Takaful Ikhlas Berhad (593075-U) (Incorporated in Malaysia

Transcription

Takaful Ikhlas Berhad
(593075-U)
(Incorporated in Malaysia)
Directors' Report and Audited Financial Statements
31 March 2014
593075-U
(formerly known as Takaful Ikhlas Sdn. Bhd.)
Contents
Page
Directors' report
1 - 10
Statement by directors
11
Statutory declaration
11
Independent auditors' report
Report of the Shariah Committee
Statement of comprehensive income
12 - 13
14
15 - 16
Statement of financial position
17
Statement of changes in equity
18
Statement of cash flows
19 - 20
Notes to the financial statements
21 - 155
593075-U
DIRECTORS' REPORT
The directors have pleasure in presenting their report together with the audited financial
statements of Takaful Ikhlas Berhad (''the Company'') for the financial year ended 31 March
2014.
Principal activities
The Company is principally engaged in the management of general, family and investment-linked
takaful businesses.
There have been no significant changes in the nature of this principal activity during the financial
year.
Results
RM '000
Net profit for the year
16,132
There were no material transfers to or from reserves or provisions during the financial year, other
than as disclosed in the financial statements.
In the opinion of the Directors, the results of the operations of the Company during the financial
year were not substantially affected by any item, transaction or event of a material and unusual
nature.
Dividends
The amount of dividends paid by the Company since 31 March 2013 was as follows:
RM '000
In respect of financial year ended 31 March 2013:
Final single tier dividend of 3.1% on 295,000,000 ordinary shares, paid on
30 September 2013
9,000
At the forthcoming Annual General Meeting, a final single tier dividend in respect of the current
financial year ended 31 March 2014 amounting to a total dividend of RM11,000,000,
approximately 3.7% based on the issued and paid-up share capital of 295,000,000 ordinary
shares at the date of this report, will be proposed for shareholder's approval. The financial
statements for the current financial year do not reflect this proposed dividend. Such dividend, if
approved by the shareholder, will be accounted for in the shareholder's equity as an
appropriation of retained profits in the next financial year ending 31 March 2015.
1
593075-U
Directors
The directors who served since the date of the last report and at the date of this report are:
Encik Sharkawi bin Alis
Encik Ab Latiff bin Haji Abu Bakar
Y. Bhg. Dato' Haji Othman bin Hashim
Tuan Haji Halim bin Haji Din
Encik Paisol bin Ahmad
Encik Yahaya bin Besah
Dr. Syed Musa bin Syed Jaafar Alhabshi
Encik Mohd Din bin Merican
Tuan Haji Megat Dziauddin bin Megat Mahmud
In accordance with Article 97A of the Articles of Association of the Company, Encik Paisol bin
Ahmad, Encik Mohd Din bin Merican and Tuan Haji Megat Dziauddin bin Megat Mahmud retire
by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for reelection.
Directors’ benefits
Neither at the end of the financial year, nor at any time during that year, did there subsist any
arrangement to which the Company was a party, whereby the directors might acquire benefits by
means of the acquisition of shares in or debentures of the Company or any other body corporate.
Since the end of the previous financial year, no director has received or become entitled to
receive any 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 9, 10 and 34 to the financial
statements) 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, 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.
2
593075-U
Corporate Governance
The Board of Directors ("the Board") confirmed that the Company has complied with all the
prescriptive requirements of, and adopts management practices that are consistent with, the
principles prescribed under BNM's Guidelines, 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 and the principles of Shariah.
During the financial year, eight (8) Board meetings were held. Details of the Directors'
attendance at the meetings during the financial year are as follows:
Attendance
(Chairman / Non-independent non-executive director)
8/8
(President & CEO)
(Non-independent executive director)
8/8
(Non-independent non-executive director)
8/8
(Non-independent non-executive director)
8/8
(Independent non-executive director)
8/8
7/8
8/8
6/8
8/8
3
593075-U
Shariah Committee
The Company is advised by a Shariah Committee which perform an oversight role on Shariah
matters related to the institution’s business operations and activities. This is achieved through the
Shariah review and the Shariah audit functions. During the financial year, 6 Shariah Committee
meetings were held. Details of the Committee members' attendance at the meeting held during
the financial year are as follows:
Attendance
Chairman
Dr. Ahmad Hidayat Buang (appointed as Chairman on 23 July 2013)
Dato' Mohd Mokhtar Shafii (resigned from the Committee on 5 July 2013)
Members
Datuk Nik Moustpha bin Nik Hassan
Dr. Muhammad bin Naim Omar
Dr. Mohamed Fairooz bin Abdul Khir (appointed to the Committee on
1 April 2014)
Dr. Shamsiah binti Muhamad (resigned from the Committee on
1 November 2013)
5/6
1/1
4/6
6/6
5/6
N/A*
3/3
* There has been no further meetings held since the date of appointment
Corporate Governance Standards
The Board has delegated specific responsibilities to the Audit, Nomination, Remuneration,
Investment and Risk Management Committees of the Board.
The membership, roles and terms of reference of the Audit, Nomination, Remuneration, Risk
Management and Investment Committees of the Board during the financial year were as follows:
(i)
Audit Committee
The Audit Committee comprises five (5) Independent Non-Executive Directors and one (1)
Non-Independent Non-Executive Director. Three (3) members of the Committee are
qualified accountants and members of the Malaysian Institute of Accountants including the
Chairman of the Committee.
During the financial year, 5 meetings were held. Details of the attendance of the members
of the Committee at the meetings held during the financial year are disclosed as follows:
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593075-U
Corporate Governance Standards (cont'd.)
(i) Audit Committee (cont'd.)
Directors
Attendance
Chairman
5/5
Members
5/5
5/5
5/5
4/5
5/5
The Audit Committee’s terms of reference 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.
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 Bank Negara Malaysia.
(ii) Nomination Committee
The Nomination Committee comprises three (3) Independent Non-Executive Directors and
two (2) Non-Independent Non-Executive Directors.
The Nomination Committee is to establish a documented, formal and transparent procedure
for the appointment of directors, the principal officer and key senior officers. The Committee
also responsible 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.
In addition, the Committee is also entrusted with the responsibility for both the appointment
and evaluation of Directors and key senior officers of the Company. The Committee also
establishes the minimum requirements for the President & Chief Executive Officer to
perform his duties effectively and regularly reviews his performance.
Apart from these, the Committee is also responsible to establish amongst others whether the
Company's Key Responsible Persons are fit and proper to hold their respective positions.
5
593075-U
(ii) Nomination Committee (cont'd.)
During the financial year, four (4) meetings were held. Details of the Committee members'
attendance at the meetings held during the financial year are as follows:
Attendance
Chairman
4/4
Members
4/4
4/4
4/4
4/4
(iii) Remuneration Committee
The Remuneration Committee comprises four (4) Independent Non-Executive Directors and
two (2) Non-Independent Non-Executive Directors.
The Remuneration Committee is to provide a formal and transparent procedure for
developing a remuneration policy for directors, the principal officer and other key senior
officers and ensuring that their compensation is competitive and consistent with the
Company's culture, objectives and strategy.
During the financial year, three (3) meetings were held. Details of the Committee members'
Attendance
Chairman
3/3
Members
3/3
3/3
3/3
3/3
3/3
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(iv) Risk Management Committee
The Risk Management Committee comprises three (3) Independent Non-Executive Directors
and two (2) Non-Independent 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.
Attendance
Chairman
4/4
Members
4/4
4/4
4/4
3/4
(v) Investment Committee
The Investment Committee comprises three (3) Independent Non-Executive Directors, two
(2) Non-Independent Non-Executive Directors and one (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, by regulation, that require
awareness of and sanctioning by the Board of Directors.
attendence at the meetings held during the financial year are as follows:
7
593075-U
(v) Investment Committee (cont'd.)
Attendance
Chairman
4/4
Members
4/4
4/4
4/4
4/4
4/4
Other statutory information
(a) Before the income statement and statement of financial position of the Company were made
out, the Directors took reasonable steps:
(i)
to ascertain that proper action had been taken in relation to the writing off of bad debts
and the making of provision for doubtful debts and satisfied themselves that there were
no known bad debts and that adequate provision had been made for doubtful debts;
(ii) to ensure that any current assets which were unlikely to realise their values as shown in
the accounting records in the ordinary course of business had been written down to an
amount which they might be expected so to realise; and
(b) As at the date of this report, the Directors are not aware of any circumstances which would
render:
(i)
the amount written off as bad debt or the amount of the provision for doubtful debts in
the financial statements of the Company inadequate to any substantial extent; and
(ii) the values attributed to the current assets in the financial statements of the Company
misleading.
(c) As at the date of this report, the Directors are not aware of any circumstances which have
arisen which would render adherence to the existing method of valuation of assets or
liabilities of the Company misleading or inappropriate.
8
593075-U
Other statutory information (cont'd.)
(d) As at the date of this report, the Directors are not aware of any circumstances not otherwise
dealt with in this report or the financial statements of the Company which would render any
amount stated in the financial statements misleading.
(e) As at the date of this report, there does not exist:
(i)
any charge on the assets of the Company which has arisen since the end of the
financial year which secures the liabilities of any other person; or
(ii) any contingent liability in respect of the Company which has arisen since the end of the
financial year.
(f)
In the opinion of the Directors:
(i)
no contingent or other liability has become enforceable or is likely to become
enforceable within the period of twelve months after the end of the financial year which
will or may affect the ability of the Company to meet its obligations when they fall due;
and
(ii) no item, transaction or event of a material and unusual nature has arisen in the interval
between the end of the financial year and the date of this report which is likely to affect
substantially the results of the operations of the Company for the financial year in which
this report is made.
For the purposes of paragraphs (e)(ii) and (f)(i) above, contingent or other liabilities do not
include liabilities arising from takaful certificates underwritten in the ordinary course of business
of the Company.
(g) Before the income statement and statement of financial position of the Company 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.
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.
9
593075-U
Auditors
The retiring auditors, Messrs. Ernst & Young, retire and have expressed their willingness to
accept re-appointment.
Signed on behalf of the Board in accordance with a resolution of the Directors dated 18 June
2014.
Sharkawi bin Alis
Ab Latiff bin Haji Abu Bakar
Before
At
the
any
require
render
no
todate
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
oftoliability
had
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:
the
of
as
have
become
interval
end
bad
provision
shown
financial
directors
of
arisen
of
debts
dealt
the
in
Kuala Lumpur, Malaysia
18 June 2014
10
593075-U
Statement by directors
Pursuant to Section 169(15) of the Companies Act, 1965
We, Sharkawi bin Alis and Ab Latiff bin Haji Abu Bakar, being two of the directors of Takaful
Ikhlas Berhad., do hereby state that, in the opinion of the directors, the accompanying financial
statements set out on pages 15 to 155 are properly drawn up in accordance with Malaysian
Financial Reporting Standards, International Financial Reporting Standards and in compliance
with the Shari'ah requirements and the provisions of the Companies Act, 1965 in Malaysia so as
to give a true and fair view of the financial position of the Company as at 31 March 2014 and of
the results and the cash flows of the Company for the financial year then ended.
Signed on behalf of the Board in accordance with a resolution of the directors.
Sharkawi bin Alis
Ab Latiff bin Haji Abu Bakar
Statutory declaration
Pursuant to Section 169(16) of the Companies Act, 1965
I, Fauziah Md Hasan, being the officer primarily responsible for the financial management of
Takaful Ikhlas Berhad, do solemnly and sincerely declare that the accompanying financial
statements set out on pages 15 to 155 are in my opinion correct, and I make this solemn
declaration conscientiously believing the same to be true and by virtue of the provisions of the
Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the
abovenamed Fauziah Md Hasan
at Kuala Lumpur in Wilayah Persekutuan
on 18 June 2014
Fauziah Md Hasan
Before me,
Commissioner for Oaths
11
593075-U
Independent auditors' report to the member of
12
593075-U
Independent auditors' report to the member of
Takaful Ikhlas Berhad (cont'd.)
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the
Company as at 31 March 2014 and of its financial performance and cash flows for the year ended
31 March 2014 in accordance with Malaysian Financial Reporting Standards, International
Financial Reporting Standards and the requirements of Companies Act, 1965 in Malaysia.
Report on other legal and regulatory requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that
and the registers required by the Act to be kept by the Company have been properly kept in
Other matters
This report is made solely to the member of the Company, as a body, in accordance with Section
for no other purpose. We do not assume responsibility to any other person for the content of this
Ernst & Young
AF: 0039
Chartered Accountants
Gloria Goh Ewe Gim
No. 1685/04/15(J)
Chartered Accountant
18 June 2014
13
593075-U
Report of the Shariah Committee
‫بسم هللا الرحمن الرحيم‬
In the name of Allah, the Beneficent, the Merciful
We, Ahmad Hidayat bin Buang and Datuk Nik Moustpha bin Nik Hassan, being two of the
members of the Shariah Committee of Takaful Ikhlas Berhad, do hereby submit the following
report on behalf of the members of the Committee :
We have reviewed the principles and the contracts relating to the transactions and applications
introduced by the Company during the period ended 31 March 2014. We have also conducted
our review to form an opinion as to whether the Company has complied with the Shariah
principles and with the Shariah rulings issued by the Shariah Advisory Council of Bank Negara
Malaysia, as well as Shariah decisions made by us.
The management of the Company is responsible for ensuring that the Company conducts its
business in accordance with Shariah principles. It is our responsibility to form an independent
opinion, based on our review of the operations of the Company.
We have assessed the work carried out by Shariah review and Shariah audit which included
examining, on a test basis, each type of transaction, the relevant documentation and procedures
adopted by the Company.
We planned and performed our review so as to obtain all the information and explanations which
we considered necessary in order to provide us with sufficient evidence to give reasonable
assurance that the Company has not violated the Shariah principles.
In our opinion:
1. the contracts, transactions and dealings entered into by the Company during the year ended
31 March 2014 that we have reviewed are in compliance with the Shariah principles; and
2. the calculation of zakat is in compliance with Shariah principles.
We, the members of the Shariah Committee of Takaful Ikhlas Berhad, do hereby confirm that
the operations of the Company for the year ended 31 March 2014 have been conducted in
conformity with the Shariah principles.
Signed on behalf of the Shariah Committee.
Datuk Nik Moustpha bin Nik Hassan
Ahmad Hidayat bin Buang
18 June 2014
14
593075-U
For the year ended 31 March 2014
Note
----------------------------------------------------------2014 ---------------------------------------------------------------------------------------------------------------------------------- 2013 ------------------------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
fund
takaful fund
takaful fund
Company
fund
takaful fund
takaful fund
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
Gross earned contributions
Earned contributions ceded to retakaful
Net earned contributions
209,206
(68,259)
140,947
547,961
(40,375)
507,586
754,473
(108,634)
645,839
11,035
1,559
27
15,181
2,081
29,883
66,419
13,904
4,119
101
84,543
83,509
16,318
3,219
15,282
6,424
124,752
(108,745)
31,679
(3,904)
16,183
(64,787)
(185,325)
14,767
(286,923)
49,695
(407,786)
(294,070)
46,446
(290,827)
65,878
(472,573)
(104,586)
(112,111)
(18,280)
(234,977)
(73,632)
(2,290)
(7,172)
(83,094)
(165,109)
(7,157)
(1,585)
(6,894)
(180,745)
(104,586)
(116,845)
(18,280)
(13,992)
(253,703)
Operating profit before surplus attributable to
participants, zakat and taxation
20,856
22,949
3,598
Surplus attributable to participants
Profit before zakat and taxation
20,856
(22,949)
-
(3,598)
-
Zakat
Taxation
(400)
(4,324)
-
16,132
-
Investment income
Realised gains
Fair value (losses)/gains
Fee and commission income
Other operating income
Other revenue
3(a)
3(b)
4
5
6
7
11
10,316
855
(7)
238,741
5,928
255,833
Gross claims and benefits paid
Claims and benefits ceded to retakaful
Gross change to certificate liabilities
Change in certificate liabilities ceded to retakaful
Net claims and benefits
Fee and commission expenses
Management expenses
Other operating expenses
Change in expense liabilities
Tax borne by participants
Other expenses
8
9
11
12
13
14
Basic earnings per share (sen)
30
15
10,276
1,165
32
226,333
1,558
239,364
-
184,179
(56,169)
128,010
542,343
(14,607)
527,736
724,669
(70,776)
653,893
10,403
1,896
9
10,806
23,114
51,231
11,424
5,483
(75)
68,063
67,649
14,485
4,482
10,731
97,347
(107,394)
21,648
24,378
2,882
(58,486)
(165,843)
21,167
(282,997)
65,147
(362,526)
(273,237)
42,815
(258,619)
68,029
(421,012)
(111,691)
(104,210)
(4,890)
(220,791)
(67,441)
(5)
(277)
(7,718)
(75,441)
(158,892)
(3)
(11,306)
(4,444)
(174,645)
(111,691)
(100,247)
(10,025)
(4,890)
(12,079)
(238,932)
44,315
18,573
17,197
58,628
91,296
(23,459)
20,856
18,573
(17,197)
-
(58,628)
-
(72,723)
18,573
-
(400)
(4,324)
(400)
(8,054)
-
-
(400)
(8,054)
-
16,132
10,119
-
-
10,119
5.5
The accompanying notes form an integral part of the financial statements.
-
3.4
593075-U
For the year ended 31 March 2014 (cont'd.)
----------------------------------------------------------Note
2014 ---------------------------------------------------------------------------------------------------------------------------------- 2013 ------------------------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
fund
takaful fund
takaful fund
Company
fund
takaful fund
takaful fund
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
16,132
-
-
-
-
-
16,132
10,119
-
-
-
-
-
10,119
Other comprehensive income:
Items that will not be reclassified subsequently to
profit or loss:
Revaluation reserves:
Net gains on fair value changes
Deferred tax on fair value changes
Items that may be subsequently reclassified to
profit or loss:
Available-for-sale fair value reserves:
Net losses on fair value changes
Realised gains transferred to statement of
comprehensive income
Other comprehensive loss attributable to
participants
Total comprehensive income for the year
18
3,162
(253)
5,284
(423)
(1,870)
(73)
(221)
438
(29,287)
2,921
(31,378)
3,286
(629)
389
(737)
417
(385)
526
(1,751)
1,332
(855)
(1,530)
(7,227)
(9,612)
(925)
(932)
(6,187)
(8,044)
1,313
-
33,593
-
31,997
13,334
6,046
-
2,437
8,954
13,334
16
8,954
1,252
-
593075-U
Statement of financial position
As at 31 March 2014
---------------------------------------------------------------------------------------Note
2014 ---------------------------------------------------------------------------------------- 2013 -----------------------------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
fund
takaful fund
takaful fund
Company
fund
takaful fund
takaful fund
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
Assets
Property and equipment
15
8,733
115,655
10,769
115,961
Investment properties
16
106,922
105,192
Intangible assets
17
6,050
6,050
6,222
6,222
Deferred tax assets
18
14,678
1,155
15,002
6,437
317
3,529
Financial assets:
Financial assets at fair value
through profit or loss ("FVTPL")
19(a)
1,160
1,372
135,626
138,158
1,153
1,153
120,194
122,500
Held-to-maturity investments ("HTM")
19(b)
62,157
72,033
332,336
466,526
62,212
74,621
352,546
489,379
Available-for-sale ("AFS") financial assets
19(c)
135,448
93,341
958,347
1,187,136
119,327
82,117
644,184
845,628
Loans and receivables ("LAR")
19(d)
176,092
163,957
337,568
579,162
171,197
123,093
409,891
626,104
Retakaful certificate assets
22
80,289
139,538
219,827
62,912
89,843
152,755
Takaful certificate receivables
20
32,274
88,964
121,238
28,804
67,710
96,514
Tax recoverable
21
7,909
7,909
6,235
6,235
Cash and bank balances
5,699
7,551
13,140
26,390
2,841
32,549
32,026
67,416
Total assets
417,926
451,972
2,112,441
2,883,053
386,393
405,566
1,821,586
2,532,243
Liabilities
Takaful certificate liabilities
Expense liabilities
Takaful certificate payables
Due to agents, retakaful and brokers
Deferred tax liabilities
Zakat payable
Tax payable
Other payables
Total liabilities
22
23
24
18
25
40,320
11,558
368
4,961
48,379
105,586
320,552
16,580
1,807
79,183
418,122
1,800,160
28,417
112
421
98,987
1,928,097
2,110,712
40,320
44,997
11,558
368
7,189
138,094
2,353,238
22,040
16,100
515
39,732
78,387
301,553
20,299
5,853
57,515
385,220
1,513,237
11,524
2,685
4,587
75,214
1,607,247
1,804,790
22,040
31,823
16,100
515
10,440
104,384
1,990,092
Participants' fund
General takaful fund
Family takaful fund
Total participants' funds
28
29
-
33,850
33,850
184,344
184,344
33,850
183,625
217,475
-
20,346
20,346
214,339
214,339
20,346
213,799
234,145
Equity
Share capital
Reserves
Total equity
26
27
295,000
17,340
312,340
-
-
295,000
17,340
312,340
295,000
13,006
308,006
-
-
295,000
13,006
308,006
417,926
451,972
2,112,441
2,883,053
386,393
405,566
1,821,586
2,532,243
Total liabilities, participants' funds and equity
17
593075-U
Statement of changes in equity
Non
distributable
Available-for
sale reserves
RM '000
Non
distributable
revaluation
reserve
RM '000
Distributable
retained profits/
(losses)
RM '000
Shareholder's fund
Share
capital
RM '000
At 1 April 2012
Dividend on ordinary shares
At 31 March 2013
295,000
295,000
2,078
(1,165)
913
-
6,974
10,119
(5,000)
12,093
304,052
8,954
(5,000)
308,006
295,000
(2,798)
(1,885)
-
16,132
(9,000)
19,225
13,334
(9,000)
312,340
295,000
295,000
2,078
(8,463)
7,298
913
4,861
(4,861)
-
6,974
10,119
(5,000)
12,093
304,052
6,517
2,437
(5,000)
308,006
295,000
(37,704)
34,906
(1,885)
2,909
(2,909)
-
16,132
(9,000)
19,225
(18,663)
31,997
(9,000)
312,340
Note
At 31 March 2014
35
35
Total
RM '000
Company
At 1 April 2012
Attributable to participants
At 31 March 2013
Attributable to participants
At 31 March 2014
35
35
18
593075-U
Cash flows from operating activities
Profit before zakat and taxation
Adjustments for:
Depreciation of equipment
Amortisation of intangible assets
Net amortisation of premiums
Profit on investment accounts
Gross dividend income
Fair value adjustments of financial assets at FVTPL
Impairment of AFS financial assets
Allowance/(writeback) for impairment of HTM financial asset
Gain on disposal of investments
(Writeback)/allowance for impairment of takaful receivables
Increase in contribution liabilities
Increase in expense liabilities
Increase in general takaful fund
Increase in family takaful fund
Operating cash flows before working capital changes
Changes in working capital:
Purchase of financial assets
Proceeds from disposal of of financial assets
Decrease/(increase) in placement of Islamic investment
accounts
(Increase)/decrease in staff financing
(Increase)/decrease in takaful receivables
Increase in tax recoverables
Increase in other receivables, deposits
and prepayments
Decrease in claims liabilities
Increase/(decrease) in takaful certificate payables
Increase in other payables
Net change in balance with holding company
Operating cash flows after working capital changes
19
2014
RM '000
2013
RM '000
20,856
18,573
5,639
971
1,735
(78,074)
(9,378)
(4,383)
1,025
139
(16,318)
(328)
13,901
18,280
22,949
510
(22,476)
5,642
1,036
924
(66,929)
(4,527)
(4,588)
137
(31)
(14,485)
11,692
14,347
4,890
17,197
55,526
39,404
(596,953)
242,280
(768,536)
450,274
48,333
(237)
(24,396)
(1,674)
(1,172)
557
47,639
(2,496)
(58,934)
(20,374)
8,632
334,178
(16)
(91,637)
(55,841)
(20,829)
(51,256)
313,634
671
(47,951)
593075-U
For the year ended 31 March 2014 (cont'd.)
2014
RM '000
Cash flows from operating activities (cont'd.)
Investment income received
Dividend income received
Hibah paid to participants
Income tax paid
Zakat paid
Net cash used in operating activities
2013
RM '000
78,389
9,445
(683)
(24,022)
(547)
(29,055)
59,938
4,224
(1,610)
(13,320)
(275)
1,006
Cash flows from investing activities
Purchase of property and equipment
Purchase of intangible assets
Net cash used in investing activities
(2,172)
(799)
(2,971)
(6,599)
(1,157)
(7,756)
Cash flows from financing activity
Dividend paid
Net cash used in financing activity
(9,000)
(9,000)
(5,000)
(5,000)
(41,026)
67,416
26,390
(11,750)
79,166
67,416
5,699
7,551
13,140
26,390
2,841
32,549
32,026
67,416
-
-
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash and bank balances of:
Shareholder's fund
Family takaful fund
20
593075-U
Notes to the financial statements - 31 March 2014
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 public 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 reporting date was 493 (2013:
457).
The financial statements were authorised for issue by the Board of Directors in accordance
with a resolution of the directors on 18 June 2014.
2.
Significant accounting policies
2.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with
Malaysia Financial Reporting Standards (''MFRS''), International Financial Reporting
Standards (''IFRS'') and the requirements of the Companies Act, 1965 in Malaysia.
The statements of financial position and statements of comprehensive income of the
shareholder's fund, family takaful fund and general takaful fund which are presented
on pages 15 to 17 of the financial statements have been provided as supplementary
financial information and to comply with the requirements of BNM's Guideline
BNM/RH/GL 004-24 : Guidelines on Financial Reporting for Takaful Operators. The
Islamic Financial Services Act 2013 and, previously, the Takaful Act, 1984, in Malaysia
requires the clear segregation of the assets, liabilities, income and expenses of the
shareholder’s funds and the respective takaful funds. Accordingly, the statements of
financial position and statements of comprehensive income prepared for the
shareholder’s fund, family takaful fund and general takaful fund as referred to above,
reflect only the assets, liabilities, income, expenses and comprehensive gains or
losses of the individual funds.
21
593075-U
2.
Significant accounting policies (cont'd.)
2.1 Basis of preparation (cont'd.)
In preparing the Company-level financial statements, the balances and transactions of
the shareholder's fund are amalgamated and combined with those of the takaful funds.
Interfund balances, transactions and unrealised gains or losses are eliminated in full
during amalgamation. The accounting policies adopted for the shareholder's and
takaful funds are uniform for like transactions and events in similar circumstances.
The takaful funds are consolidated and amalgamated from the date of control and
continue to be consolidated until the date such control ceases which will occur when
the Company's licence to manage takaful business is withdrawn or surrendered.
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 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.
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 Takaful operations and its funds
Under the concept of takaful, individuals make contributions to a pool which is
managed by a third party with the overall aim of using the monies to aid fellow
participants in times of need. Accordingly, as a takaful operator, the Company
manages the general and family takaful funds in line with the principles of Wakalah
(agency), which is the main business model used by the Company. Under the Wakalah
model, the takaful operator is not a participant in the fund but manages the funds
(including the relevant assets and liabilities) towards the purpose outlined above.
In accordance with the Islamic Financial Services Act 2013 and, previously, the Takaful
Act 1984, the assets and liabilities of the takaful funds are segregated from those of
the takaful operator: a concept known as segregation of funds. However, in
compliance with MFRS 10 Consolidated Financial Statements , the assets, liabilities,
income and expenses of the takaful funds are consolidated with those of the takaful
operator to represent the control possessed by the operator over the respective funds.
22
593075-U
2.
2.2 Takaful operations and its funds (cont'd.)
The inclusion of separate information of the takaful funds and the takaful operator
together with the consolidated financial information of the Company in the statement of
financial position, the income statement, the statement of comprehensive income as
well as certain relevant notes to the financial statements represents additional
supplementary information required for Bank Negara Malaysia reporting.
At the beginning of the current financial year, the Company had adopted all new and
revised MFRSs, amendments to MFRS and Issues Committee ("IC") Interpretations
effective for annual periods beginning on or after 1 July 2012. The adoption of these
new and revised MFRSs, amendments to MFRS and IC Interpretations did not result in
any significant impact to the financial position or performance of the Company.
2.3 Property and equipment and depreciation
(i) Recognition and measurement
All items of property and equipment are initially recorded at cost. Subsequent to
recognition, plant and equipment are stated at cost less accumulated depreciation
and impairment losses, whilst properties are stated at revalued amount less
subsequent accumulated depreciation and subsequent impairment losses. Cost
includes expenditures that are directly attributable to the acquisition of the asset.
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.
Work-in-progress are not depreciated as these assets are not available for use.
When work-in-progress is completed and the asset is available for use, it is
reclassified to the relevant category of property and equipment and depreciation of
the asset begins.
(ii) Subsequent costs
The cost of replacing part of an item of property and equipment is recognised in
the carrying amount of the item if it is probable that the future economic benefits
embodied within the part will flow to the Company and its cost can be measured
reliably. The costs of the day-to-day servicing of property and equipment are
recognised in the statement of comprehensive income as incurred.
23
593075-U
2.
2.3 Property, equipment and depreciation (cont'd.)
(iii) Depreciation
Depreciation of property and equipment is provided for on a straight-line basis to
write down the cost of each asset to its residual value over its estimated useful life,
at the following annual rates:
Buildings
Computer property and equipment
Furniture, fittings and office property and equipment
Motor vehicles
2% - 3%
33 1/3%
15%
20%
The residual values, useful lives 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 and equipment.
(iv) Derecognition
An item of property and equipment is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. On disposal of
property and equipment, the difference between net proceeds and the carrying
amount is recognised in the statement of comprehensive income and the
unutilised portion of the revaluation surplus on that item is taken directly to
retained profits.
2.4 Investment properties
Investment properties are properties which are owned or held either 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 gain or loss on the retirement or
disposal of an investment property is recognised in the statement of comprehensive
income in the year in which they arise.
24
593075-U
2.
2.5 Intangible assets
Intangible assets comprise of software development costs and computer software and
licences.
All intangible assets are initially recorded at cost. Subsequent to recognition, intangible
assets are stated at cost.
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 reporting date.
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.
(i) Software development costs
Software development costs 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.When development is
complete and the asset is available for use, it is reclassified to computer software
and amortisation of the asset begins. 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.
(ii) Computer software and licences
The useful lives of computer software and licences are considered to be finite
because computer software and licences are susceptible to technological
obsolescence.
The acquired computer software and licences are amortised using the straight-line
method over their estimated useful lives not exceeding 6 years. Impairment is
assessed whenever there is an indication of impairment and the amortisation
period and method are also reviewed at least at each reporting date.
25
593075-U
2.
2.6 Financial assets
(i) Initial recognition and measurement
Financial assets are recognised in the statement of financial position when, and
only when, the Company become a party to the contractual provisions of the
instrument.
A financial asset is recognised initially, at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
An embedded derivative is recognised separately from the host contract and
accounted for as a derivative if, and only if, it is not closely related to the economic
characteristics and risks of the host contract and the host contract is not
categorised at fair value through profit or loss. The host contract, in the event an
embedded derivative is recognised separately, is accounted for in accordance with
the policy applicable to the nature of the host contract.
(ii) Classification and subsequent measurement
The Company determine the classification of its financial assets at initial
recognition and this depends on the purpose for which the investments were
acquired or originated. The following classifications are used by the Company in
categorising its financial assets:
(a) Financial assets at FVTPL
Financial assets at FVTPL include financial assets held for trading and those
designated at fair value through profit and loss upon initial recognition.
Financial assets typically bought with the intention to sell in the near future are
classified as held-for-trading. For financial assets at FVTPL, 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
26
593075-U
2.
2.6 Financial assets (cont'd.)
(ii) Classification and subsequent measurement (cont'd.)
(a) Financial assets at FVTPL (cont'd.)
- 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.
Subsequent to initial recognition, financial assets at FVTPL are measured at
the fair value. Fair value adjustments and realised gains and losses are
recognised in statement of comprehensive income.
Financial assets held under the investment-linked funds are designated as
FVTPL upon initial recognition as they are managed and evaluated on a fair
value basis in accordance with the respective investment strategies and
mandates.
Financial assets classified as financial assets at FVTPL include shariah
approved quoted shares, warrants and unit trust.
(b) HTM investments
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 financial assets to 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 investments 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 HTM investments are derecognised or
impaired, as well as through the amortisation process.
Financial assets classified as HTM investments include unquoted Islamic
private debt securities and government investment issues.
27
593075-U
2.
(ii) Classification and subsequent measurement (cont'd.)
(c) AFS financial assets
AFS financial assets are non-derivative financial assets that are designated as
available-for-sale. These investments are initially recorded at fair value. After
initial measurement, AFS financial assets are measured at fair value except
for golf club memberships. Golf club memberships are valued at cost less
impairment. Disclosures of fair value are not required due to the carrying
amount's close approximate with its fair value.
Any gains or losses from changes in fair value of the financial assets are
recognised in the other comprehensive income, 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.
Financial assets classified as AFS financial assets are unquoted Islamic
private debt securities, government investment issues, shariah approved
quoted equities, warrants and unit trust and golf club memberships.
(d) LAR
LAR are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. LAR are initially recognised at cost,
being the fair value of the consideration paid for the acquisition of the LAR. All
transaction costs directly attributable to the acquisition are also included in the
cost of the investment. Subsequent to initial recognition, LAR 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 assets are derecognised or impaired and 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 financing and Qard (benevolent loan) provided by
shareholder's fund to the general takaful fund.
28
593075-U
2.
(iii) Derecognition
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.
On derecognition of a financial assets in its entirety, the difference between the
carrying amount and the sum of the consideration received and any cumulative
gains or losses that had been recognised in other comprehensive income is
recognised in the statement of comprehensive income.
2.7 Fair value of financial instruments
The Company measures financial instruments, such as, financial assets at FVTPL, and
non-financial assets such as investment properties, at fair value at each reporting date.
Also, fair values of financial instruments measured at amortised cost are disclosed in
Note 19.
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
(i)
In the principal market for the asset or liability, or
(ii) In the absence of a principal market, in the most advantageous market for the
asset or liability.
The principal or the most advantageous market must be accessible to by the Company.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest. A fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use. The Company uses
valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
29
593075-U
2.
2.7 Fair value of financial instruments (cont'd.)
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorised within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - Inputs that are based on observable market data, either directly or indirectly
Level 3 - Inputs that are not based on observable market data
For assets and liabilities that are recognised in the financial statements on a recurring
basis, the Company determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting
period. The fair value of financial instruments and non-financial assets are disclosed in
Note 43.
2.8 Impairment of assets
(i) Financial assets
The Company assesses at each reporting date 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.
30
593075-U
2.
2.8 Impairment of assets (cont'd.)
(i) Financial assets (cont'd.)
(a) 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.
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 the 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, to the extent that the carrying value of the asset does not exceed its
amortised cost at the reversal date. The amount of reversal is recognised in
statement of comprehensive income.
(b) 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
the statement of comprehensive income.
31
593075-U
2.
(i) Financial assets (cont'd.)
(b) AFS financial assets (cont'd.)
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. 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 the statement of
comprehensive income.
(c) 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 debtors and default or significant delay in
repayments. Loans and receivables 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. The impairment loss is recognised in the
The carrying amount of the loans and receivables is reduced by the
impairment loss, 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 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.
32
593075-U
2.
(ii) Impairment of non-financial assets
The carrying amounts of assets other than deferred tax asset and investment
properties are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists or when an annual
impairment for an asset is required, the Company makes an estimate of the
asset's recoverable amount to determine the amount of loss.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit's
("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 pro-rata 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 the statement of comprehensive income.
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2.
2.9 Measurement and impairment of Qard
Any deficits arising in the Takaful Funds are made good via a benevolent 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 affected
Takaful Funds.
The Qard is tested for impairment on an annual basis via an assessment of the
estimated surpluses or cash flows from the affected 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.
Impairment losses are subsequently reversed in the statement of comprehensive
income if objective evidence exists that the Qard is no longer impaired.
2.10 Share capital and dividend expenses
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 reporting date.
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2.
2.11 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. If the ratio of the
former exceeds the latter by 5% or more, the takaful risk accepted is deemed to be
significant.
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
expired. Investment contracts can, however, be reclassified as takaful certificates after
inception if takaful risk becomes significant.
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 meet the definition
of a takaful certificate.
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2.
2.12 Retakaful
The Company, as the operator of the participants' fund, cedes underwriting risk in the
normal course of business for all its takaful business. Retakaful certificates assets
represent balances due from retakaful operators for takaful certificates liabilities which
have yet to be settled at the reporting date. Amounts recoverable from retakaful
operators are estimated in a manner consistent with 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 its obligations to
participants. For both ceded and assumed retakaful, contributions, claims and benefits
paid or payable are presented on a gross basis.
Retakaful certificates assets are assessed for impairment at each reporting date or
more frequently when an indication of impairment arises during the reporting period.
Impairment is recognised when there is objective evidence as a result 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. The impairment loss is recorded in the
Retakaful certificate 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 derecognised when the contractual rights
are extinguished or expired 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.
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2.13 General takaful fund
The general takaful fund is maintained in accordance with the Islamic Financial
Services Act 2013 and, previously, 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. Surplus
distributable to participants' and shareholder's fund is determined after deducting
retakaful cost, 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) General takaful 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 year in respect of risks
assumed during that particular financial year. Inward treaty retakaful contributions
are recognised on the basis of periodic advices received from ceding takaful
operators.
(ii) General takaful contribution liabilities
Contribution liabilities represent the fund's future obligations on takaful certificates
as represented by contributions received for risks that have not yet expired. The
movement in contribution liabilities is released over the terms of the takaful
certificates and recognised as earned contribution.
Contribution liabilities are reported at the higher of the aggregate of the Unearned
Contribution Reserves ("UCR") for all lines of business and the best estimate
value of the Company’s unexpired risk reserves (“URR”) calculated at 75%
confidence level at the overall Company level as at the end of the reporting date.
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2.
2.13 General takaful fund (cont'd.)
(ii) Contribution liabilities (cont'd.)
(a) Unearned Contribution Reserves ("UCR")
The 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 reporting date. 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 reporting date, 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")
URR is a prospective estimate of the expected future payments arising from
future events expected to be incurred as at the end of the reporting date and
also includes cost of retakaful, expected to be incurred during the unexpired
period in administering 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 75% level
of confidence of the URR, the resulting Loss Ratio based on the IBNR plus
PRAD at 75% level of confidence is applied to the corresponding UCR for
each line of business.
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2.
(iii) Claim 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 reporting date.
Claim liabilities are valued at the best estimate which include provision for claims
reported, claims incurred but not enough reserved ("IBNER") and IBNR together
with related claims handling costs and reduction for the expected value of salvage
and other recoveries and PRAD, which is calculated at 75% confidence 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 reporting date.
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
certificate expires, is discharged or is cancelled.
(iv) Liability adequacy test
At each reporting date, 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.
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2.
(v) Commission earned
Commission earned net of 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.
2.14 Family takaful fund
The family takaful fund is maintained in accordance with the requirements of the
Islamic Financial Services Act 2013 and, previously, the Takaful Act, 1984 and
includes the amount attributable to participants.
The family takaful fund surplus/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) Family takaful 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.
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2.14 Family takaful fund (cont'd.)
(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.
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 participants or
unit holders 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 participants or unit holders.
(iv) Investments of the investment-linked funds
All investments of the investment-linked funds are stated at closing bid 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 certificate liabilities
Family takaful certificate liabilities are recognised when certificates are in-force
and contributions are charged.
For a one year family certificate or a one year extension to a family certificate
covering contingencies other than life or survival, the liability for such family takaful
certificates comprises contribution and claim liabilities with an appropriate
allowance for PRAD from the expected experience.
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2.14 Family takaful fund (cont'd.)
(v) Family takaful certificate liabilities (cont'd.)
The family takaful certificate liabilities are derecognised when the certificates
expires, discharged or are cancelled. At each reporting date, an assessment is
made of whether the recognised family takaful certificate liabilities are adequate by
using an existing liability adequacy test.
Liabilities of family takaful business are determined in accordance with valuation
guidelines for takaful operators issued by Bank Negara Malaysia ("BNM"). All
family takaful liabilities have been valued using a prospective actuarial valuation
based on the sum of the present value of future benefits and expenses less future
gross considerations arising from the certificates, discounted at the appropriate
risk discount rate. This method is known as the gross contribution valuation
method. In the case of a family certificate where a part of, or the whole of the
contributions are accumulated in a fund, the accumulated amount, as declared to
the participants are set as the liabilities. Zerosisation is applied at certificate level
and no certificate is treated as an asset under the valuation method adopted.
In respect of family takaful business risk fund, the expected future cash flows of
benefits are determined using best estimate assumptions with an appropriate
allowance for PRAD from expected experience such that an overall level of
sufficiency of certificate reserves at a 75% confidence level is secured. For
investment-linked business, the fund value is treated as liabilities.
Surplus arising from the difference between the value of the family fund and the
liabilities, including retained surplus, will be distributed to the participants 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.
2.15 Shareholder's fund
(i) Commission expenses
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.
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2.
2.15 Shareholder's fund (cont'd.)
(ii) Expense liabilities
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 shareholder's 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 expense liabilities of shareholder's fund consist of expense liabilities of
general takaful fund and family takaful fund which are based on estimates
performed by a qualified actuary.
(a) Expense liabilities of general takaful fund
The expense liabilities are 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 reporting date.
Unearned wakalah fee
The UWF 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 reporting date. The method
used in computing UWF is consistent with the calculation of UCR under Note
2.13(ii)(a). In determining the UWF at the end of the reporting date, 50% of
the wakalah fee income is recognised in the financial year in which the
certificates are issued. The remaining 50% of the wakalah fee income is
transferred to the UWF reserves and is recognised in the following financial
year.
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2.
2.15 Shareholder's fund (cont'd.)
(ii) Expense liabilities (cont'd.)
(a) Expense liabilities 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 reporting date, less
expected shareholder's fund income calculated at PRAD of 75% confidence
level. The method used to value the UER is consistent with the method used
to value the URR under note 2.13(ii)(b).
Liability adequacy test
At each reporting date, 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 expense deficiency.
(b) Expenses liabilities of family takaful fund
The expense liabilities 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 reporting
date, less expected shareholder's fund income. The method used to value
expense liabilities is consistent with the method used to value takaful liabilities
of the corresponding family takaful certificate under note 2.14(v).
2.16 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.
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2.
2.17 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.
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 receivables are derecognised when the derecognition criteria for
financial assets, as described in Note 2.6(iii), have been met.
2.18 Balances with related companies
Balances with related companies are stated at the amounts which are due and
expected to be settled.
2.19 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 date.
Deferred tax is provided for, using the liability method, on temporary differences at the
end of the reporting date 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.
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2.19 Taxation (cont'd.)
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 other comprehensive income/participants' fund, in which
case the deferred tax is also charged or credited directly in other comprehensive
income/participants' fund.
2.20 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 MFRS 139 Financial Instruments : Recognition
and Measurement , are recognised in the statement of financial position when, and
only when, the Company and/or the Takaful Funds 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.
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2.
2.20 Financial liabilities (cont'd.)
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.
2.21 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 reporting date 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.
2.22 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.
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2.23 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 reporting date are translated into Ringgit Malaysia at rates
of exchange ruling at that date. All exchange differences are taken to the statement of
comprehensive income. The principal exchange rate for every unit of United States
Dollar ruling at financial year end used is RM3.2685 (2013: RM3.094).
2.24 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.
2.25 Zakat
Zakat 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. Zakat is computed at 2.5% of the net assets of the Company.
Only the zakat that is attributable to the individual and corporate 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.
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2.26 Changes in accounting policies and effects arising from adoption of new and
revised MFRSs 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 2013, except
for the adoption of the following new/revised MFRSs, amendments to MFRSs and
Interpretations of the Issues Committee (''IC'') issued by the Malaysian Accounting
Standards Board (''MASB''):
Effective for financial periods
beginning on or after
Standard/Interpretation
Amendments to MFRS 101 Presentation of Items of
Other Comprehensive Income
MFRS 3 Business Combinations (IFRS 3 Business
Combinations issued by IASB in March 2004)
MFRS 7 Disclosures—Offsetting Financial Assets and
Financial Liabilities
MFRS 10 Consolidated Financial Statements, Joint
Arrangements and Disclosure of Interests in Other
Entities: Transition Guidance
MFRS 10 Consolidated Financial Statements
MFRS 11 Joint Arrangements
MFRS 12 Disclosure of Interests in Other Entities
MFRS 13 Fair Value Measurement
MFRS 119 Employee Benefits (as amended by IASB in
June 2011)
MFRS 127 Separate Financial Statements (as
amended by IASB in May 2011)
MFRS 127 Consolidated and Separate Financial
Statements (IAS 27 Consolidated and Separate
Financial Statements revised by IASB in
December 2003)
MFRS 128 Investments in Associates and Joint
Ventures (as amended by IASB in May 2011)
IC Interpretation 20 Stripping Costs in the Production
Phase of a Surface Mine
Annual Improvements 2009-2011 Cycle
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
The adoption of the above FRSs, Amendments to FRS, IC Interpretations,
Amendments to IC Interpretations and Technical Releases did not have any significant
effect on the financial performance or position of the Company except for those
discussed below:
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2.
(cont'd.)
(a) MFRS 10 Consolidated Financial Statements ("MFRS 10")
MFRS 10 replaces part of MFRS 127 Consolidated and Separate Financial
Statements that deals with consolidated financial statements and IC Interpretation
112 Consolidation - Special Purpose Entities .
Under MFRS 10, investor controls an investee when (a) the investor has power
over an investee, (b) the investor has exposure, or rights to variable returns from
its involvement with the investee and (c) the investor has ability to use its power
over the investee to affect the amount of the investor's returns. Under MFRS 127
Consolidated and Separate Financial Statements , control was defined as the
power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities.
MFRS 10 includes detailed guidance to explain when an investor has control over
the investee. MFRS 10 requires the investor to take into account all relevant facts
and circumstances. The Company has assessed the impact of this Standard on
the financial statements of the Company and concluded that there was no material
impact upon initial adoption.
(b) MFRS 11 Joint Arrangements
MFRS 11 replaces MFRS 131 Interests in Joint Ventures and IC Interpretation 113
Jointly-Controlled Entities – Non-monetary Contributions by Venturers.
The classification of joint arrangements under MFRS 11 is determined based on
the rights and obligations of the parties to the joint arrangements by considering
the structure, the legal form, the contractual terms agreed by the parties to the
arrangement and when relevant, other facts and circumstances. Under MFRS 11,
joint arrangements are classified as either joint operations or joint ventures.
A joint operation is a joint arrangement whereby the parties that have joint control
of the arrangement have rights to the assets, and obligations for the liabilities,
relating to the arrangement. A joint venture is a joint arrangement whereby the
parties that have joint control of the arrangement have rights to the net assets of
the arrangement.
50
593075-U
2.
(cont'd.)
(b) MFRS 11 Joint Arrangements (cont'd.)
MFRS 11 removes the option to account for jointly controlled entities (“JCE”) using
proportionate consolidation. Instead, JCE that meet the definition of a joint venture
must be accounted for using the equity method. The Company has assessed the
impact of this Standard on the financial statements of the Company and concluded
that there was no material impact upon initial adoption.
(c) MFRS 12 Disclosures of Interests in Other Entities
MFRS 12 includes all disclosure requirements for interests in subsidiaries, joint
arrangements, associates and structured entities. A number of new disclosures
are required. This standard affects disclosures only and has no impact on the
Company’s financial position or performance.
(d) MFRS 13 Fair Value Measurement
MFRS 13 establishes a single source of guidance under MFRS for all fair value
measurements. MFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value under MFRS.
MFRS 13 defines fair value as an exit price. As a result of the guidance in MFRS
13, the Company re-assessed its policies for measuring fair values, in particular,
its valuation inputs such as non-performance risk for fair value measurement of
liabilities. MFRS 13 also requires additional disclosures.
Application of MFRS 13 has not materiality impacted the fair value measurement
of the Company. Additional disclosures where required, are provided in the
individual notes relating to the assets and liabilities whose fair values were
determined.
51
593075-U
2.
(cont'd.)
(e) Amendments to MFRS 101: Presentation of Items of Other Comprehensive
Income
The amendments to MFRS 101 introduce a grouping of items presented in other
comprehensive income. Items that will be reclassified (“recycled”) to profit or loss
at a future point in time (e.g. net loss or gain on available-for-sale financial assets)
have to be presented separately from items that will not be reclassified (e.g.
revaluation of land and buildings). The amendments affect presentation only and
have no impact on the Company’s financial position or performance.
(f) MFRS 127 Separate Financial Statements
As a consequence of the new MFRS 10 and MFRS 12, MFRS 127 is limited to
accounting for subsidiaries, jointly controlled entities and associates in separate
financial statements. The Company has assessed the impact of this Standard on
(g) MFRS 128 Investments in Associates and Joint Ventures
As a consequence of the new MFRS 11 and MFRS 12, MFRS 128 is renamed as
MFRS 128 Investments in Associates and Joint Ventures. This new standard
describes the application of the equity method to investments in joint ventures in
addition to associates. The Company has assessed the impact of this Standard on
2.27 Standards issued but not yet effective
As at the date of authorisation of these financial statements, the following MFRSs,
Amendments to MFRS and Issues Committee (''IC'') Interpretations have been issued
by the Malaysian Accounting Standards Board (''MASB'') but are not yet effective as at
31 March 2014 and have not been adopted by the Company.
52
593075-U
2.
2.27 Standards issued but not yet effective (cont'd.)
Effective for financial
periods beginning
on or after
Description
Amendments to MFRS 10, MFRS 12 and MFRS 127:
Investment Entities
Amendments to MFRS 132: Offsetting Financial
Assets and Financial Liabilities
Amendments to MFRS 136: Recoverable Amount
Disclosures for Non-Financial Assets
Amendments to MFRS 139: Novation of Derivatives
and Continuation of Hedge Accounting
IC Interpretation 21 Levies
Amendments to MFRS 119: Defined Benefit Plans:
Employee Contributions
Annual Improvements to MFRSs 2010–2012 Cycle
Annual Improvements to MFRSs 2011–2013 Cycle
MFRS 9 Financial Instruments (IFRS 9 issued by
IASB in November 2009)
MFRS 9 Financial Instruments (IFRS 9 issued by
IASB in October 2010)
MFRS 9 Financial Instruments: Hedge Accounting
and amendments to MFRS 9, MFRS 7
and MFRS 139
2 January 2018
2 January 2018
2 January 2018
2 January 2018
2 January 2018
2 July 2018
2 July 2018
2 July 2018
To be announced
To be announced
To be announced
The adoption of the above FRSs, Amendments to FRS, IC Interpretations,
Amendments to IC Interpretations and Technical Releases did not have any significant
effect on the financial performance or position of the Company except for those
discussed below:
(a) MFRS 9 Financial Instruments ("MFRS 9")
MFRS 9 reflects the first phase of the work on the replacement of MFRS 139
Financial Instruments : Recognition and Measurement and applies to classification
and measurement of financial assets and financial liabilities as defined in MFRS
139 Financial Instruments : Recognition and Measurement. The adoption of the
first phase of MFRS 9 will have an effect on the classification and measurement of
the Company's financial assets. The Company will quantify the effect in
conjunction with the other phases, when the final standard including all phases is
issued.
53
593075-U
2.
2.27 Standards issued but not yet effective (cont'd.)
(b) Amendments to MFRS 139: Novation of Derivatives and Continuation of
Hedge Accounting
These amendments provide relief from discontinuing hedge accounting when
novation of a derivative designated as a hedging instrument meets certain criteria.
The Company does not expect the adoption of the amendments would have
material impact to the financial statements.
2.28 Significant accounting estimates and judgments
(a) Critical judgements made in applying accounting policies
The preparation of financial statements in conformity with MFRS requires
management to exercise judgment on the use of estimates and make assumptions
that affect the application of policies and reported amounts of assets, liabilities,
income and expenses. Although these estimates are based on management’s
best knowledge of current events and actions, actual results may differ from those
estimates. Critical accounting estimates and assumptions used that are significant
to the financial statements, and are as involving higher degree of judgment and
complexity, are disclosed as below:
(i) Classification between investment property and equipment
The Company has developed certain criteria based on MFRS 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.
54
593075-U
2.
2.28 Significant accounting estimates and judgments (cont'd.)
(a) Critical judgements made in applying accounting policies (cont'd.)
(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 flows.
(iii) Impairment of takaful and retakaful certificate 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.
55
593075-U
2.
(b) Key sources of estimation uncertainty (cont'd.)
(i) Depreciation and amortisation (cont'd.)
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.
(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 claim
liabilities.
The estimation bases for contribution liabilities for general takaful certificate
liabilities is explained in Note 2.13 (ii).
Generally, claim liabilities are estimated based upon historical claims
experience, existing knowledge of events, the terms and conditions of the
relevant certificates 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 claim liabilities.
The estimates of contribution liabilities and claim 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 reporting date, 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.
56
593075-U
2.
(ii) Uncertainty in accounting estimates for general takaful certificate
liabilities (cont'd.)
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.
(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.
All of these will give rise to estimation uncertainties of projected ultimate
liability of the family takaful fund.
At each reporting date, these estimates are reassessed for adequacy and
changes will be reflected as adjustments to the liability.
57
593075-U
2.
(iv) Uncertainty in accounting estimates for shareholder's fund expense
liabilities
The principal uncertainty in the shareholder's fund takaful certificate liabilities
arises from the technical provisions which includes the expense liabilities of
general and family takaful fund as explained in Note 2.15 (ii).
(a) Expense liabilities of general takaful fund
The estimation bases for unearned wakalah fees for general takaful
certificate liabilities is explained in Note 2.15(ii)(a).
The best estimate for unexpired expense reserve ("UER") 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. The UER is calculated at PRAD level
of 75% confidence level calculated at the overall Company level as
required by the Guidelines on Valuation Basis for Liabilities of General
Takaful Business.
(b) Expense liabilities of family takaful fund
An allowance is made to record certain future expected losses, if any to the
Company arising from servicing of individual policy contracts with
participants.
For single contribution products, the allowance is estimated based on
actuarial present value of future maintenance expenses. For other
products, provision is estimated based on discounted future net cash flows
to the Company using an actuarial method consistent with that used for
non-unit reserving called sterling reserves methodology.
The assumptions used are consistent with that used in the valuation of the
family takaful certificate liabilities and the Company's expense assumptions
are based on the Company's experience study with an appropriate
allowance of PRAD.
58
593075-U
2.
(v) Pipeline contributions
The general takaful fund has recognised pipeline contribution amounting to
approximately RM4,184,214 (2013: RM8,097,892) 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.
(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 depend 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 as at 31 March 2014 was
approximately RM14,678,000 (2013: RM6,437,000) for the shareholder's fund
and RM1,155,000 (2013: RM317,000) for the general takaful fund as
disclosed in Note 18.
59
593075-U
3.
Net earned contribution
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
224,302
547,961
769,569
(15,096)
209,206
547,961
(15,096)
754,473
Contributions ceded to retakaful
Decrease in unearned contribution
reserve
(69,454)
(40,375)
(109,829)
1,195
(68,259)
(40,375)
1,195
(108,634)
Net Earned Contributions
140,947
507,586
645,839
205,076
542,343
745,566
(20,897)
184,179
542,343
(20,897)
724,669
Contributions ceded to retakaful
reserve
(62,719)
(14,607)
(77,326)
6,550
(56,169)
(14,607)
6,550
(70,776)
Net Earned Contributions
128,010
527,736
653,893
2014
(a)
Gross contributions
Increase in unearned contribution
reserve
(b)
2013
(a)
Gross contributions
reserve
(b)
60
593075-U
4.
Investment income
2014
Financial assets at FVTPL:
Dividend income
- quoted shares in Malaysia
- unit trusts in Malaysia
HTM investments:
Profit income
AFS financial assets:
Profit income
Dividend income
Loans and receivables:
Profit income
Dividend income from
institutional trusts
Rental income
Investment expenses
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
30
-
44
-
84
4,256
158
4,256
2,342
2,900
12,417
17,659
5,248
3,337
17,195
25,780
506
-
499
6
2,542
-
3,547
6
2,319
4,563
26,824
33,706
370
(499)
10,316
(314)
11,035
1,041
5,190
(922)
(2,208)
66,419
1,411
929
(1,735)
(2,208)
83,509
2013
Dividend income
HTM investments:
Profit income
Profit income
Dividend income
Loans and receivables:
Profit income
Dividend income from
institutional trusts
Rental income
Investment expenses
22
30
420
472
2,105
2,902
12,795
17,802
4,983
3,729
21,569
30,281
161
-
247
337
1,469
505
1,877
842
2,987
3,426
11,625
18,038
350
(332)
10,276
(268)
10,403
986
5,069
(324)
(2,883)
51,231
1,336
808
(924)
(2,883)
67,649
61
593075-U
5.
Realised gains/(losses)
2014
Shareholder's
fund
RM '000
Quoted shares in Malaysia:
Shariah approved equities
Shariah approved unit
trust funds
HTM investments:
Government investment
issues
Unsecured unquoted Islamic
private debt securities:
trust funds
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
-
29
78
107
-
29
6,595
6,673
6,595
6,702
-
-
4
4
75
76
714
865
780
1,311
6,289
8,380
855
143
1,530
224
7,227
367
9,612
855
1,559
13,904
16,318
240
177
815
1,232
240
177
4,422
5,237
4,422
5,654
-
787
-
787
758
671
3,590
5,019
167
334
2,707
3,208
925
(73)
932
(110)
6,187
(183)
8,044
2013
trust funds
HTM investments:
Government investment
issues
Unsecured unquoted Islamic
private debt securities:
trust funds
1,165
62
1,896
11,424
14,485
593075-U
6.
Fair value (losses)/gains
2014
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
7
27
920
4,349
4,383
Financial assets at FVTPL
Allowance for impairment of
AFS financial assets
Writeback for impairment of
HTM investments
(43)
-
(982)
(1,025)
29
(7)
27
(168)
4,119
(139)
3,219
1
9
1,042
4,578
4,588
-
-
31
32
9
5,483
31
4,482
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
-
-
-
18,072
8,202
26,274
-
-
-
3,539
-
-
-
238,741
15,181
15,181
101
101
15,282
15,282
2013
HTM investments
7.
Fee and commission income
Shareholder's
2014
fund
RM '000
Wakalah fees:
55,560
Family takaful fund
153,368
208,928
Surplus administration charges:
Family takaful fund
Investment performance fee
from family takaful fund
Retakaful commission
income
63
(137)
(137)
593075-U
7.
Fee and commission income (cont'd.)
2013
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
50,929
147,757
198,686
-
-
-
16,512
5,724
22,236
-
-
-
5,411
-
-
-
226,333
10,806
10,806
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Wakalah fees:
Family takaful fund
Surplus administration charges:
Family takaful fund
from family takaful fund
Retakaful commission
income
8.
(75)
(75)
10,731
10,731
Fee and commission expenses
2014
Wakalah fees expense
Surplus administration
charges
Commissions paid to agents
(104,586)
(104,586)
Family
takaful fund
RM '000
(55,560)
(153,368)
(18,072)
(73,632)
(8,202)
(3,539)
(165,109)
(50,929)
(147,757)
(16,512)
(67,441)
(5,724)
(5,411)
(158,892)
Company
RM '000
(104,586)
(104,586)
2013
Wakalah fees expense
Surplus administration
charges
Commissions paid to agents
(111,691)
(111,691)
64
(111,691)
(111,691)
593075-U
9.
Management expenses
2014
Staff costs:
Salaries, bonus, and other
related costs
Directors' remuneration
(Note 10)
Pension costs - Employees
Provident Fund ("EPF")
Social security costs
Retirement benefits
Short-term accumulating
compensated absences
Auditors’ remuneration
- audit fee
- regulatory related fee
- other services
Office rental
Amortisation of intangible
assets
Depreciation of property and
equipment
Management fees paid to
holding company
Professional and legal fees
Share of acquisition costs
on quota share retakaful
Marketing and promotional
costs
Electronic data processing
costs
Agency expenses
Contribution to Perbadanan
Insurans Deposit Malaysia
("PIDM")
Other expenses
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
45,864
-
-
43,177
1,686
-
-
1,686
5,917
257
258
-
-
5,917
257
258
105
54,087
-
-
105
51,400
338
20
118
5,278
-
-
338
20
118
1,017
971
-
-
971
3,397
-
-
5,639
2,654
2,437
755
-
3,798
-
7,207
2,437
589
-
-
589
10,564
-
-
10,564
7,550
6,214
-
-
7,550
6,209
977
16,917
112,111
1,535
2,290
3,359
7,157
977
21,809
116,845
65
593075-U
9.
Management expenses (cont'd.)
2013
Staff costs:
Salaries, bonus, and other
related costs
Directors' remuneration
(Note 10)
Pension costs - EPF
Social security costs
Retirement benefits
Short-term accumulating
compensated absences
Auditors’ remuneration
- audit fee
- regulatory related fee
- other services
Office rental
Amortisation of intangible
assets
Depreciation of property and
equipment
Management fees paid to
holding company
Professional and legal fees
Share of acquisition costs
on quota share retakaful
Marketing and promotional
costs
Electronic data processing
costs
Agency expenses
Contribution to PIDM
Other expenses
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
41,189
-
-
39,424
1,611
5,293
246
74
-
-
1,611
5,293
246
74
(85)
48,328
-
-
(85)
46,563
235
15
13
5,332
-
-
235
15
13
1,071
1,036
-
-
1,036
3,499
-
-
5,642
5,920
1,619
-
-
5,920
1,619
1,970
-
-
1,970
7,156
-
-
7,156
6,252
6,345
1,141
15,349
104,210
5
5
3
3
6,252
6,340
1,141
15,274
100,247
66
593075-U
10. Directors' remuneration
2014
RM '000
2013
RM '000
723
173
896
692
201
893
676
114
10
800
614
104
66
784
Total remuneration excluding
benefits-in-kind
790
718
Total directors' remuneration
1,686
1,611
Shareholder's fund and Company
(a)
(b)
Non-executive directors' remuneration:
Fees
Allowances and other emoluments
Executive directors' remuneration:
Salary and bonus
Pension costs - EPF
Benefits-in-kind
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
2014
2013
Executive director:
RM650,001 - RM1,000,000
RM150,001 - RM650,000
1
-
2
Non-executive directors:
RM100,001 - RM150,000
RM50,001 - RM100,000
7
1
6
2
11. Other operating income/(expenses), net
2014
Miscellaneous income/
(expenses)
Allowance for impairment
of takaful receivables
other receivables
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
5,928
152
441
6,521
-
2,354
(2,026)
328
(425)
2,081
(1,585)
(425)
6,424
5,928
67
593075-U
11. Other operating income/(expenses), net (cont'd.)
2013
Shareholder's
fund
RM '000
General
takaful fund
RM '000
1,558
878
Miscellaneous income/
(expenses)
of takaful receivables
other receivables
Family
takaful fund
RM '000
(714)
Company
RM '000
1,722
-
(1,100)
(10,592)
(11,692)
1,558
(55)
(277)
(11,306)
(55)
(10,025)
12. Change in expense liability
2014
RM '000
2013
RM '000
1,035
2,466
3,501
1,825
2,410
4,235
14,779
655
18,280
4,890
Expense liability of general takaful fund
Increase in unearned wakalah fees reserve
Increase in provision for expense deficiency
Expense liability of family takaful fund
Increase in unexpired expense reserve
13. Tax borne by participants
General
takaful fund
RM '000
2014
Current year's provision
(Over)/underprovision of tax expense in
prior years
Deferred tax relating to origination and
reversal of temporary differences (Note 18)
Tax expense for the year
68
7,836
Family
takaful fund
RM '000
5,860
(264)
686
(400)
7,172
348
6,894
593075-U
13. Tax borne by participants
General
takaful fund
RM '000
2013
Under/(over) provision of tax expense in
prior years
Deferred tax relating to origination and
reversal of temporary differences (Note 18)
5,929
494
1,295
7,718
Family
takaful fund
RM '000
5,110
(899)
233
4,444
Domestic income tax for general fund is calculated at the Malaysian statutory tax rate of
25% (2013 : 25%) of the estimated assessable profit for the year.
Domestic income tax for family takaful business is taxed at the preferential tax rate of 8%
(2013 : 8%) of taxable investment income for the year.
A reconciliation of income tax expenses applicable to profit/surplus before taxation at the
statutory income tax rate to income tax expense at the effective income tax rate is as follows:
2014
Profit/surplus before taxation
Taxation at Malaysian statutory tax rate
Effects of different tax rate in respect of
family business
Income not subject to tax
Expenses not deductible for tax purposes
(Over)/underprovision of income tax expense
in prior year
69
General
takaful fund
RM '000
Family
takaful fund
RM '000
30,121
10,492
7,530
839
(137)
43
(41,141)
46,510
(264)
7,172
686
6,894
593075-U
13. Tax borne by participants (cont'd.)
General
takaful fund
RM '000
Family
takaful fund
RM '000
24,915
63,072
6,229
5,046
2013
Effects of different tax rate in respect of
family business
Utilisation of capital allowances allocated from
the Shareholder's fund
Overprovision of deferred tax in prior year
Under/(over)provision of income tax expense
in prior year
(153)
-
(40,788)
41,109
(30)
1,178
(26)
2
494
7,718
(899)
4,444
14. Taxation
Underprovision of tax expense in prior years
Deferred tax relating to origination and reversal of
temporary differences (Note 18)
2014
RM '000
2013
RM '000
12,529
109
8,226
124
(8,314)
4,324
(296)
8,054
Domestic income tax for shareholder's fund is calculated at the Malaysian statutory tax rate
of 25% (2013 : 25%) of the estimated assessable profit for the year.
A reconciliation of income tax expenses applicable to profit/surplus before taxation at the
statutory income tax rate to income tax expense at the effective income tax rate is as follows:
2014
RM '000
2013
RM '000
20,856
18,573
(Over)/underprovision of deferred tax in prior year
Underprovision of income tax expense in prior year
5,214
(227)
1,825
(2,597)
109
4,324
70
4,643
(133)
2,033
1,387
124
8,054
593075-U
15. Property and equipment
Shareholder's fund
Furniture,
fittings and
Computer
office
equipment equipment
RM '000
RM '000
Cost
At 1 April 2012
Additions
Reclassifications
At 31 March 2013
Additions
At 31 March 2014
Motor
vehicles
RM '000
Work
in
progress
RM '000
Total
RM '000
6,278
202
6,480
243
6,723
20,466
1,256
(465)
21,257
744
22,001
565
565
565
398
398
374
772
27,707
1,458
(465)
28,700
1,361
30,061
5,442
642
6,084
415
6,499
8,792
2,761
11,553
2,886
14,439
198
96
294
96
390
-
14,432
3,499
17,931
3,397
21,328
At 31 March 2014
224
7,562
175
772
8,733
At 31 March 2013
396
9,704
271
398
10,769
Accumulated depreciation
At 1 April 2012
Charge for the year
At 31 March 2013
Charge for the year
At 31 March 2014
Net Book Value
71
593075-U
15. Property and equipment (cont'd.)
Company
Self
occupied
properties
RM '000
Furniture,
fittings and
Computer
office
equipment equipment
RM '000
RM '000
Motor
vehicles
RM '000
Work
in
progress
RM '000
Total
RM '000
Cost
At 1 April 2012
Additions
Revaluation surplus
Reclassifications
Elimination of accumulated depreciation
At 31 March 2013
Additions
Revaluation surplus
Reclassifications
At 31 March 2014
102,510
5,284
1,550
(4,242)
105,102
810
3,162
90
(2,242)
106,922
72
6,278
202
6,480
243
6,723
20,466
1,256
(465)
21,257
744
22,001
565
565
565
1,716
322
(1,550)
488
374
(90)
772
131,535
1,780
5,284
(465)
(4,242)
133,892
2,171
3,162
(2,242)
136,983
593075-U
Company (cont'd.)
Self
occupied
properties
RM '000
Furniture,
fittings and
Computer
office
equipment equipment
RM '000
RM '000
Motor
vehicles
RM '000
Work
in
progress
RM '000
Total
RM '000
At 1 April 2012
Charge for the year
At 31 March 2013
Charge for the year
At 31 March 2014
2,099
2,143
(4,242)
2,242
(2,242)
-
5,442
642
6,084
415
6,499
8,792
2,761
11,553
2,886
14,439
198
96
294
96
390
-
16,531
5,642
(4,242)
17,931
5,639
(2,242)
21,328
Net Book Value
At 31 March 2014
106,922
224
7,562
175
772
115,655
At 31 March 2013
105,102
396
9,704
271
488
115,961
73
593075-U
Revaluation of self occupied properties
Self occupied properties have been revalued based on valuations performed by an
accredited independent valuer having an appropriate recognised professional qualification.
The valuations are based on the investment and comparison method.
The investment method entails the determination of the probable gross annual rental the
property is capable of producing and deducting therefrom the outgoings to arrive at the
annual net income. The comparison method entails critical analyses of recent evidence of
values of comparable properties in the neighbourhood and making adjustments for
differences.
If the self occupied properties were measured using the cost model, the carrying amounts
would be as follows:
Company
Self
occupied
properties
RM '000
Cost
At 1 April 2012
Additions
At 31 March 2013
Additions
At 31 March 2014
87,465
1,550
89,015
900
89,915
At 1 April 2012
Charge for the year
At 31 March 2013
Charge for the year
At 31 March 2014
4,598
2,143
6,741
2,242
8,983
Net carrying amount
At 31 March 2014
80,932
At 31 March 2013
82,274
74
593075-U
16. Investment properties
2014
RM '000
2013
RM '000
105,192
810
920
106,922
103,828
322
1,042
105,192
Family takaful fund
At fair value:
At beginning of year
Additions
Fair value adjustments (Note 6)
At end of year
These properties are carried at fair value as at 31 March 2014 in accordance with the
accounting policy disclosed in Note 2.4.
17. Intangible assets
Software
Computer
Development Software and
in Progress
Licences
RM '000
RM '000
Total
RM '000
Cost
At 1 April 2012
Additions
Reclassifications
At 31 March 2013
Additions
At 31 March 2014
3,438
836
(126)
4,148
573
4,721
11,362
321
126
11,809
226
12,035
14,800
1,157
15,957
799
16,756
-
8,699
1,036
9,735
971
10,706
8,699
1,036
9,735
971
10,706
4,721
1,329
6,050
Accumulated Amortisation
At 1 April 2012
Charge for the year
At 31 March 2013
Charge for the year
At 31 March 2014
Net Carrying Amount
At 31 March 2014
Deferred
The components
component
tax assets and
andmovements
movement
liabilities ofaredeferred
deferred
offset tax
tax
when
liabilities
liability
there during
during
is a the
legally
thebalance
financial
sheet
Amortisation
year
dateareis as
At 31 March 2013
4,148
2,074
6,222
Deferred
The components
component
tax assets and
andmovements
movement
liabilities ofaredeferred
deferred
offset tax
tax
when
liabilities
liability
there during
during
is a the
legally
thebalance
financial
sheet
Amortisation
year
dateareis as
75
593075-U
18. Deferred tax assets/(liabilities)
2014
Shareholder's
fund
RM '000
At 1 April 2013
Recognised in:
AFS reserve
Revaluation reserves
Statement of comprehensive
income (Notes 13 and 14)
At 31 March 2014
6,437
(73)
-
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
317
(2,685)
3,529
438
-
2,921
-
3,286
(253)
8,314
14,678
400
1,155
(348)
(112)
8,440
15,002
5,752
1,195
(2,978)
3,769
389
-
417
-
2013
At 1 April 2012
Recognised in:
AFS reserve
Statement of comprehensive
income (Notes 13 and 14)
At 31 March 2013
296
6,437
(1,295)
317
526
(233)
(2,685)
1,332
(423)
(1,149)
3,529
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when the deferred income taxes
relate to the same fiscal authority. The net deferred tax assets/(liabilities) shown in the
statement of financial position has been determined after appropriate offsetting as follows:
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
4,598
4,598
1,155
1,155
1,249
(1,361)
(112)
3,791
(2,080)
1,711
2,770
2,770
317
317
(2,685)
(2,685)
308
(2,636)
(2,328)
Company
RM '000
2014
Deferred tax assets
2013
Deferred tax assets
76
593075-U
18. Deferred tax assets/(liabilities) (cont'd.)
The components and movements of deferred tax assets/(liabilities) during the financial year
are as follows:
Shareholder's fund
Financial
Assets
RM '000
Expense
Liabilities
RM '000
Other
Accruals
RM '000
3,667
-
2,190
-
880
1,387
6,413
10,080
1,021
3,211
8,314
14,678
121
389
2,900
-
2,731
-
5,752
389
70
580
767
3,667
(541)
2,190
296
6,437
Financial
Assets
RM '000
Receivables
RM '000
Total
RM '000
9
438
308
-
317
438
71
518
329
637
400
1,155
(474)
417
1,669
-
1,195
417
66
9
(1,361)
308
(1,295)
317
Total
RM '000
2014
At 1 April 2013
Recognised in AFS reserve
Recognised in statement of
At 31 March 2014
580
(73)
6,437
(73)
2013
At 1 April 2012
At 31 March 2013
2014
At 1 April 2013
Recognised in statement of comprehensive
income
At 31 March 2014
2013
At 1 April 2012
income
At 31 March 2013
77
593075-U
Family takaful fund
Financial
Assets
RM '000
2014
At 1 April 2013
income
At 31 March 2014
Investment
Properties
RM '000
Total
RM '000
(1,398)
2,921
(1,287)
-
(2,685)
2,921
(274)
1,249
(74)
(1,361)
(348)
(112)
(1,774)
526
(1,204)
-
(2,978)
526
(150)
(1,398)
(83)
(1,287)
(233)
(2,685)
2013
At 1 April 2012
income
At 31 March 2013
78
593075-U
Company
2014
At 1 April 2013
Recognised in revaluation
reserves
At 31 March 2014
Financial
Assets
RM '000
Expense
Liabilities
RM '000
Other
Accruals
RM '000
Receivables
RM '000
3,667
-
2,190
-
308
-
(1,827)
-
-
-
-
-
(253)
677
3,154
6,413
10,080
1,021
3,211
329
637
(2,080)
8,440
15,002
(2,127)
1,332
2,900
-
2,731
-
1,669
-
(1,404)
-
3,769
1,332
-
-
-
(423)
(423)
(1,827)
(1,149)
3,529
(809)
3,286
Property and
Equipment
RM '000
Total
RM '000
3,529
3,286
(253)
2013
At 1 April 2012
Recognised in revaluation
reserves
At 31 March 2013
(14)
(809)
79
767
3,667
(541)
2,190
(1,361)
308
593075-U
19. Financial assets
---------------------------------------------------------------- 2014 ------------------------------------------------------------------------------------------------------------------------------- 2013 ----------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
fund takaful fund takaful fund
Company
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
Unquoted Islamic private debt securities:
Government guaranteed
Unsecured
Government investment issues
Warrants
Property trust funds
Shariah approved unit trust funds
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 financing:
Receivable within 12 months
Receivable after 12 months
Due from:
Family takaful fund
Investment-linked fund
Amount due from related companies
Income due and accrued
Other receivables, deposits and prepayments
33,147
104,732
42,884
31,317
54,580
61,330
316,711
434,832
441,997
381,175
594,144
546,211
21,626
112,094
40,320
18,318
65,071
59,349
213,940
403,682
318,201
253,884
580,847
417,870
17,199
37
588
178
18,932
62
525
-
95,017
155
5,708
131,889
-
131,148
254
6,821
131,889
178
8,382
26
66
178
6,632
29
98
8,394
-
51,088
328
129,685
-
66,102
55
492
138,079
178
43,438
5,756
247
14,545
6,214
10,000
100,838
24,718
33,414
-
140,728
60,569
8,964
88,325
18,641
-
285,004
91,043
9,211
136,284
24,855
-
45,599
2,361
19,578
400
14,967
7,246
10,000
69,532
8,882
39,557
-
191,139
16,365
80,666
27,703
53,126
20,437
-
306,270
27,608
139,801
28,103
68,093
27,683
-
1,220
2,072
-
-
1,220
2,072
1,121
1,934
-
-
1,121
1,934
36,933
49,501
1,460
34
1,951
2,721
374,857
559
2,762
1,666
330,703
2
557
14,658
5,124
1,763,877
591
19,371
9,511
2,370,982
28,873
33,702
34
2,097
3,285
353,889
3,552
1,570
280,984
5,502
541
14,104
308
1,526,815
575
19,753
5,163
2,083,611
80
593075-U
19. Financial assets (cont'd.)
The Company's financial instruments are summarised by categories as follows:
---------------------------------------------------------------- 2014 ------------------------------------------------------------------------------------------------------------------------------- 2013 ----------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
Company
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
Financial assets at FVTPL (Note 19(a))
HTM investments (Note 19(b))
AFS financial assets (Note 19(c))
Loans and receivables (Note 19(d))
1,160
62,157
135,448
176,092
374,857
1,372
72,033
93,341
163,957
330,703
135,626
332,336
958,347
337,568
1,763,877
138,158
466,526
1,187,136
579,162
2,370,982
1,153
62,212
119,327
171,197
353,889
1,153
74,621
82,117
123,093
280,984
120,194
352,546
644,184
409,891
1,526,815
122,500
489,379
845,628
626,104
2,083,611
1,138
22
1,160
1,352
20
1,372
3,717
20
131,889
135,626
6,207
62
131,889
138,158
1,131
22
1,153
1,133
20
1,153
3,100
117,094
120,194
5,364
42
117,094
122,500
(a) Financial assets at FVTPL
At fair value:
Warrants
An analysis of the different fair value measurement bases used in the determination of the fair value of financial assets at FVTPL are further disclosed in Note 43(v) of the financial
statements.
81
593075-U
(b) HTM investments
---------------------------------------------------------------- 2014 ------------------------------------------------------------------------------------------------------------------------------- 2013 ----------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
Company
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
At amortised cost:
Unsecured
19,018
255
42,884
62,157
18,317
53,716
72,033
32,047
300,289
332,336
69,382
255
396,889
466,526
21,626
266
40,320
62,212
18,318
2,000
54,303
74,621
41,435
8,000
303,111
352,546
81,379
10,266
397,734
489,379
18,861
567
40,725
60,153
18,159
52,929
71,088
31,740
291,091
322,831
68,760
567
384,745
454,072
19,433
396
43,141
62,970
18,718
2,002
55,435
76,155
42,472
8,010
306,164
356,646
80,623
10,408
404,740
495,771
At fair value:
Unsecured
An analysis of the different fair value measurement bases used in the determination of the fair value of HTM investments are further disclosed in Note 43(v) of the financial statements.
(c) AFS financial assets
At cost:
178
-
-
178
178
-
-
178
14,129
104,477
-
13,000
54,580
7,614
284,664
434,832
141,708
311,793
593,889
149,322
111,828
-
63,071
5,046
172,505
395,682
15,090
172,505
570,581
20,136
16,061
15
588
135,448
17,580
42
525
93,341
91,300
135
5,708
958,347
124,941
192
6,821
1,187,136
7,251
4
66
119,327
5,499
9
98
8,394
82,117
47,988
328
12,591
644,184
60,738
13
492
20,985
845,628
At fair value:
Unsecured
Warrants
An analysis of the different fair value measurement bases used in the determination of the fair value of AFS financial assets are further disclosed in Note 43(v) of the financial statements.
82
593075-U
(d) Loans and receivables
At amortised cost/cost
---------------------------------------------------------------- 2014 ------------------------------------------------------------------------------------------------------------------------------- 2013 ----------------------------------------------------Shareholder's
General
Family
Shareholder's
General
Family
Company
Company
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
RM '000
Islamic banks
Investment banks
Development bank
Building society
Secured staff financing:
Receivable within 12 months
Receivable after 12 months
Due from:
Family takaful fund
Investment-linked fund
Amount due from related companies
43,438
5,756
247
14,545
6,214
10,000
100,838
24,718
33,414
-
285,004
91,043
9,211
136,284
24,855
1,220
2,072
45,599
2,361
19,578
400
14,967
7,246
10,000
69,532
8,882
39,557
-
191,139
16,365
80,666
27,703
53,126
20,437
-
-
140,728
60,569
8,964
88,325
18,641
-
1,121
1,934
-
-
306,270
27,608
139,801
28,103
68,093
27,683
1,121
1,934
1,220
2,072
36,933
49,501
1,460
34
1,951
2,721
176,092
559
2,762
1,666
163,957
2
557
14,658
5,124
337,568
591
19,371
9,511
579,162
28,873
33,702
34
2,097
3,285
171,197
3,552
1,570
123,093
5,502
541
14,104
308
409,891
575
19,753
5,163
626,104
83
593075-U
20. Takaful certificates receivables
General
takaful fund
RM '000
2014
Due contributions including agents/brokers
and co-takaful balances
Due from retakaful operators
Family
takaful fund
RM '000
Company
RM '000
32,014
4,312
36,326
(4,052)
32,274
93,677
9,765
103,442
(14,478)
88,964
125,691
14,077
139,768
(18,530)
121,238
25,547
9,663
35,210
(6,406)
28,804
67,719
12,443
80,162
(12,452)
67,710
93,266
22,106
115,372
(18,858)
96,514
2013
Due contributions including agents/brokers
and co-takaful balances
Due from retakaful operators
Included in takaful certificates receivables are amounts due from related parties as disclosed
under Note 34. The amounts receivable is subject to settlement terms stipulated in the
takaful and retakaful certificates.
The movement in the allowance for impairment account for takaful certificates receivables
are as follows:
General
Family
takaful fund takaful fund
Company
2014
RM '000
RM '000
RM '000
At 1 April 2013
(Writeback)/allowance for impairment
losses during the year
Impairment written-off during the year
At 31 March 2014
6,406
12,452
18,858
(2,354)
4,052
2,026
14,478
(328)
18,530
6,518
1,100
(1,212)
6,406
1,860
10,592
12,452
8,378
11,692
(1,212)
18,858
2013
At 1 April 2012
Impairment losses during the year
At 31 March 2013
84
593075-U
21. Tax recoverable
The Inland Revenue Board (“IRB”) had, on 30 and 31 December 2013 and 31 March 2014,
issued to the Company notices of assessment and notices of additional assessment (i.e.
Form J and Form JA) for the years of assessment ("YA") 2006, 2007, 2008 and 2009,
disallowing family business’ commission expenses as deductions. The additional tax payable
by the Company under the above-mentioned notices is RM48,982,969.55. As a result of the
above, IRB had also treated the tax returns made bythe Company for the above years of
assessment as incorrect, and imposed a penalty of RM22,042,336.29 to the Company.
Efforts have been made by the takaful industry, through the Malaysian Takaful Association
("MTA"), to resolve the above issue with the relevant authorities. Discussions have been held
involving MTA and the relevant authorities governing the takaful industry to reach an
equitable outcome for all takaful operators. While awaiting the formal outcome of the
discussions, Takaful IKHLAS had submitted an appeal (Form Q) against the payment of this
additional assessment and penalty. IRB allowed the Company a 12 months instalments
payments while waiting for the outcome of the appeal starting from 1 March 2014.
The Company, having taken into consideration the advice from the Company’s various
advisors, decided to pay the 1st instalment to avoid additional penalty from being imposed.
As at 31 March 2014, the Company had paid 2 instalments amounting to RM7,682,546. The
IRB had, on 8 April 2014 extended the deadline for settlement to 30 June 2014.
The Company is of the view that there are strong justifications for its appeal and so the
Company had not made any provision for the above tax and penalty.
85
593075-U
22. Takaful certificate liabilities
General Takaful Fund
Gross
Retakaful
Net
RM '000
RM '000
RM '000
Family Takaful Fund
Gross
Retakaful
Net
RM '000
RM '000
RM '000
Gross
RM '000
Company
Retakaful
RM '000
Net
RM '000
2014
General takaful fund (Note (a))
Family takaful fund (Note (b))
320,552
320,552
(80,289)
(80,289)
240,263
240,263
1,800,160
1,800,160
(139,538)
(139,538)
1,660,622
1,660,622
320,552
1,790,160
2,110,712
(80,289)
(139,538)
(219,827)
240,263
1,650,622
1,890,885
301,553
301,553
(62,912)
(62,912)
238,641
238,641
1,513,237
1,513,237
(89,843)
(89,843)
1,423,394
1,423,394
301,553
1,503,237
1,804,790
(62,912)
(89,843)
(152,755)
238,641
1,413,394
1,652,035
2013
General takaful fund (Note (a))
Family takaful fund (Note (b))
#R
86
593075-U
22. Takaful certificate liabilities (cont'd.)
(a) General takaful fund
Gross
RM '000
General takaful fund and Company
Retakaful
RM '000
Net
RM '000
2014
Provision for claims reported
by certificate holders
Provision for incurred but not reported
claims ("IBNR")
Provision for risk margin for adverse
deviations ("PRAD")
Claim Liabilities (i)
Contribution liabilities (ii)
107,020
(29,436)
77,584
69,332
(21,459)
47,873
25,167
(3,030)
22,137
201,519
(53,925)
147,594
119,033
320,552
(26,364)
(80,289)
92,669
240,263
93,692
(17,510)
76,182
77,720
(14,721)
62,999
26,203
(5,511)
20,692
197,615
103,938
301,553
(37,742)
(25,170)
(62,912)
159,873
78,768
238,641
2013
Provision for incurred but not reported
claims ("IBNR")
Provision for risk margin for adverse
deviations ("PRAD")
Claim Liabilities (i)
Contribution liabilities (ii)
87
593075-U
(a) General takaful fund (cont'd.)
The movement of claim liabilities of general takaful fund and contribution liabilities of
general takaful fund are presented as follows:
(i) Claim liabilities
Gross
RM '000
Retakaful
RM '000
Net
RM '000
2014
At 1 April 2013
Claims incurred in the current
accident year
Adjustment to claims incurred in prior
accident years due to changes in
assumptions:
Increase/(decrease) in PRAD
Decrease in Expected Ultimate
Loss Ratio
Movements in claims incurred in prior
accident years
Claims paid during the year
At 31 March 2014
197,615
(37,742)
159,873
166,245
(56,074)
110,171
(1,035)
2,481
1,446
(46,817)
8,374
(38,443)
(5,744)
(108,745)
201,519
(2,642)
31,678
(53,925)
(8,386)
(77,067)
147,594
210,669
(23,536)
187,133
124,912
(33,985)
90,927
14,596
(4,547)
10,049
(24,136)
1,444
(22,692)
(21,032)
(107,394)
197,615
1,235
21,647
(37,742)
(19,797)
(85,747)
159,873
2013
At 1 April 2012
Claims incurred in the current
accident year
Adjustment to claims incurred in prior
accident years due to changes in
assumptions:
Increase in PRAD
Decrease in Expected Ultimate
Loss Ratio
Movements in claims incurred in prior
accident years
Claims paid during the year
At 31 March 2013
88
593075-U
(a) General takaful fund (cont'd.)
(ii) Contribution liabilities
Gross
RM '000
Retakaful
RM '000
Net
RM '000
2014
At 1 April 2013
Contributions written during the year
Contributions earned during the year
At 31 March 2014
103,938
224,302
(209,207)
119,033
(25,170)
(69,454)
68,260
(26,364)
78,768
154,848
(140,947)
92,669
83,041
205,076
(184,179)
103,938
(18,620)
(62,719)
56,169
(25,170)
64,421
142,357
(128,010)
78,768
2013
At 1 April 2012
Contributions written during the year
Contributions earned during the year
At 31 March 2013
89
593075-U
(b) Family takaful fund
2014
Participants' Account ("PA")
Participants' Special Account ("PSA")
NAV attributable to unitholders
Family Takaful Fund
Gross
Retakaful
Net
RM '000
RM '000
RM '000
Gross
RM '000
Company
Retakaful
RM '000
Net
RM '000
37,148
1,455,102
179,232
128,678
1,800,160
(13,212)
(126,326)
(139,538)
23,936
1,455,102
52,906
128,678
1,660,622
37,148
1,455,102
179,232
118,678
1,790,160
(13,212)
(126,326)
(139,538)
23,936
1,455,102
52,906
118,678
1,650,622
41,695
1,257,837
96,859
116,846
1,513,237
(9,664)
(80,179)
(89,843)
32,031
1,257,837
16,680
116,846
1,423,394
41,695
1,257,837
96,859
106,846
1,503,237
(9,664)
(80,179)
(89,843)
32,031
1,257,837
16,680
106,846
1,413,394
2013
Participants' Account ("PA")
Participants' Special Account ("PSA")
NAV attributable to unitholders
90
593075-U
(b) Family takaful fund (cont'd.)
The movement of family takaful fund liabilities are presented as follows:
2014
At 1 April 2013
Net creation of units
Liabilities paid for death,maturities, surrenders,
benefits and claims
Net cancellation of units
Benefits and claims experience variation
Fees deducted
Other revenue and expenses
Transfer to shareholder's fund
Increase in reserve
At 31 March 2014
Family Takaful Fund
Gross
Retakaful
Net
RM '000
RM '000
RM '000
Gross
RM '000
Company
Retakaful
RM '000
Net
RM '000
1,513,237
528,624
19,337
(89,843)
(40,375)
-
1,423,394
488,249
19,337
1,503,237
528,624
19,337
(89,843)
(40,375)
-
1,413,394
488,249
19,337
(176,231)
(20,262)
(4,547)
(153,368)
12,757
(11,741)
92,354
1,800,160
21,863
(3,548)
(27,635)
(139,538)
(154,368)
(20,262)
(8,095)
(153,368)
12,757
(11,741)
64,719
1,660,622
(176,231)
(20,262)
(4,547)
(153,368)
12,757
(11,741)
92,354
1,790,160
21,863
(3,548)
(27,635)
(139,538)
(154,368)
(20,262)
(8,095)
(153,368)
12,757
(11,741)
64,719
1,650,622
91
593075-U
(b) Family takaful fund (cont'd.)
2013
At 1 April 2012
Net creation of units
Units created from surplus distribution
Liabilities paid for death,maturities, surrenders,
benefits and claims
Net cancellation of units
Benefits and claims experience variation
Fees deducted
Other revenue and expenses
Transfer to shareholder's fund
Increase in reserve
At 31 March 2013
Family Takaful Fund
Gross
Retakaful
Net
RM '000
RM '000
RM '000
Gross
RM '000
Company
Retakaful
RM '000
Net
RM '000
1,217,377
527,586
14,757
115
(24,696)
(14,607)
-
1,192,681
512,979
14,757
115
1,207,377
527,586
14,757
115
(24,696)
(14,607)
-
1,182,681
512,979
14,757
115
(165,843)
(21,457)
5,255
(147,757)
6,976
(11,135)
87,363
1,513,237
21,167
1,176
(72,883)
(89,843)
(144,676)
(21,457)
6,431
(147,757)
6,976
(11,135)
14,480
1,423,394
(165,843)
(21,457)
5,255
(147,757)
6,976
(11,135)
87,363
1,503,237
21,167
1,176
(72,883)
(89,843)
(144,676)
(21,457)
6,431
(147,757)
6,976
(11,135)
14,480
1,413,394
92
593075-U
23. Expense liabilities
2014
RM '000
2013
RM '000
8,408
8,557
16,965
7,373
6,091
13,464
23,355
40,320
8,576
22,040
General
takaful
fund
RM '000
Family
takaful
fund
RM '000
Total
RM '000
13,464
8,576
22,040
Expense liabilities for general takaful fund:
Unearned wakalah fees reserve
Provision for expense deficiency
Expense liabilities for family takaful fund :
Unexpired expense reserve ("UER")
The movement of expense liabilities are presented as follows:
2014
At 1 April 2013
- Wakalah fee received during the
year (Note 7)
- Wakalah fee earned during the year
- Movement in provision for expense
deficiency
- Movement in provision for UER
At 31 March 2014
55,560
(54,525)
-
55,560
(54,525)
2,466
16,965
14,779
23,355
2,466
14,779
40,320
9,229
7,921
17,150
2013
At 1 April 2012
- Wakalah fee received during the
year (Note 7)
- Wakalah fee earned during the year
- Movement in provision for expense
deficiency
- Movement in provision for UER
At 31 March 2013
50,929
(49,104)
2,410
13,464
93
655
8,576
50,929
(49,104)
2,410
655
22,040
593075-U
24. Takaful certificates payables
2014
Due to agents, retakaful operators and brokers
General
takaful
fund
RM '000
Family
takaful
fund
RM '000
Company
RM '000
16,580
28,417
44,997
20,299
11,524
31,823
2013
Included in amount due to agents, retakaful operators and brokers are amounts due to
related parties as presented under Note 34. The amounts payable is subject to settlement
terms stipulated in the takaful and retakaful certificates.
25. Other payables
2014
Commissions payable
Deferred wakalah fee
Provisions
Advance contributions
Deposit contributions
Amount due to shareholder's
fund*
Amount due to general
takaful fund*
Amount due to investmentlinked fund*
Amount due to:
Holding company*
Fellow subsidiaries*
Agency provident fund
Other accruals and payables
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
13,741
25,319
-
4,620
-
30,920
13,741
25,319
4,620
30,920
-
36,933
50,961
-
-
-
559
-
-
2
-
-
927
4
5,069
3,319
48,379
37,628
79,183
16,547
98,987
927
4
5,069
57,494
138,094
94
593075-U
25. Other payables (cont'd.)
2013
Commissions payable
Deferred wakalah fee
Provisions
Advance contributions
Deposit contributions
Amount due to shareholder's
fund*
Amount due to family
takaful fund*
Amount due to:
Holding company*
Fellow subsidiaries*
Agency provident fund
Other accruals and payables
*
Shareholder's
fund
RM '000
General
takaful fund
RM '000
Family
takaful fund
RM '000
Company
RM '000
11,509
1,046
16,578
-
2,989
-
28,801
11,509
1,046
16,578
2,989
28,801
-
28,873
33,702
-
-
5,502
-
-
1,411
4
5,198
3,986
39,732
20,151
57,515
12,711
75,214
1,411
4
5,198
36,848
104,384
The amounts due to shareholder's fund, general takaful fund, family takaful fund, the
holding company and fellow subsidiaries are unsecured, not subject to any profit
elements and has no fixed terms of repayment.
95
593075-U
26. Share capital
Number of
ordinary
shares of
RM1.00 each
'000
2013/2014
Amount
RM '000
Authorised:
500,000
500,000
Issued and fully paid:
At beginning and end of the year
295,000
295,000
2014
RM
RM'000
'000
2013
RM '000
Distributable retained profits/(losses)
19,225
12,093
Non-distributable AFS reserves
(1,885)
17,340
913
13,006
27. Reserves
The AFS reserves arose from the changes in the fair value of the investment assets
classified as AFS financial assets.
96
593075-U
28. General takaful fund
2014
RM '000
Accumulated surplus
At 1 April 2013
Underwriting surplus transferred from general takaful
statement of comprehensive income
Hibah paid and payable to participants during the year
At 31 March 2014
19,760
22,949
(8,132)
34,577
AFS reserves
At 1 April 2013
Realised gain transferred to statement of
At 31 March 2014
586
(221)
438
(1,530)
(727)
General takaful fund at end of the year
Accumulated surplus
AFS reserves
34,577
(727)
33,850
2013
Accumulated surplus
At 1 April 2012
Underwriting surplus transferred from general takaful
Hibah paid and payable to participants during the year
At 31 March 2013
97
7,784
17,197
(5,221)
19,760
593075-U
28. General takaful fund (cont'd.)
2013 (cont'd.)
RM '000
AFS reserves
At 1 April 2012
At 31 March 2013
1,838
(737)
417
(932)
586
General takaful fund at end of the year
Accumulated surplus
AFS reserves
19,760
586
20,346
29. Family takaful fund
2014
Family
takaful fund
RM '000
Company
RM '000
206,923
185,382
3,598
210,521
510
185,892
7,416
(29,287)
2,921
7,416
(29,287)
2,921
(7,227)
(26,177)
(7,227)
(26,177)
Unallocated surplus
At 1 April 2013
Net surplus transferred from family takaful
At 31 March 2014
AFS reserves
At 1 April 2013
Net loss on fair value changes
At 31 March 2014
At 1 April 2013
At 31 March 2014
-
98
21,001
3,162
(253)
23,910
593075-U
29. Family takaful fund (cont'd.)
Family
takaful fund
RM '000
2014 (cont'd.)
Family takaful fund at end of the year
Unallocated surplus
AFS reserves
Company
RM '000
210,521
(26,177)
184,344
185,892
(26,177)
23,910
183,625
148,295
129,856
58,628
206,923
55,526
185,382
2013
Unallocated surplus
At 1 April 2012
Net surplus transferred from family takaful
At 31 March 2013
AFS reserves
At 1 April 2012
At 31 March 2013
13,462
(385)
526
13,462
(385)
526
(6,187)
7,416
(6,187)
7,416
At 1 April 2012
Deferred tax on changes to revaluation reserves
At 31 March 2013
Family takaful fund at end of the year
Unallocated surplus
AFS reserves
-
206,923
7,416
214,339
99
16,140
5,284
(423)
21,001
185,382
7,416
21,001
213,799
593075-U
30. Earnings per share
The basic earnings per share ("EPS") is calculated based on the net profit for the financial
year divided by the weighted average number of ordinary shares in issue during the year as
follows:
Company
Profit attributable to ordinary shareholder (RM '000)
Weighted average number/number of ordinary
ordinary shares in issue ('000)
Basic earnings per share (sen)
2014
RM '000
2013
RM '000
16,132
10,119
295,000
295,000
5.5
3.4
Family
takaful
fund
RM '000
Company
RM '000
31. Segmental information on cash flow
2014
Shareholder's
fund
RM '000
Net cash flows generated from
/(used in):
Operating activities
Investing activities
Net increase/(decrease) in
cash and cash equivalents
At 1 April 2013
At 31 March 2014
General
takaful
fund
RM '000
14,018
(2,160)
2,858
(24,998)
(24,998)
(18,076)
(810)
(18,886)
(29,055)
(2,971)
(41,026)
2,858
2,841
5,699
(24,998)
32,549
7,551
(18,886)
32,026
13,140
(41,026)
67,416
26,390
3,617
(2,150)
1,467
10,337
10,337
(23,233)
(322)
(23,555)
(3,995)
(7,756)
(16,751)
1,467
1,374
2,841
10,337
22,212
32,549
(23,555)
55,581
32,026
(11,750)
79,166
67,416
2013
Net cash flows used in:
Operating activities
Investing activities
Net decrease in
cash and cash equivalents
At 1 April 2012
At 31 March 2013
100
593075-U
32. Operating lease commitments
As at the reporting date, the Company lease office premises under lease agreements that
are not cancellable within a year. The leases contain renewable options.
Future minimum lease payments for leases with initial or remaining terms of one year or
more are as follows:
Company
Within 1 year
After 1 year but not more than 5 years
2014
RM '000
2013
RM '000
545
262
807
870
547
1,417
2014
RM '000
2013
RM '000
82
-
207
342
15,729
15,729
8,340
8,340
82
15,729
15,811
549
8,340
8,889
-
810
33. Capital commitments
Shareholder's fund
Authorised and contracted for:
- Intangible assets - computer software (payable
within 12 months)
- Tangible assets
Authorised but not contracted for:
- Intangible assets - computer software
- Tangible assets
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)
101
593075-U
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.
(a) The significant related party transactions and balances during the year are as follows:
Shareholder's
fund
RM '000
2014
General
takaful
fund
RM '000
Family
takaful
fund
RM '000
Income/(expenses) :
Transactions with MNRB Holdings
Berhad ("MNRB"):
Gross contributions
Management fees
(2,654)
275
(755)
Transactions with Malaysian Reinsurance
Berhad ("MRB"), a fellow subsidiary:
Gross contributions
Retakaful outward contributions
Retakaful commissions
Claims recoveries
-
38
(42)
5
-
Transactions with MNRB Retakaful Berhad
("MRTB"), a fellow subsidiary:
Gross contributions
Claims recoveries
-
9
(15,126)
3,225
502
Transactions with MMIP Services Sdn. Bhd.,
a fellow subsidiary:
Referral fees
102
99
-
(4,456)
124
-
16
(265)
1,851
-
593075-U
34. Related party disclosures (cont'd.)
(a) The significant related party transactions and balances during the year are as follows
(cont'd.):
Shareholder's
fund
RM '000
2014 (cont'd.)
takaful
fund
RM '000
takaful
fund
RM '000
Income/(expenses) :
Transactions with Labuan Re,
in which MNRB is a substantial
shareholder:
Gross contributions
Claims recoveries
-
Transactions with a related party,
MIDF Amanah Investment Bank Berhad:
Fund management fees
-
41
(5,486)
1,252
-
-
-
(71)
275
-
2
(653)
461
-
2013
Transactions with MNRB:
Gross contributions
Management fees
(5,920)
Transactions with MRB, a fellow subsidiary:
Gross contributions
Claims recoveries
-
38
(55)
3
3
Transactions with MRTB, a fellow subsidiary:
Gross contributions
Claims recoveries
-
9
(13,615)
3,377
1,187
Transactions with MMIP Services Sdn. Bhd.,
a fellow subsidiary:
Referral fees
117
103
-
(5)
(12,539)
19,430
-
593075-U
(cont'd.):
General
Family
Shareholder's
takaful
takaful
fund
fund
fund
2013 (cont'd.)
RM '000
RM '000
RM '000
Transactions with Labuan Re,
in which MNRB is a substantial
shareholder:
Gross contributions
Claims recoveries
-
Transactions with a related party,
MIDF Amanah Investment Bank Berhad:
Fund management fees
-
41
(5,650)
1,253
43
-
-
(70)
Included in the statement of financial position are amounts due from/(to) related parties
represented by the following:
General
Family
Shareholder's
takaful
takaful
fund
fund
fund
2014
RM '000
RM '000
RM '000
Amount due from (Note 19):
MNRB Holdings Berhad
Malaysian Reinsurance Berhad
MNRB Retakaful Berhad
Takaful certificates receivables
(Note 20):
Labuan Re
Takaful certificates payables
(Note 24):
Labuan Re
34
34
-
-
1
6
1,903
74
1,984
104
(12)
(131)
(135)
(252)
(530)
168
393
(4)
557
-
(1,407)
(1,407)
593075-U
(cont'd.):
General
takaful
fund
RM '000
Family
takaful
fund
RM '000
(927)
(4)
(931)
-
-
34
34
-
-
15
10
59
50
134
-
(12)
(118)
(259)
(202)
(591)
Shareholder's
fund
RM '000
2014 (cont'd.)
Other payables (Note 25):
2013
Amount due from (Note 19):
(Note 20):
Labuan Re
(Note 24):
Labuan Re
Other payables (Note 25):
(1,411)
(4)
(1,415)
105
-
168
377
(4)
541
2,503
2,503
-
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 directors' remuneration (Note 10(a)):
Fees
Allowances and other emoluments
Executive directors' remuneration (Note 10(b)):
Salaries and bonus
Pension costs - EPF
Benefits-in-kind
2014
RM '000
2013
RM '000
723
173
896
692
201
893
676
114
10
800
614
104
66
784
2,962
416
55
3,433
2,989
498
231
3,718
2014
RM '000
2013
RM '000
9,000
5,000
Other key management personnel's remuneration:
Salaries and bonus
Pension costs - EPF
Benefits-in-kind
Total
35. Dividends
Recognised during the financial year:
- Final tax exempt (single-tier) dividend for the financial
year ended 31 March 2013: 3.1% (financial year
ended 31 March 2012 : 1.7%)
At the forthcoming Annual General Meeting, a final single tier dividend in respect of the
current financial year ended 31 March 2014 amounting to a total dividend of RM11,000,000,
approximately 3.7% based on the issued and paid-up share capital of 295,000,000 ordinary
shares at the date of this report, will be proposed for shareholder's approval. The financial
statements for the current financial year do not reflect this proposed dividend. Such dividend,
if approved by the shareholder, will be accounted for in the shareholder's equity as an
appropriation of retained profits in the next financial year ending 31 March 2015.
106
593075-U
36. 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 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 and financial objectives.
The key objectives of the risk management framework are to:
(i) provide information on risk governance and accountabilities;
(ii) provide guidance to a standard approach to managing risks;
(iii) create a risk awareness culture; and
(iv) enhance professionalism, increase profitability and value for shareholders.
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 is as follows:
(i) The Board had established a dedicated Board Committee known as the Risk
Management Committee of the Board (“RMCB”) at the company level to oversee the
implementation of the risk management framework;
(ii) The Company has an Investment Committee to further manage risks associated with
investments and asset allocation.
(iii) The Operational Risk Management Committee ("ORMC") which comprises the
President/Chief Executive Officer and senior management implement the risk
management processes, provide assurance to the Board that the processes have
been carried out effectively and ensuring a proactive risk management culture on an
enterprise-wide basis;
107
593075-U
36. Risk management Framework (cont'd.)
(a) Risk governance framework (cont'd.)
(iv) The Group Chief Risk Management and Compliance Officer ("GRMCO") oversees the
risk governance practices across the Group. The risk management governance
process and structure is aligned across the subsidiaries of the Group through the
adoption of the Enterprise Risk Management Framework.
(v) The Risk Management Department assists the RMCB and ORMC in developing and
maintaining the Risk Management Framework in consultation with stakeholders. The
Company adopts the Group’s risk management framework established by the Group
Risk Management & Compliance Division.
(vi) At the operational level the implementation of risk management process are
consistent with the risk management framework and aligned with day-to-day
operations; and
(vii) The Line Managers of each Department in the Company are responsible for using the
various components of the risk management framework as an integral part of their
normal processes and procedures.
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 – claim liabilities are determined based upon previous claims
experience, existing knowledge of events, the terms and conditions of the relevant
policies and assessment 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.
108
593075-U
(b) Capital Management Objectives, Policies and Approach
The Capital Management Plan ("CMP") is designed and implemented to ensure an
effective management of the Company's capital. The CMP is expected to maximise the
Company's value by optimising capital structure and enhancing capital efficiency. It is
also designed to address the funding requirements of the Company to meet its various
financial obligations.
Under the CMP, the Company measures and monitors its respective capital position
mainly via the Capital Adequacy Ratio ("CAR").
The CMP identifies certain trigger points of the CAR position and further describes a set
of corrective action plans that will be implemented towards maintaining an adequate level
of capital. It is intended that capital will be utilised more efficiently in a controlled manner
so that the Company will be able to manage its capital position above the internal target.
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 the Company's business operations
and the resultant risk profile. The key objective of the CMP is to trigger appropriate action
plans to be taken by the Board and management of the Company in the event of internal
CAR 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
(i) Ensure the Company has adequate capital, expressed as SMR within a range that
supports stakeholders' objectives.
(ii) 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 business operations and the resultant risk profile and control
environment.
Approach to capital management
The Company conduct stress test on its CAR 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 CAR is assessed quarterly focusing on
short to medium term views.
109
593075-U
(c) Regulatory framework
The Company is required to comply with the Islamic Financial Service Act (IFSA) which is
administered by Bank Negara Malaysia. BNM is primarily interested in protecting the
rights of policyholders and participants and monitoring the Company closely to ensure
prudent management of its business operations. At the same time, BNM is also
interested in ensuring that the Company actively managed the capital adequacy by taking
into account the potential impact on Company business strategies, risk profile and overall
resilience of the Company.
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.
(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 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 Asset-Liability Committee ("ALCO") has been established to manage and
monitor asset-liability mismatched risks. The ALCO ultimately reports to the Board
through the Investment Committee.
37. 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 and Contractors All Risks and Erection All Risks which may be extended up to 5
year including maintenance period. 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.
110
593075-U
37. Underwriting risk (cont'd.)
General takaful fund (cont'd.)
(a) Nature of risk (cont'd.)
The above risks are mitigated by diversification across a large portfolio of business and
careful selection of risks. The variability of risks is designed to improve the portfolio
experience by implemention 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.
Stress Testing (“ST”) is performed on a quarterly basis and submitted to BNM on halfyearly basis. The purpose of the ST is to test the solvency of the general takaful fund
under the various scenarios according to regulatory guidelines, simulating drastic
changes in major parameters such as new business volume and investment environment.
(b) Concentration risk of by type of certificates
The table below sets out the concentration on takaful certificate liabilities by class:
2014
Fire
Motor
Marine, Aviation & Transit
Miscellaneous
Gross
RM '000
Retakaful
RM '000
Net
RM '000
65,488
200,857
445
53,762
320,552
(13,476)
(55,696)
(224)
(10,893)
(80,289)
52,012
145,161
221
42,869
240,263
40,938
212,859
900
46,856
301,553
(4,661)
(49,703)
(340)
(8,208)
(62,912)
36,277
163,156
560
38,648
238,641
2013
Fire
Motor
Marine, Aviation & Transit
Miscellaneous
All business of the general takaful fund is derived from participants in Malaysia;
accordingly, disclosure of concentration risk by geographical region is not relevant to the
general takaful fund.
111
593075-U
(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 claims notification and reporting, 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,
Surplus before Tax and Participants' Fund. The correlation of assumptions will have a
significant effect in determining the ultimate claim 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 has been applied to the motor classes only which are Motor Act and Motor
Others by considering the ultimate loss ratio with an extra charge for the provision in
adverse deviation.
112
593075-U
(c) Impact on liabilities, profit and equity (cont'd.)
Sensitivities (cont'd.)
Change in
Impact
assumption
of Ultimate on Gross
Claims Liabilities
Ratio
RM '000
Impact
on Net
Liabilities
RM '000
Impact
on
Impact
Surplus on Particibefore
pants'
Tax
Fund*
RM '000
RM '000
2014
Motor Act Average
Severity
Motor Others Expected
Loss Ratio
+10%
21,236
17,696
(17,696)
(13,272)
+10%
38,323
21,603
(21,603)
(16,202)
2013
Motor Act Average
Severity
Motor Others Expected
Loss Ratio
+10%
18,758
16,559
(16,559)
(12,419)
+10%
32,560
19,801
(19,801)
(14,851)
* 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 year end.
(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 reporting date,
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.
113
593075-U
(d) Claims Development table (cont'd.)
Gross General Takaful Certificate Liabilities for 2014:
2007
RM '000
2008
RM '000
2009
RM '000
As at 31 March
2010
2011
2012
RM '000 RM '000 RM '000
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
36,388
36,179
35,120
33,672
33,695
32,743
32,433
32,212
50,997
51,290
51,483
51,708
50,301
50,507
50,166
-
100,090
93,740
89,887
86,452
82,702
80,849
-
125,472
142,627
134,623
128,689
122,290
-
144,938
146,833
137,705
129,564
-
150,396
140,864
132,409
-
108,384
106,221
-
141,258
-
32,212
50,166
80,849
122,290
129,564
132,409
106,221
141,258
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
13,366
25,083
27,784
30,245
31,292
31,975
32,280
32,163
32,163
17,599
34,059
39,159
44,893
47,722
49,488
49,775
49,775
29,070
64,212
72,939
77,825
78,729
79,468
79,468
43,215
83,077
100,539
105,741
107,733
107,733
48,128
95,317
112,994
119,507
119,507
49,128
88,890
106,834
106,834
41,749
70,150
70,150
52,987
52,987
49
391
1,381
14,557
10,057
25,575
36,071
88,271
Accident year
Best Estimate of Claims
Liabilities (incl. Allocated Loss
Adjustment Expenses "ALAE")
Fund PRAD at 75%
Total gross general takaful certificate
liabilities
Note
22
2013
RM '000
2014
RM '000
Total
RM '000
176,352
25,167
201,519
114
593075-U
Net General Takaful Certificate Liabilities for 2014:
Accident year
2007
RM '000
2008
RM '000
2009
RM '000
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Current estimate of
33,895
34,140
33,195
31,470
31,341
30,328
29,987
29,777
47,452
47,361
47,903
47,484
45,894
45,091
44,591
-
83,588
81,492
78,446
76,773
72,883
71,267
-
114,632
119,456
124,071
120,563
114,108
-
134,955
131,893
125,246
117,605
-
29,777
44,591
71,267
114,108
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
11,984
23,420
26,016
28,197
29,089
29,631
29,847
29,730
29,730
16,968
32,665
37,569
41,845
43,721
44,519
44,223
44,223
27,670
56,446
64,216
69,165
69,505
70,071
70,071
47
368
1,196
Best Estimate of claim liabilities
(incl. ALAE)
Fund PRAD at 75%
Total net general takaful certificate
liabilities
Note
As at 31 March
2010
2011
2012
RM '000 RM '000 RM '000
22
2013
RM '000
2014
RM '000
139,773
126,239
119,387
-
77,046
74,561
-
89,101
-
117,605
119,387
74,561
89,101
40,682
79,471
94,614
99,156
100,447
100,447
44,669
88,779
103,862
109,008
109,008
46,245
81,802
96,453
96,453
29,182
49,605
49,605
35,402
35,402
13,661
8,597
22,934
24,956
53,699
Total
RM '000
125,458
22,137
147,595
115
593075-U
Gross General Takaful Certificate Liabilities for 2013:
Accident year
2012
RM '000
2013
RM '000
2006
RM '000
2007
RM '000
2008
RM '000
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Current estimate of
29,337
27,311
26,773
26,178
25,494
24,949
24,732
24,550
36,388
36,179
35,120
33,672
33,695
32,743
32,433
-
50,997
51,290
51,483
51,708
50,301
50,507
-
100,090
93,740
89,887
86,452
82,702
-
125,472
142,627
134,623
128,689
-
144,938
146,833
137,705
-
150,396
140,864
-
108,384
-
24,550
32,433
50,507
82,702
128,689
137,705
140,864
108,384
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
8,984
18,976
20,128
21,967
23,560
24,474
24,522
24,551
24,551
13,366
25,083
27,784
30,245
31,292
31,975
32,280
32,280
17,599
34,059
39,159
44,893
47,722
49,488
49,488
29,070
64,212
72,939
77,825
78,729
78,729
43,215
83,077
100,539
105,741
105,741
48,128
95,317
112,994
112,994
49,128
88,890
88,890
41,749
41,749
153
1,019
3,973
22,948
24,711
51,974
66,635
(incl. ALAE)
Fund PRAD at 75%
Total gross general takaful certificate
liabilities
Note
As at 31 March
2009
2010
2011
RM '000 RM '000 RM '000
(1)
22
Total
RM '000
171,412
26,203
197,615
116
593075-U
Net General Takaful Certificate Liabilities for 2013:
Accident year
2006
RM '000
2007
RM '000
2008
RM '000
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
Current estimate of
27,944
26,062
25,794
24,073
23,420
23,128
22,817
22,941
33,895
34,140
33,195
31,470
31,341
30,328
29,987
-
47,452
47,361
47,903
47,484
45,894
45,091
-
83,588
81,492
78,446
76,773
72,883
-
114,632
119,456
124,071
120,563
-
22,941
29,987
45,091
72,883
One year later
Two year later
Three year later
Four year later
Five year later
Six year later
Seven year later
8,449
18,433
19,585
21,143
22,760
22,866
22,913
22,941
22,941
11,984
23,420
26,016
28,197
29,089
29,631
29,847
29,847
16,968
32,665
37,569
41,845
43,721
44,519
44,519
140
572
(incl. ALAE)
Fund PRAD at 75%
Total net general takaful certificate
liabilities
Note
As at 31 March
2009
2010
2011
RM '000 RM '000 RM '000
-
22
2012
RM '000
2013
RM '000
134,955
131,893
125,246
-
139,773
126,239
-
77,044
-
120,563
125,246
126,239
77,044
27,670
56,446
64,216
69,165
69,505
69,505
40,682
79,471
94,614
99,156
99,156
44,669
88,779
103,862
103,862
46,245
81,802
81,802
29,181
29,181
3,378
21,407
21,384
44,437
47,863
Total
RM '000
139,181
20,692
159,873
117
593075-U
37. Underwriting
risk parties
(cont'd.)
The related
and their relationship with the Company as of 31 March 2009 are as stated
Family takaful fund
(a) Nature of risk
The Company principally issues the following types of family takaful certificate: Family
Takaful Plans, Mortgage Takaful Plans, Group Takaful Plans and Investment-linked
Takaful Plans.
Family takaful underwriting risk exists 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 ORMC and
RMCB, and approved by the Board. Retakaful structures are set based on the type of
risks to be recovered.
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 on a quarterly basis and submitted to BNM on halfyearly basis. 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 risk of by type of certificate
The Table below shows the concentration of actuarial liabilities by type of certificates :
Gross
RM '000
2014
Family takaful plans
Investment-linked takaful plans
Mortgage takaful plans
Group credit takaful plans
Others
2013
Family takaful plans
Investment-linked takaful plans
Mortgage takaful plans
Group credit takaful plans
Others
Retakaful
RM '000
Net
RM '000
735,055
23,624
501,924
284,220
89,511
1,634,334
(10,424)
(1,299)
(101,812)
(12,791)
(126,326)
724,631
22,325
400,112
271,429
89,511
1,508,008
646,576
1,365
411,588
258,131
37,036
1,354,696
(3,906)
(49,359)
(19,222)
(7,692)
(80,179)
642,670
1,365
362,229
238,909
29,344
1,274,517
As all of the business are derived from Malaysia, the entire actuarial liabilities are in
Malaysia.
(c) Key Assumptions
Material judgement is required in determining the liabilities of the family takaful fund and
in the selection 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:
119
593075-U
(c) Key Assumptions (cont'd.)
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 lower surplus
administration charge income. To the extent that mortality / morbidity is worse than
that priced for, Shareholder Fund's profitability may be affected and may in a worst
case scenario, lead to possible Risk Fund deficit. This is mitigated with adequate
retakaful arrangement as well as contract design (in some circumstances) that builds
in repricing mechanisms.
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.
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 lower surplus
administration charge income.
The assumptions that have significant effects on the statement of financial position and
statement of comprehensive income of the family takaful fund are listed below by portfolio
assumptions impacting net liabilities:
Mortality and
Morbidity rates
2014
2013
Type of Business
1
Discount rates
2014
2013
Credit related products and
individual regular
contribution plans
Base mortality
and
adjusted for retakaful
rates 2
4%
3%
Others
Base mortality 1
N/A
N/A
120
593075-U
(c) Key Assumptions (cont'd.)
(1) Various industry mortality and morbidity experience tables that were used to
determine the contribution and tabarru' (risk charge) rates
(2) Retakaful rates are derived from the fund's retakaful arrangements with respect to
the MRTT and GCT business
(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,
surplus before tax and Participants' Fund. The correlations of assumptions will have
significant effects in determining the ultimate claim 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.
Change in
Assumptions
%
Family Takaful Certificates
Impact on Impact on
Gross
Net
Liabilities
liabilities
RM '000
RM '000
Impact on
Impact on
ParticiSurplus
pants'
Before Tax
Fund
RM '000
RM '000
2014
Mortality/morbidity
Discount rates
+ 10%
+ 1%
43,773
(7,640)
3,979
(1,144)
(3,979)
1,144
(3,979)
1,144
+ 10%
+ 1%
605
(329)
605
(329)
(605)
329
(605)
329
2013
Mortality/morbidity
Discount rates
The method used and significant assumptions made for deriving sensitivity information
did not change from the previous year.
121
593075-U
38. 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.
(a) Credit Risk
Credit risk represents the loss that would be recognized if counterparties to takaful,
retakaful and investment transactions failed to meet their contractual obligations.
Credit risk includes the following elements:
-
Investment credit risk – risk of 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 largely driven by the different economic cycles and
operating cycles while the less liquid securities tend to be priced at a wider spread.
The liquidity of the securities is directly determined by its bid-to-ask spread.
-
Retakaful counterparty risk – risk of financial loss arising from a retakaful operator’s
default, or the deterioration of the solvency position of the retakaful operator;
-
Contribution credit risks - risk of 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 ratings will be evaluated to
determine actions required. As at the reporting date, the Company's bond portfolio has no
material exposure below investment grade except for one bond as shown in the credit
exposure by credit rating table below.
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.
122
593075-U
38. Financial Risk (cont'd.)
(a) Credit Risk (cont'd.)
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.
Management of credit risk
In order to manage and mitigate credit risk, the following policies and procedures were
set in place:
-
Investment policies prescribe the minimum credit rating for bonds that may be held. In
addition, the policies are further aimed at investing in a diverse portfolio of bonds in
order to reduce the potential impact that may arise from individual companies
defaulting;
-
counterparty limits are set for investments and cash deposits to ensure that there is
no concentration of credit risk;
-
the Company's investment portfolio is managed to ensure diversification and focuses
on investing in high quality investment grade fixed income securities. For the
financial year ended 31 March 2014, the average credit quality of the Company's
investment portfolio was AA as determined by Rating Agency Malaysia ("RAM") or
Malaysian Rating Corporation Berhad ("MARC"); and
-
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.
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.
The retakaful operators’ share of contribution liabilities has been excluded from the
analysis as they are not contractual obligations.
123
593075-U
Credit exposure by credit rating (cont'd.)
Shareholder's fund
2014
Quoted shares in Malaysia
HTM investments
Unquoted Islamic private debt securities
LAR
Islamic banks
Development bank
Building society
Secured staff financing
Due from takaful funds
Amount due from related company
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
Noninvestment
grade *
BBB
(C to BB)
RM '000
RM '000
Not Rated
RM '000
Not
subject to
credit risk
RM '000
Total
RM '000
-
-
-
-
-
-
-
1,160
1,160
19,018
42,884
-
-
-
-
255
-
-
-
19,273
42,884
14,129
-
86,817
-
17,660
-
-
-
-
-
16,076
588
178
118,606
16,076
588
178
76,031
600
4,180
(11)
91,586
21,049
4,440
10,365
186
53,700
573
247
2,573
3,393
34
34
255
21,216
1,316
6,214
10,000
3,292
87,894
1,951
2,721
2,951
137,555
18,002
43,438
5,756
247
14,545
6,214
10,000
3,292
87,894
34
1,951
2,721
5,699
380,556
124
593075-U
Shareholder's fund (cont'd.)
2013
HTM investments
LAR
Islamic investment accounts with licensed :
Islamic banks
Investment banks
Development bank
Building society
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
Noninvestment
grade *
BBB
(C to BB)
RM '000
RM '000
Not Rated
RM '000
Not
subject to
credit risk
RM '000
Total
RM '000
-
-
-
-
-
-
-
1,153
1,153
21,626
40,320
-
-
-
-
266
-
-
-
21,892
40,320
-
85,762
-
26,066
-
-
-
-
-
7,255
66
178
111,828
7,255
66
178
61,946
4,725
1,076
91,563
1,454
14,299
2,896
298
45,013
7,345
400
617
8,362
34
34
266
32,075
2,361
5,279
12,071
7,246
10,000
3,055
62,575
2,097
3,285
850
140,894
8,652
45,599
2,361
19,578
400
14,967
7,246
10,000
3,055
62,575
34
2,097
3,285
2,841
356,730
125
593075-U
2014
HTM investments
LAR
Islamic banks
Development bank
Due from:
Family takaful fund
Retakaful certificates assets
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
Noninvestment
grade *
BBB
(C to BB)
RM '000
RM '000
Not Rated
RM '000
Not
subject to
credit risk
RM '000
Total
RM '000
-
-
-
-
-
-
-
1,372
1,372
18,317
53,716
-
-
-
-
-
-
-
18,317
53,716
13,000
7,614
-
36,396
-
18,184
-
-
-
-
-
17,622
525
67,580
7,614
17,622
525
-
10,500
42,184
10,110
12,790
14,096
-
-
-
44,558
14,608
10,124
-
100,838
24,718
33,414
92,647
3,029
5,402
55,327
33,330
9,938
7
126,543
9,777
1,695
1,927
27,495
8,471
8,471
568
568
559
2,762
1,666
1,779
17,612
215
93,883
19,519
559
2,762
1,666
53,925
32,274
7,551
424,453
126
593075-U
2013
HTM investments
LAR
Islamic banks
Investment banks
Development bank
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
Noninvestment
grade *
BBB
(C to BB)
RM '000
RM '000
Not Rated
RM '000
Not
subject to
credit risk
RM '000
Total
RM '000
-
-
-
-
-
-
-
1,153
1,153
18,318
54,303
-
2,000
-
-
-
-
-
-
20,318
54,303
5,046
-
37,696
-
25,375
-
-
-
-
-
5,508
98
8,394
63,071
5,046
5,508
98
8,394
77,667
4,361
1,515
27,298
70,870
875
21,056
24,452
2,429
363
76,550
40,094
6,384
1,315
3,886
51,679
5,466
5,466
454
454
24,202
8,882
18,501
3,552
1,570
986
23,545
1,002
82,240
15,153
69,532
8,882
39,557
3,552
1,570
37,742
28,804
32,549
380,079
127
593075-U
Family takaful fund
2014
HTM investments
LAR
Islamic banks
Investment banks
Development bank
Building society
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
Noninvestment
grade *
BBB
(C to BB)
RM '000
RM '000
Not Rated
RM '000
Not
subject to
credit risk
RM '000
Total
RM '000
-
-
-
-
-
-
-
3,737
131,889
3,737
131,889
32,047
300,289
-
-
-
-
-
-
-
32,047
300,289
284,664
141,708
-
328,716
-
106,116
-
-
-
-
-
91,435
5,708
719,496
141,708
91,435
5,708
758,708
4,586
51,731
912
385,945
50,474
43,308
8,000
20,254
2,086
230,238
43,813
13,748
8,964
544
25,076
7,988
100,133
80,347
80,347
649
649
41,855
3,513
28,050
18,641
2
557
14,658
5,124
13,212
88,964
2,154
216,730
-
140,728
60,569
8,964
88,325
18,641
2
557
14,658
5,124
139,538
88,964
13,140
2,005,519
128
232,769
593075-U
2013
HTM investments
LAR
Islamic banks
Investment banks
Development bank
Building society
Investment grade *
Government
guaranteed
RM '000
AAA/P1
RM '000
AA
RM '000
A
RM '000
Noninvestment
grade *
BBB
(C to BB)
RM '000
RM '000
Not Rated
RM '000
Not
subject to
credit risk
RM '000
Total
RM '000
-
-
-
-
-
-
-
3,100
117,094
3,100
117,094
41,435
303,111
-
8,000
-
-
-
-
-
-
49,435
303,111
172,505
15,090
-
286,463
-
109,219
-
-
-
-
-
47,988
328
12,591
568,187
15,090
47,988
328
12,591
532,141
7,972
9,042
19,772
323,249
27,270
68,010
30,739
12,855
4,017
3,194
263,304
43,036
27,703
749
15,916
11,795
1,338
100,537
50,996
50,996
412
412
112,861
16,365
12,656
12,596
20,437
5,502
541
14,104
308
9,664
51,898
7,722
264,654
-
191,139
16,365
80,666
27,703
53,126
20,437
5,502
541
14,104
308
89,843
67,710
32,026
1,716,394
* Based on public ratings assigned by external rating agencies including Rating Agency Malaysia ("RAM") and Malaysian Rating Corporation ("MARC")
129
181,101
593075-U
38. Financial
(cont'd.)
TheRisk
related
related
parties
partiesand
andtheir
theirrelationship
relationship
with
with
thethe
Company
Company
as of
as31
of March
31
Age analysis of financial assets past-due but not impaired
0-180 Days
RM' 000
181-365
Days
RM' 000
> 365 Days
RM' 000
Total
RM' 000
2014
28,942
3,422
(90)
32,274
2013
26,681
5,832
(3,709)
28,804
Family takaful fund
0-180 Days
RM' 000
181-365
Days
RM' 000
> 365 Days
RM' 000
Total
RM' 000
2014
87,751
1,091
122
88,964
2013
34,533
17,432
15,745
67,710
Receivables are carried out at anticipated realisable value. Impairments are written off once
identified. An estimate is made for impairment based on a review of all outstanding amounts
as at reporting date.
Specific provisions are made for any outstanding contributions including brokers, agent or
retakaful balances which remaining outstanding as per Note 2.17.
Impaired Financial Assets
For assets to be classified as 'past due and impaired', please refer to Note 2.8.
The movement of allowance for impairment on financial assets are as follows:
2014
RM '000
At 1 April
(Writeback of)/additional allowance during the year
At 31 March
2013
RM '000
6,406
(2,354)
4,052
6,518
1,100
(1,212)
6,406
12,452
2,026
14,478
1,860
10,592
12,452
Family takaful fund
At 1 April
Additional allowance during the year
At 31 March
130
593075-U
Financing
The fair values of financing receivables are determined by discounting the cash flows using
the prevailing profit rates for similar instruments at reporting date.
(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 assesses its liquidity risk by ensuring the following:
(i) The Company is able meet it’s payment obligations under normal and stressed
operating environments without suffering any loss;
(ii) Additions/withdrawals from the company’s investment funds are manged efficiently;
and
(iii) Appropriate measures are in place to respond to liquidity risk.
As part of its liquidity management strategy, the Company has put in place a framework
capable of measuring and reporting on:
(i) daily cash flows;
(ii) minimum liquidity holdings;
(iii) the composition and market values of company’s investment portfolios, including
liquid holdings; and
(iv) 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 certificate liabilities and retakaful certificate assets, maturity profiles are
determined based on estimated timing of net cash outflows from the recognised takaful
certificate liabilities.
Expense liabilities, contribution liabilities and the retakaful operators’ share of
contribution liabilities have been excluded from the analysis as there are no contractual
obligations to make payments on those liabilities.
Investment-linked liabilities are repayable or transferable on demand and are included in
the “up to a year” column. Repayments which are subject to notice are treated as if
notice were to be given immediately.
131
593075-U
(b) Liquidity Risk (cont'd.)
Maturity profiles (cont'd.)
Shareholder's Fund
2014
HTM investments
LAR
Islamic banks
Development bank
Building society
Total Assets
Zakat payable
Other payables
Total Liabilities
Carrying value
RM '000
Within 1 year
RM '000
Over 1-5 years
RM '000
Over 5 years
RM '000
No maturity date
RM '000
Total
RM '000
1,160
-
-
-
1,160
1,160
19,273
42,884
785
1,645
17,643
10,180
5,996
48,493
-
24,424
60,318
118,606
16,076
588
178
8,054
-
86,510
-
57,077
-
16,076
588
178
151,641
16,076
588
178
43,438
5,756
247
14,545
6,214
10,000
3,292
87,894
34
1,951
2,721
5,699
380,556
43,568
5,834
251
14,565
1,220
87,894
34
1,951
2,721
5,699
174,221
2,072
116,405
111,566
6,214
10,000
34,216
43,568
5,834
251
14,565
6,214
10,000
3,292
87,894
34
1,951
2,721
5,699
436,408
11,558
368
48,379
60,305
11,558
368
48,379
60,305
-
-
-
11,558
368
48,379
60,305
132
593075-U
Shareholder's Fund (cont'd.)
2013
HTM investments
LAR
Islamic banks
Investment banks
Development bank
Building society
Total Assets
Zakat payable
Other payables
Total Liabilities
Carrying value
RM '000
Within 1 year
RM '000
Over 1-5 years
RM '000
Over 5 years
RM '000
No maturity date
RM '000
Total
RM '000
1,153
-
-
-
1,153
1,153
21,892
40,320
787
1,650
18,097
6,585
5,719
54,049
-
24,603
62,284
111,828
7,255
66
178
5,197
-
47,055
-
94,824
-
7,255
66
178
147,076
7,255
66
178
45,599
2,361
19,578
400
14,967
7,246
10,000
3,055
62,575
34
2,097
3,285
2,841
356,730
46,166
2,375
17,227
402
14,974
1,121
62,575
34
2,097
3,285
2,841
160,731
1,934
73,671
154,592
7,246
10,000
25,898
46,166
2,375
17,227
402
14,974
7,246
10,000
3,055
62,575
34
2,097
3,285
2,841
414,892
16,100
515
39,732
56,347
16,100
515
39,732
56,347
-
-
-
16,100
515
39,732
56,347
133
593075-U
2014
HTM investments
LAR
Islamic banks
Development bank
Total Assets
Other payables
Total Liabilities
Carrying value
RM '000
Within 1 year
RM '000
Over 1-5 years
RM '000
Over 5 years
RM '000
No maturity date
RM '000
Total
RM '000
1,372
-
-
-
1,372
1,372
18,317
53,716
756
2,157
16,861
21,046
5,105
44,003
-
22,722
67,206
67,580
7,614
17,622
525
7,058
286
-
49,936
1,431
-
24,086
8,736
-
17,622
525
81,080
10,453
17,622
525
100,838
24,718
33,414
559
2,762
1,666
53,925
32,274
7,551
424,453
101,192
25,109
33,453
559
2,762
1,666
29,659
32,274
7,551
244,482
24,266
113,540
81,930
19,519
101,192
25,109
33,453
559
2,762
1,666
53,925
32,274
7,551
459,471
201,519
16,580
79,183
297,282
110,835
16,580
79,183
206,598
90,684
90,684
-
-
201,519
16,580
79,183
297,282
134
593075-U
2013
HTM investments
LAR
Islamic banks
Investment banks
Development bank
Total Assets
Other payables
Total Liabilities
Carrying value
RM '000
Within 1 year
RM '000
Over 1-5 years
RM '000
Over 5 years
RM '000
No maturity date
RM '000
Total
RM '000
1,153
-
-
-
1,153
1,153
20,318
54,303
2,767
2,668
17,285
8,635
5,453
59,368
-
25,505
70,671
63,071
5,046
5,508
98
8,394
15,330
185
-
35,784
740
-
23,416
5,907
-
5,508
98
8,394
74,530
6,832
5,508
98
8,394
69,532
8,882
39,557
3,552
1,570
37,742
28,804
32,549
380,079
70,250
8,964
39,958
3,552
1,570
16,984
28,804
32,549
223,581
20,758
83,202
94,144
15,153
70,250
8,964
39,958
3,552
1,570
37,742
28,804
32,549
416,080
197,615
20,299
57,515
275,429
88,927
20,299
57,515
166,741
108,688
108,688
-
-
197,615
20,299
57,515
275,429
135
593075-U
Family takaful fund
2014
HTM investments
LAR
Islamic banks
Development bank
Building society
Total Assets
Other payables
Total Liabilities
Carrying value
RM '000
Within 1 year
RM '000
Over 1-5 years
RM '000
Over 5 years
RM '000
No maturity date
RM '000
Total
RM '000
3,737
131,889
-
-
-
3,737
131,889
3,737
131,889
32,047
300,289
1,392
11,565
30,291
123,895
15,315
255,642
-
46,998
391,102
719,496
141,708
91,435
5,708
36,833
6,325
-
287,554
31,645
-
812,229
198,499
-
91,435
5,708
1,136,616
236,469
91,435
5,708
140,728
60,569
8,964
88,325
18,641
2
557
14,658
5,124
139,538
88,964
13,140
2,005,519
141,596
60,964
9,060
88,396
2
557
14,658
5,124
252
88,842
13,140
478,706
2,561
122
476,068
123,871
1,405,556
18,641
12,854
264,264
141,596
60,964
9,060
88,396
18,641
2
557
14,658
5,124
139,538
88,964
13,140
2,624,594
1,800,160
28,417
98,987
1,927,564
3,253
28,417
98,987
130,657
33,037
33,037
1,598,044
1,598,044
165,826
165,826
1,800,160
28,417
98,987
1,927,564
136
593075-U
2013
HTM investments
LAR
Islamic banks
Investment banks
Development bank
Building society
Total Assets
Other payables
Total Liabilities
Carrying value
RM '000
Within 1 year
RM '000
Over 1-5 years
RM '000
Over 5 years
RM '000
No maturity date
RM '000
Total
RM '000
3,100
117,094
-
-
-
3,100
117,094
3,100
117,094
49,435
303,111
14,614
13,615
24,909
46,290
21,520
347,891
-
61,043
407,796
568,187
15,090
47,988
328
12,591
35,885
544
-
151,362
2,172
-
646,105
16,720
-
47,988
328
12,591
833,352
19,436
47,988
328
12,591
191,139
16,365
80,666
27,703
53,126
20,437
5,502
541
14,104
308
89,843
67,710
32,026
1,716,394
193,856
16,534
79,936
27,932
53,171
5,502
541
14,104
308
1,077
51,965
32,026
541,610
-
-
-
3,210
15,745
243,688
72,778
1,105,014
20,437
12,778
214,316
193,856
16,534
79,936
27,932
53,171
20,437
5,502
541
14,104
308
89,843
67,710
32,026
2,104,628
1,513,237
11,524
75,214
1,599,975
18,142
11,524
75,214
104,880
54,074
54,074
1,225,814
1,225,814
215,207
215,207
1,513,237
11,524
75,214
1,599,975
137
593075-U
38. Financial
(cont'd.)
TheRisk
related
related
parties
parties and
and their
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 elements:
(i) Profit rate risk – the risk of fluctuations in fair value or future cash flows of a financial
instrument arising from variability in profit rates;
(ii) 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; and
(iii) 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. Fixed income portfolio is inversely related to profit rates
hence it is the source of portfolio volatility.
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.
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:
138
593075-U
(c) Market Risk (Contd.)
Profit rate risk (cont'd.)
Sensitivity Analysis (cont'd.)
Changes in
basis point
Impact on
Profit/
Surplus
before tax
RM' 000
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
+ 25
- 25
(1,456)
1,456
(1,456)
1,456
-
+ 25
- 25
(1,595)
1,595
(1,595)
1,595
-
Debt Securities
+ 25
- 25
(648)
648
(648)
648
-
Government Investment
Issues
+ 25
- 25
(137)
137
(137)
137
-
Debt Securities
+ 25
- 25
(559)
559
(559)
559
-
Issues
+ 25
- 25
(100)
100
(100)
100
-
Shareholder's Fund
2014
Debt Securities
2013
Debt Securities
2014
2013
139
593075-U
Sensitivity Analysis (cont'd.)
Changes in
basis point
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
Impact on
Profit/
Surplus
before tax
RM' 000
Family takaful fund
2014
Debt Securities
+ 25
- 25
(14,705)
14,705
(14,705)
14,705
-
Issues
+ 25
- 25
(3,614)
3,614
(3,614)
3,614
-
Debt Securities
+ 25
- 25
(11,191)
11,191
(11,191)
11,191
-
Issues
+ 25
- 25
(255)
255
(255)
255
-
2013
Equity risk
Equity price risk is the risk that the fair value of a financial instrument fluctuates because
of changes in market prices (other than those arising from interest rate / profit yield risk
or currency risk), whether those changes are caused by factors specific to the individual
financial instrument or its issuer or factors affecting similar financial instruments traded in
the market.
The 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 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.
140
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 non-linear.
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
Impact on
Profit/
Surplus
before tax
RM' 000
+ 5%
- 5%
891
(891)
833
(776)
58
(299)
+ 5%
- 5%
424
(424)
366
(366)
58
(255)
+ 5%
- 5%
976
(976)
907
(843)
69
(443)
+ 5%
- 5%
338
(338)
280
(280)
58
(100)
Changes in
variable
Shareholder's Fund
2014
Market Indices
Bursa Malaysia
Bursa Malaysia
2013
Market Indices
Bursa Malaysia
Bursa Malaysia
2014
Market Indices
Bursa Malaysia
Bursa Malaysia
2013
Market Indices
Bursa Malaysia
Bursa Malaysia
141
593075-U
Equity risk (cont'd.)
Impact on
asset
RM' 000
Impact on
AFS reserve
RM' 000
Impact on
Profit/
Surplus
before tax
RM' 000
+ 5%
- 5%
5,044
(5,044)
4,857
(4,305)
187
(3,271)
+ 5%
- 5%
1,174
(1,174)
1,019
(1,019)
155
(234)
Changes in
variable
Family takaful fund
2014
Market Indices
Bursa Malaysia
Bursa Malaysia
2013
Market Indices
Bursa Malaysia
Bursa Malaysia
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.
142
593075-U
39. Operational
Risk
The related
related parties
parties and
andtheir
theirrelationship
relationshipwith
withthe
theCompany
Company
asas
of of
31 31
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 environment, technology and the industry
are monitored through the Company's strategic planning and budgeting process.
40. Shariah Non-Compliance Risk
Shariah Non-Compliance Risk is defined as "Potential Shariah Non-Compliance that
contributes to reputation, financial losses and opportunity costs resulting from ineffective
governance, incompetent employees and improper transactional & operational execution."
The Company mitigates such risk by initiating, monitoring and responding to a robust
Shariah control framework which includes the establishment of a Shariah Committee,
Shariah Department and/or Shariah Compliance Officer for monitoring and oversight
purposes. The framework is Governed by the Shariah Governance Framework issued by
BNM of which is designed to meet the following objectives:
(i)
sets out the expectations of BNM on the Company's Shariah governance structures,
processes and arrangements to ensure that all its operations and business activities are
in accordance with Shariah;
(ii) provides a comprehensive guidance to the board, Shariah Commitee and management
of the Company in discharging its duties in matters relating to Shariah; and
(iii) outlines the functions relating to Shariah review, Shariah Audit, Shariah Risk
management and Shariah research.
In addition, the Company has been certified under MS1900:2005 Quality Management
System from Islamic Perspective , which provides additional assurance that the Company
meets the relevant Shariah requirements.
41. 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 to oversee and
monitor 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.
143
593075-U
42. Significant events
The Inland Revenue Board (“IRB”) had, on 30 and 31 December 2013 and 31 March 2014,
issued to the Company notices of assessment and notices of additional assessment (i.e.
Form J and Form JA) for the years of assessment ("YA") 2006, 2007, 2008 and 2009,
disallowing family business’ commission expenses as deductions. The additional tax payable
by the Company under the above-mentioned notices is RM48,982,969.55. As a result of the
above, IRB had also treated the tax returns made by the Company for the above years of
assessment as incorrect, and imposed a penalty of RM22,042,336.29 to the Company.
Efforts have been made by the takaful industry, through the Malaysian Takaful Association
("MTA"), to resolve the above issue with the relevant authorities. Discussions have been
held involving MTA and the relevant authorities governing the takaful industry to reach an
equitable outcome for all takaful operators. While awaiting the formal outcome of the
discussions, the Company had submitted an appeal (Form Q) against the payment of this
additional assessment and penalty.
The Company, having taken into consideration the advice from its various advisors, is of the
view that there are strong justifications for its appeal and so, the Company had not made
any provision for the above tax and penalty.
43. Fair values of financial instruments
MFRS 7 Financial Instruments : Disclosures ("MFRS 7") requires the classification of
financial instruments measured at fair value according to a hierarchy that reflects the
significance of inputs used in making the measurements, in particular, whether the inputs
used are observable or unobsorvable. MFRS 13 Fair Value Measurement requires similar
disclosure requirements as MFRS 7, but extended to include all assets and liabilities
measured and/or disclosed at fair value. The following levels of hierarchy are used for
determining and disclosing the fair value of the Company's financial instruments:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - Inputs that are based on observable market data, either directly or indirectly
Level 3 - Inputs that are not based on observable market data
(i)
Cash and cash equivalents and other receivables/payables
The carrying amounts approximate fair values due to the relatively short-term maturity
of these financial instruments.
144
593075-U
43. Fair values of financial instruments (cont'd.)
(ii) Loans and receivables
Loans and receivables are granted at profit rates which are comparable with the rates
offered on similar instruments in the market and to counter parties with similar credit
profiles. Accordingly, the carrying amounts of the financing receivables approximate
their fair values as the impact of discounting are not material.
(iii) Takaful receivables and payables
The carrying amounts are measured at amortised cost in accordance with the
accounting policies as disclosed in Note 2.17 and 2.20(b). The carrying amounts
approximate fair values due to the relatively short-term maturity of these financial
instruments.
(iv) Investments
The fair value hierarchy for non-financial assets and assets for which fair values are
disclosed is being presented for the first time in the financial year ended 31 March 2014
and in line with the transitional provisions of MFRS 13, the comparative information has
not been presented in the financial statements.
Investments as at 31 March 2014 have been accounted for in accordance with the
accounting policies as disclosed in Note 2.6 and 2.7. The carrying amounts and fair
values of investments are disclosed in Note 19 of the financial statements.
Description of overall definition of the fair value hierarchy
The levels of the fair value hierarchy as defined by the accounting standards are an
indication of the observability of prices or valuation input. It can be classified into the
following hierarchies/levels:
• Level 1 : Quoted price in active market data, either directly or indirectly
Refers to financial instruments which are regarded as quoted in an active market if
quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an arm’s length basis. Such
financial instruments include actively traded quoted equities, warrants, quoted unit
and property trusts fund.
145
593075-U
43. Fair values of financial instruments (cont'd.)
(iv) Investments (cot'd.)
Description of overall definition of the fair value hierarchy (cont'd.)
• Level 2 : Inputs that are based on observable market data, either directly or indirectly
Refers to inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from
prices).
Examples of level 2 financial instruments include Islamic private debt securities and
government investment issues.
• Level 3 : Inputs that are not based on observable market data
Refers to financial instruments where fair values are measured using unobservable
market inputs. The valuation technique is consistent with level 2. The chosen
valuation technique incorporates management's assumptions and data.
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 and unit trusts, if any, fair value is
determined by reference to published bid values.
146
593075-U
43. Fair values of financial assets and liabilities (cont'd.)
(v) Fair value disclosures based on 3-level hierarchy
The following tables show financial assets recorded at fair value analysed by the different bases of fair values:
Valuation technique using:
Level 1
Level 2
Level 3
Shareholder's fund
Quoted
market prices
RM '000
2014
Financial assets:
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
Assets measured at fair value:
Warrants
Unsecured
Warrants
147
1,138
22
1,160
-
-
1,138
22
1,160
-
14,129
104,477
-
14,129
104,477
16,061
15
588
16,664
104,477
-
16,061
15
588
121,141
17,824
104,477
-
122,301
593075-U
(v) Fair value disclosures based on 3-level hierarchy (cont'd.)
Level 1
Level 2
Level 3
Quoted
market prices
RM '000
2014 (cont'd.)
Financial assets:
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
Assets for which fair values are disclosed:
HTM investments:
Unsecured
-
148
18,861
567
40,725
60,153
-
18,861
567
40,725
60,153
593075-U
Level 1
Level 2
Level 3
Quoted
market prices
RM '000
2013
Financial assets:
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
Warrants
Unsecured
Warrants
149
1,131
22
1,153
-
-
1,131
22
1,153
-
111,828
-
111,828
7,251
4
66
7,321
111,828
-
7,251
4
66
119,149
8,474
111,828
-
120,302
593075-U
Level 1
Level 2
Level 3
Quoted
market prices
RM '000
2014
Financial assets:
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
Warrants
Unsecured
Unsecured
Warrants
150
1,352
20
1,372
-
-
1,352
20
1,372
-
13,000
54,580
7,614
-
13,000
54,580
7,614
17,580
42
525
18,147
75,194
-
17,580
42
525
93,341
19,519
75,194
-
94,713
593075-U
Level 1
Level 2
Level 3
Quoted
market prices
RM '000
2014 (cont'd.)
Financial assets:
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
HTM investments:
Unsecured
-
151
18,159
52,929
71,088
-
18,159
52,929
71,088
593075-U
Level 1
Level 2
Level 3
Quoted
market prices
RM '000
2013 (cont'd.)
Financial assets:
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
Warrants
Unsecured
Warrants
152
1,133
20
1,153
-
-
1,133
20
1,153
-
63,071
5,046
-
63,071
5,046
5,499
9
98
8,394
14,000
68,117
-
5,499
9
98
8,394
82,117
15,153
68,117
-
83,270
593075-U
Level 1
Level 2
Level 3
Family takaful fund
Quoted
market prices
RM '000
2014
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
-
106,922
-
106,922
3,717
20
131,889
135,626
-
-
3,717
20
131,889
135,626
-
284,664
434,832
141,708
-
284,664
434,832
141,708
91,300
135
5,708
97,143
861,204
-
91,300
135
5,708
958,347
232,769
861,204
-
1,093,973
Financial assets:
Warrants
Unsecured
Warrants
153
593075-U
Level 1
Level 2
Level 3
Family takaful fund
Quoted
market prices
RM '000
2014 (cont'd.)
Financial assets: (cont'd.)
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
HTM investments:
-
31,740
291,091
322,831
-
31,740
291,091
322,831
-
105,192
-
105,192
3,100
117,094
120,194
-
-
3,100
117,094
120,194
2013
Financial assets:
Warrants
154
593075-U
Level 1
Level 2
Level 3
Quoted
market prices
RM '000
2013
Unsecured
Observable
inputs
RM '000
Significant
unobservable
inputs
RM '000
Total
RM '000
-
172,505
395,682
15,090
-
172,505
395,682
15,090
47,988
328
12,591
60,907
583,277
-
47,988
328
12,591
644,184
181,101
583,277
-
764,378
The fair value hierarchy for the assets for which fair values are disclosed is being presented for the first time in the financial year ended 31 March 2014 and
in line with the transitional provisions of MFRS 13, the comparative information has not been presented in the financial statements.
155

Takaful Ikhlas Berhad (593075-U) (Incorporated in Malaysia

Transcription

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