial assets (cont'd.)
LAR
LAR are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. These investments are initially recognised at cost, being
the fair value of the consideration paid for the acquisition of the investment.All
transaction costs directly attributable to the acquisition are also included in the cost of
the investment. After initial measurement, loans and receivables are measured at
amortised cost, using the effective yield method, less provision for impairment. Gains
and losses are recognised in statement of comprehensive income when the
investments are derecognised or impaired, as well as through the amortisation process.
Financial assets classified as LAR include Islamic investment accounts with licensed
banks and building society, Islamic repo placements, institutional trust fund, secured
staff loans and benevolent loan provided by shareholder's fund to the general takaful
fund.
AFS
AFS are non-derivative financial assets that are designated as available-for-sale or are
not classified in any of the three preceding categories. These investments are initially
recorded at fair value. After initial measurement, AFS are measured at fair value.
Financial assets classified as AFS are unquoted unsecured Islamic private debt
securities, shariah approved quoted equities and unit trust funds.
On derecognition or impairment, the cumulative fair value gains and losses previously
reported in equity is transferred to statement of comprehensive income.
Any gains or losses from changes in fair value of the financial assets are recognised in
the other comprehensive income or takaful certificate liabilities, except for impairment
losses and profits calculated using the effective profit method which are recognised in
the statement of comprehensive income accordingly. The cumulative gain or loss
previously recognised in other comprehensive income is recognised in the statement of
comprehensive income when the financial asset is derecognised.
2.7 Fair value of financial instruments
The fair value of financial assets that are actively traded in organised financial markets
is determined by reference to quoted market bid prices for assets and offer prices for
liabilities, at the close of business on the reporting date.
For investments in investment linked units, unit and real estate investment trusts, if any,
fair value is determined by reference to published bid values.
33
593075-U
2.
2.7 Fair value of financial instruments (cont'd.)
For financial instruments on debt securities and government investment issues, these
are measured using valuation techniques. The indicative fair values are determined
based on quotations obtained from brokers in three financial institutions.
The fair value of floating rate and over-night deposits with financial institutions is their
carrying value. The carrying value is the cost of the deposit/placement and accrued
profit. The fair value of fixed yield-bearing deposits is estimated using discounted cash
flow techniques. Expected cash flows are discounted at current market rates for similar
instruments at the end of the financial year.
If the fair value of a financial asset cannot be measured reliably, for example LAR, the
asset is measured at cost, being the fair value of the consideration paid for the
acquisition of the investment or the amount received on issuing the financial asset. All
transaction costs directly attributable to the acquisition are also included in the cost of
the financial asset. After initial measurement, LAR are measured at amortised cost
using effective yield method, less allowance for impairment.
2.8 Impairment of Financial Assets
The Company assesses at each financial year end whether there is any objective
evidence that a financial asset or a group of financial assets is impaired.
Objective evidence that a financial asset is impaired includes observable data about
loss events like significant financial difficulty of the issuer or obligor; significant adverse
changes in the business environment in which the issuer or obligor operates and the
disappearance of an active market for that financial asset because of financial
difficulties which indicate that there is a measurable decrease in the estimated future
cash flows. However it might not be possible to identify a single, discreet event that
caused the impairment. Rather, the combined effect of several events are considered in
determining whether an asset is impaired.
(i) Financial assets carried at amortised cost
The Company first assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant, and individually or
collectively for financial assets that are not individually significant. If it is determined
that no objective evidence of impairment exists for an individually assessed
financial asset, whether significant or not, the asset is included in a group of
financial assets with similar credit risk characteristics and that group of financial
assets is collectively assessed for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment. The
impairment assessment is performed at each reporting date.
34
593075-U
2.
2.8 Impairment of Financial Assets (cont'd.)
If there is objective evidence that an impairment loss on assets carried at amortised
cost has been incurred, the amount of the impairment loss is measured as the
difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future expected credit losses that have not been
incurred) discounted at the financial asset’s original effective yield. The carrying
amount of the asset is reduced and the loss is recorded in statement of
comprehensive 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. Any subsequent
reversal of an impairment loss is recognised in statement of comprehensive
income, to the extent that the carrying value of the asset does not exceed its
amortised cost at the reversal date.
(ii) AFS financial assets
Significant or prolonged decline in fair value below cost, significant financial
difficulties of the issuer or obligor, and the disappearance of an active trading
market are considerations to determine whether there is objective evidence that
investment securities classified as AFS financial assets are impaired.
If an AFS financial asset is impaired, an amount comprising the difference between
its cost (net of any principal payment and amortisation) and its current fair value,
less any impairment loss previously recognised in statement of comprehensive
income, is transferred from other comprehensive income to statement of
Impairment losses on AFS equity investments are not reversed in statement of
comprehensive income in the subsequent periods. Increase in fair value, if any,
subsequent to impairment loss is recognised directly in other comprehensive
income/takaful certificate liabilities. For AFS debt investments, impairment losses
are subsequently reversed in statement of comprehensive income if an increase in
the fair value of the investment can be objectively related to an event occurring
after the recognition of the impairment loss in statement of comprehensive income.
35
593075-U
2.
(iii) Loans and receivables
The Company first assesses whether there is objective evidence that an
impairment loss on the loans and receivables has been incurred. The Company
considers factors such as the probability of insolvency or significant financial
difficulties of the borrower and default or significant delay in principal or yield
payments. Loans that are assessed not to be impaired individually are
subsequently assessed for impairment on a collective basis based on similar risk
characteristics. The amount of impairment loss is measured as the difference
between the carrying amount and the present value of estimated future cash flows,
discounted at the loan's original effective profit rate. The impairment loss is
recognised in statement of comprehensive income.
The carrying amount of the loan is reduced by the impairment loss directly for all
loans, where the carrying amount is reduced through the use of an allowance
account.
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 as impairment loss is reversed to the extent
that the carrying amount does not exceed its amortised costs at the reversal date.
The amount of reversal is recognised in statement of comprehensive income.
2.9 Derecognition of Financial Assets
Financial assets are derecognised when the rights to receive cash flows from them
have expired or when they have been transferred and the Company has also
transferred substantially all risks and rewards of ownership.
2.10 Measurement and impairment of Qard
Any deficits arising in the Takaful Funds are made good via a benevolvent loan, or
Qard, granted by the Shareholder's Fund to the Takaful Funds. The Qard is stated at
cost less any impairment losses in the Shareholder's Fund. In the Takaful Funds, the
Qard is stated at cost. The Qard shall be repaid from future surpluses of the Takaful
Funds.
The Qard is tested for impairment on an annual basis via an assessment of the
estimated surpluses or cashflows from the Takaful Funds to determine whether there is
objective evidence of impairment. If the Qard is impaired, an amount comprising the
difference between its cost and its recoverable amount, less any impairment loss
previously recognised in statement of comprehensive income, is recognised in the
statement of comprehensive income.
36
593075-U
2.
2.10 Measurement and impairment of Qard (cont'd.)
Impairment losses are subsequently reversed in the statement of comprehensive
income if objective evidence exists that the Qard is no longer impaired.
2.11 Equity Instruments
Ordinary Share Capital
The Company has issued ordinary shares that are classified as equity. Incremental
external costs that are directly attributable to the issue of these shares are recognised
in equity, net of tax.
Dividend on Ordinary Share Capital
Dividends on ordinary shares are recognised as a liability and deducted from equity
when they are approved by the Company's shareholders. Interim dividends are
deducted from equity when they are paid.
Dividends for the year that are approved after the financial year end are dealt with as an
event after the financial year end.
2.12 Product Classification
The Company as the operator of the participants' fund issues certificates that contains
takaful risk or financial risk or both.
Financial risk is the risk of a possible future change in one or more of a specified profit
rate, financial instrument price, commodity price, foreign exchange rate, index of price
or rate, credit rating or credit index or other variable, provided in the case of a nonfinancial variable that the variable is not specific to a party to the contract. Underwriting
risk is the risk other than financial risk.
Takaful certificates are those certificates that contain significant underwriting risk. A
takaful certificate is a certificate under which the participants' fund has accepted
significant risk from the participants by agreeing to compensate the participants if a
specified uncertain future event adversely affects the participants. As a general
guideline, the Company determines whether it has significant underwriting risk, by
comparing claims paid with claims payable if the event did not occur.
Investment contracts are those contracts that do not transfer significant takaful risk.
Once a certificate has been classified as a takaful certificate, it remains a takaful
certificate for the remainder of its life-time, even if the underwriting risk reduces
significantly during this period, unless all rights and obligations are extinguished or
expire. Investment contracts can, however, be reclassified as takaful certificates after
inception if takaful risk becomes significant.
37
593075-U
2.
2.12 Product Classification (cont'd.)
When takaful certificates contain both a financial risk component and a significant
underwriting risk component and the cash flows from the two components are distinct
and can be measured reliably, the underlying amounts are unbundled. Any
contributions relating to the underwriting risk component are accounted for on the same
basis as takaful certificates and the remaining element is accounted for as a deposit
through the statement of financial position similar to investment contracts.
Based on the company's product classification review, all products fall under the
classification of takaful certificates.
2.13 Retakaful
The Company as the operator of the participants' fund cedes underwriting risk in the
normal course of business for all its business. Retakaful certificates assets represent
balances due from retakaful operators. Amounts recoverable from retakaful operators
are estimated in a manner consistent with the outstanding the outstanding claims
provisions or settled claims associated with the retakaful operator's policies and are in
accordance with the related retakaful certificates.
Ceded retakaful arrangements do not relieve the Company from the obligations to
participants. Contributions and claims are presented on a gross basis.
Retakaful certificates assets are reviewed for impairment at each financial year end or
more frequently when an indication of impairment arises during the reporting period.
Impairments occurs when there is objective evidence as a results of an event that
occurred after initial recognition of the retakaful certificates assets that the Company
may not receive all outstanding amounts due under the terms of the contract and the
event has a reliable measurable impact on the amounts that the Company will receive
from the retakaful operator. The impairment loss is recorded in statement of
Retakaful certificates liabilities represent balances due to retakaful operators. Amounts
payable are estimated in a manner consistent with the related retakaful certificates.
Retakaful certificates assets or liabilities are derognised when the contractual rights are
extinguished or expire when the contract is transferred to another party.
Retakaful certificates that do not transfer significant underwriting 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 contributions or fees to be retained by the retakaful operators.
Investment income on these contracts are accounted for using the effective yield
method when accrued.
38
593075-U
2.
2.14 General takaful fund
The general takaful fund is maintained in accordance with the Takaful Act, 1984 and
consists of unearned contribution reserves and any surplus/deficit arising during the
year. Underwriting deficit will be made good by the shareholder's fund via a benevolent
loan or Qard.
Surplus is distributable to the shareholder and participants in accordance with the terms
and conditions prescribed by the Shariah Committee of the Company. The general
takaful fund surplus or deficit is determined after deducting retakaful, net claims
incurred, wakalah fees, other operating expenses, taxation and surplus administration
charges transferred to the shareholder's fund, and adjusting for contribution liabilities
and impairment of trade receivables.
General takaful revenue consists of gross contributions and investment income.
Revenue is accounted for on an accrual basis as approved by the Company's Shariah
Committee. Unrealised income is deferred and receipts in advance are treated as
liabilities in the statement of financial position.
(i) Contribution income
Contribution from direct and facultative inwards are recognised as soon as the
amount of contribution can be reliably measured in accordance with the principles
of Shariah. Contributions are recognised in a financial period in respect of risks
assumed during that particular financial period. Inward treaty retakaful contributions
are recognised on the basis of periodic advices received from ceding takaful
operators.
(ii) Contribution Liabilities
The contribution liabilities represents contributions received for risks that have not
yet expired. Generally, the reserve is released over the term of the certificates.
Prior to 1 April 2010, contribution liabilities comprised of unearned contribution
reserves (“UCR”) for all lines of business.
Effective 1 April 2010, contribution liabilities are reported at the higher of the
aggregate of the UCR for all lines of business and the best estimate value of the
Company’s unexpired risk reserves (“URR”) as at the end of the financial year and
a provision of risk margin for adverse deviation ("PRAD") calculated at 70%
confidence level at the overall Company level.
39
593075-U
2.
2.14 General takaful fund (cont'd.)
(ii) Contribution Liabilities (cont'd.)
(a) Unearned Contribution Reserves
The Unearned Contribution Reserves ("UCR") represent the portion of net
contribution income of takaful certificates written that relate to the unexpired
periods of certificates at the end of the financial year. The UCR is calculated on
net contribution income with a further deduction for Wakalah fee expenses to
reflect the Wakalah business principle. In determining the UCR at the end of
the financial year, the method that most accurately reflects the actual unearned
contribution is used as follows:
-
Time apportionment method for all classes of general takaful business within
Malaysia except Marine and Aviation cargo;
-
25% method for Marine and Aviation Cargo;
-
Non-annual certificates are time apportioned over the period of the takaful
certificates.
(b) Unexpired Risks Reserves
URR is a prospective estimate of the expected future payments arising from
future events expected to be incurred as at the end of the financial year and
also includes cost of retakaful, expected to be incurred during the unexpired
period in adminestering these certificates and settling the relevant claims, and
expected future return contributions.
In estimating the Best Estimate URR, the resulting Loss Ratio based on Best
Estimate claims incurred but not reported (“IBNR”) is applied to the
corresponding UCR as the prospective assessment of the amount that needs
to be set aside in order to provide for claims and allocated claim costs that will
result out of unexpired future periods of cover. In order to arrive at 70% level of
confidence of the URR, the resulting Loss Ratio based on the IBNR plus PRAD
at 70% level of confidence is applied to the corresponding UCR for each line of
business.
40
593075-U
2.
2.14 General takaful fund (cont'd.)
(ii) Contribution Liabilities (cont'd.)
Liability Adequacy Test
At each financial year end, the Company reviews its unexpired risks and a liability
adequacy test is performed to determine whether there is any overall excess of
expected claims over unearned contributions. This calculation uses current
estimates of future contractual cash flows (taking into consideration current loss
ratios) after taking account of the investment return expected to arise on assets
relating to the relevant general takaful technical provisions. If these estimates show
that the carrying amount of the unearned contributions is inadequate, the
deficiency is recognised in statement of comprehensive income by setting up a
provision for contributions deficiency.
(iii) Claims Liabilities
Claims and settlement costs that are incurred during the financial year are
recognised when a claimable event occurs and/or the Company is notified. The
amount of outstanding claims is the best estimate of the expenditure required
together with related expenses less recoveries to settle the obligation at the end of
the financial year.
Prior to 1 April 2010, claims liabilities are valued at the best estimate which include
provision for claims reported, claims incurred but not enough reserved ("IBNER")
and claims incurred but not reported (“IBNR”) together with related claims handling
costs and reduction for the expected value of salvage and other recoveries. For the
financial period beginning 1 April 2010, PRAD at 60% confidence level calculated
at the overall Company level were included in claim liabilities.
Effective 1 April 2010, the PRAD level is increased to 70% confidence level
calculated at the overall Company level.
Delays can be experienced in the notification and settlement of certain types of
claims, therefore, the ultimate cost of these claims cannot be known with certainty
at the end of the financial year.
The liability is calculated by a qualified actuary at the financial year end 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 reserves is recognised. The liabilities are derecognised when the
certificates expires, is discharged or is cancelled.
41
593075-U
2.
(iv) Commission earned
Commission earned net off expense paid from retakaful in the course of
ceding/accepting contributions to/from retakaful operators are recognised in the
general takaful statement of comprehensive income, as incurred and properly
allocated to the periods in which it is probable they give rise to income. This is in
accordance with the principles of Wakalah as approved by the Shariah Committee
and as agreed between the participants and the Company.
2.15 Family takaful fund
The family takaful fund is maintained in accordance with the requirements of the
Takaful Act, 1984 and includes the amount attributable to participants.
The family takaful fund surplus or deficit is determined by an annual actuarial valuation
of the family takaful fund. Any actuarial deficit in the family takaful fund will be made
good by the shareholder's fund via a benevolent loan or Qard. Surplus distributable to
the participants is determined after deducting benefits paid and payable, retakaful,
provisions, reserves, wakalah fees, taxation and surplus administration charge
transferred to the shareholder's fund. The surplus may be distributed to the shareholder
and participants in accordance with the terms and conditions prescribed by the Shariah
Committee of the Company.
Family takaful revenue consists of gross contributions and investment income. Revenue
is accounted for on accrual basis and as approved by the Company’s Shariah
Committee. Unrealised income is deferred and receipts in advance are treated as
liabilities on the statement of financial position.
(i) Contribution income
Contribution is recognised as soon as the amount of contribution can be reliably
measured in accordance with the principles of Shariah. First contribution is
recognised on assumption of risks and subsequent contributions are recognised on
due dates. Contributions outstanding at financial year end is recognised as income
for the period provided they are within the grace period allowed for payment and
there are sufficient funds available in the participants' accounts to cover such
contributions due.
(ii) Provision for outstanding claims
Claims and settlement costs that are incurred during the financial year are
recognised when a claimable event occurs and/or the Company is notified.
42
593075-U
2.
2.15 Family takaful fund (cont'd.)
(ii) Provision for outstanding claims (cont'd.)
Claims and provisions for claims arising on family takaful certificates, including
settlement costs, are accounted for using the case basis method, and for this
purpose, the benefits payable under a takaful certificates are recognised as
follows:
(a) maturity or other certificate benefit payments due on specified dates are
treated as claims payable on due dates.
(b) death, surrender and other benefits without due dates are treated as claims
payable on receipt of intimation of death of the certificate holder or occurrence
of contingency covered.
(iii) Creation / cancellation of units
Amounts received for units created represent contributions paid by
policyholders/unitholders as payment for new contracts or subsequent payments to
increase the amount of the contracts.
Creation/cancellation of units are recognised in the financial statements at the next
valuation date, after the request to purchase/sell units are received from the
unitholders.
(iv) Investments of the Investment-Linked Funds
All investments of the investment-linked funds are stated at closing market prices
or indicative market prices as at financial year end.
Any increase or decrease in value of investments is taken into the investmentlinked funds statement of comprehensive income.
(v) Family Takaful Certificates Liabilities
Family takaful certificates liabilities are recognised when certificates are in-forced
and contributions are charged.
These liabilities, with the exception of Mortgage Term Takaful and Group Credit
certificates, are measured using the unexpired reserve of the gross monthly
tabarru' (risk charges). For Mortgage Term Takaful and Group Credit certificates,
the liability is determined by the Net Contribution Valuation method using the
statutory mortality table adjusted for retakaful arrangements and discounted at the
appropriate risk discount rate.
43
593075-U
2.
2.15 Family takaful fund (cont'd.)
(v) Family Takaful Certificates Liabilities (cont'd.)
In the case of a 1-year family takaful certificates covering contingencies other than
death or survival, such as the group health & surgical certificates, the liability for
such family takaful contracts comprises the provision for unearned contributions
and expired risks, as well as for claims outstanding, which includes an estimate of
the incurred claims that have not yet been reported to the Company ("IBNR").
The family takaful certificates liabilities are derecognised when the contract expires,
is discharged or is cancelled. At each reporting date, an assessment is made of
whether the recognised family takaful certificates liabilities are adequate by using
an existing liability adequacy test.
Surplus arising from the difference between the value of the family fund and the
liabilities, if any, will be distributed in equal proportion to the participants and the
contingency (special) fund after deducting the applicable Company's surplus
administration charge.
If the difference between the value of the family fund and the liabilities results in a
deficit, the Company will arrange a Qard (benevolent loan) which will be repaid
when the fund returns to a surplus position. An impairment test may be conducted
to a Qard which has not been repaid within a specific period of time.
2.16 Shareholder's Fund
(i) Commission expenses/acquisition cost
Commission expenses, which are costs directly incurred in securing contributions
on takaful certificates, are recognised as incurred and properly allocated to the
periods in which it is probable they give rise to income. Commission expenses are
borne by the shareholder's fund in the shareholder's fund statement of
comprehensive income at an agreed percentage for each certificate underwritten.
This is in accordance with the principles of Wakalah as approved by the Shariah
Committee and as agreed between the participants and the Company.
44
593075-U
2.
2.16 Shareholder's Fund (cont'd.)
(ii) Expenses liability
The contract underlying takaful operations defines a unique relationship between
takaful operator and participants of a takaful scheme. While takaful fund is
responsible to meet contractual benefits accorded to participants on the basis of
mutual assistance amongst participants, the Company is expected to duly observe
fundamental obligations toward participants, particularly in term of adhering to
Shariah principles and undertaking fiduciary duties to prudently manage the takaful
funds as well as meet costs involved in managing the takaful business.
In carrying out the fiduciary duty, the Company must put in place sufficient
measures to ensure sustainability of general and family takaful funds to meet
takaful benefits and shareholders’ fund to support the takaful certificates for the full
term. These measures include setting up of appropriate provisions for liabilities in
shareholder's fund and on behalf of participants in general and family takaful funds,
to ensure that adequate funds would be available to meet all contractual obligations
and commitments as they fall due, with a reasonable level of certainty.
The expenses liability of shareholder's fund consists of expenses liability of general
takaful fund and family takaful fund which are computed separately by an Actuary
approved by BNM.
(a) Expenses liability of General Takaful Fund
The expenses liability is reported at the higher of the aggregate of Unearned
Wakalah Fee ("UWF") and the best estimate value of Unexpired expense risk
("UER") as at the end of the financial year.
Unearned wakalah fee
The UWF Reserves represent the portion of wakalah fee income allocated for
management expenses of general takaful certificates that relate to the
unexpired periods of certificates at the end of the financial year. The method
used in computing UWF is consistent with the calculation of UCR under Note
2.14(ii)(a). In determining the UWF at the end of the financial year,70% of the
wakalah fee income is recognised in the financial year in which the certificates
are issued. The remaining 30% of the wakalah fee income is transferred to the
UWF reserves and is recognised in the following financial year.
45
593075-U
2.
2.16 Shareholder's Fund (cont'd.)
(a) Expenses liability of General Takaful Fund (cont'd.)
Unexpired expense reserve
The UER is determined based on the expected future expenses payable from
shareholder's fund in managing the general takaful fund for the full contractual
obligation of the takaful certificate as at the end of the financial year, less
expected shareholders’ fund income calculated at 70% confidence level at the
overall Company level. The method used to value the UER is consistent with
the method used to value the URR under note 2.14(ii)(b).
Liability Adequacy Test
At each financial year end, the Company reviews its unexpired expense risks
and a liability adequacy test is performed to determine whether there is any
overall excess of expected expenses over unearned wakalah fee. If these
estimates show that the carrying amount of the unearned wakalah fee is
inadequate, the deficiency is recognised in statement of comprehensive
income by setting up a provision for expenses deficiency.
(b) Expenses liability of Family Takaful Fund
The expenses liability is determined based on the expected future expenses
payable from shareholder's fund in managing the family takaful fund for the full
contractual obligation of the takaful certificate as at the end of the financial
year, less expected shareholders’ fund income. The method used to value
expense liabilities shall be consistent with the method used to value takaful
liabilities of the corresponding family takaful certificate under note 2.15(v).
2.17 Cash and cash equivalents
Cash and cash equivalents include cash in hand and at banks, excluding fixed and call
deposits with licensed financial institutions, which have an insignificant risk of changes
in value. The cash flows statement has been prepared using the indirect method.
2.18 Takaful Certificates Receivables
Takaful certificates receivables are recognised when due and measured on initial
recognition at the fair value of the consideration received or receivable. Subsequent to
initial recognition, takaful certificates receivables are measured at cost, which
approximate the fair value.
46
593075-U
2.
2.18 Takaful Certificates Receivables (cont'd.)
If there is objective evidence that the takaful certificates receivables is impaired, the
Company reduces the carrying amount of the takaful certificates receivables
accordingly and recognises that impairment loss in statement of comprehensive
income. The Company gathers the objective evidence that a takaful certificates
receivables is impaired using the same process adopted for financial assets carried at
amortised cost. The impairment loss is calculated under the same method used for
these financial assets. These processes are described in Note 2.8 (i).
Takaful certificates receivabless are derecognised when the derecognition criteria for
financial assets, as described in Note 2.9, have been met.
2.19 Balances with related companies
Balances with related companies are stated at the amounts which are due and
expected to be settled.
2.20 Taxation
Income tax on the statement of comprehensive income for the year comprises current
and deferred tax. Current tax is the expected amount of income taxes payable in
respect of the taxable profit for the year and is computed using the tax rates that have
been enacted at the reporting year.
Deferred tax is provided for, using the liability method, on temporary differences at the
end of the financial year between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. In principle, deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised
for all deductible temporary differences, unused tax losses and unused tax credits to
the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, unused tax losses and unused tax credits can be
utilised.
Deferred tax is computed at the tax rates that are expected to apply in the period when
the asset is realised or the liability is settled, based on tax rates that have been enacted
or substantively enacted at the reporting date. Deferred tax is recognised in the
statement of comprehensive income, except when it arises from a transaction which is
recognised directly in equity/participants' fund, in which case the deferred tax is also
charged or credited directly in equity/participants' fund.
47
593075-U
2.
2.21 Financial liabilities
Financial liabilities are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability.
Financial liabilities, within the scope of FRS 139, are recognised in the statement of
financial position when, and only when, the Company becomes a party to the
contractual provisions of the financial instrument. Financial liabilities are classified as
either financial liabilities at FVTPL or other financial liabilities.
(a) Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at FVTPL.
Financial liabilities held for trading include derivatives entered into by the Company
that do not meet the hedge accounting criteria. Derivative liabilities are initially
measured at fair value and subsequently stated at fair value, with any resultant
gains or losses recognised in statement of comprehensive income. Net gains or
losses on derivatives include exchange differences.
The Company has not designated any financial liabilities as at FVTPL.
(b) Other financial liabilities
The Company's other financial liabilities include trade payables and other payables.
Trade and other payables are recognised initially at fair value plus directly
attributable transaction costs and subsequently measured at amortised cost using
the effective profit method.
For other financial liabilities, gains and losses are recognised in statement of
comprehensive income when the liabilities are derecognised, and through the
amortisation process.
A financial liability is derecognised when the obligation under the liability is
extinguished. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognised in statement of comprehensive income.
48
593075-U
2.
2.22 Provisions for liabilities
Provisions for liabilities are recognised when the Company has 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. Provisions are reviewed at each financial year end and adjusted
to reflect the current best estimate. Where the effect of the time value of money is
material, the amount of provision is the present value of the expenditure expected to be
required to settle the obligation.
2.23 Employee benefits
(i) Short-term benefits
Wages, salaries, bonuses and social security contributions are recognised as an
expense in the year in which the associated services are rendered by employees of
the Company. Short-term accumulating compensated absences such as paid
annual leave are recognised when services are rendered by employees that
increase their entitlement to future compensated balances. Short-term nonaccumulating compensated absences such as sick leave are recognised when the
absences occur.
(ii) Defined contribution plan
As required by law, the Company makes contributions to the national pension
scheme, the Employees Provident Fund ("EPF"). The Company also makes
additional contributions to the EPF for eligible employees by reference to their
length of service and earnings. Such contributions are recognised as an expense in
the statement of comprehensive income as incurred.
2.24 Foreign currencies
Transactions in foreign currencies are converted into Ringgit Malaysia at rates of
exchange ruling at the transaction dates. Monetary assets and liabilities in foreign
currencies at the end of the financial year are translated into Ringgit Malaysia at rates
of exchange ruling at that date. All exchange differences are taken to the statement of
comprehensive income and/or revenue accounts. The principal exchange rate for every
unit of United States Dollar ruling at financial year end used is RM3.0259 (2010:
RM3.2730).
49
593075-U
2.
2.25 Other Revenue recognition
(i) Profit and investment income
Profit and investment income on Shariah compliant investments are recognised on
an accrual basis using the effective yield of the asset.
(ii) Dividend income
Dividend income is recognised when the right to receive payment is established.
(iii) Wakalah fees
Wakalah fees are recognized as soon as the amount of contribution can be reliably
measured in accordance with the principles of Shariah.
(iv) Rental income
Rental income receivable under tenancy agreements is recognised on a straightline basis over the term of the tenancy.
2.26 Zakat
This represents an obligatory amount payable by the Company to comply with the
principles of Shariah. Zakat is computed using the “net-asset” method as approved by
the Shariah Committee. Only the zakat that is attributable to the individual Muslim
shareholders of the holding company was provided for in the financial statements. The
zakat computation is reviewed by the Shariah Committee. The Board has the discretion
to pay additional zakat above the obligatory amount payable.
2.27 Changes in Accounting Policies and Effects Arising from Adoption of New and
Revised FRSs and Issues Committee Interpretations ("IC Interpretations")
The significant accounting policies adopted are consistent with those applied in the
annual audited financial statements for the financial year ended 31 March 2010, except
for the adoption of the following new/revised FRSs, amendments to FRSs and
Interpretations of the Issues Committee ("IC") issued by the Malaysian Accounting
Standards Board ("MASB") that are mandatory for the financial period beginning 1
January 2010.
50
593075-U
2.
(cont'd.)
Standard/Interpretation
FRS 4: Insurance Contracts
FRS 7: Financial Instruments: Disclosures
FRS 8: Operating Segments
FRS 101: Presentation of Financial Statements (Revised 2009)
FRS 123: Borrowing Costs
Amendments to FRS 1: First-time Adoption of Financial Reporting Standards and
FRS 127: Consolidated and Separate Financial Statements: Cost of an Investment
in a Subsidiary, Jointly Controlled Entity or Associate
Amendments to FRS 2: Share-based Payment - Vesting Conditions and
Cancellations
Amendments to FRS 132: Financial Instruments: Presentation
Amendments to FRS 139: Financial Instruments: Recognition and Measurement,
FRS 7: Financial Instruments: Disclosures
Amendments to FRSs contained in the documents entitled 'Improvements to
FRSs (2009)'
IC Interpretation 9: Reassessment of Embedded Derivatives
IC Interpretation 10: Interim Financial Reporting and Impairment
IC Interpretation 11: FRS 2 - Group and Treasury Share Transactions
IC Interpretation 13: Customer Loyalty Programmes
IC Interpretation 14: FRS 119 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
TR i - 3: Presentation of Financial Statements of Islamic Financial Institutions
FRS 123, Amendments to FRS 1, IC Interpretation 9 and 13 are not applicable to the
Company.
Unless otherwise described below, the directors expect that the adoption of the
pronouncements above will have no material impact on the financial statements of the
Company in the period of their initial application:
FRS 4 : Insurance Contracts
On adoption of FRS 4, expanded disclosures are required and reclassification of certain
items in the statement of financial position (including comparatives) previously reported
on net basis to gross basis is required.
51
593075-U
2.
(cont'd.)
FRS 4 : Insurance Contracts (cont'd.)
The adoption of FRS 4 also requires the identification of takaful certificates which do
not contain significant takaful risks to be reclassified as investment contracts. The
Company defines takaful risk to be significant when the ratio of amount payable upon
insurable event over amount payable upon non-insurable event (“the Significant Takaful
Risk Ratio”) must be at a specified level in order to be considered to have significant
takaful risk.
Accordingly, all products are classified as takaful certificates as at the date of this
statement of financial position.
FRS 4 requires a test for the adequacy of recognised takaful certificates liabilities at
each financial year end using current estimates of future cash flows under its takaful
certificates. For the purpose of complying with the requirements of a liability adequacy
test under FRS 4 : Insurance Contracts, takaful operators are deemed to comply if the
valuation methods used are in accordance with BNM/RH/GL 004-20 Guideline on
Valuation Basis for Liabilities of Family Takaful Business and BNM/RH/GL 004-21
Guideline on Valuation Basis for Liabilities of General Takaful Business.
FRS 4 requires impairment tests to be performed for takaful and retakaful certificates
assets and receivables and to reduce its carrying amount accordingly and recognise
that impairment in the statement of comprehensive income. BNM has in December
2010 issued Guidelines on Financial Reporting for Takaful Operators in order to bring
financial reporting for takaful operators in line with the requirements of FRSs issued by
MASB. For the purpose of complying with paragraph 58 of FRS 139 and paragraph
20(a) of FRS 4, objective evidence of impairment is deemed exist where the principal or
profit or both for receivables that are individually assessed for impairment, is past due
for more than 90 days or 3 months. Previously, the requirement by BNM was for takaful
operators to make full provision for outstanding contribution including agents, brokers
and retakaful operators balances in arrears for more than 30 days for motor class and 6
months for other classes of takaful certificates from the date on which they become
receivable.
Upon the adoption of FRS 139 and FRS 4, an impairment loss is recognised in respect
of retakaful certificate assets and takaful certificate receivables when there is objective
evidence that an impairment loss has been incurred in accordance with the policies
described in Notes 2.18. The amount of the loss is measured as the difference
between the carrying amount of the receivables and the present value of the estimated
future cashflows discounted at the receivable's original effective profit rate.
52
593075-U
2.
(cont'd.)
FRS 4 does not contain a transitional provision similar to FRS 139, and as such the
accounting policy change will have to be accounted retrospectively in the opening
balance of retained profits and accumulated deficits of the general takaful fund in
accordance with FRS 108: Accounting Policies, Changes in Accounting Estimates and
Error. The effects arising as a result of adopting the above are detailed as follows:
(a) Effects of changes on opening reserves
As at
1 April 2009
RM '000
Increase /
(decrease)
RM '000
Restated
As at
1 April 2009
RM '000
Shareholder's fund
Retained profits:
- Expenses Liabilities of General
Takaful Fund
- Unearned wakalah fees reserve
- Provision for expenses deficiency
- Expenses Liabilities of Family
Takaful Fund
- Deferred tax
(8,130)
(16,117)
(24,247)
(3,877)
(734)
(16,878)
5,372
Accumulated deficits:
- Impairment of Takaful certificates
receivables
- Deferred tax
3,981
(2,059)
1,922
(2,746)
687
Family takaful fund
Unallocated surplus:
receivables
53
20,036
1,638
1,638
21,674
593075-U
2.
(cont'd.)
(a) Effects of changes on opening reserves (cont'd.)
As at
1 April 2010
RM '000
Shareholder's fund
Retained profits:
- Expenses Liabilities of General
Takaful Fund
- Unearned wakalah fees reserve
- Provision for expenses deficiency
- Expenses Liabilities of Family
Takaful Fund
- Deferred tax
1,336
Increase /
(decrease)
RM '000
(11,812)
Restated
As at
1 April 2010
RM '000
(10,476)
(4,014)
(1,943)
(9,793)
3,938
General takaful fund:
receivables
- Deferred tax
8,794
(2,602)
6,192
(3,470)
868
Family takaful fund
Unallocated surplus:
receivables
35,579
1,495
37,074
1,495
(b) Reclassification of comparatives
The effects of the adoption of FRS 4 on the comparative statement of financial
position as at 31 March 2010 are summarised as follows:
54
593075-U
2.
(cont'd.)
As
previously
Rereported classification
RM '000
RM '000
Shareholder's fund
As
restated
RM '000
Assets
Deferred tax assets
2,303
3,938
6,241
Liabilities
-
15,750
15,750
1,336
(11,812)
(10,476)
39,626
1,474
(3,470)
868
36,156
2,342
8,794
(2,602)
6,192
Assets
37,266
1,495
38,761
Liabilities
- Unallocated surplus
35,579
1,495
37,074
Equity
Retained profits/
(accumulated losses)
Assets
Deferred tax assets
Participants' Fund
Family takaful fund
(c) Current year effects
The following tables provide estimates of the extent to which each of the line items
in the statement of financial position and statement of financial position for the
financial year ended 31 March 2011 are higher or lower than it would have been
had the previous policies been applied in the current year.
55
593075-U
(cont'd.)
(c) Current year effects (cont'd.)
(i) Effects on statement of financial position:
Increase/
(decrease)
2011
RM'000
Shareholder's fund
Assets
Deferred tax assets
3,787
Liabilities
(15,146)
Equity
Retained profits/(accumulated losses)
11,359
Assets
Deferred tax assets
Participants' Fund
(322)
80
4,740
Family takaful fund
Assets
Liabilities
56
113
(1,609)
593075-U
2.
(cont'd.)
(c) Current year effects (cont'd.)
(ii) Effects on statement of comprehensive income:
Increase/
(decrease)
2011
RM'000
Shareholder's fund
(605)
Fair value gains and losses:
Allowance/(writeback) for impairment
of takaful receivables
Taxation
(3,792)
948
Family takaful fund
Fair value gains and losses:
1,609
FRS 7 : Financial Instruments: Disclosures
Prior to 1 January 2010, information about financial instruments was disclosed in
accordance with the requirements of FRS 132 Financial Instruments: Disclosure and
Presentation. FRS 7 introduces new disclosures to improve the information about
financial instruments. It requires the disclosure of qualitative and quantitative
information about exposure to risks arising from financial instruments, including
specified minimum disclosures about credit risk, liquidity risk and market risk, including
sensitivity analysis to market risk.
The Company has applied the FRS 7 prospectively in accordance with the transitional
provision. Hence, the new disclosures are included throughout the Company's financial
statements for the year ended 31 March 2011.
57
593075-U
2.
(cont'd.)
FRS 101 : Presentation of Financial Statements
The revised FRS 101 introduces changes in the presentation and disclosures of
financial statements. The revised Standard separates owner and non-owner changes in
equity. The statement of changes in equity includes only details of transactions with
owners, with all non-owner changes presented as a single line. The Standard also
introduces the statement of comprehensive income, with all items of income and
expense recognised in statement of comprehensive income, together with all other
items of recognised income and expense recognised directly in equity, either in one
single statement, or in two linked statements. The Company have elected to present
this statement in one single statement.
In addition, a statement of financial position is required at the beginning of the earliest
comparative period following a change in accounting policy, the correction of an error or
the classification of items in the financial statements. The Company's statement of
financial position at the beginning of the earliest comparative period, i.e. 1 April 2009
has been included following the change in the comparative figures for 31 March 2010 to
conform with current year's presentation.
The revised FRS 101 also requires the Company to make new disclosures to enable
users of the financial statements to evaluate the Company's objectives, policies and
processes for managing capital risk.
The revised FRS 101 also prescribes one-reporting entity model, i.e. singular financial
statement presentation for all funds on a combined/consolidated basis. However
BNM/RH/GL 004-6 Guidelines on Financial Reporting for Takaful Operators requires
the Company to prepare the financial statements separately for Shareholder's Fund,
General Takaful Fund and Family Takaful Fund.
The revised FRS 101 was adopted retrospectively by the Company.
Standards issued but not yet effective
As at the date of authorisation of these financial statements, the following FRSs,
Amendments to FRSs and Interpretations of the Issues Committee ("IC Interpretations")
have been issued by the Malaysian Accounting Standards Board ("MASB") but are not
yet effective and have not been adopted by the Company.
Effective for financial periods beginning on or after 1 March 2010
Amendments to FRS 132: Financial Instruments: Presentation – Classification of
Rights Issues
58
593075-U
2.
(cont'd.)
Effective for financial periods beginning on or after 1 July 2010
FRS 1: First-time Adoption of Financial Reporting Standards (revised)
FRS 3: Business Combinations (revised)
Amendments to FRS 2: Share-based Payment
Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations
Amendments to FRS 127: Consolidated and Separate Financial Statements
(revised 2010)
Amendments to FRS 138: Intangible Assets
Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives
IC Interpretation 12: Service Concession Arrangements
IC Interpretation 15: Agreements for the Construction of Real Estate
IC Interpretation 16: Hedges of a Net Investment in a Foreign Operation
IC Interpretation 17: Distribution of Non-cash Assets to Owners
Effective for financial periods beginning on or after 1 January 2011
Amendments to FRS 1: Limited Exemption from Comparative FRS 7 Disclosures for
first- time Adopters
Amendments to FRS 1: Additional Amendments for First-time adopters
Amendments to FRS 2: Group Cash-settled Share-based Payments Transactions
Amendments to FRS 7: Improving Disclosures about Financial Instruments
IC Interpretation 4: Determining whether an Arrangement contains a lease
IC Interpretation 18: Transfer of Assets from Customers
TR 3: Guidance on Transition to IFRSs
Tri-4: Shariah Compliant Sale Contracts.
Effective for financial periods beginning on or after 1 July 2011
Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirements
IC Interpretation 19, Extinguishing Financial Liabilities with equity instruments
Effective for financial periods beginning on or after 1 January 2012
FRS 124: Related Party Disclosures (revised)
IC Interpretation 15: Agreements for the Construction of Real Estate
59
593075-U
2.
2.28 Significant accounting estimates and judgments
The preparation of the Company's financial statements requires management to make
judgements, estimates and assumptions that affect the reported amount of revenues,
expenses, assets and liabilities at the financial year end. However, uncertainty about
these assumptions and estimates could result in outcomes that could require a material
adjustment to the carrying amount of the asset or liability affected in the future.
(a) Critical judgements made in applying accounting policies
The following are the judgements made by management in the process of applying
the Company's accounting policies that have the most significant effect on the
amount recognised in the financial statements. Judgements are continually
evaluated and are based on historical experiences and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances.
(i) Classification between investment properties and property, plant and
equipment
The Company has developed certain criteria based on FRS 140 in making
judgement whether a property qualifies as an investment property. Investment
property is a property held to earn rentals or for capital appreciation or both.
Some properties comprise a portion that is held to earn rentals or for capital
appreciation and another portion that is held for use in the production or supply
of goods or services or for administrative purposes. If these portions could be
sold separately (or leased out separately under a finance lease), the Company
would account for the portions separately. If the portions could not be sold
separately, the property is an investment property only if an insignificant portion
is held for use in the production or supply of goods or services or for
administrative purposes. Judgement is made on an individual property basis to
determine whether ancillary services are so significant that a property does not
qualify as investment property.
(ii) Impairment of AFS financial assets
Significant judgement is required to assess impairment for available-for-sale
investments. The Company evaluates the duration and extent to which the fair
value of an investment is less than its cost; the financial health and near term
business outlook for the investee, including but not limited to factors such as
industry and sector performance, changes in technology and operational and
financial cash flow.
60
593075-U
2.
2.28 Significant Accounting Estimates and Judgments (cont'd.)
(a) Critical judgements made in applying accounting policies (cont'd.)
(iii) Impairment of takaful and retakaful certificates receivables
The Company performs individual assessment for takaful and retakaful
certificates receivables that are individually significant, or collectively for
financial assets that are not individually significant by calculating the present
value of future cash flows against the carrying amount of receivables. The
future cash flows are determined based on credit assessment on each
impaired receivable.
Collective assessment is performed by grouping receivables with similar credit
risk characteristics and the future cash flows are estimated based on historical
loss experience for receivables with similar credit risk characteristics.
(b) Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below.
(i) Depreciation and amortisation
Depreciation and amortisation is based on management’s estimates of the
future estimated average useful lives and residual values of property, plant and
equipment and intangible assets. Estimates may change due to technological
developments, expected level of usage, competition, market conditions and
other factors, and could impact the estimated average useful lives and the
residual values of these assets.
This may result in future changes in the estimated useful lives and in the
depreciation or amortisation expenses. It is currently estimated that the
property, plant and equipment and intangible assets of the Company will not
have any residual values.
61
593075-U
2.
(b) Key sources of estimation uncertainty (cont'd.)
(ii) Uncertainty in accounting estimates for general takaful certificate
liabilities
The principal uncertainty in the general takaful certificate liabilities arises from
the technical provisions which include the contribution liabilities and claims
liabilities.
The estimation bases for contribution liabilities for general takaful certificate
liabilities is explained in Note 2.14 (ii) of the Summary of Significant Accounting
Policies.
Generally, claims liabilities on reported claims or case reserves are estimated
based upon historical claims experience, existing knowledge of events, the
terms and conditions of the relevant policies and interpretation of
circumstances. Particularly relevant is past experience of similar cases,
historical claims development trends, legislative changes, judicial decisions and
economic conditions. It is certain that final claim liabilities may vary from
current projection. The uncertainty is also inherent in the projected contribution
liabilities as it is correlated to the projected claims liabilities.
The estimates of contribution liabilities and claims liabilities are therefore
sensitive to various factors and uncertainties. The establishment of technical
provisions is an inherently uncertain process and, as a consequence of this
uncertainty, the eventual settlement of contribution and claim liabilities may
vary from the initial estimates. At each financial year end, the estimates of
financial year end are re-assessed for adequacy by an appointed actuary and
changes will be reflected as adjustments to these liabilities. The appointment of
the actuary is approved by BNM.
There may be reporting lag between the occurrence of an insured event and
the time it is actually recorded. For these cases, the IBNR reserves are
estimated. Even for liabilities which have been recorded, there are potential
uncertainties as to the magnitude of the final claims compared to initial reserve
provisions. For these cases, IBNER reserve provision are estimated. There are
various factors affecting the level of uncertainty such as inflation, judicial
interpretations, legislative changes and claims handling procedures.
62
593075-U
2.
(ii) Uncertainty in accounting estimates for general takaful certificate
liabilities (cont'd.)
Bank Negara Malaysia has issued new Guidelines on Valuation Basis for
Liabilities of General Takaful Business which shall take effect beginning on and
after 1 July 2011. The guidelines sets out prudential requirements that should
be observed by takaful operators in valuing liabilities of their general takaful
business, with the aim of providing for those liabilities at a specified level of
adequacy with explicit prudential margins. The Guidelines is intended to reflect
the takaful operator’s fiduciary duty to manage the takaful funds prudently,
treat participants fairly as well as to ensure that the shareholders’ fund can
adequately support the takaful business. Currently, the Company has adopted
a level of provision of risk margin for adverse deviation ("PRAD") calculated at
70% confidence level. This is a progressive measure taken by the Company
towards meeting the PRAD at 75% confidence level as required by the
guidelines by financial year ending 31 March 2013.
(iii) Uncertainty in accounting estimates for family takaful certificate liabilities
The estimation of the ultimate liability arising from claims made under family
takaful certificates is a critical accounting estimate. There are several sources
of uncertainty that need to be considered in estimation of the liabilities that the
family takaful fund will ultimately be required to pay as claims.
For family takaful certificates, estimates are made for future deaths, disabilities,
maturities, investment returns, voluntary terminations and expenses in
accordance with contractual and regulatory requirements. The family takaful
fund bases the estimate of expected number of deaths on statutory mortality
tables, adjusted where appropriate to reflect the fund's unique risk exposures.
The estimated number of deaths determines the value of possible future
benefits to be paid out, which will be factored into ensuring sufficient cover by
reserves, which in return is monitored against current and future contributions.
For those certificates that cover risks related to disability, estimates are made
based on recent past experience and emerging trends. However epidemics, as
well as wide ranging changes to lifestyle, could result in significant changes to
the expected future exposures.
63
593075-U
2.
(iii) Uncertainty in accounting estimates for family takaful certificate liabilities
(cont'd.)
All of these will give rise to estimation uncertainties of projected ultimate liability
of the family takaful fund.
At each financial year end, these estimates are reassessed for adequacy and
changes will be reflected as adjustments to the liability.
Bank Negara Malaysia has issued new Guidelines on Valuation Basis for
Liabilities of Family Takaful Business which shall take effect beginning on and
after 1 July 2011. The guidelines sets out prudential requirements that should
be observed by takaful operators in valuing liabilities of their family takaful
business, with the aim of providing for those liabilities at a specified level of
adequacy with explicit prudential margins. The Guidelines is intended to reflect
the takaful operator’s fiduciary duty to manage the takaful funds prudently,
treat participants fairly as well as to ensure that the shareholders’ fund can
adequately support the takaful business. The Company had not adopted the
guidelines earlier in its financial statement for the year ended 31 March 2011.
(iv) Uncertainty in accounting estimates for shareholder's fund expenses
liabilities
The principal uncertainty in the shareholder's fund takaful certificate liabilities
arises from the technical provisions which includes the unearned wakalah fees
reserve and expenses liabilities of general and family takaful fund.
The estimation bases for unearned wakalah fees for general takaful certificate
liabilities is explained in Note 2.16 (i) (a) of the Summary of Significant
Accounting Policies.
The best estimate for unexpired expense reserve for general takaful business
on a going concern basis is derived from the estimation for expected certificate
management expenses required to maintain existing certificates and the costs
of claims handling expenses to administer and settle open claim files.
64
593075-U
2.
liabilities (cont'd.)
The unexpired expense reserve for family business is estimated assuming that
the block of in-force contracts are to be maintained on a 'going concern' basis.
Under a 'going concern' scenario, the contracts so valued are taken as a
particular sub-block of contracts and the maintenance expenses for which are
valued to the point the last certificate goes off the books.
liabilities
The maintenance expenses related to such contracts include the cost of
functions that would normally associated with operation of the business on a
'going concern' basis.
The unexpired expense reserve is calculated using adjusted parameters to
provide sufficiency at the appropriate percentile of statistical variation that is
higher than the best estimate values.
The unexpired expense reserve is the present value of future maintenance
expenses on the current in-force family takaful contracts and is further reduced
by the present value of future shareholders income realisable with reasonable
certainty relating to those in-force family takaful contracts.
The present value of the future shareholders income relates to future renewal
wakalah fees as well as investment performance fee of the PA and the nonmedical risk fund's surplus administration charge.
(v) Pipeline contributions
The general takaful fund has recognised pipeline contribution amounting to
approximately RM6,093,143 (2010: RM7,400,000) at the end of the current
financial year. Estimations made by management are based on expected and
actual risks underwritten and is as advised by the relevant agents or
underwriters. Other factors taken into consideration include average monthly
trends for turnaround time of certificate issuance.
65
593075-U
2.
(vi) Impairment of takaful receivables
The Company reviews its takaful receivables on a regular basis to assess
whether an allowance for impairment should be recorded in the statement of
comprehensive income/revenue account. In particular, judgement by
management is required in the estimation of the amount and timing of future
cash flows when determining the level of impairment required. Such estimates
are necessarily based on assumptions about the probability of default and
probable losses in the event of default, the value of the underlying security, and
realisation costs.
(vii) Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to the extent that it
is probable that taxable profit will be available against which the losses can be
utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based on the likely
timing and level of future taxable profits together with future tax planning
strategies.
Assumptions about generation of future taxable profits depend on
management’s estimates of future cash flows. These depends on estimates of
future production and sales volume, operating costs, capital expenditure,
dividends and other capital management transactions. Judgement is also
required about application of income tax legislation. These judgements and
assumptions are subject to risks and uncertainty, hence there is a possibility
that changes in circumstances will alter expectations, which may impact the
amount of deferred tax assets recognised in the statement of financial position
and the amount of unrecognised tax losses and unrecognised temporary
differences.
The amount of deferred tax assets recognised at 31 March 2011 was
approximately RM 5,169,860 (2010: RM 2,303,390) for the shareholder's fund
and RM 1,570,313 (2010: RM 1,473,794) for the general takaful fund; also the
amount of deferred tax liabilities for the family takaful fund is approximately
RM 2,133,882 (2010: RM 2,303,549) as disclosed in Note 21.
66
593075-U
3.
Operating revenue
Shareholder's fund
Wakalah fees:
Family takaful fund
Investment income:
Net accretion of discounts on investments
2011
RM
RM '000
'000
2010
RM '000
56,157
150,378
206,535
55,931
125,700
181,631
5,188
187
5,375
8,421
138
8,559
211,910
190,190
224,196
217,230
8,544
16
8,560
6,044
109
6,153
232,756
223,383
486,530
357,610
31,749
1,094
32,843
21,119
1,048
22,167
516
227
519,889
380,004
Gross contribution
Investment income:
Family takaful fund
Gross contribution
Investment income:
Investment income of Investment-linked fund (Note 33(a))
67
593075-U
4.
Net earned contributions
2011
RM
RM '000
'000
2010
RM '000
224,196
(13,670)
210,526
217,230
(911)
216,319
(22,398)
(10,151)
(32,549)
(25,525)
278
(25,247)
177,977
191,072
General
takaful fund
RM '000
Family
takaful fund
RM '000
16
16
380
1,082
97
6,643
1,494
2,559
11,856
340
858
1,149
1,938
5,014
6,958
318
187
5,375
16
8,560
897
3,866
1,094
(1,722)
31,121
(a) Gross earned contribution
Gross contribution
Change in unearned contribution provision
(b) Earned contribution ceded to retakaful operators
Contribution ceded to retakaful operators
Change in unearned contribution provision
Net Earned Contribution
5.
Investment income
Shareholder's
fund
RM '000
31 March 2011
Financial assets at FVTPL:
Dividend income
- quoted shares in Malaysia
HTM investments:
Profit income
AFS financial assets:
Profit income
Dividend income
Loans and receivables:
Profit income
Dividend income
- institutional trusts
Rental income from investment properties
Investment expenses
68
593075-U
5.
Investment income (cont'd.)
Shareholder's
fund
RM '000
31 March 2010
Dividend income
HTM investments:
Profit income
Profit income
Dividend income
Profit income
Dividend income
- institutional trusts
Rental income from investment properties
Investment expenses
6.
General
takaful fund
RM '000
Family
takaful fund
RM '000
13
14
1,026
997
1,436
5,308
1,018
1,592
8,508
171
382
-
1,514
2,231
3,615
240
-
138
4,091
109
5,764
668
600
1,018
(523)
20,220
31 March 2011
Property, plant and equipment
Realised losses
Realised gains:
Quoted shares in Malaysia:
Shariah approved equities
Realised gains:
Unquoted Islamic private debt securities:
Unsecured
Shariah approved unit trust funds
69
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
(834)
-
-
233
239
615
-
-
3,044
1,065
1,065
2,467
2,467
3,483
931
7,458
464
2,706
8,073
593075-U
6.
Realised gains and losses (cont'd.)
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
-
78
1,501
4,337
4,337
230
230
51
472
523
4,337
308
2,024
General
takaful fund
RM '000
Family
takaful fund
RM '000
31 March 2010
Realised gains:
Realised gains:
7.
Shareholder's
fund
RM '000
31 March 2011
Financial assets at FVTPL
14
(323)
(19)
-
(309)
3,054
3,035
170
(1,107)
(962)
199
389
-
(7,490)
61
(636)
(8,065)
31 March 2010
Financial assets at FVTPL
Impairment of HTM financial assets
(1,899)
70
(1,593)
(1,005)
22,535
4,659
347
(239)
27,302
593075-U
8.
2011
RM
RM '000
'000
2010
RM '000
56,157
150,378
55,931
125,700
4,378
2,376
213,289
8,095
732
4,468
194,926
(115,676)
(100,519)
Shareholder's fund
Fee income
Wakalah fees:
Family takaful fund
Surplus administrative charges :
Family takaful fund
Investment performance fee from family takaful fund
Commission expense
Commissions paid to agents
Retakaful Commission Income
3,938
4,505
(56,157)
(56,157)
(55,931)
(8,095)
(64,026)
Fee expense
Wakalah fees
Surplus administrative charges
Family takaful fund
Retakaful Commission Income
-
63
Fee expense
Wakalah fees
Investment performance fee
(143,009)
(4,341)
(2,376)
(149,726)
71
(120,139)
(732)
(4,468)
(125,339)
593075-U
9.
Other operating income/(expenses)
2011
RM
RM '000
'000
2010
RM '000
346
346
620
620
Shareholder's fund
Miscellaneous income
Miscellaneous income/(expenses)
Bank charges
Stamp duty
50
(1,818)
(2)
(1,770)
(1)
(1,382)
7
(1,376)
(419)
(1,461)
(461)
(488)
(2,829)
(2,771)
(1,137)
(352)
(514)
(4,774)
Family takaful fund
Miscellaneous expenses
Bank charges
Participants' medical fees
Stamp duty
10. Net benefits
2011
RM
RM '000
'000
2010
RM '000
Family takaful fund
Gross benefits and claims paid :
Death
Surrender
Medical
Others
(39,070)
(41,367)
(32,821)
(4,442)
(117,700)
72
(29,585)
(19,700)
(27,724)
(15,771)
(92,780)
593075-U
11. Management expenses
2011
RM '000
2010
RM '000
845
1,404
34,617
7,872
174
44,912
805
1,417
41,291
5,051
95
48,659
131
21
5,296
1,169
4,101
3,914
4,367
6,150
3,420
5,962
87
23
3,284
781
2,250
7
2,252
4,152
5,249
3,445
4,613
1,282
9,258
89,983
11,827
86,629
672
173
845
626
179
805
1,200
204
96
1,500
1,172
155
90
121
1,538
1,404
1,417
Shareholder's fund
Staff costs:
Non-executive directors' remuneration (Note 12 (a))
Executive director's remuneration (Note 12 (b))
Salaries, bonus, and other related costs
Pension costs - EPF
Short-term accumulating compensated absences
Auditors’ remuneration
- statutory audit
- other services
Office rental
Amortisation of software development costs
Depreciation of property, plant and equipment
Property, plant and equipment written off
Management fees paid to holding company
Share of acquisition costs on quota share retakaful
Marketing and communication
Electronic data processing
Agency expenses
Contribution to Perbadanan Insurans Deposit
Malaysia ("PIDM")
Other expenses
12. Directors' remuneration
(a)
(b)
Non-executive directors' remuneration:
Fees
Allowances and other emoluments
Executive director's remuneration:
Salary and bonus
Pension costs - EPF
Retirement benefits
Benefits-in-kind
Total CEO's remuneration excluding
benefits-in-kind
73
593075-U
12. Directors' remuneration (cont'd.)
The number of directors of the Company whose total remuneration during the financial year
fell within the following bands is analysed below:
Number of directors
2011
2010
Executive director:
RM1,300,001 - RM1,800,000
1
1
Non-executive directors:
RM100,001 - RM500,000
RM50,001 - RM100,000
6
2
4
2
2011
RM '000
2010
RM '000
236
1,630
137
1,209
(2,471)
(7,085)
(605)
(5,739)
13. Change in expenses liability
Shareholder's fund
Expense liability of general takaful fund
Increase in unearned wakalah fees reserve
Increase in provision for expenses deficiency
Expense liability of family takaful fund
Decrease in unexpired expense reserve
74
593075-U
14. Taxation
2011
RM
RM '000
'000
2010
RM '000
Shareholder's fund
Current year's provision
Overprovision of tax expense in prior years
Deferred tax relating to origination and
reversal of temporary differences (Note 21)
Tax expense for the year
3,944
(347)
6,848
(896)
1,173
4,770
557
6,509
Domestic income tax for shareholder's fund is calculated at the Malaysian statutory tax rate
of 25% (2009: 25%) of the estimated assessable profit for the year.
A reconciliation of income tax expenses applicable to profit before taxation at the statutory
income tax rate to income tax expense at the effective income tax rate of the shareholder's
fund is as follows:
2011
2010
RM
RM '000
'000
RM '000
Profit before taxation
14,111
Taxation at Malaysian statutory tax rate
Income not subject to tax
Expenses not deductible for tax purposes
Underprovision of deferred tax liabilities in prior years
Overprovision of tax expense in prior years
75
3,527
(73)
1,593
70
(347)
4,770
14,926
3,732
996
2,678
(896)
6,510
593075-U
14. Taxation (cont'd.)
2011
RM
RM '000
'000
2010
RM '000
474
146
2,004
-
807
1,427
507
2,511
Underprovision of tax expense in prior years
Domestic income tax for general takaful fund is calculated at the Malaysian statutory tax rate
of 25% (2009: 25%) of the estimated assessable profit for the year.
A reconciliation of income tax expenses applicable to profit before taxation at the statutory
income tax rate to income tax expense at the effective income tax rate of the general takaful
fund is as follows:
2011
2010
RM
RM '000
'000
RM '000
5,872
13,504
Taxation at Malaysian statutory tax rate
Utilisation of capital allowances allocated
from the Shareholder's fund
Underprovision of deferred tax in prior year
1,468
(182)
216
3,376
1
(279)
58
146
1,427
(1,514)
648
2,511
76
593075-U
14. Taxation (cont'd.)
2011
RM
RM '000
'000
2010
RM '000
2,830
497
843
-
Family takaful fund
(344)
2,983
1,779
2,622
Family takaful business is taxed at the preferential tax rate of 8% (2010: 8%) of taxable
investment income for the year.
A reconciliation of income tax expenses applicable to surplus before taxation at the statutory
income tax rate to income tax expense at the preferential income tax rate of the family
takaful fund is as follows:
2011
RM
RM '000
'000
2010
RM '000
Surplus for the year
Surplus administration charges transferred to
shareholders' fund
241,348
198,821
241,348
732
199,553
Taxation at preferential tax rate of 8%
Utilisation of capital allowances allocated
from the Shareholder's fund
Under/(Over)provision of deferred tax in prior years
19,308
(16,628)
(132)
15,964
(12,682)
8
(193)
131
497
2,983
(283)
(385)
2,622
77
593075-U
15. Property, plant and equipment
2011
Computer
equipment
RM'000
Furniture,
Fittings and
Office
Equipment
RM'000
Motor
Vehicles
RM'000
Total
RM'000
Shareholder's fund
Cost
At 1 April 2010
Additions
Write offs
Reclassifications
At 31 March 2011
4,955
340
(514)
1,042
5,823
18,581
4,710
(3,700)
(1,042)
18,549
430
480
910
23,966
5,530
(4,214)
4,224
840
(512)
54
4,606
5,810
3,176
(2,847)
(54)
6,085
269
85
354
10,303
4,101
(3,359)
11,045
1,217
12,464
556
14,237
4,558
448
(51)
4,955
8,806
9,798
(23)
18,581
430
430
13,794
10,246
(74)
23,966
3,737
537
(50)
4,224
4,282
1,545
(17)
5,810
100
169
269
8,119
2,251
(67)
10,303
161
13,663
25,282
Accumulated Depreciation
At 1 April 2010
Charge for the year
Write offs
Reclassifications
At 31 March 2011
Net Book Value
At 31 March 2011
2010
Cost
At 1 April 2009
Additions
Write offs
At 31 March 2010
Accumulated Depreciation
At 1 April 2009
Charge for the year
Write offs
At 31 March 2010
Net Book Value
At 31 March 2010
731
78
12,771
593075-U
16. Intangible assets
Software
Development
Computer
Cost in Software and
Progress
Licenses
RM'000
RM'000
Total
RM'000
Shareholder's fund
Cost
At 1 April 2010
Additions
Reclassifications
At 31 March 2011
1,564
78
(392)
1,250
9,427
1,101
392
10,920
10,991
1,179
12,170
-
6,418
1,169
7,587
6,418
1,169
7,587
1,250
3,333
4,583
Accumulated Amortisation
At 1 April 2010
Charge for the year
At 31 March 2011
-
Net Carrying Amount
At 31 March 2011
Deferred
The components
component
tax assets and
andmovements
movement
liabilities of
aredeferred
deferred
offset tax
when
taxliabilities
liability
there during
during
is a legally
the
thebalance
financial
sheet
Amortisation
year
dateareis as
At 31 March 2010
1,564
3,009
4,573
2011
RM'000
2010
RM'000
110,000
1,008
(7,490)
103,518
69,966
17,499
22,535
110,000
17. Investment properties
Family takaful fund
At fair value:
At 1 April
Additions
Fair value adjustments
At 31 March
These are leasehold properties acquired from a third party vendor on 19 and 22 November
2008. These properties are carried at fair value at 31 March 2011 in accordance with the
accounting policy disclosed in Note 2.3.
79
593075-U
18. Financial instruments
Shareholder's
fund
RM '000
Government guaranteed
Unsecured
Government investment issues
Warrants
Golf club memberships
Islamic investment accounts with licensed:
Islamic banks
Investment banks
Development bank
Building society
Islamic repo placements
Institutional trust fund
Units held in investment-linked fund
Secured staff loans:
Receivable within 12 months
Receivable after 12 months
Qard to general takaful fund(i)
Due from:
Family takaful fund
Investment-linked fund
Amount due from holding company
Income due and accrued
Other receivables, deposits and prepayments
31 March 2011
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
Shareholder's
fund
RM '000
31 March 2010
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
15,026
57,140
24,041
14,324
92,609
50,940
24,103
304,071
163,241
53,453
453,820
238,222
27,910
24,063
44,765
38,719
8,933
212,552
173,836
8,933
285,227
236,618
5,650
15
178
9,742
5,888
15
-
17,820
8,585
-
33,212
14,473
30
178
9,535
117
60
11,543
118
-
29,610
3,850
-
50,688
3,850
235
60
13,755
13,472
8,269
12,668
6,592
10,000
32,249
18,577
5,814
-
90,006
1,507
59,356
113,967
18,592
-
136,010
1,507
91,405
8,269
132,449
25,184
10,000
23,395
13,039
4,631
19,324
37,689
6,287
5,000
35,100
7,960
4,926
20,738
51,202
-
63,150
72,425
6,037
57,234
17,732
-
121,645
93,424
15,594
40,062
146,125
24,019
5,000
1,289
2,723
12,043
2,739
28,935
174
1,022
5,402
221,133
2,160
1,649
233,967
12,967
3
5,247
199
445
820,109
1,289
2,723
12,043
15,706
28,935
177
5,247
3,381
7,496
1,275,209
1,184
2,825
12,043
11,594
13,400
69
763
4,265
217,193
1,152
403
216,626
522
363
3,724
14
649,982
1,184
2,825
12,043
12,116
13,400
69
363
5,639
4,682
1,083,801
712
40,450
60,888
119,083
221,133
1,105
67,268
105,145
60,449
233,967
1,832
212,387
303,601
302,289
820,109
3,649
320,105
469,634
481,821
1,275,209
1,364
24,448
35,873
155,508
217,193
1,529
40,725
52,891
121,481
216,626
17,923
205,796
205,062
221,201
649,982
20,816
270,969
293,826
498,190
1,083,801
The Company's financial instruments are
summarised by categories as follows:
Financial assets at FVTPL (Note 18(a))
HTM investments (Note 18(b))
AFS financial assets (Note 18(c))
Loans and receivables (Note 18(d))
80
593075-U
18. Financial instruments (cont'd.)
(a) Financial assets at FVTPL
Shareholder's
fund
RM '000
31 March 2011
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
Shareholder's
fund
RM '000
31 March 2010
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
At cost:
Warrants
875
7
882
1,303
7
1,310
2,073
2,073
4,251
14
4,265
1,442
106
1,548
1,607
107
1,714
18,225
18,225
21,274
213
21,487
697
15
712
1,090
15
1,105
1,832
1,832
3,619
30
3,649
1,247
117
1,364
1,411
118
1,529
17,923
17,923
20,581
235
20,816
15,026
1,383
24,041
40,450
14,324
2,004
50,940
67,268
24,103
25,043
163,241
212,387
53,453
28,430
238,222
320,105
385
24,063
24,448
2,006
38,719
40,725
8,933
23,027
173,836
205,796
8,933
25,418
236,618
270,969
15,087
1,495
24,342
40,924
14,383
2,036
51,521
67,940
24,164
25,542
164,112
213,818
53,634
29,073
239,975
322,682
385
24,390
24,775
2,032
38,904
40,936
8,795
23,490
174,248
206,533
8,795
25,907
237,542
272,244
At fair value:
Warrants
(b) HTM investments
At amortised cost:
Unsecured
At fair value:
Unsecured
The fair values of the financial investments are their quoted prices on the stock exchanges or broker/dealer price quotations. Where the information is not available, fair value has been estimated
using quoted market prices for securities with a similar credit, maturity and yield characteristic.
81
593075-U
Shareholder's
fund
RM '000
(c) AFS financial assets
31 March 2011
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
Shareholder's
fund
RM '000
31 March 2010
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
At amortised cost/cost:
Unsecured
54,789
88,994
270,399
414,182
27,134
41,979
185,240
254,353
4,977
178
59,944
8,479
5,998
103,471
15,458
8,997
294,854
28,914
14,995
178
458,269
7,521
60
34,715
11,768
53,747
15,064
3,323
203,627
34,353
3,323
60
292,089
55,757
90,605
279,028
425,390
27,525
42,759
189,525
259,809
4,953
178
60,888
8,652
5,888
105,145
15,988
8,585
303,601
29,593
14,473
178
469,634
8,288
60
35,873
10,132
52,891
11,687
3,850
205,062
30,107
3,850
60
293,826
At fair value:
Unsecured
The fair values of the financial investments are their quoted prices on the stock exchanges or broker/dealer price quotations. Where the information is not available, fair value has been estimated
using quoted market prices for securities with a similar credit, maturity and yield characteristic.
(d) Loans and receivables
At cost:
Islamic banks
Investment banks
Development bank
Building society
(ii)
Qard to general takaful fund
(i)
Shareholder's
fund
RM '000
31 March 2011
General
Family
takaful fund
takaful fund
RM '000
RM '000
13,755
13,472
8,269
12,668
6,592
10,000
32,249
18,577
5,814
-
90,006
1,507
59,356
113,967
18,592
-
1,289
2,723
12,043
-
82
Total
31 March 2010
General
Family
takaful fund
takaful fund
RM '000
RM '000
RM '000
Shareholder's
fund
RM '000
136,010
1,507
91,405
8,269
132,449
25,184
10,000
23,395
13,039
4,631
19,324
37,689
6,287
5,000
35,100
7,960
4,926
20,738
51,202
1,289
2,723
12,043
1,184
2,825
12,043
Total
RM '000
-
63,150
72,425
6,037
0
57,234
17,732
-
121,645
93,424
15,594
40,062
146,125
24,019
5,000
-
-
1,184
2,825
12,043
593075-U
Shareholder's
fund
RM '000
(d) Loans and receivables (cont'd.)
31 March 2011
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
Shareholder's
fund
RM '000
31 March 2010
General
Family
takaful fund
takaful fund
RM '000
RM '000
Total
RM '000
At cost (cont'd.):
Due from:
Family takaful fund
2,739
28,935
174
1,022
5,402
119,083
2,160
1,649
60,449
12,967
3
5,247
199
445
302,289
15,706
28,935
177
5,247
3,381
7,496
481,821
11,594
13,400
69
763
4,265
155,508
1,152
403
121,481
522
363
3,724
14
221,201
12,116
13,400
69
363
5,639
4,682
498,190
13,755
13,472
8,269
12,668
6,592
10,000
32,249
18,577
5,814
-
90,006
1,507
59,356
113,967
18,592
-
136,010
1,507
91,405
8,269
132,449
25,184
10,000
23,395
13,039
4,631
19,324
37,689
6,287
5,000
35,100
7,960
4,926
20,738
51,202
-
63,150
72,425
6,037
57,234
17,732
-
121,645
93,424
15,594
40,062
146,125
24,019
5,000
1,289
2,723
12,043
-
-
1,289
2,723
12,043
1,184
2,825
12,043
-
-
1,184
2,825
12,043
2,739
28,935
174
1,022
5,402
119,083
2,160
1,649
60,449
12,967
3
5,247
199
445
302,289
15,706
28,935
177
5,247
3,381
7,496
481,821
11,594
13,400
69
763
4,265
155,508
1,152
403
121,481
522
363
3,724
14
221,201
12,116
13,400
69
363
5,639
4,682
498,190
At fair value:
(i)
Islamic banks
Investment banks
Development bank
Building society
Qard to general takaful fund(ii)
Due from:
Family takaful fund
The fair values of the LAR have been established by comparing current profit rates for similar financial instruments to the rates offered when the LAR were first recognized together with
appropriate market credit adjustments.
83
593075-U
The following tables show financial investments recorded at fair value analysed by the different basis of fair values as follows:
Financial
assets at
FVTPL
RM'000
31 March 2011
AFS
financial
assets
RM'000
Total
RM'000
Financial
assets at
FVTPL
RM'000
31 March 2010
AFS
financial
assets
RM'000
Total
RM'000
Shareholder's fund
Quoted market price
Valuation techniques - market observable inputs
At cost less impairment
Quoted market price
712
712
4,953
55,757
178
60,888
5,665
55,757
178
61,600
1,364
1,364
8,288
27,525
60
35,873
9,652
27,525
60
37,237
1,105
1,105
14,540
90,605
105,145
15,645
90,605
106,250
1,529
1,529
10,132
42,759
52,891
11,661
42,759
54,420
1,832
1,832
24,573
279,028
303,601
26,405
279,028
305,433
17,923
17,923
15,537
189,525
205,062
33,460
189,525
222,985
Family takaful fund
Quoted market price
(i)
The Islamic investment accounts of general takaful fund of RM 56,640,000 (2010 : RM 119,926,000) above has been off-set against qard of RM 12,043,000 (2010 : 12,043,000) in arriving at
the total general takaful fund assets and liabilities and participants' fund of RM 338,155,000 (2010 : RM272,976,000) on the Company's statement of financial position at page 16.
(ii) Qard represents a benevolent loan provided to the general takaful fund. It is provided in order to make good the underwriting deficit experienced by the general takaful fund during a financial
period. The amount is unsecured, not subject to any profit elements and has no fixed terms of repayment.
84
593075-U
19. Takaful certificates receivables
2011
RM'000
2010
RM'000
33,525
7,328
40,853
(8,055)
32,798
45,388
1,877
47,265
(11,109)
36,156
84,700
(882)
83,818
39,007
(246)
38,761
Contributions receivable
Due from agents, retakaful operators and brokers
Allowance for impairment
Family takaful fund
Contributions receivable
Allowance for impairment
20. Due from/(to) related companies
The amounts due from/(to) related companies are non-trade in nature, unsecured, not subject
to any profit elements and repayable upon demand.
Shareholder's Fund
Due to:
Holding company
Fellow subsidiaries
2011
RM'000
2010
RM'000
(22)
(22)
(1,037)
(95)
(1,132)
2011
RM'000
2010
RM'000
2,303
3,938
6,241
102
(1,173)
1,666
5,372
7,038
(240)
21. Deferred tax assets/(liabilities)
Shareholder's fund
At beginning of year
- As previously stated
- Effect of adopting FRS 4 (Note 2.27)
At beginning of year (as restated)
Recognised in AFS reserve
Recognised in statement of comprehensive income
At end of year
85
5,170
877
(1,434)
6,241
593075-U
21. Deferred tax assets/(liabilities) (cont'd.)
2011
RM
2010
RM
1,474
868
2,342
36
(807)
2,629
687
3,316
(467)
At beginning of year (as restated)
At end of year
1,571
(688)
181
2,342
(2,304)
(175)
344
(2,135)
(253)
(272)
(1,779)
(2,304)
Family takaful fund
At end of year
The components and movements of deferred tax assets/(liabilities) during the financial year
are as follows:
Shareholder's fund
Financial
Assets
RM'000
Property,
plant and
Receivables equipment
RM'000
RM'000
Total
RM'000
2011
At 1 April 2010
- Effect of adopting FRS 4
At 1 April 2010 (as restated)
Recognised in statement of
At 31 March 2011
2,009
2,009
102
294
3,938
4,232
-
-
2,303
3,938
6,241
102
(4)
2,107
(1,169)
3,063
-
(1,173)
5,170
86
593075-U
Shareholder's fund (cont'd.)
2010
At 1 April 2009
At 31 March 2010 (restated)
Financial
Assets
RM'000
Property,
plant and
RM'000
RM'000
Total
RM'000
1,774
1,774
(240)
732
5,372
6,104
-
(840)
(840)
-
1,666
5,372
7,038
(240)
475
2,009
(438)
(1,434)
4,232
840
-
877
(1,434)
6,241
-
395
36
1,079
868
1,947
-
-
1,474
868
2,342
36
5
436
(812)
1,135
-
(807)
1,571
913
913
(480)
1,716
687
2,403
-
-
2,629
687
3,316
(480)
(39)
394
(636)
181
1,948
-
(675)
181
2,342
2011
At 1 April 2010
At 31 March 2011
395
2010
At 1 April 2009
At 31 March 2010
87
593075-U
Family takaful fund
2011
Financial
Assets
RM'000
At 1 April 2010
At 31 March 2011
Property,
plant and
RM'000
RM'000
Total
RM'000
(501)
(175)
(1,803)
-
(2,304)
(175)
(255)
(931)
599
(1,204)
-
344
(2,135)
-
(253)
(272)
-
(1,779)
(2,304)
2010
At 1 April 2009
At 31 March 2010
(253)
(272)
24
(501)
(1,803)
(1,803)
22. Expenses liabilities
2011
RM'000
Shareholder's fund
Expense liabilities for general takaful fund:
Unearned wakalah fees reserve
Provision for expenses deficiency
Expense liabilities for family takaful fund :
Unexpired expense reserve
At beginning of the year, previously stated
Effect of adoption of FRS 4
At beginning of the year, restated
- Wakalah fee received during the year
- Wakalah fee earned during the year
- Movement in provision for expenses deficiency
- Movement in provision for UER
At end of the year
88
2010
RM'000
1.4.2009
RM'000
4,251
3,573
7,824
4,014
1,943
5,957
3,877
734
4,611
7,322
9,793
16,878
15,146
15,750
21,489
2011
2010
Gross / net Gross / net
RM'000
RM'000
15,750
21,489
15,750
21,489
56,157
55,931
(55,920)
(55,794)
1,630
1,209
(2,471)
(7,085)
15,146
15,750
593075-U
23. Takaful certificates liabilities
Provision for claims reported
by certificateholders
Provision for incurred but not
reported claims ("IBNR")
Provision for risk margin for
adverse deviations ("PRAD")
Claim Liabilities (i)
Contribution liabilities (ii)
(iii)
Family takaful fund
Provision for claims reported
by certificateholders
Participants Account ("PA")
Participants' Special Account ("PSA")
Unallocated surplus
Gross
RM'000
2011
Retakaful
RM'000
Net
RM'000
Gross
RM'000
2010
Retakaful
RM'000
Net
RM'000
Gross
RM'000
2009
Retakaful
RM'000
Net
RM'000
116,482
(23,418)
93,064
82,766
(10,170)
72,596
66,888
(13,775)
53,113
66,597
(7,789)
58,808
46,852
(5,954)
40,898
33,635
(5,253)
28,382
10,033
193,112
98,621
291,733
(1,203)
(32,410)
(1,941)
(34,351)
8,830
160,702
96,680
257,382
13,685
143,303
84,951
228,254
(1,453)
(17,577)
(12,092)
(29,669)
12,232
125,726
72,859
198,585
100,523
84,040
184,563
(19,028)
(11,814)
(30,842)
81,495
72,226
153,721
Gross
RM'000
33,668
916,304
51,868
7,962
94,387
1,104,189
2011
Retakaful
RM'000
(24,395)
(91,770)
(21,218)
(137,383)
Net
RM'000
Gross
RM'000
9,273
824,534
30,650
7,962
94,387
966,806
89
30,013
683,746
89,141
6,113
37,074
846,087
2010
Retakaful
RM'000
(7,855)
(60,015)
(37,941)
(105,811)
Net
RM'000
22,158
623,731
51,200
6,113
37,074
740,276
Gross
RM'000
18,406
609,830
13,092
2,981
21,674
665,983
2009
Retakaful
RM'000
(4,609)
(128,704)
(133,313)
Net
RM'000
13,797
481,126
13,092
2,981
21,674
532,670
593075-U
23. Takaful certificates liabilities (cont'd.)
The movement of claim liabilities of general takaful fund, contribution liabilities of general takaful fund and family takaful fund liabities are presented as follows:
Gross
RM'000
(i) Claim liabilities of general takaful fund
Claims incurred in the current accident year
Adjustment to claims incurred in prior accident years due to changes
in assumptions:
Change in PRAD
Change in Expected Ultimate Loss Ratio
Movements in claims incurred in prior accident years
Claims paid during the year
At end of year
2011
Retakaful
RM'000
Net
RM'000
Gross
RM'000
2010
Retakaful
RM'000
Net
RM'000
143,303
172,075
(17,577)
(23,637)
125,726
148,438
100,523
137,296
(19,028)
(12,492)
81,495
124,804
(3,655)
(17,330)
3,155
(104,436)
193,112
250
741
818
6,995
(32,410)
(3,405)
(16,589)
3,973
(97,441)
160,702
13,685
(20,606)
(4)
(87,591)
143,303
(1,453)
5,289
747
9,360
(17,577)
12,232
(15,317)
743
(78,231)
125,726
84,951
224,196
(210,526)
98,621
(12,092)
(22,398)
32,549
(1,941)
72,859
201,798
(177,977)
96,680
84,040
217,230
(216,319)
84,951
(11,814)
(25,525)
25,247
(12,092)
72,226
191,705
(191,072)
72,859
846,087
846,087
232,558
(194,025)
486,530
(117,700)
3,655
(149,726)
(698)
9,482
(175)
(7,458)
(4,341)
1,104,189
(105,811)
(105,811)
(31,755)
64,622
(44,244)
(3,655)
(16,540)
(137,383)
740,276
740,276
200,803
(129,403)
442,286
(121,355)
(12,885)
(149,726)
(698)
9,482
(175)
(7,458)
(4,341)
966,806
665,983
1,495
667,478
73,916
(49,450)
357,610
(92,780)
11,607
(124,607)
(87)
3,927
(272)
(523)
(732)
846,087
(133,313)
(133,313)
68,689
(60,797)
8,807
14,049
(3,246)
(105,811)
532,670
1,495
534,165
142,605
(110,247)
366,417
(78,731)
8,361
(124,607)
(87)
3,927
(272)
(523)
(732)
740,276
(ii) Contribution liabilities of general takaful fund
Contribution written in the year
Contribution earned during the year
At end of year
(iii)Family takaful fund
Effect of adopting FRS 4 (Note 2.27)
At beginning of year, as restated
Increase in PA reserve
Increase/(decrease) in participants' risk fund
Contributions received
Liabilities paid for death,maturities, surrenders, benefits and claims (Note 10)
Benefits and claims experience variation
Fees deducted
Transfer to special fund
Available-for-sale net gains on fair value changes
Available-for-sale deferred tax effect on fair value changes
Available-for-sale Realised gain transferred to statement of comprehensive income
Transfer to shareholder's fund
At end of year
90
593075-U
23. Takaful certificates liabilities (cont'd.)
Included in the family takaful fund's takaful certificate liabilities is an amount of RM
7,962,141 (2010 : 6,113,338) being the AFS reserves of the family takaful fund. In
accordance to FRS 139, the AFS reserves of the family takaful fund should be accounted
for as equity of the Company (or Participants' Fund of the Family takaful fund).
In accordance with the requirements of the Guidelines on Financial Reporting for Takaful
Operators issued by BNM, the Company has continued to classify the AFS reserves of the
family takaful fund as takaful certificates liabilities. These are the modifications to the FRS
which had been approved by BNM under Section 41 of the Takaful Act 1984. Had the
Company applied the requirements of the Standards and the FRS Framework, the takaful
certificates liabilities of family takaful fund would be lowered by RM 7,962,141 (2010 :
RM6,113,338).
24. Takaful certificates payables
2011
RM'000
2010
RM'000
Due to agents, retakaful operators and brokers
(7,932)
(5,641)
(34,406)
(19,464)
2011
RM'000
RM'000
2010
RM'000
15,457
2,720
6,948
25,125
6,031
4,243
4,273
14,547
2,739
12,970
23,766
39,475
11,181
2,844
11,594
522
16,774
42,915
Family takaful fund
Due to agents, retakaful operators and brokers
25. Other payables
Shareholder's fund
Outstanding commissions
Deferred wakalah fee
Other accruals and payables
Deposit contributions
Advance contributions
Amount due to shareholders' fund*
Amount due to family takaful fund*
91
593075-U
25. Other payables (cont'd.)
Family takaful fund
Amount due to investment-linked fund*
*
2011
RM'000
RM'000
2010
RM'000
30,232
28,932
3
6,587
65,754
20,881
13,400
118
4,086
38,485
The amounts due to shareholders' fund, general takaful fund and family takaful fund are
non-trade in nature, unsecured, not subject to any profit elements and has no fixed
terms of repayment.
26. Provisions
2011
RM'000
RM'000
2010
RM'000
466
5,878
6,344
292
10,383
10,675
Shareholder's fund
Short-term accumulating compensated absences
Provision for bonus
27. Share capital
Number of ordinary shares
of RM1.00 each
2011
2010
Amount
2011
2010
RM'000
RM'000
Authorised:
500,000
500,000
500,000
500,000
Issued and fully paid:
Issued during the year
At end of year
195,000
195,000
195,000
195,000
195,000
195,000
195,000
195,000
On 1 April 2011, the paid-up capital of the Company had been increased to RM
295,000,000 by way of issuance of 100,000,000 new ordinary shares of RM 1.00 each to
MNRB Holdings Berhad for cash.
92
593075-U
28. Earnings per share
The basic earnings per share (EPS) is calculated by dividing the net profit for the year by
the number (2010: weighted average number) of ordinary shares in issue during the year
as follows:
2011
2010
Net profit for the year (RM'000)
Number/weighted average number of ordinary
ordinary shares in issue ('000)
Basic earnings per share (sen)
8,941
13,772
195,000
195,000
4.6
7.1
29. General takaful fund
2011
RM'000
2010
RM'000
Accumulated deficit
At beginning of year (restated)
Underwriting surplus/(deficit) transferred from
General takaful statement of comprehensive income
- as previously stated
Transfer from special fund
Hibah (profit) paid to participants during the year
At end of year
Qard *
At beginning of the year
Increase in Qard
At end of the year
(4,731)
(2,602)
(7,333)
(14,102)
(2,059)
(16,161)
4,445
(1)
(2,889)
10,812
(543)
(1,361)
(80)
(7,333)
12,043
12,043
12,043
12,043
At end of year
93
1,482
2,287
36
40
2,152
(480)
(2,467)
1,338
(230)
1,482
593075-U
29. General takaful fund (cont'd.)
2011
RM'000
General takaful fund at end of the year
Accumulated deficits
Qard
AFS reserves
*
(2,889)
12,043
1,338
10,492
2010
RM'000
(7,333)
12,043
1,482
6,192
The qard of RM 12,043,000 (2010 : 12,043,000) above has been off-set against Islamic
investment accounts of RM 56,640,000 (2010 : RM 119,926,000) in arriving at the total
general takaful fund assets and liabilities and participants' fund of RM 338,155,000
(2010 : RM272,976,000) on the Company's statement of financial position at page 16.
30. Segmental information on cash flow
2011
Shareholder's
fund
RM
Net cash flow generated from/
(used in):
Operating activities
Investing activities
Financing activities
Net increase in
cash and cash equivalents:
At 1 April 2010
At 31 March 2011
General
takaful
fund
RM
Family
takaful
fund
RM'000
Total
RM'000
12,865
(6,688)
6,177
47,285
47,285
61,092
(1,008)
60,084
121,242
(7,696)
113,546
6,177
1,453
7,630
47,285
226
47,511
60,084
2,832
62,916
113,546
4,511
118,057
7,243
(6,058)
1,185
(7,236)
2,764
(4,472)
(3,247)
(2,480)
(5,727)
(3,240)
(5,774)
(9,014)
1,185
268
1,453
(4,472)
4,698
226
(5,727)
8,559
2,832
(9,014)
13,525
4,511
2010
Net cash flow generated/(used in)
from:
Operating activities
Investing activities
Net increase/(decrease) in
cash and cash equivalents:
At 1 April 2009
At 31 March 2010
94
593075-U
31. Segmental information on general takaful fund
(a) General takaful fund revenue account for the year ended 31 March 2011
Total
2011
RM '000
Fire
2010
RM '000
2011
RM '000
Motor
2010
RM '000
2011
RM '000
2010
RM '000
Marine, Aviation
& Transit
2011
2010
RM '000
RM '000
Miscellaneous
2011
2010
RM '000
RM '000
Gross contribution
Change in unearned
contribution provision
Contribution ceded to
retakaful operators
Change in unearned
contribution provision
Earned contribution ceded to
retakaful operators
224,196
217,230
23,172
30,674
177,564
159,004
872
2,517
22,588
25,035
(13,670)
210,526
(911)
216,319
(3,106)
20,066
(5,712)
24,962
(7,651)
169,913
(1,171)
157,833
30
902
(295)
2,222
(2,943)
19,645
6,267
31,302
(22,398)
(25,525)
(10,360)
(10,525)
(3,988)
(3,241)
(443)
(1,502)
(7,607)
(10,257)
(3,753)
(73)
(2,308)
1,031
(549)
(661)
(3,541)
(19)
(32,549)
177,977
(25,247)
191,072
(14,113)
5,953
(10,598)
14,364
(6,296)
163,617
(2,210)
155,623
(992)
(90)
(2,163)
59
(11,148)
8,497
(10,276)
21,026
Gross claims paid
Claims ceded to
retakaful operators
Gross change to certificate
liabilities
Change in certificate liabilities
ceded to retakaful operators
Net claims incurred
(104,436)
(87,591)
(3,755)
(6,571)
(92,607)
(72,489)
(1,054)
(738)
(7,020)
(7,793)
6,995
9,360
1,218
5,108
3,104
127
2,243
3,655
(48,224)
(40,625)
1,802
1,577
(34,231)
(39,374)
(942)
(1,591)
(14,853)
(1,237)
13,248
(132,417)
(3,605)
(122,461)
(4,427)
(4,313)
300
(123,434)
(88)
(111,481)
(1,616)
(3,182)
1,773
(429)
13,902
(5,728)
(863)
(6,238)
235
1,452
1,898
(135)
4,221
16,686
Net commission earned
Underwriting surplus
before wakalah fees
(10,151)
278
662
(73)
470
3,938
4,505
2,325
2,171
95
201
49,498
73,116
8,205
12,222
40,278
44,343
95
430
66
(3,206)
593075-U
31. Segmental information on general takaful fund (cont'd.)
(b) Contribution liabilities
31 March 2011
Total
Gross
RM '000
Contribution earned during
the year
At end of year
Fire
Retakaful
RM '000
Motor
Gross
RM '000
Retakaful
RM '000
Gross
RM '000
Retakaful
RM '000
84,951
RM 224,196
'000'000
(12,092)
RM '000'000
(22,398)
21,337
RM '000'000
23,172
(5,110)
RM '000'000
(10,360)
59,618
RM 177,564
'000'000
(210,526)
98,621
32,549
(1,941)
(20,066)
24,443
14,113
(1,357)
(169,913)
67,269
6,296
704
84,040
217,230
(11,814)
(25,525)
15,431
30,674
(5,183)
(10,525)
58,446
159,004
(216,319)
84,951
25,247
(12,092)
(24,768)
21,337
10,598
(5,110)
(157,832)
59,618
Marine, Aviation
& Transit
Gross
Retakaful
RM '000
RM '000
(1,604)
223
RM '000'000
(3,988) RM '000'000
872
Miscellaneous
Gross
Retakaful
RM '000
RM '000
(612)
RM '000'000
(443)
3,773
RM '000'000
22,588
(4,766)
(7,607)
(902)
193
992
(63)
(19,645)
6,716
11,148
(1,225)
(573)
(3,241)
(58)
2,517
(1,273)
(1,502)
10,221
25,035
(4,785)
(10,257)
2,210
(1,604)
(2,236)
223
2,163
(612)
(31,483)
3,773
10,276
(4,766)
31 March 2010
Contribution earned during
the year
At end of year
96
593075-U
31. Segmental information on general takaful fund (cont'd.)
(c) Claims liabilities
Total
31 March 2011
Claims incurred in the current
accident year
Adjustment to claims incurred
in prior accident years due to
changes in assumptions:
Change in PRAD
Change in Expected Ultimate
Loss Ratio
Movements in claims incurred
in prior accident years
At end of year
Gross
RM '000
Fire
Retakaful
RM '000
Gross
RM '000
Motor
Retakaful
RM '000
Gross
RM '000
Retakaful
RM '000
Marine, Aviation
& Transit
Gross
Retakaful
RM '000
RM '000
Miscellaneous
Gross
Retakaful
RM '000
RM '000
143,303
(17,577)
9,695
(5,035)
113,330
(429)
5,071
(4,328)
15,207
(7,785)
172,075
(23,637)
6,111
(3,375)
139,390
(989)
652
(298)
25,922
(18,975)
(3,655)
250
(167)
153
(3,509)
(1,835)
409
(17,330)
741
(4,286)
2,193
(14,249)
(676)
1,148
1,352
(363)
(388)
580
57
(413)
3,155
(104,436)
193,112
818
6,995
(32,410)
(1,314)
(3,755)
6,284
760
1,218
(4,086)
7,774
(92,607)
150,129
(2,473)
3,104
(3,298)
(1,202)
(1,054)
5,024
1,485
430
(1,722)
(2,103)
(7,020)
31,675
1,046
2,243
(23,304)
100,523
(19,028)
11,685
(9,875)
75,101
(1,663)
1,935
(1,011)
11,802
(6,479)
137,296
(12,492)
5,830
(1,876)
114,867
(577)
2,783
(2,099)
13,816
(7,940)
13,685
(1,453)
541
(198)
10,089
1,657
(1,600)
1,398
(701)
(20,606)
5,289
(1,936)
1,445
(14,465)
670
(632)
(4)
(87,591)
143,303
747
9,360
(17,577)
146
(6,571)
9,695
361
5,108
(5,035)
227
(72,489)
113,330
(375)
470
(429)
66
(738)
5,071
31 March 2010
Claims incurred in the current
accident year
Adjustment to claims incurred
in prior accident years due to
changes in assumptions:
Change in PRAD
Change in Expected Ultimate
Loss Ratio
Movements in claims incurred
in prior accident years
At end of year
97
1,046
486
(231)
127
(4,328)
(3,573)
2,688
(443)
(7,793)
15,207
992
3,655
(7,785)
593075-U
32. Investment-linked fund
(a) Statement of comprehensive income
INCOME
Investment income (Note (c))
Realised gains and losses (Note (d))
Financial assets at FVTPL's
fair value gains and losses
Retakaful commission income
OUTGO
Fee expenses (Note (e))
Deficit of income over outgo before tax
2011
RM '000
2010
RM '000
516
4,660
227
2,471
3,342
21
8,539
1,067
3,765
(7,407)
(966)
(8,373)
(5,561)
(255)
(5,816)
166
(2,051)
Taxation (Note (h))
(614)
(161)
Deficit of income over outgo after tax
(448)
(2,212)
(b) Statement of financial position
Assets
Financial instruments (Note (f)):
through statement of comprehensive income
Total Investment-linked business assets
Liabilities
Tax payable
Deferred tax liabilities
Other payables (Note (g))
Total Investment-linked business liabilities
Participants' fund (Note (i))
Total liabilities and participants' fund
98
2011
RM '000
2010
RM '000
86,949
3,216
87
2,840
93,092
33,648
6,474
64
3,205
43,391
505
362
1,998
2,865
175
95
414
684
90,227
93,092
42,707
43,391
593075-U
32. Investment-linked fund (cont'd.)
(c) Investment income
Profit income
Dividend income
Profit income
2011
RM '000
2010
RM '000
217
109
175
89
124
516
29
227
44
227
4,389
4,660
4
168
2,299
2,471
(7,370)
(37)
(7,407)
(5,561)
(5,561)
(d) Realised gains and losses
Unsecured
Quoted shares in Malaysia
(e) Fee expense
Wakalah fees
(f) Financial assets/investments
2011
RM '000
2010
RM '000
259
4,229
701
3,881
-
8,423
68,777
82,389
2,923
22,839
29,643
251
4,236
698
1,855
-
8,751
73,013
86,949
4,396
27,397
33,648
(i) Financial assets at FVTPL
At amortised cost/cost:
Unsecured
At fair value:
Unsecured
99
593075-U
(ii) Loans and receivables
2011
RM '000
2010
RM '000
3,237
1,694
4
(25)
3,216
2
118
4,660
6,474
3,237
1,694
4
(25)
3,216
2
118
4,660
6,474
At cost:
Due from:
Family takaful fund
At fair value:
Due from:
Family takaful fund
(g) Other payables
Amount due to family takaful fund*
*
2011
RM '000
2010
RM '000
340
174
3
1,481
1,998
296
69
49
414
The amounts due to shareholders' fund and family takaful fund are non-trade in nature,
unsecured, not subject to any profit elements and has no fixed terms of repayment.
100
593075-U
2011
RM '000
2010
RM '000
347
161
267
614
161
(h) Taxation
reversal of temporary differences
Investment-linked business is taxed at the preferential tax rate of 8% of taxable
investment income for the period.
A reconciliation of income tax expense applicable to surplus before taxation at the
statutory income tax rate to income tax expense at the effective income tax rate of the
fund is as follows:
2011
RM '000
166
Taxation at Malaysian statutory tax rate of 8%
Overprovision of prior year deferred tax
13
(3,331)
487
7
(2,824)
2010
RM '000
(2,051)
(164)
(2,866)
99
(2,931)
2011
RM '000
2010
RM '000
Risk fund
Unitholders' capital
Undistributed surplus
772
86,928
2,527
90,227
836
40,229
1,642
42,707
Net creation of units
Net cancellation of units
Net asset value attributable to unitholders
At end of year
42,707
49,381
(6,255)
4,394
90,227
6,264
39,831
(1,112)
(2,276)
42,707
(i) Participants' fund
101
593075-U
33. Capital commitments
2011
RM'000
2010
RM'000
4,110
4,865
8,245
466
8,711
617
617
466
8,245
8,711
617
617
543
2,015
Shareholder's fund
Authorised and contracted for:
- Intangible assets - computer software (payable
within 12 months)
Authorised but not contracted for:
- Intangible assets - computer software
- Renovation work
Payable within 12 months
Payable after 12 months
Family takaful fund
Authorised and contracted for:
- Outstanding payments on investment properties
in progress (payable within 12 months)
34. Related party disclosures
For the purposes of these financial statements, parties are considered to be related to the
Company if the Company has the ability, directly or indirectly, to control the party or exercise
significant influence over the party in making financial and operating decisions, or vice versa,
or where the Company and the party are subject to common control or common significant
influence. Related parties may be individuals or other entities.
Key management personnel are defined as those persons having authority and responsibility
for planning, directing and controlling the activities of the Company either directly or indirectly.
The key management personnel include all the Directors of the Company and certain
members of senior management of the Company.
102
593075-U
34. Related party disclosures (cont'd.)
(a) The significant related party transactions and balances during the year are as follows:
Shareholder's
fund
RM'000
2011
General
takaful
fund
RM'000
Family
takaful
fund
RM'000
429
-
47
-
Income/(expenses) :
Transactions with MNRB Holdings
Berhad ("MNRB"):
Gross contributions
Management fees
(4,441)
Transactions with Malaysian Reinsurance
Berhad ("MRB"), a fellow subsidiary:
Gross contributions
Retakaful outward contributions
Retakaful commissions
Management fees
Rental Expenses
(144)
(425)
64
(1,271)
225
-
91
-
19
(834)
-
Transactions with MNRB Retakaful Berhad,
a fellow subsidiary:
Gross contributions
-
15
(3,003)
638
Transactions with Labuan Re,
in which MNRB is a substantial
shareholder:
Gross contributions
-
11
(941)
269
Transactions with MIDF Amanah Investment
Bank Berhad, in which a director,
Encik Sharkawi Bin Alis is also
a director
Investment income
-
40
103
-
22
593075-U
General
takaful
fund
RM'000
Family
takaful
fund
RM'000
(57)
75
2
53
(147)
23
373
Shareholder's
fund
RM'000
2011 (cont'd.)
Transactions with Alliance Bank Berhad,
in which a director of the holding company,
Hj Megat Dziauddin Bin Megat Mahmud
is also a director
Bank charges
Commissions
Investment income
Transactions with Malayan Banking Bhd,
in which Permodalan Nasional
Bhd, a substantial shareholder is also a
substantial shareholder:
Bank charges
Commissions
Investment income
Transactions with Etiqa Takaful Bhd,
in which Permodalan Nasional
Bhd, a substantial shareholder is also a
substantial shareholder:
Inwards contributions
Commission expenses
Transactions with Bank Kerjasama Rakyat
(M) Berhad, in which a director of
the holding company,
Datuk Hj Mohd Khalil Bin Dato' Hj Mohd
Noor is also a director :
Gross contributions
Commissions
Investment income
104
-
(20,692)
323
375
(125)
(204)
251
1,636
92
(2,516)
45
-
2,068
593075-U
Shareholder's
fund
RM'000
2010
General
takaful
fund
RM'000
Family
takaful
fund
RM'000
414
-
Income/(expenses) :
Transactions with MNRB Holdings
Berhad ("MNRB"):
Gross contributions
Management fees
(2,252)
152
-
Transactions with Malaysian Reinsurance
Berhad ("MRB"), a fellow subsidiary:
Gross contributions
Rental Expenses
(1,510)
752
(66)
-
-
74
(5,888)
-
Transactions with MNRB Retakaful Berhad,
Gross contributions
-
Transactions with Malaysian Re Dubai,
Gross contributions
-
-
5
Transactions with MIDF Amanah Investment
Bank Berhad, in which a director,
Encik Sharkawi Bin Alis is also
a director
Investment income
8
39
-
Transactions with Alliance Bank Berhad,
in which a director of the holding company,
Hj Megat Dziauddin Bin Megat Mahmud
is also a director
Bank charges
Commissions
Investment income
59
(14)
74
105
70
593075-U
Shareholder's
fund
RM'000
2010 (cont'd.)
Transactions with Bank Kerjasama Rakyat
(M) Berhad, in which a director of
the holding company,
Datuk Hj Mohd Khalil Bin Dato' Hj Mohd
Noor is also a director :
Gross contributions
Commissions
Investment income
Transactions with Permodalan Nasional
Bhd, which is a substantial shareholder
of MNRB Holdings Bhd:
Investment income
(1,725)
200
-
General
takaful
fund
RM'000
Family
takaful
fund
RM'000
411
493
1,051
-
2,015
Outstanding balances arising from the transactions above as at 31 March have been
disclosed in Notes 18 and 19.
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593075-U
(b) Compensation of key management personnel
The remuneration of directors and other members of key management during the year
was as follows:
Non-executive director's remuneration (Note 12(a)):
Fees
Allowances and other emoluments
Executive director's remuneration (Note 12(b)):
Salaries and bonus
Pension costs - EPF
Short-term accumulating compensated
absences
Retirement benefits
Benefits-in-kind
2011
RM'000
2010
RM'000
672
173
626
179
1,200
204
1,172
155
96
1,500
90
121
1,538
3,067
537
215
3,819
2,922
456
189
3,567
Other key management personnel's remuneration:
Salaries and bonus
Pension costs - EPF
Benefits-in-kind
Total
(c) Transactions related to key management personnel
In addition, the Company had the following transactions with directors and other key
management during the financial year:
Contributions paid for takaful certificates issued
by the takaful funds
107
2011
RM'000
2010
RM'000
75
61
593075-U
35. Risk management Framework
(a) Risk governance framework
The Company's Risk Management Framework is designed to determine the level of risk
acceptable to the Company relating to its core operations by setting the appropriate
Board approved limits for adherence by management after taking into account the risk
parameters, the nature, the size, mix and complexity of business and operations. An
enterprise risk management process is adopted to identify and evaluate key business
risks that may affect the organization and to establish and implement an appropriate
system of internal controls to manage these risks while ensuring full and effective control
over significant strategic, financial, organizational and compliance matters.
The key objectives of the risk management framework are to:
- provide information on risk governance and accountabilities;
- provide guidance to a standard approach to managing risks;
- create a risk awareness culture; and
- enhance professionalism, increase profitability and value for shareholders.
The Risk Management Framework aims to serve as a guide for the effective
management of risk throughout the Company. The Framework is intended to provide
guidance to the Company in performing its risk management roles and responsibilities in
activities for which it is responsible, and ultimately aims to support the achievement of the
Company's strategic & financial objectives.
In pursuit of the above objectives, it is the Company's policy to implement good
governance, risk management and compliance principles and best practices, and to
uphold high standards of business practices in all the activities undertaken by the
Company.
The Risk Management Governance structure are as follows:
- Board of Directors & Board Risk Management Committee ("RMCB"): The Board is
ultimately responsible for the management of risks. The RMCB reviews and assess
the adequacy of risk management policies and framework for identifying, measuring,
monitoring and controlling risks, ensure adequate infrastructure, resources and
systems for an effective management of risk are in place and it is also responsible to
review and recommend to the Board on risk management strategies, policies and risk
tolerance;
- Operational Risk Management Committee ("ORMC") which comprises the President
/ Chief Executive Officer and Senior Management assists the RMCB in identifying,
measuring, monitoring and controlling risks within the Company to ensure adequacy
and effectiveness of the infrastructure, resources and systems are in place;
- Risk Management Department: Assist the RMCB and ORMC in developing and
maintaining the Risk Management Framework in consultation with stakeholders;
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35. Risk management Framework (cont'd.)
(a) Risk governance framework (cont'd.)
- Departments: Implement the risk management policies, that are consistent with Risk
Management Framework, to address specific Departmental requirements and
ensuring that they are in compliance with the day-to-day operations; and
- Line Managers: Responsible for using the various components of the Risk
Management Framework as an integral part of their normal processes and
procedures.
The Company has an Investment Committee to further manage risks in investment and
asset allocation.
The Company has put in place the following policies to ensure the proper risk
management:
1. Underwriting Policy – the underwriting policy and strategy of the Company is to have
a balanced mix and spread of business and by observing underwriting guidelines and
limits, having conservative estimations made for claims provisions, and applying
prudent standards in terms of the assessment of security of its key retakaful
operators. In this respect, the Company complies with the guidelines imposed by
BNM in conducting the underwriting business.
2.
Claim Reserving Policy – claims liabilities are determined based upon previous
claims experience, existing knowledge of events, the terms and conditions of the
relevant policies and interpretation of circumstances. Particularly relevant is past
experience with similar cases, historical claims development trends, legislative
changes, judicial decisions and economic conditions, and
3.
Investment Policy – the investment policy and strategy of the Company is to invest
mainly in low risks assets such as government Islamic papers, fixed and call deposits
with licensed financial institutions, Islamic debt securities and marketable securities.
In this respect, the Company mitigates its credit risk of its debt securities portfolio by
investing mainly in Islamic debt securities with good ratings obtained from reputable
rating agencies.
(b) Capital Management Objectives, Policies and Approach
The Capital Management Plan (“CMP”) presents descriptions of triggers and action plans
in place for the Company to monitor its Solvency Margin Ratio ("SMR") and to carry out
corrective measures when necessary to maintain the financial health of the Company. It
is intended that capital will be utilized more efficiently in a controlled manner so that
Company will be able to manage its capital position above its internal target. BNM has
issued a concept paper on Risk Based Capital Framework for Takaful Operators.
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593075-U
(b) Capital Management Objectives, Policies and Approach (cont'd.)
Capital Management Objectives
The main objective of the capital management is to monitor and maintain at all times an
appropriate level of capital which commensurate with its risk profile. The key objective of
the capital management plan ("CMP") is to trigger appropriate action plans to be taken by
the Board and management of the Company in the event of internal solvency margin ratio
("SMR") falling below the internal target requirement. The CMP will require Board and the
management of the Company to undertake remedial actions so as to improve the
Company's capital position.
Capital Management Policies
- Ensure the Company has adequate capital, expressed as SMR within a range that
supports stakeholders' objectives.
- Establish responsibility of the Company’s management and Board in developing an
internal capital adequacy assessment process and setting capital targets that
commensurate with its risk profile and control environment.
Approach to capital management
The Company conduct stress test in compliance with the Guidelines of Stress Testing for
Takaful Operators (BNM/RH/GL 004-16). The impact of the adverse scenarios on the
capital position of the Company on the SMR is assessed quarterly focusing on short to
medium term views.
(c) Regulatory framework
The Company has to comply with the Takaful Act 1984 and Regulations which is
administered by BNM. BNM is primarily interested in protecting the rights of participants
and monitors the Takaful Operators closely to ensure prudent management of its
business operation. At the same time, BNM is also interested in ensuring that the
Company maintains an appropriate solvency position to meet unforeseen liabilities arising
from economic cycle or natural disasters.
BNM/RH/CIR/004-13 Minimum Paid-up Capital Requirement for Takaful Operators
(effective from 31 December 2004) requires a minimum paid-up capital requirement of
RM100 million for existing takaful operators.
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(d) Asset-Liability Management (“ALM”) Framework
The main risk that the Company faces due to the nature of its investment and liabilities is
mismatch of asset to the liability profile (investment risks). The Company manages these
positions within ALM framework that is currently being developed to achieve long-term
investment returns in excess of its obligations under the takaful contracts. The principal
technique identified is to match assets to the liabilities arising from takaful contracts by
reference to the type of benefits payable to participants. Amongst the mechanism to
manage the ALM framework is the assessment and monitoring of the portfolio duration as
well as duration for specific products. An ALCO has been established to manage and
monitor asset-liability mismatched risks. The ALCO ultimately reports to the Board
through the Investment Committee.
36. Underwriting risk
(a) Nature of risk
The Company principally issues the following types of general takaful certificates: motor,
household and commercial fire, business interruption, personal accident, and other
miscellaneous commercial contracts. Risks under these certificates usually cover a twelve
month duration other than long term fire which may be extended up to thirty years or
more. For general takaful certificates, the most significant risk arise from accident
frequency and severity of the accident. These risks do vary significantly in relation to
location of risk, type of risk covered and industry.
The above risks are mitigated by diversification across a large portfolio of business. The
variability of risks is designed to improve the portfolio experience by implementation of
underwriting strategies and claim management policies which attempt to minimise losses.
The Company also manages its loss exposure by the use of retakaful arrangements. The
retakaful treaty arrangements are reviewed annually by RMCB and approved by the
Board.
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36. Underwriting risk (cont'd.)
General takaful fund (cont'd.)
(b) Concentration of by type of certificates
The table below sets out the concentration on takaful certificates liabilities by class :
Gross
RM'000
31 March 2011
Fire
Motor
Marine, Aviation & Transit
Miscellaneous
30,727
217,398
5,217
38,391
291,733
Retakaful
RM'000
(5,443)
(2,594)
(1,785)
(24,529)
(34,351)
Net
RM'000
25,284
214,804
3,432
13,863
257,382
(c) Impact on liabilities, profit and equity
Key Assumptions
The principal assumptions underlying the estimation of liabilities is that the Company's
future claims development will follow a similar pattern to past claims development
experience.
Additional qualitative judgments are used to assess the extent to which past trends may
not apply in the future, for example, isolated occurrence, changes in market factors such
as public attitude to claiming, economic conditions, as well as internal factors such as
portfolio mix, policy conditions and claims handling procedures. Judgment is further used
to assess the extent to which external factors, such as judicial decisions and government
legislation affect the estimates.
Other key circumstances affecting the reliability of assumptions include variation in profit
rates and delays in settlement.
Sensitivities
The general takaful claim liabilities are sensitive to the key assumptions shown below. It
has not been possible to quantify the sensitivity of certain assumptions, such as,
legislative changes or uncertainty in the estimation process.
The analysis below is performed for reasonably possible movements in key assumptions
with all other assumptions held constant, showing the impact on Gross and Net liabilities,
profit before Tax and Equity. The correlation of assumptions will have a significant effect
in determining the ultimate claims liabilities, but to demonstrate the impact due to
changes in assumptions, assumptions had to be changed on an individual basis. It should
be noted that movements in these assumptions are non-linear.
The related parties and their relationship
with the Company as of 31 March 2009 are as
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593075-U
(c) Impact on liabilities, profit and equity (Contd.)
Sensitivities (cont'd.)
Sensitivity has been applied to the major classes only which are Motor Act, Motor Others,
Fire and Personal Accident by considering the ultimate loss ratio with an extra charge for
the provision in adverse deviation.
Change in
Impact
Impact
assumption
on Net
of Ultimate on Gross
Liabilities Liabilities
Claims
Ratio
RM'000
RM'000
31 March 2011
Motor Act Average
Severity
Motor Others Expected
Loss Ratio
Impact
on
Surplus
before
Tax
RM'000
Impact
on Participants'
Fund*
RM'000
+5%
85,673
69,312
(64,867)
(58,820)
+10%
21,424
21,095
(16,650)
(10,603)
* The impact on participants' fund reflects the after tax impact .
The method used for deriving sensitivity information and significant assumption did not
change from the previous period.
(d) Claims Development table
The following tables show the estimate of cumulative incurred claims, including both
claims notified and IBNR for each successive accident year at each financial year end,
together with cumulative payments to-date.
In setting provisions for claims, the Company gives consideration to the probability and
magnitude of future experience being more adverse than assumed and exercises a
degree of caution in setting reserves when there is considerable uncertainty. In general,
the uncertainty associated with the ultimate claims experience in an accident year is
greatest when the accident year is at an early stage of development and the margin
necessary confidence in adequacy of provision is relatively at its highest. As claims
develop and the ultimate cost of claims becomes more certain, the relative level of margin
maintained should decrease.
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593075-U
(d) Claims Development table (Contd.)
Gross General Takaful Certificate Liabilities for 2011:
Accident year
Note
At the end of accident year
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Current estimate of
cumulative claims incurred*
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Cumulative payments to-date
Gross general takaful
certificates liabilities per
Statement of Financial
Position:
Best Estimate of Claims
Liabilities (incl. Allocated Loss Adjustment
Expenses "ALAE")
Fund PRAD at 70%
Total
2004
RM '000
1,027
875
855
806
790
787
735
740
2005
RM '000
11,728
10,898
9,936
9,683
8,396
7,951
7,900
-
2006
RM '000
29,337
27,311
26,773
26,178
25,494
24,949
-
2007
RM '000
36,388
36,179
35,120
33,672
33,695
-
2008
RM '000
50,997
51,290
51,483
51,708
-
2009
RM '000
100,090
93,740
89,887
-
2010
RM '000
125,472
142,627
-
2011
RM '000
144,938
-
740
7,900
24,949
33,695
51,708
89,887
142,627
144,938
203
610
614
687
714
730
730
734
734
3,957
6,632
7,123
7,436
7,728
7,807
7,826
7,826
8,984
18,976
20,128
21,967
23,560
24,474
24,474
13,366
25,083
27,784
30,245
31,292
31,292
17,599
34,059
39,159
44,893
44,893
29,070
64,212
72,939
72,939
43,215
83,077
83,077
48,128
48,128
6
74
475
2,403
6,815
16,948
59,550
96,810
Total
RM '000
23
114
183,081
10,031
193,112
593075-U
(d) Claims Development table (Contd.)
Net General Takaful Certificate Liabilities for 2011:
Accident year
Note
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Current estimate of
cumulative claims incurred*
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Cumulative payments to-date
Net general takaful
certificates liabilities per
Statement of Financial
Position:
23
Best Estimate of Claims Liabilities (incl. ALAE)
Fund PRAD at 70%
Total
2004
RM '000
923
791
786
736
737
721
671
674
2005
RM '000
9,974
9,613
8,675
8,488
7,398
6,978
6,903
-
2006
RM '000
27,944
26,062
25,794
24,073
23,420
23,128
-
2007
RM '000
33,895
34,140
33,195
31,470
31,341
-
2008
RM '000
47,452
47,361
47,903
47,484
-
2009
RM '000
83,588
81,492
78,446
-
2010
RM '000
114,632
119,456
-
2011
RM '000
134,955
-
674
6,903
23,128
31,341
47,484
78,446
119,456
134,955
203
544
548
621
648
665
665
668
668
3,121
5,636
6,128
6,440
6,732
6,811
6,831
6,831
8,406
18,391
19,542
21,101
22,694
22,968
22,968
11,984
23,422
26,017
28,199
29,091
29,091
16,995
32,713
37,616
42,202
42,202
27,613
56,404
64,559
64,559
40,682
79,479
79,479
44,714
44,714
6
72
160
2,250
5,282
13,887
39,977
90,241
115
Total
RM '000
151,875
8,827
160,702
593075-U
36. Underwriting
risk (cont'd.)
The related
parties and their relationship with the Company as of 31 March 2009 are as
Family takaful fund
(a) Nature of risk
The Company principally issues the following types of family takaful certificates: Family
Takaful Plans, Mortgage Takaful Plans, Group Takaful Plans and Investment-linked
Takaful Plans.
Family takaful underwriting risk exist from the pricing and the pool of risk in the
participants' risk fund arising from family takaful certificates. The risks arise when actual
claims experience is different from the assumptions used in setting the prices for products
and establishing the technical provisions and liabilities for claims. Sources of risk include
certificate lapses and certificate claims such as mortality, morbidity and expenses.
The Company utilizes retakaful to manage the mortality and morbidity risks. The
Company’s retakaful management strategy and policy are reviewed by the Asset-Liability
Committee ("ALCO") and RMCB, and approved by the Board. Retakaful structures are
set based on the type of risk.
The Company reviews the actual experience of mortality, morbidity, lapses and
surrenders, as well as expenses to ensure that appropriate policies, guidelines and limits
put in place to manage these risks remain adequate and appropriate.
The Family Takaful funds are participating in nature. In the event of volatile investment
climate and/or unusual claims experience, the investment profit and surplus distribution to
the participants may be reduced.
For investment-linked funds, the risk exposure for the participant's risk fund is limited only
to the underwriting aspect as all investment risks are borne by the participant.
Stress Testing (“ST”) is performed twice a year. The purpose of the ST is to test the
solvency of the family takaful fund under the various scenarios according to regulatory
guidelines, simulating drastic changes in major parameters such as new business
volume, investment environment, mortality/morbidity patterns and lapse rates.
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593075-U
Family takaful fund (cont'd.)
(b) Concentration of by type of certificates
The Table below shows the concentration of family takaful certificates liabilities :
Gross
RM'000
31 March 2011
Family takaful plans
Investment-linked takaful plans
Mortgage takaful plans
Group credit takaful plans
Risk Fund
Special Fund
Others
255,843
563
368,534
126,764
78,272
68,192
173,125
1,071,293
Retakaful
RM'000
(68,936)
(8,986)
(21,218)
(13,848)
(112,988)
Net
RM'000
255,843
563
299,598
117,778
57,054
68,192
159,277
958,305
As all of the business are derived from Malaysia, the entire family takaful certificates
liabilities are in Malaysia.
(c) Key Assumptions
Material judgement is required in determining the liabilities and in the choice of
assumptions. Assumptions used are based on past experience, current internal data,
external market indices and benchmarks which reflect current observable market prices
and other published information. Assumptions and prudent estimates are determined at
the date of valuation and no credit is taken for possible beneficial effects of voluntary
withdrawals. Assumptions are further evaluated on a continuous basis in order to ensure
realistic and reasonable valuations.
The key assumptions to which the estimation of liabilities is particularly sensitive are as
follows:
i)
Mortality and Morbidity rates
Assumptions are based on the mortality rates as set out in the Actuarial Certificate
submitted to Bank Negara Malaysia. They reflect the historical local experience and
are adjusted, when appropriate, to reflect the Participants' own experience.
Assumptions are differentiated by gender, occupational class and product group.
An increase in rates will lead to a larger number of claims (as claims could occur
sooner than anticipated), which will reduce surplus from the Risk Fund and
subsequently reduce profits for the shareholders in terms of reduction of income
arising from the surplus administration charge.
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593075-U
(c) Key Assumptions (cont'd.)
ii) Discount rates
Family takaful liabilities of credit-related products (Mortgage Reducing Term Takaful
("MRTT") and Group Credit Takaful ("GCT")) are determined as the sum of the
discounted value of the expected benefits less the discounted value of the expected
tabarru' (risk charge) that would be required to meet these future cash outflows.
Discount rates are based on the Family Fund's historical investment performance and
adjusted downwards for conservatism.Discount rates are based on the Family Fund's
historical investment performance and adjusted downwards for conservatism.
A decrease in the discount rate will increase the value of the family takaful liability and
therefore reduce profits for the shareholders in terms of reduction of income arising
from the surplus administration charge.
The assumptions that have the great effect on the Statement of Financial Position and
statement of comprehensive income of the Company are listed below by portfolio
assumptions impacting net liabilities:
Mortality and Morbidity Discount
rates
rates
%
31 March 2011
Type of Business
Credit related (MRTT and GCT)
Base mortality 1 and
adjusted for retakaful
rates 2
3%
Others
Base mortality 1
3%
(1) Various industry mortality and morbidity experience tables that were used to
determine the contribution rates
(2) Retakaful rates obtained through retakaful arrangements with respect to the MRTT
and GCT business
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(d) Sensitivity analysis
The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross
and net liabilities, profit before tax and equity. The correlations of assumptions will have a significant effect in determining the ultimate claims liabilities, but to
demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these
assumptions are non-linear. Sensitivity information will also vary according to the current economic assumptions.
Sensitivity analysis
Change in
Assumptions
%
Impact on Gross
Liabilities
%
Impact on Net
liabilities
%
Impact on Profit
Before Tax
%
Impact on Equity
9,548
(1,378)
9,548
(1,378)
(915)
93
(668)
68
%
Family Takaful Certificates
31 March 2011
Mortality / morbidity
Discount rates
+ 10%
+ 1%
Impact on Equity reflects adjustments for tax, where applicable.
The method used and significant assumptions made for deriving sensitivity information did not change from the previous period.
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37. Financial Risk
Transactions in financial instruments may result in the Company assuming financial risks.
These include credit risk, liquidity risk and market risk. This note presents information about
the Company’s exposure to each of the above risks, the Company’s objectives, policies and
processes for measuring and managing such risks. Comparative figures or analysis have not
been presented for 31 March 2010.
(a) Credit Risk
Credit risk represents the loss that would be recognized if counterparties to retakaful and
investment transactions failed to meet their contractual obligations.
Credit risk includes the following elements:
-
Investment credit risk – financial loss arising from a change in the value of an
investment due to a rating downgrade, default or widening of credit spreads. Changes
in credit spreads are also affected by the liquidity of the stock, but since the liquidity is
usually closely related to credit risk, the risk is managed as credit risk;
-
Retakaful counterparty risk – financial loss arising from a retakaful operator’s default,
or the deterioration of the retakaful operator’s solvency position;
-
Contribution credit risks - financial loss arising from non-payment of contribution.
The Company is exposed to investment credit risk on its investment portfolio, primarily
from investments in corporate bonds. Creditworthiness assessment for new and existing
investments is undertaken by the Company in accordance with the Investment Policy as
approved by the Investment Committee. In addition the credit ratings of bond portfolio are
regularly monitored and any downgrade in credit rating will be evaluated to determine
actions required. The Company's bond portfolio is highly rated, with no material exposure
below investment grade.
The Company is exposed to retakaful counterparty risk of three different types:
-
as a result of debts arising from claims made by the Company but not yet paid by the
retakaful operator;
-
from retakaful contributions payments made to the retakaful operator in advance; and
-
as a result of reserves held by the retakaful operator which would have to be met by
the Company in the event of default.
Credit risk in respect of customer balances incurred on non-payment of general takaful
contribution will only persist during the contribution warranty period specified in the
certificate or until expiry, when the certificate expired or terminated.
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37. Financial Risk (cont'd.)
(a) Credit Risk (cont'd.)
To mitigate credit risk:
-
investment policies will have a prescribed minimum credit rating of bonds that may be
held. Investing in a diverse portfolio reduces the impact from individual companies
defaulting.
-
counterparty limits are set for investments and cash deposits.
-
the Company's investment portfolio is managed following standards of diversification.
It focuses on investing in high quality investment grade fixed income securities.
-
for the financial year ended 31 March 2011, the average credit quality of the
Company's investment portfolio was AAA by Rating Agency Malaysia ("RAM") or
Malaysian Rating Corporation Berhad ("MARC").
-
To mitigate retakaful counterparty risk, the Company will give due consideration to the
credit quality of a retakaful operator before incepting a retakaful treaty. To facilitate
this process, a list of acceptable retakaful operators is maintained within the
Company.
The table below shows the maximum exposure to credit risk for the components of the
statement of financial position and items such as future commitments. The maximum
exposure is shown gross, before the effect of mitigation through the use of master netting
or collateral agreements.
121
The related
related parties
partiesand
andtheir
theirrelationship
relationship
with
with
thethe
Company
Company
as of
as31
of March
31
593075-U
Objectives in managing credit risk
Credit Exposure
Note
31 March 2011
Financial investments at FVTPL
Unsecured
HTM financial investments
Unsecured
AFS financial investments
Unsecured
Shareholder's
General
fund
takaful fund
RM'000
RM'000
Family
takaful fund
RM'000
Investmentlinked fund
RM'000
Total
RM'000
18(a)
-
-
-
251
4,236
698
73,013
-
5,888
8,585
87,486
15,026
1,383
24,041
14,324
2,004
50,940
24,103
25,043
163,241
-
53,453
28,430
238,222
55,757
90,605
279,028
-
425,390
4,953
178
8,652
5,888
-
15,988
8,585
-
-
29,593
14,473
178
4,236
18(b)
18(c)
122
593075-U
Credit Exposure (cont'd.)
31 March 2011
LAR
Islamic banks
Investment banks
Development bank
Building society
Qard to general takaful fund*
Due from:
Family takaful fund
Note
Shareholder's
General
fund
takaful fund
RM'000
RM'000
Family
takaful fund
RM'000
Investmentlinked fund
RM'000
Total
RM'000
18(d)
13,755
13,472
8,269
12,668
6,592
10,000
32,249
18,577
5,814
-
1,289
2,723
12,043
-
2,739
28,935
174
1,022
5,402
7,630
228,051
19
2,160
1,649
34,351
32,798
47,511
353,410
90,006
1,507
59,356
113,967
18,592
12,967
3
5,247
199
445
137,383
83,818
62,916
1,110,979
3,237
-
136,010
1,507
91,405
8,269
135,686
25,184
10,000
-
1,289
2,723
12,043
4
(25)
87
2,840
84,341
15,710
28,935
177
5,247
3,356
7,496
171,734
116,703
120,897
1,775,832
* The qard from shareholders' fund are non-trade in nature, unsecured, not subject to any profit elements and has no fixed terms of repayment.
Credit Exposure - non investment instruments
In the case of contributions obligations by cedant or brokers , the Company has sound Credit Control policies in place to ensure that contributions are duly
collected from the cedants and brokers.
The related
related parties
parties and
and their
theirrelationship
relationshipwith
withthe
theCompany
Companyasas
of of
3131
March
March
123
593075-U
37.
Financial Risk (cont'd.)
Credit exposure by credit rating
The table below provides information regarding the credit risk exposures of the Company by classifying assets according to the Company's credit ratings of counterparties :
Neither pass-due nor impaired
Shareholder's fund
31 March 2011
Warrants
Unsecured
Unsecured
LAR
Islamic banks
Development bank
Building society
Investment grade *
Government
guaranteed
RM '000
-
15,026
24,041
AAA/P1
RM '000
BBB
RM '000
Noninvestment
grade *
(C to BB)
RM '000
Not subject
to credit
Not Rated
risk
RM '000
RM '000
AA
RM '000
A
RM '000
Total
RM '000
-
-
-
-
-
-
697
15
998
-
-
-
385
-
-
-
-
15,026
1,383
24,041
697
15
-
35,296
20,461
-
-
-
-
-
55,757
-
-
-
-
-
-
-
4,953
178
4,953
178
-
1,600
-
1,004
5,199
-
2,599
5,000
-
-
-
8,552
8,273
8,269
7,668
6,592
10,000
-
13,755
13,472
8,269
12,668
6,592
10,000
-
-
-
-
-
-
1,289
2,723
12,043
-
1,289
2,723
12,043
124
593075-U
37.
Credit exposure by credit rating (cont'd.)
31 March 2011 (cont'd.)
LAR (cont'd.)
Due from:
Family takaful fund
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
39,067
5,886
43,780
1,066
27,730
663
8,262
-
-
-
14,324
50,940
-
-
BBB
RM '000
Noninvestment
grade *
(C to BB)
RM '000
Not subject
to credit
Not Rated
risk
RM '000
RM '000
Total
RM '000
385
-
65,409
2,739
28,935
174
1,022
5,402
15
44,130
2,739
28,935
174
1,022
5,402
7,630
228,763
-
-
-
-
1,090
15
1,090
15
-
-
-
-
2,004
-
-
14,324
2,004
50,940
38,509
-
-
-
-
52,096
-
90,605
-
-
-
-
-
-
8,652
5,888
8,652
5,888
31 March 2011
Warrants
Unsecured
Unsecured
125
593075-U
37.
LAR
Islamic banks
Development bank
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
65,264
4,085
4,978
2,161
45,891
95,624
5,366
441
5,807
2,477
1,105
3,582
-
-
-
17,027
-
8,016
-
170,766
108,262
BBB
RM '000
Noninvestment
grade *
(C to BB)
RM '000
466
466
-
-
-
-
-
-
-
-
-
-
Not subject
to credit
Not Rated
risk
RM '000
RM '000
28,164
18,577
836
22,328
74
124,079
Total
RM '000
2,160
1,649
34,351
53,805
32,249
18,577
5,814
2,160
1,649
34,351
32,798
47,511
348,627
-
1,832
1,832
-
-
Family takaful fund
31 March 2011
Unsecured
Unsecured
24,103
163,241
-
-
-
126
-
-
-
-
8,585
24,103
25,043
163,241
279,028
15,988
-
15,988
8,585
593075-U
37.
LAR
Islamic banks
Investment banks
Development bank
Due from:
31 March 2011
Unsecured
LAR
Due from:
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
BBB
RM '000
Noninvestment
grade *
(C to BB)
RM '000
Not subject
to credit
Not Rated
risk
RM '000
RM '000
-
7,345
32,286
-
22,798
40,496
44,892
-
38,421
1,507
23,081
-
-
-
21,442
18,860
13,708
18,592
-
-
-
-
-
-
-
-
12,967
3
187,344
60,488
287,912
2,602
613
227,679
2,725
-
-
251
698
949
-
-
137,383
81,170
754
300,497
5,247
199
445
36,678
90,006
1,507
59,356
113,967
18,592
12,967
3
5,247
199
445
137,383
83,818
62,917
1,104,227
37
1,062
64,108
-
1,511
-
-
-
-
-
-
251
4,236
698
-
-
-
-
-
-
8,751
73,013
8,751
73,013
-
550
2,687
-
-
-
-
3,237
2,495
4,556
2,687
-
-
-
4
(25)
81,743
4
(25)
87
2,840
93,092
340
3,065
9
-
Total
RM '000
9
* Based on public ratings assigned by external rating agencies including Rating Agency Malaysia ("RAM") and Malaysian Rating Corporation ("MARC")
127
87
5
92
593075-U
37. Financial
(cont'd.)
The Risk
related
related
parties
partiesand
andtheir
theirrelationship
relationshipwith
with
thethe
Company
Company
as of
as31
of March
31
Age Analysis of Financial Assets Past-Due But Not impaired
31 March 2011
0-180 Days 181-365 Days
RM' 000
RM' 000
21,300
3,868
> 365 Days
RM' 000
7,630
Total
RM' 000
32,798
Family takaful fund
31 March 2011
0-180 Days 181-365 Days
RM' 000
RM' 000
66,775
10,026
> 365 Days
RM' 000
7,017
Total
RM' 000
83,818
Receivables are carried out at anticipated realizable value. Bad debts are written off once
identified. An estimate is made for doubtful debts based on a review of all outstanding
amounts as at financial year end.
Specific provisions are made for any outstanding contributions including brokers, agent or
retakaful balances which remaining outstanding as per Note 2.18.
Impaired Financial Assets
For assets to be classified as 'past due and impaired' , please refer to Note 2.18.
The movement of allowance for impairment on trade receivables are as follows:
General
Family
takaful fund takaful fund
2011
2011
RM'000
RM'000
11,109
246
(3,054)
636
8,055
882
Additional allowance during the year
Writeback of allowance during the year
At end of year
128
593075-U
Loan
The fair values of loans receivable are determined by discounting the cash flows using the
prevailing profit rates for similar instruments at financial year end.
(b) Liquidity Risk
Liquidity risk is concerned with the risk that a company will not have available sufficient
cash resources to meet its payment obligations without incurring material additional costs.
The company will meet shareholder's liquidity needs arising in a number of key areas :
- the ability to meet the company’s payment obligations under normal and stressed
operating environments without suffering any loss;
- efficient management of additions/withdrawals from the company’s investment funds;
and
- have the appropriate measures in place to respond to liquidity risk.
As part of its liquidity management strategy is to put in place the necessary framework
capable of measuring and reporting on:
- daily cash flows;
- minimum liquidity holdings;
- the composition and market values of company’s investment portfolios, including liquid
holdings; and
- the holding of liquid assets in the respective Takaful Funds.
For managing the liquidity of the takaful funds, it is appropriate to maintain a certain
proportion of the Takaful Funds in liquid assets which is derived from investment mandate
of each funds. Each fund specifies a percentage of minimum holding but there is no limit
in deposits.
Maturity Profiles
The table below summarizes the maturity profile of the financial assets and liabilities of
the Company based on remaining undiscounted contractual obligations, including profit
payable and receivable.
For takaful certificates liabilities and retakaful certificate assets, maturity profiles are
determined based on estimated timing of net cash outflows from the recognised takaful
certificates liabilities.
129
593075-U
Maturity profiles (cont'd.)
Shareholder's Fund
31 March 2011
Warrants
Unsecured
Unsecured
LAR
Islamic banks
Development bank
Building society
Carrying
value
RM' 000
697
15
0-6
months
RM' 000
-
6-12
months
RM' 000
-
Over 1-5
years
RM' 000
Over 5
years
RM' 000
No
maturity
RM' 000
697
15
Total
RM' 000
-
-
697
15
612
837
3,054
18,055
15,550
383
4,185
-
19,216
1,383
27,130
15,026
1,383
24,041
1,000
4,053
55,757
-
7,507
33,212
27,856
-
68,575
4,953
178
-
-
-
-
4,953
178
4,953
178
13,755
13,472
8,269
12,668
6,592
10,000
6,261
9,766
1,710
12,668
-
7,494
3,706
6,559
-
-
-
6,592
10,000
13,755
13,472
8,269
12,668
6,592
10,000
1,289
2,723
12,043
664
-
625
-
2,723
-
-
12,043
1,289
2,723
12,043
130
593075-U
Shareholder's Fund (cont'd.)
LAR (cont'd.)
Due from:
Family takaful fund
Total Assets
Due to agents, retakaful operators
and brokers
Zakat payable
Other payables
Provisions
Total Liabilities
Carrying
value
RM' 000
0-6
months
RM' 000
6-12
months
RM' 000
Over 1-5
years
RM' 000
Over 5
years
RM' 000
No
maturity
RM' 000
Total
RM' 000
2,739
28,935
174
1,022
5,402
7,630
228,763
36,122
27,340
57,044
47,974
2,739
28,935
174
1,022
5,402
7,630
80,380
2,739
28,935
174
1,022
5,402
7,630
248,860
15,146
-
-
-
-
15,146
15,146
13,498
22
573
25,125
6,344
60,708
-
-
-
-
13,498
22
573
25,125
6,344
60,708
13,498
22
573
25,125
6,344
60,708
131
593075-U
31 March 2011
Warrants
Unsecured
Unsecured
LAR
Islamic banks
Development bank
Total Assets
Other payables
Total Liabilities
Carrying
value
RM' 000
0-6
months
RM' 000
6-12
months
RM' 000
Over 1-5
years
RM' 000
Over 5
years
RM' 000
No
maturity
RM' 000
Total
RM' 000
1,090
15
-
-
-
-
1,090
15
1,090
15
14,324
2,004
50,940
1,974
584
97
2,016
2,912
2,106
20,669
14,825
41,146
-
18,321
2,203
65,805
90,605
2,000
4,156
78,557
23,756
-
108,469
8,652
5,888
-
-
-
-
8,652
5,888
8,652
5,888
32,249
18,577
5,814
2,160
1,649
34,351
32,798
47,511
348,627
29,843
14,036
5,814
410
19,135
73,212
2,406
4,541
1,300
2,165
17,265
120
7,630
87,477
2,160
1,649
32,410
47,511
99,375
32,249
18,577
5,814
2,160
1,649
34,351
32,798
47,511
385,552
291,733
7,932
39,475
339,140
132
23,880
23,880
54,725
54,725
18,406
18,406
193,112
7,932
39,475
240,519
291,733
7,932
39,475
339,140
111
3,868
108,223
1,610
1,610
593075-U
Family takaful fund
31 March 2011
Unsecured
Unsecured
LAR
Islamic banks
Investment banks
Development bank
Due from:
Total Assets
Carrying
value
RM' 000
1,832
0-6
months
RM' 000
6-12
months
RM' 000
Over 1-5
years
RM' 000
Over 5
years
RM' 000
No
maturity
RM' 000
Total
RM' 000
-
-
-
-
1,832
24,103
25,043
163,241
12,165
18,884
805
649
26,547
13,430
9,721
63,357
15,550
5,387
88,323
-
29,785
27,922
197,111
279,028
-
12,917
162,630
194,998
-
370,545
15,988
8,585
-
-
-
-
15,988
8,585
15,988
8,585
-
18,592
90,006
1,507
59,356
113,967
18,592
12,967
3
5,247
199
445
136,820
62,917
263,595
12,967
3
5,247
199
445
137,383
83,818
62,917
1,238,175
90,006
1,507
59,356
113,967
18,592
74,258
1,507
48,844
113,967
-
12,200
10,238
-
3,548
274
-
12,967
3
5,247
199
445
137,383
83,818
62,917
1,104,227
66,775
336,400
10,026
73,382
7,017
259,977
133
563
304,821
1,832
593075-U
Other payables
Total Liabilities
31 March 2011
Unsecured
LAR
Due from:
Total Assets
Participants' fund
Other payables
Total Liabilities
Carrying
value
RM' 000
1,104,189
34,406
65,754
1,204,349
251
4,236
698
0-6
months
RM' 000
2,291
2,291
6-12
months
RM' 000
2,143
2,143
5
104
14
5
104
14
8,751
73,013
-
3,237
Over 1-5
years
RM' 000
21,617
21,617
Over 5
years
RM' 000
806,445
806,445
No
maturity
RM' 000
271,693
34,406
65,754
371,853
Total
RM' 000
1,104,189
34,406
65,754
1,204,349
270
2,141
108
3,079
768
-
280
5,428
904
-
-
-
8,751
73,013
8,751
73,013
3,237
-
-
-
-
3,237
4
(25)
87
2,840
93,092
3,360
123
2,519
3,847
4
(25)
87
2,840
84,670
4
(25)
87
2,840
94,519
90,227
1,998
92,225
-
-
-
90,227
1,998
92,225
90,227
1,998
92,225
134
-
593075-U
37. Financial
(cont'd.)
TheRisk
related
related
parties
parties and
andtheir
theirrelationship
relationshipwith
withthe
theCompany
Company
asas
of of
31 31
(c) Market Risk
Market risk is the risk of loss arising from a change in the values of, or the income from, assets
or in profit. A risk of loss also arises from volatility in asset prices or profit rates. Market risk
includes the following three elements:
-
Profit rate risk – the risk of fluctuations in fair value or future cash flows of a financial
instrument arising from variability in profit rates; and
Equity risk – the risk of fluctuations in fair value or future cash flows of a financial
instrument arising from stock market dynamic impacting the equity prices;
Property risk – the risk of fluctuations in fair value or future cash flows of a financial
instrument arising from decline in real estate values or income.
Profit rate risk
The Company is exposed to fair value profit rate risk where changes to profit rates result in
changes to fair values rather than cash flows, for example fixed profit rate loans and assets.
Conversely, floating rate loans expose the Company to cash flow profit rate risk.
The earnings of the Company are affected by changes in market profit rates due to the impact
such changes have on profit income from cash and cash equivalents, including investments in
fixed deposits.
The Company manages its profit rate risk by matching, where possible, the duration and profile
of assets and liabilities to minimize the impact of mismatches between the value of assets and
liabilities from profit rate movements.
The nature of the Company's exposure to profit rate risk and its objectives, policies and
processes for managing profit rate risk have not changed significantly from the previous
financial year.
135
593075-U
(c) Market Risk (Contd.)
Profit rate risk (cont'd.)
The following tables set out the carrying amount, by maturity, of the Company’s financial
instruments that are exposed to profit rate risk.
Shareholder's Fund
31 March 2011
Unsecured
Islamic banks
Development bank
Building society
Within 1 year
1 to 5 years
RM'000
RM'000
More than 5
years
RM'000
612
8,507
4,890
3,054
33,212
18,055
15,550
28,239
4,185
13,755
13,472
8,269
12,668
-
-
1,289
63,462
2,723
57,044
47,974
584
6,253
3,990
2,912
80,663
20,669
14,825
23,756
41,146
32,249
18,577
5,814
67,467
104,244
79,727
31 March 2011
Unsecured
Islamic banks
Development bank
136
593075-U
Family takaful fund
31 March 2011
Unsecured
Islamic banks
Investment banks
Development bank
Within 1 year
1 to 5 years
RM'000
RM'000
More than 5
years
RM'000
805
25,731
45,431
13,430
172,351
63,357
15,550
200,385
88,323
86,458
1,507
59,082
113,967
332,981
3,548
274
252,960
304,258
10
208
28
3,237
3,483
270
2,141
108
2,519
3,079
768
3,847
31 March 2011
Unsecured
Sensitivity Analysis
A change of 25 basis points ("bp") in profit rates at the reporting date would have increased /
(decreased) the value of investment instruments by the amounts shown below:
Shareholder's Fund
31 March 2011
Changes in
basis point
Debt Securities
+ 25
- 25
137
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
(625)
638
625
(638)
Impact on
Profit before
tax
RM' 000
-
593075-U
Sensitivity Analysis (cont'd.)
31 March 2011
Changes in
basis point
Impact on
AFS reserve
RM' 000
+ 25
- 25
(912)
928
912
(928)
-
+ 25
- 25
(4,049)
4,146
4,049
(4,146)
-
+ 25
- 25
+ 25
- 25
59
(59)
(132)
137
Debt Securities
Impact on
Surplus
before tax
RM' 000
Impact on
asset
RM' 000
Family takaful fund
Debt Securities
Debt Securities
Government Investment Issues
-
59
(59)
(132)
137
Equity risk
Equity price risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from profit yield risk or
currency risk) whether those changes are caused by factors specific to the individual financial
instruments or its issuer or factors affecting all similar financial instruments traded in the
market.
The Company's equity price risk exposures relates to financial assets and financial liabilities
whose values will fluctuate as a result of changes in market prices.
The Company's price risk policy requires it to manage such risks by setting and monitoring
objectives and constraints on investments, diversification plans, limits on investments in each
country, sector, market and issuer, having regards also to such limits stipulated by BNM. The
Company complies with BNM stipulated limits during the financial year and has no significant
concentration of price risk.
138
593075-U
Equity risk (cont'd.)
The analysis below is performed for reasonably possible movements in share prices with all
other variables held constant, showing the impact on equity in respect of quoted investment.
The correlation of variables will have significant effect in determining the ultimate impact on
price risk, but to demonstrate the impact due to changes in variables, variables had to be
changed on an individual basis. It should be noted that movements in these variables are nonlinear.
Shareholder's Fund
31 March 2011
Changes in
variable
Market Indices
Bursa Malaysia
Bursa Malaysia
+ 5%
- 5%
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
36
(36)
-
Impact on
Profit before
tax
RM' 000
36
(36)
31 March 2011
Changes in
variable
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
Impact on
Surplus
before tax
RM' 000
Market Indices
Bursa Malaysia
Bursa Malaysia
+ 5%
- 5%
55
(55)
-
55
(55)
+ 5%
- 5%
128
(132)
-
128
(132)
+ 5%
- 5%
4,112
(4,112)
-
4,112
(4,112)
Family takaful fund
Market Indices
Bursa Malaysia
Bursa Malaysia
Market Indices
Bursa Malaysia
Bursa Malaysia
139
593075-U
Property Risk
Property risk is the risk associated with the Company's investment in property or real estates
for own occupancy, investment or rental purpose. The Operational risk of the Company's
property is controlled by having detailed operation manual. The manual describes the
responsibilities in relation to management of the properties to maintain quality and satisfied
tenants.
The financial risk of the declining tenants are managed through careful selection of properties,
having quality tenants with long term tenancies and continuously maintaining and upgrading
facilities.
The Company has no significant exposure of property risk.
38. Operational Risk
Operational Risk is the risk of loss arising from system failure, human error, fraud or external
events. When controls fail to perform, operational risks can cause damage to reputation, have
legal or regulatory implications or can lead to financial loss. The Company cannot expect to
eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and
responding to potential risks, the Company is able to manage risks. Controls, amongst others,
include effective segregation of duties, access controls, authorization and reconciliation
procedures, staff education and assessment processes, including the use of internal audit.
Business risks such as changes in technology and the industry are monitored through the
Company's strategic planning and budgeting process.
39. Shariah Non-compliance Risk
Shariah Non-Compliance risk refers to possible failure to meet the obligation of Shariah principles.
When controls fail to perform, Shariah non-compliance risk can cause reputational and operational
damage, have regulatory implications or can even lead to financial loss and finally, impediment
from Allah’s barakah or blessing. The Company expect to mitigate such risk by initiating,
monitoring and responding to robust Shariah control framework. Controls include effective
oversight of the Shariah Committee, supported by internal Shariah Compliance Department in all
aspects of the Company's operations. Other relevant controls include staff awareness training and
internal operating guidelines, including the use of internal and external Shariah audit.
140
593075-U
40. Compliance Risk
Compliance risk is the risk arising from violations of, or non-conformance with business principles,
internal policies and procedures, related laws, rules and regulations governing the Company's
products, services and activities.
Consequently, the exposure to this risk can damage the Company's reputation, lead to legal or
regulatory sanctions and/or financial loss.
The Company has established a Compliance Management Department to look into all compliance
aspects in observing the regulatory requirements. In this respect, it has developed internal policies
and procedures to ensure compliance with all applicable laws and guidelines issued by the
regulatory authorities.
41. Comparatives
Certain comparative figures in the Statement of Financial Position and Statement of
comprehensive income as at 31 March 2010 have been reclassified to conform with current year's
presentation.
As Adjustments/
previously
ReAs
reported classification
restated
Shareholder's fund
RM '000
RM '000
RM '000
Statement of comprehensive income:
Wakalah fees
Surplus administration charges transferred from:
Family takaful fund
Investment income
- Investment performance fee from
family takaful fund
181,632
(181,632)
-
8,095
732
8,558
(8,095)
(732)
(4,467)
4,091
(4,467)
199,017
Fee income
- Wakalah fees
- Surplus administration charges
- Investment performance fee
-
Net other operating income/(expenses)
Other operating revenue
141
(194,926)
194,926
181,632
8,827
4,467
3,058
(3,058)
-
4,337
(1,899)
620
3,058
4,091
194,926
4,337
(1,899)
620
3,058
593075-U
41. Comparatives (cont'd.)
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
Statement of comprehensive income (cont'd.):
Taxation
-
5,739
5,739
5,739
(5,075)
(1,434)
(1,434)
(6,509)
2,303
3,938
3,938
6,241
-
15,750
15,750
15,750
(11,807)
14,547
1,132
10,675
11,807
1,132
10,675
11,807
(11,812)
(11,812)
(10,476)
Statement of Financial Position :
Assets
Deferred tax assets
Liabilities
Other payables
26,354
Provisions
-
Equity
Retained profits/(accumulated losses)
1,336
Gross contribution
Less: Retakaful
(Increase)/decrease
in unearned contribution reserves
Earned contribution
Earned contribution ceded
142
217,230
(25,525)
(217,230)
25,525
-
(633)
191,072
633
(191,072)
-
-
216,319
216,319
-
(25,247)
191,072
(25,247)
191,072
593075-U
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
Net claims incurred
(122,462)
Gross claims paid
Claims ceded to retakaful operators
Net claims
-
-
(87,591)
9,360
(40,625)
(87,591)
9,360
(40,625)
-
(3,605)
(122,461)
(3,605)
(122,461)
4,505
(4,505)
-
Net other operating expenses
- Miscellaneous expenses
- Gain on disposal of AFS and FVTPL
financial assets
- Fair value adjustments of financial assets
at FVTPL
Investment income
- Impairment of AFS financial assets
Provision for doubtful debts
122,462
(869)
-
4,505
4,505
869
1,376
-
(308)
6,153
(869)
- Gain on disposal of AFS and FVTPL
financial assets
-
- Fair value adjustments of financial assets
at FVTPL
- Provision for doubtful debts
-
-
(199)
(389)
(389)
869
308
5,764
308
308
Wakalah fees
Surplus administration charges transferred
to shareholder's fund
143
(1,005)
389
(1,005)
199
(869)
(724)
(1,376)
(1,376)
(1,376)
(55,931)
55,931
-
(8,095)
(64,026)
8,095
64,026
-
593075-U
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
Fee expenses
-
Taxation
(2,692)
(64,026)
181
181
(64,026)
(2,511)
Assets
Trade receivables
39,626
(39,626)
-
- As reclassed from Trade receivables
-
36,156
39,626
(3,470)
36,156
- Claim liabilities ceded to retakaful operators
- Contribution liabilities ceded to retakaful operators
-
29,669
17,577
12,092
29,669
1,474
868
868
2,342
Deferred tax assets
Liabilities
125,726
- Gross outstanding claims
- Outstanding claims ceded to retakaful operators
Trade payables
5,641
(125,726)
(143,303)
17,577
-
(5,641)
-
-
5,641
5,641
- Gross claim liabilities
- Gross contribution liabilities
-
228,254
143,303
84,951
228,254
Other payables
- Due to shareholder's fund
31,321
11,594
11,594
42,915
Due to shareholder's fund
11,594
(11,594)
144
-
593075-U
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
Statement of Financial Position (cont'd.) :
Participants' Fund
Unearned contribution reserves
- Gross unearned contribution reserves
- Unearned contribution reserves
ceded to retakaful operators
8,794
(2,602)
(2,602)
6,192
72,859
(72,859)
(84,951)
-
12,092
Family takaful fund
Benefits paid and payable
(87,092)
Gross benefits paid
Benefits ceded to retakaful operators
Net claims
-
87,092
-
(92,780)
14,049
(11,607)
(92,780)
14,049
(11,607)
-
3,246
(87,092)
3,246
(87,092)
Investment income
18,401
- Gain on disposal of FVTPL financial assets
- Gain on disposal of AFS financial assets
- Fair value adjustments of financial assets at FVTPL
1,819
4,468
(1,501)
(472)
(329)
(347)
20,220
- Gain on disposal of FVTPL financial assets
-
2,024
1,501
523
2,024
- Fair value adjustments of financial assets at FVTPL
- Gain on fair value adjustment on investment properties
- Impairment of takaful certificate receivables
-
27,302
4,659
347
22,535
(96)
(143)
27,302
145
593075-U
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
63
-
Wakalah fees
Surplus administration charges
transferred to shareholder's fund
Fee expenses
- Wakalah fees
- Surplus administration charges
transferred to shareholder's fund
(63)
-
63
63
(120,139)
120,139
-
(732)
732
-
-
(125,339)
(120,139)
(125,339)
(732)
(4,468)
Net other operating income/(expenses)
- Fair value adjustments of financial
assets at FVTPL
- Gain on fair value adjustment on
investment properties
- Bank charges
- Participants' medical fees
- Stamp duty
Allowance for doubtful debts
22,142
-
(4,330)
(51)
(22,535)
2,771
1,137
352
514
(96)
- Bank charges
- Participants' medical fees
- Stamp duty
(22,142)
-
96
(4,774)
(2,771)
(1,137)
(352)
(514)
(4,774)
Assets
- PA
- PSA
146
-
105,811
7,855
60,015
37,941
105,811
593075-U
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
Assets (cont'd.)
37,266
Investment-linked business assets
- Investment-linked business liabilities
43,991
(600)
(600)
43,391
22,158
(22,158)
(30,013)
7,855
-
Liabilities
- Gross claim liabilities
- Gross Claim liabilities
- PA
- PSA
- Available-For-Sale Reserve
- As previously reported
Trade payables
-
846,087
30,013
683,746
120,382
6,113
38,761
846,087
4,338
1,495
19,464
1,495
1,495
(19,464)
-
-
19,464
19,464
Other payables
- Due to shareholder's fund
25,085
13,400
13,400
38,485
Due to shareholder's fund
13,400
(13,400)
-
1,284
42,107
42,707
(600)
43,391
Investment-linked business liabilities
- Participants' Fund
- Investment-linked business assets
147
593075-U
As Adjustments/
previously
RM '000
RM '000
As
restated
RM '000
Participants' Fund
Family takaful fund
- PA
- Gross
- Retakaful
- PSA
- Gross
- Retakaful
- AFS Reserve
716,623
(716,623)
-
(683,746)
60,015
42,707
148
(120,382)
37,941
(6,113)
(4,338)
(42,707)
-

Audited Financial Statement 31 March 2011

Transcription

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