Kurnia asia Berhad Building Strength TogeTher the team will continue to join hands in “Building Strength Together ” to achieve greater heights. VISION & MISSION TO BE A LEADING

www.kurnia.com

a n n u a l r e p o r t 2 0 1 1

B u i l d i n g S t r e n g t h

T o g e T h e rKurnia asia Berhad 539435-K10th Floor, Bangunan Kurnia,

No. 32, Jalan Yap Ah Shak, 50300 Kuala Lumpur

T: 603 2693 1668F: 603 2697 0067

E: [email protected]

Kurnia a

sia Be

rhad

539435-Ka

nn

ua

l rep

ort 2011

A Special Tribute To Our Staff.

Kurnia Asia Berhad has come a long way since its establishment and is still the forerunner in the general insurance business. The Group owes much of its success to its dedicated team of staff who has worked together over the years to uphold and raise the brand name above its peers. Their undivided commitment and loyalty towards the Company’s performance has built a strong and dynamic force to be reckoned with. Innovation coupled with professionalism and integrity, the team will continue to join hands in “Building Strength Together” to achieve greater heights.

VISION & MISSIONTO BE A LEADING FINANCIALSERVICES GROUP IN THEASEAN REGION

Notice of Annual General Meeting 2Corporate Information 4Branch Network 6Financial Highlights 8Corporate Milestones 10Chairman’s Statement 12Board of Directors’ Profile 18Management Team 22Statement on Corporate Governance 23Audit Committee Report 27Statement on Internal Control 29Products & Services 32Analysis on the Financial Statements 36Financial Statements 39Additional Compliance Information 135List of Top 10 Properties 136Analysis of Shareholdings 138Form of Proxy 143

Contentspage

Kurnia Asia Berhadannual report 2011

page 1

To generate reasonable returns to shareholders

consistently

To provide quality servicesto customers

To expand regionally into neighbouring countries and become a leading insurer in

the ASEAN region

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2011 and the Reports of Directors and Auditors thereon.

2. To re-elect the following Directors who retire pursuant to Article 110 of the Company’s Articles of Association :-

(a) Dato’ Wira Othman bin Abdul(b) Datuk Kua Chung Sen

3. To re-appoint Messrs. KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration.

4. AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions:-

4.1 Ordinary Resolution Authority to Issue Shares

“THAT subject always to the Companies Act, 1965 (“the Act”) and the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby authorised pursuant to Section 132D of the Act to issue shares in the Company at any time until the conclusion of the next Annual General Meeting upon such terms and conditions and for such purposes that the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed 10% of the issued share capital of the Company for the time being.”

4.2 Special Resolution Proposed Change of Name from Kurnia Asia Berhad to KSK Group Berhad

“THAT the name of the Company be changed from “Kurnia Asia Berhad” to “KSK Group Berhad” with effect from the date of the Certificate of Incorporation on Change of Name of the Company to be issued by the Companies Commission of Malaysia, AND THAT all references in the Memorandum and Articles of Association to the name “Kurnia Asia Berhad”, wherever the same may appear, shall be deleted and substituted with “KSK Group Berhad”.

AND THAT the Directors and/or Company Secretary of the Company be and are hereby authorised to carry out all necessary formalities to effect the Proposed Change of Name of the Company.”

5. To transact any other business for which due notice shall have been received.

RESOLUTION 1

RESOLUTION 2RESOLUTION 3

RESOLUTION 4

RESOLUTION 5

RESOLUTION 6

NOTICE IS HEREBY GIVEN THAT the ELEVENTH ANNUAL GENERAL MEETING of Kurnia Asia Berhad (“KAB”) will be held at 9th Floor, Training Auditorium, Menara Kurnia, Block B4, Leisure Commerce Square, No. 9 Jalan PJS 8/9, 46150 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 27 June 2012 at 10.00 a.m. to transact the following businesses :-

Notice of Annual General MeetingKurnia Asia Berhadannual report 2011

page 2

Notice of Annual General Meeting (cont’d)Kurnia Asia Berhadannual report 2011

page 3

Notes:

1. In respect of deposited securities, only depositors whose names appear in the Record of Depositors as at 21June 2012 be regarded as members and entitled to attend, speak and vote at the Meeting,

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a Member of the Company and a Member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. A Member shall be entitled to appoint not more than three (3) proxies to attend and vote at the Meeting. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless the Member specifies the proportions of his holding to be represented by each proxy.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a corporation, either under its Common Seal or under the hand of its attorney duly authorised.

5. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a notarially certified copy thereof, must be deposited at the Registered Office of the Company at 10th Floor, Bangunan Kurnia, No. 32 Jalan Yap Ah Shak, 50300 Kuala Lumpur not less than forty eight (48) hours before the time for holding the Meeting or any adjournment thereof.

6. Explanatory Notes on Special Business:

Resolution 5 Authority to Issue Shares

At last year’s Annual General Meeting (“AGM”), mandate was given to the Directors of the Company to issue and allot not more than 10% of the issued share capital of the Company. However, the mandate was not utilised and accordingly will lapse at this forthcoming AGM. As such, the Board would like to seek for a renewal of the mandate.

The proposed Ordinary Resolution 5, if passed, will empower the Directors of the Company to issue and allot not more than 10% of the issued share capital of the Company subject to the approvals of all the relevant governmental and/or other regulatory bodies and for such purposes as the Directors consider would be in the interest of the Company.

The authority will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions.

This authorisation will, unless revoked or varied by the Company in a general meeting, expire at the next AGM of the Company.

Resolution 6 Proposed Change of Name

The Board proposed to change the Company’s name from “Kurnia Asia Berhad” to “KSK Group Berhad” (Proposed Change of Name). The proposed change of name is to facilitate the terms of the Sale and Purchase Agreement (“SPA”) dated 12 April 2012 in relation to the proposed disposal by the Company of its 100% equity interest in Kurnia Insurans (Malaysia) Berhad to AmG Insurance Berhad, to be approved at the EGM of the Company to be held on a date to be announced.

The approval of the Companies Commission of Malaysia (“CCM”)for the proposed name “KSK Group Berhad” had been obtained on 23 May 2012. The proposed Change of Name is now subject to the shareholders’ approval to be obtained at the forthcoming AGM.

The proposed Change of Name, if approved by the shareholders of the Company, will be effective from the date of issuance of the Certificate of Incorporation on Change of Name by CCM. The Memorandum and Articles of Association of the Company will be amended accordingly to reflect the change of name.

BY ORDER OF THE BOARD

CHUNG PEI PEISEOW FEI SANSecretaries

KUALA LUMPURDate : 5 June 2012

Tan Sri Dato’ Paduka Kua Sian Kooi(Executive Chairman/ Non-Independent Executive Director)

Datuk Kua Chung Sen(Deputy Executive Chairman/ Non-Independent Executive Director)

Dato’ Quah Teong Moo(Non-Independent Non-Executive Director)

Dato’ Wira Othman Bin Abdul(Independent Non-Executive Director)

Leow Ming Fong @ Leow Min Fong(Independent Non-Executive Director)

Dato’ Dr. Sharifuddin bin Abdul Wahab(Independent Non-Executive Director)

AUDIT COMMITTEE

Leow Ming Fong @ Leow Min Fong(Chairman)

Dato’ Wira Othman bin Abdul(Member)

Dato’ Dr. Sharifuddin bin Abdul Wahab(Member)

COMPANy SECRETARy

Chung Pei Pei (F) (MAICSA 7014594)

Seow Fei San (F) (MAICSA 7009732)

REGISTERED OFFICE

Kurnia Asia Berhad10th Floor, Bangunan Kurnia No. 32, Jalan Yap Ah Shak50300 Kuala LumpurTel No. : 603 2693 1668Fax No. : 603 2697 0067E-mail : [email protected] : www.kurnia.com

PRINCIPAL BANKER

Malayan Banking BerhadBandar Sunway BranchNo. 31-32, Jalan PJS 11/28ABandar Sunway46150 Petaling JayaSelangor Darul EhsanTel No. : 603 5637 0871Fax No. : 603 5637 0869

AUDITORS

KPMG (Firm No. AF0758)Chartered AccountantsKPMG Tower No. 8 First Avenue Bandar Utama 47800 Petaling Jaya Selangor Darul EhsanTel No. : 603 7721 3388Fax No. : 603 7721 3399

REGISTRAR

Symphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling Jaya Selangor Darul EhsanTel No. : 603 7841 8000Fax No. : 603 7840 8008

Corporate InformationKurnia Asia Berhadannual report 2011

page 4

BOARD OF DIRECTORS

I n n o v a t i v e T h i n k i n g

Creative ideas come from innovative thinking.

At Kurnia, we pride ourselves as innovators of various

valuable protection plans. We constantly come up with

new ideas to enhance our products and services to meet

the ever-changing needs of our customers.

KURNIA ASIA BERHAD (539435-K)10th Floor Bangunan Kurnia No 32, Jalan Yap Ah Shak50300 Kuala Lumpur MalaysiaTel : 603 2693 1668Fax : 603 2697 0067E-mail : [email protected] : www.kurnia.com

KURNIA INSURANS (MALAySIA) BERHAD (44191-P)Menara KurniaNo. 9, Jalan PJS 8/946150 Petaling JayaSelangor Darul Ehsan Malaysia Tel : 603 7875 3333 Fax : 603 7875 9933E-mail : [email protected] : www.kurnia.com

PT. KURNIA INSURANCE INDONESIAPlaza GRI, 12th FloorJI. H. R. Rasuna SaidBlok X-2, No. 1 Jakarta12950 Indonesia Tel : (62) 21 520 3003 Fax : (62) 21 520 3002Web : www.kurnia.com/ indonesia

KURNIA INSURANCE (THAILAND) CO., LTD.9th-10th FL. Vorawat Building 849, Silom RoadSilom, BangrakBangkok 10500 Tel : 0 2635 1555Fax : 0 2635 1298 9Web : www.kurnia.com/ thailand

ALOR SETARWisma KurniaNo. 18, Lebuhraya Darul Aman05100 Alor Setar, Kedah Tel : 04 731 1320 Fax : 04 731 0888

BATU PAHAT No. 12, Jalan Maju BaratTaman Maju83000 Batu Pahat, JohorTel : 07 432 6199 Fax : 07 432 5396

BUTTERWORTH No. 9, Jalan Todak 1Pusat Bandar Sunway13700 Seberang JayaPrai, Butterworth, Penang Tel : 04 397 5085 Fax : 04 397 8226

CENTRAL Menara KurniaNo. 9, Jalan PJS 8/946150 Petaling Jaya, Selangor Tel : 03 7875 3333 Fax : 03 7875 9933

IPOH No. 16 & 18, Persiaran Greentown 6Pusat Perdagangan Greentown30450 Ipoh, PerakTel : 05 255 4097 Fax : 05 255 6020

JOHOR BAHRU No. 12, 12A & 12B Jalan Padi SatuBandar Baru Uda81200 Johor Bahru, JohorTel : 07 238 9872 Fax : 07 238 7625

JOHOR JAyA No. 110, Jalan Ros Merah 2/17Taman Johor Jaya81100 Johor Bahru, JohorTel : 07 355 2970 Fax : 07 358 4754

KAJANG No. 31, Jalan Ria Satu (1)Kawasan Perindustrian RiaOff Jalan Semenyih43000 Kajang, SelangorTel : 03 8737 9236 Fax : 03 8734 1467

Branch NetworkKurnia Asia Berhadannual report 2011

page 6

KANGAR No. 58, Jalan PenjaraMedan Syed Alwi01000 Kangar, PerlisTel : 04 976 8905Fax : 04 977 3636

KEPONG No. 4-G To 4-3, Block B Lot B2, Jalan Prima 5Pusat Niaga Metro Prima52100 Kuala Lumpur Wilayah PersekutuanTel : 03 6257 7623Fax : 03 6257 8249

KLANGNo. 27, Jalan Tiara 3Bandar Baru Klang41150 Klang, SelangorTel : 03 3341 0559 Fax : 03 3342 6890

KLUANGNo. 8, Jalan Persiaran Yayasan86000 Kluang, Johor Tel : 07 772 2182 Fax : 07 773 3993

MIRI Lot 665, Jalan Permaisuri98000 Miri, SarawakTel : 085 420 102 Fax : 085 420 924

PENANG 2F, Lorong Selamat10400, PenangTel : 04 229 7181 Fax : 04 228 9191

SEGAMATNo. 55, Jalan Genuang Kampung85000 Segamat, JohorTel : 07 932 9303 Fax : 07 932 1701

SELANGOR Wisma Kurnia, No. 149-151Jalan Maharajalela50150 Kuala LumpurWilayah Persekutuan Tel : 03 2148 1528 Fax : 03 2145 9949

SEREMBAN No. 32, Beta Ria Business CentreJalan Durian Emas 4Off Jalan Dato’ Siamang Gagap70100 Seremban, Negeri SembilanTel : 06 767 2158 Fax : 06 763 8462

SIBU Lot 438, Block 51st Floor, Town DistrictNo. 16-E, Lane 4, Lanang Road96000 Sibu, Sarawak Tel : 084 348 333 Fax : 084 317 766

SITIAWANNo. 11, Taman Sentosa DuaJalan Lumut32000 Sitiawan, Perak Tel : 05 691 0515 Fax : 05 691 2341

SUNGAI PETANI No. 9, Jalan Cempaka 1/1Bandar Aman Jaya08000 Sungai Petani, KedahTel : 04 442 8218 Fax : 04 442 8217

TAIPING No. 408, Taman SaujanaJalan Kamunting34600 KamuntingTaiping, PerakTel : 05 807 2254 Fax : 05 808 8922

TAWAU TB311, 1st FloorBlock 36, Fajar ComplexJalan Haji Karim91000 Tawau, SabahTel : 089 762 633 Fax : 089 762 533

TEMERLOH 27, Jalan Sudirman 3Bandar Sri Semantan28000 Temerloh, PahangTel : 09 296 0933 Fax : 09 296 6933

Branch Network (cont’d)Kurnia Asia Berhadannual report 2011

page 7

KOTA BHARU Lot 358 & 359, Seksyen 27Jalan Sri Cemerlang15300 Kota Bharu, KelantanTel : 09 744 3312 Fax : 09 744 9633

KOTA KINABALU Lot 47, Lrg Bandaran Berjaya 5Bandaran Berjaya, Jalan Padang88000 Kota Kinabalu, Sabah Tel : 088 232 200 Fax : 088 232 204

KUALA LUMPUR Bangunan KurniaNo. 32, Jalan Yap Ah Shak50300 Kuala Lumpur Wilayah PersekutuanTel : 03 2693 2937 Fax : 03 2693 8431

KUALA TERENGGANU No. 26, Jalan Sultan Mahmud20400 Kuala Terengganu TerengganuTel : 09 624 6561 Fax : 09 624 6531

KUANTAN B-344, Jalan Beserah25300 Kuantan, PahangTel : 09 566 4527 Fax : 09 566 1164

KUCHING No. 246 & 247 Jalan Datuk Wee Kheng Chiang93450 Kuching, SarawakTel : 082 247 288 Fax : 082 422 914

MELAKANo. 162, Jalan Taman Melaka Raya75000, MelakaTel : 06 281 3707 Fax : 06 288 3090

For the financial year ended 30 June

For the6 months

ended31 December

For the financial year ended 31 December

Kurnia Asia Berhad 2008 2009 2009 2010 2011

RM Million Restated1 Restated2

Gross premium written 1,120.0 1,052.1 473.9 1,058.8 1,109.7

Net premium 1,009.5 923.6 416.2 838.4 772.0

Earned premium 1,013.9 983.1 435.4 852.3 774.6

Underwriting (deficit) / surplus (377.3) (4.3) 3.6 (51.0) (4.8)

Investment & other income 93.2 47.8 58.9 115.7 104.0

Profit / (Loss) before tax (290.0) 14.0 51.3 29.6 60.8

Profit / (Loss) for the year / period (277.4) 31.9 43.1 15.0 47.8

Total assets 2,115.3 2,296.9 2,580.6 2,584.4 2,761.2

Insurance contract liabilities 1,807.2 1,519.7 1,775.4 1,669.2 1,690.8

Shareholders’ fund 226.1 255.9 300.1 327.8 401.4

Restated1

Prior year figures have been restated to reflect the effect of change in accounting policies in respect of insurance claims liabilities arising from the adoption of the Risk-Based Capital Framework by the Malaysian insurance subsidiary.

Restated2

31 December 2009 figures have been restated to conform with FRS 4 Insurance Contracts, whereby the element of deferred acquisition cost has been excluded from the earned premium in income statements; and reinsurance recovery of insurance contract liabilities were reclassed to be presented as reinsurance assets in statement of financial position. Prior years (financial year ended 30 June 2008 to 2009) were not restated as it is impractical to carry out recomputation.

Financial HighlightsKurnia Asia Berhadannual report 2011

page 8

Gross Premium(RM Million)

08^ 11**10**09*09^R1 R2

Net Premium(RM Million)

08^ 11**10**09*09^R1 R2R1R1

1,12

0.0

1,00

9.5

923.

6

416.

2

838.

4

772.

0

1,05

2.1

473.

9

1,05

8.8

1,10

9.7

^ For 12 months ended 30 June* For 6 months ended 31 December 2009** For 12 months ended 31 December

Financial Highlights (cont’d)Kurnia Asia Berhadannual report 2011

page 9

Total Assets(RM Million)

08^ 11**10**09*09^R1 R2

Shareholders’ Fund(RM Million)

08^ 11**10**09*09^R1R1

R1R1

R2

R2

Profit/(Loss) Before Tax(RM Million)

08^ 11**10**09*09^

Profit/(Loss) for The year/Period(RM Million)

08^ 11**10**09*09^R1R1 R2

R1

2,11

5.3

(277

.4)

(290

.0)

31.9

14.0

51.3

29.6

60.8

43.1

15.0

47.8

226.

1

255.

9 300.

1

327.

8

401.

4

2,29

6.9

2,58

0.6

2,58

4.4

2,76

1.2

1991 Assumed present name as Kurnia Insurans (Malaysia) Berhad

1993 Gross premium surpassed RM200 million

1995 Total assets surpassed RM500 million

1996 Pre-tax profit surpassed RM100 million; Attained MS ISO 9002

1997 Gross premium surpassed RM500 million

1998 Paid-up capital increased to RM100 million

1999 Total assets surpassed RM1 billion; “A” Rating for Claims Paying Ability by MARC

2000 Launch of Kurnia Auto Assist (KAA)

2001 Paid-up capital increased to RM200 million; Corporate Head Office moved to the 25-storey Menara Kurnia

2002 “A” Rating for General Insurance Financial Strength, accredited by MARC; Attained MS ISO 9000:2000

Assumed present name as Kurnia Asia Berhad (KAB)

2003 Total assets surpassed RM1.5 billion; Launch of Kurnia Express (KE)

2004 Gross premium surpassed RM1 billion; “A+” Rating for General Insurance Financial Strength, upgraded by MARC; Launch of MediGuard and MediGuard Express

Acquisition of Kurnia Insurans (Malaysia) Berhad; Formation of Kurnia Asia Berhad Group

2005 Listing on the then Main Board of Bursa Securities (KURASIA 5097); Inclusion in the MSCI Malaysia Index; Inclusion in the then Kuala Lumpur Composite Index (KLCI)

2006 “A” Rating for General Insurance Financial Strength re-affirmed by MARC; Launch of 2 new divisions - Property & Casualty Division & Motor Division; Launched 8 new medical insurance policies - MediGuard Junior, Grads, Family, Senior, Biz, Lady, Premier and Value

Declaration of Interim Dividend of 9.027 sen per share for Financial Year Ended 30 June 2006

2007 Total assets surpassed RM2 billion Completed acquisition of effective 100% equity interest in PT. Kurnia Insurance Indonesia; Launch of TOP (Transformation of Operations & Performance) Programme

2008 Launch of “Auto Shield” plan; Awarded Malaysia’s Most Valuable Brand (MMVB) 2007; Partnership with Microsoft Malaysia to become the first user of Microsoft Dynamics CRM 4.0; Won Bronze in Brand Leadership Award under Life and General Insurance Category by Malaysia Brand Equity

Further capitalisation of existing subsidiaries, Kurnia Insurans (Malaysia) Berhad and PT. Kurnia Insurance Indonesia (KII); Acquisition of 25% of Kurnia Insurance Thailand (KIT)

2009 Launch of “Perfect 10” personal accident plan, KAA Riders & enhanced KE services; Introduced Compensation for Assessed Repair Time (CART) extension service; SMS alerts & notifications; Awarded MMVB 2008 and 2009; Launch of “Perfect Rider”; Launch of “One Touch Campaign”; Upgraded compliance certification to MS ISO 9001:2008

KII was awarded 2009 Third Best Insurer with equity below IDR 50 billion by Media Asuransi

2010 Launch of “Perfect 10 Plus”, “Pet Insurance” and “Student Personal Accident” plans; KAA Riders service extended to Johor, Penang and Malacca; Launch of KurniaInsurance Facebook and Twitter pages; First general insurer to adopt the Insurance Services Malaysia (ISM) – Automotive Business Intelligence system, which is an independent vehicle valuation system; Integrated its sales systems with the ISM – No Claims Discount (NCD) system for reference of eligible NCD for motor insurance

Incorporated Kurnia (Cambodia) Incorporated Co., Ltd (KCI) with 60% equity interest in KCI; Further capitalisation of associated company, KIT

2011 Launch of Kurnia Mobile iPhone application; Launch of “MediGuard Supreme”; Launch of “AutoGuard Warranty and “PA Supreme”; Launch of Kurnia Mobile One Touch application

KAB won “Industry Excellence Award” based on the Malaysia 1000 ranking exercise.

KURNIA INSURANS (MALAySIA) BERHAD KURNIA ASIA BERHAD

Corporate MilestonesKurnia Asia Berhadannual report 2011

page 10

N u r t u r i n g P o t e n t i a l

People are the core component of a successful and sustainable

business. We believe in nurturing individuals’ abilities and potential,

recognising talents and rewarding achievements to strengthen the

team in sustaining the Company’s growth. This is a testimonial of

several milestones that we have achieved in the past.

FINANCIAL REVIEW

Stronger Net Earnings and Growth in Non-Motor Segment

The year 2011 was a significant year for us as it marked the 20th anniversary of our main subsidiary, Kurnia Insurans (Malaysia) Berhad (KIMB). From its humble beginnings two decades ago, KIMB has grown to become a household brand and is now a leading general insurer in the country. Throughout the years, together, we have upheld the spirit of strengthening the company’s operations and performance, and we are delighted to see the resilient and commendable growth in our non-motor business as we grow and diversify our business.

We are pleased to announce that for the year under review, the Group’s overall gross premiums grew by a healthy 4.8% year-on-year (y-o-y), driven by the non-motor segment, which posted a strong growth rate of 20.2%. This was mainly attributed to KIMB, whose overall gross premium registered a 3.8% growth y-o-y, led by its non-motor gross premium, which expanded by 18.7%. As a result, KIMB’s portfolio mix of motor and non-motor continued to improve to 80%: 20% ratio (2010 – 82%: 18%).

We achieved a net profit of RM47.8 million for the year under review, a significant increase of 218%, from the RM15.0 million recorded last year. This was mainly due to stronger underwriting performance, from a deficit of RM51.0 million recorded last year to a small deficit of RM4.8 million, almost a breakeven.

KIMB’s investment income for the FYE 2011 stood at RM103.7 million, 9.7% or RM11.2 million lower than previous year’s performance. This was mainly attributable to the weaker investment environment in particular during the third quarter of 2011. Nevertheless, the prudent and defensive nature of KIMB’s investment portfolio continued to be the driving force for a sustained income contribution. Net investment yield for the FYE 2011 stood at 5.8% vis-à-vis 6.3% last year.

The net asset value of the Group improved to RM401.4 million as at 31 December 2011 from RM327.8 million as at 31 December 2010. The increase was primarily due to the surplus on revaluation of properties amounting to RM30.7 million, as well as RM47.8 million net profits recorded during the period.

Aside from KIMB, we are also pleased to report that KAB’s two other insurance operations recorded encouraging growth for the FYE 2011. PT. Kurnia Insurance Indonesia (KII) grew by 50% in terms of gross premium compared to the same period last year, while Kurnia Insurance (Thailand) Co., Ltd. (KIT) achieved a 48% gross premium growth during the same period.

The Group is optimistic about the growth potential in both Indonesia and Thailand. The potential to grow in these two markets is undeniable, as these economies have remained resilient despite the external turbulent economic conditions – In 2011, Indonesia enjoyed an economic growth of over 6% while the economic growth in Thailand was in excess of 4%. Non-life insurance product led by motor insurance is set to grow significantly in these two markets in the coming years.

Taking cue from the successful transformation programme at KIMB, KII and KIT have since last year embarked on their own transformation programmes, which aim to strengthen the companies’ fundamentals and operational platform to prepare for rapid growth in the years to come. In line with the Group’s direction, KIT is projected to achieve gross premium income of THB2 billion for the year ending 31 December 2012, while KII’s gross premium target is IDR300 billion for the same period.

We are happy that our strategy to accelerate the growth of our non-motor business continues to show positive and improving trend while prudent underwriting and cost control measures have helped the Group to improve its underwriting results without compromising on the quality of our service to customers.

Moving forward, the Group will continue to build on its strengths, and focus on its business goals and strategies to enhance shareholders’ value. On the same note, the Group will also explore various opportunities to grow and expand its business.

Chairman’s StatementKurnia Asia Berhadannual report 2011

page 12

Dear Shareholders,On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Kurnia Asia Berhad (KAB or Group) for the financial year ended 31 December 2011 (FYE 2011).

OPERATIONS REVIEW

While we continue to maintain our market leadership in the motor insurance industry, we have also stamped a strong footing in the non-motor sector. KIMB has aggressively strived towards achieving stronger growth in its non-motor business. The growth in the non-motor segment has been the key driver to achieve a more balanced portfolio during the recent years, including the year under review.

In pursuit of diversification, we have taken several initiatives to increase our capability and competency in underwriting non-motor business. Some of these include driving agency sales, developing alternative distribution channels to achieve bigger market reach, strengthening our non-motor team’s underwriting and technical knowledge, and enhancing our service level.

Committed to excellence and guided by the high standards of business ethics in the insurance industry, KAB was awarded the “Industry Excellence Award” in the Insurance category at the launching ceremony of the 5th Edition of Malaysia 1000, Directory of Top Malaysian Companies on 14 September 2011. The award further reaffirmed the strong “Kurnia” brand value and its position as one of the leading general insurers in the country.

Value Added Products and Services

To remain competitive, we recognise the need for innovation, via the introduction of new non-motor products in profitable segments and provision of continuous enhancements to our existing products and value-added services. This is also in line with our customer service commitment to offer quality products and excellent services to our customers. Over the last 15 months, KIMB has strengthened its product development teams, which focused on introducing innovative and value-added products to meet customers’ needs and expectations.

The Malaysian medical and health insurance sector is expected to sustain strong growth, driven by upward trends in consumer awareness coupled with an increasing need for cover against escalating healthcare costs. During the first half of 2011, KIMB launched a new medical product, MediGuard Supreme, an

enhanced comprehensive medical insurance protection until the age of 85 years. This yearly renewable hospital and surgical policy added extra features for the benefits of its policyholders, such as double overall annual limit upon diagnosis of critical illnesses, no-claim bonus, medical second opinion, family discount, renewable until age 85, high annual limits for both outpatient kidney dialysis or cancer treatment, and in-hospital physician visitation. The enhanced extended coverage provides relief to customers in view of the rising healthcare costs when the unexpected hospitalisation takes place due to an accident or illness.

The introduction of the health insurance plan designated for foreign workers will also bode well and drive growth for KIMB’s foreign workers insurance products. KIMB has been appointed by the Human Resource Ministry and Health Ministry of Malaysia to provide insurance coverage for employment accidents, surgical and hospitalisation to foreign workers. Foreign Worker Compensation Scheme (FWCS) and Foreign Worker Hospitalisation and Surgical Insurance Scheme (SKHPPA) are designed to reduce the financial burden of the foreign workers’ employers in the event of an accident or illness. We are pleased that KIMB has garnered strong support from its industrial clients for these two products.

In March 2011, KIMB became the first general insurer in Malaysia to launch its very own mobile application for iPhone users called Kurnia Mobile, which offers ease and convenience to customers and agents alike. This significant initiative is part of the company’s continuous effort in providing the best customer service as well as keeping up with the advancement in mobile technology.

Following the successful launch of Kurnia Mobile, KIMB continues to further enhance its mobile technology through the launch of its second mobile application called Kurnia One Touch in October 2011. Living up to its name, Kurnia One Touch aims to reach out to our policyholders with just a click away, to further assist them in the event of any road emergency and to expedite our claims service. Kurnia One Touch is a free mobile application and is currently available for major mobile platforms such as iPhone, Android and BlackBerry, making it relevant for the vast majority of data capable smartphones.

Chairman’s Statement (cont’d)Kurnia Asia Berhadannual report 2011

page 13

The new features of the application include the ability to:

• LocateusersthroughGPS,• Storeandsenduser’s information,suchasname,carplate

number and contact details,• Notifyclaimbyallowingusertotake,attachandsendphotos

of damaged vehicle, accident scene or third-party’s details using the mobile camera function,

• LocatenearestKurniabranchesandworkshops,• Accessemergencynumberslisting,and• ProvidemoreinformationaboutKurniaInsurans.

In August 2011, KIMB continued to roll out two new innovative products, namely AutoGuard Warranty, a warranty plan that covers unforeseen mechanical and electrical breakdown of the vehicle, and PA Supreme, a personal accident plan that covers beyond accidental injuries. While standard personal accident policies are triggered only in the case of accidents, PA Supreme provides extra features for the benefits of its policyholders, covering:

• Medical expenses caused by Dengue, Malaria, Japanese Encephalitis (JE), and Chikungunya

• Expenses related to trauma counseling, physiotherapy,psychotherapy or rehabilitation

• Cashless hospital admission and discharge from panelhospitals

• Actual costs of orthopedic equipment for permanentdisablement

• Renewal bonus on accidental death and permanentdisablement benefit

• Otherbenefitsandfreeextensions.

This policy also provides peace of mind as KIMB partnered with internationally acclaimed service provider, International SOS to provide overseas medical advice, referral, evacuation and repatriation for PA Supreme policyholders.

As for the new motor insurance product, AutoGuard Warranty protects unforeseen mechanical and electrical breakdown of the vehicle, and provides savings for major repairs. The plan is available through selected secondhand car dealers for unregistered reconditioned vehicles below 6 years old from the date of manufacturer, or with mileage of less than 100,000 kilometres at the point of registration.

In early 2012, KIMB was among the six insurance companies being appointed as official travel insurance service providers to provide the mandatory travel insurance for members of Malaysian Association of Tour & Travel Agents (MATTA). The move is to ensure consumers’ welfare is protected when traveling. The insurance will cover all or most of the eight critical points that are crucial, which include medical, hospitalisation and travel expenses, emergency medical evacuation and repatriation, reimbursement of deposits or full payment of air tickets or tour packages, repatriation of mortal remains, compassionate visitation benefits, accidental death, permanent disability and 24-hour emergency hotline.

As part of our non-motor expansion initiatives, KIMB signed a Memorandum of Understanding (MoU) with Yayasan Guru Malaysia Berhad (YGMB) on 17 February 2012 to underwrite Group Personal Accident for a total of 79,000 members/teachers of YGMB.

On the international front, the Group has embarked on the Information Technology (IT) platform to enhance operational efficiency and make it easy for business partners to conduct business with the companies. KII recently launched an industry first e-policy system, which is a business portal designed for KII agents to issue policies to customers on the spot. At KIT, an e-surveyor system has been launched to improve claims service to policyholders, where loss surveying is conducted on the spot after an accident occurs. Going forward, KIT and KII will continue to be IT savvy for the benefit of its business partners and customers.

To this end, the Group’s strategy has served it well, and moving ahead, KAB remains committed to drive business growth and profitability to ensure that its headline numbers remain strong for the benefit of all stakeholders.


page 14

Corporate Social Responsibility

The Group believes in giving back to the community as it endeavors to create a more caring community and make a significant difference in the lives of many in the society. As a responsible corporate citizen, we are committed to serve and support the community through various events and campaigns.

In April 2011, KIMB sponsored RM10,000 in support of the 8th Annual Blind Leading the Blind Charity Walk, organised by The Lions Club of Petaling Jaya. This charitable cause, which was held at Civic Hall, Petaling Jaya gathered more than 2,500 participants for the 3km walk. It was a memorable experience for our 200 employees who took part in the event. Walkers are to take off in pairs with one completely blindfolded and the other leading. The campaign gave the sighted the opportunity to experience blindness, to value sight and appreciate teamwork. Most importantly, to raise the much needed fund.

KIMB continued such charitable supports by sponsoring the 10th Hospis Malaysia Charity Treasure Hunt in May 2011. The hunters flagged off from Cheras and headed up north to Miami Beach on the renowned Batu Ferringhi stretch. Other than goodies bags and bottles of drinking water, KIMB also provided auto assist breakdown and towing services to the treasure hunt participants during the hunt.

It was KIMB’s day of sharing with 27 underprivileged children when the company organised a visitation to Rumah Shalom in August 2011. Themed “A Day We Share,” the objective of this corporate social responsibility initiative was to share our blessings with the less fortunate children and raise awareness on the importance of sharing, giving and caring. We received overwhelming response for this charitable event, with donations in cash and kind from our kindhearted employees. The funds collected were use to buy provisions for the home and items for the children to use in their daily life.

In sports, KIMB once again co-hosted the Kurnia Saujana Amateur Championship with Saujana Golf and Country Club for the 3rd consecutive year. This annual amateur golf tournament is to acknowledge and applaud outstanding young talents in the golf fraternity. We believe that this event will continue to serve as a platform to encourage more aspiring young Malaysians golfers to test their skills against other international talents and excel in the game. We are honoured to be the preferred choice insurance provider for the local golfing community. Our aim is to strengthen our customer base by reaching out to more golfers in the country.

As part of our community projects, KIMB recently donated RM35,000 for Taman Pusat Kepong Residents Association to build a basketball court. Sharing the vision and enthusiasm of such community project, KIMB is happy to be given the opportunity to be associated and be part of the Taman Pusat Kepong community in contributing to the well-being of the neighbourhood and fostering a healthy lifestyle among the younger generation. KIMB trusts that the new basketball court will serve as a platform to encourage more youths to get active and take up the game. The court can also be an avenue for other sports or recreational activities, as well as to gather the residents.

Acknowledging Staff Contribution

The Group has a passion to excel, a desire to bring the best out of its people and a commitment to take the Group to greater heights. These have been the very spirit and values that drove us to what we are today and will continue to take us to higher levels in time to come. While we celebrate our 20th anniversary last year, we are deeply honoured for the series of successes and milestones that we have accomplished throughout the years with the support of all our stakeholders.

As we expand our business, we continue to grow our people. It has always been the Group’s philosophy to enrich its employees’ welfare, expertise and performance. Various staff benefits and incentives have been introduced and put in place to ensure that employees’ contribution are acknowledged and rewarded accordingly. Some of these include promotions, salary adjustments, bonus payments, free motor/group term life insurance, complementary lunches, low interest rates for car/housing loans, and more. We also continue to invest in staff training and development by organising series of workshops and seminars throughout the year to further enhance our human capital capabilities.


page 15


page 16

On 20 May 2011, in the spirit of camaraderie, our staff and their families came together to celebrate our Family Day at Taman Botani, Putrajaya. With the theme, 1Kurnia, the event gathered a total of over 600 staff and their family members for a fun-filled Sunday. This event was significant as it brought staff and their families together, which not only strengthens the family ties and co-worker relationships, but also gave an opportunity for us to get to know one another. It was also our token of appreciation in recognition of staff’s contributions towards the company’s growth.

I would like to take this opportunity to thank all staff for working together as a family, with mutual respect and consideration for one another. Let’s continue to provide a harmonious working environment in which our employees’ contributions and ideas are both recognised and valued. We definitely look forward to continuing our meaningful and fruitful journey with you.

Celebrating Agents Achievements

KIMB celebrated its agents’ achievements in its Annual Agency Convention and Awards Night at Genting International Convention Centre on 30 July 2011. The 3-day event, which gathered a total of over 437 agents nationwide, was organised to pay tribute to KIMB’s agency force for their hard work and productivity in 2010/2011. In total, over 100 top agents strode up the stage to accept awards in various categories, which included Million Ringgit Producers, Top Profitable Agents, Top Rookie of the Year, Top Medical Producer, Top Overall Producers, Top Non Motor Producers and Chairman’s Challenge Trophy.

KIMB has, for the past 20 years undertaken various initiatives to arrive at where it is today in terms of its distribution network. Such initiatives involved the collective efforts and dedication from employees, agents, distributors and partners who work together for the mutual benefit of our customers. With this synergy, we continue to develop long-term partnerships, increase our agency network and share knowledge and experiences to move forward.

Industry Outlook

According to the Fitch Ratings Outlook for Malaysia’s insurance report, the industry in 2012 is stable, supported by sound operating profitability, steady market growth and manageable exposure to investment risks. The growth of the Malaysian insurance market will be driven by various government measures, a low penetration rate, as well as improving product reach through bancassurance and direct distribution.

The General Insurance Association of Malaysia (PIAM) also foresees the outlook for the general insurance industry this year to be positive with an increased demand for insurance products and services. In addition, the Government backed Economic Transformation Program (ETP) is expected to lead growth in demand for insurance products and services.

In addition, as Bank Negara plans to de-tariff motor insurance premiums by 2016, there will be gradual increments to motor insurance premiums with the new motor cover framework. This bodes well for KIMB, as being the largest motor insurer in the market, the revised tariff structure is expected to improve its profitability. There will be more emphasis now on speedy and quality customer service, as customers will be expecting more from insurance companies due to the gradual increase in motor insurance premiums. Hence, we seize this opportunity to differentiate ourselves from our peers by providing superior customer service coupled with more value-added services to attract and satisfy customers.


page 17

MOVING FORWARD

It has always been our vision to project the “Kurnia” brand to prevail as a household name in Malaysia, a name built to last. Over the past 20 years, despite lacking an advantage of being associated with a bank or corporate group franchise, KIMB has leapt ahead of its peers, and has built a strong agency network and sizeable customer base. In the midst of intense competition and stringent regulatory framework, KIMB has grown to reach a size and market position whereby it would benefit from a merger with a strong and strategic insurance operator to spur its next phase of growth. To this end, on 12 April 2012, KAB has entered into a sale and purchase agreement with AmG Insurance Berhad (AmG) for the proposed disposal of 100% equity interest in KIMB for a total cash consideration of RM1.55 billion.

We are excited about this prospect to accelerate the growth of the “Kurnia” brand and are proud to undertake this exercise for the mutual benefit of all stakeholders of the Group and to create a win-win situation for all parties. For KIMB, the merger with AmG will create Malaysia’s largest general and motor insurance player giving an opportunity for KIMB to grow to the next level with the experience of AmG. For KAB, the disposal will enable the Group to focus on driving the business growth potential of the Indonesian and Thailand insurance operations. It will also give the Group an opportunity to diversify into other investment potentials for the continued growth of the Group, and at the same time, reward its shareholders.

As we look towards the next financial year and beyond, the Group is confident and positive of the future given its solid foundation that has been laid over the years, strong economy and a disciplined and robust strategy that will ensure continued growth and sustainable shareholders’ value.

APPRECIATION

On behalf of the Board of Directors, I would like to take this opportunity to extend my heartfelt and deepest gratitude to all our loyal shareholders, valued policyholders, agents, brokers, business associates, reinsurers and media for their continuous support and faith in our Group. We also extend our gratitude to Bank Negara Malaysia, Persatuan Insurans Am Malaysia (PIAM) and all other relevant authorities for their continuous support and guidance.

Finally, I would also like to express my sincere appreciation to our employees, who represent the backbone of our Group. The success of the Group during the last two decades is the consequence of your hard work, team spirit and dedication. I thank you for your contribution and look forward to celebrate another exciting chapter of success in the decades to come.

Tan Sri Dato’ Paduka Kua Sian KooiExecutive ChairmanKurnia Asia Berhad29 May 2012

Tan Sri Dato’ Paduka Kua Sian Kooi, Malaysian, 59 years of age was appointed as Director of Kurnia Asia Berhad (“KAB”) on 12 April 2004 and is currently the Executive Chairman of KAB.

Tan Sri Dato’ Paduka Kua is also currently a Director of Kurnia Insurans (Malaysia) Bhd (“KIMB”), a subsidiary of KAB, which underwrites general insurance. He has over 30 years of vast insurance experience and in the later years appointed as the director and chairman of KIMB. Through determination and diligence, he engineered the transformation of KIMB into the indisputable leader of the general insurance industry in Malaysia, whether measured in terms of profits, policyholders, premiums or assets. His other directorship in a public company is Kurnia Foundation.

Tan Sri Dato’ Paduka Kua has attended six (6) out of the seven (7) Board meetings held during the financial year. Save for Datuk Kua Chung Sen and Dato’ Quah Teong Moo, who are his brothers, he has no other relationships with any Directors of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Datuk Kua Chung Sen, Malaysian, 52 years of age was appointed as Director of KAB on 12 April 2004. He is currently the Deputy Executive Chairman of KAB and also serves as a member of the Remuneration Committee.

Together with Tan Sri Dato’ Paduka Kua Sian Kooi, he has served in the top management position of KIMB since 1991 when the then present management took over which was then an insolvent insurer, Industrial & Commercial Insurance (M) Bhd. He was also instrumental in turning around the company into the leader in the general insurance industry. He was responsible for overseeing the establishment and strengthening of the financial and investment division of KIMB in the early years. He also led in the re-engineering of operational procedures of critical processes. Following that, he spearheaded the implementation of ISO procedures, resulting in KIMB being ISO accredited in 1996. He is also very much involved in the strategic direction of the company as well as in ensuring that business strategies are accurately and effectively implemented. Under his guidance, KIMB has strengthened all aspects of its operations. His other directorship in a public company is Kurnia Foundation.

Datuk Kua has attended six (6) out of the seven (7) Board meetings held during the financial year. Save for Tan Sri Dato’ Paduka Kua Sian Kooi and Dato’ Quah Teong Moo, who are his brothers, he has no other relationships with any Directors of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Tan Sri Dato’ Paduka Kua Sian Kooi (Executive Chairman/Non-Independent Executive Director)

Datuk Kua Chung Sen(Deputy Executive Chairman/Non-Independent Executive Director)

Board of Directors’ ProfileKurnia Asia Berhadannual report 2011

page 18

Dato’ Wira Othman bin Abdul(Independent Non-Executive Director)

Dato’ Quah Teong Moo(Non-Independent Non-Executive Director)

Dato’ Wira Othman bin Abdul, Malaysian, 61 years of age was appointed Director of KAB on 13 April 2004. He serves as the Chairman of the Nominating and Remuneration Committee and is also a member of the Audit Committee. He was the Chairman of KIMB from March 2005 to June 2008 and served as a member of the Audit Committee of KIMB until June 2008.

Dato’ Wira Othman is an alumnus of University Kebangsaan Malaysia, majoring in sociology. Upon graduation in 1978, he served with the Family Planning Board and the Kedah State Development Corporation. From 1980 to 1983, he was the Assistant District Officer of Pendang. He was elected as a Member of Parliament from April 1983 to 2004 and he was appointed twice as Parliamentary Secretary in the Prime Minister’s Department from 1987 to 1995 and subsequently his second appointment was from 1997 to 1999. Thus, Dato’ Wira Othman has 10 years of experience as a Parliamentary Secretary in the Prime Minister’s Department. He was appointed as MARA’s Chairman from 1995 to 1997. Subsequently, he was also Chairman of Westport from 1996 to 1998. During the same period from 1996 to 1998, he was also the Director for MBF Cards Services Sdn Bhd, MBF Discount Card and MBF Pacific Rent-A-Car Sdn Bhd.

Dato’ Wira Othman has attended all of the seven (7) Board meetings held during the financial year. He has no family relationship with any Director and/or major shareholder of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Dato’ Quah Teong Moo, Malaysian, 56 years of age was appointed Director of KAB on 29 June 2004.

Dato’ Quah was a director of KIMB from April 2004 until June 2008 before he was appointed to his current post as Advisor to KIMB. Dato’ Quah has over 15 years of insurance experience, starting his career with KIMB as an entry-level executive, and has been steadily promoted through the ranks to senior management position. During this period, he has accumulated vast marketing experience and an in-depth knowledge of the general insurance industry in Malaysia.

Dato’ Quah has attended all of the seven (7) Board meetings held during the financial year. Save for Tan Sri Dato’ Paduka Kua Sian Kooi and Datuk Kua Chung Sen, who are his brothers, he has no other relationships with any Directors of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.

Board of Directors’ Profile (cont’d)Kurnia Asia Berhadannual report 2011

page 19

Leow Ming Fong @ Leow Min Fong, Malaysian, 62 years of age was appointed Director of KAB on 16 June 2006. He is the Chairman of the Audit Committee and a member of the Remuneration Committee and Nominating Committee.

Leow Min Fong brings with him over more than 30 years of experience in the accounting/auditing field, having served as an audit partner and concurring partner for several portfolio of clients including several public listed companies and multinational companies. Upon graduation, he commenced his articleship with a firm of Chartered Accountants in London, United Kingdom. Prior to his appointment with the company, he joined KPMG Malaysia until his retirement as one of the senior partners after a period of 32 years. During his KPMG experience, he has been posted to various KPMG branches as audit partner inclusive of short-term assignments in Singapore, British Guinea in South America and Vietnam. He has also acted as partner in charge of KPMG Cambodia for 3 1/2 years from late 1995 to early 1999. In addition, he has been involved in special work for fraud investigation, due diligence for merger and acquisitions, reporting accountant for various corporate exercises for public listed companies.

He is a fellow of the Institute of Chartered Accountants in England and Wales and member of the Malaysian Institute of Certified Public Accountants and Malaysian Institute of Chartered Accountants. His other directorships in public listed companies in Malaysia is Focus Point Holdings Berhad. He is also a director in Canadia Bank PLC, a bank incorporated in Cambodia.

Leow Min Fong has attended all of the seven (7) Board meetings held during the financial year. He has no family relationship with any Director and/or major shareholder of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.


page 20

Leow Ming Fong @ Leow Min Fong(Independent Non-Executive Director)

Dato’ Dr. Sharifuddin bin Abdul Wahab, Malaysian, 56 years of age was appointed Director of KAB on 7 May 2010. He is also a member of the Audit, Remuneration and Nominating Committee.

Dato’ Dr. Sharifuddin started his career in the education field as a lecturer in University Pertanian Malaysia in 1982. Besides lecturing, he was also active in various research and development work. Subsequently, he left the education field in 1989 and joined Schmidt Scientific Sdn Bhd from 1989 to 2005. In 1995, he was appointed the Executive Director of Schmidt Vietnam Co. Ltd and later appointed as the Regional Managing Director of Schmidt Singapore & Malaysia in 1999 to 2000. He was promoted to head the newly restructured organization of Schmidt BioMedTech Asia Ltd in April 2000 as the President and CEO. During his stint with Schmidt group of companies, he has demonstrated continous growth, achievements and remarkable leadership in the management of complex activities within the Bio Science, Technology and Medical field. He left Schmidt BioMedTech Asia Ltd in 2007 and joined Naim Holdings Berhad in 2008 as Deputy Managing Director. He was also assigned to head the overseas business development operations in Naim, until his resignation in January 2010.

Dato’ Dr. Sharifuddin holds a doctorate in Veterinary Medicine from the University of Agriculture, Faisalabad, Pakistan and a Masters of Science in Animal Reproduction from University Pertanian Malaysia. For his achievement in the animal reproduction research work, he was given a commendation award from the former Prime Minister, Tun Dr. Mahathir Mohammad. He was also awarded the Darjah Utama Yang Amat Mulia Bintang Kenyalang Sarawak which carries the title Pegawai Bintang Kenyalang (PBK) in 2009 from Tuan Yang Terutama Tun Datuk Patinggi Abang Haji Muhammad Salahuddin. He was recently awarded the Darjah Dato’ Paduka Mahkota Perak, DPMP which carries the title Dato’ by His Royal Highness, Paduka Sultan Perak Darul Ridzuan, Sultan Azlan Muhibbudin Shah ibni Almarhum Sultan Yussuf Izzuddin Shah Ghafarullahu-lah on 19 April 2010.

Dato’ Dr. Sharifuddin has attended all of the seven (7) Board meetings during the financial year. He has no family relationship with any Director and/or major shareholder of KAB. He has no conflict of interest with KAB and has no convictions of any offences within the past ten (10) years.


page 21

Dato’ Dr. Sharifuddin bin Abdul Wahab(Independent Non-Executive Director)

KURNIA ASIA BERHAD (KAB)

Board of DirectorsTan Sri Dato’ Paduka Kua Sian Kooi Group Executive ChairmanDatuk Kua Chung SenDato’ Quah Teong MooDato’ Wira Othman bin AbdulLeow Ming Fong @ Leow Min FongDato’ Dr. Sharifuddin bin Abdul Wahab

Executive Committee (EXCO)Tan Sri Dato’ Paduka Kua Sian KooiDatuk Kua Chung SenJoanne Kua Ying Fei

Management TeamTan Sri Dato’ Paduka Kua Sian Kooi Executive ChairmanDatuk Kua Chung Sen Deputy Executive ChairmanJoanne Kua Ying Fei Director, Group Executive Chairman’s OfficeRachel Ho Director, Corporate Finance / Strategy & Planning / OperationsChung Pei Pei Company SecretaryBelinda Cheah Sze Yun Associate Director, Accounts

KURNIA INSURANS(MALAySIA) BERHAD (KIMB)

Board of DirectorsDato’ Dr. Sharifuddin bin Abdul Wahab ChairmanTan Sri Dato’ Paduka Kua Sian KooiRaymond Fam Chye SoonLian Gee MengWong Kim TeckSilvius von Lindeiner Genannt von Wildau

PT KURNIA INSURANCE INDONESIA (KII)

Board of CommissionersDatuk Kua Chung Sen President CommissionerKua Sian TenBenny Haryanto Djie

KURNIA INSURANCE THAILAND (KIT)

Board of DirectorsTan Sri Dato’ Paduka Kua Sian KooiEugene Foong Jun SeongPol Gen Watcharapol PrasarnrajkitNorawat SuwanKitti PusittisakRawat BhudhathamChaweng TathaTheodor Schupbach

Management TeamKurnia Asia Berhadannual report 2011

page 22

Statement on Corporate GovernanceKurnia Asia Berhadannual report 2011

page 23

A. BOARD OF DIRECTORS

Board Balance

The Board currently has six (6) members comprising an Executive Chairman, Deputy Executive Chairman, three (3) Independent Non Executive Directors and one (1) Non-Independent Non Executive Director. The Board composition is in line with Bursa Malaysia Securities Berhad (“Bursa Securities”) Main Market Listing Requirements (“Main LR”) that requires one-third (1/3) of the Board members to be Independent Directors to ensure independence of judgment.

The present size and composition of the Board is optimum and well balanced. As presently constituted, the Board has the stability, continuity and commitment as well as capacity to discharge its responsibilities effectively.

At the Company’s level, the Executive Chairman is primarily responsible for the working of the Board and at Group level he is responsible to oversee the group’s business and performance.

Decisions of the Board of Directors are based upon majority decisions and no single Board member can make decisions for and on behalf of the Board unless duly authorised by the Board of Directors. This is to ensure that no individual or small group of individuals can dominate the Board’s decision making. The involvement and participation of Independent Non Executive Directors further provide an element of independent judgment to bear on the issues of strategy, performance, resources and standards of conduct in the Board’s decision making and deliberation. Furthermore, the three (3) Independent Directors in effect represent minority shareholders’ interests in the Company by virtue of their roles and responsibilities as Independent Directors.

Board Meetings

During the financial year under review from 1 January 2011 to 31 December 2011, the Board met on seven (7) occasions. The Board’s meeting main focus of deliberation is on financial performance and corporate developments of the Group.

Prior to each Board meeting, the Board members are given appropriate documentation in advance of each meeting. These documents include the agenda and reports covering the areas of corporate, financial and operational matters. The Board has full access to the senior management of the Group and the advice and services of the company secretary. In addition, the Directors, whether as a full board or in their individual capacity, in furtherance of their duties may seek independent professional advice at the Company’s expense.

The attendance of the Directors at the Board meetings is set out in the Director’s Profile, which appear on pages 18 to 21 of this Annual Report.

Appointment of Directors

The appointment of new directors is under the purview of the Nominating Committee comprised exclusively of non-executive directors, majority of whom are independent which is responsible for identifying and proposing new candidates for the Board and for assessing directors on an on-going basis. Any new appointment to the Board must be upon recommendation by the Nominating Committee after assessment is done with the consideration of mix skills, experiences and other qualities that the new candidate should bring to the Board. As a holding company of an insurance company, Bank Negara Malaysia’s approval is sought after approval from the Board is obtained for any new appointment to the Board of the Company.

The Board of Directors of Kurnia Asia Berhad (“KAB”) is committed to ensure that the highest standard of corporate governance is practiced throughout the Group as a fundamental objective of protecting and enhancing the interest of all stakeholders.

The Board is pleased to report to shareholders the manner in which the Principles of corporate governance contained in the Malaysian Code on Corporate Governance (“Code”) are applied and the extent of compliance thereof during the financial year under review.

Statement on Corporate Governance (Cont’d)Kurnia Asia Berhadannual report 2011

page 24

Re-election of Directors

In accordance with the Company’s Articles of Association, one-third (1/3) or the number nearest to one-third (1/3) shall retire from office at each Annual General Meeting. A retiring Director is eligible for re-appointment. Article 100 of the Company’s Articles of Association provides that any new or additional Director appointed by the Board during the year shall hold office until the next Annual General Meeting and shall then be eligible for re-election. The election of each Director is voted on separately.

Directors’ Training

The Directors have participated in and benefitted from conferences, seminars and training programmes on areas pertinent to the enhancement of their roles and responsibilities as Directors. During the financial year ended 31 December 2011, the Directors in office had attended the following conferences, seminars and training:

Members of the Board Conferences, seminars and training

Tan Sri Dato’ Paduka Kua Sian Kooi Making Sense of the Auditors Report and its Impact

Datuk Kua Chung Sen Making Sense of the Auditors Report and its Impact

Dato’ Wira Othman bin Abdul Assessing the Risk and Control Environment

Dato’ Quah Teong Moo Failed Business : Deriving Sound Strategic Insights

Leow Ming Fong @ Leow Min Fong MIA Conference 2011

Dato’ Dr. Sharifuddin bin Abdul Wahab Law Governing Directors in a Nutshell: Malaysia Companies Act 1965

Board Committees

In discharging its fiduciary duties, the Board has delegated certain responsibility to the following committees and each committee operates under their respective approved terms of reference.

a. Audit Committee

The Committee members are as follows :

Chairman Members

• Leow Ming Fong @ Leow Min Fong Independent Non Executive Director

• Dato’ Wira Othman bin Abdul Independent Non-Executive Director

• Dato’ Dr. Sharifuddin bin Abdul Wahab Independent Non-Executive Director

Terms of reference of the Committee are disclosed in the Audit Committee Report which appear on pages 27 to 28 of this Annual Report.

b. Nominating Committee

The Committee appointed by the Board of Directors consists of not less than 2 members comprising exclusively of independent non-executive directors.

The Committee’s members are:

• Dato’WiraOthmanbinAbdul(Chairman)• LeowMingFong@LeowMinFong• Dato’Dr.SharifuddinbinAbdulWahab


page 25

The primary functions of the Nominating Committee are as follows:

a. To recommend the nomination of a person or persons for all directorships to be filled by the shareholders or the board; b. To consider, in making its recommendations, candidates for directorships proposed by the Managing Director/Chief

Executive Officer and, within the bounds of practicability, by any other senior executive or any director or shareholder;c. To recommend to the board, directors to fill the seats on board committees;d. To identify, evaluate and recommend candidates for appointment as Company Secretary;e. To assess annually the effectiveness of the board as a whole, the committees of the board and the contribution of each

existing individual director and thereafter, recommend its findings to the board; andf. To review annually the required mix of skills and experience and other qualities, including core competencies which non-

executive directors should bring to the board and thereafter, recommend its findings to the board.

c. Remuneration Committee

The Committee appointed by the Board of Directors consists of not less than two (2) members comprising mainly of non-executive directors.

The Committee members are as follows:

• Dato’ Wira Othman bin Abdul (Chairman) • Leow Ming Fong @ Leow Min Fong

• Datuk Kua Chung Sen • Dato’ Dr. Sharifuddin bin Abdul Wahab

The Committee is responsible for recommending to the Board the remuneration packages of managing directors, executive directors and senior management of the Company in all its forms, drawing from outside advice as necessary. The remuneration packages of non executive directors shall be determined by the Board of Directors as a whole.

The number of directors of the Company who served during the financial year ended 31 December 2011 whose remuneration falls into the following bands:-

Range of Remuneration

No. of Directors

Executive Non-Executive

RM50,001-100,000 - 2

RM100,001 - 150,000 - 1

RM150,001 - 400,000 - -

RM400,001 - 450,000 - 1

RM450,001 – 1,750,000 - -

RM1,750,001 – RM1,800,000 1 -

RM1,800,001 – RM4,150,000 - -

RM4,150,001 – RM4,200,000 1 -

Aggregate Remuneration of the Director of the Company receivable from the group for serving on the Board of the Company:-

Executive Directors(RM’000)

Non Executive Directors(RM’000)

Directors Fee - 240

Salaries and other emoluments 5,988 434


page 26

B. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS RELATION

The Board appreciates feedback from their valued

shareholders and consistent with this, it is the intention of the Board that the shareholders are well informed of all major developments that have an impact on the Group.

Announcements of quarterly financial results, corporate proposals and other required announcements were released on time to ensure fast and efficient dissemination of information to the shareholders. The Company’s website, www.kurnia.com provides a comprehensive avenue for up-to-date information dissemination, such as dedicated sections on corporate information including financial information, press releases and company news.

The Annual General Meeting is used as another forum to inform the shareholders of current developments with an opportunity for shareholders to seek clarifications and provide feedback and comments to the Directors and Management for consideration.

C. ACCOUNTABILITy AND AUDIT

Financial Reporting

In submitting the annual audited financial statements, the Board is aware of its responsibilities and the requirement to present a balanced, clear as well as meaningful assessment of the Group’s performance and future prospects. The Company’s Financial Statements are prepared in accordance with the requirements of the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

In discharging its responsibilities, the Board is assisted by the Audit Committee in scrutinizing information for disclosure to ensure accuracy, adequacy and completeness. The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements is set out on page 40 of this Annual Report.

Internal Control

The Board recognizes that it is responsible for the Group’s internal control systems and for reviewing its effectiveness. The Board also maintains a sound internal control system to safeguard the shareholders’ investments and the Group’s assets. The overview of the state of the Group’s internal control is spelt out in the Statement on Internal Control set out on pages 29 to 30 of this Annual Report.

Relationship with the Auditors

The Board through the Audit Committee has an appropriate and transparent relationship with the external auditors and the external auditors are given access to books and records of the Group.

A summary of the activities of the Audit Committee during the year are set out under the Audit Committee Report on this Annual Report.

The amount of non-audit fees paid to the external auditors and it’s affiliated company during the financial year was RM335,219.00 for review of RBC Forms, tax and IT advisory services and divestiture services.

Compliance with the Code

The Board strives to ensure that the Company complies with the Principles and Best Practices of the Code. The Board will endeavour to improve and enhance the procedures from time to time. The Group has complied with the Best Practice of the Code.

D. BOARD COMMITTEES OF SUBSIDIARy COMPANy

As a measure of good corporate governance, Kurnia Insurans (Malaysia) Berhad (“KIMB”), the subsidiary of the Company has formed the following committees:-

• AuditCommittee• RiskManagementCommittee• RemunerationCommittee• NominatingCommittee

Audit Committee ReportKurnia Asia Berhadannual report 2011

page 27

MEMBERSHIP AND ATTENDANCE

During the financial year ended 31 December 2011, a total of five (5) Audit Committee meetings were held. The details of attendance of the Audit Committee (Committee) members are as follows:-

Composition of Audit Committee Attendance of Meetings

Leow Ming Fong @ Leow Min FongChairman/Independent Non-Executive Director

5/5

Dato’ Wira Othman bin AbdulMember/Independent Non-Executive Director

5/5

Dato’ Dr. Sharifuddin bin Abdul WahabMember/Independent Non-Executive Director

5/5

COMPOSITION

The Audit Committee shall be appointed by the directors from amongst themselves and its number shall not be less than three (3) members and all members must be non-executive directors, with a majority of whom shall be independent non-executive directors. The Chairman of the Audit Committee shall be an independent director.

RIGHTS

The Audit Committee shall, in accordance with the procedure determined by the Board and at the cost of the Company have authority to investigate any matter within its terms of reference, full and unrestricted access to any information pertaining to the Company and all the resources required to perform its duties. The Audit Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity and be able to obtain independent professional or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary.

FUNCTIONS AND DUTIES

The functions of the Audit Committee are as follows:-

(1) to review the following and report the same to the Board of Directors:-

(a) with the external auditor, the audit plan, the evaluation of the system of internal controls, the audit report and the assistance given by the employees of the company to the external auditors;

(b) the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work;

(c) the internal audit plan, the results of the internal audits or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

(d) the quarterly results and year end financial statements, prior to the approval by the board of directors. and

(e) any related party transaction and conflict of interest situation that may arise within the company or group including any transaction, procedure or course of conduct that raises questions of management integrity.

(2) to meet with the external auditors, the internal auditors or both without the presence of the senior management.

(3) to recommend the re-appointment/nomination of auditors and to review any letter of resignation from the external auditors of the company; and

(4) to report promptly to Bursa Securities where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements.

MEETINGS

The Committee shall meet at least four (4) times in a year subject to the quorum of at least two (2) independent directors or more frequently as circumstances required or upon the request of any member of the Committee, the external auditors or the internal auditors with due notice of issues to be discussed and shall record its conclusions in discharging its duties and responsibilities. The Committee may invite any Board member or any member of management or any employee of the Company who the Committee deems fit to attend its meetings to assist and to provide pertinent information as necessary.

PROCEDURE OF AUDIT COMMITTEE

The Audit Committee may regulate its own procedures, in particular:-

(a) the calling of meetings;(b) the notice to be given of such meetings;(c) the voting and proceedings of such meetings;(d) the keeping of minutes; and(e) the custody, production and inspection of such minutes.

SECRETARy

The Company Secretary or other appropriate senior official shall be the Secretary to the Audit Committee.

SUMMARy OF ACTIVITIES

During the financial year, the activities undertaken by the Committee include the following:-

a. Reviewed the external auditors’ scope of work and audit plans for the year;

b. Reviewed the internal auditors’ scope of work and audit plans for the year;

c. Reviewed the financial statements of the Group on a quarterly basis;

d. Reviewed 34 branches audit reports, 32 departmental audit reports and 10 investigative audit reports as well as the audit recommendation and management response to these recommendations; and

e. Met with the external auditors twice during the financial year without the presence of the executive Board members.

THE INTERNAL AUDIT FUNCTION

The principal subsidiary company, Kurnia Insurans (Malaysia) Berhad has a well-established Internal Audit Department (IAD), which reports to the Audit Committee (AC) in the monitoring and managing of risks and internal controls of the Group.

The IAD is independent of the activities or operations of other departments and is guided by its Audit Charter. Audit assignments are prioritised based on audit risk assessment where the audit plan is reviewed and approved by the AC. The IAD also performs ad-hoc assignments as directed by the AC.

The IAD’s primary role is to assist the AC to discharge its duties and responsibilities by independently reviewing and reporting:

• on the adequacy and integrity of the company’s system ofinternal controls on various departments,

• toprovidereasonableassurancethatsuchsystemcontinueto operate satisfactorily and effectively, and

• on the compliance with the established policies andprocedures as well as relevant statutory requirements.

Upon completion of each audit, audit reports together with the recommended action plans and its implementation status are presented to the Management and AC. The IAD will monitor closely the implementation progress of its audit recommendations to obtain assurance that all major risks and controls have been addressed by the Management. The IAD also follow-up on the findings reported by Bank Negara Malaysia / External Auditors.

The Head of the IAD has regular meetings with the AC during the financial year in order for the audit findings to be raised and addressed promptly.

The cost of the IAD in respect of the financial year ended 31 December 2011 is RM699,041.65

Audit Committee Report (Cont’d)Kurnia Asia Berhadannual report 2011

page 28

Statement on Internal ControlKurnia Asia Berhadannual report 2011

page 29

RESPONSIBILITy

The Board affirms its overall responsibility for the Group’s system of internal control. This includes reviewing the adequacy and integrity of financial, operational and compliance controls and risk management procedures. In view of the limitations that are inherent in any system of internal control, this system is designed to manage rather than eliminate the risk of failure to achieve business objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or error.

THE GROUP STRUCTURE

The Group comprises Kurnia Asia Berhad (KAB), its subsidiaries, Kurnia Insurans (Malaysia) Berhad (KIMB), PT. Kurnia Insurance Indonesia, Premier Assist Sdn. Bhd., Kurnia Asia Pte. Ltd., Kurnia (Cambodia) Incorporated Co. Ltd and its associate, Kurnia Insurance (Thailand) Co. Ltd. Premier Assist Sdn. Bhd. is a company involved in the provision of car breakdown assistance services, Kurnia Asia Pte. Ltd. is an investment holding company and Kurnia (Cambodia) Incorporated Co. Ltd. is a dormant company. The principal operating subsidiary of the Group, KIMB, is regulated by Bank Negara Malaysia. KIMB’s internal control processes constitute a major part of the Group’s system of internal control. In addition, two committees were established at the holding company, KAB level, namely an Executive Committee (EXCO) and an Audit Committee to enhance the internal control function of the Group as a whole.

KEy INTERNAL CONTROL PROCESSES

The key processes that have been established in reviewing the adequacy of the system of internal controls of the Group include the following:

At holding company level,

• KAB’sEXCOwasestablishedbytheBoardtoimplementpolicydecisions made by the Board and to monitor the Group’s business direction formulated by the Board. The EXCO is also to set corporate philosophy /direction, strategy, goals and targets for the Group, and to review the performance of the Group on a monthly basis, together with other functions as stipulated in its terms of reference. The EXCO receives monthly reports on the performance of the respective subsidiaries and associate company.

• The Audit Committee of KAB, together with the AuditCommittee of KIMB, are responsible for reviewing the internal control issues identified by the Internal Audit Department and the external auditors, as well as to improve the Group’s business efficiency, the quality of the accounting function, the system of internal controls and internal audit function. The committee’s function also includes reviewing the annual and quarterly financial results and making appropriate recommendation to the KAB Board for its approval. During the financial year, the Audit Committee of KAB met 5 times. Further details of the activities undertaken by the Audit Committee are set out in the Audit Committee Report.

The Malaysian Code on Corporate Governance stipulates that the Board of Directors of listed companies should maintain a sound system of internal control to safeguard shareholders’ investments and Group assets. The Statement on Internal Control is prepared under the requirement of Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and in accordance with the “Statement on Internal Control: Guidance for Directors of Public Listed Companies” issued by the Institute of Internal Auditors Malaysia and as adopted by Bursa Malaysia Securities Berhad. The Board recognises the importance of a sound system of internal control to safeguard shareholders’ investments and the Group’s assets, enhance accountability and monitoring function, minimise fraud and ensure the accuracy and reliability of information reporting to management.

Statement on Internal Control (Cont’d)Kurnia Asia Berhadannual report 2011

page 30

At the principal insurance subsidiary, KIMB level,

• The Audit Committee of KIMB is responsible for reviewingthe internal control issues identified by the Internal Audit Department and the external auditors, and their recommendations to improve the company’s business efficiency, the quality of the accounting function, the system of internal controls and internal audit function. It is also responsible for reviewing the adequacy of the scope, functions and resources of the Internal Audit Department. The Audit Committee of KIMB held 13 meetings during the financial year ended 31 December 2011 and had met with the external auditors twice during the year without the presence of the management.

• TheInternalAuditDepartmentofKIMBreviewscomplianceswith selected operational policies and procedures and the effectiveness of the internal control systems and highlights significant findings in respect of any non-compliance. Audits are carried out on the selected operating units and branches as approved by the Audit Committee, focusing on their critical operational and management activities. The frequency of the audits is determined by the level of risk assessed. The annual audit plan is reviewed and approved by the Audit Committee of KIMB. The annual audit plan is subject to a half yearly review and any changes to the audit plan is approved by the Audit Committee of KIMB.The findings of the audits are submitted to the Audit Committee of KIMB for review at its regular meetings.

• TheRiskManagementCommitteeofKIMBisresponsibleforreviewing and approving the company’s Risk Management Policy and Framework annually so that they remain relevant and effective. The Committee is also responsible for overseeing the implementation of the risk management process. The Committee met 6 times during the financial year to receive and review reports on risk management activities of the company as submitted by the Enterprise Risk Management Department, which is independent from the management or operational units. The Committee also reviews and monitors the related risk exposures and ensures that there are appropriate and adequate internal controls to actively manage these risks.

• AnInvestmentCommitteeisalsoinplacewiththefollowingresponsibilities:-

- to review KIMB’s portfolio and strategic investments and supervise KIMB’s Investment Department on investment strategies, and major investment evaluations, decisions and recommendations, with due consideration to and in compliance with KIMB’s Capital Adequacy management framework;

- to determine the investment objectives of each fund and appropriate benchmarks to evaluate investment performance;

- to monitor the performance returns of the fund;- to approve all counter party risk exposures – stockbrokers,

counter party, financial institutions and depository banks;- As necessary, to enter into any agreements with third

parties that have appropriate skills and experience to provide direct or ancillary services relating to the investment arrangement of the investment funds of the company;

- to undertake and decide on any matters, including establishing investment guidelines, from time to time that are aimed at establishing a framework for, and pertaining to, the prudent management of investment funds of KIMB.

• AnnualbusinessplansarepreparedbytheManagementandreviewed and approved by the Board of Directors of KIMB. Year-to-date performance and results are regularly presented at the KIMB Board meetings.

• There are Human Resource management guidelines withinKIMB for hiring and terminating of staff, formal training programs and annual performance appraisals to ensure that staffs are competent and appropriately motivated in carrying out their responsibilities.

• Policiesandproceduresforcompliancewithinternalcontrolsand the relevant laws and regulations are set out in the various operations manuals of KIMB. These are updated as and when the need arises.

B u i l d i n g H u m a n C a p i t a l

Unlike paid-up capital, human capital cannot be quantified

in ringgits and cents. But it is human capital that determines

the real worth of the Company and its brand.

At Kurnia Insurans, we anticipate the needs of our extensive customer base through a diverse range of general insurance products and services. We are committed to fulfilling the needs of our customers by providing them with the best possible financial protection tools.

Motor

When you buy a motor vehicle, you need to have a motor insurance. Kurnia’s comprehensive motor policy protects against losses or damages to vehicles, third party bodily injuries and properties. Kurnia’s Private Car Comprehensive policy includes Kurnia Auto Assist (KAA), a free 24-hour service for breakdowns and accidents and Kurnia Express (KE), a 1-hour motor claims service, where you will receive immediate settlement* at our designated Kurnia Express Centers. This service is extended to windscreen claim for policyholders who have their insurance coverage for windscreen. The KAA service is also further enhanced with the deployment of ‘KAA Riders’ on motorcycles in the Klang Valley. These riders will arrive at breakdown scene within 15 minutes in the Klang Valley area to carry out repair if possible. Otherwise, alternative arrangements will be made through the KAA call center. The ‘KAA Riders’ service is also available in the major towns of Penang, Johor and Malacca.

Under the KAA service, policyholders are entitled to a free towing service up to 50km, while for policyholders who purchase the Personal Accident plan, ‘Perfect Rider’ will enjoy free towing service for unlimited distance. For motorcyclists, Kurnia’s Motorcyclist Personal Accident policy provides 24-hour worldwide coverage against accidental death or total permanent disablement.

In 2009, Kurnia launched a product extension, Compensation for Assessed Repair Time (CART), which provides compensation to policyholder for the number of days the car is being repaired at the workshop according to the loss adjuster’s assessment.

In 2010, Kurnia has introduced the “Agreed Value” concept for vehicles below 10 years. The car models include Perodua, Proton, Toyota, Honda, Nissan and Mitsubishi. The “Agreed Value” concept is deemed the best avenue, as the car owners need not worry about underinsurance or overinsurance, and will be compensated as per the agreed Sum Insured.

*cheque or direct deposit into your bank account

Products & ServicesKurnia Asia Berhadannual report 2011

page 32

Personal Accident

Kurnia offers a wide range of Personal Accident products that cater to the different needs and demands of our customers. Personal Accident insurance provides compensation in the event of death or disablement caused by accidental, violent, external and visible means. Coverage is available for individual, family or on group basis by employers, associations, clubs and similar groups. In general, the period of insurance coverage is on annual basis.

Home

Insures home, property and personal effects against fire, theft, natural disasters and accidental physical loss or damage. Available to private dwellings, houses, flats, garages and out-buildings depending on the type of coverage. Kurnia’s home protection plans include Fire Insurance, Houseowner and Householder Insurance as well as Householder Plus Insurance. Insurance for maids is also available to cover personal accident, repatriation expenses, hospital and surgical expenses, weekly benefits for temporary total disablement, fidelity guarantee and personal liability.

Engineering

Kurnia’s various engineering insurance protection plans are designed to cover projects involving construction and other civil engineering works, and includes comprehensive protection for machinery and equipment.


page 33

Fire with Risk Management

Kurnia’s fire insurance plans protect your property against material damage caused by fire or lightning. In fact, it is more than just fire insurance. With an additional premium, it also protects you against damages resulting from other causes, such as riot, strike, malicious damage, flood and landslide. Kurnia also conducts Fire Risk Management Surveys to assess the fire hazards, standard of fire safety and evaluation of loss potential of the insured property with a view to recommend measures for loss control and risk management.

Medical

Proper healthcare is no longer a privilege, but a right for everyone as health insurance coverage is one of the key components of a sound financial plan and a necessity in view of the escalating medical cost. Kurnia’s MediGuard medical policy guarantees hassle-free admission and discharge for a covered condition at any of our panel hospitals nationwide. Alternatively, insured can opt for the reimbursement plan, with a lower premium, where the insured settles the bill upon discharge and submit for reimbursement for a covered condition. Kurnia has individual medical insurance products that are specially designed for everyone and anyone from all walks of life. In addition, Kurnia also customize Group Medical Insurance plan to cover employees’ medical expenses that suit the needs of the company.

Products & Services (cont’d)Kurnia Asia Berhadannual report 2011

page 34

Travel

Kurnia Care Travel and Traveller’s Personal Accident safeguard the insured while they are on a vacation, excursion or a business trip. The policies extend from local activities to overseas travels, be it individually or in groups.

BizGuard

Your business is your achievement and pride. But should a fire, theft or any unfortunate event occur, you could lose everything that you have established in a single instant. Kurnia BizGuard is a comprehensive insurance package that allows you to find the best solution from 3-easy plans; allowing you to focus on growing your business.

Employee Benefits

The policy gives protection to an employer against any compensation amount they may be liable to pay to any employee or their dependents for personal injuries sustained by accident or disease arising out of and in the course of his employment.

Marine

Marine Cargo Insurance policies provides cover against physical loss or damage to cargoes whilst in the course of transit by air, sea and/or overland. Generally the cover ceases once the cargoes are delivered to the final destination. Whereas, Goods In Transit Insurance policies provides cover for goods conveyed by land whether by lorry, train or other mode of land conveyance licensed to carry goods throughout the year.

Liability

Kurnia’s range of liability insurance policies indemnifies the insured in respect of its legal liability to pay compensation for accidental bodily injury to or accidental property damage of Third Party caused by or through the negligence of the insured or his/her employees. The policies also pay for legal fees and litigation expenses incurred with the written consent of the Company.


page 35

ASIA

EUROPE

AFRICA

AMERICA

BALANCE SHEET

Total Assets

The Group’s total assets stood at RM2,761.2 million as at 31.12.2011, reflecting a 6.8% growth from RM2,584.4 million as at 31.12.2010. Investments made up 59.2% (2010: 65.9%) of the Group’s total assets, followed by reinsurance assets and property and equipment that accounted for 20.0% and 8.4% (2010: 14.4% and 7.8%) respectively.

Net assets value (NAV)

The Group’s net assets value (NAV) improved to RM401.4 million as at 31.12.2011 (2010: RM327.8 million) which mainly resulted from the revaluation surplus of RM30.7 million and net profit of RM47.8 million recorded for the financial year. This translates into NAV per share of 26.97 sen as at 31.12.2011 (2010: 22.02 sen).

Investments

The Group’s investment portfolio stood at RM1.635 billion as at 31.12.2011 (2010: RM1.703 billion), and the composition is as follows:

Analysis on the Financial StatementsKurnia Asia Berhadannual report 2011

page 36

Fixe

d &

Cal

lD

epo

sits

Pri

vate

Deb

tS

ecur

itie

s

Go

vern

men

tS

ecur

itie

s

Eq

uiti

es

Uni

t Tr

ust

Oth

ers

Hel

d f

or

trad

ing

Loan

&

rece

ivab

les

(exc

lud

ing

in

sura

nce

asse

ts)

200 200

400 400

600 600

800 800

Ava

ilab

lefo

r sa

les

31.12.2011 (RM’000) • Total: 1,634,93431.12.2010 (RM’000) • Total: 1,702,846

1,000 1,000

501,

836

399,

300

10,1

79

43,4

20

19,0

55

727,

789

975,

928

141,

482

156,

298 52

2,15

8

469,

171

947,

342

20,3

22

11,4

43

Hel

d t

om

atur

ity

63,2

78

62,1

23

819,

472

457,

728

327,

236

Reinsurance Assets

As at 31.12.2011, Group’s reinsurance assets that consist of reinsurers’ share of provision for outstanding claims and provision for unearned premium increased by RM178.5 million or 47.9% to RM551.3 million from RM372.8 million as at 31.12.2010. The increase was driven by higher gross premium written and reinsurance outwards during the current financial year.

Insurance Receivables

The Group’s insurance receivables rose by 7.5% or RM4.0 million to RM56.8 million from RM52.8 million as at 31.12.2010. The increase was mainly attributed to growth in gross premium written during the current financial year.

Analysed by types of investment Analysed by classifications

Cash and Cash Equivalents

The Group’s cash and cash equivalents are made up of cash in hand, balance with banks and fixed deposits placed with licensed financial institutions with maturities of three months or less. The Group’s cash and cash equivalents stood at RM130.8 million, increased slightly from RM129.6 million as at 31.12.2010.

Total Liabilities

The Group’s total liabilities increased by 4.6% or RM103.2 million to RM2,359.8 million from RM2,256.6 million as at 31.12.2010. This increase was primarily due to higher insurance contract liabilities which accounted for 71.6% (2010: 74.0%) of the Group’s total liabilities.

Insurance Contract Liabilities

The Group’s insurance contract liabilities consist of:- gross provision for outstanding claims which amounted to

RM1,136.4 million (2010: RM1,155.8 million) and - gross provision for unearned premium which amounted to

RM554.5 million (2010: RM513.4 million)

Total insurance contract liabilities increased by RM21.7 million or 1.3% mainly due to higher provision for unearned premium in tandem with the expanded business portfolio.

Other Financial Liabilities

The Group’s other financial liabilities increased by 3.5% or RM15.3 million to RM450.6 million from RM435.3 million as at 31.12.2010, mainly due to the increase in deposits received from reinsurers.

Other Payables

The Group’s other payables increased by 13.5% or RM12.3 million to RM103.0 million from RM90.7 million as at 31.12.2010, mainly due to the additional advance from a major shareholder.

INCOME STATEMENT

The Group’s results are mainly derived from its insurance subsidiary in Malaysia, Kurnia Insurans (M) Berhad (“KIMB”). The contribution of PT Kurnia Insurance Indonesia (“KII”) and the equity-accounted associated company, Kurnia Insurance (Thailand) Co. Ltd. (“KIT”) to the performance of the Group was not significant.

The Group recorded an improved net profit of RM47.844 million for the financial year ended 31.12.2011 (2010: RM15.012 million).

The Group’s underwriting experience for the financial year was as reflected by the performance indicators tabled below:

Analysis on the Financial Statements (cont’d)Kurnia Asia Berhadannual report 2011

page 37

Underwriting Performance Indicators 31.12.2011 31.12.2010

Retention ratio (Net premium / Gross premium) 69.6% 79.2%

Net commission ratio (Net Commission / Net premium) 9.0% 9.5%

Net claims incurred ratio (Net claims inccurred / Earned premium) 70.8% 75.9%

Management expense ratio (Management expense / Net premium) 20.9% 21.0%

Underwriting margin (Underwriting margin / Earned premium) -0.6% -6.0%

Business portfolio

During the financial year under review, the Group recorded RM1,109.7 million in gross premium (2010: RM1,058.8 million), which represented a 4.8% growth year-on-year. Based on this, 78.0% (2010: 80.8%) was derived from Motor business whilst 22.0% (2010: 19.2%) was from Non-Motor business.

Retention Ratio

The Group recorded lower retention ratio of 69.6% during the current financial year (2010: 79.2%) as KIMB started to cede out its 25% of motor premium via quota share arrangement since the second half of financial year 2010.

Net commission ratio

The Group recorded lower net commission over net premium ratio of 9.0% during the current financial year (2010: 9.5%) as the commission received from reinsurance premium increased.

Net claims incurred ratio

The Group’s net claims incurred ratio improved to 70.8% (2010: 75.9%), owing to the more stringent risk selection and better claims management and control.

Management expense ratio

The Group’s management expenses ratio maintained at 20.9% (2010: 21.0%), despite the lower absolute amount of management expense incurred during the year, as the net premium base was lower compared to previous year. The lower management expense of RM161.6 million (2010: RM176.4 million) was largely due to better cost management and more efficient use of resources.

Net investment income (insurance fund)

During the financial year, the Group recorded net investment income (including realised and unrealised gain /(loss) recognised in income statement) of RM104.0 million (2010: RM115.7 million). This translated into a net investment yield of 5.8% p.a. (2010: 6.3%p.a.).

Analysis on the Financial Statements (cont’d)Kurnia Asia Berhadannual report 2011

page 38

Motor/Non-Motor(RM ‘000)

31.12.2011

1,109,729

Motor Non-Motor

31.12.2010

1,058,753

Total: 244,280

Non-Motor(RM’000)

Non-Motor(RM’000)

Engineering23,556 (9.7%)

Engineering15,960 (7.9%)

PersonalAccident57,721(23.6%)

PersonalAccident58,203 (28.6%)

Marine17,402 (7.1%)

Marine16,067 (7.9%)

Fire62,905 (25.8%)

Fire47,979 (23.6%)

Non-Motor31.12.2011

Total: 203,189

Non-Motor31.12.2010

244,

280

(22.

0%)

865,

449

(78.

0%)

203,

189

(19.

2%)

855,

564

(80.

8%)

MisceleneousAccident47,463 (19.4%)

MisceleneousAccident40,912 (20.1%)

Medical35,233 (14.4%)

Medical24,068 (11.9%)


page 39

Financial Statements

Statement of Directors’ Responsibility 40Directors’ Report 41Statements of Financial Position 46Income Statements 48Statements of Comprehensive Income 49Statements of Changes in Equity 50Statements of Cash Flow 52Notes to the Financial Statements 55Statement by Directors 130Statutory Declaration 131Independent Auditors’ Report 132


page


page 40

Statement of Directors’ Responsibilitypursuant to paragraph 15.26(a) of the Listing Requirements ofBursa Malaysia Securities Berhad

The Directors are responsible for ensuring that the audited financial statements of the Group and of the Company are drawn up in accordance with the requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board as modified by Bank Negara Malaysia’s Guidelines, the Listing Requirements of Bursa Malaysia Securities Berhad and the provisions of the Companies Act, 1965.

The Directors are also responsible for ensuring that the audited financial statements of the Group and of the Company are prepared with reasonable accuracy from the accounting records of the Group and of the Company so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2011, and of the results of their operations and cash flows for the year ended on that date.

In preparing the audited financial statements, the Directors have:

• appliedtheappropriateandrelevantaccountingpoliciesonaconsistentbasis;• madejudgementsandestimatesthatarereasonableandprudent;and• preparedtheannualauditedfinancialstatementsonagoingconcernbasis.

The Directors and Management are also responsible for ensuring that the Group and the Company maintain proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and of the Company.

The Directors and Management also have a general responsibility for taking reasonable steps to safeguard the assets of the Group and of the Company to prevent and detect fraud and other irregularities.


page 41

Directors’ Reportfor the year ended 31 December 2011

The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2011.

PrinciPal activities

The Company is principally engaged in investment holding whilst the principal activities of the subsidiaries are stated in Note 7.2 to the financial statements. There has been no significant change in the nature of these activities during the financial year, except as disclosed in Note 7.2.

results

Group company

rM’000 rM’000

Profit / (Loss) for the year 47,844 (10,593)

reserves and Provisions

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.

dividend

No dividend was paid during the financial year and the Directors do not recommend any dividend to be paid for the financial year ended 31 December 2011.

directors of the coMPany

Directors who served since the date of the last report are:

• TanSriDato’PadukaKuaSianKooi• DatukKuaChungSen• Dato’WiraOthmanBinAbdul• Dato’QuahTeongMoo• LeowMingFong@LeowMinFong• Dato’Dr.SharifuddinBinAbdulWahab


page 42

directors’ interests

The interests and deemed interests in the ordinary shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at the financial year end (including the interests of the spouses and children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

number of ordinary shares at rM0.25 each

at at

1.1.2011 Bought sold 31.12.2011

TanSriDato’PadukaKuaSianKooi

Interest in the Company

•Own 765,646,824 - - 765,646,824

•Others# 5,000,000 - - 5,000,000

DatukKuaChungSen


•Own 12,702,000 - - 12,702,000

Deemed interest in the Company

•Own 60,000,000 - - 60,000,000

Dato’WiraOthmanBinAbdul


•Own 32,857,400 - 802,800 32,054,600

•Others# 334,600 - - 334,600

Dato’QuahTeongMoo


•Own 17,867,300 - - 17,867,300

# Includes the spouse of TanSriDato’ PadukaKuaSianKooi and children ofDato’WiraOthmanBinAbdul respectively. Inaccordance with Section 134(12)(c) of the Companies Act, 1965, the interests and deemed interests of the spouses and children of the Directors in the ordinary shares of the Company and of its related corporations (other than wholly-owned subsidiaries) shall be treated as the interests of the Directors respectively.

LeowMingFong@LeowMinFongandDato’Dr.SharifuddinBinAbdulWahabdidnothaveanyinterestintheordinarysharesoftheCompany and of its related corporations during the financial year.

Directors’ Reportfor the year ended 31 December 2011 (cont’d)


page 43


directors’ Benefits

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements of the Company and its related companies) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest except for those disclosed in Note 35 to the financial statements.

Therewerenoarrangementsduringandattheendofthefinancialyear,whichhadtheobjectofenablingDirectorsoftheCompanyto acquire benefits by means of the acquisition of shares in the Company or any other body corporate.

issue of shares

There were no changes in the authorised, issued and paid-up capital of the Company during the financial year.

oPtions Granted over unissued shares

No options were granted to any person to take up unissued shares of the Company during the financial year.

other statutory inforMation

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

(i) allknownbaddebtshavebeenwrittenoffandadequateprovisionhadbeenmadefordoubtfuldebts;

(ii) any current assets, which were unlikely to be realised in the ordinary course of business have been written down to an amount whichtheymightbeexpectedsotorealise;and

(iii) there was adequate provision for insurance contract liabilities in the Group in accordance with the valuation methods specified in Part D of the Risk-Based Capital (“RBC”) Framework issued by Bank Negara Malaysia (“BNM”).


page 44

other statutory inforMation (cont’d)

At the date of this report, the Directors are not aware of any circumstances:

(i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or

(ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

(iii) which have arisen which render adherence to the existing method of valuation of assets and liabilities of the Group and of the Company misleading or inappropriate, or

(iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

(ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due.

For the purpose of this paragraph, contingent and other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Group.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December 2011 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of the financial year and the date of this report.

siGnificant event

On19December2011,theCompanysubmittedanapplicationtoBankNegaraMalaysia(“BNM”)fortheapprovaloftheMinisterofFinance(“MOF”)pursuanttoSection67oftheMalaysianInsuranceActandRegulations,1996,toreviewaproposaltoenterintoanagreementwithAmGInsuranceBerhad(“AmG”)forthepossibledisposaloftheCompany’s100%equityinterestinKurniaInsurans(Malaysia)Berhad(“KIMB”)toAmG.

On3April2012,theCompanyreceivedwrittenapprovalfromMOFviaBNMtoenterintoanagreementwithAmGforthepossibledisposaloftheCompany’s100%equityinterestinKIMBtoAmG.



page 45

auditors

Theauditors,MessrsKPMG,haveindicatedtheirwillingnesstoacceptre-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

tan sri dato’ Paduka Kua sian Kooi

datuk Kua chung sen

Petaling Jaya, Selangor

Date: 9 April 2012



page 46

Group

2011 2010

note rM’000 rM’000

assets

Property and equipment 4 231,161 202,236

Goodwill 5 - -

Investment property 6 7,713 7,500

Investments 9 1,634,934 1,702,846

Held-to-maturity 62,123 63,278

Available-for-sale 947,342 975,928

Held for trading 156,298 141,482

Loans and receivables 469,171 522,158

Investment in associate 8 14,668 13,279

Reinsurance assets 10 551,273 372,759

Insurance receivables 11 56,832 52,851

Otherreceivables,depositsandprepayments 12 80,333 35,207

Deferred acquisition costs 13 26,070 36,275

Deferred tax assets 20 3,670 1,172

Current tax assets 23,746 30,613

Cash and cash equivalents 14 130,771 129,632

total assets 2,761,171 2,584,370

equity

Share capital 21 375,000 375,000

Reserves 22 36,689 10,938

Accumulated losses (10,303) (58,147)

total equity attributable to owners of the company 401,386 327,791

non-controlling interests 6 6

total equity 401,392 327,797

liabilities

Insurance contract liabilities 15 1,690,838 1,669,152

Deferred tax liabilities 20 - 5,928

Otherfinancialliabilities 16 450,630 435,322

Insurance payables 17 87,373 29,630

Current tax liabilities 629 249

Otherpayables 18 102,976 90,748

Provision for retirement benefits 19 27,333 25,544

total liabilities 2,359,779 2,256,573

total equity and liabilities 2,761,171 2,584,370

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

Statements of Financial Positionas at 31 December 2011


page 47


company

2011 2010


assets

Property and equipment 4 273 414

Investments in subsidiaries 7 740,552 731,852

Otherreceivables,depositsandprepayments 12 676 285

Current tax assets 2,372 -

Cash and cash equivalents 14 1,543 3,272

total assets 745,416 735,823

equity

Share capital 21 375,000 375,000

Reserves 22 607 607

Accumulated losses (40,951) (30,358)

total equity attributable to owners of the company 334,656 345,249

liabilities

Otherfinancialliabilities 16 360,000 360,000

Current tax liabilities - 195

Otherpayables 18 48,281 28,135

Provision for retirement benefits 19 2,479 2,244

total liabilities 410,760 390,574

total equity and liabilities 745,416 735,823

Statements of Financial Positionas at 31 December 2011 (cont’d)


page 48

Group company

2011 2010 2011 2010

note rM’000 rM’000 rM’000 rM’000

operating revenue 23 1,161,263 1,096,936 22,451 21,538

Gross written premiums 15.2 1,109,729 1,058,753 - -

Change in unearned premiums provision (41,094) (52,666) - -

Gross earned premiums 15.2 1,068,635 1,006,087 - -

Gross written premiums ceded to reinsurers 15.2 (337,714) (220,387) - -

Change in unearned premiums provision 43,697 66,575 - -

Premiums ceded to reinsurers 15.2 (294,017) (153,812) - -

net earned premiums 15.2 774,618 852,275 - -

Investment income 24 92,628 90,849 22,451 21,538

Realised gains and losses 25 6,773 14,356 - -

Fair value gains and losses 26 4,590 10,544 - -

Commission income 27 72,230 48,848 - -

Otheroperatingincome 28 800 358 108 -

other income 177,021 164,955 22,559 21,538

Gross claims paid 29 (805,496) (858,953) - -

Claims ceded to reinsurers 29 171,054 86,092 - -

Gross change in claims liabilities 29 19,408 158,930 - -

Change in claims liabilities ceded to reinsurers 29 66,956 (33,006) - -

net claims incurred 29 (548,078) (646,937) - -

Commission expense 27 (141,944) (128,772) - -

Management expenses 30 (175,681) (187,912) (11,221) (9,052)

Finance costs (22,451) (21,193) (22,451) (21,193)

Otheroperatingexpenses (2,109) - - -

other expenses (342,185) (337,877) (33,672) (30,245)

Share of loss of equity accounted associate (557) (2,780) - -

Profit/(loss) before tax 60,819 29,636 (11,113) (8,707)

Tax (expense)/credit 32 (12,975) (14,624) 520 (2,269)

net profit/(loss) for the year 47,844 15,012 (10,593) (10,976)


Income Statementsfor the year ended 31 December 2011


page 49

Group company

2011 2010 2011 2010

note rM’000 rM’000 rM’000 rM’000

net profit/(loss) for the year 47,844 15,012 (10,593) (10,976)

other comprehensive income

Foreign currency translation differences for foreign operations 463 (1,686) - -

Net (loss)/gain on fair value of available-for-sale financial assets 9.5 (7,277) 7,844 - -

Net gain on revaluation of property 4 32,364 - - -

25,550 6,158 - -

Tax effects thereon 201 (1,961) - -

total other comprehensive income for the year, net of tax 25,751 4,197 - -

total comprehensive income/(loss) for the year 73,595 19,209 (10,593) (10,976)

Profit/(loss) attributable to:

owners of the company 47,844 15,012 (10,593) (10,976)

total comprehensive income/(loss) attributable to:

owners of the company 73,595 19,209 (10,593) (10,976)

earnings per share (sen)

Basic 33 3.21 1.01


Statements of Comprehensive Incomefor the year ended 31 December 2011


page 50

attributable to owners of the company

non-distributable distributable

fair Property non-

share treasury share value translation revaluation accumulated controlling total

capital shares premium reserve reserve reserve losses interest equity

Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 2010 375,000 (11,971) 12,578 6,952 (818) - (73,159) - 308,582

Fair value of available-for-sale financial assets - - - 5,883 - - - - 5,883

Foreign currency translation differences for foreign operations - - - - (1,686) - - - (1,686)

Total other comprehensive income for the year - - - 5,883 (1,686) - - - 4,197

Profit for the year - - - - - - 15,012 - 15,012

total comprehensive income for the year - - - 5,883 (1,686) - 15,012 - 19,209

Issuance of shares for newly incorporated subsidiary - - - - - - - 6 6

at 31 december 2010 /1 January 2011 375,000 (11,971) 12,578 12,835 (2,504) - (58,147) 6 327,797

Revaluation of property - - - - - 30,746 - - 30,746

Fair value of available-for-sale financial assets - - - (5,458) - - - - (5,458)

Foreign currency translation differences for foreign operations - - - - 463 - - - 463

Total other comprehensive income for the year - - - (5,458) 463 30,746 - - 25,751

Profit for the year - - - - - - 47,844 - 47,844

total comprehensive income for the year - - - (5,458) 463 30,746 47,844 - 73,595

at 31 december 2011 375,000 (11,971) 12,578 7,377 (2,041) 30,746 (10,303) 6 401,392

Note 21 Note 22.2 Note 22.3 Note 22.1 Note 22.4

Statements of Changes in Equityfor the year ended 31 December 2011



page 51

attributable to owners of the company

non-distributable distributable

share treasury share accumulated total

capital shares premium losses equity

company rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 2010 375,000 (11,971) 12,578 (19,382) 356,225

Loss and total comprehensive loss for the year - - - (10,976) (10,976)

at 31 december 2010 / 1 January 2011 375,000 (11,971) 12,578 (30,358) 345,249

Loss and total comprehensive loss for the year - - - (10,593) (10,593)

at 31 december 2011 375,000 (11,971) 12,578 (40,951) 334,656

Note 21 Note 22.2

Statements of Changes in Equityfor the year ended 31 December 2011 (cont’d)



page 52

Group company

2011 2010 2011 2010

note rM’000 rM’000 rM’000 rM’000

operating activities

Profit/(Loss) before tax 60,819 29,636 (11,113) (8,707)

Investment income (92,628) (90,849) (22,451) (21,538)

Realised gains recorded in income statements (6,773) (14,356) - -

Fair value gains recorded in income statements (4,590) (10,544) - -

Purchase of held for trading financial investments (114,982) (82,534) - -

Proceeds from sale of held for trading financial investments 109,424 122,233 - -

Purchase of available-for-sale financial investments 9.5 (309,156) (690,313) - -

Proceeds from sale of available-for-sale financial investments 197,256 568,771 - -

Maturity of available-for-sale financial investments 9.5 135,000 92,647 - -

Maturity of held-to-maturity financial investments 9.5 900 21,701 - -

Change in loans and receivables 9.5 53,267 (8,976) - -

28,537 (62,584) (33,564) (30,245)

non-cash items:

Depreciation of property and equipment 13,534 16,312 141 108

Writeoffofpropertyandequipment 310 - - -

Gain on disposal of property and equipment (1,127) (920) (10) (130)

(Reversal) / Allowance for impairment loss on property and equipment (351) 1,383 - -

Allowance for impairment loss on reinsurance asset 1,445 - - -

Insurance receivables:

Reversal of allowance for impairment loss (12,346) (10,066) - -

Impairment loss written off 11,050 6,601 - -

Impairment loss recovered (118) (29) - -

Retirement benefits expense 3,022 3,011 255 246

Impairment loss on goodwill - 4,373 - -

Impairment loss on investment in subsidiary - 2,394 - 4,373

Share of loss of equity accounted associate 557 2,780 - -

Finance costs 22,451 21,193 22,451 21,193

Total non-cash items 38,427 47,032 22,837 25,790

Statements of Cash Flowfor the year ended 31 December 2011


page 53

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

changes in working capital:

Change in reinsurance assets (179,959) (33,569) - -

Change in insurance receivables (2,567) 319 - -

Change in other receivables (40,176) (11,213) (391) 287

Change in deferred acquisition costs 10,205 550 - -

Change in insurance contract liabilities 21,686 (106,264) - -

Change in other financial liabilities 15,308 67,128 - -

Change in insurance payables 57,743 3,325 - -

Change in other payables 11,131 44,015 19,030 22,225

Net changes in working capital (106,629) (35,709) 18,639 22,512

cash (used in)/ generated from operating activities (39,665) (51,261) 7,912 18,057

Dividend income received 46,814 44,122 - -

Interest income received 40,914 52,936 - -

Retirement benefits paid (1,233) (1,252) (20) (68)

Income tax paid (13,921) (16,513) (2,047) (1,721)

net cash flows from operating activities 32,909 28,032 5,845 16,268

investing activities

Proceeds from disposal of property and equipment 1,752 2,914 10 130

Purchase of property and equipment (10,650) (8,900) - (390)

Interest received - 371 22,451 21,563

Investment in associate (1,644) (2,206) - -

Investment in a subsidiary - - (8,700) -

net cash flows (used in)/from investing activities (10,542) (7,821) 13,761 21,303

financing activities

Proceeds from issuance of shares in a subsidiary - 6 - -

Term loan interest paid (21,335) (20,845) (21,335) (20,845)

Repayment of term loan - (40,000) - (40,000)

net cash flows used in financing activities (21,335) (60,839) (21,335) (60,845)

Net increase/(decrease) in cash and cash equivalents 1,032 (40,628) (1,729) (23,274)

Effect of exchange rate fluctuations on cash held 107 474 - -

Cash and cash equivalents at beginning of year 129,632 169,786 3,272 26,546

cash and cash equivalents at end of year 130,771 129,632 1,543 3,272

Statements of Cash Flowfor the year ended 31 December 2011 (cont’d)


page 54

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

cash and cash equivalents comprise:

Cash and bank balances 37,436 38,818 1,543 3,272

Fixed and call deposits (with maturity of less than three months):

Licensed financial institutions in Malaysia 82,741 90,814 - -

Financial institutions outside Malaysia 10,594 - - -

Cash and cash equivalents 130,771 129,632 1,543 3,272

Included in the fixed and call deposits are RM6,487,000 (2010: RM6,708,000) held as cash collateral for guarantees issued on behalf of policyholders (Note 16).


Statements of Cash Flowfor the year ended 31 December 2011 (cont’d)


page 55

1. PrinciPal activity and General inforMation

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the registered office and principal place of business of the Company is located at:

MenaraKurnia Block B4, Pusat Dagang Setia Jaya Leisure Commerce Square No. 9, Jalan PJS 8/9 46150 Petaling Jaya Selangor

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate. The financial statements of the Company as at and for the financial year ended 31 December 2011 do not include other entities.

The Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are stated in Note 7.2 to the financial statements. There has been no significant change in the nature of these activities during the financial year, except as disclosed in Note 7.2.

The financial statements were approved by the Board of Directors on 9 April 2012.

2. Basis of PreParation

2.1 statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRSs”) as modified by Bank Negara Malaysia (“BNM”) Guidelines, generally accepted accounting principles in Malaysia, the Companies Act, 1965 and the Insurance Act and Regulations, 1996.

The following are accounting standards, amendments and interpretations of the FRS framework that have been issued by the Malaysian Accounting Standards Board (MASB) but have not been adopted by the Group and Company:

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2011• ICInterpretation19,Extinguishing Financial Liabilities with Equity Instruments• AmendmentstoICInterpretation14,Prepayments of a Minimum Funding Requirement

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012• FRS124,Related Party Disclosures (revised)• AmendmentstoFRS1,First-time Adoption of Financial Reporting Standards – Severe Hyperinflation and Removal of

Fixed Dates for First-time Adopters• AmendmentstoFRS7,Financial Instruments: Disclosures – Transfers of Financial Assets• AmendmentstoFRS112, Income Taxes – Deferred Tax: Recovery of Underlying Assets

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2012• Amendments to FRS101,Presentation of Financial Statements – Presentation of Items of Other Comprehensive

Income

Notes to the Financial Statements


page 56

2. Basis of PreParation (cont’d)

2.1 statement of compliance (cont’d)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2013• FRS10,Consolidated Financial Statements• FRS11,Joint Arrangements• FRS12,Disclosure of Interests in Other Entities• FRS13,Fair Value Measurement• FRS119,Employee Benefits (2011)• FRS127,Separate Financial Statements (2011)• FRS128,Investments in Associates and Joint Ventures (2011)• ICInterpretation20,Stripping Costs in the Production Phase of a Surface Mine• AmendmentstoFRS7,Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities• AmendmentstoFRS7,Financial Instruments: Disclosures – Mandatory Date of FRS 9 and Transition Disclosures

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2014• AmendmentstoFRS132,Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2015• FRS9,Financial Instruments (2009)• FRS9,Financial Instruments (2010)

The Group’s and the Company’s financial statements for annual period beginning on 1 January 2012 will be prepared in accordance with the Malaysian Financial Reporting Standards (MFRSs) issued by the MASB that will also comply with International Financial Reporting Standards (IFRSs). As a result, the Group and the Company will not be adopting the above FRSs, Interpretations and amendments that are effective for annual periods beginning on or after 1 January 2012.

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except as disclosed in the notes to the financial statements, on the assumption that the Group and the Company are going concerns.

The Company incurred a net loss of RM10,593,000 during the year ended 31 December 2011, and as of that date, the Company’s current liabilities exceeded its current assets by RM243,690,000 which may indicate the existence of a significant uncertainty about the Company’s ability to continue as a going concern.

The Company has considered prospective cash flow information and events that may occur in the next twelve months and the possible actions to be taken by the Company. In this regards, the Company had on 3 April 2012 obtained approval from MOFviaBNM,toenterintoanagreementwithAmGtodisposetheCompany’s100%equityinterestinKIMB.

The validity of the going concern assumption in the preparation of financial statements is dependent on the successful outcome of the various initiatives being undertaken by the Company and the Company achieving future profitable operations. Thefinancialstatementsdonotincludeanyadjustmentsrelatingtotherecoverabilityandclassificationofrecordedassetamounts, and relating to amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

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

Notes to the Financial Statements (cont’d)


page 57

2. Basis of PreParation (cont’d)

2.3 functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

2.4 use of estimates and judgements

ThepreparationoffinancialstatementsinconformitywithFRSsrequiresmanagementtomakejudgements,estimatesandassumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Therearenosignificantareasofestimationuncertaintyandcriticaljudgementsinapplyingaccountingpoliciesthathaveasignificant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

• Note3.3 - revaluationofpropertyandequipment• Note3.6 - determinationoffairvalueofinvestmentproperties• Note3.7 - financialinstruments• Note3.14 - valuationforretirementbenefits• Note3.18 - valuationofgeneralinsurancecontractliabilities

3. siGnificant accountinG Policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by the Group entities, except for:

i) the change in accounting policy to adopt the revaluation model to measure freehold land and buildings and leasehold land and buildings classified as property and equipment in accordance with FRS 116, Property,plantandequipment. This change in accounting policy has been accounted for prospectively upon the initial application of the revaluation model in accordance with FRS 116. Under the revaluation model, the properties are stated at revalued amounts, which are the fair values at the date of the revaluation less subsequent accumulated depreciation (except for freehold land which has an unlimited useful life and therefore is not depreciated) and any subsequent accumulated impairment losses. Any revaluation surplus is credited to the revaluation reserve included within equity.

ii) the change in accounting policy with respect to the subsequent measurement of investment property from the cost model to the fair value model, with changes in fair value recognised in income statement, in accordance to FRS 140, Investment Property. The Group applied the impact of adopting fair value model, which amounted to RM160,000, prospectively rather thanmakinganadjustmenttotheopeningbalanceofretainedearningsasrequiredbyFRS140,sincetheimpactisnotmaterial to the Group’s financial results.



page 58

3. siGnificant accountinG Policies (cont’d)

3.1 Basis of consolidation

3.1.1 subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting.

Investments in subsidiaries are stated in the Company’s statement of financial position at cost less any impairment losses. Investment in Irredeemable Convertible Subordinated Debt (“ICSD”) issued by the subsidiary of the Company is treated as cost of investment in the subsidiary as the ICSD is non-redeemable and convertible during the tenure of the ICSD. ICSD which has not been converted will be fully converted on maturity date.

3.1.2 associates

Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies.

Associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the equity accounted associates, after adjustments,ifany,toaligntheaccountingpolicieswiththoseoftheGroup,fromthedatethatsignificantinfluencecommences until the date that significant influence ceases.

WhentheGroup’sshareof lossesexceeds its interest inanequityaccountedassociate, thecarryingamountof that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

3.1.3 transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.1.4 accounting for business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

The Group has changed its accounting policy with respect to the accounting for business combinations.

From 1 January 2011 the Group has applied FRS 3, Business Combinations (revised) in accounting for business combinations. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the standard and does not have impact on earnings per share.



page 59


3.1 Basis of consolidation (cont’d)

3.1.4 accounting for business combinations (cont’d)

Acquisitions on or after 1 January 2011 For acquisition on or after 1 January 2011, the Group measures goodwill at the acquisition date as:

- thefairvalueoftheconsiderationtransferred;plus- iftherecognisedamountofanynon-controllinginterestsintheacquiree;plus- ifthebusinesscombinationisachievedinstages,thefairvalueoftheexistingequityinterestintheacquiree;

less- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Whentheexcessisnegative,abargainpurchasegainisrecognisedimmediatelyinincomestatements.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in income statements.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent considerationisclassifiedasequity,itisnotremeasuredandsettlementisaccountedforwithinequity.Otherwise,subsequent changes to the fair value of the contingent consideration are recognised in income statements.

3.1.5 non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Since the beginning of the reporting period, the Group has applied FRS 127, Consolidated and Separate Financial Statements (revised) where losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. This change in accounting policy is applied prospectively in accordance with the transitional provisions of the standard and does not have impact on earnings per share.

In the previous years, where losses applicable to the non-controlling interests exceed the interest in the equity of a subsidiary, the excess, and any further losses applicable to the non-controlling interests, were charged against the Group’s interest except to the extent that the non-controlling interests had a binding obligation to, and was able to, make additional investment to cover the losses. If the subsidiary subsequently reported profits, the Group’s interest was allocated with all such profits until the non-controlling interests’ share of losses previously absorbed by the Group had been recovered.



page 60


3.2 foreign currency

3.2.1 foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period date are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rates at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in the income statements.

3.2.2 operations denominated in functional currencies other than ringgit Malaysia (“rM”)

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill andfairvalueadjustments,aretranslatedtoRMatexchangeratesattheendofthereportingperiod,exceptforgoodwillandfairvalueadjustmentsarisingfrombusinesscombinationsbefore1January2006whicharereportedusing the exchange rates at the dates of the acquisitions. The income and expenses of foreign operations in functional currencies other than RM, are translated to RM at exchange rates at the dates of the transactions. Foreign exchange differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve.

Ondisposalofsuchoperations,theaccumulatedtranslationdifferencesarerecognisedintheconsolidatedincomestatements as part of the gain or loss on disposal.

3.3 Property and equipment

3.3.1 recognition and measurement

Items of property and equipment except for property under construction are stated at cost/ valuation less any accumulated depreciation and any accumulated impairment losses. Property under construction is stated at cost.

The Group revalues its properties comprising land and buildings every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value.

The revalued amounts of property are determined by using comparison and investment methods. The comparison method entails critical analysis of recent evidence of values of comparable properties in the neighborhood and makingadjustments fordifferencessuchasdifferences in location,sizeandshapeof land,ageandconditionof building, tenure, title restrictions if any and other relevant characteristics. The investment method entails the determination of the probable gross annual rental the property is capable of producing and deducting there from the outgoings to arrive at the annual net income. The annual net income is capitalised using a rate of interest to arriveatthecapitalvalueoftheproperty.Valuationofpropertiesinvolvesadegreeofjudgementbeforearrivingatthe respective property’s revalued amount. As such, the revalued amount of the properties may be different from its actual market price.



page 61


3.3 Property and equipment (cont’d)

3.3.1 recognition and measurement (cont’d)

Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to income statements.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

Whensignificantpartsofanitemofpropertyandequipmenthavedifferentusefullives,theyareaccountedforasseparateitems(majorcomponents)ofpropertyandequipment.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognised net within “management expenses” in the incomestatements.Whenrevaluedassetsaresold, theamounts included in therevaluationreserve account are transferred to retained earnings / accumulated losses.

3.3.2 subsequent costs

The cost of replacing a part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group or the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised to income statements. The costs of the day-to-day servicing of property and equipment are recognised in the income statements as incurred.

3.3.3 depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in the income statements on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. Freehold land is not depreciated. Property and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Leasehold land over lease period Buildings 50 years Officeimprovements 3-5years Furniture and fittings 10 years Officeequipmentandcomputers 3-10years Motor vehicles 5 years

Depreciationmethods,residualvaluesandusefullivesarereviewed,andadjustedasappropriateattheendofthereporting period.



page 62


3.4 leased assets

3.4.1 finance leases

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified asfinanceleases.Oninitialrecognitionoftheleasedassetismeasuredatanamountequaltothelowerofitsfair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Minimum lease payments made under finance lease are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustmentisconfirmed.

Leasehold land which in substance is a finance lease is classified as property and equipment.

3.4.2 operating leases

Leases, where the Group does not assume substantially all the risk and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the Group’s statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property.

Payments made under operating leases are recognised in the income statements on a straight-line basis over the term of the lease. Lease incentives received are recognised in income statements as an integral part of the total lease expense, over the term of the lease.

Leasehold land which in substance is an operating lease is classified as prepaid lease payments.

3.5 intangible asset

3.5.1 Goodwill

Goodwill arises on business combinations is measured at cost less any accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any assets, including goodwill, that forms part of the carrying amount of the equity accounted investee.

For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair values of the net identifiable assets and liabilities.

For business acquisition between 1 January 2006 and 1 January 2011, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Any excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in income statements.



page 63


3.6 investment properties

3.6.1 investment properties carried at fair value

Investment properties are properties which are owned or held under leasehold interest to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business. These include land held for a currently undetermined future use.

Investment properties are measured initially at cost and subsequently at fair value with any change therein recognisedinincomestatementsfortheperiodinwhichtheyarise.Wherethefairvalueoftheinvestmentpropertyunder construction is not reliably determinable, the investment property under construction is measured at cost until either its fair value becomes reliably determinable or construction is complete, whichever is earlier.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in the income statements in the period in which the item is derecognised.

3.6.2 determining fair value

An external, independent valuation firm, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued is engaged to, value the Group’s investment properties every 3 years and at shorter intervals whenever the fair value of the revalued asset is expected to differ materially from their carrying value.

The fair value of the investment property is determined by using comparison and investment methods. The comparison method entails critical analyses of recent evidence of values of comparable properties in the neighbourhoodandmakingadjustmentsfordifferencessuchasdifferencesinlocation,sizeandshapeoftheland,age and condition of building, tenure, title restrictions if any and other relevant characteristics. The investment method entails the determination of the probable gross annual rental the property is capable of producing and deducting therefrom the outgoings to arrive at the annual net income. The annual net income is capitalised using a rateofinteresttoarriveatthecapitalvalueoftheproperty.Valuationofpropertiesinvolvesadegreeofjudgementbefore arriving at the respective property’s revalued amount. As such, the revalued amount of the properties may be different from its actual market price.

Investment property under construction is valued by estimating the fair value of the completed investment property and then deducting from that amount the estimated cost to complete construction, financing costs and a reasonable profit margin.



page 64



3.7 financial instruments

3.7.1 initial recognition and measurement

A financial instrument is recognised in the financial statements when, and only when, the Group and the Company become a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

3.7.2 financial instrument categories and subsequent measurement

The Group and the Company categorise and measure financial instruments as follows:

financial assets

3.7.2.1 Financial assets at fair value through profit or loss (“FVTPL”)

Fair value through profit or loss category comprises financial assets that are held for trading (“HFT”) or financial assets that are specifically designated into this category upon initial recognition.

A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing in the near term or it is part of a portfolio of identified securities that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking.

Financial assets classified as HFT are subsequently measured at their fair values and any gain or loss arising from a change in the fair value will be recognised in the income statements.

3.7.2.2 Held-to-maturity investments (“HTM”)

HTM investments category comprises debt instruments that are quoted in an active market and the Group and the Company have the positive intention and ability to hold to maturity.

Financial assets categorised as HTM investments are subsequently measured at amortised cost using the effective interest method.


page 65



3.7 financial instruments (cont’d)

3.7.2 financial instrument categories and subsequent measurement (cont’d)

3.7.2.3 Loans and receivables (“LAR”)

Loans and receivables category comprises debt instruments that are not quoted in an active market and include other receivables and cash and cash equivalents.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

3.7.2.4 Available-for-sale financial assets (“AFS”)

AFS category comprises investments in equity and debt securities that are not held for trading or held-to-maturity.

Investments in equity instruments that do not have a quoted market price in an active market and whosefairvaluecannotbereliablymeasuredaremeasuredatcost.OtherfinancialassetsclassifiedasAFS are subsequently measured at their fair values and any gain or loss arising from a change in the fair value will be recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses arising from monetary items which are recognised in the income statements. Onderecognition, the cumulative gain or loss previously recognised in other comprehensive incomeis reclassified from equity into income statements. Interest calculated for a debt instrument using the effective interest method is recognised in the income statements.

3.7.2.5 Insurance receivables

Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective yield method.

Ifthereisobjectiveevidencethattheinsurancereceivableisimpaired,theGroupreducesthecarryingamount of the insurance receivable accordingly and recognises that impairment loss in income statements.TheGroupgatherstheobjectiveevidencethataninsurancereceivableisimpairedusingthesame process adopted for financial assets carried at amortised cost. The impairment loss is calculated under the same method used for these financial assets. These processes are described in Note 3.9.

Insurance receivables are derecognised when the derecognition criteria for financial assets, as described in Note 3.7.5, have been met.

Allfinancialassets,exceptforthosemeasuredatfairvaluethroughprofitorloss,aresubjecttoreviewforimpairment (see Note 3.9).


page 66



3.7 financial instruments (cont’d)

3.7.3 a regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market place concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

- the recognition of an asset to be received and the liability to pay for it on the trade date, and- derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a

receivable from the buyer for payment on the trade date.

All the financial assets are recognised using trade date except for debt instruments which are recognised using settlement date.

3.7.4 financial liabilities

All financial liabilities are initially measured at fair value and subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are held for trading or financial liabilities that are specifically designated into this category upon initial recognition.

Financial liabilities categorised as fair value through profit or loss is subsequently measured at their fair values with the gain or loss recognised in income statements.

3.7.5 derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially allrisksandrewardsoftheasset.Onderecognitionofafinancialasset,thedifferencebetweenthecarryingamountand the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the income statements.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is dischargedorcancelledorexpires.Onderecognitionofafinancial liability,thedifferencebetweenthecarryingamount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the income statements.

3.8 cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value with original maturities of three (3) months or less.

Cash and cash equivalents are categorised and measured as loans and receivables in accordance with policy note 3.7.2.3.


page 67



3.9 impairment

3.9.1 financial assets, excluding insurance receivables

All financial assets (except for financial assets categorised as fair value through profit or loss, investment in subsidiaries, investment in associate and fixed and call deposits) are assessed at each reporting date whether there isanyobjectiveevidenceofimpairmentasaresultofoneormoreeventshavinganimpactontheestimatedfuturecash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised.

Foranequityinstrument,asignificantorprolongeddeclineinthefairvaluebelowitscostisanobjectiveevidenceof impairment.

3.9.1.1 Held-to-maturity (“HTM”) and loans and receivables (“LAR”)

An impairment loss in respect of HTM investments and LAR is recognised in income statements and is measured as the difference between the financial asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate. The amount of the impairment loss is recognised in the income statement. The carrying amount of the assets is reduced through the use of an allowance account.

Subsequentreversalintheimpairmentlossisrecognisedwhenthedecreasecanbeobjectivelyrelatedto an event occurring after the impairment was recognised, to the extent that the financial assets carrying amount does not exceed its amortised cost if no impairment had been recognised. The reversal is recognised in the income statements.

3.9.1.2 Available-for-sale (“AFS”)

An impairment loss in respect of available-for-sale financial assets is recognised in the income statements and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Whereadeclineinthefairvalueofanavailable-for-salefinancialassethasbeenrecognisedintheothercomprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised to income statements.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in income statements and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in income statements for an investment in an equity instrument classified as available-for-sale is not reversed through the income statements.

If, in the subsequent period, the fair value of a debt instrument increases and the increase can be objectivelyrelatedtoaneventoccurringaftertheimpairmentlosswasrecognisedinincomestatements,the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the income statements.


page 68


3.9 impairment (cont’d)

3.9.2 insurance receivables

Insurancereceivablesareassessedateachreportingdatewhetherthereisanyobjectiveevidenceofimpairmentas a result of one or more events having an impact on the estimated future cash flows of the assets. Losses expectedasaresultoffutureevents,nomatterhowlikely,arenotrecognised.Anobjectiveevidenceofimpairmentis deemed to exist where the principal or interest or both for insurance receivables is past due for more than 90 days or 3 months, as prescribed in the Guidelines on Financial Reporting for Insurers issued by BNM.

An impairment loss in respect of insurance receivables is recognised in income statements and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

If,insubsequentperiod,thefairvalueofinsurancereceivableincreasesandtheincreasecanbeobjectivelyrelatedto an event occurring after the impairment loss was recognised in income statements, the impairment loss is reversed, to the extent that the insurance receivables’ carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the income statements.

3.9.3 other assets

The carrying amounts of other assets (except for deferred tax assets and investment property that is measured at fair value) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. For goodwill that have indefinite useful lives, the recoverable amount is estimated each period at the same time.

Whenindicationofimpairmentexists,theasset’srecoverableamountisestimated.Forthepurposeofimpairmenttesting, assets are grouped together into the smallest group of assets (known as the “cash-generating unit”) that generates cash inflows from continuing use that are largely independent of the cash flows of other assets or groups of assets or cash-generating unit.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.

Impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit or the group of cash-generating units and then to reduce the carrying amount of the other assets in the cash-generating unit (or a group of cash-generating units) on a pro rata basis.



page 69



3.9 impairment (cont’d)

3.9.3 other assets (cont’d)

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to income statements in the year in which the reversals are recognised.

3.10 Product classification

The Group issues contracts that transfer insurance risk. Insurance contracts are those contracts that transfer significant insurance risk. An insurance contract is a contract under

which the Group (the insurer) has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. As a general guideline, the Group determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.

Onceacontracthasbeenclassifiedasaninsurancecontract,itremainsaninsurancecontractfortheremainderofitslife-time, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expired.

3.11 reinsurance

The Group cedes the insurance risk in the normal course of business for all its businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contracts.

Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.

Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairmentarisesduringthereportingperiod.Impairmentoccurswhenthereisobjectiveevidenceasaresultofaneventthat occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recorded in income statements.

Gains or losses on buying reinsurance, if any, are recognised in income statements.

The Group also assumes reinsurance risk in the normal course of business for general insurance contracts when applicable.


page 70


3.11 reinsurance (cont’d)

Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. Reinsurance liabilities represent balances due to reinsurance companies.

Amounts payable are estimated in a manner consistent with the related reinsurance contract.

Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.

Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statements of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured.

3.12 commission agency expenses

Gross commission and agency expenses, which are costs directly incurred in securing premium on insurance policies, and income derived from reinsurers in the course of ceding of premiums to reinsurers, are charged to income statements in the period in which they are incurred or deferred where appropriate as set out in Note 3.17.3.

3.13 equity instruments

All equity instruments are stated at cost on initial recognition and are not remeasured subsequently.

3.13.1 issue expenses

Incremental costs directly attributable to the issue of equity instruments are recognised as a deduction from equity.

3.13.2 repurchase of share capital

Whensharecapitalrecognisedasequityisrepurchased,theamountoftheconsiderationpaid,includingdirectlyattributable costs, is recognised as a deduction from equity and is not re-valued for subsequent changes in the fair value or market price of shares. Repurchased shares are classified as treasury shares in the statement of changes in equity.

Where treasury shares are distributed as share dividends, the cost of the treasury shares is applied in thereduction of the share premium account or distributable reserves, or both.

Wheretreasurysharesarereissuedbyre-saleintheopenmarket,thedifferencebetweenthesalesconsiderationnet of directly attributable costs and the carrying amount of the treasury shares is recognised in equity.



page 71


3.14 employee benefits

3.14.1 short term employee benefits

Short term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

The Group’s and the Company’s contributions to the Employees’ Provident Fund are charged to the income statements in the period to which they relate. Once the contributions have been paid, the Group and theCompany have no further payment obligations.

3.14.2 defined benefit plan

The Group’s and the Company’s net obligation in respect of the defined benefit retirement plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and priorperiods;thatbenefitisdiscountedtodeterminethepresentvalue.Anyunrecognisedpastservicecostsandthe fair value of the plan assets are deducted. The discount rate is the yield at the end of the reporting period on high quality corporate bonds or government bonds that have maturity dates approximating the terms of the Group’s and the Company’s obligation and that are denominated in the same currency in which the benefits are expectedtobepaid.Thecalculationisperformedbyaqualifiedactuaryusingtheprojectedunitcreditmethod.WhenthecalculationresultsinabenefittotheGroupandtheCompany,therecognisedassetislimitedtothenet total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

When thebenefitsof theplanare improved, theportionof the increasedbenefit relating topast servicebyemployees is recognised as an expense in the income statements on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statements.

In calculating the Group’s and the Company’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds ten percent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, if any, that portion is recognised in the income statements over the expectedaverageremainingworkinglivesoftheemployeesparticipatingintheplan.Otherwise,theactuarialgain or loss is not recognised.

The latest actuarial valuation on the Group’s and the Company’s obligations for their defined benefit plans was carried out on 22 February 2011.



page 72


3.15 Provisions

A provision is recognised if, as a result of a past event, the Group and the Company have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of discount is recognised as finance cost.

Whereitisnotprobablethatanoutflowofeconomicbenefitswillberequired,ortheamountcannotbeestimatedreliably,the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. Contingent liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Group.

3.16 other financial liabilities and payables

Otherfinancialliabilitiesandpayablesarerecognisedwhendueandmeasuredoninitialrecognitionatthefairvalueoftheconsideration received less directly attributable transactions costs.

3.17 General insurance underwriting results

The general insurance underwriting results are determined for each class of business after taking into account inter alia reinsurances, commissions, unearned premiums and claims incurred.

3.17.1 Premium income

Premium is recognised in a financial period in respect of risks assumed during that particular financial period except for inwards treaty reinsurance premiums which are recognised on the basis of periodic advices / accounts received from ceding insurers.

3.17.2 insurance contract liabilities

General insurance contract liabilities are recognised when contracts are entered into and premiums are charged.

These liabilities comprise provision for unearned premiums and provision for outstanding claims.

3.17.2.1 Provision for unearned premiums

Provision for unearned premiums is the higher of the aggregate of the Unearned Premium Reserves (“UPR”) for all lines of business and the best estimate value of the Unexpired Risk Reserves (“URR”) at the required risk margin for adverse deviation.



page 73


3.17 General insurance underwriting results (cont’d)

3.17.2 insurance contract liabilities (cont’d)

3.17.2.1 Provision for unearned premiums (cont’d)

Unearned premium reserves

The UPR represents the premiums received for risks that have not yet expired. Generally, the reserve is released over the term of the contract and is recognised as premium income.

In determining the UPR at the end of the reporting period, the method that most accurately reflects the actual unearned premium reserves is as follows:

- 25% method for marine cargo, aviation cargo and transit business of annual Malaysian general policies

- 1/24th method for all other classes of annual Malaysian general policies- 1/8th method for all other classes of annual overseas inward treaty business- non-annual policies are time-apportioned over the period of the risks

TheUPR isadjusted foradditionalUPR in respectofpremiumsceded tooverseas reinsurersasrequired under the guidelines issued by BNM.

Unexpired risk reserves

At each reporting date, the Group reviews its unexpired risks and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows (taking into consideration current loss ratios) after taking account of the investment return expected to arise on assets relating to the relevant general insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums less related deferred acquisition costs is inadequate, the deficiency is recognised in income statements by setting up a provision for liability adequacy.

3.17.2.2 Provision for outstanding claims

Outstanding claimsprovision arebasedon the estimatedultimate cost of all claims incurredbutnot settled at the end of the reporting period, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the end of the reporting period. The liability is calculatedatthereportingdatebyanindependentactuarialfirmusingprojectiontechniquesassetout in Note 3.18 that included a regulatory risk margin for adverse deviation. The liability is discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled.



page 74



3.17 General insurance underwriting results (cont’d)

3.17.3 acquisition costs and deferred acquisition costs (“dac”)

The gross cost of acquiring and renewing insurance policies net of income derived from ceding reinsurance premiums is recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Acquisition costs or ceding income which are not recoverable, or not payable in the event of a termination of the policy to which they relate, are not deferred but are recognised in the period in which they occur.

Those costs are deferred to the extent that these costs are recoverable out of future premiums. All other acquisition costs are recognised as an expense when incurred.

Subsequent to initial recognition, these costs are amortised on a straight-line basis based on the term of expected future premiums. Amortisation is recognised in income statements.

An impairment review is performed at each reporting date or more frequently when an indication of impairment arises.Whentherecoverableamountislessthanthecarryingvalue,animpairmentlossisrecognisedinincomestatements. DAC is also considered in the liability adequacy test for each accounting period.

DAC is derecognised when the related contracts are either settled or disposed of.

3.18 valuation of general insurance contract liabilities

For general insurance contracts, estimates have to be made for both the expected ultimate cost of claims reported at the end of the reporting period and for the expected ultimate cost of claims incurred but not yet reported (“IBNR”) at the end of the reporting period.

It can take a significant period of time before the ultimate claims costs can be established with certainty and for some type ofpolicies,IBNRclaimsformthemajorityofthestatementsoffinancialpositionliability.Theultimatecostofoutstandingclaims is estimatedby using a rangeof standard actuarial claimsprojection techniques, such asChain Ladder andBornheutter-Ferguson methods.

The main assumption underlying these techniques is that a company’s past claims development experience can be usedtoprojectfutureclaimsdevelopmentandhence,theultimateclaimscosts.Assuch,thesemethodsextrapolatethe development of paid and incurred losses, average costs per claim and claims numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by significant business lines and claims type. Large claims are usually separately addressed,eitherbybeingreservedatthefacevalueoflossadjustorestimatesorseparatelyprojectedinordertoreflecttheir future development. In most cases, no explicit assumptions are made regarding their future rates of claims inflation orlossratios.Instead,theassumptionsusedareimplicitinthehistoricclaimsdevelopmentdataonwhichtheprojectionsare based.

Additionalqualitativejudgementisusedtoassesstheextenttowhichpasttrendsmaynotapplyinfuture,(forexample,to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions,levelofclaimsinflation,judicialdecisionsandlegislation,aswellasinternalfactorssuchasportfoliomix,policyfeatures and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome for the range of possible outcomes, taking account of all the uncertainties involved.


page 75



3.19 other revenue recognition

3.19.1 interest income

Interest income is recognised as it accrues, using the effective interest method except where an interest bearing investments is 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.

3.19.2 dividend income

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

3.19.3 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 over 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.

3.19.4 realised gains and losses on investments

Realised gains and losses recorded in income statements on investments include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised costs and are recorded on occurrence of the sale transaction.

3.20 tax expense

Tax expense comprises current and deferred tax. Tax expense is recognised in the income statements except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enactedattheendofthereportingperiod,andanyadjustmenttotaxpayableinrespectofpreviousyears.

Deferred tax is recognised using liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statements of financial position and their tax bases. Deferred tax is not recognised for the temporary differences in relation to the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting, nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax liability is recognised for all taxable temporary differences.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.


page 76


3.21 earnings per share

The Group presents basic earnings per shares (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. No diluted EPS is disclosed in these financial statements as there are no dilutive potential ordinary shares.

3.22 operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in the case istheChiefExecutiveOfficeroftheGroup,tomakedecisionsaboutresourcestobeallocatedtothesegmentandassessits performance, and for which discrete financial information is available.

4. ProPerty and equiPMent

office

long term office furniture equipment Property

Group freehold leasehold improve- and and Motor under

land land Buildings ments fittings computers vehicles construction total

Cost/ valuation rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 2010 17,123 33,137 137,367 9,042 37,738 75,979 9,013 7,049 326,448

Additions - - - 27 352 1,601 1,066 5,854 8,900

Disposals - (312) (1,460) (7) (6) (1,451) (2,748) - (5,984)

Effect of movements in exchange rates - - (31) (1) (17) (101) (71) - (221)

at 31 december 2010 / 1 January 2011 17,123 32,825 135,876 9,061 38,067

76,028

7,260 12,903 329,143

Additions - - - 146 512 3,683 1,175 5,134 10,650

Disposals - - - (85) (110) (3,400) (4,003) - (7,598)

Writtenoff - - - (7,304) (19,812) (42,337) - (264) (69,717)

Elimination of accumulated depreciation on revaluation - (2,762) (18,783) - - - - - (21,545)

Revaluation surplus 7,371 4,351 20,642 - - - - - 32,364

Effect of movements in exchange rates - - (58) 66 15 39 24 - 86

at 31 december 2011 24,494 34,414 137,677 1,884 18,672 34,013 4,456 17,773 273,383



page 77


4. ProPerty and equiPMent (cont’d)

office Property

long term office furniture equipment under

Group freehold leasehold improve- and and Motor con-

land land Buildings ments fittings computers vehicles struction total

Depreciation rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 2010 - 2,180 14,662 6,315 22,320 56,291 6,538 - 108,306

Depreciation for the year - 417 2,955 854 3,580 7,619 887 - 16,312

Disposals - (27) (283) (2) (5) (1,418) (2,243) - (3,978)

Effect of movements in exchange rates - - (4)

(2) (9) (61) (62) - (138)

at 31 december 2010 /1 January 2011 - 2,570 17,330 7,165

25,886 62,431 5,120 - 120,502

Depreciation for the year - 455 3,196 564 2,944 5,519 856 - 13,534

Disposals - - - (53) (89) (3,336) (3,474) - (6,952)

Writtenoff - - - (6,724) (17,832) (41,717) - - (66,273)

Elimination of accumulated depreciation on revaluation - (2,762) (18,783) - - - - - (21,545)

Effect of movements in exchange rates - - (15) 12 13 27 20 - 57

at 31 december 2011 - 263 1,728 964 10,922 22,924 2,522 - 39,323

Impairment loss

at 1 January 2010 - - 1,867 577 1,974 616 - - 5,034

Impairment loss for the year 460 105 818 - - - - - 1,383

Disposal - - - - - (12) - - (12)

at 31 december 2010 /1 January 2011 460

105 2,685

577 1,974

604 - - 6,405

Impairment loss/ (reversal) for the year 447 83 (881) - - - - - (351)

Disposal - - - - (16) (5) - - (21)

Writtenoff - - - (577) (1,958) (599) - - (3,134)

at 31 december 2011 907 188 1,804 - - - - - 2,899

Carrying amounts

At 1 January 2010 17,123 30,957 120,838 2,150 13,444 19,072 2,475 7,049 213,108

At 31 December 2010 /1 January 2011 16,663 30,150 115,861 1,319 10,207 12,993 2,140 12,903 202,236

At 31 December 2011 23,587 33,963 134,145 920 7,750 11,089 1,934 17,773 231,161


page 78


Revaluation of land and buildings

The Group’s land and buildings have been revalued during the year based on valuations performed by independent professional qualified valuers. The fair value of the land and buildings are the estimated market value of the property derived using the market value of properties in the vicinity and past transaction prices.

Had the land and buildings of the Group been carried under cost model, their carrying amounts would have been as follows:-

Group

2011 2010

rM’000 rM’000

Freehold land 16,512 16,663

Leasehold land 29,578 30,150

Buildings 112,820 115,441

At 31 December 158,910 162,254

Impairment loss and subsequent reversal

The Group performed an impairment assessment on its property and equipment during the year ended 31 December 2010. As a result of the assessment, impairment loss of RM1,383,000 was recognised in the income statement. In 2011, impairment loss of RM351,000 was reversed as a result of the revaluation of land and buildings.

Motor

vehicles total

company rM’000 rM’000

Cost

at 1 January 2010 1,308 1,308

Additions 390 390

Disposals (415) (415)

at 31 december 2010 / 1 January 2011 1,283 1,283

Disposals (96) (96)

at 31 december 2011 1,187 1,187

Depreciation

at 1 January 2010 1,176 1,176

Depreciation for the year 108 108

Disposals (415) (415)

at 31 december 2010 / 1 January 2011 869 869

Depreciation for the year 141 141

Disposals (96) (96)

at 31 december 2011 914 914



page 79



Motor

vehicles total


Carrying amounts

At 1 January 2010 132 132

At 31 December 2010 / 1 January 2011 414 414

At 31 December 2011 273 273

5. Goodwill

Group

2011 2010

rM’000 rM’000

Carrying amounts

At 1 January - 5,061

Impairment loss - (4,373)

Effect of movements in exchange rates - (688)

At 31 December - - TheentirecarryingamountofgoodwillwasallocatedtothegeneralinsurancebusinessunitinIndonesia,PTKurniaInsurance

Indonesia(“KII”),whichrepresentsthelowestlevelwithintheGroupatwhichthegoodwillismonitoredforinternalmanagementpurposes.

The goodwill was fully impaired in 2010, after management had considered the past historical financial track record and the uncertainties over the profitability of the cash-generating unit in the immediate future.

6. investMent ProPerty

Group

2011 2010

rM’000 rM’000

at 1 January 7,500 7,500

Change in fair value – income statement 213 -

at 31 december 7,713 7,500

The fair value of the investment property is the estimated market value of the property derived using the market value of properties in the vicinity and past transaction prices. Valuation is performed by independent professional qualified valuers.


page 80

6. investMent ProPerty (cont’d)

The following are recognised in the income statement in respect of investment property:

Group

2011 2010

rM’000 rM’000

Rental income 78 65

Direct operating expenses (31) (31)

7. investMents in suBsidiaries

company

2011 2010

rM’000 rM’000

Unquoted ordinary shares, at cost 519,925 511,225

Less: Accumulated impairment losses (9,373) (9,373)

510,552 501,852

Irredeemable Convertible Subordinated Debt 7.1 230,000 230,000

740,552 731,852

7.1 On 10 September 2008, the Company subscribed for RM400,000,000 nominal value of Irredeemable ConvertibleSubordinatedDebt(“ICSD”)issuedbytheCompany’ssubsidiary,KurniaInsurans(Malaysia)Berhad(“KIMB”).

The ICSD has a tenure of 5 years from the date of issuance, and bears interest at the rate of 1.5% per annum above the cost of fund of CIMB Bank Berhad or such other amended rates at the discretion of the Company.

TheICSDshallbeconvertibleintofullypaidordinarysharesofKIMBattheconversionpriceofRM1.00perordinaryshare(“Conversion Price”) at any time during the tenure of the ICSD. All ICSD not converted during the tenure of the ICSD shall be automatically converted on the maturity date.

On 19 September 2008, RM400,000,000 nominal value of ICSD was issued to the Company, and on even date,RM170,000,000nominalvalueofICSDwasconvertedintoordinarysharesofKIMBattheConversionPrice.



page 81


7. investMents in suBsidiaries (cont’d)

7.2 Details of the subsidiaries are as follows:

country of effective ownership

name of subsidiary incorporation Principal activities interest

2011 2010

KurniaInsurans(Malaysia)Berhad Malaysia Underwriting of general insurance

100% 100%

KurniaAsiaPte.Ltd.# Singapore Investment holding 100% 100%

PTKurniaInsuranceIndonesia# Indonesia Underwriting of general insurance

100% 100%

Premier Assist Sdn. Bhd. (formerlyknownasKurniaAutoAssistSdn.Bhd.)*

Malaysia Auto assists service 100% 100%

KurniaCambodiaIncorporatedCo.Ltd.# Cambodia Dormant 60% -

# NotauditedbyKPMG

* Thesubsidiarywasincorporatedon26December2001andcommencedbusinesson1April2011.

8. investMent in associate

Group

2011 2010

rM’000 rM’000

Unquoted shares outside Malaysia, at cost 21,181 19,235

Less: Accumulated impairment losses (2,394) (2,394)

18,787 16,841

Share of post acquisition loss (4,119) (3,562)

14,668 13,279

Summaryfinancialinformationforassociate,notadjustedforthepercentageownershipheldbytheGroup:

effective total total

country of ownership revenue loss assets liabilities

incorporation interest (100%) (100%) (100%) (100%)

rM’000 rM’000 rM’000 rM’000

KurniaInsurance(Thailand)Co.Ltd. Thailand 25% 75,316 2,228 74,429 59,902


page 82

9. investMents

The Group’s investments are categorised as follow:

2011 2010

Group rM’000 rM’000

Malaysian government securities - 10,179

Cagamas bonds 1,006 1,012

Government guaranteed bonds 5,062 20,177

Debt securities 321,168 378,111

Equity securities 19,055 43,420

Quotedunitandpropertytrustfunds 138,704 99,523

Collective investment funds 680,768 628,266


1,634,934 1,702,846

The following investments mature after 12 months:

2011 2010


Held-to-maturity financial assets 58,059 63,278

Available-for-sale financial assets 820,863 900,378


1,027,988 1,479,829

9.1 held-to-maturity

2011 2010


amortised cost

Debt securities

- Unquoted in Malaysia 62,123 63,278

fair value

Debt securities




page 83


9. investMents (cont’d)

9.2 available-for-sale

2011 2010


fair value

Collective investment funds 680,768 628,266


Debt securities


cost

Equity securities


- Unquoted outside Malaysia 31 31

947,342 975,928

9.3 held for trading

2011 2010


fair value

QuotedequitysecuritiesinMalaysia 17,594 41,959

QuotedunitandpropertytrustfundsinMalaysia 138,704 99,523

156,298 141,482

9.4 loans and receivables

2011 2010


amortised cost

Fixed and call deposits

- Licensed banks 457,728 472,427

Negotiable instruments of deposits (“NID”) - 29,409

Commercial loans

- Performing loan - 6,590

- Non-performing loan 6,000 6,000

Mortgage loans 5,408 7,683

Otherloans 35 49

469,171 522,158


page 84


9.4 loans and receivables (cont’d)

2011 2010


fair value

Fixed and call deposits

- Licensed banks 457,728 472,427

Negotiable instruments of deposits (“NID”) - 29,409

Commercial loans

- Performing loan - 6,590

- Non-performing loan 6,000 6,000

Mortgage loans 5,408 7,683

Otherloans 35 49

469,171 522,158

9.5 carrying values of financial instruments

Group

htM lar afs hft total

rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 2010 85,224 513,390 924,856 159,934 1,683,404

Effect of adopting FRS 139 - - 9,269 1,545 10,814

Purchases - 16,213 690,313 82,534 789,060

Maturities (21,701) - (92,647) - (114,348)

Disposals - (7,237) (568,771) (122,233) (698,241)

Realised gains recorded in:

- Income statements - - 5,195 9,161 14,356

Fair value gains recorded in:

- Income statements - - - 10,544 10,544

-Othercomprehensiveincome - - 7,844 - 7,844

Amortisation net of accretion (187) 714 40 - 567

Translation difference (58) (922) (171) (3) (1,154)

at 31 december 2010 63,278 522,158 975,928 141,482 1,702,846



page 85


9.5 carrying values of financial instruments (cont’d)

Group

htM lar afs hft total

rM’000 rM’000 rM’000 rM’000 rM’000

at 31 december 2010 63,278 522,158 975,928 141,482 1,702,846

Purchases - - 309,156 114,982 424,138

Maturities (900) (14,700) (135,000) - (150,600)

Disposals - (38,567) (197,256) (109,424) (345,247)

Realised gains recorded in:

- Income statements - - 1,892 4,881 6,773

Fair value gains/(losses) recorded in:

- Income statements - - - 4,377 4,377

-Othercomprehensiveincome - - (7,277) - (7,277)

Amortisation net of accretion (255) 280 (101) - (76)

at 31 december 2011 62,123 469,171 947,342 156,298 1,634,934

10. reinsurance assets

2011 2010

Group note rM’000 rM’000

Reinsurance of insurance contracts

- Claims liabilities 15.1 385,576 250,759

- Premium liabilities 15.2 165,697 122,000

551,273 372,759



page 86

11. insurance receivaBles

Group

2011 2010


Due premiums including agents / brokers and co-insurers balances 60,955 59,288

Due from reinsurers and cedants 11.1 13,652 23,684

74,607 82,972

Allowance for impairment 11.2 (17,775) (30,121)

56,832 52,851

11.1 amount due from associate company

Included in the amount due from reinsurers and cedants is an amount of RM122,000 (2010: Nil) due from associate company. The transaction is based on normal trade terms and the balance outstanding is unsecured.

11.2 allowance for impairment

During the year, impairment loss of RM11,050,000 (2010: RM6,601,000) was written off against the allowance for impairment.

12. other receivaBles, dePosits and PrePayMents

Group company

2011 2010 2011 2010

note rM’000 rM’000 rM’000 rM’000

Income due and accrued 16,857 9,492 - -

Otherreceivables,depositsandprepayments 59,478 18,724 336 249

Amount due from subsidiaries 12.1 - - 340 36

Malaysian Institute of Insurance bond (“MII”) 200 200 - -

Advance premium ceded to reinsurers 2,624 5,194 - -

Commission paid to agents on advance premium 1,174 1,597 - -

80,333 35,207 676 285

Receivable after 12 months 18,783 13,845 - -



page 87


12. other receivaBles, dePosits and PrePayMents (cont’d)

estimation of fair values

The carrying amount of other receivables approximates its fair value due to the relatively short term nature of the financial instruments.

The fair value of other receivables after 12 months was determined to approximate the carrying amounts as it is immaterial in the context of the financial statements.

12.1 amounts due from subsidiaries

The amounts due from subsidiaries are unsecured, interest-free and repayable on demand.

13. deferred acquisition costs

2011 2010

Group note rM’000 rM’000

Gross of reinsurance

at 1 January 41,646 43,151

Movement during the year 27 (4,639) (1,505)

at 31 december 37,007 41,646

reinsurance

at 1 January (5,371) (6,326)

Movement during the year 27 (5,566) 955

at 31 december (10,937) (5,371)

net of reinsurance

at 1 January 36,275 36,825

Movement during the year (10,205) (550)

at 31 december 26,070 36,275


page 88

14. cash and cash equivalents

Group company2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Cash and bank balances 37,436 38,818 1,543 3,272

Deposits placed with licensed banks in Malaysia 82,741 90,814 - -

Deposits placed with licensed banks outside Malaysia 10,594 - - -130,771 129,632 1,543 3,272

The carrying amounts approximate their fair values due to the relatively short term nature of these financial instruments.

15. insurance contract liaBilities

General insurance contract liabilities consist of:

2011 2010Gross reinsurance net Gross reinsurance net

Group note rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Provision for claims reported by policyholders 802,024 (257,716) 544,308 861,845 (170,555) 691,290

Provision for incurred but not reported claims (“IBNR”) 334,360 (127,860) 206,500 293,947 (80,204) 213,743

Provision for outstanding claims 15.1 1,136,384 (385,576) 750,808 1,155,792 (250,759) 905,033

Provision for unearned premiums 15.2 554,454 (165,697) 388,757 513,360 (122,000) 391,3601,690,838 (551,273) 1,139,565 1,669,152 (372,759) 1,296,393

15.1 Provision for outstanding claims

2011 2010Gross reinsurance net Gross reinsurance net

Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 1,155,792 (250,759) 905,033 1,314,722 (283,765) 1,030,957

Loss portfolio transfer - (67,861) (67,861) - - -

Claims incurred in the current accident year (direct and facultative) 469,924 (60,511) 409,413 587,820 (67,842) 519,978

Adjustmenttoclaimsincurredin prior accident years (directand facultative) 298,448 (177,499) 120,949 108,898 14,756 123,654

Claims incurred during the year (treaty inwards claims) 17,716 - 17,716 3,305 - 3,305

Claims paid during the year (805,496) 171,054 (634,442) (858,953) 86,092 (772,861)at 31 december 1,136,384 (385,576) 750,808 1,155,792 (250,759) 905,033



page 89


15. insurance contract liaBilities (cont’d)

15.2 Provision for unearned premiums

2011 2010

Gross reinsurance net Gross reinsurance net


at 1 January 513,360 (122,000) 391,360 460,694 (55,425) 405,269

Premiums written during the year 1,109,729 (337,714) 772,015 1,058,753 (220,387) 838,366

Premiums earned during the year (1,068,635) 294,017 (774,618) (1,006,087) 153,812 (852,275)

at 31 december 554,454 (165,697) 388,757 513,360 (122,000) 391,360

16. other financial liaBilities

Group company

2011 2010 2011 2010

note rM’000 rM’000 rM’000 rM’000

Treaty deposits from reinsurers 84,143 68,614 - -

Performance bond deposits 16.1 6,487 6,708 - -

Term loan 16.2 360,000 360,000 360,000 360,000

450,630 435,322 360,000 360,000

16.1 Performance bond deposits

Performance bond deposits are collateral deposits received from policyholders for guarantees issued on behalf of policyholders.

The carrying amounts disclosed above approximate fair values at the end of the reporting period.

All amounts, except for term loan, are payable within one year.

16.2 term loan

16.2.1 security

On11September2008,theCompanyenteredintoanagreementwithCIMBBankBerhad(“CIMB”)foratermloan facility of up to RM400,000,000 for a tenure of 5 years from the date of first drawing. The term loan facility is for the purpose of subscribing for RM400,000,000 nominal value Irredeemable Convertible Subordinated Debt (“ICSD”)ofitssubsidiary,KurniaInsurans(Malaysia)Berhad(“KIMB”).

ThetermloanissecuredbytheentireissuedandpaidupsharecapitalandtheentireICSDofKIMBheldbytheCompany.


page 90

16. other financial liaBilities (cont’d)

16.2 term loan (cont’d)

16.2.2 term and repayment schedule

year of carrying under 1 - 2 2 - 5

maturity amount 1 year years years

Group and company rM’000 rM’000 rM’000 rM’000

2011

Term loan 2012 to 2013 360,000 220,000 140,000 -

2010

Term loan 2011 to 2013 360,000 80,000 140,000 140,000

The effective interest rate on the term loan during the year is 5.91% per annum (2010: 5.40%).

During the financial year, CIMB agreed to extend the principal repayment of RM80,000,000 which was due in September2011toMay2012.GiventhattheCompanyhadon3April2012obtainedtheapprovalfromMOFviaBNMtoenterintoanagreementwithAmGtodisposetheCompany’s100%equityinterestinKIMBtoAmG,theBoard of Directors intends to seek further extension of time from CIMB to repay the RM80,000,000 to facilitate the completion of the proposed disposal.

17. insurance PayaBles

Group

2011 2010

rM’000 rM’000

Due to agents, brokers, co-insurers and insured 10,824 10,890

Due to reinsurers and cedants 76,549 18,740

87,373 29,630



page 91

18. other PayaBles

Group company

2011 2010 2011 2010

note rM’000 rM’000 rM’000 rM’000

Accrued expenses and deposits 26,007 18,487 2,733 177

Advance premium written 11,302 14,356 - -

Commission received on advance premium ceded to reinsurers 657 687 - -

Otherpayables 33,264 34,400 16 27

Term loan interest 718 783 718 783

Amount due to shareholders 18.1 31,028 22,035 31,028 22,035

Amount due to subsidiaries 18.2 - - 13,786 5,113

102,976 90,748 48,281 28,135

The carrying amounts disclosed above approximate fair values at the end of the reporting period.

All amounts, except for the amount due to shareholders, are payable within one year.

18.1 amount due to shareholders

IncludedintheamountduetoshareholdersisaloanamountingtoRM27,371,000extendedbyTanSriDato’PadukaKuaSianKooitotheCompany,forthepurposeofenablingtheCompanytomeetitsobligationunderthetermloantorepayCIMB and for working capital purposes. RM20,000,000 of the RM27,371,000 is unsecured and subordinated to the term loan from CIMB (Note 16.2). The effective interest rate on this amount during the year is 5.91% per annum (2010: 5.67%). The remaining balance of RM7,371,000 is unsecured, interest free and repayable on demand.

18.2 amount due to subsidiaries

Amount due to subsidiaries is unsecured, interest-free and repayable on demand.



page 92

19. Provision for retireMent Benefits

19.1 the movements in the present value of the defined benefit obligation recognised in the statements of financial position are as follows:

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

defined benefit obligation at 1 January 25,544 23,785 2,244 2,066

Benefits paid (1,233) (1,252) (20) (68)

Current service costs and interest 3,022 3,011 255 246

31 december 27,333 25,544 2,479 2,244

Present value of unfunded obligation 27,333 25,544 2,479 2,244

Recognised liability for defined benefit obligation 27,333 25,544 2,479 2,244

19.2 expenses recognised in income statements as retirement benefits (note 30):

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Current service cost 1,962 1,941 148 153

Interest cost 1,060 1,070 107 93

3,022 3,011 255 246



page 93

19. Provision for retireMent Benefits (cont’d)

19.3 actuarial assumptions

Principal actuarial assumptions at the end of the reporting period (expressed as weighted average):

Group company

2011 2010 2011 2010

Discount rate at 31 December (per annum) 4.50% 4.50% 4.50% 4.50%

Future salary increases (per annum) 6.00% 6.00% 6.00% 6.00%

The discount rate used is based on market yields at the end of the reporting period on high quality corporate bonds. The amount and terms of the corporate bonds are consistent with the current and estimated future post-employment benefit obligation.

Assumption regarding future mortality is based on the experience of Malaysian insured lives between 1983 and 1988 with allowance for improvement in mortality rates allowed for by applying a 25% reduction to the standard rate. The average expected future working lives has been estimated at 7.9 years.

Calculationoftheunfundeddefinedretirementbenefitsinvolvestheprojectionofthepresentvalueforunfundedobligationsusing certain principal actuarial assumptions such as the rate of interest at which to discount the future retirement benefits payments at the valuation date and the assumed rate of growth of liabilities, namely the rate of salary escalation. There areelementsofuncertaintyontheassumptionsusedandthustheprojectedfutureretirementbenefitspayablemaybedifferent from the actual retirement benefits paid.

Under the scheme, eligible employees who have completed a minimum of 10 years of service are entitled to retire at 56 years of age or optional retirement age of 50 years. Employees who leave before the attainment of the normal retirement age or optional retirement age, are not entitled to the benefit.

All new employees who are hired after 18 March 2011 will cease to be entitled for the retirement benefit.



page 94


20. deferred tax assets / (liaBilities)

20.1 recognised deferred tax assets and (liabilities) are attributable to the following:

assets liabilities net2011 2010 2011 2010 2011 2010


Property and equipment - - (2,916) (5,139) (2,916) (5,139)Provisions 8,884 3,830 - - 8,884 3,830Unutilised tax losses carry forward 1,814 811 - - 1,814 811Otheritems 144 20 (179) - (35) 20

10,842 4,661 (3,095) (5,139) 7,747 (478)Revaluation surplus - - (1,618) - (1,618) -Fair value reserve of securities available-for-sale - - (2,459) (4,278) (2,459) (4,278)

10,842 4,661 (7,172) (9,417) 3,670 (4,756)

20.2 Movement in temporary differences during the year:

recognised recognised effect of recognised recognised effect ofin income in equity movements in income in equity movements

at statements statements in exchange at statements statements in exchange atGroup 1.1.2010 (note 32) (note 32) rates 31.12.2010 (note 32) (note 32) rates 31.12.2011

rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Property and equipment (6,865) 1,797 - (71) (5,139) 2,121 - 102 (2,916)

Provisions 6,525 (2,695) - - 3,830 5,699 - (645) 8,884Unutilised tax

losses carry forward 9,184 (8,373) - - 811 249 - 754 1,814

Otheritems 75 (55) - - 20 124 - (179) (35)Tax assets /

(liabilities) 8,919 (9,326) - (71) (478) 8,193 - 32 7,747Revaluation

surplus - - - - - - (1,618) - (1,618)Fair value

reserve of securities available-for-sale - - (4,278) - (4,278) - 1,819 - (2,459)

Net tax assets / (liabilities) 8,919 (9,326) (4,278) (71) (4,756) 8,193 201 32 3,670

The estimation of the recogniseddeferred tax assets involves theprojection of theGroup’s future profits. There areelementsofuncertaintyintheprojection,whichcompriseoftheglobaleconomicconditionandmarketvolatilityamongothers.Thustheprojectedfutureprofitsmaybedifferentfromitsactualprofits.


page 95


21. share caPital

Group and company

2011 2010

no. of no. of

shares amount shares amount

‘000 rM’000 ‘000 rM’000

Authorised:

OrdinarysharesofRM0.25each 5,000,000 1,250,000 5,000,000 1,250,000

Issued and fully paid:

OrdinarysharesofRM0.25each 1,500,000 375,000 1,500,000 375,000

22. reserves

The reserves as shown in the statements of changes in equity are as follows:

22.1 translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

22.2 treasury shares

In 2008, the Company repurchased 11,577,400 of its issued shares from the open market. The average price paid for the shares purchased was approximately RM1.03 per ordinary share. The repurchase transactions were financed by internal funds. The repurchased shares are held as treasury shares and carried at cost.

As at 31 December 2011, the Company held 11,577,400 of the Company’s shares. The number of outstanding shares in issue after deducting treasury shares held was 1,488,422,600 ordinary shares of RM0.25 each.

There were no shares repurchased during the financial year ended 31 December 2011.

22.3 fair value reserve

The fair value reserve is in respect of the cumulative change in the fair value on securities available-for-sale, net of deferred taxation until the investments are derecognised or impaired.

22.4 Property revaluation reserve

The property revaluation reserve relates to the revaluation of property and equipment, net of deferred taxation.


page 96

23. oPeratinG revenue

Group company2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Gross earned premiums 1,068,635 1,006,087 - -Investment income 92,628 90,849 22,451 21,538

1,161,263 1,096,936 22,451 21,538

24. investMent incoMe

Group company2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Rental income 700 637 - -

Financial assets at FVTPL – Held for tradingDividend / distribution income- equity securities quoted in Malaysia 1,502 2,758 - -- equity securities quoted outside Malaysia 4 7 - -- quoted unit and property trust funds 7,257 6,513 - -

Held-to-maturity financial assetsInterest income 3,922 4,999 - -Amortisation of premiums, net of accretion of discounts (255) (187) - -

Available-for-sale financial assetsInterest income 14,782 18,623 - -Dividend / distribution income- equity securities unquoted in Malaysia 490 98 - -- collective investment funds 43,957 35,091 - -

Loans and receivablesInterest income 494 998 - -

Deposits with financial institutionsInterest income 15,769 16,481 - -Amortisation of premiums, net of accretion of discounts on NID 591 714 - -

Cash and cash equivalentsInterest income 3,415 4,117 - 345

Irredeemable Convertible Subordinated DebtInterest income - - 22,451 21,193

Total investment income 92,628 90,849 22,451 21,538



page 97

25. realised Gains and losses

Group

2011 2010

rM’000 rM’000

hft financial assets

Realised gains

- equity securities quoted in Malaysia 4,864 6,910

- unit and property trust fund quoted in Malaysia 17 2,251

Total realised gains for HFT financial assets 4,881 9,161

afs financial assets

Realised gains

- unit and property trust fund quoted in Malaysia - 129

- debt securities quoted in Malaysia 1,892 4,897

- debt securities quoted outside Malaysia - 169

Total realised gains for AFS financial assets 1,892 5,195

6,773 14,356

26. fair value Gains and losses

Group

2011 2010

rM’000 rM’000

Financial investments

- held for trading 4,377 10,544

Fair value gain on investment property 213 -

Total fair value gains 4,590 10,544



page 98

27. coMMission incoMe / exPense

Group

2011 2010


commission income

Commission income 77,796 47,893

Movement in deferred acquisition costs 13 (5,566) 955

72,230 48,848

commission expense

Commission expense (137,305) (127,267)

Movement in deferred acquisition costs 13 (4,639) (1,505)

(141,944) (128,772)

28. other oPeratinG incoMe

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Transfer fees and other contract fees 417 315 - -

Otherincome 383 43 108 -

800 358 108 -



page 99

29. net claiMs incurred

Group2011 2010

rM’000 rM’000

Gross claims paid less salvage 805,496 858,953Claims ceded to reinsurers (171,054) (86,092)Net claims paid 634,442 772,861

Gross change in claims liabilitiesat 31 december 1,136,384 1,155,792at 1 January (1,155,792) (1,314,722)

(19,408) (158,930)

Change in claims liabilities ceded to reinsurersat 31 december (385,576) (250,759)Lossportfoliotransfer* 67,861 -at 1 January 250,759 283,765

(66,956) 33,006548,078 646,937

* Duringthefinancialyear,asubsidiary,KIMBenteredintoaLossPortfolioTransferwithAdverseDeviationCoverReinsuranceAgreement (“LPT”) for 25% of all incurred claims after all inuring reinsurance protection in respect of the year of occurrence from 1 July 1998 to 30 June 2008 which have not been paid as at 31 December 2010. The incurred claims include case estimates,incurredbutnotreported(“IBNR”)andincurredbutnotenoughreported(“IBNER”)claims,subjecttoamaximumaggregate losses paid of 144% of the undiscounted central estimate of claims liability.



page 100

30. ManaGeMent exPenses

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Personnel expenses (including key management personnel):

Contributions to Employees Provident Fund 9,380 8,730 904 116

Expenses related to defined benefit plan 3,022 3,011 255 246

Wages,salariesandothers 94,284 88,491 7,042 1,476

Auditors’ remuneration

KPMGMalaysia-currentyear 400 375 65 50

- prior year 13 (1) 13 20

- non-audit fees 298 69 219 8

Subsidiaries’ auditors 82 46 - -


Reversal of allowance for impairment loss (12,346) (10,066) - -

Impairment loss written off 11,050 6,601 - -

Impairment loss recovered (118) (29) - -

Depreciation of property and equipment 13,534 16,312 141 108

Rental of office and premises 1,293 1,215 - -

IGSF levies 1,376 2,572 - -

Advertisement expenses 1,859 2,023 - -

Bank charges 10,515 10,684 - -

Writeoffofpropertyandequipment 310 - - -

Gain on disposal of property and equipment (1,127) (920) (10) (130)

Allowance for impairment loss on reinsurance assets 1,445 - - -

(Reversal)/Allowance for impairment loss on property and equipment (351) 1,383 - -

Allowance for impairment loss on investment in subsidiary - 2,394 - 4,373

Allowance for impairment loss on goodwill - 4,373 - -

Otherexpenses 40,762 50,649 2,592 2,785

Total management expenses 175,681 187,912 11,221 9,052



page 101

31. Key ManaGeMent Personnel coMPensation

The key management personnel compensations are as follows:

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Executive Directors

Remuneration 5,162 4,676 4,172 385

Othershorttermemployeebenefits(includingestimatedmonetary value of benefits-in-kind) 1,865 1,145 1,816 197

7,027 5,821 5,988 582

Non-executive Directors

Fees 966 943 600 579

Othershorttermemployeebenefits(includingestimatedmonetary value of benefits-in-kind) 147 140 74 65

1,113 1,083 674 644

Total short term employee benefits 8,140 6,904 6,662 1,226

The Group and the Company provide non-cash benefits to Executive Directors and other key management personnel. The estimated non-cash benefits received by Executive Directors of the Group and of the Company amounted to RM302,000 (2010: RM280,000) and RM277,000 (2010: RM28,000) respectively.

In addition to their non-cash benefits, Executive Directors and other key management personnel in Malaysia are also eligible to the Group’s and the Company’s retirement benefits as disclosed in Note 19.

32. tax exPense

32.1 recognised in the income statements

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

current tax expense

- Current year 21,823 4,178 135 2,096

-(Over)/Underprovisioninprioryears (655) 1,120 (655) 173

21,168 5,298 (520) 2,269

deferred tax expense

Originationandreversaloftemporarydifferences (8,193) 9,326 - -

Total tax expense 12,975 14,624 (520) 2,269



page 102

32. tax exPense (cont’d)

32.2 income tax recognised directly in other comprehensive income

Group

2011 2010

rM’000 rM’000

Fair value reserve

at 1 January 4,278 -

Effect of adopting FRS139 - 2,317

Net (loss) / gain arising from change in fair value of securities available-for-sale (1,819) 1,961

at 31 december 2,459 4,278

Property revaluation reserve

at 1 January - -

Net gain arising from change in revaluation surplus 1,618 -

at 31 december 1,618 -

32.3 reconciliation of tax expense

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Profit / (Loss) before tax 60,819 29,636 (11,113) (8,707)

Tax at Malaysian tax rate of 25% 15,205 7,409 (2,778) (2,177)

Non-deductible expenses 6,472 8,602 2,851 4,028

Tax exempt income (13,739) (9,001) - -

Non-deductible interest expense on ICSD 5,613 5,298 - -

Others 79 1,196 62 245

13,630 13,504 135 2,096

(Over)/Underprovisioninprioryears (655) 1,120 (655) 173

Total tax recognised in the income statements 12,975 14,624 (520) 2,269

Witheffect fromyearofassessment2009, thecorporate tax rate isat25%.Consequently,deferred taxassetsandliabilities are measured using this tax rate.



page 103

32. tax exPense (cont’d)

32.4 unrecognised deferred tax assets

Deferred tax has not been recognised for the following items:

2011 2010


Provisions 620 630

Deferred tax assets in respect of the above items have not been recognised because it is not probable that future taxable profit will be available against which the Company can utilise the benefits therefrom.

33. Basic earninGs Per ordinary share

Basic earnings per ordinary share is calculated based on the profit for the year of RM47,844,000 (2010: RM15,012,000) divided by the weighted average number of ordinary shares in issue of 1,488,422,600 during the year.

2011 2010


Profit for the year attributable to ordinary shareholders 47,844 15,012

Weightedaveragenumberofordinaryshares:

Issued ordinary shares at beginning of the year 1,500,000,000 1,500,000,000

Effect of treasury shares (11,577,400) (11,577,400)

Weightedaveragenumberofordinaryshares 1,488,422,600 1,488,422,600

sen sen

Basic earnings per ordinary share 3.21 1.01 Diluted earnings per share are not presented as there were no dilutive potential ordinary shares as at the end of the reporting

period.

There have been no other transactions involving ordinary shares between the reporting date and the date of completion of these financial statements.



page 104

34. caPital and other coMMitMents

Capital expenditure and other commitments approved by the Directors but not provided for in the financial statements amounted to approximately:

2011 2010


Property and equipment

Contracted but not provided for 4,196 7,600

35. related Parties

identity of related parties

For the purpose of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financialandoperatingdecisions,orviceversa,orwheretheGroupandtheCompanyorthepartyaresubjecttocommoncontrolor common significant influence. Related parties may be individuals or other entities.

Keymanagementpersonnelaredefinedasthosepersonshavingauthorityandresponsibilityforplanning,directingandcontrollingthe activities of the Group or the Company either directly or indirectly. The key management personnel include all the Directors of the Group and the Company. Compensation of key management personnel have been disclosed in Note 31.

The significant transactions and balances with related parties other than key management personnel compensation are as follows:

2011 2010

transaction transaction

amount amount


a company in which tan sri dato’ Paduka Kua sian Kooi is a common director and has indirect interest:

Reinsurance inwards premium (187) (169)

a company in which dato’ wira othman Bin abdul is a common director and dato’ wira othman Bin abdul and tan sri dato’ Paduka Kua sian Kooi have indirect interest:

Rental expense 60 52

shareholder


Interest expense on loan 1,182 329



page 105

35. related Parties (cont’d)

2011 2010

transaction transaction

amount amount


subsidiaries

Share of common expenses - (10,466)

ICSD coupon payment (22,451) (21,193)

Reimbursement of extension fee on term loan (1,600) -

shareholder


Interest expense on loan 1,182 329

The terms and conditions for the above transactions are based on normal trade terms or on a negotiated basis. Significant related party balances related to the above transactions are disclosed in Note 12 and Note 18. No allowance for impairment was made during the year.

36. oPeratinG seGMents

The Group has one reportable segment, namely the general insurance business in Malaysia, for which the Group Executive Chairmanreviewsinternalmanagementreportsonatleastamonthlybasis.Othernon-reportablesegmentscomprisegeneralinsurance business unit in Indonesia and investment holdings.

Performance is measured based on segment profit before tax, interest, depreciation and amortisation, as included in the internal management reports that are reviewed by the Group Executive Chairman, who is the Group’s chief operating decision maker. Segment profit or loss is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

segment assets and liabilities

The total of segment assets and liabilities is measured based on all assets and liabilities of a segment, as included in the internal management reports that are reviewed by the Group Executive Chairman. Segment total assets and liabilities are used to measure financial health of the segment.



page 106

36. oPeratinG seGMents (cont’d)

General

insurance in

Malaysia others consolidated

rM’000 rM’000 rM’000

2011

Segment revenue 1,133,537 27,726 1,161,263

Segment results 100,094 (38,718) 61,376

Operatingprofit/(loss)beforefinancecost 100,094 (16,267) 83,827

Finance costs - (22,451) (22,451)

Operatingprofit/(loss) 100,094 (38,718) 61,376

Share of loss of equity accounted associate - (557) (557)

Profit/(Loss) before tax 100,094 (39,275) 60,819

Tax expense (12,975)

Profit for the year 47,844

2010

Segment revenue 1,063,301 33,635 1,096,936

Segment results 68,797 (36,381) 32,416

Operatingprofit/(loss)beforefinancecost 68,797 (15,188) 53,609

Finance costs - (21,193) (21,193)

Operatingprofit/(loss) 68,797 (36,381) 32,416

Share of loss of equity accounted associate - (2,780) (2,780)

Profit/(Loss) before tax 68,797 (39,161) 29,636

Tax expense (14,624)

Profit for the year 15,012



page 107


General

insurance in


rM’000 rM’000 rM’000

2011

Segment assets 2,682,032 51,723 2,733,755

Unallocated assets 27,416

total assets 2,761,171

Segment liabilities 1,926,136 433,014 2,359,150

Unallocated liabilities 629

total liabilities 2,359,779

2010

Segment assets 2,492,965 59,620 2,552,585

Unallocated assets 31,785

total assets 2,584,370

Segment liabilities 1,829,110 421,286 2,250,396

Unallocated liabilities 6,177

total liabilities 2,256,573

General

insurance in


rM’000 rM’000 rM’000

2011

Capital expenditure – property and equipment 9,302 1,348 10,650

Depreciation of property and equipment 12,959 575 13,534

Amortisation of premiums net of accretion of discounts 336 - 336

Fair value (gains) /losses (4,591) 1 (4,590)


(Reversal)/ allowance for impairment loss (14,248) 1,902 (12,346)

Impairment loss written off 11,050 - 11,050

Impairment loss recovered (118) - (118)

Retirement benefits expense 2,767 255 3,022

Allowance for impairment loss on reinsurance assets 1,445 - 1,445

Reversal of impairment loss on property and equipment (351) - (351)

Writeoffofpropertyandequipment 310 - 310



page 108


General

insurance in


rM’000 rM’000 rM’000

2010

Capital expenditure – property and equipment 8,460 440 8,900

Depreciation of property and equipment 15,849 463 16,312

Amortisation of premiums net of accretion of discounts 527 - 527

Fair value gains and losses 10,544 - 10,544

Allowance for impairment loss on property and equipment 1,383 - 1,383

Allowance for impairment loss on goodwill - 4,373 4,373

Allowance for impairment loss on investments in subsidiary - 2,394 2,394

Retirement benefits expense 2,765 246 3,011

Reversal for allowance for impairment loss on insurance receivables (9,796) (270) (10,066)

37. risK ManaGeMent fraMeworK risk management overview

The Board is committed to implement Enterprise Risk Management (“ERM”) to drive towards maintaining good governance and internal control system. The role of risk management is to ensure the risks are properly identified, evaluated and managed as to protect and increase the Group’s long-term value to its shareholders and other stakeholders.

risk management strategy

The risk management strategy formulated by the Risk Management Committee (“RMC”) and approved by the Board, serves to ensure the risk management framework, processes and internal control system are in place to identify, monitor, evaluate and manage the material risk consistently across all activities.

role and responsibility

The RMC’s responsibility is to oversee the activities in risk management and legal compliance. These include matters relating to the identification, assessment, monitoring and management of risks associated with the operations of the Group.

The focus of the RMC is to support the Board to fulfill its duties in the oversight of activities in risk and business continuity management and legal compliance.



page 109

37. risK ManaGeMent fraMeworK (cont’d)

role and responsibility (cont’d)

The roles of the RMC are:

• Toapproveriskmanagementstrategiesandpolicies,monitortheirimplementationandreviewthematleastonceayear,toensuretheyremainrelevantandeffective;

• Periodically assess the adequacy of these riskmanagement policies and framework, inclusive of Business ContinuityManagementandComplianceManagementframework;

• TodefinetheriskappetiteorthelevelofrisktoleranceoftheGroupbasedoninternalcapacityandbusinessobjectives;

• Tomonitortheriskexposuresregularlytoensurethereissatisfactorylevelofinternalcontrol;

• Toensurethatallsignificantriskfactorsandimpacthavebeendulyconsideredbeforeapprovingnewbusinessinitiativesorstrategicchanges;

• ToensurethattheinfrastructureisadequateandresourcesaresufficientlyinplaceforERMpersonneltoperformtheirroleseffectively;

• ToensureERMpersonnelareadequatelytrainedandareperformingtheirdutiesindependentlyfromtheGroup’srisktakingactivities;

• Tomonitorcomplianceriskwithregardstolegalandregulatoryrequirements;and

• Toreceivereportsonriskmanagementactivities,reviewthemandmakerecommendationtotheBoardwhennecessary.

38. insurance risK

The general insurance contracts written by the Group are mostly on annual coverage and annual premium basis, with the exception of short term policies such as Travel Insurance which covers only the travel period and Marine cargo which covers the duration in which the cargo is being transported.

Themajorityof thegeneral insurancebusiness ismotor insurance.Other insurancebusiness includesFire,Marine,PersonalAccident,Engineering,Liabilities,WorkmenCompensationandEmployerLiabilitiesandothermiscellaneousclasses.

Theobjectivesofmanaginginsurancerisksaretoenhancethefinancialperformanceofthebusinessandlimitanyexcessivevariability of the insurance results.

Insurance risk includes the risk of incurring higher claims cost than expected owing to the random nature of claims and their frequency and severity and the risk of change in legal or economic 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.



page 110

38. insurance risK (cont’d)

Underwriting insurance contracts involves the pooling of a large number of uncorrelated risks to reduce relative variability. The Group adopts the following measures to manage the general insurance risk:

• Underwritingstandards,byperforming riskselection tocontrol theexposure inaccordance to theGroup’sestablishedguidelines;

• Claimsmanagement,topayclaimsfairlyandcontrolclaimsleakagesandfraud;• Pricingandreservestandards,toensureadequatepremiumchargeforriskandvaluationofinsuranceliabilities;and• Reinsuranceprotection,tolimitexposuretolargeinsurancecontractsandcatastropheexposure.

Concentration risk is particularly relevant in the case of natural disasters and other catastrophes. The Group’s concentration risk is negligible as the Group’s insurance contracts mostly cover perils and risks in Malaysia and Malaysia is hardly exposed to natural disasters.

The table below sets out the concentration of general insurance business by type of product.

2011 2010



Motor 865,449 (242,424) 623,025 855,564 (146,925) 708,639

Fire 62,905 (42,745) 20,160 47,979 (29,564) 18,415

Marine Cargo, Aviation Cargo and Transit 17,402 (8,618) 8,784 16,067 (10,457) 5,610

Miscellaneous 163,973 (43,927) 120,046 139,143 (33,441) 105,702

1,109,729 (337,714) 772,015 1,058,753 (220,387) 838,366

The table below sets out the concentration of general insurance claims liabilities by type of product.

2011 2010



Motor 964,571 (269,873) 694,698 996,940 (139,994) 856,946

Fire 63,085 (52,319) 10,766 65,663 (57,272) 8,391

Marine Cargo, Aviation Cargo and Transit 20,110 (13,664) 6,446 14,941 (10,052) 4,889

Miscellaneous 88,618 (49,720) 38,898 78,248 (43,441) 34,807

1,136,384 (385,576) 750,808 1,155,792 (250,759) 905,033



page 111


38.1 insurance claims liabilities for general insurance

The insurance contract liabilities comprised claims and premium liabilities and are computed in accordance with sound actuarial principles and regulatory guidelines.

These liabilities comprise:

• bestestimateofthepremiumliabilities;• bestestimateoftheclaimsliabilities;and• marginsforadversedeviationwithnolessthana75%probabilityofadequacy.

38.1.1 valuation methodology

Variousactuarial techniquesareused toproject theprovision forclaimsand lossadjustmentexpensesandprovision for unexpired risk (claims and premium liabilities). These methods include:

• paid chain-ladder method (inflation and non-inflation adjusted, operational time and standard time,BornhuetterFerguson(BF)adjustments);

• reportedchain-laddermethod(operationaltimeandstandardtime,BornhuetterFerguson(BF)adjusted);• projectedcaseestimates;and• frequency/severitymethod.

The valuation process involves using the Group’s gross claims and policies data and net claims and policies data to estimate future claims experience. These insurance liabilities have been derived on a gross basis and are subsequentlyadjustedforreinsuranceandotherrecoveriesforanetbasis.

38.1.2 Key assumptions

The principal assumptions underlying the estimation of liabilities is that the Group’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim cost, claim handling costs, claims inflation factors and average number of claims for each accident year.

Additionalqualitativejudgementsareusedtoassesstheextenttowhichpasttrendsmaynotapplyinthefuture,for example, isolated occurrence, changes in market factors such as public attitude to claiming, economic conditions, as well as internal factors, such as portfolio mix, policy conditions and claims handling procedures.

In this regards, an analysis performed on the claims data on an individual claims basis indicated that:-

• Partofthevalueinthecaseestimatesrelatestoclaimsthatwillbesettledwithnofurtherpayment,whichamount is expected to more than offset the future development required on claims that will settle for more thancurrentcaseestimatesandsoleadtoareductionintheaveragesizeofclaimstobesettled;

• Despiteannualreviews,thereareanumberofclaimscaseswithnofurtherdevelopmentafterthe initialprovision that will be closed after 6 years, or earlier upon due verification of no claims from third parties, which will result in a reduction in case estimates in the subsequent years. There are also a number of claims where liability may be in question but the reserves are held assuming a 100% liability.



page 112


38.1 insurance claims liabilities for general insurance (cont’d)

38.1.2 Key assumptions (cont’d)

This has led to a key assumption that the high probability of claims continuing to settle for no additional cost will in turn lead to a reduction in the average amount per open claim to a level which is lower than the current average case estimates across most accident years for the Motor Act classes.

Other key circumstances affecting the reliability of assumptions include variation of interest rates, delays insettlement and changes in foreign currency rates.

The key assumptions of the actuarial valuation models include:

• chain-ladderclaimdevelopmentfactors• lossratios• expenseratios• reinsurancerecoveryratios

These assumptions are based on the Group’s historical underwriting experience.

For the valuation as at 31 December 2011, the basis of liability valuation assumptions has not been changed as compared to 31 December 2010.

38.1.3 Margin for adverse deviation

In accordance with the insurance regulations, the insurance liabilities include a risk margin with no less than a 75% probability of adequacy.

The risk margin is determined to allow for the uncertainty and volatility of the claims experience. Effects of diversification on the risk margin, arising from writing diversified lines of business, are also taken into account.

38.1.4 discounting

The insurance liabilities have been discounted using the risk-free discount rate derived from a yield curve as follows:

• fordurationsoflessthan15years,zero-couponspotyieldofMGSwithmatchingduration,and• fordurationsof15yearsormore,zero-couponspotyieldofMGSwith15yearstermtomaturity.



page 113



38.1.5 sensitivities

The general insurance claim liabilities are sensitive to key assumptions shown below. It has not been possible to quantify the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process.

The analysis below is performed for reasonable possible movements in key assumptions with all other assumptions held constant, showing the impact on Gross and Net liabilities, Profit before tax and Equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis.

impact on impact impact onchange in gross on net profit impact on

assumptions liabilities liabilities before tax equity*Group rM’000 rM’000 rM’000 rM’000

2011Average claims cost +5% 54,407 35,759 (35,759) (26,819)Average claims cost -5% (54,407) (35,759) 35,759 26,819Average number of claims +5% 54,407 35,759 (35,759) (26,819)Average number of claims -5% (54,407) (35,759) 35,759 26,819Average claim settlement period Improved by

6 months 13,291 9,243 (9,243) (6,932)

2010Average claims cost +5% 55,485 43,890 (43,890) (32,918)Average claims cost -5% (55,485) (43,890) 43,890 32,918Average number of claims +5% 55,485 43,890 (43,890) (32,918)Average number of claims -5% (55,485) (43,890) 43,890 32,918Average claim settlement period Improved by

6 months 22,640 18,793 (18,793) (14,095)

* Impactonequityreflectsadjustmentsfortax,whereapplicable.Themethodusedforderivingsensitivityinformation and significant assumptions did not change from the previous period.

38.1.6 claims development table

The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at the end of each reporting period, together with cumulative payment to date.

While the information in the tables provides a historical perspective on the adequacy of the unpaid claimsestimate established in previous years, users of these financial statements are cautioned against extrapolating redundancies or deficiencies of the past on current unpaid loss balances.

The management of the Group believes that the estimates of total claims outstanding as of 31 December 2011 are adequate. However, due to the inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate.



page 114




38.1.6 claims development table (cont’d)

38.1.6.1 Gross general insurance claims liabilities as at 31 December 2011

Before2004 2005 2006 2007 2008 2009 2010 2011 total


accident yearAt end of accident year 615,757 643,764 663,938 717,727 702,117 595,236 566,810 660,000Oneyearlater 639,896 671,628 691,106 742,073 746,799 616,375 604,649 -Two years later 666,813 701,146 733,987 758,404 772,749 649,587 - -Three years later 727,528 775,072 765,116 796,651 789,389 - - -Four years later 798,830 805,459 788,850 822,061 - - - -Five years later 807,041 818,971 777,987 - - - - -Six years later 831,085 815,705 - - - - - -Seven years later 854,906 - - - - - - -current estimate of

cumulative claims incurred 854,906 815,705 777,987 822,061 789,389 649,587 604,649 660,000

At end of accident year 195,354 193,933 198,629 204,490 232,479 214,699 197,287 231,053Oneyearlater 417,241 424,270 405,633 477,415 507,214 407,737 415,751 -Two years later 502,311 501,656 555,957 599,995 626,401 522,919 - -Three years later 582,871 642,092 642,597 698,485 703,687 - - -Four years later 686,468 711,249 708,157 750,619 - - - -Five years later 739,171 760,546 735,919 - - - - -Six years later 781,122 777,346 - - - - - -Seven years later 815,477 - - - - - - -cumulative payments

to-date815,477 777,346 735,919 750,619 703,687 522,919 415,751 231,053

Gross general insurance claims liabilities (direct and facultative) 39,429 38,359 42,068 71,442 85,702 126,668 188,898 428,947 1,021,513

Gross general insurance claims liabilities (treaty inwards) 20,886Best estimates of claims liabilities 1,042,399Claims handling expenses 26,106PRAD at 75% confidence level 108,375Discounting (45,282)Gross general insurance claims liabilities pertaining to principal subsidiary in Malaysia 1,131,598Gross general insurance claims liabilities pertaining to other subsidiary 4,786Gross general insurance claims liabilities per statements of financial position 1,136,384


page 115




38.1.6 claims development table (cont’d)

38.1.6.2 Net general insurance claims liabilities as at 31 December 2011

Before2004 2005 2006 2007 2008 2009 2010 2011 total


accident yearAt end of accident year 550,490 594,322 613,361 658,402 626,108 534,795 516,673 479,585Oneyearlater 572,071 620,046 638,459 680,735 660,822 555,515 522,142 -Two years later 596,135 647,296 678,074 695,443 694,403 571,797 - -Three years later 650,414 715,544 709,193 731,089 698,051 - - -Four years later 714,159 745,385 726,323 716,759 - - - -Five years later 732,483 754,254 705,178 - - - - -Six years later 731,683 740,931 - - - - - -Seven years later 752,352 - - - - - - -current estimate of cumulative claims

incurred752,352 740,931 705,178 716,759 698,051 571,797 522,142 479,585

At end of accident year 180,520 183,890 188,335 192,907 217,938 201,741 180,785 178,304Oneyearlater 386,765 399,634 381,650 446,026 465,821 381,232 371,773 -Two years later 464,555 471,636 523,962 560,350 576,397 485,047 - -Three years later 535,209 602,227 603,575 650,071 640,942 - - -Four years later 629,476 666,939 664,332 685,604 - - - -Five years later 677,046 712,768 681,472 - - - - -Six years later 713,953 723,992 - - - - - -Seven years later 735,541 - - - - - - -cumulative payments

to-date 735,541 723,992 681,472 685,604 640,942 485,047 371,773 178,304

Net general insurance claims liabilities (direct and facultative) 16,811 16,939 23,706 31,155 57,109 86,750 150,369 301,281 684,120

Net general insurance claims liabilities (treaty inwards) 20,886Best estimates of claims liabilities 705,006Claims handling expenses 19,585PRAD at 75% confidence level 55,828Discounting (30,845)Net general insurance claims liabilities pertaining to principal subsidiary in Malaysia 749,574Net general insurance claims liabilities pertaining to other subsidiary 1,234Net general insurance claims liabilities per statements of financial position 750,808


page 116



38.1.6 Claims development table (cont’d)

38.1.6.3 Gross general insurance claims liabilities as at 31 December 2010

Before2003 2004 2005 2006 2007 2008 2009 2010 total


accident yearAt end of accident year 615,757 643,764 663,938 717,117 702,117 595,236 566,810Oneyearlater 639,896 671,628 691,106 742,073 746,799 616,375 -Two years later 666,813 701,146 733,987 758,404 772,749 - -Three years later 727,528 775,072 765,116 796,651 - - -Four years later 798,830 805,459 788,850 - - - -Five years later 807,041 818,971 - - - - -Six years later 831,085 - - - - - -current estimate of

cumulative claims incurred 831,085 818,971 788,850 796,651 772,749 616,375 566,810

At end of accident year 195,354 193,933 198,629 204,490 232,479 214,699 197,287Oneyearlater 417,241 424,270 405,633 477,415 507,214 407,737 -Two years later 502,311 501,656 555,957 599,995 626,401 - -Three years later 582,871 642,092 642,597 698,485 - - -Four years later 686,468 711,249 708,157 - - - -Five years later 739,171 760,546 - - - - -Six years later 781,122 - - - - - -cumulative payments

to-date 781,122 760,546 708,157 698,485 626,401 407,737 197,287

Gross general insurance claims liabilities (direct and facultative) 36,818 49,963 58,425 80,693 98,166 146,348 208,638 369,523 1,048,574

Gross general insurance claims liabilities (treaty inwards) 7,219Best estimates of claims liabilities 1,055,793Claims handling expenses 26,059PRAD at 75% confidence level 127,204Discounting (71,251)General insurance claims liabilities pertaining to principal subsidiary in Malaysia 1,137,805General insurance claims liabilities pertaining to other subsidiary 17,987General insurance claims liabilities per statements of financial position 1,155,792



page 117



38.1.6 Claims development table (cont’d)

38.1.6.4 Net general insurance claims liabilities as at 31 December 2010

Before2003 2004 2005 2006 2007 2008 2009 2010 total


accident yearAt end of accident year 550,490 594,322 613,361 658,402 626,108 534,795 516,673Oneyearlater 572,071 620,046 638,459 680,735 660,822 555,515 -Two years later 596,135 647,296 678,074 695,443 694,403 - -Three years later 650,414 715,544 709,193 731,089 - - -Four years later 714,159 745,385 726,323 - - - -Five years later 732,483 754,254 - - - - -Six years later 731,683 - - - - - -current estimate of

cumulative claims incurred 731,683 754,254 726,323 731,089 694,403 555,515 516,673

At end of accident year 180,520 183,890 188,335 192,907 217,938 201,741 180,785Oneyearlater 386,765 399,634 381,650 446,026 465,821 381,232 -Two years later 464,555 471,636 523,962 560,350 576,397 - -Three years later 535,209 602,227 603,575 650,071 - - -Four years later 629,476 666,939 664,332 - - - -Five years later 677,046 712,768 - - - - -Six years later 713,953 - - - - - -cumulative payments

to-date 713,953 712,768 664,332 650,071 576,397 381,232 180,785

Net general insurance claims liabilities (direct and facultative) 14,712 17,730 41,486 61,991 81,018 118,006 174,283 335,888 845,114

Net general insurance claims liabilities (treaty inwards) 7,219Best estimates of claims liabilities 852,333Claims handling expenses 21,396PRAD at 75% confidence level 86,786Discounting (57,726)Net general insurance claims liabilities pertaining to principal subsidiary in Malaysia 902,789Net general insurance claims liabilities pertaining to other subsidiary 2,244Net general insurance claims liabilities per statements of financial position 905,033



page 118

39. financial risK

39.1 financial risk management objectives and policies

Exposure to credit, liquidity, market (currency risk, interest rate yield risk and price risk) and operational risk arises in the normal course of the Group’s and the Company’s business. The Board of Directors assumes overall responsibility for the Group’s and the Company’s financial risk management and has established certain committees to address these risks on an ongoing basis.

39.2 credit risk

Credit risk represents the potential losses that may result due to the inability of the counterparties to insurance, reinsurance and investment transactions in meeting their contractual obligations.

The Group has a credit control department and a credit policy in place and the exposure of credit risk is monitored on an ongoing basis. Investments are made based on appropriate evaluations, in accordance with Guidelines / Circulars issued by BNM, whereby all bond investments must carry a minimum rating of BBB or P3 by rating agencies established in Malaysia.

At the end of the reporting period, there were no significant concentrations of credit risk. The maximum exposure to credit risk for the Group is represented by the carrying amount of each financial asset.

The Group considers rating BBB and above as investment grades. Financial assets which are not rated by rating agencies are classified as non- rated.

39.3 credit exposure

The table below shows the maximum exposure to credit risks for the financial assets components on the statements of financial position.

2011 2010


HTM financial investments


Loans and receivables (“LAR”)

Loans 11,443 20,322

Fixed and call deposits 457,728 501,836

AFS financial investments



Reinsurance assets 385,576 250,759

Insurance receivables 56,832 52,851

Cash and cash equivalents 130,771 129,632

1,369,586 1,364,879



page 119

39. financial risK (cont’d)

39.3 credit exposure (cont’d)

39.3.1 credit exposure by credit rating

The table below provides information regarding the credit risk exposure of the Group by classifying assets according to the Group’s credit rating of counterparties.

neither

past due nor

impaired / Past-due

investment but

grade non- rated not impaired total

Group rM’000 rM’000 rM’000 rM’000

2011


Debt securities 62,123 - - 62,123

Loans and receivables - 463,171 6,000 469,171



Reinsurance assets 220,720 164,856 - 385,576

Insurance receivables 8,685 36,641 11,506 56,832

Cash and cash equivalents - 130,771 - 130,771

556,641 795,439 17,506 1,369,586

2010



Loans and receivables 29,410 486,748 6,000 522,158



Reinsurance assets 138,749 112,010 - 250,759

Insurance receivables 7,035 32,466 13,350 52,851

Cash and cash equivalents - 129,632 - 129,632

584,673 760,856 19,350 1,364,879



page 120



39.3.2 credit exposure by credit rating

The table below provides information regarding the credit risk exposure of the Group by classifying assets according to the Rating Agency of Malaysia’s (“RAM”) or MARC’s credit ratings of counterparties. AAA is the highest possible rating.

aaa aa a BBB non- rated total


2011


Debt securities 14,833 43,226 - 4,064 - 62,123

LAR

Loans - - - - 11,443 11,443

Fixed and call deposits - - - - 457,728 457,728


Debt securities 77,666 177,136 10,311 - - 265,113

Reinsurance assets 13,144 29,232 178,226 118 164,856 385,576

Insurance receivables 832 524 7,329 - 48,147 56,832

Cash and cash equivalents - - - - 130,771 130,771

106,475 250,118 195,866 4,182 812,945 1,369,586

2010


Debt securities 14,777 43,516 - 4,985 - 63,278

LAR

Loans - - - - 20,322 20,322

Fixed and call deposits 29,410 - - - 472,426 501,836


Debt securities 88,165 247,946 10,090 - - 346,201

Reinsurance assets 8,079 33,346 96,761 563 112,010 250,759

Insurance receivables 691 1,005 5,339 - 45,816 52,851

Cash and cash equivalents - - - - 129,632 129,632

141,122 325,813 112,190 5,548 780,206 1,364,879



page 121



39.3.3 age analysis of insurance receivables past-due but not impaired

The Group maintains an ageing analysis in respect of insurance receivables only. The ageing of insurance receivables that are past due as at the reporting date but not impaired is as follow:

< 30 days 31 to 60 days 61 to 90 days > 90 days total

Group rM’000 rM’000 rM’000 rM’000 rM’000

31 december 2011

Insurance receivables 1,366 - 2,805 7,335 11,506

31 december 2010

Insurance receivables 7,398 - 2,360 3,592 13,350

39.3.4 other receivable past due but not impaired

Included in other receivables is a non-performing loan of RM6,000,000 (2010: RM6,000,000). The Group does not specifically monitor the ageing of the loan. Nevertheless, this amount has been overdue for more than 1 year.

At the end of the reporting period, there was no indication that the loan is not recoverable as it is secured by land charged by the borrower with carrying value of approximately RM12,000,000 (2010: RM12,000,000) determined based on valuation performed by an independent professional qualified valuer.

39.3.5 impaired financial assets

At 31 December 2011, based on collective and individual assessment of receivables, there are impaired insurance receivables of RM17,775,000 (2010: RM30,121,000). No collateral is held as security for any past due or impaired assets. The Group records impairment allowance for loans and receivables and insurance receivables in separate Allowance for impaired loss accounts. A reconciliation of the allowance for impairment losses for loans and receivables and insurance receivables is as follows:

insurance receivables other receivables

2011 2010 2011 2010

Group rM’000 rM’000 rM’000 rM’000

at 1 January 30,121 40,187 720 720

Movement during the year (12,346) (10,066) - -

at 31 december 17,775 30,121 720 720



page 122


39.4 liquidity risk

Liquidity risk is the risk whereby the Group entities are unable to meet their obligations at a reasonable cost or at any time. The Group and the Company manage this risk by monitoring its daily and monthly estimated and actual cash flows. The Group and the Company also hold a sufficient quantity of liquid investments that can be readily converted to cash.

The following policies and procedures are in place to mitigate the Group’s and the Company’s exposure to liquidity risk:

• TheGroupandtheCompanysetguidelinesonassetallocations,portfoliolimitstructuresandmaturityprofilesoftheassets, in order to ensure sufficient funding is available to meet insurance and investment contracts obligations.

• TheGroupandtheCompanymonitortheirliquidityriskandmaintainalevelofcashandcashflowdeemedadequateby management to finance their operations and to mitigate the effect of fluctuations in cash requirements.

• TheGroup’scatastropheexcess-of-lossreinsurancecontractscontainclausespermittingtheimmediatedrawdownof funds to meet claims payments should claim events exceed a certain amount.

39.4.1 Maturity profiles

The table below summarises the maturity profile of the financial liabilities of the Group and the Company based on remaining undiscounted contractual obligations, including interest / profit payable.

For insurance claims liabilities, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities.

The carrying value of the insurance claims liabilities have been discounted using the risk-free discount rate derived from a yield curve as follows:

• fordurationsoflessthan15years,zero-couponspotyieldofMGSwithmatchingduration,and• fordurationsof15yearsormore,zero-couponspotyieldofMGSwith15yearstermtomaturity.



page 123


39.4 liquidity risk (cont’d)

39.4.1 Maturity profiles (cont’d)

no

carrying up to a 1 - 3 3 - 5 5 - 15 over 15 maturity

value year years years years years date total

Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

2011

Insurance claims liabilities 1,136,384 660,166 351,292 89,187 37,418 - - 1,138,063

Otherfinancialliabilities 450,630 327,104 146,103 - - - - 473,207

Insurance payables 87,373 87,373 - - - - - 87,373

Otherpayables 102,976 84,192 21,216 - - - - 105,408

total liabilities 1,777,363 1,158,835 518,611 89,187 37,418 - - 1,804,051

2010

Insurance claims liabilities 1,155,792 498,481 401,264 196,364 122,345 - - 1,218,454


Insurance payables 29,630 29,630 - - - - - 29,630

Otherpayables 90,728 71,862 2,268 20,000 - - - 94,130

total liabilities 1,711,472 774,423 702,860 216,364 122,345 - - 1,815,992

company

2011


Otherpayables 48,281 29,497 21,216 - - - - 50,713

total liabilities 408,281 265,971 167,319 - - - - 433,290

2010


Otherpayables 28,115 9,249 2,268 20,000 - - - 31,517

total liabilities 388,115 108,377 301,596 20,000 - - - 429,973



page 124



39.5 Market risk

Market risk is the risk of loss arising from uncertainty concerning movements in the market prices and rates, including observable variables such as interest rates and others that may be only indirectly observable such as volatilities and correlations. Market risk includes factors such as changes in economic environment, consumption pattern and investor’s expectation which may have significant impact on the value of the investments.

The Group’s investment portfolio is generally exposed to fluctuation in market prices. Risk and returns are constantly monitored and reviewed by the Investment Committee Members.

The Group and the Company distinguish market risk as follows:

• Currencyrisk• Interestraterisk• Pricerisk

39.5.1 foreign currency risk

The Group and the Company are exposed to foreign currency risk on gross direct premiums, reinsurance outwards, claims and intra-group borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities. The currencies giving rise to this risk are primarily Singapore Dollar (SGD), Indonesian Rupiah and Thai Baht.

In respect of monetary assets and liabilities held in currencies other than RM, the Group entities ensure that the net exposure is kept to an acceptable level. The exposure to currency risk of the Group entities is not material, and hence sensitivity analysis is not presented.

39.5.2 interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate/profit yield.

Floating rate/yield instruments expose the Group and the Company to cash flow interest/profit risk, whereas fixed rate/yield instruments expose the Group and the Company to fair value interest/profit risk.

The Group’s earnings are affected by changes in market interest rates as the impact of such changes has an effect on interest income from deposit placements and fixed income securities. To mitigate the interest rate risk, the deposit placements are made with various financial institutions at varying maturity dates and rates. Hence, the Group has no significant concentration of interest rate/profit yield risk.

The Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.


page 125



39.5 Market risk (cont’d)

39.5.2 interest rate risk (cont’d)

The analysis below is performed for reasonable possible movements in key variables with all other variable held constant, showing the impact on profit before tax (due to changes in fair value of floating rate/yield financial instruments)andequity(thatreflectsadjustmentstoprofitbeforetaxandre-valuingfixedrate/yieldAFSfinancialassets). The correlation of variables will have a significant effect in determining the ultimate impact on interest rate/profit yield risk but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear.

2011 2010

impact impact

change in on profit impact on on profit impact on

variables before tax equity* before tax equity*

Group rM’000 rM’000 rM’000 rM’000

Parallel shift in yield curves + 100 basis points (2,910) (5,385) (3,574) (8,087)

Parallel shift in yield curves - 100 basis points 2,910 5,507 3,574 8,289

company

Parallel shift in yield curves + 100 basis points (2,910) (2,182) (3,574) (2,680)

Parallel shift in yield curves - 100 basis points 2,910 2,182 3,574 2,680

* impactonequityreflectsadjustmentsfortax,whereapplicable.

The method used for deriving sensitivity information and significant variables did not change from the previous period.

39.5.3 Price risk

Equity price risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from interest/profit yield risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting similar financial instruments traded in the market.

The Group’s equity price risk exposure relates to financial assets and financial liabilities whose values will fluctuate as result of changes in market prices.

TheGroup’spriceriskpolicyrequiresittomanagesuchriskbysettingandmonitoringobjectivesandconstraintson investments, diversification plans, limits on investments in each country, sector, market and issuer, having regard also to such limits stipulated by BNM. The Group complies with BNM stipulated limits during the financial year and has no significant concentration of price risk.


page 126


39.5 Market risk (cont’d)

39.5.3 Price risk (cont’d)

The analysis below is performed for reasonable possible movements in key variables with all other variables held constant, showing the impact on profit before tax (due to changes in fair value of financial assets and liabilities whosechangesinfairvaluearerecordedinincomestatements)andequity(thatreflectsadjustmentstoprofitbefore tax and changes in fair value of AFS financial assets). The correlation of variables will have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear.

2011 2010

impact impact

change in on profit impact on on profit impact on

variables before tax equity* before tax equity*

Group rM’000 rM’000 rM’000 rM’000

Market price +5% 5,654 29,769 3,874 25,186

Market price -5% (5,654) (29,769) (3,874) (25,186)

* impactonequityreflectsadjustmentsfortax,whereapplicable.

The method used for deriving sensitivity information and significant variables did not change from the previous period.

39.6 fair value of financial instruments

The fair value of negotiable instruments of deposits is based on indicative market price as determined by the issuer at the end of the reporting period.

The fair values of quoted shares of corporations, unit and property funds trust are based on quoted closing market prices at the end of the reporting period.

The fair values of collective investment funds are based on the net asset values of the unit trusts as at the date of the statements of assets and liabilities obtained from fund managers.

The estimated fair values of Malaysian government securities, Cagamas bonds, Government guaranteed bonds and unquoted corporate debt securities are based on the average indicative market yields obtained from three financial institutionswhichinvolveprojectionsofthemarketyieldsbasedonpasttransactions.Thereareelementsofsignificantuncertainty inprojecting theexpectedmarket yieldand theseuncertaintiesarise fromchanges in theunderlying riskandoveralleconomicconditions.Assuch,theprojectedmarketyieldsmaybedifferentfromtheactualmarketyieldsinfuture.



page 127



39.6 fair value of financial instruments (cont’d)

The carrying amount of secured short term loans and fixed and call deposits with a maturity period less than one year are assumed to approximate their fair values.

The mortgage loans with variable rates are considered to approximate their fair values. For mortgage and other loans with fixed rates, fair values are derived by discounting future cash flows, using interest rates for similar instruments, where applicable, taking into consideration the nature and contracted terms of these loans. Based on management’s assessment as at 31 December 2011, the estimated fair values of the loans approximate their carrying values.

It was not practical to estimate the fair value of the Group’s investment in unquoted shares of corporations due to the lack

of comparable quoted market price and the inability to estimate fair value without incurring excessive costs.

39.7 fair value hierarchy

Comparative figures have not been presented for 31 December 2010 by virtue of the exemption provided in paragraph 44G of FRS7.

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level1: Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

level 1 level 2 level 3 total

Group rM’000 rM’000 rM’000 rM’000

2011

financial assets

Debt securities - 265,113 - 265,113

Quotedequitysecurities 17,594 - - 17,594

Collective investment funds - 680,768 - 680,768

Quotedunitandpropertytrustfunds 138,704 - - 138,704

156,298 945,881 - 1,102,179


page 128


39.8 operational risks

Operationalriskistheriskoflossarisingfromsystemfailure,humanerror,fraudorexternalevents.Whencontrolsfailtoperform, operational risk can cause damage to reputation, have legal or regulatory implications or can lead to financial loss.

The Group cannot expect to eliminate all operational risks but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, staff training and evaluation procedures, including the use of Internal Audit.

Business risks, such as changes in environment, technology and the industry are monitored through the Group’s strategic planning and budgeting process.

40. caPital ManaGeMent

TheGroup’sobjectiveswhenmanagingcapitalistomaintainastrongcapitalbaseandsafeguardtheGroup’sabilitytocontinueas a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirements.

There were no changes in the Group’s approach to capital management during the year.

Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid up capital (excluding treasury shares) and such shareholders’ equity is not less than RM40 million. The Company has complied with this requirement.

TheMalaysianinsurancesubsidiaryoftheGroupissubjecttotheRBCFrameworkwhichcameintoeffecton1January2009.Under the RBC Framework, insurance companies need to maintain a capital adequacy level that commensurate with their risk profiles. All insurance companies are required to maintain a minimum Capital Adequacy Ratio (“CAR”) of 130%.

The Malaysian insurance subsidiary of the Group has met its regulatory requirement and has a CAR in excess of the minimum requirement.



page 129


41. suPPleMentary financial inforMation on the BreaKdown of realised and unrealised Profits or losses

The breakdown of the retained profits of the Group and of the Company as at 31 December, into realised and unrealised profits, pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements are as follows:

Group company

2011 2010 2011 2010

rM’000 rM’000 rM’000 rM’000

Totalaccumulated(losses)/profitsofKurniaAsiaBerhadand its subsidiaries

- realised (34,241) (65,334) (40,951) (30,358)

- unrealised 25,633 10,749 - -

(8,608) (54,585) (40,951) (30,358)

Total share of accumulated (losses)/ profits from associates

- realised (1,695) (3,616) - -

- unrealised - 54 - -

Total accumulated losses as per statements of financial position (10,303) (58,147) (40,951) (30,358)

The determination of realised and unrealised profits is based on the Guidance of Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.


page 130

In the opinion of the Directors, the financial statements set out on pages 46 to 128 are drawn up in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia Guidelines and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2011 and of their financial performance and cash flows for the financial year then ended on that date.

In the opinion of the Directors, the information set out in Note 41 on page 129 to the financial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:


datuk Kua chung sen


Date: 9 April 2012

Statement by Directorspursuant to Section 169(15) of the Companies Act, 1965


page 131

I,BelindaCheahSzeYun, theofficerprimarily responsible for thefinancialmanagementofKurniaAsiaBerhad,dosolemnlyandsincerely declare that the financial statements set out on pages 46 to 129 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Petaling Jaya, Selangor on 9 April 2012.

Belinda cheah sze yun

Before me:

radziah Binti abdul rahmanCommissionerforOaths

Statutory Declarationpursuant to Section 169(16) of the Companies Act, 1965


page 132

WehaveauditedthefinancialstatementsofKurniaAsiaBerhad,whichcomprisethestatementsoffinancialpositionasat31December2011 of the Group and of the Company, and the income statements, statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 46 to 128.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of these financial statements that give a true and fair view in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia Guidelines and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.Weconductedourauditinaccordancewith 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 proceduresselecteddependonourjudgement,includingtheassessmentofrisksofmaterialmisstatementofthefinancialstatements,whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia Guidelines and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2011 and of their financial performance and cash flows for the year then ended.

Independent Auditors’ Reportto the members of Kurnia Asia Berhad


page 133

Emphasis of Matter

Withoutqualifyingouropinion,wedrawattentiontoNote2.2inthefinancialstatementswhichdisclosesthepremiseuponwhichthe Company has prepared its financial statements by applying the going concern assumption, notwithstanding that the Company incurred a net loss of RM10,593,000 during the year ended 31 December 2011, and as of that date, the Company’s current liabilities exceeded its current assets by RM243,690,000 which may indicate the existence of a significant uncertainty about the Company’s ability to continue as a going concern.

The Company has considered prospective cash flow information and events that may occur in the next twelve months and the possible actions to be taken by the Company. In this regards, the Company had on 3 April 2012 obtained approval from Minister of Finance via Bank Negara Malaysia, to enter into an agreement with AmG Insurance Berhad to dispose the Company’s 100% equity interestinKurniaInsurans(Malaysia)Berhad.

The validity of the going concern assumption in the preparation of financial statements is dependent on the successful outcome of the various initiatives being undertaken by the Company and the Company achieving future profitable operations. The financial statements donotincludeanyadjustmentsrelatingtotherecoverabilityandclassificationofrecordedassetamounts,andrelatingtoamountsandclassification of liabilities that may be necessary if the Company is unable to continue as a going concern.

report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) Wehaveconsideredtheaccountsandtheauditors’reportsofallthesubsidiariesofwhichwehavenotactedasauditors,whichare indicated in Note 7.2 to the financial statements.

(c) WearesatisfiedthattheaccountsofthesubsidiariesthathavebeenconsolidatedwiththeCompany’sfinancialstatementsareinform and content appropriate for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

other reporting responsibilities

Ourauditwasmadeforthepurposeofforminganopiniononthefinancialstatementstakenasawhole.TheinformationsetoutinNote 41 on page 129 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities BerhadListingRequirementsandisnotrequiredbytheFinancialReportingStandards.Wehaveextendedourauditprocedurestoreport on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance of Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Independent Auditors’ Reportto the members of Kurnia Asia Berhad (cont’d)


page 134

other Matter

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 inMalaysiaandfornootherpurpose.Wedonotassumeresponsibilitytoanyotherpersonforthecontentofthisreport.

KPMG foong Mun KongFirm Number: AF 0758 Approval Number: 2613/12/12(J)Chartered Accountants Chartered Accountant


Date: 9 April 2012

Independent Auditors’ Reportto the members of Kurnia Asia Berhad (cont’d)


page 135

Additional Compliance Information

1. share Buy-Back There was no share buy-back by the Company during the financial year.

2. option, warrants or convertible securities The Company did not issue any options, warrants or convertible securities during the financial year.

3. american depository receipt (adr) or Global depository receipt (Gdr) The Company did not sponsor an ADR or GDR programme during the financial year.

4. imposition of sanctions and / or penalties. There was no material public sanction and / or penalty imposed on the Company and / or its subsidiaries, Directors or the

Management by the relevant regulatory bodies during the financial year.

5. variation in results There were no variation of 10% or more in results for the fourth quarter and year ended 31 December 2011.

6. Profit guarantee There was no profit guarantee given by the Company during the financial year.

7. Material contracts Save as disclosed below, there was no material contract entered into by the Company / or its subsidiaries involving Directors’

andmajorshareholders’interestwhichwerestillsubsistingasattheendofthefinancialyearorifnotthensubsisting,enteredinto since the end of the previous financial year.

(i) Loan Agreement with Tan Sri Dato’ Paduka Kua Sian Kooi, dated 31/12/2010 TheCompanyenteredintoaloanagreementwithitsmajorshareholder,TanSriDato’PadukaKuaSianKooifora loan

amounting RM20,000,000, for the purpose of enabling the Company to meet its obligation on a scheduled term loan repayment to CIMB Bank Berhad (“CIMB”). The loan is unsecured and subordinated to the term loan from CIMB. The effective interest rate of the loan during the financial year was 5.91% (2010: 5.67%) per annum.


page 136

List of Top 10 Properties

no. locationexisting

use tenureland area

(sq.meters)type of

buildingage of

building

latest date of revaluation(#)/

acquisition

carrying amounts as

at 31.12.2011 (rM)

1 MenaraKurnia,No.9,JalanPJS8/9, 46150 Petaling Jaya held under issue document of title H.S. (D) 63219, P.T. No. 54435, Mukim Damansara, Daerah Petaling, Selangor Darul Ehsan.

Office Leasehold Expiring-

17 July 2091

26,759.66 25-storey office building

11+ 28 February 2011(#)

90,994,751.96

2 No.32,JalanYapAhShak,BangunanKurnia,50300KualaLumpurheldunderissue document of title Grant No. 42162 Lot 2485 Seksyen 41,BandarKualaLumpur,DaerahKualaLumpur,WilayahPersekutuanKualaLumpur.

Office Freehold 682.00 10 ½ -storey terraced corner

office building

15+ 01 March 2011(#)

30,698,436.22

3 Lot No. 14, Jalan Teknologi, Taman Sains Selangor 1,47810KotaDamansara,Daerah Petaling,Selangor Darul Ehsan.

Archive Storage

Leasehold Expiring-

11 September 2062

21,779 A data information

resource centre consisting of a 3-storey office

building

Not available

10 February 2011(#)

19,794,846.34

4 No. 18, 18A, 18B, 18C, 18D, 18E & 18F, Leboh Raya Darul Aman, 05100 Alor Setar, KedahDarulAmanheldunder title Grant No. 37915, Lot No. 62, Section 9, Town of Alor Setar, DistrictofKotaSetar,KedahDarulAman.

Office Freehold 2,519 1 unit 6-storey terraced corner

office block, 5 units 3-storey

terraced intermediate shoplots &

1 unit 3-storey terraced end-lot

shoplots

9+ 26 January 2011(#)

8,864,294.62

5 Lot 1246 to 1255, Seksyen 41, LorongHajiHussein2,50300KualaLumpuronGrantNo.26312, 26313, 26314, 26315, 28311 to 28316, Lot No.1246 to 1255,Section41,BandarKualaLumpur,DaerahKualaLumpur,WilayahPersekutuanKualaLumpur.

Investment(Currently rented out as parking facilities)

Freehold 2,047.24 10 pieces of land

Not applicable

17 February 2011(#)

7,713,000.00


page 137

no. locationexisting

use tenureland area

(sq.meters)type of

buildingage of

building

latest date of revaluation(#)/

acquisition

carrying amounts as

at 31.12.2011 (rM)

6 No. 2F, Lorong Selamat, 10400 Pulau Pinang held under issue document of title Grant No. 61391, Lot No. 1296, Section 16 Daerah Timor Laut, Bandar George Town, Pulau Pinang.

Office Freehold 342.00 9-storey terraced

corner office building

13+ 27 January 2011(#)

5,929,502.46

7 No. 28, 30, 32 & 34, Jalan Kamunting,50300KualaLumpuron Grant No. 29792, 29793, 29794 & 29795, Lot No. 575 to 578,Seksyen41,BandarKualaLumpur,DaerahKualaLumpur,WilayahPersekutuanKualaLumpur.

Private parking for staff

Freehold 594.56 4 pieces of land

Not applicable

09 February 2011(#)

4,800,000.00

8 No.149-151,JalanMaharajalela,WismaKurnia,50150KualaLumpur, held under issue document of title Grant No. 4594 & 4595, Lot 956 & 957 Seksyen 69,BandarKualaLumpur,DaerahKualaLumpur,WilayahPersekutuanKualaLumpur.

Office Freehold 251.30 2 units 5 ½ storey terraced

intermediate shopoffice

Notavailable

17 February 2011(#)

3,964,638.94

9 Lot47,LorongBerjaya5,BandaranBerjaya,88000KotaKinabalu,Sabah

Office Leasehold Expiring -21

January 2901

157.93 4(+1)-storey corner

shopoffice

Not available

21 February 2011(#)

2,177,902.48

10 No. 16A-C & 18A-C, Persiaran Greentown 6, Greentown Business Centre, 30450 Ipoh, PerakDarulRidzuanheldunder issue document of title PN147559 9393N & PN147560 9394N, Bandar Ipoh, Daerah Kinta,PerakDarulRidzuan.

Office Leasehold Expiring-

21 November 2094

334 2 units 4-storey intermediate

shopoffice

12+ 01 February 2011(#)

2,174,940.88

List of Top 10 Properties (Cont’d)


page 138

Analysis of Shareholdingsas at 21 May 2012

analysis of shareholdings as at 21/05/2012

Authorised Share Capital : RM1,250,000,000Issued & Paid Up Share Capital : RM375,000,000ClassofShares :OrdinarysharesofRM0.25eachVotingrights :Onevoteperordinaryshare

size of holdings no. of holders no. of holdings %

M’sian foreign M’sian foreign M’sian foreign

1 - 99 15 0 535 0 0.00 0.00

100 – 1,000 785 3 718,597 2,300 0.05 0.00

1,001 – 10,000 3,445 32 18,700,047 182,700 1.26 0.01

10,001 – 100,000 1,746 33 61,977,300 1,453,100 4.16 0.10

100,001–74,421,129* 381 22 583,790,187 55,951,010 39.22 3.76

74,421,130andabove** 2 0 765,646,824 0 51.44 0.00

total 6,374 90 1,430,833,490 57,589,110 96.13 3.87

no. of holders no. of holdings % of holdings

Grand total 6,464 1,488,422,600*** 100.00

Remark: * -Lessthan5%ofIssuedHoldings ** -5%andaboveofIssuedHoldings ***-Excluding11,577,400treasuryshares

top thirty securities account holders as at 21/05/2012

no. nameno. of

shares held %

1. KuaSianKooi 413,999,600 27.81

2. CimsecNominees(Tempatan)SdnBhdCIMBforKuaSianKooi(PB) 351,647,224 23.63

3. CSKuaSdnBhd 60,000,000 4.03

4. Damai Asset Management Sdn Bhd 42,966,068 2.89

5. KenangaNominees(Tempatan)SdnBhdPledgedSecuritiesAccountforEpic Portfolio Sdn Bhd

40,000,000 2.69

6. JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Harta Rigap Sdn Bhd (Margin)

38,011,800 2.55

7. Cimsec Nominees (Tempatan) Sdn Bhd Siew Lee Guan 37,000,000 2.49

8. OthmanbinAbdul 31,904,600 2.14

9. KenangaNominees(Tempatan)SdnBhdPledgedSecuritiesAccountforDamaiAssetManagement Sdn Bhd

30,711,400 2.06

10. Cartaban Nominees (Asing) Sdn Bhd Government of Singapore Investment Corporation Pte Ltd for Government of Singapore (C)

28,743,700 1.93


page 139

Analysis of Shareholdingsas at 21 May 2012 (cont’d)

top thirty securities account holders as at 21/05/2012 (cont’d)

no. nameno. of

shares held %

11. Modal Sekata Sdn Bhd 22,700,000 1.53

12. QuahTeongMoo 17,867,300 1.20

13. Modal Sekata Sdn Bhd 15,403,200 1.03

14. KenangaNominees(Tempatan)SdnBhdPledgedSecuritiesAccountforModal Sekata Sdn Bhd

13,036,100 0.88

15. KenangaNominees(Tempatan)SdnBhdPledgedSecuritiesAccountforHarta Rigap Sdn Bhd

12,904,800 0.87

16. KuaChungSen 12,702,000 0.85

17. JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for TehSiewWah(Margin)

11,678,800 0.78

18. Cartaban Nominees (Asing) Sdn Bhd Government of Singapore Investment Corporation Pte Ltd for Monetary Authority of Singapore (H)

9,299,300 0.62

19. Law Ah Moy 8,000,000 0.54

20. Cimsec Nominees (Tempatan) Sdn Bhd CIMB Bank for Harta Rigap Sdn Bhd (MP0117)

7,000,300 0.47

21. Cimsec Nominees (Tempatan) Sdn Bhd CIMB Bank for Modal Sekata Sdn Bhd (MP0116)

7,000,000 0.47

22. Siew Toh Ee 5,000,000 0.34

23. Citigroup Nominees (Tempatan) Sdn Bhd Exempt An For OCBCSecuritiesPrivateLimited(ClientA/C-RES)

4,991,200 0.34

24. Maybank Nominees (Tempatan) Sdn Bhd Pledged Securities Account for TehSiewWah

4,700,000 0.32

25. Cimsec Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Law Ah Moy (Penang-CL)

4,553,019 0.31

26. Cartaban Nominees (Asing) Sdn Bhd Government of Singapore Investment Corporation Pte Ltd for Monetary Authority of Singapore (B)

3,838,400 0.26

27. M.I.TNominees(Tempatan)SdnBhdPledgedSecuritiesAccountforOngSawPeng(MG0067-188)

3,349,600 0.23

28. AIBB Nominees (Tempatan) Sdn Bhd Pledged Securities Account For CheongChenYue

3,295,500 0.22

29. CitigroupNominees(Asing)SdnBhdCBNYForDFA Emerging Markets Small Cap Series

3,263,700 0.22

30. HRHSultanHjAbdulHalimMuadzamShah 3,046,400 0.20


page 140

Analysis of Shareholdingsas at 21 May 2012 (cont’d)

directors’ direct and indirect interest in the company and its related corporations

direct interest indirect interest

no. of shares held %

no. of shares held %

TanSriDato’PadukaKuaSianKooi 765,646,824 51.44 5,000,000 0.33

DatukKuaChungSen 12,702,000 0.85 60,000,000 4.03

Dato’WiraOthmanbinAbdul 31,904,600 2.14 334,600 0.02

Dato’QuahTeongMoo 17,867,300 1.20 - -

Dato’Dr.SharifuddinbinAbdulWahab - - - -

LeowMingFong@LeowMinFong - - - -

substantial shareholders

direct interest indirect interest total interest

nameno. of

shares held %no. of

shares held %no. of

shares held %

TanSriDato’PadukaKuaSianKooi 765,646,824 51.44 5,000,000 0.33 770,646,824 51.77

This page has been intentionally left blank

This page has been intentionally left blank

Form of Proxy

I/We (Full name in block capitals)

of (Full address)

being*amember(s)ofKURNIAASIABERHAD(539435-K)(“KAB”),herebyappoint(s)

of

or failing him

of as my/our proxy to attend and vote for me/us on my/our behalf at the Eleventh Annual General Meeting of the Company to be held at 9thFloor,TrainingAuditorium,MenaraKurnia,BlockB4,LeisureCommerceSquare,No.9,JalanPJS8/9,46150PetalingJaya,SelangorDarulEhsanonWednesday,27June2012at10.00a.m.oranyadjournmentthereof.

Please indicate with an “X” in the space provided below as to how you wish your votes to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his/her discretion.

resolutions for against

Resolution 1 To receive the Audited Financial Statements for the financial year ended 31 December 2011 and the Reports of Directors and Auditors thereon.

Resolution 2 Tore-electDato’WiraOthmanbinAbdulwhoretiresbyrotationpursuanttoArticle110 of the Company’s Articles of Association as Director.

Resolution 3 Tore-electDatukKuaChungSenwhoretiresbyrotationpursuanttoArticle110ofthe Company’s Articles of Association as Director.

Resolution 4 To re-appointMessrs. KPMGasAuditors of theCompany and to authorise theDirectors to fix their remuneration.

Resolution 5 Authority to issue shares.

Resolution 6 ProposedChangeofNamefromKurniaAsiaBerhadtoKSKGroupBerhad.

Dated this , 2012

Signature of Member or Affix Common Seal

notes :1. In respect of deposited securities, only depositors whose names appear in the Record of Depositors as at 21 June 2012 be regarded as members and entitled to attend, speak and

vote at the Meeting.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a Member of the Company and a Member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. AMembershallbeentitledtoappointnotmorethanthree(3)proxiestoattendandvoteattheMeeting.WhereaMemberappointsmorethanone(1)proxy,theappointmentshallbe invalid unless the Member specifies the proportions of his holding to be represented by each proxy.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a corporation, either under its Common Seal or under the hand of its attorney duly authorised.

5. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a notarially certified copy thereof, must be deposited at the RegisteredOfficeoftheCompanyat10thFloor,BangunanKurnia,No.32JalanYapAhShak,50300KualaLumpurnotlessthanfortyeight(48)hoursbeforethetimeforholdingtheAnnualGeneralMeetingoranyadjournmentthereof.

No. of Shares Held

(539435-K)

AffixStampHere

1st fold here

2nd fold here

Fold this flap to seal

Kurnia asia Berhad (539435-K)10thFloor,BangunanKurniaNo.32,JalanYapAhShak50300KualaLumpur

Documents

Kurnia asia Berhad Building Strength TogeTher the team will continue to join hands in “Building Strength Together ” to achieve greater heights. VISION & MISSION TO BE A LEADING