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Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATUTORY FINANCIAL STATEMENTS
31 DECEMBER 2019
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
CONTENTS
Page(s)
CORPORATE INFORMATION ii
DIRECTORS’ REPORT 1 - 11
STATEMENT BY DIRECTORS 12
STATUTORY DECLARATION 12
INDEPENDENT AUDITORS' REPORT 13 - 16
FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION 17
STATEMENTS OF INCOME 18
STATEMENTS OF COMPREHENSIVE INCOME 19
STATEMENTS OF CHANGES IN EQUITY 20
STATEMENTS OF CASH FLOWS 21 - 22
NOTES TO THE FINANCIAL STATEMENTS 23 - 102
i
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
CORPORATE INFORMATION
BOARD OF DIRECTORS
Executive Director
Jean, Paul, Dominique, Louis Drouffe
Non-Executive Directors
Tan Sri Hashim bin Meon
Yu Choong Cheong
Datin Zaimah Binti Zakaria
SECRETARIES
Aisah Bevi binti Abdul Rahman
Nor Hakimah binti Haji Abdul Latiff
AUDITORS
PricewaterhouseCoopers PLT
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
Ground Floor, Wisma Boustead
71, Jalan Raja Chulan
50200 Kuala Lumpur
ii
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT
DIRECTORS
Tan Sri Hashim bin Meon
General Tan Sri Ahmad Saruji bin Che Rose, RMAF (Retired) (resigned w.e.f. 3 June 2019)
Jean, Paul, Dominique, Louis Drouffe
Yu Choong Cheong
Datin Zaimah Binti Zakaria
Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019 and resigned w.e.f. 2 March 2020)
PRINCIPAL ACTIVITY
FINANCIAL RESULTS
Group Company
RM'000 RM'000
Net profit for the financial year 73,145 70,871
DIVIDENDS
ISSUE OF SHARES
No shares were issued by the Company during the financial year.
The Directors have pleasure in submitting their report together with the audited financial statements of the
Group and Company for the financial year ended 31 December 2019.
The Directors in office during the financial year and during the period from the end of the financial year to the
date of the report are:
The Group and Company are principally engaged in the underwriting of all classes of general insurance
business. There have been no significant changes in the nature of this activity of the Group and Company
during the financial year.
No dividend has been paid or declared by the Company since the end of the previous financial year. The
Directors do not recommend any dividend in respect of the financial year ended 31 December 2019.
1
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
RESERVES AND PROVISIONS
INSURANCE LIABILITIES
BAD AND DOUBTFUL DEBTS
CURRENT ASSETS
VALUATION METHODS
Before the financial statements of the Group and Company were made out, the Directors took reasonable
steps to ascertain that there was adequate provision for insurance liabilities in accordance with the valuation
methods specified in Part D of the Risk-Based Capital Framework (“RBC Framework”) issued by Bank
Negara Malaysia (“BNM”) for insurers.
All material transfers to or from reserves or provisions during the financial year are as disclosed in the
financial statements.
Before the financial statements of the Group and Company were made out, the Directors took reasonable
steps to ascertain that proper action had been taken in relation to the writing off of impaired debts and the
making of impairment allowance for impaired debts, and satisfied themselves that all known impaired debts
had been written off and adequate allowance had been made for impaired debts.
At the date of this report, the Directors are not aware of any circumstances that would render the amount
written-off for impaired debts or the amount of the impairment allowance for impaired debts in the financial
statements of the Group and Company inadequate to any substantial extent.
Before the financial statements of the Group and Company were made out, the Directors took reasonable
steps to ascertain that any current assets, other than debts, which were unlikely to realise in the ordinary
course of business, their values as shown in the accounting records of the Group and Company have been
written down to amounts which they might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances which would render the values
attributed to the current assets in the financial statements of the Group and Company misleading.
At the date of this report, the Directors are not aware of any circumstances which have arisen which render
adherence to the existing methods of valuation of assets or liabilities of the Group and Company misleading
or inappropriate.
2
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CONTINGENT AND OTHER LIABILITIES
At the date of this report, other than as disclosed above, there does not exist:
(a)
(b)
CHANGE OF CIRCUMSTANCES
ITEMS OF AN UNUSUAL NATURE
any charge on the assets of the Group and Company which has arisen since the end of the financial
year which secures the liabilities of any other person, or
any contingent liability in respect of the Group and Company that has arisen since the end of the
financial year.
Other than as disclosed above, no contingent or other liability of the Group and Company has become
enforceable, or is likely to become enforceable within the period of twelve months after the end of the
financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and
Company to meet their obligations when they fall due.
For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising from contracts
of insurance underwritten in the ordinary course of business of the Group and Company.
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 Company, which would render any amount stated in the
financial statements misleading.
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect
substantially the results of the operations of the Group and Company for the financial year in which this
report is made.
The results of the operations of the Group and Company for the financial year were not, in the opinion of the
Directors, substantially affected by any item, transaction or event of a material and unusual nature.
In August 2016, Malaysia Competition Commission (“MyCC”) had commenced investigation under Section
15(1) of the Competition Act, 2010 (“the Act”) against PIAM (Malaysian General Insurance Association) and
22 member companies with regards to an alleged infringement of Section 4(2)(a) of the Act in relation to an
agreement to fix parts trade discount and labour rates for 6 vehicle makes. On 22 February 2017, MyCC
issued a proposed decision to all 22 member companies, proposing to impose collective penalty of RM213
million on the general insurance industry. PIAM and its members (including the Company) had submitted
their respective Written Representation to MyCC in April 2017. The first oral representation was completed in
January 2018. However, there was a change of government after the 14th general election. The Competition
Committee (new Chairman was appointed) decided to review this case. A new oral representation was
agreed to be held. The case management was held on 21 February 2019 and the oral representation from all
relevant insurers (represented by counsels) was held on 13 and 14 May 2019 and 17 and 18 June 2019
respectively. Decision is expected to be issued in 2020.
3
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE
Composition of the Board of Directors (“the Board”)
The composition of the Board during the period since the date of the last report is as follows:
Tan Sri Hashim bin Meon
General Tan Sri Ahmad Saruji bin Che Rose, RMAF (Retired) (resigned w.e.f. 3 June 2019)
Jean, Paul, Dominique, Louis Drouffe
Yu Choong Cheong
Datin Zaimah Binti Zakaria
Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019 and resigned w.e.f. 2 March 2020)
The Board comprises individuals with a wide range of professional skills and operational experience:
Tan Sri Hashim bin Meon
Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired)
Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) holds a Masters' Degree in Defence Studies
and an Advanced Diploma in Defence Resources Management. He was the Chief of the Royal Malaysian
Air Force from 1996 to 2001, and was an Independent Director of a number of defence related companies
namely, Airod Sdn Bhd, SME Aerospace Sdn Bhd and Aerospace Technology System Corporation (ATSC).
After retirement from government service in 2001, he served as Chairman of BH Insurance (M) Bhd
(formerly Royal & Sun Alliance Insurance Bhd.). He was appointed as an Independent Director of the
Company on 2 June 2010 and officially resigned on 3 June 2019.
The Board and management have reviewed the Group's and Company’s corporate governance structures
and procedures with reference to Policy Document BNM/RH/PD/029-09 on Corporate Governance issued by
BNM and are satisfied that the Group and Company has complied with all the prescriptive applications in the
Framework. Where applicable, best practices are adopted to improve the standard of the Group's and
Company’s corporate governance. There is no departure from the Framework principles applicable to
general insurance business.
Tan Sri Hashim bin Meon graduated from University of Malaya in 1970 with honours degree in Arts. He also
holds a Master of Public Administration degree from University of Southern California, Los Angeles, USA,
and has held several senior government positions during his long career. He was Selangor State Secretary
(1995 – 1999) and then Secretary General, Ministry of Defence until he retired in 2003. He now sits on the
Board of a number of local companies, and also the Board of Trustees of several Non-Governmental
Organisations (“NGOs”). He was appointed a Director of the Company since January 2006 and assumed
chairmanship in 2018.
4
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE (CONTINUED)
Composition of the Board of Directors (“the Board”) (continued)
Jean, Paul, Dominique, Louis Drouffe
Yu Choong Cheong
Dato' Dr. Nirmala Menon a/p Y B Menon
Datin Zaimah Binti Zakaria
Dato' Dr. Nirmala holds a Bachelor of Medical Science and Doctor of Medicine (BSc. MD) from Mysore
University, India in 1983. She has 9 years of experience as medical practitioner and 27 years of experience
in insurance industry both in life and health insurance. She held several senior positions during her long
career and her last position prior to her retirement in 2016 was the Executive Vice President, Head of
Designated Markets & Health Asia at Metlife Asia Pacific Ltd. (Insurance) based in Hong Kong. Currently,
she is an independent director of Nestle Malaysia Berhad and Sime Darby Berhad. She was appointed to the
Board of the Company on 15 July 2019 and resigned on 2 March 2020.
Datin Zaimah Zakaria holds a Bachelor of Science in Agribusiness from University Putra Malaysia (UPM) in
1981 and Master in Business Administration (Finance) from International Islamic University Malaysia (IIUM)
in 2003. She has held several senior positions in the banking sector during her long career and her last
position prior to her retirement in 2015 was as the Executive Vice President at RHB Bank, Kuala Lumpur.
Datin Zaimah has vast experience in financial industry. Currently, she is an occasional speaker on
International Social Etiquette covering personal grooming, art of communication and entertaining including
dining etiquette and also guest speaker on Investment Banking and Treasury related products. She is also
an independent director of Malaysian Reinsurance Berhad and Bank Simpanan Nasional.
Mr Jean Drouffe is currently a Chief Executive Officer of AXA Singapore. After completing his studies in
Economics and Applied Mathematics at Ecole Polytechnique, France, he graduated from ENSAE and
became a Qualified Actuary of the French Institute IAF. He started his career at Arthur Andersen, Paris as an
Actuarial Consultant. He then joined AXA GIE, Paris where he was in charge of launching and leading the
economic capital for AXA Group.
Mr. Yu Choong Cheong graduated in 1975 from University of Malaya with an Honours Degree in Economics
(Business Administration). He has vast experience in investment management, project studies and
management and general financial management. He was appointed as Financial Controller of Affin Holdings
Berhad (AHB) when the company was listed on Bursa Malaysia in 1991. He was then promoted to General
Manager in 2001 and was the Executive Director of AHB from year 2004 to May 2013. He started his career
with Lembaga Tabung Angkatan Tentera (LTAT), which is the ultimate holding body corporate of AHB in
1975 and retired in 2007 as a General Manager (Investment). He was conferred Kesatria Mangku Negara in
1995 and Johan Setia Mahkota in 2004. Currently he is a non-executive director of Union Harvest Sdn Bhd
and Union Harvest (M) Sdn Bhd.
He spent 9 years in AXA UK in London, initially as Chief Risk Officer and then as Chief Finance Officer in
AXA Insurance and subsequently became Chief Finance Officer of AXA UK Group. He then relocated to
Paris and took the responsibility of Chief Executive Office of AXA France West Region, leading the AXA
business for retail and SME business for the Western quadrant of France until December 2015. He is
currently a director of four (4) AXA entities.
5
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE (CONTINUED)
Attendance at Board Meeting
Directors’ Training
Audit Committee ("AC")
The composition of the AC is as follows:
Datin Zaimah Binti Zakaria Chairperson (Independent)
General Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired)
(resigned w.e.f. 3 June 2019) Member (Independent)
Yu Choong Cheong Member (Independent)
Tan Sri Hashim bin Meon Member (Non-Independent)
Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019
and resigned w.e.f. 2 March 2020) Member (Independent)
The responsibilities of the AC include, but are not limited to the following:
(i)
(ii)
(iii) Select independent auditors for appointment by the Company’s Board each year.
(iv) Consider the appointment, appraisal, resignation and dismissal of the Internal Auditor.
All existing Directors have attended the “FIDE Programme” as required by Bank Negara Malaysia. The
Directors also participated in other briefings/programs to better equip themselves to effectively discharge
their duties.
The Board holds regular meetings, with additional meetings being convened as necessary. All members
complied with the minimum attendance requirements for the Board meetings during the financial year ended
31 December 2019.
Review the overall condition, in particular, the financial status of the Company, its internal controls and
audit programme.
Review with external auditors, the scope of their audit and audit reports, including their findings and any
action to be taken.
6
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE (CONTINUED)
Audit Committee (continued)
Nomination and Remuneration Committee (“NRC”)
The composition of the NRC is as follows:
Datin Zaimah Binti Zakaria Chairperson (Independent)
General Tan Sri Ahmad Saruji bin Che Rose (RMAF) (Retired)
(resigned w.e.f. 3 June 2019) Member (Independent)
Yu Choong Cheong Member (Independent)
Tan Sri Hashim bin Meon Member (Non-Independent)
Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019
and resigned w.e.f. 2 March 2020) Member (Independent)
The primary responsibilities of the NRC are as follows:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Overseeing the overall composition of the Board in terms of the appropriate size and mix of skills, the
balance between executive, non-executive and independent Directors and other core competencies
required.
Examine and recommend the Directors’ fees and allowances in accordance with market practice or as
prescribed by the shareholders of the Company.
There were four (4) meetings held in the current financial year and all members attended these meetings.
Recommending and assessing the nominees for directorship, the Directors to fill Board committees as
well as nominees for the CEO position including assessment and recommendation on the Directors to
be re-appointed at the Annual General Meeting of the Company.
Overseeing the appointment, management succession planning and performance evaluation of key
senior officers.
There were four (4) meetings held in the current financial year and all members attended these meetings.
On an annual basis, review and evaluate the effectiveness of the Board as a whole, the contribution by
each Director to the effectiveness of the Board, the contribution of the Board’s various committees and
the performance of the CEO.
Develop a policy on remuneration of Directors and senior executives, and determine the remuneration
packages of individual Directors under conditions of objectivity and full transparency in accordance with
Policy Document BNM/RH/PD/029-9 on Corporate Governance issued by BNM.
7
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE (CONTINUED)
Risk Management Committee (“RMC”)
The composition of the RMC is as follows:
Yu Choong Cheong Chairman (Independent)
General Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired)
(resigned w.e.f. 3 June 2019) Member (Independent)
Datin Zaimah Binti Zakaria Member (Independent)
Tan Sri Hashim bin Meon Member (Non-independent)
Dato' Dr. Nirmala Menon a/p Y B Menon (appointed w.e.f. 15 July 2019
and resigned w.e.f. 2 March 2020) Member (Independent)
The primary responsibilities of the RMC are as follows:
(i)
(ii)
(iii)
There were five (5) meetings held in the current financial year and all members attended these meetings.
Review and recommend risk management strategies, policies and risk tolerance for the Board’s
approval.
Review and assess 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.
Ensure adequate infrastructure, resources and systems are in place for an effective risk management,
for example ensuring that staff responsible for implementing risk management system, perform their
duties independently of the Company’s risk taking activities.
8
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE (CONTINUED)
DIRECTORS’ BENEFITS
DIRECTORS’ INTERESTS
At At
01.01.2019 Acquired Disposed 31.12.2019
The ultimate holding corporation, AXA
Jean, Paul, Dominique, Louis Drouffe 31,534 13,464 (1,503) 43,495
During and at the end of the financial year, no arrangements subsisted to which the Group and Company are
parties, with the object or objects of enabling Directors of the Group and Company to acquire benefits by
means of the acquisition of shares in or debentures of the Group and Company or any other body corporate,
other than the AXA Group Share Plan scheme which applies to all employees of the Group and Company
and the options over the shares in the ultimate holding corporation as disclosed in this report.
Since the end of the previous financial year, no Director of the Group and Company has received or
becomes entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments
received or due and receivable by the Directors disclosed in Note 24 to the financial statements) by reason of
a contract made by the Group and Company or a related corporation with a Director or with a firm of which
he is a member, or with a company in which the Director has a substantial financial interest, except that
certain Directors receive remuneration as Directors/Executives of the related corporations.
According to the register of Directors’ shareholdings required to be kept under Section 59 of the Companies
Act 2016, the interest of the Directors in office at the end of the financial year in shares in the Company or its
subsidiaries or its holding company or subsidiaries of the holding company during the financial year were as
follows:
Number of ordinary shares of 2.29 Euros each
9
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
CORPORATE GOVERNANCE (CONTINUED)
DIRECTORS’ INTERESTS (CONTINUED)
Options over shares in the ultimate holding corporation, AXA, granted to the Directors are as follows:
At At
01.01.2019 Granted Exercised Forfeited 31.12.2019
Jean, Paul, Dominique, Louis
Drouffe 134,100 - (37,933) - 96,167
DIRECTORS’ REMUNERATION
Details of Directors’ remuneration are set out in Note 24 to the financial statements.
SHARE OPTION SCHEME
No Share Option Scheme was offered during the financial year.
SUBSIDIARIES
Details of subsidiaries are set out in Note 9 to the financial statements.
AUDITORS REMUNERATION
Details of auditors’ remuneration are set out in Note 24 to the financial statements.
HOLDING CORPORATION
Options over ordinary shares of 2.29 Euros each
Other than the above, none of the other Directors in office at the end of the financial year held any interest in
shares in, or debentures of, the Company or its related corporations during the financial year.
The immediate and ultimate holding companies are AXA Asia and AXA S.A. (hereinafter referred to as
“AXA”), respectively, both are incorporated in France.
10
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
DIRECTORS’ REPORT (CONTINUED)
AUDITORS
TAN SRI HASHIM BIN MEON DATIN ZAIMAH BINTI ZAKARIA
DIRECTOR DIRECTOR
Kuala Lumpur
This report was approved by the Board of Directors on 13 May 2020. Signed on behalf of the Board of
Directors:-
The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their
willingness to accept re-appointment as auditors.
11
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENT BY DIRECTORS
PURSUANT TO SECTION 251 (2) OF THE COMPANIES ACT 2016
Signed on behalf of the Board of Directors in accordance with their resolution dated 13 May 2020.
TAN SRI HASHIM BIN MEON DATIN ZAIMAH BINTI ZAKARIA
DIRECTOR DIRECTOR
Kuala Lumpur.
STATUTORY DECLARATION
PURSUANT TO SECTION 251 (1) OF THE COMPANIES ACT 2016
EMMANUEL JEAN LOUIS NIVET
COMMISSIONER FOR OATHS
I, Emmanuel Jean Louis Nivet, the officer primarily responsible for the financial management of AXA Affin
General Insurance Berhad, do solemnly and sincerely declare that the financial statements set out on
pages 17 to 102 are, in my opinion, correct, and I make this solemn declaration conscientiously believing
the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the above named Emmanuel Jean Louis Nivet at Kuala Lumpur in
Malaysia on 13 May 2020, before me.
We, Tan Sri Hashim bin Meon and Datin Zaimah binti Zakaria, being two of the Directors of AXA Affin
General Insurance Berhad, do hereby state that, in the opinion of the Directors, the financial statements
set out on pages 17 to 102 are drawn up so as to give a true and fair view of the financial position of the
Group and Company as at 31 December 2019 and of the financial performance and cash flows of the
Group and Company for the financial year ended 31 December 2019 in accordance with Malaysian
Financial Reporting Standards, International Financial Reporting Standards and the provisions of the
Companies Act 2016.
12
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
2018
Note Group Company Company
RM'000 RM'000 RM'000
Assets
Property, plant and equipment 5 24,304 24,304 27,313
Intangible asset – software 6 30,953 30,953 22,914
Goodwill 7 165,822 165,822 165,822
Investments 8 2,797,622 2,657,366 2,593,022
Available-for-sale (“AFS”) financial
assets 1,134,518 1,617,994 1,569,330
Loans and receivables 1,663,104 1,039,372 1,023,692
Right-of-use assets 10 13,510 13,510 -
Reinsurance assets 11 292,523 292,523 320,905
Insurance receivables 12 232,633 232,633 282,948
Other receivables and prepayments 13 68,627 67,097 89,796
Deferred tax assets 16 3,372 3,378 13,846
Tax recoverable 17,971 17,971 -
Cash and cash equivalents 68,975 68,953 48,542
Total assets 3,716,312 3,574,510 3,565,108
Equity and liabilities
Share capital 14 190,645 190,645 190,645
Retained earnings 14 992,111 992,259 921,388
AFS reserve 28,606 28,588 7,813
Revaluation reserve 13,181 13,181 13,175
Share option reserve 4,801 4,801 4,801
Total equity 1,229,344 1,229,474 1,137,822
Insurance contract liabilities 15 1,854,356 1,854,356 1,892,278
Borrowing 17 70,025 70,025 130,100
Insurance payables 18 261,691 261,691 233,892
Other payables 19 286,979 145,047 165,921
Lease liabilities 10 13,917 13,917 -
Tax payable - - 5,095
Total liabilities 2,486,968 2,345,036 2,427,286
Total equity and liabilities 3,716,312 3,574,510 3,565,108
The accompanying notes form an integral part of the financial statements.
2019
17
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENTS OF INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
2018
Note Group Company Company
RM'000 RM'000 RM'000
Gross earned premiums 20(a) 1,371,369 1,371,369 1,436,564
Premiums ceded to reinsurers 20(b) (214,589) (214,589) (232,347)
Net earned premiums 1,156,780 1,156,780 1,204,217
Investment income 21 117,546 114,678 103,795
Realised gains and losses 22 3,378 3,378 14,901
Realised and unrealised foreign
exchange gains 1,866 1,866 635
Reinsurance commission
income 41,954 41,954 49,948
Other operating revenue 371 371 815
Other revenue 165,115 162,247 170,094
Gross claims paid 15(a) (907,100) (907,100) (971,661)
Claims ceded to reinsurers 15(a) 98,960 98,960 194,106
Gross change to claims liabilities 15,700 15,700 59,130
Change to claims liabilities ceded
to reinsurers (27,234) (27,234) (81,581)
Net claims incurred (819,674) (819,674) (800,006)
Commission expense (153,634) (153,634) (171,097)
Fair value losses 23 - - (462)
Management expenses 24(a) (253,104) (252,510) (248,522)
Finance costs 24(b) (8,323) (8,323) (14,227)
Other expenses (415,061) (414,467) (434,308)
Profit before taxation 87,160 84,886 139,997
Taxation 25 (14,015) (14,015) (39,652)
Net profit for the financial year 73,145 70,871 100,345
Attributable to:
Equity holders of the parent 70,723 70,871 100,345
Non-controlling interests 2,422 - -
73,145 70,871 100,345
Basic earnings per share (sen) 26 60 84
The accompanying notes form an integral part of the financial statements.
2019
18
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
2018
Note Group Company Company
RM'000 RM'000 RM'000
Net profit for the financial year 73,145 70,871 100,345
Other comprehensive income
Items that may be subsequently
reclassified to the statement of
income:
Available-for-sale reserve:
Net gain arising during the
period (Note 8(c)) 30,767 30,743 3,325
Net realised gain transferred to
income statement (Note 8(c)) (3,377) (3,377) (14,897)
Tax effect thereon (Note 16) (6,597) (6,591) 2,777
20,793 20,775 (8,795)
Items that will not be reclassified
to the statement of income:
Revaluation reserve:
Surplus arising during the
financial year 6 6 6
Tax effect thereon (Note 16) - - -
6 6 6
Total comprehensive income
for the financial year 93,944 91,652 91,556
Attributable to:
Equity holders of the parent 91,522 91,652 91,556
Non-controlling interests 2,422 - -
93,944 91,652 91,556
The accompanying notes form an integral part of the financial statements.
2019
19
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENTS OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
Distributable
Share Revaluation Share option AFS Retained
capital reserve reserve reserve earnings Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
At 1 January 2019 190,645 13,175 4,801 7,813 921,388 1,137,822
Total comprehensive income for the
financial year - 6 - 20,793 70,723 91,522
At 31 December 2019 190,645 13,181 4,801 28,606 992,111 1,229,344
Non-distributable Distributable
Share Revaluation Share option AFS Retained
capital reserve reserve reserve earnings Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
At 1 January 2019 190,645 13,175 4,801 7,813 921,388 1,137,822
Total comprehensive income for the
financial year - 6 - 20,775 70,871 91,652
At 31 December 2019 190,645 13,181 4,801 28,588 992,259 1,229,474
At 1 January 2018 190,645 13,169 4,801 16,608 821,043 1,046,266
Total comprehensive income for the
financial year - 6 - (8,795) 100,345 91,556
At 31 December 2018 190,645 13,175 4,801 7,813 921,388 1,137,822
The accompanying notes form an integral part of the financial statements.
Non-distributable
20
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENTS OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
2018
Group Company Company
RM'000 RM'000 RM'000
Operating ActivitiesNet profit for the financial year 73,145 70,871 100,345
Investment income (117,546) (114,678) (103,795)
Finance costs 8,323 8,323 14,227
Realised gains and losses (3,378) (3,378) (14,901)
Fair value losses - - 462
Taxation 14,015 14,015 39,652
Purchase of AFS financial assets (277,006) (760,506) (306,052)
Proceeds from disposal of AFS financial assets 535,180 535,180 204,302
Proceeds from maturity of AFS financial assets 206,700 206,700 230,000
Interest on lease liabilities 769 769 -
Non-cash items:
Depreciation of property, plant and equipment 5,714 5,714 5,902
Depreciation of right-of-use assets 4,915 4,915 -
Amortisation of intangible asset - software 9,852 9,852 7,093
Realised and unrealised foreign exchange gain (1,866) (1,866) (635)
Allowance for impairment of insurance receivables 4,870 4,870 1,601
Changes in working capital:
Increase in loans and receivables (637,546) (13,814) (152,753)
Decrease in reinsurance assets 28,382 28,382 75,174
Decrease/(increase) in insurance receivables 45,445 45,445 (53,093)
Decrease in other receivables 21,169 22,699 2,722
Decrease in insurance contract liabilities (37,922) (37,922) (33,391)
Increase/(decrease) in insurance payables 27,799 27,799 (7,530)
(Decrease)/increase in other payables (18,041) (20,874) 18,560
Cash (used in)/generated from operating activities (107,027) 32,496 27,890
Dividend income received 9,590 16,115 15,550
Interest income received 108,661 99,268 89,089
Income tax paid (33,204) (33,204) (50,477)
Net cash (outflows)/inflows from operating activities (21,980) 114,675 82,052
Investing Activities
Proceeds from disposal of property, plant and equipment 2 2 6
Purchase of property, plant and equipment (2,700) (2,700) (1,854)
Non-controlling interests on acquisition of subsidiary 136,677 - -
Purchase of intangible assets - software (17,891) (17,891) (11,291)
Net cash inflows/(outflows) from investing activities 116,088 (20,589) (13,139)
2019
21
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
2018
Group Company Company
RM'000 RM'000 RM'000
Financing Activities
Interest paid on borrowings (8,398) (8,398) (15,494)
Repayment of borrowing (60,000) (60,000) (70,000)
Payment of lease liabilities (5,277) (5,277) -
Net cash outflows from financing activities (73,675) (73,675) (85,494)
Net increase/(decrease) in cash and cash equivalents 20,433 20,411 (16,581)
Cash and cash equivalents at
the beginning of the financial year 48,542 48,542 65,123
Cash and cash equivalents at
the end of the financial year 68,975 68,953 48,542
Cash and cash equivalents comprise:
Cash and bank balances 68,975 68,953 48,542
Reconciliation of liabilities arising from financing activities
Group and Company
Principal
Interest
payable Principal
Interest
payable
RM'000 RM'000 RM'000 RM'000
Subordinated loans
As at 1 January 130,000 100 200,000 1,367
Cash flows (60,000) (8,398) (70,000) (15,494)
Finance costs - 8,323 - 14,227
As at 31 December 70,000 25 130,000 100
2019
RM'000
Lease liabilities
As at 1 January 2019 18,425
Interest expense 769
Cash flows (5,277)
As at 31 December 2019 13,917
The accompanying notes form an integral part of the financial statements.
2019
2019 2018
22
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019
1 PRINCIPAL ACTIVITIES AND GENERAL INFORMATION
2 BASIS OF PREPARATION
(a)
• MFRS 16 ‘Leases’
• Amendments to MFRS 9 ‘Prepayment Features with Negative Compensation’
• Amendments to MFRS 128 ‘Long-term Interests in Associates and Joint Ventures’
• Amendments to MFRS 119 ‘Plan Amendment, Curtailment or Settlement’
• Annual Improvements to MFRSs 2015 – 2017 Cycle
The Company, a public limited company incorporated and domiciled in Malaysia, is principally engaged
in the underwriting of all classes of general insurance business. There has been no significant changes
in the nature of the activities during the financial year.
The financial statements of the Group and Company have been prepared under the historical cost
convention except as disclosed in this summary of significant accounting policies, and comply with
Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and
the requirements of the Companies Act 2016 in Malaysia.
The Company has met the minimum capital requirements as prescribed by the RBC Framework and
the Guidelines on Internal Capital Adequacy Assessment Process (“ICAAP”) for Insurers as at the date
of the statements of financial position.
The preparation of financial statements in conformity with MFRS requires the use of certain critical
accounting estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the statement of financial position and the
reported amounts of revenues and expenses during the reported financial year. It also requires the
Directors to exercise their judgement in the process of applying the Group's and Company’s
accounting policies. Although these estimates and judgement are based on the Directors’ best
knowledge of current events and actions, actual results may differ.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in Note 4 to the financial statements.
Standards, amendments to published standards and interpretations that are applicable to the
Group and Company that are effective
On 1 January 2019, the Group and Company applied the following standards and amendments
for the first time for the financial year beginning on 1 January 2019:
The immediate and ultimate holding companies are AXA Asia and AXA S.A. (hereinafter referred to as
“AXA”), respectively, both are incorporated in France.
The financial statements were authorised for issue by the Board of Directors in accordance with a
resolution of the Directors on 13 May 2020.
23
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
2 BASIS OF PREPARATION (CONTINUED)
(a)
•
(i)
(ii)
Amendments to MFRS 4 - Applying MFRS 9 “Financial Instruments” with MFRS 4
“Insurance Contracts”.
The amendments allow entities to avoid temporary volatility in profit or loss that might result
from adopting MFRS 9 before the forthcoming new insurance contracts standard. This is
because certain financial assets have to be measured at fair value through profit or loss
under MFRS 9; whereas, under MFRS 4, the related liabilities from insurance contracts are
often measured on amortised cost basis.
The amendments provide 2 different approaches for entities:
Standards, amendments to published standards and interpretations that are applicable to the
Group and Company that are effective (continued)
The Group and Company have adopted MFRS 16 for the first time in the 2019 financial
statements, which resulted in changes in accounting policies. The Group and Company have
applied MFRS 16 with the date of initial application of 1 January 2019 by applying the simplified
retrospective transition method. Under the simplified retrospective transition method, the 2018
comparative information was not restated and the cumulative effects of initial application of
MFRS 16 where the Group and Company is a lessee were recognised as an adjustment to the
opening balance of retained earnings as at 1 January 2019. The comparative information
continued to be reported under the previous accounting policies governed under MFRS 117
‘Leases’ and IC Interpretation 4 ‘Determining whether an Arrangement Contains a Lease’. The
detailed impact of change in accounting policies are set out in Note 10 to the financial
statements.
Other than that, the adoption of other amendments listed above did not have any impact on the
current period or any prior period and is not likely to affect future periods.
a temporary exemption from MFRS 9 for entities that meet specific requirements; and
the overlay approach.
Both approaches are optional.
24
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
2 BASIS OF PREPARATION (CONTINUED)
(a)
•
(b)
•
Based on the analysis performed, the Company was eligible to apply the temporary
exemption as the predominance ratio reflecting the share of liabilities connected to
insurance to total liabilities exceeded 90 percent. No reassessment of eligibility was
required during subsequent annual periods up to and including 2019 as there is no
significant change in the activities performed by the Company. Due to the strong interaction
between underlying assets held and the measurement of insurance contracts, the Company
decided to use the option to defer the full implementation of MFRS 9 until MFRS 17
“Insurance Contracts” becomes effective on 1 January 2021.
For further information on the effects from MFRS 9, Note 33 shows the fair value and fair
value movement of financial assets separately between financial assets with contractual
cash flows that are solely payments of principal and interest (“SPPI”) and other financial
assets. Other financial assets consist of assets with contractual cash flows that are not
SPPI and assets measured at fair value through profit or loss under MFRS 139.
Standards, amendments to published standards and interpretations that are applicable to the
Group and Company that are effective (continued)
The temporary exemption enables eligible entities to defer the implementation date of
MFRS 9 for annual periods beginning before 1 January 2021 at the latest. An entity may
apply the temporary exemption from MFRS 9 if its activities are predominantly connected
with insurance whilst the overlay approach allows an entity to adjust profit or loss for eligible
financial assets by removing any accounting volatility to other comprehensive income that
may arise from applying MFRS 9.
Standards, amendments to published standards and interpretations to existing standards that are
applicable and relevant to the Group and Company but not yet effective
Amendments to MFRS 4 - Applying MFRS 9 “Financial Instruments” with MFRS 4
“Insurance Contracts” (continued).
MFRS 17 “Insurance Contracts” replaces MFRS 4 “Insurance Contracts”.
MFRS 17 applies to insurance contracts issued, to all reinsurance contracts and to
investment contracts with discretionary participating features if an entity also issues
insurance contracts. For fixed-fee service contracts whose primary purpose is the provision
of services, an entity has an accounting policy choice to account for them in accordance
with either MFRS 17 or MFRS 15 “Revenue from Contracts with Customers”. An entity is
allowed to account financial guarantee contracts in accordance with MFRS 17 if the entity
has asserted explicitly that it regarded them as insurance contracts. Insurance contracts,
(other than reinsurance) where the entity is the policyholder are not within the scope of
MFRS 17. Embedded derivatives and distinct investment and service components should
be “unbundled” and accounted for separately in accordance with the related MFRSs.
Voluntary unbundling of other components are prohibited.
25
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
2 BASIS OF PREPARATION (CONTINUED)
(b)
•
Alternative measurement models are provided for the different insurance coverages:
-
-
The Company plans to adopt the new standard on the required effective date. A Project
Steering Committee has been formally set up by the Group and Company to steer decisions
and oversees the implementation of MFRS 17. Major enhancements on the accounting and
actuarial systems have been completed. From year 2020 onward, the focus would primarily
be on finalising the implementation efforts and analysing the effects of MFRS 17 on the
financial statements.
Standards, amendments to published standards and interpretations to existing standards that are
applicable and relevant to the Group and Company but not yet effective (continued)
Simplified Premium Allocation Approach if the insurance coverage period is a year or
less; and
Variable Fee Approach should be applied for insurance contracts that specify a link
between payments to the policyholder and the returns on the underlying items
The requirements of MFRS 17 align the presentation of revenue with other industries.
Revenue is allocated to the periods in proportion to the value of the expected coverage and
other services that the insurer provides in the period, and claims are presented when
incurred. Investment components are excluded from revenue and claims.
Insurers are required to disclose information about amounts, judgements and risks arising
from insurance contracts.
All other new amendments to the published standards and interpretations to existing standards
issued by the MASB effective for financial periods subsequent to 1 January 2019 are not relevant
to the Group and Company.
On 17 March 2020, the International Accounting Standards Board tentatively decided to
defer the effective date of IFRS 17 “Insurance Contracts” and the temporary exemption of
the adoption of IFRS 9 for insurers to annual reporting periods beginning on or after 1
January 2023. The Board expects to issue the amendments to IFRS 17 in the second
quarter of 2020.
MFRS 17 “Insurance Contracts” replaces MFRS 4 “Insurance Contracts” (continued).
MFRS 17 requires a current measurement model where estimates are remeasured at each
reporting period. The measurement is based on the building blocks of discounted,
probability-weighted cash flows, a risk adjustment and a contractual service margin (“CSM”)
representing the unearned profit of the contract. An entity has a policy choice to recognise
the impact of changes in discount rates and other assumptions that related to financial risks
either in profit or loss or in other comprehensive income.
26
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES
(a) Subsidiaries
(b) Investment in a subsidiary
Subsidiaries are all entities (including structured entities) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the
entity.
Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition
method of accounting, subsidiaries are fully consolidated from the date on which control is
transferred to the Group and are de-consolidated from the date that control ceases. The cost of
an acquisition is measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the
acquisition.
Inter-company transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated. This may indicate an
impairment of the asset transferred. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the Group.
The gain or loss on disposal of a subsidiary which is the difference between net disposal
proceeds and the Group’s share of its net assets as of the date of disposal including the
cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the
statement of income attributable to the parent.
In the Group’s separate financial statements, investment in a subsidiary is stated at cost less
accumulated impairment losses. Where an indication of impairment exists, the carrying amount
of the investment is assessed and written down immediately to its recoverable amount. See
accounting policy Note 3(g) to the financial statements on impairment of financial assets. The
amount due from subsidiary of which the Company does not expect repayment in the foreseeable
future are considered as part of the Company’s investments in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the
extent of any minority interest. The excess of the cost of acquisition over the fair value of the
Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as
goodwill. See accounting policy Note 3(d) to the financial statements on goodwill. If the cost of
acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the
gain is recognised directly in the statement of income.
27
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Property, plant and equipment
Freehold building 50 years
Motor vehicles 5 - 6 years
Office and computer equipment 3 - 5 years
Furniture, fixtures and fittings 5 - 10 years
When the land and buildings are revalued, any accumulated depreciation at the date of
revaluation is eliminated against the gross carrying amount of the asset. The net amount is then
restated as the revalued amount of the asset.
The surplus arising on revaluation is credited to an asset revaluation reserve account except that
a surplus, to the extent that such surplus is related to and not greater than a deficit arising on
revaluation previously recorded as an expense, is credited to the income statement. A deficit
arising on revaluation is recognised as an expense except that, to the extent that such a deficit is
related to a surplus which was previously recorded as a credit to the asset revaluation reserve
account and which has not been subsequently reversed or utilised, it is charged directly to that
account.
Land and buildings are initially stated at cost and subsequently revalued by the Directors, based
on independent valuation of the open market value on the existing use basis carried out by
professional valuers. The valuation of the land and buildings is carried out once in every three
years or earlier if the carrying values of the revalued assets are materially higher and/or lower
than the market values.
Land and buildings, which are substantially occupied by the Company for their operations, are
classified under property, plant and equipment.
Freehold land is not depreciated as it has infinite life. Depreciation of property and equipment is
provided for on a straight-line basis to write off the cost of each asset to its residual value over
the following estimated useful lives:
The residual values and useful lives of property, plant and equipment are reviewed, and adjusted
if appropriate, at each date of the statement of financial position.
Property and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses.
All items of property and equipment are initially stated 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
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 the income statement
during the financial year in which they are incurred.
Subsequent costs recognition, property and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses.
28
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Property, plant and equipment (continued)
(d) Goodwill
(e) Intangible assets - software
Goodwill is tested annually for impairment and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed. See accounting policy Note 3(h) to the
financial statements on impairment of non-financial assets.
The Company allocates goodwill to the combined general insurance business as a whole, which
has been identified as a cash-generating unit.
Where computer software is not an integral part of a related item of computer hardware, the
software is treated as an intangible asset. Capitalised internal-use software costs include external
direct costs of materials and services consumed in developing or obtaining the software, payroll
and payroll-related costs for employees who are directly associated with and who devote
substantial time to the project. Capitalisation of these costs ceases no later than the point at
which the project is substantially completed and ready for its intended purpose. These costs are
amortised over their expected useful life of 3 - 5 years on a straight-line basis, with the useful
lives being reviewed annually.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to each of the cash-generating units ("CGUs"), or groups of CGUs that is
expected to benefit from the synergies of the combination.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts and
are credited or charged in the statement of income.
Goodwill represents the excess of the cost of acquisition of the subsidiary over the fair value of
the Company's share of the identifiable net assets at the date of acquisition.
At each date of the statement of financial position, the Group and Company assess whether there
is any indication of impairment. If such indications exist, an analysis is performed to assess
whether the carrying amount of the asset is fully recoverable. A write-down is made if the carrying
amount exceeds the recoverable amount. See accounting policy Note 3(h) to the financial
statements on impairment of non-financial assets.
29
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Investments and financial assets
(i) LAR
(ii) AFS
(g) Impairment of financial assets
AFS financial assets are investments that are not classified as fair value through profit or
loss, held-to-maturity or loans and receivables. AFS financial assets initially recorded at fair
value. After initial measurement, the AFS financial assets are re-measured at fair value.
Interest from AFS financial assets calculated using the effective interest method, is
recognised in the statement of income. Any gains or losses arising from a change in fair
value, net of income tax, are recognised directly in statement of comprehensive income,
except for impairment losses. When the AFS financial assets are derecognised, the
cumulative fair value gains or losses previously recognised in other comprehensive income
are transferred to the statement of income as net realised gains or losses on AFS financial
assets.
The Group and Company assess at each date of the statement of financial position whether there
is objective evidence that a financial asset or a group of financial assets is impaired. A financial
asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset
(a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows
of the financial asset that can be reliably estimated.
The Group and Company classify their investments into loans and receivables (“LAR”) or
available-for-sale (“AFS”) financial assets. Classification of the financial assets is determined at
initial recognition.
LAR are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. These financial assets are initially recognised at fair value plus
all transaction costs directly attributable to the acquisition. After initial measurement, LAR
are measured at amortised cost, using the effective yield method, less allowance for
impairment. Gains and losses are recognised in the statement of income when the financial
assets are derecognised or impaired, as well as through the amortisation process.
30
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Impairment of financial assets (continued)
(i) Financial assets carried at amortised cost
(ii) Financial assets carried at cost
(iii) Financial assets carried at fair value
If there is objective evidence that an impairment loss on financial asset carried at amortised
cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows discounted at
the financial asset’s original effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recognised
in the statement of income.
If, in a subsequent period, the fair value of a debt instrument classified as AFS increases
and the increase can be objectively related to an event occurring after the impairment loss
was recognised in the statement of income, the impairment loss is reversed through the
statement of income. Impairment losses previously recognised in the statement of income
on equity instruments are not reversed through the statement of income.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed by adjusting the allowance account. The
amount of the reversal is recognised in the statement of income.
If there is objective evidence that an impairment loss on securities carried at cost (e.g.
equity instruments or which there is no active market or whose fair value cannot be reliably
measured) has been incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return for similar securities. Such impairment
losses shall not be reversed.
In the case of AFS financial assets, a significant or prolonged decline in the fair value of the
financial asset below its cost is considered in determining whether the assets are impaired.
If any such evidence exists for financial asset held at AFS, the cumulative loss, measured
as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised in the statement of income is
removed from statement of comprehensive income and recognised in the statement of
income.
31
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Impairment of other non-financial assets
An impairment loss is charged to the income statement immediately.
(i) Insurance receivables
(j) Cash and cash equivalents
(k) Share capital
(l) Earning per share
Basic earning per share
-
-
The carrying values of assets that are subject to amortisation are reviewed for impairment when
there is an indication that the assets might be impaired. Impairment is measured by comparing
the carrying values of the assets with their recoverable amounts. The recoverable amount is the
higher of the fair value less cost to sell and the value in use, which is measured by reference to
discounted cash flows. Recoverable amounts are estimated for individual assets, or, if it is not
possible, for the cash-generating unit. Non-financial assets that suffered impairment are
reviewed for possible reversal of impairment at each reporting date.
Insurance receivables are recognised when due and measured on initial recognition at the fair
value. Subsequent to initial recognition, insurance receivables are measured at amortised cost,
using the effective yield method.
If there is objective evidence that the insurance receivable is impaired, the Group and Company
reduce the carrying amount of the insurance receivable accordingly and recognise that
impairment loss in the statement of income. The Group and Company gather the objective
evidence that an insurance receivable is impaired using the same processes adopted for financial
assets carried at amortised cost. The impairment loss is calculated under the same method used
for these financial assets.
A subsequent increase in the recoverable amount of an asset is treated as a reversal of the
previous impairment loss and is recognised to the extent of the carrying amount of the asset that
would have been determined (net of amortisation and depreciation) had no impairment loss been
recognised. The reversal is recognised in the statement of income immediately. Impairment loss
on goodwill is not reversed.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of
new shares and options are shown in equity as a deduction, net of tax, from the proceeds.
Cash and cash equivalents consist of cash and bank balances, excluding fixed and call deposits
which are held for investment purpose.
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the Company, excluding any costs of servicing equity
other than ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year and excluding
treasury shares.
32
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) Borrowings
(n) Insurance product classification
The Group and Company issue contracts that transfer insurance risk.
(o) General insurance underwriting results
Premium income
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised costs, any difference between the proceeds (net of redemption
cost) and the redemption value is recognised in the deferments of income over the period of the
borrowings using the effective interest yield. All other borrowing costs are recognised in
statement of income in the period which they are incurred.
Insurance contracts are those that transfer significant insurance risk. An insurance contract is a
contract under which the Group and Company (the insurer) have 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 Group and Company determine whether they have significant insurance
risk, by comparing claims payable on the occurrence of an insured event with claims payable if
the insured event had not occurred.
The general insurance underwriting results are determined for each class of business after taking
into account reinsurances, commissions, unearned premiums and claims incurred.
Premiums are recognised in a financial year in respect of the risks assumed during that particular
financial year. Premiums from direct business are recognised during the financial year upon the
issuance of debit notes or policies. Premiums in respect of risks incepted for which debit notes or
policies have not been raised as of the date of the statement of financial position are accrued at
that date as pipeline premiums.
Inward treaty reinsurance premiums are recognised on the basis of periodic advices received
from ceding insurers.
Outward reinsurance premiums are recognised in the same accounting period as the original
policy to which the reinsurance relates.
33
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) General insurance underwriting results (continued)
Premium liabilities
Premium liabilities refer to the higher of:
(i) the aggregate of the unearned premium reserves (“UPR”); or
(ii)
(i) 25% method for marine cargo, aviation cargo and transit business;
(ii)
(iii)
Acquisition costs
the best estimate value of the insurer’s unexpired risk reserves (“URR”) at the valuation
date and the Provision of Risk Margin for Adverse Deviation (“PRAD”) calculated 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 as at valuation
date and also includes allowance for the insurer’s 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 shall allow for expected future premium
refunds.
UPR represent the portion of the net premiums of insurance policies written that relate to the
unexpired periods of the policies at the end of the financial period.
In determining UPR at the date of the statement of financial position, the method that most
accurately reflected the actual unearned premium is used, as follows:
time apportionment method for non-annual policies reduced by the percentage of accounted
gross direct business commissions to the corresponding premiums, not exceeding limits
specified by BNM; and
1/365th method for all other classes of general business in respect of Malaysian policies,
reduced by the corresponding percentage of accounted gross direct business commission
to the corresponding premium, not exceeding limits specified by BNM.
The cost of acquiring and renewing insurance policies net of income derived from ceding
reinsurance premiums is recognised as incurred and properly allocated to the periods in which it
is probable they give rise to income.
34
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) General insurance underwriting results (continued)
Claims liabilities
Reinsurance
A liability for outstanding claims is recognised in respect of both direct insurance and inward
reinsurance.
Provision for claims liabilities is made for the estimated costs of all claims together with related
expenses less reinsurance recoveries, in respect of claims notified but not settled at the date of
the statement of financial position. Provision is also made for the cost of claims, together with
related expenses, incurred but not reported at the date of the statement of financial position,
based on an actuarial valuation.
Throughout the course of the financial year, management regularly re-assesses claims and
provision both on an individual and class basis, based on independent professional advice and
reports, other available information and management’s own assessment of the claims and
provisions.
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. Reinsurance
liabilities represent balances due to reinsurance companies. Amount payable are estimated in a
manner consistent with the related insurance contract.
The Group and Company also assume reinsurance risk in the normal course of business for
general insurance contracts when applicable.
Gains or losses on buying reinsurance are recognised in the statement of income immediately at
the date of purchase and are not amortised.
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 Group and 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 Group
and Company will receive from the reinsurer. The impairment loss is recorded in the statement of
income.
Ceded reinsurance arrangements do not relieve the Group and Company from their obligations to
policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed
reinsurance.
The Group and Company cede 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.
35
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) General insurance underwriting results (continued)
Reinsurance (continued)
Insurance contract liabilities
These liabilities comprise claims liabilities and premiums liabilities.
Reinsurance contracts that do not transfer significant insurance risk are accounted for directly
through the statement of financial position. These are deposit assets or financial liabilities that are
recognised based on the consideration paid or received less any explicit identified premiums or
fees to be retained by the reinsured. Investment income on these contracts is accounted for
using the effective yield method when accrued.
Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or
expire or when the contract is transferred to another party.
General insurance contract liabilities are recognised when contracts are entered into and
premiums are charged.
Claims liabilities are based on the estimated ultimate cost of all claims incurred but not settled at
the date of the statement of financial position, 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 date of the statement of
financial position. 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 reserve is recognised. The liabilities are
derecognised when the contract expires, is discharged or is cancelled.
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.
At each reporting date, the Group and Company review the unexpired risks and a liability
adequacy test is performed to determine whether there is any overall excess of expected claims
and associated expenses (policy administration and claims handing) incurred in future over
unearned premiums. This calculation uses current estimates of future contractual cash flows
(taking into consideration current loss ratio and general policy administration and claims handling
expense ratios) expected to be paid out, loaded with a risk margin to cope with the uncertainty
surrounding the estimates. If these estimates show that the carrying amount of the unearned
premiums is inadequate, the deficiency is recognised in the statement of income by setting up a
provision for liability adequacy.
36
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Other revenue recognition
Dividend income is recognised when the right to receive payment is established.
(q) Income tax
Gains or losses arising on disposal of financial assets are credited or charged to the statement of
income.
Rental income is recognised on a time proportion basis except where default in payment of rent
has already occurred and the rent due remains outstanding, in which case recognition of rental
income is suspended. Subsequent to suspension, rental income is recognised on receipt basis
until all arrears have been paid.
Other interest income, including amortisation of premiums or accretion of discounts, is
recognised on a time proportion basis that takes into account the effective yield of the asset.
When a loan and receivable is impaired, the Group and Company reduce the carrying amount to
its recoverable amount, being the estimated future cash flow discounted at the original effective
interest rate of the instrument, and continue unwinding the discount as interest income. Interest
income on impaired loan and receivables are recognised using the original effective interest rate.
Interest income is recognised using the effective interest method. The effective interest rate is the
rate that discounts estimated future cash receipts or payments through the expected life of the
financial instrument or, when appropriate, a shorter period to its carrying amount. The calculation
includes significant fees and transaction costs that are integral to the effective interest rate, as
well as premiums or discounts.
Deferred tax is recognised in the statement of income except when it arises from a transaction
which is recognised in other comprehensive income, in which case, the deferred tax is also
charged or credited to other comprehensive income.
Deferred tax is determined using tax rates that have been enacted or substantively enacted by
the date of the statement of financial position and are expected to apply when the related
deferred tax asset is realised or deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which the deductible temporary differences or unused tax losses can be utilised.
Deferred tax is recognised in full, using the liability method, on temporary differences arising
between the amounts attributed to assets and liabilities for tax purpose and their carrying
amounts in the financial statements. However, deferred tax is not accounted if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss.
Current tax expense is determined according to the tax laws in Malaysia and includes all taxes
based upon the taxable profits and is measured using the tax rates that have been enacted at the
reporting date. Current tax is recognised in the statement of income.
37
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) Employees’ benefits
(i) Short-term employees’ benefits
(ii) Post-employment benefits
(iii) Termination benefits
(iv) Share-based compensation
The Group and Company contribute to the Employees’ Provident Fund (“EPF”), a defined
contribution plan. The Group’s and Group and Company’s contributions to the defined
contribution plan are charged to the income statement in the financial year to which they
relate. Once the contributions have been paid, the Group and Company have no further
payment obligations.
The Group and Company also operate a defined contribution retirement gratuity scheme
based on a percentage of basic staff salary, less contributions made to the EPF.
Termination benefits are payable whenever an employee’s employment is terminated before
the normal retirement date or whenever an employee accepts voluntary redundancy in
exchange for these benefits. The Group and Company recognise termination benefits when
it is demonstrably committed to either terminate the employment of current employees
according to a detailed formal plan without possibility of withdrawal or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy.
AXA, the ultimate holding corporation, offers certain eligible employees of the Group and
Company options to purchase ordinary shares of AXA, pursuant to the share options plan
maintained by AXA, at a fixed price. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be
expensed over the vesting period is determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting conditions (for example,
profitability and premium income growth targets). Non-market vesting conditions are
included in assumptions about the number of options that are expected to become
exercisable. At each date of the statement of financial position, the Group and Company
revise the estimates of the number of options that are expected to become exercisable. It
recognises the impact of the revision of original estimates, if any, in the statement of
income, and a corresponding adjustment to equity over the remaining vesting period.
Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits are
accrued in the financial year in which the associated services are rendered by employees of
the Group and Company.
38
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Foreign currencies
(t) Insurance payables and other payables
(u) Provisions
(v) Leases
(i) Accounting policies applied from 1 January 2019
Insurance payables and other payables are recognised when due and measured on initial
recognition at the fair value of the consideration less directly attributable transaction costs.
Subsequent to the initial recognition, they are measured at amortised cost using the effective
yield method.
Provisions are recognised when the Group and Company have a present obligation as a result of
a past event and it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, and a reliable estimate of the amount can be made.
Items included in the financial statements of the Group and Company are measured using the
currency of the primary economic environment in which the entity operates (the “functional
currency”). The financial statements are presented in Ringgit Malaysia, which is the Group’s and
Group and Company’s functional and presentation currency.
All transactions in a currency other than the functional currency (“foreign currency”) are converted
into Ringgit Malaysia at the rates of exchange prevailing on the transaction dates. Foreign
currency monetary assets and liabilities at the date of the statement of financial position are
translated at the rates of exchange prevailing at that date. Exchange differences arising from the
settlement of foreign currency transactions and from the translation of foreign currency monetary
assets and liabilities are included in the statement of income.
Contracts may contain both lease and non-lease components. The Group and Company
allocates the consideration in the contract to the lease and non-lease components based on
their relative stand-alone prices. However, for leases of properties for which the Group and
Company is a lessee, it has elected the practical expedient provided in MFRS 16 not to
separate lease and non-lease components. Both components are accounted for as a single
lease component and payments for both components are included in the measurement of
lease liability.
From 1 January 2019, leases are recognised as right-of-use (‘ROU’) asset and a
corresponding liability at the date on which the leased asset is available for use by the
Group and Company (i.e. the commencement date).
39
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Leases (continued)
(i) Accounting policies applied from 1 January 2019 (continued)
Lease term
ROU assets
ROU assets are initially measured at cost comprising the following:
- The amount of the initial measurement of lease liability;
- Any lease payments made at or before the commencement date less any lease
incentive received;
- Any initial direct costs; and
- Decommissioning or restoration costs.
ROU assets that are not investment properties are subsequently measured at cost, less
accumulated depreciation and impairment loss (if any). The ROU assets are generally
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line
basis. If the Group and Company is reasonably certain to exercise a purchase option, the
ROU asset is depreciated over the underlying asset’s useful life. In addition, the ROU
assets are adjusted for certain remeasurement of the lease liabilities.
While the Group and Company revalue land and building (presented as part of property,
plant and equipment) that it owns, it has chosen not to revalue the ROU building held by the
Group and Company.
The Group and Company reassess the lease term upon the occurrence of a significant
event or change in circumstances that is within the control of the Group and the Group and
Company and affects whether the Group and Company is reasonably certain to exercise an
option not previously included in the determination of lease term, or not to exercise an
option previously included in the determination of lease term. A revision in lease term
results in remeasurement of the lease liabilities. See accounting policy below on
reassessment of lease liabilities.
In determining the lease term, the Group and Company consider all facts and
circumstances that create an economic incentive to exercise an extension option, or not to
exercise a termination option. Extension options (or periods after termination options) are
only included in the lease term if the lease is reasonably certain to be extended (or not to be
terminated).
40
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Leases (continued)
(i) Accounting policies applied from 1 January 2019 (continued)
Lease liabilities
-
-
-
-
-
Short term leases and leases of low value assets
Amounts expected to be payable by the Group and Company under residual value
guarantees;
Lease liabilities are initially measured at the present value of the lease payments that are
not paid at that date. The lease payments include the following:
Payments of penalties for terminating the lease, if the lease term reflects the Group
and Company exercising that option.
The exercise price of a purchase and extension options if the group is reasonably
certain to exercise that option; and
Variable lease payments that are based on an index or a rate, initially measured using
the index or rate as at the commencement date;
Fixed payments (including in-substance fixed payments), less any lease incentive
receivable;
Lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in the Group and
Company, the lessee’s incremental borrowing is used. This is the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value
to the ROU in a similar economic environment with similar term, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
Variable lease payments that depend on sales are recognised in profit or loss in the period
in which the condition that triggers those payments occurs.
The Group and Company present the lease liabilities as a separate line item in the
statement of financial position. Interest expense on the lease liability is presented within the
finance cost in statement of income.
Short-term leases are leases with a lease term of 12 months or less. Low-value assets
comprise IT equipment and small items of office furniture and equipment. Payments
associated with short-term leases of equipment and vehicles and all leases of low-value
assets are recognised on a straight-line bases as an expense in profit or loss.
41
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Leases (continued)
(ii) Accounting policies on lessee accounting applied until 31 December 2018
(w) Dividends
(x) Contingent liabilities and contingent assets
Dividends are recognised as liabilities when the obligation to pay is established in which the
dividends are declared and approved by BNM and the Company’s shareholders. No provision is
made for a proposed dividend.
The Group and Company do not recognise a contingent liability but disclose its existence in the
financial statements. A contingent liability is a possible obligation that arises from past events
whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain
future events beyond the control of the Group and Company or a present obligation that is not
recognised because it is not probable that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in the extremely rare case where there is a liability that
cannot be recognised because it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will be
confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond
the control of the Group and Company. The Group and Company do not recognise a contingent
asset but disclose its existence where inflows of economic benefits are probable, but not virtually
certain.
When an operating lease is terminated before the lease period has expired, any payment
required to be made to the lessor by way of penalty is recognised as an expense in the
financial year in which termination takes place.
Leases of assets where a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under operating
leases are charged to the statement of income on a straight line basis over the period of the
lease.
42
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(y) Fair value estimation for disclosure purpose
The basis of estimation of fair values for financial instruments is as follows:
(i)
(ii)
(iii)
(iv)
Level 1 -
Level 2 -
Level 3 -
A level is assigned to each fair value measurement based on the lowest level input significant to
the fair value measurement in its entirety. The three-level hierarchy is defined as follows:
Fair value measurements that reflect unadjusted, quoted prices in active markets for
identical assets and liabilities that the Group and Company have the ability to access
at the measurement date. Valuations are based on quoted prices reflecting market
transactions involving assets or liabilities identical to those being measured.
Fair value measurements using significant non market observable inputs. These
include valuations for assets and liabilities that are derived using data, some or all of
which is not market observable, including assumptions about risk.
Fair value measurements using inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly or indirectly. Those
include quoted prices for similar assets and liabilities in active market markets, quoted
prices for identical assets and liabilities in inactive markets, inputs that are observable
that are not prices (such as interest rates, credit risks, etc) and inputs that are derived
from or corroborated by observable market data.
Fair value measurements are classified using a fair value hierarchy based on the observability of
the inputs used in the fair value measurement.
The carrying amounts for other financial assets and liabilities with a maturity period of less
than one year are assumed to approximate their fair values.
The fair values of fixed rate loans are estimated by discounting future expected cash flows,
taking into consideration market conditions and contractual terms of these loans.
The fair values of Malaysian Government securities and unquoted corporate debt securities
are based on the indicative market prices.
The fair values of quoted equity securities and real estate investment trusts (“REITs”) are
based on quoted market prices.
43
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(z) Business combination under common control
The transfer of business from the subsidiary has been accounted for as business combination
under common control using the predecessor method of accounting. Under the predecessor
method of accounting, the consolidated statements of income include the results of each of the
combining entities from the date of the combinations. The assets and liabilities of the combining
entities are accounted for based on the carrying amounts from the perspective of the common
controlling party or the combining entities if the common controlling party does not prepare
consolidated financial statements. The excess of the cost of acquisition over the aggregate
carrying amounts of assets and liabilities as of the date of the combination is taken to equity.
A similar treatment applies in the Company’s separate financial statements when assets and
liabilities representing the underlying businesses under common control are directly acquired by
the Company. In accounting for the business combination in the Company’s separate financial
statements, the excess of the cost of acquisition over the aggregate carrying amounts of assets
and liabilities as of the date of the combination is taken to equity.
44
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
(a) Critical accounting estimates and assumptions
Claims liabilities
Impairment of goodwill
(b) Critical judgement in applying the entity’s accounting policies
In determining and applying accounting policies, judgement is often required in respect of items
where the choice of specific accounting policy could materially affect the reported results and
financial position of the Group and Company. However, the Directors are of the view that there
are currently no accounting policies which require significant judgement to be exercised in their
application.
The Group and Company assess the impairment of goodwill on an annual basis in accordance
with its accounting policy in Note 3(d) to the financial statements. The recoverable amount of the
goodwill is assessed based on its value-in-use. Value-in-use is determined using the present
value of estimated future cash flows expected to be generated from future new business, using
the estimates and key assumptions as disclosed in Note 7 to the financial statements.
Estimates and judgements are continually evaluated by the Directors and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
The Group and Company make estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, rarely equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are outlined below.
The key assumptions and the sensitivity analysis of claims liabilities are disclosed in Note 31 to
the financial statements.
A risk margin for uncertainty is added to the central estimate of outstanding claims. A central
estimate is an estimate of the level of claims provision that is intended to contain no intentional
under or over estimation. In simple terms, the central estimate i.e. equally likely to be too high
(more than adequate) or too low (inadequate) and is commonly described as providing a 50%
probability of adequacy. As the Group and Company require a higher degree of certainty that
estimates will be adequate over time, a risk margin is added to the central estimate of
outstanding claims.
Estimation of the ultimate cost of certain liabilities claims is a complex process. The Group and
Company apply the AXA Group “Analyse” tool or use an external actuary, to determine the liability
within the chain ladder model. Some factors that affect the liability estimation process are the
inconsistent court resolutions and jurisprudence that has broadened the intent and scope
coverage of the protections offered in the insurance contracts issued by the Group and Company.
The estimation of the ultimate liability arising from claims made under insurance contracts is the
Group's and Group and Company’s most critical accounting estimate. There are several sources
of uncertainty that need to be considered in the estimate of the liability that the Group and
Company will ultimately pay for such claims.
45
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
5 PROPERTY, PLANT AND EQUIPMENT
Office and Furniture,
Freehold Freehold Motor computer fixtures and
land building vehicles equipment fittings Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
Cost
At 1 January 2019 16,790 280 515 29,703 9,888 57,176
Additions - - - 1,692 1,008 2,700
Disposals - - - (228) (1) (229)
Revaluation surplus 6 - - - - 6
At 31 December 2019 16,796 280 515 31,167 10,895 59,653
Cost - - 515 31,167 10,895 42,577
Valuation 16,796 280 - - - 17,076
At 31 December 2019 16,796 280 515 31,167 10,895 59,653
Accummulated depreciation
At 1 January 2019 - 70 155 23,995 5,643 29,863
Charge for the financial year
(Note 24(a)) - 6 101 4,075 1,532 5,714
Disposals - - - (227) (1) (228)
At 31 December 2019 - 76 256 27,843 7,174 35,349
Net book value
At 31 December 2019 16,796 204 259 3,324 3,721 24,304
46
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Office and Furniture,
Freehold Freehold Motor computer fixtures and
land building vehicles equipment fittings Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
Cost
At 1 January 2018 16,784 280 521 28,249 9,547 55,381
Additions - - - 1,513 341 1,854
Disposals - - (6) (59) - (65)
Revaluation surplus 6 - - - - 6
At 31 December 2018 16,790 280 515 29,703 9,888 57,176
Cost - - 515 29,703 9,888 40,106
Valuation 16,790 280 - - - 17,070
At 31 December 2018 16,790 280 515 29,703 9,888 57,176
Accummulated depreciation
At 1 January 2018 - 64 60 19,732 4,168 24,024
Charge for the financial year
(Note 24(a)) - 6 101 4,320 1,475 5,902
Disposals - - (6) (57) - (63)
At 31 December 2018 - 70 155 23,995 5,643 29,863
Net book value
At 31 December 2018 16,790 210 360 5,708 4,245 27,313
47
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Recurring fair value measurements
6 INTANGIBLE ASSET - SOFTWARE
2019 2018
RM'000 RM'000
Group and Company
Cost
At 1 January 59,454 48,163
Additions 17,891 11,291
At 31 December 77,345 59,454
Accumulated amortisation
At 1 January 36,540 29,447
Amortisation during the financial year (Note 24(a)) 9,852 7,093
At 31 December 46,392 36,540
Net book value
At 31 December 30,953 22,914
7 GOODWILL
2019 2018
RM'000 RM'000
Group and Company
Cost/Net book value
At 31 December 165,822 165,822
The freehold land and freehold building, which are used as the Company’s training facilities, were last
revalued in 2019 by an independent professional valuer, James Wong Kwong Onn, member of the
Institution of Surveyors, Malaysia of VPC Alliance (KL) Sdn Bhd at open market value on an existing
use basis.
The net book value of the revalued land and building had these assets been carried at cost less
accumulated depreciation is not disclosed due to the absence of historical records.
The freehold land and building, which fair value is under Level 2 of the fair value hierarchy, is measured
using the sales comparison approach. Sales prices of comparable land and buildings in close proximity
are adjusted for differences in key attributes such as land area and location and time factor. The most
significant input into this valuation approach is price per square foot.
The goodwill has been allocated to the cash generating unit, being the combined general insurance
business as a whole. The recoverable amount of the goodwill has been determined based on value-in-
use calculations using cash flow projections based on the strategic plan 2020 - 2023 approved by
senior management covering a four years period. The projected cash flows beyond four years are
determined on the assumptions that earnings level will remain fairly stable for the period covering years
2024 to 2029. The projected cash flows are determined by budgeted profitability based on past
performance and management’s expectations of market developments.
48
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
7 GOODWILL (CONTINUED)
The key assumptions used in the value-in-use calculation are as follows:
(a)
(b)
(c)
(d)
(e) Terminal value is determined based on the present value of the net assets at the end of 2019.
Based on the assessment of value-in-use for the cash generating unit, the Company do not expect that
any reasonable change in the key assumptions will cause the carrying amount of the goodwill to exceed
its recoverable amount, resulting in impairment of goodwill.
Loss ratios have been projected after taking into account management’s strategy for premium
growth as well as past developments with respect to loss development patterns.
Premium growth rates have been projected on the basis of management’s expectations of market
developments.
A discount rate of 9.8% (2018: 9.6%) has been considered based on the weighted cost of capital
of the Company.
The expense projections including projection of acquisition cost/commission have been done after
taking into account the projected inflation over the strategic business plan period as well as
projected portfolio growth. The projected portfolio mix has also been considered in determining
the projection of acquisition cost/commission.
49
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
8 INVESTMENTS
2018
Group Company Company
RM'000 RM'000 RM'000
AFS financial assets 1,134,518 1,617,994 1,569,330
LAR 1,663,104 1,039,372 1,023,692
2,797,622 2,657,366 2,593,022
(a) AFS financial assets
2018
Group Company Company
RM'000 RM'000 RM'000
At fair value
Malaysian Government Securities
- unquoted in Malaysia 210,158 210,158 357,021
Corporate debt securities
- unquoted in Malaysia 879,216 879,216 768,533
Equity securities
- quoted in Malaysia 226 226 230
- unquoted in Malaysia 250 250 250
Wholesale unit trust fund 44,668 528,144 443,296
1,134,518 1,617,994 1,569,330
Maturing within 12 months 42,602 42,602 192,260
Maturing after 12 months 1,046,772 1,046,772 933,294
1,089,374 1,089,374 1,125,554
(b) LAR
2018
Group Company Company
RM'000 RM'000 RM'000
At amortised cost
Loans 684 684 862
Fixed and call deposits 1,662,420 1,038,688 1,022,830
1,663,104 1,039,372 1,023,692
Loans maturing within 12 months 684 684 559
Loans maturing after 12 months - - 303
684 684 862
The fixed and call deposits mature within 12 months and the carrying amounts approximate the
fair values at the date of the statements of financial position.
2019
2019
2019
50
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
8 INVESTMENTS (CONTINUED)
(c) Carrying value of financial instruments
AFS LAR Total
RM'000 RM'000 RM'000
Group
At 1 January 2019 1,569,330 1,023,692 2,593,022
Purchases 277,006 2,443,008 2,720,014
Maturities (206,700) (1,803,056) (2,009,756)
Disposals (531,803) - (531,803)
Net gain recorded in other comprehensive
income 30,767 (851) 29,916
Net realised gain transferred to income statement (3,377) 511 (2,866)
Amortisation adjustment (Note 21) (1,206) - (1,206)
Movement in interest income accrued 501 (200) 301
At 31 December 2019 1,134,518 1,663,104 2,797,622
Company
At 31 December 2017/1 January 2018 1,695,561 870,304 2,565,865
Purchases 306,052 4,147,188 4,453,240
Maturities (230,000) (3,994,863) (4,224,863)
Disposals (189,405) - (189,405)
Net gain recorded in other comprehensive
income 3,325 - 3,325
Net realised gain transferred to income statement (14,897) - (14,897)
Net gain on foreign exchange - 507 507
Movement in impairment allowance (Note 23) (462) - (462)
Amortisation adjustment (Note 21) (1,288) - (1,288)
Movement in interest income accrued 444 556 1,000
At 31 December 2018/1 January 2019 1,569,330 1,023,692 2,593,022
Purchases 760,506 4,059,710 4,820,216
Maturities (206,700) (4,043,489) (4,250,189)
Disposals (531,803) - (531,803)
Net gain recorded in other comprehensive
income 30,743 (851) 29,892
Net realised gain transferred to income statement (3,377) 511 (2,866)
Amortisation adjustment (Note 21) (1,206) - (1,206)
Movement in interest income accrued 501 (200) 301
At 31 December 2019 1,617,994 1,039,372 2,657,366
51
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
8 INVESTMENTS (CONTINUED)
(d) Fair value of financial instruments
Recurring fair value measurements
2018
Group Company Company
RM'000 RM'000 RM'000
Level 1 226 226 230
Level 2 1,134,042 1,617,518 1,568,850
Level 3 250 250 250
1,134,518 1,617,994 1,569,330
9 CONTROLLED STRUCTURED ENTITY
Name of fund Principal activities
2019 2018
76% -
The following tables show financial instruments recorded at fair value analysed by the different
hierarchy of fair value:
2019
During the financial year ended 31 December 2019, the Company acquired units in a wholesale unit
trust fund which is established in Malaysia and managed by an external fund manager. Details of the
investment in the wholesale unit trust fund are as follow:
% of ownership interest
held by the Company
Invest in deposits with financial institutions
and money market instruments
Principal
Deposit Fund 2
The Company determined that its investment in the wholesale unit trust fund amounting to
RM476,814,796 as at 31 December 2019 as disclosed in Note 8 to the financial statements as
investment in structured entity (“investee fund”). The investee fund was managed by Principal Asset
Management Berhad.
As at 31 December 2019, the Company held 76% of units in Principal Deposit Fund 2 and thus had
control over the investee fund. The Company was exposed to, or had rights to variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
This investee fund was classified as AFS financial asset and the change in fair value of the investee
fund is included in the statement of other comprehensive income in the Company’s separate financial
statements.
52
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
9 CONTROLLED STRUCTURED ENTITY (CONTINUED)
2019
RM'000
Deposits with licensed financial institutions 475,945
Cash and cash equivalents 16
Receivables 1,167
Payables (313)
476,815
The investee fund is audited by PricewaterhouseCoopers PLT.
As at 31 December 2019, the Company’s maximum exposure to loss from its interests in the investee
fund was equal to the fair value of its investment in the investee fund.
As the Company had control over the investee fund which is considered controlled structured entity, the
structured entity is consolidated at Group level. The underlying assets of the structured entity were duly
consolidated in 2019 as shown in Note 8 to the financial statements.
The Company’s exposure to investments in the investee fund is disclosed below.
53
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
10 LEASES
Right-of-use Lease
assets liabilities
RM'000 RM'000
Group and Company
As at 1 January 2019 18,425 (18,425)
Interest expense - (769)
Depreciation charge (4,915) -
Rental paid - 5,277
As at 31 December 2019 13,510 (13,917)
2019
RM'000
Expense related to short-term leases -
Expense relating to lease of low-value assets 593
593
11 REINSURANCE ASSETS
2019 2018
RM'000 RM'000
Group and Company
Claims liabilities (Note 15) 235,656 262,890
Premium liabilities (Note 15) 56,867 58,015
292,523 320,905
Receivable within 12 months 171,738 192,643
Receivable after 12 months 120,786 128,261
292,524 320,905
The Company is applying MFRS 16 for the first time for the year commencing 1 January 2019.
MFRS 16 allows two methods of initial application: (1) full retrospective application with the restatement
of comparatives and (2) modified retrospective approach without the restatement of comparatives and
with certain simplifications available upon adoption. The Company has elected to use the second
approach by implementing the standard retrospectively in relation to all leases in which the Company is
a lessee without restating comparatives. The implementation of MFRS 16 will not affect total equity.
The Company has various lease contracts. All contracts are either short term leases (12 months and
below) or with low value of underlying assets, except for rental of properties.
54
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
12 INSURANCE RECEIVABLES
2019 2018
RM'000 RM'000
Group and Company
Due premiums including agents, brokers and
co-insurers balances 184,515 232,808
Due from reinsurers and cedants 76,781 73,933
261,296 306,741
Allowance for impairment (28,663) (23,793)
232,633 282,948
Receivable within 12 months 232,633 282,948
Receivable after 12 months - -
232,633 282,948
Movement in allowance for impairment:
At 1 January 23,793 22,192
Allowance for impairment (Note 24(a)) 4,870 1,601
At 31 December 28,663 23,793
The carrying amounts approximate the fair values at the date of the statements of financial position.
Offsetting financial assets and financial liabilities
Gross Net
amounts of amounts
recognised of financial
financial assets
Gross liabilities presented
amounts of set off in the in the
recognised statements statements
financial of financial of financial
assets position position
RM'000 RM'000 RM'000
Group and Company
2019
Insurance receivables 419,604 (158,308) 261,296
2018
Insurance receivables 475,407 (168,666) 306,741
The following financial assets are subject to offsetting, enforceable master netting arrangements and
similar agreements:
There are no financial instruments received as collateral, nor any cash collateral pledged or received as
at 31 December 2019 (2018: Nil).
55
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
13 OTHER RECEIVABLES AND PREPAYMENTS
2018
Group Company Company
RM'000 RM'000 RM'000
Malaysian Motor Insurance Pool (“MMIP”) 49,062 49,062 51,727
- Cash calls paid to MMIP 34,360 34,360 34,360
- Assets held under MMIP 14,702 14,702 17,367
Due from AXA regional offices (Note 29) 6,308 6,308 6,377
Other receivables, deposits and prepayments 13,257 11,727 31,692
68,627 67,097 89,796
The carrying amounts approximate the fair values at the date of the statements of financial position.
14 SHARE CAPITAL AND RETAINED EARNINGS
No. of No. of
Amount shares Amount shares
RM'000 000 RM'000 000
Group and Company
Issued and fully paid share capital
At 1 January / 31 December 190,645 190,645 190,645 190,645
MMIP as at 31 December 2019 is a net receivable of RM15,742,363 (2018: net receivable of
RM12,170,301) after setting-off the amount receivable from MMIP against the Company’s share of
claims and premium liabilities amounting to RM33,320,478 (2018: RM39,557,552) included in Note 15
to the financial statements.
2019 2018
The Company may distribute single-tier tax exempt dividends to its shareholders out of its retained
earnings. Pursuant to Section 51(1) of the Financial Services Act, 2013, the Company is required to
obtain BNM’s written approval prior to declaring or paying any dividend. Pursuant to the RBC
Framework, the Company shall not pay dividends if its Capital Adequacy Ratio position is less than its
internal target capital level or if the payment of dividends would impair its Capital Adequacy Ratio
position to below its internal target.
The amounts due from AXA regional offices are unsecured, interest free and have no fixed terms of
repayment.
2019
56
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
15 INSURANCE CONTRACT LIABILITIES
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 941,048 (175,122) 765,926 974,346 (203,031) 771,315
Provision for IBNR claims 351,625 (60,534) 291,091 334,027 (59,859) 274,168
Claims liabilities (a) 1,292,673 (235,656) 1,057,017 1,308,373 (262,890) 1,045,483
Premium liabilities (b) 561,683 (56,867) 504,816 583,905 (58,015) 525,890
1,854,356 (292,523) 1,561,833 1,892,278 (320,905) 1,571,373
Within 12 months 977,393 (171,738) 805,655 1,013,051 (192,643) 820,408
After 12 months 876,963 (120,785) 756,178 879,227 (128,261) 750,965
1,854,356 (292,523) 1,561,833 1,892,278 (320,905) 1,571,373
20182019
57
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
15 INSURANCE CONTRACT LIABILITIES (CONTINUED)
(a) Claims liabilities
Gross Reinsurance Net Gross Reinsurance Net
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
At 1 January 1,308,373 (262,890) 1,045,483 1,367,503 (344,471) 1,023,032
Claims incurred in the current
accident year before provision
of risk margin for adverse
deviation (“PRAD”) and claims
handling expenses (“CHE”) 938,983 (121,566) 817,417 974,048 (154,653) 819,395
Movements in claims incurred in
prior accident years before
PRAD and CHE (44,321) 47,613 3,292 (59,277) 36,687 (22,590)
Movement in PRAD of claims
liabilities at 75% confidence level (3,403) 2,227 (1,176) (3,631) 5,441 1,810
Movement in claims handling
expenses 141 - 141 1,391 - 1,391
Claims paid during the financial year (907,100) 98,960 (808,140) (971,661) 194,106 (777,555)
At 31 December 1,292,673 (235,656) 1,057,017 1,308,373 (262,890) 1,045,483
Within 12 months 818,370 (162,153) 656,217 849,861 (182,622) 667,239
After 12 months 474,303 (73,503) 400,800 458,512 (80,268) 378,244
1,292,673 (235,656) 1,057,017 1,308,373 (262,890) 1,045,483
2019 2018
58
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
15 INSURANCE CONTRACT LIABILITIES (CONTINUED)
(b) Premium liabilities
Gross Reinsurance Net Gross Reinsurance Net
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
At 1 January 583,905 (58,015) 525,890 558,166 (51,608) 506,558
Premiums written in the financial
year (Note 20) 1,349,147 (213,441) 1,135,706 1,462,303 (238,754) 1,223,549
Premiums earned during the
financial year (Note 20) (1,371,369) 214,589 (1,156,780) (1,436,564) 232,347 (1,204,217)
At 31 December 561,683 (56,867) 504,816 583,905 (58,015) 525,890
The carrying amounts approximate the fair values at the date of the statements of financial position.
2019 2018
59
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
16 DEFERRED TAXATION
2018
Group Company Company
RM'000 RM'000 RM'000
Deferred tax assets 3,372 3,378 13,846
At 1 January 13,846 13,846 3,391
Movement during the financial
year recognised in:
Statement of income (Note 25) (3,877) (3,877) 7,678
Other comprehensive income
- AFS reserve (6,597) (6,591) 2,777
At 31 December 3,372 3,378 13,846
Deferred tax assets:
- to be recovered after more than
12 months - - 821
- to be recovered within 12 months 14,646 14,646 17,497
14,646 14,646 18,318
Deferred tax liabilities:
- to be settled after more than
12 months (11,274) (11,268) (4,472)
Deferred tax assets (net) 3,372 3,378 13,846
At 1 Charged/ At 31
January (credited) December
RM'000 RM'000 RM'000
2019
Group
Recognised in statement of income
Excess of capital allowance over depreciation (1,356) (198) (1,554)
AFS financial assets 595 (208) 387
Impairment on equities 226 (105) 121
Provisions and accruals 17,504 (2,914) 14,590
Unrealised foreign exchange loss - (452) (452)
Recognised in AFS reserve
AFS financial assets (2,052) (6,904) (8,956)
Unit Trust - Wholesale fund (374) 307 (67)
Recognised in revaluation reserve
Self-occupied property (697) - (697)
13,846 (10,474) 3,372
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when the deferred taxes relate to the same tax authority.
2019
60
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
16 DEFERRED TAXATION (CONTINUED)
At 1 Charged/ At 31
January (credited) December
RM'000 RM'000 RM'000
2019 (continued)
Company
Recognised in statement of income
Excess of capital allowance over depreciation (1,356) (198) (1,554)
AFS financial assets 595 (208) 387
Impairment on equities 226 (105) 121
Provisions and accruals 17,504 (2,914) 14,590
Unrealised foreign exchange loss - (452) (452)
Recognised in AFS reserve
AFS financial assets (2,052) (6,904) (8,956)
Unit Trust - Wholesale fund (374) 313 (61)
Recognised in revaluation reserve
Self-occupied property (697) - (697)
13,846 (10,468) 3,378
2018
Company
Recognised in statement of income
Excess of capital allowance over depreciation (2,493) 1,137 (1,356)
AFS financial assets 715 (120) 595
Impairment on equities 949 (723) 226
Provisions and accruals 10,120 7,384 17,504
Unrealised foreign exchange loss - - -
Recognised in AFS reserve
AFS financial assets (5,391) 3,339 (2,052)
Unit Trust - Wholesale fund 188 (562) (374)
Recognised in revaluation reserve
Self-occupied property (697) - (697)
3,391 10,455 13,846
61
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
17 BORROWING
2019 2018
RM'000 RM'000
Group and Company
Subordinated loan 70,000 130,000
Interest payable on loan 25 100
70,025 130,100
Payable within 12 months 25 100
Payable after 12 months 70,000 130,000
70,025 130,100
Fair value 55,949 103,660
Subordinated loan - RM150,000,000
Subordinated loan - RM130,000,000
On 28 March 2018, with the approval from BNM, the Company received RM130 million subordinated loan
from AXA S.A. and Affin Holdings Berhad for the Company's working capital purposes.
This subordinated loan has a tenor of not exceeding 10 years from the drawdown date of 28 March 2017.
Interest on the subordinated loan is at the rate of 6.5% and payable every 3 months.
The Company has obtained approval from BNM for a partial early redemption of the subordinated loan.
RM60 million was paid by the Company on 10 December 2019.
The fair value is calculated at a discount rate of 9.8% (2018: 9.6%) based on the weighted cost of capital of
the Company, and is within Level 3 of the fair value hierarchy.
On 28 April 2010, with the approval from BNM, the Company received RM150 million subordinated loan
from AXA S.A. and Affin Holdings Berhad for its acquisition of AMS.
This subordinated loan has a tenor of not exceeding 10 years from the drawdown date of 28 April 2010.
Interest of 8% per annum for 5 years and 10% per annum after the fifth year is charged and deemed
payable every 3 months. An additional charge of 2% per annum above the prescribed rate will be imposed
if the interest remained unpaid when it is ought to be paid.
The subordinated loan was fully settled by the Company on 15 October 2018.
The Company has obtained approval from BNM to make prepayment of the loan in stages over the
remaining last 5 years to its shareholders, AXA S.A. and Affin Holdings Berhad.
62
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
17 BORROWING (CONTINUED)
Non-cash
At 1 charges At 31
January 2019 Cash flows Finance cost December 2019RM'000 RM'000 RM'000 RM'000
Group and Company
Subordinated loans 130,000 (60,000) - 70,000
Finance cost payable on loan 100 (8,398) 8,323 25
130,100 (68,398) 8,323 70,025
Non-cash
At 1 charges At 31
January 2018 Cash flows Finance cost December 2018RM'000 RM'000 RM'000 RM'000
Group and Company
Subordinated loans 200,000 (70,000) - 130,000
Finance cost payable on loan 1,367 (15,494) 14,227 100
201,367 (85,494) 14,227 130,100
18 INSURANCE PAYABLES
2019 2018
RM'000 RM'000
Group and Company
Due to agents and intermediaries 63,469 60,478
Due to reinsurers and cedants 176,916 152,108
Deposits received from reinsurers (Note 29) 21,306 21,306
261,691 233,892
The carrying amounts approximate the fair values at the date of the statements of financial position.
There were no other issuances, cancellations, repurchases, resale and repayments of debt and equity
securities by the Company during the financial period under review.
63
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
18 INSURANCE PAYABLES (CONTINUED)
Offsetting financial assets and financial liabilities
Gross Net
amounts of amounts
recognised of financial
financial liabilities
Gross assets set presented
amounts of off in the in the
recognised statements statements
financial of financial of financial
liabilities position position
RM'000 RM'000 RM'000
Group and Company
2019
Insurance payables 419,999 (158,308) 261,691
2018
Insurance payables 402,558 (168,666) 233,892
19 OTHER PAYABLES
2018
Group Company Company
RM'000 RM'000 RM'000
Accrued expenses 12,406 12,406 25,252
Provision for staff bonus 19,076 19,076 26,443
Other payables 193,009 51,077 62,714
Due to AXA regional offices (Note 29) 62,488 62,488 51,512
286,979 145,047 165,921
The carrying amounts approximate the fair values at the date of the statements of financial position.
The following financial liabilities are subject to offsetting, enforceable master netting arrangements and
similar agreements:
2019
64
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
20 NET EARNED PREMIUMS
2019 2018
RM'000 RM'000
Group and Company
(a) Gross earned premiums
Gross premiums (Note 15(b)) 1,349,147 1,462,303
Change in premium liabilities 22,222 (25,739)
Gross earned premiums
(Note 15(b)) 1,371,369 1,436,564
(b) Premiums ceded
Reinsurance premiums ceded
(Note 15(b)) (213,441) (238,754)
Change in premium liabilities (1,148) 6,407
Premiums ceded to reinsurers
(Note 15(b)) (214,589) (232,347)
Net earned premiums 1,156,780 1,204,217
65
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
21 INVESTMENT INCOME
2018
Group Company Company
RM'000 RM'000 RM'000
AFS financial assets
- interest income 53,730 53,730 52,864
- dividend income 9,590 16,115 15,550
- amortisation of premiums,
net of accretion (Note 8(c)) (1,206) (1,206) (1,288)
LAR
- interest income from fixed
and call deposits 51,167 41,774 33,988
Others 4,265 4,265 2,681
117,546 114,678 103,795
22 REALISED GAINS AND LOSSES
2019 2018
RM'000 RM'000
Group and Company
Property, plant and equipment
Realised gains 1 4
AFS financial assets
Realised gains from disposal of
- equity securities quoted in
Malaysia 22 14,688
- debt securities unquoted
in Malaysia 3,340 -
- wholesale unit trust fund 15 209
3,378 14,901
23 FAIR VALUE LOSSES
2019 2018
RM'000 RM'000
Group and Company
AFS financial assets
- impairment loss on equities
quoted in Malaysia (Note 8(c)) - 462
2019
66
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
24 MANAGEMENT EXPENSES AND FINANCE COSTS
(a) Management expenses
2018
Group Company Company
RM'000 RM'000 RM'000
Staff salaries and bonus 88,943 88,943 94,392
Defined contribution plans 13,720 13,720 13,613
Other employee benefits 11,295 11,295 9,797
Staff costs 113,958 113,958 117,802
Chief Executive Officer
- salaries and bonus 1,758 1,758 1,603
- other emoluments 603 603 524
Non-Executive Directors
- fees 393 393 351
- other emoluments 77 77 70
Directors' remuneration 2,831 2,831 2,548
Auditor's remuneration*
- statutory audit 372 368 304
- audit related services 9 9 9
- tax related service 82 80 73
Depreciation of property,
plant and equipment (Note 5) 5,714 5,714 5,902
Depreciation of right-of-use assets 4,915 4,915 -
Amortisation of intangible asset
- software (Note 6) 9,852 9,852 7,093
Rental of offices 515 515 5,759
EDP expenses 37,510 37,510 32,499
(Writeback of bad debts)/Bad debts written off (3,870) (3,870) 45
Allowance for impairment of
insurance receivables (Note 11) 4,870 4,870 1,601
Advertising and promotion 12,089 12,089 14,227
Bank charges 11,808 11,807 9,845
Telemarketing 924 924 1,099
Administrative service fee 5,181 5,181 2,770
Management fees 5,605 5,183 4,100
Other expenses 40,739 40,574 42,846
136,315 135,721 128,172
Total management expenses 253,104 252,510 248,522
* There was no indemnity given or insurance effected for any auditor of the Group and Company
during the current financial year and its comparative financial year.
2019
67
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
24 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED)
(a) Management expenses (continued)
Key management personnel compensation
The total remuneration (including benefits-in-kind) of the Chief Executive Officer & Directors are as follows:-
Benefits-in-
Fees Salary Bonus Others kind Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
2019
Chief Executive Officer
- Emmanuel Jean Louis Nivet - 1,063 695 572 31 2,361
Non-Executive Directors
- Tan Sri Hashim bin Meon 111 - - 19 - 130
- Gen. Tan Sri Ahmad Saruji bin Che Rose 40 - - 8 - 48
- Datin Zaimah binti Zakaria 100 - - 19 - 119
- Yu Choong Cheong 98 - - 24 - 122
- Dato' Dr. Nirmala Menon a/p Y B Menon 44 - - 7 - 51
393 1,063 695 649 31 2,831
68
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
24 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED)
(a) Management expenses (continued)
Key management personnel compensation (continued)
Benefits-in-
Fees Salary Bonus Others kind Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
2018
Chief Executive Officer
- Emmanuel Jean Louis Nivet - 1,068 535 493 31 2,127
Non-Executive Directors
- Tan Sri Hashim bin Meon 97 - - 18 - 115
- Gen. Tan Sri Ahmad Saruji bin Che Rose 83 - - 17 - 100
- Datin Zaimah binti Zakaria 87 - - 17 - 104
- Yu Choong Cheong 84 - - 18 - 102
351 1,068 535 563 31 2,548
There were no indemnity given or insurance effected for any Director and officer during the current financial year and its comparative financial year.
The remuneration, including benefits-in-kind, attributable to the Chief Executive Officer of the Group and Company during the financial year amounted
to RM2,361,000.00 (2018: RM2,127,000.00).
69
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
24 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED)
(b) Finance costs
2019 2018
RM'000 RM'000
Group and Company
Interest expense on subordinated loan 8,323 14,227
(c) AXA Share Option Scheme
-
- valid for a maximum term of 10 years; and
-
(i) In respect of the employees of the Company
Average Average
exercise exercise
price in Euro price in Euro
per share Options per share Options
Group and Company
At 1 January 14.35 4,500 14.09 7,896
Granted - - - -
Exercised/expired - (250) - (3,396)
At 31 December 14.32 4,250 14.35 4,500
Pursuant to the Share Option Scheme operated by AXA, the ultimate holding corporation of the
Company, Directors and eligible employees of the Company are granted options to purchase
ordinary shares of AXA. While the precise terms and conditions of each option grant may vary,
current options are:
granted at a price not less than the average closing price of the ordinary share on the Paris
Stock Exchange during the 20 trading days preceding the date of grant;
becomes exercisable in instalments of 33.33% per year on each of the second, third and
fourth anniversaries of the grant date which is generally end of March.
The Black-Scholes option pricing model was used by AXA in determining the fair values of the
AXA share options.
Movements in the number of share options held by the employees of the Company and
their related weighted average exercise prices are as follows:
2019 2018
70
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
24 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED)
(c) AXA Share Option Scheme (continued)
(i) In respect of employees of the Company (continued)
Exercise
price in Euro
Expiry date per share 2019 2018
21.3.2020 15.43 1,125 1,125
18.3.2021 14.73 2,125 2,375
16.3.2022 12.22 1,000 1,000
Total number of options 4,250 4,500
Expiry date 2019 2018
21.3.2020 1,125 1,125
18.3.2021 2,125 2,375
16.3.2022 1,000 1,000
Total number of options 4,250 4,500
Weighted average exercise price in Euro per share 14.32 14.35
Share options outstanding at the end of the financial year held by the employees of the
Company have the following expiry dates and exercise prices:
Outstanding options
Exercisable share options at the end of the financial year held by the employees of the
Company have the following expiry dates:
Exercisable options
71
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
24 MANAGEMENT EXPENSES AND FINANCE COSTS (CONTINUED)
(c) AXA Share Option Scheme (continued)
(ii) In respect of the Executive Director of the Company only
(d) AXA Miles
The cumulative fair value of AXA Miles for eligible employees as at 31 December 2019
amounted to RM2,284,000.00 (2018: RM2,284,000.00).
These 50 AXA Miles will be converted to 50 AXA shares at the end of the acquisition period
which for the grant made on 16 March 2012 will be 16 March 2016 (4 years from the grant of
AXA Miles), i.e. 4 years vesting period with no subsequent restriction period.
The Executive Director has resigned on 23 May 2018 and the new appointed Executive
Director does not hold any Company's share option scheme. There is no related share
option scheme to be reported as at end of 2018 and 2019.
In 2007, AXA, the ultimate holding corporation of the Company introduced the “AXA Miles
Program”. The AXA Miles Program entitles all eligible employees of AXA worldwide as at 1 July
2007 to 50 AXA Miles subject to the employee meeting certain eligibility conditions.
72
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
25 TAXATION
2018
Group Company Company
RM'000 RM'000 RM'000
Current tax
Current financial year 18,876 18,876 45,349
(Over) / Under provision in
prior financial years (8,738) (8,738) 1,981
10,138 10,138 47,330
Deferred tax (Note 16)
Origination and reversal of
temporary differences 3,877 3,877 (7,678)
14,015 14,015 39,652
2018
Group Company Company
RM'000 RM'000 RM'000
Profit before taxation 87,160 84,886 139,997
Tax calculated at the statutory
rate of 24% (2018: 24%) 20,918 20,373 33,599
Tax effect of expenses not
deductible for tax purposes 7,039 7,039 10,405
Non-taxable income (5,204) (4,659) (5,464)
Different tax rate for offshore
insurance business - - (869)
(Over) / Under provision in
in prior financial years (8,738) (8,738) 1,981
14,015 14,015 39,652
The income tax for the Shareholders’ and General funds are calculated based on the tax rate of 24%
(2018: 24%) of the estimated assessable profit for the financial year.
A reconciliation of taxation applicable to profit before taxation at the statutory income tax rate to tax at
the effective tax rate is as follows:
2019
On 1 January 2017, the Company early adopted IC Interpretation 23 for financial year beginning on or
after 1 January 2017. The IFRS Interpretations Committee developed IFRIC 23 to clarify the
accounting for uncertainties in income taxes. This interpretation is to be applied to the determination of
taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is
uncertainty over income tax treatments under MFRS 112. This interpretation is effective for annual
reporting periods beginning on or after 1 January 2019. However, earlier application is permitted.
2019
73
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
25 TAXATION (CONTINUED)
i)
ii)
iii)
iv)
26 EARNINGS PER SHARE
2019 2018
Company Company
RM'000 RM'000
Net profit for the financial year 70,871 100,345
Weighted average number of
ordinary shares in issue 119,048 119,048
Basic earnings per share (sen) 60 84
Basic earnings per share is calculated by dividing the net profit for the financial year attributable to
ordinary equity holders of the Group and Company by the weighted average number of ordinary
shares in issue during the financial year:
Upon consulting its legal counsel, the Company is of the view that there are reasonable grounds and
strong justifications to challenge the basis and validity of the notices of additional assessment raised
and the penalty imposed by the IRB.
The Ministry of Finance (MOF), in its letter dated 22 November 2019, agreed that PRAD is an
allowable expense for tax deduction from YA 2009 onwards for general insurance and general takaful
business.
The tax recoverable amount of RM15,993,549 was similarly accounted for as a tax recoverable,
offsetting the accrued position above.
Taxing the dividend income received under section 60(8) instead of Section 4(c) of the ITA;
Disallowing the tax deduction on interest expenses;
Disallowing the tax deduction on Risk-Based Capital (RBC) certification; and
Disallowing the tax deduction on movement of Provision of Risk Margin for Adverse Deviation
(PRAD) as part of the net claims incurred.
The amount payable to the IRB, inclusive of penalty, of RM6,843,909 was made in January 2019.
The amount payable to the IRB of RM9,909,147 has been made in January 2018.
The Inland Revenue Board (“IRB”) had on 22 December 2017, issued to the Company notices of
additional assessment (Form JA) for the years of assessment (“YA”) 2011 and 2012, taxing the
dividend income received under section 60(8) instead of Section 4(c) of the Income Tax Act (“ITA”)
and disallowing the tax deduction on interest expenses and management expenses. The additional tax
payable by the Company, inclusive of penalty, was RM9,909,147 and similarly accrued in the financial
statements.
Subsequently on 8 January 2019, the Company received another Form JA dated 28 December 2018
for YA 2013 from the IRB for the following tax adjustments:
74
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
27 OPERATING LEASE COMMITMENTS
2019 2018
RM'000 RM'000
Group and Company
Not later than 1 year - 5,539
Later than 1 year and not later than 5 years - 524
- 6,063
28 CAPITAL COMMITMENTS
2019 2018
RM'000 RM'000
Group and Company
Capital expenditure approved but not contracted for:
Property, plant and equipment - -
Intangible asset – software 13,197 8,121
13,197 8,121
29 RELATED PARTY TRANSACTIONS
The Company (as lessee) have entered into non-cancellable operating lease agreements on the rental
of offices for branch operations. These leases have remaining non-cancellable lease terms not later
than 5 years.
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below
are other related party disclosures. In the normal course of business, the Group and Company
undertake various transactions with other companies deemed related parties by virtue of them being
members of Affin Holdings Berhad group of companies (“Affin Group”) and AXA group of companies
(“AXA Group”) on agreed terms and conditions.
From 1 January 2019, the Group and Company have recognised right-of-use (ROU) assets for the
leases, except for short term and low value leases, see Note 10 to the financial statements for further
information.
75
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
29 RELATED PARTY TRANSACTIONS (CONTINUED)
The related parties of, and their relationship with the Group and Company, are as follows:
Country of
Name of company incorporation Relationship
AXA S.A. France Ultimate holding corporation
Affin Holdings Berhad Malaysia Entity which has significant influence
in the Company
AXA Asia France Immediate holding corporation
Axa Group Operations
Hong Kong Limited Hong Kong Company within AXA Group
AXA Global P&C France Subsidiary of Ultimate holding corporation
GIE AXA France Subsidiary of Ultimate holding corporation
Maxis GBN S.A.S. France Affiliate
AXA Regional Services S.A.U. Spain Company within AXA Group
AXA Group Solutions Asia
Limited Hong Kong Company within AXA Group
AXA Group Operations S.A.S France Company within AXA Group
Related party balances
2019 2018
RM'000 RM'000
Receivables
Outstanding premiums due from Affin Group 5,742 10,368
Other receivables due from other subsidiaries of AXA Group
(Note 13) 6,308 6,377
Reinsurance balances due from AXA Global P&C 4,631 16,621
Cash and bank balances
Bank balances with a licensed bank of Affin Group 19,701 3,951
Investments
Fixed deposits placed with a licensed bank of Affin Group 160,285 168,724
Payables
Reinsurance balances due to:
- Other subsidiaries of AXA Group (13,086) (9,948)
Reinsurance deposits due to AXA Global P&C (Note 18) (21,306) (21,306)
Other payables due to other subsidiaries of AXA Group (Note 19) (62,488) (51,512)
The following is a summary of significant related party balances, which were carried out in the normal
course of the business:
76
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
29 RELATED PARTY TRANSACTIONS (CONTINUED)
Significant related party transactions
2019 2018
RM'000 RM'000
Transactions with AXA Global P&C:
Reinsurance premiums ceded (65,316) (67,148)
Reinsurance claims recovered 26,264 78,259
Commissions received 15,246 17,563
Transactions with Maxis GBN S.A.S.:
Reinsurance premiums ceded (15,601) (24,639)
Reinsurance claims recovered 17,830 18,335
Commissions received 2,382 3,910
Transactions with other subsidiaries of AXA Group:
Reinsurance premiums ceded (22,628) (27,647)
Reinsurance claims recovered 5,900 7,059
Commissions received 3,635 4,046
Transactions with GIE AXA:
Management expenses incurred 460 (502)
Transactions with AXA Regional Services S.A.U.:
Management expenses incurred (1,102) (6,553)
Transactions with AXA Group Solutions Asia Limited:
Management expenses incurred - (1,525)
Transactions with AXA Group Operations S.A.S:
Management expenses incurred (91) (1,113)
Transactions with AXA Asia:
Interest expense on subordinated loan (4,647) (4,718)
Management expenses incurred (2,490) 2,971
Transactions with AXA Group Operations Hong Kong Limited:
Management expenses incurred (25,444) (26,093)
Transactions with AXA S.A:
Interest expense on subordinated loan - (3,412)
Significant related party transactions of the Group and Company with the related parties during the
financial year are as follows:
77
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
29 RELATED PARTY TRANSACTIONS (CONTINUED)
Significant related party transactions (continued)
2019 2018
RM'000 RM'000
Transactions with Affin Group:
Interest expense on subordinated loan (3,676) (6,097)
Interest income earned 8,900 4,591
Gross premiums received 1,585 1,979
Commissions paid (3,973) (4,546)
(a)
(b)
(c)
The total remuneration of the Directors is disclosed in Note 24 to the financial statements.
2019 2018
RM'000 RM'000
Salaries and other remuneration 9,961 8,839
Benefits-in-kind 31 31
9,992 8,870
The Company has reinsurance agreements (treaty and facultative) with a number of fellow
subsidiaries of AXA under which the Company agrees to cede and assume premiums and
liabilities in accordance with specific reinsurance schedules. Commissions are paid and received
on such arrangements. Such reinsurance agreements with fellow subsidiaries are entered into in
the Company’s normal course of business.
The Company entered into management service agreements with fellow subsidiaries, AXA Asia
and GIE AXA, an economic interest group whereby the fellow subsidiaries undertake to provide
certain management services set out in the service agreements.
Key management personnel are those people defined as having authority and responsibility for
planning, directing and controlling the activities of the Group and Company, either directly or indirectly,
including any director (Executive or Non-Executive).
The compensation of the other key management personnel (including Executive Directors) is as
follows:
The Company has a credit facility with Affin Bank Berhad. This facility has not been drawn down
during the current financial year ended 31 December 2019.
78
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK
Insurance risks
(i) Underestimation of the frequency and/or severity of the claims;
(ii) Change in legal/economic environment;
(iii) Change in insured’s behavior; or
(iv) Change in reinsurance rates etc.
(i) Documented underwriting guidelines and underwriting authorities;
(ii) Risk management engineering and risk accumulation limits;
(iii) Reinsurance is placed to minimize certain insurance risks within approved limits and security;
(iv)
(v) Regular internal audit reviews are performed to ensure compliance with the Group's and
Company's guidelines and standards.
The Group and Company underwrite various types of general insurance contracts, where majority of
contracts are having annual coverage and premium, with the exception of short term policies in Travel
and Marine Cargo (single trip and single shipment policies respectively) and multi-year policies in
Construction and Contractor’s All Risks (project policies).
For the current financial year ended 31 December 2019, Motor and Fire classes constitute 66.8%
(2018: 65.5%) of the Company’s business.
Insurance contracts transfer the risk from the policyholders to the Group and Company. The Group
and Company receive a premium and are then liable for all the claims (as per wording) occurring
between the inception date and the expiry date of the insurance contract arising from random events.
Underestimation of this insurance risk leads to financial consequences for the Group and Company as
the premium might not be enough to cover the costs. The causes of underestimation can be various
such as:
Due to the nature of the business, all the above mentioned elements are assessed and the following
procedures are in place to mitigate the risks:
Claims approval and settlement authorities are clearly defined for prudent control on financial
exposure; and
The Group and Company issue contracts that transfer Insurance risk. This section summarises these
risks and the way the Group and Company manage them.
79
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
The table below sets out the concentration of the Group's and Company’s premiums by classes of business:
Gross Reinsurance Net Gross Reinsurance Net
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
Motor 748,032 (22,885) 725,147 784,212 (26,540) 757,672
Fire 152,799 (89,206) 63,593 174,321 (91,944) 82,377
Marine, aviation and transit 52,001 (27,652) 24,349 57,767 (29,500) 28,267
Miscellaneous 396,315 (73,697) 322,618 446,003 (90,770) 355,233
1,349,147 (213,440) 1,135,707 1,462,303 (238,754) 1,223,549
(a) Key assumptions
2019 2018
The principal assumption underlying the estimation of liabilities is the future claims development will follow a similar pattern to the past claims
development experience. This includes assumptions in respect of ultimate loss ratios, case reserve, provision of risk margin for adverse deviation
(“PRAD”) and claims handling expenses.
Additional qualitative judgements are used to assess the extent to which the past trends may not apply in the future, for example, isolated occurrence,
changes in market factors such as public attitude to claiming, economic conditions, as well as internal factors, such as, portfolio mix, policy conditions
and claims handling procedures. Judgement is further used to assess the extent to which external factors, such as judicial decisions and government
legislation affect the estimates.
80
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
(b) Sensitivity analysis
Impact on Impact on Impact on
Change in gross net profit Impact on
assumptions liabilities liabilities before tax equity
RM'000 RM'000 RM'000 RM'000
Group and Company
2019
Loss ratios for last 3 years +10% 323,903 272,344 (272,344) (206,982)
Case reserve +10% 98,255 79,531 (79,531) (60,444)
PRAD +10% 8,065 6,541 (6,541) (4,971)
Claims handling expenses +10% 1,493 1,493 (1,493) (1,135)
2018
Loss ratios for last 3 years +10% 319,164 264,950 (264,950) (201,362)
Case reserve +10% 101,469 79,711 (79,711) (60,580)
PRAD +10% 8,406 6,648 (6,648) (5,052)
Claims handling expenses +10% 1,479 1,479 (1,479) (1,124)
The insurance claim liabilities calculation is based on key assumptions. Variation of these
assumptions may vary the amount of claim liabilities and impact significantly the results. As
illustrated below, sensitivity analyses are carried out in order to understand how key assumptions
(i.e. ultimate loss ratios of the last 3 accident years, case reserve, PRAD and claims handling
expenses) impact the claim liability. It is worth mentioning that these 4 assumptions do not
represent an exhaustive list but are likely to be the most important.
The analysis below is performed for reasonably possible movements in key assumptions with all
other assumptions held constant, showing the impact on gross liabilities, net liabilities, profit
before tax and equity (profit after tax).
81
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
(c) Claims development tables
The following tables show estimates of cumulative incurred claims including both claims notified
(settled or not yet settled) and IBNR for each successive accident year at each date of the
statement of financial position, together with cumulative payments to-date. The past year claims
pattern is used to assess future claims pattern and therefore estimating the ultimate claims for
each accident year. Actuarial methods such as Chain Ladder but also other quantitative
information (such as market loss ratio benchmarks) and qualitative information (such as
underwriter’s and claim manager’s feedback) are taken into account in the assessments.
In setting provisions for claims, the Group and Company assess the future experience and adjust
the level of reserve to cover future uncertainties such as civil law changes and general claims
inflation. Risk margin is also provided to cope with this uncertainty. The higher the uncertainty,
the higher the risk margin is. This uncertainty depend on the line of business (short tail or long
tail), the nature of the risks (high sum insured or low sum insured) as well as the accident year
(the more recent the accident year is, the higher the uncertainty associated with the ultimate
claims experience is).
82
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
(c) Claims development tables (continued)
Group and Company
Gross claims liabilities for 2019:
Accident Year 2012 & prior 2013 2014 2015 2016 2017 2018 2019 Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At the end of accident year 4,496,214 567,571 658,522 772,979 915,328 1,109,642 1,023,437 982,536
1 Year Later 4,452,665 599,057 733,577 861,265 880,322 1,091,576 995,815
2 Years Later 4,376,830 512,581 654,133 811,504 890,519 1,071,674
3 Years Later 4,314,054 488,362 639,181 768,086 886,127
4 Years Later 4,263,313 489,567 610,448 759,725
5 Years Later 4,250,029 479,151 604,935
6 Years Later 4,229,552 459,528
7 Years Later 4,223,830
4,223,830 459,528 604,935 759,725 886,127 1,071,674 995,815 982,536
At the end of accident year (3,879,295) (178,996) (235,090) (266,619) (324,455) (378,897) (369,645) (393,524)
1 Year Later (4,080,338) (347,515) (468,230) (532,526) (608,803) (782,648) (686,614)
2 Years Later (4,159,936) (394,959) (530,475) (631,676) (733,530) (903,107)
3 Years Later (4,184,606) (418,419) (555,993) (679,305) (780,332)
4 Years Later (4,198,747) (433,796) (571,344) (698,010)
5 Years Later (4,203,577) (440,149) (574,247)
6 Years Later (4,207,775) (443,973)
7 Years Later (4,211,689)
Cumulative payments to-date (4,211,689) (443,973) (574,247) (698,010) (780,332) (903,107) (686,614) (393,524)
12,141 15,555 30,688 61,715 105,795 168,567 309,201 589,012 1,292,674
Gross claims liabilities as per
statement of financial position
Current Estimate of Cumulative
Claims Incurred
83
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
(c) Claims development tables (continued)
Group and Company
Net claims liabilities for 2019:
Accident Year 2012 & prior 2013 2014 2015 2016 2017 2018 2019 Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At the end of accident year 3,273,792 455,531 546,602 677,873 799,911 818,888 860,395 854,482
1 Year Later 3,246,324 498,415 627,210 759,168 765,359 840,806 856,164
2 Years Later 3,171,989 417,280 552,285 733,969 782,131 844,744
3 Years Later 3,136,518 398,120 539,904 690,597 781,003
4 Years Later 3,098,988 395,559 512,399 684,128
5 Years Later 3,088,223 385,353 508,281
6 Years Later 3,070,232 368,340
7 Years Later 3,064,447
3,064,447 368,340 508,281 684,128 781,003 844,744 856,164 854,482
At the end of accident year (2,803,322) (151,435) (201,022) (242,826) (301,954) (340,175) (332,941) (366,161)
1 Year Later (2,964,715) (291,651) (385,926) (474,713) (552,030) (605,769) (606,086)
2 Years Later (3,016,629) (326,529) (441,889) (553,253) (666,310) (707,294)
3 Years Later (3,037,395) (344,777) (464,722) (596,734) (709,041)
4 Years Later (3,050,595) (354,318) (477,771) (613,887)
5 Years Later (3,054,372) (359,461) (480,524)
6 Years Later (3,057,444) (362,641)
7 Years Later (3,058,938)
Cumulative payments to-date (3,058,938) (362,641) (480,524) (613,887) (709,041) (707,294) (606,086) (366,161)
5,509 5,699 27,757 70,241 71,962 137,450 250,078 488,321 1,057,017
Net claims liabilities as per
statement of financial position
Current Estimate of Cumulative
Claims Incurred
84
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
(c) Claims development tables (continued)
Group and Company
Gross claims liabilities for 2018:
Accident Year 2011 & prior 2012 2013 2014 2015 2016 2017 2018 Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At the end of accident year 4,028,969 484,595 567,571 658,522 772,979 915,328 1,109,642 1,023,437
1 Year Later 4,011,619 489,768 599,057 733,577 861,265 880,322 1,091,576
2 Years Later 3,962,897 443,461 512,581 654,133 811,504 890,519
3 Years Later 3,933,369 430,949 488,362 639,181 768,086
4 Years Later 3,883,105 412,156 489,567 610,448
5 Years Later 3,851,157 409,859 479,151
6 Years Later 3,840,170 396,466
7 Years Later 3,833,086
3,833,086 396,466 479,151 610,448 768,086 890,519 1,091,576 1,023,437
At the end of accident year (3,505,459) (163,615) (178,996) (235,090) (266,619) (324,455) (378,897) (369,645)
1 Year Later (3,715,680) (304,717) (347,515) (468,230) (532,526) (608,803) (782,648)
2 Years Later (3,775,621) (358,185) (394,959) (530,475) (631,676) (733,530)
3 Years Later (3,801,751) (373,143) (418,419) (555,993) (679,305)
4 Years Later (3,811,463) (381,575) (433,796) (571,344)
5 Years Later (3,817,172) (386,447) (440,149)
6 Years Later (3,817,130) (387,938)
7 Years Later (3,819,837)
Cumulative payments to-date (3,819,837) (387,938) (440,149) (571,344) (679,305) (733,530) (782,648) (369,645)
13,249 8,528 39,002 39,104 88,781 156,989 308,928 653,792 1,308,373
Gross claims liabilities as per
statement of financial position
Current Estimate of Cumulative
Claims Incurred
85
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Insurance risks (continued)
(c) Claims development tables (continued)
Group and Company
Net claims liabilities for 2018:
Accident Year 2011 & prior 2012 2013 2014 2015 2016 2017 2018 Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At the end of accident year 2,877,204 398,493 455,531 546,602 677,873 799,911 818,888 860,395
1 Year Later 2,875,299 411,824 498,415 627,210 759,168 765,359 840,806
2 Years Later 2,834,500 360,512 417,280 552,285 733,969 782,131
3 Years Later 2,811,477 350,361 398,120 539,904 690,597
4 Years Later 2,786,157 333,741 395,559 512,399
5 Years Later 2,765,247 331,565 385,353
6 Years Later 2,756,658 318,775
7 Years Later 2,751,457
2,751,457 318,775 385,353 512,399 690,597 782,131 840,806 860,395
At the end of accident year (2,500,414) (137,889) (151,435) (201,022) (242,826) (301,954) (340,175) (332,941)
1 Year Later (2,665,433) (254,939) (291,651) (385,926) (474,713) (552,030) (605,769)
2 Years Later (2,709,776) (287,423) (326,529) (441,889) (553,253) (666,310)
3 Years Later (2,729,206) (300,269) (344,777) (464,722) (596,734)
4 Years Later (2,737,126) (309,033) (354,318) (477,771)
5 Years Later (2,741,562) (312,712) (359,461)
6 Years Later (2,741,660) (314,112)
7 Years Later (2,743,332)
Cumulative payments to-date (2,743,332) (314,112) (359,461) (477,771) (596,734) (666,310) (605,769) (332,941)
8,125 4,663 25,892 34,628 93,863 115,821 235,037 527,454 1,045,483
Current Estimate of Cumulative
Claims Incurred
Net claims liabilities as per
statement of financial position
86
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Financial risks
Credit risk
- Reinsurer’s share of insurance liabilities
- Amounts due from reinsurers’ in respect of claims already paid
- Amounts due from insurance contract holders
- Amounts due from insurance intermediaries, and
- Counterparty risk with respect to derivative transactions and custodian
Concentration of credit risk exists when changes in geographic, economic or industry factors similarly
affect groups of counterparties whose aggregate credit exposure is material in relation to the Group's
and Company’s total exposures. The Group's and Company’s portfolio of financial assets is diversified
along geographic, industry and product sectors. The Group and Company have been monitoring the
concentration risk by adopting appropriate risk control measures, such as setting limit on exposures to
individual counterparty.
The Group and Company are exposed to financial risks through their financial assets, reinsurance
assets and insurance liabilities. In particular, the key financial risk is that the proceeds from the
financial assets and reinsurance assets are not sufficient to fund the obligations arising from the
insurance contracts. The important components of these financial risks are interest rate risk, equity
price risk, credit risk, liquidity risk and currency risk.
The Group and Company have exposures to credit risk, which is the risk that a counterparty will not be
able to pay amounts in full when due. Key areas where the Group and Company are exposed to credit
risks are:
The Group and Company structure the levels of credit risk they accept by placing limits on the
exposure to a single counterparty, or group of counterparties. Such risks are subject to regular review
by the management.
The Group and Company entered into custodial agreements with Standard Chartered Bank Malaysia
Berhad and AmFunds Management Berhad, whose credit rating is AAA and AA respectively whereby
both companies provide safekeeping services for the Company’s investment assets (equities and
bonds).
Reinsurance is used to manage insurance risk. This does not, however, discharge the Group's and
Company’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group and
Company remain liable for the payment to the policyholder. The creditworthiness of reinsurers is
considered on a regular basis by reviewing their financial strength prior to finalisation of any contract.
87
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Credit risk (continued)
Not
subject to
AAA AA A BBB BB to B Non-rated credit risk Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
2019
AFS financial assets 256,034 596,393 - - - 281,865 226 1,134,518
Loans and receivables - 73,513 1,066,677 522,230 - 684 - 1,663,104
Reinsurance assets 8 71,327 145,813 1,193 1,795 72,387 - 292,523
Insurance receivables - 12,807 56,949 111 11 162,755 - 232,633
Other receivables - - - - - 63,443 - 63,443
Cash and cash equivalents - 245 43,514 19,701 5,495 20 - 68,975
256,042 754,285 1,312,953 543,235 7,301 581,154 226 3,455,196
The table below provides information regarding the credit risk exposure of the Group and Company by classifying assets according to the recognised local
or international rating agencies’ credit ratings of counterparties. AAA is the highest possible rating. Rated assets that fall outside the range of AAA to BBB
are classified as speculative grade and thus are considered as non-investment grade.
88
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Credit risk (continued)
Not
subject to
AAA AA A BBB BB to B Non-rated credit risk Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
2019
AFS financial assets 256,034 596,393 - - - 765,341 226 1,617,994
Loans and receivables - 73,513 659,343 305,832 - 684 - 1,039,372
Reinsurance assets 8 71,327 145,813 1,193 1,795 72,387 - 292,523
Insurance receivables - 12,807 56,949 111 11 162,755 - 232,633
Other receivables - - - - - 61,913 - 61,913
Cash and cash equivalents - 245 43,492 19,701 5,495 20 - 68,953
256,042 754,285 905,597 326,837 7,301 1,063,100 226 3,313,388
2018
AFS financial assets 259,617 483,345 - - - 825,888 480 1,569,330
Loans and receivables - 351,496 296,523 371,672 3,139 862 - 1,023,692
Reinsurance assets 10 88,771 152,896 630 1,724 76,874 - 320,905
Insurance receivables 11 15,420 51,125 1,009 287 215,096 - 282,948
Other receivables - - - - - 82,198 - 82,198
Cash and cash equivalents - 398 40,289 3,951 3,888 16 - 48,542
259,638 939,430 540,833 377,262 9,038 1,200,934 480 3,327,615
89
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Credit risk (continued)
Neither past Not past Past Not
due nor due but due and subject to
impaired impaired impaired credit risk Total
RM'000 RM'000 RM'000 RM'000 RM'000
Group
2019
AFS financial assets 1,134,042 - - 476 1,134,518
Loans and receivables 1,663,104 - - - 1,663,104
Reinsurance assets 292,523 - - - 292,523
Insurance receivables 75,196 84,102 101,998 - 261,296
Allowance for impairment - (152) (28,511) - (28,663)
Other receivables 63,443 - - - 63,443
Cash and cash
equivalents 68,975 - - - 68,975
3,297,283 83,950 73,487 476 3,455,196
Company
2019
AFS financial assets 1,617,518 - - 476 1,617,994
Loans and receivables 1,039,372 - - - 1,039,372
Reinsurance assets 292,523 - - - 292,523
Insurance receivables 75,196 84,102 101,998 - 261,296
Allowance for impairment - (152) (28,511) - (28,663)
Other receivables 61,913 - - - 61,913
Cash and cash
equivalents 68,953 - - - 68,953
3,155,475 83,950 73,487 476 3,313,388
To manage the credit risks of insurance receivables, the Group and Company have established credit
policies that govern credit approval, review and monitoring processes and impairment assessment
processes. The credit policies also lay down the actions to be taken to handle debts overdue for a
certain period of time. There are also monthly management reports showing the ageing analysis of
balance overdue, and the management will monitor the ageing analysis on a regular basis.
The following table summarizes the credit quality of financial assets and reinsurance assets at the date
of the statement of financial position.
90
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Credit risk (continued)
Neither past Not past Past Not
due nor due but due and subject to
impaired impaired impaired credit risk Total
RM'000 RM'000 RM'000 RM'000 RM'000
Company
2018
AFS financial assets 1,568,850 - - 480 1,569,330
Loans and receivables 1,023,692 - - - 1,023,692
Reinsurance assets 320,905 - - - 320,905
Insurance receivables 91,495 88,599 126,647 - 306,741
Allowance for impairment - (91) (23,702) - (23,793)
Other receivables 82,198 - - - 82,198
Cash and cash
equivalents 48,542 - - - 48,542
3,135,682 88,508 102,945 480 3,327,615
The ageing analysis of insurance receivables is as follows:
Neither past Not past Past Past
due nor due but due and due and
impaired impaired impaired impaired
0-2 months 0-2 months 2-6 months >6 months Total
RM'000 RM'000 RM'000 RM'000 RM'000
Group and Company
2019
Insurance receivables 75,196 84,102 55,251 46,747 261,296
Allowance for impairment - (152) (1,727) (26,784) (28,663)
75,196 83,950 53,524 19,963 232,633
2018
Insurance receivables 91,495 88,599 39,158 87,489 306,741
Allowance for impairment - (91) (1,438) (22,264) (23,793)
91,495 88,508 37,720 65,225 282,948
91
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Liquidity risk
The Group and Company are exposed to daily calls on its available cash resources mainly from claims arising from short-term insurance contracts.
Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable time.
The Group and Company manage liquidity risk by holding sufficient liquid assets (e.g. cash and debt securities) of appropriate quality to ensure that short
term funding requirements are covered within prudent times. In addition, the Group and Company regularly conduct stress-tests on its liquidity position.
The tables below summarise the estimated maturity profile of the financial assets, financial liabilities, reinsurance assets and claim liabilities based on
remaining undiscounted contractual obligations.
For insurance contract liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the
recognised insurance liabilities. Premium liabilities and the reinsurers’ share of premium liabilities have been excluded from the analysis as they do not
contain any contractual obligations.
92
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Liquidity risk (continued)
Carrying Up to More than No maturity
Value a year 1 - 3 years 3 - 5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Group
2019
AFS financial assets 1,134,518 133,940 246,050 456,783 494,896 476 1,332,145
Loans and receivables 1,663,104 1,663,104 - - - - 1,663,104
Right-of-use assets 13,510 8,761 4,370 185 - - 13,316
Reinsurance assets - claims liabilities 235,656 162,153 67,037 6,236 230 - 235,656
Insurance receivables 232,633 232,633 - - - - 232,633
Other receivables 63,443 63,443 - - - - 63,443
Cash and cash equivalents 68,975 68,975 - - - - 68,975
Total 3,411,839 2,333,009 317,457 463,204 495,125 476 3,609,272
Insurance contract liabilities - claims liabilities 1,292,673 818,370 406,036 63,687 4,580 - 1,292,673
Borrowing 70,025 4,550 9,100 9,100 80,222 - 102,972
Insurance payables 261,691 261,691 - - - - 261,691
Other payables 286,979 286,979 - - - - 286,979
Lease liabilities 13,917 9,192 4,675 183 - - 14,050
Total 1,925,285 1,380,782 419,811 72,970 84,802 - 1,958,365
93
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Liquidity risk (continued)
Carrying Up to More than No maturity
Value a year 1 - 3 years 3 - 5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company
2019
AFS financial assets 1,617,994 617,416 246,050 456,783 494,896 476 1,815,621
Loans and receivables 1,039,372 1,039,372 - - - - 1,039,372
Right-of-use assets 13,510 8,761 4,370 185 - - 13,316
Reinsurance assets - claims liabilities 235,656 162,153 67,037 6,236 230 - 235,656
Insurance receivables 232,633 232,633 - - - - 232,633
Other receivables 61,913 61,913 - - - - 61,913
Cash and cash equivalents 68,953 68,953 - - - - 68,953
Total 3,270,031 2,191,201 317,457 463,204 495,125 476 3,467,464
Insurance contract liabilities - claims liabilities 1,292,673 818,370 406,036 63,687 4,580 - 1,292,673
Borrowing 70,025 4,550 9,100 9,100 80,222 - 102,972
Insurance payables 261,691 261,691 - - - - 261,691
Other payables 145,047 145,047 - - - - 145,047
Lease liabilities 13,917 9,192 4,675 183 - - 14,050
Total 1,783,353 1,238,850 419,811 72,970 84,802 - 1,816,433
94
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Liquidity risk (continued)
Carrying Up to More than No maturity
Value a year 1 - 3 years 3 - 5 years 5 years date Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Company (continued)
2018
AFS financial assets 1,569,330 683,458 173,750 330,391 610,116 480 1,798,195
Loans and receivables 1,023,692 1,023,389 23 - 280 - 1,023,692
Reinsurance assets - claims liabilities 262,890 182,622 72,415 7,307 546 - 262,890
Insurance receivables 282,948 282,948 - - - - 282,948
Other receivables 82,198 82,198 - - - - 82,198
Cash and cash equivalents 48,542 48,542 - - - - 48,542
Total 3,269,600 2,303,157 246,188 337,698 610,942 480 3,498,465
Insurance contract liabilities - claims liabilities 1,308,373 849,861 395,575 57,556 5,381 - 1,308,373
Borrowing 130,100 8,450 16,923 16,900 157,456 - 199,729
Insurance payables 233,892 233,892 - - - - 233,892
Other payables 165,921 165,921 - - - - 165,921
Total 1,838,286 1,258,124 412,498 74,456 162,837 - 1,907,915
95
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
30 RISK MANAGEMENT FRAMEWORK (CONTINUED)
Equity price risk
Impact on Impact Impact on Impact
statement on statement on
of income equity* of income equity*
RM'000 RM'000 RM'000 RM'000
Group and Company
Change in market price
+10% - 17 - 17
-10% - (17) - (17)
* Impact on equity reflects adjustments for tax, when applicable.
Interest-rate risk
Foreign currency risk
The Group's and Company’s interest rate risk mainly arises from investment in AFS debt securities
which are recorded at fair value. The impact on profit before tax at +/- 50 basis point change in the
interest rate, with all other variables held consistent, is insignificant to the Group and Company given
that there are minimal floating rate financial instruments.
As the Group's and Company’s business is conducted primarily in Malaysia, the financial assets are
also primarily maintained in Malaysia and denominated in the local currency as its insurance contract
liabilities.
As the Group's and Company’s main foreign currency risk from recognised assets and liabilities arises
from reinsurance transactions for which the balances are expected to be settled and realised in less
than a year, the impact arising from sensitivity in foreign currency exchange rates is deemed minimal
as the Group and Company have no significant concentration of foreign currency risk.
The Group's and Company’s equity risk position arises from the holdings of certain equity securities
listed in the Bursa Malaysia Securities Berhad. The Group and Company have been monitoring its
concentration risk by adopting appropriate risk control measures.
The analysis below is performed for reasonably possible movements in equity price with all other
variables held constant, showing the impact of statement of income and equity (due to changes in fair
value of AFS financial assets).
2019 2018
Short term insurance liabilities are not directly sensitive to the level of market interest rates, as they
are undiscounted and contractually non-interest-bearing. However, due to the time value of money and
impact of interest rates on the level of bodily injury and certain liability claims incurred by the Group's
and Company’s insurance contract holders (where an increase of interest rates would normally
produce a higher insurance liability), the Group and Company match the liabilities by using portfolios of
debt securities with mean duration of 2 - 3 years.
96
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
31 CAPITAL MANAGEMENT PLAN AND STRUCTURE
Capital Management Plan (“CMP”)
Stress testing
The results and proposed action plan would be incorporated into the Company’s capital management
plan and be used to determine the extent by which capital will be eroded by the threats identified and
the impact on the Company’s financial health, the actions that will be required to mitigate the threats
identified and the future financial resilience of the Company.
As per the RBC Framework issued by BNM, the Company is required to assess their capital profiles
and develop appropriate plans towards developing internal capital target/plans. In line with this
requirement, management had developed a CMP that takes into account the Company’s strategic
business direction and changing business environment, and adequate processes to monitor and
ensure the maintenance of an appropriate level of capital which commensurate with the current risk
profile of the Company. The Board had approved and adopted the CMP for implementation with effect
from 1 January 2009.
The Risk Management Committee is responsible for the oversight of the Company’s capital
management. All proposals for any deviation from capital targets or capital raising exercise must be
approved by the Risk Management Committee prior to recommendation to the Board of Directors for
approval and implementation.
Stress tests and scenario analyses are important components of a risk management framework. The
Company are required to perform stress tests at least twice a year on the financial performance of the
Company to detect possible sources of vulnerability. The objective is to ensure that management can
identify problems early so that pre-emptive measures can be implemented at an early stage.
97
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
31 CAPITAL MANAGEMENT PLAN AND STRUCTURE (CONTINUED)
Capital structure
2019 2018
RM'000 RM'000
Eligible Tier 1 capital
Share capital (paid-up) 190,645 190,645
Retained earnings 992,259 921,388
1,182,904 1,112,033
Tier 2 capital
AFS reserve 28,588 7,813
Revaluation reserve 13,181 13,175
Share option reserve 4,801 4,801
Subordinated loan * 70,000 130,000
116,570 155,789
Deductions
Goodwill and intangible assets (196,775) (188,736)
Deferred tax assets (3,378) (13,846)
(200,153) (202,582)
Total capital available 1,099,321 1,065,240
* Excluded accrued interest of RM25,000 (2018: RM107,000).
The capital structure of the Company as at 31 December 2019, as prescribed under the RBC
Framework is provided below:
98
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
32 CONTINGENT LIABILITY
33 ADDITIONAL DISCLOSURES ON MFRS 9
As a % of
total liabilities RM'000
(a) Liabilities arising from contracts within the scope
of MFRS 4 87.8% 1,777,148
(b) Liabilities that arise from issuance or fulfilment of
obligations arising from contracts above:
- Subordinated loan included as Tier 2 capital under
the RBC Framework
6.4% 130,000
94.2% 1,907,148
The Company’s business activity is predominantly insurance as the liabilities connected with the
Company’s insurance businesses made up of more than 90% of the Company’s total liabilities. Hence,
the Company qualifies for the temporary exemption from applying MFRS 9 and will defer and adopt
MFRS 9 together with MFRS 17, Insurance Contracts for the financial year beginning on or after 1
January 2021.
The details of the Company's liabilities connected with insurance as at 31 December 2015 are as
follows:
In August 2016, Malaysia Competition Commission (“MyCC”) had commenced investigation under
Section 15(1) of the Competition Act, 2010 (“the Act”) against PIAM (Malaysian General Insurance
Association) and 22 member companies with regards to an alleged infringement of Section 4(2)(a) of
the Act in relation to an agreement to fix parts trade discount and labour rates for 6 vehicle makes. On
22 February 2017, MyCC issued a proposed decision to all 22 member companies, proposing to
impose collective penalty of RM213 million on the general insurance industry. PIAM and its members
(including the Company) had submitted their respective Written Representation to MyCC in April 2017.
The first oral representation was completed in January 2018. However, there was a change of
government after the 14th general election. The Competition Committee (new Chairman was
appointed) decided to review this case. A new oral representation was agreed to be held. The case
management was held on 21 February 2019 and the oral representation from all relevant insurers
(represented by counsels) was held on 13 and 14 May 2019 and 17 and 18 June 2019 respectively.
Decision is expected to be issued in 2020.
99
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
33 ADDITIONAL DISCLOSURES ON MFRS 9 (CONTINUED)
Fair value Fair value
as at movement
31.12.2019
RM'000 RM'000
(a) Financial assets with contractual terms
that give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding
At fair value
Malaysian Government Securities
- unquoted in Malaysia 210,158 6,874
Corporate debt securities
- unquoted in Malaysia 879,216 25,058
At amortised cost
Loans 684 -
Fixed and call deposits 1,038,688 -
Cash and cash equivalents 68,953 -
(b) Financial assets other than the above
At fair value
Equity securities
- quoted in Malaysia 226 127
- unquoted in Malaysia 250 -
Wholesale unit trust fund 528,144 (1,316)
The fair value of the Company's financial assets as at 31 December 2019 and the amount of change
in the fair value during that period are as follows:
100
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
33 ADDITIONAL DISCLOSURES ON MFRS 9 (CONTINUED)
AAA AA A BBB BB to B Non-rated Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At fair value
Malaysian Government Securities
- unquoted in Malaysia - - - - - 210,158 210,158
Corporate debt securities
- unquoted in Malaysia 256,034 596,393 - - - 26,789 879,216
Equity securities
- quoted in Malaysia - - - - - 226 226
- unquoted in Malaysia - - - - - 250 250
Wholesale unit trust fund - - - - - 528,144 528,144
At amortised cost
Loans - - - - - 684 684
Fixed and call deposits - 73,513 659,343 305,832 - - 1,038,688
Cash and cash equivalents - 245 43,492 19,701 5,495 20 68,953
256,034 670,151 702,835 325,533 5,495 766,271 2,726,319
101
Company No.
23820 W
AXA AFFIN GENERAL INSURANCE BERHAD(Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)
34 SUBSEQUENT EVENTS
Coronavirus (Covid-19)
In the first quarter 2020, the rapid spread of the Covid-19 has been declared a pandemic. Globally,
increasing measures are being taken to contain it and these have led to a significant volatility in the
financial markets and resulting in an adverse impact on the global business and economic activity.
There is an increasing likelihood that the Covid-19 and the continuous efforts could have an impact on
the Malaysian economy. The Company is closely monitoring the developing situation and the potential
impact of the spread of Covid-19 on its operations.
102
Sungai Petani86 1st Floor Jalan Legenda 1Legenda Heights 08000 Sungai Petani Kedah Tel: (604) 423 8680Fax: (604) 423 8660
Ipoh7 & 9 Persiaran Greentown 5 Greentown Business Centre30450 Ipoh PerakTel: (605) 254 8034 (605) 241 3477Fax: (605) 253 7078
Seremban77B & 77B-1 Lorong Haruan 5/3Oakland Commerce Square70300 Seremban Negeri Sembilan Tel: (606) 633 3366Fax: (606) 633 2882
MelakaGround Floor 61 Jalan Melaka Raya 8Taman Melaka Raya 75000 Melaka Tel: (606) 287 8588Fax: (606) 283 6023
Johor Bahru67 & 67A Jalan Molek 1/29 Taman Molek81100 Johor Bahru JohorTel: (607) 352 7551 (607) 352 7552 (607) 352 7553Fax: (607) 352 7554 / (607) 353 9596
Kuantan B-8008 2nd & 3rd FloorSri Kuantan SquareJalan Telok Sisek25000 Kuantan PahangTel: (609) 517 7509 (609) 516 3708Fax: (609) 514 3489
Batu Pahat35 Ground Floor Jalan Flora Utama 5Taman Flora Utama 83000 Batu Pahat JohorTel: (607) 431 3569 (607) 431 3577 (607) 431 3598Fax: (607) 431 3605
Mentakab66 1st Floor Jalan Orkid28400 Mentakab Pahang Tel: (609) 277 2002 / (609) 277 2003Fax: (609) 277 2008
Kota BharuPT227 Ground & 1st FloorJalan Kebun Sultan 15350 Kota Bharu KelantanTel: (609) 748 2054Fax: (609) 744 4585
Kuala Terengganu18-A Dataran Panji Panji Curve Business Park Jalan Panji Alam 21100 Kuala Terengganu, TerengganuTel: (609) 628 5340Fax: (609) 628 5345
KuchingGround & 1st Floor Sublot 3Lot 68-71 Jalan Green 93150 Kuching SarawakTel: (6082) 24 8300 Fax: (6082) 42 8148
MiriLot 582 Ground & 1st FloorPelita Commercial CentreMiri Pujut Road 98000 Miri SarawakTel: (6085) 41 6661Fax: (6085) 41 9600
Sibu20 Ground Floor Jalan Wong King Huo96000 Sibu SarawakTel: (6084) 32 6993 / (6084) 32 6992Fax: (6084) 31 0128
Kota KinabaluLot 27-1 & 27-2 Ground & 1st Floor Block DKepayan Perdana Commercial CentreJalan Lintas 88200 Kota Kinabalu SabahTel: (6088) 41 3240Fax: (6088) 41 3270
TawauTB 281 Tingkat 1 Blok 29Fajar Komplex Jalan Haji KarimTown Extension II 91000 Tawau SabahTel: (6089) 75 6475 / (6089) 75 6476Fax: (6089) 75 6473
Head O�iceAXA A�in General Insurance Berhad (197501002042)Ground Floor, Wisma Boustead, 71 Jalan Raja Chulan, 50200 Kuala Lumpur.Tel: (603) 2170 8282 Fax: (603) 2031 7282 E-mail: [email protected]: www.axa.com.my
Branch O�icesCheras165 & 165-1 Jalan LancangTaman Seri Bahtera 56100 Cheras Kuala LumpurTel: (603) 9130 5688Fax: (603) 9130 5788
Klang28 Jalan Tiara 2A/KU1 Pusat Perniagaan Bandar Baru Klang41150 Klang SelangorTel: (603) 3341 7808 (603) 3342 7808Fax: (603) 3341 6505
Petaling Jaya46B Jalan SS21/35Damansara Utama 47400 Petaling Jaya SelangorTel: (603) 7727 8962Fax: (603) 7727 9057
PuchongGF-09 IOI Business ParkPersiaran Puchong Jaya Selatan47170 Puchong Jaya SelangorTel: (603) 8079 0892 (603) 8079 0893Fax: (603) 8079 0901
PenangGround & 1st Floor Wisma AXA1E Lebuh Penang 10200 PenangTel: (604) 261 6935 (604) 261 1595 (604) 261 1981Fax: (604) 261 0688
Bukit Mertajam2996 Jalan MajuTaman Sri Maju14000 Bukit Mertajam PenangTel: (604) 539 6808 (604) 539 7808Fax: (604) 530 6308
Subang Jaya113 Ground Floor Jalan SS15/5A47500 Subang Jaya SelangorTel: (603) 5632 3535Fax: (603) 5632 7177