annual report 2009 - ammetlife · it project/enterprise application ... 200 insurance and bank...

2009ANNUAL REPORT

AmLife InsurAnce BerhAd(15743-P)

(Formerly known as AmAssurance Berhad) (Incorporated in Malaysia)

The general insurance operations are now undertaken by AmG Insurance Berhad, licensed under the Insurance Act 1996 to conduct general insurance business. The transfer to AmG Insurance Berhad was effective from 1 December 2008 and was accomplished by way of High Court vesting order. AmG Insurance Berhad is, like AmAssurance Berhad, a subsidiary within the AmBank Group of companies.

Following the transfer of the general insurance operations, AmAssurance Berhad will focus solely on the life insurance portfolio and, also with effect from 1 December 2008, has assumed the new corporate name of AmLife Insurance Berhad (AmLife). To enhance the potential of this business, we welcome the active involvement of Friends Provident plc, a UK life and pensions company that has taken a 30% shareholding in AmLife. Friends Provident attracts many UK industry awards for its products and processes and has also recently been voted Pension Provider of the Year at the prestigious European Pensions Awards 2009. Both partners are enthusiastic about the prospects of pooling their talents to maximise marketing opportunities in Malaysia.

AmLife Financial PerformanceFor the financial year ended 31 March 2009, the life business of AmLife attracted total premiums of RM546 million, representing 30% growth which is an excellent achievement given the tough economic conditions prevailing. The major part of this growth was achieved by our Agency and Bancassurance channels which registered increases of 27% or RM61 million and 65% or RM65 million respectively.

AmLife increased new business premiums to RM109 million, an impressive 23% ahead of the previous year. For the financial year under review, AmLife’s total life policyholders’ fund (inclusive of investment-linked funds) achieved growth of 19% to RM1.8 billion. A pre-tax profit of RM19 million was recorded for the 2008/09 financial year, whilst total assets of RM2.1 billion were achieved as at the end of the financial year.

Chairman’s Message

Dear Shareholders, business partners and friends,

2008 was a significant year in the development of AmAssurance Berhad, marked by the separation of its general insurance operations and its life insurance operations into two distinct companies:-

Tactical initiativesAmLife was ranked eighth in the market share of the industry this year, gaining two places. This significant advance was underpinned by a series of marketing strategies and product launches, including:

• The launch of AmAsia Star in May 2008, a 100% secured capital guaranteed fund with up to 125% insurance protection that seeks to benefit from the upside potential gains from Asia’s property, equity and currencies growing trend;

• The launch in May 2008 of AmLife’sfirst women’s products – AmBeautiful - that rewards policyholders during the good and bad times throughout the different stages in their lives;

• AmPreferred Medicare, launched in July 2008 to provide comprehensive cover for hospitalisation and surgical needs;

• The launch of AmLifestyle and AmMedicare Plus in October 2008. AmLifestyle is a flexible plan that allows customers to exercise greater control over the cover provided, based on their changing lifestyle needs over time. AmMedicare Plus is an individual hospital and surgical rider attachable to any available investment linked plans.

Customer Proximity AmLife aspires to become the top insurer for service by ensuring that all of its customers and business partners can easily transact business with the staff of AmLife, whenever they want to and in a manner that is convenient to them.

To support this aim, AmLife launched its own internal call centre on 8 August 2008 to provide instant services to its customers across the whole range of enquiries. Additionally, various contact channels such as AmAlert SMS, website, fax and email systems were also deployed to ensure that AmLife is easily accessible to its customers and business partners.

Corporate Social Responsibility Our Corporate Social Responsibility (CSR) framework constitutes an inherent part of AmLife’s DNA and no doubt contributed to the solid financial performance achieved. AmLife is proud of its values that drive the way we do business and sets us apart from others. In addition to ensuring corporate social responsibility shapes our everyday business activities, we also undertake specific initiatives to associate our name with social good. For example, in 2008 we worked closely with the Ministry of Transport, resulting in emergency help line numbers and AmLife’s contact points now printed on the back of 10 million road tax display stickers. Also, our annual “Drive Safely. We Care” road safety education campaign was organised at the three most popular Rest and Relax (R&R) spots along PLUS highway, to remind the public at large of the importance of road safety.

Word of AppreciationThe new financial year will hold many challenges. The Government has put in place the stimulus plan to boost the country’s economic conditions and improve consumer sentiments, which will translate into growth opportunities for the overall markets. Nonetheless, strengthened by the strategic partnership we have entered into with Friends Provident, expanding our access to market expertise, we are optimistic about achieving respectable growth in new business premiums in the 2009/10 financial year. I wish to express my deepest appreciation and gratitude to all our shareholders, business partners and friends. It is because of your unwavering support and trust, coupled with the tireless commitment of our people and the loyalty of our valued customers who have all contributed to our progress.

Y.Bhg Tan Sri Dato’ Azman HashimChairman

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Good leadership is vital to the growth and success of any business. We are proud to have a team of experienced, goal-oriented, result driven leaders with the common vision of creating innovative products and value-added services.

Business Department

Name

Agency Sales, Life Clement Heng Eak Yak

•AgencyTraining&Development

Azlanshah Mohamed Yusof

•SalesSupport Mohd Aszemi Ibrahim

•AgencyAdministration Foziah Yassin

Corporate & Bancassurance Sales

Firozdin Abd Wahab

•Corporate D Puspanathan A/L Thilai

•Bancassurance Muhammad Shahnaz Saupi Udin

•BusinessDevelopment & Sales Support

Nazren Bahari

•CreditRelated Zuraidah Zainal Abidin

Medical Business Lau Pick Kee

Direct Marketing Vacant

Ng Lian Lu

Chairman Y.Bhg Tan Sri Dato’ Azman Hashim

Chief Executive Officer Ng Lian Lu

Cheah Swee ChongLau Pick KeeLaila Mazlan

Clement Heng Eak Yak Firozdin Abdul Wahab

Philomena Jan

The Management Team

Patrick Cheah Gim Guan

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“Taking our company to new heights requires the leadership skills of goal oriented and result driven individuals. Their continuous focus on creating innovative ideas into value added services and products contributes to the success of not just our company but our customers.”

Y.Bhg Tan Sri Dato’ Azman Hashim

Our Inspirational Leaders

Business Support Department

Name

Operations Kamariah Zainal

•Claims Azllynah Bakar

•PolicyAdmin Azman Md Jim

•TechnicalSupport Azizah Shaari

•CreditRelated Sherine Ng Siew Fung

•NewBusiness&Business Quality

Noor Ashikin Mohd Rom

•CorporateBusiness Azman Zainal

Customer Relationship Daisy Kwan Bee Poh

Actuarial & Financial Patrick Cheah Gim Guan

•Finance&Accounts Nicole Ng Hoong Yean

Information Services Zahanum Yahaya

Risk Management & Compliance

Chin Ying Jack

Support Service Department

Name

Corporate Communications & Marketing

Tiew Hock Chuan

Legal & Company Secretarial

Aziah Abd Aziz

Services Laila Mazlan

•HumanResource Vacant

•TotalQualityManagement

Vacant

•Property&Maintenance Fazidah Hanim Sulaiman

•Administration Zefrina Rosli

Investment Philomena Jan

Information Services IT Project/Enterprise Application

Cheah Swee Chong

Mohd Aszemi Ibrahim Azlanshah Mohamed Yusof

Azllynah BakarKamariah Zainal Daisy KwanNicole Ng

Aziah Abdul AzizTiew Hock Chuan

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Creating Milestones Together

AmAssurance’s Nationwide BillboardIn a world filled with constant change, certain fundamentals remain the same. Our goal is to create brand awareness by placing attractive, entertaining and creative messages everywhere. SimpIicity is our friend; we don’t use many words. It is the simplicity of outdoor messages which make it an effective medium, reaching consumers with succinct details and

relevant information when and where they need it.

As there are so many changes in the industry and in Malaysian lifestyles, our billboards too evolve in design and message to cater to these needs; touching their hearts and souls and igniting ideas for a better and brighter future with AmAssurance.

Old Klang Road Alor Star Georgetown

SitiawanSibu Bintulu Tawau

Over 36 years of experience in the insurance industry

Top 8 local insurance company

Top 3 largest motor insurer

Winner, Asia Pacific Entrepreneurship Award 2008

Nominated for Corporate Social Responsibility Award 2008

Winner, Best Business of the Year 2007 (Superior Company Category)

Providing insurance solutions at over 200 insurance and bank branches

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With the advancement in technology, AmAssurance has witnessed a steady decrease in the usage of paper in the workplace. With the provision of high technology gadgets, the paperless workplace we’ve been imagining is truly beginning to materialise.

AmAssurance is comprehensive in terms of IT applications from available running systems such as ipalm, AmAlert SMS, Touch & Serve, AmPartner and electronic Document Management System (E-DMS) to benefit customers, agency force and the organisation.

AmAssurance Goes Digitally Green

The launching of the newest customer information micro site ‘AmPrestige’ has blessed our valued life customers with the ‘digitally green’ benefits. Customers can login today with their personal secured login ID and auto generated password to access their life insurance portfolio @ https://www.amassurance.com.my. They can view, in the comfort of their home, office or favourite kopitiam, their policy’s next premium payment status, insurance coverage, servicing agent’s details and much more. On top of that, our customers can further enjoy other user friendly features such as interactive life insurance calculators, e-greeting cards and servicing forms.

We have decreased not just the amount of papers used at the office but have also cut costs, share information and be environmentally friendly. The idea has gone beyond its original conception. We have since ceased printing and dispatching greeting cards and the bi-annual “We Care” customer information bulletins.

With the savings from going digitally green, AmAssurance has channeled over RM1 million worth of annual costs savings towards our Corporate Social Responsibility (CSR) initiatives to benefit fellow Malaysians; these CSR initiatives include providing new jobs and business opportunities, road safety and financial management education.

Over RM2 billion of assets under management

AmAssurance’s brand on 10 Million road tax discs nationwide

Longest signboard in Johor •recordedin

Malaysian Book of Records (September 2003)

Backed by over 6,000 agents and representatives nationwide

Sold more than 1,500 AmAuto Extended Warranty policies every month

A combination of 2,500 signboards and billboards nationwide

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Rewards & Recognitions

Reaching Out & Touching Lives

We recognise our agents, who have had a prominent influence on shaping the company and improving the lives of many, with tangible rewards, making them more productive and motivated. Through the years, we have developed thousands of agents who share the corporation’s managerial mindset with integrity

and see themselves as assets. We consider ourselves experts in motivation and productivity and understand the value of rewarding achievements with incentive trips, national conventions and award banquets, which boost the morale of not just agents but the entire corporation. No contributions by these

agents are deemed too trivial – they all have a huge impact on the company’s overall direction. These recognitions are testaments to our high standards and customer satisfaction qualities that make us a leader in our industry.

The company believes that the long term future of our business is best served by respecting the interests of all our policyholders and the wider community. It actively promotes opportunities to improve and contributes to the wellbeing of our policyholders. We set out principles by which we have developed to focus on areas where we have significant impact and influence. Whether it is prompt and efficient settlement of

claims or simply understanding the needs of policyholders, we uphold our responsibilities.

Policies and objectives are communicated honestly and transparently, in turn, our customers are encouraged to communicate with us and we seek their views. We take into account of customer concerns and expectations in the development of policies and procedures and set

objectives for improvements. We take reasonable steps to manage and promote ease of transactions. We also regularly review our business practices and performance to identify how we can improve in creating better solutions. We conduct our relationships with integrity and courtesy and honour our commitments towards making a difference in people’s lives.

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Financial Statements 20098 Directors’ Report

16 Statement by Directors

16 Statutory Declaration

17 Report of the Auditors

18 Balance Sheet

19 Income Statement

20 Statement of Changes in Equity

21 General Insurance Revenue Account

22 Life Fund Balance Sheet

23 Life Fund Revenue Account

24 Cash Flow Statement

26 Notes to the Financial Statements

DIRECTORS’

ReportThe directors have pleasure in presenting their report together with the audited financial statements of the Company for the financial year ended 31 March 2009.

PRINCIPAL ACTIVITIES

The principal activities of the Company is the underwriting of life and investment-linked insurance and it was involved in the underwriting of all classes of general insurance business up to 30 November 2008. On 1 December 2008, the Company transferred its general insurance assets, liabilities and business as a going concern to AmG Insurance Berhad as disclosed in Note 33(a) to the financial statements.

The principal activity of the subsidiary is described in Note 5 to the financial statements.

Other than as stated above, there have been no significant changes in the nature of the principal activities during the financial year.

RESULTSRM’000

Net profit/(loss) for the year:

- from continuing operations 13,154

- from discontinued operations (1,824)

11,330 There were no material transfers to or from reserves or provisions during the financial year.

In the opinion of the directors, the results of operations of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

The amount of dividends paid by the Company since 31 March 2008 were as follows:

RM’000

Special interim dividend for the financial year ended 31 March 2009 of 173.33% less 25% tax, on 100,000,000 ordinary shares, declared on 26 November 2008 and paid on 1 December 2008 130,000

The directors do not recommend the payment of any final dividend for the current financial year.A

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DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of this report are:

Tan Sri Dato’ Azman Hashim (Chairman) (Non-independent, non-executive director)

Dato’ Zainal Azmi Zainal Ariffin (Independent, non-executive director)

Datuk Lakshmanan Meyyappan (Independent, non-executive director)

Mr Leung Hoong Kuan (Independent, non-executive director)

Mr Rocco Sepe (Non-independent, non-executive director) - Appointed on 26 March 2009

Mr Richard Duxbury (Non-independent, non-executive director) - Appointed on 26 March 2009

Mr Duncan Victor Brain (Non-independent, non-executive director) - Resigned on 9 December 2008

Mr Justin Paul Breheny (Non-independent, non-executive director) - Resigned on 9 December 2008

Mr Cheah Tek Kuang (Non-independent, non-executive director)

Datuk Mohamed Azmi Mahmood (Non-independent, non-executive director)

Dato’ James Lim Cheng Poh (Non-independent, non-executive director)

In accordance with Article 94A of the Articles of Association, Tan Sri Dato’ Azman Hashim, Dato’ Zainal Azmi Zainal Ariffin and Datuk Lakshmanan Meyyappan retire by rotation from the Board at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

Pursuant to Section 129 of the Company Act 1965, Mr Leung Hoong Kuan will retire at the forthcoming AGM and a separate resolution will be proposed for his re-appointment as Director at the AGM under the provision of Section 129(6) of the said Act to hold office until the next AGM of the Company.

CORPORATE GOVERNANCE

The Company has complied with the prescriptive requirements of, and adopted management practices that are consistent with, the principles prescribed under Bank Negara Malaysia’s (“BNM”) Guideline JPI/GPI 25 (Consolidated): Prudential Framework of Corporate Governance for Insurers.

Board Responsibilities

The Board of Directors (the “Board”) remains fully committed in ensuring that the principles and best practices in corporate governance are observed in the Company. The Board supervises the management of the company in business policies and affairs with the goal of enhancing shareholders’ value.

The Board meets monthly to carry out its duties and responsibilities, with additional Board meetings being convened, whenever required.

The Board addresses key matters concerning strategy, finance, organisation structure, business development, human resource, and establishes guidelines for overall business, risk and control policies, capital allocation as well as approves all key business developments.

Board Activities

The Board currently comprises nine (9) directors with wide-ranging skills and experience. The Board is represented by six (6) non-independent, non-executive directors and three (3) independent, non-executive directors of calibre, and with necessary skills and diverse corporate experience to ensure that strategies proposed by the management are fully discussed and examined, as well as to take into account the long term interests of various stakeholders. During the year, the Board met twelve (12) times.

All directors review Board reports prior to the Board meetings. The reports are issued with sufficient time to enable the directors to obtain further explanations, where necessary, before the meetings.

In addition, the Board decides on matters reserved specifically for its decision, including the approval of corporate plans and budgets, acquisitions and disposals of assets that are material to the Company, major investments, changes to the management and control structure of the company, including key policies, procedures and authority limits.

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The Board has also adopted a policy for induction and education of directors. The program is to provide essential and comprehensive information to a new director in order for him to be familiar with relevant insurance industry regulatory requirements and the company’s nature of business. The directors may also request independent professional advice, at the Company’s expense. The Company Secretary, to whom the directors have independent access, assists the Board and keeps it appraised of relevant laws and regulations.

Membership and Board Meetings For the Financial Year Ended 31 March 2009

Members Number of Meetings(Attended/Held)

Tan Sri Dato' Azman Hashim (Chairman) 10/12

Dato' Zainal Azmi Zainal Ariffin 12/12

Datuk Lakshmanan Meyyappan 11/12

Mr Leung Hoong Kuan 12/12

Mr Rocco Sepe - Appointed on 26 March 2009 1/1

Mr Richard Duxbury - Appointed on 26 March 2009 1/1

Mr Cheah Tek Kuang 11/12

Datuk Mohamed Azmi Mahmood 10/12

Dato' James Lim Cheng Poh 11/12

Mr Duncan Victor Brain - Resigned on 9 December 2008 8/8

Mr Justin Paul Breheny - Resigned on 9 December 2008 8/8

Board Committees

The Board delegates certain responsibilities to Board Committees. The Committees which were set up to assist the Board in certain areas of deliberation are the:

1. Nomination Committee (“NC”)2. Remuneration Committee (“RC”)3. Risk Management Committee (“RMC”)4. Audit & Examination Committee (“AEC”)5. Investment Committee (“IC”)

Nomination Committee The Committee comprises three (3) independent, non-executive directors and three (3) non-independent, non-executive directors of the Board with mixed skills, experience and competencies for the effectiveness of the committee. The functions of the Committee are to:

a. recommend and assess the nominees for new appointments of directors, the various Board Committees’ membership as well as the nominees for the Chief Executive Officer (“CEO”) position including assessing the directors and CEO proposed for reappointment, before an application for approval is submitted to BNM;

b. establish minimum requirements for the Board and the CEO to perform their responsibilities effectively and review the overall composition of the Board in terms of appropriate size, structure, mix of skills and experience and other qualities and competencies, besides the balance between executive, non-executive and independent directors;

c. establish a mechanism for formal assessment of the effectiveness of the Board, the contribution of the Board’s various Committees and the performance of the CEO; and

d. review the composition of the Board and Committees of the Board during the financial year and ensure that the recommendations have been implemented by the Board during the financial year.

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Membership and Meetings of the Nomination Committee For the Financial Year Ended 31 March 2009

Members Number of Meetings (Attended/Held)

Datuk Lakshmanan Meyyappan (Chairman) 4/4


Mr Leung Hoong Kuan 4/4


Mr Cheah Tek Kuang 3/4


Remuneration Committee

The Committee comprises three (3) independent, non-executive directors and four (4) non-independent, non-executive directors.

The functions of the Committee are to: a. determine and recommend to the Board the framework or broad policy for the remuneration of the directors, CEO, senior

management and other members of the staff. The remuneration policy:

i. is documented and approved by the full Board and any changes thereto are subjected to the endorsement of the full Board; ii. reflects the experience and level of responsibility borne by individual directors, the CEO and senior management;

iii. is sufficient to attract and retain directors, CEO and senior management of calibre needed to manage the Company successfully; and

iv. is balanced against the need to ensure that the funds of the Company are not used to subsidise excessive remuneration packages;

b. recommend specific remuneration packages for directors, CEO and senior management. The remuneration packages:

i. are based on an objective consideration and approval by the full Board;

ii. take due consideration of the assessments of the Nomination Committee of the effectiveness and contribution of the directors and CEO;

iii. are not decided by the exercise of sole discretion of any individual or restricted group of individuals; and

iv. are competitive and consistent with the Company’s culture, objective and strategies; and

c. ensure the remuneration packages for directors are linked to their levels of responsibilities undertaken and contributions to the effective functioning of the Board.

Membership and Meetings of the Remuneration Committee For the Financial Year Ended 31 March 2009 Members Number of Meetings

(Attended/Held)

Mr. Leung Hoong Kuan (Chairman) 5/5




Mr. Cheah Tek Kuang 5/5



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Risk Management Committee The Committee comprises three (3) independent, non-executive directors and three (3) non-independent, non-executive directors. The primary objective of the Risk Management Committee is to oversee senior management’s activities in managing the key risk areas of the Company and to determine that the risk management process is in place and functioning effectively. The functions of the Committee are:

a. reviewing and recommending Risk Management strategies, policies and risk tolerance for the board’s approval;

b. reviewing and assessing the adequacy of Risk Management policies and framework for identifying, measuring, monitoring and controlling risks as well as the extent to which these are operating effectively;

c. ensuring that adequate infrastructure, resources and systems are in place for an effective Risk Management i.e. ensuring that the staff responsible for implementing Risk Management systems perform those duties independently of the insurer’s risk taking activities; and

d. reviewing the management’s periodic reports on risk exposure, risk portfolio composition and risk management activities.

Membership and Meetings of the Risk Management Committee For the Financial Year Ended 31 March 2009


Datuk Lakshmanan Meyyappan (Chairman) 9/10


Mr. Leung Hoong Kuan 7/10





Audit and Examination Committee The Board has appointed the Audit and Examination Committee (“AEC”) to assist in discharging its duties of maintaining a sound system of internal control to safeguard the company’s assets and shareholders’ investments. The Committee comprises three (3) independent, non-executive directors and one (1) non-independent, non-executive director.

The primary objective of the AEC is to provide assistance to and review and report to the Board in relation to:

i. fulfilling the statutory and fiduciary responsibilities of the Board; and

ii. monitoring of the accounting and financial reporting practices of the Company.

The AEC also determines that the Company has adequate established policies, procedures and guidelines as well as operating and internal controls, and that they are being complied with and are operating effectively in promoting efficiency and proper conduct including protection of the assets of the Company.

Membership and Meetings of the Audit and Examination Committee For the Financial Year Ended 31 March 2009


Mr. Leung Hoong Kuan (Chairman) 8/8





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Investment Committee The Committee comprises one (1) independent, non-executive director and three (3) non-independent, non-executive directors. The primary objective of the Investment Committee is to oversee Investment Management’s activities in managing the investment funds of the insurer and that the risk management and compliance process is effective and affective. The functions of the Committee are:

a. reviewing the investment performances of the investment portfolio by the internal investment department and external fund managers;

b. reviewing and recommending investment strategies within approved risk levels for the Committee’s approval;

c. presenting the investment outlook and strategies with regards to the various asset classes of all funds under management; and

d. reviewing the risk management activities and the portfolio risk exposures.

Membership and Meetings of the Investment Committee For the Financial Year Ended 31 March 2008


Dato' James Lim Cheng Poh (Chairman) 11/12





DIRECTORS’ BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement, to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 22 to the financial statements and the financial statements of its related corporations or the fixed salaries of full-time employees of related corporations) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, other than for the related transactions as shown in Note 30 to the financial statements.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in its related corporations during the financial year were as follows:

DIRECT INTERESTS

Number of ordinary shares of RM1.00 each

Balance as at 1.4.2008 Bought Sold

Balance as at 31.3.2009

Direct Interest

AMMB Holdings Berhad (ultimate holding company)

Mr Cheah Tek Kuang 78,800 - - 78,800

Datuk Mohamed Azmi Mahmood 296,533 9,000 - 305,533

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DEEMED INTEREST

Name of Company

Number of ordinary shares of RM1.00 each

Balance as at 1.4.2008 Bought Sold

Balance as at 31.3.2009

Tan Sri Dato’ Azman Hashim AmcorpGroup Berhad

480,151,333 1,850,000 - 482,001,333

By virture of Tan Sri Dato Azman Hashim’s shareholding in the ultimate holding company, AMMB Holdings Berhad, through his interest in the corporate shareholder, AmcorpGroup Berhad, he is deemed to have interests in the shares of the Company and its related corporations, to the extent the ultimate holding company has an interest. None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

PROVISION FOR OUTSTANDING CLAIMS

Before the income statement and balance sheet of the Company were made out, the directors took reasonable steps to ascertain that there was adequate provision for incurred claims, including Incurred But Not Reported (“IBNR”) claims.

OTHER STATUTORY INFORMATION

a. Before the income statement and balance sheet of the Company were made out, the directors took reasonable steps:

i. to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

ii. to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

b. At the date of this report, the directors are not aware of any circumstances that have arisen which would render:

i. the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Company inadequate to any substantial extent; and

ii. the values attributed to the current assets in the financial statements of the Company misleading.

c. At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate.

d. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Company which would render any amount stated in the financial statements misleading.

e. As at the date of this report, there does not exist:

i. any charge on the assets of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

ii. any contingent liability of the Company which has arisen since the end of the financial year. f. In the opinion of the directors:

i. no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Company to meet its obligations when they fall due; and

ii. no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Company for the financial year in which this report is made.

For the purpose of paragraphs (e) and (f) above, contingent or other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Company.

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SIGNIFICANT EVENTS

a. Business Transfer

On 11 April 2008, the Company received the approvals of Bank Negara Malaysia and the Minister of Finance (“MOF”) for the proposed separation of the composite insurance business of the Company involving the transfer of the general insurance business to a related corporation of the Company which was incorporated under the name of AmG Insurance berhad (“AmG”) (the “Scheme of Business Transfer”). The Scheme of Business Transfer was implemented in accordance with the provisions of Part XI of the Insurance Act 1996 and was completed on 1 December 2008 via the vesting orders of the High Court of Malaya and High Court of Sabah and Sarawak.

In line with the completion of the Scheme of Business Transfer, the Company also changed its name to AmLife Insurance Berhad (“AmLife”) which was duly approved by the Company’s shareholders on 26 November 2008, to better reflect its status as a life insurance company.

b. Shareholding Restructuring

On 20 November 2008, the Company’s holding company, AMMB Holdings Berhad (“AHB”), received the approval of MOF for the shareholding restructuring of the Company (the “Shareholding Restructuring”), which, inter alia, involved,:-

i. the acquisition by AHB from IAG International Pty Limited (“IAG”) of the 30% equity interest held by IAG in AmLife, for a cash consideration of RM170 million (completed on 9 December 2008);

ii. the sale by AHB to Friends Provident Plc (“FP”) of 30% equity interest in AmLife for a cash consideration of RM170 million (completed on 9 December 2008); and

iii. the transfer of AHB’s investments in the Company and AmG to AMAB Holdings Sdn Bhd (“AMAB Holdings”), the wholly-owned subsidiary of AHB established to hold its investments in the Company and AmG.

With the completion of the Shareholding Restructuring, the shareholders of the Company comprise AMAB Holdings holding 70% equity interest and FP holding the remaining 30% equity interest.

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors.

Tan Sri Dato’ Azman Hashim Leung Hoong Kuan Kuala Lumpur, MalaysiaDate: 27 May 2009

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STATEMENT BY

STATuTORY

Directors

Declaration

PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

We, Tan Sri Dato’ Azman Hashim and Leung Hoong Kuan, being two of the directors of AmLife Insurance Berhad (formerly known as AmAssurance Berhad), do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 18 to 65 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Company as at 31 March 2009 and of the results and the cash flows of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors.

Tan Sri Dato’ Azman Hashim Leung Hoong Kuan Kuala Lumpur, Malaysia Date: 27 May 2009

PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

I, Ng Lian Lu, being the officer primarily responsible for the financial management of AmLife Insurance Berhad (formerly known as AmAssurance Berhad), do solemnly and sincerely declare that the accompanying financial statements set out on pages 18 to 65 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 declaredby the abovenamed Ng Lian Lu atKuala Lumpur in Wilayah Persekutuanon 27 May 2009. Ng Lian Lu

Before me,

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INDEPENDENT

Auditors’ Report

Report on the financial statements

We have audited the financial statements of AmLife Insurance Berhad (formerly known as AmAssurance Berhad), which comprise the balance sheet as at 31 March 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 18 to 65.

Directors’ responsibility for the financial statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Company as at 31 March 2009 and of its financial performance and cash flows for the year then ended.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

Other matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Pushpanathan a/l S.A. Kanagarayar AF: 0039 No. 1056/03/11(J/PH) Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia 27 May 2009

To The Members of AmLife Insurance Berhad (Incorporated in Malaysia)

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BALANCE

Sheet

as at 31 March 2009

Note 2009

RM’0002008

RM’000

ASSETS

General business and Shareholders’ fund assets

Property, plant and equipment 4 - 13,653

Subsidiary 5 6,000 6,000

Investments 7 57,585 751,320

Intangible assets 8 - 1,827

Loans receivable 9 - 540

Receivables 10 2,035 40,174

Cash and bank balances - 4,400

Total general business and shareholders' fund assets 65,620 817,914

Total life business assets (page 22) 2,034,818 1,700,860

Total Assets 2,100,438 2,518,774

LIABILITIES

General business and shareholders’ fund liabilities

Provision for outstanding claims 11 - 348,508

Payables 12 1,200 49,576

Amount owing to subsidiary 5 7,565 7,565

Subordinated term loan 13 30,000 30,000

Deferred tax liabilities 14 - 2,061

Total general business and shareholders’ fund liabilities 38,765 437,710

Total life business liabilities (page 22) 144,485 104,368

Total Liabilities 183,250 542,078

Insurance Reserves

Unearned premium reserves 15 - 227,430

Life policyholders’ fund 16 1,613,057 1,425,821

Unitholders' investment-linked fund 28 174,426 75,070

Total insurance reserves 1,787,483 1,728,321

SHAREHOLDERS’ EQuITY

Share capital 17 100,000 100,000

Unappropriated profit 29,705 148,375

Total shareholders’ equity 129,705 248,375

TOTAL LIABILITIES, INSuRANCE RESERVES AND SHAREHOLDERS’ EQuITY 2,100,438 2,518,774

The accompanying notes form an integral part of the financial statements.

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INCOME

Statement

For The Year Ended 31 March 2009

Note 2009

RM’0002008

RM’000

CONTINuING OPERATIONS

Operating revenue 19 542,208 432,700

Transfer from life insurance revenue account 20,000 17,000

Shareholders’ fund:

Investment income 20 773 275

Net other operating expenses 21 (390) (819)

Management expenses 22 (47) (3)

336 (547)

Profit from operations 20,336 16,453

Finance costs 26 (1,357) (1,720)

Profit before taxation 18,979 14,733

Taxation 23 (5,825) (4,135)

Net profit for the year from continuing operations 13,154 10,598

DISCONTINuED OPERATIONS

Transfer from general insurance revenue account 24 (1,824) 29,298

11,330 39,896

Earnings/(loss) per ordinary share (sen):

From continuing operations 24 13.2 10.6

From discontinued operations 24 (1.8) 29.3

11.3 39.3


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STATEMENT OF

Changes In EquityFor The Year Ended 31 March 2009

Note

Issued Capital

Distributable unappropriated

Profit Total

RM’000 RM’000 RM’000

At 31 March 2007 100,000 115,879 215,879

Net profit for the year - 39,896 39,896

Dividend 18 - (7,400) (7,400)

At 31 March 2008 100,000 148,375 248,375

Net profit for the year - 11,330 11,330

Dividend 18 - (130,000) (130,000)

At 31 March 2009 100,000 29,705 129,705


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GENERAL INSuRANCE

Revenue AccountFor The Period Ended 30 November 2008

Note

Fire Motor Marine & Aviation Miscellaneous Total

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Gross premium 26,244 41,182 297,358 428,369 4,336 5,607 66,690 70,409 394,628 545,567

Reinsurance (12,274) (19,273) (15,679) (22,232) (1,864) (2,662) (33,826) (20,703) (63,643) (64,870)

Net premium 13,970 21,909 281,679 406,137 2,472 2,945 32,864 49,706 330,985 480,697

Decrease/(increase) in unearned premium reserves 15 675 (802) (1,479) (20,430) 91 (291) (1,234) (11,270) (1,947) (32,793)

Earned premium 14,645 21,107 280,200 385,707 2,563 2,654 31,630 38,436 329,038 447,904

Net claims incurred 25 (3,936) (4,310) (222,786) (297,381) (324) (913) (8,657) (12,995) (235,703) (315,599)

Net commission (491) (1,802) (28,768) (42,399) (326) (340) (3,976) (10,696) (33,561) (55,237)

Underwriting surplus before management expenses 10,218 14,995 28,646 45,927 1,913 1,401 18,997 14,745 59,774 77,068

Management expenses 22 (49,793) (69,273)

Underwriting surplus 9,981 7,795

Investment income 20 24,839 33,166

Net other operating (expenses)/income 21 (22,077) 2,472

Profit before taxation from discontinued operations 12,743 43,433

Taxation 23 (14,567) (14,135)

(Loss)/profit after taxation from discontinued operations (1,824) 29,298

The general business revenue account has been prepared for the period from 1 April 2008 to 30 November 2008 after which the general insurance assets, liabilities and business as a going concern were transferred to AmG Insurance Berhad on 1 December 2008.


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LIFE FuND

Balance SheetAs At 31 March 2009

Note 2009

RM’0002008

RM’000

ASSETS

Property, plant and equipment 4 30,439 29,699

Investment properties 6 84,193 82,278

Investments 7 1,551,154 1,372,567

Intangible assets 8 20,904 10,614

Loans receivable 9 100,003 91,342

Receivables 10 63,058 37,330

Cash and bank balances 8,465 1,597

Investment-linked business assets 28 176,602 75,433

Total life business assets (page 18) 2,034,818 1,700,860

LIABILITIES

Provision for outstanding claims 11 25,013 19,439

Payables 12 112,290 81,610

Tax liabilities 4,757 2,707

Deferred tax liabilities 14 249 249

Investment-linked business liabilities 28 2,176 363

Total life business liabilities (page 18) 144,485 104,368

Amount due to shareholders' fund 10 102,850 95,601

Total liabilities 247,335 199,969

Insurance Reserves

Life policyholders' fund 16 1,613,057 1,425,821

Unitholders' investment-linked fund 28 174,426 75,070

Total insurance reserves 1,787,483 1,500,891

TOTAL LIFE BuSINESS LIABILITIES AND INSuRANCE RESERVES 2,034,818 1,700,860

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LIFE FuND

Revenue AccountFor The Year Ended 31 March 2009

Note 2009

RM’0002008

RM’000


Gross premium 449,036 352,242

Reinsurance (29,034) (23,280)

Net premium 420,002 328,962

Benefits paid and payable:

Death (29,701) (16,955)

Maturity (12,422) (12,268)

Surrender (50,689) (42,402)

Cash bonus (756) (769)

Others (15,341) (4,850)

(108,909) (77,244)

311,093 251,718

Commission and agency expenses (100,807) (89,454)

Management expenses 22 (54,419) (49,021)

(155,226) (138,475)

155,867 113,243

Investment income 20 92,399 80,183

Net other operating (expenses)/income 21 (34,251) 10,588

Surplus before taxation 214,015 204,014

Taxation 23 (6,779) (7,486)

Surplus after taxation 207,236 196,528

Life policyholders' fund at beginning of year 1,425,821 1,246,293

1,633,057 1,442,821

Transfer to income statement (20,000) (17,000)

Life policyholders' fund at end of year 1,613,057 1,425,821


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CASH FLOW

StatementFor The Year Ended 31 March 2009

2009RM’000

2008RM’000

CASH FLOWS GENERATED FROM OPERATING ACTIVITIES

Profit before taxation from:

Continuing operations 18,979 14,733

Discontinuing operations 12,743 43,433

31,722 58,166

Adjustments for:

Life fund surplus before tax 214,015 204,014

Increase in unearned premium reserves 1,947 32,793

Depreciation of property, plant and equipment 4,255 4,426

Write back of doubtful debts (3,168) (497)

Gain on disposal of property, plant and equipment (3) (35)

Bad debts written off 1,664 1,174

Change in unitholders' accounts 99,395 63,692

Provision for diminution in value of investments 35,064 10,595

Interest expense 1,357 1,720

Write off of property, plant and equipment - 13

Amortisation of intangible assets 709 938

Provision for retirement benefits - 27

Interest income (98,021) (89,948)

Realised loss/(gain) on net investment 24,003 (22,590)

Unrealised gain on net investment (1,531) -

Realised profit on foreign exchange (236) -

Dividend income (9,264) (11,294)

Life fund surplus transferred to income statement (20,000) (17,000)

Rental income (6,181) (6,058)

Accretion of discounts - net (5,050) (7,050)

Change in fair value of investment properties (1,915) -

Operating profit from operations before changes in operating assets and liabilities 268,762 223,086

Purchase of investments (664,645) (948,508)

Proceeds from realisation of investments 292,040 688,681

Net assets transferred to AmG (226,725) -

Proceeds for transfer of General business, net of cash disposed (2,652) -

Investment transferred to AmG:

-Deposit and placements with financial institutions 278,048 -

-Other investment 484,244 -

Property, plant and equipment transferred to AmG 13,694 -

Intangible assets transferred to AmG 2,616 -

Changes in working capital:

Loans receivable (7,531) (3,763)

Trade receivables 8,698 (7,525)

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2009RM’000

2008RM’000

CASH FLOWS GENERATED FROM OPERATING ACTIVITIES (CONT’D.)

Other receivables, deposits and prepayments 3,525 11,043

Amount owing by other related companies (1,370) 67,416

Fixed and call deposits (28,307) (174,940)

Provision for outstanding claims (342,934) 51,545

Trade payables (10,967) 5,771

Amount owing to other related companies (123) 23,421

Other payables and accrued expense (4,674) 14,865

Cash generated from/(used in) operations 61,699 (48,908)

Interest received 94,492 88,141

Dividend received 8,132 12,230

Rental received 6,575 5,474

Income tax paid (20,066) (35,065)

Retirement benefits paid - (23)

Interest paid (1,509) (1,716)

Net cash generated from operating activities 149,323 20,133

CASH FLOWS uSED IN INVESTING ACTIVITIES

Proceeds from disposal of property, plant and equipment 3 35

Purchase of property, plant and equipment (5,036) -

Purchase of intangible assets (11,788) (16,932)

Net cash used in investing activities (16,821) (16,897)

CASH FLOWS uSED IN FINANCING ACTIVITIES

Dividend paid representing net cash used in financing activities (130,000) (7,400)

NET INCREASE/(DECREASE) IN CASH AND CASH EQuIVALENTS 2,502 (4,164)

CASH AND CASH EQuIVALENTS AT BEGINNING OF YEAR 6,002 10,166

CASH AND CASH EQuIVALENTS AT END OF YEAR 8,504 6,002

Cash and cash equivalents comprise:

Cash and banks balances:

Shareholders' Fund and General business - 4,400

Life fund 8,465 1,597

Investment-linked fund 39 5

8,504 6,002

CASH FLOW STATEMENT (CONTD.)

For The Year Ended 31 March 2009


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1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia. The principal place of business of the Company is located at 9th Floor, Bangunan AmAssurance, No.1 Jalan Lumut, 50400 Kuala Lumpur.

The immediate holding company is AMAB Holdings Sdn.Bhd, a company incorporated in Malaysia and its ultimate holding company is AMMB Holdings Berhad a public listed company incorporated in Malaysia.

The principal activities of the Company is the underwriting of life and investment-linked insurance and it was involved in the underwriting of all classes of general insurance business up to 30 November 2008. On 1 December 2008, the Company transferred its general business assets, liabilities and business as a going concern to AmG Insurance berhad (“AmG”) as disclosure in Note 33(a) to the financial statements. The principal activity of the subsidiary is described in Note 5 to the financial statements. Other than as stated above, there have been no significant changes in the nature of the principal activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 27 May 2009.

2. SIGNIFICANT ACCOuNTING POLICIES

2.1 Basis of Preparation

The financial statements have been prepared under the historical cost convention and comply with applicable Financial Reporting Standards (“FRS”) in Malaysia and the provisions of the Companies Act, 1965, the Insurance Act and Regulations, 1996 and Guidelines/Circulars issued by Bank Negara Malaysia. At the beginning of the current financial year, the Company had adopted new and revised FRSs as described fully in Note 2.3.

General business assets and liabilities relate to both general insurance and shareholders’ funds.

The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except where otherwise indicated.

2.2 Summary of Significant Accounting Policies

(a) Property, Plant and Equipment and Depreciation

All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the 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 period in which they are incurred.

Subsequent to recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and any accumulated impairment losses.

The policy for the recognition and measurement of impairment losses is in accordance with note 2.2(f).

Computer equipment under installation is not depreciated and is stated at cost, until such time when such assets are completed and are ready for active use. Depreciation of property, plant and equipment is provided on a straight-line basis, calculated to write-off the cost of each asset to its residual value over its estimated useful life at the following annual rates:

Freehold and leasehold properties 2% Motor vehicles 20% Office and computer equipment 15% - 20% Furniture, fittings and renovation 10% - 20%

To 31 March 2009

NOTES TO THE

Financial Statements

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The residual values, useful lives and depreciation methods are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss.

(b) Subsidiary

A subsidiary is a company in which the Company has power to exercise control over the financial and operating policies so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company has such power over another entity.

Investment in subsidiary is stated at cost less impairment losses, if any. On disposal of such investment, the difference between net disposal, proceeds and their carrying amount is included in profit or loss.

The financial statements of the subsidiary are not consolidated with the financial statements of the Company for the reasons stated in Note 5.

(c) Investments

i. Malaysian Government Securities and other approved investments as specified by BNM are stated at cost adjusted for the amortisation of premiums or accretion of discounts, calculated from the date of purchase to date of maturity on an effective yield basis. The amortisation of premium and accretion of discounts are recognised in the income statement and/or revenue accounts.

ii. Corporate bonds which are secured or which carry a minimum rating of “BBB” or “P3” are valued at cost adjusted for the amortisation of premiums or accretion of discounts, calculated on an effective yield basis from the dates of purchase to the maturity dates. Any bond with a lower rating is valued at the lower of cost and net realisable value. The amortisation of premiums and accretion of discounts are recognised in the income statement and/or revenue accounts.

iii. Quoted investments are stated at the lower of cost and market value determined on an aggregate portfolio basis by category of investments except that if diminution in value of a particular investment is not regarded as temporary in accordance with the requirements of BNM, specific provision is made against the value of that investment.

iv. Investments of the investment-linked business are stated at the closing market prices as at the balance sheet date. Unrealised gains and losses on these investments are taken into the investment-linked business income statement.

v. Unquoted and other investments are stated at cost less provision for any diminution in value.

(d) Investment Properties

Investment properties are initially stated at cost and include related and incidental expenditure incurred. Subsequent to initial recognition, investment properties are stated at fair value. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued.

Gains or losses arising from changes in the fair values of investment properties are recognised in the revenue account in the year in which they arise.

A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.

Investment properties are derecognised when either they have been disposed of or when the investment properties are permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the revenue accounts in the year in which they arise.

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(e) Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.2(f). The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the income statement and/or revenue account.

(f) Impairment of Non-Financial Assets

The carrying amounts of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs to.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(g) Interest and Other Income

Interest income is recognised in the financial statements on an accrual basis except for interest on loans which are considered non-performing, i.e., where repayments are in arrears for more than six months, in which case recognition of such interest is suspended. Subsequent to suspension, interest income is recognised on the receipt basis until all arrears have been paid.

Gains and losses arising on disposals of investments are credited or charged to the income statement and/or revenue account.

(h) Rental Income

Rental income is recognised on an accrual basis except where default in payment of rent has already occurred and rent due remains outstanding for more than six months, in which case recognition of rental income is suspended. Subsequent to suspension, rental income is recognised on the receipt basis until all arrears have been paid.

(i) Dividend Income

Dividend income represents gross dividends from quoted and unquoted investments and is recognised when the right to receive payment is established.

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(j) General Insurance underwriting Results

The general insurance underwriting results, other than those arising from inward treaty business, are determined for each class of business, after taking into account reinsurances, unearned premium reserves, net commissions, net claims incurred and any other additional reserves.

i. Premium Income

Premium income is recognised in a financial period in respect of risks assumed during the particular financial period. Inward treaty reinsurance premiums are recognised on the basis of periodic advices received from ceding insurers.

ii. unearned Premium Reserves

The Unearned Premium Reserves (“UPR”) represent the portion of the net premiums of insurance policies written that relate to the unexpired periods of policies at the end of the financial year. In determining the UPR at the balance sheet date, the method that most accurately reflects the actual unearned premium is used as follows:

• 25%methodformarinecargo,aviationcargoandtransitbusiness;

• 1/24thmethodforallotherclassesofMalaysianpoliciesreducedbythecorrespondingpercentageofaccountedgross direct business commissions and agency-related expenses not exceeding the limits specified by BNM as follows:

Motor 10%

Fire, engineering, aviation and marine hull 15%

Medical and health

•Standaloneindividuals 15%

•Groupof3ormore 10%

Workmen's compensation and employers' liability

•Foreignworkers 10%

•Others 25%

Other classes 10% - 25%

• 1/8thmethodforallotherclassesofoverseainwardtreatybusinesswithadeductionof20%forcommission.

• Non-annualpoliciesaretimeapportionedovertheperiodoftherisks.

iii. Acquisition Costs

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 will give rise to income.

iv. Provision for Claims

A liability for outstanding claims is recognised in respect of both direct insurance and inward reinsurance. The amount of outstanding claims is the best estimate of the cost of all claims together with related expenses less reinsurance recoveries, in respect of claims notified but not settled at balance sheet date using the case-basis method.

Provision is also made for the cost of claims together with related expenses incurred but not reported (“IBNR”) at balance sheet date based on an actuarial estimation by a qualified independent actuary using a mathematical method of estimation.

(k) Life Insurance underwriting Results

The surplus transferable from the life fund to the income statement is based on the surplus determined by an annual actuarial valuation of the long-term liabilities to policyholders, made in accordance with the provisions of the Insurance Act, 1996 by the Company’s appointed actuary. Any deficit arising from the actuarial valuation is recoverable from the shareholders’ fund.

i. Premium Income Premium is recognised as soon as the amount of the premium can be reliably measured. First premium income is

recognised from inception date and subsequent premium income is recognised when it is due. Premium outstanding at balance sheet date is recognised as income for the year, provided it is still within the grace period allowed for payment.

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ii. Commission and Agency Expenses Commission and agency expenses, which are costs directly incurred in securing premium on insurance policies net

of income derived from reinsurers in the course of the ceding of premium to reinsurers, are charged to the revenue account in the period in which they are incurred.

iii. Provision for Claims

Claims and settlement costs that are incurred during the financial period are recognised when a claimable event occurs and/or the insurer is notified.

Claims and provisions for claims arising on life insurance policies, including settlement costs, are accounted for using the case-basis method and for this purpose, the benefits payable under a life insurance policy are recognised as follows:

i. maturity or other policy benefit payments due on specified dates are treated as claims payable on the due dates; and

ii. death, surrender and other benefits without due dates are treated as claims payable on the date of receipt of intimation of death of the assured or occurrence of contingency covered.

(l) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity.

(m) Foreign Currency Transactions

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the dates of the transactions. At each balance sheet date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at that date. Non-monetary items initially denominated in foreign currencies, which are carried at historical cost are translated using the historical rate as of the date of acquisition and non-monetary items which are carried at fair value are translated using the exchange rates that existed when the values were determined. All exchange rate differences are taken to the income statement and/or revenue accounts.

(n) Employee Benefits

i. Short-Term Benefits

Wages, salaries and other salary related expenses are recognised as an expense in the year in which the associated services are rendered by employees of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

ii. Defined Contribution Plan

As required by law, the Company makes contributions to the Employees Provident Fund (“EPF”). Such contributions are recognised as an expense in the income statement and/or revenue accounts as incurred.

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(o) Leases

A lease is recognised as a finance lease if it transfers substantially to the Company all the risks and rewards incidental to ownership. Leases of land and building are classified as operating or finance leases in the same way as leases of other assets. All leases that do not transfer substantially all the risks and rewards are classified as operating leases except for properties held under operating lease that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (Note 2.2(d)).

i. Operating Leases – Company as Lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expenses over the lease term on a straight-line basis.

In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the building elements in proportion to the relative fair values for leasehold interests in the land element and building element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease terms.

ii. Operating Leases – the Company as Lessor

Assets leased under operating leases are presented on the balance sheet according to the nature of the assets. Rental income from operating lease is recognised on an accrual basis over the terms of the relevant lease (Note 2.2(h)). Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

(p) Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash on hand and at bank, excluding fixed and call deposits.

The cash flow statement has been prepared using the indirect method.

(q) Financial Instruments

Financial instruments are recognised in the balance sheet when the Company has become a party to the contractual provisions of the instruments.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangements. Interest, dividends and gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

Disclosure information for financial assets and liabilities that relate to rights and obligations arising under insurance contracts are excluded from the scope of Financial Reporting Standard 132 - Financial Instruments: Disclosure and Presentation.

i. Receivables

Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

Specific provisions are made for any general insurance premiums including agents, brokers or reinsurance balances which remain outstanding for more than thirty days for motor business and six months for other classes of business from the date on which they become receivable.

ii. Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

iii. Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised and accounted for in the statement of changes in equity in the period in which they are declared.

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2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs

On 1 April 2008, the Company adopted the following revised FRSs, amendment to FRS and Interpretations of the Issue Committee (“IC interpretations”):

i. FRS 107: Cash Flow Statements ii. FRS 111: Construction Contracts iii. FRS 112: Income Taxes iv. FRS 118: Revenue v. FRS 120: Accounting for Government Grants and Disclosure of Government Assistance vi. FRS 134: Interim Financial Reporting vii. FRS 137: Provisions, Contingent Liabilities and Contingent Assets viii. Amendment to FRS 121:The Effects of Changes in Foreign Exchange Rates-Net Investment in a Foreign Operation. ix. IC Interpretation 1: Change in Existing Decommissioning, Restoration and Similar Liabilities x. IC Interpretation 2: Member’ Shares in Co-operative Entities and Similar Instruments xi. IC Interpretation 5: Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds xii. IC Interpretation 6: Liabilities arising from Participating in a Specific Market- Waste Electrical and Electronic Equipment xiii. IC Interpretation 7: Applying the Restatement Approach under FRS 1292004 - Financial Reporting in Hyperinflationary

Economies xiv. IC Interpretation 8: Scope of FRS 2

The revised FRSs, amendment to FRS and IC Interpretations above do not have any significant impact on the financial statements of the Company. FRS 111, 120 and 121 and IC Interpretations 1,2,5,6,7 and 8 are not applicable to the Company.

2.4 Standards and Interpretations Issued but not yet Effective

At the date of authorisation of these financial statements, the following new FRSs, amendment to FRS and Interpretations have been issued but are not yet effective and have not been adopted by the Company:

Effective for financial periods beginning FRS, Amendments to FRS and Interpretations on or after i. FRS 4: Insurance Contracts 1 January 2010

ii. FRS 7: Financial Instruments-Disclosures 1 January 2010

iii. FRS 8: Operating Segments 1 July 2009

iv. FRS 139: Financial Instruments - Recognition and Measurement 1 January 2010

v. FRS 123: Borrowing Costs 1 January 2010

vi. Amendments to FRS 2 Share-based Payment - Vesting Conditions and Cancellations 1 January 2010

vii. Amendments to FRS 1 First-time Adoption of Financial Reporting Standards and FRS 127 Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 1 January 2010

viii. IC Interpretation 9: Reassessment of Embedded Derivatives 1 January 2010

ix. IC Interpretation 10: Interim Financial Reporting and Impairment 1 January 2010

x. IC Interpretation 11 FRS 2 – Group and Treasury Share Transactions 1 January 2010

xi. IC Interpretation 13 Customer Loyalty Programmes 1 January 2010

xii. IC Interpretation 14 FRS 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 1 January 2010

The impact of applying FRS 4 and 139 on the financial statements upon first adoption as required by paragraph 30(b) of FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed by virtue of the exemptions given in the respective FRSs.

FRS 7, FRS 8, FRS 123, Amendments to FRS 1, 2 and 127, IC Interpretation 9, 10, 11, 13 and 14 are not expected to have significant impact on the financial statements of the Company except for changes in disclosure arising from the adoption of FRS 7.

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3. SIGNIFICANT ACCOuNTING ESTIMATES AND JuDGEMENTS

(a) Critical Judgements made in Applying Accounting Policies

The following are judgements made by management in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.

i. Liabilities of Life Insurance Business

The estimation of the ultimate liability arising from claims made under life insurance contracts is the Company’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in estimation of the liabilities that the Company will ultimately be required to pay as claims. For life insurance contracts, estimates are made for future deaths, disabilities, maturities, investment returns, voluntary terminations and expenses in accordance with regulatory requirements. The Company bases the estimate of expected number of deaths on statutory mortality tables, adjusted where appropriate to reflect the Company’s unique risk exposures. The estimated number of deaths determines the value of possible future benefits to be paid out, which will be factored into ensuring sufficient cover by reserves, which in return is monitored against current and future premiums. For those contracts that insure risk to disability, estimates are made based on recent past experience and emerging trends. However epidemics, as well as wide ranging changes to life style, could result in significant changes to the expected future exposure. All of this will give rise to estimation uncertainties of projected ultimate liability of the life insurance fund.

ii. uncertainties in Accounting Estimates for General Insurance Business

The principal uncertainty in the Company’s general insurance business up to 30 November 2008 arose from the technical provisions which included the provisions of premiums and claim liabilities. The premium liabilities comprised unearned premium reserves while claim liabilities comprised provision for outstanding claims. The estimation bases for unearned premium reserves are explained in the related accounting policy statement.

Generally, claim liabilities were determined based upon previous claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant was past experience with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. It was certain that actual future premium and claim liabilities would not exactly develop as projected and would vary from the Company’s projections. The estimates of premiums and claim liabilities were therefore sensitive to various factors and uncertainties. The establishment of technical provisions was an inherently uncertain process and, as a consequence of this uncertainty, the eventual settlement of premium and claim liabilities would vary from the initial estimates. There would be significant reporting lags between the occurrence of an insured event and the time it was actually reported to the Company. Following the identification and notification of an insured loss, there would still be uncertainty as to the magnitude of the claim. There were many factors that would determine the level of uncertainty such as inflation, inconsistent judicial interpretations, legislative changes and claims handling procedures.

iii. Classification between Investment Properties and Property, Plant and Equipment

The Company has developed certain criteria based on FRS 140 in making judgement whether a property qualifies to be classified as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purpose. If these portions could be sold separately (or leased out separately under finance leases), the Company would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purpose.

iv. Impairment of unquoted Investments

Impairment of unquoted investment is made after considering several factors, including business viability of the investee, potential recovery of capital invested and present values of any future dividend or income streams thereon. The present values of future income streams are measured by applying an expected rate of return that reflects the risk profile of the investment. These are compared against the carrying costs of investments and appropriate judgement and consideration is made by management to ascertain if the current carrying costs continue to be relevant.

This assessment is performed at each balance sheet date and is critically reviewed by management taking into consideration specific industry and economic factors relevant to the investment concerned.

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(b) Key Sources of Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

i. Depreciation of Property, Plant and Equipment

The cost of freehold and leasehold properties are depreciated on a straight line basis over their estimated useful lives of 50 years. The Company estimates that at the end of the useful lives, these properties will not have any residual values.

ii. Amortisation of Intangible Assets

The Company recognises the costs of significant development of knowledge based software and computer applications as intangible assets with finite useful lives. Such software and applications are unique to the requirements of the insurance business and the Company establishes that these development costs will generate economic benefits beyond one year.

The Company estimates the useful lives of these software costs to be between 5 to 10 years.

The Company expects that amortisation on software under development will only commence after the software and computer applications are available to be used and generate future economic benefits.

4. PROPERTY, PLANT AND EQuIPMENT

General Business and Shareholders’ Fund

2009

Freehold Building

Motor Vehicles

Office Equipment

Computer Equipment

Furniture, Fittings and Renovation Total

RM’000 RM'000 RM'000 RM'000 RM'000 RM'000

Cost

At beginning of year 9,794 1,042 2,667 16,693 7,496 37,692

Additions - - 219 1,166 623 2,008

Transferred to AmG (Note 30) (9,794) - (2,886) (17,859) (8,119) (38,658)

Reclassification to life fund - (1,042) - - - (1,042)

At end of year - - - - - -

Accumulated Depreciation

At beginning of year 2,643 595 1,894 13,799 5,108 24,039

Charge for the year 131 79 141 839 409 1,599

Transferred to AmG (Note 30) (2,774) - (2,035) (14,638) (5,517) (24,964)

Reclassification to life fund - (674) - - - (674)

At end of year - - - - - -

Net Carrying Amount

At end of year - - - - - - Annual R

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2008

Freehold Building

Motor Vehicles

Office Equipment

Computer Equipment

Furniture, Fittings and Renovation

ComputerEquipment

under Installation Total

RM’000 RM’000 RM'000 RM'000 RM'000 RM'000 RM'000

Cost

At beginning of year 9,794 757 2,246 14,918 6,036 5,310 39,061

Additions - 493 421 1,739 1,460 - 4,113

Transfers - - - 36 - (36) -

Disposals - (208) - - - - (208)

Write off - - - - - (13) (13)

Reclassification to life fund - - - - - (5,261) (5,261)

At end of year 9,794 1,042 2,667 16,693 7,496 - 37,692


At beginning of year 2,448 686 1,735 12,632 4,631 - 22,132

Charge for the year 195 116 159 1,167 477 - 2,114

Disposals - (207) - - - - (207)

At end of year 2,643 595 1,894 13,799 5,108 - 24,039

Net Carrying Amount

At end of year 7,151 447 773 2,894 2,388 - 13,653

Life Fund

2009

Buildings - Owner

Occupied Properties

Motor Vehicles

Office Equipment

Computer Equipment


RM’000 RM'000 RM'000 RM'000 RM'000 RM'000

Cost


Additions - - 228 1,682 1,118 3,028

Reclassification from shareholders' fund - 1,042 - - - 1,042

Disposals - - - (2) - (2)

At end of year 26,422 1,309 2,655 10,978 11,857 53,221


At beginning ofyear 3,438 267 1,705 7,196 6,848 19,454

Reclassification from shareholders' fund - 674 - - - 674

Charge for the year 459 - 193 699 1,305 2,656

Disposals - - - (2) - (2)

At end of year 3,897 941 1,898 7,893 8,153 22,782

Net Carrying Amount

At end of year 22,525 368 757 3,085 3,704 30,439

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Life Fund

2008

Buildings - Owner

Occupied Properties

Motor Vehicles

Office Equipment

Computer Equipment


RM’000 RM'000 RM'000 RM'000 RM'000 RM'000

Cost


Additions - - 264 1,946 1,534 3,744

Write off - - - (31) - (31)

At end of year 26,422 267 2,427 9,298 10,739 49,153



Charge for the year 528 - 155 571 1,058 2,312

At end of year 3,438 267 1,705 7,196 6,848 19,454

Net Carrying Amount

At end of year 22,984 - 722 2,102 3,891 29,699

Included in owner-occupied properties of the life fund are properties with a total net book value amounting to RM709,000 (2008: RM724,000), for which the title deeds were still in the process of being transferred to the Company.

Included in property, plant and equipment of the Company are the costs of fully depreciated assets which are still in use as follows:

Shareholders’ Fund Life Fund

2009RM’000

2008RM’000

2009RM’000

2008RM’000

Motor vehicles - 444 710 267

Office equipment - 1,417 1,277 1,200

Computer equipment - 10,560 6,409 6,063

Furniture, fittings and renovation - 3,564 5,703 3,347

- 15,985 14,099 10,877

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5. SuBSIDIARY

General and Shareholders’ Fund

2009 2008

RM’000 RM’000

Unquoted shares, at cost 6,000 6,000

The subsidiary is:

Place of incorporation

Paid-up capital

EffectiveEquity interest

Principal activity

RM’0002009

%2008

%

Arab-Malaysian Services Bhd. Malaysia 6,000 100 100 Dormant

The financial statements of the subsidiary are not consolidated as the ultimate holding company, AMMB Holdings Berhad produces consolidated financial statements that are available for public use and which comply with applicable Financial Reporting Standards in Malaysia. The financial statements of the subsidiary are annexed to these financial statements.

The amount owing to the subsidiary of RM7,565,000 (2008: RM7,565,000) arose mainly from non-trade advances which are unsecured, interest free and have no fixed terms of repayment.

6. INVESTMENT PROPERTIES

Life Fund

2009 2008

RM’000 RM’000

At beginning of year 82,278 82,278

Fair value adjustments 1,915 -

At end of year 84,193 82,278

The following investment properties are held under lease terms:

Leasehold land and buildings 19,360 18,025

Freehold land and buildings 64,833 64,253

84,193 82,278

Included in investment properties of the life fund are properties with a total net book value amounting to RM3,980,000 (2008: RM30,294,478), for which the title deeds are still in the process of being transferred to the Company.

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7. INVESTMENT


2009 2008

CostRM’000

Market value RM’000

CostRM’000


Malaysian Government Securities - 12,076

Amortisation of premiums net of accretion of discounts - (28)

- - 12,048 12,081

Cagamas bonds - 5,000

Amortisation of premiums net of accretion of discounts - -

- - 5,000 4,996

Shares of corporations quoted in Malaysia 106 110 19,268 19,590

Quoted Real Estate Investment Trusts ("REITS") - 21,749

Provision for diminution in value - (753)

- - 20,996 20,996

Unit trusts 1,601 8,399

Provision for diminution in value (222) (267)

1,379 1,380 8,132 8,146

Unquoted shares of corporations - 44

Provision for diminution in value - (44)

- -

Negotiable Instruments of Deposit - 93,321

Accretion of discounts net of amortisation of premiums - 1,971

- - 95,292 97,585

Unquoted bonds of corporations 1,300 328,612

Accretion of discounts net of amortisation of premiums - 4,555

Provision for diminution in value - (5,158)

1,300 1,241 328,009 332,967

Investment-linked fund 5,625 4,000

Fixed and call deposits with:

Licensed banks 49,175 258,575

Total investments 57,585 751,320

Included in fixed and call deposits are RM 48,389,000 (2008: RM223,260,000) placed with related companies with interest rates ranging from 2.1% to 3.2% (2008: 2.1% to 3.2%) per annum.

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Life Fund

2009 2008

CostRM’000


CostRM’000


Malaysian Government Securities 69,942 67,684

Amortisation of premiums net of accretion of discounts (72) (479)

69,870 70,593 67,205 67,604

Government investment issues 5,008 5,008

Amortisation of premiums net of accretion of discounts (3) (2)

5,005 5,206 5,006 5,212

Cagamas bonds - 26,391


- - 25,272 25,272

Shares of corporations quoted in Malaysia 55,898 -

Provision for diminution in value (15,460) -

40,438 40,438 - -

Quoted REITS 23,450 23,913

Provision for diminution in value (2,548) (887)

20,902 20,902 23,026 23,026

Unit trusts 11,848 13,982


11,663 11,675 13,714 13,728

Unquoted shares of corporations 2,147 2,147


2,091 2,094

Negotiable Instruments of Deposit 62,450 82,181

Accretion of discounts net of amortisation of premiums 586 2,064

63,036 66,869 84,245 84,818

Unquoted bonds of corporations 1,052,247 826,119

Accretion of discounts net of amortisation of premiums 10,849 10,990


1,063,096 1,064,775 831,951 841,662

Fixed and call deposits with:

Licensed banks 245,316 112,741

Other corporations 29,737 207,313

275,053 320,054

Total investments 1,551,154 1,372,567

Included in fixed and call deposits are RM 230,333,000 (2008: RM199,675,000) placed with related companies with interest rates ranging from 3.35% to 7% per annum (2008: 3.35% to 7% per annum).

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8. INTANGIBLE ASSETS

Software Costs General Business and Shareholders’ Fund Life Fund

2009RM’000

2008RM’000

2009RM’000

2008RM’000

Cost

At beginning of year 9,021 8,413 13,248 5,233

Additions 1,356 1,091 10,432 2,271

Transferred to AmG (Note 30) (10,377) - - -

Reclassification to life fund - (483) - -

Reclassification from general fund - - - 5,744

At end of year - 9,021 23,680 13,248

Accumulated Amortisation

At beginning of year 7,194 6,369 2,634 2,521

Amortisation for the year 567 825 142 113

Transferred to AmG (Note 30) (7,761) - - -

At end of year - 7,194 2,776 2,634

Net Carrying Amount

At 31 March 2009 - 1,827 20,904 10,614

Included in intangible assets of the life fund are the costs of software under development amounting to RM20,265,000 (2008: RM10,307,000).

Included in the intangible assets of the Company are the costs of fully amortised software which are still in use as follows:

General Business and Shareholders’ Fund Life Fund

2009RM’000

2008RM’000

2009RM’000

2008RM’000

Software - 3,445 2,434 2,338

9. LOANS RECEIVABLE


2009RM’000

2008RM’000

2009RM’000

2008RM’000

Policy loans - - 96,016 84,129

Mortgage loans - - 3,672 7,462

Provision for doubtful debts - - (217) (799)

- - 3,455 6,663

Staff loans - 567 642 668

Provision for doubtful debts - (27) (110) (118)

- 540 532 550

- 540 100,003 91,342

Receivable:

- within 12 months - 192 646 1,273

- after 12 months - 348 99,357 90,069

- 540 100,003 91,342

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10. RECEIVABLES


2009RM’000

2008RM’000

2009RM’000

2008RM’000

Trade receivables

Outstanding premiums including agents, brokers and co-insurers balances - 31,308 16,262 12,416

Provision for doubtful debts - (7,580) (681) (3,017)

- 23,728 15,581 9,399

Amount owing by reinsurers and cedants - 3,351 23,034 11,994

Provision for doubtful debts - (2,226) - (852)

- 1,125 23,034 11,142

- 24,853 38,615 20,541

Other receivables

Other receivables, deposits and prepayments 108 3,305 5,187 1,700

Provisions for doubtful debts - (457) - -

108 2,848 5,187 1,700

Tax recoverable 1,875 7,107 - -

Malaysian Institute of Insurance ("MII") bonds - 200 - -

Income due and accrued 52 5,137 17,856 15,088

Amount owing by other related companies - 29 1,400 1

2,035 15,321 24,443 16,789

2,035 40,174 63,058 37,330

Amount due from life fund 102,850 95,601

104,885 135,775

In the balance sheet on page 18, the amount due from life fund of RM102,850,000 (2008: RM95,601,000) has been offset against the amount due to shareholders’ fund in the life fund balance sheet on page 22.

Included in the amount owing by reinsurers and cedants of the general business as at 31 March 2008 were balances amounting to RM2,051,261, for which statements from third parties had not been received.

In cases where statements from third parties had not been received, the Company made specific requests to the parties concerned to submit such statements, in order to facilitate the reconciliation exercise. Where statements of accounts were received, the unreconciled differences did not exceed 2% of the gross balances outstanding in the respective categories of assets.

The amount owing by other related companies is non-trade in nature, interest-free, unsecured and has no fixed terms of repayment.

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11. PROVISION FOR OuTSTANDING CLAIMS


2009RM’000

2008RM’000

2009RM’000

2008RM’000

Provision for outstanding claims - 438,888 28,349 21,420

Recoverable from reinsurers - (90,380) (3,336) (1,981)

Net outstanding claims - 348,508 25,013 19,439

12. PAYABLES


2009RM’000

2008RM’000

2009RM’000

2008RM’000

Trade payables

Amount owing to agents, brokers, co-insurers and insureds

- 11,267 8,491 7,329

Amount owing to reinsurers and cedants - 17,245 24,776 8,393

- 28,512 33,267 15,722

Other payables

Accruals 1,151 14,332 21,368 19,900

Sundry payables - 5,425 8,170 2,009

Deposits - - 46,323 41,952

Amount owing to other related companies 49 1,307 3,162 2,027

1,200 21,064 79,023 65,888

1,200 49,576 112,290 81,610

Included in the amount owing to reinsurers and cedants of the general business as at 31 March 2008 were balances amounting to RM902,341 for which statements from third parties had not been received.

In cases where statements from third parties had not been received, the Company made specific requests to the parties concerned to submit such statements, in order to facilitate the reconciliation exercise. Where statements of accounts were received, the unreconciled differences did not exceed 2% of the gross balances outstanding in the respective categories of liabilities.

The amount owing to other related companies is non-trade in nature, interest-free, unsecured and has no fixed terms of repayment.

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13. SuBORDINATED TERM LOAN

2009RM’000

2008RM’000

Shareholders’ Fund

Subordinated term loan 30,000 30,000

In 1998, a subordinated term loan of RM80 million was obtained from a then major shareholder of the Company, AmMerchant Bank Berhad (“AMMB”), to supplement its capital fund.

The initial term of the loan facility was for a period of five (5) years commencing from the date of first drawdown in June 1998. The rate of interest payable was 1% plus AMMB’s cost of funds and the repayment of the principal amount was to be made in one single payment at the end of the initial loan period. The interest was waived with effect from 1 July 2000.

The shareholders of the Company had undertaken to subscribe to their respective entitlement under a rights issue of shares to convert or otherwise replace the loan with share capital. The exercise for the rights issue of shares to increase the paid-up capital of the Company to RM100 million was completed on 5 November 2001.

Accordingly, RM50 million of the above loan was repaid by the Company in 2002. BNM had agreed for the Company to maintain RM30 million as a subordinated term loan pursuant to the increase in the paid-up capital. The subordinated term loan cannot be repaid without the prior approval of BNM.

The Company has subsequently obtained approval from BNM for the extension of the loan term until 30 June 2008. In conjunction with that, BNM had also approved AMMB’s application to charge interest on the term loan at the rate of 1% above AMMB’s cost of funds, effective 1 July 2006 until the expiry of the loan facility on 30 June 2008.

Subsequently, the Company had obtained further approval from BNM for the extension of the loan term for another year until 30 June 2009. This was to facilitate the completion of the transfer of the general insurance business to AmG Insurance Berhad, the shareholding restructuring of the Company and the finalization of its capital management plan in view of the RBC framework.

14. DEFERRED TAX LIABILITIES


2009RM’000

2008RM’000

2009RM’000

2008RM’000

At beginning of year (2,061) (2,159) (249) (249)

Recognised in the Income Statement/Life Insurance Revenue Account (Note 23) 5,449 98 - -

Effect from transfer of the General business (Note 23) (3,388) - - -

At end of year - (2,061) (249) (249)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Net deferred tax liabilities shown on the Balance Sheets have been determined after considering appropriate offsetting as follows:


2009RM’000

2008RM’000

2009RM’000

2008RM’000

Deferred tax assets - 13 15 15

Deferred tax liabilities - (2,074) (264) (264)

- (2,061) (249) (249)

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The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows:

Deferred Tax Assets


Accelerated Capital Allowance on

Property, Plant and Equipment Others Total

RM’000 RM’000 RM’000

2009

At 1 April 2008 - 13 13

Recognised in the Income Statement - (13) (13)

At 31 March 2009 - - -

2008

At 1 April 2007 (2,763) (255) (3,018)

Recognised in the Income Statement 2,763 268 3,031

At 31 March 2008 - 13 13

Life Fund

Provision for Diminution

in value of Investment

RM’000At 31 March 2008 & 2009 15

Deferred Tax Liabilities


Provision for Diminution in value

of Investment Others TotalRM’000 RM’000 RM’000

2009

At 1 April 2008 (69) (2,005) (2,074)

Recognised in the Income Statement 69 2,005 2,074

At 31 March 2009 - - -

2008

At 1 April 2007 - 859 859

Recognised in the Income Statement (69) (2,864) (2,933)

At 31 March 2008 (69) (2,005) (2,074)

Life Fund

Accelerated Capital Allowance on

Property, Plant and Equipment

Net Accretion of Discounts Total

RM’000 RM’000 RM’000

At 31 March 2008 and 2009 (88) (176) (264)

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15. uNEARNED PREMIuM RESERVES

General Business Fire Motor

Marine, Aviation and

Transit Miscellaneous Total

RM’000 RM'000 RM'000 RM'000 RM'000

2009

At 1 April 2008 11,662 189,307 843 25,618 227,430

(Decrease)/increase in unearned premium reserves (675) 1,479 (91) 1,234 1,947

Transferred to AmG (Note 30) (10,987) (190,786) (752) (26,852) (229,377)

At 30 November 2008 - - - - -

2008

At 1 April 2007 10,860 168,877 552 14,348 194,637

Increase in unearned premium reserves 802 20,430 291 11,270 32,793

At 31 March 2008 11,662 189,307 843 25,618 227,430

16. LIFE POLICYHOLDERS’ FuND

Based on the actuarial valuation of the fund made up to 31 March 2009, the actuary was satisfied that the assets available in the life fund are sufficient to meet its long term liabilities to policyholders.

2009RM’000

2008RM’000

Actuarial Liabilities:

At beginning of year 1,275,118 1,118,744

Add: Increase in policy reserves 189,269 154,746

Bonus allocated to participating policyholders (including interim bonus) from normal surplus 10,355 11,287

Less: Increase in reinsurance (21,730) (9,659)

177,894 156,374

At end of year 1,453,012 1,275,118

unallocated Surplus:

At beginning of year 150,703 127,549

Less: Surplus arising during the year 17,967 41,782

Bonus allocated to participating policyholders (including interim bonus) from normal surplus (10,355) (11,287)

Transfer to shareholders’ fund (20,000) (17,000)

Add: Increase in reinsurance 21,730 9,659

9,342 23,154

At end of year 160,045 150,703

Life Policyholders’ Fund At End Of Year: 1,453,012 1,275,118

Actuarial liabilities 160,045 150,703

Unallocated surplus 1,613,057 1,425,821

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17. SHARE CAPITAL

2009RM’000

2008RM’000

Authorised:

100,000,000 ordinary shares of RM1 each 100,000 100,000

Issued and fully paid:

100,000,000 ordinary shares of RM1 each 100,000 100,000

18. DIVIDENDS

Dividend In Respect of Year Dividend Recognised In Year

2009RM’000

2008RM’000

2009RM’000

2008RM’000

Recognised during the year:

Special interim dividend for 2009:

173.33% less 25% taxation, on 100,000,000 ordinary shares (130.00 sen net per share) 130,000 - 130,000 -

Final dividend for 2007:

10% less 27% taxation, on 100,000,000 ordinary shares (7.40 sen net per share) - 7,400 - 7,400

19. OPERATING REVENuE

1.4.2008 to 30.11.2008

Continuing Operations

Discontinued Operations

Shareholders’ Fund Life Fund Total General Fund

RM’000 RM’000 RM’000 RM’000

2009

Gross premiums - 449,036 449,036 394,628

Investment income (Note 20) 773 92,399 93,172 24,839

773 541,435 542,208 419,467

2008

Gross premiums - 352,242 352,242 545,567

Investment income (Note 20) 275 80,183 80,458 33,166

275 432,425 432,700 578,733Annual R

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20. INVESTMENT INCOME

1.4.2008 to 30.11.2008



Shareholders’ Fund Life Fund General Fund

RM’000 RM’000 RM’000

2009

Interest income from:

Malaysian Government Securities - 2,710 335

Cagamas bonds - - 30

Unquoted corporate bonds - 49,781 11,849

Policy loans - 8,700 -

Mortgage loans - 297 -

Staff loans - 21 16

Fixed and call deposits 613 15,881 7,580

Gross dividends from:

Shares quoted in Malaysia 16 3,208 1,399

Other investments 136 2,374 1,834

Rental income - 6,181 -

Accretion of discounts, net of amortisation of premiums 8 3,246 1,796

773 92,399 24,839

2008

Interest income from:

Malaysian Government Securities - 3,375 1,500

Cagamas bonds - 142 441

Unquoted corporate bonds 109 40,518 15,855

Policy loans - 5,211 -

Mortgage loans - 374 -

Staff loans - 8 26

Fixed and call deposits 33 14,189 7,905

Gross dividends from:

Shares quoted in Malaysia 92 4,272 4,274

Other investments 41 2,002 208

Rental income - 6,058 -

Accretion of discounts, net of amortisation of premiums - 4,034 2,957

275 80,183 33,166

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21. NET OTHER OPERATING EXPENSES

1.4.2008 to 30.11.2008



Shareholders’ Fund Life Fund General Business

RM’000 RM’000 RM’000

2009

Gain on disposal of property, plant and equipment - 3 -

Change in fair value of investment properties - 1,915 -

Realised profit on foreign exchange - 235 1

(Loss)/gain on disposal of investments in:

Quoted shares (170) (21,313) (4,943)

Unquoted corporate bonds - 1,874 518

Malaysian Government Securities - 47 -

Other investments - (55) -

Provision for diminution in value of investments (222) (16,159) (18,683)

Sundry income 2 144 1,134

Sundry expenditure - (942) (104)

(390) (34,251) (22,077)

2008

Gain on disposal of property, plant and equipment - - 35

Write off of property, plant and equipment - (31) (13)

Realised loss on foreign exchange - (180) (15)

Gain on disposal of investments in:

Quoted shares 65 10,465 2,862

Unquoted corporate bonds 17 4,029 1,947

Malaysian Government Securities - - 133

Other investments - 2,905 2,550

Writeback of/(provision for) diminution in value of investments 88 (5,774) (4,909)

Sundry income - 108 351

Sundry expenditure (989) (934) (469)

(819) 10,588 2,472A

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22. MANAGEMENT EXPENSES

1.4.2008 to 30.11.2008




RM’000 RM’000 RM’000

2009

Staff Costs

Directors' remuneration (Note (a)) - 262 182

Chief Executive Officer's ("CEO") remuneration including benefits-in-kind - 408 377

Wages, salaries and bonuses - 19,440 16,215

Contributions to EPF - 3,008 2,647

Other employee benefits - 1,821 1,505

- 24,939 20,926

Writeback of provision for doubtful debts (7) (3,778) 617

Bad debts written off 50 1,269 345

Auditors' remuneration

Statutory audit 3 137 -

Others - 150 -

Rental of office from third parties - 1,806 683

Rental of office from other related companies - 1,255 826

Depreciation of property, plant and equipment - 2,656 1,599

Amortisation of intangible assets - 142 567

Insurance Guarantee Scheme Fund levies - 975

Establishment cost - 2,169 587

Marketing expenses - 8,153 11,304

Communication expenses - 2,499 1,298

Administration and general expenses 1 11,409 8,815

Policy processing expenses and others - 1,613 1,251

47 29,480 28,867

47 54,419 49,793A

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22. MANAGEMENT EXPENSES (CONT’D)

1.4.2008 to 30.11.2008




RM’000 RM’000 RM’000

2008

Staff Costs

Directors' remuneration (Note (a)) - 192 288

Chief Executive Officer's ("CEO") remuneration including benefits-in-kind - 395 592

Wages, salaries and bonuses - 17,731 24,411

Contributions to EPF - 2,798 3,935

Other employee benefits - 2,109 1,428

- 23,225 30,654

Provision for doubtful debts - 2,012 -

Writeback of provision for doubtful debts - - (2,509)

Bad debts written off - - 1,174

Auditors’ remuneration

Statutory audit 3 54 73

Others - 11 14

Rental of office from third parties - 2,447 1,709

Rental of office from other related companies - 157 135

Depreciation of property, plant and equipment - 2,312 2,114

Amortisation of intangible assets - 113 825

Insurance Guarantee Scheme Fund levies - 360 1,229

Establishment cost - 1,320 798

Marketing expenses - 7,022 18,005

Communication expenses - 1,391 2,244

Administration and general expenses - 7,229 10,481

Policy processing expenses and others - 1,368 2,327

3 25,796 38,619

3 49,021 69,273

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22. MANAGEMENT EXPENSES (CONT’D)

(a) Directors’ Remuneration

Continuing Operations Discontinued Operations

Life Fund General Business

2009RM’000

2008RM’000

2009RM’000

2008RM’000

Non-executive Directors:

Fees 145 116 98 174

Allowances and other emoluments 117 76 84 114

262 192 182 288

The number of directors of the Company whose remuneration during the financial year fell within the following bands is analysed below:

Continuing Operations Discontinued Operations

Life Fund General Business

Number of Directors Number of Directors

2009 2008 2009 2008

Non-executive Directors:

Below RM50,000 5 2 9 2

RM50,001 - RM100,000 4 7 - 7

23. TAXATION



2009RM’000

2008RM’000

2009RM’000

2008RM’000

Tax expense for the year 5,149 4,135 6,779 7,486

Tax under-provided in prior year 676 - - -

5,825 4,135 6,779 7,486


General Business

2009RM’000

2008RM’000

Tax expense for the year 9,956 14,233

Tax under-provided in prior year 6,672 -

Deferred tax relating to transfer of general business (Note 14) 3,388 -

Deferred tax relating to origination and reversal of temporary differences (Note 14) (5,449) (98)

14,567 14,135

Domestic income tax for general business and shareholders’ fund is calculated at the Malaysian statutory rate of 25% (2008: 26%) of the estimated assessable profit for the year.

The amount of tax charged on the life fund is based on the method prescribed under the Income Tax Act, 1967 for life business. The statutory tax rate for the life insurance business 8%.

Prior to the year of assessment 2008, Malaysian companies adopt the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders (“single tier system”). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard the Section 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the Section 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.

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The Company did not elect for the irrevocable option to disregard the Section 108 balance as at 31 March 2008. Accordingly, during the transitional period, the Company may utilise the credit in the Section 108 balance as at 31 March 2008 to distribute cash dividend payments to ordinary shareholdings as defined under the Finance Act 2007. As at 31 March 2009, the Company has sufficient credit in the Section 108 balance to pay franked dividends out of its entire retained earnings.

A reconciliation of income tax expenses applicable to profit/surplus before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the general business and shareholder’s fund is as follows:


(a) Shareholders’ Fund

2009RM’000

2008RM’000

Profit before tax 18,979 14,733

Taxation at Malaysian statutory tax rate of 25% (26% in 2008) 4,745 3,831

Expenses not deductible for tax purposes 404 304

Deferred tax relating to origination and reversal of temporary differences (Note 14) - -

Tax under-provided in prior year 676 -


(b) Life Fund

2009RM’000

2008RM’000

Surplus before taxation 214,015 204,014

Taxation at Malaysian tax charge of 8% 17,121 16,321

Income not subject to tax (33,599) (26,852)

Expenses not deductible for tax purposes 23,257 18,017


Previously, investment income and gains from disposal of investments from the Life Fund was taxed twice, once at tax rate of 8% in the Life Fund and again at a tax rate of 25% (2008:26%) when the surplus from Life Fund is transferred to the Shareholders’ Fund. In Budget 2008 which was enacted via a Gazette order on 21 April 2008 and effective from year of assessment 2008 onwards insurance companies are permitted a set-off (“Section 110B credits”) from the total amount of tax imposed on the Shareholders’ Fund to overcome the incidence of double taxation.

Section 110B credits are governed by a specific Inland Revenue Board (“IRB”) guideline issued on 5 November 2008 which details the computation of said credits available to the Shareholders’ Fund of an insurance company. Section 110B credits are applied before dividend tax credits when computing net tax payable to IRB.


(a) General Business

2009RM’000

2008RM’000

Profit before tax 12,743 43,433

Taxation at Malaysian statutory tax rate of 25% (26% in 2008) 3,186 11,293

Expenses not deductible for tax purposes 6,770 2,940

Deferred tax relating to transfer of general business (Note 14) 3,388 -

Deferred tax relating to origination and reversal of temporary differences (Note 14) (5,449) (98)

Tax under-provided in prior year 6,672 -


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24. EARNINGS PER ORDINARY SHARE

2009 2008

Basic

Net profit/(loss) for the year attributable to shareholders (RM’000)

- from continuing operations 13,154 10,598

- from discontinued operations (1,824) 29,298

11,330 39,896

Number of ordinary shares of RM1 each ('000) 100,000 100,000

Basic earnings/(losses) per share (sen)

- from continuing operations 13.2 10.6

- from discontinued operations (1.8) 29.3

11.3 39.9

25. NET CLAIMS INCuRRED

Fire Motor Marine & Aviation Miscellaneous Total

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

1.4.2008 to

30.11.2008

1.4.2007 to

31.3.2008

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Gross claims paid less salvage 7,600 38,057 214,271 237,509 2,574 2,853 15,750 20,276 240,195 298,695

Reinsurance recoveries (4,230) (32,456) (10,000) (11,461) (1,073) (624) (4,113) (7,233) (19,416) (51,774)

Net claims paid 3,370 5,601 204,271 226,048 1,501 2,229 11,637 13,043 220,779 246,921

Net outstanding claims:

At end of year 5,144 4,578 338,764 320,249 2,339 3,516 17,185 20,165 363,432 348,508

At begining of year (4,578) (5,869) (320,249) (248,916) (3,516) (4,832) (20,165) (20,213) (348,508) (279,830)

566 (1,291) 18,515 71,333 (1,177) (1,316) (2,980) (48) 14,924 68,678

Net claims incurred 3,936 4,310 222,786 297,381 324 913 8,657 12,995 235,703 315,599

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26. FINANCE COSTS


Shareholders’ Fund

2009RM’000

2008RM’000

Interest on subordinated loan from AMMB 1,357 1,720

27. CASH FLOW INFORMATION BY SEGMENT

1.4.2008 to 30.11.2008



Shareholders’ Fund Life Fund General Business Total

RM’000 RM’000 RM’000 RM’000

2009

Cash flows generated from/(used in):

Operating activities 130,000 20,362 (1,039) 149,323

Investing activities - (13,460) (3,361) (16,821)

Financing activities (130,000) - - (130,000)

Net increase/(decrease) in cash and cash equivalents - 6,902 (4,400) 2,502

Cash and cash equivalents:

At beginning of year - 1,602 4,400 6,002

At end of year - 8,504 - 8,504

2008

Operating activities 7,400 12,784 (51) 20,133

Investing activities - (11,728) (5,169) (16,897)

Financing activities (7,400) - - (7,400)

Net (decrease)/increase in cash and cash equivalents - 1,056 (5,220) (4,164)

Cash and cash equivalents:

At beginning of year - 546 9,620 10,166

At end of year - 1,602 4,400 6,002

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28. INVESTMENT-LINKED BuSINESS

Balance Sheet as at 31 March 2009

Note 2009 2008

RM’000 RM’000

Assets

Investments (a) 175,922 74,885

Tax recoverable 103 83

Amount due from brokers 48 257

Other receivables 470 183

Deferred tax asset (b) 20 20

Cash and bank balances 39 5

176,602 75,433

Liabilities

Other payables 2,144 343

Amount due to brokers 12 -

Provision for taxation 2 2

Deferred tax liabilities (b) 18 18

2,176 363

Net asset value of funds 174,426 75,070

Net asset value as at beginning of the year 75,070 11,410

Net surplus/(deficit) after taxation 846 (1,924)

Net creation of units 103,519 68,299

Net cancellation of units (5,009) (2,715)

Net asset value as at end of the year 174,426 75,070

unitholders' account 174,426 75,070

Income Statement For the year ended 31 March 2009

Note 2009 2008

RM’000 RM’000

Net investment income (c) 505 726

Gain on disposal of investments in quoted shares 39 675

Unrealised capital gain/(loss) 1,531 (3,058)

Management expenses (1,199) (231)

Surplus/(deficit) before taxation 876 (1,888)

Taxation (d) (30) (36)

Net surplus/(deficit) after taxation 846 (1,924)

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(a) Investments

2009 Cost/Market

Value

2008 Cost/Market

Value

RM’000 RM’000

Shares of corporations quoted in Malaysia

At cost 2,492 3,476

Unrealised (loss)/gain (211) 1,324

At market value 2,281 4,800

Unquoted bonds of corporations

At cost 400 400

Unrealised gain (18) -

At market value 382 400

Unit trusts

At cost 165,263 69,337

Unrealised gain/(loss) 279 (2,708)

At market value 165,542 66,629

Fixed and call deposits with licensed banks 7,717 3,056

Total investments by Investment-linked business 175,922 74,885

(b) Deferred Tax

2009 2008

RM’000 RM’000

At beginning and end of year 2 2

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

The components and movements of deferred tax assets and liabilities during the financial year are as follows:

Deferred Tax Assets

Tax losses

RM’000

At 1 April 2008 and 31 March 2009 20

Deferred tax liabilities

Net unrealised gain

Net accretion of discounts Total

RM’000 RM’000 RM’000

At 1 April 2008 and at 31 March 2009 (17) (1) (18)

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(c) Net investment income

2009 2008

RM’000 RM’000

Interest from: - -

Unquoted corporate bonds 208 262

Fixed and call deposits 297 405

Gross dividends from shares quoted in Malaysia - 59

Accretion of discounts, net 505 726

(d) Taxation

2009 2008

RM’000 RM’000

Tax expense for the year - Malaysian income tax 30 36

The Malaysian tax charge on the investment-linked business is based on the method prescribed under the Income Tax Act, 1967 for life business.

A reconciliation of income tax expenses applicable to surplus before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the investment-linked business is as follows:

2009 2008

RM’000 RM’000

Surplus/(Deficit) before tax 885 (1,888)

Taxation at Malaysian statutory tax rate of 8% 71 (151)

Income not subject to tax (335) (360)

Expenses not deductible for tax purposes 294 547

Tax expense for the year 30 36

29. OPERATING LEASE ARRANGEMENTS

(a) The Company as Lessee

The Company has entered into operating lease agreements for the use of buildings. These leases have an average lease term ranging between 2 and 3 years.

The future aggregate minimum lease payments under operating leases contracted for as at the balance sheet date but not recognised as liabilities, are as follows:

2009 2008

RM’000 RM’000

Future minimum rental payments:

General Business

Not later than 1 year 790 870

Later than 1 year and not later than 5 years - 790

790 1,660

Transfer to AmG (790) -

- 1,660

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(b) The Company as Lessor

The Company has entered into operating lease agreements on its investment property portfolios. These leases have remaining lease terms ranging between 1 to 5 years. These leases generally include a clause to enable revision of rental charge upon expiry of the initial term based on prevailing market rates. Certain leases include contingent rental arrangements computed based on sales or profits achieved by tenants.

The future minimum lease payments receivable under operating leases contracted for as at the balance sheet date but not recognised as receivables, are as follows:

2009 2008

RM’000 RM’000

Life fund

Not later than 1 year 384 461

Later than 1 year and not later than 5 years - 384

384 845

Rental income recognised in the Revenue Account during the financial year is described in Note 20.

30. SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS

(a) Related parties

The related parties and their relationship with the Company as of 31 March 2009 are as follows:

Name Relationship

AMAB Holdings Sdn.Bhd Immediate holding company

AMMB Holdings Berhad Ultimate holding company

AmG Insurance Berhad Subsidiary of its immediate holding company

Insurance Australia Group Ltd (IAG Ltd.) Corporate shareholder of AmG Insurance Berhad and past corporate shareholder of the Company

AmInvestment Bank Berhad (formerly known as AmMerchant Bank Berhad)

Other related company

AMFB Holdings Berhad Other related company

AmBank (M) Berhad Other related company

AmInvestment Management Sdn. Bhd. Other related company

AmInvestment Services Berhad Other related company

AmSecurities Sdn. Bhd. Other related company

Arab-Malaysian Credit Berhad Other related company

AmTrustee Berhad Other related company

Amcorp Group Berhad A corporate shareholder of ultimate holding company

Melawangi Sdn Bhd Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

AMDB Berhad Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

Harpers Travel (M) Sdn. Bhd. Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

Medan Delima Sdn. Bhd. Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

Friends Provident Public Company Limited (FP)

The Corporate shareholder of the Company

Syarikat Kompleks Damai Sdn. Bhd. Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

AMDB Property Management Company Sdn. Bhd.

Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

MCM Consulting Sdn. Bhd. Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

MCM Horizon Sdn. Bhd. Company in which a director, Tan Sri Dato’ Azman Hashim and a past director, Dato’ Azlan Hashim, have financial interests

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In the normal course of business, the Company undertakes various transactions with subsidiary and associated companies of its ultimate holding company, and other companies deemed related parties by virtue of common director’s shareholdings and corporate shareholders’ interests in its ultimate holding company. The Directors are of the opinion that the Company sold insurance policies to the related companies and related parties on terms and conditions no more favourable than those available on similar transactions to its other customers or employees, and other related party transactions were also carried out on terms and conditions no more favourable than those available on similar transactions to its unrelated parties, unless otherwise stated.

(b) Key Management Personnel

In line with the group classification, our key management personnel include directors, the Chief Executive Officer and the Appointed Actuary.


2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Included in trade receivables (Note 10):

Outstanding premium including agents/ brokers and co-insurers balances

AmBank (M) Berhad - 3,185 - -

AmInvestment Bank Berhad - 204 - -

- 3,389 - -

Included in amount owing by other related companies (Note 10):

AmSecurities Sdn. Bhd. - 18 - -


AmBank (M) Berhad - 8 - -

AmG Insurance Berhad - - 1,400 -

- 29 1,400 -

Included in income due and accrued (Note 10):


- 213 - -

Included in payables (Note 12):

AmBank (M) Berhad - 7 - -

- 7 - -

Included in amount owing to other Arab-Malaysian Credit related companies (Note 12):

AmInvestment Bank Berhad - 1,307 1,723 1,585

Arab-Malaysian Credit Berhad - - 2 2

AmBank (M) Berhad - - 1,413 438

AMMB Holdings Berhad - - 24 2

AMG Insurance Berhad 49 - - -

49 1,307 3,162 2,027

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The significant transactions of the Company with related parties during the financial year are as follows:

2009 2008

RM’000 RM’000

Interest income receivable from:

AmInvestment Bank Berhad 3,712 7,754

AmIslamic Bank Berhad - 1,086

AmBank (M) Berhad 10,650 7,907

14,362 16,747

Rental income receivable from:


AmInvestment Bank Berhad 268 268

Syarikat Kompleks Damai Sdn. Bhd 2,000 4,000

5,657 7,657

Commission expenses payable to:


AmInvestment Bank Berhad - 111

4,660 31,389

Commission income receivable from:

IAG Ltd - 216

Gross premium income earned from:

AmBank (M) Berhad 223,011 374,402

AmInvestment Bank Berhad - 764

223,011 375,166

Reinsurance premium ceded to:

IAG Ltd - 758

General and administrative expenses payable to:


AMDB Property Management Company Sdn. Bhd. 74 91

AMDB Realty Sdn.bhd 56 -


Computer Systems Advisers (M) Berhad 217 144

Harpers Travel (M) Sdn. Bhd. 477 319

Melawangi Sdn. Bhd. 269 154

AmInvestment Management Sdn Berhad - 1,086

Restoran Seri Melayu Sdn. Bhd 58

6,067 7,788

Brokerage rebate receivable from:

AmSecurities Sdn. Bhd. - 100

Subordinated term loan interest payable to:


Rental expenses payable to:

AmInvestment Bank Berhad 52 79

Medan Delima Sdn. Bhd. 24 96

AmBank (M) Berhad 1,179 651

1,255 826

Dividend payable to :

IAG Ltd 39,000 2,220

AMMB Holdings Berhad 91,000 5,180

130,000 7,400

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Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

2009 2008

RM’000 RM’000

Salaries and other remuneration 1,339 1,118

Other short-term employee benefits - 106

1,339 1,224

Included in the total key management personnel are:

2009 2008

RM’000 RM’000

Non-Executive Directors’ remuneration (Note 22) 569 480

Transfer under transferred license agreement

On 1 December 2008, pursuant to a Vesting Order obtained from the High Court of Malaya in Kuala Lumpur and High Court of Sabah and Sarawak, AmLife transferred its general insurance business and net assets as a going concern to AmG Insurance Berhad. Details of the net assets transferred on 1 December 2008 are:

Note RM’000

Assets

Property, plant and equipment 4 13,694

Intangible assets 8 2,616

Investments:

- Deposits and placements with financial institutions 278,048

- Other investments 484,244

Loans 3,311

Receivables 40,557

Cash and bank balances 2,652

825,122

Liabilities

Provision for outstanding claims 25 363,432

Payables 51,677

Amount due to AmLife 180,636

595,745

Insurance reserves

Unearned premium reserves 15 229,377

Total net assets transferred *

* The net assets transferred to AmG Insurance Berhad were satisfied via a consideration of RM1.00.

For the financial year ended 31 March 2009, the results from the general insurance business for the period from 1 April 2008 to 30 November 2008 are presented separately on the income statements as discontinued operations. The analysis of the results of the discontinued operations have been included in the income statements and respective notes to the financial statements.

The net cash flow incurred by the General Insurance Business is disclosed in Note 27.

As the general insurance business was transferred prior to 31 March 2009, the assets and liabilities are no longer included in the balance sheet of the Company.

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31. CAPITAL COMMITMENTS

As of 31 March 2009, capital expenditure approved by Directors but not provided for in the financial statements are as follows:


2009 2008 2009 2008RM’000 RM’000 RM’000 RM’000

Authorised and contracted but not provided for: Property, plant and equipment - - 410 - Computer hardware & software - 17,110 12,557 - Investment properties - - 675 -

- 17,110 13,642 -

(a) Financial Risk Management Objectives and Policies

The operations of the Company are subject to four major areas of risk which comprise underwriting, credit, interest rate and liquidity risks. The Company’s risk management objective is to effectively link and manage risks with rewards in order to maximise the Company’s shareholders’ value as well as to ensure that the Company is able to sustain its performance.

The Company is guided by risk management policies and guidelines which set out their overall business strategies and their general risk management philosophy where the principal objective is to minimise the Company’s exposure to risks and/or costs associated with the financing, investing and operating activities of the Company. The Company has established processes to monitor and control risks on an ongoing basis.

The Board constituted the Investment Committee (IC), to comprise four Directors of the Board. The principal role of the IC is to provide oversight on the implementation of the investment policy as approved by the Board, review the investment policy on a regular basis so that it remains appropriate and consistent with product pricing and asset/liability management strategies, ensure that the risk management functions and internal control systems relating to investments are adequate and oversee assets allocation.

(b) underwriting Risk

Underwriting risk include the risk of incurring higher claims costs than expected owing to the random nature of claims and their frequency and severity and the risk of change in legal or economic conditions or behavioural patterns affecting insurance pricing and conditions of insurance or reinsurance cover. This may result in the insurer having either received too little premium for the risks it has agreed to underwrite and hence has not enough funds to invest and pay claims, or that claims are in excess of those expected. The Company seeks to minimise underwriting risks with a balanced mix and spread of business between classes of business and by observing underwriting guidelines and limits, conservative estimation of the claims provisions, and high standards applied to the security of reinsurers.

(c) Credit Risk

Credit risk represents the exposure to the risk that any of the Company’s business counterparties to insurance, reinsurance and investment transactions fail to perform and meet their contractual obligations. In the case of premium payment obligations by cedants or brokers, the Company has sound credit control policies in place to ensure that premiums are duly collected from the cedants and brokers. Credit evaluations are performed on all new customers, agents, brokers, reinsurers, financial institutions and other counterparties. Similarly on investment operations, the Company’s investment portfolio managers adopt a very stringent set of quantitative and qualitative criteria in selecting issuers of financial instruments that the Company invests in.

At balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk for the Company are represented by the carrying amount of each financial asset. The credit ratings of corporate bonds obtained from reputable rating agencies, based on their market values are as follows:

Market valueShareholders’ Fund Life Fund

2009 2008 2009 2008RM’000 RM’000 RM’000 RM’000

Rating of corporate bonds on market value basis:AAA - 81,298 261,652 278,193 AA - 109,026 467,909 319,779 A - 94,776 192,411 217,692 BBB - 4,631 - - Non-rated 1,241 43,236 142,803 25,998

1,241 332,967 1,064,775 841,662

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(d) Interest Rate Risk

The Company’s core insurance and investment activities are inherently exposed to interest rate risk which arises principally from differences in maturities of invested assets and long-term policyholders’ liabilities. Hence, the Company’s earnings can be potentially affected by changes in market interest rates in view of the impact, such fluctuations have on interest income from cash and cash equivalents and other fixed income investments. In dealing with this risk, the Company adopts an approach of focusing on achieving a desired overall interest rate profile, which may change over time, based on management’s longer term view of interest rates and economic conditions.

In respect of interest-earning financial assets, the following table indicates their effective interest rate at the balance sheet date and the periods in which they reprice or mature, whichever is earlier.

31 March 2009

Effective interest rate Total

Within 1 year

1 - 5 years

After 5 years

% RM'000 RM'000 RM'000 RM'000

Financial assets

General business and shareholders' fund

Unquoted bonds of corporations 9.00 1,300 - - 1,300

Fixed and call deposits 1.53 49,175 49,175 - -

Life fund

Malaysian Government Securities 3.59 69,870 9,999 43,381 16,490

Government Investment Issues 4.40 5,005 - - 5,005

Unquoted bonds of corporations 5.84 1,063,096 41,857 350,595 670,644

Negotiable Instruments of Deposits 4.51 63,036 9,804 53,232 -

Fixed and call deposits 3.93 275,053 175,053 100,000

Loans:

Policy loans 8.00 96,016 - 78,645 17,371

Mortgage loans 4.00 3,455 600 2,509 238

Staff loans 4.00 532 150 490 -

Investment-linked business

Unquoted bonds of corporations 4.00 382 382 - -


General and shareholders' fund

Malaysian GovernmentSecurities 3.79 12,048 5,000 7,048 -

Cagamas bonds 3.11 5,000 5,000 - -

Unquoted bonds of corporations 5.25 328,009 24,298 167,419 136,292

Negotiable Instruments of Deposits 3.29 95,292 - 75,732 19,560


Life fund

Malaysian Government Securities 4.13 67,205 20,070 38,151 8,984

Government Investment Issues 4.42 5,006 - - 5,006

Unquoted bonds of corporations 5.43 831,951 40,499 282,284 509,168

Negotiable Instruments of Deposits 3.20 84,245 - 54,333 29,912

Fixed and call deposits 4.48 320,054 220,054 - 100,000

Loans:

Policy loans 8.00 84,129 - - -

Mortgage loans 4.00 6,663 600 2,509 3,554

Other secured loans 4.00 550 151 399 -

Investment-linked business

Unquoted bonds of corporations - 400 - - -


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(e) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The Company manages this risk by monitoring daily and monthly projected and actual cash inflows and outflows and by ensuring that a reasonable amount of financial assets are kept in liquid instruments at all times.

(f) Fair Value of Financial Instruments

Financial instruments comprise financial assets and financial liabilities. The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale. The information presented herein represents best estimates of fair values of financial instruments at the balance sheet date.

Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a number of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates and the corresponding fair values.

The estimated fair values of the Company’s financial instruments are as follows:

31 March 2009


Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Investments 57,585 57,531 1,551,154 1,557,602

Loans - - 100,003 100,003

Other receivables 2,035 2,035 24,443 24,443

Cash and bank balances - - 8,465 8,465

Investment-linked business assets - - 176,602 176,602

Financial Liabilities

Other payables 1,200 1,200 79,023 79,023

Subordinated term loan 30,000 30,000 - -

Investment-linked business liabilities - - 2,176 2,176

Financial assets

Investments 751,320 758,936 1,372,567 1,383,470

Loans 540 540 91,342 91,342

Other receivables 15,321 15,321 16,789 16,789

Cash and bank balances 4,400 4,400 1,597 1,597

Investment-linked business assets - - 75,433 75,433

Financial liabilities

Other payables 21,064 21,064 65,888 65,888

Subordinated term loan 30,000 30,000 - -

Investment-linked business liabilities - - 363 363

The following methods and assumptions were used to estimate the fair value of assets and liabilities as of 31 March 2009:

i. Investments

The estimated fair value is based on quoted or observable market prices at the balance sheet date. Where such quoted or observable market prices are not available, the fair value is estimated using discounted cash flow or net tangible assets techniques. Where the discounted cash flow technique is used, the estimated future cash flows are discounted using prevailing market rates for similar instruments at the balance sheet date.

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ii. Loans

The fair values of loans receivable are determined by discounting the relevant cash flow using the prevailing interest rates for similar instruments at balance sheet date.

iii. Receivables and Payables

The fair values of receivables and payables are estimated to approximate their carrying values because of the short-term nature of these financial instruments.

iv. Cash and Bank Balances

The carrying values are a reasonable estimate of the fair values because of negligible credit risk and their short-term nature or frequent repricing.

No disclosure is made for amount owing to a subsidiary as it is impractical to determine its fair value with sufficient reliability given this balance has no fixed terms of repayment.

33. SIGNIFICANT AND SuBSEQuENT EVENTS

(a) Business Transfer

On 11 April 2008, the Company received the approvals of Bank Negara Malaysia and the Minister of Finance (“MOF”) for the proposed separation of the composite insurance business of the Company involving the transfer of the general insurance business to a related corporation of the Company which was incorporated under the name of AmG Insurance berhad (“AmG”) (the “Scheme of Business Transfer”). The Scheme of Business Transfer was implemented in accordance with the provisions of Part XI of the Insurance Act 1996 and was completed on 1 December 2008 via the vesting orders of the High Court of Malaya and High Court of Sabah and Sarawak.

In line with the completion of the Scheme of Business Transfer, the Company also changed its name to AmLife Insurance Berhad (“AmLife”) which was duly approved by the Company’s shareholders on 26 November 2008, to better reflect its status as a life insurance company.

(b) Shareholding Restructuring

On 20 November 2008, the Company’s holding company, AMMB Holdings Berhad (“AHB”), received the approval of MOF for the shareholding restructuring of the Company (the “Shareholding Restructuring”), which, inter alia, involved:

i. the acquisition by AHB from IAG International Pty Limited (“IAG”) of the 30% equity interest held by IAG in AmLife, for a

cash consideration of RM170 million (completed on 9 December 2008);

ii. the sale by AHB to Friends Provident Plc (“FP”) of 30% equity interest in AmLife for a cash consideration of RM170 million (completed on 9 December 2008); and

iii. the transfer of AHB’s investments in the Company and AmG to AMAB Holdings Sdn Bhd (“AMAB Holdings”), the wholly-owned subsidiary of AHB established to hold its investments in the Company and AmG.

With the completion of the Shareholding Restructuring, the shareholders of the Company comprise AMAB Holdings holding 70% equity interest and FP holding the remaining 30% equity interest.

34. GENERAL INSuRANCE REVENuE ACCOuNT

The General Insurance Revenue Account and its related notes have been prepared for the period from 1 April 2008 to 30 November 2008 as a result of the transfer of the general insurance business to AmG Insurance Berhad as a going concern. The income statement of the shareholders’ fund and related notes, however, have been prepared for the period from 1 April 2008 to 31 March 2009.

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AmLife InsurAnce BerhAd (15743-P) (Formerly known as AmAssurance Berhad) (Incorporated in Malaysia) Licensed Insurer. A member of the AmBank Group

Head Office9th Floor, Bangunan AmAssuranceNo. 1, Jalan Lumut, 50400 Kuala Lumpur, MalaysiaTel: 603-4047 8000Fax: 603-4043 8680

Customer Care CentreCall 1300 88 8800 at local ratesAlternatively, contact us viaFax: 603-2171 3000E-mail: [email protected]: Type Alert<space>message Send to 012/016/019-262 5378 (AmAlert)

https://www.amassurance.com.my

annual report 2009 - ammetlife · it project/enterprise application ... 200 insurance and bank...

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