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M P I G E N E R A L I I N S U R A N S B E R H A D (14730-X) (Incorporated in Malaysia)
Directors’ Report and Audited Financial Statements 31 December 2018
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Contents Page
Directors' report 1 - 20
Statement by directors 21
Statutory declaration 21
Independent auditors' report 22 - 25
Statements of financial position 26
Income statements 27
Statements of comprehensive income 28
Statements of changes in equity 29 - 30
Statements of cash flows 31 - 33
Notes to the financial statements 34 - 140
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Directors' report
Principal activity
Results
Group Company
RM'000 RM'000
Net profit for the year 33,081 29,360
Profit attributable to:
Equity holder of the Company 29,163 29,360
Non-controlling interests 3,918 - 33,081 29,360
Dividend
The Directors have pleasure in presenting their report together with the audited financial
statements of the Group and the Company for the financial year ended 31 December 2018.
The Company is principally engaged in underwriting general insurance business.
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.
No dividend has been declared or paid by the Company since the end of the previous financial
year. The directors do not recommend the payment of any dividends in respect of the current
financial year.
The principal activities of the subsidiaries or wholesale unit trust funds are investments in fixed
income instruments and money market instruments.
Other information relating to the subsidiaries are disclosed in Note 6(c) to the financial
statements.
1
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Board of Directors (the "Board")
Mohd Azlan bin Mohammed Independent Non-Executive Chairman
Kheoh And Yeng Non-Independent Executive Director
Datuk Tan Leh Kiah Independent Non-Executive Director
Tam Chiew Lin Independent Non-Executive Director
Jennifer Susan Sparks Non-Independent Non-Executive Director
Profile of Directors
The following are the profile of the Directors of the Company:
MOHD AZLAN BIN MOHAMMED
Independent Non-Executive Chairman
KHEOH AND YENG
Non-Independent Executive Director
The names of the directors of the Company in office since the beginning of the financial year to
the date of this report are:
Ms Kheoh And Yeng was appointed to the Board of the Company as a Non-Independent Non-
Executive Director on 30 May 2006. Ms Kheoh was re-designated as a Non-Independent
Executive Director on 30 May 2017. Ms Kheoh obtained a Bachelor of Commerce (Hons) from
the University of Manitoba, Canada in 1979 and a Master of Business Administration from the
University of Windsor, Canada in 1981.
Ms Kheoh is currently the Chief Executive Officer ("CEO") of MPHB Capital Berhad (“MPHB
Capital”) and she is responsible for ensuring the effective control of the general management and
operation of MPHB Capital, and developing and implementing the overall business strategies and
direction of MPHB Capital. Prior to that, she was the Chief Operating Officer (“COO”) of MPHB
Capital from 14 May 2013 to 17 November 2016. During her tenure as COO of MPHB Capital,
she was responsible for the overall management of the operations of the MPHB Capital Group.
Encik Mohd Azlan bin Mohammed was appointed to the Board of the Company as an
Independent Non-Executive Director on 15 August 2014. On 7 May 2015, he was appointed as
an Independent Non-Executive Chairman of the Company. Encik Mohd Azlan holds a Bachelor of
Arts Degree (Honours) majoring in Accounting and Business.
Encik Mohd Azlan is currently the Managing Director of Wasco Oilfield Services Sdn Bhd
(“Wasco”) which is principally involved in the provision of oil and gas services. He is responsible
for overseeing the business operations of Wasco. He is currently a director of various
subsidiaries of Wah Seong Corporation Berhad, a subsidiary of Ancom Berhad, and several
private limited companies in Malaysia.
2
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Profile of Directors (cont'd.)
The following are the profile of the Directors of the Company (cont'd.):
KHEOH AND YENG (CONT'D.)
Non-Independent Executive Director
DATUK TAN LEH KIAH
Independent Non-Executive Director
TAM CHIEW LIN
Independent Non-Executive Director
Datuk Tan Leh Kiah was appointed to the Board of the Company on 7 May 2015. He is a
consultant with Azman, Davidson & Co, a law firm. He was the Managing Partner from 1986 to
2008. He is a fellow of the Malaysian Institute of Chartered Secretaries and Administrators
(MAICSA) and an associate of the Chartered Tax Institute of Malaysia. He is also a solicitor of
the Supreme Court of England and Wales.
Datuk Tan possesses considerable experience in corporate and tax matters. He has advised on
business structures and takeovers and mergers, particularly from the aspect of tax efficiency. He
also appears regularly before the Special Commissioners of Income Tax and the superior court
on tax and company law matters. He was a member of the Securities Commission from 1999 to
2018.
Ms Kheoh was a Senior Manager at Hong Leong Bank Berhad before joining Magnum and
throughout her twelve (12) years of banking experience, she was principally involved in various
areas.
Ms Kheoh was managing a leasing and hire purchase company prior to joining Hong Leong Bank
Berhad.
Prior to joining MPHB Capital in May 2013, she was the COO of Magnum Berhad (“Magnum”).
She joined Magnum as General Manager in 2002 and was subsequently promoted to Senior
General Manager in 2003 before assuming the position of Chief Operating Officer in 2007 until
May 2013.
Madam Tam was appointed as an Independent Non-Executive Director of the Company on 7
May 2015. She is a Fellow of the Institute of Chartered Accountants in England and Wales, a
Chartered Accountant of the Malaysian Institute of Accountants and Public Accountant of the
Malaysian Institute of Certified Public Accountants. She also holds a Diploma in Applied
International Management from the Swedish Institute of Management and a Postgraduate
Certificate in Banking and Finance from the University of Wales, Bangor.
3
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Profile of Directors (cont'd.)
The following are the profile of the Directors of the Company (cont'd.):
TAM CHIEW LIN (CONT'D.)
Independent Non-Executive Director
JENNIFER SUSAN SPARKS
Non-Independent Non-Executive Director
External professional Commitments
Tenure of independent Director
Ms. Jenni Sparks was appointed to the Board of the Company on 26 September 2016. She holds
a Bachelor of Science with First Class Honours in Applied Mathematics from the University of
Adelaide. She is also a Fellow of the Institute of Actuaries of Australia.
Ms. Jenni Sparks is currently the Regional Chief Financial Officer, Asia of Assicurazioni Generali
S.p.A (“Generali”). She drives the regional finance and accounting operations as well as
monitors the financial management of Generali’s businesses in Asia.
Ms. Jenni Sparks has over 30 years of international experience in insurance and financial
services across Australia, Japan and Korea. Prior to joining Generali, she was the Chief
Executive Officer of Hartford Life Insurance KK. Between 2003 and 2011, she held various senior
management positions within AIG, including Chief Financial Officer for AIG Edison Life in Japan
and Regional Controller for AIG Life companies in Japan and Korea.
None of the Directors holds more than 25 directorships (including the directorship in the
company).
The maximum tenure of service of an Independent Director of the Company shall not exceed
nine (9) years.
Currently, Madam Tam also sits on the Board of JAB Capital Berhad (formerly known as Jerneh
Asia Berhad) and PPB Group Berhad.
Madam Tam was the Managing Director of the Jerneh Asia Berhad from 2005 until her retirement
in 2012. Prior to joining the Jerneh group, she held various positions in the IMC group of
companies from 1991 to 2000.
4
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Directors' interest
As at As at
1.1.2018 Acquired Disposed 31.12.2018
Ultimate Holding Company
MPHB Capital Berhad
("MPHB Capital")
Direct interest:
Kheoh And Yeng 464,400 - - 464,400
Datuk Tan Leh Kiah 220,000 30,000 30,000 220,000
Indirect interest:
Datuk Tan Leh Kiah (a) 80,000 - - 80,000
Note:
(a)
Directors' benefits
Deemed interest by virtue of Section 8(4) of the Companies Act 2016 held through his
shareholdings of more than 20% interest in AD Consult Sdn Bhd.
According to the register of directors' shareholdings, the interests of directors in office at the end
of the financial year in shares in the Company and its related corporations during the financial
year were as follows:
Number of Ordinary Shares
Other than as disclosed above, none of the directors in office at the end of the financial year had
any interest in shares in the Company or its related corporations during the financial year.
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 directors might acquire benefits by
means of the acquisition of shares in, or debentures of, the Company or any other body
corporate.
Since the end of the previous financial year and at the date of this report, no director has
received or become entitled to receive a benefit (other than benefits included in the aggregate
amount of emoluments received or due and receivable by directors as shown in Notes 23 and 28
to the financial statements) by reason of a contract made by the Company or a related
corporation with any director or with a firm of which he is a member or with a company in which
he has a substantial financial interest.
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Indemnification of Directors
Corporate governance
(i) Board responsibility and oversight
(i)
(ii)
The Company, through its ultimate holding company, MPHB Capital Berhad has maintained on a
group basis, a Directors’ and Officers’ Liability Insurance in respect of any legal action taken
against or legal liability incurred by the Directors and Officers in the discharge of their duties
while holding office for the Company.
The Directors and Officers shall not be indemnified by such insurance for any deliberate
negligence, fraud, intentional breach of law or breach of trust proven against them.
The total amount of insurance coverage effected for any Director and Officer of the Company
during the financial year was RM20,000,000. The premium paid for the policy was RM18,000.
The Company has adopted the management practices that are consistent with the principles
prescribed under Policy Document on Corporate Governance issued by Bank Negara Malaysia
("BNM").
The membership roles and terms of reference of the Board, Audit Committee, Risk Management
Committee, Nominating Committee and Remuneration Committee of the Company are as
follows:
The Board of the Company has the overall responsibility of promoting the sustainable growth
and financial soundness of the Company and ensuring reasonable standards of fair dealing,
without undue influence from any party. This includes a consideration of the long-term
implications of the Board’s decisions on the Company and its customers, officers and the
general public.
In fulfilling the above role, the Board shall assume, among others, the following
responsibilities:
setting and overseeing the implementation of business and risk strategies of the
Company and in doing so, the Board shall have regard to the long term financial
soundness of the Company and reasonable standards of fair dealing;
ensuring and overseeing the effective design and implementation of sound internal
controls, compliance and risk management systems that commensurate with the
nature, scale and complexity of the business and structure of the Company, including
ensuring that all control functions and internal audit have the proper authority and are
adequately staffed and resourced;
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(i) Board responsibility and oversight (cont'd.)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
overseeing the implementation of the Company’s governance framework and internal
control framework, and periodically review whether these remain appropriate in the
light of material changes to the size, nature and complexity of the Company’s
operations;
ensuring that there is a reliable and transparent financial reporting process within the
Company and consider all relevant risk, including non-quantifiable risk;
overseeing the selection, performance, remuneration and succession plans of the
Chief Executive Officer, control function heads and other members of senior
management, such that the Board is satisfied with the collective competence of senior
management to effectively lead the operations of the Company;
promoting sustainability through appropriate environmental, social and governance
considerations in the Company’s business strategies;
overseeing and approving the recovery and resolution as well as business continuity
plans for the Company to restore its financial strength, and maintain or preserve
critical operations and critical services when it comes under stress;
establishing and regularly review succession plans for the Board to promote Board
renewal and address any vacancies; and
promoting timely and effective communications between the Company and BNM on
matters affecting or that may affect the safety and soundness of the Company.
overseeing the performance of the senior management in managing the business and
affairs of the Company to ensure that the business and affairs of the Company are
being properly and competently managed. These include ensuring the solvency of the
Company and the ability of the Company to meet its contractual obligations and to
safeguard its assets, and setting clear expectations for senior management to ensure
the integrity of the essential reporting and monitoring systems;
Reviewing and approving the risk appetite, business plans and other initiatives which
will, singularly or cumulatively, have a material impact on the Company’s risk profile,
financial soundness, reputation or key operational controls of the Company, including
taking appropriate steps to ensure that business and operational decisions are aligned
with the risk appetite set;
promoting, together with senior management, a sound corporate culture within the
Company which reinforces ethical, prudent and professional behavior; and
establishing the tone at the top.
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(ii) Financial reporting
(iii) Membership and meetings of the committees
Risk
Board of Audit Nominating Remuneration Management
Directors Committee Committee Committee Committee
Encik Mohd Azlan Chairman Member - Member -
bin Mohammed 8/86/6 7/7 4/4
Ms Kheoh And Member - - - -
Yeng 8/86/6
Datuk Tan Leh Member Member Chairman Member Chairman
Kiah 8/86/6 7/7 4/4 4/4 6/6
Madam Tam Member Chairman Member Chairman Member
Chiew Lin 8/84/4 7/7 4/4 4/4 6/6
Ms Jennifer Member - Member - Member
Susan Sparks 8/82/2 4/4 6/6
(iv) Training attended
(i)
(ii)
The Directors will continue to undergo relevant training programmes to upgrade themselves
to effectively discharge their duties as Directors.
Details of the training attended by the Directors during the financial year are set out below:-
World Capital Markets Symposium KL - Renaissance of Capitalism: Markets for
Growth;
The composition of the Committees, meetings held and attendance of directors at meetings
during the financial year ended 31 December 2018 are as follows:
The Changing Role of Company’s Board & Its Members In The Wake of the new CG
Code’;
The Company maintains proper accounting records and the financial statements are
prepared in accordance with Malaysian Financial Reporting Standards, International
Financial Reporting Standards, the requirements of Companies Act, 2016 and the Financial
Services Act 2013, in Malaysia.
Attendance/Number of Meetings
8
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(iv) Training attended (cont'd.)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
(xx)
Financial Institutions Directors’ Education Programme entitled “Understanding Fintech
and its Implications for Banks;
Business Foresight Forum (BFF) 2018;
Corporate liability under the Malaysia Anti-Corruption Commission (Amendment) Act
2018;
Asian Confederation of Institutes of Internal Auditors Conference 2018;
Power Talk – Effective Boards in a VUCA World;
Malaysia in transition : Policy challenges and opportunities;
Digital transformation and navigating through its disruptive nature;
The 8th Annual Malaysia Roundtable-Global Pensions and Investments : Impact of
Fintech and the Emerging Landscape;
Breakfast Series for Directors of Public Listed Companies: Non-Financials-Does it
Matter?
Review of Strategic Planning by Directors-Bursa Requirements;
Seminar Percukaian Kebangsaan 2018-Lembaga Hasil Dalam Negeri;
Briefing on MFRS 9 Financial Instruments;
Sustainability Engagement Series for Directors/Chief Executive Officer;
Actuarial Conference by the Actuaries Institute Australia;
InsureTech Conference by Asia Insurance Review;
Conference on Chief Financial Officer of the Future;
Conference on IFRS17; and
Conference on FinTech and Innovation.
9
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(v) Responsibilities of the Committees
The duties and responsibilities of the Committees are as follows:
Audit Committee
(i)
(ii)
- reviewing and approving the audit scope, procedures and frequency;
-
-
-
(iii)
-
-
-
making recommendations to the Board on the appointment, removal and
remuneration of the external auditor;
exercising oversight over the external auditor, which include the following:
monitoring and assessing the effectiveness of the external audit, including
meeting with the external auditor without the presence of senior management at
least annually;
monitoring and assessing the independence of the external auditor including
approving the provision of non-audit services by the external auditor;
The Audit Committee is a committee of the Board with the function of assisting the Board in
fulfilling its oversight responsibilities. The Audit Committee reviews the Company’s financial
reporting process, the system of internal control and management of risk, the audit process
and the Company’s process for monitoring compliance with laws and regulations, and such
other matters which may be delegated by the Board.
The duties and responsibilities of the Audit Committee includes the following:
supporting the board in ensuring that there is a reliable and transparent financial
reporting process within the Company;
establishing a mechanism to assess the performance and effectiveness of the
internal audit function.
noting significant disagreements between the chief internal auditor and the rest
of the senior management team, irrespective of whether these have been
resolved, in order to identify any impact the disagreements may have on the
audit process or findings, if any; and
overseeing the effectiveness of the internal audit function which include the following:
reviewing key audit reports and ensuring that senior management is taking
necessary corrective actions in a timely manner to address control weaknesses,
non-compliance with laws, regulatory requirements, policies and other problems
identified by the internal audit and other control functions;
10
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(v) Responsibilities of the Committees (cont'd.)
The duties and responsibilities of the Committees are as follows (cont'd.):
Audit Committee (cont'd.)
-
-
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
Nominating Committee ("NC")
The NC is responsible for:
(i)
ensuring that supervisory issues raised by Bank Negara Malaysia are resolved in a
timely manner.
reviewing and updating the Board on all related party transactions;
ensuring that the Company's accounts are prepared in a timely and accurate manner
for regulatory, management and general reporting purposes, with regular reviews
carried out on the adequacy of provisions made; and
monitoring compliance with the Board’s conflicts of interest policy;
ensuring that senior management is taking necessary corrective actions in a
timely manner to address external audit findings and recommendations.
maintaining regular, timely, open and honest communication with the external
auditor, and requiring the external auditor to report to the board audit committee
on significant matters; and
reviewing the accuracy and adequacy of the directors’ report and corporate
governance disclosures in relation to the preparation of financial statements;
reviewing third-party opinions on the design and effectiveness of the Company’s
internal control framework;
reviewing any conflicts of interest situations that may arise within the Company
including any transaction, procedure or conduct that raises questions of management
integrity;
ensuring that the Company complies with Bank Negara Malaysia’s Policy Document
on Financial Reporting which requires the Company to publish its accounts within 14
days of the laying of its accounts at its annual general meeting;
establishing the procedure and requirements for appointment and removal of
Directors and key senior officers of the Company;
11
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(v) Responsibilities of the Committees (cont'd.)
The duties and responsibilities of the Committees are as follows (cont'd.):
Nominating Committee ("NC") (cont'd.)
(ii)
(iii)
-
-
-
(iv)
(v)
(vi)
(vii)
assessing the independence of Independent Directors;
the proposed re-election/re-appointment of Directors prior to tabling to the
shareholders for approval at the Annual General Meeting of the Company,
which includes conducting assessments on the fitness, probity and propriety of
the proposed candidates, Directors, CEO, key senior officers and Company
Secretary;
the proposed re-appointment of Directors and CEO before application for
approval is submitted to Bank Negara Malaysia (“BNM”); and
the nominees to be appointed to the Board and nominees for the positions of
Chief Executive Officer (“CEO”), key senior officers and Company Secretary;
overseeing the overall composition of the Board in terms of the appropriate size and
skills, the balance between executive directors, non-executive directors and
independent directors, and mix of skills and other core competencies or skill sets
required by the directors, and also ensuring that the Board composition is in
compliance with the requirements as set out in paragraph 11 of Bank Negara
Malaysia’s Policy Document on Corporate Governance (“Policy Document on
Corporate Governance”) through annual reviews;
assessing and recommending to the Board:
assessing and recommending to the Board on removal of a Director and Company
Secretary, if he/she no longer meets the requirements as set out in the Policy
Document on Corporate Governance, the Financial Services Act, 2013 (“FSA”) and
other regulatory requirements (where applicable), or if he/she is ineffective, errant or
otherwise unsuited to carry out his/her responsibilities;
establishing a mechanism for formal assessment and assessing the effectiveness of
the Board as a whole, the contribution by each Director to the effectiveness of the
Board, the contribution/performance of the various Board committees and the
performance of the CEO or key senior officers;
reporting its recommendations/findings to the Board on the effectiveness of the Board
as a whole, the contribution by each Director to the effectiveness of the Board, the
contribution/performance of the various Board committees and the performance of
the Chief Executive Officer or key senior officers;
12
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(v) Responsibilities of the Committees (cont'd.)
The duties and responsibilities of the Committees are as follows (cont'd.):
Nominating Committee ("NC") (cont'd.)
(viii)
(ix)
Remuneration Committee ("RC")
The RC is also responsible for:
(i)
-
-
(ii)
(iii)
- be based on an objective consideration and approved by the Board;
-
reviewing and recommending to the Board for approval of the overall remuneration
framework/policy of the Company;
take due consideration of the assessments of the Nominating Committee of the
effectiveness and contribution of the Director, CEO and key senior officers
concerned;
reviewing and recommending to the Board for approval/adoption of any major
changes in employees’ benefit structures throughout the Company;
ensuring that all directors undergo appropriate training programmes and receive
continuous training; and
reviewing and recommending to the Board for approval/adoption of the policy or
framework for the Company’s annual employees’ incentive scheme which may
include merit increment, merit bonus and other incentives.
overseeing the appointment, management succession planning and performance
evaluation of CEO or key senior officers, and recommending to the Board the removal
of CEO or key senior officers or company secretary, if he/she no longer meets the
minimum requirements set out in the Policy Document on Corporate Governance, the
FSA and other regulatory requirements, or has been assessed to be ineffective, errant
or otherwise unsuited to carry out his/her responsibilities.
The RC is responsible to recommend to the Board a framework of remuneration structure for
the Directors, CEO and employees of the Company.
supporting the Board in overseeing the design and operation of the Company’s
remuneration system, which shall include the following:
reviewing and recommending to the Board the specific remuneration packages for
Directors, CEO, key senior officers and other material risk takers of the Company.
The remuneration packages should:
13
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(v) Responsibilities of the Committees (cont'd.)
The duties and responsibilities of the Committees are as follows (cont'd.):
Remuneration Committee ("RC") (cont'd.)
-
-
(iv)
Risk Management Committee ("RMC")
The RMC is responsible for:
(i)
(ii)
(iii)
(iv)
(v)
carrying out periodic review of the remuneration of Directors, particularly on whether
their remuneration remains appropriate to each Director’s contribution, taking into
account the level of expertise, commitment and responsibilities undertaken.
Support the Board in ensuring that the Company’s corporate objectives are supported
by a sound risk strategy and an effective risk management framework (the Company's
risk map includes compliance risk as one of its operational risks and any mention of
risk management includes compliance risk management) that is appropriate to the
nature, scale and complexity of its activities;
reviewing and assessing management’s implementation of risk strategy and obtaining
assurance that the organisational units are operating within the parameters of the
Company’s risk appetite;
not to be decided by the exercise of the sole discretion of any one individual or
restricted group of individuals; and
be competitive and is consistent with the Company’s culture, objective and
strategy.
The RC must regularly review and approved the list of officers who fall within the
definition of “other material risk takers”;
reviewing and recommending the Company’s risk management strategies, policies
and risk tolerance and risk strategy (including the risk appetite) for the Board's
approval and oversee the implementation thereof;
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;
reviewing and assessing the Company’s risk appetite regularly to ensure that it
continues to be relevant and reflects any changes in the Company’s capacity to take
on risk, its inherent risk profile, as well as market and macroeconomic conditions;
14
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Corporate governance (cont'd.)
(v) Responsibilities of the Committees (cont'd.)
The duties and responsibilities of the Committees are as follows (cont'd.):
Risk Management Committee ("RMC") (cont'd.)
(vi)
(vii)
(viii)
Remuneration policy
Scope of remuneration policy
ensuring adequate infrastructure, resources and systems are in place for an effective
risk management systems i.e. ensuring that the staff responsible for implementing risk
management systems perform those duties independently of the Company's risk
taking activities;
Meeting periodically to ensure effective exchange of information and reviewing
management’s periodic reports on risk exposure, risk portfolio composition and risk
management activities; and
assisting the Board in the implementation of a sound remuneration system, examining
whether the incentives provided by the Company’s remuneration system take into
consideration of risks, capital, liquidity and the likelihood and timing of earnings,
without prejudice to the tasks of the Remuneration Committee.
The objective of the remuneration policy is to facilitate the attraction, engagement and retention
of suitable employees of relevant capabilities and to provide the necessary skills and experience
as required and commensurate with the responsibilities for the effective management and
operations of the Company. In addition, it seeks to be balanced to ensure the proper
management of the Company’s funds and is not excessive nor creates incentive for imprudent,
unsustainable or unethical behaviour in managing the Company. It takes into account the
Company’s corporate culture and values, business objective and strategy as well as its the long-
term interests.
The scope of this policy applies to the Company, which operates its business only in Malaysia,
and to its employees.
15
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Remuneration policy (cont'd.)
Remuneration components and structure
The Company's integrated remuneration structure is made up of three components:
Internal control and risk management framework
(i)
(ii)
(iii) Internal Audit, which represents the third line of defence.
The operating functions (the “Risk Owners”), which represent the first line of defence and
have ultimate responsibility for management of risks relating to their area of
expertise/operations;
Actuarial, Compliance, and Risk Management Functions, which represent the second line of
defence; and
The key feature of the policy is that remuneration is focused on being competitive in the
insurance industry and will reinforce desired characteristics in the Company. The remuneration
has a fixed component and a variable component. The fixed component consists of fixed basic
salaries, allowances and other benefits which commensurate with the employee’s position and
scope of responsibilities while the variable component (typically a variable cash bonus) considers
the performance of the Company against the criteria set and the performance of the individual.
The Company’s performance metrics are determined by the Board as appropriate. These metrics
are used to determine the Company’s performance, as to whether it is strong, acceptable or
weak as well as the corresponding impact on variable remuneration for employees. An
employee’s variable remuneration is influenced significantly by the Company’s performance
metrics. As such, should the Company perform well, an employee’s variable remuneration will
increase and vice versa.
An individual’s performance and contribution is focused on appropriate measures based on their
role. This may include financial performance, operating efficiency and effectiveness, customer
experience, compliance, managerial effectiveness and people metrics. As appropriate,
employees with control functions are measured differently in determining their individual
performance. Their individual performance does not take into account revenue or financial
measures. Depending on their role, they may be measured on the effectiveness of the control
measures they are responsible for.
In considering the variable compensation component, which is typically a variable cash bonus or
short term incentive, the performance of the company and the performance of the individual are
key components used to determine the amount of variable compensation to an individual
employee.
The Company’s internal control and risk management system consists of the policies,
administrative and accounting procedures and organisational structures aimed at identifying,
measuring, managing, and monitoring the main risks. It is based on the three lines of defence
model:
16
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Internal control and risk management framework (cont'd.)
(i) Internal control environment
(ii) Internal control activities
(iii) Awareness
All employees are required to be:
- Aware of their role in the internal control system;
-
-
Control activities are set up throughout the organization, at all levels and in the business
functions. The control activities include approvals, authorizations, verifications,
reconciliations, reviews of operating performance, security of assets. Duties and
responsibilities must be clearly allocated, segregated and coordinated, and reflected in the
description of tasks and responsibilities. Internal controls include the task of identifying and
managing any areas of potential conflicts of interest appropriately.
Aware of internal and external rules and other proper information for the proper
carrying out of their responsibilities as well as of each individual role and
responsibilities in the management of risks; and
Aware of the essential need to embed the controls to manage risks in their daily
activities.
Positive internal control environment is the foundation for all other key elements of the
internal control and risk management system, providing discipline and structure. It sets the
tone of the organization, influencing and strengthening the control consciousness of the
Company’s employees. It includes the integrity, ethical values, competencies development
of the personnel, management’s philosophy and operating style, the way roles and
responsibilities are assigned, the organization set-up and governance.
The internal control system must ensure the Company’s compliance with applicable laws and
regulations, and the effectiveness and efficiency of the Company’s operations in light of its
objectives as well as to ensure the availability and reliability of financial and non-financial
information.
The risk management system must allow risks, including those arising from non-compliance with
regulations, to be identified, assessed even on a forward-looking basis, managed, monitored,
and reported. The Internal Capital Adequacy Assessment Process (ICAAP) is part of the risk
management system.
The key elements of the internal control and risk management system are:
Collectively, Actuarial, Compliance, Risk Management and Internal Audit functions are referred to
as the Company’s Control Functions.
17
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Internal control and risk management framework (cont'd.)
(iv) Monitoring and reporting
System of governance
Actuarial function is responsible to certify the calculation or valuation of technical provisions and
prepare the financial condition report in accordance to regulatory requirements.
The Board is ultimately responsible of the internal control and risk management system and
ensures that it is always complete, functional and effective.
Risk Management Committee ("RMC") supports the Board in overseeing the Company’s internal
control and risk management system by providing advice and making proposals, in determining
policy and guidelines in relation to the system of internal controls, periodical checks on its
adequacy and effective functioning, the identification and management of main corporate risks.
Remuneration Committee ("RC") is delegated by the Board to perform a competent and
independent judgement on the remuneration policy and its oversight.
CEO implements, maintains and monitors the system of internal controls and risk management,
including risks arising from non-compliance with regulations, in accordance to the directives of
the Board.
EXCO assists the CEO in ensuring the effectiveness of the Company’s internal control and risk
management system in the day-to-day management of the Company’s business and operation
activities.
Monitoring and reporting mechanisms within the internal control system must be established
in order to provide the Executive Committee ("EXCO") and the Board with the relevant
information for the decision-making processes.
Compliance function has the responsibility to advise the RMC on compliance with relevant laws
and regulations, and relevant internal compliance-related policies. The function also assesses the
possible impact of any changes in the legal environment on the operation of the Company and to
identify and assess the compliance risks, including adequacy of the measures adopted to prevent
non-compliance in accordance with the Company’s Compliance Management System Policy and
Compliance Operating Model Guidelines.
Risk Management function drives the effective implementation of the risk management system in
accordance with the Company’s Risk Management Policy. The function supports the Board and
EXCO in defining the risk management strategies and tools for identifying, monitoring, managing
and measuring risks.
Risk Owners are directly responsible to take charge for risks, manage them and implement
appropriate control measures.
18
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Other statutory information
(a)
(i)
(ii)
(b)
(i)
(ii)
(c)
(d)
(e) As at the date of this report, there does not exist:
(i)
(ii)
(f) In the opinion of the directors:
(i)
At the date of this report, the directors are not aware of any circumstances which would
render:
to ascertain that proper action had been taken in relation to the writing off of bad
debts and the making of allowance for doubtful debts, and had satisfied themselves
that all known bad debts had been written off and that adequate allowance had been
made for doubtful debts; and
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 have been written down
to an amount which they might be expected so to realise.
the values attributed to the current assets in the financial statements of the Group and
the Company misleading.
the amount written off as bad debts or the amount of allowance for doubtful debts in
the financial statements of the Group and of the Company inadequate to any
substantial extent; and
Before the statements of financial position, income statements and statements of
comprehensive income of the Group and the Company were made out, the directors took
reasonable steps:
any charge on the assets of the Group and of the Company which has arisen since
the end of the financial year which secures the liabilities of any other person; or
any contingent liability of the Group and of the Company which has arisen since the
end of the financial year other than as disclosed in Note 35 of the financial
statements.
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 and of the Company to meet its
obligations as and when they fall due;
At the date of this report, the directors are not aware of any circumstances which have
arisen which render adherence to the existing method of valuation of assets or liabilities of
the Group and the Company misleading or inappropriate.
At the date of this report, the directors are not aware of any circumstances not otherwise
dealt with in this report or the financial statements of the Group and of the Company which
would render any amount stated in the financial statements misleading.
19
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statements of financial position
As at 31 December 2018
Note 31.12.2018 31.12.2017 01.01.2017 31.12.2018 31.12.2017 01.01.2017
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Restated Restated Restated Restated
ASSETS
Property and
equipment 3 8,485 8,513 7,938 8,485 8,513 7,938
Investment properties 4 6,939 7,701 7,862 6,939 7,701 7,862
Deferred tax assets 15 4,097 2,936 1,549 4,097 2,936 1,549
Intangible assets 5 11,279 4,650 3,158 11,279 4,650 3,158
Investment securities 6 1,068,821 1,029,190 976,516 1,003,945 968,112 912,940
Loans - - 15 - - 15
Reinsurance assets 7 366,250 366,253 381,056 366,250 366,253 381,056
Insurance receivables 8 110,137 179,464 145,356 110,137 179,464 145,356
Other receivables 9 112,382 104,365 106,581 101,973 99,229 103,114
Cash and bank
balances 10 20,308 21,247 19,447 16,789 15,938 19,228
Total assets 1,708,698 1,724,319 1,649,478 1,629,894 1,652,796 1,582,216
EQUITY AND
LIABILITIES
Share capital 11 100,200 100,200 100,000 100,200 100,200 100,000
Share premium - - 200 - - 200
Retained earnings 12 420,683 405,120 366,359 420,676 394,701 360,770
Fair value reserve 12 - (5,893) (9,165) - 4,526 (6,098)
Shareholders' equity 520,883 499,427 457,394 520,876 499,427 454,872
Non-controlling
interests 33 76,617 71,385 64,627 - - -
Total equity 597,500 570,812 522,021 520,876 499,427 454,872
Insurance contract
liabilities 13 967,664 936,777 916,361 967,664 936,777 916,361
Insurance payables 14 59,570 138,654 121,808 59,570 138,654 121,808
Tax payable 5,153 4,732 7,478 5,153 4,732 7,478
Other payables 16 78,811 73,344 81,810 76,631 73,206 81,697
Total liabilities 1,111,198 1,153,507 1,127,457 1,109,018 1,153,369 1,127,344
TOTAL EQUITY AND
LIABILITIES 1,708,698 1,724,319 1,649,478 1,629,894 1,652,796 1,582,216
The accompanying notes form an integral part of the financial statements.
CompanyGroup
26
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Income statements
For the year ended 31 December 2018
Note 2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Gross earned premium 626,899 637,842 626,899 637,842
Premiums ceded to
reinsurers (213,246) (219,962) (213,246) (219,962)
Net earned premiums 17 413,653 417,880 413,653 417,880
Investment income 18 50,065 46,789 45,487 41,141
Realised gains 19 1,921 6,309 526 5,352
Unrealised losses (362) - 524 -
Commission income 20 42,072 46,889 42,072 46,889
Other operating
revenue/(expenses) 21 3,367 (11,104) 3,596 (11,104)
Other revenue 97,063 88,883 92,205 82,278
Gross claims paid 22 (357,653) (344,105) (357,653) (344,105)
Claims ceded to
reinsurers 22 110,213 96,267 110,213 96,267
Gross change to contract
liabilities 22 (55,357) (360) (55,357) (360)
Change in contract liabilities
ceded to reinsurers 22 19,744 (24,536) 19,744 (24,536)
Net claims incurred (283,053) (272,734) (283,053) (272,734)
Commission expenses (85,132) (91,124) (85,132) (91,124)
Management expenses 23 (100,231) (94,205) (99,094) (93,981)
Other expenses (185,363) (185,329) (184,226) (185,105)
Profit before taxation 42,300 48,700 38,579 42,319
Taxation 24 (9,219) (8,388) (9,219) (8,388)
Net profit for the year 33,081 40,312 29,360 33,931
Earnings per share (sen)
Basic and diluted 25 29.2 38.8
The accompanying notes form an integral part of the financial statements.
Group Company
27
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statements of comprehensive income
For the year ended 31 December 2018
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Net profit for the year 33,081 40,312 29,360 33,931
Other comprehensive
income:
Items that are or may be
reclassified subsequently
to profit or loss
Fair value reserves
Net gain arising during
the year - 19,682 - 18,948
Net realised gains transferred
to income statements - (6,309) - (5,352)
- 13,373 - 13,596
Tax effects - (2,972) - (2,972)
- 10,401 - 10,624
Total comprehensive income
for the year 33,081 50,713 29,360 44,555
Profit attributable to:
Equity holder of the Company 29,163 38,761 29,360 33,931
Non-controlling interests 3,918 1,551 - -
33,081 40,312 29,360 33,931
Total comprehensive income
attributable to:
Equity holder of the Company 29,163 42,033 29,360 44,555
Non-controlling interests 3,918 8,680 - -
33,081 50,713 29,360 44,555
The accompanying notes form an integral part of the financial statements.
Group Company
28
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statements of changes in equity
For the year ended 31 December 2018
Group
Distributable
Fair Non-
Share Share value Retained Shareholder's controlling
capital premium reserves earnings equity interests Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At 1 January 2017 100,000 200 (9,165) 366,359 457,394 64,627 522,021
Fair value reserves
Net gain arising
during the year - - 14,821 - 14,821 1,889 16,710
Net realised gains
transferred to
income statements - - (11,549) - (11,549) 5,240 (6,309)
Total other
comprehensive
income for the year - - 3,272 - 3,272 7,129 10,401
Profit for the year - - - 38,761 38,761 1,551 40,312
Total comprehensive
income for the year - - 3,272 38,761 42,033 8,680 50,713 Effect of
implementation of Companies Act,
2016 200 (200) - - - - -
Creation of units, net - - - - - 1,476 1,476
Distribution to unit
holders - - - - - (3,398) (3,398)
As 31 December
2017 100,200 - (5,893) 405,120 499,427 71,385 570,812
At 31 December 2017,
as previously stated 100,200 - (5,893) 405,120 499,427 71,385 570,812
Impact of adopting
MFRS 9 (Note 2.2) - - 5,893 (13,804) (7,911) - (7,911)
At 1 January 2018,
as restated 100,200 - - 391,316 491,516 71,385 562,901
Profit for the year,
representing total
comprehensive
income for the year - - - 29,163 29,163 3,918 33,081
Creation of units, net - - - 204 204 4,851 5,055
Distribution to unit
holders - - - - - (3,537) (3,537)
As 31 December
2018 100,200 - - 420,683 520,883 76,617 597,500
The accompanying notes form an integral part of the financial statements.
<Non-distributable>
29
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statement of changes in equity (cont'd.)
For financial year ended 31 December 2017
Company
<Non-Distributable> Distributable
Share Share Fair value Retained
capital premium reserves earnings Total
RM'000 RM'000 RM'000 RM'000 RM'000
At 1 January 2017 100,000 200 (6,098) 360,770 454,872
Fair value reserves
Net gain arising during the year - - 15,976 - 15,976
Net realised gains transferred to
income statements - - (5,352) - (5,352)
Total other comprehensive
income for the year - - 10,624 - 10,624
Profit for the year - - - 33,931 33,931
Total comprehensive
income for the year - - 10,624 33,931 44,555
Effect of implementation
of Companies Act, 2016 200 (200) - - -
As 31 December 2017 100,200 - 4,526 394,701 499,427
At 31 December 2017,
as previously stated 100,200 - 4,526 394,701 499,427
Impact of adopting MFRS 9 (Note 2.2) - - (4,526) (3,385) (7,911) At 1 January 2018,
as restated 100,200 - - 391,316 491,516
Profit for the year,
representing total
comprehensive income
for the year - - - 29,360 29,360
As 31 December 2018 100,200 - - 420,676 520,876
The accompanying notes form an integral part of the financial statements.
30
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statement of cash flows
For the year ended 31 December 2018
Note 2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Cash flows from operating
activities
Profit before taxation 42,300 48,700 38,579 42,319
Adjustments for:
Investment income 18 (50,065) (46,789) (45,487) (41,141)
Realised gains recorded
in profit or loss 19 (1,921) (6,309) (526) (5,352)
Realised gains on disposal
of investment property 21 (372) - (372) -
Depreciation of property
and equipment 23 1,943 1,633 1,943 1,633
Realised loss/(gain) on
disposal of property and
equipment 21 2 (1) 2 (1)
Depreciation of investment
properties 23 162 161 162 161
Amortisation of intangible
assets 23 2,044 1,132 2,044 1,132
Impairment losses on
available-for-sale ("AFS")
financial assets 21 - 17,941 - 17,941
(Reversal of)/allowance for
impairment loss on
insurance receivables 23 (13,707) 1,560 (13,707) 1,560
Bad debts written off 23 10,619 1,780 10,619 1,780
Operating (loss)/profit before
working capital changes (8,995) 19,808 (6,743) 20,032
Decrease/(increase) in
receivables 20,364 (5,049) - 1,101
Decrease in reinsurance assets 3 14,803 3 14,803
Decrease/(increase) in
insurance receivables 64,504 (37,448) 64,504 (37,448)
Increase in other
receivables (9,178) (183) (3,905) (183)
Increase in insurance contract
liabilities 30,887 20,416 30,887 20,416
(Decrease)/increase in
insurance payables (79,084) 16,846 (79,084) 16,846
Increase/(decrease) in other
payables 4,130 (4,570) 2,088 (4,594)
22,631 24,623 7,750 30,973
Group Company
31
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statement of cash flows (cont'd.)
For the year ended 31 December 2018
Note 2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Cash flows from operating
activities (cont'd.)
Dividend income received 2,220 1,683 2,220 1,683
Interest income received 47,845 43,622 43,267 39,504
Income tax paid (7,461) (15,493) (7,461) (15,493)
Net cash flows generated from/
(used in) operating activities 65,235 54,435 45,776 56,667
Cash flows from investing
activities
Proceeds from disposal of
property and equipment 10 1 10 1
Purchase of property and
equipment 3 (1,927) (2,208) (1,927) (2,208)
Purchase of intangible
assets 5 (8,673) (2,624) (8,673) (2,624)
Purchase of investment
properties 5 (163) - (163) -
Purchase of AFS financial
assets (254,248) (325,692) (32,000) (103,500)
Proceeds from sale of
investment properties 1,135 - 1,135 -
Proceeds from sale of AFS
financial assets - 270,779 - 47,273
Proceeds from sale of fair value
through profit or loss
("FVTPL") financial assets 268,665 - 57,164 -
Deposits placed with financial
institutions (51,275) 41,960 (51,275) 41,960
Redemption of fixed income
securities - 9,000 - -
Net cash flows (used in)/generated
from investing activities (46,476) (8,784) (35,729) (19,098)
Group Company
32
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Statement of cash flows (cont'd.)
For the year ended 31 December 2018
Note 2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Cash flows from financing
activities
Payment for cancellation of
units - (227) - -
Proceeds from subcription
of units 5,055 1,703 - -
Payment for distributions (3,537) (3,398) - -
Net cash flows generated from/
(used in) financing activities 1,518 (1,922) - -
Net increase in cash and
cash equivalents 20,277 43,729 10,047 37,569
Cash and cash equivalents
at beginning of year 79,470 35,741 64,315 26,746
Cash and cash equivalents
at end of year 10 99,747 79,470 74,362 64,315
The accompanying notes form an integral part of the financial statements.
Group Company
33
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
Notes to the financial statements - 31 December 2018
1. Corporate information
2. Significant accounting policies
2.1 Basis of preparation
The Company is a public limited liability company, incorporated and domiciled in Malaysia.
The principal place of business of the Company is at 8th Floor, Menara Multi-Purpose,
Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur.
The holding and ultimate holding companies of the Company are Multi-Purpose Capital
Holdings Berhad and MPHB Capital Berhad respectively, both of which are incorporated in
Malaysia. MPHB Capital Berhad is listed on Bursa Malaysia Securities Berhad.
The Company is engaged in the underwriting of all classes of general insurance business.
Information relating to the subsidiaries are disclosed in Note 6(c).
The financial statements were authorised for issue by the Board of Directors in accordance
with a resolution of the Directors on 21 March 2019.
The financial statements of the Group and the Company have been prepared in
accordance with Malaysian Financial Reporting Standards ("MFRS"), International
Financial Reporting Standards ("IFRS") and the requirements of the Companies Act,
2016, in Malaysia.
The accounting policies set out in Note 2.4 have been applied in preparing the financial
statements of the Group and the Company for the financial year ended 31 December
2018.
The financial statements of the Group and the Company have been prepared on a
historical cost basis, except for those financial instruments which have been measured
at their fair values and insurance liabilities which have been measured in accordance
with the valuation methods specified in the Risk-Based Capital Framework ("RBC
Framework") for Insurers issued by Bank Negara Malaysia ("BNM").
The financial statements are presented in Ringgit Malaysia ("RM") and all values are
rounded to the nearest thousand (RM'000) except when otherwise stated.
34
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies
MFRS 9, Financial Instruments
MFRS 15, Revenue from Contracts with Customers
MFRS 15, Revenue from Contracts with Customers - Clarifications to
MFRS 15, Revenue from Contracts with Customers
Amendments to MFRS 2, Share-based Payments – Classification and
Measurement of Share-based Payment Transactions (Amendments to MFRS 2)
Amendments to MFRS 4, Insurance Contracts – Applying MFRS 9
Financial Instruments with MFRS 4 , Insurance Contracts
Amendments to MFRS 1, First-time Adoption of Malaysian Financial
Reporting Standards (Annual Improvements 2014-2016 Cycle)
Amendments to MFRS 128, Investments in Associates and Joint Ventures
(Annual Improvements 2014-2016 Cycle)
Amendments to MFRS 140, Investment Properties – Transfers of
Investment Property
IC Interpretation 22, Foreign Currency Transactions and Advance Consideration
MFRS 9 Financial Instruments
The adoption of this Standard resulted in changes in accounting policies and
adjustments to the financial statements. The accounting policies that relate to the
recognition, classification, measurement and derecognition of financial instruments
and impairment of financial assets are amended to comply with the provisions of this
Standard, while the hedge accounting requirements under this Standard are not
relevant to the Group and the Company. In accordance with the transition requirements
of this Standard, comparatives are not restated and the financial impact of the adoption
of this Standard is recognised in retained earnings as at 1 January 2018.
The accounting policies adopted are consistent with those of the previous financial year.
On 1 January 2018, the Group and the Company adopted the following new and
amended MFRSs and Interpretation mandatory for annual financial periods beginning on
or after 1 January 2018.
The initial adoption of the above standards did not have any material impact to the
financial statements except as described below:
35
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 9 Financial Instruments (cont'd.)
i. Changes in accounting policies
Financial assets
-
-
-
-
-
-
Financial liabilities
There is no impact on the classification and measurement of the Group's and the
Company's financial liabilities.
Listed equity investments previously classified as AFS financial assets are now
classified and measured as financial assets at FVTPL.
The Group and the Company classifies its financial assets into the following
measurement categories:
Those to be measured at amortised cost; and
Those to be measured subsequently at fair value through profit or loss
The classification above depends on the Group's and the Company's business
model for managing the financial assets and the terms of contractual cash flows.
The following summarises the key changes:
The available-for-sale ("AFS") and loans and receivables ("LAR") financial
asset categories were removed.
A new financial asset category measured at amortised cost was introduced.
This applies to financial assets with contractual cash flow characteristics
that are solely payments of principal and interest and held in a business
model whose objective is achieved by collecting contractual cash flows only.
Quoted and unquoted debt instruments previously classified as AFS financial
assets are now classified and measured as financial assets at FVTPL. The
Group and the Company expect not to hold the assets to collect contractual
cash flows, but to sell a significant amount on a relatively frequent basis.
36
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 9 Financial Instruments (cont'd.)
i. Changes in accounting policies (cont'd.)
Impairment of financial assets
a. Financial assets measured at amortised cost
ECL: Simplified approach
MFRS 9 Financial Instruments requires impairment assessments to be
based on an Expected Credit Loss ("ECL") model. The key changes in the
Group's and Company's accounting policies in relation to impairment of financial
assets are as follows:
For individual impairment assessment, the amount of ECL is measured as the
probability-weighted present value of all cash shortfalls over the expected life
of the financial asset discounted at its original effective interest rate. The cash
shortfall is the difference between all contractual cash flows that are due to the
Group and the Company and all the cash flows that the Group and the
Company expect to receive.
At each reporting date, the Group and the Company assess allowance for ECL
for amount due from the reinsurers and cedants based on available external
credit ratings for probability of default and external information for loss given
default.
For collective impairment assessment, the Group and the Company have
established a transition matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
The Group and the Company applies the simplified approach prescribed by
MFRS 9 Financial Instruments, which requires expected lifetime losses to be
recognised from initial recognition of the trade and other receivables which are
financial assets measured at amortised cost.
37
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 9 Financial Instruments (cont'd.)
(ii) Classification and measurement of financial instruments and impairment
Original New Original New
(MFRS 139) (MFRS 9) (MFRS 139) (MFRS 9)
RM'000 RM'000
Financial assets:
Investment securities
- Quoted shares AFS FVTPL 96,021 96,021
- Unquoted debt
instruments * AFS FVTPL 344,535 344,535
Deposits with financial
institutions LAR Amortised 588,634 588,634
cost
Insurance receivables LAR Amortised 179,464 179,464
cost
Other receivables LAR Amortised 104,365 104,365
cost
Cash and bank balances LAR Amortised 21,247 21,247
cost
* including debt sucurities and unit trust funds.
Group
Classification and
measurement category
Carrying amount
as at 1 January 2018
The following table summarises the classification and measurement of the financial
assets as at 1 January 2018:
38
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 9 Financial Instruments (cont'd.)
(ii)
Original New Original New
(MFRS 139) (MFRS 9) (MFRS 139) (MFRS 9)
RM'000 RM'000
Financial assets:
Investment securities
- Quoted shares AFS FVTPL 34,972 34,972
- Unquoted debt
instruments * AFS FVTPL 354,352 354,352
Deposits with financial
institutions LAR Amortised
cost 578,788 578,788
Insurance receivables LAR Amortised
cost 179,464 179,464
Other receivables LAR Amortised
cost 99,229 99,229
Cash and bank balances LAR Amortised
cost 15,938 15,938
* including debt sucurities and unit trust funds.
Receivables, cash and bank balances and deposits with financial instituitions are
financial assets measured at amortised cost. The Group and the Company intends
to collect contractual cash flows from these financial assets and these cashflows
consist solely of payments of principal and interest on the principal amount
outstanding.
The Group and the Company elected to reclassify as FVTPL, its quoted shares
previously classified as AFS. Debt instruments that have previously been classified
as AFS are now reclassified to FVTPL. The Group's and the Company's business
model for these investment securities are achieved both by collecting contractual
cash flows and selling of these assets. The contractual cash flows of these
investments are solely principal and interest.
Company
Classification and measurement of financial instruments and impairment
(cont'd.)
Classification and
measurement category
Carrying amount
as at 1 January 2018
39
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 9 Financial Instruments (cont'd.)
iii. The effect of adopting MFRS is as follows:
Classification Expect
& credit Tax
Group 31-12-2017 measurement losses effect 01-01-2018
RM'000 RM'000 RM'000 RM'000 RM'000
ASSETS
Property and
equipment 8,513 - - - 8,513
Investment properties 7,701 - - - 7,701
Deferred tax assets 2,936 - - 2,498 5,434
Intangible assets 4,650 - - - 4,650
Investment securities 1,029,190 - - - 1,029,190
Reinsurance assets 366,253 - - - 366,253
Insurance
receivables 179,464 - (10,346) - 169,118
Other receivables 104,365 - (63) - 104,302
Cash and bank
balances 21,247 - - - 21,247
Total assets 1,724,319 - (10,409) 2,498 1,716,408
EQUITY AND
LIABILITIES
Share capital 100,200 - - - 100,200
Retained earnings 405,120 (5,893) (10,409) 2,498 391,316
Fair value reserve (5,893) 5,893 - - -
Shareholders' equity 499,427 - (10,409) 2,498 491,516
Non-controlling
interests 71,385 - - - 71,385
Total equity 570,812 - (10,409) 2,498 562,901
Insurance contract
liabilities 936,777 - - - 936,777
Insurance payables 138,654 - - - 138,654
Tax payable 4,732 - - - 4,732
Other payables 73,344 - - - 73,344
Total liabilities 1,153,507 - - - 1,153,507
TOTAL EQUITY AND
LIABILITIES 1,724,319 - (10,409) 2,498 1,716,408
Restatements upon adoption
of MFRS 9
40
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 9 Financial Instruments (cont'd.)
iii. The effect of adopting MFRS is as follows:
Classification Expect
& credit Tax
Company 31-12-2017 measurement losses effect 01-01-2018
RM'000 RM'000 RM'000 RM'000 RM'000
ASSETS
Property and
equipment 8,513 - - - 8,513
Investment
properties 7,701 - - - 7,701
Deferred tax assets 2,936 - - 2,498 5,434
Intangible assets 4,650 - - - 4,650
Investment securities 968,112 - - - 968,112
Reinsurance assets 366,253 - - - 366,253
Insurance
receivables 179,464 - (10,346) - 169,118
Other receivables 99,229 - (63) - 99,166
Cash and bank
balances 15,938 - - - 15,938
Total assets 1,652,796 - (10,409) 2,498 1,644,885
EQUITY AND
LIABILITIES
Share capital 100,200 - - - 100,200
Retained earnings 394,701 4,526 (10,409) 2,498 391,316
Fair value reserve 4,526 (4,526) - - -
Total equity 499,427 - (10,409) 2,498 491,516
Insurance contract
liabilities 936,777 - - - 936,777
Insurance payables 138,654 - - - 138,654
Tax payable 4,732 - - - 4,732
Other payables 73,206 - - - 73,206
Total liabilities 1,153,369 - - - 1,153,369
TOTAL EQUITY AND
LIABILITIES 1,652,796 - (10,409) 2,498 1,644,885
of MFRS 9
Restatements upon adoption
41
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.2 Changes in accounting policies (cont'd.)
MFRS 15 introduces a five-steps approach to recognising revenue:
- Identify contracts with customers;
- Identify the separate performance obligations;
- Determine the transaction price of the contract;
-
- Recognise the revenue as each performance obligation is satisfied.
2.3 Standards issued but not yet effective
Effective for
annual financial
periods beginning
Description on or after
Amendments to MFRS 9 Prepayment Features with
Negative Compensations
Amendments to MFRS 128 Long-term Interests in
Associates and Joint Ventures
MFRS 16 Leases
IC Interpretation 23: Uncertainty over
Income Tax Treatments
Amendments to MFRS 119
Plan Amendment, Curtailment or Settlement
Amendments to MFRS 3: Business Combinations
contained in the document entitled "Annual Improvements
to MFRS Standards 2015-2017 Cycle"
The Group and the Company plan to adopt the following pronouncements when they
become effective in the respective financial periods.
MFRS 15 "Revenue from Contracts with Customers" replaces MFRS 118 "Revenue" and
MFRS 111 "Construction Contracts" and related interpretations. MFRS 15 established
new five-step model that applies to revenue arising from contracts with customers,
based on the underlying principle that an entity should recognise revenue in a manner
which depicts the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services.
The adoption of MFRS 15 did not have any material financial impact because the Group
and the Company have been recognising their non-insurance contracts and non-
financial instruments related revenue in a manner consistent with the principles of MFRS
15.
Allocate the transaction price to each of the separate performance obligations; and
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
42
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.3 Standards issued but not yet effective (cont'd.)
Effective for
annual financial
periods beginning
Description on or after
Amendments to MFRS 112: Income Tax Consequences of
Payments on Financial Instruments Classified as Equity
Improvements to MFRS Standards 2015-2017 Cycle"
Amendments to MFRS 11: Joint Arrangements contained
in the document entitled "Annual Improvements to
MFRS Standards 2015-2017 Cycle"
Amendments to MFRS 123: Borrowing Costs Eligible for
Capitalisation contained in the document entitled
MFRS 17 Insurance Contracts
Amendments to MFRS 10 and MFRS 128: Sale or
Contribution of Assets between an Investor and
its Associate or Joint Venture
MFRS 16 Leases
1 January 2021
1 January 2019
These pronouncements are expected to have no significant impact to the financial
statements of the Group and the Company upon their initial application except as
described below:
MFRS 16 will replace MFRS 117 Leases, IC Interpretation 4 Determining whether an
Arrangement contains a Lease, IC Interpretation 115 Operating Lease-Incentives and IC
Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of
a Lease. MFRS 16 sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to account for all leases
under a single on-balance sheet model similar to the accounting for finance leases
under MFRS 117.
At the commencement date of a lease, a lessee will recognise a liability to make lease
payments and an asset representing the right to use the underlying asset during the
lease term. The right-of-use asset is initially measured at cost and subsequently
measured at cost (subject to certain exceptions), less accumulated depreciation and
impairment losses, adjusted for any remeasurement of the lease liability. The lease
liability is initially measured at present value of the lease payments that are not paid at
that date. Subsequently, the lease liability is adjusted for interest and lease payments,
as well as the impact of lease modifications.
To be determined by MASB
1 January 2019
1 January 2019
contained in the document entitled "Annual
2015-2017 Cycle"
"Annual Improvements to MFRS Standards
43
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.3 Standards issued but not yet effective (cont'd.)
MFRS 16 Leases (cont'd.)
MFRS 17 Insurance Contracts
-
-
MFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with
comparative figures required. Early application is permitted, provided the entity also
applies MFRS 9 and MFRS 15 on or before the date it first applies MFRS 17.
Classification of cash flows will also be affected as operating lease payments under
MFRS 117 are presented as operating cash flows, whereas under MFRS 16, the lease
payments will be split into a principal (which will be presented as financing cash flows)
and an interest portion (which will be presented as operating cash flows).
Lessor accounting under MFRS 16 is substantially the same as the accounting under
MFRS 117. Lessors will continue to classify all leases using the same classification
principle as in MFRS 117 and distinguish between two types of leases: operating and
finance leases. MFRS 16 also requires lessees and lessors to make more extensive
disclosures than under MFRS 117.
MFRS 17 will replace MFRS 4 Insurance Contracts. MFRS 17 applies to all types of
insurance contracts (i.e life, non-life, direct insurance and re-insurance), regardless of
the type of entities that issue them, as well as to certain guarantees and financial
instruments with discretionary participation features. The overall objective of MFRS 17 is
to provide an accounting model for insurance contracts that is more useful and
consistent for insurers. In contrast to the requirements in MFRS 4, which are largely
based on grandfathering previous local accounting policies, MFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects.
The core of MFRS 17 is the general model, supplemented by:
A specific adaptation for contracts with direct participation features (the variable fee
approach); and
A simplified approach (the premium allocation approach) mainly for short-duration
contracts.
MFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early
application is permitted but not before an entity applies MFRS 15. A lessee can choose
to apply the standard using either a full retrospective or a modified retrospective
approach.
The standard will affect primarily the accounting for the Group’s and Company's
operating leases. As at 31 December 2018, the Group and Company have non-
cancellable operating lease commitments of RM3,845,000. The Group and the
Company are currently assessing the impact of adopting this Standard.
44
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.3 Standards issued but not yet effective (cont'd.)
MFRS 17 Insurance Contracts (cont'd.)
2.4 Summary of significant accounting policies
(a) Subsidiaries and basis of consolidation
(i) Subsidiaries
(ii) Basis of consolidation
(i)
(ii)
(iii) The ability to use its power over the investee to affect its returns.
(i)
The Group and the Company have appointed a consultant to look into the requirements
of MFRS 17 and have completed the assessment of the operational impacts for adopting
MFRS 17 and intend to assess the financial impacts in the financial year ending 2019.
In the Company's separate financial statements, investments in subsidiaries are
initially recognised at cost. Subsequently, investments in subsidiaries,
comprising unit trust funds, are measured in accordance with the requirements
of MFRS 9, as further elaborated in Note 2.4(e).
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.
Consistent accounting policies are applied for like transactions and events in
similar circumstances.
Power over the investee (i.e existing rights that give it the current ability to
direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its investment with the
investee; and
The Company controls an investee if and only if the Company has all the
following:
When the Company has less than a majority of the voting rights of an investee,
the Company considers the following in assessing whether or not the
Company’s voting rights in an investee are sufficient to give it power over the
investee:
The size of the Company’s holding of voting rights relative to the size and
dispersion of holdings of the other vote holders;
45
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(a) Subsidiaries and basis of consolidation (cont'd.)
(ii) Basis of consolidation (cont'd.)
(ii)
(iii) Rights arising from other contractual arrangements; and
(iv)
Losses within a subsidiary are attributed to the non-controlling interests even if
that results in a deficit balance.
Any additional facts and circumstances that indicate that the Company
has, or does not have, the current ability to direct the relevant activities at
the time that decisions need to be made, including voting patterns at
previous shareholders’ meetings.
Subsidiaries are consolidated when the Company obtains control over the
subsidiaries and ceases when the Company loses control of the subsidiaries.
All intra-group balances, income and expenses and unrealised gains and
losses resulting from intra-group transactions are eliminated in full.
Potential voting rights held by the Company, other vote holders or other
parties;
Changes in the Group’s ownership interests in subsidiaries that do not result in
the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group’s interests and the non-
controlling interests are adjusted to reflect the changes in their relative interests
in the subsidiaries. The resulting difference is recognised directly in equity and
attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss calculated as the
difference between (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and (ii) the previous carrying
amount of the assets and liabilities of the subsidiary and any non-controlling
interest, is recognised in profit or loss. The subsidiary’s cumulative gain or loss
which has been recognised in other comprehensive income and accumulated in
equity are reclassified to profit or loss or where applicable, transferred directly
to retained earnings. The fair value of any investment retained in the former
subsidiary at the date control is lost is regarded as the cost on initial recognition
of the investment.
46
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(b) Property and equipment and depreciation
Lands and buildings 2 %
Motor vehicles 20 %
Office equipment and computer 12.5 to 33 %
Renovation, furniture and fittings 12.5 to 20 %
All items of property and equipment are initially recorded at cost. Subsequent costs
are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the Company and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised. All
other repairs and maintenance are charged to profit or loss during the financial year
in which they are incurred.
Subsequent to recognition, property and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. The policy for the
recognition and measurement of impairment losses is in accordance with Note
2.4(j).
Depreciation on property and equipment is provided on a straight line basis to write
off the cost of each asset to its residual value over the estimated useful life. Work-in-
progress is 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 and equipment. The annual depreciation rates are:
The residual values, useful lives and depreciation methods are reviewed at each
financial year end to ensure that the amount, method and period of depreciation are
consistent with previous estimates and the expected pattern of consumption of the
future economic benefits embodied in the items of property and equipment.
An item of property and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. The difference between
the net disposal proceeds, if any, and the net carrying amount is recognised in profit
or loss.
47
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(c) Investment properties
(d) Intangible assets
Intangible assets comprise computer application software which were developed or
acquired to meet the unique requirements of the Group and the Company.
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less accumulated
amortisation and any accumulated impairment losses. Internally generated
intangible assets are not capitalised and expenditure is reflected in the income
statement in the period in which the expenditure is incurred. The policy for the
recognition and measurement of impairment losses is in accordance with Note
2.4(j).
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and
assessed for impairment whenever there is an indication that the intangible asset
may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at each financial year
end. Changes in the expected useful life or the expected pattern of consumption of
future economic benefits embodied in the asset is accounted for by changing the
amortisation period or method, as appropriate, and are treated as changes in
accounting estimates.
Acquired computer software licenses are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives of five years.
Investment properties are properties that are held either to earn rental income or for
capital appreciation or for both.
Investment properties are measured initially at cost, including related transaction
costs. Subsequent to initial recognition, investment properties are stated at cost less
accumulated depreciation and any accumulated impairment losses. The
depreciation policy for investment properties are in accordance with that for
depreciation of property and equipment as described in Note 2.4(b).
Investment property is derecognised when it has been disposed of or when the
investment property is permanently withdrawn from use and no future economic
benefit is expected from its disposal. Any gains or losses on the disposal of an
investment property are recognised in profit or loss in the year in which they arise.
48
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(d) Intangible assets (cont'd.)
(e) Financial assets
Policy applicable from 1 January 2018
(i) Initial recognition and initial measurement
Gains or losses arising from derecognition of an intangible asset are measured as
the difference between the net disposal proceeds and the carrying amount of the
asset and are recognised in profit or loss when the asset is derecognised.
The classification of financial assets at initial recognition depends on the
financial asset’s contractual cash flow characteristics and the Group's and the
Company's business model for managing them. With the exception of trade
receivables that do not contain a significant financing component or for which
the Group and the Company have applied the practical expedient, the Group
and the Company initially measure a financial asset at its fair value plus, in the
case of a financial asset not at FVTPL, transaction costs.
In order for a financial asset to be classified and measured at amortised cost or
fair value, it needs to give rise to cash flows that are ‘solely payments of
principal and interest' ("SPPI") on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument
level.
Costs associated with maintaining computer software programmes are recognised
as an expense when incurred. Costs that are directly associated with identifiable
and unique software products controlled by the Group and the Company, and that
will probably generate economic benefits exceeding costs beyond one year, are
recognised as intangible assets. Costs include employee costs incurred as a result
of developing software and an appropriate portion of relevant overheads. Computer
software development costs recognised as assets are amortised using the straight
line method over their estimated useful lives, not exceeding a period of five years.
Intangible assets with indefinite useful lives are tested for impairment annually
either individually or at the cash-generating-unit level. Such intangibles are not
amortised. The useful life of an intangible asset with an indefinite life is reviewed
annually to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to
definite is made on a prospective basis.
49
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(e) Financial assets (cont'd.)
Policy applicable from 1 January 2018 (cont'd.)
(i) Initial recognition and initial measurement (cont'd.)
(ii) Classification and subsequent measurement
- Financial assets at amortised cost (debt instruments)
- Financial assets at FVTPL
(a) Financial assets at amortised cost (debt instruments)
-
-
The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount
outstanding; and
The financial asset is held within a business model with
the objective to hold financial assets in order to collect
contractual cash flows.
The Group's and the Company’s financial assets at amortised cost
include insurance receivables, other receivables, cash and bank
balance and deposits from financial institutions.
The Group's and the Company's business model for managing financial assets
refers to how it manages its financial assets in order to generate cash flows.
The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a
time frame established by regulation or convention in the market place (regular
way trades) are recognised on the trade date, i.e., the date that the Group and
the Company commit to purchase or sell the asset.
The Group and the Company measure financial assets at amortised
cost if both of the following conditions are met:
Financial assets at amortised cost are subsequently measured using
the effective interest ("EIR") method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
For purposes of subsequent measurement, the Group and the Company have
classified financial assets into two categories:
50
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(e) Financial assets (cont'd.)
Policy applicable from 1 January 2018 (cont'd.)
(ii) Classification and subsequent measurement (cont'd.)
(b) Financial assets at FVTPL
Policy applicable before 1 January 2018
(a) AFS financial assets
(b) LAR
LAR are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. LAR are initially recognised at cost,
being the fair value of the consideration paid for the acquisition of the loans and
receivables. All transaction costs directly attributable to the acquisition are also
included in the cost of the loans and receivables. After initial measurement,
loans and receivables are measured at amortised cost, using the effective yield
method, less provision for impairment. Gains and losses are recognised in
profit or loss when the investments are derecognised or impaired.
Prior to 1 January 2018, the Group and the Company classified their investments
into available-for-sale (“AFS”) financial assets and loans and receivables ("LAR").
Financial assets with cash flows that are not solely payments of principal
and interest are classified and measured at FVTPL, irrespective of the
business model. Financial assets at FVTPL are carried in the statements of
financial position at fair value with net changes in fair value recognised in
profit or loss.
This category includes listed equity investments and debt instruments
which the Group's and the Company’s business model is achieved both by
collecting contractual cash flows and selling off these assets.
AFS are non-derivative investments that are designated as available-for-sale or
are not classified in any of the preceding categories. These investments are
initially recorded at fair value. After initial measurement, AFS investments are
re-measured at fair value with unrealised gains or losses recognised directly in
equity. Upon derecognition or impairment, the cumulative fair value gains and
losses previously reported in equity are transferred to profit or loss.
51
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(e) Financial assets (cont'd.)
Policy applicable before 1 January 2018 (cont'd.)
(b) LAR (cont'd.)
(f) Fair value measurement
(a)
(b)
Amortised cost is computed using the effective interest method less any
allowance for impairment and principal repayment or reduction. The calculation
takes into account any premium or discount on acquisition and includes
transaction costs and fees that are an integral part of the effective interest rate.
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 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:
In the absence of a principal market, in the most advantageous market for the
asset or liability
In the principal market for the asset or liability; or
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.
The principal or the most advantageous market must be accessible by the Group
and the Company.
The fair value of an asset 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 interests.
52
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(f) Fair value measurement (cont'd.)
Policy applicable before 1 January 2018 (cont'd.)
Level 1 :
Level 2 :
Level 3 :
(g) Impairment of financial assets
Policy applicable from 1 January 2018
(i) Overview of expected credit losses ("ECL")
Inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
For financial instruments where there is no active market such as unquoted
securities, the fair value is determined based on the average quotes obtained from
one licensed financial institution which are also the principal dealers.
From 1 January 2018, the Group and the Company have been recording the
allowance for expected credit losses for debt financial assets not held at
FVTPL. Equity instruments are not subject to impairment under MFRS 9.
All assets for which fair value is measured or disclosed in the financial statements
are categorised within the fair value hierarchy, described as follows:
Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (ie. as prices) or indirectly (ie.
derived from prices).
All financial instruments are recognised initially at the transacted price, which is the
best indicator of fair value. The fair value of investments that are actively traded in
organised financial markets is determined by reference to quoted market bid prices
for assets and offer prices for liabilities, at the close of business on the reporting
date. For investments in unit trusts, the fair value is determined by reference to
published net assets values.
The Group and the Company assess at each reporting date whether a financial
asset or group of financial assets is impaired.
53
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(g) Impairment of financial assets (cont'd.)
Policy applicable from 1 January 2018 (cont'd.)
(i) Overview of expected credit losses ("ECL") (cont'd.)
(ii)
Both 12-month ECL and lifetime ECL are calculated on either an individual
basis or a collective basis, depending on the nature of the underlying portfolio
of financial instruments.
The Group and the Company applies the simplified approach prescribed by
MFRS 9 Financial Instruments , which requires expected lifetime losses to be
recognised from initial recognition of the debt financial assets not held at
FVTPL.
Calculation of ECL
For debt instruments measured at amortised cost, the Group and the Company
apply a simplified approach in calculating ECL. Therefore, the Group and the
Company do not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECL at each reporting date.
The Group and the Company have established a transition matrix that is based
on its historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
For individual impairment assessment, the amount of ECL is measured as the
probability-weighted present value of all cash shortfalls over the expected life of
the financial asset discounted at its original effective interest rate.
The cash shortfall is the difference between all contractual cash flows that are
due to the Group and the Company and all the cash flows that the Group and
the Company expects to receive.
For credit exposures for which there has not been a significant increase in
credit risk since initial recognition, ECL are provided for credit losses that result
from default events that are possible within the next 12-months (a 12-month
ECL). For those credit exposures for which there has been a significant
increase in credit risk since initial recognition, a loss allowance is required for
credit losses expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
54
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(g) Impairment of financial assets (cont'd.)
Policy applicable from 1 January 2018 (cont'd.)
(iii)
- Gross Domestic Product
- Inflation
- FTSE Bursa Malaysia KLCI index
- Unemployment rates
Policy applicable before 1 January 2018
Assets carried at amortised cost
If there is objective evidence that an impairment loss on assets carried at amortised
cost has been incurred, 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 (excluding future expected credit losses that have not been
incurred) discounted at the financial instrument's original effective interest rate/yield.
The carrying amount of the asset is reduced and the loss is recorded in profit or
loss.
Forward looking information
In its ECL models, the Group and the Company rely on a broad range of
forward looking information as economic inputs, such as:
The inputs and models used for calculating ECL may not always capture all
characteristics of the market at the date of the financial statements. To reflect this,
qualitative adjustments or overlays are occasionally made as temporary
adjustments when such differences are significantly material.
55
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(g) Impairment of financial assets (cont'd.)
Policy applicable before 1 January 2018 (cont'd.)
Assets carried at amortised cost (cont'd.)
AFS financial assets
The Group and 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 the group of financial
assets is collectively assessed for impairment. Assets that are individually assessed
for impairment and for which an impairment loss is or continues to be recognised
are not included in a collective assessment of impairment. The impairment
assessment is performed at each reporting date.
A review of all outstanding amounts is performed at the end of the reporting period.
Specific allowance for impairment are made for other receivables that have been
individually reviewed and specifically identified as impaired. The carrying amount of
the asset is reduced through the use of an allowance account and the amount of
the loss is recognised in profit or loss. Other receivables are written off when
deemed irrecoverable. If a write-off is later recovered, the recovery is recognised in
profit or loss.
If an AFS financial asset is impaired, an amount comprising the difference between
its cost (net of any principal repayment and amortisation) and its current fair value,
less impairment loss previously recognised in other comprehensive income, is
transferred from other comprehensive income to the income statement.
Reversals in respect of equity instruments classified as AFS are not recognised in
the income statement. Reversals of impairment losses on debt instruments
classified as AFS are reversed through profit or loss if the increase in the fair value
of the instruments can be objectively related to an event occurring after the
impairment losses were recognised in profit or loss.
56
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(h) Derecognition of financial assets
(i) Equity instruments
(j) Impairment of non-financial assets
Financial assets are derecognised when the Group's and the Company’s
contractual rights to receive cash flows from the financial assets expire or where the
financial assets have been transferred and the Group and the Company have also
transferred substantially all risks and rewards of ownership.
Ordinary shares are classified as equity on the statements of financial position.
Dividends on ordinary shares are recognised and reflected in the statements of
changes in equity in the period in which they are declared.
Non-financial assets are tested annually for impairment. The carrying amounts of
these assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the asset's recoverable
amount is estimated to determine the amount of impairment loss.
For the purpose of impairment testing of these assets, recoverable amount is
determined on an individual asset basis unless the asset does not generate cash
flows that are largely independent of those from other assets, If this is the case,
recoverable amount is determined for the cash generating unit ("CGU") to which the
asset belongs.
An asset's recoverable amount is the higher of an asset's or CGU's fair value less
costs to sell and its value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. Impairment losses recognised in respect of a CGU are
allocated to reduce the carrying amount of the assets in the unit or groups of units
on a pro-rata basis.
57
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(j) Impairment of non-financial assets (cont'd.)
(k) Financial liabilities
An impairment loss is recognised in the income statement in the period in which it
arises, unless the asset is carried at a revalued amount, in which case the
impairment loss is accounted for as a revaluation decrease to the extent that the
impairment loss does not exceed the amount held in the asset revaluation reserve
for the same asset.
An impairment loss of an asset is reversed if, and only if, there has been a change
in the estimates used to determine the asset's recoverable amount since the last
impairment loss was recognised. The carrying amount of an asset is increased to its
revised recoverable amount, provided that this amount does not exceed the carrying
amount that would have been determined (net of amortisation or depreciation) had
no impairment loss been recognised for the assets in prior years. A reversal of
impairment loss for an asset is recognised in profit or loss.
Financial liabilities are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability.
Financial liabilities, are recognised in the statements 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 recognised initially at fair value plus directly attributable
transaction costs and subsequently measured at amortised cost using the effective
interest method.
For other financial liabilities, gains and losses are recognised in profit or loss 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 profit or loss.
58
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(l) Lease
(i) As lessee
(ii) As lessor
(m) Product classification
The Company issues contracts that transfer insurance risk only.
Financial risk is the risk of a possible future change in one or more of a specified
interest 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 risk is the risk other than financial risk.
Insurance contracts are those contracts that transfer significant insurance risk. An
insurance contract is a contract under which the Company (the insurer) has
accepted significant insurance risk from another party (the policyholders) by
agreeing to compensate the policyholders if a specified uncertain future event (the
insured event) adversely affects the policyholders. As a general guideline, the
Company determines whether it has significant insurance risk, by comparing
benefits paid with benefits payable if the insured event did not occur.
Finance leases, which transfer to the Group and the Company substantially all
the risks and rewards incidental to ownership of the leased item, are capitalised
at the inception of the lease at the fair value of the leased assets or, if lower, at
the present value of the minimum lease payments. Any initial costs are also
added to the amount capitalised.
Leased assets are depreciated over the estimated useful life of the asset.
However, if there is no reasonable certainty that the Group and the Company
will obtain ownership by the end of the lease term, the asset is depreciated over
the shorter of the estimated useful life and the lease term.
Operating lease payments are recognised as an expense in the income
statement on an accrual basis over the lease term.
Leases where the Group and the Company retain substantially all the risks and
rewards of ownership of the asset are classified as operating leases. Operating
lease receipts are recognised as an income on an accrual basis over the lease
term.
59
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(m) Product classification (cont'd.)
(n) Reinsurance
Once a contract has been classified as an insurance contract, it remains an
insurance contract for the remainder of its life-time, even if the insurance risk
reduces significantly during this period, unless all rights and obligations are
extinguished or expire.
Investment contracts can, however, be reclassified as insurance contracts after
inception if insurance risk becomes significant.
Insurance and investment contracts are further classified as being either with or
without discretionary participation features ("DPF"). DPF is a contractual right to
receive, as a supplement to guaranteed benefits, additional benefits.
The Company cedes insurance risk in the normal course of business for all of its
businesses. Reinsurance assets represent balances due from reinsurance
companies. Amounts recoverable from reinsurers are estimated in a manner
consistent with the outstanding claims provision or settled claims associated with
the reinsurer’s policies and are in accordance with the related reinsurance
contracts.
Ceded reinsurance arrangements do not relieve the Company from its obligations to
policyholders. Premiums and claims are presented on a gross basis for both ceded
and assumed reinsurance.
Reinsurance assets are reviewed for impairment at each reporting date or more
frequently when an indication of impairment arises during the reporting period.
Impairment occurs when there is objective evidence as a result of an event that
occurred after initial recognition of the reinsurance asset that the Company may not
receive all outstanding amounts due under the terms of the contract and the event
has a reliably measurable impact on the amounts that the Company will receive
from the reinsurer. The impairment loss is recorded in profit or loss.
Gains or losses on buying reinsurance are recognised in profit or loss immediately
at the date of purchase and are not amortised.
The Company also assumes reinsurance risk in the normal course of business for
general insurance contracts when applicable.
The Company does not have any investment contracts and the insurance contracts
issued do not contain any DPF.
60
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(n) Reinsurance (cont'd.)
(o) General insurance underwriting results
(i) Gross Premiums
(ii) Reinsurance Premiums
(iii) Premium liabilities
Premiums and claims on assumed reinsurance are recognised as revenue or
expenses in the same manner as they would be if the reinsurance were considered
direct business, taking into account the product classification of the reinsured
business. Reinsurance liabilities represent balances due to reinsurance companies.
Amounts payable are estimated in a manner consistent with the related reinsurance
contract.
Reinsurance assets or liabilities are derecognised when the contractual rights are
extinguished or expire or when the contract is transferred to another party.
The general insurance underwriting results are determined for each class of
business after taking into account, inter alia, reinsurances, unearned premium,
commissions and claims incurred.
Gross premiums are recognised in a financial period in respect of risks
assumed during that particular financial period.
Inwards facultative reinsurance premiums are recognised in the financial period
in respect of the facultative risks assumed during that particular financial
period, as in the case of direct policies, following the individual risks’ inception
dates.
In respect of reinsurance premiums relating to proportional treaties, it is
recognised on the basis of periodic advices received from the cedants given
that the periodic advices reflect the individual underlying risks being incepted
and reinsured at various inception dates of these risks.
The provision for unearned premiums represents premiums received for risks
that have not yet expired. Generally, the reserve is released over the term of
the contract and is recognised as premium income.
61
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(o) General insurance underwriting results (cont'd.)
(iii) Premium liabilities (cont'd.)
(a) URR
(b) UPR
At each reporting date, the Company reviews its unexpired risks and a liability
adequacy test is performed to determine whether there is any overall excess of
expected claims and deferred acquisition costs over unearned premiums. This
calculation uses current estimates of future contractual cash flows (taking into
consideration current loss ratios) after taking into account of the investment
return expected to arise on assets relating to the relevant general insurance
technical provisions. If these estimates show that the carrying amount of the
unearned premiums less related deferred acquisition costs is inadequate, the
deficiency is recognised in the income statement by setting up a provision for
liability adequacy.
Premium liability is reported at the higher of the aggregate of the unearned
premium reserve (“UPR”) for all lines of business and the best estimate value of
the insurer’s unexpired risk reserves (“URR”) at the end of the financial year
and the provision of risk margin for adverse deviation ("PRAD") calculated at
75% confidence level at the overall Company level. The best estimate value is
a prospective estimate of the expected future payments arising from future
events insured under policies in force at the end of the financial year including
allowance for insurer’s expenses.
The URR is the prospective estimate of the expected future payments
arising from future events insured under policies in force as at the end of
the financial year and also includes allowance for expenses, including
overheads and cost of reinsurance, expected to be incurred during the
unexpired period in administering these policies and settling the relevant
claims, and expected future premium refunds.
The UPR represents the portion of net premiums less the related net
acquisition costs of insurance policies written that relate to the unexpired
periods of the policies at the end of the financial year.
62
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(o) General insurance underwriting results (cont'd.)
(iii) Premium liabilities (cont'd.)
(b) UPR (cont'd.)
- 25% method for marine and aviation cargo, and transit business;
-
- Motor and bonds 10%
- Fire, engineering, aviation and marine hull 15%
- Medical 10 - 15%
- Other classes 20%
-
-
(iv) Claim liabilities
Non-annual policies are time-apportioned over the period of the risks.
General insurance contract liabilities are recognised when contracts are
entered into and premiums are charged. These liabilities comprise outstanding
claims provision and provision for unearned premiums.
Outstanding claims provision are based on the estimated ultimate cost of all
claims incurred but not settled at the reporting date, whether reported or not,
together with related claims handling costs and reduction for the expected
value of salvage and other recoveries. Delays can be experienced in the
notification and settlement of certain types of claims, therefore, the ultimate
cost of these claims cannot be known with certainty at the reporting date. The
liability is calculated at the reporting date using a range of standard actuarial
claim projection techniques based on empirical data and current assumptions
that may include a margin for adverse deviation. The liability is not discounted
for the time value of money. No provision for equalisation or catastrophe
reserves is recognised. The liabilities are derecognised when the contract
expires, is discharged or is cancelled.
In determining the UPR at reporting date, the methods used in calculation
of actual unearned premium are as follows:
1/24th method for all other classes of general business in respect of
Malaysian policies, with the following deduction rates, or actual
commission incurred, whichever is lower:
1/8th method for all other classes of overseas inward treaty
business, with a deduction of 20% for commission.
63
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(o) General insurance underwriting results (cont'd.)
(iv) Claim liabilities (cont'd.)
(v) Acquisition costs
(p) Insurance receivables
Claim liabilities are recognised as the obligation to make future payments in
relation to all claims that have been incurred as at the end of the financial year.
They are recognised in respect of both direct insurance and inward
reinsurance. The value is the best estimate value of claim liability which
includes provision for claims reported, claims incurred but not enough reserved
("IBNER"), claims incurred but not reported (“IBNR”) and direct and indirect
claim-related expenses as well as PRAD at 75% confidence level calculated at
the overall Company level. These are based on an actuarial valuation by a
qualified actuary, using a mathematical method of estimation based on, among
others, actual claims development pattern.
The costs of acquiring and renewing insurance policies, net of income derived
from ceding reinsurance premiums, are recognised as incurred and properly
allocated to the periods in which it is probable they give rise to income.
Insurance receivables are recognised when due and measured at the fair value of
the consideration received and receivable.
The Company gathers the objective evidence that an insurance receivable is
impaired using the same process and method adopted for financial assets carried at
amortised cost. These processes are described in Note 2.4(g).
Insurance receivables are derecognised when the derecognition criteria for financial
assets, as described in Note 2.4(h), have been met.
64
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(q) Other revenue recognition
(i) Rental income
(ii) Investment income and interest income on loan
(iii) Dividend/distribution income from unit trust funds
(iv) Realised gains and losses on investments
Revenue is recognised to the extent that it is probable that the economic benefits
associated with the transactions will flow to the Group and the Company and the
revenue can be measured reliably. The following specific recognition criteria must
also be met before revenue is recognised.
Rental income is recognised on an accrual basis except where default in
payment of rent has already occurred and rent due remains outstanding for
over six months, in which case the recognition of rental income is suspended.
Subsequent to suspension, income is recognised on receipt basis until all
arrears have been paid.
Investment and interest income is recognised in the financial statements on an
accrual basis using the effective interest method.
Dividend/distribution income from unit trust funds is recognised on a declared
basis, when the Company's right to receive payment is established.
Realised gains and losses recorded in the income statements on investments
include gains and losses on financial assets and investment properties. Gains
and losses on the sale of investments are calculated as the difference between
net sales proceeds and the original or amortised cost and are recorded on
occurrence of the sale transaction.
65
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(r) Foreign currencies
(s) Income tax
Income tax on the 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 reporting date.
Deferred tax is provided for, using the liability method. In principle, deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax
assets are recognised for all deductible temporary differences, unused tax losses
and unused tax credits to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, unused tax losses and
unused tax credits can be utilised. Deferred tax is not recognised if the temporary
difference arises from goodwill or negative goodwill or 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.
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 the tax rates that have
been enacted or substantively enacted at the reporting date. Deferred tax is
recognised in the income statement, except when it arises from a transaction which
is recognised directly in equity, in which case the deferred tax is also charged or
credited directly in equity.
The financial statements are presented in Ringgit Malaysia which is also the
functional currency of the Group and the Company.
Transactions in foreign currencies are initially recorded at the functional currency
rate prevailing at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency rate of
exchange ruling at the reporting date. All differences are taken to profit or loss.
66
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.4 Summary of significant accounting policies (cont'd.)
(t) Employee benefits
(i) Short term benefits
(ii) Defined contribution plans
(u) Cash and cash equivalents
(v) Non-controlling interests
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 and the Company. Short term accumulating
compensated absences such as paid annual leave are recognised when
services are rendered by employees that increase their entitlement to future
compensated absences, and short term non-accumulating compensated
absences such as sick leave are recognised when the absences occur.
As required by law, companies in Malaysia make contributions to the
Employees' Provident Fund ("EPF"). Such contributions are recognised as an
expense in the income statement as incurred.
For the purpose of the statements of cash flow, cash and cash equivalents consist
of cash and bank balances and fixed deposits with original maturities of 3 months or
less.
The cash flow statements have been prepared using the indirect method.
Non-controlling interest represents the equity in subsidiaries not attributable, directly
or indirectly, to owners of the Company, and are presented separately in the
statements of comprehensive income and within equity in the statements of
financial position, separately from equity attributable to owners of the Company.
Changes in the Company owners’ ownership interest in a subsidiary that do not
result in a loss of control are accounted for as equity transactions. In such
circumstances, the carrying amounts of the controlling and non-controlling interests
are adjusted to reflect the changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-controlling interest is adjusted and
the fair value of the consideration paid or received is recognised directly in equity
and attributed to owners of the Company.
67
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.5 Significant accounting judgements, estimates and assumptions
(a) Critical judgements in applying the Group's accounting policies
(b) Key sources of estimation uncertainty
(i) Valuation of insurance contract liabilities
The preparation of financial statements in conformity with MFRS requires
management to exercise judgement on the use of estimates and make assumptions
that affect the application of policies and reported amounts of assets, liabilities,
income and expenses. Although these estimates are based on management’s best
knowledge of current events and actions, actual results may differ from those
estimates. There are no critical judgement which requires disclosure in the financial
statements.
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 is discussed below:
For insurance contracts, estimates have to be made for both the expected
ultimate cost of claims reported at the reporting date and for the expected
ultimate cost of claims incurred but not yet reported ("IBNR") at the reporting
date.
It can take a significant period of time before the ultimate claims costs can be
established with certainty and for some type of policies, IBNR claims form the
majority of the reporting liability. The ultimate cost of outstanding claims is
estimated by using a range of standard actuarial claims projection techniques,
such as the Chain Ladder and Bornhuetter-Ferguson methods.
68
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
2. Significant accounting policies (cont'd.)
2.5 Significant accounting judgements, estimates and assumptions (cont'd.)
(b) Key sources of estimation uncertainty (cont'd.)
(i) Valuation of insurance contract liabilities
The main assumption underlying these techniques is that the Company's past
claims development experience can be used to project future claims
development and hence, ultimate claims costs. As such, these methods
extrapolate the development of paid and incurred losses, average costs per
claim and claim numbers based on the observed development of earlier years
and expected loss ratios. Historical claims development is mainly analysed by
accident years, but can also be further analysed by geographical areas, as well
as by significant business lines and claims type. Large claims are usually
separately addressed, either by being reserved at the face value of the loss
adjuster's estimates or separately projected in order to reflect their future
development. In most cases, no explicit assumptions are made regarding future
rates of claims inflation or loss ratio. Instead, the assumptions used are those
implicit in the historic claims development data on which the projections are
based.
Additional qualitative judgement is used to assess the extent to which past
trends may not apply in future, (for example, to reflect one-off occurrences,
changes in external or market factors such as public attitudes to claiming,
economic conditions, level of claims inflation, judicial decisions and legislation,
as well as internal factors such as portfolio mix, policy features and claims
handling procedures) in order to arrive at the estimated ultimate cost of claims
that present the likely outcome from the range of possible outcomes, taking
account of all the uncertainties involved. The movement and carrying amount of
insurance contract liabilities of the Group and the Company are as disclosed in
Note 13.
69
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
3. Property and equipment
Office Renovation,
Lands and Motor equipment furniture
buildings vehicles and computer and fittings Total
RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
2018
Cost
At 1 January 2018 3,185 651 11,301 7,578 22,715
Additions - - 1,851 76 1,927
Disposals - - (634) (795) (1,429)
At 31 December 2018 3,185 651 12,518 6,859 23,213
Accumulated
depreciation
`
At 1 January 2018 562 218 7,990 5,432 14,202
Charge for the year 64 130 1,266 483 1,943
Disposals - - (633) (784) (1,417)
At 31 December 2018 626 348 8,623 5,131 14,728
Net carrying amount
At 31 December 2018 2,559 303 3,895 1,728 8,485
Indicative fair value for lands and buildings*
RM'000
At 31 December 2018 5,020
70
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
3. Property and equipment (cont'd.)
Office Renovation,
Lands and Motor equipment furniture
buildings vehicles and computer and fittings Total
RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
2017
Cost
At 1 January 2017 3,185 385 10,001 7,081 20,652
Additions - 266 1,442 500 2,208
Disposals - - (142) (3) (145)
At 31 December 2017 3,185 651 11,301 7,578 22,715
Accumulated
depreciation
At 1 January 2017 498 97 7,168 4,951 12,714
Charge for the year 64 121 964 484 1,633
Disposals - - (142) (3) (145)
At 31 December 2017 562 218 7,990 5,432 14,202
Net carrying amount
At 31 December 2017 2,623 433 3,311 2,146 8,513
Indicative fair value for lands and buildings*
RM'000
At 31 December 2017 4,970
*
The cost of fully depreciated property and equipment which are still in use as at 31
December 2018 amounted to RM9,099,176 (2017: RM9,645,374).
The disclosed fair value was derived based on valuation performed by an appointed
independent valuer using the comparison method as disclosed in Note 4. The
movements and key assumptions used in the valuation are disclosed in Note 32.
71
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
4. Investment properties
2018 2017
Group and Company RM'000 RM'000
Cost
At 1 January 8,063 8,063
Additions 163 -
Disposals (792) -
At 31 December 7,434 8,063
Accumulated depreciation
At 1 January 362 201
Charge for the year 162 161
Disposals (29) -
At 31 December 495 362
Net carrying amount 6,939 7,701
Indicative fair value 8,350 9,400
2018 2017
Group and Company RM'000 RM'000
Rental income from investment properties 80 167
Direct operating expenses (62) (33)
Net rental arising from investment properties 18 134
Investment properties consist of 3 units (2017: 4 units) of residential properties and a
commercial building which are located in Penang.
Investment properties and lands and buildings disclosed in the property and equipment note
are stated at cost. Estimated fair value is based on valuations performed by an accredited
independent valuer with recent experience in the location and category of properties being
valued. Fair value is determined using the comparison method of valuation.
Under the comparison method, fair value is estimated by considering the sale of similar or
substitute properties and related market data and fair value estimates by making adjustments
to certain factors including location, accessibility, market conditions, size, shape and terrain
of land that affect fair value.
The valuation updates were performed by the valuers in January 2019 (2017: January 2018)
for the fair value of investment properties and lands and buildings of property and equipment
as at 31 December 2018. There have been no significant changes in method of valuation
used as compared with the previous full valuation report performed by the valuer in 2018.
The movements and key assumptions used in the valuation are disclosed in Note 32.
72
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
5. Intangible assets
2018 2017
RM'000 RM'000
Group and Company
Cost
At 1 January 11,657 9,033
Additions 8,673 2,624
Disposals (18) -
At 31 December 20,312 11,657
Accumulated amortisation
At 1 January 7,007 5,875
Charge for the year 2,044 1,132
Disposals (18) -
At 31 December 9,033 7,007
Net carrying amount 11,279 4,650
6. Investment securities
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Malaysian Government
Papers - 9,940 - -
Debt securities 369,055 334,595 - -
Equity securities 32,040 34,972 32,040 34,972
Unit trust funds * 6,601 61,049 332,646 354,352
Deposits with financial institutions 661,125 588,634 639,259 578,788
1,068,821 1,029,190 1,003,945 968,112
*
Group Company
Included in unit trust funds of the Company are investments in subsidiaries amounting to
RM326.0 million (2017: RM293.3 million) as disclosed in Note 6(c).
Intangible assets comprise computer application software which were developed or acquired
to meet the unique requirements of the Group and the Company.
73
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
6. Investment securities (cont'd.)
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
AFS - 440,556 - 389,324
LAR - 588,634 - 578,788
FVTPL 407,696 - 364,686 -
Financial assets at amortised
cost 661,125 - 639,259 - 1,068,821 1,029,190 1,003,945 968,112
(a) Financial assets at FVTPL and AFS financial assets
Group Company Group Company
RM'000 RM'000 RM'000 RM'000
At fair value
Equity securities
Quoted in Malaysia 32,040 32,040 58,828 58,828
Allowance for impairment - - (23,856) (23,856)
32,040 32,040 34,972 34,972
Malaysian Government
Papers
Malaysian Government
Securities - - 9,940 -
Debt securities
Unquoted in Malaysia 369,055 - 334,595 -
Unit trust funds
Quoted in Malaysia 6,601 120,086 61,049 142,900
Unquoted in Malaysia - 212,560 - 211,452
6,601 332,646 61,049 354,352
407,696 364,686 440,556 389,324
* classified as financial assets at FVTPL.# classified as AFS financial assets.
2018 * 2017 #
The Group's and the Company's investment securities are summarised by categories as
follows:
Group Company
74
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
6. Investment securities (cont'd.)
(a) Financial assets at FVTPL and AFS financial assets (cont'd.)
Movement of allowance for impairment:
Group Company Group Company
RM'000 RM'000 RM'000 RM'000
At 31 December,
as previously stated 23,856 23,856 5,915 5,915
Impact from adoption of
MFRS 9 (23,856) (23,856) - -
At 1 January, as restated - - 5,915 5,915
Addition - - 17,941 17,941
At 31 December - - 23,856 23,856
(b) Financial assets at amortised cost/LAR
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
At amortised cost/LAR
Fixed and call deposits
with licensed financial
institutions 661,125 588,634 639,259 578,788
- Fixed and call deposits
with original maturities of less
than or equal to 3 months
classified as cash and cash
equivalents (Note 10) 79,439 58,223 57,573 48,377
- Weighted average effective
interest rate (per annum) 3.5% 2.9% 3.6% 3.5%
- Maturity periods < 3 months < 3 months < 3 months < 3 months
- Fixed and call deposits
with original maturities of
more than 3 months
classified as cash and cash
equivalents (Note 10) 581,686 530,411 581,686 530,411
- Weighted average effective
interest rate (per annum) 4.2% 4.0% 4.2% 4.0%
- Maturity periods 4-18 months 4-15 months 4-18 months 4-15 months
2018 2017
Group Company
75
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
6. Investment securities (cont'd.)
(b) Financial assets at amortised cost/LAR (cont'd.)
(c) Investments in subsidiaries
2018 2017
RM'000 RM'000
At 1 January 293,303 225,542
Additions 32,742 67,761
At 31 December 326,045 293,303
2018 2017
% %
Unquoted unit trust funds:
Opus Institutional Income 66.87 67.70
Fund 2 ("Opus IIF2") *
United Institutional Income 98.49 98.49
Fund 2 ("United IIF2")
The carrying amounts of fixed and call deposits approximate fair values due to the
relatively short-term nature of these balances and insignificant risk of changes in value.
In compliance with MFRS 10, the Group's financial statements include unit trust funds
which have been consolidated with the Company's financial statements. The Company
has established that it has control over these unit trust funds in accordance with the
accounting policy described in Note 2.4(a).
Details of these unquoted unit trust funds in Malaysia, at fair value, are as follows:
Company
The subsidiaries of the Company, which are established in Malaysia and held directly by
the Company, are as follows:
Fixed and call deposits with financial institutions are classified as financial assets at
amortised cost in 2018. Prior to 1 January 2018, they were classified as LAR.
Company's
effective interest Principal activities
Wholesale unit trust fund
invested in fixed income
securities
Wholesale unit trust fund
invested in fixed income
securities
76
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
6. Investment securities (cont'd.)
(c) Investments in subsidiaries (cont'd.)
2018 2017
% %
Quoted unit trust funds:
Nomura i-Income Fund * 97.44 99.19
("Nomura IIF")
* Not audited by Ernst & Young or its affiliated firms
7. Reinsurance assets
2018 2017
RM'000 RM'000
Group and Company
Reinsurance of insurance contracts
Claim liabilities (Note 13) 279,976 260,232
Premium liabilities (Note 13) 86,274 106,021
366,250 366,253
Company's
Principal activitieseffective interest
The remaining 33.13% (2017: 32.30%) in Opus IIF2 and 1.51% (2017: 1.51%) in United
IIF2 are held by the Company's immediate holding company whilst the remaining 2.56%
(2017: 0.81%) in Nomura IIF are held by third parties.
Wholesale unit trust fund
invested in money market
77
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
8. Insurance receivables
2018 2017
RM'000 RM'000
Group and Company
Due premiums including agent/brokers and
co-insurers balances 94,314 144,383
Due from reinsurers and cedants 33,700 56,139
Due from related companies * 84 264
128,098 200,786
Less: Impairment
- Individual impairment (1,029) (17,846)
- Collective impairment (16,932) (3,476)
(17,961) (21,322)
110,137 179,464
The breakdown of allowance for ECL under MFRS 9 is as follows;
Allowance for ECL
- Lifetime ECL not credit impaired (8,415) -
- Lifetime ECL credit impaired (9,546) -
(17,961) -
*
9. Other receivables
2018 2017 2016 2018 2017 2016
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Restated Restated Restated Restated
Proportionate share
of net assets of
Malaysian Motor
Insurance Pool
("MMIP") 51,585 47,502 49,771 51,585 47,502 49,771
Income due and
accrued 10,541 9,832 10,017 10,541 9,832 10,017
Deposits and
prepayments 2,390 2,071 1,572 2,390 2,071 1,572
Allowance for
impairment (66) - - (66) - -
2,324 2,071 1,572 2,324 2,071 1,572
Other receivables 48,524 45,060 45,321 38,015 39,824 41,754
Allowance for
impairment (592) (100) (100) (492) - -
47,932 44,960 45,221 37,523 39,824 41,754
112,382 104,365 106,581 101,973 99,229 103,114
CompanyGroup
The amount due from related companies is unsecured, non interest bearing and is
subject to normal credit terms of 90 days (2017: 90 days).
78
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
9. Other receivables (cont'd.)
10. Cash and bank balances
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Cash and bank balances 20,308 21,247 16,789 15,938
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Cash and bank balances 20,308 21,247 16,789 15,938
Deposits with financial
institutions with original
maturity of 3 months
or less (Note 6(b)) 79,439 58,223 57,573 48,377
Total cash and cash
equivalents 99,747 79,470 74,362 64,315
The carrying amount of cash and bank balances approximate fair values due to the relatively
short-term nature of these balances.
Cash and cash equivalents included in the statements of cash flows comprise the following:
Group Company
Group Company
The carrying amounts of other receivables (other than the proportionate share of net assets
of MMIP and prepayments) approximate fair values due to the relatively short-term maturity
of these balances.
The proportionate share of net assets of MMIP (which excludes the share of insurance
contract liabilities of MMIP which has been included in Note 13) is after taking into
consideration cash release of RM3.5 million (2017: NIL) received from MMIP during the year.
79
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
11. Share capital
2018 2017 2018 2017
'000 '000 RM'000 RM'000
Issued and fully paid up:
At 1 January 100,000 100,000 100,200 100,000
Effect of implementation
of Companies Act, 2016 - - - 200
At 31 December 100,000 100,000 100,200 100,200
12. Reserves
(i) Retained earnings
(ii) Fair value reserve
Number of ordinary
shares Amount
The retained earnings as at 31 December 2018 can be distributed as dividends under
the single tier system.
The fair value reserves at 31 December 2017 was in respect of unrealised gain/(loss) on
AFS financial assets, net of deferred taxation. All balances remaining in the AFS
reserves as at 1 January 2018 has been reclassified to retained earnings as disclosed in
Note 2.2.
80
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
13. Insurance contract liabilities
2018 2017
Gross Reinsurance Net Gross Reinsurance Net
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
Provision for claims reported by policyholders 522,389 (215,128) 307,261 484,238 (208,065) 276,173
Provision for IBNR 162,222 (64,848) 97,374 145,016 (52,167) 92,849
Claim liabilities 684,611 (279,976) 404,635 629,254 (260,232) 369,022
Premium liabilities 283,053 (86,274) 196,779 307,523 (106,021) 201,502 Insurance contract liabilities 967,664 (366,250) 601,414 936,777 (366,253) 570,524
(i) Claim Liabilities
At 1 January 629,254 (260,232) 369,022 628,894 (284,768) 344,126
Claims incurred in current accident year 380,033 (114,138) 265,895 341,593 (92,017) 249,576
Claims incurred in prior accident year 15,771 (3,138) 12,633 (3,703) 23,936 20,233
Movement in PRAD of claim liabilities at 75% -
confidence level 36,878 (19,921) 16,957 13,289 (5,264) 8,025
Movement in claims handling expenses 654 - 654 336 - 336
Adjustment in IBNR (20,326) 7,240 (13,086) (7,050) 1,614 (5,436)
Claims paid during the year (Note 22) (357,653) 110,213 (247,440) (344,105) 96,267 (247,838) At 31 December 684,611 (279,976) 404,635 629,254 (260,232) 369,022
81
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
13. Insurance contract liabilities (cont'd.)
2018 2017
Gross Reinsurance Net Gross Reinsurance Net
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
(ii) Premium Liabilities
At 1 January 307,523 (106,021) 201,502 287,467 (96,288) 191,179
Premiums written in the year (Note 17) 602,429 (193,499) 408,930 657,898 (229,695) 428,203
Premiums earned during the year (Note 17) (626,899) 213,246 (413,653) (637,842) 219,962 (417,880) At 31 December 283,053 (86,274) 196,779 307,523 (106,021) 201,502
As at 31 December 2018, included in insurance contract liabilities of the Group and Company are the Group's and the Company's
proportionate share of MMIP's claims and premium liabilities amounting to RM35.7 million (2017: RM31.0 million) and RM2.8 million (2017:
RM1.5 million), respectively.
82
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
14. Insurance payables
2018 2017
RM'000 RM'000
Group and Company
Due to agents and intermediaries 8,939 6,412 Due to reinsurers and cedants 46,654 131,307 Due to ultimate holding company * 20 21
Due to related companies * 3,957 914
59,570 138,654
*
15. Deferred tax (assets)/liabilities
2018 2017
RM'000 RM'000
Group and Company
At 31 December, as previously stated (2,936) (1,549)
Impact from adoption of MFRS 9 (2,498) -
At 1 January, as restated (5,434) (1,549)
Recognised in other comprehensive income - 2,972
Recognised in the income statements (Note 24) 1,337 (4,359)
At 31 December (4,097) (2,936)
Presented in the statements of financial position as follows:
Deferred tax assets (4,097) (2,936)
Presented after appropriate offsetting as follows:
Deferred tax assets (6,063) (4,715)
Deferred tax liabilities 1,966 1,779
(4,097) (2,936)
The amounts due to ultimate holding company and related companies are unsecured,
non interest bearing and subject to normal credit term of 90 days (2017: 90 days).
The carrying amounts approximate fair values due to the relatively short-term maturity of
these balances.
83
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
15. Deferred tax (assets)/liabilities (cont'd.)
Deferred tax liabilities
Unearned Accelerated
premium capital
reserve allowances Total
RM'000 RM'000 RM'000
Deferred tax liabilities
2018
At 1 January - 1,779 1,779
Recognised in:
Income statements - 187 187
At 31 December - 1,966 1,966
2017
At 1 January 228 1,436 1,664
Recognised in:
Income statements (228) 343 115
At 31 December - 1,779 1,779
Fair value Allowance for
changes on impairment
investments loss Total
RM'000 RM'000 RM'000
Deferred tax assets
2018
At 31 December, as previously stated 1,017 (5,732) (4,715)
Impact from adoption of MFRS 9 - (2,498) (2,498)
At 1 January, as restated 1,017 (8,230) (7,213)
Recognised in:
Income statements (1,017) 2,167 1,150
At 31 December - (6,063) (6,063)
2017
At 1 January (1,955) (1,258) (3,213)
Recognised in:
Other comprehensive income 2,972 - 2,972
Income statements - (4,474) (4,474)
At 31 December 1,017 (5,732) (4,715)
84
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
16. Other payables
2018 2017 2016 2018 2017 2016
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Provisions and accruals 15,970 15,524 18,766 15,970 15,524 18,766
Ultimate holding
company * 110 134 532 110 134 532
Other payables 62,731 57,686 62,512 60,551 57,548 62,399
78,811 73,344 81,810 76,631 73,206 81,697
*
17. Net earned premium
2018 2017
RM'000 RM'000
Group and Company
(a) Gross premium (Note 13(ii)) 602,429 657,898
Change in premium liabilities 24,470 (20,056)
Gross earned premium (Note 13(ii)) 626,899 637,842
(b) Gross premium ceded (Note 13(ii)) (193,499) (229,695)
Change in premium liabilities (19,747) 9,733
Premium ceded (Note 13(ii)) (213,246) (219,962)
Net earned premiums 413,653 417,880
Group Company
The amount due to ultimate holding company is unsecured, non interest bearing and is
repayable on demand.
The carrying amounts of other payables (other than provisions) approximate fair values due
to the relatively short-term maturity of these balances.
85
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
18. Investment income
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Interest income from debt
securities 47,827 45,424 43,249 23,448
Rental income from
investment properties 18 134 18 134
Amortisation of premium, net - (452) - -
AFS financial assets
Dividend/distribution income:
- equity securities quoted
in Malaysia - 1,683 - 1,683
- unquoted unit trust fund - - - 10,688
- quoted unit trust fund - - - 5,188
Financial assets at FVTPL
Dividend from equity securities
quoted in Malaysia 2,220 - 2,220 -
50,065 46,789 45,487 41,141
19. Realised gains
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Realised gains/(losses) for:
AFS financial assets:
Equity securities quoted
in Malaysia - 5,403 - 5,221
Equity securities quoted
outside Malaysia - (51) - (51)
Unit trust funds quoted
in Malaysia - - - (10)
Unit trust funds unquoted
in Malaysia - - - 192
Debt securities quoted
in Malaysia - 110 - -
Debt securities unquoted
in Malaysia - 847 - -
Group Company
Group Company
86
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
19. Realised gains (cont'd.)
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Financial assets at FVTPL:
Equity securities quoted
in Malaysia 77 - 77 -
Unit trust funds quoted
in Malaysia 449 - 449 -
Unit trust funds unquoted
in Malaysia 1,395 - - -
1,921 6,309 526 5,352
20. Commission income
2018 2017
RM'000 RM'000
Group and Company
Reinsurance commission income 42,072 46,889
21. Other operating revenue/(expenses)
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Realised (loss)/gain on disposal
of property and equipment (2) 1 (2) 1
Realised gain on disposal of
investment property 372 - 372 -
(Reversal of)/ impairment
losses on AFS financial assets - (17,941) - (17,941)
Service income earned
from MMIP 3,298 5,961 3,298 5,961
Sundry (expenses)/income (301) 875 (72) 875
3,367 (11,104) 3,596 (11,104)
Group Company
Group Company
87
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
22. Net claims incurred
Note 2018 2017
RM'000 RM'000
Group and Company
Gross claims paid less salvage 13(i) 357,653 344,105
Reinsurance recoveries 13(i) (110,213) (96,267)
Net claims paid 247,440 247,838
Gross change in contract liabilities
At 31 December 13(i) 684,611 629,254
At 1 January 13(i) (629,254) (628,894)
55,357 360
Change in contract liabilities ceded to
reinsurers
At 31 December 13(i) (279,976) (260,232)
At 1 January 13(i) 260,232 284,768
(19,744) 24,536
Net claims incurred 283,053 272,734
23. Management expenses
2018 2017 2018 2017
Note RM'000 RM'000 RM'000 RM'000
Employee benefits
expense 23(a) 59,203 52,903 59,203 52,903
Directors'
remuneration 23(b) 373 280 373 280
Parent auditors'
remuneration:
- statutory audit 252 317 243 308
- audit-related
services 9 9 9 9
- over provision of
audit fees
in prior year (20) - (20) -
Other auditors'
remuneration 22 15 - -
Group Company
88
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
23. Management expenses (cont'd.)
2018 2017 2018 2017
Note RM'000 RM'000 RM'000 RM'000
(Reversal of allowance
for ECL)/impairment
losses on insurance
receivables (13,707) 1,560 (13,707) 1,560
Rental of properties 2,803 2,783 2,803 2,783
Depreciation of property
and equipment 3 1,943 1,633 1,943 1,633
Depreciation of
investment
properties 4 162 161 162 161
Amortisation of
intangible assets 5 2,044 1,132 2,044 1,132
Fund managers' 1,049 1,023 1,049 1,023
expenses
Bad debts written off 10,619 1,780 10,619 1,780
Marketing expenses 17,816 16,909 17,816 16,909
Management fees 489 397 489 397
Bank charges 3,190 2,946 3,190 2,946
Computers maintenance 4,077 2,699 4,077 2,699
Printing and stationery 3,864 3,465 3,864 3,465
Other expenses 6,043 4,193 4,937 3,993
100,231 94,205 99,094 93,981
(a) Employee benefits expense
2018 2017
RM'000 RM'000
Group and Company
Wages and salaries 41,974 39,226
Bonus 5,539 2,949
Social security contributions 406 371
Contributions to defined contribution plan, EPF 5,565 5,144
Other benefits 5,719 5,213
59,203 52,903
Group Company
89
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
23. Management expenses (cont'd.)
(b) Directors' remuneration
Group and Company
2018 2017
RM'000 RM'000
Non-executive Directors:
Fees 270 210
Emoluments 103 70
373 280
2018 2017
Non-executive Directors
RM50,000 and below 1 1
RM50,001 - RM100,000 1 3
RM100,001 - RM150,000 2 -
Executive Directors
RM50,000 and below 1 1
(c) Chief Executive Officer's remuneration
2018 2017
RM'000 RM'000
Salaries and other emoluments 863 849
Contribution to defined contribution plan, (EPF) 104 102
Benefits-in-kind 27 28
Amount included in employee benefits expenses 994 979
The details of remuneration received or receivable by directors during the year are as
follows:
The number of directors whose total remuneration (received/receivable) during the
financial year are as follows:
Number of Directors
Remuneration received by the Chief Executive Officer ("CEO") during the year are as
follows:
90
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
24. Taxation
2018 2017
RM'000 RM'000
Group and Company
Income tax:
Malaysian income tax 9,822 12,255
(Over)/under provision of tax expense in prior year (1,940) 492
7,882 12,747
Deferred tax (Note 15):
Relating to origination and reversal of
temporary differences 1,498 (5,174)
(Over)/under provision of deferred tax in prior year (161) 815
1,337 (4,359)
Tax expense for the year 9,219 8,388
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Profit before taxation 42,300 48,700 38,579 42,319
Taxation at Malaysian
statutory tax rate of 24% 10,152 11,688 9,259 10,157
Income not subject to tax (3,168) (5,736) (2,275) (4,205)
Effect of expenses not
deductible for tax purposes 4,336 1,129 4,336 1,129
(Over)/under provision of
deferred tax in prior years (161) 815 (161) 815
(Over)/under provision
of tax expense in prior years (1,940) 492 (1,940) 492
Tax expense for the year 9,219 8,388 9,219 8,388
Domestic current income tax is calculated at the statutory tax rate of 24% (2017: 24%) of the
estimated assessable profit for the year.
A reconciliation of income tax expense applicable to profit before taxation at the statutory tax
rate to income tax expense at the effective tax rate of the Group and the Company is as
follows:
Group Company
91
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
25. Earnings per share
26. Capital commitments
2018 2017
RM'000 RM'000
Group and Company
Approved and contracted for:
Computer software and hardware 250 1,071
Property and equipment 64 80
314 1,151
27. Operating lease arrangements
(a) The Company as lessor
2018 2017
RM'000 RM'000
Future minimum rental payments receivables:
Not later than 1 year 192 -
Later than 1 year and not later than 5 years 304 -
496 -
The Group's basic and diluted earning per ordinary share has been calculated based on the
Group profit after taxation for the year attributable to the equity holder of the Company of
RM29.2 million (2017: RM38.8 million) and the weighted average number of ordinary shares
in issue of 100,000,000 (2017: 100,000,000) shares.
The Company has entered into operating lease agreements for the lease of certain
office premises. These leases have an average life of 3 years (2017: nil) with certain
contracts carrying renewal options in the contracts. These contracts include fixed rentals
over the tenure of the lease period.
The future aggregate minimum lease payments receivable under operating lease
contracted for as at the reporting date but not recognised as receivables, are as follows:
92
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
27. Operating lease arrangements (cont'd.)
(b) The Company as lessee
2018 2017
RM'000 RM'000
Future minimum rental payments:
Not later than 1 year 2,535 2,656
Later than 1 year and not later than 5 years 1,400 379
3,935 3,035
28. Significant related party disclosures
(a) Related parties
Name Relationship
MPHB Capital Berhad Ultimate holding company
Assicurazioni Generali S.p.A Related Companies
Flamingo Management Sdn Bhd^ ^Subsidiary of the ultimate holding
Magnum Leisure Sdn Bhd^ company
Syarikat Perniagaan Selangor Sdn Bhd^
Magnum 4D Berhad* *Company in which there is common
Magnum Corporation Bhd* significant shareholder
Magnum Information Technology
Sdn Bhd*
Metra Management Sdn Bhd*
Sababumi (Sandakan) Sdn Bhd*
Asas Resources Holdings Sdn Bhd# #
Company which certain directors
Ganda Persona Sdn Bhd* have interest
The Company has entered into operating lease agreements for the use of certain office
premises. These leases have an average life of between 2 to 3 years (2017: 2 to 5
years) with certain contracts carrying renewal options in the contracts. These contracts
include fixed rentals over the tenure of the lease period.
The future aggregate minimum lease payments under operating leases contracted for as
at the reporting date but not recognised as liabilities, are as follows:
For the purpose of these financial statements, parties are considered to be related to the
Group if the Group has the ability, directly or indirectly, to control the party or exercise
significant influence over the party in making financial and operating decisions, or vice versa,
or where the Group and the party are subject to common control or common significant
influence. Related parties may be individuals or other entities.
Related parties also include key management personnel as disclosed in Note 28(d).
93
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
28. Significant related party disclosures (cont'd.)
(b)
2018 2017
RM'000 RM'000
Group and Company
Income/(expenses):
Ultimate holding company:
Insurance premium received 231 247
Commission paid (32) (30)
Claim paid (121) (53)
Management fees paid for service provided (536) (824)
General expenses (18) (20)
Subsidiaries of the ultimate holding company:
Insurance premium received 464 673
Commission paid (56) (70)
Claims paid (216) (355)
General expenses - (50)
Related company:
Insurance premium ceded (9,889) (34,737)
Commission received 2,658 8,549
Claim paid recovery 8,326 10,574
General expenses - (120)
Payment recovery - 22
Companies in which certain directors'
have financial interest:
Insurance premium received 2,053 2,474
Commission paid (263) (265)
Claims paid (413) (586)
Sponsorship received 50 55
General expenses (17) (26)
In addition to the transactions detailed elsewhere in the financial statements, the Group
and the Company had the following significant transactions and balances with related
parties during the year:
94
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
28. Significant related party disclosures (cont'd.)
(b)
2018 2017
RM'000 RM'000
Group and Company
Income/(expenses) (cont'd.):
Amount due from:
Amount due from ultimate holding company:
MPHB Capital Berhad 4 -
Amount due from subsidiaries of the
ultimate holding company:
Syarikat Perniagaan Selangor Sdn Bhd - 106
Amount due from companies in which there
is a common significant shareholder:
Magnum 4D Berhad 7 3
Magnum Corporation Bhd 4 -
Metra Management Sdn Bhd 69 155
80 158
Amount due to:
Amount due to ultimate holding company:
MPHB Capital Berhad 130 155
Amount due to a related company:
Assicurazioni Generali S.p.A 3,953 914
Amount due to subsidiaries of the ultimate
holding company:
Magnum Leisure Sdn Bhd 3 -
Syarikat Perniagaan Selangor Sdn Bhd 1 -
4 -
Amount due to a company in which there
is a common significant shareholder:
Metra Management Sdn Bhd 1 -
In addition to the transactions detailed elsewhere in the financial statements, the Group
and the Company had the following significant transactions and balances with related
parties during the year (cont'd.):
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MPI Generali Insurans Berhad
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28. Significant related party disclosures (cont'd.)
(c)
(d) Compensation of key management personnel
2018 2017
RM'000 RM'000
Short term employee benefits 3,773 3,870
Other long-term benefits 429 441
4,202 4,311
29. Risk management framework
- Internal control environment and activities;
- Awareness and monitoring;
- Reporting duties; and
-
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.
The remuneration of directors and other members of key management personnel during
the year was as follows:
Key management personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company, directly or indirectly.
Risk governance is part of the Company’s internal control and management system to
manage risks within the Board approved tolerances and risk appetites. The objectives of the
framework are to create value and protect the interest of the Company's shareholders and to
fulfil its strategic intent.
The Company’s internal control and management system is a set of principles, rules,
procedures and structures that ensure the effective operation of the Company and enable it
to identify, manage, report and monitor the main risks to which it is exposed. Key elements of
the system are:
Roles and responsibilities that the Board of Directors ("BOD") and its committees, the
Executive Committee, including the Chief Executive Officer ("CEO"), who is also in
charge of the internal control and risk management system, and the Chief Financial
Officer ("CFO"), who oversees the preparation of the Company’s financial reports, as
well as, risk owners and Control Functions must discharge within the internal control and
risk management system.
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(Incorporated in Malaysia)
29. Risk management framework (cont'd.)
-
-
- Internal Audit, which represents the third line of defence.
The key roles and responsibilities within the risk management system are outlined below:
-
-
-
The BOD is ultimately responsible for the internal control and risk management system
and ensures that it is always functional, complete and effective, with the Risk
Management Committee's support, and establishes the risk appetite framework (RAF) at
least once a year. It also governs the Company and ensuring its long term financial
soundness including determining the Company's business and risk strategy defines the
organisational setup, appoints the heads of the Control Functions and defining their
mandates, establishes and approves risk policies, approves the Internal Capital
Adequacy Assessment Process ("ICAAP") report, and based on them defines the risk
appetite and tolerance limits;
The Executive Committee ("EXCO") is then responsible for executing the defined
strategy, and ensuring that day to day management of the Company's activities is
consistent with the risk strategy, including the risk appetite, and policies approved by the
Board. It is also responsible for establishing a management structure that promotes
accountability and the effective oversight of delegated authority and responsibilities for
risk-taking decisions, with adequate checks and balances; and
The risk management function supports BOD and EXCO in ensuring the effectiveness of
the risk management system and provides risk perspective in business decision-making
processes.
The Company’s internal control and risk management system is founded on the
establishment of the three lines of defence:
The operating functions (the “Risk Owners”), which represent the first line of defence
and have ultimate responsibility for management of risks relating to their area of
expertise/operations;
Actuarial, Compliance, and Risk Management Functions, which represent the second
line of defence; and
Collectively, Actuarial, Compliance, Risk Management and Internal Audit functions are
referred to as the Company’s Control Functions.
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(Incorporated in Malaysia)
29. Risk management framework (cont'd.)
Risk Management System
The risk management system is founded on the following five processes:
1. Risk identification;
2. Risk measurement;
3. Risk management and control;
4. Risk reporting; and
5. Risk monitoring.
Risk Identification
The categorisation of identified risks is consistent with BNM’s regulation.
The audit function verifies business processes and the adequacy and effectiveness of
controls in place, provides assurance to the Board that the Company is operating in a sound
control environment and ensures that control weaknesses are appropriately dealt with.
Head of Compliance and Chief Risk Officer report functionally to the Risk Management
Committee ("RMC"), while the Head of Actuarial Function reports functionally to the BOD.
The Head of Internal Audit reports functionally to the Audit Committee.
The principles defining the Company risk management system are provided in the
Company’s Risk Management Policy, which is the cornerstone of all risk-related policies and
guidelines. The Risk Management Policy covers all risks the company is exposed to, on
current and forward-looking basis.
The purpose of risk identification is to ensure that all material risks to which the Company is
exposed to are properly identified. To this end, the Risk Management Function liaises with
business functions in order to identify the main risks are identified and assessed based on
their likelihood of occurrence and severity and ensure that mitigating actions are identified
and properly assigned to risk owner. Within this process, emerging risks are also considered.
The actuarial function coordinates the technical provisions calculation and grants their
adequacy of underlying methodologies, models and assumptions, verifies the quality of the
related data and expresses an opinion on the overall underwriting practices.
The compliance function forms part of the Company's internal control function and
determines the compliance risks measurement and assessment and ensuring the Company's
compliance to the applicable laws, regulations, internal policies procedures and limits.
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29. Risk management framework (cont'd.)
Risk Measurement
Risk Management & Control
Risk measurement of single risk is complemented by Stress test and Scenario analysis. The
purpose is to assess the vulnerabilities of the Company under unexpected and potentially
severe, but plausible, events. The outcome, in terms of impact on financial and capital
position, should prepare the Company to take appropriate management actions if such
events were to materialize.
The Company’s Risk Appetite Framework ("RAF") supports the effective selection of risks by
establishing the risks that the Company wishes to acquire, avoid, retain or remove, along with
the measures in place to orient the Company activities consistently, the monitoring and
escalation procedures.
The purpose of the RAF is to set the desired level of risk on the basis of the Company’s
strategy and should reflect the wilingness and capacity of the Company to take on risk while
taking a longer term view that considers the Company's financial capacity, and continuing
ability to meet obligations towards stakeholders. The RAF statement is complemented by
qualitative assertions (risk preferences) supporting decision-making processes as well as risk
tolerances providing quantitative boundaries, limiting excessive risk-taking.
The RAF governance provides a framework for guiding strategy development and business
plans and direct the Company's priorities and embedding risk management into day-to-day
and extraordinary business operations and control mechanisms as well as the escalation and
reporting to be applied in case of risk tolerance breaches.
Tolerance levels are set based on capital metrics. Should the indicator approach or breach
the defined tolerance levels, escalation mechanisms are activated.
Common risk measurement methodologies (both qualitative and quantitative) are applied in
order to provide an integrated measurement of risks at Company level. For assessing risks
identified in accordance to the Company Risk Map, a quantitative approach is implemented.
The Risk Management Function shall liaise with other competent Company functions for the
definition of the methodologies for evaluating other risks.
The qualitative approach shall be based on capital requirements calculation stipulated in
BNM RBC for Insurers, complemented by additional measurement techniques deemed
appropriate and proportionate.
The capital charge for the operational risk under Risk-Based Capital Framework for Insurers
published by BNM is calculated based on 1% of total assets.
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(Incorporated in Malaysia)
29. Risk management framework (cont'd.)
Risk Reporting
Risk Monitoring
30. Insurance risk
The Company operates in the retail, middle market and corporate and commercial segments
and has a client centric philosophy based on multichannel distribution model. The Company
coordinates a variety of distribution channels (i.e. agents, brokers, financial advisors, affinity
partners, digital partners, and direct channels), with the objective of improving the service
provided to its customers and also to diversify the risks. The Company favours longstanding
relationship with clients to reduce the risk of moral hazard and adverse selection.
The purpose of the risk monitoring and reporting is to keep business functions, EXCO, BOD
and also regulators aware and informed on the development of the risk profile, on the risk
trends and on the breaches of risk tolerances.
Under BNM’s Guidelines, the ICAAP is the main risk reporting process and is coordinated by
Risk Management Function. Its purpose is to provide the assessment of main risks and of the
overall solvency position on a current and forward-looking basis. The ICAAP ensures
adequate capital to meet its capital need on an ongoing basis based on the Company’s
Strategic Plan and Capital Management Plan, followed by a regular communication of the
results to BNM after BOD’s approval.
The ICAAP provides an overall risk profile assessment, taking into consideration the year-end
financial data of previous year. Within the ICAAP, stress test and scenario / sensitivity
analyses are also performed to assess the resilience of the Solvency Position and risk profile
to changed market conditions or specific risk factor.
The ICAAP report, documenting main results of this process, is produced on an annual basis.
The purpose of risk monitoring and reporting requirements across the organisation, including
the development and use of key risk indicators is to provide early warnings on adverse risk
developments to ensure the Company is able to manage and mitigate their risks in a timely
manner.
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30. Insurance risk (cont'd.)
-
-
-
The Company’s underwriting limits define the maximum size of risks and classes of business
the Company shall be allowed to write without seeking any additional or prior approval. The
limits may be set based on value, risk type, product exposure or class of occupancy. The
purpose of these limits is to attain a coherent and profitable book of business founded on the
expertise within the Company.
Additional indicators such as relevant exposures, risk concentration, and risk capital figures
are used for insurance risks monitoring.
Reinsurance is the key mitigating factor for balancing the portfolio. It aims to optimize the use
of risk capital by ceding part of the insurance risk to selected counterparties, while
simultaneously minimising the credit risk associated with such operations.
Insurance risks arise in relation to the perils covered and the processes used in the conduct
of the business model described above. They include the risk of underestimating the
frequency and/or severity of the claims in defining the pricing and reserves (respectively
pricing and reserving risk), the risk of losses arising from extreme or exceptional events
(catastrophe risk) and the risk of policyholder lapses from insurance contracts:
The pricing and catastrophe risks derive from the possibility that premiums are not
sufficient to cover future claims, contract expenses and extremely volatile events;
The reserving risk relates to the uncertainty of the claims reserves’ run off around its
expected value; and
The lapse risk arises from the uncertainty of the underwriting profits recognized in the
premium provisions.
The insurance risks are assessed by means of stress testing and scenario analysis. The
assessments are based mainly on the models developed by the in-house actuarial team.
The Company’s insurance risk is mainly driven by reserving risks and pricing risks, followed
by catastrophe risks.
In terms of catastrophe risk, the Company’s largest catastrophe exposures are floods in
Malaysia.
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30. Insurance risk (cont'd.)
The reinsurance program is designed as follows:
-
-
- Substantial risk capital has been saved by means of the protection.
The estimation of the Company’s insurance contract liabilities (claims liabilities and premium
liabilities) is performed and certified by an in-house Appointed Actuary. In estimating the
insurance contract liabilities (claims liabilities and premium liabilities), the principal
assumption underlying the estimates is that the Company's future claims development will
follow a similar pattern to past claims development experience. This includes assumptions in
respect of average claims costs, claims handling cost and claims numbers for each accident
period.
Additional qualitative judgements are used to assess the extent to which past trends may not
apply in the future, for example, isolated occurrence, change in market factors such as public
attitude to claiming, economic conditions, as well as internal factors, such as, portfolio mix,
policy conditions, claims handling and settling procedures. Judgement is further used to
assess the extent to which external factors, such as, judicial decisions, changes in foreign
exchange rates, and government legislation affect the estimation.
In accordance to the requirement set by BNM under the RBC for Insurers, the Company has
included risk margin for adverse deviation for the insurance contract liabilities at 75% level of
sufficiency.
The protection aims to cover single occurrence losses up to a return period of at least
250 years (2017: 200 years);
The protection has proven capable in all recent major catastrophe losses, i.e. flood; and
Alternative risk transfer solutions are continuously analysed. As an example, in addition to
traditional reinsurance, a Stop Loss protection has been placed to reduce the impact of high
loss ratio for motor business due to liberalisation and escalating claims cost, and medical
business due to escalating medical cost, for policies underwritten in 2017.
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(Incorporated in Malaysia)
30. Insurance risk (cont'd.)
Gross Reinsurance Net Gross Reinsurance Net
RM RM RM RM'000 RM'000 RM'000
Group and Company
Claim liabilities
Motor 312,729 (41,619) 271,110 247,304 (13,094) 234,210
Fire 90,138 (63,532) 26,606 70,803 (49,223) 21,580
Marine, Aviation & Transit 20,434 (12,377) 8,057 83,572 (76,140) 7,432
Miscellaneous 261,310 (162,448) 98,862 227,575 (121,775) 105,800
684,611 (279,976) 404,635 629,254 (260,232) 369,022
Premium liabilities
Motor 125,432 (14,614) 110,818 124,330 (8,525) 115,805 Fire 41,289 (24,575) 16,714 39,136 (22,714) 16,422
Marine, Aviation & Transit 8,462 (5,553) 2,909 18,225 (15,172) 3,053
Miscellaneous 107,870 (41,532) 66,338 125,832 (59,610) 66,222
283,053 (86,274) 196,779 307,523 (106,021) 201,502
2018 2017
The table below sets out the concentration of the Group's and the Company's insurance contract liabilities by type of insurance product:
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MPI Generali Insurans Berhad
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30. Insurance risk (cont'd.)
Sensitivities
Group and Company
Sensitivities
An analysis of sensitivity around various scenarios provides an indication of the adequacy of
the Company's estimation process in respect of its insurance contracts. The table presented
below demonstrates the sensitivity of the insurance contract liabilities estimates to particular
movements in assumptions used in the estimation process.
The analysis below is performed for reasonably possible movements in key assumptions with
all other assumptions held constant, showing the impact on gross and net liabilities, profit
before tax and equity. The correlation of assumptions will have a significant effect in
determining the ultimate claims liabilities, but to demonstrate the impact due to changes in
assumptions, assumptions had to be changed on an individual basis. It should be noted that
movements in these assumptions are non-linear.
Impact Impact Impact Impact
Change in on gross on net on profit on
assumption liabilities liabilities before tax equity*
RM'000 RM'000 RM'000 RM'000
2018
Motor Act Accident Year ("AY")
2016-2018 Loss Ratio +20% 25,903 24,685 (24,685) (18,761)
-20% (25,903) (24,685) 24,685 18,761
Motor Others AY 2018 Loss Ratio +10% 17,243 16,445 (16,445) (12,498)
-10% (17,243) (16,168) 16,168 12,288
Non-Motor AY 2018 Loss Ratio +10% 48,991 24,120 (24,120) (18,331)
-10% (48,991) (23,227) 23,227 17,653
Indirect Claims Handling Expenses +10% 673 1,067 (1,067) (811)
-10% (673) (1,067) 1,067 811
PRAD +10% 7,549 5,464 (5,464) (4,153)
-10% (7,549) (5,464) 5,464 4,153
<------------Increase/(decrease)--------------->
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30. Insurance risk (cont'd.)
Sensitivities (cont'd.)
* impact on equity reflects adjustments for tax, when applicable
Claim Development Table
The following tables show the estimate of cumulative incurred claims, including both claims
notified and IBNR for each successive accident period at reporting date, together with
cumulative payments to-date.
In setting provisions for claims, the Company gives consideration to the probability and
magnitude of future experience being more adverse than assumed and exercises a degree of
caution in setting reserves when there is considerable uncertainty. In general, the uncertainty
associated with the ultimate claims experience in an accident period is greater when the
accident period is at an early stage of development and the margin necessary to provide the
necessary confidence in adequacy of provision is relatively at its highest. As claims develop
and the ultimate cost of claims becomes more certain, the relative level of margin maintained
should decrease.
The Management of the Company believes that the estimate of total claims outstanding as of
31 December 2018 are adequate. However, due to the inherent uncertainties in the reserving
process, it cannot be assured that such balances will ultimately prove to be adequate.
Impact Impact Impact Impact
Change in on gross on net on profit on
assumption liabilities liabilities before tax equity*
RM'000 RM'000 RM'000 RM'000
2017
Motor Act AY 2015-2017 Loss Ratio +20% 17,259 21,997 (21,997) (16,718)
-20% (17,259) (21,380) 21,380 16,249
Motor Others AY 2017 Loss Ratio +10% 18,072 26,244 (26,244) (19,945)
-10% (17,824) (21,448) 21,448 16,300
Non-Motor AY 2017 Loss Ratio +10% 68,763 39,254 (39,254) (29,833)
-10% (50,896) (28,908) 28,908 21,970
Indirect Claims Handling Expenses +10% 604 1,028 (1,028) (781)
-10% (604) (1,028) 1,028 781
PRAD +10% 7,214 5,261 (5,261) (3,998)
-10% (7,214) (5,261) 5,261 3,998
<------------Increase/(decrease)--------------->
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30. Insurance risk (cont'd.)
Claim Development Table (cont'd.)
Gross general insurance contract liabilities 2018
Prior 2011 2012 2013 2014 2015 2016 2017 2018 TotalAccident year RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At end of accident year 221,092 225,900 250,573 319,927 337,467 364,500 401,803 449,601
One year later 196,535 218,491 275,039 298,232 359,040 347,516 392,322
Two years later 185,600 206,308 268,228 290,607 350,844 342,492
Three years later 177,983 201,210 250,437 287,349 349,912
Four years later 174,818 199,640 241,723 280,690
Five years later 172,081 195,018 231,935
Six years later 164,040 186,863
Seven years later 178,328 Current estimate of cumulative
claims incurred 178,328 186,863 231,935 280,690 349,912 342,492 392,322 449,601
At end of accident year (66,857) (68,404) (78,103) (107,625) (87,568) (113,618) (145,432) (156,798)
One year later (132,063) (140,189) (157,222) (208,729) (248,442) (237,522) (270,662)
Two years later (152,569) (160,186) (185,018) (239,950) (295,397) (274,066)
Three years later (159,273) (176,761) (209,525) (251,184) (316,073)
Four years later (161,056) (181,867) (210,092) (263,185)
Five years later (162,157) (183,360) (216,430)
Six years later (162,648) (184,200)
Seven years later (166,642) Cumulative payments to date (166,642) (184,200) (216,430) (263,185) (316,073) (274,066) (270,662) (156,798)
Gross general insurance outstanding liabilities (direct and facultative) 11,686 2,663 15,505 17,505 33,839 68,426 121,660 292,803 564,087
Gross general insurance outstanding liabilities (treaty inward) 32,831
Best estimate of claim liabilities 596,918
Claim handling expenses 5,967
PRAD at 75% confidence interval 81,726 Gross general insurance contract liabilities per statements of financial position (Note 13) 684,611
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(Incorporated in Malaysia)
30. Insurance risk (cont'd.)
Claim Development Table (cont'd.)
Net general insurance contract liabilities 2018
Prior 2011 2012 2013 2014 2015 2016 2017 2018 TotalAccident year RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At end of accident year 129,887 142,612 157,393 184,691 198,959 253,976 294,262 321,951
One year later 123,352 137,868 158,587 176,155 190,773 256,607 286,231
Two years later 121,023 129,143 152,215 171,634 189,304 253,533
Three years later 117,275 126,578 148,628 164,212 185,588
Four years later 114,584 126,592 142,940 158,020
Five years later 112,575 123,431 140,775
Six years later 105,743 121,170
Seven years later 106,445 Current estimate of cumulative
claims incurred 106,445 121,170 140,775 158,020 185,588 253,533 286,231 321,951
At end of accident year (47,308) (55,488) (63,109) (76,737) (76,018) (101,485) (124,083) (126,581)
One year later (85,415) (98,085) (115,460) (130,314) (137,924) (183,461) (207,900)
Two years later (98,114) (110,481) (128,322) (142,578) (157,446) (208,498)
Three years later (102,597) (116,930) (133,954) (149,605) (169,225)
Four years later (103,911) (118,966) (136,168) (152,585)
Five years later (104,370) (120,302) (137,358)
Six years later (104,815) (120,630)
Seven years later (105,313) Cumulative payments to date (105,313) (120,630) (137,358) (152,585) (169,225) (208,498) (207,900) (126,581)
Net general insurance outstanding liabilities (direct and facultative) 1,132 540 3,417 5,435 16,363 45,035 78,331 195,370 345,623
Net general insurance outstanding liabilities (treaty inward) 32,831
Best estimate of claim liabilities 378,454 Claim handling expenses 5,968
PRAD at 75% confidence interval 38,160
Stop loss recovery (17,947)
Net general insurance contract liabilities per statements of financial position (Note 13) 404,635
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(Incorporated in Malaysia)
30. Insurance risk (cont'd.)
Claim Development Table (cont'd.)
Gross general insurance contract liabilities 2017
Prior 2010 2011 2012 2013 2014 2015 2016 2017 TotalAccident year RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At end of accident year 273,955 221,092 225,900 250,573 319,927 337,467 364,500 401,803
One year later 297,469 196,535 218,491 275,039 298,232 359,040 347,516
Two years later 283,844 185,600 206,308 268,228 290,607 350,844
Three years later 281,178 177,983 201,210 250,437 287,349
Four years later 258,719 174,818 199,640 241,723
Five years later 246,172 172,081 195,018
Six years later 233,160 164,040
Seven years later 221,631 Current estimate of cumulative
claims incurred 221,631 164,040 195,018 241,723 287,349 350,844 347,516 401,803
At end of accident year (66,089) (66,857) (68,404) (78,103) (107,625) (87,568) (113,618) (145,432)
One year later (145,219) (132,063) (140,189) (157,222) (208,729) (248,442) (237,522)
Two years later (164,223) (152,569) (160,186) (185,018) (239,950) (295,397)
Three years later (182,266) (159,273) 176,761 (209,525) (251,184)
Four years later (190,640) (161,056) (181,867) (210,092)
Five years later (201,360) (162,157) (183,360)
Six years later (202,735) (162,647)
Seven years later (206,151) Cumulative payments to date (206,151) (162,647) (183,360) (210,092) (251,184) (295,397) (237,522) (145,432)
Gross general insurance outstanding liabilities (direct and facultative) 15,480 1,393 11,658 31,631 36,165 55,447 109,994 256,371 518,139
Gross general insurance outstanding liabilities (treaty inward) 28,599 Best estimate of claim liabilities 546,738
Claim handling expenses 5,367
PRAD at 75% confidence interval 77,149 Gross general insurance contract liabilities per statements of financial position (Note 13) 629,254
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(Incorporated in Malaysia)
30. Insurance risk (cont'd.)
Claim Development Table (cont'd.)
Net general insurance contract liabilities 2017
Prior 2010 2011 2012 2013 2014 2015 2016 2017 TotalAccident year RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At end of accident year 125,014 129,887 142,612 157,393 184,691 198,959 253,976 294,262
One year later 122,605 123,352 137,868 158,587 176,155 190,773 256,607
Two years later 120,212 121,023 129,143 152,215 171,634 189,304
Three years later 117,792 117,275 126,578 148,628 164,212
Four years later 116,153 114,584 126,592 142,940
Five years later 113,704 112,575 123,431
Six years later 112,062 105,743
Seven years later 107,358 Current estimate of cumulative
claims incurred 107,358 105,743 123,431 142,940 164,212 189,304 256,607 294,262
At end of accident year (46,848) (47,308) (55,488) (63,109) (76,737) (76,018) (101,485) (124,081)
One year later (85,718) (85,415) (98,085) (115,460) (130,314) (137,924) (183,461)
Two years later (96,694) (98,114) (110,481) (128,322) (142,578) (157,448)
Three years later (102,441) (102,597) (116,930) (133,954) (149,605)
Four years later (104,087) (103,911) (118,966) (136,168)
Five years later (104,591) 104,370 (120,304)
Six years later (105,489) (104,817)
Seven years later (106,110) Cumulative payments to date (106,110) (104,817) (120,304) (136,168) (149,605) (157,448) (183,461) (124,081)
Net general insurance outstanding
liabilities (direct and facultative) 1,248 926 3,127 6,772 14,607 31,856 73,146 170,181 301,863
Net general insurance outstanding liabilities (treaty inward) 28,602
Best estimate of claim liabilities 330,465
Claim handling expenses 5,369
PRAD at 75% confidence interval 33,188 Net general insurance contract liabilities per statements of financial position (Note 13) 369,022
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31. Financial risks
As a result, the Company is exposed to the financial risks that:
-
-
(i)
(ii)
(iii)
(iv) Currency risk arising from adverse changes in exchange rates;
(v)
(vi)
Credit risk
Interest rate risk, defined as the risk of adverse changes in the market value of the
assets or in the value of liabilities due to change in the level of interest rates in the
market;
Property risk arising from changes in the level of property market prices. Exposure to
property risk arises from property asset positions; and
Currency risk arising from adverse changes in exchange rates.
The Company is exposed to credit risks related to investment assets and also arising from
other counterparties (i.e. reinsurance). Similarly to financial risk, the Company has to ensure
that the value of assets do not fall below the value of insurance obligations.
The Company invests collected premiums in financial assets, with the purpose of honouring
future promises to policyholders and generating value for its shareholders.
Cash from maturing bonds is reinvested at unfavourable market conditions, typically
lower interest rates.
For its business, the Company has to ensure that the benefits can be paid on timely basis
when claims occur. In more detail, the Company is exposed to:
Equity risk arising from the risk of adverse changes in the market value of the assets or
in the value of liabilities due to changes in the level of equity market prices which can
lead to financial losses;
Equity volatility risk arising from the changes in the volatility of equity markets. Exposure
to equity volatility is typically related to equity option contracts;
Invested assets do not perform as expected because of falling or volatile market prices;
110
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit risk (cont'd.)
Credit risks include the following two categories:
-
-
Credit exposure
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
LAR:
Fixed and call deposits - 588,634 - 578,788
Other receivables - 70,095 - 64,959
Cash and bank balances - 21,247 - 15,938
Financial assets at amortised
cost:
Fixed and call deposits 661,125 - 639,259 -
Other receivables 112,382 - 101,973 -
Cash and bank balances 20,308 - 16,789 -
AFS financial assets:
Malaysian Government
Papers - 9,940 - -
Debt securities - 334,595 - -
Unit trust funds - 61,049 - 354,352
Financial assets at FVTPL:
Debt securities 369,055 - - -
Unit trust funds 6,601 - 212,560 -
Reinsurance assets 366,250 366,253 366,250 366,253
Insurance receivables 110,137 179,464 110,137 179,464
1,645,858 1,631,277 1,446,968 1,559,754
Spread widening risk, defined as the risk of adverse changes in the market value of
assets due to change in the market value of non-defaulted credit assets. The decrease
in the market value of an asset due to spread widening can be linked either to the
market’s assessment of the creditworthiness of the specific obligor (often implying also a
decrease in rating) or to market-wide systemic reduction in the price of credit assets;
and
Default risk, defined as the risk of incurring in losses because of the inability of
counterparty to honour its financial obligations.
The table below shows the maximum exposure to credit risk for the components on the
statements of financial position.
Group Company
111
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure (cont'd.)
Investment
grade Not Rated Total
RM'000 RM'000 RM'000
Group
2018
Financial assets at amortised cost:
Fixed and call deposits 649,625 11,500 661,125
Other receivables - 112,382 112,382
Cash and bank balances 20,199 109 20,308
Financial assets at FVTPL:
Debt securities 333,609 35,446 369,055
Unit trust funds - 6,601 6,601
Reinsurance assets 62,505 303,745 366,250
Insurance receivables 6,042 104,095 110,137
1,071,980 573,878 1,645,858
Past-due
Investment but not
grade Not Rated impaired Total
RM'000 RM'000 RM'000 RM'000
Group
2017
LAR:
Fixed and call deposits 522,634 66,000 - 588,634
Other receivables - 104,365 - 104,365
Cash and bank balances 20,754 493 - 21,247
AFS financial assets:
Malaysian Government
Papers - 9,940 - 9,940
Debt securities 289,190 45,405 - 334,595
Unit trust funds - 61,049 - 61,049
Reinsurance assets 203,812 161,341 - 365,153
Insurance receivables (before
collective impairment) 8,069 156,289 18,582 182,940
1,044,459 604,882 18,582 1,667,923
The table below provides information regarding the credit risk exposure of the Group and the
Company by classifying assets according to the Company's credit ratings of counterparties.
impaired
Neither past-due nor
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure (cont'd.)
Investment
grade Not Rated Total
RM'000 RM'000 RM'000
Company
2018
Financial assets at amortised cost:
Fixed and call deposits 627,759 11,500 639,259
Other receivables - 101,973 101,973
Cash and bank balances 16,680 109 16,789
Financial assets at FVTPL:
Unit trust funds - 332,646 332,646
Reinsurance assets 62,505 303,745 366,250
Insurance receivables 6,042 104,095 110,137
712,986 854,068 1,567,054
Past-due
Investment but not
grade Not Rated impaired Total
RM'000 RM'000 RM'000 RM'000
Company
2017
LAR:
Fixed and call deposits 512,788 66,000 - 578,788
Other receivables - 99,229 - 99,229
Cash and bank balances 15,445 493 - 15,938
AFS financial assets:
Unit trust funds - 354,352 - 354,352
Reinsurance assets 204,912 161,341 - 366,253
Insurance receivables (before
collective impairment) 8,069 156,289 18,582 182,940
741,214 837,704 18,582 1,597,500
Neither past-due nor
impaired
113
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure by credit rating (cont'd.)
AAA AA A BBB to B Not rated Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
2018
Financial assets at amortised cost:Fixed and call deposits 283,521 249,797 116,307 - 11,500 661,125
Other receivables - - - - 112,382 112,382
Cash and bank balances 1,963 3,858 14,378 - 109 20,308
Financial assets at FVTPL
Debt securities 81,852 194,790 56,967 - 35,446 369,055
Unit trust funds - - - - 6,601 6,601
Reinsurance assets - 3 56,083 6,419 303,745 366,250
Insurance receivables - - 5,503 539 104,095 110,137 367,336 448,448 249,238 6,958 573,878 1,645,858
The table below provides information regarding the credit risk exposure of the Group and the Company by classifying assets according to the
Rating Agency of Malaysia's ("RAM"), Malaysian Rating Corporation Berhad ("MARC"), A.M. Best Company ("A.M. Best") and Standards &
Poor's ("'S&P") credit ratings of counterparties. AAA is the highest possible rating.
114
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure by credit rating (cont'd.)
AAA AA A BBB to B Not rated Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
2017
LAR:
Fixed and call deposits 275,544 43,289 203,801 - 66,000 588,634
Other receivables - - - - 104,365 104,365 Cash and bank balances 2,310 6,165 12,279 - 493 21,247
AFS financial assets:
Malaysian Government Papers - - - - 9,940 9,940
Debt securities 77,615 175,273 36,302 - 45,405 334,595
Unit trust funds - - - - 61,049 61,049
Reinsurance assets 485 713 203,099 615 161,341 366,253
Insurance receivables - - 8,069 - 171,395 179,464 355,954 225,440 463,550 615 619,988 1,665,547
115
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure by credit rating (cont'd.)
AAA AA A BBB to B Not rated Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
2018
Financial assets at amortised cost:
Fixed and call deposits 275,197 236,255 116,307 - 11,500 639,259
Other receivables - - - - 101,973 101,973
Cash and bank balances 1,963 339 14,378 - 109 16,789
Financial assets FVTPL
Unit trust funds - - - - 332,646 332,646
Reinsurance assets - 3 56,083 6,419 303,745 366,250
Insurance receivables - - 5,503 539 104,095 110,137 277,160 236,597 192,271 6,958 854,068 1,567,054
2017
LAR:
Fixed and call deposits 269,943 39,044 203,801 - 66,000 578,788
Other receivables - - - - 99,229 99,229
Cash and bank balances 2,310 856 12,279 - 493 15,938
AFS financial assets:
Unit trust funds - - - - 354,352 354,352
Reinsurance assets 485 713 203,099 615 161,341 366,253
Insurance receivables - - 8,069 - 171,395 179,464 272,738 40,613 427,248 615 852,810 1,594,024
116
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure by credit rating (cont'd.)
Not credit Credit
impaired impaired Total
RM'000 RM'000 RM'000
As at 1 January 2018 177,046 23,740 200,786
Reduction (53,720) (18,968) (72,688)
As at 31 December 2018 123,326 4,772 128,098
Allowance for ECL
As at 31 December 2017, as previosly stated 3,476 17,846 21,322
Effect from adoption of MFRS 9 7,857 2,489 10,346
As at 1 January 2018, restated 11,333 20,335 31,668
Reversal, net (2,918) (10,789) (13,707)
As at 31 December 2018 8,415 9,546 17,961
Aging analysis of insurance receivables:
2017
RM'000
Neither past-due nor impaired 164,358
Past-due but not impaired 18,582
Past-due and impaired 17,846
Total 200,786
It is the Group and the Company's policy to monitor and update current risk ratings
across its credit portfolio. This enables Management to focus on the applicable risks and
the comparison of credit exposures across all lines of business and products. The
attributable risk ratings are assessed and updated regularly.
During the year, there were no significantly adverse credit risk exposures.
The Group and the Company actively manages its product mix to ensure that there is no
significant concentration of credit risk.
Gross carrying amount
The table below shows the gross insurance receivables and the movement of allowance
for ECL after the adoption of MFRS 9 in 2018. The comparative information are under
MFRS 139.
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Credit exposure by credit rating (cont'd.)
2018 2017
RM'000 RM'000
(i) Individual allowance for impairment
At 1 January 17,846 16,986
(Reversal)/charge for the year (16,817) 860
At 31 December 1,029 17,846
(ii) Collective allowance for impairment
At 1 January 3,476 2,776
Charge for the year 13,456 700
At 31 December 16,932 3,476
Liquidity risk
Liquidity is defined as the uncertainty, emanating from business operations, investment or
financial activities, over the ability of the Company to meet payment obligations in full and
timely manner, in a current or stressed environment. This could include meeting
commitments only through accessing credit markets at unfavourable conditions or through
the sales of financial assets, incurring in additional costs due to liquidity of (or difficulties in
liquidating) the assets.
At 31 December 2018, there are impaired insurance receivables of approximately RM1.0
million (2017: RM17.9 million). For assets to be classified as "past-due and impaired",
contractual payments must be in arrears for more than twelve (12) months. No collateral is
held as security for any past due or impaired assets.
The Group and the Company records impairment allowance for insurance receivables in a
separate allowance account. A reconciliation of the allowance for impairment losses for
insurance receivables is as follows:
118
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Liquidity risk (cont'd.)
Maturity profiles
The table below summarises the maturity profile of the financial assets, financial liabilities,
reinsurance assets and insurance contract liabilities of the Group and the Company based on
remaining undiscounted contractual obligations, including interest/profit payable and
receivable.
For insurance contracts liabilities and reinsurance assets, maturity profiles are determined
based on estimated timing of net cash outflows from the recognised insurance liabilities.
Unearned premiums and the reinsurers' share of unearned premiums have been excluded
from the analysis as they are not contractual obligations.
As far as investment process is concerned, the Company identified liquidity risk as the main
risks connected with investments. As a result, the Company asset allocations, portfolio limit
structures and maturity profiles of assets are governed by its Investment Policy to ensure
sufficient funding is available to meet insurance and investment contracts obligations.
The Company's treaty reinsurance contracts contain clauses permitting the Company to call
for funding to meet claims payment should claim events exceed a specified amount.
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Carrying More than No maturity
value Up to a year 1-5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
2018
Investment securities:Financial assets at amortised cost 661,125 624,625 36,500 - - 661,125
Financial assets at FVTPL 407,696 12,243 130,238 226,573 38,642 407,696
Reinsurance assets - claim liabilities 279,976 158,945 108,354 12,677 - 279,976
Insurance receivables 110,137 110,137 - - - 110,137 Other receivables 111,275 111,275 - - - 111,275
Cash and bank balances 20,308 - - - 20,308 20,308 1,590,517 1,017,225 275,092 239,250 58,950 1,590,517
Insurance contract liabilities - claim liabilities 684,611 413,327 256,935 14,349 - 684,611
Insurance payables 59,570 59,570 - - - 59,570
Other payables 62,951 62,951 - - - 62,951 807,132 535,848 256,935 14,349 - 807,132
120
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Carrying More than No maturity
value Up to a year 1-5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
2017
Investment securities:
Fixed and call deposits 588,634 583,634 5,000 - - 588,634 AFS financial assets 440,556 4,992 110,314 226,626 98,624 440,556
Reinsurance assets - claim liabilities 260,232 130,146 115,387 14,699 - 260,232
Insurance receivables 179,464 179,464 - - - 179,464
Other receivables 103,443 103,443 - - - 103,443 Cash and bank balances 21,247 - - - 21,247 21,247
1,593,576 1,001,679 230,701 241,325 119,871 1,593,576
Insurance contract liabilities - claim liabilities 629,254 367,486 244,895 16,873 - 629,254
Insurance payables 138,654 138,654 - - - 138,654
Other payables 57,819 57,819 - - - 57,819 825,727 563,959 244,895 16,873 - 825,727
121
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Carrying More than No maturity
value Up to a year 1-5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
2018
Investment securities:
Financial assets at amortised cost 639,259 602,759 36,500 - - 639,259
Financial assets at FVTPL 364,686 - - - 364,686 364,686
Reinsurance assets - claim liabilities 279,976 158,945 108,354 12,677 - 279,976
Insurance receivables 110,137 110,137 - - - 110,137
Other receivables 100,867 100,867 - - - 100,867 Cash and bank balances 16,789 - - - 16,789 16,789
1,511,714 972,708 144,854 12,677 381,475 1,511,714
Insurance contract liabilities - claim liabilities 684,611 413,329 256,933 14,349 - 684,611
Insurance payables 59,570 59,570 - - - 59,570
Other payables 60,771 60,771 - - - 60,771 804,952 533,670 256,933 14,349 - 804,952
122
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Carrying More than No maturity
value Up to a year 1-5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
2017
Investment securities:
Fixed and call deposits 578,788 573,788 5,000 - - 578,788
AFS financial assets 389,324 10,000 1,245 - 378,079 389,324
Reinsurance assets - claim liabilities 260,232 130,146 115,387 14,699 - 260,232
Insurance receivables 179,464 179,464 - - - 179,464
Other receivables 98,307 98,307 - - - 98,307
Cash and bank balances 15,938 - - - 15,938 15,938 1,522,053 991,705 121,632 14,699 394,017 1,522,053
Insurance contract liabilities - claim liabilities 629,254 367,486 244,895 16,873 - 629,254
Insurance payables 138,654 138,654 - - - 138,654
Other payables 57,682 57,682 - - - 57,682 825,590 563,822 244,895 16,873 - 825,590
123
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Current Non-current Total
RM'000 RM'000 RM'000
Group
2018
Property and equipment - 8,485 8,485
Investment properties - 6,939 6,939
Intangible assets - 11,279 11,279
Investment securities -
Financial assets at amortised cost 624,625 36,500 661,125
Financial assets at FVTPL 12,243 395,453 407,696
Reinsurance assets 245,219 121,031 366,250
Insurance receivables 110,137 - 110,137
Other receivables 112,382 - 112,382
Deferred tax assets - 4,097 4,097
Cash and bank balances 20,308 - 20,308
Total assets 1,124,914 583,784 1,708,698
Insurance contract liabilities 696,380 271,284 967,664
Insurance payables 59,570 - 59,570
Tax payable 5,153 - 5,153
Other payables 78,811 - 78,811
Total liabilities 839,914 271,284 1,111,198
2017
Property and equipment - 8,513 8,513
Investment properties - 7,701 7,701
Intangible assets - 4,650 4,650
Investment securities
LAR 583,634 5,000 588,634
AFS 4,992 435,564 440,556
Reinsurance assets 236,167 130,086 366,253
Insurance receivables 179,464 - 179,464
Other receivables 104,365 - 104,365
Deferred tax assets - 2,936 2,936
Cash and bank balances 21,247 - 21,247
Total assets 1,129,869 594,450 1,724,319
The table below summarises the current and non-current portions of the assets and liabilities
presented in the statements of financial position.
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Current Non-current Total
RM'000 RM'000 RM'000
Group
2017
Insurance contract liabilities 675,009 261,768 936,777
Insurance payables 138,654 - 138,654
Tax payable 4,732 - 4,732
Other payables 73,344 - 73,344
Total liabilities 891,739 261,768 1,153,507
Company
2018
Property and equipment - 8,485 8,485
Investment properties - 6,939 6,939
Intangible assets - 11,279 11,279
Investment securities
Financial assets at amortised cost 602,759 36,500 639,259
Financial assets at FVTPL - 364,686 364,686
Reinsurance assets 245,219 121,031 366,250
Insurance receivables 110,137 - 110,137
Other receivables 101,973 - 101,973
Deferred tax assets - 4,097 4,097
Cash and bank balances 16,789 - 16,789
Total assets 1,076,877 553,017 1,629,894
Insurance contract liabilities 696,380 271,284 967,664
Insurance payables 59,570 - 59,570
Tax payable 5,153 - 5,153
Other payables 76,631 - 76,631
Total liabilities 837,734 271,284 1,109,018
125
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Maturity profiles (cont'd.)
Current Non-current Total
RM'000 RM'000 RM'000
Company
2017
Property and equipment - 8,513 8,513
Investment properties - 7,701 7,701
Intangible assets - 4,650 4,650
Investment securities
LAR 573,788 5,000 578,788
AFS 10,000 379,324 389,324
Reinsurance assets 236,167 130,086 366,253
Insurance receivables 179,464 - 179,464
Other receivables 99,229 - 99,229
Deferred tax assets - 2,936 2,936
Cash and bank balances 15,938 - 15,938
Total assets 1,114,586 538,210 1,652,796
Insurance contract liabilities 675,009 261,768 936,777
Insurance payables 138,654 - 138,654
Tax payable 4,732 - 4,732
Other payables 73,206 - 73,206
Total liabilities 891,601 261,768 1,153,369
Market risk
(i)
(ii)
Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises three (3) types of risk -
foreign exchange rates (Currency risk), market interest rates/profit yields (Interest Rate/Profit
Yield risk) and market prices (Price risk).
The key features of the Company's market risk management practices and policies are as
follows:
A Company-wide market risk policy setting out the evaluation and determination of
components of market risk for the Company.
The Company’s policies on asset allocation, portfolio limit structure and diversification
benchmark have been set in line with the Company’s risk management policy after
taking cognisance of the regulatory requirements in respect of maintenance of assets
and solvency.
The Company manages its subsidiary's market risk in the same manner with the above risk
management practices and policies.
126
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Currency risk
Interest rate/profit yield risk
The Group and the Company does not engage in derivative transaction.
As the Group's and the Company’s main foreign exchange risk from recognised assets and
liabilities arises from reinsurance and investment transactions for which the balances are
expected to be settled and realised in less than a year, the impact arising from sensitivity in
foreign exchange rates is deemed minimal as the Group and the Company has no significant
concentration of foreign currency risk.
Interest rate risk is the risk that the value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates/profit yield.
The Group and the Company is exposed to interest rate risk primarily through its investments
in fixed income securities and deposits placements. Interest rate risk is managed by the
Group and the Company on an ongoing basis.
Currency risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates.
The Group's and the Company’s primary transactions are carried out in Ringgit Malaysia
(RM) and its exposure to foreign exchange risk arises principally with respect to United State
Dollar (USD).
As the Group's and the Company’s businesses are conducted primarily in Malaysia, the
Group's and Company’s financial assets are also primarily maintained in Malaysia as required
under the Financial Services Act 2013, and hence, primarily denominated in the same
currency (the local RM) as its insurance contract liabilities, the main foreign exchange risk
from recognised assets and liabilities arises from transactions other than those in which
insurance contract liabilities are expected to be settled.
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31. Financial risks (cont'd.)
Change
in basis
pointsGroup Company
RM'000 RM'000
2018 - impacting profit or loss
Debt securities +25 / -25 (923)/923 -
2017 - impacting equity
Malaysian Government
Papers +25 / -25 (25/)/25 -
Debt securities +25 / -25 (832)/832 -
Price risk
The Group and the Company has no significant concentration of interest rate/profit yield risk.
The sensitivity analysis of the Group's and the Company's fixed income securities is as follows:
Equity price risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from interest rate/profit
yield risk or currency risk), irregardless whether those changes are caused by factors specific to
the individual financial instruments or its issuer or factors affecting similar financial instruments
traded in the market.
The Group's and the Company’s equity price risk exposure relates to financial assets and
financial liabilities whose values will fluctuate as a result of changes in market prices.
Increase/(decrease)
Sensitivity of changes
in fair value ofinvestment securities
128
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Price risk (cont'd.)
Changes
in variable profit or loss * equity *
2018 2017
% RM'000 RM'000
Group
Market indices:
Stock exchange +10% 2,937 7,298
Stock exchange -10% (2,937) (7,298)
Changes
in variable profit or loss * equity *
2018 2017
% RM'000 RM'000
Company
Market indices:
Stock exchange +10% 11,562 5,333
Stock exchange -10% (11,562) (5,333)
* Impact reflects adjustments for tax, when applicable.
Impact on
<--Increase/(decrease)-->
Impact on
The Group and the Company is exposed to equity price risk arising from investments held by
the Group and the Company and classified in the statements of financial positions as
financial assets at FVTPL that comprises quoted equities and unit trusts. Prior to 1 January
2018, these investments are classified as AFS financial assets.
The analysis below is performed for reasonably possible movements in equity price with all
other variables held constant, showing the impact of statements of comprehensive income
and equity (due to changes in fair value of available-for-sale financial assets).
<--Increase/(decrease)-->
129
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
31. Financial risks (cont'd.)
Operational risks
32. Fair value hierarchy
(a) Level 1 :
(b) Level 2 :
(c) Level 3 :
Operational risk is the risk of loss arising from inadequate or failed internal processes,
personnel or systems, or from external events. Losses from events such as fraud, litigation,
damages to the Company’s premises, cyber-attack and failure to comply with regulations are
therefore covered in the definition. It also includes financial reporting risk but excludes
strategic and reputational risks.
Although ultimate responsibility for managing the risks sits in the first line, the so-called risk
owners, the Risk Management Function with its methodologies and processes ensures an
early identification of the most severe threats to the Company. In doing so, it provides
management at all levels with a holistic view of the broad operational risk spectrum that is
essential for prioritizing actions and allocation of resources in the most risk related critical
areas.
The target is achieved by adopting methodologies and tools in line with industry best
practices and by establishing a strong dialogue with the first line of defence.
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (ie. as prices) or indirectly (ie. derived from
prices).
Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
To further strengthen the internal control systems and in addition to the usual risk owners’
responsibilities for managing their risks on day to day basis, various company-wide key
initiatives and action plans were developed to address the key operational risks identified.
The progress of these initiatives and plans are monitored closely on regular basis and
updated to the Risk Management Committee.
The table below analyses those financial instruments carried at fair value by their valuation
methods and non-financial assets which are carried at cost in the statements of financial
position, of which their fair value are disclosed. The different levels have been defined as
follows:
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(Incorporated in Malaysia)
32. Fair value hierarchy (cont'd.)
(i) Financial assets carried at fair value
Level 1 Level 2 Level 3 Total
RM'000 RM'000 RM'000 RM'000
Group
2018
Quoted equity securities 32,040 - - 32,040
Debt securities - 369,055 - 369,055
Quoted unit trust funds 6,601 - - 6,601
2017
Quoted equity securities 34,972 - - 34,972
Malaysian Government
Papers - 9,940 - 9,940
Debt securities - 334,595 - 334,595
Quoted unit trust funds 61,049 - - 61,049
Company
2018
Quoted equity securities 32,040 - - 32,040
Unit trust funds 120,086 212,560 - 332,646
2017
Quoted equity securities 34,972 - - 34,972
Unit trust funds 142,900 211,452 - 354,352
(ii) Non-financial assets carried at cost but with fair value disclosed
Level 1 Level 2 Level 3 Total
RM'000 RM'000 RM'000 RM'000
Group and Company
2018
Lands and buildings - - 5,020 5,020
Investment properties - - 8,350 8,350
2017
Lands and buildings - - 4,970 4,970
Investment properties - - 9,400 9,400
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
32. Fair value hierarchy (cont'd.)
(ii) Non-financial assets carried at cost but with fair value disclosed (cont'd.)
Movement in Level 3 fair value hierarchy is as follows:
Lands and Investment
buildings properties
RM'000 RM'000
As at 1 January 2017 4,950 9,400
Fair value increase 20 -
As at 31 December 2017 4,970 9,400
Fair value increase/(decrease) 50 (1,050)
As at 31 December 2018 5,020 8,350
(a) Key assumption used
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Price per square
metres 4 - 9 4 - 9 6 - 10 5 - 10
(b) Sensitivity analysis
2018 2017 2018 2017
RM'000 RM'000 RM'000 RM'000
Increase in price per
square metres
by 10% 4 - 10 4 - 10 6 - 11 6 - 11
Decrease in price per
square metres
by 10% (3) - (8) (3) - (8) (5) - (9) (5) - (9)
The significant unobservable valuation input used in the valuation of property and
equipment and investment properties is as follows:
Investment properties
Significant increase/(decrease) in estimated price per square metres in isolation
would result in significantly higher/(lower) fair value as follows:
Lands and buildings Investment properties
Lands and buildings
<------------------Increase/(decrease)-------------------->
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
33. Non-controlling interests
2018 2017
RM'000 RM'000
Group
At beginning of year 71,385 64,627
Share of profit for the year 3,918 1,551
Share of other comprehensive income - 7,129
Creation of units to non-controlling interests, net 4,851 1,476
Distribution paid (3,537) (3,398)
At end of year 76,617 71,385
Proportion of equity interest held by non-controlling interests:
Country of
incorporation
and 2018 2017
Name of the subsidiaries operation % %
OPUS Institutional Income Fund 2 Malaysia 33.13 32.30
United Institutional Income Fund 2 Malaysia 1.51 1.51
Nomura i-Income Fund Malaysia 2.56 0.81
2018 2017
RM'000 RM'000
Accumulated balances of non-controlling interests:
OPUS Institutional Income Fund 2 72,621 69,711
United Institutional Income Fund 2 1,013 1,007
Nomura i-Income Fund 2,983 667
76,617 71,385
Profit allocated to non-controlling interests:
OPUS Institutional Income Fund 2 3,703 1,539
United Institutional Income Fund 2 51 11
Nomura i-Income Fund 164 1
3,918 1,551
Financial information of the subsidiaries that have material non-controlling interests are
provided below:
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
33. Non-controlling interests (cont'd.)
Opus Institutional Income Fund 2
2018 2017
RM'000 RM'000
Summarised statement of
comprehensive income:
Investment income 11,842 11,744
Management expenses (664) (678)
Profit before taxation 11,178 11,066
Taxation - -
Net profit for the year, representing
total comprehensive income for the year 11,178 11,066
Profit attributable to non-controlling interests 3,703 1,539
2018 2017
RM'000 RM'000
Summarised statement of financial position
as at 31 December:
Investments 218,309 211,383
Cash and bank balances 5 4,251
Other receivables/(payables) 905 (69)
Total equity 219,219 215,565
Attributable to:
Equity holders of parent 146,598 145,854
Non-controlling interest 72,621 69,711
219,219 215,565
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
33. Non-controlling interests (cont'd.)
Opus Institutional Income Fund 2
2018 2017
RM'000 RM'000
Summarised cash flow information
for year ended 31 December:
Operating activities 14,794 9,134
Financing activities (5,497) (7,067)
Net increase in cash
and cash equivalents 9,297 2,067
United Institutional Income Fund 2
2018 2017
RM'000 RM'000
Summarised statement of
comprehensive income:
Investment income 3,516 3,648
Management expenses (146) (175)
Profit before taxation 3,370 3,473
Taxation - -
Net profit for the year, representing
total comprehensive income for the year 3,370 3,473
Profit attributable to non-controlling interests 51 11
The summarised financial information of these subsidiaries are provided below. This
information is based on amounts before inter-company eliminations. (cont'd.)
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
33. Non-controlling interests (cont'd.)
United Institutional Income Fund 2
2018 2017
RM'000 RM'000
Summarised statement of financial position
as at 31 December:
Investments 65,990 60,957
Other receivables
Cash and bank balances 158 5,659
Other receivables/(payables) 830 (34)
Total equity 66,978 66,582
Attributable to:
Equity holders of parent 65,965 65,575
Non-controlling interest 1,013 1,007
66,978 66,582
2018 2017
RM'000 RM'000
Summarised cash flow information
for year ended 31 December:
Operating activities (1,012) 16,862
Financing activities (2,975) (18,015)
Net decrease in cash
and cash equivalents (3,987) (1,153)
The summarised financial information of these subsidiaries are provided below. This
information is based on amounts before inter-company eliminations. (cont'd.)
136
14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
33. Non-controlling interests (cont'd.)
Nomura i-Income Fund
2018 2017
RM'000 RM'000
Summarised statement of
comprehensive income:
Investment income 6,732 4,565
Management expenses (326) (348)
Profit before taxation 6,406 4,217
Taxation - -
Net profit for the year, representing
total comprehensive income for the year 6,406 4,217
Profit attributable to non-controlling interests 164 1
2018 2017
RM'000 RM'000
Summarised statement of financial position
as at 31 December:
Investments 106,623 77,328
Cash and bank balances 3,356 5,246
Other receivables/(payables) 6,493 (34)
Total equity 116,472 82,540
Attributable to:
Equity holders of parent 113,489 81,873
Non-controlling interest 2,983 667
116,472 82,540
The summarised financial information of these subsidiaries are provided below. This
information is based on amounts before inter-company eliminations. (cont'd.)
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
33. Non-controlling interests (cont'd.)
Nomura i-Income Fund
2018 2017
RM'000 RM'000
Summarised cash flow information
for year ended 31 December:
Operating activities (22,607) (73,087)
Financing activities 27,527 78,323
Net increase in cash and cash equivalents 4,920 5,236
34. Regulatory capital requirement
2018 2017
RM'000 RM'000
Eligible Tier 1 Capital
Share capital 100,200 100,200
Retained Earnings 420,676 394,701
520,876 494,901
Tier 2 Capital
Fair value reserves - 4,526
Amount deducted from Capital
Intangible assets (11,279) (4,650)
Deferred tax assets (4,097) (2,936)
Total Capital Available 505,500 491,841
The summarised financial information of these subsidiaries are provided below. This
information is based on amounts before inter-company eliminations. (cont'd.)
Company
The Company is required to comply with the regulatory capital requirements prescribed in the
RBC Framework which is imposed by the Ministry of Finance. Under the RBC Framework
guidelines issued by Bank Negara Malaysia, insurance companies are required to satisfy a
minimum capital adequacy ratio of 130%. As at the reporting date, the Company has met
with the minimum capital adequacy ratio of 130%.
The capital structure of the Company, as prescribed under the RBC Framework is provided
below:
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MPI Generali Insurans Berhad
(Incorporated in Malaysia)
35. Updates to legal case
MYCC's Proposed Decision against PIAM and its 21 members
The MYCC had investigated PIAM (Persatuan Insurans Am Malaysia) together with its 22
members, including MPI Generali, for an alleged infringement of the prohibition under section
4(2)(a) of the Competition Act 2010 (“the Act”) for fixing parts trade discount and labour rates
for PARS (PIAM Authorised Repairers Scheme) workshops.
On 23 February 2017, the MYCC issued its proposed decision to impose a financial penalty
on all 22 general insurance companies amounting to RM213,454,814. MPI Generali’s share
of the penalty is amounting to RM4,089,138.
Following this decision, MPI Generali and other insurance companies, with the
recommendation of PIAM, have made oral representation on 29 January 2018 to collectively
challenge the proposed decision and penalty. Bank Negara Malaysia (“BNM”) has made an
oral representation on 26 February 2018. The oral representation session by BNM is a closed
session and no counsels and insurance representatives from any other insurance companies
are allowed to be present.
On 21 February 2019, the cousel for PIAM made their oral representations to the MYCC
Commissioners and it was treated as de novo hearing (fresh hearing - starting from the
beginning). All previous submissions of the insurers' counsels were allowed to be adopted
and will form part of the record of evidence. This matter is fixed for further oral
representations on May and June 2019.
Management has also sought legal opinion from the general counsel (acting on behalf of a
group of insurance companies including the Company) on this matter. The Company will take
all necessary and appropriate actions to defend its position and at all times maintain that the
Company acted in accordance with the directives issued by the regulator. As such, no
provision has been made in the financial statements as at 31 December 2018.
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14730-X
MPI Generali Insurans Berhad
(Incorporated in Malaysia)
36. Comparative
As
previously Re- As
stated classification restated
RM'000 RM'000 RM'000
Group
Statements of Financial Position
At 1 January 2017
Assets
Other receivables 68,414 38,167 106,581
Liabilities
Other payables 43,643 38,167 81,810
At 31 December 2017
Assets
Other receivables 70,095 34,270 104,365
Liabilities
Other payables 39,074 34,270 73,344
Company
Statements of Financial Position
At 1 January 2017
Assets
Other receivables 64,947 38,167 103,114
Liabilities
Other payables 43,530 38,167 81,697
At 31 December 2017
Assets
Other receivables 64,959 34,270 99,229
Liabilities
Other payables 38,936 34,270 73,206
Certain amounts in the comparative financial statements and notes disclosures have been
reclassified to conform with the current year's presentation. The reclassification is as follows:
The above reclassification relates to cash collateral received from policyholders on bond
policies issued which was previously set-off against amounts due to the policyholders in other
payables.
140