AS A TRUSTED PARTNER - MNRB Holdings Berhad
Transcription
AS A TRUSTED PARTNER - MNRB Holdings Berhad
STANDING ANNUAL REPORT 2015 STRONG AS A TRUSTED PARTNER STANDING STRONG A S A T RU S T ED PA RT NER Amidst the challenges of an evolving global insurance landscape, the MNRB Group continues to stand strong as a trusted partner to financial industries. Via the Group’s reinsurance, takaful and retakaful businesses in Malaysia, and abroad, we are steadfastly protecting client investments and enabling economic growth. Being a knowledge company and a thought leader, we have devoted substantial resources to understanding current and future risks by considering every number, statistic, segment and variable of every reinsurance, takaful and retakaful activity that we undertake. As we venture forth into a highly challenging market environment, we will continue to leverage on astute business strategies and enduring partnerships to deliver a robust performance. By balancing out our good economic performance with responsible corporate practices, we are confident of delivering resilient and sustainable growth. 002 2 MNRB HOLDINGS BERHAD 3 Corporate Profile 4 Corporate Milestones 5 Notice of 42nd Annual General Meeting 8 Statement Accompanying Notice of Annual General Meeting 9 Corporate Information 10 Group Structure 11 Chairman’s Statement 19 Board of Directors 22 Directors’ Profile 26 Senior Management Team 28 Senior Management Team’s Profile 30 Five-Year Financial Highlights 32 Financial Calendar 2015 33 MNRB’s Growth 34 Investors’ Information 35 Sustainability Report 46 Event Highlights 48 Statement on Corporate Governance 59 Audit Committee Report 61 Statement on Risk Management and Internal Control 64 Statement of Directors’ Responsibility in Relation to the Financial Statements 65 Additional Compliance Information 066 66 MALAYSIAN REINSURANCE BERHAD 67 Corporate Profile 68 Corporate Information 69 Directors’ Profile 74 Senior Management Team 75 Senior Management Team’s Profile 77 Corporate Activities and Services 79 Malaysian Re’s Portfolio of Business INSIDE THIS ANNUAL REPORT 080 for more information Please scan the QR Code to redirect to the official website: www.mnrb.com.my 80 TAKAFUL IKHLAS BERHAD 81 Corporate Profile 82 Corporate Information 83 Directors’ Profile 88 Profile of Shariah Committee Members 90 Senior Management Team 91 Senior Management Team’s Profile 93 Takaful IKHLAS’ Portfolio of Business 094 94 MNRB RETAKAFUL BERHAD 111 Financial Statements 237 Analysis of Shareholdings 240 List of Properties 95 Corporate Profile • Proxy Form 96 Corporate Information 97 Directors’ Profile 104 104 MALAYSIAN RE (DUBAI) LTD. 105 Corporate Profile 106 Corporate Information 107 Directors’ Profile 109 Senior Executive Officer’s Profile 110 110 MMIP SERVICES SDN. BHD. 100 Profile of Shariah Committee Members 102 President & CEO’s Profile 110 Corporate Profile 103 MRT’s Portfolio of Business 110 Corporate Information A RESILIENT PARTNER By remaining resilient amidst industry challenges and consistently delivering on our promises to our partners, MNRB continues to explore new areas of growth opportunity. The strong foundations we have laid and long-term partnerships we have fostered continue to hold us in good stead. As we build upon these, we are extending our reach and opening up new avenues of opportunity. CORPORATE PROFILE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Authorised Capital of RM500 RM213 million Paid-up Capital of million Malaysian National Reinsurance Berhad, the country’s national reinsurer was set up in 1972 to limit the outflow of reinsurance premiums overseas. The Company commenced operations on 9 February 1973. In 2005, as a result of a restructuring exercise within the MNRB Group, the Company’s reinsurance license, business and assets were transferred to its subsidiary company, Malaysian Reinsurance Berhad. Pursuant to the restructuring, Malaysian National Reinsurance Berhad became an investment holding company and changed its name to MNRB Holdings Berhad (MNRB). Today, MNRB is listed on the Malaysian Bourse (Bursa Malaysia). Its market capitalisation stood at RM803.26 million as at 31 July 2015. The MNRB Group comprises leading wholesale providers of reinsurance and retakaful as well as a takaful operator. Its reinsurance subsidiary stands tall among the top reinsurers in the region, writing lines of general businesses locally and abroad. In Malaysia, its takaful operator vies with the leaders in the provision of Islamic financial protection services based on the takaful system. CAPITAL STRUCTURE The Company has an Authorised Capital of RM500 million, divided into 500 million ordinary shares of RM1.00 each and a Paid-up Capital of RM213 million, divided into 213 million ordinary shares of RM1.00 each. 3 NRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB OLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOL NGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS //MNRB HOLDINGS ERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB BERHAD HOLDINGS BERH //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MN MNRB HOLDINGS BERHAD OLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB 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The new holding company is an investment holding company that focuses on business expansion to broaden the Group’s income base and further strengthen its financial position. The reinsurance business was then transferred to a newly incorporated one hundred percent (100%) subsidiary of MNRB, Malaysian Reinsurance Berhad (Malaysian Re). The takaful business continues to be undertaken by Takaful IKHLAS, a wholly owned subsidiary of MNRB. Labuan Re became an associate company of Malaysian Re. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD • MNRB obtained BNM’s approval to establish a retakaful operation under the Takaful Act, 1984 to conduct both General and Family Retakaful businesses. The wholly owned subsidiary company of MNRB is known as MRT. • MRDL, a wholly owned subsidiary of Malaysian Re was incorporated. 2004 • Commenced the restructuring exercise of the Group. 2006 • Malaysian Re was assigned a Financial Strength Rating (FSR) of ‘A-’ (Excellent) and an Issuer Credit Rating (ICR) of ‘a-’ by A.M. Best. • Malaysian Re was assigned an ‘A-’ Insurer Financial Strength (IFS) rating with Stable outlook by Fitch Ratings. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best. 2007 • MNRB was granted the approval on certification to the new ISO Standard, MS ISO 9001:2000. • MRDL was officially launched on 18 March 2008. • MRDL was wholly transferred from Malaysian Re to MNRB. • Implementation of new levels of VC, Retrocession to the industry ceased with effect from 1 January 2003. 2002 2000 — 2001 • MRT was officially launched on 11 August 2008. • MRT was assigned an IFS rating of ‘BBB+’ with Stable outlook by Fitch Ratings. • Arrangement of terrorism insurance via the Malaysian Terrorism Facility. • Received approval in principle from BNM to set up a takaful operation. • Awarded the MS ISO 9002:1994 certiication. 2008 • Injected additional RM1 million to the MNRB Scholarship Fund. • IKHLAS Medic Assist Takaful (IMAT) won the “Most Innovative Product Award” by KLIFF 2008. • Launching of MNRB Scholarship Fund of RM1 million. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best. • Malaysian National Reinsurance Berhad moved to its own building, Bangunan Malaysian Re. • Malaysian Re’s IFS rating of ‘A-’ with Stable outlook was reaffirmed by Fitch Ratings. • Implementation of new levels of VC, Retrocessions and other market reinsurance arrangements. • Appointed as Manager for the Malaysian Energy Risks Consortium. 1994 — 1996 • Launching of the Central Administration Bureau. • Following are certification audit conducted by SIRIM, Malaysian Re’s MS ISO 9001:2000 Quality Management Systems certification was reaffirmed. 2009 • Implementation of Stage III – new levels of VC, Retrocessions and other market reinsurance arrangements. • Malaysian National Reinsurance Berhad was listed on the Main Board of the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad). 1991 — 1993 1988 — 1990 2010 • Malaysian-Re International Insurance (L) Ltd. (MIIL) was set up as a wholly owned subsidiary. • Increased level of retrocession from fifty percent (50%) to fifty-five percent (55%) to shareholding companies of Malaysian National Reinsurance Berhad. • Takaful IKHLAS was named Best Takaful/Retakaful Provider by Islamic Finance News Polls Awards 2010 (third consecutive year). 2011 • Began to organise Annual Golf Tournaments and Outward Bound School for the insurance industry. • Inspection Department – To ensure companies’ adherence to the various Inter Company Agreements. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best, with Stable outlook for both ratings. • Malaysian Re’s IFS rating of ‘A’ was reaffirmed by Fitch Ratings, with Stable outlook. 2012 • Rating Committee – To determine special rate under the Fire Tariff for Fire and Industrial All Risks Insurances. 1982 — 1984 1979 — 1981 2013 • Commenced reciprocal exchange with overseas companies. • Commenced writing ten percent (10%) Quota Share of the Miscellaneous Accidents and Motor businesses. 2014 • Began to offer Excess of Loss Treaties to local insurance companies. • Began to write Local Facultative business and non-reciprocal inwards overseas business. • MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, with Stable outlook. • Takaful IKHLAS won Malaysian Best Takaful Operator 2013 – Global Banking & Finance Review. • Malaysian National Reinsurance Berhad commenced operations on 19 February 1973. 1973 — 1975 • Fitch Ratings reaffirmed Malaysian Re’s IFS rating of ‘A’ with Stable outlook. • Takaful IKHLAS was named “Best Takaful House” in the 2014 Islamic Finance Awards by Euromoney. • Increased level of retrocessions from twenty-five percent (25%) to thirty percent (30%) for Fire and Personal Accident businesses. • Voluntary Cessions (VC) to Malaysian National Reinsurance Berhad commenced four (4) months later. • MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, with Stable outlook. • A.M. Best revised Malaysian Re’s outlook to Positive from Stable and reaffirmed the FSR of ‘A-’ (Excellent) and ICR of ‘a-’. • Retrocede part of the VC cessions to the local insurance companies for their net account. 1976 — 1978 • Malaysian Re’s IFS rating of ‘A’ was reaffirmed by Fitch Ratings, with Stable outlook. • Takaful IKHLAS won the Best Takaful Provider – Euromoney Islamic Finance Awards 2013. • Perbadanan Nasional Berhad’s (PERNAS) fifty percent (50%) share in Malaysian National Reinsurance Berhad was transferred to Permodalan Nasional Berhad (PNB). • Sponsored the 1st Kuala Lumpur Insurance Seminar, attended by over four hundred (400) delegates. • Takaful IKHLAS and MRT won the Best Islamic Takaful Provider and Best Re-Takaful Provider awards, respectively, at the Islamic Finance News (IFN) Service Providers Poll 2011 Awards held in Kuala Lumpur. • Malaysian Re’s FSR of ‘A-’ (Excellent) and ICR of ‘a-’ was reaffirmed by A.M. Best, with Stable outlook for both ratings. • Published the 1st edition of the Malaysian Insurance Directory. • Increased paid-up capital from RM5,200,002 to RM6,240,003. • MRT’s IFS rating of ‘BBB+’ was reaffirmed by Fitch Ratings, with Stable outlook. • Takaful IKHLAS won the Best Islamic Takaful Provider at the Euromoney Islamic Finance Awards 2012. • Paid-up capital increased to RM8,216,004. • Introduced Common Account Excess of Loss for retrocessionaires. • Takaful IKHLAS was awarded for its excellence in Branding by “The BrandLaureate – SMEs Chapter Awards 2010” in the categories of The Best Brands in Corporate Branding – Islamic Financial Protection Services (second consecutive year) and The Best Brands in Product Branding – Health Insurance Services (third consecutive year). • Fitch Ratings upgraded Malaysian Re’s IFS rating from ‘A-’ to ‘A’ with Stable outlook. Formation of the following:- 1985 — 1987 • IKHLAS Medical Assistance Takaful won “Best Takaful Product” by International Takaful Awards 2010. • Takaful IKHLAS was awarded The BrandLaureate – SMEs Chapter Award 2010 (third consecutive year). • Implementation of Stage 1 – new levels of VC, Retrocessions and other market reinsurance arrangements. • Technical Services Department – To conduct fire surveys including advisory services on risk management with the cost mostly borne by Malaysian National Reinsurance Berhad. • Takaful IKHLAS was named the “Best Takaful Provider” at the Euromoney Islamic Finance Awards 2010 organised by financial magazine, Euromoney. • Takaful IKHLAS moved to its new corporate office, IKHLAS Point, in Bangsar South, Kuala Lumpur. • Implementation of Stage II – new levels of VC, Retrocessions and other market reinsurance arrangements. • Malaysian National Reinsurance Berhad and Malaysia National Insurance Berhad (MNI) jointly hosted and organised the 13th General Meeting of the Federation of Afro – Asian Insurers and Reinsurers (F.A.I.R.) attended by over three hundred fifty (350) international and local participants. • Malaysian Re and Labuan Re jointly hosted and organised the 21st F.A.I.R. Conference, attended by over six hundred (600) delegates including leaders and experts in the insurance industry. • Takaful IKHLAS won The BrandLaureate – SMEs Chapter Award 2009, “Best Brands in Product Branding – Consumer Healthcare Insurance” & The BrandLaureate – SMEs Chapter Award 2009, Corporate Branding – “Best Brands in Services – Islamic Protection Services”. • Appointed as Manager of the Malaysian Aviation Pool. • Appointed as the Administration Manager of MMIP. • MRT’s IFS rating of ‘BBB+’ with Stable outlook was reaffirmed by Fitch Ratings. • Takaful IKHLAS won “Best Takaful/Retakaful Provider” for the second time at the Islamic Finance News Polls Awards 2009. • MIIL, now known as Labuan Re, ceased to be a wholly owned subsidiary of Malaysian National Reinsurance Berhad with the equity interest being diluted to twenty percent (20%). • Implementation of automatic cessions on Facultative and Treaty business. • Malaysian Re’s MS ISO 9001:2000 Quality Management Systems certification which was issued in 2003, was reaffirmed. • Takaful IKHLAS won The BrandLaureate – SMEs Chapter Award 2008, “Best Brands in Product Branding – Consumer Healthcare Insurance”. • Launching of Malaysian National Reinsurance Berhad Homepage (http://www.malaysian-re.com.my). • Bank Negara Malaysia (BNM) appointed Malaysian National Reinsurance Berhad to manage the Scheme for Insurance of Large and Specialised Risks. • MRT was awarded “The Most Outstanding Retakaful Operator 2008” at the KL Islamic Finance Forum 2008 (KLIFF 2008). • Takaful IKHLAS was awarded “Best Takaful/Retakaful Provider 2008” by Islamic Finance News (IFN). • Appointed as Account Manager for the Sihat Malaysia Scheme. • Commencement of Overseas Facultative business. 1997 — 1999 • Malaysian Re’s IFS rating of ‘A-’ with Stable outlook was reaffirmed by Fitch Ratings. • MRT commenced operations in August 2007 as the first Retakaful operator in Malaysia. • BNM approved the registration of Takaful IKHLAS on 21 April 2003 and it commenced operations on 2 July 2003. 2003 • Malaysian Re won the prestigious Reinsurance Industry Contribution Award given by the Asia Insurance Review and the Review Magazine. 20 15 • Malaysian Re’s Financial Strength Rating of ‘A-’ (Excellent) and Issuer Credit Rating of ‘a-’ was reaffirmed by A.M. Best, with Positive outlook for both ratings. • Malaysian Re’s Insurer Financial Strength rating of ‘A’ was reaffirmed by Fitch Ratings, with Stable outlook. NOTICE OF 42 ANNUAL GENERAL MEETING ND //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD NOTICE IS HEREBY GIVEN that the Forty-Second Annual General Meeting of the Company will be held at the Auditorium, 3rd Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 30 September 2015 at 2.00 p.m. for the following purposes:AS ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 March 2015 together with the Reports of the Directors and Auditors thereon. Please refer to Explanatory Note (i) 2. To re-elect the following Directors retiring pursuant to Article 86 of the Company’s Articles of Association:(i) Yusoff Yaacob (ii) Paisol Ahmad (Ordinary Resolution 1) (Ordinary Resolution 2) 3. To re-elect Hijah Arifakh Othman, retiring pursuant to Article 92 of the Company’s Articles of Association, as Director of the Company. (Ordinary Resolution 3) 4. To approve Directors’ fees amounting to RM804,000 for the financial year ended 31 March 2015 (2014: RM700,000). (Ordinary Resolution 4) 5. To re-appoint Messrs Ernst & Young as Auditors and to authorise the Directors to fix their remuneration. (Ordinary Resolution 5) 6. Continuing in Office as Independent Non-Executive Director. “THAT approval be and is hereby given to the following Directors who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years, to continue to serve as an Independent Non-Executive Directors of the Company, in accordance with the Malaysian Code on Corporate Governance 2012.” (i) Yusoff Yaacob (ii) Megat Dziauddin Megat Mahmud (Ordinary Resolution 6) (Ordinary Resolution 7) AS SPECIAL BUSINESS To consider and if thought fit, to pass the following Ordinary Resolution:7. Re-appointment of a Director retiring in accordance with Section 129 of the Companies Act, 1965: “THAT P. Raveenderen, retiring in accordance with Section 129 of the Companies Act, 1965 be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting.” (Ordinary Resolution 8) 8. To transact any other business which may properly be transacted at the Annual General Meeting. By Order of the Board NORAZMAN HASHIM (MIA 5817) LENA ABD LATIF (LS 8766) Company Secretaries Kuala Lumpur 18 August 2015 5 NOTICE OF 42ND ANNUAL GENERAL MEETING (Cont’d) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD NOTES: 1. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote in his behalf. A proxy need not be a member of the Company. 2. A member may appoint not more than two (2) proxies to attend the meeting provided the member shall specify in each proxy the proportion of the member’s shareholdings to be represented by each proxy and only one (1) proxy shall be entitled to vote on a show of hands. 3. Where a member is an exempt authorized nominee, which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds. 4. An Instrument appointing a proxy(ies) shall be in writing, and in the case of an individual shall be signed by the appointer or by his attorney duly authorized in writing, and in the case of a Corporation shall be either given under its common seal or signed on its behalf by its attorney or an officer of the Corporation so authorized. 5. An Instrument appointing a proxy(ies) must be deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, not less than forty-eight (48) hours before the time set for the Annual General Meeting or any adjournment thereof. 6. Only members registered in the Record of Depositors as at 21 September 2015 shall be eligible to attend the AGM or appoint proxy(ies) to attend and vote on his/her behalf. 7.Explanatory Notes (i) Item 1 of the Agenda This item on the Agenda is meant for discussion only. The provision of Section 169(1) of the Companies Act, 1965 requires that the Audited Financial Statements be laid before the Company at its Annual General Meeting and do not require a formal approval of the shareholders. As such, this Agenda item is not a business which requires a resolution to be put to vote by shareholders. (ii) Ordinary Resolution 6 and 7 – Continuing in Office as Independent Non-Executive Director The proposed Ordinary Resolutions 6 and 7 are to seek the shareholders’ approval to retain Yusoff Yaacob and Megat Dziauddin Megat Mahmud who have served on the Board for a cumulative term of more than nine (9) years, as Independent Non-Executive Directors of the Company. The Board has via the Nomination Committee, assessed the Independence of Yusoff Yaacob and Megat Dziauddin Megat Mahmud and recommended them to continue to serve as Independent Non-Executive Directors based on the following justifications:- Ordinary Resolution 6: Yusoff Yaacob (a) Yusoff Yaacob has been an Independent Non-Executive Director for nine (9) years. (b) Notwithstanding the long tenure, Yusoff Yaacob is considered to still fulfill the criteria under the definition of “Independent Director” as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. (c) Yusoff Yaacob has performed his duties diligently and in the best interest of the Company without being subject to influence of the management. (d) Yusoff Yaacob has devoted sufficient time in attending Board meetings and has participated in Board discussions. 6 NOTICE OF 42ND ANNUAL GENERAL MEETING (Cont’d) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD (e) Yusoff Yaacob who is the Chairman of the Risk Management Committee, has the relevant industry background and experience which enables him to provide constructive advice, expertise and independent judgment. (f) This assessment is based on the Directors’ Evaluation exercise that was performed yearly amongst Board members. Ordinary Resolution 7: Megat Dziauddin Megat Mahmud (a) Megat Dziauddin Megat Mahmud has been an Independent Non-Executive Director for nine (9) years. (b) Notwithstanding the long tenure, Megat Dziauddin Megat Mahmud is considered to still fulfill the criteria under the definition of “Independent Director” as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. (c) Megat Dziauddin Megat Mahmud has performed his duties diligently and in the best interest of the Company without being subject to influence of the management. (d) Megat Dziauddin Megat Mahmud has devoted sufficient time in attending Board meetings and has participated in board discussions. (e) Megat Dziauddin Megat Mahmud who is the Chairman of the Audit Committee and Remuneration Committee, has the relevant industry background and experience which enables him to provide constructive advice, expertise and independent judgment. (f) This assessment is based on the Directors’ Evaluation exercise that was performed yearly amongst Board members. (iii) Ordinary Resolution 8 – Re-appointment of Directors pursuant to Section 129 of the Companies Act, 1965 (a) P. Raveenderen, who is over the age of seventy (70) years, shall retire pursuant to Section 129 of the Companies Act, 1965 at the conclusion of the forthcoming 42nd Annual General Meeting. The proposed re-appointment of P. Raveenderen will require a resolution passed by a majority of not less than three-fourths (3/4) of members of the Company who are entitled to vote at the forthcoming Annual General Meeting. The proposed resolution will enable P. Raveenderen, to hold office until the conclusion of the next Annual General Meeting of the Company. (b) Dato’ Syed Ariff Fadzillah Syed Awalluddin shall retire pursuant to Section 129 of the Companies Act, 1965 at the conclusion of the forthcoming 42nd Annual General Meeting and does not wish to seek re-election. 7 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Pursuant to Paragraph 8.27(2) of the Bursa Malaysia Main Market Listing Requirements Directors standing for re-election and re-appointment at the Forty-Second Annual General Meeting The following are Directors retiring pursuant to Article 86 of the Company’s Articles of Association:1. Yusoff Yaacob 2. Paisol Ahmad The following is the Director retiring pursuant to Article 92 of the Company’s Articles of Association – Retirement after appointment to fill casual vacancy:1. Hijah Arifakh Othman The following is the Director retiring pursuant to Section 129 of the Companies Act, 1965:Section 129 of the Companies Act, 1965 1. P. Raveenderen The respective profile of the above Directors is set out in the Profile of Directors’ section of the Annual Report from pages 23 to 25. 8 CORPORATE INFORMATION //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Registered Office Board of Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN 12th Floor, Bangunan Malaysian Re No. 17, Lorong Dungun Damansara Heights 50490 Kuala Lumpur Tel : +603-2096 8000 Fax: +603-2096 7000 E-mail: [email protected] Website: www.mnrb.com.my Stock Exchange Listing Bursa Securities – Main Market Mohd Din Merican President & Group Chief Executive Officer Non-Independent Executive Director Megat Dziauddin Megat Mahmud Senior Independent Non-Executive Director Company Secretaries Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766) P. Raveenderen Non-Independent Non-Executive Director Dato’ Syed Ariff Fadzillah Syed Awalluddin Independent Non-Executive Director Yusoff Yaacob Independent Non-Executive Director Paisol Ahmad Non-Independent Non-Executive Director Hijah Arifakh Othman Non-Independent Non-Executive Director Share Registrar Auditors Symphony Share Registrars Sdn. Bhd. Ernst & Young Level 23A, Menara Millenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur Tel : +603-7495 8000 Fax: +603-2095 5332 Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan Tel : +603-7841 8000 Fax: +603-7841 8008 Audit Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin P. Raveenderen Paisol Ahmad Yusoff Yaacob Nomination Committee Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) Sharkawi Alis Yusoff Yaacob Paisol Ahmad Megat Dziauddin Megat Mahmud Remuneration Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Yusoff Yaacob Risk Management Committee Yusoff Yaacob (Chairman) P. Raveenderen Hijah Arifakh Othman Investment Committee Principal Bankers Standard Chartered Bank Malayan Banking Berhad CIMB Bank Berhad Hijah Arifakh Othman (Chairman) Megat Dziauddin Megat Mahmud Paisol Ahmad Mohd Din Merican 9 GROUP STRUCTURE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD (13487-A) Malaysian Reinsurance Berhad 100% *Labuan Reinsurance (L) Ltd. 20% Takaful Ikhlas Berhad 100% MNRB Retakaful Berhad 100% Malaysian Re (Dubai) Ltd. 100% MMIP Services Sdn. Bhd. 100% * Motordata Research Consortium Sdn. Bhd. 40% 10 * Associate Company CHAIRMAN’S STATEMENT //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD SHARKAWI ALIS Chairman DEAR VALUED SHAREHOLDERS 11 CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD A MIXED ECONOMIC ENVIRONMENT The global economy expanded at a moderate pace in 2014, posting real Gross Domestic Product (GDP) growth of 3.4%, the same level registered in 2013. Economic divergence persisted with the developed economies continuing to be the main pillar of growth. The US economy grew 2.4% over the same period from the 2.2% growth recorded in the previous year as its unemployment rate fell to 5.6%, the lowest level since 2008. The Eurozone saw its GDP growing 0.8% after contracting 0.4% in 2013. Economic growth in the United Kingdom was also higher at 2.9% compared to the 1.7% growth registered in the previous year. However, there was still the lingering effect of the sovereign debt crisis in the Eurozone, particularly in Greece, and this made the task quite challenging for European policymakers. An uneven global growth path was seen in the 0.1% GDP contraction in Japan despite steep policy easing by the Bank of Japan (BoJ). Further to that, the International Monetary Fund (IMF) reported that GDP among the emerging economies grew at a slower rate of 4.6% in 2014 as compared to 5.0% in the previous year. Economic growth in China decelerated further to 7.4% from 7.7% previously as structural economic reforms continued to take place, underscoring global economic divergence in the present cycle. The significant correction in the price of oil is a concern within the context of the Malaysian economy as the country is a net exporter of crude oil, gas and petroleum products. The combined value of these exports was RM163.1 billion in 2014, while government revenue from this segment via petroleum tax, royalty and dividend income makes up about RM63.0 billion or 24.5% of the total government revenue. Due to the sharp correction in oil prices, the Government revised its budget deficit-to-GDP estimate for 2015 upwards to 3.2% from its initial estimate of 3.0% (with an oil price assumption of USD55.0 per barrel). The revised estimate, however, was still more favourable than the 3.5% deficit recorded in 2014. Despite the negative development in global oil prices, the Malaysian economy posted higher growth of 6.0% in 2014 (2013: 4.7%). This was due to better-than-expected exports performance during the first half of 2014 which cushioned the negative effect of the lower oil price to the economy in general. Overseas shipments gained 8.3% in 1H2014 before moderating in 2H2014 due to factors such as the economic slowdown in Japan, China and the Eurozone, while lower commodity prices during the second half of the year affected the value of exports. Additionally, private consumption remained relatively robust with an annual growth 12 rate of 7.1% on the back of stable labour market conditions and this was seen as a mitigating factor of the downside risk brought on by the decline in global oil prices. The end of Quantitative Easing (QE) in the US was followed by market expectations of an interest rate hike by the US Federal Reserve. Such an expectation triggered capital outflows from the emerging markets with RM6.9 billion of foreign selling seen in the local stock market for the whole of 2014. This also put downward pressure on emerging market currencies and the ringgit was not spared as investors started to price in USD-favourable interest rate differentials. Downward pressure on the local currency raised concerns about additional costs among corporations with forex exposure in their balance sheets. The challenging environment also affected the primary equity capital market. There were only 14 new listings on Bursa Malaysia Securities Berhad in comparison to 18 listings in 2013. These initial public offerings (IPOs) collectively raised funds amounting to RM5.9 billion, down 28.0% from the RM8.2 billion raised in 2013. Meanwhile, the FBM KLCI hit an all-time high of 1,892.65 points on 8 July 2014 but moderated to close the year at 1,761.3 points, 5.7% lower than the preceding year-end’s 1,866.96 points. MODERATE INDUSTRY GROWTH Global general insurance premiums registered 2.5% real growth in 2014, lower than the 3.1% growth in 2013. In the advanced economies, premium growth slowed to 1.7% from 1.9% in the previous year and the same outcome was observed among the emerging economies where premium growth slowed from 8.2% in 2013 to 5.5% in 2014. For the takaful industry, global gross takaful contributions for both general and family are estimated to have grown by 15.6% in 2014 as compared to 15.0% in 2013 with Saudi Arabia and Malaysia as the largest takaful markets. In 2014, natural disasters globally caused economic losses amounting to USD132.0 billion; however, this was some 37.0% below the 10-year average of USD211.0 billion. Furthermore, the year’s disasters caused insurance losses of USD39.0 billion, which was 38.0% below the 10-year average of USD63.0 billion. These losses were the lowest insured total loss since 2009, translating into the second consecutive year of below-normal catastrophe losses. Notable disasters during the year included major flooding incidents in India, Pakistan, China, and Southeast Europe; billion-dollar convective thunderstorm events in the US, France and Germany; as well as winter storms in Japan and the US. CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD In Malaysia, we had the East Coast floods that affected the states of Kelantan, Terengganu and Pahang which caused widespread destruction of property and belongings. Developments in takaful are likely to accelerate in key domiciles such as the key Gulf Cooperation Council (GCC) countries as well as highly populated Muslim countries, such as Indonesia and Pakistan, where takaful is gaining popularity. In Pakistan, for example, recent changes to regulations allow conventional insurers to establish takaful windows, which should spur growth in the country’s nascent takaful market. Meanwhile, the concept of takaful and Islamic finance continues to gain interest and we should expect more new entrants mainly from African and Asian countries. In Malaysia, the general insurance industry sustained a robust growth trend, registering gross written premiums of RM16.9 billion, an increase of 6.1% from 2013. The growth pace recorded was about identical to the country’s economic growth of 6.0% seen over the same period. The motor insurance segment which makes up about 47.0% of total gross written premiums in the industry grew at a lower rate of 5.6% (2013: 8.7%). The non-motor segment on the other hand saw premiums growing at 6.6% in 2014 compared to the 5.4% growth recorded in the previous year. In the general takaful segment, gross contributions rose 13.3% in 2014 to RM2.2 billion with major business classes registering double-digit growth. Meanwhile, the life insurance industry recorded healthy growth in 2014 with premiums from new business growing 9.6% to RM8.9 billion. Investment-linked products were the main drivers of growth recording an 18.0% increase in 2014 to RM3.9 billion as compared to RM3.3 billion in 2013. The family takaful industry on the other hand saw contributions from new business declining 2.9% to RM3.5 billion in 2014. STEADFAST GROUP PERFORMANCE The difficult global economic backdrop coupled with a few large claims, including the East Coast floods, created a challenging business environment for insurance and takaful operators in the country. Despite this difficult operating environment, the MNRB Group posted revenue of RM2.4 billion in FY2015, equivalent to FY2014’s revenue. Gross written premiums and contributions amounted to RM2.2 billion. The Group garnered total investment income amounting to RM199.5 million, a 14.5% or RM25.3 million increase over the RM174.2 million recorded in FY2014. The Group’s net profit for FY2015 was RM139.1 million, a reduction of 10.8% from RM156.0 million, translating into Earnings Per Share (EPS) of 65.3 sen as compared to 73.2 sen previously. This performance was achieved despite the provisions that the Group had made for a few large claims that impacted its reinsurance, takaful and retakaful subsidiaries, including claims related to the East Coast floods towards the end of 2014. 13 CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD PERFORMANCE OF KEY OPERATING SUBSIDIARIES Malaysian Reinsurance Berhad (Malaysian Re) Over the course of the financial year, Malaysian Re’s total gross premiums remained stable at RM1.3 billion. Approximately 59.0% of Malaysian Re’s total business volume was from the domestic market as compared to 62.0% in the previous year, whilst the remaining 41.0% was generated from its overseas business in comparison to 38.0% recorded previously. Malaysian Re continues to draw closer to achieving its target of having equal contributions in terms of gross premiums for both its local and overseas portfolios for the financial year ending 31 March 2017. Malaysian Re registered a profit before tax of RM196.0 million as compared to RM213.1 million in the preceding year, a reduction of 8.0%. This commendable performance was registered despite the large losses reported during the year such as the recent East Coast Floods, strikes and riots in Vietnam, and a major shipping disaster in Korea. Investment income grew by RM7.1 million or 8.2% to RM92.7 million in FY2015 from RM85.6 million previously. Malaysian Re recorded an overall profit after tax of RM152.1 million in comparison to RM160.7 million previously. Takaful Ikhlas Berhad (Takaful IKHLAS) In FY2015, Takaful IKHLAS’s gross contributions increased by 7.3% from RM769.6 million to RM826.0 million. The Family Takaful business accounted for 66.8% of total gross contributions and grew by 1.1% over the previous year. The General Takaful business accounted for the remaining 33.2% and grew by 22.7% over the previous year. The shareholder’s fund registered a profit before tax and zakat of RM27.8 million, a growth of 33.3% as compared to RM20.9 million in the preceding year. The shareholder's fund recorded a net profit after tax and zakat of RM19.4 million, a growth of 20.1% as compared to the preceding year’s RM16.1 million. The favourable variance was partly due to higher wakalah fee income from higher gross contributions and higher surplus administrative charges from the General Takaful business. The ongoing transformation of the business is already showing positive results and we are optimistic that the performance will continue to improve in the coming years. MRT registered a higher loss of RM17.7 million in FY2015 as compared to a loss of RM1.2 million in FY2014 mostly due to lower gross contributions arising from business portfolio consolidation and an increase in provision for claim liabilities of the General Retakaful fund. MAINTAINING OUR STRONG SHOWING Over the course of the financial year, Malaysian Re had its ratings reaffirmed by the rating agencies, which is apt testament to the quality of the Company’s business and the strength of its capital. Fitch Ratings reaffirmed Malaysian Re’s Insurer Financial Strength Rating (IFS) of 'A' with a stable outlook. The rating takes into consideration Malaysian Re's healthy financial fundamentals, as demonstrated by its sustained premium growth, consistently healthy financial performance, solid market franchise in Malaysia, and highly liquid profile of its investment portfolio. At the same time, A.M Best also reaffirmed Malaysian Re’s IFS rating of ‘A-’ with a stable outlook. The ratings considered Malaysian Re’s strong operating performance and excellent risk-adjusted capitalisation. GOVERNANCE AND RISK MANAGEMENT PRACTICES MNRB Retakaful Berhad (MRT) MRT saw its gross contribution for FY2015 reduced by 45.5% from RM117.2 million to RM63.9 million. The General Retakaful business accounted for 44.1% of the total business while the remaining 55.9% was generated from the Family Retakaful business. 14 The Board remains committed to upholding high standards of corporate governance throughout the Group. We strive to continuously improve the effective application of the principles and best practices as laid down by the Malaysian Code on Corporate Governance, the Corporate Governance Guide as well as the Main Market Listing Requirement issued by Bursa Malaysia Securities Berhad. MNRB’s policy is to implement CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD these principles and best practices as well as to uphold high standards of business integrity in all activities undertaken by the Group. This shall include a commitment to emulate good industry examples and to comply with the respective guidelines and recommendations in the conduct of the business activities of the Group. The Board recognises that an effective risk management framework is essential for the Group in our quest to achieve our corporate objectives, especially with regard to our continued profitability and enhancement of shareholder value in today’s rapidly changing market. Further details of our Governance and Risk Management policies can be found in the relevant sections of this Annual Report. RESPONSIBLE CORPORATE PRACTICES The Group continues to make good inroads by way of its corporate responsibility (CR) efforts on the Workplace, Marketplace, Community and Environment fronts. As a conscientious corporate citizen and a key player in the reinsurance, takaful and retakaful sectors, we continue to integrate responsible and sustainable practices into our total business operations. Our CR agenda sees us undertaking sustainable activities that focus on education, knowledge and human capital development. This is helping to ensure a continuous pool of talent in the Group and industry, as well as the cultivation of dynamic insurance and takaful professionals. Through these efforts, we are not only helping develop the local insurance and takaful industry but are also contributing towards our nation’s growth. In 2014, we continued to roll out the MNRB Scholarship Fund, which aims to encourage and promote education in the fields of insurance and takaful, actuarial science and risk management. Our community efforts to date focus on equipping the younger generation to become leaders of tomorrow through scholarship programmes, seminars, workshops, study camps and sponsorships. All these initiatives are helping lay strong foundations for the younger generation in order for them to attain greater heights in the future. Back in 2011, we created the Program Lestari Cemerlang MNRB, where the MNRB Group adopted a school as part of our effort to enhance the quality of education in rural areas. This programme, a two-year partnership between the MNRB Group and its selected school, aims to improve the academic achievements of students through extra educational activities and the setting up of learning facilities. The selected schools are typically secondary schools located in rural areas and the programme has benefited 2,634 students to date. As mentioned in last year’s Annual Report, on the professional front and in line with our aim of strengthening the capabilities of the local industry, Malaysian Re has developed a flood model for Malaysia which will allow companies to perform data analytics and flood simulations. We have called this model Re.Banjir. Companies that use the model will be able to perform flood simulations, loss estimations and make informed decisions on their business portfolio as well as their reinsurance programming. This is the way we are contributing to the market and this shall benefit the Malaysian insurance and takaful industry. The detail of these initiatives and the Group’s other corporate responsibility efforts can be found in the relevant section of this Annual Report. 15 CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD NEW DEVELOPMENT – ESTABLISHMENT OF RETAKAFUL DIVISION AT MALAYSIAN RE On 22 April 2015, the Board of Directors of MNRB announced that Malaysian Re had received approval from Bank Negara Malaysia (BNM) to conduct general and family retakaful businesses under Section 10 of the Islamic Financial Services Act 2013 (IFSA) via the establishment of a retakaful division. Malaysian Re plans to commence underwriting its retakaful business once the operating license is granted by BNM. Arising from this new development, MRT would focus on consolidating and subsequently running-off its business until such time deemed appropriate for it to surrender its operating license to BNM. Moving forward, the retakaful business of the MNRB Group will be offered via the Retakaful Division at Malaysian Re. The establishment of Retakaful division would enable the business to utilize the higher IFS ratings of ‘A’ (Fitch) and ‘A-’ (A.M. Best) from Malaysian Re to gain access to business which otherwise would not have been accessible due to the lower rating of ‘BBB+’ (Fitch) given to MRT in the past. In addition, the growth in Retakaful business volume has not been in tandem with the corresponding double digit growth in Takaful business due to the nature of the Takaful portfolio which demands much less Retakaful cover as compared to conventional reinsurance. Hence, the lack of Retakaful volume makes having a full-fledged stand-alone Retakaful operation difficult to sustain in the longer term. Despite the lack of Retakaful volume currently, we do see the future potential of the business albeit at a slower pace and we are in full support of the Government’s efforts to make Malaysia as an International Islamic Finance Marketplace. This division shall leverage on the proven technical expertise, IT systems and operations whereby combined resources would immediately provide better economies of scale. It also creates more efficient, consistent and cost-effective approach to the business. In terms of geographical diversification strategy, Retakaful business will be able to reach into the Middle East and North African (MENA) region through our subsidiary Malaysian Re (Dubai) Ltd (MRDL) in Dubai. Changes are also taking place in other jurisdictions. In China, the soon to be introduced China Risk Oriented Solvency System (C-ROSS) aims to link capital requirements closely to underwritten risks and promote sound risk management practices across the industry. We have seen a move to shift placements with onshore reinsurers or international reinsurers with better ratings. Local insurer and reinsurers also have started to ask offshore reinsurers to provide collateral for reinsurance assets as this measure is also part of the C-ROSS regime. Regulatory changes are also taking place in Indonesia where the regulator aims at optimising reinsurance capacity within the country. This new regulation will increase local retentions considerably from 10% to a minimum of 25% for all lines of business and would translate into lower market share for international and offshore reinsurers. These developments require Malaysian Re to re-strategise its approach into these markets. Under the Financial Services Act 2013 (FSA), MNRB Holdings Berhad (MNRB) has been designated as a Financial Holding Company (FHC) with effect from 1 July 2015. Section 115 of the FSA provides for BNM to specify standards on prudential matters to MNRB and its subsidiaries, which include but not limited to capital adequacy, liquidity and corporate governance while Section 116 of FSA provides BNM the power to issue written directions to MNRB and its subsidiaries in relation to the Group’s business affairs. The effect of the implementation of the Goods and Services Tax (GST) effective 1 April 2015 on the Insurance and Takaful industry is expected to be manageable although the impact on product pricing has not yet been seen. Life and Family products, with the exception of riders, are exempted from GST. The Group has put in place proper infrastructure and processes to handle GST compliance. While the aforementioned key developments will pose challenges to the MNRB Group, we have taken the necessary steps to ensure that we are able to meet these challenges and at the same time meet regulatory compliance. We will endeavour to be conscious of market developments and be able to take advantage of business opportunities as they arise. SHAREHOLDER VALUE CREATION A CHALLENGING BUSINESS LANDSCAPE Both fire and motor classes are currently governed by tariffs and plans to gradually abolish the tariffs are expected to take place on a staggered basis in 2016. Customers would then be charged premium/contribution rates reflective of the risks. Insurers and Takaful operators are gearing towards this market liberalisation and this is a move towards risk-based pricing. Abolition of the tariff would also encourage more product innovation and price differentiation, giving customers more choice offerings based on price and risk factors. To this end, Takaful IKHLAS is gearing itself towards its readiness to meet these challenges. 16 We have consistently maintained that capital preservation is a priority for the MNRB Group and we continue to propagate the importance of maintaining that principle. The need to further strengthen the capital position of the Group is more significant now as MNRB carries the role and responsibilities of a financial holding company which means MNRB has to maintain a certain level of capital adequacy and liquidity. Strengthening the capital position is part of the Group's strategy in facing the challenging operating environment and dynamic regulatory landscape ahead. Furthermore, increasing industry competitiveness globally have seen more mergers and acquisitions taking place, resulting CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD in players with stronger capital base, larger international network and wider expertise. As such, it is crucial to strengthen the capital so that we can continue to support our subsidiaries to stay competitive in the industry and hence sustaining the Group’s presence. looking at an acceleration of growth to 3.8% the year after. The downside risk to global growth is seen coming from China with the People’s Bank of China surprising the market with a few unexpected monetary policy easing to boost the economy. Against this backdrop, the Board is not recommending the payment of any dividend in respect of FY2015. Nevertheless, the Board remains committed to provide better returns to your dedicated investment in the forthcoming years. On the domestic front, the Malaysian economy is anticipated to grow between 4.5% and 5.0% with a central tendency forecast of 4.7% in 2015, well within the Government’s GDP forecast of 4.5%–5.5%. While domestic demand is key to anchoring the economy in this challenging environment, household spending is likely to be affected by the implementation of GST that came into effect on 1 April 2015. The weakening of the local currency may provide a boost to Malaysia export’s competitiveness but this view should also be balanced by external developments given that economic forecasts across major trading partners are not identical. With regard to the 11th Malaysia Plan, the Government has highlighted that it remains committed to fiscal consolidation and the budget deficit is expected to narrow to 0.6% of GDP by the year 2020 which should be positive for the Malaysian economy in the long-run. The downside risk to the ringgit remains as the current account surplus is likely to narrow and the likelihood of policy normalisation in the US would narrow any positive influence the ringgit may have. The inflationary effect from GST implementation should be partly offset by lower energy prices and BNM is forecasting headline inflation to be in the 2.0%–3.0% range in 2015 (2014: 3.1%). Looking back five years ago when the risk-based capital (RBC) framework was first adopted, MNRB had taken a similar decision in favour of capital preservation for our subsidiary, Malaysian Re. Now, the Board is pleased to note that the decision has paid off as Malaysian Re has grown stronger in terms of its capital base. The Board believes that MNRB is now at a similar juncture and that the same prudent approach should be taken for the Group’s corporate sustainability and until there is further clarity on the operating environment. LOOKING AHEAD Divergence in growth should continue to be the case for the world’s economies with the US economy expected to play a crucial role in supporting global growth. The International Monetary Fund in July 2015 cut its 2015 global GDP forecast from 3.5% to 3.3% and the fund is 17 CHAIRMAN’S STATEMENT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Although insurers in Asia-Pacific are likely to face deteriorating economic conditions in 2015, growth prospects remain firm for life and general insurance products. Rising real estate and financial asset values are enabling insurers throughout the region to produce higher premium volume from increased protection levels. Prospects for commercial lines insurance remain strong, given the region’s elevated catastrophe risk, the rise in infrastructure and home building across much of Asia-Pacific, as well as a low insurance penetration rate. This should have a positive impact on Malaysian Re as its overseas business averaged approximately 40% of its total revenue over the last two years. Nonetheless, the volatile foreign exchange rate in the current environment is a risk factor to Malaysian Re’s overseas operations. Despite the slower GDP growth forecast, prospects for Malaysia’s insurance and takaful sectors are expected to remain stable in 2015 even as regulatory changes and market liberalisation set in. Ongoing premium expansion, sound capital buffers and stable underwriting margins will continue to support the risk profiles of most insurers and takaful operators. The growth potential of the takaful segment is likely to remain despite new regulations, supported by a growing range of products and wider distribution coverage. Against this backdrop, Takaful IKHLAS shall position itself to capitalise on any business opportunities. Moving forward, the Board of Directors remains positive of the Group’s prospects for the financial year and recognises the challenging operating landscape that lies ahead. three new Board members, Puan Hijah Arifakh Othman, Encik Mustaffa Ahmad and Encik Md Adnan Md Zain. Puan Hijah Arifakh Othman was appointed to the Board of MNRB, while Encik Mustaffa Ahmad and Encik Md Adnan Md Zain were appointed to the Board of Malaysian Re with effect from 1 June 2015. My heartfelt thanks also go to my colleagues on the Board for their dedication, contributions and wise counsel. The Group and its subsidiaries are indeed fortunate to have such committed individuals to serve on the respective Boards and I certainly look forward to their untiring support. The Board would like to record our sincere gratitude to Encik Mohd Sahimy Man, the former President & Chief Executive Officer (CEO) of MRT whose contract expired on 30 September 2014 and to Encik Hashim Harun, who retired as the President & CEO of Malaysian Re on 31 March 2015. We thank these gentlemen for their worthy contributions and wish them every success in their future endeavours. We would like to extend a warm welcome to Encik Ahmad Ruhaizad Hashim who has been appointed as the new President & CEO of MRT on 2 January 2015 and Encik Zainudin Ishak who joined us on 1 April 2015 as the new President & CEO of Malaysian Re. We look forward to their insights and leadership. Last but not least, I wish to convey my utmost gratitude to our loyal management team and employees who continue to work hard and exhibit a spirit of excellence in all that they do. We have come thus far because of the staunch commitment and resolute effort of our team and I am confident they will continue to help us to attain greater heights. ACKNOWLEDGEMENTS On behalf of the Board of Directors, I would like to express my heartfelt gratitude to the many parties who have rendered us their worthy support. We sincerely thank our valued shareholders for their unwavering support and confidence in the MNRB Group. My deep gratitude goes also to all our loyal customers, business partners, ceding companies and intermediaries, as well as Bank Negara Malaysia and the insurance and takaful associations, for their steadfast support and cooperation. I would also like to thank YBhg. Datuk Mohd Khalil Dato’ Mohd Noor, who retired from the Board on 1 June 2015 and YBhg. Dato’ Syed Ariff Fadzillah Syed Awalluddin, who will not be seeking re-election at the forthcoming Annual General Meeting. We sincerely thank them for their guidance, dedication and worthy contributions to the Group during their time on the Board. Please join me in extending a warm welcome to the 18 As the MNRB Group continues to make strong stride forward amidst a challenging marketplace, we look to all our stakeholders to lend us their continuous support as we leverage on all opportunities and overcome all challenges to ensure a strong and sustainable future for all. On behalf of the Board Sharkawi Alis Chairman NRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB OLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLD GS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS //MNRB BERHAD ERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ HOLDINGS MNRB HOLDINGS BERH //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MN MNRB HOLDINGS BERHAD OLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLD GS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS ERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB 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GS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS ERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERH MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MNRB HOLDINGS BERHAD ∙ MN board of Directors 2015 19 BOARD OF DIRECTORS Paisol Ahmad 20 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Dato’ Syed Ariff Fadzillah Syed Awalluddin Megat Dziauddin Megat Mahmud Sharkawi Alis BOARD OF DIRECTORS (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Mohd Din Merican P. Raveenderen Yusoff Yaacob Hijah Arifakh Othman 21 DIRECTORS’ PROFILE 10/10 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Board meeting attended SHARKAWI ALIS Non-Independent Non-Executive Chairman SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Director since 7 January 2005 and was subsequently appointed as Non-Independent Non-Executive Chairman on 3 September 2007. Member of the Nomination Committee. He is a Barrister-at-Law from Middle Temple, London where he was called in 1971. He served in the Malaysian Judicial and Legal Service in various capacities for eleven (11) years before he was appointed as Group Legal Adviser of Malaysia Mining Corporation Berhad in August 1982. In January 1997, he joined the Securities Commission, Malaysia as Director of Market Supervision and subsequently as Director of Corporate Resources Division till March 2003. Also Chairman of Malaysian Re, Takaful IKHLAS, MRT, Labuan Re and MRDL, a Director of MIDF Amanah Asset Management Berhad, Malaysian Industrial Development Finance Berhad, MIDF Amanah Investment Bank Berhad, MIDF Property Berhad, Permodalan Satok Berhad and Motordata Research Consortium Sdn. Bhd. Not related to any Director and/or major shareholder of MNRB except by virtue of being a nominee Director of PNB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. MOHD DIN MERICAN 10/10 Board meeting attended Non-Independent Executive Director MOHD DIN MERICAN, aged fifty-three (53), Non-Independent Executive Director with effect from 9 January 2012 and President & Group Chief Executive Officer of the Company. Member of the Investment Committee. Obtained Bachelor of Commerce (Honours) degree from Carleton University, Ottawa, Canada. He is an Associate of The Malaysian Insurance Institute (AMII) since 1991. He has thirty (30) years experience in the insurance industry and has held key management positions in various insurance, insurance broking and reinsurance firms including being the Principal Officer & General Manager of SCOR Switzerland Ltd, Labuan Branch. Prior to joining MNRB, he was the Chief Executive Officer of Etiqa Insurance Berhad. Formerly a member of the Management Committee of Persatuan Insurans Am Malaysia, National Insurance Association of Malaysia and President of Life Insurance Association of Malaysia. Also a Director of Malaysian Re, MRT, Takaful IKHLAS, Labuan Re, MRDL and Motordata Research Consortium Sdn. Bhd. Not related to any Director and/or major shareholder of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. 22 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 10/10 MEGAT DZIAUDDIN MEGAT MAHMUD Board meeting attended Senior Independent Non-Executive Director MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 24 August 2006 and re-designated as Senior Independent Non-Executive Director on 19 July 2011. Chairman of the Remuneration Committee as well as the Audit Committee. Member of the Investment Committee and the Nomination Committee. He obtained a Bachelor of Science (Econs.) (Hons.) degree from the Queen’s University of Belfast, Northern Ireland and is a Fellow of the Institute of Chartered Accountants in Ireland as well as a Chartered Accountant with the Malaysian Institute of Accountants. He had served Golden Hope Plantations Berhad as Group Director, Finance, Arab-Malaysian Merchant Bank, first as General Manager – Operations and later as General Manager – Investment, Bank Simpanan Nasional as Finance Manager and the Accountant-General’s Department as Treasury Accountant. Also the Chairman of Alliance Islamic Bank Berhad and a Director of Malaysian Re, MRT, Pernec Corporation Berhad, Alliance Financial Group Berhad, Takaful IKHLAS and several other private limited companies. Not related to any Director and/or shareholder of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. 10/10 Board meeting attended P. RAVEENDEREN Non-Independent Non-Executive Director P. RAVEENDEREN, aged seventy (70), Malaysian. Appointed as a Director on 11 November 1993 and designated as an Independent Non-Executive Director on 1 September 2003. He was re-designated as a Non-Independent Non-Executive Director on 19 July 2011. Member of the Audit Committee and the Risk Management Committee. An Associate of The Chartered Insurance Institute as well as a Chartered Insurer. He was the Chief Executive Officer of Royal Insurance (M) Sdn. Bhd. since 1985 until the Company merged with Sun Alliance Insurance (M) Sdn. Bhd. on 1 September 1999 when he assumed the position of Executive Director of the merged Royal & Sun Alliance Insurance (M) Bhd. until his retirement on 31 August 2001. Also a Director of Malaysian Re. Not related to any Director and/or major shareholder of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. 23 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 10/10 DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN Board meeting attended Independent Non-Executive Director DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged seventy-one (71), Malaysian. Appointed as a Director on 31 January 2003 and re-designated as an Independent Non-Executive Director on 28 October 2004. Chairman of the Nomination Committee, member of the Audit Committee and the Remuneration Committee. Graduated from the University of Malaya with a Bachelor of Arts degree, then obtained a Diploma in International Relations from the University of Oslo, a Diploma in Development Administration from the London School of Economics and a Master’s in International Relations from the University of New York. Joined the Government service in 1967 and was later posted abroad to serve in Canada, Libya and the United Nations in New York and Indonesia. Was appointed as the Ambassador to Fiji, Republic of Korea and Thailand until his retirement from Government Service in 2001. Also the Chairman of Berjaya Auto Berhad, a Director of Malaysian Re, MRT, EcoFirst Consolidated Bhd. and one (1) other private limited company. Not related to any Director and/or major shareholder of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. YUSOFF YAACOB 10/10 Board meeting attended Independent non-Executive Director YUSOFF YAACOB, aged sixty-seven (67), Malaysian. Appointed as a Director on 10 November 2004 and re-designated as an Independent Non-Executive Director on 23 March 2006. Chairman of the Risk Management Committee, member of the Audit Committee, the Remuneration Committee and the Nomination Committee. Obtained a Diploma in Insurance Studies & Insurance Management from the University of Nottingham, United Kingdom. A Chartered Insurance Practitioner and a Fellow of the Chartered Insurance Institute, United Kingdom. Started his career as an Insurance Trainee with Malaysia National Insurance Sdn. Bhd. in 1970 and held the position of Marine Manager until 1979. Joined Petroliam Nasional Berhad (PETRONAS) in 1979 and was the General Manager (Insurance Division) until his retirement in 2003. Also a Director of Malaysian Re. Not related to any Director and/or major shareholder of MNRB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. 24 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 10/10 PAISOL AHMAD Board meeting attended non-Independent Non-Executive Director PAISOL AHMAD, aged sixty-one (61), Malaysian. Non-Independent Non-Executive Director since 11 April 2008. Member of the Audit Committee, the Investment Committee and the Nomination Committee. Obtained a Diploma in Accountancy from Universiti Teknologi MARA and thereafter became a Fellow of the Association of Chartered Certified Accountants, United Kingdom. Also a Chartered Accountant with the Malaysian Institute of Accountants, a Fellow of the Financial Services Institute of Australasia and a Certified Financial Planner with the Financial Planning Association of Malaysia. He was the Senior Accountant of Pernas Charter Management Sdn. Bhd. He then held various positions in Amanah Saham Nasional Berhad before being appointed as its Executive Director/Senior Vice President II. He was subsequently transferred to PNB and is currently the Senior Vice President, Internal Assurance Division. Also a Director of Takaful IKHLAS, KAF Investment Bank Berhad and two (2) other private limited companies. Not related to any Director and/or shareholder of MNRB except by virtue of being a Nominee Director and employee of PNB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. N/A Board meeting attended HIJAH ARIFAKH OTHMAN Non-Independent Non-Executive Director HIJAH ARIFAKH OTHMAN, aged fifty-five (55), Malaysian. Non-Independent Non-Executive Director since 1 June 2015. Chairman of the Investment Committee and member of the Risk Management Committee. She obtained a Degree in Mathematics and Computer Science from City University of London. She began her career in Bank Negara Malaysia (BNM) in 1984 where she served in various divisions including in senior positions as the Managers/Head of Fixed Income Portfolio Management of the External Reserves and Assistant General Manager/Head of Treasury of Danamodal from 1989 to 2000. She had served as the Director/Head of Asian Fixed Income in Standard Chartered Bank Malaysia and subsequently also served as the Executive Vice President/Head of Group Treasury Business in Malayan Banking Berhad from 2006 to 2009. She was appointed as the Managing Director/ Chief Executive Officer of Hong Leong Islamic Bank from 2009 to 2011. She has been a Director of KAF Investment Bank Berhad since 2012. Not related to any Director and/or shareholder of MNRB except by virtue of being a Nominee Director of PNB. Does not have any conflict of interest with MNRB and has never been convicted for any offences within the past ten (10) years. 25 SENIOR MANAGEMENT TEAM //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The President & Group Chief Executive Officer, MOHD DIN MERICAN leads the day-to-day operations of MNRB together with the key management staff which includes: Mohd Din Merican Norazman Hashim 26 Ahkter Abdul Manan Azlan A. Azizee SENIOR MANAGEMENT TEAM (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Ahmad Ruhaizad Hashim Romie Khalid Sharmini Perampalam Lena Abd Latif Raja zalman tuah Raja izzaham iszatul mashani ishak 27 SENIOR MANAGEMENT TEAM’S PROFILE Norazman Hashim EXECUTIVE VICE PRESIDENT & GROUP CHIEF FINANCIAL OFFICER/ COMPANY SECRETARY NORAZMAN HASHIM is the Executive Vice President & Group Chief Financial Officer/Company Secretary of MNRB. He obtained his Masters degree in Business Administration from the Cranfield School of Management, United Kingdom in 1990. He is also a fellow member of the Association of Chartered Certified Accountants (ACCA), United Kingdom and a member of the Malaysian Institute of Accountants (MIA). He joined the then Malaysian National Reinsurance Berhad in 1985 and was appointed as its Financial Controller and Company Secretary in 1994. He was subsequently transferred to Malaysian Re in April 2005 and promoted to General Manager of the Corporate Services Division in June 2005 where he oversaw the, Administration, Legal & Secretarial, Corporate Communications, Human Capital Management and Finance Departments. On 1 April 2008, he was transferred to MNRB where he assumed his current position. Norazman Hashim is also a Director of MSSB and the Company Secretary of Malaysian Re, MRT, MRDL and Takaful IKHLAS. Ahkter Abdul Manan SENIOR VICE PRESIDENT & GROUP CHIEF INVESTMENT OFFICER AHKTER ABDUL MANAN is the Senior Vice President & Group Chief Investment Officer of MNRB. He graduated from the University of Science, Malaysia with a Bachelor of Social Science (Honours) degree majoring in Management with a minor in Economics. He is responsible for the overall investment, property and administrative functions of the MNRB Group. He started his career in the Investment and Securities Department (IVS) of Malaysian International Merchant Bankers Berhad (MIMB) in 1987 as an Investment Analyst. In 1991, he was promoted to Manager, Head of IVS and in 1995 to Assistant General Manager. He was subsequently promoted to General Manager of IVS in 1997. He was then seconded to MIDF Aberdeen Asset Management Sdn. Bhd. (MIDF Aberdeen), which he set up in 1998. In January 2001, he was appointed the Chief Executive Officer and Executive Director of MIDF Aberdeen. He joined Asia Unit Trust Berhad (AUTB) in September 2004 as Chief Executive Officer following the transfer of the business of MIDF Aberdeen to Amanah SSCM Asset Management Berhad. He left AUTB in July 2007 to join MNRB on 17 July 2007. In total, he brings to the Company more than twenty-seven (27) years of experience in the Asset Management industry. 28 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Azlan A. Azizee SENIOR VICE PRESIDENT & GROUP CHIEF INFORMATION OFFICER AZLAN A. AZIZEE is the Senior Vice President & Group Chief Information Officer of MNRB. He graduated with a Bachelor of Science in Computer Science from the University of Wisconsin, Green Bay, USA in 1984 and received a Masters of Science in Information Systems Technology from The George Washington University, Washington D.C., USA in 1986. In 1987, he joined the then Malaysian National Reinsurance Berhad as an IT Executive. He held positions of increasing responsibility in the ensuing years at the Company and was involved in the implementation of IT initiatives for the insurance industry. Having assumed his current position on 1 April 2005, he is today responsible for directing the Company’s information technology strategy, management and operations. Ahmad Ruhaizad Hashim SENIOR VICE PRESIDENT & GROUP CHIEF STRATEGY OFFICER AHMAD RUHAIZAD HASHIM is the Senior Vice President & Group Chief Strategy Officer of MNRB. He graduated in 1990 with a Bachelor of Economics and Accounting from the University of Leeds, England. He has been a member of the Malaysian Institute of Certified Public Accountants (MICPA) since 1995 as well as a member of the Malaysian Institute of Accountants (MIA). He brings almost twenty-one (21) years of experience in corporate management and advisory services to the table. His began his career in 1991 when he joined Arthur Andersen as an auditor. He served Arthur Andersen for more than five (5) years until 1996 when he left to join KUB Malaysia Berhad. He then re-joined Arthur Andersen in 1999 to head its Kuala Terengganu branch operation. In 2002, he joined Putrajaya Holdings Sdn. Bhd. as the Head of the Corporate Planning Department. He then joined MNRB on 2 January 2008. In addition to his current role, he is also the President & CEO of MRT, a wholly owned subsidiary of MNRB. SENIOR MANAGEMENT TEAM PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Romie Khalid SENIOR VICE PRESIDENT & GROUP CHIEF INTERNAL AUDITOR ROMIE KHALID is the Senior Vice President & Group Chief Internal Auditor of MNRB. He graduated in 1996 with a Bachelor of Science (Economics), majoring in Accounting & Finance from the London School of Economics & Political Science. He began his career as an auditor with Arthur Andersen in 1997, where he served in the financial services group of the audit division. In 2003, he joined the then Malaysian National Reinsurance Berhad as an Executive in the Finance Department. He was then transferred to the Risk Management Department in 2004 to take up the role as the Risk Management Officer (RMO). On 1 April 2005, he was transferred to Malaysian Re where he served as RMO to Malaysian Re. Subsequently, he was transferred back to MNRB and assumed his current position on 7 August 2007. Sharmini Perampalam SENIOR VICE PRESIDENT & HEAD OF FINANCE SHARMINI PERAMPALAM is the Senior Vice President & Head of Finance of MNRB. She holds an Honours degree in Accountancy from Universiti Putra Malaysia and is a member of the Malaysian Institute of Accountants. She joined the then Malaysian National Reinsurance Berhad in 1995 as an Internal Audit Executive and moved up the ranks to Manager before being transferred to the Finance Department. She was promoted to her current position as Senior Vice President & Head of Finance in 2011. Having been with the MNRB Group for more than eighteen (18) years, she brings to the table a wealth of experience from financial and audit procedures to corporate and operations management. LENA ABD LATIF Senior Vice President & Head of Legal & Secretarial/ Company Secretary LENA ABD LATIF is the Senior Vice President, Head of Legal & Secretarial and the Company Secretary of MNRB. She holds a Bachelor of Laws (Honours) degree from the International Islamic University, Malaysia and has been called to the Malaysian Bar. She has over twenty-one (21) years of working experience in both legal practice and corporate firms. She was employed by Utusan Melayu (Malaysia) Berhad as its legal advisor in 1991 and thereafter, as the General Manager, Corporate Affairs/Group Company Secretary at Land & General Berhad between 1993 and 2000. She joined the then Malaysian National Reinsurance Berhad in 2003 as Manager, Legal & Secretarial and was appointed as its Company Secretary in February 2004. She was promoted to her current position as Senior Vice President & Head of Legal & Secretarial in 2011. She is also the Company Secretary of Malaysian Re, MRT, Takaful IKHLAS and MSSB. RAJA ZALMAN TUAH Raja Izzaham SENIOR VICE PRESIDENT & GROUP Chief RISK MANAGEMENT AND COMPLIANCE OFFICER RAJA ZALMAN TUAH Raja Izzaham is the Senior Vice President & Group Chief Risk Management and Compliance Officer of MNRB. He is a fellow member of the Association of Chartered Certified Accountants (ACCA), United Kingdom and a member of the Malaysian Institute of Accountants (MIA). He joined MNRB in 2006 as an Executive in the Internal Audit Department. He held positions of increasing responsibility in the ensuing years at the Company before being promoted as the Deputy Group Chief Internal Auditor in 2011. He assumed his current position on 9 October 2014 and has over fifteen (15) years of working experience. ISZATUL MASHANI ISHAK SENIOR VICE PRESIDENT & HEAD OF HUMAN CAPITAL MANAGEMENT ISZATUL MASHANI ISHAK is the Senior Vice President & Head of Human Capital Management, MNRB. She graduated in 1996 with a degree in Information Technology from the University of Queensland, Australia. She began her career as an Analyst Programmer with Mayban Life Assurance Berhad (now known as Etiqa Insurance Berhad). In 2006, she decided on a career change and embarked on her Human Resource journey as a Recruitment Specialist with Scicom (MSC) Berhad. As a self-learner, she obtained more experience as a Human Resource Generalist and a manager over the next few years with Accenture and Labuan Financial Services Authority. Prior to joining MNRB, she was the Section Head, Talent Management & Staff Engagement with RHB Banking Group specialising predominantly in Performance Management, Talent Development, Succession Planning and Employee Engagement. She joined MNRB on 2 September 2014 as Vice President, Learning & Development and was promoted to her current position on 1 January 2015. 29 FIVE-YEAR FINANCIAL HIGHLIGHTS //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 2015 2014 2013 2012 2011 RM’000 RM’000 RM’000 RM’000 RM’000 2,383,957 2,381,378 2,293,382 1,870,326 1,463,262 Profit before zakat and tax 190,705 214,728 159,332 188,212 164,952 Profit after zakat and tax 139,148 155,986 112,665 89,369 122,942 Technical reserves 3,784,625 3,612,476 3,204,985 2,793,864 1,266,110 Total assets 6,476,711 6,136,097 5,642,265 5,048,449 4,467,967 Shareholders’ fund 1,349,474 1,223,469 1,131,944 1,058,488 998,715 213,070 213,070 213,070 213,070 213,070 65.3 73.2 52.9 41.9 57.7 6.3 5.7 5.3 5.0 4.7 Profit before zakat and tax to Shareholders’ fund (%) 14.1 17.6 14.1 18.4 16.5 Profit after zakat and tax to Shareholders’ fund (%) 10.3 12.8 10.0 13.8 12.3 Gross Dividends (%) - - 32.0 17.0 20.0 Net dividends per share (sen) - 16.5 24.0 13.0 15.0 Revenue Paid-up capital Earnings per share (sen) Net assets per share (RM) 30 FIVE-YEAR FINANCIAL HIGHLIGHTS (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 2011: 1,463 2011: 165 2012: 1,870 2012: 188 2013: 2,293 2013: 159 2014: 2,381 2014: 215 2015:2,384 Revenue (RM’000) 2015:191 Profit before zakat and tax (RM’000) 2011: 4,468 2011: 999 2012: 5,048 2012: 1,058 2013: 5,642 2013: 1,132 2014: 6,136 2014: 1,223 2015:6,477 total assets (RM’000) 2015:1,349 Shareholders’ fund (RM’000) 2011: 57.7 2011: 4.7 2012: 41.9 2012: 5.0 2013: 52.9 2013: 5.3 2014: 73.2 2014: 5.7 2015:65.3 Earnings per share (sen) 2015:6.3 Net assets per share (rm) 31 FINANCIAL CALENDAR 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 4th Quarter Results Announcement date 29 May 2015 4th Quarter Results Reported as at 31 March 2015 2nd Quarter Results Announcement date 27 November 2014 Reported as at Announcement date 2nd Quarter Results Notice of AGM Reported as at 30 September 2014 JAN FEB MAR APR MAY JUN JUL AUG 2014 SEPT AGM date OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT 2015 NOV DEC 2016 1st Quarter Results Reported as at 30 June 2014 1st Quarter Results Announcement date 28 August 2014 3rd Quarter Results Reported as at 31 December 2014 3rd Quarter Results Announcement date 17 February 2015 The 42nd Annual General Meeting Date of Notice of AGM 18 August 2015 The 42nd Annual General Meeting Annual General Meeting date 30 September 2015 32 OCT MNRB’S GROWTH //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD RM Million 7,000 6,500 Total Assets Shareholders’ Fund 6,000 5,500 5,000 Year Shareholders’ Fund Total Assets 2002 506,313 1,329,716 2003 564,609 1,427,390 2004 617,010 1,476,021 2005 677,039 1,607,197 2006 747,803 1,772,311 2007 808,477 1,963,036 2008 893,919 2,576,247 2009 835,646 3,378,919 2010 892,513 3,845,983 2011 998,715 4,467,967 2012 1,058,488 5,048,449 2013 1,131,944 5,642,265 2014 1,223,469 6,136,097 2015 1,349,474 6,476,711 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 500 33 INVESTORS’ INFORMATION //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD MNRB HOLDINGS BERHAD – PERFORMANCE OF SHARE 1/4/14–31/3/15 1/4/13–31/3/14 1/4/12–31/3/13 1/4/11–31/3/12 1/4/10–31/3/11 3.58 3.72 2.94 2.62 2.63 Highest Price (RM) 4.9 4.24 3.39 3.42 3.04 Lowest Price (RM) 3.53 2.81 2.81 2.33 1.90 31,178 63,856 59,886 57,903 9,803 Gross Dividend Yield (%) 0.00 4.44 10.88 6.49 7.60 Price Earning Ratio (x) 5.48 5.08 5.56 6.25 14.21 Closing Price (RM) Total Volume Traded (‘000) Source: Bloomberg @ 20/5/2015 SHARE PRICES AND VOLUME TRADED (JANUARY 2013 – MARCH 2015) Closing Price (RM) Volume Traded (‘000) 12,500 5.00 11,500 10,500 4.50 9,500 8,500 4.00 7,500 6,500 3.50 5,500 4,500 3.00 3,500 2,500 2.50 1,500 500 Mar 15 Feb 15 Jan 15 Dec 14 Nov 14 Oct 14 Sep 14 Aug 14 Jul 14 Jun 14 May 14 Apr 14 Mar 14 Feb 14 Jan 14 Dec 13 Nov 13 Oct 13 Sep 13 Aug 13 Jul 13 Jun 13 May 13 Apr 13 Mar 13 Feb 13 Jan 13 2.00 Volume Traded (’000) Closing Price (RM) PERFORMANCE OF SHARES (JANUARY 2013 – MARCH 2015) Closing Price (RM) Kuala Lumpur Composite Index 34 Closing Price of MNRB Share (RM) Kuala Lumpur Composite Index Mar 15 Feb 15 Jan 15 Dec 14 Nov 14 Oct 14 Sep 14 Aug 14 Jul 14 Jun 14 May 14 Apr 14 Mar 14 Feb 14 1,600 Jan 14 2.00 Dec 13 1,650 Nov 13 2.50 Oct 13 1,700 Sep 13 3.00 Aug 13 1,750 Jul 13 3.50 Jun 13 1,800 May 13 4.00 Apr 13 1,850 Mar 13 4.50 Feb 13 1,900 Jan 13 5.00 SUSTAINABILITY REPORT //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD (13487-A) WORKPLACE MARKETPLACE COMMUNITY ENVIRONMENT OUR COMMITMENT TO SUSTAINABLE PRACTICES Being a conscientious corporate citizen and a key player in the reinsurance, takaful and retakaful sectors, MNRB recognises the need to go beyond mere profit. As such, we continue to embed responsible and sustainable practices into our total business operations within the areas of the Workplace, Marketplace, Community and Environment. To this end, the Group undertakes sustainable activities that focus on education, knowledge building and human capital development. This is to ensure a sustainable pool of talent in the Group, the industry as well as the cultivation of dynamic insurance and takaful professionals. In this manner, we are not only helping develop the local insurance and takaful industries but also contributing towards our nation’s growth. 35 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD strengthening our workplace 36 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD STRENGTHENING OUR WORKPLACE As a key player in an industry that is continuously evolving, MNRB has set its sights on developing a solid pipeline of talent and building a highly motivated workforce to ensure we keep our competitive edge. To this end, we continue to implement sustainable workplace initiatives to further strengthen the knowledge and the development of our employees. Training and Development Opportunities To enhance the capabilities of our employees, ensure they keep abreast of industry trends and perform to the best of their abilities, we provide them with a variety of training opportunities. Through various training initiatives, we introduce our employees to the fundamentals of the Company’s business, the insurance and takaful industries, the legal and regulatory environment, as well as technical and soft skills training. Our employees participate in workshops, seminars and conferences, both locally and overseas. All these initiatives help them to be the best they can be, as well as bolstering their career pathways and lending to their personal growth. As part of the Group’s Top Talent Development and Succession Planning Framework, several customized in-house leadership programmes were designed and developed. Via the MNRB Leadership Enhancement Programme (LEaP), 34 of our Senior Management underwent over 20-learning days spanning a period of 18 months and completed the programme in June 2014. This programme serves to strengthen the Group’s leadership team. In addition, 47 of our Middle Management completed the High Impact Group Leadership (HIGH) programme in early 2014, designed primarily to enhance personal and team effectiveness. For the past year, the MNRB Group had embarked on Career Ladder. Its main purpose is to provide a structured career and personal development whilst climbing up one’s career ladder. A skills competency matrix was developed for each identified Job Family within the Group. Varying degree of competencies for four job levels consisting of Individual Contributor, Functional Expert, Organisation Expert and Industry Expert were mapped out depending on their respective competency matrix. Individuals The front-line managers’ programme also known as Future Leader in You (FLY) was launched in November 2014 and will develop over 60 potential future leaders throughout 2015. Both programmes aim to enhance self-awareness and confidence around one’s personal capabilities and preferences in becoming a successful leader. In continuation from the LEaP and HIGH programs, leaders are being selected and sent to relevant Leadership Development Programmes conducted by top executive-education providers. This type of learnings addresses specific leadership competencies and will expose them to best practices as well as provide them with networking opportunities by accessing other global leaders. 37 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD were then assessed according to their job family and current professional level to determine their competency gaps. Given these information, Management and the individuals are able to ascertain the development requirements. The Career Ladder is still in its development stage and has vast potential to enhance the professional development of our employees in a structured manner. It provides our employees with the opportunity to be responsible and take accountability of their development and subsequently their professional career. The Education Assistance Programme (EAP), is a testament to the Group’s commitment to strengthen our employees and to create a continuous learning culture. This is also in line with our aspirations in becoming a high performing organization. For Takaful IKHLAS’ agents, a variety of training programmes continue to be rolled out to ensure that our agents are of a high calibre, continue to conduct themselves in a professional manner, and have the necessary knowledge to serve our customers effectively. In addition, Takaful IKHLAS also implemented a series of Shariah Compliance Activities (SCA) comprising Shariah training and awareness programmes for its agents and employees, shariah research, risk management and audits. An in-house training programme on Family Takaful/Retakaful was organised by MNRB in collaboration with our External Auditors. 38 Held in January 2015, the objective of the programme was for the employees to have better understanding of Family Takaful/ Retakaful business and increase their expertise, particularly those handling Family Takaful/ Retakaful operations. MNRB also observes mutual respect and maintains a cordial relationship with the National Union of Commercial Workers to foster good employee relations in the organisation. Such good rapport has allowed relevant issues to be resolved amicably. In addition to the above mentioned, MNRB, in its efforts to gain the strength of its diverse workforce, has also undertaken the following initiatives:- Employee Safety and Health Initiatives • Provides fair and equitable employment terms regardless of gender, ethnicity or age; • Gives equal opportunities for career advancement based on merit. This is supported by a well-developed performance appraisal system which is link to rewards; and • Awarding representation of women in management and senior management positions. We continue to implement a host of initiatives throughout the length and breadth of the organisation to keep our employees safe and healthy and ensure they live a balanced lifestyle. MNRB’s annual educational programme on heart disease prevention, the Healthy Heart Awareness Campaign, is a tie-up with the Heart Foundation of Malaysia. This campaign emphasises on the importance of preserving a work-life balance and educates the employees on all aspects of health especially pertaining to the heart disease. This campaign comprises of free health screening packages, health talks and a bone health check to measure employees’ calcium intake and bone health. SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD elevating the marketplace 39 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD ELEVATING THE MARKETPLACE We are conscious of the responsibility we have as a leading player in the reinsurance/takaful/ retakaful industries via our subsidiaries and are committed to instilling a higher degree of professionalism in the marketplace by helping develop more industry professionals. (13487-A) At the same time, we are focused on enriching the knowledge of underwriters to mitigate exposure of their portfolios by according them a flood risk analysis tool. The Malaysian Flood Model (Re.Banjir) Flooding is one of the most significant natural perils in Malaysia in terms of frequency and severity. Malaysian Re is committed to developing a Malaysian flood risk analysis tool, named Re.Banjir, for use by members of Persatuan Insurans Am Malaysia (PIAM) and the Malaysian Takaful Association (MTA). Re.Banjir is based on a software developed using the most detailed data and methodology available. It includes rainfall and river gauge data spanning many years. This data had been processed and developed using state-of-the-art hydrological solutions and programming tools. Re.Banjir is able to simulate a range of potential insurance losses from mild local flooding to floods in excess of the 1-in-250-years return period. Re.Banjir would allow Malaysian insurance and takaful companies to estimate flood exposure of their own portfolios. In addition, it would also allow them to better understand the effects of flooding on their portfolios, derive the Probable Maximum Loss (PML) to their portfolios for different return periods, quantify the financial implications and enable them to make informed decisions in relation to their reinsurance programming. Stage 1 of the Flood Model, which covers the Klang Valley, was launched on 23 September 2013. Stage 2 of the Flood Model will cover the whole of Peninsular Malaysia, while Stage 3 will cover Sabah & Sarawak. Stage 2, which was initially expected to be completed in 2014, will be launched in 2015 and the necessary work for Stage 3 is expected to commence soon. Market Training Programmes Over the years, Malaysian Re and MRT have implemented various training programmes on insurance/reinsurance and takaful/retakaful for staff of insurance/takaful companies to enhance their professionalism within the industry. These programmes serve as platforms for participants to exchange ideas and update themselves with the latest industry developments. Malaysian Re annually conducts Technical Courses in Fire Risk Assessment and Special/ Self Rating for underwriting and marketing staff of insurance companies. At the end of the training, these staff would be expected to conduct risk surveys and determine fire premium rates for certain types of risks. In September 2014, the 2014 Programme for Insurance Executive Development (PIED), was organised for Malaysian Re’s domestic and international clients in Kuala Lumpur. The 21st PIED covered four classes of insurance, namely Fire, Marine Hull & Cargo, Engineering and Liability. The programme was designed for executives with at least two years’ working experience in the insurance industry and who were well versed with theoretical knowledge of insurance in these four classes of insurance. The programme adopted a highly interactive approach, including illustrated case studies, to enable the participants to appreciate the practical application of what they have learnt. In March 2015, the annual Cedants’ Seminar was held by Malaysian Re in Ho Chi Minh City, Vietnam. This seminar was specially tailored to provide a technical and interactive session for senior reinsurance officers in the insurance industry to understand better the aspects of “Run-off Management” and “Finance for Reinsurance Underwriters.” 40 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Enriching Communities 41 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD ENRICHING COMMUNITIES We believe in enriching the communities around us to elevate lives and ensure a better future for all. As such, our community efforts focussed on equipping the younger generation to become leaders of tomorrow through scholarship programmes, seminars, workshops, study camps and sponsorships. These efforts are helping lay solid foundations for the younger generation in order for them to attain greater heights in the future. MNRB Scholarship Programme The MNRB Scholarship Programme is an initiative to encourage and promote education in the fields of Insurance/Takaful, Actuarial Science and Risk Management. It also serves to increase the pool of qualified and well-trained professionals in the Malaysian insurance and takaful industries. The MNRB Scholarship Fund (the Fund) was established in 1998 with an initial start-up fund of RM1 million. Since its commencement, the Fund has awarded a total of 389 scholarships to deserving Malaysians to further their undergraduate studies in both public and private institutions of higher learning. 42 Since 2007, as part of our efforts and commitment to develop young talent within the insurance/takaful industry, MNRB via the Fund had been collaborating with the Malaysian Insurance Institute or MII to extend its scholarship programme to working adults within the insurance and takaful industries. These scholarships are offered to staff of insurance and takaful companies who are keen to pursue professional insurance qualifications, such as the Associateship of the MII (AMII) and Diploma of the MII (DMII), on part-time basis. Since the onset of our partnership with MII, MNRB has offered a total of 191 scholarships. The knowledge that our scholarships are helping to produce more competent and qualified professionals in the Malaysian insurance and takaful industries shows our emphasis on education and human capital development. It reflects our unwavering commitment towards the continuous growth of not only our people, but also all those within the industry. SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Program Lestari Cemerlang MNRB Minggu Saham Amanah Malaysia (MSAM) Petrosains Visit for Asnaf (Zakat recipients) Kids The Program Lestari Cemerlang MNRB was created in 2011 to show support to our local education system. This programme is a twoyear partnership between MNRB Group and its selected school with the aims of improving the academic achievement through extra educational activities and contribution of learning facilities. The selected schools are typically secondary schools located in rural areas with the majority of students coming from lower-income families. MSAM event is one of the largest national investment education events in Malaysia organized by Permodalan Nasional Berhad (PNB) with the objective to help educate Malaysians on the importance of implementing prudent financial planning for the past 15 years. A visit to Petrosains is an annual event organised by Takaful IKHLAS for 30 asnaf children between 7 to 12 years old for them to experience science in the practical way of learning. The children participate in 2 workshops at Petrosains during this visit and at the end of the session, the Company hands over school items and cash contribution to assist them for the upcoming school term. A total of RM60,000 is allocated for this 2-year programme to cover various activities such as additional tuition classes, motivational talks, study camps and computer-aided learning section in the school’s library. The MNRB Group also contributed to the construction of the school’s Drug Prevention Education Path (PPDa) as well as to the upgrade of the school’s ‘surau’. The MNRB Group has been a firm supporter of MSAM activities and PNB’s initiative in educating the Malaysian public on making smart investments. The Group is also proud to be in involved in MSAM activities and will continue to support PNB’s noble cause. In addition to this, MSAM is also an avenue for the MNRB Group to share with the investors and public, on its subsidiaries, businesses and products. This helps to promote and enhance MNRB’s image and presence as a public listed company. 43 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD conserving our environment 44 SUSTAINABILITY REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD CONSERVING OUR ENVIRONMENT Our sustainable efforts extend to undertaking initiatives that seek to educate various target audiences about environmental conservation as well as mitigating the impact of our business activities on the environment. MNRB Ringgit-Savvy Programme A supplement to the MSAM exhibition, the MNRB Ringgit-Savvy Programme, which was commenced in 2012, educates the primary and secondary students on money management and the importance of saving as well as exposing the students on the creative thinking process when undertaking investment and wealth management activities. MNRB invited the National Cultural Arts Trainers to motivate students to be financially savvy through environmental friendly activities. The students were introduced to the concept of recycling and taught to construct musical instruments using recycled items. Guest artistes were also invited to inspire and share valuable tips on saving to the students. Rehabilitation of the Raja Musa Forest Reserve As an effort to educate our employee on the importance of conserving the environment, MNRB participated in PIAM’s planting of 600 saplings on 1 hectare of the peat swamp area under the Rehabilitation of the Raja Musa Forest Reserve project. This initiative has encouraged our employees to value the environment and to protect it for the benefit of our future generations to come. This project is a collaboration with the Global Environment Centre, an NGO active in addressing environmental issue with tree planting at the peat swamp forest as the main focus. MOVING FORWARD As MNRB continues to set its sights on growing profitably in a responsible manner, we will continue to ensure the delivery of impactful and tangible sustainable activities in the areas of the Workplace, Marketplace, Community and Environment. Only then can we hope to truly create sustainable value for the Group in a holistic manner, reinforce our ties with all stakeholders and stand out as a model for responsible corporate behaviour. 45 EVENT HIGHLIGHTS //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD TAKAFUL IKHLAS AGENCY WORKFORCE FACILITATE CUSTOMERS BUSINESS TRANSACTIONS WITH PLUG N PAY BY CIMB 8 APRIL 2014 Takaful IKHLAS provides Plug n Pay by CIMB Bank (Plug n Pay) payment device facility to Takaful IKHLAS agency workforce throughout Malaysia in an effort to ease mobile payment transactions with its customers. TAKAFUL IKHLAS REGIONAL OFFICE IN KELANTAN OPERATING FROM NEW PREMISES FOR THE CONVENIENCE OF CUSTOMERS 19 APRIL 2014 After operating for 9 years in Kelantan, Takaful IKHLAS relocated to a new office. The Kelantan Regional Office is the second asset bought by the Company subsequent to Sarawak Regional Office in 2013. The ceremony was officiated by the Chairman of MNRB Group, Encik Sharkawi bin Alis and attended by Takaful IKHLAS President & CEO, Ab Latiff Abu Bakar. 46 MINGGU SAHAM AMANAH MALAYSIA 2014 1 9 –2 7 A P R I L 2 0 1 4 Both MNRB and its takaful subsidiary, Takaful IKHLAS, supported Permodalan Nasional Berhad’s (PNB) effort in educating Malaysians on smart investment and prudent financial management by being event partners at Minggu Saham Amanah 2014 (MSAM 2014) held at Kota Bharu, Kelantan. MNRB was once again one of the ‘Rakan Utama’ and Takaful IKHLAS took on the role as ‘Rakan Program Keagamaan’. EVENT HIGHLIGHTS (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD MNRB SCHOLARSHIP PRESENTATION CEREMONY 4 JUNE 2014 MNRB awarded scholarships to thirty-four (34) students to pursue their studies in various insurance-related courses under the MNRB Scholarship Fund. En Mohd Din Merican, MNRB Holding’s President & GCEO and also Member of the Board of Trustee of the MNRB Scholarship Fund presented the scholarships at a ceremony held at Bangunan Malaysian Re in Damansara Heights. MNRB 41st ANNUAL GENERAL MEETING 18 SEPTEMBER 2014 At the Group’s 41st Annual General Meeting, shareholders were informed that MNRB recorded total revenue of RM2.4 billion in Financial Year Ended 31 March 2014 (FYE2014), as compared to RM2.3 billion recorded in the preceding year. MNRB’s shareholders also approved the declaration of a First and Final Single-Tier Dividend of 16.5% per ordinary share to be paid on 29 October 2014. FITCH RATINGS AFFIRMS ‘A’ RATINGS OF MALAYSIAN REINSURANCE BERHAD 29 OCTOBER 2014 Fitch Ratings affirmed Malaysian Reinsurance Berhad’s (Malaysian Re) Insurer Financial Strength rating (IFS) at ‘A’. Fitch Ratings also confirmed the Outlook is Stable. The affirmation reflects Malaysian Re’s well-maintained healthy financial fundamentals and sustained premium growth, coupled with strong capitalisation to support its market franchise leadership in Malaysia. A.M. BEST AFFIRMS MALAYSIAN RE’S POSITIVE OUTLOOK MALAYSIAN RE’S 24th ANNUAL GOLF TOURNAMENT 2 SEPTEMBER 2014 Malaysian Re organised a friendly golf tournament for its clients and business partners at Palm Garden Golf Club. 120 golfers participated in this tournament. 12 DECEMBER 2014 A.M. Best Asia-Pacific Limited (A.M. Best) has affirmed Malaysian Reinsurance Berhad’s (Malaysian Re) financial strength rating of A(Excellent) and the issuer credit rating of “a-”. A.M. Best also affirmed that the outlooks for both ratings are positive. 47 STATEMENT ON CORPORATE GOVERNANCE • The Malaysian Code on Corporate Governance 2012 (“the Code” or “MCCG 2012”); and • Bursa Malaysia Securities Berhad’s Main Market Listing Requirements (“Listing Requirements”). //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD MNRB’s policy is to implement these principles and best practices and to uphold high standards of business integrity in all activities undertaken by the Group. This shall include a commitment to emulate good industry examples and to comply with guidelines and recommendations in the conduct of business activities within the Group. Set out below is a statement on how MNRB has applied the principles and complied with the Best Practices as prescribed under the MCCG 2012 and the Listing Requirements during the financial year ended 31 March 2015. BOARD OF DIRECTORS BOARD COMPOSITION The Board of MNRB is responsible for the proper stewardship of the Group’s resources, the achievement of the Group’s objectives and good corporate citizenship. It discharges this responsibility by complying with all the relevant Acts and Regulations, including adopting the principles and best practices of the MCCG 2012 and the Listing Requirements. The Board comprises members with relevant expertise and experience drawn from business, financial and technical fronts which strengthened leadership and management. The Board retains full and effective control over the Group’s affairs. This includes the responsibility to determine the Group’s development and overall strategic direction. Key matters such as the approval of quarterly and annual results, major acquisitions and disposals, major capital expenditures, budgets, business plans and succession planning for top management, are reserved for the Board or its appointed committees to deal with. The meetings of the Board are chaired by the Non-Executive Chairman, whose role is clearly separated from the role of the President & Group Chief Executive Officer (“GCEO”), who ensures that Board policies and decisions are implemented accordingly. The Board currently comprises eight (8) members of whom seven (7) members are Non-Executive Directors, including the Chairman. Three (3) of these members are Independent Non-Executive Directors, four (4) are Non-Independent Non-Executive Directors and one (1) is a Non-Independent Executive Director (the GCEO). As at the date of this report, the percentage of the Board composition is as follows:Executive Director (Also the GCEO) 1 out of 8 12.5% Independent Non-Executive Directors 3 out of 8 37.5% Non-Independent Non-Executive Directors (including the Chairman) 4 out of 8 50% By virtue of this composition, the Company is in compliance with Paragraph 15.02 of the Listing Requirements which requires at least two (2) directors or one-third (1/3) of the Board, whichever is the higher, to be independent. 48 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The Board takes cognizance of the recommendation to ensure that the majority of its Directors are Independent Directors as well as to have diversity in terms of gender, ethnicity and age in the Board. The Board is committed to fulfilling the above but it faces constraints in terms of the number of members that are to be on the Board. Under the Company’s Articles of Association, the number of Directors shall not be more than ten (10) and the Board currently comprises eight (8) Directors. Notwithstanding this, the Board is making efforts to identify suitable candidates who can assist in fulfilling the above recommendations. The Board, following the resignation of Datuk Mohd Khalil Dato’ Mohd Noor, Non-Independent Non-Executive Director, had appointed a lady member on 1 June 2015 i.e. Hijah Arifakh Othman. This reflects the Board's effort to observe the recommendations on diversity. The Directors bring to the Board, a wide range of knowledge and experience in relevant fields such as insurance and reinsurance, accounting and finance, legal, economic, investment, international business, banking and business operations. Therefore, all Directors have the necessary depth to bring experience and judgment to bear on issues of strategy, performance, resources and ethical standards. The Board is of the opinion that its current composition and size constitute an effective Board for the Company. In accordance with the Listing Requirement, none of the members of the Board holds more than five (5) directorships in listed companies. The profiles of the Directors are provided on pages 22 to 25 of this Annual Report. BOARD CHARTER The Board had formalised a Board Charter setting out the duties, responsibilities and functions of the Board in accordance with the principles of good corporate governance set by the regulatory authorities. This Board Charter, if necessary, will be periodically reviewed, to incorporate updates and enhancements to the existing rules and regulations as and when necessary. The Board Charter is available on the Company’s website at www.mnrb.com.my. DIRECTORS’ CODE OF ETHICS The Directors observe a code of ethics in accordance with the code of conduct expected of Directors of a holding company of financial service providers. The Chairman is primarily responsible for the effective conduct and workings of the Board. The Chairman leads the Board in the oversight of the Management and in setting strategic business plans, goal and key policies for the Group to ensure the sustainability of long-term returns. STRATEGIES PROMOTING SUSTAINABILITY The Board is committed to implementing responsible and sustainable corporate practices. MNRB, as a conscientious corporate citizen, has embraced good corporate responsibility practices in the areas of stakeholder engagement, the community, workplace, marketplace and environment. Every business decision the Group makes pertaining to growth and profitability is consistent with its social and environmental goals for sustainability. The corporate responsibility initiatives undertaken by MNRB for the financial year ended 31 March 2015 are disclosed in the Sustainability Report of this Annual Report. A summary of the Corporate Responsibility Activities is also available on the Company’s website at www.mnrb.com.my. DIRECTORS’ INDEPENDENCE AND INDEPENDENT NON-EXECUTIVE DIRECTORS The Independent Directors play a pivotal role in corporate accountability and provide unbiased and independent views and judgement in relation to the Board’s deliberation and decision-making process. This is reflected in their membership of the various Board Committees and attendance at meetings. All the Independent Directors have demonstrated to the Board that they have exercised impartial and independent judgment, protecting the interests of the Group and the minority shareholders. The Non-Executive Directors do not participate in the day-to-day management of the Company and do not engage in any business dealing or other relationships with the Company (other than in situations permitted by the applicable regulations) in order that they remain truly capable of exercising independent judgment and act in the best interests of the Group and its shareholders. The Board is also satisfied that no individual or group of individuals dominate the decision-making process of the Board to ensure a balanced and objective consideration of issues, thereby facilitating optimal decision-making. 49 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD DIRECTORS’ INDEPENDENCE POLICY APPOINTMENTS TO THE BOARD The Board has adopted a nine (9) years with maximum of twelve (12) years policy for the tenure of Independent Non-Executive Directors, which is implemented to ensure the continuous effective functioning of the Board. Due to the nature of the Group’s businesses that are considered specialised, the Board is of the view that the maximum of twelve (12) years is reasonable considering there are significant advantages to be gained from long-serving Directors who already possess tremendous insight and knowledge of the Group’s/Company’s business affairs. The appointment of new Board members are considered and properly evaluated by the Nomination Committee. Upon completing this process, the Committee shall recommend the proposed appointment to the Board for its deliberation and approval. In making these recommendations, the Nomination Committee assesses the suitability of candidates, taking into account the required mix of skills, knowledge, expertise and experience, as well as professionalism, integrity including financial integrity, competencies and other qualities, before recommending them to the Board for appointment. The Board feels that the length of their service on the Board does not in any way interfere with their exercise of independent judgment and ability to act in the best interests of the Company. In assessing independence, the Board evaluates the following criteria:• The ability to challenge the assumptions, beliefs or viewpoints of others with intelligent questioning, constructive and rigorous debating, and dispassionate decision for the good of MNRB; • A willingness to stand-up and defend their own views, beliefs and opinions for the ultimate good of MNRB; and • An understanding of MNRB’s business activities in order to appropriately provide responses on the various strategic and technical issues brought before the Board. The Board considers that both Yusoff Yaacob and Megat Dziauddin Megat Mahmud who had served as Independent Directors for more than nine (9) years still meet the abovementioned criteria and that their long tenure do not affect their assessment and responsibilities as Independent Directors. The Nomination Committee and Board will devote sufficient time to review, deliberate and finalise the selection of Directors. In this aspect, the Company Secretary will ensure that all the necessary information is obtained and relevant legal and regulatory requirements are complied with. In this aspect, the Board is also guided by the Group’s Fit and Proper Policy for Key Responsible Persons. The Nomination Committee conducts a yearly assessment on the suitability of the present Directors under the abovementioned Fit and Proper Policy for Key Responsible Persons. The fit and proper assessment for the Directors includes self-declaration and vetting by the Company for the purpose of ensuring that they are suitable to continue serving as Directors of the Company. The following aspects would be considered by the Board in appointing/ reappointing Directors:• Probity, personal integrity and reputation – the person must have key qualities such as honesty, independence of mind, integrity, diligence and fairness. • Competence and capability – the person must have the necessary skills, ability and commitment to carry out the role. • Financial integrity – the person must manage their debts and financial affairs prudently. SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR RE-APPOINTMENT AND RE-ELECTION OF DIRECTORS In accordance with the best practices in corporate governance, Megat Dziauddin Megat Mahmud continues to be the Senior Independent Non-Executive Director of the Board to whom the concerns of shareholders and stakeholders may be conveyed. Megat Dziauddin Megat Mahmud is also the Chairman of the Audit Committee as well as the Remuneration Committee. He can be contacted at his email address at [email protected]. 50 In accordance with Article 86 the Company’s Articles of Association, one-third (1/3) of the Directors for the time being, or if their number is not a multiple of three (3), then the number nearest to one-third (1/3), shall retire from office at each Annual General Meeting (AGM). All retiring Directors can offer themselves for re-election. Directors who are appointed by the Board during the financial period before the AGM are also required to retire from office and seek re-election by the shareholders at the first opportunity after their appointment. STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The Articles further provide that all Directors shall retire from office at least once every three (3) years but shall be eligible for re-election. ROLES AND RESPONSIBILITIES OF THE CHAIRMAN AND GCEO Pursuant to Section 129 of the Companies Act, 1965, the office of a Director of over the age of seventy (70) years becomes vacant at every AGM unless he is re-appointed by a resolution passed at such an AGM of which no shorter notice than that required for the AGM has been given, and the majority by which such resolution is passed is not less than three-fourths (3/4) of all members present and voting at such an AGM. The roles and responsibilities of the Chairman and the GCEO are separated with a clear division of responsibilities as defined in the Board Charter. At the 42nd AGM, two (2) Directors are due for re-election pursuant to Article 86 and one (1) Director is due for re-election pursuant to Article 92 of the Articles of Association. Two (2) Directors are due to retire pursuant to Section 129 of the Companies Act, 1965. However, one of them i.e. Dato’ Syed Ariff Fadzillah Syed Awalluddin, has expressed his intention not to seek re-election. This distinction is to provide better understanding and distribution of jurisdictional responsibilities and accountabilities. The Chairman leads the Board and is also responsible for its performance. Together with the rest of the Board members, the Chairman sets the policy framework and strategies to align the business activities driven by the Senior Management Team with the Group’s vision and mission. BOARD AND INDIVIDUAL DIRECTORS’ EFFECTIVENESS The GCEO is mainly accountable for the day-to-day management to ensure the smooth and effective running of the Group. He is also responsible for the implementation of policies and Board decisions as well as coordinating the development and implementation of business corporate strategies. The Board members undertake a formal and transparent process, upon completion of every financial year, to assess the effectiveness of their fellow directors, the Board as a whole and the performance of the Executive Director. The GCEO also ensures that the financial management practice is at the highest level of integrity and transparency for the benefit of the shareholders and the affairs of the Company be performed in an ethical manner. The Board and Individual Directors Evaluation is based on answers to a detailed questionnaire. The evaluation form is distributed to all Board members and covers topics which include, among others, the responsibilities of the Board in relation to strategic plan, fiscal oversight, risk management, Board composition and training needs. Other areas which are assessed include the contribution of each and every member of the Directors at meetings as well as meeting arrangements. The Nomination Committee, having deliberated the findings of the Board and Individual Directors Evaluation, will report to the Board the results and highlight those matters that require further discussion and direction by the Board. The Board members’ directorship in companies other than the Company and the Group, are well within the restriction of not more than five (5) directorships in public listed companies as stated in the Listing Requirements. BOARD MEETINGS The Board meeting dates for the ensuing financial year are scheduled in advance before the end of the current financial year so that the Directors are able to plan ahead and schedule these dates into their respective meeting schedules. The Board has scheduled meetings at least six (6) times a year, besides the AGM. For the financial year ended 31 March 2015, the Board held ten (10) meetings. Technology and information technology are effectively used in Board meetings and communications with the Board. Board meeting materials are shared electronically and where required, Directors may participate in meetings via video conference. All Directors have complied with the requirement to attend at least fifty percent (50%) of Board meetings held during the financial year ended 31 March 2015 pursuant to the Listing Requirements. 51 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The details of attendance of the Directors at Board meetings held during the financial year are as follows:- Name of Director No. of Meetings Percentage of Attended Attendance The Board delegates the day-to-day management of the Company’s business to the Senior Management Team, but reserves for its consideration significant matters such as the following:• Approval of financial results and quarterly announcements; • Material acquisition and disposals of assets; • Related party transactions of a material nature; Sharkawi Alis 10/10 100% Mohd Din Merican 10/10 100% Megat Dziauddin Megat Mahmud 10/10 100% P. Raveenderen 10/10 100% • Authority levels for core functions of the Company; Dato’ Syed Ariff Fadzillah Syed Awalluddin 10/10 100% • Yusoff Yaacob 10/10 100% Corporate policies on investments (including the use of derivatives) and risk management; • Outsourcing of core business functions; • Policies and Procedures; • Annual Budget; and • Capital Management Plan. Datuk Mohd Khalil Dato’ Mohd Noor 8/10 80% Paisol Ahmad 10/10 100% - - Hijah Arifakh Othman (Appointed w.e.f. 1 June 2015) At each scheduled Board meeting, there is a report on the six (6) elements of responsibility of the Board under the MCCG 2012, namely:• Reviewing/adoption of strategic and business plans for the Group; • Overseeing the conduct of the Group’s business to evaluate whether the business is being properly managed; • Identifying principal risks and ensuring the implementation of appropriate systems to manage the risks; • Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacing key management; • Developing and implementing an investor/shareholder relations programme or communication policy for the Group; and • Reviewing the adequacy and integrity of the Group’s systems of internal control and of management information. There is also a financial and business review and discussion of the Group’s quarterly performance including operating performance to date, against the annual budget and business plan previously approved by the Board for that year. The respective Board Committee’s reports and recommendations are also presented and discussed at Board meetings. All proceedings of Board meetings are duly recorded in the minutes of each meeting and signed minutes of each Board meeting are properly retained by the Company Secretary. 52 DIRECTORS’ REMUNERATION Remuneration Policy and Procedure The Remuneration Committee recommends to the Board the appropriate remuneration packages for the Directors as well as Executive Director and the key senior officers in order to attract, motivate and retain the Directors, Executive Director and the key senior officers of the necessary calibre and quality as required by the Group. The Group’s remuneration policy is to reward the Directors and the key senior officers competitively, taking into account performance, market comparisons and competitive pressures in the industry. Whilst not seeking to maintain a strict market position, the Committee takes into account comparable roles in similar organisations that may be the same in size, market sector or business complexity. The Executive Director does not participate in any way in determining his individual remuneration. All Non-Executive Directors are paid Directors’ fees, which are recommended by the Board and approved annually by the shareholders at the AGM. The details of the total remuneration of each Director of the Company during the financial year ended 31 March 2015 are disclosed on pages 154 and 155 of this Annual Report. STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Indemnification of Directors and Officers Directors and Officers are indemnified under a Directors’ and Officers’ Liability Insurance against any liability incurred by them in the discharge of their duties while holding office as Directors and Officers of the Company. The Directors and Officers shall not be indemnified where there is any negligence, fraud, breach of duty or breach of trust proven against them. SUPPLY OF INFORMATION The Company Secretary also serves notices to the Directors and all staff on the closed periods for trading in MNRB shares, in accordance with the black-out periods for dealing in the Company’s securities pursuant to Chapter 14 of the Listing Requirements. The Directors may, if necessary, obtain independent professional advice from external consultants, at the Company’s expense. Throughout their period in office, Directors are updated on the Group’s business, the competitive and regulatory environments in which it operates and other changes by way of written briefings and meetings with the Senior Management staff. All Directors have full and unrestricted access to all information pertaining to the Group’s business affairs, whether as a full Board or in their individual capacity, to enable them to discharge their duties. CONFLICT OF INTEREST Prior to Board meetings, every Director receives a notice of meeting, the agenda and Board papers. Sufficient time is given to the Directors to enable them to obtain further explanations, where necessary, so that there will be full participation by Directors at the meeting. The Board papers include the following:- Directors are required to declare their respective shareholdings in the Company and related companies and their interests in any contracts with the Company or any of its related companies. Directors are also required to declare their directorships in other companies and shall abstain from any discussions and decision-making in relation to these companies. • Minutes of Board Committee meetings to keep the Board informed; • Reports by the various Board Committees on issues deliberated at the respective Board Committee meetings; DIRECTORS’ TRAINING • Financial Statements Report on the Group and subsidiaries’ performance; and • Compliance reports. Proper guidelines have been given by the Board pertaining to the content, presentation style and delivery of papers to the Board for each Board meeting to ensure adequate information is disseminated to the Directors. All Directors have direct access to the members of the Senior Management Team and the services of the Company Secretary to enable them to discharge their duties effectively. The Company Secretary attends and ensures that all Board meetings are properly convened, and that accurate and proper record of the proceedings and resolutions passed are taken and maintained in the statutory register at the registered office of the Company. The Company Secretary works closely with Management to ensure that there are timely and appropriate information flows within and to the Board and Board Committees, and between the Non-Executive Directors and Management. The Company acknowledges that continuous education is vital for the Board members to gain insight into the regulatory updates and market developments to enhance the Directors’ skills and knowledge in discharging their responsibilities. All new Directors are required to undergo an induction programme whereby they receive information about the Group, the formal statement of the Board’s role, the powers that have been delegated to the Company’s Senior Management and Management committees as well as the latest financial information about the Group. This is to enable them to contribute effectively from the outset of their appointment. With the repeal of Practice Note 15 on Continuing Education Programme by Bursa Securities, the continuous training needs of the Directors are now vested in the Board. During the financial year, all Directors attended various seminars and programmes to strengthen their skills set and knowledge in order to effectively discharge their responsibilities, as well as to acquire sound understanding of current issues and developments in the financial and business environment. Pursuant to the requirements of Bursa Malaysia, a newly appointed Director is required to attend the Mandatory Accreditation Programme (“MAP”) and obtain a certificate from a programme organizer approved by Bursa Malaysia. Hijah Arifakh Othman had attended MAP on 29 July 2015 and 30 July 2015. 53 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The Company Secretary facilitates the organization of internal training programmes and the Directors’ participation in external programmes. The Company Secretary keeps a complete record of the training received or attended by the Directors. BOARD COMMITTEES The following are some of the programmes and seminars attended by the Board members during the financial year:- • Audit Committee; • Nomination Committee; • Remuneration Committee; • Risk Management Committee; and • Investment Committee. • • • Corporate Governance - Great Companies Deserve Great Boards and Great Boards Leading the Way for Highly Innovative Companies; - Nominating Committee Programme; - Recovery and Resolution Plan in Financial Institutions: Board Leading the Way; and - Lean Management System. Reinsurance Business - The Impact of Science and Technology on the Insurance Industry; - Reinsurance Overview; -20th Indonesian Rendezvous – Robust Indonesian Reinsurance Company Forthcoming the Asean Economic Community; - Overview of Compulsory Automobile Liability Insurance (“CALI”) in Japan; and - Detariffication and Actuarial Liabilities for General and Family Takaful Business and Responsibilities of the Board on Actuarial Matters. Economics, Finance, Capital Market and Exchange - Global Competitiveness and the Malaysian Experience; - Islamic Corporate Banking: Products & Instruments; and - Anti-Money Laundering and Anti-Terrorism Financing. The Board has delegated specific responsibilities to five (5) Board Committees, as follows:- These Board Committees have their respective Terms of Reference, which clearly define their duties and obligations in assisting and supporting the Board. The ultimate responsibility for the final decision on all matters lies with the entire Board. Audit Committee The Audit Committee comprises five (5) members of whom three (3) are Independent Non-Executive Directors and two (2) are Non-Independent Non-Executive Director. Two (2) members of the Committee are qualified Accountants and members of the Malaysian Institute of Accountants. • Megat Dziauddin Megat Mahmud Chairman (Senior Independent Non-Executive Director) • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director) • P. Raveenderen (Non-Independent Non-Executive Director) All Non-Executive Directors are paid Directors’ fees which have been approved by the shareholders at the AGM based on the Board’s recommendation. • Paisol Ahmad (Non-Independent Non-Executive Director) The remuneration structure of Non-Executive Directors of the Company is as follows:- • Yusoff Yaacob (Independent Non-Executive Director) • Fees for duties as Director and as member of the various committees of the Board as well as additional fees for undertaking responsibilities as Chairman of the Board and the various Board Committees. • Meeting allowance for each meeting attended. The Committee’s Terms of Reference include the review and deliberation of the Financial Statements of the Company and the Group, findings of the External and Internal Auditors, any related party transactions and any conflict of interest situation within the Group, as well as making recommendations to the Board pertaining to the appointment/ re-appointment of External Auditors. DIRECTORS’ FEES The fees for Non-Executive Directors are recommended by the Board to the shareholders after deliberating the recommendations by the Remuneration Committee. The meeting allowance for all Non-Executive Directors is also determined by the Board. 54 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD In order to encourage a greater exchange of free and honest views and opinions between the Audit Committee and External Auditors, meeting between them, without the executive board member and the Senior Management Team being present, was held during the year. The Directors are able to devote full commitment to their roles and responsibilities as Directors of the Company, as no directors hold more than five directorships in other public listed companies. The Committee met six (6) times during the financial year. The Audit Committee’s duties, as spelt-out in the Audit Committee Report on pages 59 and 60 of this Annual Report, include primarily, the duties as spelt out in paragraph 15.12 of the Listing Requirements. In accordance with prescribed Corporate Governance best practices, the Nomination Committee undertook these key activities during the financial year:- The Committee met six (6) times during the financial year. • Assessed the performance of key Senior Management staff prior to the renewal of their contracts; • Assessed and made recommendations on the re-election of Directors retiring by rotation at the 42nd AGM; • Reviewed the results of the Annual Assessment on the Effectiveness of the Board and the Individual Board members, including the assessment on the independence of the Independent Directors; Nomination Committee The Nomination Committee comprises five (5) Non-Executive Directors, the majority of whom are independent. The Committee is chaired by an Independent Non-Executive Director in compliance with Paragraph 15.08A(1) of the Listing Requirements. The members of the Committee are:• Dato’ Syed Ariff Fadzillah Syed Awalluddin Chairman (Independent Non-Executive Director) • Assessed the training needs of the Directors and ensured that the necessary training was being provided by the Company; • Sharkawi Alis (Non-Independent Non-Executive Director) • • Yusoff Yaacob (Independent Non-Executive Director) Assessed the Directors and key Senior Management compliance with the fit and proper criteria approved by the Board which are consistent with the Financial Services Act, 2013 and the Policy Document on Fit and Proper Criteria; • • Paisol Ahmad (Non-Independent Non-Executive Director) Assessed and made recommendations on the appointment of new Director; and • Training required by Board members. • Megat Dziauddin Megat Mahmud (Senior Independent Non-Executive Director) The Committee’s objectives are to establish a documented formal and transparent procedure for the appointment of Directors and key senior officers as well as to assess the effectiveness of Directors, the Board as a whole and the various committees of the Board on an ongoing basis. The Committee regularly reviews the profile of the required mix of skills and attributes of the Directors and is satisfied that the Board has the appropriate balance of expertise and ability to discharge its responsibilities. All assessments and evaluations carried out by the Committee are properly documented and kept by the Company Secretary. The Committee, following its recent annual assessment review, is satisfied that the size of the MNRB Board is optimum and that there is the appropriate mix of knowledge, skills, attributes and core competencies in the composition of the Board. The Committee is satisfied that all the members of the Board are suitably qualified to hold their positions as Directors of MNRB in view of their respective academic and professional qualifications, experience, knowledge and personal qualities. Remuneration Committee The Board has established a Remuneration Committee comprising three (3) Non-Executive Directors. The members of the Committee are:• Megat Dziauddin Megat Mahmud Chairman (Senior Independent Non-Executive Director) • Dato’ Syed Ariff Fadzillah Syed Awalluddin (Independent Non-Executive Director) • Yusoff Yaacob (Independent Non-Executive Director) 55 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The Committee’s primary objective is to establish a formal and transparent procedure for developing a remuneration policy for Directors, Executive Directors and key senior officers and to ensure that their compensation is competitive and consistent with the Company’s culture, objectives and strategies. Additionally, the Committee is also responsible for recommending to the Board the specific remuneration packages for Directors, Executive Directors and key senior officers to ensure that they commensurate with the scope of responsibilities held, and as well as to review and recommend changes to the Board whenever necessary. The Board as a whole will determine the remuneration of the Non-Executive Directors. Each individual Director will abstain from the Board discussion and decision on his own remuneration. The members of the Committee are:• Yusoff Yaacob Chairman (Independent Non-Executive Director) • P. Raveenderen (Non-Independent Non-Executive Director) • Hijah Arifakh Othman (Non-Independent Non-Executive Director) The RMCB is responsible for:• Reviewing and recommending risk management strategies, policies and risk tolerance for the Board’s approval; • Reviewing and assessing the adequacy of risk management policies and framework for identifying, measuring, monitoring and controlling risks as well as the extent to which these are operating effectively; • Ensuring adequate infrastructure, resources and systems are in place for effective risk management i.e. ensuring that the staff responsible for implementing risk management systems perform those duties independently of the Group’s risk taking activities; and Reviewing the management’s periodic reports on risk exposure, risk portfolio composition and risk management activities. The Committee met seven (7) times during the financial year. During the year, the Remuneration Committee had reviewed and deliberated the following matters:• The performance of the Balanced Scorecard/KPI for the bonus and performance of staff for the financial year ended 31 March 2015; • The proposed Balanced Scorecard/KPI and linkages to annual increment and bonus for financial year ending 31 March 2016; • The starting salaries for all new graduates joining the MNRB Group of Companies; • • The existing Anniversary Increment policy for new staff; The Committee met four (4) times during the financial year. • Travel Guidelines for the MNRB Group; Investment Committee • Directors’ Fees and Directors’ meeting allowance; and • The Education Assistance Programme for staff to further study. The Investment Committee, comprising two (2) Non-Independent Non-Executive Directors, one (1) Independent Non-Executive Director and one (1) Non-Independent Executive Director, examines strategic investment proposals and makes decisions to optimise the Group’s returns on its investment activities. The members of the Committee are:- Risk Management Committee The Board believes that an effective Risk Management Framework is essential for the Group in its quest to achieve its corporate objectives, continued profitability and enhancement of shareholders’ value in today’s rapidly changing market environment. With this in mind, the Board had established a dedicated Board Committee known as the Risk Management Committee of the Board (“RMCB”) which oversees the implementation of an enterprise-wide risk management framework. The Committee comprises three (3) members and is chaired by an Independent Non-Executive Director. • Hijah Arifakh Othman Chairman (Non-Independent Non-Executive Director) • Megat Dziauddin Megat Mahmud (Senior Independent Non-Executive Director) • Paisol Ahmad (Non-Independent Non-Executive Director) • Mohd Din Merican (Non-Independent Executive Director) The Committee met four (4) times during the financial year. 56 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD WHISTLEBLOWING EFFECTIVE COMMUNICATION WITH SHAREHOLDERS The Group is committed to carrying out its business in accordance with the highest standards of professionalism, honesty, integrity and ethics. Accordingly, the Group has established a Whistleblowing Policy with the following objectives:- The Group recognises the paramount importance of shareholder communication as it is a key component to upholding the principles and best practices of corporate governance for the Group. • To help develop a culture of accountability and integrity within the Group; • To provide a safe and confidential avenue for all employees, external parties and other stakeholders to raise concerns about any misconduct; • To reassure whistleblowers that they will be protected from detrimental action or unfair treatment for disclosing concerns in good faith; and • To deter wrongdoing and promote standards of good corporate practices. This Policy governs the disclosures, reporting and investigation of misconduct within the Group as well as the protection offered to the persons making those disclosures (“whistleblowers”) from detrimental action in accordance with Act 711, Whistleblower Protection Act, 2010. It is the Group’s policy to encourage its employees and external parties to disclose any misconduct, and to fully investigate reports and disclosures of such misconduct, as well as to provide the whistleblower protection in terms of confidentiality of information, and to safeguard the whistleblower from any act of interference that may be detrimental to the whistleblower. The Group assures whistleblowers that all reports will be treated with strict confidentiality and upon verification of genuine cases, prompt investigation will be carried out. The official avenues for disclosure by the whistleblower are via any of the following recipients:• The Chairman; • The Chairman of the Audit Committee of MNRB Holdings Berhad; or • The GCEO. The disclosure of misconduct or wrongdoing shall be made in writing via email to [email protected]. The Policy and relevant form can be accessed at the Company's website www.mnrb.com.my. In maintaining the commitment to communicate effectively with shareholders, the Group adopts the practice of comprehensive, timely and continuing disclosure of information to its shareholders as well as to the investing public. This practice of disclosure of information is not just established to comply with the requirements of the Listing Requirements pertaining to continuing disclosure, but to align with the best practices as recommended in the Code with regard to strengthening engagement and communication with shareholders. The Group’s Annual Report is the main channel of communication between the Group and its stakeholders. The Annual Report communicates comprehensive information of the financial results and activities undertaken by the Group. As a listed corporation, the contents and disclosure requirements of the Annual Report are also governed by the Listing Requirements. The Company disseminates its Annual Report to its shareholders either in hard copy or in CD-ROM media. All information to shareholders is available electronically in the Company’s website (www.mnrb.com.my) as soon as it is announced or published. The AGM is the principal forum for dialogue with shareholders. The Company’s AGM is normally well attended as it provides the shareholders direct access to the Board as well as give them an opportunity to participate effectively and to vote. Notice of the AGM and the Annual Report are sent out to shareholders at least twenty-one (21) days before the date of the meeting. Besides the normal agenda for the AGM, the Chairman of the Group presents a comprehensive and concise review of the Group’s financial performance and the value created for shareholders. This review is supported by the presentation of key points and key financial figures. The Chairman also presents the progress and performance of the Group in the Annual Report and provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. All Directors are available to provide responses to questions from the shareholders during this meeting. Each item of Special Business included in the notice of the meeting will be accompanied by an explanatory statement and/or Circular to Shareholders to facilitate full understanding and evaluation of the issues involved. 57 STATEMENT ON CORPORATE GOVERNANCE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Apart from the abovementioned engagement with shareholders through annual reports and general meetings, the Group also makes announcements of its quarterly results and other announcements to Bursa Malaysia to provide stakeholders with key information that affects their decision-making, thus enhancing the level of transparency. To promote wider publicity and dissemination of information that is made public, the Group also issues press releases to the Media on all significant corporate developments and business initiatives to keep the investment community and all stakeholders updated on the progress and strategic development of the business of the Group. position and prospects. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. The Directors are responsible for ensuring that the accounting records are kept properly and that the Group’s financial statements are prepared in accordance with applicable approved accounting standards in Malaysia. The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 116 of this Annual Report. Internal Control and Risk Management POLL VOTING Information on the Group’s internal control and risk management is presented in the Group’s Statement on Risk Management and Internal Control as set out on pages 61 to 63 of this Annual Report. The Chairman, at the commencement of a general meeting, informs shareholders of their right to vote by poll. This is in line with MNRB’s Articles of Association. Relationship with Auditors Poll voting will be adopted if there is/are substantive resolution(s) to be put forth for shareholders’ approval at the general meetings. Polling slips are prepared in the event shareholders request for poll voting on any resolution tabled at the general meeting. Information on the role of the Audit Committee in relation to the External Auditors may be found in the Audit Committee Report set out in pages 59 and 60. The Group has always maintained a close and transparent relationship with its auditors in seeking professional advice and ensuring compliance with the approved accounting standards. Management’s Accountability INVESTOR RELATIONS As part of the initiatives in developing and implementing an investor relations programme, regular briefings are held between the Group with analysts and investors. Presentations based on permissible disclosures are made to explain the Group’s performance and major development programmes. Price-sensitive information about the Group is however, not disclosed at these briefings until after the prescribed announcement to Bursa Securities has been made. MNRB also maintains a website, which shareholders and the public in general can access to gain information about the Group at www.mnrb.com.my. The Group has an organisational structure showing all reporting lines as well as clearly documented job descriptions for all its Management and Executive employees and formal performance appraisals are done on a periodic basis. Authority limits, as approved by the Board, are clearly established and made available to all employees. STATEMENT ON COMPLIANCE WITH THE BEST PRACTICES OF THE CODE The Group is committed to achieving high standards of corporate governance and the highest level of integrity and ethical standards in all its business dealings. The Board will continuously strive towards adopting all the Principles and Best Practices as set out in the MCCG 2012, the CG Guide and the Listing Requirements. ACCOUNTABILITY AND AUDIT Financial Reporting For financial reporting through interim quarterly reports to Bursa Malaysia and the Annual Report to shareholders, the Directors have a responsibility to present a fair assessment of the Group’s 58 This Statement on Corporate Governance is made in accordance with the resolution of the Board of Directors dated 31 July 2015. AUDIT COMMITTEE REPORT MEMBERS OF THE COMMITTEE TERMS OF REFERENCE Megat Dziauddin bin Megat Mahmud (Chairman & Senior Independent Non-Executive Director) The main duties of the Committee are:- Dato’ Syed Ariff Fadzillah bin Syed Awalluddin (Independent Non-Executive Director) Yusoff bin Yaacob (Independent Non-Executive Director) P. Raveenderen (Non-Independent Non-Executive Director) Paisol Ahmad (Non-Independent Non-Executive Director) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD 1. To review and approve the annual audit plan, audit charter, budget, scope of audit procedures, audit programmes and reports of the internal auditors including actions taken on internal audit recommendations; 2. To review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; 3. To review annually with the external auditors, the audit plan and the report including the coordination between the internal and external auditors to prevent duplication of effort; MEMBERSHIP 4. To review the quarterly results and year-end financial statements before approval by the Board including the assistance given by the Company’s officers to the auditors; The Audit Committee shall be appointed by the Board and comprises at least three (3) members of whom all members must be Non-Executive Directors and the majority shall be Independent Directors. At least one member of the Committee must be a member of the Malaysian Institute of Accountants or eligible for membership. 5. To recommend to the Board the nomination of the external auditors after evaluating their performance and to consider the auditors’ remuneration and any questions of resignation or dismissal; The members of the Audit Committee must elect a Chairman among themselves who is an Independent Director. 6. To review the external auditors’ management letter and Management’s response thereto; The term of office shall be reviewed no less than once in every two (2) years. 7. To review the disclosure statements in the annual report to be in compliance with Bursa Malaysia requirements; AUTHORITY 8. To review any related-party transactions and any conflict of interests situation that may arise within the Group; and The Committee is authorised by the Board to undertake any activity within its terms of reference and must have unlimited access to all information and documents relevant to its activities, to both the internal and external auditors, as well as to all employees of the Group. 9. To review the allocation of options pursuant to the Company’s Employees’ Share Option Scheme. MEETINGS It must be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the listed issuer, whenever deemed necessary. It must also have the authority to obtain independent legal or other professional advice as it considers necessary. A quorum shall consist of at least two-thirds of the members with independent directors forming the majority. A minimum of four meetings per year is planned. Additional meetings may be called at any time if so requested by any committee member, the Management, the internal or external auditors. The Chairman of the Committee shall invite any person to be in attendance to assist the committee in its deliberations. 59 AUDIT COMMITTEE REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The minutes of the meetings shall be circulated to the Board after confirmation. The Secretary to the Committee shall be the Company Secretary. For the financial year under review, a total of 6 Audit Committee Meetings were held. The details of attendance of the Audit Committee members were as follows:Name of Audit Committee member A summary of its activities for the year is as follows:1. Conducted audits of the various business portfolios/departments of the Group; 2. Conducted follow-up audits on the implementation of the Audit Committees’ recommendations and Management’s actions taken to improve on issues identified during the audits; and Megat Dziauddin Megat Mahmud 6/6 ii. Dato’ Syed Ariff Fadzillah Syed Awalluddin 6/6 iii. Yusoff Yaacob 6/6 iv. P. Raveenderen 6/6 v. 6/6 The main activities that took place during the meetings were:1. Reviewed the quarterly results and year-end financial statements prior to approval by the Board; 2. Considered and recommended to the Board the nomination of the external auditors for the financial year ended 31 March 2015; 3. Reviewed the external auditors’ audit plan for the year ended 31 March 2015; 4. Reviewed the external auditors’ management letter and Management’s response thereto. Meetings without the presence of the Management were also held with the external auditors. 5. Reviewed the disclosure statements in the annual report to be in compliance with Bursa Malaysia requirements; 6. Considered and recommended to the Board the payment of final dividends; 7. Reviewed the results of the internal audits carried out in the year and the adequacy of actions taken by Management; and 8. Reviewed the Internal Audit Department’s annual audit plan for the year ended 31 March 2015. In respect of the Company’s Employees’ Share Option Scheme, there was no allocation of options in the year for the Audit Committee to review. 60 The Internal Audit Department was set up in-house on January 2, 1991. It is independent of the activities or operations of the operating units. For the financial year ended March 31, 2015, the total costs incurred for the Group Internal Audit function were RM2,413,000. No. of Meetings Attended i. Paisol Ahmad INTERNAL AUDIT DEPARTMENT 3. Prepared annual audit plans and budget for the Audit Committees’ consideration. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL RESPONSIBILITY RISK MANAGEMENT AND INTERNAL CONTROL STRUCTURE To further complement the enterprise risk management framework of the Group, dedicated Management Committees known as the Operational Risk Management Committee (“ORMC”) at the operational level were also established to assist the RMCBs in implementing the risk management framework and ensuring inculcation of a proactive risk management culture on an enterprise-wide basis. A Risk Management & Compliance Division was formed to provide the infrastructure and carry out the risk management process. • The Audit Committee (“AC”) complements the role of the Board by providing an independent assessment of the adequacy and reliability of the risk management process, and compliance with the risk policies and regulatory guidelines. The AC is assisted by an independent Internal Audit Department in performing its role. • The Group Chief Risk Management and Compliance Officer (“GCRMCO”) oversees the risk governance across the Group. The risk governance structure is aligned across the subsidiaries of the Group through the adoption of the Enterprise Risk Management Framework and structures in order to embed and enhance the risk management & compliance culture. • The Group adopts the three lines of Defence model: Operating Units, Management Oversight and Independent Assurance. Within each entity, Heads of Divisions/Departments are responsible for managing risks and system of internal controls within their respective functions on day-to-day basis, as well as escalating significant potential risks to the respective ORMC via the risk management function. The risk management and compliance function assumes overall responsibility for the implementation of the Risk Management Framework and its continued application in the respective entities. Internal Audit provides the AC with reasonable independent assurance on the effectiveness and efficiency of the Framework as part of Group’s system of internal controls. The key features that the Board has established in reviewing the adequacy and effectiveness of the risk management and internal control system include the following:Enterprise Risk Management Framework • The Board of MNRB believes that an effective enterprise risk management framework and strong internal control system is essential to the Group in its quest to achieve its corporate objectives, especially on the continued profitability and enhancement of shareholders’ value in today’s rapidly changing market environment. • With this in mind, the Board had established dedicated Board Committees known as the Risk Management Committee of the Board (“RMCB”) at the holding company and each of its subsidiary companies to oversee the implementation of an enterprise-wide risk management framework in each company. As part of risk governance process, Chairman of the respective RMCBs had provided their confirmation to the Chairman of MNRB that the necessary risk management framework had been put in place and it is operating effectively to manage the risks of the company for the whole of the financial year ended 31 March, 2015. MNRB HOLDINGS BERHAD • The Board acknowledges that it is responsible to oversee the implementation of the Group’s risk management and internal control system and for reviewing its effectiveness, adequacy and integrity. It recognises that risk management is a continuous process, designed to manage the risk of failure to achieve the Group’s business objectives. In pursuing these objectives, internal control system can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has established a robust process for identifying, evaluating and managing the significant risks faced by the Group (Enterprise Risk Management Framework). These processes have been in place for the whole of the financial year ended 31 March, 2015 and have continued up to the date on which this Statement was approved. The Board is confident that these processes provide reasonable assurance on the effectiveness and efficiency of both the strategic, financial and operational aspects of the Group. The process is regularly reviewed by the Board and is guided by the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 Internal Audit Function • The internal audit function of the Company and its subsidiaries (via outsourcing arrangements) is undertaken by the Internal Audit Department at the holding company level. The department has a functional reporting line to the respective ACs set up at each company level. • The Internal Audit Department performs regular reviews of the business processes of the Group in an effort to assess the adequacy and effectiveness of internal controls and to highlight significant risks impacting the Group. 61 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD • • Where applicable, it provides recommendations to improve on the effectiveness of risk management, control and governance processes. Management will accordingly follow through and review the resolution status of recommendations made. Audit reviews are carried out on units that are identified on a risk-based approach, in the context of the Group’s evolving business and its regulatory environment, while also taking into consideration inputs of Senior Management and the Board. The AC meets on a scheduled basis to review matters identified in reports prepared by Internal Audit, the External Auditors, and Regulatory Authorities and further evaluates the effectiveness and adequacy of the Group’s internal control system. The AC has active oversight on Internal Audit’s independence, scope of work and resources. It also reviews the scope of the annual audit plan and frequency of the internal audit activities. The activities undertaken by the AC during the year are highlighted in the Audit Committee Report. • Annual business plans are submitted to the Board for approval. • A detailed budgeting process has been implemented in the Group where each department prepares a budget for the upcoming financial year for the approval of the Board. The budget is monitored and major variances are followed-up by the respective Management. • Shariah Committees have also been established at each of the takaful and retakaful subsidiary companies to provide oversight on Shariah related matters. • Every employee of the Group is contractually bound to observe prescribed standards of business ethics in their conduct at work and their relationships with external parties such as customers and suppliers. The Group expects each employee to conduct him/ herself with integrity and objectivity and not to place him/herself in a position of conflict of interest. The competence of personnel is maintained through a structured recruitment process, a performance measurement and rewarding system and a wide variety of training and development programmes. • MNRB holds a 20% effective equity interest in its associated company, Labuan Reinsurance (L) Limited (“Labuan Re”) through its subsidiary, Malaysian Reinsurance Berhad and is represented on the Board of Labuan Re by two (2) of its directors. It also has a 40% effective equity interest in another associated company, Motordata Research Consortium Sdn. Bhd. (“MRC”) and is similarly represented on the Board of MRC by two (2) of its directors. Other Key Elements of Internal Control • The Group has a well-defined organisational structure with clear lines of responsibility and accountability. • The Board has also adopted communication policies to ensure that all decisions made are communicated promptly to staff of all levels within the Group and vice versa where feedbacks and suggestions on improvements could be communicated to the Board and Management. • The Underwriting Guidelines of the Reinsurance, Takaful and Retakaful subsidiary companies have been put in place to manage risks that are being underwritten. • • • Reinsurance and retrotakaful programs exist where there is a spread of reinsurers with acceptable ratings from accredited agencies. The securities of these reinsurers and retakaful companies are reviewed on an annual basis. Departmental manuals are available within the Group and these set out policies and procedures for day-to-day operations and act as guidance to employees on the necessary steps to be taken in a given set of circumstances. The manuals enable tasks to be carried out with minimal supervision. It also specifies relevant authority limits to be complied with by each level of management within the subsidiaries. There is an ongoing process in place currently to review and update the manuals, where applicable. The Group’s financial systems record all transactions to produce performance reports that are submitted to the respective Management within internally stipulated timelines. 62 Other Committees of the Board Apart from the RMCB and the AC, other Board Committees have also been established at both the Group and subsidiary levels to assist the Board in performing its oversight function. They consist of the following:• The Investment Committee, which is responsible for reviewing and approving investment proposals, as well as monitoring the Group’s investment portfolio to ensure conformity with overall business objectives and statutory requirements. • The Nomination Committee, which is responsible to recommend to the Board the appointment of directors, CEOs and Board appointees. The Nomination Committee is also responsible for the annual assessment of the effectiveness of the Board. • The Remuneration Committee, which is responsible to recommend the appropriate remuneration for the directors, CEOs and Board appointees. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD Assurance from Management The Board has also received full assurance from the President & Group Chief Executive Officer (“GCEO”) and the Group Chief Financial Officer (“GCFO”) that the Group’s risk management and internal control system are operating adequately and effectively, in all material respects, based on the risk management framework adopted by the Group. To facilitate this process, the Group undertakes a risk assurance process to ensure that the risk management and internal control system are adequate and effective at all level of the organisation. Review of the Statement by External Auditors The external auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the annual report for the financial year ended 31 March 2015. The external auditors conducted the review in accordance with the “Recommended Practice Guide 5 (Revised): Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report” (“RPG 5 (Revised)”) issued by the Malaysian Institute of Accountants. The review has been conducted to assess whether the Statement on Risk Management and Internal Control is both supported by the documentation prepared by or for the Directors and appropriately reflects the processes the Directors had adopted in reviewing the adequacy and integrity of the system of internal controls of the Group. RPG 5 (Revised) does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the effectiveness of the Group’s risk and control procedures. RPG 5 (Revised) also does not require the external auditors to consider whether the processes described to deal with material internal control aspects of any significant matters disclosed in the annual report will, in fact, mitigate the risks identified or remedy the potential problems. Based on their review, the external auditors have reported to the Board that nothing had come to their attention that causes them to believe that the Statement on Risk Management and Internal Control is inconsistent with their understanding of the processes the Board has adopted in the review of the adequacy and integrity of the risk management and internal control of the Group. 63 STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS MNRB HOLDINGS BERHAD //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 pursuant to paragraph 15.26(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad 64 ADDITIONAL COMPLIANCE INFORMATION //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB HOLDINGS BERHAD The information set out below is disclosed in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities):(1) Utilisations of proceeds raised from corporate proposal There was no corporate proposal and proceeds raised by the Company during the financial year ended 31 March 2015. (2) Share buy-back There was no proposal by the Company to carry out a share buy-back during the financial year ended 31 March 2015. (3)Options or convertible securities No options or convertible securities were issued by the Company during the financial year ended 31 March 2015 and there are no options or convertible securities outstanding and exercisable at the end of the financial year ended 31 March 2015. (4) Depository receipt programme The Company did not sponsor any depository receipt programme during the financial year ended 31 March 2015. (5) Sanctions and/or penalties There was no sanction and/or penalty imposed on the Company and its subsidiary companies, directors or management by the relevant regulatory bodies during the financial year ended 31 March 2015. (6)Non-audit fees The amount of non-audit fees paid to external auditors by the Group and the Company for the financial year ended 31 March 2015 amounted to RM116,180 and RM9,000 respectively. (7) Variation in results There were no significant variations between the audited results for the financial year ended 31 March 2015 and the unaudited results previously announced. There were no profit estimate, forecast or projection issued by the Company and its subsidiary companies during the financial year ended 31 March 2015. (8) Profit guarantee There was no profit guarantee given by the Company and its subsidiary companies during the financial year ended 31 March 2015. (9)Material contracts There were no material contracts entered into by the Company and its subsidiary companies involving directors’ and major shareholders’ interests, which subsisted at the end of the financial year ended 31 March 2015 or, if not then subsisting, entered into since the end of the previous financial year. (10)Recurrent related party transaction of revenue or trading nature MNRB is not required to seek any mandate from its shareholders under Paragraph 10.09(2)(b), Part E of Chapter 10 of the Listing Requirements of Bursa Securities as the recurrent related party transactions of a revenue or trading nature entered into by the MNRB Group qualified as exempted transactions as defined under Paragraph 10.08(11)(e), Part E of Chapter 10 of the Listing Requirements of Bursa Securities. 65 A STRATEGIC PARTNER Over the years, Malaysian Re has proven its worth as a strategic partner that is committed to strengthening local insurance companies. Be it the development of a flood risk analysis tool for industry players or the roll out of training programmes for staff of insurance companies, Malaysian Re continues to leverage on its strong fundamentals, experience and expertise as well as proven record of accomplishment to elevate industry professionalism and standards. CORPORATE PROFILE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD Authorised Capital of RM1 RM510 billion Paid-up Capital of million Malaysian Reinsurance Berhad, (MALAYSIAN RE) is a wholly owned subsidiary of mnrb holdings berhad. As the national reinsurer, Malaysian Re continues to enhance the competitiveness and efficiency of the local insurance companies in an increasingly globalised marketplace through its active involvement in leading and underwriting their reinsurance needs. CAPITAL STRUCTURE The Company has an Authorised Capital of RM1 billion, divided into 1 billion ordinary shares of RM1.00 each and a Paid-up Capital of RM510 million, divided into 510 million ordinary shares of RM1.00 each. Leveraging on its breadth and depth of experience and expertise, strong fundamentals and proven record of accomplishment, Malaysian Re has grown in stature as an international player having established a strong market presence in Asia, the Middle East and Africa. 67 CORPORATE INFORMATION Board of Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Zainudin Ishak //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD Registered Office Auditors 12th Floor, Bangunan Malaysian Re No. 17, Lorong Dungun Damansara Heights 50490 Kuala Lumpur Tel : +603-2096 8000 Fax: +603-2096 7000 E-mail: [email protected] Website: www.malaysian-re.com.my Ernst & Young Level 23A, Menara Millenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur Tel : +603-7495 8000 Fax: +603-2095 5332 President & Chief Executive Officer Non-Independent Executive Director P. Raveenderen Non-Independent Non-Executive Director Dato’ Syed Ariff Fadzillah Syed Awalluddin Independent Non-Executive Director Yusoff Yaacob Independent Non-Executive Director Megat Dziauddin Megat Mahmud Independent Non-Executive Director Mohd Din Merican Non-Independent Non-Executive Director Mustaffa Ahmad Independent Non-Executive Director Md Adnan Md Zain Independent Non-Executive Director Audit Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin P. Raveenderen Nomination Committee Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) Sharkawi Alis P. Raveenderen Yusoff Yaacob Mustaffa Ahmad Remuneration Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Yusoff Yaacob Mohd Din Merican Risk Management Committee Company Secretaries Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766) Principal Bankers Standard Chartered Bank Malayan Banking Berhad CIMB Bank Berhad 68 Yusoff Yaacob (Chairman) P. Raveenderen Mohd Din Merican Mustaffa Ahmad Investment Committee Md Adnan Md Zain (Chairman) Megat Dziauddin Megat Mahmud Mohd Din Merican Zainudin Ishak DIRECTORS’ PROFILE 9/9 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD Board meeting attended SHARKAWI ALIS Non-Independent Non-Executive Chairman SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Director since 31 March 2005 and was subsequently appointed as Non-Independent Non-Executive Chairman on 3 September 2007. Member of the Nomination Committee. Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. ZAINUDIN ISHAK N/A Board meeting attended Non-Independent Executive Director ZAINUDIN ISHAK, aged forty-eight (48), Malaysian. Non-Independent Executive Director since 1 April 2015. Member of the Investment Committee. An Associate member of Malaysian Insurance (AMII) since 1994. He started his career as Executive at Trust International Insurance Sdn Bhd in 1989. He joined Commerce Assurance Berhad (now CIMB Aviva Takaful Berhad) in 1994 and appointed CEO in 2006. In 2009, he then joined HSBC Amanah Takaful Berhad as Executive Director & Chief Executive Officer. He served as Chairman of Malaysian Takaful Association until early 2015. Also a Director of Malaysian Re (Dubai) Ltd., Financial Park (Labuan) Sdn Bhd and MMIP Services Sdn Bhd. 69 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD P. RAVEENDEREN 9/9 Board meeting attended Non-Independent Non-Executive Director P. RAVEENDEREN, aged seventy (70), Malaysian. Independent Non-Executive Director since 27 August 2004 and re-designated as Non-Independent Non-Executive Director on 19 July 2011. Member of the Audit Committee, the Risk Management Committee and the Nomination Committee. Other information on P. Raveenderen is disclosed in the Directors’ Profile section of MNRB on page 23 of this Annual Report. 9/9 Board meeting attended Independent Non-Executive Director DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged seventy-one (71), Malaysian, Non-Independent Non-Executive Director since 27 August 2004 and re-designated as Independent Non-Executive Director on 28 October 2004. Chairman of the Nomination Committee. Member of the Audit Committee and the Remuneration Committee. Other information on Dato’ Syed Ariff Fadzillah Syed Awalluddin is disclosed in the Directors’ Profile section of MNRB on page 24 of this Annual Report. 70 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD 9/9 Board meeting attended YUSOFF YAACOB Independent Non-Executive Director YUSOFF YAACOB, aged sixty-seven (67), Malaysian. Non-Independent Non-Executive Director since 31 March 2005 and re-designated as Independent Non-Executive Director on 23 March 2006. Chairman of the Risk Management Committee. Member of the Remuneration Committee and the Nomination Committee. Other information on Yusoff Yaacob is disclosed in the Directors’ Profile section of MNRB on page 24 of this Annual Report. MEGAT DZIAUDDIN MEGAT MAHMUD 9/9 Board meeting attended Independent Non-Executive Director MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 24 August 2006. Chairman of the Remuneration Committee and the Audit Committee. Member of the Investment Committee. Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 23 of this Annual Report. 71 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD 9/9 MOHD DIN MERICAN Board meeting attended Non-Independent Non-Executive Director MOHD DIN MERICAN, aged fifty-three (53), Malaysian. Non-Independent Non-Executive Director since 2 March 2012. Member of the Investment Committee, the Risk Management Committee and the Remuneration Committee. Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. N/A Board meeting attended MUSTAFFA AHMAD Independent Non-Executive Director MUSTAFFA AHMAD, aged fifty-nine (59), Malaysian. Independent Non-Executive Director since 1 June 2015. Member of the Risk Management Committee and Nomination Committee. He graduated with a Bachelor of Science (Honours) degree in Statistics from the Heriot-Watt University, Edinburgh, Scotland in 1978. He had worked for several insurance companies since 1978 and then joined Malaysian National Reinsurance Berhad as Senior Manager in 1989. He assumed various other roles whilst he was in Malaysian National Reinsurance Berhad. Following the MNRB Group restructuring exercise in 2005, he was transferred to Malaysian Re and was appointed the Chief Operating Officer until 2010. He currently sits as Director in two (2) other companies, MIDF Amanah Investment Bank Berhad and Amanah International Finance Sdn Bhd. 72 DIRECTOR’S PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD N/A Board meeting attended MD ADNAN MD ZAIN Independent Non-Executive Director MD ADNAN MD ZAIN, aged fifty-eight (58), Malaysian. Independent NonExecutive Director since 1 June 2015. Chairman of the Investment Committee. He obtained a Bachelor of Economics degree from University Putra Malaysia and is a Registered Financial Planner from Malaysian Financial Planning Council. He began his career in the banking industry with Standard Chartered Bank in 1981 where he served in various operations including senior positions as the Regional Manager and the Head, Global Electronic Banking. He was appointed as the CEO of MCIS Zurich Insurance Berhad in 2006 and was elected as President of Life Insurance Association of Malaysia for (2) terms in 2009/2010 and 2010/2011. He was the Chairman of Malaysian Life Reinsurance Berhad and currently a Director of Malaysian Rating Corporation Berhad, Kuwait Finance House Berhad and Malaysian Insurance Institute. 73 SENIOR MANAGEMENT TEAM //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD Paul Ng Wooi Yip Rajinder Mohan MILI MOHD YUSOFF ABDUL HALIM ANUAR SHARIF Lua Tiong Aik Tony Tan chee yew Zainudin ishak P resident & C E O AHMAD NASARUDDIN ISHAUDIN 74 SENIOR MANAGEMENT TEAM’S PROFILE PAUL NG WOOI YIP Chief operating officer PAUL NG WOOI YIP is the Chief Operating Officer. He graduated with a Bachelor of Science (Hons) degree in Mechanical Engineering from the University of Salford, Manchester, United Kingdom in 1984. He began his career with the then Malaysian National Reinsurance Berhad as a Risk Engineer in 1984. He was promoted to Assistant General Manager in 1994. He was transferred to Malaysian Re on 1 April 2005 and assumed the position of Senior Vice President & Chief Underwriter of International Treaties. He was promoted to the position of Chief Operating Officer in June 2015. RAJINDER MOHAN Senior Vice President & Chief Underwriter of Business Region 1 RAJINDER MOHAN is the Senior Vice President & Chief Underwriter of Business Region 1. He is a Fellow member of the Chartered Insurance Institute, United Kingdom (F.C.I.I.) and a Senior Associate member of the Australian and New Zealand Institute of Insurance and Finance (A.N.Z.I.I.F.). He started his career as an Executive with Guardian Royal Exchange in New Zealand in February 1988 and subsequently joined the then Malaysian National Reinsurance Berhad in November 1988 as an Underwriting Executive. He was promoted to Assistant General Manager for Business Unit 2 in April 2002. He was transferred to Malaysian Re on 1 April 2005 and assumed his present position on 1 June 2015. //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD MILI MOHD YUSOFF Vice President & Head of Retakaful Division and the Large & Specialised Risks (LSR) Department MILI MOHD YUSOFF assumed the position as Vice President & Head of Retakaful Division and the Large & Specialised Risks (LSR) Department in June 2015. She obtained her Associateship of the Chartered Insurance Institute from the London School of Insurance. Whilst in the UK, she was attached to Gily Carvajal Brokers Pte Ltd where she received training as a junior reinsurance broker. She subsequently returned to Malaysia in 1987 and thereafter, spent a major part of her career in insurance broking specialising in Oil & Gas, Marine and Specialised Risks portfolios. She was the Risk and Insurance Manager for a major Dutch oil company for a short stint before returning to the broking fraternity in 2001. In her last broking assignment, she led her team to successfully secure Malaysia’s first deepwater offshore construction project. She was also the Client Manager for the country’s ‘Angkasawan (Astronaut)’ insurance programme. A Fellow of the Chartered Insurance Institute (by examination, 1994). ABDUL HALIM ANUAR SHARIF Vice President & Head of Market Services ABDUL HALIM ANUAR SHARIF is the Vice President & Head of Market Services. He graduated with a Bachelor of Science in Mechanical Engineering in 1986 from South Dakota State University, USA. He commenced his career with the Technical Services Department of the then Malaysian National Reinsurance Berhad as Risk Engineer in 1987. He was transferred to Voluntary Cession Department in 1996, Market Cession & Facultative Department in 1998, Marketing/ Underwriting – Business Unit 1 in 2002, Retrocessions/Claims/Pools Department in 2003, transferred to Malaysian Re on 1 April 2005 and Head of Market Pools Department in May 2010. He assumed his present position in June 2015. 75 SENIOR MANAGEMENT TEAM’S PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD AHMAD NASARUDDIN ISHAUDIN TONY TAN Chee Yew Vice President & Head of Actuarial Services Vice President & Head of Claims Department AHMAD NASARUDDIN ISHAUDIN is the Vice President & Head of Claims Department. He has 23 years of working experience in the insurance fraternity including takaful. He holds an engineering degree in mechanical from University of Malaya in 1986 and has worked as an engineer for Lembaga Letrik Negara at Tuanku Jaafar Power Plant, Port Dickson. He is an Associate member of the Malaysian Institute of Insurance. He started his long career in the insurance industry as a loss adjuster. His working experience then expands as a reinsurance facultative underwriter, general claims examiner and risk surveyor. He has experience in all classes of general insurance, with specialisation in fire and engineering. In 2008, he joined Takaful IKHLAS Berhad as a Risk Surveyor and on 1 June 2015 he was transferred to Malaysian Re and assumed his current position. Lua Tiong Aik Vice President & Head of Facultative Department Lua Tiong Aik is the Vice President & Head of Facultative Department. He graduated with a Bachelor of Engineering in Industrial Engineering from the University of Melbourne, Australia in 1985. He commenced his insurance career as a direct underwriter in 1990 and had since held several underwriting and broking portfolios before joining Malaysian Reinsurance Berhad as a treaty underwriter in his capacity as Vice President of Business Unit 2 in October 2009. He assumed his current position in June 2015. 76 TONY TAN is the Vice President & Head of Actuarial Services. He graduated with a Bachelor of Science (Hons) degree in Mathematics, Operational Research, Statistics and Economics from Warwick University, UK, and holds a Master Degree in Actuarial Science from City University, UK. He started his career as an actuarial analyst in a local consulting firm and subsequently joined Malaysian Re in June 2010 to start up the Actuarial Services Department. He assumed his present position in January 2013. CORPORATE ACTIVITIES AND SERVICES //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD Malaysian Re has been actively involved in underwriting all classes of general reinsurance business from the Malaysian market. It has expanded its business internationally and is actively underwriting business from the Asian, Middle East and Africa markets. Malaysian Re will continue to provide prompt services and will ensure the existing products to be not only competitive but also meet the requirements of its customers. MARKET SERVICES Malaysian Re is currently involved in providing various services to the Malaysian insurance industry. The services amongst others include the following:A.MALAYSIAN MARKET POOLS • Malaysian Aviation Pool Malaysian Re assumed the role as Manager of the Malaysian Aviation Pool (MAP) effective 1 October 1996. Currently, its membership comprises six (6) local insurers and two (2) reinsurers with a total underwriting capacity of RM338 million. The underwriting of risks is by a Committee, nominated by participating companies. The business written by MAP is primarily Malaysian risks and Malaysian interests abroad. • Malaysian Energy Risks Consortium Malaysian Energy Risks Consortium (MERIC) was established in March 1995 with the objective to optimise national retention, promote wider interest and develop underwriting skills in the specialised class of energy business. MERIC comprises eleven (11) local insurers and two (2) reinsurers with Malaysian Re taking on the role of Secretariat. It has a capacity to underwrite up to a combined single limit of RM50 million for upstream and downstream risks. The underwriting of risks is by a Committee, nominated by participating companies. The primary portfolio of the business written by MERIC is Malaysian risks and Malaysian interests abroad. B. CENTRAL ADMINISTRATION BUREAU Malaysian Re initiated the establishment of the Central Administration Bureau (CAB) in 1995 to manage the centralised computerised and web-based system (CABFAC) for the administration and settlement of facultative reinsurance between CAB members i.e. insurers and reinsurers operating in Malaysia. The elimination of reconciliation problems and the efficient settlement of balances and claims recovery between members were the main drivers for the formation of CAB. The cost of development and operations of the system were then, and still are, being jointly funded by its members. Following the success of the CABFAC system, the members of Persatuan Insurans Am Malaysia (PIAM), in 2009 conceptualised the idea of developing a centralised coinsurance system (CABCO) which would function on the same operating model as the CABFAC. The CABCO was formally launched in August 2011 to cater for the coinsurance business transactions between the local insurers. C.TECHNICAL SERVICES Surveying and Advisory Services on Risk Management Malaysian Re provides Property and Engineering Risk Survey services to the local insurance industry for the purpose of special rating, underwriting and also loss estimation. Property Risk assessment and risk management services tailored to the insureds’ needs are also provided through their insurers when requested. 77 CORPORATE ACTIVITIES AND SERVICES (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD D. SPECIAL RATING Malaysian Re was appointed by PIAM to form a Rating Committee specifically for the purpose of determining special rates for Fire and Industrial All Risks (IAR) insurances, for risks which qualify for special rating under the Fire Tariff. This Committee comprises not less than six (6) qualified or experienced insurance underwriters or risk surveyors from among PIAM members of whom not more than three (3) shall be from Malaysian Re. The Chairman of the Rating Committee shall be a representative from Malaysian Re. By virtue of this appointment, Malaysian Re also acts as the Secretariat to this Committee as well as handles the day-to-day operations of all matters pertaining to special rating applications. E.INSPECTION Malaysian Re was given the mandate by PIAM to form an Inspection Task Force to conduct inspections or carry out investigations on the conduct and activities of its members in accordance with the terms and provisions of the various Inter-Company Agreements. With effect from 1 April 1992, the various Inter-Company Agreements had now been amalgamated into a single agreement called “Inter Company Agreement On General Insurance Business (ICAGIB)”. Thus, the Inspection Department has been entrusted to provide practical, reliable and timely inspection on the General Insurance Companies’ compliance with provisions embodied in the “ICAGIB” on matters pertaining to:a. b. c. d. Dealing with Agents; Motor Tariff; Fire Tariff; and Bond Insurance. F. SIHAT MALAYSIA The Sihat Malaysia Scheme, which was officially launched on 18 February 2000, was developed by the National Insurance Association of Malaysia (NIAM). Members of NIAM subscribing to this Scheme provide a uniformed health insurance programme covering health care including cashless admission to hospitals, medical treatments, surgery as well as emergency assistance to policy holders. Managed Care Organisation has been appointed under the Scheme to provide specialised services to both the policy holders and NIAM members. Malaysian Re was appointed as the Account Manager of the Scheme, which is currently being subscribed to by four (4) NIAM members. G.MARKET TRAINING Over the years, Malaysian Re has and will continue to organise various training courses and seminars on insurance/reinsurance related topics in addition to market updates for staff of insurance companies to instil a higher degree of professionalism in the industry. H. SCHEME FOR INSURANCE OF LARGE & SPECIALISED RISKS The Scheme for Insurance of Large & Specialised Risks (SILSR) was implemented on 1 January 1994 with Malaysian Re appointed as Scheme Manager by Bank Negara Malaysia (BNM). The SILSR was formed with the primary objective of developing and enhancing the level of technical expertise and professionalism within the Malaysian insurance fraternity. In addition to this, SILSR’s function is to facilitate the most favourable cover at internationally competitive terms for the Malaysian risk owners. To this end, SILSR’s crucial role is to promote the optimum retention of Malaysian risks with reinsurance placed to the best national advantage. 78 MALAYSIAN RE’S PORTFOLIO OF BUSINESS //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN REINSURANCE BERHAD 2015 2014 Class RM’000 % RM’000 % Fire 538,176 41 558,542 41 Marine 222,587 17 226,842 17 Motor 226,334 17 214,282 16 Miscellaneous Accident 323,906 25 345,260 26 1,311,003 100 1,344,926 100 Total Miscellaneous Accident 25% Motor 17% Fire 41% 2015 Miscellaneous Accident 26% Fire 41% 2014 Motor 16% Marine 17% Marine 17% 79 A PRINCIPLED PARTNER Takaful IKHLAS continues to cultivate sound partnerships through principled, caring and innovative means. Whether it is through its ethical approach or customer-oriented service delivery, its agent-focussed training programmes, or host of innovative programmes such as Malaysia’s first Diploma in Takaful and a host of Shariah-related courses, Takaful IKHLAS continues to go all out to ensure its partners benefit in tangible ways from its efforts. CORPORATE PROFILE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD Authorised Capital of RM500 RM295 million Paid-up Capital of million TAKAFUL IKHLAS Berhad (Takaful IKHLAS) was incorporated on 18 September 2002 as Takaful Ikhlas Sdn. Bhd. and is a wholly owned subsidiary of MNRB Holdings Berhad. Subsequently on 5 May 2014, it converted its status to a public company and be known as Takaful Ikhlas Berhad. The Company is principally involved in the provision of Islamic Financial protection services, based on principles and rulings of Shariah. Takaful IKHLAS has established a strong presence in the provision of Islamic Financial protection services based on the takaful system, which places an emphasis on a spirit of cooperation and joint responsibility among participants. More than 2.0 million individuals and corporations have placed their trust in the Company and become its certificate holders (participants). Takaful IKHLAS’ commitment and adherence to Shariah values, coupled with the application of cutting-edge technology in conducting its business, have reinforced the Company’s reputation for its ethical approach and service delivery. The Company offers individuals and commercial enterprises a comprehensive range of Individual Family, Group Family, General Retail and Commercial Takaful products. Its distribution channels comprise highly knowledgeable and well-trained people that number more than 5,000 agents, brokers, financial institutions, motor franchise holders, co-operatives and Islamic bodies. Takaful IKHLAS has 13 regional offices in Kuala Lumpur, Kedah, Perak, Selangor, Putrajaya, Negeri Sembilan, Melaka, Johor, Pahang, Terengganu, Kelantan, Sabah and Sarawak. Takaful Ikhlas Berhad is registered under Islamic Financial Services Act 2013 and regulated by Bank Negara Malaysia. CAPITAL STRUCTURE Takaful IKHLAS has an Authorised Capital of RM500 million and a Paid-up Capital of RM295 million. 81 CORPORATE INFORMATION Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766) Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Ab Latiff Abu Bakar President & Chief Executive Officer Non-Independent Executive Director Dato’ Othman Hashim Independent Non-Executive Director Halim Haji Din Independent Non-Executive Director Paisol Ahmad Non-Independent Non-Executive Director Yahaya Besah Independent Non-Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Independent Non-Executive Director Mohd Din Merican Non-Independent Non-Executive Director Megat Dziauddin Megat Mahmud Independent Non-Executive Director Auditors Registered Office Ernst & Young 9th Floor, IKHLAS Point Tower 11A, Avenue 5, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur Tel : +603-2723 9999 Fax: +603-2723 9998 Level 23A, Menara Millenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur Tel : +603-7495 8000 Fax: +603-2095 5332 E-mail: [email protected] Website: www.takaful-ikhlas.com.my Principal Bankers Maybank Islamic Berhad Bank Islam Malaysia Berhad CIMB Islamic Bank Berhad 82 TAKAFUL IKHLAS BERHAD Company Secretaries Board of //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 Audit Committee Halim Haji Din (Chairman) Dato’ Othman Hashim Paisol Ahmad Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi Megat Dziauddin Megat Mahmud Shariah Committee Prof. Dr. Ahmad Hidayat Buang (Chairman) Datuk Haji Nik Moustpha Haji Nik Hassan Dr. Syed Musa Syed Jaafar Alhabshi Dr. Muhammad Naim Omar Dr. Mohamed Fairooz Abdul Khir Nomination Committee Dr. Syed Musa Syed Jaafar Alhabshi (Chairman) Sharkawi Alis Dato’ Othman Hashim Halim Haji Din Mohd Din Merican Remuneration Committee Yahaya Besah (Chairman) Dato’ Othman Hashim Halim Haji Din Paisol Ahmad Mohd Din Merican Megat Dziauddin Megat Mahmud Risk Management Committee Dato’ Othman Hashim (Chairman) Paisol Ahmad Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi Mohd Din Merican Investment Committee Paisol Ahmad (Chairman) Dr. Syed Musa Syed Jaafar Alhabshi Halim Haji Din Mohd Din Merican Megat Dziauddin Megat Mahmud Ab Latiff Abu Bakar DIRECTORS’ PROFILE 9/9 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD Board meeting attended SHARKAWI ALIS Non-Independent Non-Executive Chairman SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Chairman since 3 January 2008. Member of the Nomination Committee. Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. AB LATIFF ABU BAKAR 9/9 Board meeting attended Non-Independent Executive Director AB LATIFF ABU BAKAR, aged fifty-five (55), Malaysian. Non-Independent Executive Director since 7 January 2013. Member of the Investment Committee. He graduated with a Bachelor of Business Administration from the University of Portland, Oregon, USA. He has more than twenty-two (22) years’ experience in insurance and Takaful industry which began in 1989 when he joined Malaysian Assurance Alliance Bhd. Since then he has held senior and key management positions in various Insurance and Takaful companies including being an Acting Chief Operating Officer of Takaful Nasional Sdn Bhd until June 2006. He was appointed as Executive Vice President/Head of Agency at Etiqa Insurance & Takaful until September 2008. In October 2008, he was appointed as Chief Executive Officer of Hong Leong Tokio Marine Takaful (now known as Hong Leong MSIG Takaful) until April 2011. Prior to joining Takaful IKHLAS, he was the Head of Takaful for Tokio Marine Asia Pte Ltd until 6 January 2013. 83 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD 9/9 DATO’ OTHMAN HASHIM Board meeting attended Independent Non-Executive Director DATO’ OTHMAN HASHIM, aged sixty-three (63), Malaysian. Independent Non-Executive Director since 23 April 2003. Chairman of the Risk Management Committee. Member of the Audit Committee, the Remuneration Committee and the Nomination Committee. Graduated from the Royal Military College, Sungai Besi. Obtained his Degree in Law from London and qualified as a Barrister-at-Law from Council of Legal Education, London. He was among the first batch of lecturers to teach Diploma in Law at the Mara Institute of Technology. In 1983, he set up his partnership legal practice, Messrs. Othman Hashim, Chen & Co. In 1990, he moved on and set up his own legal practice, Messrs. Othman Hashim & Co. He is also a Director of Dynaura Trading Sdn. Bhd. 7/9 Board meeting attended HALIM HAJI DIN Independent Non-Executive Director HALIM HAJI DIN, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 24 July 2003. Chairman of the Audit Committee. Member of the Nomination Committee, the Remuneration Committee and the Investment Committee. Halim is a Chartered Accountant who spent more than thirty-two (32) years working for multinational corporations and international consulting firms. He accumulated eighteen (18) years of experience working in the Oil and Gas Industry – six (6) years of which as a Board member of Caltex/Chevron, responsible for financial management before engaging in the Consulting business. Prior to his appointment as a Board member of Caltex Malaysia, Halim served as Regional Financial Advisor for Caltex Petroleum Corporation Dallas, Texas overseeing investment viability of the Corporation’s Asian subsidiaries. Halim also had extensive experience in corporate recovery when he worked for Ernst & Whinney, London, United Kingdom in mid-1980s. He was appointed as Managing Partner of the Consulting Division of Ernst & Young Malaysia from 1995. He later became the Country Advisor of Cap Gemini Ernst & Young Consulting Malaysia when Cap Gemini of France merged with Ernst & Young Consulting. In 2003, he with two (2) partners took over the consulting business of Cap Gemini Ernst & Young Malaysia through a MBO and rebranded it as Innovation Associates, currently known as The IA Group, where he is currently the Chairman of the Group. Halim was also a Council Member of the Malaysian Institute of Certified Public Accountants from 1994 to 2003. He also served as a Board Member of Employees Provident Fund (KWSP) for four (4) years from April 2009 till May 2013. Halim is also an independent member of the Board of Wah Seong Corporation Berhad, BNP Paribas Malaysia Berhad, IGB REIT Management Sdn. Bhd, Kwasa Land Sdn. Bhd. and several other private limited companies. 84 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD 9/9 Board meeting attended PAISOL AHMAD Non-Independent Non-Executive Director PAISOL AHMAD, aged sixty-one (61), Malaysian. Non-Independent Non-Executive Director since 6 August 2008. Chairman of the Investment Committee and member of the Audit Committee, the Risk Management Committee and the Remuneration Committee. Other information on Paisol Ahmad is disclosed in the Directors’ Profile section of MNRB on page 25 of this Annual Report. YAHAYA BESAH 9/9 Board meeting attended Independent Non-Executive Director YAHAYA BESAH, aged sixty-three (63), Malaysian. Independent Non-Executive Director since 20 August 2009. Chairman of the Remuneration Committee. Member of the Audit Committee and the Risk Management Committee. He is also a Director of MRT. Graduated from Universiti Sains Malaysia with a Bachelor Degree in Social Science. He was a Director at the Office of the Director General of Insurance, Federal Treasury from 1975 until 1988. Joined BNM in 1988 and had served in various insurance related departments throughout his length of service. He was the former Director in the Insurance Supervision Division from 1995 until 1998 and also Director Internal Audit of BNM from 1998 until 2005. His last position in BNM was Director Special Projects (Deposit Insurance) before he retired in 2006. 85 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD 9/9 DR. SYED MUSA SYED JAAFAR ALHABSHI Board meeting attended Independent Non-Executive Director DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), Malaysian. Independent Non-Executive Director since 20 August 2009. Chairman of the Nomination Committee. Member of the Audit Committee, the Risk Management Committee, the Investment Committee and the Shariah Committee. He is also a Director of MRT. He currently sits on the Shariah Committees of Bank of Tokyo - Mitsubishi UFJ (Malaysia) Berhad and MRT. Obtained a Diploma in Business Studies from Ngee Ann Polytechnic, Singapore in 1984, a Bachelor of Business Administration (Hons.) Degree from the International Islamic University Malaysia (IIUM) in 1989 and a Doctorate in Business Administration majoring in Accounting and Finance from University of Strathclyde, Glasgow, United Kingdom in 1994. He began his career with Coopers & Lybrand, Singapore as an Audit Assistant in 1984. From 1989 until 1994, he joined IIUM as an Assistant Lecturer and upon completion of his doctorate he became an Assistant Professor and held various academic administrative positions in IIUM till 2000. He joined Universiti Tun Abdul Razak in 2000 as an Associate Professor and became Head of Centre for Graduate Studies. He later served as Dean of Faculty of Business in 2004. In 2006, he joined Amanie Business Solutions Sdn Bhd as a Principal Consultant until 2009 and as a Fellow Consultant from 2010 to 2012. In 2009, he resumed his academic career as Associate Professor with Universiti Tun Abdul Razak and appointed Dean of Graduate School of Business in 2010. Since October 2012, he is the Associate Professor of Institute of Islamic Banking and Finance (IIiBF). Currently, he is Dean of IIiBF, IIUM. 9/9 Board meeting attended MOHD DIN MERICAN Non-Independent Non-Executive Director MOHD DIN MERICAN, aged fifty-three (53), Malaysian. Non-Independent Non-Executive Director since 2 March 2012. Member of the Investment Committee, the Risk Management Committee, the Nomination Committee and the Remuneration Committee. Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. 86 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD 9/9 Board meeting attended Independent Non-Executive Director MEGAT DZIAUDDIN MEGAT MAHMUD MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 17 April 2012. Member of the Audit Committee, the Investment Committee and the Remuneration Committee. Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 23 of this Annual Report. 87 PROFILE OF SHARIAH COMMITTEE MEMBERS PROF. DR. AHMAD HIDAYAT BUANG 6/6 SHARIAH COMMITTEE CHAIRMAN Shariah committee meeting attended PROF. DR. AHMAD HIDAYAT BUANG, aged fifty-three (53). Shariah Committee member of Takaful IKHLAS since 26 December 2002 and appointed as Shariah Committee Chairman with effect from 23 July 2013. Professor of the Academy of Islamic Studies at University of Malaya. Previously, he was a Director for the Academy of Islamic Studies from October 2006 until February 2011. Holds a Bachelor in Shariah from the University of Malaya. Completed his Master in Law and Doctorate from University of London (specialising in Islamic Contracts). Former member of OCBC Al-Amin Bank Berhad and CIMB Islamic Bank Berhad’s Shariah Council. A Shariah Committee member of Bank Islam Malaysia Berhad since 2011. DR. MOHAMED FAIROOZ ABDUL KHIR 5/6 SHARIAH COMMITTEE MEMBER Shariah committee meeting attended DR. MOHAMED FAIROOZ ABDUL KHIR, aged thirty-nine (39). Shariah Committee member of Takaful IKHLAS since 1 April 2014. Holds a B.A in Islamic Revealed Knowledge and Human Sciences (Fiqh & Usul Fiqh) from IIUM in 2000. Obtained his M.A in Shariah from University of Malaya, Kuala Lumpur, Malaysia in 2005 and completed his Ph.D in Islamic Finance from the same university in 2011. He started his career with IIUM Centre for Foundation Studies since 2002 as a lecturer in the Department of Islamic Revealed Knowledge and Human Sciences. After eight (8) years in service, he resumed his career path as a Researcher at the International Shari’ah Research Academy for Islamic Finance (ISRA). He is a member of the Shari’ah Committee for Maybank Islamic Berhad since July 2013. He is also a member of the Shariah Committee for AGRO Bank since August 2012. Actively involved in research works, writing books, and presentation of research papers at various local and international conferences and forums. He had been conferred Excellence Award by University of Malaya for early completion of his Ph.D study. Also a Shariah Committee member of MRT. 88 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD PROFILE OF SHARIAH COMMITTEE MEMBERS (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD DR. MUHAMMAD NAIM OMAR 5/6 SHARIAH COMMITTEE Member Shariah committee meeting attended DR. MUHAMMAD NAIM OMAR, aged forty-seven (47). Shariah Committee member of Takaful IKHLAS since 1 April 2009. He is an Assistant Professor of Islamic Law at Ahmad Ibrahim Kulliyyah of Laws, International Islamic University of Malaysia and also OCBC Al-Amin Bank Berhad’s Shariah Committee Member. Graduated with a degree in Shariah Law from Al-Azhar University in 1992. In 1999, he received a Master degree from Cairo University in Shariah Law and later received his PhD from the University of Wales, Lampeter, in 2006. DATUK Haji NIK MOUSTPHA HAJI NIK HASSAN 6/6 SHARIAH COMMITTEE MEMBER Shariah committee meeting attended DATUK HAJI NIK MOUSTPHA HAJI NIK HASSAN, aged sixty-two (62). Shariah Committee member of Takaful IKHLAS since 26 December 2002. Currently he is the Director General, Institute of Islamic Understanding Malaysia (IKIM) since August 2009. He studied Business and Economics at Ohio University, United States of America. Prior to joining IKIM, he was the Dean of Kulliyyah Economics at the International Islamic University of Malaysia. In 1989, he used to serve as visiting Scholar at Oxford Centre for Islamic Studies, United Kingdom for one (1) academic year. DR. SYED MUSA SYED JAAFAR ALHABSHI 6/6 SHARIAH COMMITTEE Member Shariah committee meeting attended DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), Shariah Committee member of Takaful IKHLAS since 1 September 2012. Independent Non-Executive Director since 20 August 2009. Other information on Dr. Syed Musa Syed Jaafar Alhabshi is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 86 of this Annual Report. 89 SENIOR MANAGEMENT TEAM //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD Kau Kong Hoi Nazrul Hisham Abdul Hamid Fauziah Md Hasan Yushida Husin Wan Rosli Shaharuddin Wan Yaacob Zarina Mohd Sahim Ab latiff Abu Bakar P resident & C E O 90 SENIOR MANAGEMENT TEAM’S PROFILE Kau Kong Hoi //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD FAUZIAH MD HASAN Senior vice President & Head of Actuarial Services Senior Vice President & Chief Financial officer Kau Kong Hoi is the Senior Vice President & Head of Actuarial Services. Graduated with a Bachelor of Science in Actuarial Science from Universiti Kebangsaan Malaysia and has obtained the Fellowship qualification from the Society of Actuaries, USA (FSA) in 2008 and Malaysia (FASM) in 2011 respectively. He has more than 12 years of actuarial services and financial reporting experiences in both conventional insurance business and takaful business across major international and domestic insurers in Asia Pacific countries. FAUZIAH MD HASAN is the Senior Vice President & Chief Financial Officer of Takaful IKHLAS. Graduated with a Bachelor of Accounting from Universiti Kebangsaan Malaysia (UKM) and has over twenty (20) years of working experience in various accounting and financial management functions in both insurance and takaful industry. After graduation, her career began at Ernst & Young as an Auditor. After three (3) years, she joined Talasco Insurance Sdn. Bhd. (Talasco) as an Executive and subsequently promoted to Assistant General Manager, Finance. Her working experience with Talasco was for nine (9) years. Her career at Takaful industry began when she joined Takaful Nasional Bhd (Takaful Nasional) where she was there for six (6) years. She joined as a Manager, Credit Control and subsequently promoted to Vice President, Corporate Accounts. After the merger exercise between Takaful Nasional and Maybank Takaful, she was responsible to oversee the Finance Department of both entities. Prior to joining Takaful IKHLAS on 3 August 2008, she was the Assistant General Manager, Finance at Syarikat Takaful Malaysia Bhd. She joined Takaful IKHLAS as an Assistant Vice President, Finance & Account. She was re-designated as Vice President and Head of Finance – General on 1 February 2010 and subsequently appointed as Senior Vice President & Chief Financial Officer effective 1 November 2013. He joined Takaful Ikhlas on 17 November 2014. His main responsibility is to certify the valuation of actuarial and other certificate liabilities in accordance with the generally accepted actuarial principles and practices. NAZRUL HISHAM ABDUL HAMID Senior Vice President & Chief Business Operations Officer NAZRUL HISHAM ABDUL HAMID is the Senior Vice President & Chief Business Operations Officer. Graduated with a Degree in Accounting and Finance from University of Hull, United Kingdom and Master of Business and Administration from Mara University of Technology (UiTM). He is also the Chartered member of Institute of Internal Auditors Malaysia (IIAM) and has over twenty (20) years of extensive experience in various industries and public listed companies holding senior managerial positions. His involvement in takaful industry started in June 2007, of which he was appointed as the Chief Internal Auditor / Group General Manager for Syarikat Takaful Malaysia Berhad. He was aggressively involved in revamping the business process, internal control system and risk management of the company. He was later appointed as the General Manager of Operations responsible in managing the Underwriting, Retakaful, Certificate Processing, Claims, Customer Service and Branch Operations. YUSHIDA HUSIN Senior Vice President & Chief Corporate Services Officer YUSHIDA HUSIN is the Senior Vice President & Chief Corporate Services Officer of Takaful IKHLAS. Graduated with a Bachelor of Science in Statistics Degree from the University of Illinois at Urbana-Champaign. Before joining Takaful IKHLAS, she served six (6) years with a multinational consultancy firm Accenture (previously known as Andersen Consulting) where she was involved in both local and international business process re-engineering and system implementation projects for insurance as well as other financial institutions in the Asian region. She was one of the pioneer members involved in the formation of Takaful IKHLAS. She joined Takaful IKHLAS in January 2003. He joined Takaful IKHLAS on 9 June 2014. 91 SENIOR MANAGEMENT TEAM'S PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 TAKAFUL IKHLAS BERHAD WAN ROSLI SHAHARUDDIN WAN YAACOB ZARINA MOHD SAHIM Senior Vice President & Head, General Operations Senior Vice President & Head, AGENCY WAN ROSLI SHAHARUDDIN WAN YAACOB is the Senior Vice President & Head, Agency of Takaful IKHLAS. Graduated with a Bachelor of Science (Business Administration) and Master of Business Administration from the United States International University (USIU), San Diego, United States of America, respectively. He has eighteen (18) years experience in the insurance industry, having served in The People’s Insurance Co. (M) Berhad (Technical Service Division), Malaysia National Insurance Berhad (Total Quality Management Department) and AMI Insurans Berhad (Internal Audit Department). Prior to his current appointment, he served Bank Negara Malaysia and was attached to the Insurance Examination Department. He was a Member of the PIAM Motor Sub-Committee (2001–2002). He joined Takaful IKHLAS in October 2002. 92 ZARINA MOHD SAHIM is the Senior Vice President & Head, General Operations. Graduated with a Bachelor degree of Business Administration (Insurance) from Mara University of Technology (UiTM) and has over twenty-five (25) years of extensive experience in insurance and takaful industry. Her career began at Malaysia National Insurance Sdn Bhd after graduation where she spent five (5) years as an Executive, Fire Department. In 1991, she joined Hong Leong Assurance Sdn Bhd as an Executive, Fire Underwriting for Corporate Clients. In 1994, her takaful experience started when she joined Syarikat Takaful Malaysia Berhad for eighteen (18) years. Her last position was Head of Operations – General Takaful where she was responsible in managing the entire operations of General Takaful Division. Prior to joining Takaful IKHLAS, she was at Hong Leong MISG Takaful for a few months as Head of General Operations. She joined Takaful IKHLAS in October 2012. TAKAFUL IKHLAS’ PORTFOLIO OF BUSINESS (A) GENERAL TAKAFUL Fire Marine Motor Miscellaneous Accident Total TAKAFUL IKHLAS BERHAD (B) FAMILY TAKAFUL 2015 Class //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 2014 2015 2014 RM’000 % RM’000 % Class RM’000 % RM’000 % 36,415 13 31,951 14 Individual 233,742 42 239,021 44 244 1 258 1 Mortgage 128,976 23 119,993 22 192,646 70 162,765 72 Group 138,160 25 158,402 29 45,859 16 29,328 13 Investment-Linked 53,077 10 30,545 5 275,164 100 224,302 100 553,955 100 547,961 100 Fire 13% Marine 1% Miscellaneous Accident 16% Motor 70% Total Individual 42% Investment-Linked 10% Group 25% 2015 2015 Mortgage 23% Fire 14% Marine 1% Miscellaneous Accident 13% Motor 72% Investment-Linked 5% Individual 44% Group 29% 2014 2014 Mortgage 22% 93 A COMMITTED PARTNER MNRB Retakaful continues to commit to its diverse generations of stakeholders and acts as a second layer of protection to takaful players. Through its Family and General retakaful businesses MNRB Retakaful is helping Malaysia achieve its ambition of transforming into an international hub for the development of Islamic financial services. CORPORATE PROFILE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD Authorised Capital of RM500 RM102 million Paid-up Capital of million MNRB Retakaful Berhad (MRT), a wholly owned subsidiary of MNRB Holdings Berhad, is involved in the Family and General retakaful businesses. MRT was incorporated in December 2006 and registered by Bank Negara Malaysia as the first retakaful operator in Malaysia on 1 August 2007. CAPITAL STRUCTURE MRT has an Authorised Capital of RM500 million and a Paid-up Capital of RM102 million. With the setting up of MRT, the MNRB Group has entrenched itself as a significant player in the global takaful industry and is helping to promote Malaysia as a leading centre for the development of the Islamic finance industry. 95 CORPORATE INFORMATION Norazman Hashim (MIA 5817) Lena Abd Latif (LS 8766) Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Dato’ Syed Ariff Fadzillah Syed Awalluddin Independent Non-Executive Director Megat Dziauddin Megat Mahmud Independent Non-Executive Director Yahaya Besah Independent Non-Executive Director Dr. Syed Musa Syed Jaafar Alhabshi Independent Non-Executive Director Mohd Din Merican Non-Independent Non-Executive Director President & Chief Executive Officer Ahmad Ruhaizad Hashim Registered Office Auditors Ernst & Young Level 23A, Menara Millenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur Tel : +603-7495 8000 Fax: +603-2095 5332 9th Floor, Bangunan Malaysian Re No. 17, Lorong Dungun Damansara Heights 50490 Kuala Lumpur Tel : +603 2096 7007 Fax: +603 2096 8007 Email: [email protected] Website: www.mnrb-retakaful.com.my Principal Bankers Standard Chartered Bank Malayan Banking Berhad CIMB Bank Berhad 96 MNRB RETAKAFUL BERHAD Company Secretaries Board of //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 Audit Committee Megat Dziauddin Megat Mahmud (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi Shariah Committee Ir. Dr. Muhamad Fuad Abdullah (Chairman) Assoc. Prof. Dr. Said Bouheraoua Dr. Syed Musa Syed Jaafar Alhabshi Datuk Haji Nik Moustpha Haji Nik Hassan Dr. Mohamed Fairooz Abdul Khir Nomination Committee Dato’ Syed Ariff Fadzillah Syed Awalluddin (Chairman) Sharkawi Alis Yahaya Besah Dr. Syed Musa Syed Jaafar Alhabshi Mohd Din Merican Risk Management Committee Yahaya Besah (Chairman) Dato’ Syed Ariff Fadzillah Syed Awalluddin Mohd Din Merican Remuneration Committee Dr. Syed Musa Syed Jaafar Alhabshi (Chairman) Megat Dziauddin Megat Mahmud Dato’ Syed Ariff Fadzillah Syed Awalluddin Yahaya Besah Investment Committee Megat Dziauddin Megat Mahmud (Chairman) Yahaya Besah Mohd Din Merican DIRECTORS’ PROFILE 8/8 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD Board meeting attended SHARKAWI ALIS Non-Independent Non-Executive Chairman SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Independent Non-Executive Chairman since 24 December 2007. Member of Nomination Committee. Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN 8/8 Board meeting attended Independent Non-Executive Director DATO’ SYED ARIFF FADZILLAH SYED AWALLUDDIN, aged seventy-one (71), Malaysian, Independent Non-Executive Director since 6 August 2007. Chairman of the Nomination Committee. Member of the Audit Committee, the Remuneration Committee and the Risk Management Committee. Other information on Dato’ Syed Ariff Fadzillah Syed Awalluddin is disclosed in the Directors’ Profile section of MNRB on page 24 of this Annual Report. 97 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD MEGAT DZIAUDDIN MEGAT MAHMUD 8/8 Board meeting attended Independent Non-Executive Director MEGAT DZIAUDDIN MEGAT MAHMUD, aged sixty-nine (69), Malaysian. Independent Non-Executive Director since 6 August 2007. Chairman of the Audit Committee and the Investment Committee. Member of the Remuneration Committee. Other information on Megat Dziauddin Megat Mahmud is disclosed in the Directors’ Profile section of MNRB on page 23 of this Annual Report. 8/8 Board meeting attended YAHAYA BESAH Independent Non-Executive Director YAHAYA BESAH, aged sixty-three (63), Malaysian. Independent Non-Executive Director since 4 July 2008. Chairman of the Risk Management Committee. Member of the Audit Committee, the Investment Committee, the Nomination Committee and the Remuneration Committee. Other information on Yahaya Besah is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 85 of this Annual Report. 98 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD 7/8 DR. SYED MUSA SYED JAAFAR ALHABSHI Board meeting attended Independent Non-Executive Director DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), Malaysian. Independent Non-Executive Director since 23 July 2008. Chairman of the Remuneration Committee. Member of the Audit Committee, the Nomination Committee and the Shariah Committee. Other information on Dr. Syed Musa Syed Jaafar Alhabshi is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 86 of this Annual Report. MOHD DIN MERICAN 8/8 Board meeting attended Non-Independent Non-Executive Director MOHD DIN MERICAN, aged fifty-three (53), Malaysian. Non-Independent Non-Executive Director since 2 March 2012. Member of the Investment Committee, the Risk Management Committee and the Nomination Committee. Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. 99 PROFILE OF SHARIAH COMMITTEE MEMBERS IR. DR. MUHAMAD FUAD ABDULLAH SHARIAH COMMITTEE CHAIRMAN 6/6 Shariah committee meeting attended IR. DR. MUHAMAD FUAD ABDULLAH, aged sixty-two (62). Shariah Committee member since 1 June 2011 and subsequently appointed as Chairman of Shariah Committee on 28 October 2011. Obtained his Bachelor Degree in Electrical Engineering from Southampton University in 1977. In 1982, he obtained his Masters Degree in Electrical Engineering from the same university and in 1994, obtained his Bachelor Degree in Shariah from Jordan University. In 1996, he completed his Ph.D. in Muslim Civilisation from Aberdeen University in Scotland. He is the Chairman of the Shariah Committee of MIDF Group of Companies in addition to being a Shariah Advisory Committee member of BIMB Securities Sdn. Bhd. He is a registered Shariah Adviser with the Securities Commission (SC) which qualifies him to advise on Shariahcompliant products and services regulated by the SC. He is a registered Shariah lawyer with Majlis Agama Islam Perak since 2007 and was a member of the Board of Studies of the BA (Fiqh and Usul Fiqh) Programme of the International Islamic University of Malaysia (IIUM) in 2007– 2010. He is a member of the Majlis Agama Islam Wilayah Persekutuan (MAIWP) and sits on the boards of Malaysian Industrial Development Finance (MIDF) Berhad, MIDF Property Berhad, Mesiniaga Berhad, Sime Darby Berhad, and Sime Darby Property Berhad. He also serves as a Board member of Institut Kefahaman Islam Malaysia (IKIM). ASSOC. PROF. DR. SAID BOUHERAOUA SHARIAH COMMITTEE MEMBER 6/6 Shariah committee meeting attended ASSOC. PROF. DR. SAID BOUHERAOUA, aged forty-eight (48). Shariah Committee member of MRT since 1 April 2011. Holds a Bachelor Degree in Fiqh and Usul Al-Fiqh from University of Algiers in 1991. In 1998, he obtained his Masters Degree from the International Islamic University of Malaysia (IIUM) and in 2002, he completed his Ph.D from the Department of Fiqh and Usul al-Fiqh of the same university. He started his career with University Sains Islam Malaysia (USIM) as a Lecturer in 2003. After two (2) years, he became an Assistant Professor Dr. & Associate Professor Dr. at the Ahmad Ibrahim Kulliyyah of Laws in IIUM, from year 2004 to 2009. He then resumed his career path as a Senior Researcher at the International Shari’ah Research Academy (ISRA) for Islamic Finance. He is also a member of the Shariah Committee for Affin Islamic Bank since March 2008. He is also member of Shari’ah Committee of ISRA Consultancy institute, since April 2011 and a registered Shariah Adviser with Securities Commission Malaysia since March 2012. Dr. Said is the editor-in-chief of ISRA International Journal of Islamic Finance. He has published four (4) books, six (6) chapters in books and several articles in refereed journals. He has also presented several papers in international conferences including the International Fiqh Academy of the OIC and Islamic Fiqh Academy of Muslim World League. He developed the curricula in Islamic law for four (4) courses at IIUM and conducted several training sessions in Islamic law Islamic banking and finance in Malaysia and abroad. Prior to his achievements and contributions towards the industry, he had won the Lamya al-Faruqi Award for Academic Excellence in 1999, organised by International Institute of Islamic Thought and IIUM. 100 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD PROFILE OF SHARIAH COMMITTEE MEMBERS (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD DR. SYED MUSA SYED JAAFAR ALHABSHI SHARIAH COMMITTEE Member 6/6 Shariah committee meeting attended DR. SYED MUSA SYED JAAFAR ALHABSHI, aged fifty-five (55), Shariah Committee member of MRT since 1 June 2011. Independent Non-Executive Director since 23 July 2008. Other information on Dr. Syed Musa Syed Jaafar Alhabshi is disclosed in the Directors’ Profile section of Takaful IKHLAS on page 86 of this Annual Report. DATUK Haji NIK MOUSTPHA HAJI NIK HASSAN SHARIAH COMMITTEE MEMBER 5/6 Shariah committee meeting attended DATUK HAJI NIK MOUSTPHA HAJI NIK HASSAN, aged sixty-two (62). Shariah Committee member of MRT since 1 April 2012. Other information on Datuk Haji Nik Moustpha Haji Nik Hassan is disclosed in the Shariah Committee Member’s Profile section of Takaful IKHLAS on page 89 of this Annual Report. DR. MOHAMED FAIROOZ ABDUL KHIR SHARIAH COMMITTEE Member 6/6 Shariah committee meeting attended DR. MOHAMED FAIROOZ ABDUL KHIR, aged thirty-nine (39). Shariah Committee member of MRT since 1 April 2013. Other information on Dr. Mohamed Fairooz Abdul Khir is disclosed in the Shariah Committee Member’s Profile section of Takaful IKHLAS on page 88 of this Annual Report. 101 PRESIDENT & CEO’S PROFILE AHMAD RUHAIZAD HASHIM President & CEO AHMAD RUHAIZAD HASHIM is the President & CEO and also Senior Vice President & Group Chief Strategy Officer of MNRB. He graduated in 1990 with a Bachelor of Economics and Accounting Degree from the University of Leeds, England. He is a member of the Malaysian Institute of Certified Public Accountants (MICPA) since 1995 as well as a member of the Malaysian Institute of Accountants. He brings almost twenty-one (21) years of experience in corporate management and advisory services. His career started in 1991 when he joined Arthur Andersen as an auditor. He served Arthur Andersen for more than five (5) years until 1996 when he left to join KUB Malaysia Berhad. He then rejoined Arthur Andersen in 1999 to head the Kuala Terengganu branch operation. In 2002, he joined Putrajaya Holdings Sdn. Bhd. as the Head of the Corporate Planning Department. He joined MNRB on 2 January 2008. Appointed as the President & CEO with effect from 1 January 2015. 102 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD MRT’S PORTFOLIO OF BUSINESS //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MNRB RETAKAFUL BERHAD (A) GENERAL RETAKAFUL 2015 Class 2014 RM’000 % RM’000 % 14,882 53 42,301 66 Marine 3,836 14 8,332 13 Motor 4,478 16 5,372 8 Miscellaneous Accident 4,956 17 8,074 13 28,152 100 64,079 100 Fire Total Miscellaneous Accident 17% Fire 53% Miscellaneous Accident 13% Fire 66% Motor 8% Motor 16% 2015 2014 Marine 13% Marine 14% (B) FAMILY RETAKAFUL 2015 2014 RM’000 RM’000 35,711 53,071 103 A NURTURING PARTNER Malaysian Re (Dubai) Ltd. or MRDL continues to make good headway in its role as a nurturing reinsurance partner to clients in the Middle East and North Africa (MENA) region. Through the provision of high quality reinsurance services and underwriting support to its clientele in the MENA region, MRDL is developing solid relationships with them as well as paving the way for future growth in that part of the world. CORPORATE PROFILE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN RE (DUBAI) LTD. Authorised Capital of USD5 USD2 million Paid-up Capital of million Malaysian Re (Dubai) Limited (MRDL), a wholly owned subsidiary of MNRB Holdings Berhad, was incorporated on 7 December 2006 in Dubai, the United Arab Emirates. Its office is situated within the strategic Dubai International Financial Centre (DIFC) and regulated by the Dubai Financial Services Authority (DFSA). MRDL is engaged in developing business for its sister company, Malaysian Reinsurance Berhad (Malaysian Re) in the Middle East and North Africa (MENA) region. Its primary functions are to develop relationships with clients around the MENA region as well as provide services and underwriting support to them. Its close proximity to this target market gives MRDL an edge when servicing its clients. All businesses of MRDL are fully underwritten by Malaysian Re, an ‘a-’ (Excellent) rated company by A.M. Best and ‘A’ by Fitch Ratings. MRDL will continue to expand its market presence in the MENA region and is committed to being at the forefront of the reinsurance segment within the region. CAPITAL STRUCTURE MRDL has an authorised Capital of USD5 million and a Paid-up Capital of USD2 million. 105 CORPORATE INFORMATION //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN RE (DUBAI) LTD. Company Secretary Board of Norazman Hashim (MIA 5817) Senior Executive Officer Zaini Abdul Aziz Sharkawi Alis NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Principal Banker Zainudin Ishak Standard Chartered Bank Non-Independent Non-Executive Director Precinct Building 1 DIFC Branch Dubai, United Arab Emirates Tel : +971 4 5083612 Fax: +971 4 4282502 Mohd Din Merican Non-Independent Non-Executive Director Auditors Moore Stephens Chartered Accountants 106 Suite M5-A, Zalfa Building Al Garhoud Area P. O. Box 28817 Dubai, United Arab Emirates Tel : +971 4 2820811 Fax: +971 4 2820812 Registered Office Unit 101, Level 1 Gate Village 4, The Gate District Dubai International Financial Centre P. O. Box 506571 Dubai, United Arab Emirates Tel : +971 4 3230388 Fax: +971 4 3230288 Website: www.malaysian-re.com.my DIRECTORS’ PROFILE 2/2 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN RE (DUBAI) LTD. Board meeting attended SHARKAWI ALIS Non-Independent Non-Executive Chairman SHARKAWI ALIS, aged sixty-eight (68), Malaysian. Non-Executive Chairman since 17 December 2007. Non-Independent Other information on Sharkawi Alis is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. N/A ZAINUDIN ISHAK Board meeting attended Non-Independent Non-Executive Director ZAINUDIN ISHAK, aged forty-eight (48), Non-Executive Director since 23 April 2015. Malaysian. Non-Independent Other information on Zainudin Ishak is disclosed in the Directors’ Profile section of Malaysian Re on page 69 of this Annual Report. 107 DIRECTORS’ PROFILE (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN RE (DUBAI) LTD. MOHD DIN MERICAN 2/2 Board meeting attended Non-Independent Non-Executive Director MOHD DIN MERICAN, aged fifty-three (53), Malaysian. Non-Independent Non-Executive Director since 5 February 2012. Other information on Mohd Din Merican is disclosed in the Directors’ Profile section of MNRB on page 22 of this Annual Report. 108 SENIOR EXECUTIVE OFFICER’S PROFILE ZAINI ABDUL AZIZ //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN RE (DUBAI) LTD. 2/2 Board meeting attended Senior Executive Officer ZAINI ABDUL AZIZ, is the Senior Executive Officer of MRDL. Prior to this, he served as Vice President, International Treaties Department of Malaysian Re, a sister company of MRDL. He has been with Malaysian Re for twenty (20) years, and comes to the role with extensive on the ground client-facing experience. He joined Malaysian Re as a Risk Surveyor upon obtaining his Bachelor of Business from Temple University, Philadelphia, in 1992. He has had a successful career with Malaysian Re in various departments where he gained his knowledge and experience in many aspects of reinsurance business. 109 CORPORATE PROFILE //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 MALAYSIAN MOTOR INSURANCE POOL (MMIP) The Malaysian Motor Insurance Pool (MMIP) was collectively set up in 1992 by the local insurance companies to provide motor insurance to vehicle owners who are unable to obtain insurance protection for their vehicles. Malaysian Re was then appointed as the Administration Manager for the pool. MMIP Services Sdn. Bhd. (MSSB), a subsidiary of MNRB Holdings Berhad, was incorporated on 23 March 2006. Following its incorporation, the duties and functions of the Administration Manager were transferred from Malaysian Re to MSSB on 12 April 2006. The duties and functions of MSSB, include inter alia, dealing with the overall administrative and financial functions of the MMIP as well as Bodily Injury claims administration. CORPORATE INFORMATION Senior Vice President Board of S. Manogaran Company Secretary Lena Abd Latif (LS 8766) Zainudin Ishak Auditors DIRECTOR Ernst & Young Norazman Hashim DIRECTOR Principal Banker CIMB Bank Berhad 110 Level 23A, Menara Millenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur Tel : +603-7495 8000 Fax: +603-2095 5332 Registered Office 6th Floor, Bangunan Malaysian Re No. 17, Lorong Dungun Damansara Heights 50490 Kuala Lumpur Tel : +603 2096 8006 Fax: +603 2096 7006 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Directors’ Report 112 Statement by Directors 116 Statutory Declaration 116 Independent Auditors’ Report 117 Income Statements 119 Statements of Comprehensive Income 120 Statements of Financial Position 121 Statements of Changes in Equity 122 Statements of Cash Flows 123 Notes to the Financial Statements 125 FINANCIAL STATEMENTS DIRECTORS’ REPORT //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Directors’ Report The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 March 2015. Principal Activities The Company is an investment holding company, principally engaged in the provision of management services to its subsidiaries. The principal activities of the subsidiaries have been disclosed in Note 17 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year. Results Net profit for the year Group RM’000 Company RM’000 139,148 11,539 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 Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Dividend The amount of dividend paid by the Company since the end of the previous financial year was as follows: RM’000 In respect of the financial year ended 31 March 2014: First and final single-tier dividend of 16.5%, paid on 29 October 2014 The Directors do not recommend the payment of any dividend in respect of the current financial year. 112 35,156 DIRECTORS’ REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Directors The names of the Directors of the Company in office since the date of the last report and at the date of this report are: Sharkawi bin Alis Mohd Din bin Merican P. Raveenderen Dato’ Syed Ariff Fadzillah bin Syed Awalluddin Yusoff bin Yaacob Datuk Mohd Khalil bin Dato’ Mohd Noor (Resigned with effect from 1 June 2015) Megat Dziauddin bin Megat Mahmud Paisol bin Ahmad Hijah Arifakh binti Othman (Appointed with effect from 1 June 2015) In accordance with Article 86 of the Company’s Articles of Association, Yusoff bin Yaacob and Paisol bin Ahmad will be retiring by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with Article 92 of the Company’s Articles of Association, Hijah Arifakh binti Othman retires and, being eligible offers herself for re-election. P. Raveenderen, who will be retiring pursuant to Section 129 of the Companies Act, 1965 at the forthcoming Annual General Meeting, offers himself for re-appointment as Director in accordance with Section 129 of the said Act to hold office until the conclusion of the next Annual General Meeting of the Company. Dato’ Syed Ariff Fadzillah bin Syed Awalluddin who will be also retiring pursuant to Section 129 of the Companies Act 1965 at the forthcoming Annual General Meeting, had informed that he would not be seeking re-election. 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 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 from the Company or the fixed salary and benefits receivable as a full-time employee of the Company as disclosed in Notes 9, 10 and 32 to the financial statements or benefits receivable from related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. Directors’ Interests According to the register of Directors’ shareholdings, the interest of Directors in office at the end of the financial year in shares of the Company during the financial year are as follows: Number of ordinary shares of RM1.00 each As at As at 1 April 2014 Acquired Sold 31 March 2015 Direct Interests: P. Raveenderen Datuk Mohd Khalil bin Dato’ Mohd Noor (Resigned with effect from 1 June 2015) 10,000 - - 10,000 5,000 - - 5,000 Other than as stated above, none of the Directors in office at the end of the financial year had any interest in shares of the Company or its related corporations during the financial year. 113 DIRECTORS’ REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Significant and Subsequent Events The significant events during the financial year are as disclosed in Note 39 to the financial statements. The Board of the Company had on 22 April 2015, announced that the Company’s reinsurance subsidiary, Malaysian Re, had been granted an approval from Bank Negara Malaysia (“BNM”), vide its letter dated 16 April 2015, to conduct General and Family retakaful business under Section 10 of the Islamic Financial Services Act, 2013 (“IFSA”) via the establishment of a retakaful division. Following this, the MNRB Group plans to undertake an internal restructuring exercise for its retakaful business, the details of which will be announced at a later date. Other Statutory Information (a) (b) Before the income statements and statements of financial position of the Group and 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; and (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. At the date of this report, the Directors are not aware of any circumstances which would render: (i) it necessary to write off any bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and (ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) 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 Group and of the Company misleading or inappropriate. (d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or in the financial statements of the Group and 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 Group or 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 of the Group or of the Company which has arisen since the end of the financial year other than those arising in the normal course of business of the Group and of the Company. 114 DIRECTORS’ REPORT (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Other Statutory Information (CONT’D) (f) In the opinion of the Directors: (i) no contingent liability 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 Group or of the Company to meet their 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 Group or of the Company for the financial year in which this report is made. For the purpose of paragraphs (e)(ii) and (f)(i) above, contingent or other liabilities do not include liabilities arising from reinsurance, takaful and retakaful contracts underwritten in the ordinary course of business of the reinsurance, takaful and retakaful subsidiaries and associate companies. Auditors The retiring auditors, Messrs. Ernst & Young, have expressed their willingness to accept re-appointment. Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 July 2015. Sharkawi bin Alis Mohd Din bin Merican Kuala Lumpur, Malaysia 115 STATEMENT BY DIRECTORS //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Pursuant to Section 169(15) of the Companies Act, 1965 We, Sharkawi bin Alis and Mohd Din bin Merican, being two of the Directors of MNRB Holdings Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 119 to 235 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia, so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2015 and of the results and the cash flows of the Group and of the Company for the year then ended. In the opinion of the Directors, the information set out in Note 41 and page 236 of the financial statements has been compiled in accordance with the Guidance On Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” issued by the Malaysian Institute of Accountants on 20 December 2010, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 July 2015. Sharkawi bin Alis Mohd Din bin Merican Kuala Lumpur, Malaysia Statutory declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Norazman bin Hashim, being the officer primarily responsible for the financial management of MNRB Holdings Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 119 to 236 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 Norazman bin Hashim at Kuala Lumpur in Wilayah Persekutuan on 31 July 2015 Before me, 116 ) ) ) ) Norazman bin Hashim Independent auditors’ report //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS to the members of MNRB Holdings Berhad (Incorporated in Malaysia) Report on the financial statements We have audited the financial statements of MNRB Holdings Berhad, which comprise the statements of financial position as at 31 March 2015 of the Group and of the Company, the income statements, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 119 to 235. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 March 2015 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act, 1965 (“the Act”) in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. (b) We have considered the financial statements and the auditors’ report of the subsidiary of which we have not acted as auditors, which are indicated in Note 17 to the financial statements, being financial statements that have been included in the consolidated financial statements. (c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. (d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and, in respect of the subsidiaries incorporated in Malaysia, did not include any comment required to be made under Section 174(3) of the Act. 117 independent auditors’ REPORT (CONT’D) to the members of MNRB Holdings Berhad (Incorporated in Malaysia) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS Other reporting responsibilities The supplementary information set out in Note 41 on page 236 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Kuala Lumpur, Malaysia 31 July 2015 118 Dato’ Abdul Rauf bin Rashid No. 2305/05/16(J) Chartered Accountant income statements //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS for the year ended 31 march 2015 Note Gross earned premiums/contributions Premiums/contributions ceded to reinsurers/retakaful operators 4(a) 4(b) Net earned premiums/contributions Investment income Net realised gains/(losses) Net fair value (losses)/gains Fee and commission income Other operating revenue 5 6 7 8 Other revenue Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2,191,597 (244,266) 2,182,962 (199,524) - - 1,947,331 1,983,438 - - 2014 RM’000 199,507 9,733 (5,839) 35,737 10,471 174,235 21,056 3,796 24,574 12,242 62,164 (85) 33,868 101 105,787 (763) 794 31,072 53 249,609 235,903 96,048 136,943 - - - - - - Gross claims and benefits paid Claims ceded to reinsurers/retakaful operators Gross change in contract liabilities Change in contract liabilities ceded to reinsurers/ retakaful operators (1,240,681) 154,687 (147,847) Net claims and benefits (1,269,971) (1,281,256) (435,399) (209,555) (18,123) (7,680) (10,764) (13,265) (451,224) (195,411) (17,916) (5,154) (18,637) (13,992) (36,866) (18,123) (30,330) - (35,898) (17,916) (32,474) - (694,786) (702,334) (85,319) (86,288) Fee and commission expense Management expenses Finance costs Other operating expenses Change in expense liabilities Tax borne by participants (36,130) 8 9 11 12 Other expenses Share of results of associates Operating profit before surplus attributable to takaful participants, zakat and taxation Surplus attributable to takaful participants Operating profit before zakat and taxation Zakat Taxation 4,157 11,737 2,437 - - 23(a) 236,340 (45,635) 238,188 (23,460) 10,729 - 50,655 - 12 190,705 (960) (50,597) 214,728 (400) (58,342) 10,729 810 50,655 (25,616) 139,148 155,986 11,539 25,039 65.3 73.2 Net profit for the year attributable to equity holders of the Parent Basic and diluted earnings per share attributable to equity holders of the Parent (sen): (1,064,335) 151,356 (380,014) 29 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 119 statements of comprehensive income //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS for the year ended 31 march 2015 Group 2015 RM’000 2014 RM’000 139,148 155,986 11,539 25,039 Effects of post-acquisition foreign exchange translation reserve on investment in associate 9,689 5,160 - - Effects of foreign exchange translation reserve on investment in subsidiary 1,101 369 - - Net profit for the year Company 2015 RM’000 2014 RM’000 Other comprehensive income/(losses) Other comprehensive income/(losses) to be reclassified to income statement in subsequent periods: Net gain/(loss) on Available-for-sale (“AFS”) financial assets: Gain/(loss) on fair value changes Realised (gains)/losses transferred to income statement (Note 6) Deferred tax relating to net (gain)/loss on AFS financial assets 44,155 (7,378) (3,389) (50,487) (13,626) 8,646 - Other comprehensive (gains)/losses attributable to participants (Note 23(b)) (27,120) 34,915 - - 8,032 4,749 - - (770) 763 2 Other comprehensive income not to be reclassified to income statement in subsequent periods: Revaluation of land and buildings Deferred tax relating to revaluation of land and buildings Other comprehensive income attributable to participants (Note 23(c)) Total comprehensive income for the year (937) (141) - - (2,140) (2,909) - - 11,539 25,034 161,161 142,662 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 120 statements of financial position //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS as at 31 march 2015 Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2014 RM’000 237,495 7,100 14,632 11,484 110,567 236,936 6,900 14,519 24,180 96,053 2,907 3,797 2,313 843,705 1,957 2,610 2,497 1,503 872,032 1,957 137,934 722,356 2,530,716 1,917,938 374,653 303,918 25,216 82,702 - 139,478 718,597 2,303,023 1,783,211 399,787 369,611 5,462 36,644 1,696 50 37,071 2,877 - 50 26,927 5,461 2,904 - 6,476,711 6,136,097 894,677 915,941 286,726 320,000 4,159,278 169,424 170,807 7,676 12,455 871 217,476 320,000 4,012,263 169,865 157,393 8,298 26,965 368 320,000 9,203 2,083 - 320,000 8,933 - 5,127,237 4,912,628 331,286 328,933 213,070 1,136,404 213,070 1,010,399 213,070 350,321 213,070 373,938 Total equity attributable to equity holders of the Parent 1,349,474 1,223,469 563,391 587,008 Total liabilities, participants’ funds and equity 6,476,711 6,136,097 894,677 915,941 Note Assets Property, plant and equipment Investment properties Intangible assets Deferred tax assets Investments in subsidiaries Investments in associates Financial assets: Financial assets at fair value through profit or loss (“FVTPL”) Held-to-maturity (“HTM”) investments AFS financial assets Loans and receivables (“LAR”) Reinsurance/retakaful assets Insurance/takaful receivables Tax recoverable Cash and bank balances Non-current assets held for sale 13 14 15 16 17 18 19(a) 19(b) 19(c) 19(d) 20 21 22 Total assets Liabilities and Participants’ funds Participants’ funds Borrowings Insurance/takaful contract liabilities Insurance/takaful payables Other payables Deferred tax liabilities Provision for taxation Provision for zakat 23 24 20 25 26 16 Total liabilities and participants’ funds Equity Share capital Reserves 27 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 121 statements of changes in equity //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS for the year ended 31 march 2015 Share capital RM’000 Attributable to equity holders of the Company Reserves Non-distributable Distributable Foreign exchange translation AFS Revaluation Retained Share reserve reserve reserve profits premium RM’000 RM’000 RM’000 RM’000 RM’000 Total RM’000 Group At 1 April 2013 Net profit for the year Other comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year Dividend paid during the year (Note 28) Reclassification upon disposal of property 213,070 - 105,051 - 16,728 - 8,472 - 30,660 - 757,963 155,986 - - 5,529 (20,552) 1,699 - - - 5,529 - (20,552) - 1,699 - - - - At 31 March 2014 Net profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividend paid during the year (Note 28) 213,070 - 105,051 - 22,257 - (12,080) - - - 10,790 10,790 - At 31 March 2015 213,070 105,051 At 1 April 2013 Net profit for the year Other comprehensive loss for the year Total comprehensive (loss)/income for the year Dividend paid during the year (Note 28) 213,070 - - (115) 155,986 (51,137) 1,131,944 155,986 (13,324) 142,662 (51,137) 115 - 32,244 - 862,927 139,148 1,223,469 139,148 6,268 6,268 - 4,955 4,955 - 139,148 (35,156) 33,047 (5,812) 37,199 966,919 105,051 - - 5 (5) - 294,985 25,039 - 613,111 25,039 (5) - - - (5) - - 25,039 (51,137) 25,034 (51,137) At 31 March 2014 Net profit and total comprehensive income for the year Dividend paid during the year (Note 28) 213,070 105,051 - - - 268,887 587,008 - - - - - 11,539 (35,156) 11,539 (35,156) At 31 March 2015 213,070 105,051 - - - 245,270 563,391 22,013 161,161 (35,156) 1,349,474 Company The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 122 statements of cash flows //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS for the year ended 31 march 2015 Cash flows from operating activities Profit before zakat and taxation Adjustments for: Net fair value losses/(gains) on financial assets at FVTPL Impairment loss/(reversal of impairment loss) on AFS financial assets (Reversal of impairment loss)/impairment loss on HTM investments Reversal of impairment loss on properties Impairment loss on other receivables Impairment loss/(reversal of impairment loss) on insurance/ takaful receivables Depreciation of property, plant and equipment Amortisation of intangible assets Fair value gains on investment properties Net losses/(gains) on disposals of property, plant and equipment (Decrease)/increase in gross premium and contribution liabilities Impairment loss on investment in subsidiary Interest/profit income Dividend income Rental income Finance cost Realised (gains)/losses on disposals of investments Realised gains on disposals of non-current assets held for sale Net amortisation of premiums on investments Share of results of associates Group 2015 RM’000 2014 RM’000 190,705 214,728 Company 2015 RM’000 10,729 - 2014 RM’000 50,655 4,266 2,043 (54) (216) 32 (3,987) 1,229 139 (477) 425 (794) - 6,947 8,310 3,950 (200) 81 (11,596) (184,589) (15,122) (4,888) 18,123 (9,761) (53) 3,579 (4,157) (2,575) 10,726 3,352 (700) (149) 20,651 (162,749) (11,578) (5,436) 17,916 (20,907) 3,315 (2,437) 441 75 85 30,327 (1,164) (61,000) 18,123 - 955 552 32,469 (789) (105,000) 17,916 763 - 61,486 (2,384) (3,273) Profit/(loss) from operations before changes in operating assets and liabilities Increase in placements with licensed financial institutions, Islamic investment accounts and marketable securities Net (purchase)/disposal of investments Increase in staff loans Decrease in insurance/takaful receivables (Increase)/decrease in other receivables Net change in balances with subsidiaries Increase in gross claim and actuarial liabilities Increase in expense liabilities Increase in participants’ funds Decrease/(increase) in reinsurance/retakaful assets Decrease in insurance/takaful payables Increase/(decrease) in other payables Taxes and zakat (paid)/refunded Interest/profit received Dividends received Rental received (147,007) (171,646) (1,294) 58,746 (7,413) 147,847 10,764 45,635 25,134 (441) 13,414 (78,615) 172,406 24,118 4,175 (128,744) (448,067) (1,976) 37,023 (12,439) 380,014 18,637 23,459 (11,811) (41,859) 40,418 (52,884) 162,327 11,536 4,534 (9,657) (135) 388 (147) (288) 7,544 1,129 61,000 - (10,042) 453 (1,447) 280 1,312 (382) 2,514 764 81,000 - Net cash generated from operating activities 103,223 41,654 57,450 71,179 7,400 123 statements of cash flows (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 for the year ended 31 march 2015 FINANCIAL STATEMENTS Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2014 RM’000 Cash flows from investing activities Subscription of shares in subsidiary Purchase of property, plant and equipment Purchase of intangible assets Proceeds from disposal of intangible assets Proceeds from disposal of non-current assets held for sale Proceeds from disposal of property, plant and equipment (2,413) (3,503) 2 1,749 279 (6,438) (4,682) 420 (2,000) (1,094) (1,375) 271 (1,359) (810) - Net cash used in investing activities (3,886) (10,700) (4,198) (2,169) Cash flows from financing activities Profit paid Dividend paid (18,123) (35,156) (17,901) (51,137) (18,123) (35,156) (17,901) (51,137) Net cash used in financing activities (53,279) (69,038) (53,279) (69,038) Cash and bank balances Net increase/(decrease) during the year At beginning of the year 46,058 36,644 (38,084) 74,728 (27) 2,904 (28) 2,932 At end of the year 82,702 36,644 2,877 2,904 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 124 notes to the financial statements //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS – 31 March 2015 1.Corporate information The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at 12th Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia. The Company is an investment holding company, principally engaged in the provision of management services to its subsidiaries. The principal activities of the subsidiaries have been disclosed in Note 17 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial year. The number of employees in the Group and in the Company at the end of the financial year were 893 and 193 (2014: 862 and 196) respectively. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 31 July 2015. 2.Significant accounting policies 2.1 Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the requirements of the Companies Act, 1965 in Malaysia. The financial statements of the Group and of the Company have been prepared under the historical cost convention, unless otherwise stated in the accounting policies. The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated. 2.2Accounting period For the general reinsurance business, the Group adopts quarterly accounting periods ending on 31 March, 30 June, 30 September and 31 December, insofar as the underwriting income and outgo for Market Cessions business is concerned. This is to correspond with the ceding companies’ accounting periods. Underwriting income and outgo in respect of other business classes and all other income and expenditure are for the 12 months ended 31 March 2015. 2.3Subsidiaries, associates and basis of consolidation (i)Subsidiaries A subsidiary is an entity over which the Group has all the following: (a) power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); (b) exposure, or rights, to variable returns from its investment with the investee; and (c) the ability to use its power over the investee to affect its returns. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. 125 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.3Subsidiaries, associates and basis of consolidation (cont’d) (i)Subsidiaries (cont’d) Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: (a) the contractual arrangement with the other vote holders of the investee; (b) rights arising from other contractual arrangements; and (c) the Group’s voting rights and potential voting rights. In the Company’s separate financial statements, investments in subsidiaries are stated at cost less any accumulated impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in the income statement. (ii) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses resulting from intragroup transactions are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances. Acquisitions of subsidiaries are accounted for using the acquisition method. The acquisition method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition. Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement. (iii)Takaful and retakaful operations and funds Under the concept of takaful/retakaful, individuals/cedants 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, the takaful and retakaful subsidiaries of the Company manage the general and family takaful and retakaful funds in line with the principles of Wakalah (agency), which is the main business model used by the takaful and retakaful subsidiaries. Under the Wakalah model, the takaful/retakaful 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 IFSA 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 and retakaful funds are consolidated with those of the takaful and retakaful subsidiaries to represent the control possessed by the takaful/retakaful operator over the respective funds. 126 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.3Subsidiaries, associates and basis of consolidation (cont’d) (iii)Takaful and retakaful operations and funds (cont’d) In preparing the Group financial statements, the balances and transactions of the shareholders’ funds of the takaful and retakaful subsidiaries were amalgamated and combined with those of the takaful and retakaful funds respectively. Interfund balances, transactions and unrealised gains or losses are eliminated in full during amalgamation and consolidation. The takaful and retakaful funds of the takaful and retakaful subsidiaries 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 takaful and retakaful subsidiaries’ licences to manage takaful and retakaful businesses respectively are withdrawn or surrendered. (iv)Associates Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investments in associates are carried in the consolidated statement of financial position at cost adjusted for postacquisition changes in the Group’s share of net assets of the associates. The Group’s share of the net profit or loss of the associates is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associates, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and the associates are eliminated to the extent of the Group’s interest in the associates. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investments in the associates. The investments in associates are accounted for using the equity method from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associates or the investments become subsidiaries. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associates’ identifiable assets, liabilities and contingent liabilities over the cost of the investments is excluded from the carrying amount of the investments and is instead included as income in the determination of the Group’s share of the associates’ profit or loss in the period in which the investments are acquired. When the Group’s share of losses in associates equal or exceed its interest in the associates, including any long-term interests that, in substance, form part of the Group’s net investment in the associates, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates. The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not co-terminous with those of the Group, the share of results is derived from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting polices are adopted for like transactions and events in similar circumstances. In the Company’s separate financial statements, investments in associates are stated at cost less any accumulated impairment losses. On disposal of such investments, the difference between net disposal proceeds and the carrying amount is included in the income statement. 127 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.4 General reinsurance, takaful and retakaful underwriting results The general reinsurance, takaful and retakaful underwriting results are determined after taking into account premiums/contributions, reinsurance/retakaful/retrotakaful costs, commissions, movements in premium/contribution liabilities, net claims incurred and wakalah fees. The general takaful and retakaful funds are maintained in accordance with the IFSA 2013 and consist of AFS reserves and the accumulated surplus/deficit in the funds. Any deficit will be made good by the shareholder’s fund via a loan or Qard. In general takaful and retakaful funds, the surplus distributable to the participants is determined after deducting retakaful/retrotakaful costs, movements in contribution liabilities, commissions, net claims incurred, wakalah fees, expenses, taxation and surplus administration charges. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts or prescribed by the Shariah Committee. (i)Premium and contribution recognition Gross premiums/contributions are recognised in a financial period in respect of risks assumed during the particular financial period. Gross premiums/contributions include premium/contribution income in relation to direct general business, inwards facultative business, inwards proportional treaty reinsurance/retakaful and inwards non-proportional treaty reinsurance/retakaful. Contributions from direct businesses are recognised as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah. Contributions are recognised in a financial period in respect of risks assumed during that particular financial period. Inwards facultative premiums/contributions are recognised in the financial period in respect of the facultative risk assumed during the particular financial period following individual risks’ inception dates. Inwards proportional treaty premiums/contributions are recognised on the basis of periodic advices received from cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured/covered at various inception dates of these risks and contractually accounted for under the terms of the proportional reinsurance/retakaful treaty. Premium/contribution income on inward non-proportional treaties, which cover losses occurring during a specified treaty period, are recognised based on the contractual premiums/contributions already established at the start of the treaty period under the terms and conditions of each contract. (ii)Premium and contribution liabilities Premium/contribution liabilities represent the future obligations on insurance/takaful contracts as represented by premiums/ contributions received for risks that have not yet expired. The movement in premium/contribution liabilities is released over the term of the insurance/takaful contracts and recognised as earned premium/contribution income. Premium/contribution liabilities are reported at the higher of the aggregate of the unearned premium reserves (“UPR”)/unearned contribution reserves (“UCR”) respectively for all lines of business or the best estimate value of the unexpired risk reserves (“URR”) and a provision of risk margin for adverse deviation (“PRAD”) calculated at 75% confidence level at the end of the financial year. 128 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.4 General reinsurance, takaful and retakaful underwriting results (cont’d) (ii)Premium and contribution liabilities (cont’d) (a)Unexpired risk reserves The URR is a prospective estimate of the expected future payments arising from future events insured or covered under policies or contracts in force and expected to be incurred as at the end of the financial year and also includes allowance for expenses, including overheads and costs of reinsurance/retakaful, expected to be incurred during the unexpired period in administering these policies or contracts and settling the relevant claims, and shall allow for expected future premium/contribution refunds. URR is estimated via an actuarial valuation performed by a qualified actuary, using a mathematical method of estimation similar to incurred but not reported (“IBNR”) claims. (b)Unearned premium and contribution reserves The UPR/UCR represent the portion of the net premiums/contributions of insurance/takaful contracts written that relate to the unexpired periods of the contracts at the end of the financial year. The UCR is calculated on net contribution income with a further deduction for wakalah fee expenses to reflect the wakalah business principle. The methods of computation of UPR/UCR are as follows: - For inwards proportional treaty reinsurance/retakaful business, UPR/UCR are computed on the 1/8th method commencing from the quarter corresponding to the reporting quarter of the treaty statement; - For inwards non-proportional treaty reinsurance/retakaful business, UPR/UCR is computed at 1/2 of the last quarter Minimum Deposit Premiums/Contributions received; - For inwards facultative reinsurance/retakaful business, UPR/UCR is computed on the 1/8th method commencing from the date of inception; - Time apportionment method for all classes of general takaful business within Malaysia except Marine and Aviation Cargo; and - 25% method for Marine and Aviation Cargo. (iii)Claim liabilities The amount of outstanding claims is the best estimate value of claim liabilities, which include provision for claims reported, claims incurred but not enough reserved (“IBNER”) and IBNR claims together with related expenses less recoveries to settle the present obligation as well as a PRAD calculated at 75% confidence level at the end of the financial year. Liabilities for outstanding claims are recognised when a claimable event occurs and/or as advised/notified. IBNER and IBNR claims are based on an actuarial valuation by a qualified actuary, using a mathematical method of estimation based on, amongst others, actual claims development patterns. 129 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.4 General reinsurance, takaful and retakaful underwriting results (cont’d) (iv)Liability adequacy test At each reporting date, the Group reviews all insurance/takaful contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the Group, contractual or otherwise, with respect to insurance/takaful contracts issued. In performing this review, the Group compares all contractual cash flows against the carrying value of insurance/takaful contract liabilities. Any deficiency is recognised in the income statement. The estimation of claim/benefit and premium/contribution liabilities performed at the reporting date is part of the liability adequacy tests performed by the Group. (v)Acquisition costs and commission expense The acquisition costs and commission expenses, which are costs directly incurred in acquiring and renewing reinsurance/takaful/ retakaful business, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. 2.5Family takaful and retakaful underwriting results The family takaful and retakaful underwriting results are determined after taking into account contributions, retakaful/retrotakaful costs, commissions, net benefits incurred and wakalah fees. The family takaful and retakaful funds are maintained in accordance with the requirements of the IFSA 2013 and consist of AFS reserves and the accumulated surplus/deficit in the funds. The family takaful and retakaful fund surplus/deficit is determined by an annual actuarial valuation of the funds. Any actuarial deficit in the family takaful and retakaful funds will be made good by the shareholder’s fund via a loan or Qard. In family takaful and retakaful funds, the surplus distributable to the participants is determined after deducting retakaful/retrotakaful costs, net benefits incurred, wakalah fees, expenses, taxation and surplus administration charges. The surplus may be distributed to the shareholder and participants in accordance with the terms and conditions of the respective contracts or prescribed by the Shariah Committee. (i)Contribution recognition Takaful contribution is recognised as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah. First year contribution is recognised on the assumption of risks and subsequent takaful contributions are recognised on due dates. Takaful contributions outstanding at the reporting date 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. Retakaful contributions are recognised in respect of risks assumed during a particular financial period. Inwards treaty retakaful contributions are recognised on the basis of statements received from ceding companies. 130 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.5Family takaful and retakaful underwriting results (cont’d) (ii)Contract liabilities Family takaful contract liabilities are recognised when contracts are in-force and contributions are charged. Liabilities of benefits payable of the family retakaful fund are recognised as advised by ceding companies. For a one year family contract or a one year extension to a family contract covering contingencies other than life or survival, the liability for such family takaful contracts comprises contribution and claim liabilities with an appropriate allowance for PRAD from the expected experience. The family takaful contract liabilities are derecognised when the contracts expire, are discharged or are cancelled. At each reporting date, an assessment is made of whether the recognised family takaful contract liabilities are adequate by performing a liability adequacy test as disclosed in Note 2.5(iv). Liabilities of family takaful business are determined in accordance with valuation guidelines for takaful operators issued by 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 contracts, discounted at the appropriate risk discount rate. This method is known as the gross contribution valuation method. In the case of a family contract 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. Zerorisation is applied at contract level and no contract is treated as an asset under the valuation method adopted. In respect of the family takaful and retakaful 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 contract reserves at a 75% confidence level is secured. In the case of investment-linked business, the fund value is treated as a liability. Surpluses arising from the difference between the value of the family fund and the liabilities, including accumulated surplus, will be distributed to the participants after deduction for surplus administration charges, as appropriate. If the difference between the value of the family fund and the liabilities results in a deficit, the deficit is made good via a Qard from the takaful subsidiary which will be repaid when the fund returns to a surplus position. (iii)Creation/cancellation of units of family takaful fund Amounts received for units created represent contributions paid by participants or unitholders as payment for new contracts or subsequent payments to increase the amount of the contracts. Creation/cancellation of units are recognised in the financial statements at the next valuation date, after the request to purchase/sell units are received from the participants or unitholders. (iv)Liability adequacy test At each reporting date, the Group reviews all insurance/takaful contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the Group, contractual or otherwise, with respect to insurance/takaful contracts issued. In performing this review, the Group compares all contractual cash flows against the carrying value of insurance/takaful contract liabilities. Any deficiency is recognised in the income statement. 131 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.6Shareholder’s fund of takaful and retakaful subsidiaries (i)Commission expenses Commission expenses, which are costs directly incurred in securing contributions on takaful contracts, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Commission expenses are recognised in the income statement at an agreed percentage for each contract underwritten. This is in accordance with the principles of Wakalah as approved by the Shariah Committee and as agreed between the participants and the takaful subsidiary. (ii)Expense liabilities The expense liabilities of the shareholder’s fund consist of expense liabilities of the general takaful and retakaful funds and the family takaful and retakaful funds which are based on estimations performed by qualified actuaries. The movement in expense liabilities is released over the term of the takaful contracts and recognised in the income statement. (a)Expense liabilities of general takaful and retakaful funds The expense liabilities of the general takaful and retakaful funds are reported at the higher of the aggregate of the reserves for unearned wakalah fees (“UWF”) and the best estimate value of the provision for unexpired expense reserves (“UER”) and a PRAD at a 75% confidence level at the end of the financial year. Unexpired expense reserves The UER is determined based on the expected future expenses payable by the shareholder’s fund in managing the general takaful and retakaful funds for the full contractual obligation of the takaful and retakaful contracts as at the end of the financial year, less any expected cash flows from future wakalah fee income, and any other income due to the shareholder’s fund that can be determined with reasonable certainty, calculated at 75% confidence level. The method used to value the UER is consistent with the method used in estimating the URR as disclosed in Note 2.4(ii)(a). Reserves for unearned wakalah fees The UWF represent the portion of wakalah fee income allocated for management expenses of general takaful and retakaful contracts that relate to the unexpired periods of contracts at the end of the financial year. The method used in computing UWF is consistent with the calculation of UCR under Note 2.4(ii)(b). (b)Expense liabilities of family retakaful and takaful fund The valuation of expense liabilities in relation to contracts of the family retakaful and takaful fund is conducted separately by the Appointed Actuaries. The method used to value expense liabilities is consistent with the method used to value retakaful liabilities of the corresponding family retakaful/takaful contracts. In valuing the expense liabilities, the present value of expected future expenses payable by the shareholder’s fund in managing the retakaful fund for the full contractual obligation of the retakaful/takaful contracts less any expected cash flows from future wakalah fee income, and any other income due to the shareholder’s fund that can be determined with reasonable certainty, are taken into consideration. The estimation includes a PRAD at a 75% confidence level. (c)Liability adequacy test 132 At each reporting date, the Group reviews the expense liabilities to ensure that the carrying amount is sufficient or adequate to cover the obligations of the Group for all managed takaful contracts. In performing this review, the Group considers all contractual cash flows and compares this against the carrying value of expense liabilities. Any deficiency is recognised in the income statement. notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.7Product classification Financial risk is the risk of a possible future change in one or more of a specified interest/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 non-financial variable that the variable is not specific to a party to the contract. Insurance/underwriting risk is the risk other than financial risk. An insurance/takaful contract is a contract under which the reinsurance, takaful and retakaful subsidiaries have accepted significant insurance/ underwriting risk from another party by agreeing to compensate the party if a specified uncertain future event adversely affects the party. As a general guideline, the reinsurance, takaful and retakaful subsidiaries determine whether significant insurance/underwriting risk has been accepted by comparing claims/benefits payable on the occurrence of an insured event with claims/benefits payable if the event had not occurred. Conversely, investment contracts are those contracts that transfer financial risk with no significant insurance/underwriting risk. Once a contract has been classified as an insurance/takaful contract, it remains an insurance/takaful contract for the remainder of its life-time, even if the insurance/underwriting risk reduces significantly during the period, unless all rights and obligations expire or are extinguished. 2.8Reinsurance/retakaful The reinsurance, takaful and retakaful subsidiaries cede insurance/underwriting risk in the normal course of business. Ceded reinsurance/ retakaful arrangements do not relieve the reinsurance, takaful and retakaful subsidiaries from their obligations to cedants/participants. For both ceded and assumed reinsurance/retakaful, premiums/contributions and claims/benefits are presented on a gross basis. Reinsurance/retakaful arrangements entered into by the reinsurance, takaful and retakaful subsidiaries that meet the classification requirements of insurance/takaful contracts as described in Note 2.7 are accounted for as noted below. Arrangements that do not meet these classification requirements are accounted for as financial assets. Reinsurance/retakaful assets represent amounts recoverable from reinsurers/retakaful operators for insurance/takaful contract liabilities which have yet to be settled at the reporting date. Amounts recoverable from reinsurers/retakaful operators are measured consistently with the amounts associated with the underlying insurance/takaful contracts and the terms of the relevant reinsurance/retakaful arrangement. At each reporting date, the reinsurance, takaful and retakaful subsidiaries assess whether objective evidence exists that reinsurance/ retakaful assets are impaired. Objective evidence of impairment for reinsurance/retakaful assets are similar to those noted for insurance/ takaful receivables. If any such evidence exists, 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 discounted at the financial asset’s original effective interest/profit rate. The impairment loss is recognised in the income statement. Reinsurance/retakaful assets are derecognised when the contractual rights expire or are extinguished or when the contract is transferred to another party. 2.9Property, plant and equipment and depreciation (i)Recognition and measurement All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, plant and equipment are stated at cost less accumulated depreciation and any impairment losses, whilst properties are stated at revalued amounts less subsequent accumulated depreciation and subsequent impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. In respect of freehold land and buildings, valuations are performed with sufficient frequency to ensure that the carrying amount does not differ materially from the fair value of the freehold land and buildings at the reporting date. 133 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.9Property, plant and equipment and depreciation (cont’d) (i)Recognition and measurement (cont’d) Any revaluation surplus is recognised in other comprehensive income and accumulated in equity under the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. On disposal of property, plant and equipment, the difference between net proceeds and the carrying amount is recognised in the income statement and the unutilised portion of the revaluation surplus on that item is taken directly to retained profits. (ii)Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred. (iii)Depreciation Freehold land has an unlimited useful life and therefore is not depreciated. Leased properties are depreciated over the shorter of the lease term and their useful lives. Work in progress is also not depreciated as it is 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, plant and equipment and depreciation of the asset begins. During the period in which the asset is not yet available for use, it is tested for impairment annually. Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over its estimated useful life, at the following annual rates: Buildings Computer equipment Office equipment Furniture and fittings Motor vehicles The residual values, useful lives and depreciation method are reviewed at the end of each financial year to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. 134 2% to 4% 10% to 33.3% 10% to 33.3% 10% to 15% 20% notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.10Investment properties Investment properties are properties which are held either to earn rental income and/or for capital appreciation. 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 the fair values of investment properties are recognised in the income statement in the year in which they arise. Investment properties are derecognised when either they have been disposed of or when the investment properties are permanently withdrawn from use and no future economic benefit is expected from the disposals. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year in which they arise. Transfers are made to or from investment property only when there is a change in use. For a transfer from owner-occupied property to investment property, any excess of the property’s carrying value over its fair value is accounted for as a revaluation surplus which is recognised in other comprehensive income. Any deficit between the property’s carrying value and its fair value is recognised as an impairment loss in the income statement. Subsequent to the date of change in use, the property is measured similar to other investment properties. Any revaluation surplus previously recognised in other comprehensive income is transferred to the income statement only upon disposal of the property. 2.11Intangible assets All intangible assets are initially recorded at cost. Subsequent to recognition, intangible assets are stated at cost less any accumulated amortisation and any impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. On disposal of intangible assets, the difference between net proceeds and the carrying amount is recognised in the income statement. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed annually at the end of each reporting period. Amortisation is charged to the income statement. Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if 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 in progress Software development in progress 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 in which the asset is not yet available for use, it is tested for impairment annually. 135 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.11Intangible assets (cont’d) (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 annually at the end of each financial year. 2.12Financial assets (i) Initial recognition and measurement Financial assets are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the instrument. A financial asset is recognised initially, at its fair value plus, in the case of a financial asset not at FVTPL, 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 FVTPL. 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 Group and 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 Group and the Company in categorising its financial assets: (a)Financial assets at FVTPL 136 Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Any gains or losses arising from changes in fair value are recognised in the income statement. Net gains or net losses on financial assets at FVTPL do not include exchange differences, interest and dividend income. Exchange differences and interest and dividend income on financial assets at FVTPL are recognised in the appropriate categories of income and expenses in the income statement. notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.12Financial assets (cont’d) (ii)Classification and subsequent measurement (cont’d) (b)HTM investments Financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the Group and the Company have the positive intention and ability to hold the investments to maturity. Subsequent to initial recognition, HTM investments are measured at amortised cost using the effective interest/yield method less any accumulated impairment losses. Gains and losses are recognised in the income statement when the HTM investments are derecognised or impaired, and through the amortisation process. (c)Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest/yield method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, and through the amortisation process. (d)AFS financial assets AFS financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. After initial recognition, AFS financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest/profit calculated using the effective interest/yield method are recognised in the income statement. The cumulative gain or loss previously recognised is reclassified from other comprehensive income to the income statement as a reclassification adjustment when the financial asset is derecognised. Interest/profit income calculated using the effective interest/yield method is recognised in the income statement. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less accumulated impairment losses. (iii)Derecognition A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired or the Group and the Company have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in the income statement. (iv)Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 137 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.13Fair value measurement The Group and the Company measure financial instruments, such as, financial assets at FVTPL, and non-financial assets such as investment properties, at fair value at each reporting date. The fair values of financial instruments measured at amortised cost are disclosed in Notes 19 and 40. 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 by the Group and 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 non-financial 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 Group and the Company use 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. 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; and 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 Group and the Company determine 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 hierarchy of financial instruments is disclosed in Note 40. 138 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.14Impairment of assets (i)Financial assets The Group and the Company assess at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. (a)Financial assets carried at amortised cost The Group and the Company first assess 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 the end of each reporting period. 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 interest rate/yield. The carrying amount of the asset is reduced and the loss is recorded in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. (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 losses previously recognised in the income statement, is transferred from equity to the income statement. Impairment losses on AFS equity investments are not reversed in the income statement in subsequent periods. Increases in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For AFS debt investments, impairment losses are subsequently reversed in the income statement 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 income statement. 139 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.14Impairment of assets (cont’d) (ii)Non-financial assets The carrying amounts of non-financial assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of the other assets in the unit (or groups of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the losses have decreased or no longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statement in the period in which the reversals are recognised. 2.15Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary. Immediately before classification as held for sale, the non-current assets are measured in accordance with applicable MFRSs. On initial classification as held for sale, non-current assets are then measured at the lower of its carrying amount and fair value less costs to sell. Any difference is included in the income statement. Non-current assets classified as held for sale are not depreciated. 2.16 Measurement and impairment of Qard Any deficits in the takaful/retakaful funds are made good via a loan or Qard, granted by the shareholder’s funds to the takaful/retakaful funds. The Qard is stated at cost less any impairment losses in the shareholder’s funds. In the takaful/retakaful funds, the Qard is stated at cost. The Qard shall be repaid from future surpluses of the takaful/retakaful funds. The Qard is tested for impairment on an annual basis via an assessment of the estimated surpluses or cash flows from the takaful/retakaful funds to determine whether there is any 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, is recognised in the income statement. Impairment losses are subsequently reversed in the income statement if objective evidence exists that the Qard is no longer impaired. 140 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.17Share capital and dividend expenses An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. 2.18Cash 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 statement of cash flows has been prepared using the indirect method. 2.19Insurance and takaful receivables Insurance/takaful receivables are amounts receivable under the contractual terms of an insurance/takaful contract. On initial recognition, insurance/takaful receivables are measured at fair value based on the consideration receivable. Subsequent to initial recognition, insurance/ takaful receivables are measured at amortised cost, using the effective interest/yield method. Insurance/takaful receivables are assessed at each reporting date for objective evidence of impairment. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the insurance/takaful receivable’s original effective interest/yield rate. The impairment loss is recognised in the income statement. The basis for recognition of such impairment loss is as described in Note 2.14(i)(a). Insurance/takaful receivables are derecognised when the rights to receive cash flows from them have expired or when they have been transferred and the Group has also substantially transferred all risks and rewards of ownership. 2.20Borrowings All borrowings are classified as other financial liabilities and are recognised initially at fair value plus directly attributable transaction costs. The profits payable are recognised as finance costs in the income statement in the period in which they are incurred. After initial recognition, profit-bearing borrowings are subsequently measured at amortised cost using the effective profit rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective profit rate method. 2.21Leases (i)Classification A lease is recognised as a finance lease if it substantially transfers to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not substantially transfer all risks and rewards are classified as operating leases, with the following exceptions: (a) Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a case-by-case basis and, if classified as investment property, is accounted for as if held under a finance lease, as disclosed in Note 2.10; and (b) Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. 141 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.21Leases (cont’d) (ii)Finance leases - the Group as lessee Assets acquired by way of hire purchase or finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. The corresponding liability is included in the statement of financial position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest/profit rate implicit in the lease, when it is impracticable to determine; otherwise, the Group and the Company’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2.9(iii). (iii)Operating leases - the Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. In the case of a lease of land and buildings, the minimum lease payments or the upfront payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values of leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payments represent prepaid lease payments and are amortised on a straight-line basis over the lease term. (iv)Operating leases - the Group as lessor Assets leased out under operating leases are presented in the statement of financial position according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease, as disclosed in Note 2.27(ii). Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. 2.22Financial 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 Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. 142 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.22Financial liabilities (cont’d) (i)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 Group and 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 the income statement. Net gains or losses on derivatives include exchange differences. The Group and the Company have not designated any financial liabilities as at FVTPL nor were there any financial liabilities held for trading during and at the end of the financial year. (ii)Other financial liabilities The Group and the Company’s other financial liabilities include borrowings, insurance/takaful payables and other payables. Insurance/takaful and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest/yield method. For other financial liabilities, gains and losses are recognised in the income statement when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. 2.23Provisions Provisions are recognised when the Group 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. 2.24Income tax Income tax on profit or loss 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 measured using the tax rates that have been enacted at the end of the financial year. Deferred tax is provided for, using the liability method, on temporary differences at the end of the financial year between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. 143 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.24Income tax (cont’d) Deferred tax is measured 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 end of the financial year. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in other comprehensive income, in which case the deferred tax is also charged or credited directly in other comprehensive income. 2.25Employee 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 Group. 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 non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined contribution plan As required by law, the Group makes contributions to the national pension scheme, the Employees Provident Fund (“EPF”). The Group 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 income statement as incurred. (iii)Employees’ terminal benefits As required by law in the United Arab Emirates, the Group makes provision for terminal benefits for employees of its Dubai subsidiary, based on the employees’ salaries and number of years of service. The terminal benefits are paid to the employees on termination or completion of their terms of employment. 2.26Foreign currencies (i)Functional and presentation currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency. (ii)Foreign currency transactions In preparing the financial statements, transactions in currencies other than the functional currency (“foreign currencies”) are recorded in the functional currency using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised intially in other comprehensive income and accumulated under the foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to the income statement of the Group on disposal of the foreign operation. 144 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.26Foreign currencies (cont’d) (ii)Foreign currency transactions (cont’d) Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. Exchange differences arising from such non-monetary items are also recognised directly in other comprehensive income. (iii)Foreign operations The results and financial position of foreign operations that have a functional currency different from the presentation currency of the consolidated financial statements are translated into RM as follows: (a) Assets and liabilities for each statement of financial position presented are translated at the closing rate prevailing at the reporting date; (b) Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; (c) All resulting exchange differences are taken to the foreign currency translation reserve within equity; and (d) The results of an associate, Labuan Reinsurance (L) Limited, are translated at the closing rate prevailing at the reporting date with respect to the carrying amount of the investment in associate, and at the exchange rate at the date of the transactions with respect to the share of profits or losses. All resulting translation differences are included in the foreign exchange translation reserve in shareholders’ equity. 2.27Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits flow to the Group and the Company and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. (i) Interest and profit income are recognised using the effective interest/yield method. (ii) Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis. (iii) Dividend income is recognised when the right to receive payment is established. (iv) Management fees are recognised when services are rendered. (v) Wakalah fees are recognised as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah. (vi) Premiums/contributions are recognised in accordance with the policies stated in Note 2.4(i) and 2.5(i). 2.28Zakat Zakat represents an obligatory amount payable by the takaful and retakaful subsidiaries to comply with the principles of Shariah. Zakat is computed using the “net-asset” method at a rate of 2.5%, as approved by the Shariah Committee. 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 quantum above the obligatory amount payable. 145 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.29Changes in Accounting Policies The accounting policies adopted by the Group and the Company are consistent with those of the previous financial year except for the following: Adoption of Amendments to MFRSs and Issues Committee (“IC”) Interpretation At the beginning of the current financial year, the Group and the Company had adopted all Amendments to MFRSs and IC Interpretation mandatory for annual periods beginning on or after 1 January 2014 as follows: 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 Effective for annual periods beginning on or after 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 The adoption of the above Amendments to MFRSs and IC Interpretation did not have any significant effect on the financial statements of the Group and the Company. 2.30Standards issued but not yet effective The standards and amendments to standards that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements are disclosed below. The Group and the Company intend to adopt these standards and amendments to standards, if applicable, when they become effective: Description Amendments to MFRS 119 Defined Benefit Plans: Employee Contributions Annual Improvements to MFRS 2010 - 2012 Cycle Annual Improvements to MFRS 2011 - 2013 Cycle MFRS 14 Regulatory Deferral Accounts Amendments to MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to MFRS 10, MFRS 12 and MFRS 128 Investment Entities: Applying the Consolidation Exception Amendments to MFRS 11 Accounting for Acquisitions of Interests in Joint Operations Amendments to MFRS 101 Disclosure Initiative Amendments to MFRS 116 and MFRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to MFRS 116 and MFRS 141 Agriculture: Bearer Plants Amendments to MFRS 127 Equity Method in Separate Financial Statements Annual Improvements to MFRS 2012 - 2014 Cycle MFRS 15 Revenue from Contracts with Customers MFRS 9 Financial Instruments 146 Effective for annual periods beginning on or after 1 July 2014 1 July 2014 1 July 2014 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2017 1 January 2018 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 2.Significant accounting policies (cont’d) 2.30Standards issued but not yet effective (cont’d) The Directors expect that the adoption of the above standards and amendments to standards are not expected to have material impact on the financial statements in the period of initial application except as discussed below: MFRS 9 Financial Instruments (“MFRS 9”) In November 2014, MASB issued the final version of MFRS 9 which reflects all phases of the financial instruments project and replaces MFRS 139 and all previous versions of MFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The adoption of MFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities. The Directors are in the process of assessing the financial implications for adopting the new standard. 3.Significant accounting estimates and judgements The preparation of the Group and the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. 3.1Critical judgement made in applying accounting policies The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements. Judgements are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Classification between investment properties and property, plant and equipment The Group has developed certain criteria based on MFRS 140 Investment Property in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals and/or for capital appreciation. 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 Group 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. Impairment of AFS financial assets The Company reviews its debt securities classified as AFS financial assets at each reporting date to assess whether they are impaired. The Company also records impairment charges on AFS equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Company evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost. 147 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 3.Significant accounting estimates and judgements (cont’d) 3.2 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. (a) Depreciation and amortisation Depreciation and amortisation are based on management’s estimates of the future estimated average useful lives and residual values of property, plant and equipment and intangible assets respectively. 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 and correspondingly, may result in future changes in depreciation or amortisation expenses. Accordingly, at the end of each reporting period, the residual values and estimated useful lives of property, plant and equipment and intangible assets are assessed to determine that they continue to be consistent as disclosed in Notes 2.9(iii) and 2.11, respectively. As at the reporting date, management has determined that the estimated useful lives and residual values of property, plant and equipment and intangible assets of the Group and of the Company remain consistent. (b) General reinsurance, takaful and retakaful business The principal uncertainty in the general reinsurance, takaful and retakaful business arises from the technical provisions which include the estimation of premium/contribution and claim liabilities. Premium/contribution liabilities are recorded as the higher of UPR/UCR and URR while claim liabilities mainly comprise provision for claims reported and IBNER and IBNR claims. Generally, claim liabilities are determined based upon previous claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past experience with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. It is certain that actual future premium/contribution and claim liabilities will not exactly develop as projected and may vary from the projection. The estimates of premium/contribution 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 premium/contribution and claim liabilities may vary from the initial estimates. At each reporting date, the estimates of premium/contribution and claim liabilities 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. (c)Family takaful and retakaful business The estimation of the ultimate liability arising from claims made under the family takaful and retakaful businesses is a critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimation of the liabilities that the family takaful and retakaful funds will ultimately be required to pay as claims/benefits. For family takaful and retakaful contracts, estimates are made for future deaths, disabilities, maturities, investment returns, voluntary terminations and expenses in accordance with contractual and regulatory requirements. The family takaful and retakaful funds base the estimate of expected number of deaths on statutory mortality tables, adjusted where appropriate to reflect the funds’ 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. 148 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 3.Significant accounting estimates and judgements (cont’d) 3.2 Key sources of estimation uncertainty (cont’d) (c)Family takaful and retakaful business (cont’d) For those contracts 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 the projected ultimate liabilities of the family takaful and retakaful funds. At each reporting date, these estimates are re-assessed for adequacy and changes will be reflected as adjustments to the liabilities by an appointed actuary. The appoinment of the actuary is approved by BNM. (d)Impairment of non-financial assets Assets are tested for impairment when indications of potential impairment exist. Indicators of impairment which could trigger an impairment review include evidence of obsolescence or physical damage, significant fall in market values, significant underperformance relative to historical or projected future operating results, significant changes in the use of assets or the strategy of the business and significant adverse industry or economic changes. Recoverable amounts of assets are based on management’s estimates and assumptions of the net realisable value, cash flows arising from the future operating performance and revenue generating capacity of the assets and CGUs, and future market conditions. Changes in circumstances may lead to changes in estimates and assumptions, and result in changes to the recoverable amounts of assets and impairment losses needed. As at the reporting date, management has determined that recognised cumulative impairment losses as at the reporting date are appropriate. (e)Impairment of unquoted equity investments The Group and the Company follows the guidance of the applicable MFRS in determining whether there is a decline other than temporary in the fair value of its investment in unquoted corporations. This determination requires significant judgement. In making this judgement, the Group and the Company evaluate the quantitative and qualitative factors affecting the market position of the investee including the regulatory support it receives and its longer term business outlook and financial standing. Appropriate considerations are given to the investee’s financial gestation period, financial projections, business prospects and the proprietary technology involved. It is also recognised that an initial decline in fair value of investments in new start-up investee companies, which is deemed temporary, may arise due to development and operational losses in the initial years. Based on an assessment performed at the reporting date, the Board of Directors and Management of the Group and the Company are of the opinion that there is no further indication of impairment of the Group and the Company’s investment in unquoted corporations at this juncture. (f)Impairment of insurance/takaful receivables and reinsurance/retakaful assets The Group reviews its insurance/takaful and reinsurance/retakaful assets on a regular basis to assess whether impairment losses should be recognised in the income statement. 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. These estimates are revisited by management on a frequent basis, at least once a year, to determine if certain assumptions continue to be reasonable. As at the reporting date, the impairment losses recognised on insurance/takaful receivables and reinsurance/retakaful assets reflect the expected recoverable amounts of these assets. 149 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 3.Significant accounting estimates and judgements (cont’d) 3.2 Key sources of estimation uncertainty (cont’d) (g) Deferred tax Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and unused tax 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 the 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 in the interpretation and 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 statements of financial position and the amount of unrecognised tax losses and unrecognised temporary differences. The judgements and assumptions used in the estimation of deferred tax liabilities/assets are re-assessed at least once a year to determine that they continue to be appropriate. The total carrying value of recognised temporary differences of the Group and unrecognised temporary deductible differences are disclosed in Note 16 to the financial statements. As at the reporting date, recognised deferred tax assets represent a fair estimate of the Group’s deductible temporary differences and deferred tax liabilities reflect a fair estimate of the Group’s taxable temporary differences. 150 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 4.Net earned premiums/contributions Group 2015 RM’000 (a) Gross earned premiums/contributions Insurance and takaful contracts Change in premium/contribution liabilities (b)Premiums/contributions ceded to reinsurers and retakaful operators Insurance and takaful contracts Change in premium/contribution liabilities Net earned premiums/contributions 2014 RM’000 2,180,001 11,596 2,203,613 (20,651) 2,191,597 2,182,962 (255,262) 10,996 (199,598) 74 (244,266) (199,524) 1,947,331 1,983,438 5.Investment income Group 2015 RM’000 Financial assets at FVTPL Dividend income: - quoted shares in Malaysia - unit trust funds HTM investments Interest/profit income AFS financial assets Interest/profit income Dividend income: - quoted shares in Malaysia - unquoted shares in Malaysia - unit and real estate investment trusts in Malaysia Loans and receivables Interest/profit income Dividend income from institutional trust funds Dividend income from subsidiaries Rental income Net amortisation of premiums on investments Investment expenses 2014 RM’000 Company 2015 RM’000 2014 RM’000 176 4,410 171 4,256 - - 28,507 29,023 - - 93,590 65,660 - - 9,554 82 - 5,578 156 6 - - 62,492 900 4,888 (3,579) (1,513) 68,066 1,411 5,436 (3,315) (2,213) 199,507 174,235 1,164 61,000 - 789 105,000 (2) 62,164 105,787 151 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 6.Net realised gains/(losses) Group 2015 RM’000 Property, plant and equipment Net realised (losses)/gains Financial assets at FVTPL Net realised (losses)/gains: - quoted shares in Malaysia - Shariah approved unit trust funds - Structured products HTM investments Realised gains AFS financial assets Quoted shares in Malaysia Quoted shares outside Malaysia Unquoted corporate debt securities Shariah approved unit trust funds Government investment issues Unquoted Islamic private debt securities Net realised gains/(losses) Non-current assets held for sale Realised gains 2014 RM’000 Company 2015 RM’000 (81) 149 (471) 2,854 - 163 6,595 519 - - 4 - - 11,636 758 367 865 13,626 - 53 - - 9,733 21,056 (85) 2014 RM’000 Company 2015 RM’000 7,643 (651) (225) 611 7,378 (85) 2014 RM’000 - (763) (763) (763) 7.Net fair value (losses)/gains Group 2015 RM’000 Fair value gain on investment property (Note 14) Net fair value (losses)/gains on financial assets at FVTPL Reversal of impairment losses/(impairment losses) on HTM investments Reversal of impairment losses on properties (Impairment losses)/reversal of impairment losses on AFS financial assets 152 200 (4,266) - - (139) 477 - - (2,043) (1,229) - 794 (5,839) 3,796 - 794 54 216 700 3,987 2014 RM’000 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 8.Fee and commission income/(expense) Group 2015 RM’000 Fee and commission income Management fees Commission income Fee and commission expense Commission expense Brokerage 9. 2014 RM’000 Company 2015 RM’000 2014 RM’000 4,449 31,288 3,530 21,044 33,868 - 31,072 - 35,737 24,574 33,868 31,072 (434,627) (772) (449,489) (1,735) (435,399) (451,224) Management expenses Group 2015 RM’000 Staff costs: Salaries, bonus and other related costs Directors’ remuneration (Note 10) Shariah Committee members’ remuneration Pension costs - EPF Social security costs Retirement benefits Short term accumulating compensated absences Auditors’ remuneration: Statutory auditors of the Group - statutory audit -audit-related - other services Component auditors of a foreign subsidiary Depreciation of property, plant and equipment Amortisation of intangible assets Property, plant and equipment written off Share of acquisition costs on quota share retakaful Agency expenses Marketing and promotional costs Electronic data processing costs Office rental Professional and legal fees Contributions and donations Other management expenses 2014 RM’000 Company 2015 RM’000 2014 RM’000 88,368 9,181 249 12,076 489 577 255 81,540 8,407 256 11,178 462 714 142 22,317 4,179 2,983 110 317 16 22,145 3,480 2,804 111 120 15 111,195 102,699 29,922 28,675 811 65 115 30 8,310 3,950 623 945 6,360 15,519 17,748 4,188 6,679 610 32,407 815 59 158 29 10,726 3,352 589 6,209 14,267 7,550 3,937 8,312 820 35,889 73 5 9 441 75 770 1,623 971 2,977 73 5 9 955 552 855 1,237 331 20 3,186 209,555 195,411 36,866 35,898 153 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 10.directors’ remuneration Group 2015 Number of non-executive directors 12 Group 2015 RM’000 Executive directors: Salaries and bonus Pension costs - EPF Social security costs Allowances Benefits-in-kind Others 2014 12 2014 RM’000 Company 2015 7 Company 2015 RM’000 2014 7 2014 RM’000 3,805 623 1 255 184 67 3,854 655 1 12 108 - 1,648 280 1 255 57 - 1,485 253 1 12 60 - 4,935 4,630 2,241 1,811 2,729 677 24 2,421 560 31 804 167 24 700 125 31 3,430 3,012 995 856 810 130 1 83 55 726 118 1 59 72 810 130 1 83 55 726 118 1 59 72 1,079 976 1,079 976 Total directors’ remuneration 9,444 8,618 4,315 3,643 Total directors’ remuneration excluding benefits-in-kind 9,181 8,407 4,179 3,480 Non-executive directors: Fees Meeting allowances Benefits-in-kind Director of a subsidiary*: Salaries and bonus Pension costs - EPF Social security costs Other allowances Benefits-in-kind * Director of a subsidiary refers to management personnel who is employed by the holding company. 154 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 10.directors’ remuneration (cont’d) The number of non-executive directors of the Company whose total remuneration, borne by the Company and Group, during the financial year fell within the following bands is analysed below. Number of Directors Group 2015 11. 2014 Company 2015 2014 Executive director: RM1,800,001 to RM1,850,000 RM2,200,001 to RM2,250,000 1 1 - 1 1 - Non-executive directors: RM100,001 to RM150,000 RM150,001 to RM200,000 RM200,001 to RM250,000 RM250,001 to RM300,000 RM300,001 to RM350,000 RM350,001 to RM400,000 RM400,001 to RM450,000 RM450,001 to RM500,000 3 1 1 2 3 1 1 1 1 - 5 2 - 7 - other operating expenses Group 2015 RM’000 Loss on foreign exchange Impairment losses on insurance/takaful receivables Impairment loss on other receivables Impairment loss on investment in subsidiary Sundry expenses 2014 RM’000 Company 2015 RM’000 2014 RM’000 6,947 32 701 86 425 4,643 3 30,327 - 3 32,469 2 7,680 5,154 30,330 32,474 155 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 12.Taxation Group 2015 RM’000 Malaysian income tax: Tax expense for the year (Over)/under provision in prior years(i) Deferred tax: Relating to origination and reversal of temporary differences (Note 16) 2014 RM’000 Company 2015 RM’000 2014 RM’000 54,074 (10,180) 64,652 2,565 - 22,919 2,729 43,894 67,217 - 25,648 6,703 (8,875) (810) 50,597 58,342 (810) (32) 25,616 Domestic income tax for general business and shareholders’ fund is calculated at the Malaysian statutory tax rate of 25% (2014: 25%) of the estimated assessable profit for the year. Income tax on the Group’s family takaful business is calculated at a preferential tax rate of 8% (2014: 8%). Income tax on the Group’s offshore insurance/takaful business is calculated at a tax rate of 5% (2014: 5%) of the estimated assessable profit on the Group’s offshore insurance/takaful business for the year. A reconciliation of income tax expenses applicable to profit before zakat and tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows: Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 Profit before zakat and tax 190,705 214,728 10,729 50,655 Taxation at Malaysian statutory tax rate of 25% Effects of different tax rate in respect of offshore insurance Income not subject to tax(ii) Expenses not deductible for tax purposes(ii) Unutilised current year business loss carried forward Deferred tax assets not recognised (Over)/under provision of tax in prior year(i) Share of results of associates 47,676 (3,541) (41,300) 55,950 2,929 103 (10,180) (1,040) 53,682 (3,392) (10,052) 14,990 407 751 2,565 (609) 2,682 (16,060) 12,465 103 - 12,664 (2,282) 11,679 826 2,729 - Tax expense for the year 50,597 58,342 (810) 2014 RM’000 25,616 (i) The tax expense from YA 2010 to YA 2014 of the takaful subsidiary, which represents the open tax periods on which the subsidiary is entitled to claim tax refunds under the Income Tax Act 1967, had been revised and the resultant changes had been recognised as an overprovision of tax in the current financial year. The details are as described in Note 39. (ii) Following the enactment of Finance (No. 2) Act 2014, effective from YA 2015, wakalah fee income received by the shareholder’s fund of the takaful subsidiary from its family takaful fund is no longer subject to tax and accordingly, the commission and management expenses incurred by the shareholder’s fund in connection with the management of the family takaful fund is also not deductible for tax purposes. Therefore, the deferred tax assets previously recognised for the expenses liability and management expenses in connection with the family fakaful fund were derecognised in the financial year. 156 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 12.Taxation (cont’d) Tax borne by participants Group 2015 RM’000 2014 RM’000 Current year’s provision (Over)/under provision of tax expense in prior years Deferred tax relating to origination and reversal of temporary differences 13,533 (1,313) 1,045 13,696 422 (126) Tax expense for the year 13,265 13,992 Capital work-inprogress RM’000 Total RM’000 13.Property, plant and equipment Group Freehold land RM’000 Buildings RM’000 Computer equipment RM’000 Furniture, fittings and office equipment RM’000 Motor vehicles RM’000 Cost At 1 April 2013 Additions Disposals Reclassification Revaluation surplus Elimination of accumulated depreciation on revaluation Transfer to non-current assets held for sale (Note 22) 30,660 1,600 196,971 1,923 (284) 90 3,149 - (2,355) - - - - (2,355) - (1,696) - - - - (1,696) At 31 March 2014 Additions Disposals Write-offs Reclassification Revaluation surplus Elimination of accumulated depreciation on revaluation Adjustments Transfer to intangible assets 32,260 1,740 197,798 8 (623) 6,292 13,369 304 (94) (890) - - (4,718) - (562) At 31 March 2015 34,000 198,757 12,555 1,007 (193) - 12,127 36,065 2,688 (54) - 38,699 1,929 (502) (1,627) 303 - 3,208 446 (409) - 3,245 100 (670) - - - 38,802 2,675 488 374 (90) - 279,947 6,438 (940) 4,749 772 72 (303) - 286,143 2,413 (1,266) (3,140) 8,032 (247) - (4,718) (247) (562) 294 286,655 157 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 13.Property, plant and equipment (cont’d) Group (cont’d) Freehold land RM’000 Buildings RM’000 Computer equipment RM’000 Furniture, fittings and office equipment RM’000 Motor vehicles RM’000 Capital work-inprogress RM’000 Total RM’000 Accumulated depreciation and impairment loss At 1 April 2013 Depreciation charge for the year Disposals Elimination of accumulated depreciation on revaluation Reversal of impairment losses during the year - 4,311 5,030 (16) - (2,355) - - - (477) - - At 31 March 2014 Depreciation charge for the year Disposals Write-offs Elimination of accumulated depreciation on revaluation Reversal of impairment losses during the year At 31 March 2015 - At 31 March 2015 At 31 March 2014 11,553 979 (192) 12,340 538 (96) (890) 24,461 4,204 (53) 28,612 3,086 (501) (1,627) 1,657 513 (408) - 41,982 10,726 (669) - - (2,355) - - (477) - 49,207 8,310 (906) (2,517) - 6,493 4,255 - 1,762 431 (309) - - (4,718) - - - - (4,718) - (216) - - - - (216) 5,814 11,892 29,570 1,884 - 49,160 34,000 192,943 235 9,232 791 294 237,495 32,260 191,305 1,029 10,087 1,483 772 236,936 Net carrying amount 158 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 13.Property, plant and equipment (cont’d) Revaluation of freehold land and buildings Freehold land and buildings in Malaysia have been revalued based on valuations performed by an accredited independent valuer having an appropriate recognised professional qualification. The valuations are based on the income approach. The income approach 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. Freehold buildings outside Malaysia have been revalued based on their value-in-use and a discount rate of 7% (2014: 7%) is applied, being the prevailing rental yield in the country where the buildings are located. During the financial year, the impairment losses on two of the buildings outside Malaysia were being reversed. The recoverable amount of these two buildings is RM2.963 million (2014: RM2.442 million). If the freehold land and buildings were measured using the cost model, the carrying amounts would be as follows: Freehold land RM’000 Buildings RM’000 Total RM’000 Cost At 1 April 2013 Additions Disposals Reclassification from capital work-in-progress Transfer to non-current asset held for sale 15,886 - 175,246 1,923 (230) 90 (1,696) 191,132 1,923 (230) 90 (1,696) At 31 March 2014 Additions Write-offs 15,886 - 175,333 8 (623) 191,219 8 (623) At 31 March 2015 15,886 174,718 190,604 Accumulated depreciation At 1 April 2013 Depreciation charge for the year Disposals Reversal of impairment losses during the year - 26,589 4,554 (16) (477) 26,589 4,554 (16) (477) At 31 March 2014 Depreciation charge for the year Reversal of impairment losses during the year - 30,650 4,265 (216) 30,650 4,265 (216) At 31 March 2015 - 34,699 34,699 At 31 March 2015 15,886 140,019 155,905 At 31 March 2014 15,886 144,683 160,569 Net carrying amount 159 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 13.Property, plant and equipment (cont’d) Company Computer equipment RM’000 Furniture, fittings and office equipment RM’000 Motor vehicles RM’000 Total RM’000 Cost At 1 April 2013 Additions Disposals 4,253 170 (103) 2,403 1,189 - 1,808 - 8,464 1,359 (103) At 31 March 2014 Additions Disposals 4,320 79 - 3,592 1,010 (149) 1,808 5 (596) 9,720 1,094 (745) At 31 March 2015 4,399 4,453 1,217 At 1 April 2013 Charge for the year Disposals 3,765 442 (103) 1,678 243 - 815 270 - 6,258 955 (103) At 31 March 2014 Charge for the year Disposals 4,104 193 - 1,921 71 (148) 1,085 177 (241) 7,110 441 (389) At 31 March 2015 4,297 1,844 1,021 7,162 At 31 March 2015 102 2,609 196 2,907 At 31 March 2014 216 1,671 723 2,610 10,069 Accumulated depreciation Net carrying amount 14.Investment property Group 2015 RM’000 2014 RM’000 At beginning of the year Fair value gain (Note 7) 6,900 200 6,200 700 At end of the year 7,100 6,900 160 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 14.Investment property (cont’d) The rental income and operating expenses in relation to the investment properties are as disclosed below: Group 2015 RM’000 Rental Income Operating Expenses 15. 2014 RM’000 300 (32) 257 (32) 268 225 Computer software and licences RM’000 Total RM’000 8,689 3,798 (714) 29,291 884 714 37,980 4,682 - 11,773 2,808 (2) 562 (7,049) 30,889 695 7,049 42,662 3,503 (2) 562 - 8,092 38,633 46,725 At 1 April 2013 Amortisation for the year - 24,791 3,352 24,791 3,352 At 31 March 2014 Amortisation for the year - 28,143 3,950 28,143 3,950 At 31 March 2015 - 32,093 32,093 At 31 March 2015 8,092 6,540 14,632 At 31 March 2014 11,773 2,746 14,519 intangible assets Group Software development in progress RM’000 Cost At 1 April 2013 Additions Reclassification At 31 March 2014 Additions Disposal Transfer from property, plant and equipment Reclassification At 31 March 2015 Accumulated amortisation Net carrying amount 161 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 15. FINANCIAL STATEMENTS intangible assets (cont’d) Software development in progress RM’000 Computer software and licences RM’000 Total RM’000 At 1 April 2013 Additions 1,837 210 6,584 600 8,421 810 At 31 March 2014 Additions 2,047 772 7,184 603 9,231 1,375 At 31 March 2015 2,819 7,787 10,606 At 1 April 2013 Amortisation for the year - 6,182 552 6,182 552 At 31 March 2014 Amortisation for the year - 6,734 75 6,734 75 At 31 March 2015 - 6,809 6,809 At 31 March 2015 2,819 978 3,797 At 31 March 2014 2,047 450 2,497 Company Cost Accumulated amortisation Net carrying amount 16. Deferred taxation Group 2015 RM’000 At beginning of year Recognised in: Income statement (Note 12) Participants’ fund Other comprehensive income At end of year These comprise the following: - Deferred tax assets - Deferred tax liabilities 162 2014 RM’000 15,882 (1,624) (6,703) (3,744) (1,627) Company 2015 RM’000 2014 RM’000 1,503 1,469 8,875 3,236 5,395 810 - 32 2 3,808 15,882 2,313 1,503 11,484 (7,676) 24,180 (8,298) 2,313 - 1,902 (399) 3,808 15,882 2,313 1,503 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 16. Deferred taxation (cont’d) The components and movements of deferred tax assets/(liabilities) during the financial year are as follows: Group Provisions and payables RM’000 Unabsorbed/ accelerated Impairment capital losses on allowances receivables RM’000 RM’000 Premium/ Impairment Expense losses on liabilities investments RM’000 RM’000 AFS Revaluation financial of land and assets buildings RM’000 RM’000 Others RM’000 Total RM’000 2,912 15,882 2015 At 1 April 2014 Recognised in: Income statement (Note 12) Participants’ fund Other comprehensive income 3,211 (1,034) (2,106) - 1,559 - 1,175 (74) 9,814 (5,580) (1,513) 1,544 355 - 5,524 (2,513) (186) (931) 542 (6,703) (3,744) - - - - - (751) - 1,105 525 1,101 2,721 1,899 2,135 (8,201) 2,523 3,808 At 1 April 2013 Recognised in: Income statement (Note 12) Participants’ fund Other comprehensive income 2,190 (816) 846 2,638 1,376 (3,122) (7,123) 2,387 (1,624) 1,021 - (218) - 329 7,176 - 168 - 3,363 (253) 728 (203) 8,875 3,236 - - - 5,283 112 At 31 March 2014 3,211 1,175 9,814 1,544 5,524 Unabsorbed Accelerated capital capital allowances allowances RM’000 RM’000 At 31 March 2015 (876) (7,264) (1,627) 2014 - Company (1,034) - 5,395 (7,264) 2,912 15,882 Loans and receivables RM’000 AFS financial assets RM’000 Others RM’000 Total RM’000 1,483 1,503 2015 At 1 April 2014 Recognised in: Income statement (Note 12) 415 (399) 4 - 272 539 - - At 31 March 2015 687 140 4 - 1,482 2,313 405 (401) 4 (2) 1,463 1,469 - 2 20 - 32 2 4 - 1,483 1,503 (1) 810 2014 At 1 April 2013 Recognised in: Income statement (Note 12) Other comprehensive income At 31 March 2014 10 415 2 (399) 163 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 16. Deferred taxation (cont’d) Deferred tax assets have not been recognised in respect of the following items of the Company and its retakaful subsidiary as the probability of recognition cannot be determined with certainty given the lack of assessable profits in current and prior years. Group 2015 RM’000 Unutilised business losses Other temporary differences: - net contribution and expense liabilities - net accretion of discounts - financial assets -others 21,040 1,315 (21) 157 125 22,616 2014 RM’000 Company 2015 RM’000 2014 RM’000 18,008 6,423 6,320 363 376 90 93 - - 18,930 6,423 6,320 17.Investments in subsidiaries Unquoted shares, at cost: In Malaysia Less: Impairment loss Outside Malaysia Company 2015 RM’000 2014 RM’000 907,000 (69,665) 905,000 (39,338) 837,335 6,370 865,662 6,370 843,705 872,032 Details of the subsidiaries are as follows: Name of subsidiaries Country of incorporation Principal activities Effective ownership interest 2015 2014 % % Malaysian Reinsurance Berhad Malaysia Underwriting of all classes of general reinsurance business 100 100 Takaful Ikhlas Berhad (formerly known as Takaful Ikhlas Sdn. Bhd.) Malaysia Management of family, general and investment-linked takaful business 100 100 MNRB Retakaful Berhad Malaysia Management of family and general retakaful business 100 100 MMIP Services Sdn. Bhd. Malaysia Management of the Malaysian Motor Insurance Pool which provides motor insurance to vehicle owners who are unable to obtain insurance protection for their vehicles 100 100 100 100 Malaysian Re (Dubai) Ltd.* Dubai, United Marketing and promotional activities and servicing of clients Arab Emirates on behalf of Malaysian Re AmIslamic Cash 1 Malaysia Investment in money market instruments and Sukuk 100 - AmIslamic Cash 2 Malaysia Investment in Shariah compliant money market instruments 100 - * Audited by a firm of chartered accountants other than Messrs. Ernst & Young. 164 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 17.Investments in subsidiaries (cont’d) (a)Investment in retakaful subsidiary The cumulative impairment loss of RM69,665,000 (2014: RM39,338,000) was made in respect of the retakaful subsidiary, which had recorded a net loss in the prior years, mainly due to the losses incurred by the general and family retakaful funds. On 31 March 2015, the Company increased its investment in its retakaful subsidiary by RM2 million via the issuance of 2,000,000 new ordinary shares of RM1.00 each in the retakaful subsidiary at an issue price of RM1.00 per share, to meet regulatory capital requirements. With the above subscription, the issued and paid-up capital of the retakaful subsidiary has increased from RM100 million to RM102 million, comprising 102,000,000 ordinary shares of RM1.00 each. (b)Investment in wholesale unit trust funds There were no significant changes in the composition of the Group during the current financial year ended 31 March 2015 other than the reinsurance and takaful subsidiaries’ acquisition of 100% interest in two wholesale unit trust funds. During the financial year ended 31 March 2015, the Company’s reinsurance and takaful subsidiaries acquired all units in two wholesale unit trust funds which are managed by an external fund manager. The principal activities of these funds are to invest in Shariah compliant money market instruments and Sukuk. As at the reporting date, the Company’s subsidiaries have an effective direct interest of 100% in the funds. The Company’s subsidiaries have assessed and determined that they have control over these two wholesale unit trust funds. Hence, these two wholesale unit trust funds would need to be consolidated in full. In accordance with the exemption provisions under MFRS 10 Consolidated Financial Statements, the financial statements of the funds are consolidated with the Group’s consolidated financial statements from the date of control and continue to be consolidated until the date such control ceases. 18.Investments in associates Group 2015 RM’000 Unquoted shares in Malaysia, at cost Share of post-acquisition accumulated losses Share of post-acquisition AFS reserve Post-acquisition foreign exchange translation reserve* Represented by share of net assets 77,615 (3,456) 1,660 34,748 77,615 (3,923) 992 21,369 110,567 96,053 110,567 96,053 Company 2015 RM’000 Unquoted shares in Malaysia, at cost 2014 RM’000 1,957 2014 RM’000 1,957 * This is in respect of retranslation of the cost of the investment in Labuan Re at the rate of exchange prevailing at the reporting date. 165 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 18.Investments in associates (cont’d) Details of the associates which are all incorporated in Malaysia are as follows: Name of associates Year end Principal activities Proportion of ownership interest and voting power 2015 2014 % % Held by the Company: Motordata Research Consortium Sdn. Bhd. 31 December Development and provision of a centralised motor parts price database for the Malaysian insurance industry 40 40 31 December Underwriting of all classes of general reinsurance business 20 20 Held by Malaysian Re: Labuan Reinsurance (L) Ltd (“Labuan Re”) The financial statements of the above associates are not co-terminous with those of the Group. For the purpose of applying the equity method of accounting, the audited financial statements of the associates for the year ended 31 December 2014 and management financial statements to the end of the accounting period of 31 March 2015 have been used. The summarised financial information of the associates are as follows: 2015 RM’000 2014 RM’000 Assets and liabilities: Current assets Non-current assets 1,883,386 55,508 1,646,295 50,273 Total assets 1,938,894 1,696,568 Current liabilities Non-current liabilities 336,059 1,057,867 222,223 999,676 Total liabilities 1,393,926 1,221,899 Equity 544,968 474,669 Results: Revenue Profit for the year 892,255 21,355 744,621 13,674 166 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 19.Financial assets The following table summarises the carrying values of financial assets of the Group and the Company: Group 2015 RM’000 At carrying value: Financial assets at FVTPL HTM investments AFS financial assets Loans and receivables Malaysian government securities Government investment issues Debt securities Equity securities Unquoted shares Institutional trust deposit Shariah approved unit trust funds Real estate investment trusts Fixed and call deposits Uncallable negotiable Islamic deposits Islamic investment accounts Islamic repo placements Other loans and receivables 2014 RM’000 Company 2015 RM’000 2014 RM’000 137,934 722,356 2,530,716 1,917,938 139,478 718,597 2,303,023 1,783,211 50 37,071 50 26,927 5,308,944 4,944,309 37,121 26,977 128,212 731,967 2,051,056 293,184 44,796 133,955 7,836 611,987 1,169,292 136,659 108,217 725,015 1,934,814 209,546 44,796 24,855 131,889 6,821 731,957 18,743 747,288 136,284 124,084 50 20,282 7,879 8,910 50 16,925 1,579 8,423 5,308,944 4,944,309 37,121 26,977 Group 2015 RM’000 2014 RM’000 3,951 28 133,955 7,527 62 131,889 137,934 139,478 (a)Financial assets at FVTPL At fair value: Quoted shares in Malaysia Warrants Shariah approved unit trust funds 167 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 19.Financial assets (cont’d) Group 2015 RM’000 2014 RM’000 78,734 100,030 543,592 78,936 95,344 544,317 722,356 718,597 77,817 100,578 537,841 75,558 95,167 529,137 716,236 699,862 2014 RM’000 Company 2015 RM’000 2014 RM’000 44,796 44,796 50 50 49,478 1,951,026 289,064 141 7,836 188,375 29,281 1,839,470 201,485 280 192 6,821 180,698 - - 2,530,716 2,303,023 50 50 (b)HTM investments At amortised cost/cost: Malaysian government securities Unquoted corporate debt securities Government investment issues At fair value: Malaysian government securities Unquoted corporate debt securities Government investment issues Group 2015 RM’000 (c)AFS financial assets At cost: Unquoted shares in Malaysia(i) At fair value: Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Quoted shares outside Malaysia Warrants Real estate investment trusts Government investment issues 168 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 19.Financial assets (cont’d) Group 2015 RM’000 Company 2015 RM’000 2014 RM’000 190,482 421,505 310,491 421,466 8,373 11,909 15,464 1,461 28,939 1,079,194 1,996 58,907 256 12,496 44,523 26,290 53,350 28,824 618,210 91,043 9,211 24,855 18,743 136,284 11,202 40,623 35,266 36,993 7,879 3,461 4,111 72 1,266 1,579 3,326 3,406 37 1,654 1,917,938 1,783,211 37,071 26,927 2014 RM’000 (d)Loans and receivables At amortised cost/fair value: Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed: Co-operative bank Islamic banks Investment banks Development bank Building society Institutional trust deposit Uncallable negotiable Islamic deposits Islamic repo placements Secured staff loans Amounts due from subsidiaries(ii) Income due and accrued Amount due from Insurance Pool accounts Other receivables and deposits* * Included in other receivables and deposits are monies recoverable from the Inland Revenue Board as detailed in Note 39. (i) The pertinent information of the investments in unquoted shares in Malaysia are as follows: Group 2015 RM’000 - 27,500,000 ordinary shares of RM1.00 each of Financial Park (Labuan) Sdn. Bhd. (“FPL”), representing an equity shareholding of 9%. Less: Impairment loss 28,283 (4,759) 28,283 (4,759) - 20,000,000 redeemable preference shares of RM1.00 each of FPL 23,524 20,569 23,524 20,569 44,093 44,093 410 293 410 293 44,796 44,796 - 410,000 ordinary shares of Malaysian Rating Corporation Berhad (“MARC”) of RM1.00 each, representing an equity shareholding of 4%. -Others (ii) 2014 RM’000 These amounts are non-trade in nature, are unsecured, not subject to any interest/profit elements and repayable on demand. 169 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 20.Insurance/takaful contract liabilities 2015 Reinsurance/ Gross retakaful RM’000 RM’000 Net RM’000 2014 Reinsurance/ Gross retakaful RM’000 RM’000 Net RM’000 General reinsurance/takaful/retakaful funds (Note (a)) Family takaful/retakaful funds (Note (b)) Shareholder’s funds (Note (c)) 2,184,154 1,921,784 53,340 (337,177) (37,476) - 1,846,977 1,884,308 53,340 2,145,644 1,824,043 42,576 (253,361) (146,426) - 1,892,283 1,677,617 42,576 Total 4,159,278 (374,653) 3,784,625 4,012,263 (399,787) 3,612,476 1,799,017 385,137 (293,867) (43,310) 1,505,150 341,827 1,748,911 396,733 (221,047) (32,314) 1,527,864 364,419 2,184,154 (337,177) 1,846,977 2,145,644 (253,361) 1,892,283 At beginning of the year Claims incurred in the current underwriting/accident year Adjustment to claims incurred in prior underwriting/accident years due to changes in IBNR and PRAD Movements in claims incurred in prior underwriting/accident years Claims paid during the year 1,748,911 (221,047) 1,527,864 1,671,998 (260,411) 1,411,587 278,715 (76,270) 202,445 284,345 (58,518) 225,827 (32,339) 23,092 20,138 18,789 776,126 (972,396) (126,647) 107,005 (53,895) 131,639 566,622 (694,961) At end of the year 1,799,017 (293,867) 1,505,150 1,748,911 (221,047) 1,527,864 396,733 (32,314) 364,419 376,082 (32,240) 343,842 1,614,319 (228,497) 1,385,822 1,633,307 (179,820) 1,453,487 (1,625,915) 217,501 (1,408,414) (1,612,656) 179,746 (1,432,910) (a) General reinsurance/takaful/retakaful funds Claim liabilities (Note (i)) Premium/contribution liabilities (Note (ii)) (i)Claim liabilities (9,247) (1,349) 649,479 (865,391) 620,517 (826,600) (ii)Premium/contribution liabilities At beginning of the year Premiums/contributions written in the year Premiums/contributions earned during the year At end of the year 170 385,137 (43,310) 341,827 396,733 (32,314) 364,419 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 20.Insurance/takaful contract liabilities (cont’d) 2015 Reinsurance/ Gross retakaful RM’000 RM’000 Net RM’000 2014 Reinsurance/ Gross retakaful RM’000 RM’000 Net RM’000 (b)Family takaful/retakaful funds Provision for claims reported by contract holders Participants’ Account (“PA”) Participants’ Special Account (“PSA”) Net asset value attributable to unitholders 70,619 1,540,257 190,140 120,768 (20,720) (7,260) (9,496) - 49,899 1,532,997 180,644 120,768 37,148 1,488,985 179,232 118,678 (13,212) (6,888) (126,326) - 23,936 1,482,097 52,906 118,678 1,921,784 (37,476) 1,884,308 1,824,043 (146,426) 1,677,617 At beginning of the year Net earned contributions 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 (Decrease)/increase in reserve 1,824,043 530,416 23,539 (146,426) (39,205) - 1,677,617 491,211 23,539 1,520,942 528,624 19,337 (95,325) (40,375) - 1,425,617 488,249 19,337 At end of the year 1,921,784 (268,285) (24,231) 33,471 (143,299) 2,782 (9,249) (47,403) 47,682 (7,508) 107,981 (37,476) (220,603) (24,231) 25,963 (143,299) 2,782 (9,249) 60,578 1,884,308 (237,735) (20,262) (4,547) (153,368) 12,757 (11,741) 170,036 1,824,043 19,717 (3,548) (26,895) (218,018) (20,262) (8,095) (153,368) 12,757 (11,741) 143,141 (146,426) 1,677,617 2015 Gross/net RM’000 2014 Gross/net RM’000 (c)Shareholder’s funds At beginning of the year General takaful and retakaful funds: - Wakalah fee received during the year - Wakalah fee earned during the year - Movement in provision for expense deficiency Family takaful and retakaful funds: - Movement in provision for UER 42,576 23,939 88,326 (79,141) (5,160) 62,994 (62,567) 3,172 6,739 15,038 At end of the year 53,340 42,576 171 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 21.Insurance/takaful receivables Group 2015 RM’000 2014 RM’000 69,606 265,339 (31,027) 125,691 268,000 (24,080) 303,918 369,611 Offsetting insurance/takaful receivables and insurance/takaful payables Gross amounts of recognised insurance/takaful receivables Less: Gross amounts of recognised insurance/takaful payables set off in the statement of financial position 670,687 (335,742) 592,134 (198,443) Net amounts of insurance/takaful receivables presented in the statement of financial position 334,945 393,691 Due contributions including agents’ balances Amounts due from brokers and ceding companies Less: Allowance for impairment Included in amounts due from brokers and ceding companies is an amount of RM764,512 (2014: RM275,000) due from an associate, Labuan Reinsurance (L) Ltd. The amount receivable is subject to settlement terms stipulated in the reinsurance contracts. 22.Non-current assets held for sale Group 2015 RM’000 Freehold land and buildings: At beginning of the year Transfer from property, plant and equipment (Note 13) Less: Disposal At end of the year The disposals of non-current assets held for sale were completed during the financial year. 172 1,696 (1,696) - 2014 RM’000 1,696 1,696 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 23.Participants’ funds Participants’ funds comprise the following: Accumulated surplus (Note (a)) AFS reserves (Note (b)) Revaluation surplus (Note (c)) (a)Accumulated surplus At beginning of year Net surplus of the general and family takaful funds Hibah paid and payable to participants At end of the year (b)AFS reserves At beginning of the year Net gain on fair value changes Realised gain transferred to income statement Deferred tax on fair value changes Net change in AFS reserves attributable to participants At end of the year (c)Revaluation surplus At beginning of the year Recognised in other comprehensive income Deferred tax on revaluation surplus Net change in revaluation surplus attributable to participants At end of the year Group 2015 RM’000 2014 RM’000 260,459 217 26,050 220,469 (26,903) 23,910 286,726 217,476 220,469 45,635 (5,645) 205,142 23,460 (8,133) 260,459 220,469 (26,903) 34,032 (4,399) (2,513) 27,120 8,012 (29,466) (8,812) 3,363 (34,915) 217 (26,903) 23,910 2,326 (186) 2,140 21,001 3,162 (253) 2,909 26,050 23,910 173 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 24.Borrowings Islamic revolving credit facility (“RC-i Facility”) Sukuk Mudharabah Programme Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2014 RM’000 200,000 120,000 200,000 120,000 200,000 120,000 200,000 120,000 320,000 320,000 320,000 320,000 The salient terms and conditions of the borrowings of the Group and the Company are as follows: (a)Islamic Revolving Credit Facility (“RC-i Facility”) On 10 December 2012, the Company obtained an Islamic revolving credit facility (“RC-i Facility”) from Standard Chartered Saadiq Berhad, amounting to RM200 million and denominated in Ringgit Malaysia. The RC-i Facility is unsecured and carries a floating profit rate that is reviewed quarterly. This floating profit rate credit facility has a tenure of 5 years from the date it was obtained and is repayable on 10 December 2017. The profit rates for the financial year ended 31 March 2015 range from 5.45% to 5.85% per annum (2014: 5.45% to 5.71% per annum). (b)Sukuk Mudharabah Programme On 10 December 2012, the Company issued RM120 million of Sukuk under the Sukuk Mudharabah Programme to MIDF Amanah Investment Bank Berhad. The issued Sukuk carries a fixed profit rate of 5.4% per annum with a tenure of 5 years and has a final redemption date on 10 December 2017. 25.Insurance/takaful payables Group 2015 RM’000 2014 RM’000 108,528 60,896 113,310 56,555 169,424 169,865 Offsetting insurance/takaful receivables and insurance/takaful payables Gross amounts of recognised insurance/takaful payables Less: Gross amounts of recognised insurance/takaful receivables set off in the statement of financial position 505,166 (335,742) 368,308 (198,443) Net amounts of insurance/takaful payables presented in the statement of financial position 169,424 169,865 Due to brokers and retrocessionaires Due to agents, retakaful operators and brokers Included in amounts due to brokers and retrocessionaires is an amount of RM6,321 (2014: RM9,000) due to an associate, Labuan Reinsurance (L) Ltd. The amount payable is subject to settlement terms stipulated in the reinsurance contracts. 174 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 26.Other payables Group 2015 RM’000 Advance contributions Deposit contributions Outstanding commissions Provisions Amount due to subsidiaries Sundry payables and accruals 2014 RM’000 Company 2015 RM’000 2014 RM’000 36,895 10,636 44,906 78,370 4,620 30,920 13,741 37,142 70,970 6,267 1,099 1,837 5,932 541 2,460 170,807 157,393 9,203 8,933 27.Share capital Number of ordinary shares of RM1.00 each 2015 2014 ‘000 ‘000 Amount 2015 RM’000 2014 RM’000 Authorised 500,000 500,000 500,000 500,000 Issued and fully paid: At beginning and end of the year 213,070 213,070 213,070 213,070 Amount 2015 RM’000 2014 RM’000 28.Dividends Net dividend per share 2015 2014 Sen Sen Recognised during the year: Dividend paid in respect of the financial year ended 31 March 2013: First and final dividend of 32% less 25% tax - 51,137 - 24.0 Dividend paid in respect of the financial year ended 31 March 2014: First and final single-tier dividend of 16.5% 35,156 - 16.5 - 35,156 51,137 16.5 24.0 The Directors do not recommend the payment of any dividend in respect of the current financial year. 175 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 29.Earnings per share The basic and diluted earnings per share (“EPS”) is calculated by dividing the net profit for the year by the number of ordinary shares in issue during the year. Group 2015 2014 Company 2015 2014 Net profit for the year (RM’000) 139,148 155,986 11,539 25,039 Number of ordinary shares in issue (‘000) 213,070 213,070 213,070 213,070 65.3 73.2 5.4 11.8 Basic and diluted EPS (sen) 30.Operating lease arrangements (a)The Group as lessee The Group has entered into non-cancellable operating lease agreements for the use of office premises. This lease is for a period of 5 years and subject to review every 2 years. There are no restrictions placed upon the Group by entering into this lease. The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the reporting date but not recognised as liabilities, are as follows: Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2014 RM’000 Future minimum rental payments: Not later than 1 year Later than 1 year and not later than 5 years 176 5,577 14,220 5,242 12,856 1,612 1,612 1,097 4,388 19,797 18,098 3,224 5,485 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 30.Operating lease arrangements (CONT’D) (b)The Group as lessor The Group has entered into non-cancellable operating lease agreements on its portfolio of investment properties. These leases have remaining non-cancellable lease terms of between 5 and 10 years. All leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions and certain contracts include contingent rental arrangements computed based on sales achieved by tenants. The future minimum lease payments receivable under non-cancellable operating leases contracted for as at the reporting date but not recognised as receivables, are as follows: Group 2015 RM’000 2014 RM’000 Future minimum rental receipts: Not later than 1 year Later than 1 year and not later than 5 years 5,273 4,938 4,560 3,710 10,211 8,270 31.Commitments The commitments of the Group and of the Company as at the financial year end are as follows: Group 2015 RM’000 Authorised and contracted for: - Property, plant and equipment - Intangible assets* Authorised but not contracted for: - Property, plant and equipment - Intangible assets* 2014 RM’000 Company 2015 RM’000 2014 RM’000 2,697 8,485 1,476 1,505 325 1,171 333 149 11,182 2,981 1,496 482 324 4,409 18,599 - 370 4,733 18,599 - 370 * Relating to purchases and enhancement of the reinsurance and takaful subsidiaries’ computer systems. 177 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 32.Related party disclosures For the purposes of these financial statements, parties are considered to be related to the Group and the Company if the Group and the Company have 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 Group and 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 Group and the Company, and certain members of senior management of the Group and the Company. (a)The significant transactions with related parties are as follows: Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2014 RM’000 Income/(expenses): Transactions with subsidiaries: Management fees received Net dividend received Rental paid - - 33,868 61,000 (1,623) 31,072 81,000 (1,237) Transactions with takaful funds of a subsidiary: Takaful contributions paid - - (881) (821) Transactions with an associate, Labuan Reinsurance (L) Ltd: Net reinsurance inwards 178 (229) 192 - - notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 32.Related party disclosures (cont’d) (a)The significant transactions with related parties are as follows: (cont’d) The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties. Outstanding balances arising from the transactions above as at the reporting date have been disclosed in Notes 21 and 25 of the financial statements as well as on the face of statements of financial position. (b)The key management personnel compensations are as follows: Group 2015 RM’000 2014 RM’000 Company 2015 RM’000 2014 RM’000 Non-executive directors: Fees Meeting allowances Benefits-in-kind 2,729 677 24 2,421 560 31 804 167 24 700 125 31 Executive directors: Salaries and bonus Pension costs - EPF Social security costs Allowances Benefits-in-kind Others 3,805 623 1 255 184 67 3,854 655 1 12 108 - 1,648 280 1 255 57 - 1,485 253 1 12 60 - 810 130 1 83 55 726 118 1 59 72 810 130 1 83 55 726 118 1 59 72 10,300 1,463 6 455 609 11,197 1,572 6 425 534 4,579 688 5 61 319 5,054 751 5 42 381 22,277 22,352 9,967 9,876 Director of a subsidiary: Salaries and bonus Pension costs - EPF Social security costs Other allowances Benefits-in-kind Other key management personnel’s remuneration: Salaries and bonus Pension costs - EPF Social security costs Allowances Benefits-in-kind 179 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 33.Segment information Group Investment holding RM’000 Reinsurance business RM’000 Takaful operator RM’000 Retakaful operator RM’000 Adjustments and eliminations Consolidated RM’000 RM’000 2015 Results Net earned premiums/contributions Interest/profit income Other revenue Net claims Other expenses(i) Depreciation Amortisation Finance costs Share of results of associates 1,164 94,884 (66,680) (441) (75) (18,123) (228) 1,213,056 83,614 44,119 (744,156) (397,581) (2,279) (495) 4,385 683,640 94,466 31,579 (468,060) (259,259) (5,577) (3,348) - 51,516 5,345 884 (57,755) (17,690) (13) (32) - (881) (106,446) 76,807 - 1,947,331 184,589 65,020 (1,269,971) (664,403) (8,310) (3,950) (18,123) 4,157 Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation Surplus attributable to takaful participants 10,501 - 200,663 - 73,441 (45,635) (17,745) - (30,520) - 236,340 (45,635) Operating profit/(loss) before zakat and taxation 10,501 200,663 27,806 (17,745) (30,520) 190,705 (43,930) (960) (7,477) 11,311 156,733 19,369 (17,745) (30,520) 789 136,154 (66,865) (955) (552) (17,916) (438) 1,237,520 79,308 31,458 (725,029) (403,044) (4,022) (1,660) 2,875 645,839 77,145 48,032 (472,574) (247,517) (5,639) (971) - 100,900 5,507 1,816 (83,653) (25,510) (110) (169) - (821) (144,306) 72,596 - 1,983,438 162,749 73,154 (1,281,256) (670,340) (10,726) (3,352) (17,916) 2,437 Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation Surplus attributable to takaful participants 50,217 - 217,406 - 44,315 (23,460) (1,219) - (72,531) - 238,188 (23,460) Operating profit/(loss) before zakat and taxation Zakat Taxation 50,217 (25,616) 217,406 (52,402) 20,855 (400) (4,324) (1,219) - (72,531) 24,000 214,728 (400) (58,342) Net profit/(loss) for the year 24,601 165,004 16,131 (1,219) (48,531) 155,986 Zakat Taxation Net profit/(loss) for the year 810 - - (960) (50,597) 139,148 2014 Results Net earned premiums/contributions Interest/profit income Other revenue Net claims Other expenses(i) Depreciation Amortisation Finance costs Share of results of associates 180 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 33.Segment information (cont’d) Adjustments and eliminations Consolidated RM’000 RM’000 Investment holding RM’000 Reinsurance business RM’000 Takaful operator RM’000 Retakaful operator RM’000 892,720 1,957 3,024,712 75,658 3,103,548 - 194,865 - (849,161) 32,412 6,366,684 110,027 894,677 3,100,370 3,103,548 194,865 (816,749) 6,476,711 320,000 11,285 1,739,442 118,730 286,726 2,276,856 217,514 142,980 19,695 (5,991) 286,726 320,000 4,159,278 361,233 331,285 1,858,172 2,781,096 162,675 (5,991) 5,127,237 Equities Segment equities(i) 563,392 1,242,198 322,452 32,190 (810,758) 1,349,474 Total liabilities, participants’ funds and equity 894,677 3,100,370 3,103,548 194,865 (816,749) 6,476,711 913,984 1,957 2,898,968 75,658 2,883,053 - 214,123 - (870,084) 18,438 6,040,044 96,053 915,941 2,974,626 2,883,053 214,123 (851,646) 6,136,097 320,000 8,933 1,718,028 126,239 217,475 2,151,032 202,206 1 143,203 23,568 1,943 217,476 320,000 4,012,263 362,889 328,933 1,844,267 2,570,713 166,772 1,943 4,912,628 Equities Segment equities(i) 587,008 1,130,359 312,340 47,351 (853,589) 1,223,469 Total liabilities, participants’ funds and equity 915,941 2,974,626 2,883,053 214,123 (851,646) 6,136,097 Group (cont’d) 2015 Assets Segment assets(i) Investments in associates Liabilities and Participants’ funds Segment liabilities Participants’ funds Borrowings Insurance and takaful contract liabilities Other liabilities 2014 Assets Segment assets(i) Investments in associates Liabilities and Participants’ funds Segment liabilities Participants’ funds Borrowings Insurance and takaful contract liabilities Other liabilities (i) Included in segment assets is a Qard granted to the general and family retakaful funds by the shareholder’s fund of the retakaful subsidiary, amounting to RM100.2 million (2014: RM96.3 million). Qard represents a loan to the general and family retakaful funds to make good any underwriting deficit experienced during a financial period. These balances, including the impairment losses recognised thereon amounting to RM88.1 million (2014: RM83.2 million), have been eliminated in full upon consolidation. 181 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 34.Risk management framework (a)Risk governance framework The Group’s Risk Management Framework is designed to determine the level of risk acceptable to the Group 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 and the 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 organisation 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, organisational and compliance matters. The Risk Management Framework aims to serve as a guide for the effective management of risk throughout the Group. The Framework is intended to provide guidance to the Group in performing its risk management roles and responsibilities and ultimately aims to support the achievement of the Group’s strategic and financial objectives. The key objectives of the risk management framework are to: (i) (ii) (iii) (iv) provide information on risk governance and accountabilities; provide guidance on a standard approach to managing risks; create a risk aware and compliance culture; and enhance professionalism and increase profitability and value for shareholders. In pursuit of the above objectives, it is the Group’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 Group. 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 MNRB Holdings Berhad level to oversee the implementation of an enterprise-wide risk management framework. This is also replicated at each of the subsidiary companies; (ii) The Board had established a dedicated Investment Committee at MNRB Holdings Berhad level to further oversee risk associated with investments and assets allocation. This is also replicated at each of the subsidiary companies; (iii) The Operational Risk Management Committee (“ORMC”) which comprises the President/Chief Executive Officer and senior management, implements the risk management processes, provides assurance to the Board that the processes have been carried out effectively and inculcates a risk management and compliance culture on an enterprise-wide basis; (iv) The Group Chief Risk Management and Compliance Officer (“GCRMCO”) and Group Risk Management and Compliance Division establish the infrastructure and facilitate the risk management and compliance process in the Company and across the subsidiaries through the adoption of the Group’s risk management framework; (v) At the operational level, the implementation of risk management and compliance process in the day to day operations of the Group is consistent with the risk management framework; and (vi) The Line Managers of each department within the Group are responsible for using the various components of the risk management framework as an integral part of the business processes and procedures. 182 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 34.Risk management framework (cont’d) (b)Capital management objectives, policies and approach The Capital Management Plan (“CMP”) is designed and implemented at the subsidiary level to ensure an effective management of the subsidiaries’ capital. The CMP is expected to maximise the Group’s value by optimising capital structure and enhancing capital efficiency. Under the CMP, the subsidiaries measure and monitor their 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 subsidiaries will be able to manage their capital position above the internal target. Capital management objectives The main objective of capital management is to monitor and maintain, at all times, an appropriate level of capital which is commensurate with the subsidiaries’ business operations and the resultant risk profile. The key objective of the CMP is to trigger appropriate action plans to be taken by the relevant Board and the management of the subsidiaries in the event of internal capital levels falling below the internal target requirement. This includes remedial actions that must be undertaken by the subsidiaries’ Board and management to improve the capital position. Capital management policies The key capital management policies are as follows: (i) Ensure the Group has adequate capital within a range that supports the stakeholders’ objectives; and (ii) Establish responsibility of the subsidiaries’ Board and management in developing an internal capital adequacy assessment process and setting capital targets that are commensurate with its business operations and the resultant risk profile and control environment. Approach to capital management The reinsurance, retakaful and takaful subsidiaries conduct stress tests on its CAR in compliance with BNM/RH/GL 003-23: Guideline on Stress Testing for Insurers and BNM/RH/GL 004-16: Guideline on Stress Testing for Takaful Operators. The impact of the adverse scenarios on the capital position of the subsidiaries is assessed quarterly focusing on short to medium term views. (c)Regulatory framework The reinsurance, retakaful and takaful subsidiaries are required to comply with the Financial Services Act (“FSA”) 2013 and IFSA 2013, respectively, which are administered by BNM. BNM is primarily interested in protecting the rights of policyholders and participants and monitoring the subsidiaries closely to ensure prudent management of its business operations. At the same time, BNM is also interested in ensuring that the subsidiaries actively manage the capital adequacy by taking into account the potential impact on the subsidiaries business strategies, risk profile and the overall resilience of the Company. In addition, the Company is required to comply with Bursa Malaysia Securities Berhad’s (“Bursa”) Risk Management and Internal Control System, the Listing Requirements of Bursa, Guidelines issued by the Securities Commission and the Capital Markets and Services Act 2007 as a result of its status as a listed company on the Main Market of Bursa Malaysia Securities Berhad. 183 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (a) General reinsurance (i)Nature of risk The reinsurance subsidiary principally underwrites all classes of general reinsurance business. Risks under these contracts usually cover a twelve month duration other than some long term contracts which may cover up to 3 years or more. For general reinsurance, the most significant risks arise from adverse development of claims and catastrophic loss events. These risks vary significantly in relation to economic conditions and territories from which the risks are underwritten. The above risks are mitigated by diversification across a large portfolio of business to ensure a balanced mix and spread of business as required by underwriting policies. Diversification through the implementation of underwriting strategies and claim management policies reduces the volatility of risks and improves the overall portfolio experience, and also ensures that conservative estimates are secured on its insurance contract liabilities are adequate. The reinsurance subsidiary also manages its loss exposure through the use of retrocession programmes which are reviewed annually by the ORMC and RMCB, and subsequently approved by the Board. Prudent standards are applied in the assessment of the security of the Company’s key retrocessionaires. To manage its underwriting risk, the reinsurance subsidiary also complies with relevant guidelines imposed by BNM in the underwriting of business. (ii)Concentration of risk by type of business The table below measures the concentration of contracts by liabilities exposure for the main classes of the business and by local and overseas risks as follows: Gross RM’000 Retrocession RM’000 Net RM’000 2015 Fire Motor Marine Miscellaneous Local Overseas 725,095 364,964 262,311 387,072 (70,780) (14,607) (52,448) (58,842) 654,315 350,357 209,863 328,230 1,739,442 (196,677) 1,542,765 1,187,892 551,550 (186,920) (9,757) 1,000,972 541,793 1,739,442 (196,677) 1,542,765 725,638 379,442 252,319 360,629 (19,954) (35,930) (56,767) (37,564) 705,684 343,512 195,552 323,065 1,718,028 (150,215) 1,567,813 1,129,808 588,220 (137,117) (13,098) 992,691 575,122 1,718,028 (150,215) 1,567,813 2014 Fire Motor Marine Miscellaneous Local Overseas 184 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (a) General reinsurance (cont’d) (iii)Reserving risk The reinsurance subsidiary’s claim liabilities, and consequently some of the inputs used in determining its premium liabilities, are based upon claims experience, existing knowledge of the events, the terms and conditions of relevant policies and interpretation of circumstances. Upon notification of a claim by its cedants, the reinsurance subsidiary sets aside reserves to meet the expected ultimate loss arising from this claim. These claim reserves are updated periodically for further developments via advice from cedants. At each reporting date, the reinsurance subsidiary performs a test on the adequacy of its liabilities via the services of an independent qualified external actuary engaged for the purpose of ensuring that claim and premium liabilities are objectively assessed and adequately provided for. Any such deficiency is recognised in the income statement. (iv)Impact on liabilities, profit and equity Key assumptions Liabilities are determined based upon claims experience, existing knowledge of events, the terms and conditions of the relevant contracts and interpretation of circumstances. Particularly relevant are past experiences with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. The inherent uncertainties in estimating liabilities arises from a variety of factors such as the range and quality of data available, underlying assumptions made and random volatility of future experience. Sensitivity analysis As a general reinsurer, the insurance contract liabilities of the reinsurance subsidiary are sensitive to various key factors which are both internal and external. External factors to which the reinsurance subsidiary is sensitive to include: (i) (ii) (iii) (iv) Claims practices of ceding companies; Frequency and severity of claims incurred by cedants; Changes in premium rates in insurance and reinsurance markets; and Legislative and regulatory changes. The sensitivity analysis was applied to the ultimate loss ratio of the Company by increasing the said ratio of the most recent underwriting year by 5%. The table below shows the impact on the Company’s gross and net claim liabilities, profit before tax and equity should the ultimate loss ratio be increased by 5%: Impact on gross liabilities RM’000 Impact on net liabilities RM’000 Impact on profit before tax RM’000 Impact on equity* RM’000 16,187 5,230 7,031 8,525 16,186 4,593 6,961 8,532 16,186 4,593 6,961 8,532 13,553 4,060 5,295 6,893 36,973 36,272 36,272 29,801 2015 Fire Marine Motor Miscellaneous 185 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (a) General reinsurance (cont’d) (iv)Impact on liabilities, profit and equity (cont’d) Sensitivity analysis (cont’d) Impact on gross liabilities RM’000 Impact on net liabilities RM’000 Impact on profit before tax RM’000 Impact on equity* RM’000 17,403 5,507 7,195 9,571 17,400 4,534 7,195 9,566 17,400 4,534 7,195 9,566 14,433 3,913 5,477 7,644 39,676 38,695 38,695 31,467 2014 Fire Marine Motor Miscellaneous * The impact on equity reflects the after tax impact. This analysis assumes that other factors relevant, but not significant, to the valuation of claim liabilities remain constant. (v)Claims development table The following tables show the estimate of cumulative ultimate incurred claims, including both claims provisions and IBNR for each successive underwriting year at each financial year end, along with cumulative claim payments to-date. In setting provisions for claims, the reinsurance subsidiary relies on advice by its cedants and exercises discretion where the claim may develop more adversely than advised. An estimate will be made in the absence of a reported figure or in the event the loss is still preliminary and has not been fully assessed. The estimates of the ultimate incurred claims are subject to a great deal of uncertainty in the early stages as claims are still being intimated and developed, particularly so for large and catastrophic claims. These uncertainties reduce over time as the claims develop and progress towards the ultimate cost. Beginning 1 April 2009, the methodology used in the valuation of general reinsurance liabilities was changed. This change involved a more granular segregation of the business of the Company into specific portfolios with the intention of achieving greater accuracy in the estimation process. Accordingly, data pertaining to the gross general reinsurance liabilities prior to financial year ended 31 March 2009 was not available and hence only developments in gross general reinsurance liabilities for financial year ended 31 March 2009 onwards are disclosed. The following tables have excluded the impact of specific large losses and other claims that management believes are not relevant for purposes of establishing claims development trends. 186 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (a) General reinsurance (cont’d) (v)Claims development table (cont’d) Gross general reinsurance contract liabilities for 2015: Underwriting year Before 2007 2007 2008 2009 2010 2011 2012 2013 2014 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 408,945 448,593 464,785 457,881 555,322 544,131 538,486 Current estimate of booked ultimate claims incurred (a) 538,250 563,819 625,900 666,201 833,626 626,374 680,370 392,353 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 53,719 224,029 333,537 379,990 403,432 517,164 521,617 526,247 81,664 72,602 45,707 65,738 304,808 457,413 322,956 439,662 489,316 650,735 461,369 569,484 758,933 617,380 - 50,329 - Cumulative payments to-date (b) 526,247 539,381 594,717 617,380 758,933 461,369 439,662 50,329 Expected claim liabilities (a) - (b) Other portfolios Best estimate of claim liabilities Claim handling expenses Fund PRAD at 75% confidence interval Gross general reinsurance claim liabilities 29,927 12,003 418,389 496,009 493,161 492,705 576,942 571,554 564,373 - 63,614 256,339 358,844 411,516 515,279 529,417 539,381 - 24,438 573,070 570,029 573,383 633,550 633,211 627,195 - 92,548 301,430 430,566 544,944 574,075 594,717 - 31,183 640,777 603,851 671,472 674,073 669,536 - 48,821 643,911 663,610 712,406 690,348 722,113 642,522 746,746 794,395 645,558 841,767 - 74,693 165,005 240,708 342,024 968,802 396,779 1,365,581 7,385 109,805 1,482,771 187 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (a) General reinsurance (cont’d) (v)Claims development table (cont’d) Net general reinsurance contract liabilities for 2015: Underwriting year At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 317,442 418,288 439,019 441,390 437,100 519,346 515,127 514,038 Current estimate of booked ultimate claims incurred (a) 513,842 545,705 598,548 626,008 819,497 601,338 666,931 388,589 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 52,635 219,484 324,757 368,751 390,048 497,241 501,625 506,000 70,948 72,009 45,218 65,738 291,065 451,089 319,123 435,537 471,728 642,608 454,603 545,602 748,462 578,564 - 50,328 - Cumulative payments to-date (b) 506,000 525,129 574,402 578,564 748,462 454,603 435,537 50,328 Expected claim liabilities (a) - (b) Other portfolios Best estimate of claim liabilities Claim handling expenses Fund PRAD at 75% confidence interval Less: Retrocession recoveries Net general reinsurance claim liabilities 188 Before 2007 2007 2008 2009 2010 2011 2012 2013 2014 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 24,990 7,842 496,557 480,442 476,158 479,882 546,688 546,771 546,212 - 62,609 251,249 350,613 402,025 501,521 515,394 525,129 - 20,576 537,097 546,681 549,676 593,617 597,410 599,731 - 91,038 296,382 415,719 526,099 554,187 574,402 - 24,146 579,366 557,852 626,114 627,273 628,890 - 47,444 556,166 631,329 706,648 685,728 707,118 624,620 731,426 779,122 617,389 827,433 - 71,035 146,735 231,394 338,261 912,423 306,713 1,219,136 7,385 97,673 (32,351) 1,291,843 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (a) General reinsurance (cont’d) (v)Claims development table (cont’d) Gross general reinsurance contract liabilities for 2014: Underwriting year Before 2006 2006 2007 2008 2009 2010 2011 2012 2013 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 403,736 417,448 399,937 395,525 438,867 434,488 Current estimate of booked ultimate claims incurred (a) 434,473 543,980 570,863 630,635 664,078 771,790 585,640 415,425 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 42,356 217,724 294,220 335,359 355,014 369,071 420,704 423,366 92,548 81,664 72,602 45,707 301,430 304,808 457,413 322,956 430,566 489,316 650,735 544,944 569,484 574,075 - 65,738 - Cumulative payments to-date (b) 423,366 521,617 529,417 574,075 569,484 650,735 322,956 65,738 Expected claim liabilities (a) - (b) Other portfolios Best estimate of claim liabilities Claim handling expenses Fund PRAD at 75% confidence interval Gross general reinsurance claim liabilities 28,586 11,107 408,945 448,593 464,785 457,881 555,322 544,131 - 53,719 224,029 333,537 379,990 403,432 517,164 521,617 - 22,363 418,389 496,009 493,161 492,705 576,942 571,554 - 63,614 256,339 358,844 411,516 515,279 529,417 - 41,446 573,070 570,029 573,383 633,549 633,211 - 56,560 640,777 643,911 663,610 712,406 603,851 722,113 642,522 671,472 794,395 674,073 - 94,594 121,055 262,684 349,687 988,082 356,386 1,344,468 3,235 101,365 1,449,068 189 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (a) General reinsurance (cont’d) (v)Claims development table (cont’d) Net general reinsurance contract liabilities for 2014: Underwriting year At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 305,287 328,514 366,752 371,474 350,446 344,994 384,365 381,387 Current estimate of booked ultimate claims incurred (a) 381,373 515,006 546,114 594,882 619,691 755,835 566,362 412,402 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 40,581 194,490 257,795 288,807 307,552 320,957 369,377 371,930 91,038 70,948 72,009 45,218 296,382 291,065 451,089 319,122 415,719 471,728 642,608 526,099 545,602 554,187 - 65,738 - Cumulative payments to-date (b) 371,930 501,625 515,394 554,187 545,602 642,608 319,122 65,738 Expected claim liabilities (a) - (b) Other portfolios Best estimate of claim liabilities Claim handling expenses Fund PRAD at 75% confidence interval Less: Retrocession recoveries Net general reinsurance claim liabilities 190 Before 2006 2006 2007 2008 2009 2010 2011 2012 2013 Sub Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 22,853 9,443 317,442 418,288 439,019 441,390 437,100 522,621 515,127 - 52,635 219,484 324,757 368,751 390,048 497,241 501,625 - 13,381 496,557 480,442 476,158 479,882 551,447 546,771 - 62,609 251,249 350,613 402,025 501,521 515,394 - 30,720 537,097 546,681 549,676 598,507 597,410 - 40,695 579,366 556,166 631,329 706,648 557,852 707,118 624,620 626,114 779,122 627,273 - 74,089 113,227 247,240 346,664 898,312 330,354 1,228,666 3,235 89,394 (17,106) 1,304,189 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (i)Nature of risk The takaful subsidiary principally issues the following types of general takaful contract: motor, household and commercial fire, business interruption, personal accident, and other miscellaneous commercial contracts. Risks under these contracts usually cover a twelvemonth 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 five years including maintenance period. For general takaful contracts, the most significant risks arise from accident frequency and severity of the accident. These risks vary significantly in relation to the location of risk, type of risk covered and industry. 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 implementation of underwriting strategies and claim management policies which attempt to minimise losses. The takaful subsidiary also manages its loss exposure by the use of retakaful arrangements. The retakaful treaty arrangements are reviewed annually by the RMCB and approved by the Board. Stress Testing (“ST”) is performed on a quarterly basis and submitted to BNM on a half-yearly 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. (ii)Reserving risk The general takaful fund’s claim liabilities, and consequently some of the inputs used in determining its contribution liabilities, are based upon claims experience, existing knowledge of the events, the terms and conditions of relevant certificates and interpretation of circumstances. Upon notification of a claim, the takaful subsidiary sets aside case and technical reserves to meet the expected ultimate loss arising from this claim. These claim reserves are updated periodically for further developments. At each reporting date, the takaful subsidiary performs a valuation of liabilities that is certified by the Signing Actuary for the purpose of ensuring that claim and contribution liabilities are objectively assessed and adequately provided for. Any deficiency is recognised in the income statement. 191 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (cont’d) (iii)Concentration of risk by type of contracts The table below sets out the concentration of takaful contracts liabilities by classes of business: Gross RM’000 Retakaful RM’000 Net RM’000 2015 Fire Motor Marine, Aviation & Transit Miscellaneous 70,651 204,383 358 60,788 (20,093) (78,217) (174) (13,149) 50,558 126,166 184 47,639 336,180 (111,633) 224,547 65,488 200,857 445 53,762 (13,476) (55,696) (224) (10,893) 52,012 145,161 221 42,869 320,552 (80,289) 240,263 2014 Fire Motor Marine, Aviation & Transit Miscellaneous All business of the general takaful fund is derived in Malaysia; accordingly, disclosure of concentration risk by geographical region is not relevant to the general takaful fund. (iv)Impact on liabilities, profit and equity Key assumptions The principal assumption underlying the estimation of liabilities is that the takaful subsidiary’s future claims development will follow a pattern similar to the historical trend experience. Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrence, changes in market factors such as public attitude to claims notification and reporting, economic conditions, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors, such as judicial decisions and government legislation affect the estimates. Other key circumstances affecting the reliability of assumptions include delays in settlement. 192 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (cont’d) (iv)Impact on liabilities, profit and equity (cont’d) Sensitivity analysis 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 on possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, surplus before tax and general takaful fund. The correlation of assumptions will have a significant effect in determining the ultimate claim liabilities, however, to demonstrate the impact due to changes in assumptions, only individual factor is changed, while other assumptions are held constant. It should be noted that movements in these assumptions are non-linear. The sensitivity analysis has been performed for the main classes of business which are Motor Act and Motor Others. Motor Act is stressed using changes in claim severity; while Motor Others is tested by considering a stressed ultimate loss ratio level. Impact on surplus before tax RM’000 Impact on general takaful fund* RM’000 Change in assumption of ultimate claims ratio Impact on gross liabilities RM’000 Impact on net liabilities RM’000 +10% +10% 20,157 28,406 15,798 15,301 (15,798) (15,301) (11,849) (11,476) +10% +10% 21,236 38,323 17,696 21,603 (17,696) (21,603) (13,272) (16,202) 2015 Motor Act Average Severity Motor Others Expected Loss Ratio 2014 Motor Act Average Severity Motor Others Expected Loss Ratio * The impact on general takaful fund reflects the after tax impact. The method used in performing the sensitivity analysis is consistent with the prior year. (v)Claims development table The following tables show the estimate of cumulative incurred claims, including both claims reported and IBNR (including IBNER) for each successive accident year at each reporting date, together with cumulative payments to-date. In setting provisions for claims, the takaful subsidiary gives consideration to the probability and magnitude of future experience at best estimate level with a degree of caution in setting reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience for an accident year is greatest when the claim is at an early stage of development; hence the provision for risk margin for adverse deviation is relatively higher than the provision for claims at a later development period. As the claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. 193 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (cont’d) (iv)Claims development table (cont’d) Gross general takaful contract liabilities for 2015: Accident year 2008 RM’000 2009 RM’000 2010 RM’000 2012 RM’000 2013 RM’000 2014 RM’000 2015 RM’000 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 50,997 51,290 51,483 51,708 50,301 50,507 50,166 50,035 100,090 93,740 89,887 86,452 82,702 80,849 80,259 - 125,472 144,938 150,396 142,627 146,833 140,864 134,623 137,705 132,409 128,689 129,564 125,201 122,290 126,078 122,147 - 108,384 106,221 97,322 - 141,258 125,098 - 176,570 - Current estimate of cumulative claims incurred 50,035 80,259 122,147 125,201 97,322 125,098 176,570 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 17,599 34,059 39,159 44,893 47,722 49,488 49,775 49,967 29,070 64,212 72,939 77,825 78,729 79,468 79,896 - 43,215 48,128 49,128 83,077 95,317 88,890 100,539 112,994 106,834 105,741 119,507 113,031 107,734 121,220 108,720 - 41,750 70,150 81,392 - 52,986 89,882 - 72,444 - Cumulative payments to-date 49,967 79,896 108,720 121,220 113,031 81,392 89,882 72,444 68 363 13,427 4,858 12,170 15,930 35,216 104,126 Gross general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) Fund PRAD at 75% Total 194 2011 RM’000 126,078 Total RM’000 186,158 24,181 210,339 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (cont’d) (iv)Claims development table (cont’d) Net general takaful contract liabilities for 2015: Accident year 2008 RM’000 2009 RM’000 2010 RM’000 2011 RM’000 2012 RM’000 2013 RM’000 2014 RM’000 2015 RM’000 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 47,452 47,361 47,903 47,484 45,894 45,091 44,591 44,410 83,588 81,492 78,446 76,773 72,883 71,266 70,735 - 114,632 119,456 124,071 120,563 114,108 114,400 - 134,955 139,773 131,893 126,239 125,246 119,387 117,605 111,481 114,720 - 77,046 74,561 66,794 - 89,101 80,459 - 104,072 - Current estimate of cumulative claims incurred 44,410 70,735 114,400 114,720 111,481 66,794 80,459 104,072 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 16,968 32,665 37,569 41,845 43,721 44,519 44,223 44,353 27,670 40,682 44,669 46,245 56,446 79,471 88,779 81,802 64,216 94,614 103,862 96,453 69,165 99,156 109,008 100,801 69,505 100,448 110,484 70,071 101,372 70,386 - 29,182 49,605 55,605 - 35,402 58,337 - 45,182 - Cumulative payments to-date 44,353 70,386 101,372 110,484 100,801 55,605 58,337 45,182 57 349 13,028 4,236 10,680 11,189 22,122 58,890 Net general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. ALAE) Fund PRAD at 75% Total Total RM’000 120,551 15,659 136,210 195 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (cont’d) (iv)Claims development table (cont’d) Gross general takaful contract liabilities for 2014: Accident year 2007 RM’000 2008 RM’000 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 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 - Current estimate of cumulative claims incurred 32,212 50,166 80,849 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 13,366 25,083 27,784 30,245 31,292 31,975 32,280 32,163 Cumulative payments to-date Gross general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses “ALAE”) Fund PRAD at 75% Total 196 2009 RM’000 2010 RM’000 2012 RM’000 2013 RM’000 2014 RM’000 100,090 125,472 144,938 150,396 93,740 142,627 146,833 140,864 89,887 134,623 137,705 132,409 86,452 128,689 129,564 82,702 122,290 80,849 - 108,384 106,221 - 141,258 - 132,409 106,221 141,258 17,599 34,059 39,159 44,893 47,722 49,488 49,775 - 29,070 43,215 48,128 49,128 64,212 83,077 95,317 88,890 72,939 100,539 112,994 106,834 77,825 105,741 119,507 78,729 107,733 79,468 - 41,750 70,150 - 52,987 - 32,163 49,775 79,468 107,733 119,507 106,834 70,150 52,987 49 391 1,381 14,557 10,057 25,575 36,071 88,271 122,290 2011 RM’000 129,564 Total RM’000 176,352 25,167 201,519 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (b) General takaful fund (cont’d) (iv)Claims development table (cont’d) Net general takaful contract liabilities for 2014: Accident year 2007 RM’000 2008 RM’000 2009 RM’000 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 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 - Current estimate of cumulative claims incurred 29,777 At the end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Cumulative payments to-date Net general takaful contract liabilities: Best Estimate of Claims Liabilities (incl. ALAE) Fund PRAD at 75% Total 2010 RM’000 2011 RM’000 2012 RM’000 2013 RM’000 2014 RM’000 83,588 81,492 78,446 76,773 72,883 71,267 - 114,632 134,955 139,773 119,456 131,893 126,239 124,071 125,246 119,387 120,563 117,605 114,108 - 77,046 74,561 - 89,101 - 44,591 71,267 114,108 117,605 119,387 74,561 89,101 11,984 23,420 26,016 28,197 29,089 29,631 29,847 29,730 16,968 32,665 37,569 41,845 43,721 44,519 44,223 - 27,670 40,682 44,669 56,446 79,471 88,779 64,216 94,614 103,862 69,165 99,156 109,008 69,505 100,447 70,071 - 46,245 81,802 96,453 - 29,182 49,605 - 35,402 - 29,730 44,223 70,071 100,447 109,008 96,453 49,605 35,402 47 368 1,196 13,661 8,597 22,934 24,956 53,699 Total RM’000 125,458 22,136 147,594 197 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (c)Family takaful fund (i)Nature of risk The takaful subsidiary principally issues the following types of family takaful certificate: Ordinary Takaful Plans, Mortgage Takaful Plans, Group Takaful Plans and Investment-linked Takaful Plans. Family takaful underwriting risk exists from the anti-selection and adequacy of tabarru’ to meet future claims 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 and morbidity and experience. The takaful subsidiary utilises retakaful arrangement to manage the mortality and morbidity risks. Retakaful structures are set based on the type of risks to be recovered. The takaful subsidiary 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 effective. 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 participants. Stress Testing (“ST”) is performed on a quarterly basis and submitted to BNM on a half-yearly 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. (ii)Concentration of risk by type of contracts The table below shows the concentration of actuarial liabilities by type of contract: Gross RM’000 Retakaful RM’000 Net RM’000 2015 Family takaful plans Investment-linked takaful plans Mortgage takaful plans Group credit takaful plans Others 198 708,684 21,880 649,960 219,846 101,257 (4,221) (5,275) - 704,463 16,605 649,960 219,846 101,257 1,701,627 (9,496) 1,692,131 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (c)Family takaful fund (cont’d) (ii)Concentration of risk by type of contracts (cont’d) Gross RM’000 Retakaful RM’000 Net RM’000 2014 Family takaful plans Investment-linked takaful plans Mortgage takaful plans Group credit takaful plans Others 735,055 23,624 501,924 284,220 89,511 (10,424) (1,299) (101,812) (12,791) - 724,631 22,325 400,112 271,429 89,511 1,634,334 (126,326) 1,508,008 All business of the family takaful fund is derived from participants in Malaysia; accordingly, disclosure of concentration risk by geographical region is not relevant to the family takaful fund. (iii) 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: Mortality and morbidity rates Assumptions are based on mortality rates as set out in the Actuarial Certificate submitted to BNM. 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 the 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, profitability of shareholder’s fund 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. 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. The valuation of liabilities will be discounted to valuation date using the government investment issues zero coupon spot yields which are obtained from the Bond Pricing Agency Malaysia rates as prescribed in the valuation guidelines. A decrease in the discount rate will increase the value of the family takaful liabilities and therefore reduce profits for the shareholders in terms of lower surplus administration charge income. 199 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (c)Family takaful fund (cont’d) (iii) Key assumptions (cont’d) The assumptions that have significant effects on the financial position and financial performance of the family takaful fund are listed below: Type of business Mortality and morbidity rates Credit related (MRTT and GCT) Others Base mortality1, adjusted for retakaful rates2 Base mortality1 2015 Discount rates 2014 Discount rates 4% N/A 4% N/A These rates are obtained from the various industry mortality and morbidity experience tables that were used to determine the contribution rates. 1 Retakaful rates are derived from the fund’s retakaful arrangements with respect to the MRTT and GCT business. 2 (iv)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 family takaful fund. The correlations of assumptions will have a significant effect in determining the ultimate family takaful liabilities but to demonstrate the impact due to changes in assumptions, assumptions are 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 % Impact on gross liabilities RM’000 Impact on net liabilities RM’000 Impact on profit before tax RM’000 Impact on family takaful fund* RM’000 2015 Mortality/morbidity Discount rates + 10% + 1% 87,579 (21,906) 82,703 (12,413) (82,703) 12,413 (82,703) 12,413 + 10% + 1% 43,773 (7,640) 3,979 (1,144) (3,979) 1,144 (3,979) 1,144 2014 Mortality/morbidity Discount rates * The impact on the family takaful fund reflects the after tax impact which is presumed to be nil as the family takaful fund is taxed only on investment income. 200 The method used in performing the sensitivity analysis is consistent with the prior year. notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund During the financial year ended 31 March 2015, the Management has decided to undergo a consolidation exercise and to review its business portfolio. This would include temporarily not writing and renewing the general business, as well as cleaning up the outstanding contributions and claims balances. This decision was taken with a view to further strengthen the retakaful subsidiary’s capital position. (i)Nature of risk For general retakaful, the most significant risks arise from adverse development of the loss ratios and catastrophic loss events. These risks vary significantly in relation to economic conditions and territories from which the risk originates. The retakaful subsidiary also manages the general retakaful fund’s loss exposure via the use of retrotakaful arrangements. The retrotakaful arrangements are reviewed annually by the RMCB and approved by the Board. Stress testing is performed on a quarterly basis and submitted to BNM twice a year. The purpose of the stress testing is to test the solvency of the general retakaful fund under various scenarios. These scenarios are based on regulatory guidelines and simulate drastic changes in major parameters such as new business volume, claims experience and investment environment. (ii)Reserving risk The general retakaful fund’s claim liabilities, and consequently some of the inputs used in determining its contribution liabilities, are based upon claims experience, existing knowledge of the events, the terms and conditions of relevant certificates and interpretation of circumstances. Upon notification of a claim, the retakaful subsidiary sets aside case and technical reserves to meet the expected ultimate loss arising from this claim. These claim reserves are updated periodically for further developments. At each reporting date, the retakaful subsidiary performs a test on the adequacy of its liabilities via the services of an independent qualified external actuary engaged for the purpose of ensuring that claim and premium liabilities are objectively assessed and adequately provided for. Any such deficiency is recognised in the income statement. (iii)Concentration of takaful contract liabilities The table below sets out the concentration of takaful contract liabilities by class of business and by local and overseas: Gross RM’000 Retakaful RM’000 Net RM’000 2015 Fire Motor Marine, Aviation & Transit Miscellaneous Local Overseas 40,193 25,813 5,490 37,036 (8,820) (1) 80 (20,127) 31,373 25,812 5,570 16,909 108,532 (28,868) 79,664 75,855 32,677 (28,737) (131) 47,118 32,546 108,532 (28,868) 79,664 201 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund (cont’d) (iii)Concentration of takaful contract liabilities (cont’d) Gross RM’000 Retakaful RM’000 Net RM’000 2014 Fire Motor Marine, Aviation & Transit Miscellaneous Local Overseas 49,801 20,879 4,286 32,098 (7,555) (3) (89) (15,211) 42,246 20,876 4,197 16,887 107,064 (22,858) 84,206 83,553 23,511 (22,369) (489) 61,184 23,022 107,064 (22,858) 84,206 (iv)Impact on liabilities, profit and equity Key assumptions Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrences, 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. Judgement 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. 202 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund (cont’d) (iv)Impact on liabilities, profit and equity (cont’d) Sensitivity analysis The general retakaful fund’s claim liabilities are sensitive to changes in the loss ratio especially in the event of large or catastrophic claims. However, as the business is still relatively new, the amount of information available to conduct a sensitivity analysis is limited. The sensitivity analysis was applied to the ultimate loss ratio of the general retakaful fund by increasing the said ratio by 5%. The ultimate loss ratios of Fire and Marine, Aviation & Transit classes of business for the most recent underwriting year and the ultimate loss ratios of Motor and Miscellaneous classes of business for all underwriting years were increased by 5%. The table below shows the impact on the general retakaful fund’s gross and net claim liabilities, surplus before tax and general retakaful fund should the ultimate loss ratio be increased by 5%: Impact on gross liabilities RM’000 Impact on net liabilities RM’000 Impact on surplus before tax RM’000 Impact on general retakaful fund* RM’000 654 1,678 167 2,756 635 1,678 150 2,577 635 1,678 150 2,577 635 1,678 150 2,577 5,255 5,040 5,040 5,040 2,457 1,479 331 2,742 2,167 1,479 326 2,698 2,167 1,479 326 2,698 2,167 1,479 326 2,698 7,009 6,670 6,670 6,670 2015 Fire Motor Marine, Aviation & Transit Miscellaneous 2014 Fire Motor Marine, Aviation & Transit Miscellaneous * The impact on the general retakaful fund reflects the after tax impact which is presumed to be nil based on the current tax position of the fund. This analysis assumes all other parameters are held constant. 203 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund (cont’d) (v)Claims development table The following tables show the estimate of cumulative ultimate incurred claims, including both claims provisions and IBNR for each successive underwriting year at each financial year end, along with cumulative claim payments to-date. In setting provisions for claims, the Company relies on advice by the cedants and exercises discretion where the claim may develop more adversely than advised. An estimate will be made in the absence of a reported figure or in the event the loss is still preliminary and has not been fully assessed. The estimates of the ultimate incurred claims are subject to a great deal of uncertainty in the early stages as claims are still being intimated and developed, particularly so for large and catastrophic claims. These uncertainties reduce over time as the claims develop and progress towards the ultimate cost. Gross general retakaful claim liabilities for 2015: Underwriting year 2007 RM’000 2008 RM’000 2009 RM’000 2010 RM’000 2011 RM’000 2012 RM’000 2013 RM’000 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 9,441 11,149 8,983 8,826 17,641 18,864 28,583 30,340 - 21,520 18,780 19,282 19,143 - 27,915 35,220 41,994 47,230 - 9,284 33,682 36,964 42,744 - 15,171 56,646 57,574 - 42,843 32,126 - 19,642 - Current estimate of booked ultimate claims incurred (a) 8,826 30,340 19,138 47,140 42,508 56,615 30,265 14,283 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later (3,196) 7,045 8,036 6,005 6,186 8,030 8,220 8,360 (8,238) 4,950 14,171 16,391 20,578 24,807 27,548 - (392) 8,483 12,669 14,145 14,923 16,528 - (3,293) 13,468 25,419 30,745 39,120 - 1,506 11,500 21,355 27,968 - 2,524 14,017 23,897 - 676 11,191 - 135 - Cumulative payments to-date (b) 8,360 27,548 16,528 39,120 27,968 23,897 11,191 135 466 2,792 2,610 8,020 14,540 32,718 19,074 14,148 Expected claim liabilities (a) - (b) Other portfolios Best estimate of claim liabilities Fund PRAD at 75% confidence interval Gross general retakaful claim liabilities 204 2014 Sub Total RM’000 RM’000 94,368 981 95,349 10,558 105,907 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund (cont’d) (v)Claims development table (cont’d) Net general retakaful claim liabilities for 2015: Underwriting year 2007 RM’000 2008 RM’000 2009 RM’000 2010 RM’000 2011 RM’000 2012 RM’000 2013 RM’000 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 9,441 11,149 8,983 8,826 17,641 18,864 28,583 30,340 - 21,520 18,780 19,282 19,143 - 27,915 35,220 41,994 47,230 - 9,284 33,682 36,935 42,744 - 15,171 55,371 57,574 - 38,790 32,126 - 19,642 - Current estimate of booked ultimate claims incurred (a) 8,826 30,319 19,121 47,113 42,450 56,241 29,643 14,142 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later (3,196) 7,045 8,036 6,005 6,186 8,030 8,220 8,360 (8,238) 4,950 14,171 16,391 20,578 24,807 27,548 - (392) 8,483 12,669 14,145 14,923 16,528 - (3,293) 13,468 25,419 30,745 39,120 - 1,506 11,500 21,355 27,968 - 2,524 14,017 23,897 - 676 11,191 - 135 - Cumulative payments to-date (b) 8,360 27,548 16,528 39,120 27,968 23,897 11,191 135 466 2,771 2,593 7,993 14,482 32,344 18,452 14,006 Expected claim liabilities (a) - (b) Other portfolios 2014 Sub Total RM’000 RM’000 93,107 870 Best estimate of claim liabilities Fund PRAD at 75% confidence interval Less: Retrotakaful recoveries 93,977 8,025 (24,906) Net general retakaful claim liabilities 77,096 205 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund (cont’d) (v)Claims development table (cont’d) Gross general retakaful claim liabilities for 2014: Underwriting year 2007 RM’000 2008 RM’000 2009 RM’000 2010 RM’000 2011 RM’000 2012 RM’000 9,441 11,149 8,983 - 17,641 18,864 28,583 - 21,520 18,780 19,282 - 27,915 35,220 41,994 - 9,284 33,682 36,964 - 15,171 56,646 - 42,843 - Current estimate of booked ultimate claims incurred (a) 8,985 28,567 19,245 41,878 36,594 51,860 16,275 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later (3,196) 7,045 8,036 6,005 6,186 8,030 8,220 - (8,238) 4,950 14,171 16,391 20,578 24,807 - (392) 8,346 12,669 14,145 14,923 - (3,293) 13,468 25,419 30,745 - 1,506 11,500 21,355 - 2,524 14,017 - 676 - Cumulative payments to-date (b) 8,220 24,807 14,923 30,745 21,355 14,017 676 Expected claim liabilities (a) - (b) 765 3,760 4,322 11,133 15,239 37,843 15,599 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Other portfolios 206 2013 Sub Total RM’000 RM’000 88,661 456 Best estimate of claim liabilities Fund PRAD at 75% confidence interval 89,117 9,207 Gross general retakaful claim liabilities 98,324 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (d) General retakaful fund (cont’d) (v)Claims development table (cont’d) Net general retakaful claim liabilities for 2014: Underwriting year 2007 RM’000 2008 RM’000 2009 RM’000 2010 RM’000 2011 RM’000 2012 RM’000 9,441 11,149 8,983 - 17,641 18,864 28,583 - 21,520 18,780 19,282 - 27,915 35,220 41,994 - 9,284 33,682 36,935 - 15,171 55,371 - 38,790 - Current estimate of booked ultimate claims incurred (a) 8,985 28,567 19,245 41,877 36,574 51,062 15,982 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later (3,196) 7,045 8,036 6,005 6,186 8,030 8,220 - (8,238) 4,950 14,171 16,391 20,578 24,807 - (392) 8,346 12,669 14,145 14,923 - (3,293) 13,468 25,419 30,745 - 1,506 11,500 21,355 - 2,524 14,017 - 676 - Cumulative payments to-date (b) 8,220 24,807 14,923 30,745 21,355 14,017 676 Expected claim liabilities (a) - (b) 765 3,760 4,322 11,132 15,219 37,045 15,306 At the end of underwriting year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Other portfolios 2013 Sub Total RM’000 RM’000 87,549 449 Best estimate of claim liabilities Fund PRAD at 75% confidence interval Less: Retrotakaful recoveries 87,998 7,350 (19,268) Net general retakaful claim liabilities 76,080 207 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (e)Family retakaful fund During the financial year ended 31 March 2015, the Management has decided to undergo a consolidation exercise and to review its business portfolio. This would include temporarily not writing and renewing the family business, as well as cleaning up the outstanding contributions and claims balances. This decision was taken with a view to further strengthen the retakaful subsidiary’s capital position. (i)Nature of risk The retakaful subsidiary principally underwrites the following types of family retakaful business: Individual Family Retakaful Plans, Group Family Retakaful Plans, Individual Medical Retakaful Plans and Retakaful Individual Facultative. Family retakaful underwriting risk relates to the pricing and loss ratios arising from family retakaful products. The risks arise when actual claims experience is different from the assumptions used in setting the yearly renewable term fees for retakaful products. Deviations in actual claims experience compared to the assumptions used may be due to deviations in actual mortality and morbidity experience. The retakaful subsidiary utilises retrotakaful to manage mortality and morbidity risks. The retakaful subsidiary reviews the actual experience of mortality and morbidity to ensure that appropriate policies, guidelines and limits put in place to manage these risks remain adequate and appropriate. Stress testing is performed on a quarterly basis and submitted to BNM on a half-yearly basis. The purpose of the stress testing is to test the solvency of the family retakaful fund under various scenarios. These scenarios are based on regulatory guidelines and simulate drastic changes in major parameters such as new business volume, investment environment and mortality/morbidity patterns. (ii)Concentration of takaful contract liabilities The table below sets out the concentration of retakaful contract liabilities by local and overseas treaties: Gross RM’000 Retakaful RM’000 Net RM’000 2015 Local Overseas 26,706 2,064 (6,647) (613) 20,059 1,451 28,770 (7,260) 21,510 32,417 1,466 (6,269) (619) 26,148 847 33,883 (6,888) 26,995 2014 Local Overseas 208 Business of the family retakaful fund is derived from Malaysian and overseas risks. Liabilities of the family retakaful fund are mainly spread within Malaysia, Brunei and Indonesia. notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 35.Underwriting risk (cont’d) (e)Family retakaful fund (cont’d) (iii)Impact on liabilities, profit and equity Key assumptions Material judgement is required in determining the liabilities and in the choice of assumptions. Assumptions in use 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 estimation of liabilities is particularly sensitive to the assumption of loss ratios due to the nature of the pricing of family retakaful products which are based on yearly renewable terms. Sensitivity analysis The family retakaful fund’s claim liabilities are sensitive to changes in loss ratios. However, as the business is still relatively new, the amount of information available to conduct a sensitivity analysis is limited. Due to limited information, the sensitivity analysis was applied to the ultimate loss ratio of the family retakaful fund by increasing the said ratio by 20%. The table below shows the impact on the family retakaful fund’s gross and net liabilities, surplus before tax and family retakaful fund should the ultimate loss ratio be increased by 20%: Change in assumptions % Impact on gross liabilities RM’000 Impact on net liabilities RM’000 Impact on surplus before tax RM’000 Impact on family retakaful fund* RM’000 2015 Loss ratio Loss ratio -20% +20% (18,145) 29,889 (18,145) 29,889 (18,145) 29,889 (18,145) 29,889 -20% +20% (20,248) 34,695 (20,248) 34,695 (20,248) 34,695 (20,248) 34,695 2014 Loss ratio Loss ratio * The impact on the family retakaful fund reflects the after tax impact which is presumed to be nil based on the current tax position of the fund. The method used in performing the sensitivity analysis is consistent with the prior year. 209 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk Transactions in financial instruments may result in the Group and the Company assuming financial risks. These include credit risk, liquidity risk and market risk. This note presents information about the Group’s and the Company’s exposure to each of the above risks and the Group’s and the Company’s objectives, policies and processes for measuring and managing such risks. The following tables summarise the financial assets and financial liabilities of the Group and the Company, and their carrying value and fair values, which are considered by management in monitoring and managing of its financial risks. 2015 Carrying value RM’000 Fair value RM’000 2014 Carrying value RM’000 Fair value RM’000 Group Financial and insurance assets Financial assets at FVTPL (Note 19) HTM investments (Note 19) AFS financial assets (Note 19) Loans and receivables* (Note 19) Reinsurance/retakaful assets Insurance/takaful receivables* Cash and bank balances Financial and insurance liabilities Borrowings Insurance/takaful contract liabilities Insurance/takaful payables* Other payables and provisions* 137,934 722,356 2,530,716 1,917,938 374,653 303,918 82,702 137,934 716,236 2,530,716 1,917,938 374,653 303,918 82,702 139,478 718,597 2,303,023 1,783,211 399,787 369,611 36,644 139,478 699,862 2,303,023 1,783,211 399,787 369,611 36,644 6,070,217 6,064,097 5,750,351 5,731,616 320,000 4,159,278 169,424 170,807 318,637 4,159,278 169,424 170,807 320,000 4,012,263 169,865 157,393 319,798 4,012,263 169,865 157,393 4,819,509 4,818,146 4,659,521 4,659,319 50 37,071 2,877 50 37,071 2,877 50 26,927 2,904 50 26,927 2,904 39,998 39,998 29,881 29,881 320,000 9,203 318,637 9,203 320,000 8,933 319,798 8,933 329,203 327,840 328,933 328,731 Company Financial and insurance assets AFS financial assets (Note 19) Loans and receivables* (Note 19) Cash and bank balances Financial and insurance liabilities Borrowings Other payables and provisions* * The carrying values of these loans and receivables, insurance receivables, insurance payables and other payables and provisions approximate their fair values due to their short term nature. 210 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (a)Credit Risk Credit risk is the risk of financial loss resulting from the failure of counterparties to reinsurance, takaful, retakaful and investment transactions to meet their contractual obligations. Credit risk includes the following major elements: (i) An investment credit risk which is the 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; (ii) A derivative counterparty risk which is the risk of financial loss arising from a derivative counterparty’s default, or the deterioration of the derivative counterparty’s financial position. As at the reporting date, the Group does not transact in derivatives and is not exposed to this risk; and (iii) Reinsurance/retakaful counterparty risk which is the risk of financial loss arising from a default by the retrocessionaire/retakaful operator, or the deterioration of the solvency position of the retrocessionaire/retakaful operator. The Group is exposed to investment credit risk on its investment portfolio, primarily from investments in corporate bonds. A creditworthiness assessment for new and existing investments is undertaken by the Group in accordance with the Investment Policy as approved by the Investment Committee. In addition, the credit ratings of the bond portfolio are regularly monitored and any downgrade in credit ratings will be evaluated to determine the required actions. As at the reporting date, the Group’s bond portfolio has no material exposure below investment grade. The Group is exposed to reinsurance/retakaful counterparty risks of three different types: (i) as a result of recoveries owing from the retrocessionaire/retakaful operators for claims; (ii) from amounts due from ceding companies; and (iii) as a result of reserves held by the reinsurers and/or retakaful operators which would have to be met by the reinsurance and/or retakaful subsidiaries in the event of default. Management of credit risk In order to manage and mitigate credit risk, the following policies and procedures were set in place: (i) 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; (ii) Counterparty limits are set for investments and cash deposits to ensure that there is no concentration of credit risk; (iii) The Group’s investment portfolio is managed to ensure diversification and focuses on high quality investment grade fixed income securities and equity with good fundamentals. For the financial year ended 31 March 2015, the credit rating of the Group’s fixed income portfolio was dominated by securities rated AAA as determined by Rating Agency Malaysia (“RAM”) and/or Malaysian Rating Corporation Berhad (“MARC”); and (iv) To mitigate reinsurance/retakaful counterparty risk, the Group will give due consideration to the credit quality of the reinsurer/retakaful operator. To facilitate this process, a list of acceptable reinsurers/retakaful operators based on their rating is maintained within the Group. The Group regularly reviews the financial security of its reinsurers/retakaful operators. 211 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (a)Credit Risk (cont’d) Unearned premium and contribution reserves and reserves for unearned wakalah fees have been excluded from the analysis as they are not contractual obligations. The table below provides information regarding the credit risk exposures of the Group by classifying assets according to the credit ratings of counterparties. Credit exposure by credit rating for 2015: BB to C RM’000 Not subject to credit risk RM’000 Not rated RM’000 Total RM’000 - - 3,951 28 133,955 - 3,951 28 133,955 78,734 99,779 543,592 - 251 - - - 78,734 100,030 543,592 49,478 478,750 188,375 1,472,276 - - 44,796 289,064 141 7,836 - - 44,796 49,478 1,951,026 289,064 141 7,836 188,375 500 190,482 421,005 - - - 190,482 421,505 Government guaranteed RM’000 AAA to BBB RM’000 - HTM investments Malaysian government securities Unquoted corporate debt securities Government investment issues AFS financial assets Unquoted shares in Malaysia Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Warrants Real estate investment trusts Government investment issues Group Financial assets at FVTPL Quoted shares in Malaysia Warrants Shariah approved unit trust funds Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks 212 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (a)Credit Risk (cont’d) Credit exposure by credit rating for 2015: (cont’d) BB to C RM’000 Not subject to credit risk RM’000 Not rated RM’000 Total RM’000 28,939 489,526 1,996 43,312 256 - - 294,632 - 295,036 15,595 12,496 44,523 28,939 1,079,194 1,996 58,907 256 12,496 44,523 - 199,406 74,390 79,329 67 69 - - 26,290 53,350 131,870 229,459 3,373 26,290 53,350 331,343 303,918 82,702 1,439,208 3,000,917 387 774,403 811,992 6,026,907 - - - 50 - 50 500 8,373 11,409 - - - 8,373 11,909 - 7,879 2,974 2,877 - - 3,461 1,137 72 1,266 - 7,879 3,461 4,111 72 1,266 2,877 500 33,512 - 50 5,936 39,998 Government guaranteed RM’000 AAA to BBB RM’000 - Group (cont’d) Loans and receivables (cont’d) Islamic investment accounts with licensed: Co-operative bank Islamic banks Investment banks Development bank Building society Secured staff loans Income due and accrued Amount due from Insurance Pool accounts Other receivables and deposits Reinsurance/retakaful assets Insurance/takaful receivables Cash and bank balances Company AFS financial assets Unquoted shares in Malaysia Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed Islamic banks Secured staff loans Amounts due from subsidiaries Income due and accrued Other receivables and deposits Cash and bank balances 213 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (a)Credit Risk (cont’d) Credit exposure by credit rating for 2014: BB to C RM’000 Not subject to credit risk RM’000 Not rated RM’000 Total RM’000 - - 7,527 62 131,889 - 7,527 62 131,889 78,936 95,089 544,317 - 255 - - - 78,936 95,344 544,317 29,281 438,733 180,698 1,394,622 - - 44,796 201,485 280 192 6,821 - 6,115 - 44,796 29,281 1,839,470 201,485 280 192 6,821 180,698 - 310,491 421,466 - - - 310,491 421,466 Government guaranteed RM’000 AAA to BBB RM’000 - HTM investments Malaysian government securities Unquoted corporate debt securities Government investment issues AFS financial assets Unquoted shares in Malaysia Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Quoted shares outside Malaysia Warrants Real estate investment trusts Government investment issues Group Financial assets at FVTPL Quoted shares in Malaysia Warrants Shariah approved unit trust funds Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks 214 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (a)Credit Risk (cont’d) Credit exposure by credit rating for 2014: (cont’d) BB to C RM’000 Not subject to credit risk RM’000 Not rated RM’000 Total RM’000 28,824 510,581 71,606 9,211 18,743 98,110 - - - 107,629 19,437 24,855 38,174 11,202 40,623 28,824 618,210 91,043 9,211 24,855 18,743 136,284 11,202 40,623 - 600 240,746 56,363 31,324 1,219 214 - - 35,266 36,393 125,508 313,034 5,320 35,266 36,993 367,473 369,611 36,644 1,367,054 3,192,687 1,688 393,052 763,556 5,718,037 - - - 50 - 50 - 15,464 1,461 - - - 15,464 1,461 - 1,579 2,159 2,904 - - 3,326 1,247 37 1,654 - 1,579 3,326 3,406 37 1,654 2,904 - 23,567 - 50 6,264 29,881 Government guaranteed RM’000 AAA to BBB RM’000 - Group (cont’d) Loans and receivables (cont’d) Islamic investment accounts with licensed: Co-operative bank Islamic banks Development bank Building society Institutional trust deposit Uncallable negotiable Islamic deposits Islamic repo placements Secured staff loans Income due and accrued Amount due from Insurance Pool accounts Other receivables and deposits Reinsurance/retakaful assets Insurance/takaful receivables Cash and bank balances Company AFS financial assets Unquoted shares in Malaysia Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed Islamic banks Secured staff loans Amounts due from subsidiaries Income due and accrued Other receivables and deposits Cash and bank balances 215 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (a)Credit Risk (cont’d) Movement of allowance for impairment losses on receivables Individually impaired RM’000 Group Collectively impaired RM’000 Total RM’000 2015 At beginning of the year (Reversal of impairment losses)/impairment losses for the year 16,722 (91) 7,358 7,038 24,080 6,947 At end of the year 16,631 14,396 31,027 2014 At beginning of the year Reversal of impairment losses for the year 19,142 (2,420) 7,513 (155) 26,655 (2,575) At end of the year 16,722 7,358 24,080 Liquidity risk is the risk that the Group will not have sufficient cash resources available to meet its payment obligations without incurring material additional costs. As part of its liquidity management strategy, the Group has in place a framework capable of measuring and reporting on: (i) (ii) (iii) (iv) daily cash flows; minimum liquidity holdings; the composition and market values of company’s investment portfolios, including liquid holdings; and the holding of liquid assets in the respective reinsurance, takaful and retakaful funds. In order to manage the liquidity of the reinsurance/takaful/retakaful funds, the investment mandate requires that a certain proportion of the fund is maintained as liquid assets. Accordingly, the Group is required to maintain a minimum holding of low risk assets between 10% and 15% and no maximum limit on its placements in fixed and call deposits. Maturity Profiles The table below summarises the maturity profile of the financial assets and liabilities of the Group based on remaining undiscounted contractual obligations, including interest payable and receivable. For insurance and takaful contract liabilities and reinsurance and retakaful assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance/takaful liabilities. Unearned premium and contribution reserves and reserves for unearned wakalah fees have been excluded from the analysis as they are not contractual obligations. 216 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (b)Liquidity Risk (cont’d) Maturity profiles for 2015 Carrying value RM’000 Up to 1 year RM’000 1-5 years RM’000 Over 5 years RM’000 No maturity date RM’000 Total RM’000 Financial assets at FVTPL Quoted shares in Malaysia Warrants Shariah approved unit trust funds 3,951 28 133,955 - - - 3,951 28 133,955 3,951 28 133,955 HTM investments Malaysian government securities Unquoted corporate debt securities Government investment issues 78,734 100,030 543,592 3,276 23,188 21,353 13,115 68,031 165,733 103,505 25,525 501,292 - 119,896 116,744 688,378 AFS financial assets Unquoted shares in Malaysia Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Warrants Real estate investment trusts Government investment issues 44,796 49,478 1,951,026 289,064 141 7,836 188,375 1,674 256,897 13,078 42,608 940,052 61,296 9,944 1,368,624 195,288 44,796 289,064 141 7,837 - 44,796 54,226 2,565,573 289,064 141 7,837 269,662 190,482 421,505 192,971 416,629 6,582 - - 192,971 423,211 28,939 1,079,194 1,996 58,907 256 12,496 44,523 28,967 789,806 1,997 59,059 260 6,976 44,523 5,520 - - 294,632 - 28,967 1,084,438 1,997 59,059 260 12,496 44,523 26,290 53,350 331,343 303,918 82,702 26,290 53,350 132,260 303,810 82,702 145,388 108 - 40,333 - 13,362 - 26,290 53,350 331,343 303,918 82,702 6,026,907 2,459,066 1,448,433 2,244,511 787,766 6,939,776 Group Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed: Co-operative bank Islamic banks Investment banks Development bank Building society Secured staff loans Income due and accrued Amount due from Insurance Pool accounts Other receivables and deposits Reinsurance/retakaful assets Insurance/takaful receivables Cash and bank balances Total financial and insurance assets 217 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (b)Liquidity Risk (cont’d) Maturity profiles for 2015 (cont’d) Carrying value RM’000 Up to 1 year RM’000 1-5 years RM’000 Over 5 years RM’000 No maturity date RM’000 Loans and receivables (cont’d) Borrowings Insurance/takaful contract liabilities Insurance/takaful payables Other payables (320,000) (3,720,801) (169,424) (170,807) (19,480) (765,847) (169,424) (170,807) (342,335) (1,008,010) - (1,826,581) - (120,363) - (361,815) (3,720,801) (169,424) (170,807) Total financial and insurance liabilities (4,381,032) (1,125,558) (1,350,345) (1,826,581) (120,363) (4,422,847) Total RM’000 Group (cont’d) Company AFS financial assets Unquoted shares in Malaysia 50 - - - 50 50 8,373 11,909 8,409 11,970 - - - 8,409 11,970 7,879 3,461 4,111 72 1,266 2,877 7,944 3,461 4,111 72 1,266 2,877 - - - 7,944 3,461 4,111 72 1,266 2,877 39,998 40,110 - - 50 40,160 Borrowings Other payables (320,000) (9,203) (19,480) (9,203) (342,335) - - - (361,815) (9,203) Total financial liabilities (329,203) (28,683) (342,335) - - (371,018) Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed Islamic banks Secured staff loans Amounts due from subsidiaries Income due and accrued Other receivables and deposits Cash and bank balances Total financial assets 218 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (b)Liquidity Risk (cont’d) Maturity profiles for 2014 Carrying value RM’000 Up to 1 year RM’000 1-5 years RM’000 Over 5 years RM’000 No maturity date RM’000 Total RM’000 Financial assets at FVTPL Quoted shares in Malaysia Warrants Shariah approved unit trust funds 7,527 62 131,889 - - - 7,527 62 131,889 7,527 62 131,889 HTM investments Malaysian government securities Unquoted corporate debt securities Government investment issues 78,936 95,344 544,317 3,276 3,994 21,356 13,115 91,199 179,090 106,983 26,416 507,454 - 123,374 121,609 707,900 AFS financial assets Unquoted shares in Malaysia Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Quoted shares outside Malaysia Warrants Real estate investment trusts Government investment issues 44,796 29,281 1,839,470 201,485 280 192 6,821 180,698 1,011 170,174 7,748 22,180 938,968 56,251 10,145 1,402,094 220,060 44,796 201,485 280 192 6,821 - 44,796 33,336 2,511,236 201,485 280 192 6,821 284,059 310,491 421,466 311,862 422,307 - - - 311,862 422,307 28,824 618,210 91,043 9,211 24,855 18,743 136,284 11,202 40,623 28,908 620,837 91,907 9,311 24,855 18,846 136,414 11,202 40,623 - - - 28,908 620,837 91,907 9,311 24,855 18,846 136,414 11,202 40,623 35,266 36,993 35,266 36,993 - - - 35,266 36,993 Group Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed: Co-operative bank Islamic banks Development bank Building society Institutional trust deposit Uncallable negotiable Islamic deposits Islamic repo placements Secured staff loans Income due and accrued Amount due from Insurance Pool accounts Other receivables and deposits 219 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (b)Liquidity Risk (cont’d) Maturity profiles for 2014 (cont’d) Carrying value RM’000 Up to 1 year RM’000 1-5 years RM’000 Over 5 years RM’000 No maturity date RM’000 Total RM’000 367,473 369,611 36,644 103,058 369,489 36,644 109,120 122 - 130,920 - 24,375 - 367,473 369,611 36,644 Total financial and insurance assets 5,718,037 2,506,081 1,410,045 2,404,072 417,427 6,737,625 Borrowings Insurance/takaful contract liabilities Insurance/takaful payables Other payables (320,000) (3,572,954) (169,865) (157,393) (17,900) (746,267) (169,865) (157,393) (361,815) (895,347) - (1,664,149) - (267,191) - (379,715) (3,572,954) (169,865) (157,393) Total financial and insurance liabilities (4,220,212) (1,091,425) (1,257,162) (1,664,149) (267,191) (4,279,927) Group (cont’d) Loans and receivables (cont’d) Reinsurance/retakaful assets Insurance/takaful receivables Cash and bank balances Company AFS financial assets Unquoted shares in Malaysia 50 - - - 50 50 15,464 1,461 15,464 1,461 - - - 15,464 1,461 1,579 3,326 3,406 37 1,654 2,904 1,579 3,326 3,406 37 1,654 2,904 - - - 1,579 3,326 3,406 37 1,654 2,904 29,881 29,831 - - 50 29,881 Borrowings Other payables (320,000) (8,933) (17,900) (8,933) (361,815) - - - (379,715) (8,933) Total financial liabilities (328,933) (26,833) (361,815) - - (388,648) Loans and receivables Fixed and call deposits with licensed: Commercial banks Investment banks Islamic investment accounts with licensed Islamic banks Secured staff loans Amounts due from subsidiaries Income due and accrued Other receivables and deposits Cash and bank balances Total financial assets 220 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (c) Market Risk Market risk is the risk of loss arising from a change in the values of, or the income from, assets. A risk of loss also arises from volatility in asset prices, interest/profit rates, or exchange rates. Market risk includes the following elements: (i) Equity price risk which is the risk of fluctuations in the fair value or future cash flows of a financial instrument arising from stock market dynamics impacting equity prices; (ii) Foreign exchange risk which is the risk of fluctuations in the fair value or future cash flows of a financial instrument arising from a movement of or volatility in exchange rates; and (iii) Interest/profit rate risk which is the risk of fluctuations in the fair value or future cash flows of a financial instrument arising from variability in interest/profit rates. Equity price 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 Group’s equity risk exposures relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices. The Group’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 regard also to such limits as stipulated by BNM for its reinsurance, takaful and retakaful subsidiaries. The Group complied with such limits as stipulated by BNM during the financial year and has no significant concentration of price risk. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax and equity (inclusive of the impact on other comprehensive income). The correlation of variables have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, changes in variables are considered individually. It should be noted that movements in these variables are non-linear. The equities under the investment-linked fund were excluded from the sensitivity analysis as the risks associated with the fluctuations in market prices of the equities are borne by the unitholders. 221 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (c) Market Risk (cont’d) Sensitivity analysis Changes in Impact on market indices profit before tax RM’000 Impact on equity* RM’000 2015 Group Price Price + 5% - 5% 199 (1,273) 12,647 (12,647) + 5% - 5% 380 (1,423) 9,285 (9,285) 2014 Group Price Price * The impact on equity reflects the after tax impact. Management is of the opinion that the Company is not subject to significant equity price risk and, hence, a sensitivity analysis has not been performed. Foreign exchange risk/currency risk Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to volatility in foreign exchange rates. The Group’s business is conducted primarily in Malaysia and the Group’s functional and presentation currency is Malaysian Ringgit. As the growth of business outside Malaysia increases, the Group’s main foreign exchange risk arises primarily from recognised assets and liabilities resulting from reinsurance and retakaful transactions of the reinsurance and retakaful subsidiaries. These balances are expected to be settled and realised on net basis within 12 months; accordingly, the impact arising from sensitivity in foreign exchange rates is deemed to be manageable. Interest/profit rate risk The Group is exposed to interest/profit rate risk as follows: (i) fair values of fixed interest/profit-bearing assets would move inversely to changes in interest/profit rates; and (ii) future cash flows of variable interest/profit-bearing assets would move in direct proportion to changes in rates. The earnings of the Group are affected by changes in market interest/profit rates due to the impact such changes have on interest/profit income from cash and cash equivalents, including investments in fixed/Islamic deposits. The fixed income portfolio is inversely related to profit rates and, hence, it is the source of portfolio volatility. The Group manages its interest/profit rate risk by matching, where possible, the duration and profile of assets and liabilities to minimise the impact of mismatches between the value of assets and liabilities from interest/profit rate movements. The nature of the Group’s exposure to interest/profit rate risk and its objectives, policies and processes for managing interest/profit rate risk have not changed significantly from the previous financial year. 222 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 36.Financial risk (cont’d) (c) Market Risk (cont’d) Interest/profit rate risk (cont’d) Sensitivity analysis A change of 25 basis points (“bp”) in interest/profit rates at the reporting date would have increased/(decreased) the value of the portfolio of fixed-income investment by the amounts shown below. Changes in variable Impact on equity* RM’000 2015 Group Interest/profit rates Interest/profit rates +25 bp -25 bp (30,714) 21,654 +25 bp -25 bp (26,420) 26,420 2014 Group Interest/profit rates Interest/profit rates * The impact on equity reflects the after tax impact. 37.Other risks (a)Property Risk Property risk is the risk associated with the Group’s investment in property or real estate for own occupancy, investment or rental purpose. The Operational Risk of the Group’s Property is detailed in operational manuals that describe the responsibilities in relation to management of the properties to maintain quality and satisfied tenants. The financial risk arising from a delinquent or loss of tenants are managed at the outset through careful selection of properties with high tenancy including tenants with long term tenancies and a continuous maintenance and upgrade of facilities. The Group has no significant exposure to property risk. (b)Operational Risk Operational risk is the risk of loss arising from process and system failure, human error, specific loss events or external events. When controls fail to perform, operational risks can cause damage to the reputation of the Group, have legal or regulatory implications or can lead to financial loss. The Group cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Group is able to minimise risks to an acceptable level. Controls include effective segregation of duties, effective access controls, authorisation and reconciliation procedures, continuous staff education and appropriate assessment processes, including the use of internal audit. 223 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 37.Other risks (cont’d) (c)Shariah Risk Shariah risk is defined as potential Shariah non-compliance that contributes to adverse reputation, financial losses and opportunity costs resulting from ineffective governance, incompetent employees and improper transactional and operational execution. The Group 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 guided by the Shariah Governance Framework issued by BNM which is designed to meet the following objectives: (i) sets out the expectations of BNM on the Group’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 Committee and management of the Group 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. (d)Compliance Risk Compliance risk is the risk arising from violations of, or non conformance with, business principles, internal policies and procedures, related laws and rules and regulations governing the Group’s products, services and activities. Consequently, the exposure to this risk can damage the Group’s reputation, lead to legal or regulatory sanctions and/or financial loss. The Group has established a Compliance Division at the Group and subsidiary level to oversee and monitor all compliance aspects in observing 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. 224 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 38.Insurance, takaful and retakaful funds (i)Consolidated income statement by fund for the year ended 31 March 2015 Gross earned premiums/ contributions Premiums/contributions ceded to reinsurers/retakaful operators Net earned premiums/ contributions General reinsurance and shareholders’ fund RM’000 General takaful fund RM’000 Family takaful fund RM’000 General retakaful fund RM’000 1,323,292 268,356 553,955 34,267 35,711 (23,984) (96,352) (39,205) (10,913) (7,549) 19,989 172,004 514,750 23,354 28,162 (3,995) (110,236) 1,213,056 Investment income Net realised gains Net fair value gains/(losses) Fee and commission income Other operating revenue 167,126 2,648 4,668 315,953 9,864 12,712 865 (761) 26,563 950 81,851 6,068 (9,557) - 3,456 112 (171) 495 264 Other revenue 500,259 40,329 78,362 4,156 Gross claims and benefit paid Claims ceded to reinsurers/ retakaful operators Gross change in contract liabilities Change in contract liabilities ceded to reinsurers/retakaful operators (809,894) (130,098) (243,079) 53,392 (33,703) 48,788 (8,820) 46,049 Net claims and benefits (744,156) Family Eliminations retakaful and fund adjustments Consolidated RM’000 RM’000 RM’000 905 40 (18) 425 81 2,191,597 (244,266) 1,947,331 (66,543) (307,699) (688) 199,507 9,733 (5,839) 35,737 10,471 1,433 (374,930) 249,609 (39,934) (43,301) 25,625 57,121 (102,854) 12,356 (7,583) 8,655 5,113 (25,625) - 20,204 (109,322) 6,567 (69,926) (398,134) (28,594) 372 (29,161) (1,240,681) 154,687 (147,847) - (36,130) - (1,269,971) 225 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 38.Insurance, takaful and retakaful funds (Cont’d) (i)Consolidated income statement by fund (cont’d) for the year ended 31 March 2015 (cont’d) General reinsurance and shareholders’ fund RM’000 General takaful fund RM’000 Family takaful fund RM’000 General retakaful fund RM’000 Family Eliminations retakaful and fund adjustments Consolidated RM’000 RM’000 RM’000 Fee and commission expense Management expenses Finance costs Other operating expenses Changes in expense liabilities Tax borne by participants (431,092) (246,679) (18,123) (35,782) (10,764) - (103,942) (3,439) (8,508) (152,548) (8,609) (7,621) (4,757) (9,096) (405) - (4,376) - 265,655 49,172 36,128 - (435,399) (209,555) (18,123) (7,680) (10,764) (13,265) Other expenses (742,440) (115,889) (173,535) (9,501) (4,376) 350,955 (694,786) Share of results of associates Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation Surplus attributable to takaful participants - - - 226,719 26,518 21,443 (26,518) (21,443) - - (10,585) - - (3,942) - 4,157 4,157 (23,813) 236,340 2,326 (45,635) Operating profit/(loss) before zakat and taxation Zakat Taxation 226,719 (960) (50,597) - - (10,585) - (3,942) - (21,487) - 190,705 (960) (50,597) Net profit/(loss) for the year attributable to equity holders of the Parent 175,162 - - (10,585) (3,942) (21,487) 139,148 226 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 38.Insurance, takaful and retakaful funds (Cont’d) (i)Consolidated income statement by fund (cont’d) for the year ended 31 March 2014 General reinsurance and shareholders’ fund RM’000 General takaful fund RM’000 Family takaful fund RM’000 General retakaful fund RM’000 1,334,573 209,206 547,961 68,876 53,071 (30,725) (68,259) (40,375) (14,433) (6,614) 27,210 1,237,520 140,947 507,586 54,443 46,457 (3,515) 1,983,438 Investment income Net realised gains Net fair value gains/(losses) Fee and commission income Other operating revenue 203,709 5,257 665 296,874 12,697 11,035 1,559 27 15,181 2,506 66,420 13,904 4,119 101 (1,585) 3,196 281 (95) 1,158 118 476 55 2 26 (110,601) (920) (288,742) (1,520) 174,235 21,056 3,796 24,574 12,242 Other revenue 519,202 30,308 82,959 4,658 559 (401,783) 235,903 Gross claims and benefit paid Claims ceded to reinsurers/ retakaful operators Gross change in contract liabilities Change in contract liabilities ceded to reinsurers/retakaful operators (685,322) (108,745) (185,325) (32,533) (52,410) - (1,064,335) 97,925 (64,351) 31,679 (3,904) 14,767 (286,923) 2,035 (8,658) 4,950 (16,178) - 151,356 (380,014) (73,281) 16,183 49,694 17,735 1,406 - 11,737 Net claims and benefits (725,029) (64,787) (407,787) (21,421) (62,232) - Gross earned premiums/ contributions Premiums/contributions ceded to reinsurers/retakaful operators Net earned premiums/ contributions (97,053) Family Eliminations retakaful and fund adjustments Consolidated RM’000 RM’000 RM’000 2,182,962 (199,524) (1,281,256) 227 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 38.Insurance, takaful and retakaful funds (Cont’d) (i)Consolidated income statement by fund (cont’d) for the year ended 31 March 2014 (cont’d) General reinsurance and shareholders’ fund RM’000 General takaful fund RM’000 Family takaful fund RM’000 General retakaful fund RM’000 Family Eliminations retakaful and fund adjustments Consolidated RM’000 RM’000 RM’000 Fee and commission expense Management expenses Finance costs Other operating expenses Changes in expense liabilities Tax borne by participants (436,966) (233,465) (17,916) (86,458) (18,637) - (73,632) (2,290) (425) (7,172) (165,109) (7,157) (6,894) (23,111) (622) - (6,135) (9) - 253,729 47,501 82,360 74 (451,224) (195,411) (17,916) (5,154) (18,637) (13,992) Other expenses (793,442) (83,519) (179,160) (23,733) (6,144) 383,664 (702,334) Share of results of associates Operating profit/(loss) before surplus attributable to takaful participants, zakat and taxation Surplus attributable to takaful participants - - - - 238,251 22,949 3,598 13,947 (22,949) (3,598) - - - (21,360) - 2,437 2,437 (19,197) 238,188 3,087 (23,460) Operating profit/(loss) before zakat and taxation Zakat Taxation 238,251 (400) (82,342) - - 13,947 - (21,360) - (16,110) 24,000 214,728 (400) (58,342) Net profit/(loss) for the year attributable to equity holders of the Parent 155,509 - - 13,947 (21,360) 7,890 155,986 228 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 38.Insurance, takaful and retakaful funds (cont’d) (ii)Consolidated statement of financial position by fund as at 31 March 2015 General reinsurance and shareholders’ fund RM’000 General takaful fund RM’000 Family takaful fund RM’000 General retakaful fund RM’000 Family Eliminations retakaful and fund adjustments Consolidated RM’000 RM’000 RM’000 Assets Property, plant and equipment Investment properties Intangible assets Deferred tax assets Investments in subsidiaries Investments in associates Financial assets: Financial assets at FVTPL HTM investments AFS financial assets LAR Reinsurance/retakaful assets Insurance/takaful receivables Tax recoverable Cash and bank balances 130,573 7,100 14,632 7,835 843,705 77,615 - 106,922 - 95 - - 106,922 (106,922) 3,554 (843,705) 32,952 237,495 7,100 14,632 11,484 110,567 886 281,578 1,532,603 1,131,858 196,676 218,963 24,856 16,044 724 71,941 173,158 73,782 111,633 29,296 24,116 135,972 337,163 1,084,084 469,808 30,216 44,233 360 42,523 341 19,211 30,075 38,710 28,868 14,825 9 11 12,463 18,661 3,748 7,260 2,642 10 (307,865) 200,032 (6,041) - 137,934 722,356 2,530,716 1,917,938 374,653 303,918 25,216 82,702 Total assets 4,484,924 484,650 2,251,281 132,134 44,795 (921,073) 6,476,711 Liabilities and Participants’ funds Participants’ funds Borrowings Insurance/takaful contract liabilities Insurance/takaful payables Other payables Deferred tax liabilities Provision for taxation Provision for zakat 320,000 1,792,782 105,713 84,021 1,470 8,461 871 55,340 336,180 21,797 66,919 420 3,994 - 232,291 1,903,014 32,131 81,750 2,095 - 3,173 108,532 10,273 10,156 - 28,770 5,551 10,465 9 - (4,078) (10,000) (6,041) (82,504) 3,682 - 286,726 320,000 4,159,278 169,424 170,807 7,676 12,455 871 Total liabilities and participants’ funds 2,313,318 484,650 2,251,281 132,134 44,795 (98,941) 5,127,237 Equity Share capital Reserves 1,126,570 1,045,036 - - - - (913,500) 91,368 213,070 1,136,404 Total equity attributable to equity holders of the Parent 2,171,606 - - - - (822,132) 1,349,474 Total liabilities, participants’ funds and equity 4,484,924 484,650 2,251,281 132,134 44,795 (921,073) 6,476,711 229 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 38.Insurance, takaful and retakaful funds (cont’d) (ii)Consolidated statement of financial position by fund (cont’d) as at 31 March 2014 General reinsurance and shareholders’ fund RM’000 General takaful fund RM’000 Family takaful fund RM’000 General retakaful fund RM’000 Family Eliminations retakaful and fund adjustments Consolidated RM’000 RM’000 RM’000 Assets Property, plant and equipment Investment properties Intangible assets Deferred tax assets Investments in subsidiaries Investments in associates Financial assets: Financial assets at FVTPL HTM investments AFS financial assets LAR Reinsurance/retakaful assets Insurance/takaful receivables Tax recoverable Cash and bank balances Non-current assets held for sale 130,014 6,900 14,519 21,846 872,032 77,615 1,155 - 106,922 - 215 - - 106,922 (106,922) 964 (872,032) 18,438 236,936 6,900 14,519 24,180 96,053 1,841 290,927 1,213,832 1,342,899 150,214 228,906 5,461 15,911 1,696 1,372 72,033 93,341 163,957 80,289 32,274 7,551 - 135,626 332,336 958,347 337,568 139,538 88,964 13,140 - 616 19,243 31,250 54,640 22,858 16,121 1 33 - 23 4,058 6,253 19,850 6,888 3,346 9 - (135,703) - 139,478 718,597 2,303,023 1,783,211 399,787 369,611 5,462 36,644 1,696 Total assets 4,374,613 451,972 2,112,441 144,977 40,427 (988,333) 6,136,097 Liabilities and Participants’ funds Participants’ funds Borrowings Insurance/takaful contract liabilities Insurance/takaful payables Other payables Deferred tax liabilities Provision for taxation Provision for zakat 320,000 1,760,604 102,005 83,689 6,504 24,737 368 33,850 320,552 16,580 79,183 1,807 - 184,344 1,800,160 28,417 98,987 112 421 - 13,415 107,064 16,319 8,179 - 33,883 6,544 - (14,133) (10,000) (112,645) 1,682 - 217,476 320,000 4,012,263 169,865 157,393 8,298 26,965 368 Total liabilities and participants’ funds 2,297,907 451,972 2,112,441 144,977 40,427 (135,096) 4,912,628 Equity Share capital Reserves 1,124,570 952,136 - - - - (911,500) 58,263 213,070 1,010,399 Total equity attributable to equity holders of the Parent 2,076,706 - - - - (853,237) 1,223,469 Total liabilities, participants’ funds and equity 4,374,613 451,972 2,112,441 144,977 40,427 (988,333) 6,136,097 230 notes to the financial statements (CONT’D) – 31 March 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 FINANCIAL STATEMENTS 39.Significant events The Company, in the previous financial year, had made disclosures on the notices of assessment and notices of additional assessment (i.e. Form J and Form JA) for the years of assessment 2006, 2007, 2008 and 2009, issued by the Inland Revenue Board (“IRB”) to its wholly owned subsidiary Takaful IKHLAS Berhad (“Takaful IKHLAS”), disallowing Family business’ commission expenses as deductions against the earning of wakalah fee income. The additional tax payable by Takaful IKHLAS under the said notices was RM48,982,970. In addition, the IRB had also imposed a penalty of RM22,042,336 as the tax returns by Takaful IKHLAS for those years were regarded as incorrect. Takaful IKHLAS received a confirmation from the Ministry of Finance (“MOF”) subsequently, granting an exemption of tax on the wakalah fee income of the shareholder’s fund received from the family takaful fund for the years of assessment 2004 to 2014. With MOF’s above exemption, the total instalment payments made to date to the IRB which amounted to RM18,239,672 would be receivable from the IRB. This amount has been reduced following the set off made against the tax payable for the previous year of assessment amounting to RM7,323,348. Takaful IKHLAS is currently pursuing the recovery of the remaining balance from the IRB through the Special Commissioners of Income Tax. In addition to the amount receivable from IRB of RM10,916,324, the Takaful IKHLAS had revised the tax computations for years of assessment 2010 to 2014 based on the letter from MOF. This had resulted in tax recoverable of RM12,200,831 from the IRB which had been recognised in the current financial year. Takaful IKHLAS is pursuing this matter with the IRB. 40.Fair values of assets 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 unobservable. MFRS 13 Fair Value Measurement requires similar disclosure requirements as MFRS 7, but extended these requirements 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 Group and of the Company’s assets: 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 The fair values of the Group and Company’s assets are determined as follows: (i) The carrying amounts of financial assets and financial liabilities, such as loans and receivables, insurance/takaful receivables, cash and bank balances, insurance/takaful payables and other payables, are reasonable approximation of their fair values due to the relatively short term maturity of these balances; (ii) The fair values of quoted equities are based on quoted market prices as at the reporting date; (iii) The fair values of Malaysian government securities, government investment issues and unquoted corporate debt securities are based on indicative market prices from the Bond Pricing Agency of Malaysia (“BPAM”); (iv) The fair values of investments in mutual funds, unit trust funds and real estate investment trusts are valued based on the net asset values of the underlying funds as at the reporting date; and (v) Freehold land and buildings and investment property have been revalued based on valuations performed by an accredited independent valuer having an appropriate recognised professional qualification. The valuations are based on the income method. In arriving at the fair value of the assets, the valuer had also taken into consideration the future developments in terms of infrastructure in the vicinity of the properties. 231 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 40.Fair values of assets (cont’d) Description of significant unobservable inputs: Valuation technique Significant unobservable inputs Range Property, plant and equipment Office building Income approach Yield Rental per square foot 6.0% to 6.25% RM4.50 Investment properties Shoplots Income approach Rental per square metre RM2.00 Property, plant and equipment Office building Income approach Yield Rental per square foot 6.0% to 6.5% RM4.50 Investment properties Shoplots Income approach Rental per square metre RM2.00 AFS financial assets Unquoted corporate debt securities Income approach Estimated haircut based on projected performance 45% 2015 2014 A significant increase or decrease in the unobservable inputs used in the valuation would result in a correspondingly higher or lower fair value. There have been no transfers between Level 1 and Level 2 during the financial year. 232 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 40.Fair values of assets (cont’d) As at the reporting date, the Group and the Company held the following assets that are measured and/or disclosed at fair value under Levels 1, 2 and 3 of the fair value hierarchy: Group Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - - 34,000 192,943 34,000 192,943 - - 226,943 226,943 - - 7,100 7,100 3,951 28 133,955 - - 3,951 28 133,955 137,934 - - 137,934 289,064 141 7,836 - 49,478 1,951,026 188,375 - 49,478 1,951,026 289,064 141 7,836 188,375 297,041 2,188,879 - 2,485,920 - 77,817 100,578 537,841 - 77,817 100,578 537,841 - 716,236 - 716,236 2015 Assets measured at fair value: (a) Property, plant and equipment Freehold land Buildings (b) Investment property (c) Financial assets at FVTPL Quoted shares in Malaysia Warrants Shariah approved unit trust funds (d) AFS financial assets Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Quoted shares outside Malaysia Warrants Real estate investment trusts Government investment issues Assets for which fair values are disclosed: HTM investments Malaysian government securities Unquoted corporate debt securities Government investment issues 233 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 40.Fair values of assets (cont’d) Group (cont’d) Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - - 32,260 191,305 32,260 191,305 - - 223,565 223,565 - - 6,900 6,900 7,527 62 131,889 - - 7,527 62 131,889 139,478 - - 139,478 201,485 280 192 6,821 - 29,281 1,833,355 180,698 6,115 - 29,281 1,839,470 201,485 280 192 6,821 180,698 208,778 2,043,334 6,115 2,258,227 2014 Assets measured at fair value: (a) Property, plant and equipment Freehold land Buildings (b) Investment property (c) Financial assets at FVTPL Quoted shares in Malaysia Warrants Shariah approved unit trust funds (d) AFS financial assets Malaysian government securities Unquoted corporate debt securities Quoted shares in Malaysia Quoted shares outside Malaysia Warrants Real estate investment trusts Government investment issues 234 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 40.Fair values of assets (cont’d) Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - 75,558 95,167 529,137 - 75,558 95,167 529,137 - 699,862 - 699,862 Group 2015 RM’000 2014 RM’000 AFS financial assets At beginning of year Unquoted corporate debt securities transferred from Level 2 Reversal of impairment loss Fair value gain Unquoted corporate debt securities transferred to Level 2 6,115 4,990 769 (11,874) Group (cont’d) 2014 Assets for which fair values are disclosed: HTM investments Malaysian government securities Unquoted corporate debt securities Government investment issues Reconciliation of Level 3 fair value hierarchy At end of year - 6,115 6,115 235 notes to the financial statements (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 – 31 March 2015 FINANCIAL STATEMENTS 41.Supplementary information - breakdown of retained profits into realised and unrealised profits or losses The breakdown of the retained profits of the Group and of the Company as at 31 March 2015 into realised and unrealised profits or losses is presented in accordance with the directives issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and 20 December 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. 2014 RM’000 Company 2015 RM’000 2014 RM’000 997,424 4,913 890,944 11,450 245,270 - 267,385 1,502 1,002,337 (3,456) 902,394 (3,923) 245,270 - 268,887 - Less: Consolidation adjustments 998,881 (31,962) 898,471 (35,544) 245,270 - 268,887 - Total retained profits 966,919 862,927 245,270 268,887 Realised and unrealised profits of the Company and its subsidiaries: -Realised -Unrealised Share of accumulated losses from associated companies 236 Group 2015 RM’000 ANALYSIS OF SHAREHOLDINGS //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 AS AT 28 JULY 2015 SHARE CAPITAL Authorised Capital : RM500,000,000 ordinary shares Issued and Fully Paid-up Capital : 213,069,500 ordinary shares of RM1.00 each No. of shareholders : 5,652 Class of Shares : RM1.00 ordinary shares Voting Rights : 1 vote per ordinary share ANALYSIS BY SIZE OF SHAREHOLDINGS Share Capital Size of Shareholdings No. of Holders Shareholders Percentage of Shareholders No. of Shares (%) Less than 100 Percentage of Share Capital (%) 305 5.40 2,813 0.00 100 – 1,000 1,895 33.53 1,618,387 0.76 1,001 – 10,000 2,501 44.25 11,075,651 5.20 10,001 – 100,000 809 14.31 26,445,100 12.41 100,001 to less than 5% of issued shares 140 2.48 48,125,449 22.59 2 0.03 125,802,100 59.04 5,652 100.00 213,069,500 100.00 5% and above of issued shares Total LIST OF SUBSTANTIAL SHAREHOLDERS (5% AND ABOVE) AS AT 28 JULY 2015 No. Name of Substantial Shareholders 1 AMANAHRAYA TRUSTEES BERHAD <SKIM AMANAH SAHAM BUMIPUTERA> 2 PERMODALAN NASIONAL BERHAD Shareholdings Percentage (%) 98,617,000 46.28 27,185,100 12.76 LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 28 JULY 2015 No. Name of Shareholders 1 AMANAHRAYA TRUSTEES BERHAD <SKIM AMANAH SAHAM BUMIPUTERA> 2 3 No. of Shares Percentage (%) 98,617,000 46.28 PERMODALAN NASIONAL BERHAD 27,185,100 12.76 AMANAHRAYA TRUSTEES BERHAD <AMANAH SAHAM MALAYSIA> 2,300,000 1.08 237 ANALYSIS OF SHAREHOLDINGS (CONT’D) AS AT 28 JULY 2015 //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 28 JULY 2015 (CONT’D) No. Name of Shareholders 4 JOHAN ENTERPRISE SDN. BHD. 5 No. of Shares Percentage (%) 2,230,000 1.05 CITIGROUP NOMINEES (ASING) SDN BHD <CBNY FOR DIMENSIONAL EMERGING MARKETS VALUE FUND> 1,702,600 0.80 6 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD <PLEDGED SECURITIES ACCOUNT FOR SHANMUGAM A/L THOPPALAN (8069535)> 1,694,800 0.80 7 HSBC NOMINEES (TEMPATAN) SDN BHD <HSBC (M) TRUSTEE BHD FOR AMB ETHICAL TRUST FUND (4256)> 1,556,300 0.73 8 MAYBANK NOMINEES (ASING) SDN BHD <EXEMPT AN FOR DBS BANK LIMITED (CLIENT A/C)> 1,545,000 0.73 9 HONG LEONG ASSURANCE BERHAD <AS BENEFICIAL OWNER (S’HOLDERS NPAR)> 1,191,449 0.56 10 NEOH CHOO EE & COMPANY, SDN. BERHAD 1,080,000 0.51 11 CITIGROUP NOMINEES (ASING) SDN BHD <CBNY FOR EMERGING MARKET CORE EQUITY PORTFOLIO DFA INVESTMENT DIMENSIONS GROUP INC> 958,900 0.45 12 HSBC NOMINEES (TEMPATAN) SDN BHD <HSBC (M) TRUSTEE BHD FOR PERTUBUHAN KESELAMATAN SOSIAL (UOB AMM6939-406)> 930,000 0.44 13 HSBC NOMINEES (ASING) SDN BHD <EXEMPT AN FOR THE BANK OF NEW YORK MELLON (MELLON ACCT)> 875,900 0.41 14 CIMB GROUP NOMINEES (TEMPATAN) SDN BHD <CIMB COMMERCE TRUSTEE BERHAD-AMB SMALLCAP TRUST FUND> 850,300 0.40 15 PUBLIC NOMINEES (TEMPATAN) SDN BHD <PLEDGED SECURITIES ACCOUNT FOR LIM HOCK FATT (E-SS2)> 850,000 0.40 16 CITIGROUP NOMINEES (ASING) SDN BHD <CBNY FOR DFA EMERGING MARKETS SMALL CAP SERIES> 811,400 0.38 17 THONG SU-F’NG 644,200 0.30 18 HSBC NOMINEES (ASING) SDN BHD <TNTC FOR LSV EMERGING MARKETS SMALL CAP EQUITY FUND, LP> 629,900 0.30 19 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD <PLEDGED SECURITIES ACCOUNT FOR CHONG YIEW ON (6000006)> 626,600 0.29 20 AFFIN HWANG NOMINEES (TEMPATAN) SDN. BHD. <UOB KAY HIAN PTE LTD FOR RAJ KUMAR A/L R GOPAL PILLAI (MARGIN)> 606,500 0.28 21 HLB NOMINEES (TEMPATAN) SDN BHD <PLEDGED SECURITIES ACCOUNT FOR GOH CHU YONG> 602,500 0.28 22 NAHOORAMMAH A/P SITHAMPARAM PILLAY 580,000 0.27 238 ANALYSIS OF SHAREHOLDINGS (CONT’D) //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 AS AT 28 JULY 2015 LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 28 JULY 2015 (CONT’D) No. Name of Shareholders No. of Shares 23 CHUA HIN BEE 550,000 0.26 24 HONG LEONG ASSURANCE BERHAD <AS BENEFICIAL OWNER (LIFE PAR)> 550,000 0.26 25 LEE KOK HAI 521,700 0.24 26 GAN KHO @ GAN HONG LEONG 513,000 0.24 27 MAYBANK NOMINEES (TEMPATAN) SDN BHD <PLEDGED SECURITIES ACCOUNT FOR NG CHEE SIONG> 468,000 0.22 28 LEONG SOO HA @ LEONG CHOON YIN 451,000 0.21 29 HA SAU KIN 426,900 0.20 30 MENG HIN HOLDINGS SDN BHD 409,300 0.19 151,958,349.00 71.32 Total Percentage (%) MNRB HOLDINGS BERHAD INFORMATION ON DIRECTORS’ SHAREHOLDINGS AS AT 28 JULY 2015 No. Name of Directors Shareholdings Percentage (%) 1 Sharkawi Alis - - 2 Mohd Din Merican - - 3 P. Raveenderen 10,000 0.00 4 Dato’ Syed Ariff Fadzillah Syed Awalluddin - - 5 Yusoff Yaacob - - 6 Megat Dziauddin Megat Mahmud - - 7 Paisol Ahmad - - 8 Hijah Arifakh Othman - - CATEGORY OF SHAREHOLDERS AS AT 28 JULY 2015 Type of Ownership Government Agencies Shareholders Percentage (%) Shareholdings Percentage (%) 1 0.02 10 0.00 4,852 85.84 46,645,368 21.89 Companies 118 2.09 137,986,949 64.76 Nominees Company 681 12.05 28,437,173 13.35 5,652 100.00 213,069,500 100.00 Individual Grand Total 239 LIST OF PROPERTIES //MNRB HOLDINGS BERHAD //ANNUAL REPORT 2015 31 MARCH 2015 Net Book Value as at 31/3/2015 (RM) Date of Revaluation No. 15, Jalan Sri Hartamas 7 Taman Sri Hartamas 50480 Kuala Lumpur 14 July 1984 31 March 2015 1 unit of 4 storey shophouse Freehold/rented out/31 years 1,600/6,150 3,500,000 No. 17, Jalan Sri Hartamas 7 Taman Sri Hartamas 50480 Kuala Lumpur 14 July 1984 31 March 2015 1 unit of 4 storey shophouse Freehold/rented out/31 years 1,600/6,150 3,600,000 Address Description of Properties Tenure/Existing Land Area (sq.ft.) Use/Age of Build-Up Area Buildings (sq.ft.) Date of Acquisition Investment Properties Total Investment Properties 7,100,000 Self Occupied Properties Ikhlas Point, Tower 11 Avenue 5, Bangsar South No. 8, Jln Kerinchi 59200 Kuala Lumpur 22 December 2008 10 March 2015 1 unit of 11 storey intermediate office building Leasehold/ office premise/ rented out/ 7 years strata 37,562,000 Ikhlas Point, Tower 11A Avenue 5, Bangsar South No. 8, Jln Kerinchi 59200 Kuala Lumpur 19 November 2008 10 March 2015 1 unit of 10 storey corner office building Leasehold/ office premise/ occupied/ 7 years strata 66,560,000 No. 17, Lorong Dungun Damansara Heights 50490 Kuala Lumpur 17 February 1995 31 March 2015 1 unit of 12 storey building with 2 storey basement car park Freehold/ office premise/ rented out/ 20 years 61,300/ 366,409 115,300,000 Lot 528, Section 6 Kuching Town Land District No. 11C, Jalan Kulas 93732 Kuching, Sarawak 7 September 2010 10 March 2015 4 Storey intermediate terraced shophouse Leasehold/ office premise/ occupied/5 years Not applicable/ 1,200 1,800,000 Manchester Tower Apartment 2406, Dubai Marina Dubai, UAE 28 July 2008 31 March 2014 1 unit of apartment Freehold/ occupied by staff/ 7 years Not applicable/ 1,011 1,408,000 Apt. 507 Marina Diamond 5 Dubai Marina Dubai, UAE 29 July 2008 31 March 2014 1 unit of apartment Freehold/ occupied by staff/ 7 years Not applicable/ 1,084 1,555,000 Yansoon 4, Apartment 204 Burj Khalifa, Dubai Downtown, UAE 30 September 2010 31 March 2014 1 unit of apartment Freehold/ occupied by staff/ 5 years Not applicable/ 1,475 1,758,000 10 March 2015 3 storey shophouse Leasehold/ office premise/ occupied/2 years Not applicable/ 4,680 1,000,000 Pejabat Wilayah Kelantan 31 January 2013 PT 483, Jalan Jambatan Sultan Yahya KB waterfront, Seksyen 17 15000 Kota Bahru, Kelantan Total Self Occupied Properties 240 226,943,000 (13487-A) Proxy Form No. of Shares Held I/We of being a member/members of MNRB HOLDINGS BERHAD hereby appoint of or failing him of as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at the Auditorium, 3rd Floor, Bangunan Malaysian Re, No. 17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur on Wednesday, 30 September 2015 at 2.00 p.m. and at any adjournment thereof, on the following resolutions referred to in the Notice of Annual General Meeting. NO. RESOLUTIONS FOR AGAINST ORDINARY BUSINESS 1. To re-elect Yusoff Yaacob, who retires pursuant to Article 86 of the Company’s Articles of Association 2. To re-elect Paisol Ahmad, who retires pursuant to Article 86 of the Company’s Articles of Association 3. To re-elect Hijah Arifakh Othman, who retires pursuant to Article 92 of the Company’s Articles of Association 4. To approve the payment of Directors’ fees 5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration 6. To approve the continuing in office of Yusoff Yaacob as an Independent Non-Executive Director 7. To approve the continuing in office of Megat Dziauddin Megat Mahmud as an Independent Non-Executive Director SPECIAL BUSINESS 8. To re-appoint P. Raveenderen, who retires pursuant to Section 129 of the Companies Act, 1965 (Please indicate with a cross (X) in the space provided whether you wish your votes to be cast for or against the resolutions above. In the absence of specific instructions, your proxy will vote or abstain as he/they may think fit.) Dated day of 2015. Signed NOTE A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote in his behalf. A proxy need not be a member of the Company. A member may appoint not more than two (2) proxies to attend the meeting provided the member shall specify in each proxy the proportion of the member’s shareholdings to be represented by each proxy and only one (1) proxy shall be entitled to vote on a show of hands. Where a member is an exempt authorised nominee, who holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An instrument appointing a proxy(ies) shall be in writing, and in the case of an individual shall be signed by the appointer or by his attorney duly authorised in writing, and in the case of a Corporation shall be either given under its common seal or signed on its behalf by its attorney or an officer of the Corporation so authorised. An instrument appointing a proxy(ies) must be deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, not less than forty-eight (48) hours before the time set for the Annual General Meeting or any adjournment thereof. Only members registered in the Record of Depositors as at 21 September 2015 shall be eligible to attend the AGM or appoint proxy(ies) to attend and vote on his/her behalf. 1st FOLD Please affix Stamp Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor 2nd FOLD 12th Floor, Bangunan Malaysian Re No. 17, Lorong Dungun, Damansara Heights 50490 Kuala Lumpur Tel : (603) 2096 8000 Fax : (603) 2096 7000 Email : [email protected] www.mnrb.com.my