TUNEINS AnnualReport2012

TUNE INS HOLDINGS BERHAD
(948454-K)
Annual Report
12
OUR VISION TIHs vision is to be recognized as ASEANs leading regional digital insurance franchise and Malaysias first home-grown regional insurance player, distinctive in its innovative culture, people and customer loyalty proposition. OUR PROFILE TIH Group is an underwriter, directly and via reinsurance, of general and life insurance products across the Asia-Pacific region. We operate two core businesses, an online insurance business through which insurance products are sold to customers as part of their online booking process with our online partners, and other general insurance business, currently only in Malaysia. Our online insurance business comprises primarily our Travel Protection Plan but also includes products such as the AA Lifestyle Protection Plan and Tune Hotels Lifestyle Protection Plan. This business segment is underpinned by exclusive long-term agreements with AirAsia, and a contractual arrangement with Tune Hotels. Through our online business, we operate in 15 markets including Malaysia, Indonesia, Thailand, Singapore and China as our key markets. In addition to our relationships with AirAsia and Tune Hotels, we have entered into arrangements with AirAsia Expedia to provide insurance products to AirAsia Expedia customers making online bookings initially through three of their websites in Asia. The underwriting of reinsurance for general and life products across the Asia-Pacific region is currently conducted through Tune Money Gen Re Ltd (TMGR) and Tune Money Life Re Ltd (TMLR). We have also channeled the business previously conducted through Tune Insurance (Labuan) Ltd (TIL) to TMGR. In May 2012, we acquired an established Malaysian general insurance business, Tune Insurance Malaysia Berhad (TIMB) (previously known as Oriental Capital Assurance Berhad), which had approximately 1,000 agents and 16 branches throughout Malaysia and through which we now carry out our other general insurance business. This acquisition provides us the licence to undertake the role of a traditional insurance provider and to underwrite general insurance policies directly in Malaysia, as well as to offer a broader range of insurance products through a broader range of channels. On 20 February 2013, TIH was successfully listed on the main market of Bursa Malaysia with a market capitalisation of RM1 billion. Via the listing, we have marquee regional and international shareholders along with existing significant domestic shareholders including AirAsia founders Tony Fernandes and Kamarudin Meranun, and leading financial institution, CIMB.
TIH AT A GLANCE
OUR STRATEGY
CAPTURE SYNERGIES FROM TIMB INTEGRATION & DIVERSIFY PRODUCT OFFERING Capture underwriting revenue previously ceded to third party insurance partners in Malaysia Improve profitability and portfolio mix of TIMB's products Improve effectiveness of TIMB's existing distribution network and IT systems Leverage AirAsia and Tune Companies' other businesses for marketing TIMB products
ENHANCE REVENUE STREAMS VIA STRATEGIC ACQUISITIONS Selectively seeking opportunities to acquire businesses with the relevant licenses in our core SEA markets Broaden our ability to offer a range of products in underpenetrated markets
REPLICATE & EXPAND TRAVEL INSURANCE BUSINESS MODEL IMPROVE ONLINE TAKE-UP RATES & TAILOR OUR SALES & MARKETING EFFORTS LEVERAGE ON THE GROWTH OF AIRASIA'S BUSINESSES Currently in 14 out of 21 markets where AirAsia operates Continue to manage insurance needs of AirAsia's customers Expand into new markets alongside AirAsia Improve consumer education through advertisements, telemarketing etc Leverage our access to brand recognition of AirAsia and Tune Companies Tailor our product offering, sales and marketing efforts to markets beyond Malaysia, Thailand, Indonesia Expand our travel insurance business by establishing tieups with other partners e.g. regional airlines, Expedia Leveraging our TIPG system, strong local relationships and onthe-ground experience
CORPORATE INFORMATION_1 NOTICE OF ANNUAL GENERAL MEETING_2 BOARD OF DIRECTORS_6 CEOS PROFILE_11 GROUP STRUCTURE_12 CHAIRMANS MESSAGE_13 CEOS MESSAGE_16 CORPORATE GOVERNANCE_23 AUDIT AND RISK COMMITTEE REPORT_31 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL_33 OTHER STATEMENTS AND DISCLOSURES_35 FINANCIAL HIGHLIGHTS_37
TABLE OF CONTENTS
FINANCIAL STATEMENTS_40 ANALYSIS OF SHAREHOLDINGS_131 LIST OF PROPERTIES_134 PROXY FORM
ANNUAL REPORT 2012
CORPORATE INFORMATION
AUDIT & RISK COMMITTEE Ng Soon Lai @ Ng Siek Chuan Razman Hafidz bin Abu Zarim Tan Hong Kheng REMUNERATION COMMITTEE Ng Soon Lai @ Ng Siek Chuan Razman Hafidz bin Abu Zarim Tan Sri Dr. Anthony Francis Fernandes NOMINATION COMMITTEE BOARD OF DIRECTORS Razman Hafidz bin Abu Zarim (Independent Non-Executive Chairman) Tan Sri Dr. Anthony Francis Fernandes (widely known as Tan Sri Dr. Tony Fernandes) (Non-Independent Non-Executive Director) Dato Kamarudin bin Meranun (Non-Independent Non-Executive Director) Tan Hong Kheng (Non-Independent Non-Executive Director) Ng Soon Lai @ Ng Siek Chuan (Independent Non-Executive Director) Ng Soon Lai @ Ng Siek Chuan Razman Hafidz bin Abu Zarim Tan Sri Dr. Anthony Francis Fernandes SENIOR INDEPENDENT DIRECTOR Ng Soon Lai @ Ng Siek Chuan COMPANY SECRETARY Jasmindar Kaur A/P Sarban Singh (MAICSA 7002687) AUDITORS Ernst & Young Level 23A, Menara Milenium Jalan Damanlela Pusat Bandar Damansara 50490 Kuala Lumpur Wilayah Persekutuan Malaysia Tel : (603)-7495 8000 Fax : (603)-2095 5332 REGISTERED OFFICE Tune Ins Holdings Berhad (Company No. 948454-K) B-13-15, Level 13, Menara Prima Tower B Jalan PJU 1/39 Dataran Prima 47301 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : (603) 7491 4318 Fax : (603) 7887 2318 E-mail : asktune@tuneinsurance.com Website : www.tuneinsurance.com HEAD OFFICE Bangunan Tune Insurance No. 38 Jalan Ampang 50450 Kuala Lumpur Wilayah Persekutuan Malaysia Tel : (603) 2070 2828 Fax : (603) 2070 3657 SHARE REGISTRARS Symphony Share Registrars Sdn Bhd Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/46, 47301 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : (603) - 78418000 Fax : (603) - 78418008 PRINCIPAL BANKERS CIMB Bank Berhad HSBC Bank Malaysia Berhad SOLICITORS Foong & Partners Suite 21.08, Level 21, Plaza 138 138 Jalan Ampang, 50450 Kuala Lumpur Malaysia Tel No. : (603) 2713 2822 Fax No. : (603) 2713 1822 STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad (Listed since 20 February 2013) (Stock code: 5230)
ANNUAL REPORT 2012
NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Second Annual General Meeting of Tune Ins Holdings Berhad (948454-K) (TIH or the Company) will be held at Hugos on 6, Best Western Premier, Dua Sentral, Level 6, Jalan Tun Sambanthan, 50470 Kuala Lumpur, Wilayah Persekutuan, Malaysia on Wednesday, 19 June 2013 at 10.00 a.m. for the following purposes:-
AS ORDINARY BUSINESS
1. To receive and consider the Audited Financial Statements together with the Reports of the Directors and Auditors thereon for the financial year ended 31 December 2012. 2. To approve Directors Fees of RM62,032 for the financial year ended 31 December 2012. 3. To approve Directors Fees as follows: (a) (b) payment of Directors Fees amounting to RM54,000 per annum for the NonExecutive Chairman and RM42,000 per annum for other Non-Executive Directors with effect from financial year ending 31 December 2013; and payment of Directors fees in respect of the Boards Audit & Risk Committee amounting to RM30,000 per annum for the Non-Executive Committee Chairman and RM24,000 per annum for other Committee members with effect from financial year ending 31 December 2013. (Resolution 1) (Resolution 2)
(Resolution 3)
4.
To re-elect the following Directors who retire pursuant to Article 128 of the Companys Articles of Association: a) b) c) d) e) Razman Hafidz bin Abu Zarim; Tan Sri Dr. Anthony Francis Fernandes; Dato Kamarudin Bin Meranun; Tan Hong Kheng; and Ng Soon Lai @ Ng Siek Chuan. (Resolution 4) (Resolution 5) (Resolution 6) (Resolution 7) (Resolution 8) (Resolution 9)
5.
To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.
AS SPECIAL BUSINESS
To consider and if thought fit, to pass, with or without modifications, the following Resolutions:
6.
ORDINARY RESOLUTION AUTHORITY TO ALLOT SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965
THAT pursuant to Section 132D of the Companies Act, 1965 and subject to the approval of relevant authorities, the Directors be and are hereby empowered to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be and also empowered to obtain approval for the listing of and quotation for the additional shares so issued on the Main Market of Bursa Malaysia Securities Berhad AND THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.
(Resolution 10)
ANNUAL REPORT 2012
NOTICE OF ANNUAL GENERAL MEETING (CONTD)
7.
THAT pursuant to Paragraph 10.09 Part E of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the recurrent related party transactions of a revenue or trading nature and which are necessary for the day-to-day operations of the Company and/or its subsidiaries (RRPTs) entered or to be entered into by the Company and/or its subsidiaries with related parties from 20 February 2013, being the date of listing of the Company until the date of the Second Annual General Meeting (AGM) of the Company as set out in Section 2.4 of the Circular to Shareholders dated 27 May 2013 (the Circular), on terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company, be and is hereby approved and ratified. AND THAT all the actions taken and the execution of all necessary documents by the Directors of the Company as they had considered expedient or deemed fit in the best interest of the Company, be and is hereby approved and ratified.
ORDINARY RESOLUTION PROPOSED SHAREHOLDERS RATIFICATION FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE
(Resolution 11)
8.
ORDINARY RESOLUTION PROPOSED SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE
THAT approval be and is hereby given to the Company to enter into all the recurrent related party transactions of a revenue or trading nature and which are necessary for the day-to-day operations of the Company and/or its subsidiaries (RRPTs) with the related parties as set out in Section 2.4 of the Circular, subject further to the following: (i) the RRPTs are entered into in the ordinary course of business and are on terms which are not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company; disclosure is made in the annual report of the breakdown of the aggregate value of the RRPTs conducted pursuant to the shareholders mandate during the financial year based on the following information: (a) (b) the type of RRPTs made; and the names of the related parties involved in each type of the RRPT made and their relationship with the Company.
(ii)
If the actual value of any of the RRPT exceeds the estimated value disclosed in Section 2.4 of the Circular by 10% or more, the Company will make an immediate announcement, which will include the information as may be prescribed, to Bursa Malaysia Securities Berhad. the shareholders mandate is subject to annual renewal and this shareholders mandate shall only continue to be in full force until: (a) the conclusion of the next AGM of the Company following the AGM at which this shareholders mandate is approved, at which time it will lapse, unless by a resolution passed at the next AGM, such authority is renewed; the expiration of the period within which the next AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (Act) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting,
(iii)
(b)
(c)
whichever is the earliest.
ANNUAL REPORT 2012
THAT the Directors of the Company and/or any one of them be and are hereby authorised to complete and do all such acts and things as they consider necessary or expedient in the best interest of the Company, including executing all such documents as may be required or necessary and with full powers to assent to any modifications, variations and/or amendments as the Directors of the Company in their discretion deem fit and expedient to give effect to the RRPTs contemplated and/or authorised by this Ordinary Resolution. AND THAT as the estimates given for the RRPTs specified in Section 2.4 of the Circular being provisional in nature, the Directors of the Company and/or any one of them be and are hereby authorised to agree to the actual amount or amounts thereof provided always that such amount or amounts comply with the procedures set out in Section 2.7 of the Circular.
(Resolution 12)
OTHER ORDINARY BUSINESS

9. To transact any other business of which due notice shall have been given.
By Order of the Board JASMINDAR KAUR A/P SARBAN SINGH (MAICSA 7002687) Company Secretary Selangor Darul Ehsan 27 May 2013
NOTES ON APPOINTMENT OF PROXY

a. A member must be registered in the Record of Depositors at 5.00 p.m. on 12 June 2013 (General Meeting Record of Depositors) in order to attend and vote at the Meeting. A depositor shall not be regarded as a Member entitled to attend the Meeting and to speak and vote thereat unless his name appears in the General Meeting Record of Depositors. Any changes in the entries on the Record of Depositors after the abovementioned date and time shall be disregarded in determining the rights of any person to attend and vote at the Meeting. A member entitled to attend and vote is entitled to appoint up to two proxies (or in the case of a corporation, to appoint a representative), to attend and vote in his stead. There shall be no restriction as to the qualification of the proxy(ies). The Proxy Form in the case of an individual shall be signed by the appointor or his attorney, and in the case of a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. Where a member appoints two proxies, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (omnibus account), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. The Proxy Form or other instruments of appointment shall not be treated as valid unless deposited at the Registered Office of the Company at B-13-15, Level 13, Menara Prima Tower B, Jalan PJU 1/39, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than forty-eight (48) hours before the time set for holding the meeting. Faxed copies of the duly executed form of proxy are not acceptable.
b.
c. d. e.
f.
ANNUAL REPORT 2012
EXPLANATORY NOTES:
1. Authority to allot shares pursuant to Section 132D of the Companies Act, 1965 (Resolution 10) Ordinary Resolution 10 has been proposed for the purpose of obtaining the general mandate for issuance of shares by the Company under Section 132D of the Companies Act, 1965 (hereinafter referred to as the General Mandate). Ordinary Resolution 10, if passed, will give the Directors of the Company authority to issue ordinary shares in the Company at their discretion without having to first convene another General Meeting. The General Mandate will, unless revoked or varied by the Company in a General Meeting, expire at the conclusion of the next Annual General Meeting or the expiration of the period within which the next Annual General Meeting is required by law to be held, whichever is earlier. The General Mandate, if granted, will enable the Company to fulfill its obligations under the Companys Employees Share Option Scheme in an expedient manner as well as provide flexibility to the Company for any future fund raising activities, including but not limited to further placing of shares for the purposes of funding future investment project(s), repayment of bank borrowing, working capital and/or acquisition(s) and thereby reducing administrative time and costs associated with the convening of additional shareholders meeting(s). Proposed shareholders ratification for Recurrent Related Party Transactions of a revenue or trading nature with related parties (Proposed Ratification) (Resolution 11) The proposed Ordinary Resolution 11, if passed, will ratify all Recurrent Related Party Transactions of a revenue or trading nature entered by the Company and/or its subsidiaries with the Related Parties as set out in Section 2.4 of the Circular to Shareholders dated 27 May 2013 from the listing of the Company on 20 February 2013 up to the date of the Second AGM of the Company. Please refer to the Circular dated 27 May 2013 which was despatched together with this Annual Report for more details. Proposed shareholders mandate for Recurrent Related Party Transactions of a revenue or trading nature (Resolution 12) The proposed Ordinary Resolution 12, if passed, will provide the Company and/or its subsidiaries a mandate to enter into Recurrent Related Party Transactions of a revenue or trading nature with the Related Parties in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The mandate, unless revoked or varied by the Company at a general meeting, will expire at the next AGM of the Company. Please refer to the Circular dated 27 May 2013 which was despatched together with this Annual Report for more details.
2.
3.
ANNUAL REPORT 2012
BOARD OF DIRECTORS
RAZMAN HAFIDZ BIN ABU ZARIM

MALAYSIAN, AGED 57 CHAIRMAN, INDEPENDENT NON-EXECUTIVE DIRECTOR Razman Hafidz bin Abu Zarim was appointed to the Board on 5 October 2012 as our Chairman, Independent Non-Executive Director. He is a member of the Audit and Risk, Remuneration and Nomination Committees. He graduated with a joint-honours degree in Economics and Accounting, BSc (Econs) from University College, Cardiff, Wales, in 1977. He is a fellow member of the Institute of Chartered Accountants in England & Wales and a member of the Malaysian Institute of Accountants. He has more than 35 years of experience in the fields of corporate restructuring, mergers and acquisitions, corporate finance, management consulting and auditing. He started his career with Touche Ross & Co., Chartered Accountants, London, England in 1977 as an Audit Junior. He later joined Hacker Young, Chartered Accountants, London, England in 1984 as an Audit Assistant Manager, where he was subsequently admitted as an Audit Partner in 1987. He held the position until 1989. In 1989, he returned to Malaysia as an Audit Partner of Price Waterhouse and later Partner-in-Charge of Price Waterhouses Management Consulting Practice and became an Executive Committee member. He left his position as the Partner-in-Charge of Price Waterhouses Management Consulting Practice at the end of 1993. In 1994, he established Norush Sdn Bhd., an investment holding and business advisory firm, where he remains as Chairman. He holds independent directorships in Panasonic Manufacturing Malaysia Berhad and Yeo Hiap Seng Limited, both of which are public listed companies. He presently serves as an independent director on the board of non-listed public entities at Linde Malaysia Holdings Berhad (formerly Malaysian Oxygen Berhad), Sumitomo Mitsui Banking Corporation Malaysia Berhad and TerraGali Resources Berhad, where he is currently the Chairman. He also sits on the boards of several private limited companies.
ANNUAL REPORT 2012
BOARD OF DIRECTORS (CONT'D)
TAN SRI DR ANTHONY FRANCIS FERNANDES (TAN SRI DR. TONY FERNANDES)
MALAYSIAN, AGED 49 NON-INDEPENDENT NON-EXECUTIVE DIRECTOR Tan Sri Dr. Tony Fernandes was appointed as a Non-Independent Non-Executive Director of the company on 5 October 2012. He is also a member of Remuneration and Nomination Committees. He graduated with a Bachelor of Science in Accounting and Finance from the London School of Economics in 1987. He was admitted as an Associate Member of the Association of Chartered Certified Accountants in 1991, and became a Fellow Member in 1996. He also received an Honorary Doctorate of Business Innovation from Universiti Teknologi Malaysia (UTM) in March 2010 for his role in changing the face of aviation and benefitting travellers and economies locally and in the region. He was also a recipient of the Masterclass Global CEO of the Year award at the 2nd Malaysia Business Leadership Award (MBLA) 2010 ceremony for his contributions to the countrys economy. He was the Financial Controller at Virgin Communications Limited in London from 1987 to 1989 and subsequently, the Senior Financial Analyst at Warner Music International Services Limited in London from 1989 to 1992. He was later appointed as the Managing Director at Warner Music (Malaysia) Sdn Bhd in 1992 and held the position until 1996. He was later appointed by Warner Music Group Corp. as the Regional Managing Director, Asean from 1996 to 1999 and subsequently, Vice President, Asean from 1999 to 2001. In 2001, he joined AirAsia Berhad as the Group Chief Executive Officer until June 2012 when he was redesignated as a non-independent non-executive director of AirAsia Berhad and Group Chief Executive Officer of AirAsia ASEAN Inc. He is one of the co-founders of Tune Money Sdn Bhd, a substantial shareholder of the Company and also the co-founder and director of Tune Group Sdn Bhd. In addition, he is also an independent non-executive director of Star Publications (Malaysia) Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad. He is a Non-Independent Non-Executive Director of AirAsia X Berhad.
ANNUAL REPORT 2012
BOARD OF DIRECTORS (CONTD)
DATO KAMARUDIN BIN MERANUN (DATO KAMARUDIN)

MALAYSIAN, AGED 51 Non-Independent Non-Executive Director Dato Kamarudin was appointed as a Non-Independent Non Executive Director of the Company on 11 March 2013. He is also the chairman of TIH Employees Share Option Scheme (ESOS) Committee. He received a Diploma in Actuarial Science from Universiti Teknologi MARA (UiTM) and was named the Best Actuarial Student by the Life Insurance Institute of Malaysia in 1983. He further received a Bachelor of Science (BSc) with Distinction (Magna Cum Laude) majoring in Finance in 1986, and a Master of Business Administration (MBA) in 1987 from Central Michigan University. He worked in Arab-Malaysian Merchant Bank from 1988 to 1993 as a Portfolio Manager, managing both institutional and high net-worth individual clients investment funds. In 1994, he was appointed as an executive director of Innosabah Capital Management Sdn Bhd, a subsidiary of Innosabah Securities Sdn Bhd. He subsequently acquired the shares of the joint venture partner of Innosabah Capital Management Sdn Bhd, which was later renamed Intrinsic Capital Management Sdn Bhd and remains as an executive director to date. In 2001, he joined AirAsia Berhad as the Deputy Group Chief Executive Officer and President of Group Finance, Treasury, Corporate Finance and Legal until June 2012 when he was redesignated as a nonindependent non-executive director of AirAsia Berhad and appointed as Deputy Group Chief Executive Officer and President of Group Finance, Treasury, Corporate Finance and Legal of AirAsia ASEAN Inc. He is one of the co-founders of Tune Money Sdn Bhd, a substantial shareholder of the Company. He is a Non-Independent NonExecutive Director of Airasia X Berhad. He is also the co-founder and director of Tune Group Sdn Bhd.
ANNUAL REPORT 2012
TAN HONG KHENG

MALAYSIAN, AGED 45 NON-INDEPENDENT NON-EXECUTIVE DIRECTOR Tan Hong Kheng was appointed as a Non-Independent Non-Executive Director on 5 October 2012. He is also a member of the Audit and Risk Committee of the Company. He is currently the General Counsel of CIMB Group, where he oversees the departments of Group Legal, Group Compliance and Group Company Secretarial. Prior to his appointment as the General Counsel, he was the Head of the Special Situation Investments (SSI) department of CIMB Group, a department he set up in 2006 that was responsible for direct principal investments and investments in private equity funds and hedge funds. Direct principal investments made include take-private transactions, leveraged buyouts, expansion capital, mezzanine investments and early stage investing. Before that, he was selected in 2003 to establish and head up CIMB Groups first investment banking foray into Indonesia. As the Executive Director of PT CIMB Niaga Securities Indonesia (CNS), Hong Kheng established an investment banking presence for CIMB Group in Indonesia and successfully executed numerous investment banking mandates. Under his leadership, CNS was named by Bloomberg as the most active lead underwriter for IPOs and market leader for Equity and Equity-related issues in Indonesia in 2005. Prior to his stint in Indonesia, Hong Kheng was active in M&A and fund raising deals such as the management buyout and restructuring of KFC Malaysia and the RM1.03 billion zero coupon bonds issued by Intelek Perkasa Berhad, a deal that was voted Best Malaysian Ringgit Bond Deal in 2001 by Euroweek. Throughout his career with CIMB Group, Hong Kheng has had cross-departmental exposure with the Investment Banking division, the Corporate Finance department (where he was the head of the Mesdaq unit) and the Capital Markets department. Hong Khengs other previous employment positions were with Shook Lin & Bok, Lee Choon Wan & Co and as the investment manager for Jerneh Insurance Berhad. Hong Kheng obtained his Bachelor of Economics (Accounting major) and Bachelor of Laws from Monash University and earned his MBA from the University of Chicago Booth School of Business. Hong Kheng was called as an advocate and solicitor to the Malaysian Bar in 1992 and is also a member of the Australian Society of CPAs (Certified Practicing Accountants) since 2002.
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ANNUAL REPORT 2012
NG SOON LAI @ NG SIEK CHUAN

MALAYSIAN, AGED 59 INDEPENDENT NON-EXECUTIVE DIRECTOR Ng Soon Lai @ Ng Siek Chuan was appointed to the Board on 5 October 2012 as our Independent Non-Executive Director. He is also the Chairman of the Audit and Risk, Remuneration and Nomination Committees. He has been a member of the Institute of Chartered Accountants in England & Wales since 1977. He started his career in audit and accounting with Portlock & Co. in London as an Articled Clerk from 1973 to 1977 where he was subsequently appointed as Qualified Senior. In 1977, he left Portlock & Co. in London and joined Coopers & Lybrand in London as Qualified Senior and subsequently, Coopers & Lybrand in Kuala Lumpur as Audit Supervisor in 1979 before embarking on his career path in the financial sector in 1980. He was with Arab-Malaysian Development Bank Bhd from 1980 to 1987 where he served in various positions. From 1987 to 1989, he was with Kuala Lumpur Finance Berhad (now known as Malayan Banking Berhad) and he re-joined ArabMalaysian Development Bank Bhd in 1989 as General Manager, Business Development until 1991. Subsequently, he joined Alliance Bank (M) Berhad in July 1991 as General Manager of Credit. He was appointed as Chief Executive Director of Alliance Bank (M) Berhad on 21 January 1994 and to the Board of Alliance Bank (M) Berhad on 22 July 2002 until his resignation on 31 August 2005. He also sits on the boards of S P Setia Bhd, Deutsche Bank (Malaysia) Berhad, Hiap Teck Venture Berhad, Tune Insurance Malaysia Berhad (formerly known as Oriental Capital Assurance Berhad), Unico-Desa Plantations Berhad and ELK-Desa Resources Berhad.
Notes: (1) None of the Directors has any family relationship with any other director and/ or major shareholder of TIH. (2) None of the Directors has any conflict of interest with TIH. (3) None of the Directors has been convicted for offences within the past 10 years, other than traffic offences, if any.
ANNUAL REPORT 2012
11
CEOS PROFILE
PETER DIXON MILLER

BRITISH, AGED 48 CHIEF EXECUTIVE OFFICER OF TIH Peter Dixon Miller was appointed the Chief Executive Officer of TIH on 8 October 2012 and is also a member of TIH ESOS Committee. He graduated with a Bachelor of Science, Mathematics from Leicester University, England in 1986. He began his career as an IT professional with global insurance broker, Willis, Faber & Dumas (now known as Willis Group Holdings Public Limited Company) before joining Clerical Medical Investment Group Ltd. He first came to Malaysia in 1995 with United Kingdom based consultancy firm, TBOi Management Consultants to work on a major bancassurance project and then spent the next 5 y e a r s a c ro s s 5 c o n t i n e n t s (Africa, America, Asia, Australasia and Europe) in financial services distribution, in particular alternative distribution including initiatives such as Branchless Banking (based in USA), Internet Insurance (based in USA), Supermarket Financial Services (based in South Africa), Direct Distribution (based in Australia) and Pre-eminent Advice Network (based in New Zealand). He then spent 5 years with American International Assurance (now known as AIA Group Ltd) between 2001 to 2006 where he was Regional Bancassurance Director from 2001 to 2004 and Head of Bancassurance, China from 2004 to 2006. In 2006, he joined Southern Bank Berhad as the Head of Consumer Banking. When Southern Bank Berhad merged with CIMB group of companies, Peter oversaw CIMBs insurance interests in Malaysia, Indonesia, Singapore and Thailand and was the President Commissioner of PT CIMB Sun Life and a director of CIMB Aviva Assurance Berhad, CIMB Aviva Takaful Berhad, Labuan Reinsurance (L) Ltd and CIG Bhd. He joined Tune Money Sdn Bhd in October 2010 and holds directorships in our subsidiaries, TIL, TMGR, TMLR, TIMB and Capital OCA, as well as in companies outside our Group, namely Tune Money Capital Sdn Bhd, Think Big Digital Sdn Bhd, Tune Money Employee Holding Sdn Bhd, Tune Money Company Limited and PT Tune Money. He does not hold any directorship in public companies and has no family relationship with any other director and/or major shareholder of TIH and has no conflict of interest with TIH. He has not been convicted for offences within the past 10 years, other than traffic offences, if any. For information on Peters shareholdings in TIH, please refer to Page 132 of the Annual Report.
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ANNUAL REPORT 2012
GROUP STRUCTURE
Our Group structure is as follows:
TUNE INS HOLDINGS BERHAD (TIH)

Investment holding
Tune Money (Labuan) Ltd (TIL)
Tune Money Gen Re Ltd (TMGR)
Tune Money Life Re Ltd (TMLR)
Direct General Insurance (TIMB)

General Insurance
Captive Insurance
General Reinsurance
Life Reinsurance
80%(1)
100%
100%
83.26% (2)
Capital OCA (3)
Dormant
100%
Notes: (1) (2) (3) The remaining 20% of the equity interest in TIL is held by Multi-Purpose Capital Holdings Berhad The remaining 16.74% of the equity interest in Tune Insurance Malaysia Berhad (TIMB) is held by the minority shareholders of TIMB To be dissolved during the year 2013.
ANNUAL REPORT 2012
13
CHAIRMAN'S MESSAGE
Being Chairman of a newly listed company can be a daunting experience, given our responsibilities to our stakeholders, especially our shareholders. However, I share none of the anxiety that others in my shoes may have, because I am confident of the prospects of this Group of its ability to create value for our target communities in Asean and indeed greater Asia, and to channel this value to our shareholders. OUR INDUSTRY The insurance industry in the region has huge potential. According to insurance industry consultant Milliman, general insurance penetration rates in Malaysia, Thailand, Indonesia and the Philippines are low, hovering below 2%. Furthermore, the density rate (or gross non-life premium per capita) stands at under US$200. These figures fall far short of those in more developed markets. The growth in premiums over the five years from 2006 to 2011 indicates that regional markets are indeed playing catch-up with the developed world. During this period, non-life premiums in Asia exJapan have been growing at a compound annual growth rate (CAGR) of 16% while that in core Asean countries have been growing at between 9% and 18%.
I feel honoured to be able to share my views on Tune Ins Holdings Berhad (TIH) in this annual report, which has the distinction of being the very first since our listing on Bursa Malaysia on 20 February 2013.
RAZMAN HAFIDZ BIN ABU ZARIM CHAIRMAN of TUNE INS HOLDINGS BERHAD
Bank Negara Malaysia (BNM), in its Financial Sector Blueprint, has identified micro-insurance or insurance for low-income populations as key to increasing total insurance coverage in the country. It would have been impossible, or at least difficult, in the past to develop a sustainable model for the provision of micro-insurance because of tariff restrictions. Over the years, however, the Government has been liberalising the industry to promote greater efficiencies. And, today, tariffs are imposed only on motor and fire insurance, the two largest classes of general insurance, accounting for 46% and 17% of the markets gross premiums, respectively. We believe that even these tariffs are short-lived; BNM has indicated that the industry will be completely deregulated by 2016. This is extremely good news for us as, by then, there truly will be a Blue Ocean of opportunity and TIH will be wellpositioned to dive into this exciting niche. OUR EXCLUSIVE PARTNERS The Company was born under the Tune Group. Accordingly, our entire DNA is wired like our sister Tune companies to be technology-intensive, cost effective and to provide essential services without the frills, so that these can be offered at a low-cost to be enjoyed by the greatest number of people. What is more, being joined at the hip with AirAsia means that we get to provide this service not only to Malaysians, but to every country within the AirAsia route network.
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CHAIRMANS MESSAGE (CONTD)
AirAsia currently flies to 21 countries and territories in the Asia-Pacific region and is actively pursuing further expansion. Even as I write, preparations are being made for a joint venture in the massive Indian subcontinent. We are also very excited about AirAsias acquisition of 49% equity in Zest Airways as this gives the airline greater presence in the Philippine archipelago where, again, insurance penetration leaves much room for growth. We are currently in 15 countries served by AirAsia providing online travel and lifestyle insurance and have made it our target to bridge the existing gap. Wherever AirAsia set up operations, we enter into a quota-share relationship with an existing general insurance provider, that underwrites our policies. It has not been a challenge to find suitable partners to engage with, given the high premium placed on the Tune brand. Our partnerships with AirAsia, Tune Hotels and AirAsia Expedia are strategic not only because they give us automatic access to potential customers across the region, but also because of the rates at which these entities are growing. The potential for low-cost insurance in this region is enormous for the same reasons that apply to low-cost travel the existence of a huge population and a growing affluent middle-class that to date has been under-served. From 2001 to 2011, revenue-passenger kilometres (RPK) in Asia-Pacific grew 92%, much of it driven by low-cost carriers, as opposed to 69% in Europe. Within this region, Indonesia and the Philippines are seen to be two particularly high-growth markets given their geographical structure of hundreds of islands separated by sea. This potential is reflected in AirAsias passenger volume, which has been increasing at a CAGR of 15% to 20% between 2009 and 2011 in the core Asean markets of Malaysia, Indonesia and Thailand. With the addition of another 357 aircraft to be delivered in phases up to year 2026 to its current fleet of 118 aircraft, the airlines own expectations of growth are evident. OUR PROSPECTS While the future is certainly looking up, the present is also cause for celebration. The year 2012 has been very encouraging for us. Operationally, we laid the groundwork for our listing. We also acquired Oriental Capital Assurance (OCA), to allow us to circumvent using third-party insurance companies to underwrite our policies in Malaysia. This gives us greater control over the service we provide to our customers, as well as saves us from having to share premiums with our partners. Four months after the acquisition, we rebranded OCA as Tune Insurance Malaysia Berhad (TIMB). Currently, its processes and systems are being upgraded for greater cost and operational efficiencies, as well as to support growth plans. Financially, it was all systems go to expand and build both our online business as well as the general insurance business we inherited from TIMB, with sterling results.
We managed to turn around TIMB from a loss-making underwriter to earning an 8.5% underwriting margin. The Group achieved RM226 million in revenue, with a 42% increase in net profit to register a record RM48.6 million compared to RM34.2 million in 2011.
As our listing took place only in early 2013, we have not declared a dividend for our financial year 2012 earnings. However, as mentioned in our IPO prospectus, the Group has decided on a dividend policy based on a minimum payout of 40% of profit after tax (PAT) for the financial year 2013 onwards. Our results were released shortly after our listing on Bursa Malaysia on 20 February 2013. Yet investors were already convinced of our fundamentals, as reflected in the oversubscription of our shares by both retail and institutional investors from Hong Kong, the Middle East, Singapore, UK and, of course, Malaysia. Our market capitalisation reached RM1 billion, outperforming analysts predictions. The funds raised had placed us in the enviable position of zero gearing. More importantly, our listing has provided us with the platform to take TIH to the next level of our exciting journey. As mentioned above, we intend to grow our business geographically in tandem with AirAsia, while increasing the take-up rate of guests. We will increase our range of general insurance products catering to the needs of the people, maximising the potential of the huge database presented by AirAsia, Tune Hotels and AirAsia Expedia. We believe we have a model that will allow us to achieve our goals and we look forward to sharing the fruits of our adventure with you, our valued shareholders. Having just emerged from our listing, I wish to take this opportunity to thank all our shareholders for their trust in us, and for contributing to a truly spectacular outcome. A big thank you to our business partners the AirAsia Group and Tune Group of companies for literally taking us under their wings and allowing us to soar with them. At the same time, my heartfelt appreciation goes to fellow members of the TIH Board, for their commitment to the company, and the wise counsel offered which has seen us ride over a year that was critical to our future success. Finally, but not least, on behalf of the Board, I take great pleasure in thanking the excellent team at TIH for all their hard work that can only come from a deep-rooted passion. My hope is for us to keep the flames of this passion going, and let it fuel our growth in the years to come.
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we give you a peace of mind in protecting your sanctuary
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CEOS MESSAGE
T h e y e a r s performance was extremely encouraging and left us with a strong balance sheet with total Group assets increasing to a n A 1 / P 1 R a t i n g f ro m RAM and TIMBs capital adequacy ratio (CAR) improving from 177% in 2011 to 221%.
PETER MILLER
CHIEF EXECUTIVE OFFICER OF TIH
RM812.6 million,
Tune Ins Holdings Bhd (TIH) has barely been in existence for two years, and we havent even celebrated the first half anniversary of our listing; yet we are already making waves in the industry, and 2012 was a fine example of that. From an online insurance product manager of primarily travel insurance with no licence for direct underwriting, we became a full-fledged general insurance provider with a portfolio that includes motor, fire, health and engineering businesses. From having only 14 staff, we now have 358. We may still be considered small in an industry that has seen massive consolidation over the years, but we have a unique business model, exclusive long-term arrangements with world-renowned AirAsia Group and Tune Hotels, and we are the only made-in-Malaysia Pan Asian insurance brand with a presence in 15 countries and territories in the region. In other words, were not some anxious new kid on the block exploring the market tentatively. We are an insurance company apart from the rest; we have very strong foundations; and we are growing very fast. 2012 marked a tipping point for TIH, as it was the year in which we acquired our general insurance licence via 83.26% equity in Oriental Capital Assurance (OCA). OCA, which has a 37-year history in Malaysia, has since been renamed Tune Insurance Malaysia Berhad (TIMB). The first part of the year saw us finalise the acquisition, following which we embarked on a comprehensive integration programme, still on-going, to restructure the companys systems and processes, design new products, rebalance its product portfolio, and build a strong, experienced team. At the same time, we prepared assiduously for our IPO, which unfolded this February.
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CEOS MESSAGE (CONT'D)
The challenges have been great, the hours put in at times seemingly impossible. Yet our team constantly rose to the occasion. Best of all, our hard work and unrelenting efforts have been validated. TIMB performed beyond expectations. Our online business continued to expand. And the IPO was a huge success, immediately bequeathing us with RM1 billion in market capitalisation, zero gearing and access funds to fulfil our growth strategies. For all intents and purposes, it has been an amazing year for everyone at TIH; and it gives me great pleasure to share our journey in greater detail, beginning with our financial performance. FINANCIAL PERFORMANCE TIH Group achieved revenue of RM226.34 million for the financial year 2012, with year-on-year net profit increasing by 42% to RM48.6 million. That our revenue increased did not come as a surprise, as we consolidated TIMBs contribution to the Groups earnings. However our profit was a record, which was especially encouraging given significant expenses from the acquisition of OCA and our listing. These results indicate that the strategies put in place to develop both our online and traditional (ie general) insurance businesses are leading us to our desired destination. Before its acquisition, OCA had been making underwriting losses for years as it had become increasingly dependent on motor insurance for which the claims ratio is very high. During the year, however, we decreased the proportion of motor business in TIMBs portfolio, with the rationale that if it isnt profitable it isnt worth it. The results surprised even us. TIMB achieved a significant underwriting margin of 8.5%, when we had initially targeted break-even by year 2013 and industry average (currently 0.10%) by 2015.
TIMBs performance in Q4 was particularly strong, achieving a 28% growth in operating revenue from the previous quarter, partly contributed by its offering of our online travel plan. For the year, TIMB contributed a net profit of RM28.6 million to TIH on the back of gross earned premiums of RM261.73 million and operating revenue of RM279.14 million (RM263.46 million in FY2011). TIH as a group benefited from increased profits from our online business as TIMB was able to recoup total earnings from all online insurance originating from Malaysia as of September 2012, when business that had been underwritten previously by our third-party Malaysian partner was transferred to TIMB. Our online insurance business, which is centred around strategic partnerships with AirAsia, AirAsia Expedia and Tune Hotels, provided a net profit of RM37.7 million against revenue of RM69.6 million, maintaining a profit margin in excess of 50% with revenue growing 24.6% against 2011. A total of 6 million policies were issued online during the year, with increasing contributions from the region; Indonesia, Thailand, Singapore and China provided 45% of the business in Q4 2012. Gross earned premiums of TIH Group for the full year grew to RM215 million from RM55.5 million due to the consolidation of TIMBs gross earned premiums as well as an increase in gross earned premiums from the general reinsurance business. More policies were issued by our local insurance partners at a higher average premium charge as a result of enhanced benefits and a higher proportion of flights originating in higher premium countries such as Australia and Japan. At the same time, the Group stood to benefit from RM10.5 million in investment income generated by TIMB, as well as interest of RM547,000 accrued from its fixed deposits. This led to a sharp increase in our total investment income from RM377,000 in 2011 to RM11.4 million. The years performance was extremely encouraging and left us with a strong balance sheet with total Group assets increasing to RM812.8 million, an A1/P1 Rating from RAM in 2013 and TIMBs capital adequacy ratio (CAR) improving from 177% in 2011 to 226% at year end 2012.
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CEOS MESSAGE (CONTD)
ACQUISITION OF OCA In all the countries where we have an online business, we engage in quota share arrangements with local general insurance partners through which our partners underwrite our products and retain a certain percentage of the premiums (about 30%) with the balance (circa 70%) coming to us. The arrangement means that buyers of our general products automatically become customers of our partners rather than our customers. While this model has its benefits, especially for a Group like TIH which until recently had no insurance licence of our own, we believe it is in our interest eventually to establish our own licensed insurance companies so as to reap the full benefits of insurance in a region where the business fundamentals are good: take-up rates are generally low while growing affluence of the population means a growing need for insurance. The quickest way is to acquire existing insurers given most regulators have not been issuing new licenses in recent years. Being our home ground and our largest market, Malaysia was ideal for our first acquisition. We had identified four insurers as possible candidates for acquisition but OCA proved the most attractive as it was the smallest company, came with the lowest price tag and consequently we estimated provided the best Return On Investment. We also happened to strike a good working relationship with the vendors who acted courteously, honourably and professionally throughout the lengthy process. Due to some bad press that OCA had attracted over the years, much of which unjustified, we managed to acquire the company at a very attractive rate of 1.2 times its book value. Compared to more recent acquisition proposals nearing 2.5 times the insurance companys book value, ours was a very good deal. Following this acquisition, we terminated our agreement with our general insurance partner in Malaysia, Multi-Purpose Insurans Bhd (MPIB), and effective September 2012 all insurance issued in Malaysia is being underwritten by OCA (now TIMB). INTEGRATION OF TIMB Every merger or acquisition brings with it inevitable challenges in term of consolidating the different cultures, mindsets, systems and processes of two different companies with different histories. With TIMB, our strategy is to build on the positive factors that already exist in the company while changing those that are either
no longer relevant or that are unprofitable or that simply do not fit into our overall vision of where we would like TIH to be. We have charted out a gradual integration plan for TIMB and established an Integration Committee comprising middle and senior management of TIH and TIMB, which meets regularly to ensure a smooth assimilation of the company into the Group. While the entire process is expected to be completed towards middle 2013, many changes have already taken place. A number of previous OCA management were already at retirement age, and there were several vacant positions in the company. To fill in the gaps, we brought in 30 new management and marketing staff including a new CEO, Head of Underwriting, Head of Claims, Head of ICT and Head of Franchising. The focus of management is on the three cardinal insurance principles of cash, claims and sales. In terms of cash, we have been recouping receivables from reinsurance partners and other parties. For claims, our new Head of Claims has been settling all backdated claims and has managed to close most of our files. As for sales, we intend to diversify TIMBs business portfolio by reducing its over-reliance on unprofitable motor claims and growing more profitable businesses such as Personal Accident and Foreign Workers. Towards this end, we have had to block the businesses of some 400 agents who were only giving us unprofitable motor business. At the same time, we are broadening our agency base by entering into agreements with third parties for their licensed marketers to sell our general insurance products on a commission basis. One such agreement was signed with ECM Libra in June 2012. Being part of the Tune Group, the most salient challenge facing TIMB is to adapt to a no-frills, low-cost culture coupled with a healthy risk profile in which the benefits are passed down to our customers. Towards creating greater cost efficiencies, TIMB has entered into a more profitable arrangement for its Roadside Assist programme that saves the company RM2 million a year. We also introduced a Motor Quota Share in August 2012 under which we signed on Swiss Re as our reinsurer, absorbing 25% of all our new motor business. This has helped to improve TIMBs capital adequacy ratio (CAR) significantly from 170% in May 2012 to 226% by year end.
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IT REVAMP OF TIH / TIMB Another corollary of being a Tune company is employing the IT infrastructure to ensure the most efficient systems and processes underlying the Companys operations. An important new management hire was for the position of Head of IT to spearhead the upgrade and integration of TIMBs IT system with that of the Group. In August 2012, TIH purchased the rights relating to key online insurance software, Tune Insurance Policy Gateway (TIPG), which can be accessed by third-party agents through the Internet. The software is scalable hence allows for the inclusion of more online products in future as well as new airline partners and new markets. As at end December 2012, the Group had built a database of 7.6 million policyholders. Our new system will incorporate TIPG to allow for better scalability and stability to support the companys business growth objectives. It will further have a direct customer portal for regional markets, starting with Malaysia, Indonesia and Singapore, allowing customers to review the products available, make purchases online and manage their policies using their own profile accounts. Another focus area of the new IT system is business intelligence, which will provide us with an insight into growth opportunities across the region and enable the company to analyse market trends so as to develop and market products via target-specific campaigns. We have allocated a RM10 million budget to upgrade our IT infrastructure, which is being installed in phases. EXPANDING OUR ONLINE BUSINESS The online business is TIHs core business. It is the business we started and grew the company with and is the business that differentiates us from others in the industry. It is also our most profitable business; although it accounts for only 20% of Group operating revenue, it generates more than half of our profits. As of 2012, we have exclusive long-term distribution agreements with AirAsia and its subsidiaries as well as Tune Hotel to market our travel and lifestyle products to their customers via their websites. We also work exclusively in certain markets with AirAsia Expedia, a joint venture between AirAsia and the worlds leading online travel company, Expedia, to provide insurance products to their customers. Currently we offer four online products, namely: Tune Insure Travel Protection Plan (TPP) our core product and revenue driver, which we have been offering to AirAsia passengers since 2009. This provides for losses arising from personal accidents, medical needs, evacuation, flight delays/cancellations and lost/damaged baggage, among others.
Lifestyle Protection Plan (LPP) introduced in 2011 and offered to AirAsia and Tune Hotel customers in Malaysia, Thailand and Indonesia providing coverage against cancer, death, accidents and hospitalisation. Tune Hotels Personal Accident Plan offered to Tune Hotel customers in Malaysia and Indonesia covering losses from personal accidents. Travel insurance to AirAsia Expedia customers launched in September 2012, this is basically the same as the TPP but is offered as a Tune Insurance and Expedia co-branded product to Expedia customers. Other than in Malaysia, where we can now underwrite these products ourselves through TIMB, our quota-share arrangements with third-party insurance companies in the region are such that they provide the insurance while ceding a certain portion to us to reinsure. Two companies were formed in Labuan in 2011 to undertake our local and regional reinsurance business Tune Money GenRe (TMGR) and Tune Money LifeRe (TMLR). To optimise our risk adjusted returns and manage our underwriting exposure, we in turn have reinsurance arrangements with global as well as local reinsurance companies. At the start of 2012, we were offering online insurance coverage in 12 of the countries and territories within the AirAsia destination network, namely Malaysia, Thailand, Indonesia, Singapore, Australia, the Philippines, China, Hong Kong, Macau, Cambodia, Laos and New Zealand. In 2012, we expanded our reach to Vietnam, India and Japan. Our objective is eventually to cover all the markets where AirAsia has a presence, and our team is currently in discussion with interested third parties in another four countries Brunei, Korea, Myanmar and Taiwan. The current take-up rate of our TPP is between 23% and 31% in our biggest markets, hence the potential upside of this business is very attractive. In 2012, we launched into a post-ticket purchase initiative to increase our take-up rate by emailing or sms-ing passengers who did not purchase any TPP when booking their tickets informing them, a few days before their flight, that they can still do so. Many regular AirAsia guests buy their ancillary products close to the date of flying, hence our reminder comes at a strategic time. So far, this service has resulted in an increase in TPP purchase. In Indonesia, meanwhile, we have managed to enhance TPP sales by allowing the Call Centre team to market the plan off-line.
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We intend to further increase the take-up rate of TPP in 2013 by educating AirAsias frontline staff (via training) and AirAsia guests (via online marketing) on the importance of travel insurance. We will also enhance our re-solicitation approach by sending more personalised messages via email and sms to customers, depending on their routes based on the knowledge that certain routes are more likely to be frequented by certain types of traveller, such as businessmen or blue-collar workers or holiday revellers. The Lifestyle Protection Plan is currently marketed online as well as over the phone, but there are plans to switch over entirely to online marketing, to cut down on the need for human resources and thus increase cost efficiencies. Like the TPP, our Lifestyle Protection Plan is underwritten by third parties with TMLR receiving final premium payments via an arrangement with RGA Global, our strategic reinsurance partner. NEW PRODUCTS To diversify our general insurance portfolio, in November 2012, we introduced a new product the Foreign Workers Compensation Benefit which promises to be a very profitable class of business. As of 1 January 2011, the Ministry of Health has made it compulsory for every foreign worker in Malaysia to have medical insurance covering hospitalisation and surgical charges. This is in addition to earlier requirements mandated by the Ministry of Human Resources and the Immigration Department for foreign workers to be covered against injuries under the Foreign Workers Compensation Scheme (FWCS); and for employers to obtain an Insurance Guarantee or Bank Guarantee to cover the costs of repatriation should the need arise. In the five months since we introduced our Foreign Workers Compensation Benefit which covers all three classes of insurance necessary for foreign workers we have collected more than RM1 million in premiums. As the claim ratio for this class of compensation is relatively low, we are very excited about growth prospects of this product. Meanwhile, we are working on other simple general insurance products that we are able to offer at relatively low premiums, for which there will be little competition from intermediaries such as brokers or agents given their price range. We believe there is much potential for low-premium Business to Customer (B2C) products, and intend to capitalise on this niche in the not too distant future.
CREATING GREATER BRAND AWARENESS The Tune brand is one of our strongest value propositions, and we have already been able to leverage on it to our benefit. In building the team at TIMB, there was no shortage of highly qualified and experienced insurance practitioners who were willing to join us, simply on the strength of the Tune brand. In seeking third-party partners in the countries where we would like to offer our online products, again there has been no shortage of companies eager to ride on the Tune bandwagon. The Tune brand is so strongly associated with costefficiencies and value-for-money customer focus that there is much trust in what we stand for in terms of our products, our business operations and our relationships with all our stakeholders. Our objective is to live up to the Tune brand value with products and services that our stakeholders expect of us, as well as to build awareness of the Tune Insurance brand. In September, in conjunction with renaming OCA as TIMB, we also launched a branding initiative that promised our customers an insurance company that gets you by offering products that are Simple, Cool & Innovative. Our message was that life is complicated enough; insurance neednt be. Our marketing approach leverages on Tunes virtual and real space, as well as other high-traffic, highly visible public areas. Our ads can be seen everywhere at the Low Cost Carrier Terminal (LCCT) in Kuala Lumpur and the airport in Jakarta outside the terminals, on strategically located buntings, on T-shits worn by ground personnel, on boarding passes and at the departure lounge. They are even to be wrapped around a plane in the form of livery and found inside them on meal trays, luggage racks and the 3sixty inflight magazines. Up to 5% of our premium is being channelled towards marketing initiatives, which has seen TIH sponsor and advertise with the Queens Park Rangers Football Club during its pre-season tour in Asia. Independently of the Tune Group, our ads are emblazoned along major roads and highways in Kuala Lumpur. In addition, we advertise our products and educate the public on the importance of travel insurance on the radio and in magazines.
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Given our extensive use of the online medium, we also have our own Facebook and twitter accounts, both of which have acquired decent followings since they were launched in December 2012. We aim to capitalise on the power of the social media to promote fun campaigns, such as the Tunetastic Race, launched in February 2013. This pitched teams of our loyal fans, (led by CEOs from AirAsia, Tune Hotels and myself), against each other in a virtual race that was fuelled by the number of tweets each team managed to send out. The campaign helped to increase the number of our followers to 23,000 as at April 2013. With continued emphasis on social media engagement, this number continues to increase by the day. OUTLOOK The year 2012 has been fantastic for TIH, and we are looking at an equally exciting 2013, during which we will go all out to put into motion our five key growth strategies, namely to: leverage on growth of AirAsias business. As AirAsia expands its footprint, we intend to follow suit so long as it is commercially viable. We are very excited about the airlines impending entry into India, as well as the acquisition of Zest Airways Inc in the Philippines as these will greatly increase AirAsias market share in these countries, hence present us with a bigger captive market for our products. replicate our business model with new partners. Our existing partners do not restrict us from entering into arrangements with other third parties with whom we can replicate our online business model. Hence, our online team has been actively seeking new partners and is finalising one such partnership while working on other suitable online businesses. further improve the take-up rates of our online business. Other than the education campaign mentioned above, we constantly evaluate market conditions in each country where we offer insurance products and tailor our sales and marketing efforts accordingly. For example, we are looking at extending our life insurance products beyond Malaysia, Thailand and Indonesia to markets such as Australia and Singapore where consumers are more receptive to the purchase of insurance online. build on our general insurance capacity. We will accelerate the integration of TIMB into the Group to further improve the effectiveness of its multi-product and multi-distribution platform while maintaining a disciplined approach to underwriting risk, capital conservation and expense management. We will also
leverage on marketing and branding opportunities with other businesses under the AirAsia Group and Tune Companies, and further expand our range of online products. acquire more third-party insurance companies in the region. Just as we did with OCA in Malaysia, we are looking to acquire suitable insurance companies in Southeast Asia. This would enable us to broaden the range of products offered in sizeable markets that are generally under-served, while also allowing us to retain the full amount of premiums thus increase both revenue and profitability of our online business. We are currently in discussions with identified insurance providers in Indonesia and Thailand. In other words, we have our work mapped out for 2013 and beyond and are confident of attaining positive outcomes given our great team, great products, great partners and unique business model. ACKNOWLEDGEMENTS TIH Group has come a long way in a relatively short time, and for this I have various stakeholders to thank, from our customers for their belief in a young company such as ours; to our numerous partners and associates for their support and cooperation. In particular, I would like to thank those institutions that made our IPO possible: ECM Libra, who was with us from day one in making this idea a reality; CIMB, RHB and Standard Chartered, who believed in our plans and provided us with the financial backing to acquire OCA; regulators, in particular Bank Negara Malaysia and the Securities Commission, with whom we often were in contact late into the night; bankers including CLSA who guided us throughout the IPO process, principal advisor RHB who similarly worked incredibly hard throughout the SC submission process, and CIMB who were there when it counted at the sales stage. We were also supported by numerous other advisors including Ernst & Young, our actuarial partners and our major shareholder, AirAsia. But most of all, I would like to acknowledge the wonderful team that we have at TIH for the many successes that we notched in 2012, or even before. Everyone in the Group, from our Board of Directors to our management and support staff, has gone that extra mile to ensure all our goals for the year were met. It is great to be surrounded by such team spirit, and I truly look forward to TIMBs full integration with the Group in 2013, enabling us to move forward with even greater vigour as one powerful, unbeatable team.
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CORPORATE GOVERNANCE
The Board of Directors of TIH is committed to striving continuously to improve the effective implementation of the principles and best practices as laid down in the Malaysian Code on Corporate Governance (Revised 2012) and the Bursa Malaysia Securities Berhad Main Market Listing Requirements (Bursa Malaysia Main Market Listing Requirements).
TIHs policy is to implement all those principles and best practices in all activities undertaken by the Group. The commitment to high standards of corporate governance includes compliance with guidelines and recommendations in the conduct of business activities within the Group. Set out below is a statement on how TIH has applied the principles and complied with the Best Practices as prescribed under the above Code on Corporate Governance and Bursa Malaysia Main Market Listing Requirements during the financial year ended 31 December 2012.
The TIH Group Board

The Board is accountable to shareholders for achieving the Groups strategic objectives, for the delivery of strong and sustainable performance and for ensuring that it operates within its risk limits. It does so by complying with all the relevant Acts and Regulations, including adopting the Principles and Best Practices of the above Code on Corporate Governance and Bursa Malaysia Main Market Listing Requirements. The Board comprises members with the necessary depth and breadth of experience to bear on the governance, strategy, resources and performance of the Group. The Board members have a wide range of relevant experience such as insurance and reinsurance, banking, accounting, legal, economic, investment and international business operations. The profiles of the Directors are provided on Pages 6 to 10 of this Annual Report. The Board of TIH retains full and effective control over the Groups affairs and is the principal decision-making forum in providing stewardship and entrepreneurial leadership, either directly, through its Committees or by delegating authority to the Chief Executive Officer and his team. The Groups Malaysian regulated entities are responsible to the Malaysian Central Bank (Bank Negara Malaysia) and the Labuan Financial Services Authority for ensuring compliance with its regulations and that communication with the relevant authorities are handled in a constructive and transparent manner. The Board Terms of Reference are listed below: to review and approve strategies, business plans and significant policies for TIH and monitor managements performance in implementing them to set corporate values and clear lines of responsibility and accountability, including governance systems and processes that are communicated throughout TIH to ensure full compliance and to carry out the duties of the Board in accordance with the relevant provisions of the MMLR, the CMSA, the CA and all applicable laws, regulations and guidelines including but not limited to the directors duties contained in Part V, Division 2 of the CA to oversee the conduct of TIHs business and ensure that the management of TIH is competent and effective to ensure that there shall be unrestricted access to independent advice or expert advice at TIHs expense in furtherance of the Boards duties (whether as a Board or a director in his/her individual capacity) to formalise the ethical standards through a code of conduct which will be applicable throughout TIH and ensure the compliance of this code of conduct to ensure that the operations of TIH are conducted prudently, and within the framework of relevant laws and regulations to establish, approve, review, and monitor TIHs risk appetite and comprehensive risk management policies, processes and infrastructure, and receive regular reports therein; to approve delegated authority for expenditure, lending, and other risk exposures to consider emerging issues which may be material to the business and affairs of TIH and ensure that TIH has a proper succession plan for its senior management and Executive Directors to keep under review and maintain TIHs capital and liquidity positions as well as ensure that TIHs strategies promote sustainability to review and approve proposals for the allocation of capital and other resources within TIH to review and approve TIHs annual capital and revenue budgets (and any material changes thereto) to ensure that the Board has adequate procedures in place to receive reports periodically and/or on a timely basis from TIHs management that would provide the Board with a reasonable basis to make proper judgement on an ongoing basis as to the financial position and business prospects of TIH
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ANNUAL REPORT 2012
CORPORATE GOVERNANCE (CONTD)
to approve TIHs annual reports and unaudited periodic financial statements as required by the applicable stock exchange, including but not limited to other published financial statements and material and significant statements issued to shareholders to review the adequacy and integrity of TIHs internal control system and management information systems, including systems for complying with applicable laws, regulations, rules, directives and guidelines to set up an internal audit department staffed with qualified personnel to perform internal audit functions, covering financial and management audit as well as regulatory compliance, that reports directly to the Companys Audit & Risk Committee to establish procedures to assess any related party transactions or conflict of interest situations that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity to establish and ensure the effective functioning and monitoring of the Audit & Risk, Remuneration, Nomination and ESOS committees, and any other committees as deemed necessary by the Board, and to delegate appropriate authority and terms of reference to such committees established by the Board to prepare an Audit & Risk Committee report at the end of each financial year that will be clearly set out in the annual report of TIH to look at and to address their mind to major and/or material litigation situations against the Group as and when they arise to ensure that TIH has a beneficial influence on the economic well-being of its community to ensure that TIH has in place a policy and/or procedures to enable effective communication with, and appropriate disclosure to, its shareholders and other stakeholders; and that its shareholders have access to information about TIH to receive and consider high level reports on matters material to TIH, in particular (i) relations with regulatory authorities (ii) health and safety (iii) insurance cover (iv) disaster recovery (v) litigation and claims (vi) premises and (vii) public relations. to receive the minutes of and/or reports from the committees established by the Board to review and agree to changes in the terms of reference of TIHs Board and committees established by the Board to strive to achieve an optimum balance and dynamic mix of competent and diverse skill sets amongst the Board members to ensure adequate training of members of the Board to undertake an assessment of the independence of its independent directors annually in accordance with the assessment criteria to be developed by the Nomination Committee to conduct a Board evaluation through Nomination Committee comprises a Board Assessment and an Individual (Self & Peer) Assessment. The assessment of the Board is based on specific criteria, covering areas such as the Board composition and structure, principal responsibilities of the Board, the Board process, the CEOs performance, succession planning and Board governance. For Individual (Self & Peer) Assessment, the assessment criteria include contribution to interaction, role and duties, knowledge and integrity and assessment of independence to undertake a proper process for Directors selection through Nomination Committee and to establish formal and transparent remuneration policies and procedures to attract and retain directors through Remuneration Committee.
The Board has adopted a formal schedule of reserved matters, which is reviewed on an annual basis. Matters reserved for Board approval include: The Groups long term strategy, corporate objectives and plans The Groups capital structure Operating and capital budgets Any significant changes to accounting policies and practices Results and financial reporting Dividend policy and proposals for dividend payments New ventures Major acquisitions, disposals, and other transactions outside delegated limits The Groups overall risk appetite Review of the Groups overall corporate governance arrangements The maintenance and review of the system of internal control and risk management Changes to the structure, size and composition of the Board, including new appointments Succession plans for the Board and senior management Annual review of its own performance and that of its Board Committees
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The Board met on three occasions in 2012. The details of attendance of the Directors at Board meetings held during the financial year are as follows: No. 1. 2. 3. 4. 5. 6. Directors PETER DIXON MILLER FAZLIN BINTI ABU HASSAN SHAARI RAZMAN HAFIDZ BIN ABU ZARIM TAN SRI DR. ANTHONY FRANCIS FERNANDES TAN HONG KHENG NG SOON LAI @ NG SIEK CHUAN No of Meetings Attended 1/1 1/1 2/2 1/2 1/2 2/2
Peter Dixon Miller and Fazlin Binti Abu Hassan Shaari resigned as Directors on 6 October 2012 Razman Hafidz bin Abu Zarim, Tan Sri Dr. Tony Fernandes, Tan Hong Kheng and Ng Soon Lai @ Ng Siek Chuan were appointed as Directors on 5 October 2012 Dato Kamarudin Bin Meranun was appointed as Director on 11 March 2013
Agendas and papers are circulated to the Board with sufficient time for members to prepare for Board and Committee meetings. These papers include information specifically requested by the Board member (if any). All Board and Committee meetings held during the year were conducted in an open atmosphere which allowed constructive challenge and debate, where all Directors were able to bear independent judgement on issues discussed. Meetings are called as and when required, and there is also frequent contact between meetings on Group matters.
The Company Secretary

All the Directors have access to the Company Secretary who ensures that Board procedures are followed. The Company Secretary advises and provides updates to the Board on Directors duties and obligations, regulatory and corporate governance legislation. The appointment and removal of the Company Secretary requires Board approval.
Board balance and Independence

At the year-end, the Board comprises four (4) members. All four (4) members are Non-Executive Directors and two (2) are independent. The Chairman is both Non-Executive and independent. By virtue of this composition, the Company has thus, complied with Paragraph 15.02 of the Bursa Malaysia Main Market Listing Requirements which requires at least two (2) directors or one-third (1/3rd) of the Board, whichever is the higher, to be independent. The Board members at the year-end are: Razman Hafidz bin Abu Zarim, Chairman (Independent Non-Executive Director) Ng Soon Lai @ Ng Siek Chuan (Independent Non-Executive Director) Tan Sri Dr. Anthony Francis Fernandes (Non-Independent Non-Executive Director) Tan Hong Kheng (Non-Independent Non-Executive Director)
RE-ELECTION OF DIRECTORS
The Articles of Association (AoA) of TIH provide that at least one-third of the Directors are subject to retirement by rotation at each AGM and that each Director shall retire once in every three years, and is eligible to offer himself for re-election. AoA also provide that a Director who is appointed by the Board during the year, shall be subject to re-election at the next AGM to be held, following his appointment.
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PROFESSIONAL DEVELOPMENT
The Group recognizes that continuous education is essential for Board in the discharge of their duties and responsibilities. The following are the programmes and seminars attended by the Directors during the year: Directors name Razman Hafidz bin Abu Zarim Tan Sri Dr. Tony Fernandes Dato Kamarudin Bin Meranun Tan Hong Kheng Training Programme Directors Legal Tool Kit (FIDE) FIDE (Banks) Course Module 1 Malaysian Capital Market Summit Cross Border Champions ICAAP Program Invest ASEAN Credit Suisse Conference Leadership & Education Seminar Sabah International Luncheon Talk CIMB ASEAN Investor Conference JP Morgan Investor Roadshow Credit Suisse Investor Conference CIMB ASEAN Conference Sabah International Luncheon Talk CIMB ASEAN Conference Risk Management & Basel III Training by Deutsche Bank AG, Singapore ICAAP Programme by Iclif under Financial Institutions Directors Education Program
Ng Siek Chuan
Relations with shareholders

The Group considers communications with shareholders important. The Chief Executive Officer has the day-to-day responsibility for communicating with analysts and institutional shareholders, on the Groups strategy and how it intends to achieve its objectives. Regular dialogue sessions are also held to ensure that the Group strategy is properly understood, the status in meeting its objectives is given and that issues are addressed in a constructive manner. External analysts reports are circulated to all Directors and senior management. A corporate website (www.tuneinsurance. com) is maintained where information is easily accessible to institutional and private investors. Briefings by CEO on Groups performance will be conducted during AGMs whereby Annual Reports will be made available to shareholders prior to the meetings. Additionally, Financial Statements and announcements will be made accessible through Bursa Malaysia.
Conflict of interest
The Board members directorship in companies are well within the restriction of not more than five (5) directorships in public listed companies as stated in the Bursa Malaysia Main Market Listing Requirements. Directors have declared their respective shareholdings in the Company and related companies and their interests in any contracts with the Company or any of its related companies. Directors have also declared their directorships in other companies and have or shall abstain from any discussions and decision-making in relation to these companies.
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Board committees
The Board has delegated its authority to several Committees, with clear written terms of references. The Committees of the Board are the Audit and Risk Committee, the Remuneration Committee and the Nomination Committee. All Committees are chaired by an independent Director and have a majority of independent Directors. New members are properly evaluated before recommendation by the Nomination Committee. In assessing the suitability of candidates, the required mix of skills, expertise, competencies, experience, professionalism, integrity and other qualities, is taken into account. The Nomination Committee then recommends the proposed appointment to the Board for its approval. Sufficient time is devoted to finalize the selection of Committee members by the Nomination Committee and Board. The Company Secretary ensures that all appointments are properly done and, relevant legal and regulatory requirements are complied with. Committees written terms of references are established and will be reviewed periodically to ensure that they remain relevant and reflect changes in good practice and governance. The Board is fully informed of Committee proceedings by the Committee Chairmen who provide a report at the subsequent Board meeting. Committees are authorized to obtain outside independent professional advice if they deem it to be necessary.
The Audit & Risk Committee

The membership as at 31 December 2012 was Ng Soon Lai @ Ng Siek Chuan, Razman Hafidz Bin Abu Zarim and Tan Hong Kheng. The Company Secretary is the Secretary for the Committee. Ng Soon Lai @ Ng Siek Chuan (Committee Chairman) and Razman Hafidz Bin Abu Zarim, both members of the Malaysian Institute of Accountants have the relevant financial experience, and all members of the Committee have the appropriate experience and competence to carry out their duties. The Committees meeting calendar and agenda are linked to events in TIHs financial calendar. The Committee is kept up to date with relevant developments, changes in legislation and regulations, and information on external seminars and conferences by the Company Secretary and the Executive team. The Board Chairman, Chief Executive Officer, Chief Financial Officer, Heads of Risk and Internal Audit as well as the external auditors are regularly invited to attend all or part of any meeting as and when appropriate. The Terms of Reference of the Audit & Risk Committee include all Code requirements and was approved by the Board in 2012. The duties and responsibilities of the Committee include: To consider the appointment or re-appointment of the external auditors, the audit fees, any questions of resignation or dismissal of the external auditors and to recommend the nomination of the external auditors; To assess the suitability and independence of the external auditors; To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved; To provide a line of communication between our Board and the external auditors; To review the quarterly and year-end financial statements of the Group and Company, focusing particularly on: (a) any change and appropriateness of accounting policies and practices; (b) significant adjustments arising from the audit; (c) litigation that could affect the results materially; (d) significant and unusual events; (e) the going concern assumption; (f) compliance with approved accounting standards and other legal requirements; and (g) ensuring the timely release of such financial statements; To discuss problems and reservations arising from the interim and final audits, and any matter the external auditors may wish to discuss (in the absence of management where necessary) including the audit report and the level of assistance given by our employees to the external auditors; To review the external auditors management letter and managements response in evaluating our Companys and our Groups system of internal control;
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To do the following, in relation to the internal audit function: (a) mandate the internal audit function to report directly to our Audit & Risk Committee; (b) review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary independence and authority to carry out its work, which should be performed professionally and with impartiality and proficiency; (c) review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; (d) review any appraisal or assessment of the performance of members of the internal audit function; (e) approve any appointment or termination of senior staff members of the internal audit function; and (f) take cognisance of resignations of internal audit staff and provide the staff an opportunity to submit reasons for resigning; To review and monitor the adequacy and integrity of our Companys system of internal controls and management information systems, including systems to ensure compliance with applicable laws, regulations, rules, directives and guidelines; To consider and evaluate any related party transactions or conflict of interest situations that may arise within our Company or our Group including any transaction, procedure or course of conduct that raises questions of management integrity; To consider the major findings of internal investigations and managements response; To review the risk management framework of our Group and our Company to ensure the existence of effective risk management policies and controls to monitor and manage all financial and non-financial risks; To review our Companys procedures for detecting fraud and whistle blowing and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters (in compliance with provisions made in the Act); and To consider any other matters as directed by our Board.
Relationship with External Auditors

The Board, through the Audit & Risk Committee (ARC), has maintained appropriate, formal and transparent relationship with the external auditors. The ARC will meet the external auditors, without the presence of management, where necessary at least twice a year.
The Nomination Committee

The membership as at 31 December 2012 was Ng Soon Lai @ Ng Siek Chuan, Razman Hafidz bin Abu Zarim and Tan Sri Dr. Anthony Francis Fernandes. The Company Secretary is the Secretary for the Committee. The Committee may invite other Board members and the Chief Executive Officer to attend meetings when it deems appropriate. Appointments to the Board are assessed by the Nomination Committee for their suitability and the required mix of knowledge, skills and competencies, professionalism and integrity are taken into account. The Nomination Committee then recommends the proposed appointment to the Board for its approval. The Company Secretary ensures that all appointments are properly done and, relevant legal and regulatory requirements are complied with. The Committee intends to assess annually in a formal and transparent manner, the effectiveness of the Board as a whole, its various Committees and Directors in the discharge of their duties and responsibilities. In 2012, as part of TIHs commitment for an Initial Public Offering (IPO), the initial Board members initiated a search for new Directors after reviewing the size and the balance of its composition. The Group recruited ahead of the IPO date to ensure continuity of knowledge. The Committee used external parties to recommend suitable candidates who were diverse but yet knowledgeable in insurance, entrepreneurial experience and overseas business expansion.
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The Remuneration Committee

The membership as at 31 December 2012 was Ng Soon Lai @ Ng Siek Chuan, Razman Hafidz bin Abu Zarim and Tan Sri Dr. Anthony Francis Fernandes. The Company Secretary is the Secretary for the Committee. The Committee may invite other Board members and the Chief Executive Officer to attend meetings when it deems appropriate. The Committee reviewed and considered the following during the year: Approved the Groups remuneration strategy and policy; and Approved remuneration packages for Directors and the Executive team The total remuneration of Directors during the financial year ended 31 December 2012 are as follows: Non Executive Executive Total Directors Remuneration (RM 000) (RM 000) (RM 000) Fees 62 62 Salaries and other emoluments 18 18 Benefits-in-kind Total 80 80 No. of No. of Non Executive Executive Directors Remuneration Director Directors Up to RM50,000 4 RM50,001 to RM100,000 RM100,001 to RM150,000 RM150,001 to RM200,000 Above RM200,000 Total 4
Risk management and internal control

The Board views its management of risk exposure as fundamental to the Groups operation and long-term growth. Therefore the Board recognizes its ultimate responsibility in managing the Groups risk exposure and to that end, is also ultimately responsible for the internal control system of the Group. The Board through its Audit & Risk Committee reviews the effectiveness of the Groups internal control systems where they intended to manage risks identified and provide reasonable assurance against the failure to achieve business objectives, and material misstatements and losses. To support the system of internal control, the following elements are in place for the Group: a formal and regular schedule of Board and Committee meetings annually with the minimum times in accordance with legislation and regulations from 2013 onwards identification of matters reserved for Boards and/or its Committees decision identification of matters delegated to the Executive team, which has an organizational structure with clearly defined lines of responsibility in line with regulations and best practices of listed issuers. The Chief Executive Officer is to ensure proper discharge of these authorities and responsibilities a Group Management Committee internal policies and procedures including a Code of Ethics, People and Culture policies and procedures, formal performance reviews and a Fraud policy
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a Group risk management policy set by the Board including a framework designed to ensure that risks which could undermine its strategy, reputation and long-term viability are identified and addressed, including emerging risks enforcement of the Board risk management policy by the Chief Executive Officer assurance provided by the Audit & Risk Committee to the Board that the operational level decisions take into account risks, how they can be controlled effectively and that the control systems operate effectively to do so
The Audit & Risk Committee is assisted by our Group Risk Management Department, which is in turn supported by working committees with representation by the Chief Executive Officer of the respective entities. The Head of Risk Management takes the responsibility for communicating the risk strategy, ensuring Senior Management is aware of the risks in their respective areas and their corresponding obligations, and providing the support in tracking these risks. The Group Risk Management Department implements the risk assessment process and maintains as well as updates the risk registers subsequent to regular reviews with Executive team. Reports on the most significant risks to the least are tabled for Board discussion and direction. The Group Internal Audit Department, which also reports functionally to the Committee works closely with the Group Risk Department. Risk registers are used to provide direction on Internal Audit plans and audit programmes of the audits of significant risks to the Group. Internal Audit will provide the independent assurance to the Board, via the Audit & Risk Committee that effective controls have been put in place by management to curb identified risks. The Board is satisfied that there is an effective and adequate system of internal control in place to manage the Groups risks for the year ended 31 December 2012; and it is an on-going process in accordance with the guidance for Directors of Listed Issuers up to the date of approval of the annual report by the Board. The Board confirms that there were no significant issues arising during the year under review.
Corporate Social Responsibility

The Group is currently drawing up the Corporate Social Responsibility Policy towards achieving positive impact to the consumers, employees, communities and the environment.
Going concern
The Board has reviewed the Groups financial projections for the next twelve months, including regulatory capital surpluses. Based on this review, the Directors are satisfied that it is appropriate to prepare the financial statements on a going concern basis. Therefore, the financial statements have been prepared on a going concern basis.
Statement on compliance with the best practices of the code

The Group is committed to achieving high standards of ethics, integrity and corporate governance in all its business dealings. The Board considers that it has complied throughout the financial year with all the Principles and Best Practices as set out in Part 2 of the Malaysian Code on Corporate Governance and the Corporate Governance Guide issued by Bursa Securities, the Bursa Malaysia Main Market Listing Requirements. This Statement on Corporate Governance is made in accordance with the approval of the Board during a meeting held on 23 April 2013.
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AUDIT AND RISK COMMITTEE REPORT

MEMBERSHIP AND AUTHORITY
ur Audit and Risk Committee was established on 5 October 2012 and comprises three Non-Executive Directors, of which O two are independent. Members of our Audit and Risk Committee are as follows: Name Designation Directorship Ng Soon Lai @ Ng Siek Chuan Chairman Independent Non-Executive Director Razman Hafidz Bin Abu Zarim Member Chairman, Independent Non-Executive Director Tan Hong Kheng Member Non-Independent Non-Executive Director Our Audit and Risk Committee was established by our Board in order to assist it in overseeing the internal controls of our Group independent from our management and to oversee the risk management activities of our Group, approving appropriate risk management procedures and methodologies across the organisation as well as to identify business risks of our Group. Our Audit and Risk Committee has full access to both internal and external auditors and vice versa. Under our Audit and Risk Committees terms of reference, at least one member of our Audit and Risk Committee must either be a member of the Malaysian Institute of Accountants, or if not, he/she must have at least three years working experience and must have passed certain examinations stipulated in the Accountants Act 1967, or any other requirement as prescribed by Bursa Malaysia or the Securities Commission Malaysia. The Chairman of our Audit and Risk Committee must be an independent Director appointed by the Board, based on the recommendation of our Nomination Committee.
TERMS OF REFERENCE
Our Audit and Risk Committees terms of reference include the following: (i) To consider the appointment or re-appointment of the external auditor, the audit fees, any questions of resignation or dismissal of the external auditors and to recommend the nomination of the external auditors; To assess the suitability and independence of the external auditors; To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved; To provide a line of communication between our Board and the external auditors; To review the quarterly and year-end financial statements of the Group and Company, focusing particularly on: (a) (b) (c) (d) (e) (f) (g) (vi) any change and appropriateness of accounting policies and practices; significant adjustments arising from the audit; litigation that could affect the results materially; significant and unusual events; the going concern assumption; compliance with approved accounting standards and other legal requirements; and ensuring the timely release of such financial statements;
(ii) (iii) (iv) (v)
To discuss problems and reservations arising from the interim and final audits, and any matter the external auditors may wish to discuss (in the absence of management where necessary) including the audit report and the level of assistance given by our employees to the external auditors;
(vii) To review the external auditors management letter and managements response in evaluating our Companys and our Groups system of internal control;
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AUDIT AND RISK COMMITTEE REPORT (CONTD)
(viii) To do the following, in relation to the internal audit function: (a) (b) (c) (d) (e) (f) (ix) mandate the internal audit function to report directly to our Audit and Risk Committee; review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary independence and authority to carry out its work, which should be performed professionally and with impartiality and proficiency; review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function; approve any appointment or termination of senior staff members of the internal audit function; and take cognisance of resignations of internal audit staff and provide the staff an opportunity to submit reasons for resigning;
Review and monitor the adequacy and integrity of our Companys system of internal controls and management information systems, including systems to ensure compliance with applicable laws, regulations, rules, directives and guidelines; To consider and evaluate any related party transactions or conflict of interest situations that may arise within our Company or our Group including any transaction, procedure or course of conduct that raises questions of management integrity; To consider the major findings of internal investigations and managements response;
(x)
(xi)
(xii) To review the risk management framework of our Group and our Company to ensure the existence of effective risk management policies and controls to monitor and manage all financial and non-financial risks; (xiii) To review our Companys procedures for detecting fraud and whistle blowing and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters (in compliance with provisions made in the Act); and (xiv) To consider any other matters as directed by our Board.
MEETINGS
The first meeting of the Audit & Risk Committee (ARC) was held on 22 November 2012, with attendance recorded as follows: No. ARC Members Attendance 1. Ng Soon Lai @ Ng Siek Chuan Yes 2. Razman Hafidz Bin Abu Zarim Yes 3. Tan Hong Kheng Yes The ARC met once during the financial year. Key matters deliberated or reviewed during the meeting are summarized as follows: Financial results to-date; Indicative timetable for the Companys Initial Public Offering (IPO); Interim audit update for the Third Quarter ended 30 September 2012; External auditors proposed audit scope or plan for the financial year ending 31 December 2012, fees and independence; Regional expansion updates; Preliminary Risk Plan 2013; Enterprise Risk Management (ERM) Policy; Group Risk, Compliance and Assurance Framework; Internal Audit Charter; Internal Audit Methodology and Preliminary Audit Plan 2013; Cost allocations for shared services and capital expenditure between group companies.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION
This Statement on Risk Management and Internal Control is made pursuant to Bursa Malaysia Securities Berhad Listing Requirements which requires the Board of Directors to include in its Company Annual Report a statement about the state of its internal control. The revised Malaysian Code on Corporate Governance (2012) requires all listed companies to establish and maintain a sound risk management framework and internal control system. Accordingly, the Board is pleased to provide the Statement on Risk Management and Internal Control (Statement) that was prepared in accordance with the Statement on Risk Management and Internal Control Guidelines for Directors of Public Listed Issuers issued by Bursa Malaysia Securities Berhad which outlines the process to be adopted by the Board in reviewing the adequacy and effectiveness of the risk management and internal control system of the Group. The Board acknowledges its overall responsibility and is committed to the establishment of sound and effective systems of internal control and risk management within the Group although it recognises that such systems may only be able to contain risks within acceptable levels and not totally eliminate all risks. In this respect the Board is periodically updated by the Chief Executive Officer (CEO) about significant issues pertaining to the internal control and risk management systems as well as whether these frameworks are operating adequately and effectively in all material aspects.
RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

Risk Management Management of risk exposure is fundamental to our operation and our long-term growth. Our risk management framework is designed to ensure that risks which could undermine our strategy, reputation and long-term viability are identified and addressed. In addition, there is an on-going oversight of the adequacy and effectiveness of our risk management policy by our Audit and Risk Committee, which reports directly to our Board. A Group risk management policy set by the Board is in place for the Group. It is designed to ensure that risks which could undermine its strategy, reputation and long-term viability are identified and addressed, including emerging risks. Our Audit and Risk Committee is assisted by our Group Risk Management Department, which is in turn supported by working committees with representation by the CEO of the respective entities. The role of Management includes: The Head of Risk Management takes the responsibility for communicating the risk strategy, ensuring Senior Management is aware of the risks in their respective areas and their corresponding obligations, and provides the support in tracking these risks. The Group Risk Management Department implements the risk assessment process and maintains as well as updates the risk registers subsequent to regular reviews with the Management team. Findings and reports on the most significant risks to the least are tabled for Board discussion and direction. This entire process has been in place for the Group since the acquisition of Tune Insurance Malaysia Berhad (TIMB) (formerly known as Oriental Capital Assurance Berhad (OCA)) in May 2012 and up to the date of approval of this Statement for inclusion in the annual report. Moreover a risk management function was already established in the Groups significant subsidiary, TIMB, prior to acquisition in May 2012.
Our Group Risk Department works closely with our Internal Audit Department, which also reports functionally to our Audit and Risk Committee. As TIMB is licensed and regulated by Bank Negara Malaysia, the entity is subject to more stringent regulations than our other subsidiaries and requires a separate risk management committee that designs and implements a risk management framework specifically for TIMB. This committee reports to the Board of Directors of TIMB. TIMB has in addition, a separate audit committee, investment committee and nomination and remuneration committee.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTD)
Internal Control Framework Our system of internal control comprises various policies, procedures and frameworks, amongst which are: Clear and structured organizational reporting lines; Annual budgeting and target setting processes; Board approval of all strategic, business and investment plans; Adequate monitoring on implementation of strategic, business and investment plans supported by the Board; and Timely reviews of strategies, financial performance and business development at both Management and Board levels.
In addition, the following has been established at TIMB in tandem with Bank Negara Malaysia requirements and best practices: General Insurance Underwriting Guidelines to manage and adequately assess risks being underwritten; Controls over claims handling and settlement processes; Controls over credit control processes; Reinsurance programmes where there is a spread of reinsurers with acceptable ratings from accredited agencies; and Departmental manuals to guide employees in the day-to-day execution of their duties.
Internal Audit Function An effective Internal Audit function is essential to help a company accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, financial and operational control, and governance processes. In this regard our Internal Audit Department reports functionally to the Audit and Risk Committee to facilitate the Committees oversight responsibilities for our Group, and minutes of every Audit and Risk Committee meeting are tabled to the Board. Details of activities undertaken by the Committee are also highlighted in the Audit and Risk Committee Report. The Audit and Risk Committee has active oversight on Internal Audits independence, scope of work and resources. It also reviews the Internal Audit function, particularly the scope of the annual audit plan and frequency of the internal audit activities. The annual internal audit plan detailing audit coverage and scope of work for the forthcoming financial year 2013 was presented for the consideration and approval of the Audit and Risk Committee and the Board to provide mandate to the Internal Audit department. Where applicable, Internal Audit provides recommendations to improve on the effectiveness of risk management, control and governance processes. Management will follow through and review the status of actions on recommendations made by the internal and external auditors. Audit reviews are carried out on units that are identified premised on a risk based approach, in cognisance with the Groups objectives and policies in the context of its evolving business and regulatory environment, taking into consideration input of senior Management and the Board. In view that TIMB is subject to more stringent regulations than our other subsidiaries; it has a separate Audit Committee that reports to the board of directors of TIMB. This committee designs and implements the Internal Audit framework for TIMB, further evaluates the effectiveness and adequacy of internal control systems as well as reviews internal control issues identified in reports prepared by Internal Audit, the external auditors and regulatory authorities. The total cost incurred by the Internal Audit function performed in-house for year ended 31 December 2012 was RM412,000.
Assurance from Management The Board has received assurance from the CEO and Head of Risk Management that the Companys and Groups internal control and risk management system is operating adequately and effectively, in all material aspects, based on the internal control and risk management system of the company. The Statement of Risk Management and Internal Control is made in accordance with the approval of the Board during a meeting held on 23 April 2013.
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Other Statements and Disclosures

The Companies Act, 1965 (Act) requires the Directors to prepare financial statements for each financial year which give a true & fair view of the state of affairs of the Company and the Group and their results for the financial year under review. For the preparation of the financial statements for the financial year ended 31 December 2012, The Directors have:a) b) c) adopted appropriate accounting policies, which are constantly applied; made judgments and estimations which are prudent & reasonable; and ensured that applicable approved accounting standards in Malaysia and the provisions of the Act are complied with.
The Board is responsible for ensuring the Company & Group keep accounting records which disclose the financial position of the Company & Group & also enable them to ensure that the financial statements comply with the Act. The Board has the responsibility for taking such steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Additional Compliance Information

The information set out below is disclosed in compliance with the Bursa Malaysia Main Market Listing Requirements:1.0 Share Buyback The Company does not have a scheme to buy back its own share. 2.0 Options, warrants or Convertible Securities Exercised On 20 April 2012, the Company and TMSB entered into a call option agreement with AirAsia Berhad whereby the Company and TMSB agreed to grant to AirAsia Berhad an option to acquire up to 20% of the issued and paidup share capital of the Company at the time the call option is exercised from TMSB for a purchase consideration computed based on the net asset value of the Company at the time of exercise of the option (subject to a maximum purchase consideration of RM16.0 million) to be satisfied in cash. On 11 October 2012, AirAsia Berhad has exercised its right under the call option agreement to purchase 121,677,000 ordinary shares of RM0.10 each in the Company, for a consideration of RM16.0 million, which represents 20% of the Companys issued and paid up share capital of 608,385,080 shares as at 11 October 2012. Depository Receipt Programme The Company did not sponsor any depository receipt programme during the financial year ended 31 December 2012. Employees Share Option Scheme (ESOS) The ESOS is the only share scheme of the Company approved by the shareholders on 2 January 2013 and only came into effect on the date of Listing, 20 February 2013. Sanctions and/or penalties There was no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year ended 31 December 2012. Non-Audit Fees The amount of non-audit fees incurred for services rendered to the Company by Messrs Ernst and Young, external auditors, as Reporting Accountants for the IPO during the financial year ended 31 December 2012 was RM730,000. Material Contracts involving Directors and Major Shareholders There were no material contracts entered into by the Company and its subsidiaries involving directors & major shareholders interest except as disclosed in Note 41 of the audited financial statements for the year ended 31 December 2012.
3.0 4.0 5.0 6.0 7.0
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we care for your health and well-being
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FINANCIAL HIGHLIGHT - 2012
OPERATING REVENUE
RM226.3
vs. 2011's 55.9 MILLION
MILLION
INVESTMENT INCOME
EARNINGS PER SHARE
RM11.4
MILLION
16.28
RM60.8
SEN
PROFIT AFTER TAX
SHARE CAPITAL
RM48.6
MILLION
MILLION
Feb 2013 Share price - High (RM per share) - Low (RM per share) 1.38 1.29
March 2013
April 2013
20 May 2013
1.48 1.27
1.51 1.38
2.11 1.47
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ANNUAL REPORT 2012
FINANCIAL HIGHLIGHT - 2012 (CONT'D)
SEGMENTAL REVENUE
Macau, China 1% Japan 2% Hong Kong, China 2% Shenzhen, China 5% Australia 4%
Philippines 1% Cambodia 0% Laos 0%
Japan 1% Hong Kong, China 1% Shenzhen, China 2% Australia 2% Singapore 6%
Macau, China 0% Philippines 0% Cambodia 0% Laos 0%
Singapore 10%
Geographical Diversication for Group RM'000
Malaysia 37%
Indonesia 10%
Geographical Diversication for Group RM'000
2012
2011
Indonesia 14%
Thailand 24%
Thailand 15%
Malaysia 63%
NUMBER OF POLICIES - ONLINE
Singapore 6%
China 6%
Others 5%
China Singapore 4% 6%
Others 1%
Indonesia 13% Thailand 19%
Malaysia 50%
Indonesia 13% Thailand 19%
Malaysia 57%
6.0 Million Policies Issued 2012
5.6 Million Policies Issued 2011
ANNUAL REPORT 2012
39
we cover your journey from start to finish
40
ANNUAL REPORT 2012
Directors Report_41 Statement by Directors_45 Statutory Declaration_45 Independent Auditors Report to the Members_46 Statements of Financial Position_48 Statements of Comprehensive Income_49 Statements of Changes in Equity_51 Statements of Cash Flows_52 Notes to the Financial Statements_54
FINANCIAL STATEMENTS
ANNUAL REPORT 2012
41
DIRECTORS REPORT
The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2012.
Principal activities
The principal activities of the Company are investment holding and provision of management services to its subsidiaries. The Company was incorporated as a private limited liability company on 14 June 2011, incorporated under the Companies Act, 1965 and domiciled in Malaysia. On 17 August 2012, the status of the Company was converted from a private company to a public company. Accordingly, the name of the Company was changed from Tune Ins Holdings Sdn. Bhd. to Tune Ins Holdings Berhad. The Company was listed on Bursa Malaysia Securities Berhad on 20 February 2013. The principal activities of the subsidiaries are set out in Note 6 to the financial statements. There have been no significant changes in the nature of the principal activities of the Company and its subsidiaries during the financial year other than the acquisition of subsidiaries as disclosed in Note 6(i).
Results
Net profit for the year Profit attributable to : Equity holder of the Company Non-controlling interests Group 2012 RM000 48,588 41,480 7,108 48,588 Company 2012 RM000 11,040
11,040 11,040
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.
Dividends
No dividend has been declared or paid since the end of the previous financial year. The directors do not recommend the payment of any dividend in respect of the current financial year.
Directors
The names of the directors of the Company in office since the date of the last report and at the date of this report are: Razman Hafidz Bin Abu Zarim Tan Sri Dr. Anthony Francis Fernandes Tan Hong Kheng Ng Soon Lai @ Ng Siek Chuan Dato Kamarudin Bin Meranun Peter Dixon Miller Fazlin Binti Abu Hassan Shaari (appointed on 5 October 2012) (appointed on 5 October 2012) (appointed on 5 October 2012) (appointed on 5 October 2012) (appointed on 11 March 2013) (resigned on 6 October 2012) (resigned on 6 October 2012)
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ANNUAL REPORT 2012
DIRECTORS REPORT (CONTD)
Directors benefits
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company or its subsidiary was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors from the company and related corporations, or the fixed salary of a full-time employee of the Company as shown in Notes 26 and 33(b) to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.
Directors interests
According to the register of directors shareholdings, the interest of directors in office at the end of the financial year in shares in the Company or its related corporations during the financial year were as follows: Indirect interest: Tan Sri Dr. Anthony Francis Fernandes Tan Sri Dr. Anthony Francis Fernandes
#1 #2
No of ordinary shares of RM0.10 each As at As at 1.1.2012* Acquired Disposed 31.12.2012 000 000 000 000
142,385
466,000 121,677
(121,677)
486,708 121,677
Notes: Deemed interested by virtue of his interest in Tune Money Sdn Bhd #2 Deemed interested by virtue of his interest in AirAsia Berhad * The numbers are adjusted after subdivision of shares par value from RM1.00 to RM0.10
#1
Other than as disclosed above, none of the directors in office at the end of the financial year had any interest in shares of the Company or its related corporations during the financial year.
Share split
On 4 October 2012, the Company implemented a share split of the par value of the Company shares whereby each existing ordinary share of RM1.00 each in the Company is subdivided into 10 ordinary shares of RM0.10 each. Upon the completion of the share split, the issued and paid up share capital of the Company stood at RM14,238,508 comprising 142,385,080 ordinary shares of RM0.10 each.
Issue of shares
On 4 October 2012, the Company also increased its issued and fully paid share capital from RM14,238,508 to RM60,838,508 via the capitalisation of advances from holding company of 466,000,000 new ordinary shares of RM0.10 each to the shareholders of the Company. The new ordinary shares issued ranked pari passu with the shares in issue at the date of issuance.
ANNUAL REPORT 2012
43
Other statutory information

(a) Before the statements of financial position and statements of comprehensive income of the Group and of the Company were made out, the directors took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowances had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.
(ii)
(b)
At the date of this report, the directors are not aware of any circumstances which would render: (i) the amount written off for bad debts or the amount of the allowances for doubtful debts of the Group and of the Company inadequate to any substantial extent; and the values attributed to current assets in the financial statements of the Group and of the Company misleading.
(ii) (c)
At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. As at the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability in respect of the Group or of the Company which has arisen since the end of the financial year.
(d)
(e)
(f)
In the opinion of the directors: (i) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.
(ii)
For the purpose of paragraphs (e)(ii) and (f)(i) above, contingent or other liabilities do not include liabilities arising from insurance contracts underwritten in the ordinary course of business of the Group. Before the statement of financial position and statement of comprehensive income of the general insurance subsidiary were made out, the directors took reasonable steps to ascertain that there was adequate provision for its insurance liabilities in accordance with the valuation methods prescribed under Part D of the Risk-Based Capital (RBC) Framework for insurers issued by BNM.
(g)
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ANNUAL REPORT 2012
Significant and subsequent events

The significant and subsequent events are as disclosed in Note 41 to the financial statements.
Auditors
The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 19 March 2013.
Ng Soon Lai @ Ng Siek Chuan Kuala Lumpur, Malaysia 19 March 2013
Razman Hafidz Bin Abu Zarim
ANNUAL REPORT 2012
45
STATEMENT BY DIRECTORS
pursuant to Section 169 (15) of the Companies Act, 1965

We, Ng Soon Lai @ Ng Siek Chuan and Razman Hafidz Bin Abu Zarim, being two of the directors of Tune Ins Holdings Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 48 to 130 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended. The information set out in Note 42 to the financial statements have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board in accordance with a resolution of the directors dated 19 March 2013.
Ng Soon Lai @ Ng Siek Chuan Kuala Lumpur, Malaysia
Razman Hafidz Bin Abu Zarim
STATUTORY DECLARATION
pursuant to Section 169 (16) of the Companies Act, 1965

I, Peter Dixon Miller being the officer primarily responsible for the financial management of Tune Ins Holdings Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 48 to 130 are in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the abovenamed Peter Dixon Miller at Kuala Lumpur in the Federal Territory on 19 March 2013
) ) ) )
Peter Dixon Miller
Before me, Commissioner for Oaths Kuala Lumpur
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ANNUAL REPORT 2012
INDEPENDENT AUDITORS REPORT

to the members of Tune Ins Holdings Berhad (formerly known as Tune Ins Holdings Sdn Bhd) (incorporated in Malaysia)
Report on the financial statements

We have audited the financial statements of Tune Ins Holdings Berhad (formerly known as Tune Ins Holdings Sdn. Bhd.), which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, and statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 48 to 130. Directors responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys 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 entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.
Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) (b) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.
(c)
ANNUAL REPORT 2012
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INDEPENDENT AUDITORS REPORT (CONTD) to the members of Tune Ins Holdings Berhad (formerly known as Tune Ins Holdings Sdn Bhd) (incorporated in Malaysia)
Other reporting responsibilities

The supplementary information set out in Note 42 on page 130 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (MIA Guidance) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
Other matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Ernst & Young AF: 0039 Chartered Accountants
Yeo Beng Yean No. 3013/10/14(J) Chartered Accountant
Kuala Lumpur, Malaysia 19 March 2013
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ANNUAL REPORT 2012
STATEMENTS OF FINANCIAL POSITION

as at 31 December 2012
Note Assets Property and equipment 3 Investment property 4 5 Intangible assets Investment in subsidiaries 6 Goodwill 7 8 Investments Reinsurance assets 9 10 Insurance receivables Other receivables 11 Cash and bank balances Total assets Equity Share capital 12 Merger deficit 13 Available-for-sale reserves Retained earnings Equity attributable to owners of the parent Non-controlling interests Total equity Liabilities Insurance contract liabilities 14 Deferred tax liabilities 15 Provision for taxation Borrowings 16 Insurance payables 17 Retirement benefits 18 Other payables 19 Total liabilities Total equity and liabilities 2012 RM000 10,411 2,395 157 29,818 474,615 159,970 75,977 36,832 22,587 812,762 Group Company 2011 2012 2011 RM000 RM000 RM000 3 24,715 223 16,771 63 8,555 50,330 138 198,751 6,212 5,336 11,384 221,821 14,238 5,625 8,130 27,993
60,838 (13,838) (455) 61,178 107,723 32,052 139,775
14,238 (13,838) 19,698 20,098 1,631 21,729
60,838 24,784 85,622 85,622
14,238 13,744 27,982 27,982
439,915 508 132,106 68,022 1,148 31,288 672,987 812,762
10,481 20 156 17,944 28,601 50,330
132,106 4,093 136,199 221,821
11 11 27,993
The accompanying notes form an integral part of the financial statements.
ANNUAL REPORT 2012
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STATEMENTS OF COMPREHENSIVE INCOME

for the financial year ended 31 December 2012
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 Note RM000 RM000 RM000 RM000 Operating revenue Gross earned premiums Premiums ceded to reinsurers Net earned premiums 20 226,344 55,870 27,164 14,000
21(a) 21(b) 21
214,955 (56,477) 158,478 11,389 3,854 9,509 430 25,182 (125,505) 62,106 17,647 2,212 (43,540) (37,043) (29,645) (4,863) (10,015) (81,566) 58,554 (9,966) 48,588
55,493 (1,063) 54,430 377 26 403 (1,123) (819) (1,942) (17,292) (1,404) (18,696) 34,195 (20) 34,175
27,164 506 27,670 (4,337) (3,600) (8,693) (16,630) 11,040 11,040
14,000 14,000 (256) (256) 13,744 13,744
Investment income 22 23 Realised gains and losses Fees and commission income 24 Other operating income Other revenue Gross claims paid Claims ceded to reinsurers Gross change to contract liabilities Change in contract liabilities ceded to reinsurers 25(a) 25(b) 25(c) 25(d)
Net claims Fee and commission expense Management expenses 26 Other operating expenses 24 Finance costs 27 Other expenses Profit before taxation Taxation 28 Net profit for the year/period
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ANNUAL REPORT 2012
STATEMENTS OF COMPREHENSIVE INCOME (CONTD)
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 Note RM000 RM000 RM000 RM000 Other comprehensive loss: Movements in available-for-sale fair value reserves: Gain on fair value changes of AFS investments Realised gain transferred to profit or loss Deferred tax relating to components of other comprehensive income Net other comprehensive loss for the year/period Total comprehensive income for the year/period Profit attributable to: Owners of the parent Non-controlling interests
3,120 (3,849)
183 (546) 48,042
34,175
11,040
13,744
41,480 7,108 48,588
27,255 6,920 34,175
11,040 11,040
13,744 13,744
Other comprehensive income attributable to: Owners of the parent (455) Non-controlling interests (91) (546) Total comprehensive income attributable to: Owners of the parent Non-controlling interests Earnings per share attributable to owners of the parent (sen per share) Basic
41,025 7,017 48,042
27,255 6,920 34,175
11,040 11,040
13,744 13,744
29
16.28
67.83
ANNUAL REPORT 2012
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STATEMENTS OF CHANGES IN EQUITY

Attributable to the owners of the parent Non distributable Distributable Merger Available- Non- Share reserve/ for-sale Retained controlling capital (deficit) reserves earnings Total interests RM000 RM000 RM000 RM000 RM000 RM000 Group (Note 12) (Note 13) At 1 January 2011 Issuance of shares during the year (Note 12) Total comprehensive income for the year Dividends (Note 30) At 31 December 2011 At 1 January 2012 Total comprehensive income for the year Arising from acquisition of subsidiaries (Note 6(i)) Issuance of shares during the year (Note 12) Dividends (Note 30) At 31 December 2012 14,238 14,238 400 (14,238) (13,838) 12,843 27,255 (20,400) 19,698 13,243 27,255 (20,400) 20,098 3,311 6,920 (8,600) 1,631
Total equity RM000 16,554 34,175 (29,000) 21,729
14,238 46,600 60,838
(13,838) (13,838)
(455) (455)
19,698 41,480 61,178
20,098 41,025 46,600 107,723
1,631 7,017 26,904 (3,500) 32,052
21,729 48,042 26,904 46,600 (3,500) 139,775
Dis tributable Share Retained capital earnings Company RM000 RM000 (Note 12) At date of incorporation on 14 June 2011 Issuance of shares during the period (Note 12) Total comprehensive income for the period At 31 December 2011 At 1 January 2012 Issuance of shares during the year (Note 12) Total comprehensive income for the year At 31 December 2012 * Denotes share capital of RM2.00 * 14,238 14,238 13,744 13,744
Total equity RM000 * 14,238 13,744 27,982
14,238 46,600 60,838
13,744 11,040 24,784
27,982 46,600 11,040 85,622
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ANNUAL REPORT 2012
STATEMENTS OF CASH FLOWS

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Cash flows from operating activities Profit before taxation 58,554 34,195 11,040 13,744 Adjustments for: Investment income (11,389) (377) (27,164) (14,000) Unrealised loss/(gain) on foreign exchange 127 (26) Realised gain on disposal of investments (3,849) Purchases of AFS financial assets (62,094) Proceeds from maturities/disposal of AFS financial assets 22,724 Increase in LAR 53,630 Interest expenses 10,015 8,693 Gain on disposal of property and equipment (5) 88 1 6 Depreciation of property and equipment Depreciation of investment property 13 Amortisation of intangible assets 55 255 Impairment loss of property and equipment Write-off of property and equipment 2 Net amortisation of premiums on investment 4 Reversal of allowance for impairment losses of insurance receivables (420) Operating profit/(loss) before working capital changes: Reinsurance assets Insurance receivables Other receivables Insurance contract liabilities Insurance payables Retirement benefits Other payables Cash generated from/(used in) operating activities Net interest received Net dividend received Rental received Retirement benefits paid Income tax paid Net cash generated from operating activities 67,710 497 (12,191) (6,497) (28,215) 8,939 89 (5,056) 25,276 11,914 667 211 (78) (7,333) 30,657 33,793 4 10,009 (10) 1,016 (1,241) 168 43,739 377 (20) 44,096 (7,425) (1,848) (1,516) (10,789) 143 27,000 16,354 (256) 11 (245) 12,000 11,755
ANNUAL REPORT 2012
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STATEMENTS OF CASH FLOWS (CONTD)
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Investing activities Advances to subsidiaries (635) (2,990) Advances to holding company Proceeds from disposal of property and equipment 5 Purchase of property and equipment (612) (81) Transfer of property and equipment from ultimate holding company (net) (63) (63) Purchase of intangibles (84) Acquisition of a subsidiary/subscription for additional shares in subsidiaries (78,489) (184,513) Net cash used in investing activities (79,243) (184,657) (3,625)
Financing activities 132,964 132,964 Proceeds from borrowings Interest paid (4,171) (4,171) Advances from holding company 29,705 17,218 49,808 Advances from subsidiaries (832) Dividends paid to equity holders of the parent (20,400) Dividends paid to non-controlling interests (4,000) (8,100) Net cash generated from/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year/at the date of incorporation Cash and cash equivalents at end of year/period Cash and cash equivalents comprise: Fixed and call deposits (with maturity of less than three months) with licensed financial institutions (Note 8(a)) Cash and bank balances 154,498 105,912 33,270 139,182 177,769 9,466 8,130 17,596
(11,282) 32,814 456 33,270
8,130 8,130
116,595 22,587 139,182
24,715 8,555 33,270
6,212 11,384 17,596
8,130 8,130
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ANNUAL REPORT 2012
NOTES TO THE FINANCIAL STATEMENTS

1.

Corporate information
The principal activities of the Company are investment holding and provision of management services to its subsidiaries. The Company was incorporated as a private limited liability company on 14 June 2011, incorporated under the Companies Act, 1965 and domiciled in Malaysia. On 17 August 2012, the status of the Company was converted from a private company to a public company. Accordingly, the name of the Company was changed from Tune Ins Holdings Sdn. Bhd. to Tune Ins Holdings Berhad. The Company was listed on Bursa Malaysia Securities Berhad on 20 February 2013. The principal activities of the subsidiaries are set out in Note 6 to the financial statements. There have been no significant changes in the nature of the principal activities of the Company and its subsidiaries during the financial period, other than the acquisition of subsidiaries as disclosed in Note 6(i). The addresses of the principal place of business and registered office of the Company are as follows: Principal place of business Bangunan Tune Insurance No. 38, Jalan Ampang 50450 Kuala Lumpur Registered office B-13-15, Level 13, Menara Prima Tower B Jalan PJU 1/39, Dataran Prima 47301 Petaling Jaya Selangor Darul Ehsan The holding and ultimate holding company is Tune Money Sdn Bhd (TMSB), a private limited liability company, incorporated and domiciled in Malaysia. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 19 March 2013.
2.
Significant accounting policies

2.1 Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRS) as issued by the Malaysian Accounting Standards Board (MASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the requirements of the Companies Act, 1965 in Malaysia. The financial statements of the Group and the Company have been prepared under the historical cost convention, unless otherwise stated in the accounting policies. Financial assets and financial liabilities are offset and the net amount reported in the statements of financial position only when there is legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expense will not be offset in the statements of comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group and of the Company. The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM000) except when otherwise indicated.
ANNUAL REPORT 2012
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NOTES TO THE FINANCIAL STATEMENTS (CONT'D)
2.
Significant accounting policies (cONTD)

2.2 Basis of consolidation (a) Basis of consolidation and business combinations The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at reporting date. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. Losses within a subsidiary are attributed to any non-controlling interest, even if this results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: - - - - - - - (b) Derecognises the assets (including goodwill) and liabilities of the subsidiary Derecognises the carrying amount of any non-controlling interest Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parents share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate
Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group has an option to measure any non-controlling interests in the acquiree either at fair value or at the noncontrolling interests proportionate share of the acquirees identifiable net assets. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. No reclassification of insurance contracts is required as part of the accounting for the business combination. If the business combination is achieved in stages, the acquisition date fair value of the acquirers previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or a liability, will be recognised as measurement period adjustments in accordance with the applicable MFRS. If the contingent consideration is classified as equity, it will not be remeasured and its subsequent settlement will be accounted for within equity.
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ANNUAL REPORT 2012
2.

2.2 Basis of consolidation (contd) (b) Business combinations and goodwill (contd) Goodwill is initially measured at cost, being the excess of the fair value of the consideration transferred over the Groups share in the net identifiable assets acquired and liabilities assumed and net of the fair value of any previously held equity interest in the acquiree. Fair values for general reinsurance contracts are derived by calculating the present value of claims reserves. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment testing, goodwill acquired in a business combination is allocated to an appropriate cash-generating unit that is expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Merger method of accounting Business combinations involving entities under common control are accounted for by applying the merger method of accounting. The acquisition of the 100% equity interest in Tune Money GenRe Ltd. (TMGR) and Tune Money Life Re Ltd. (TMLR) on 1 August 2011 and the 80% equity interest in Tune Insurance (Labuan) Ltd. (TIL) on 19 September 2011 has been accounted for as a business combination among entities under common control. Accordingly, the assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the acquired entity is reflected within equity as merger reserve or merger deficit. The statements of comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination takes place. Comparatives are presented as if the entities have always been combined since the date the entities had come under common control.
(c)
2.3
Summary of significant accounting policies (a) Property and equipment Property and equipment includes property occupied by the Group, renovations, furniture, fittings, office equipment, computers and motor vehicles. Freehold land is not depreciated and is carried at cost. Other property and equipment are stated at cost less accumulated depreciation and any impairment losses. Residual values, useful life and depreciation method are reviewed, and adjusted if appropriate, at each reporting date to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property and equipment. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(e). The cost of an item of property and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition for its intended use. Expenditure incurred after items of property and equipment have been put into operation, such as repairs and maintenance, is charged to profit or loss in the period in which it is incurred. Subsequent costs are included in the assets carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised.
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2.3 Summary of significant accounting policies (Contd) (a) Property and equipment (Contd) Depreciation of property and equipment other than freehold land is provided for on a straight-line basis to write off the cost of each asset to its residual value over its estimated useful life at the following annual rates: Buildings 2% Renovations 10% 20% Motor vehicles Furniture, fittings and office equipment 12% - 17% Computers 25% An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Upon the disposal of a property and equipment, the difference between the net disposal proceeds and the net carrying amount is recognised in profit and loss. Investment property Properties that are held for long-term rental yields or for capital appreciation or both, and that are not significantly occupied by the Group, for use by, or in the operations of the Group, are classified as investment property. If an investment property becomes owner-occupied, it is reclassified to property and equipment at its carrying value on the date of transfer. Investment properties are initially measured at cost, including related transaction costs. Subsequent to initial recognition, the investment properties are carried at cost less accumulated depreciation and any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(e). Depreciation is provided for on a straight-line basis over the estimated useful life of 50 years for the investment properties. The residual values and useful lives of the investment properties are reviewed, and adjusted if appropriate, at each reporting date. Any gains or losses on the retirement or disposal of an investment property are recognised when it has been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.
(b)
(c) Intangible assets Intangible assets of the Group consist of computer software. These intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least once annually at each reporting date. The acquired computer software and licenses are amortised using the straight line method over their estimated useful lives not exceeding 4 years.
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2.3 Summary of significant accounting policies (Contd) (d) Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. In the Companys separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. Impairment of non-financial assets The carrying amounts of non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated to determine the amount of loss. For goodwill, the recoverable amount is estimated at each reporting date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups CGUs that is expected to benefit from the synergies of the combination. An assets recoverable amount is the higher of an assets or CGU fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit on a pro-rata basis. An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset. Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.
(e)
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2.3 Summary of significant accounting policies (Contd) (f) Investments and financial assets The Group classifies its investments into financial assets at fair value through profit or loss (FVTPL), held-to-maturity (HTM), loans and other receivables (LAR) and available-for-sale (AFS) financial assets. The classification depends on the purpose for which the investments were acquired or originated. Financial assets are classified as FVTPL where the Groups documented investment strategy is to manage financial assets on a fair value basis. The AFS and HTM categories are used when the relevant liability is passively managed and/or carried at amortised cost. All regular way purchases and sales of financial assets are recognised on the trade date which is the date that the Group commits to purchase or sell the asset. Regular way purchases or sales of financial assets require delivery of assets within the period generally established by regulation or convention in the market place. Financial assets at FVTPL Financial assets at FVTPL include financial assets held-for-trading and those designated as FVTPL at inception. Investments typically bought with the intention to sell in the near future are classified as heldfor-trading. For investments designated as FVTPL, the following must be met: - the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on a different basis, or the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
These investments are initially recorded at fair value. Subsequent to initial recognition these investments are measured at the fair value. Fair value adjustments and realised gains and losses are recognised in profit or loss. HTM financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the Group has the positive intention and ability to hold until maturity. These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. After initial measurement, HTM financial assets are measured at amortised cost, using the effective yield method, less provision for impairment. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.
LAR LAR are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost, using the effective yield method, less provision for impairment. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.
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2.3 Summary of significant accounting policies (Contd) (f) Investments and financial assets (Contd) AFS financial assets AFS financial assets are non-derivative financial assets that are designated as AFS or are not classified in any of the three preceding categories. These investments are initially recorded at fair value. After initial measurement, AFS financial assets are measured at fair value. Fair value gains and losses of monetary and non-monetary securities are reported as a separate component of equity until the investment is derecognised or investment is determined to be impaired. Fair value gains and losses of monetary securities denominated in a foreign currency are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. On derecognition or impairment, the cumulative fair value gains and losses previously reported in equity is transferred to profit or loss. Fair value of financial assets The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices for assets at the close of business on the reporting date. For investments in unit and property trusts, fair value is determined by reference to published bid values. The fair values of floating rate over-night deposits with financial institutions is their carrying value. The carrying value is the cost of the deposit/placements. The fair values of Malaysian Government Securities, Cagamas Papers and unquoted corporate bonds are determined by reference to Bond Pricing Agency Malaysia. If the fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair value of the consideration paid for the acquisition the instrument or the amount received on issuing the financial liability. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. Impairment of financial assets The Group assesses at each reporting date whether a financial asset or Group of financial assets is impaired. Objective evidence that an investment security is impaired includes observable data about loss events like significant financial difficulty of the issuer or obligor; significant adverse changes in the business environment in which the issuer or obligor operates and the disappearance of an active market for that investment security because of financial difficulties which indicate that there is measurable decrease in the estimated future cash flows. However, it may not be possible to identify a single, discrete event that caused the impairment. Rather, the combined effect of several events is considered in determining whether an investment securities is impaired.
(g)
(h)
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2.3 Summary of significant accounting policies (Contd) (h) Impairment of financial assets (Contd) Assets carried at amortised cost If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial assets original effective interest rate/yield. The carrying amount of the asset is reduced and the loss is recorded in profit or loss. The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a Group of financial assets with similar credit risk characteristics and the Group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The impairment assessment is performed at each reporting date. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment is recognised in profit and loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Asset carried at cost If there is objective evidence that an impairment loss on an investment security carried at cost has been incurred, the amount of the loss is measured as the difference between the security carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for similar security. Such impairment losses are recognised in profit or loss and not reversed in subsequent periods. AFS financial assets If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in other comprehensive income, is transferred from other comprehensive income to profit or loss. Reversals in respect of equity instruments classified as AFS are not recognised in profit or loss. Reversals of impairment losses on debt instruments classified as AFS are reversed through profit or loss if the increase in the fair value of the instruments can be objectively related to an event occurring after the impairment losses were recognised in profit or loss. When assessing the impairment of an equity instrument, the Group considers, in addition to observable data about loss events, whether there is significant or prolonged decline in the fair value of the equity instrument, and whether the cost of the investment in the equity instrument may be recovered. Where there is evidence that the cost of the investment in the equity instrument may not be recovered, impairment loss is provided.
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2.3 Summary of significant accounting policies (Contd) (i) Derecognition of financial assets A financial asset is derecognised when: - - the contractual right to receive cash flows from the financial asset expired. The Group retains the contractual rights to receive cash flow from the asset but has assumed obligation to pay them in full without material delay to a third party. The Group has transferred its rights to receive cash flows from the asset and either: (a) (b) has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Groups continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Equity instruments Ordinary share capital The Company has issued ordinary shares that are classified as equity. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity, net of tax. Dividends on ordinary share capital Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Companys shareholder. Dividends are deducted from equity when they are paid. Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date. Product classification The Group currently only 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 re/insurer) has accepted significant insurance risk from another party (the cedants/policyholders) by agreeing to compensate the cedants/policyholders if a specified uncertain future event (the insured event) adversely affects the cedants/policyholders. As a general guideline, the Group determines whether it has significant insurance risk, by comparing claims paid with claims payable if the insured event did not occur. Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its life-time, even if the insurance risk reduces significantly during the period, unless all rights and obligations are extinguished or expired.
(j) (k)
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2.3 Summary of significant accounting policies (Contd) (k) Product classification (Contd) When insurance contracts contain both a financial risk component and a significant insurance risk component and the cash flows from the two components are distinct and can be measured reliably, the underlying amounts are unbundled. Any premiums relating to the insurance risk component are accounted for on the same bases as insurance contracts and the remaining element is accounted for as a deposit through the statements of financial position similar to investment contracts. Investments contracts are those contracts that do not transfer significant insurance risk.
(l) Reinsurance The Group assumes reinsurance risk in the normal course of business for general and life insurance contracts when applicable. 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 statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Investment income on these contracts is accounted for using the effective yield method when accrued. Reinsurance assets 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 reinsurers 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 gross basis for both ceded and assumed reinsurance. Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment is recognised when there is objective evidence as a result of an event that occurs after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of 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 profit or loss.
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2.3 Summary of significant accounting policies (Contd) (m) General insurance/reinsurance underwriting results The general insurance/reinsurance underwriting results are determined after taking into account premiums, movements in premium liabilities and claims liabilities and commissions. (i) Gross premiums Gross premiums are recognised as income in a financial period in respect of risks assumed during that particular financial period. Inwards facultative reinsurance premiums are recognised in the financial period in respect of the facultative risks assumed during that particular financial period, as in the case of direct policies, following individual risks inception dates. Inward treaty reinsurance premiums comprise both proportional and non-proportional treaties. In respect of reinsurance premiums relating to proportional treaties, it is recognised on the basis of periodic advices received from the cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured at various inception dates of these risks and contractually accounted for, as such to reinsurers under the terms of the proportional treaties. In respect of reinsurance premiums relating to non-proportional treaties which cover losses occurring during a specified treaty period, the inwards treaty reinsurance premiums are recognised based on the contractual premiums already established at the start of the treaty period under the nonproportional treaty contract. Premium liabilities Premium liabilities represent the insurance/reinsurance subsidiaries future obligations on insurance contracts as represented by premiums received for risks that have not yet expired. The movement in premium liabilities is released over the term of the insurance contracts and is recognised as premium income. Premium liabilities are reported at the higher of the aggregate of the unearned premium reserves (UPR) for all lines of business or the best estimate value of the insurance/reinsurance subsidiaries unexpired risk reserves (URR) at the end of the financial period and PRAD calculated at 75% confidence level. (a) Unexpired risk reserves The URR is a prospective estimate of the expected future payments arising from future events insured under policies in force as at the end of the financial year and also includes allowance for expenses, including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and expected future premium refunds. URR is estimated via an actuarial valuation performed by a qualified actuary, using a mathematical method of estimation similar to incurred but not reported claims (IBNR).
(ii)
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2.3 Summary of significant accounting policies (Contd) (m) General insurance/reinsurance underwriting results (Contd) (ii) Premium liabilities (Contd) (b) Unearned premium reserves UPR represent the portion of the net premiums of insurance policies written that relate to the unexpired periods of the policies at the end of the financial period. In determining UPR at reporting date, the method that most accurately reflects the actual unearned premium used is as follows: - 25% method for marine, aviation cargo and transit business - 1/24th method for all other classes of Malaysian policies reduced by the corresponding percentage of accounted gross direct business commissions and agency-related expenses not exceeding the limits specified by BNM as follows: Motor Fire, engineering, aviation and marine hull Medical and health - Standalone individuals - Group of 3 or more Workmens compensation and employers liability - Foreign workers - Other workers - Employers Liability Other classes 10% 15% 15% 10% 10% 25% 25% 25%
- 1/8th method for all other classes of overseas inward treaty business with a deduction of 20% for commission - Non-annual policies are time apportioned over the period of the risks (iii) Claims liabilities Claim liabilities are recognised as the obligation to make future payments in relation to all claims that have been incurred as at the end of the financial year. The value is the best estimate value of claim liabilities which includes provision for claims reported, claims incurred but not enough reserved (IBNER), claims incurred but not reported (IBNR) and direct and indirect claim-related expenses as well as the provision of risk margin for adverse deviation (PRAD) at 75% confidence level. These are based on an actuarial valuation by a qualified actuary, using a mathematical method of estimation based on, among others, actual claims development pattern. Liability adequacy test At each reporting date, the insurance/reinsurance subsidiaries reviews all insurance contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the Group, contractual or otherwise, with respect to insurance contracts issued. In performing this review, the Group compares all contractual cash flows against the carrying value of insurance contract liabilities. Any deficiency is recognised in the statements of comprehensive income.
(iv)
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2.3 Summary of significant accounting policies (Contd) (m) General insurance/reinsurance underwriting results (Contd) (iv) Liability adequacy test (Contd) The estimation of claim and premium liabilities performed at reporting date is part of the liability adequacy tests performed by the insurance/reinsurance subsidiaries. Based on this, all insurance contract liabilities as at the reporting date are deemed to be adequate. Acquisition cost The gross costs of acquiring and renewing reinsurance policies and income derived from ceding reinsurance premiums are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income.
(v)
(n)
Life reinsurance underwriting results (i) Gross premiums Gross premiums are recognised in a financial period in respect of risks assumed during the particular financial period. Inwards treaty reinsurance premiums are recognised on the basis of periodic advices received from cedants given that the periodic advices reflect the individual underlying risks being incepted and reinsured at various inception dates of these risks and contractually accounted for under the terms of the reinsurance treaty. Benefits payable and actuarial liabilities Liabilities for benefits payable are recognised as advised by ceding companies. The actuarial liabilities of the life reinsurance fund is the best estimate of the expenditure required together with related expenses less recoveries to settle the obligation at the end of the financial period. The valuation of the actuarial liabilities is performed by a qualified actuary based on the retrospective method to estimate the liabilities. Liability adequacy test At each reporting date, the life reinsurance subsidiary reviews all insurance contract liabilities to ensure that the carrying amount of the liabilities is sufficient or adequate to cover the obligations of the life reinsurance subsidiary, contractual or otherwise, with respect to insurance contracts issued. In performing this review, the life reinsurance subsidiary compares all contractual cash flows against the carrying value of insurance contract liabilities. Any deficiency is recognised in the statement of comprehensive income. The estimation of insurance contract liabilities performed at reporting date is part of the liability adequacy tests performed by the life reinsurance subsidiary. Based on this, all insurance contract liabilities as at the reporting date are deemed to be adequate. Acquisition cost The cost of acquiring and renewing reinsurance business 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.
(ii)
(iii)
(v)
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2.3 Summary of significant accounting policies (Contd) (o) 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. If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in profit or loss. The Group gathers the objective evidence that an insurance receivable is impaired using the same 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 2.3(h). Insurance receivables are derecognised when the derecognition criteria for financial assets, as described in Note 2.3(f), have been met. Insurance payables Insurance payables are recognised when due and measured on initial recognition at the fair value of the consideration received less directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest rate method. Derecognition insurance payables Insurance payables are derecognised when the obligation under the liability is settled, cancelled or expired. Other revenue recognition Other revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Rental income Rental income is recognised on an accrual basis in accordance with the substance of the relevant agreements. Interest income Interest income is recognised using the effective interest method. Dividend income Dividend income represents gross dividends and is recognised on a declared basis when the shareholders right to receive payment is established. Realised gain and losses on investments Realised gains and losses recorded in profit or loss on investments include gains and losses on financial assets. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original, revalued or amortised cost and are recorded on occurrence of the sale transaction. Commission income Commission income derived from reinsurers in the course of ceding of premiums to reinsurers are charged to profit or loss in the period in which they are incurred.
(p)
(q)
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2.3 Summary of significant accounting policies (Contd) (r) Income tax Income tax expense for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit and surplus for the year and is measured using the tax rates that have been enacted at the reporting date. Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date. Deferred tax is recognised as income or an expense and included in the income statement for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity. For Labuan incorporated subsidiaries, the income tax represents the amount payable in respect of the chargeable profit for the year and is measured at 3% of the chargeable profit or by election under Section 7 of the Labuan Business Activity Tax Act, 1990, to pay a flat amount of RM20,000.
(s) Provisions Provisions are recognised when the Group and the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provision are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost. Employee benefits Short-term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in profit or loss as incurred. As required by law, the Group makes such contributions to the Employees Provident Fund (EPF).
(t)
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2.3 Summary of significant accounting policies (Contd) (t) Employee benefits (Contd) Staff retirement benefits Provision for retirement benefits is made for all eligible staff in the Group from the date of employment under an unfunded defined contribution plan. For eligible executive staff, gratuity is calculated based on the last drawn monthly salary of an employee multiplied by years of service up to a maximum of 15 years. For eligible clerical staff, an additional 3% over and above the Groups monthly statutory EPF contribution is provided. The staff will be entitled to this gratuity upon completion of 5 years of service in the Group. Other staff are entitled to additional EPF contribution between 1% to 5% over the Groups monthly statutory EPF contribution rate after completion of 1 year of service. This benefit is charged to profit or loss as incurred. Foreign currencies (i) Functional and presentation currency The financial statements of the Group and the Company are recorded using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Ringgit Malaysia (RM), which is also the Group and the Companys functional currency. Foreign currency transactions In preparing the financial statements of the Group and the Company, transactions in currencies other than the Group and the Companys functional currencies are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of nonmonetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.
(u)
(ii)
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2.3 Summary of significant accounting policies (Contd) (v) Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. All financial liabilities of the Group and the Company, comprising insurance payables, retirement benefits and other payables, except for those covered under FRS 4, are classified as other financial liabilities. Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group and the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Insurance payables, retirement benefits and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
(w) Borrowing costs Borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds. Cash and cash equivalents Cash and cash equivalents consist of cash in hand and deposits held at call with financial institutions with original maturities of three months or less. Transactions with non-controlling interests Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company. Changes in the Company owners ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
(x) (y)
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2.4 Standards issued but not yet effective As at the date of authorisation of these financial statements, the following MFRSs, amendments to MFRSs and IC Interpretations have been issued by MASB but are not yet effective and have not been adopted by the Group. Effective for financial periods beginning on or after 1 July 2012 Amendments to MFRS 101 Presentation of Items of Other Comprehensive Income Effective for financial periods beginning on or after 1 January 2013 Amendments to MFRS 1 : First-time Adoption of Malaysian Financial Reporting Standards -Government Loans Amendments to MFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) MFRS 10 Consolidated Financial Statements MFRS 11 Joint Arrangements MFRS 12 Disclosure of Interests in Other Entities MFRS 13 Fair Value Measurement MFRS 119 Employee Benefits Amendments to MFRS 10, MFRS 11 and MFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance MFRS 127 Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December 2003) MFRS 127 Separate Financial Statements MFRS 128 Investments in Associates and Joint Ventures IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine Annual Improvements 2009-2011 Cycle: - Amendment to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards - Amendment to MFRS 101 Presentation of Financial Statements - Amendment to MFRS 116 Property, Plant and Equipment - Amendment to MFRS 132 Financial Instruments: Presentation - Amendment to MFRS 134 Interim Financial Reporting - Amendment to IC 2 Members Shares in Co-operatives Entities and Similar Instruments Effective for financial periods beginning on or after 1 January 2014 Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 10, MFRS 12 and MFRS 127 : Investment Entities Effective for financial periods beginning on or after 1 January 2015 MFRS 9 Financial Instruments The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below: MFRS 12 Disclosures of Interests in Other Entities MFRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Groups financial position or performance.
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2.

2.4 Standards issued but not yet effective (Contd) MFRS 13 Fair Value Measurement MFRS 13 establishes a single source of guidance under MFRS for all fair value measurements. MFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under MFRS when fair value is required or permitted. Upon adoption of MFRS 13, the Group will take into consideration the highest and best use of certain properties in measuring the fair value of such properties. The adoption of MFRS 13 is not expected to have any significant impact to the Group and the Company. Amendments to MFRS 101: Presentation of Financial Statements (Annual Improvements 2009-2011 Cycle) The amendments to MFRS 101 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, exchange differences on translation of foreign operations and net loss or gain on available-for-sale financial assets) would be presented separately from items which will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Groups financial position and performance. MFRS 9 Financial Instruments: Classification and Measurement MFRS 9 reflects the first phase of the work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Groups financial assets. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. Significant accounting judgements, estimates and assumptions (a) Critical judgements made in applying accounting policies The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Groups accounting policies. These are areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates, by definition, may cause material adjustments to the carrying amounts of assets and liabilities within the next financial year such as those discussed below: (i) Deferred tax assets (Note 15) Deferred tax assets are recognised for unutilised business losses, unutilised capital allowances, various allowances and provisions to the extent that it is probable that taxable profit will be available against which these losses, allowances and provisions can be utilised. Significant judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing of future taxable profits together with future tax planning strategies.
2.5
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2.

2.5 Significant accounting judgements, estimates and assumptions (Contd) (a) Critical judgements made in applying accounting policies (Contd) (ii) Income taxes (Note 28) The Group is subject to income taxes in Malaysia. Significant judgement is required in determining the allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Property and equipment (Note 3) Property and equipment requires the review of the residual value and remaining useful life of an item of property and equipment at least at each financial year end. Management estimates that the residual values and remaining useful lives are applicable for the current financial year.
(iii)
(b)
Key sources of estimation uncertainty and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Valuation of general insurance/reinsurance contract liabilities (Note 14) For general insurance/reinsurance contracts, estimates have to be made for both the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported at the reporting date (IBNR). It can take a significant period of time before the ultimate claims costs can be established with certainty and for some type of policies, IBNR claims form the majority of the liability at the reporting date. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as the Link Ratios. The main assumption underlying these techniques is that the insurance/reinsurance subsidiaries past claims development experience can be used to project future claims development and hence, ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical areas, as well as by significant business lines and claims type. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historic claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example, to reflect once-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, level of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved.
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2.

2.5 Significant accounting judgements, estimates and assumptions (Contd) (b) Key sources of estimation uncertainty and assumptions (Contd) (ii) Uncertainty in accounting estimates for general insurance/reinsurance business (Note 14) The principal uncertainty in the insurance/reinsurance subsidiaries general insurance/reinsurance business arises from the technical provisions which include the premium liabilities and claim liabilities. The premium liabilities comprise unearned premium reserves, unexpired risk reserves and provision for risk margin for adverse deviation while claim liabilities comprise provision for outstanding claims. Generally, premium and claim liabilities are determined based upon previous claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past experience with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. It is certain that actual future premiums and claims liabilities will not exactly develop as projected and may vary from the insurance/reinsurance subsidiaries projections. The estimates of premium and claim liabilities are therefore sensitive to various factors and uncertainties. The establishment of technical provisions is an inherently uncertain process and, as a consequence of this uncertainty, the eventual settlement of premiums and claims liabilities may vary from the initial estimates. There may be significant reporting lags between the occurrence of an insured event and the time it is actually reported to the insurance/reinsurance subsidiaries. Following the identification and notification of an insured loss, there may still be uncertainty as to the magnitude of the claim. There are many factors that will determine the level of uncertainty such as inflation, inconsistent judicial interpretations, legislative changes and claims handling procedures. At each reporting date, these estimates are reassessed for adequacy and changes will be reflected as adjustments to the liability.
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3.
Property and equipment
Furniture, Properties fittings, Buildings office on equipment Freehold freehold Motor and land land Renovation vehicles computers Total Group RM000 RM000 RM000 RM000 RM000 RM000 Cost At 1 January 2011/ 31 December 2011 Arising from acquisition of a subsidiary (Note 6(i)(a)) Transferred from holding company Additions Disposals Write-off At 31 December 2012 Accumulated depreciation and impairment loss At 1 January 2011 Charge for the year At 31 December 2011 Transferred from holding company Charge for the year Disposals Write-off Impairment loss during the year At 31 December 2012 Net carrying amount At 31 December 2011 At 31 December 2012
7,113 7,113
2,300 2,300
195 229 424
53 53
4 417 113 383 (2) (4) 911
4 10,078 113 612 (2) (4) 10,801
255 255 6,858
51 51 2,249
24 24 400
5 5 48
1 1 50 8 (2) (2) 55 3 856
1 1 50 88 (2) (2) 255 390 3 10,411
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3.
Property and equipment (CONTD)

Furniture, fittings, office equipment and Renovation computers Company RM000 RM000
Total RM000
Cost At 1 January 2012/At 14 June 2011 (date of incorporation) Transferred from holding company 113 113 Additions 81 81 At 31 December 2012 Accumulated depreciation At 1 January 2012/At 14 June 2011 (date of incorporation) Transferred from holding company Charge for the year At 31 December 2012 Net carrying amount At 31 December 2012 81 113 194
6 6 75
50 50 63
50 6 56
138
4.
Investment property
2012 RM000 2011 RM000
Group Freehold land and building: Cost At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) Less: Accumulated depreciation At 31 December Fair value
2,408 (13) 2,395
2,950
The fair value is determined based on valuation performed by an independent professional valuer, C H Williams Talhar @ Wong Sdn Bhd on 7 December 2012.
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5.
Intangible assets
2012 2011 Group RM000 RM000 Computer software Cost At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) Additions At 31 December 128 84 212
Accumulated amortisation At 1 January Amortisation 55 At 31 December Net carrying amount 55 157
6.
Investment in subsidiaries
2012 2011 Company RM000 RM000 Unquoted shares, at cost 198,751 14,238
At 1 January/At date of incorporation Acquisition of Tune Insurance Malaysia Berhad (TIMB) (formerly known as Oriental Capital Assurance Berhad (OCA)) and its subsidiary, Capital OCA Berhad, (TIMB Group) (Note 6(i)(a)) Acquisition of TMGR (Note 6(ii)(a)) Acquisition of TMLR (Note 6(ii)(a)) Acquisition of TIL (Note 6(ii)(b)) Subscription of additional shares in TMGR (Note 6(iii)) Subscription of additional shares in TMLR (Note 6(iii)) At 31 December * ** Denotes of RM3.00 RM164,513,000 includes capitalisation of transaction cost of RM881,000.
14,238
**164,513 10,000 10,000 198,751
* * 14,238 14,238
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6.
Investment in subsidiaries (Contd)

Details of subsidiaries are as follows: Name of Company Country of incorporation Proportion of ownership interest (%) 2012 2011 % %
Principal activities
Date of acquisition
Tune Money Operating a 01.08.2011 Malaysia 100% 100% GenRe Ltd. general reinsurance business Tune Money Operating a life Life Re Ltd. reinsurance business Tune Operating an Insurance offshore (Labuan) Ltd. captive insurance business Tune Operating a Insurance general Malaysia insurance Berhad business Capital OCA Berhad (Held via TIMB) (i) Dormant 01.08.2011 Malaysia 100% 100%
19.09.2011
Malaysia
80%
80%
23.05.2012
Malaysia
83.26%
23.05.2012
Malaysia
83.26%
Acquisition of TIMB On 23 April 2012, the Company signed a Share Sale Agreements with Maika Holdings Berhad, G Team Resources & Holding Sdn. Bhd. and Gryss Holdings Sdn. Bhd to acquire their 77.92% and 1.92% equity holdings, respectively, in TIMB. This acquisition was completed on 23 May 2012.
Pursuant to the Share Sale Agreements and in accordance with the Malaysian Code on Take-Overs and Mergers, the Company made a mandatory general offer (general offer) to the remaining shareholders of TIMB to acquire their respective individual shareholdings thereon. Certain individual shareholders had accepted the general offer, which ended on 9 July 2012. As a result of this exercise, the Company has acquired an additional 3.42% in TIMB, resulting in an equity holding of 83.26% in TIMB as at 31 December 2012. The total purchase consideration for the said 83.26% stake in TIMB amounted to RM163,632,000. (a) Details of the acquisition of TIMB and the net assets acquired are as follows:
RM000 Purchase consideration: - Cash paid 163,632 - Share of net assets of subsidiary acquired (133,814) Goodwill 29,818
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6.

(i) Acquisition of TIMB (Contd) (a) Details of the acquisition of TIMB and the net assets acquired are as follows: (Contd) Details of net assets of subsidiary acquired are as follows:
Recognised acquisition values RM000 Assets Property and equipment (Note 3) 10,078 2,408 Investment property (Note 4) Intangible assets (Note 5) 128 446,106 Investments (Note 8(c)) Reinsurance assets (Note 14(a)) 163,943 Insurance receivables 52,287 Other receivables 27,253 Cash and bank balances 5,838 Total assets 708,041 Liabilities Insurance contract liabilities (Note 14(a)) 461,348 Deferred tax liabilities (Note 15) 939 Insurance payables 64,490 Other payables 19,409 Retirement benefits (Note 18) 1,137 Total liabilities 547,323 Net identifiable assets 160,718 Non-controlling interests (26,904) Share of net assets acquired 133,814
(b)
The effect of the acquisition on cash flows is as follows:
RM000 Details of cash flows arising from the acquisition are as follows: Purchase consideration settled in cash, by the Company Less: Cash and cash equivalents of subsidiary acquired: Fixed and call deposits (with maturity of l ess than three months) with licensed financial institutions Cash and bank balances Net cash outflow of the Group on acquisition of subsidiary 163,632 (79,305) (5,838) 78,489
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6.

(i) Acquisition of TIMB (Contd) (c) Provisional accounting for the acquisition of TIMB Group As at 31 December 2012, the Company has accounted for the acquisition of TIMB Group on a provisional basis as the purchase price allocation (PPA) exercise and allocation of goodwill to specific cash generating units (CGU) are not yet completed. The Company anticipates to be able to complete the PPA and allocation of goodwill exercise not exceeding one year from the acquisition date. Upon the completion of this exercise, the carrying amount of the residual goodwill will be adjusted accordingly on a retrospective basis.
(ii)
In the previous financial year, the Company acquired TMGR, TMLR and TIL: (a) TMGR and TMLR: On 1 August 2011, the Company acquired the following: (1) (2) (b) TIL: On 19 September 2011, the Company acquired 80% of the issued and paid-up share capital of TIL from TMSB, comprising 114,400 ordinary shares of USD1 each for a purchase consideration of RM14,238,506, being the net assets (excluding non-controlling interest) as of that date. The purchase consideration was satisfied by way of issuance of 14,238,000 ordinary shares of RM1 each in the Company at par to the holding company, TMSB. Details of net assets of TIL acquired are as follows: 100% of the issued and paid-up share capital of TMGR from its holding company, TMSB, comprising 1 ordinary share of USD1 each for a cash consideration of USD1. 100% of the issued and paid-up share capital of TMLR from TMSB, comprising 1 ordinary share of USD1 each for a cash consideration of USD1.
Recognised acquisition values RM000 Assets Equipment 4 Due from cedant 13,648 Cash and bank balances 5,342 Total assets 18,994 Liabilities Insurance contract liabilities 208 Provision for taxation 20 Insurance payables 870 Other payables 98 Total liabilities 1,196 Net identifiable assets 17,798 Non-controlling interest (3,560) Share of net assets acquired 14,238
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6.

(ii) In the previous financial year, the Company acquired TMGR, TMLR and TIL (contd):
Basis of consolidation of the acquisition of TMGR, TMLR and TIL The acquisitions of the 100% equity interest in TMGR and TMLR on 1 August 2011 and the 80% equity interest in TIL on 19 September 2011 arose from a common control transfer and have been accounted for in the consolidated financial statements using the merger method of accounting, as if the group structure had been in existence throughout 2011, or since their respective dates of incorporation, whichever is the shorter period. This manner of presentation reflects the economic substance of the combining companies, which were under common control throughout the relevant periods, as a single economic entity, although certain legal parentsubsidiary relationships were not incorporated until after the respective reporting dates. Accordingly, the assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the acquired entity is reflected within equity as merger reserve or deficit. The merger deficit arising as a result of the above was derived as follows: 2012 2011 Group RM000 RM000 Purchase consideration (14,238) (14,238) Less: Carrying value of ordinary shares in TMGR, TMLR and TIL acquired 400 400 Merger deficit (Note 13) (iii) Subscription of additional shares in TMGR and TMLR (13,838) (13,838)
On 12 September 2012, the Company subscribed for additional shares in TMGR and TMLR, as follows: - The Companys investment in TMGR was increased by USD3,207,287 (RM10.0 million), via the issuance of 3,207,287 new ordinary shares of USD1.00 each in TMGR at an issue price of USD1.00 per share; and The Companys investment in TMLR was increased by USD3,207,287 (RM10.0 million), via the issuance of 3,207,287 new ordinary shares of USD1.00 each in TMLR at an issue price of USD1.00 per share.
Cessation and commencement of business by the subsidiaries The Board of Directors of TIL had, on 4 July 2012 resolved that TIL will cease to underwrite new reinsurance contracts and have put the reinsurance business of TIL into run-off, effective from March 2012. TMLR and TMGR commenced their principal activities as a life reinsurer and a general reinsurer, respectively, in July 2011 and December 2011.
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7. Goodwill
2012 2011 Group RM000 RM000 At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) At 31 December 29,818 29,818
The goodwill above arose from the acquisition of TIMB on 23 May 2012. Goodwill is allocated to the Groups Cash Generating Unit (CGU) which is expected to benefit from the synergies of the acquisition. The recoverable amount of the CGU is assessed based on its value-in-use and compared to the carrying value of the CGU to determine whether any impairment exists. Impairment is recognised in profit or loss if the carrying amount of the CGU exceeds its recoverable amount. The value-in-use calculations apply discounted cash flow projections prepared and approved by management, covering a five-year period. The key assumptions for the computation of value-in-use are as follows: (i) (ii) (iii) The growth in business volume is expected to be at 11% per annum; The retention ratio and net claims incurred ratio are estimated to be approximately 53% and 72% per annum; The discount rate applied is the internal weighted average cost of capital of TIMB at the time of the assessment, which is estimated to be 8% per annum (pre-tax discount rate of 11% per annum); and Terminal value cash flow growth rate of 5%, which is consistent with the Gross Domestic Product rate.
(iv)
The allocation of goodwill exercise for TIMB Group is provisional in nature, as at 31 December 2012, as disclosed in Note 6(i)(c). Management believes that reasonably possible changes in any of the above key assumptions would not cause the carrying value of the CGU to exceed its recoverable amount. Accordingly, there is no evidence of impairment of goodwill as at the financial year end.
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8. Investments
2012 RM000 Group 2011 RM000 Company 2012 RM000 2011 RM000
Debt securities 137,800 Equity securities 9,028 Unit and property trust funds 69,146 Loans 682 Deposits with financial institutions 257,959 24,715 6,212 474,615 24,715 6,212
The Group and Companys financial investments are summarised by categories as follows: 2012 RM000 258,641 215,974 474,615 Group 2011 RM000 24,715 24,715 Company 2012 RM000 6,212 6,212 2011 RM000
LAR (Note (a)) AFS financial assets (Note (b))
(a) LAR At amortised cost: Fixed and call deposits with licensed financial institutions Loans receivable: Staff mortgage loans Other staff loans: Secured Unsecured
257,959 636 23 23 682 258,641
24,715 24,715
6,212 6,212
Included in fixed and call deposits with licensed financial institutions of the Group and the Company are short term deposits with maturity periods of less than 3 months amounting to RM116,595,000 and RM6,212,000 respectively (31.12.2011: RM24,715,000 and Nil) which have been classified as cash and cash equivalents for the purpose of the statements of cash flows. The carrying value of the fixed and call deposits approximates fair value due to the relatively short term maturities. The carrying value of the staff mortgage loans and other staff loans amounting to RM682,000 (31.12.2011: Nil) is a reasonable approximation of fair value due to the insignificant impact of discounting.
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8.

Investments (Contd)
(b) AFS financial assets 2012 RM000 Group 2011 RM000 Company 2012 RM000 2011 RM000
At fair value: Equity securities: Quoted in Malaysia Unit and property trust funds: Quoted in Malaysia Debt securities: Unquoted in Malaysia
8,889 69,146 137,800
215,835 At cost less impairment: Equity securities: Unquoted in Malaysia 139 215,974 (c) Carrying values of investments LAR RM000 AFS RM000 Total RM000
Group
At 1 January 2011 Purchases 24,715 24,715 At 31 December 2011 24,715 24,715
At 1 January 2012 Arising from acquisition of a subsidiary (Note 6(i)(a)) Purchases Maturities/disposals Fair value gains recorded in: Other comprehensive income Realised loss transferred to profit or loss Amortisation of investments At 31 December 2012
24,715 268,769 1,312,720 (1,347,563) 258,641
177,337 62,094 (22,724) 3,120 (3,849) (4) 215,974
24,715 446,106 1,374,814 (1,370,287) 3,120 (3,849) (4) 474,615
LAR Company RM000 At 1 January 2012/At 14 June 2011 (date of incorporation) Purchases 24,705 Maturities/disposals (18,493) At 31 December 2012 6,212
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8.
Investments (Contd)
(d) Fair values of investments
The following tables show investments recorded at fair value analysed by the different bases as follows: AFS Group RM000 31 December 2012 Quoted market bid price Valuation techniques - market observable inputs At cost less impairment 78,035 137,800 139
215,974
Included in the quoted category are financial instruments that are measured in whole or in part by reference to quoted market bid prices. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, secondary market via dealer and broker, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arms length basis. Financial instruments measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions are instruments for which pricing is obtained via pricing services. For the Groups unquoted equity securities, fair value cannot be measured reliably. These financial instruments are measured at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. For financial investments carried at fair value, please refer to Note 38 for the fair value hierarchy disclosure. (e) Average effective interest rates
The average effective interest rates and the earlier of the contractual re-pricing or maturity dates for each class of interest-bearing investment and placements with licensed financial institutions, at net carrying amounts are as below: Debt securities Loans Deposits with financial institutions 2012 % 4.67 5.00 3.31 Group 2011 % 3.05 Company 2012 % 2011 %
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ANNUAL REPORT 2012
9.
Reinsurance assets
2012 RM000 127,476 32,494 159,970 2011 RM000 223 223
Group Claims liabilities (Note 14) Premium liabilities (Note 14)
10. Insurance receivables

Group Due premiums including agents, brokers and co-insurers balances Due from reinsurers and cedants 2012 RM000 31,733 42,181 73,914 2,063 75,977 2011 RM000 16,771 16,771 16,771
Write back of allowance for impairment losses Movement in allowance accounts: At 1 January Impairment losses written-off Reversal of allowance for impairment losses At 31 December
(1,643) (420) (2,063)
11. Other receivables

Amount due from holding company Amount due from subsidiaries Income due and accrued Assets held under the Malaysian Motor Insurance Pool (MMIP) Malaysian Institute of Insurance (MII) bonds Other receivables 2012 RM000 3,789 25,698 260 7,085 36,832 Group 2011 RM000 63 63 Company 2012 RM000 1,467 21 3,848 5,336 2011 RM000 2,990 635 2,000 5,625
The carrying amounts of financial assets included under other receivables (excluding assets held under MMIP) approximate their respective fair values due to the relatively short-term maturity of these balances. The amount due from holding company and subsidiaries are unsecured, interest free and are repayable on demand.
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12. Share capital

Group and Company Authorised: At 1 January/At date of incorporation Created during the year/period Share split during the year At 31 December Number of ordinary 2012 2011 000 000 25,000 125,000 1,350,000 1,500,000 100 24,900 25,000 2012 RM000 25,000 125,000 150,000 Amount 2011 RM000 100 24,900 25,000
Issued and fully paid: At 1 January/At date of incorporation Issued pursuant to the acquisition of TIL (Note 6(ii)(b)) Share split during the year Issued pursuant to the capitalisation of advances from holding company At 31 December * Denotes share capital of RM2.00 Share split
14,238 128,147 142,385 466,000 608,385
* 14,238 14,238 14,238
14,238 14,238 46,600 60,838
* 14,238 14,238 14,238
On 4 October 2012, the Company implemented a share split of the par value of the Company shares whereby each existing ordinary share of RM1.00 each in the Company is subdivided into 10 ordinary shares of RM0.10 each. Upon the completion of the share split, the issued and paid up share capital of the Company stood at RM14,238,508 comprising 142,385,080 ordinary shares of RM0.10 each. Capitalisation of advances from holding company On 4 October 2012, the Company increased its issued and fully paid share capital from RM14,238,508 to RM60,838,508 via the capitalisation of advances from holding company of 466,000,000 new ordinary shares of RM0.10 each to the shareholders of the Company. The new ordinary shares issued during the year ended 31 December 2012 ranked pari passu with the shares in issue at the date of issuance. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regards to the Companys residual assets. In the previous financial period, the Company issued 14,238,000 ordinary shares of RM1.00 each at par to its holding company for the acquisition of an 80% equity interest in TIL. The new ordinary shares issued ranked pari passu with the existing ordinary shares in issue as of the issuance date.
13. Merger deficit

2012 2011 Group RM000 RM000 Merger deficit (13,838) (13,838) Merger deficit represents the difference between consideration given and the carrying value of ordinary shares of the subsidiary acquired as described in Note 6 (ii).
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14. Insurance contract liabilities

2012 2011 Rein- Rein Gross surance Net Gross surance Net Group RM000 RM000 RM000 RM000 RM000 RM000 General insurance (Note 14(a)) General reinsurance (Note 14(b)) 431,521 (159,733) 271,788 8,394 (237) 8,157 439,915 (159,970) 279,945 General insurance 255,825 (106,790) 149,035 71,020 (20,686) 50,334 10,481 10,481 (223) (223) 10,258 10,258
(a)
Provision for claims reported by policyholders Provision for IBNR claims and PRAD Claims liabilities (i) Premium liabilities (ii) (i) Claims liabilities
326,845 (127,476) 199,369 104,676 (32,257) 72,419 431,521 (159,733) 271,788
At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) Claims incurred in the current accident year Adjustment to claims incurred in prior accident years due to changes in assumptions Claims paid during the year (ii) At 31 December Premium liabilities
344,853 (128,603) 216,250 175,085 (93,155) 81,930
(69,410) (123,683)
32,176 62,106
(37,234) (61,577)
326,845 (127,476) 199,369
At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) Premiums written in the year Premiums earned during the year At 31 December
116,495 143,070 (154,889) 104,676
(35,340) (52,230) 55,313 (32,257)
81,155 90,840 (99,576) 72,419
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14. Insurance contract liabilities (Contd)

2012 2011 Rein- Rein Gross surance Net Gross surance Net Group RM000 RM000 RM000 RM000 RM000 RM000 (b) General reinsurance 545 2,015 2,560 5,834 8,394 (237) (237) 545 2,015 2,560 5,597 8,157 411 1,635 2,046 8,435 10,481 (223) (223) 411 1,635 2,046 8,212 10,258
Provision for claims reported by policyholders Provision for IBNR claims and PRAD Claims liabilities (i) Premium liabilities (ii) (i) Claims liabilities
At 1 January Claims incurred in the current accident year Claims paid during the year (ii) At 31 December Premium liabilities
2,046 2,336 (1,822) 2,560
2,046 2,336 (1,822) 2,560
1,227 1,942 (1,123) 2,046
1,227 1,942 (1,123) 2,046
At 1 January Premiums written in the year Premiums earned during the year At 31 December
8,435 57,465 (60,066) 5,834
(223) (1,178) 1,164 (237)
8,212 56,287 (58,902) 5,597
8,238 55,690 (55,493) 8,435
(228) (1,058) 1,063 (223)
8,010 54,632 (54,430) 8,212
15. Deferred tax liabilities

2012 2011 Group RM000 RM000 At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) Recognised in: Profit or loss (Note 28) Other comprehensive income At 31 December 939 (248) (183) 508
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority.
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ANNUAL REPORT 2012
15. Deferred tax liabilities (contd)

2012 2011 Group RM000 RM000 Presented after appropriate offsetting as follows: Deferred tax liabilities Deferred tax assets 1,045 (537)
508 The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: Accelerated capital allowance on property and equipment Group RM000 Deferred tax liabilities At 1 January 2012 Arising from acquisition of a subsidiary (Note 6(i)(a)) (42) 1,114 1,072 Recognised in: Profit or loss 156 156 Other comprehensive income (183) (183) At 31 December 2012 Group Deferred tax assets At 1 January 2012 Arising from acquisition of a subsidiary (Note 6(i)(a)) Recognised in: Profit or loss At 31 December 2012 (522) 260 (262) 389 (664) (275) (133) (404) (537) 114 931 1,045 Fair value of AFS financial assets RM000
Total RM000
Premium liabilities Others Total RM000 RM000 RM000
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16. Borrowings
Group and Company Short term borrowings Secured: Term loan 132,106 2012 RM000 2011 RM000
On 21 May 2012, the Company was granted a term loan facility of RM160.0 million for the purpose of acquisition of an equity interest in TIMB and further acquisitions of shares of TIMB under the mandatory general offer from its minority shareholders. The term loan facility is denominated in Ringgit Malaysia and is secured by TIMB shares. The interest on term loan is chargeable at rates raging from 2.75% to 3.75% per annum above the banks cost of funds. The weighted average effective interest rates of the borrowings are as follows: Group and Company 2012 % 2011 %
Term loan 6.26%
The term loan is to be repaid in 16 quarterly principal instalments commencing from the end of the 15th month from the date of first drawdown on 23 May 2012. However, pursuant to Clause 8.2 of the Term Loan Facility Agreement dated 21 May 2012, the Company is required to undertake mandatory repayment of the loan in whole or in part at any time during the tenure upon receiving the proceeds arising from its listing exercise on the Main Market of Bursa Securities. With the listing exercise completed on 20 February 2013, the term loan has been repaid on 20 February 2013. The term loan is thus classified as current and repayable within 1 year as at 31 December 2012. The carrying amount of the borrowings are reasonable approximation of fair value due to their short term maturity. Insurance payables
17.
2012 2011 Group RM000 RM000 Due to agents, brokers, co-insurers and insureds 12,385 Due to reinsurers and cedants 55,637 156 68,022 156
The carrying amounts approximate fair value due to their relatively short-term maturity.
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18. Retirement benefits

2012 2011 Group RM000 RM000 At 1 January Arising from acquisition of a subsidiary (Note 6(i)(a)) Provision for the year Payments during the year At 31 December Amount payable after 12 months 1,137 89 (78) 1,148 1,075
19. Other payables

Financial liabilities: Amount due to ultimate holding company Dividend payable Finance costs payable Claims payable Reinsurance deposits Others 2012 RM000 1,522 892 6,304 3,721 7,238 19,677 458 1,892 9,261 31,288 Group 2011 RM000 17,218 500 226 17,944 17,944 Company 2012 RM000 218 892 1,110 1,892 1,091 4,093 2011 RM000 11 11 11
Non-financial liabilities: Provision for taxation Listing expenses Accrued expenses
The carrying amounts approximate fair value due to their relatively short-term maturity. Included in the amount due to holding company of the Group and the Company are net advances received of Nil (31.12.2011: RM20,000,000) and Nil (31.12.2011: Nil), respectively, provided for the purpose of working fund of its subsidiaries. Included in the amount due to unlimate holdings company of the Group in 2011 was an advance of RM17,010,000 which bore interest of 4.85% per annum and which was capitalized during the year. All other amounts due to the ultimate holdings company are interest-fees, unsecured and repayable on demand.
20. Operating revenue

Gross earned premiums (Note 21(a)) Investment income (Note 22) 2012 RM000 214,955 11,389 226,344 Group 2011 RM000 55,493 377 55,870 Company 2012 RM000 27,164 27,164 2011 RM000 14,000 14,000
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21. Net earned premiums

2012 2011 Group RM000 RM000 (a) Gross earned premiums General insurance contracts Change in premium liabilities (b) Premiums ceded to reinsurers General insurance contracts Change in premium liabilities 200,535 14,420 214,955 55,690 (197) 55,493
53,408 3,069 56,477
1,058 5 1,063
Net earned premiums 158,478 54,430
22. Investment income

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Rental income from investment property Interest income: - AFS financial assets - LAR - Others Dividend income: - AFS financial assets - Subsidiary 211 3,529 5,939 1,143 571 377 164 27,000 14,000
11,393 377 27,164 14,000 Net amortisation of premiums on investments (4) 11,389 377 27,164 14,000
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23. Realised gains and losses

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Property and equipment: Realised gain on disposal of property and equipment AFS financial assets: Realised gains: Equity securities - quoted in Malaysia Debts securities - unquoted in Malaysia Realised losses: Equity securities - quoted in Malaysia Net realised gains for AFS financial assets Total net realised gains
4,309 20
(480) 3,849 3,854
24. Other operating income/(expenses)

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Other operating income: Unrealised gain on foreign exchange Tele-marketing commission income Management fees income Sundry income 226 204 430 26 26 226 280 506
Other operating expenses: Unrealised loss on foreign exchange (127) Listing expenses (3,600) Impairment loss of property and equipment (255) Professional fees incurred in relation to acquisition of TIMB Group (881) (4,863)
(3,600) (3,600)
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25. Net claims

2012 2011 Group RM000 RM000 (a) Gross claims paid General insurance contracts (b) Claims ceded to reinsurers General insurance contracts Net claims paid (a) (125,505) 62,106 (63,399) 17,647 (1,123) (1,123) (819)
(c) Gross change to contract liabilities General insurance contracts (d) Change in contract liabilities ceded to reinsurers General insurance contracts Net change in contract liabilities (b)
2,212 19,859 (43,540)
(819) (1,942)
Net claims (a) + (b)
26. Management expenses

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Reimbursement of expenses incurred by the ultimate holding company: Staff costs: - Salaries and bonuses - Defined contribution plan - Staff recruitment costs - Other employee benefits Marketing expenses Rental of premises Professional fees Management fees Administration and general expenses
2,859 291 46 119 3,315 25 45 135 157 943
506 52 11 569 5 12 147 56 217
1,431 144 46 39 1,660 10 29 94 144 564
54 5 3 62 1 8 38 74
4,620 1,006 2,501 183 Reimbursement of expenses incurred by subsidiary: Rental of premises 6 Administration and general 9 15
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26. Management expenses (contd)

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Employee benefits expense Note 26(a)) Directors remuneration (Note 26(b)) Auditors remuneration: - statutory audits - other services Depreciation of property and equipment (Note 3) Depreciation of investment property (Note 4) Write-off of property and equipment Amortisation of intangible assets (Note 5) Reversal of allowance for impairment losses on insurance receivables Provision for Takaful and Insurance Benefits Protection System Management fees Marketing expenses Rental of premises Professional fees Printing charges Publicity expenses Communication expenses Computer expenses Administration and general expenses (a) Employee benefits expense Wages and salaries Social security contributions Contributions to defined contribution plan-EPF Other benefits 9,367 90 1,390 2,358 13,205 1,273 149 26 1,448 13,205 314 226 23 88 13 2 55 (420) 164 122 3,871 492 159 319 637 445 587 4,723 29,645 26 40 1 32 138 88 73 1,404 1,448 80 35 8 6 9 - 77 158 4,337 6 79 (12) 256
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(b) Directors remuneration Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Directors of the Company: 62 18 80 62 18 80
Non-executive: Fees Allowances and other emoluments Directors of the subsidiaries:
Non-executive: Fees Allowances and other emoluments Total
183 51 234
24 2 26
314
26
80
The remuneration, including benefits-in-kind, attributable to the CEO, is amounted to RM582,000 (2011: RM48,000). The number of directors of whose total remuneration received and receivable from the Group during the year that fall within the following bands is analysed below:
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Non-executive directors: RM0 - RM50,000 RM50,001 - RM100,000 10 4 2 4
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(c) CEOs remuneration Company 01.01.2012 14.06.2011 to to 31.12.2012 31.12.2011 RM000 RM000 The details of remuneration received by the CEO during the year are as follows: Salaries and other emoluments 240 48 Fees Bonus 280 Defined contribution plan 62 Total CEOs remuneration (excluding benefits-in-kind) Estimated money value of benefits-in-kind Total CEOs remuneration (including benefits-in-kind) 582 582 48 48
27. Finance costs

Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Interest expense on: Borrowings - term loans Advances from ultimate holding company 7,894 2,121 10,015 7,894 799 8,693
28. Taxation
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Current income tax: Malaysian income tax Over provision in prior year Deferred tax (Note 15): Relating to origination and reversal of temporary differences Over provision in prior year 10,326 (112) 10,214 20 20
(242) (6)
(248) 9,966 20
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28. Taxation (contd)

The Company is not subject to tax as it is in a tax loss position. The Labuan subsidiaries are entitled to elect to pay tax of 3% of the chargeable profits or RM20,000 based on the election under Section 7 of the Labuan Business Activity Tax Act, 1990 in respect of its chargeable profits for the period. The income tax for the general insurance subsidiary namely, TIMB, is based on the tax rate of 25% of the estimated assessable profit for the financial year. A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expenses at the effective income tax rate is as follows:
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Profit before taxation 58,554 34,195 11,040 13,744
Taxation at Malaysian statutory tax rate of 25% Effect of chargeable profits subject to RM20,000 Income not subject to tax Expenses not deductible for tax Over provision of taxation in prior a year Over provision of deferred taxation in prior year Tax expense for the year
14,639 (9,976) 5,421 (112) (6) 9,966
8,549 (8,635) (353) 459 20
2,760 (6,750) 3,990
3,436 (3,500) 64
29. Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary equity holder of the Company by the weighted average number of ordinary shares in issue during the year. 2012 41,480 254,736 16.28 Group 2011 27,255 40,180 67.83
Profit attributable to ordinary equity holder (RM000) Weighted average number of ordinary shares in issue during the year (000) Basic earnings per share (sen)
There were no dilutive potential ordinary shares as at the end of the respective period. There have been no other transactions involving ordinary shares between the reporting date and the date of completion of these financial statements.
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30. Dividends
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Recognised during the financial year: Dividend on ordinary shares:
Interim tax exempt dividends of RM122.38 per ordinary share in respect of the financial year ended 31 December 2012 Final tax exempt dividend of RM55.94 per ordinary share in respect of the financial year ended 31 December 2010 Interim tax exempt dividend of RM244.75 per ordinary share in respect of the financial year ended 31 December 2011
3,500
8,000
3,500
21,000 29,000
No dividend has been paid or declared by the Company since the date of its incorporation. The directors do not recommend any dividend payment in respect of the current financial year. The dividend per ordinary share disclosed above is arrived at based on the total dividends paid by the Group to the holding company and non-controlling interests, divided by the number of ordinary shares of TIL as of the respective dates of declaration/payment of the dividends. The number of ordinary shares of TIL is used as the Group and Company were not in existence as of the dates such dividends were declared/paid.
31. Operating lease arrangements

(a) The Company as lessee The Company has entered into a lease agreement for rental of office premises. The future aggregate minimum lease payments under operating lease contracted for as at the reporting date but not recognised as liabilities are as follows: Future minimum rental payments: 2012 RM000 Group 2011 RM000 Company 2012 RM000 2011 RM000
Rental of office premises: Payable within one year 557 Payable after one year 186 743
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31. Operating lease arrangements (contd)

(b) The Company as lessor The Company has entered into a non-cancellable operating lease arrangement on its investment property. The lease have remaining non-cancellable lease term of 3 years. The future minimum lease payments receivable under a non-cancellable operating lease contracted for as at the reporting date but not recognised as receivables, are as follows: 2012 RM000 338 196 534 Group 2011 RM000 Company 2012 RM000 2011 RM000
Receivable within one year Receivable after one year
Rental income on investment property recognised in profit or loss during the relevant financial years is disclosed in Note 22.
32. Capital commitments

The commitments of the Group and of the Company as at the financial period-end are as follows: 2012 RM000 Group 2011 RM000 Company 2012 RM000 2011 RM000
Capital expenditure: Approved but not contracted for: Property and equipment
10,000
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ANNUAL REPORT 2012
33. Related party disclosures

(a) Significant related party transactions The Group and the Company had the following significant transactions with related parties during the financial year/period:
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 (Expense)/income: RM000 RM000 RM000 RM000 Ultimate holding company, TMSB: Reimbursement of expenses incurred (4,620) (1,006) (2,501) (183) Dividend paid (20,400) Transaction with subsidiaries: TIL: Dividend income TMGR: Management expenses paid on behalf Dividend income TMLR: Management expenses paid on behalf TIMB: Management fee income Reimbursement of expenses incurred
14,000 (483) 13,000 (147) 280 (15)
14,000 (499) (136)
Corporate shareholder of the Company, AirAsia Berhad: Fee and commission expense (3,152) Data management fee (172) (172) Corporate shareholder of a subsidiary, Multi-Purpose Capital Holdings Berhad: Dividend paid Gross earned premiums Fee and commission expense Gross claims paid Related companies: Tune Talk Sdn Bhd Gross written premium AirAsia X Berhad Fee and commission expense Tune Hotels Sdn Bhd Data management fee
(3,500) 14,532 (2,194) (1,212)
(8,600) 54,457 (16,752) (1,123)
1,070 (599) (11)
(11)
Details of balances with related parties at the end of the respective year are disclosed in Notes 11 and 19.
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33. Related party disclosures

(b) Compensation of key management personnel The remuneration of key management personnel during the year are as follows:
Group Company 01.01.2012 14.06.2011 to to 2012 2011 31.12.2012 31.12.2011 RM000 RM000 RM000 RM000 Non-executive directors remuneration 314 26 80 CEOs remuneration: - Company 582 ** 582 ** 48 Other key management personnel: Short term employee benefits 2,546 1,696 296 EPF expenses 305 203 35 Gratuity 14 Benefits-in-kind 21 ** 3,782 26 2,561 379
For the period from October to December 2012.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The key management personnel of the Group includes the Director, Chief Executive Officer, Chief Financial Officer, Senior General Manager, General Manager and Assistant General Manager.
34. Regulatory capital/working fund and solvency requirements of subsidiaries

(i) TMGR, TMLR and TIL The Guidelines on Application for License - Insurance and Insurance Related Activities (the Guidelines) were introduced as the capital adequacy, working fund and solvency requirement for all insurers licensed under the Labuan Financial Services and Securities Act 2010 (LFSSA 2010) effective from 13 December 1997. It has been imposed by the Labuan Financial Services Authority (Labuan FSA), pursuant to Section 109 of the LFSSA 2010 as a licensing condition for insurance companies. (a) TMGR and TMLR TMGR and TMLR, as Labuan reinsurers are required to maintain at all times, a minimum paid-up capital/ net working funds of RM10.0 million each. In addition, TMGR and TMLR are also each required to have minimum solvency margin of: (1) (2) RM10.0 million; or 20% of net premium income of the preceding year, whichever is greater for TMGR and 3% of the latest actuarial valuation of liabilities, whichever is greater for TMLR. TMGR has met the minimum capital adequacy requirements as prescribed by the Labuan FSA at end of the financial period. As at 31 December 2012, TMLRs net working funds was RM9,312,000 and margin of solvency shows a deficiency of RM688,000. The Company has committed to continue to support TMLRs operations should there be any insufficient working funds available to meet TMLRs obligations and liabilities as and when they fall due.
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34. Regulatory capital/working fund and solvency requirements of subsidiaries (contd)

(i) TMGR, TMLR and TIL (Contd) (b) TIL TIL, as a Labuan captive insurer is required to maintain at all times a surplus of assets over liabilities, which is: (a) (b) equivalent to, or more than the amount of TILs working fund; or 20% of the net premium income for the preceding year in respect of the general insurance business, whichever is greater.
As at 31 December 2012, TILs margin of solvency shows a deficiency of RM8,357,000 (31.12.2011: RM897,000). As TIL is currently in run-off, the Company will continue to support its operations should there not be sufficient working funds available to meet TILs obligations and liabilities as and when they fall due.
(ii) TIMB Regulatory capital requirement The capital structure of the TIMB as at 31 December 2012, as prescribed under the RBC Framework, is provided as below:
2012 RM000 Eligible Tier 1 capital Share capital (paid-up) 100,013 Reserves, including retained earnings 83,403 183,416 Tier 2 capital Eligible reserves 5,452 Amount deducted from capital 365
Total capital available 188,503 TIMB has met the minimum capital adequacy requirements as prescribed by the Risk-Based Capital Framework (RBC Framework) as at the reporting date.
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35. Risk management framework

The Board of the insurance subsidiary has established a Risk Management Committee (RMC) of 3 members, comprising two Non-Executive Directors, the Chief Executive Officer and other members of staff. The Committee is responsible for regularly identifying risks, ensuring that adequate risk management policies and procedures are in place, and monitoring compliance with policies and procedures. The Committee has worked with the Management to develop these policies and both Management and Board have agreed to adopt these policies to govern the running of the business. Risk appetite The insurance subsidiarys risk appetite has been established as 3% of shareholders funds i.e. approximately RM4 million on any one event or series of events arising from a single cause. Overview of risk management policies The Group and the Companys financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group and the Companys business whilst managing the key risks faced by the Group and the Company. A. Underwriting i. Risk Acceptance of poor insurance risks, risks with low profit margins and inadequate reinsurance arrangements contribute to low profitability and inadequate capital growth. Insurance risk is also the risk of outstanding insurance contract liabilities being greater than estimated.
ii. Policy The following outlines the Groups policies to safeguard against these risks: (a) (b) (c) Underwrite only classes of risks which have been approved by the Board; Accept risks within the approved classes only according to comprehensive underwriting guidelines and within limits of delegated authority; Expand into new lines only where there is adequate experience within the Group and after management has obtained appropriate Board authority; Price risks with sufficient margin to ensure ongoing viability of the business, and maintaining a professional approach to this function; Retain risks according to guidelines on maximum risks to be retained; Mitigate foreign currency risks on reinsurance by all significant reinsurance arrangements being entered into in Malaysian Ringgit; Ensure compliance with treaty arrangements in accepting risks; Maintain a balanced portfolio to yield a reasonable level of profits; and Review on a regular basis the insurance contract liabilities.
(d) (e) (f) (g) (h) (i)
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35. Risk management framework (contd)

Overview of risk management policies (Contd) B. Reinsurance Maintain prudent reinsurance arrangements with reputable reinsurers to safeguard the ongoing viability of the business including its capacity to meet obligations to cedants and shareholders. Assess the credit worthiness of reinsurance counterparties and their ability to service their claims obligations.
C. Claims i. Risk Exposure to unexpected or excessive losses, fraudulent claims and inadequate provisions for outstanding claims could affect the Groups profitability, financial position and reputation.
ii. Policy The Groups policies to guard against these risks are: (a) (b) Identify claims exposures and properly assess them, and routinely review them upon advent of further information and at least once a year. Maintain good claims administration and settlement processes to ensure prudent claims estimation and appropriate loss adjustment. Make adequate provisions for all claims liabilities, especially for long-tail liabilities and the effect of superimposed inflation and adverse foreign exchange movements on such liabilities. Assess exposure to fraud periodically and employ measures to minimise potential losses through accepting claims outside contractual obligations for fraudulent reasons and for detecting fraudulent claims. Ensure that losses are mitigated and potential recovery action is followed up in a professional and timely fashion.
(c) (d)
(e)
D. Investments i. Risk Investment risk is the risk of inadequate investment returns from poor investment strategies and adverse movements in the value of investments. Investment risk is derived from market risk, credit risk, investment concentration risk, liquidity risk, and asset/liability mismatch risk.
ii. Policy Returns from investment of premium income are an important source of income to the Company and maintenance of the market value of the investments is essential for the financial stability of the Group. Absence of prudent investment strategies and investment decision framework could result in poor investment return which would affect the Groups profitability and competitiveness and also result in the Group not being able to meet its obligations as they fall due. It is the Groups policy to: (a) (b) Implement an investment strategy to ensure appropriate asset allocation, concentration of investments and matching of asset and liability portfolios. Ensure that investments are held in different classes within limits specified by the Investment Committee.
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Overview of risk management policies (Contd) D. Investments (Contd) ii. Policy (Contd) (c) Undertake a thorough analysis before making an investment to minimise market risk and continuously monitor the performance and risk of the investment. Manage disposal of investments to optimise the returns on realisation. Limit exposure to interest rate risk by investing in term deposits, corporate bonds and government securities on a long and short-term basis at competitive rates. Ensure liquidity by maintaining sufficient cash float at any time and regularly matching expected duration of liabilities and investment; and uncertainties arising from timing and amount of cash flows. Minimise credit risk and investment concentration risk by investing with institutions that have a minimum rating of B within specific overall limits for each institution. Monitor investment portfolio and performance weekly or at other shorter intervals and report investment exposure and performance to the Board monthly.
(d) (e) (f)
(g) (h) E.
Credit Quality i. Risk The Groups exposure to credit risks are mainly due to uncertainty in counter parties (mainly from cedants, reinsurers and intermediaries) ability to meet the financial and contractual obligations to the Group when they are due. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. Impairment is estimated by management based on prior experience and the current economic environment. The Groups maximum exposure to credit risk is represented by the carrying amount of its financial assets as at the end of the reporting period.
ii. Policy Policies to limit credit risks include the following: (a) Maintain credit control in accordance with appropriate policies and procedures which govern the extension of credit to the cedants and specifies guidelines for setting limits on credit as per the quota share agreement. Monitor compliance with such established credit limits.
(b)
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Overview of risk management policies (Contd) F. Operations i. Risk Non-financial or operational risks the Group faces include technology risk, risk to reputation, fraud, compliance, legal risk, physical damage to property, poor outsourcing arrangements, threats to business continuity and key person risk.
ii. Policy The policies to monitor and minimise these risks are as follows: (a) (b) Undertake annual risk audits to identify material operations risks to which the Group are exposed. Effect appropriate insurance cover for all identified operations risks which can be cost-effectively insured. Closely monitor the external relationships. Ensure at all times that compliance with regulatory requirements and fulfillment of material obligations under the legislative framework is maintained. Maintain an ethics and personal conduct policy to conduct the affairs of the Group are conducted in a manner that would avoid any action by the Group or its officers that would bring disrepute to the Group. Implement adequate security procedures to prevent unauthorized access, damage, loss to assets and facilities and harm to employees. Ensure that division and responsibility is clear and mutually understood where any part of the Groups business is outsourced to third parties whilst ultimate control over the outsourced operations is retained by the Group. Identify the possible types of fraud the Group is exposed to and develop and maintain effective controls to prevent them and to take appropriate and prompt action if fraud occurs.
(c) (d)
(e)
(f)
(g)
(h) G.
Regulatory compliance and corporate governance The Management is responsible to follow a systematic approach to the business and effectively manage the risks. The key risks that have been identified are monitored and their status communicated as appropriate throughout all levels of the organisation and are also incorporated in the Groups performance management reporting. Regulations of risk management In accordance with these policies a framework for management of risks identified has been developed for the effective management of risk. Effective and efficient operation of the organisation would be ensured through: (a) (b) Providing a framework for an organisation that enables for activities to be undertaken in a consistent and controlled manner. A management structure that clearly identifies the roles and responsibilities of the staff.
H.
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Overview of risk management policies (Contd) H. Regulations of risk management (Contd) (c) (d) (e) (f) Development of procedures to ensure that the risk management strategies are implemented. Retention of a well-qualified level of staff through appropriate recruitment, training and staff development programme. Improving motivation of staff through a suitable communication, review, feedback and rewards system. Prompt and comprehensive management reporting systems to assess performance and progress of the business and the utilisation of its resources.
36. Insurance risk

The Group has in place comprehensive underwriting guidelines and limits of authority to ensure that risks are accepted in accordance with the authorised limits. The retention of risks is protected by proportional and non-proportional treaties with reputable reinsurers and brokers, and premised on the risk appetite of the Group. (a) Concentration of risks by class of business (i) General reinsurance The following table sets out the concentration of travel insurance risks by country/regions based on the geographical location of the primary insurers or reinsurers from which the gross premium are written. 2012 RM000 Group 2011 RM000
Geographical diversification
21,283 34,784 Malaysia Thailand 13,618 8,577 Indonesia 8,257 5,574 Singapore 5,449 3,394 Australia 2,124 1,256 Shenzhen, China 2,592 985 Hong Kong, China 1,135 657 Japan 1,346 Macau, China 756 235 Philippines 661 108 Cambodia 220 106 Laos 24 14 (ii) General insurance The table below shows the concentration of gross written premium by class of business: 2012 RM000 Group 2011 RM000 57,465 55,690
Class of business diversification
Motor 71,093 Fire 10,493 Marine, aviation and transit 27,313 Others 34,171 143,070
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36. Insurance risk (Contd)

(a) Concentration of risks by class of business (Contd) (ii) General insurance (Contd) The table below shows the concentration of premium and claim liabilities by class of business at the reporting date: Net liabilities RM000
Re Gross insurance liabilities liabilities RM000 RM000 Premium liabilities 64,514 7,615 18,734 13,813 104,676 (10,974) (3,025) (16,639) (1,619) (32,257)
2012 Motor Fire Marine, aviation and transit Others Claim liabilities
53,540 4,590 2,095 12,194 72,419
2012 Motor Fire Marine, aviation and transit Others (b) Sensitivity analysis Key assumptions
161,139 23,869 91,058 50,779 326,845
(6,502) (17,617) (75,954) (27,403) (127,476)
154,637 6,252 15,104 23,376 199,369
The principal assumptions underlying the estimation of liabilities is that the Groups future claims development will follow a similar pattern to past claims development experience. This includes key assumptions such as the adopted Ultimate Loss Ratios (ULR), risk margin percentages (i.e. Provision of Risk Margin for Adverse Deviation (PRAD)) and provision for claims handling costs. Additional qualitative judgments are used to assess the extent to which past trends may not apply in the future, for example, isolated occurrence, changes in market factors such as public attitude to claiming, economic conditions, as well as internal factors, such as, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors, such as judicial decisions and government legislation affect the estimates.
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36. Insurance risk (Contd)

(b) Sensitivity analysis (Contd) Sensitivities The general reinsurance claim liabilities are sensitive to the key assumptions shown below. It is 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 reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on Gross and Net Liabilities, Profit before Tax and Equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non-linear. (i) General reinsurance
Increase/(decrease) Impact Impact Impact on profit Changes on gross on net before in liabilities liabilities taxation variable RM000 RM000 RM000 2012 Loss ratio 2011 Loss ratio (ii) General insurance +10% +10% +10% 143,119 1,834 495 71,037 1,274 495 (71,037) (1,274) (495) +1% -1% 692 (692) 545 (545) 692 (692) 545 (545) 692 (692) 545 (545)
Impact on equity RM000 692 (692)
+1% -1%
545 (545)
2012 Loss ratio PRAD Provision for expenses 2011 Loss ratio PRAD Provision for expenses
(53,278) (956) (371)
+10% +10% +10%
57,635 2,040 525
36,159 1,797 1,118
(36,159) (1,797) (1,118)
(27,119) (1,348) (839)
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36. Insurance risk (contd)

(c) Claims development table (i) General reinsurance As this is only the fourth financial year since the incorporation of TIL and second financial year since the incorporation of TMGR, it is not meaningful to present the claims development table in the financial statements. General insurance The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each reporting date, together with cumulative payments to-date of TIMB. In setting provisions for claims, TIMB gives consideration to the probability and magnitude of future experience being more adverse than assumed and exercises a degree of caution in setting reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience in an accident year is greatest when the accident year is at an early stage of development and the margin necessary to provide the necessary confidence in adequacy of provision is relatively at its highest. As claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. Gross general insurance contract liabilities for 31.12.2012:
(ii)
Accident year 2005 2006 2007 2008 2009 2010 2011 2012 Total RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 At end of accident year 215,703 171,487 168,880 231,999 174,026 170,544 164,136 244,139 One year later 206,489 189,062 158,065 251,136 124,814 168,597 150,123 Two years later 199,753 238,023 161,822 211,179 117,799 146,125 Three years later 185,568 190,660 157,899 206,783 106,592 Four years later 185,137 192,144 152,896 201,353 Five years later 190,674 190,249 153,684 Six years later 186,659 186,940 Seven years later 199,609 Current estimate of cumulative claims incurred 199,609 186,940 153,684 201,353 106,592 146,125 150,123 244,139 1,388,565 At end of accident year (56,005) (39,651) (52,065) (43,395) (39,747) (38,182) (30,815) (76,857) One year later (108,271) (111,344) (97,631) (146,308) (73,127) (95,372) (75,244) Two years later (147,832) (131,382) (120,035) (173,375) (88,940) (110,466) Three years later (158,615) (172,851) (133,779) (188,104) (100,378) Four years later (166,057) (177,927) (140,857) (193,255) Five years later (170,840) (178,884) (145,024) Six years later (173,027) (180,024) Seven years later (180,472) Cumulative payments to-date (180,472) (180,024) (145,024) (193,255) (100,378) (110,466) (75,244) (76,857) (1,061,720)
Gross general insurance contract liabilities per statements of financial position 19,137 6,916
8,660
8,098
6,214 35,659 74,879 167,282 326,845
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36. Insurance risk (contd)

(c) Claims development table (Contd) (ii) General insurance (Contd) Net general insurance contract liabilities for 31.12.2012:
Accident year 2005 2006 2007 2008 2009 2010 2011 2012 Total RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 At end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Current estimate of cumulative claims incurred At end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later 86,749 93,390 90,326 102,392 100,098 114,029 134,687 134,463 90,534 96,896 85,079 96,959 88,388 106,956 121,263 88,846 87,560 84,387 89,334 87,742 98,737 79,869 85,438 84,684 85,705 82,173 79,430 86,228 80,836 83,684 80,828 84,087 79,412 77,700 81,511 80,204 80,204 81,511 79,412 83,684 82,173 98,737 121,263 134,463 761,447 (27,106) (34,194) (32,810) (34,131) (36,105) (34,592) (28,737) (34,135) (57,734) (64,307) (60,380) (63,502) (62,444) (67,182) (66,529) (65,144) (70,765) (66,712) (71,614) (70,711) (77,525) (68,029) (74,012) (71,819) (75,894) (75,656) (70,604) (77,293) (74,337) (78,497) (72,926) (77,821) (75,595) (73,708) (78,546) (75,595)
Cumulative payments to-date (75,595) (78,546) (75,595) (78,497) (75,656) (77,525) (66,529) (34,135) (562,078)
Net general insurance contract liabilities per statements of financial position
4,609 2,965
3,817
5,187
6,517 21,212 54,734 100,328 199,369
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37. Financial risks

(a) Credit risk Treaty reinsurers and brokers credit ratings are evaluated prior to entering into treaty arrangements. The Group observes the Bank Negara Malaysia Guidelines and internal Group policies in assessing the credit ratings of reinsurers and brokers. The settlement risks are also mitigated through prompt reconciliations of records and recovery actions, avoiding at all times delays in collection from cedants and reinsurers and entering into commutations for run off reinsurers. The Group has tightened the credit collection and recovery policies to expedite collections. The Group is unable to avoid any deterioration in credit ratings of reinsurers after inception of treaties. Credit exposure At the reporting date, the Groups and the Companys maximum exposure to credit risk is represented by the maximum amount of each class of financial assets recognised in the statements of financial position as shown in the table below: 2012 RM000 Group 2011 RM000 Company 2012 RM000 2011 RM000
LAR: Fixed and call deposits with licensed financial institutions Loans receivable: Staff mortgage loans Other staff loans: Secured Unsecured AFS financial assets: Debt securities Reinsurance assets Insurance receivables Other receivables Cash and bank balances
257,959 636 23 23 137,800 159,970 75,977 36,832 22,587 691,807
24,715 223 16,771 63 8,555 50,327
6,212 5,336 11,384 22,932
5,625 8,130 13,755
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37. Financial risks (contd)

(a) Credit risk (Contd) Credit exposure by credit rating The table below provides information regarding the credit risk exposures of the Group and the Company by classifying assets according to the Groups credit ratings of counterparties. Neither past-due nor impaired Past-due BBB and Not but not AAA AA A lower rated impaired Total Group RM000 RM000 RM000 RM000 RM000 RM000 RM000 2012 LAR: Fixed and call deposits with licensed financial institutions 109,417 31,410 50,028 67,104 257,959 Loans receivable: Staff mortgage loans 636 636 Other staff loans: Secured 23 23 Unsecured 23 23 AFS financial assets: Debt securities 60,664 68,813 1,038 7,285 137,800 Reinsurance assets 3 215 74,702 6,473 78,577 159,970 19 11,420 207 17,782 46,549 75,977 Insurance receivables Other receivables 1,459 862 600 33,911 36,832 Cash and bank balances 20,052 1,370 1,524 (359) 22,587 2011 LAR: Fixed and call deposits with licensed financial institutions Reinsurance assets Insurance receivables Other receivables Cash and bank balances 191,595 102,689 139,312 6,680 204,982 46,549 691,807
24,715 223 8,555 33,493
16,771 63 16,834
24,715 223 16,771 63 8,555 50,327
The table below provides information regarding the credit risk exposures of the Group and the Company by classifying assets according to the Groups credit ratings of counterparties.
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(a) Credit risk (Contd) Credit exposure by credit rating (Contd) Neither past-due nor impaired Past-due BBB and Not but not AAA AA A lower rated impaired Total Company RM000 RM000 RM000 RM000 RM000 RM000 RM000 2012 LAR: Fixed and call deposits with licensed financial institutions 6,212 6,212 5,336 5,336 Other receivables Cash and bank balances 11,384 11,384 2011 Other receivables Cash and bank balances 17,596 5,336 22,932
8,130 8,130
5,625 5,625
5,625 8,130 13,755
Age analysis of financial assets past-due but not impaired < 30 days RM000 Past due but not impaired 31 to 60 61 to 90 91 to 180 days days days RM000 RM000 RM000 More than 180 days RM000
Total RM000
2012 Insurance receivables: Due premium including agents, brokers and co-insurers balances 3,808 11,659 1,516 2,183 3,730 Due from reinsurers and cedants 3,488 2,930 2,171 5,812 9,252 7,296 14,589 3,687 7,995 12,982
22,896 23,653 46,549
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(b) Liquidity risk Liquidity risk is the risk where the Group and the Company is unable to meet its obligations in a timely manner at a reasonable cost at any time. The Group maintains a large tranche of liquid asset instruments, primarily bank deposits and Malaysian Government Securities, to ensure high liquidity. Maturity profiles The table below summarises the maturity profile of the financial assets and liabilities of the Group and the Company based on remaining undiscounted contractual obligations, including interest payable and receivable. For insurance contracts liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities.
No Carrying Less than Over 1-5 Over 5 maturity value 1 year years years date Total Group RM000 RM000 RM000 RM000 RM000 RM000 2012 LAR: Fixed and call deposits with licensed financial institutions Loans receivable: Staff mortgage loans Other staff loans: Secured Unsecured AFS financial assets: Equity securities Unit and property trust funds Debt securities Reinsurance assets Insurance receivables Other receivables Cash and bank balances Total financial assets
257,959 636 23 23 9,028 69,146 137,800 159,970 75,977 36,832 22,587 769,981
260,627 32 4 23 32,482 63,348 75,977 9,515 20,372 462,380
33 19 102,565 37,200 139,817
571 16,671 23,322 40,564
9,028 69,146 36,100 27,317 2,215 143,806
260,627 636 23 23 9,028 69,146 151,718 159,970 75,977 36,832 22,587 786,567
Insurance contract liabilities Borrowings Insurance payables Retirement benefits Other payables Total financial liabilities Liquidity gap
439,915 132,106 68,022 1,148 31,288 672,479 97,502
175,676 132,106 68,022 73 23,704 399,581 62,799
124,850 343 574 125,767 14,050
34,713 732 35,445 5,119
104,676 7,010 111,686 32,120
439,915 132,106 68,022 1,148 31,288 672,479 114,088
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(b) Liquidity risk (Contd) Maturity profiles (Contd)
No Carrying Less than Over 1-5 Over 5 maturity value 1 year years years date Total Group RM000 RM000 RM000 RM000 RM000 RM000 2011 LAR: Fixed and call deposits with licensed financial institutions Reinsurance assets Insurance receivables Other receivables Cash and bank balances Total financial assets Insurance contract liabilities Insurance payables Other payables Total financial liabilities Liquidity gap
24,715 223 16,771 63 8,555 50,327 10,481 156 17,944 28,581 21,746
24,715 223 16,771 63 8,555 50,327 10,481 156 17,944 28,581 21,746
24,715 223 16,771 63 8,555 50,327 10,481 156 17,944 28,581 21,746
Company 2012 LAR: Fixed and call deposits with licensed financial institutions Other receivables Cash and bank balances Total financial assets Borrowings Other payables Total financial liabilities Liquidity gap
6,212 5,336 11,384 22,932 132,106 4,093 136,199 (113,267)
6,212 5,336 11,384 22,932 132,106 4,093 136,199 (113,267)
6,212 5,336 11,384 22,932 132,106 4,093 136,199 (113,267)
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(b) Liquidity risk (Contd) Maturity profiles (Contd)
No Carrying Less than Over 1-5 Over 5 maturity value 1 year years years date Total Company RM000 RM000 RM000 RM000 RM000 RM000 2011 Other receivables Cash and bank balances Total financial assets 5,625 8,130 13,755 5,625 8,130 13,755 5,625 8,130 13,755
Other payables Total financial liabilities Liquidity gap
11 11 13,744
11 11 13,744
11 11 13,744
The table below summarises the expected utilisation or settlement of assets: Non Current* current Group RM000 RM000 2012 Property and equipment Investment property Intangible assets Goodwill Investments LAR: Fixed and call deposits with licensed financial institutions Loans receivable: Staff mortgage loans Other staff loans: Secured Unsecured AFS financial assets: Equity securities Unit and property trust funds Debt securities Reinsurance assets Insurance receivables Other receivables Cash and bank balances Total assets 10,411 2,395 157 29,818 10,411 2,395 157 29,818 Total RM000
257,959 32 4 23 18,564 63,348 75,977 9,515 20,372 445,794
604 19 9,028 69,146 119,236 96,622 27,317 2,215 366,968
257,959 636 23 23 9,028 69,146 137,800 159,970 75,977 36,832 22,587 812,762
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(b) Liquidity risk (Contd) Maturity profiles (Contd) The table below summarises the expected utilisation or settlement of assets (contd.): Non Current* current Group RM000 RM000 2011 Property and equipment Investments LAR: Fixed and call deposits with licensed financial institutions Reinsurance assets Insurance receivables Other receivables Cash and bank balances Total assets Company 2012 Property and equipment Investment in subsidiaries Investments LAR: Fixed and call deposits with licensed financial institutions Other receivables Cash and bank balances 2011 Investment in subsidiaries Other receivables Cash and bank balances * 5,625 8,130 13,755 14,238 14,238 14,238 5,625 8,130 27,993 138 198,751 138 198,751 3 3 Total RM000
24,715 223 16,771 63 8,555 50,327
24,715 223 16,771 63 8,555 50,330
6,212 5,336 11,384 22,932
198,889
6,212 5,336 11,384 221,821
Expected utilisation or settlement within 12 months from the reporting date.
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(c) Market risk Market risk arises with changes in equity and bond prices. This risk is mitigated through proper initial and continuous credit evaluation of bonds and shares respectively, purchase of high grade shares and bonds, and constant watch on investment portfolio for adverse changes and opportunities. Fund managers performance are monitored constantly, parameters are prescribed to fund managers according to the Groups risk appetite on purchase of equity, bonds and unit trusts, and by placing limits on categories of purchase. Holding of unquoted shares is progressively reduced, with an emphasis on risk and return. Equity price risk Managements best estimate of the effect on the net income for the year and equity due to a reasonably possible change in the FTSE Bursa Malaysia KLCI Index (FBMKLCI) with all other variables held constant is indicated in the table below: Increase/(decrease) Effect on net income for Effect on equity the period RM000 RM000
Change in FBMKLCI % Group 2012 Market indices: FBMKLCI FBMKLCI Interest rate risk +10 -10
- -
5,853 (5,853)
The Groups exposure to interest rate risk arises primarily from their variable interest rate borrowings and investments in debt securities classified as available-for-sale. The interest and capital value of the latter may be affected by changes in the interest yield curve. The Group has an investment policy that investments are made at competitive interest rates. Sensitivity analysis: The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on income or loss and impact on equity. The correlation of variables will have a significant effect in determining the ultimate impact on interest rate 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.
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(c) Market risk (Contd) Interest rate risk (Contd) Sensitivity analysis (Contd): Increase/(decrease) Effect on net income for Effect on the period equity RM000 RM000
Changes in Group basis points 2012 Interest rates: Variable interest rate borrowings Investments in debt securities classified as available-for-sale + 100 bps + 100 bps
19 (1,738) (1,719)
14 (5,284) (5,270)
Interest rates: Variable interest rate borrowings Investments in debt securities classified as available-for-sale
- 100 bps - 100 bps
(19) 1,738 1,719
(14) 4,943 4,929
Foreign currency risk
The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than Ringgit Malaysia. Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. The Groups exposure to foreign currency is as follows: 2012 RM000 2,688 1,644 931 338 458 29 343 1,182 908 8,521 2011 RM000 714 394 206 27 59 9 5 1,414
Group Insurance receivables: Thai Baht Indonesian Rupiah Singapore Dollar Macau Pataca Hong Kong Dollar U.S. Dollar Philippines Peso China Yuen Renminbi Japanese Yen Cash and bank balances: United States Dollar Sensitivity analysis:
223
259
A 5% strengthening / weakening of the Ringgit Malaysia against the foreign currencies as at the end of 31 December 2012 would have increased/decreased net profit by approximately RM438,000. This assumes that all other variables remain constant.
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38. Fair values of financial assets and liabilities

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data The following table shows an analysis of financial assets recorded at fair value by level of the fair value hierarchy: Valuation technique using Quoted Unmarket Observable observable price inputs inputs (Level 1) (Level 2) (Level 3) Total RM000 RM000 RM000 RM000
Group AFS financial assets: 2012 Equity securities: Quoted in Malaysia Unit and property trust funds: Quoted in Malaysia Debt securities: Unquoted in Malaysia
8,889 69,146 78,035
137,800 137,800
8,889 69,146 137,800 215,835
The Group did not have any financial assets/liabilities carried at fair value at the end of comparative financial year.
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39. Segmental information

The Group is organised into four major business segments, investment holding, general reinsurance, life reinsurance and general insurance business. The Directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business based on negotiated and mutual terms.
General Life General Adjust- Investment reinsurance reinsurance insurance ments and Conso For the year ended holding business business business elimination lidated 31 December 2012 RM000 RM000 RM000 RM000 RM000 RM000 Operating revenue External Inter-segment Results Gross earned premiums Premiums ceded to reinsurers Net earned premiums Investment income Realised gains and losses Fees and commission income Other operating income 164 27,000 27,164 60,489 9,142 69,631 302 302 165,389 165,389 (36,142) (36,142) 226,344 226,344
69,208 (1,164) 68,044
154,889 (64,455) 90,434
(9,142) 9,142
214,955 (56,477) 158,478
27,164 506 27,670
423 34 457
302 302
10,500 3,854 12,755 170 27,279
(27,000) - (3,246) (280) (30,526)
11,389 3,854 9,509 430 25,182
Other revenue
Gross claims paid Claims ceded to reinsurers Gross changes to contract liabilities Change in contract liabilities ceded to reinsurers Net claims Fee and commission expense Management expenses Other operating expenses Finance costs
(1,900) (523) (2,423)
(123,683) 62,184 18,161 2,221 (41,117)
78 (125,505) (78) 62,106 9 (9) 17,647 2,212 (43,540)
(4,337) (3,600) (8,693) (16,630)
(20,742) (7,124) (127) (368) (28,361)
(290) (368) (658)
(19,547) (18,174) (255) (37,976)
3,246 280 (881) (586) 2,059
(37,043) (29,645) (4,863) (10,015) (81,566)
Other expenses
Profit before taxation Taxation Net profit for the year
11,040 11,040
37,717 (40) 37,677
(356) (356)
38,620 (9,926) 28,694
(28,467) (28,467)
58,554 (9,966) 48,588
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39. Segmental information (contd)

General Life General Adjust- Investment reinsurance reinsurance insurance ments and Conso holding business business business elimination lidated As at 31 December 2012 RM000 RM000 RM000 RM000 RM000 RM000 Assets Property and equipment Investment property Intangible assets Investment in subsidiaries Goodwill Investments Reinsurance assets Insurance receivables Other receivables Cash and bank balances Total assets Equity Share capital Share premium Merger deficit Available-for-sale reserves Retained earnings 138 198,751 6,212 5,336 11,384 221,821 10,000 238 21,016 386 8,777 40,417 10,000 59 211 10,270 10,273 2,395 157 448,403 163,585 60,524 31,160 2,215 718,712 10,411 2,395 157 (198,751) 29,818 29,818 474,615 (3,853) 159,970 (5,563) 75,977 (109) 36,832 22,587 (178,458) 812,762
60,838 24,784 85,622 85,622
10,500 14,408 24,908 24,908
10,000 (688) 9,312 9,312
100,013 3,335 5,452 80,068 188,868 188,868
(120,513) (3,335) (13,838) (5,907) (57,394)
60,838 (13,838) (455) 61,178
Equity attributable to owners of the parent Non-controlling interests Total equity
(200,987) 107,723 32,052 32,052 (168,935) 139,775
Liabilities Insurance contract liabilities Deferred tax liabilities Provision for taxation Borrowings Insurance payables Retirement benefits Other payables Total liabilities Total equity and liabilities
132,106 4,093 136,199 221,821
12,246 40 191 3,032 15,509 40,417
958 958 10,270
431,521 508 73,394 1,148 23,273 529,844 718,712
(3,852) 439,915 508 (40) 132,106 (5,563) 68,022 1,148 (68) 31,288 (9,523) (178,458) 672,987 812,762
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General Life General Adjust- Investment reinsurance reinsurance insurance ments and Conso For the year ended holding business business business elimination lidated 31 December 2011 RM000 RM000 RM000 RM000 RM000 RM000 Operating revenue External Inter-segment Results Gross earned premiums Premiums ceded to reinsurers Net earned premiums Investment income Other operating income Other revenue 55,870 55,870 55,870 55,870
55,493 (1,063) 54,430
55,493 (1,063) 54,430
377 26 403
377 26 403
Gross claims paid Gross changes to contract liabilities Net claims Fee and commission expense Management expenses Other expenses Profit before taxation Taxation Net profit for the year
(1,123) (819) (1,942)
(1,123) (819) (1,942)
(17,292) (1,404) (18,696)
(17,292) (1,404) (18,696)
34,195 (20) 34,175
34,195 (20) 34,175
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General Life General Adjust- Investment reinsurance reinsurance insurance ments and Conso holding business business business elimination lidated As at 31 December 2011 RM000 RM000 RM000 RM000 RM000 RM000 Assets Property and equipment Investment in subsidiaries Investments Reinsurance assets Insurance receivables Other receivables Cash and bank balances Total assets Equity Share capital Merger deficit Retained earnings 14,238 5,625 8,130 27,993 3 14,563 223 16,771 32 415 32,007 10,152 31 10 10,193 (14,238) (5,625) (19,863) 3 24,715 223 16,771 63 8,555 50,330
14,238 13,744 27,982 27,982
500 7,524 8,024 8,024
(39) (39) (39)
(500) (13,838) (1,531) (15,869) 1,631 (14,238)
14,238 (13,838) 19,698 20,098 1,631 21,729
Equity attributable to owners of the parent Non-controlling interests Total equity Liabilities Insurance contract liabilities Provision for taxation Insurance payables Other payables Total liabilities Total equity and liabilities
11 11 27,993
10,481 20 156 13,326 23,983 32,007
10,232 10,232 10,193
(5,625) (5,625) (19,863)
10,481 20 156 17,944 28,601 50,330
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40. Capital management

The Groups capital management objective is to ensure that the Group creates value for its shareholders while minimising the potential adverse effects on the performance of the Group. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the financial period 31 December 2012. The Company is not subject to any externally imposed capital requirements. The Labuan subsidiaries are required to comply with the capital requirements stipulated under the Guidelines on application for License - Insurance and Insurance Related Activities (the Guideline), as issued by the Labuan Financial Services Authority. Whereas, TIMB is required to meet the minimum capital adequacy requirements as prescribed by the RBC Framework. The status of compliance of the subsidiaries with the Guideline and RBC Framework above are disclosed in Note 34.
41. Significant and subsequent events

(a) (b) (c) (d) Acquisition of TIMB Details of the Companys acquisition of equity interest in TIMB is as disclosed in Note 6(i). Cessation of business by TIL On 4 July 2012, the Board of Directors of TIL had resolved that TIL will cease to underwrite new reinsurance contracts and have put the reinsurance business of TIL into run-off, effective from March 2012. Subscription of additional shares in TMGR and TMLR On 12 September 2012, the Company subscribed for additional shares in TMGR and TMLR for USD3,207,287 (RM10.0 million) each, as disclosed in Note 6 (iii). Share split On 4 October 2012, the Company implemented a share split of the par value of the Company shares whereby each existing ordinary share of RM1.00 each in the Company is subdivided into 10 ordinary shares of RM0.10 each. Upon the completion of the share split, the issued and paid up share capital of the Company stood at RM14,238,508 comprising 142,385,080 ordinary shares of RM0.10 each. Capitalisation of advances from ultimate holding company On 4 October 2012, the Company increased its issued and fully paid share capital from RM14,238,508 to RM60,838,508 via the capitalisation of advances from holding company of 466,000,000 new ordinary shares of RM0.10 each to the shareholders of the Company. The new ordinary shares issued during the period ended 31 December 2012 ranked pari passu with the shares in issue at the date of issuance. Call option On 20 April 2012, the Company and TMSB entered into a call option agreement with AirAsia Berhad whereby the Company and TMSB agreed to grant to AirAsia Berhad an option to acquire up to 20% of the issued and paid-up share capital of the Company at the time the call option is exercised from TMSB for a purchase consideration computed based on the net asset value of the Company at the time of exercise of the option (subject to a maximum purchase consideration of RM16.0 million) to be satisfied in cash. On 11 October 2012, AirAsia Berhad has exercised its right under the call option agreement to purchase 121,677,000 ordinary shares of RM0.10 each in the Company, for a consideration of RM16.0 million, which represents 20% of the Companys issued and paid up share capital of 608,385,080 shares as at 11 October 2012.
(e)
(f)
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41. Significant and subsequent events (contd)

(g) Initial Public Offering (IPO) On 8 January 2013, the Company obtained approval for the following: Initial public offering (IPO) of up to 210,224,900 ordinary shares of RM0.10 each in Tune Ins Holdings Berhad (TIH) (TIH shares) comprising a public issue of up to 143,374,900 new TIH shares (public issue shares) and an offer for sale of up to 66,850,000 existing TIH shares (offer shares) comprising: (i) the institutional offering of up to 102,028,100 public issue shares and up to 66,850,000 offer shares to: (a) (b) Malaysian institutional and selected investors including bumiputera investors approved by the Ministry of Finance; and foreign institutional and selected investors outside the United States in reliance on regulations under the United States Securities Act of 1933, as amended,
(ii)
the retail offering of up to 41,346,800 public issue shares to: (a) (b) Malaysian citizens, companies, co-operatives, societies and institutions; and the eligible directors, employees and persons who have contributed to the success of TIH and its subsidiaries,
at the retail price of RM1.35 per issue share. On 20 February 2013, the Companys shares were successfully listed on the Main Market of Bursa Securities.
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42. Supplementary information

Realised and unrealised profit/(losses) Pursuant to the directive and guidance issued by Bursa Securities, the breakdown of the Groups retained earnings into realised and unrealised earnings is analysed as follows:
2012 2011 RM000 RM000 Total retained earnings of the Group: - Realised - Unrealised 118,145 423 21,229
118,568 21,229 Consolidation adjustments (57,390) (1,531) Total retained earnings as per statements of financial position 61,178 19,698
The analysis of realised and unrealised earnings is made reference to the Guidance On Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Securities Listing Requirements issued by the Malaysian Institute of Accountants on 20 December 2010. The disclosure of realised and unrealised earnings above is solely for complying with the disclosure requirement of Bursa Securities and should not be applied for any other purposes.
This note should be read in conjunction with the Consolidated Statement of Changes in Equity.
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ANALYSIS OF SHAREHOLDINGS
as at 30 April 2013
DISTRIBUTION OF SHAREHOLDINGS
Class of shares : Ordinary shares of RM0.10 each (Shares) Voting rights :O ne vote per ordinary share Shareholdings Less than 100 100 1,000 1,001 10,000 10,001 100,000 100,001 to less than 5% of issued shares 5% and above of issued shares No. of Shareholders 5 353 1,356 311 116 2 % of Shareholders No. of Shares 0.23 16.47 63.29 14.51 5.41 0.09 122 305,100 7,292,400 9,571,700 193,055,578 541,535,080 % of Issued Share Capital 0.00 0.04 0.97 1.27 25.68 72.04
2,143 100.00 751,759,980 100.00
SUBSTANTIAL SHAREHOLDERS
The direct and indirect shareholdings of the shareholders holding more than 5% in Tune Ins Holdings Berhad based on the Register of Substantial Shareholders are as follows: Name Tune Money Sdn Bhd (TMSB) AirAsia Berhad (AAB) Tan Sri Dr Anthony Francis Fernandes Dato Kamarudin Bin Meranun Tune Group Sdn Bhd CIMB SI II Sdn Bhd CIMB Group Sdn Bhd CIMB Group Holdings Berhad Tune Air Sdn Bhd (TASB) NOTES:
(1)
DIRECT No. of % of Shares Held Issued Shares 419,858,080 121,677,000 100,000 81,900 55.85 16.19 0.01 0.01
INDIRECT No. of % of Shares Held Issued Shares
(1) 541,535,080 72.03 (1) 541,535,080 72.03 (2) 419,858,080 55.85 (3) 419,858,080 55.85 (4) 419,858,080 55.85 (5) 419,858,080 55.85 (6) 121,677,000 16.19
(4)
(2) (3) (5)
(6)
Deemed interested by virtue of Section 6A of the Companies Act, 1965 (the Act) through a shareholding of more than 15% in TMSB and TASB. Deemed interested by virtue of Section 6A of the Act through a shareholding of more than 15% in TMSB. Deemed interested by virtue of Section 6A of the Act through a shareholding of more than 15% in TMSB. Deemed interested by virtue of Section 6A of the Act through a shareholding of more than 15% in CIMB SI II Sdn Bhd. Deemed interested by virtue of Section 6A of the Act through a shareholding of more than 15% in CIMB Group Sdn Bhd. Deemed interested by virtue of Section 6A of the Act through a shareholding of more than 15% in AAB.
132
ANNUAL REPORT 2012
ANALYSIS OF SHAREHOLDINGS (CONTD)
DIRECTORS & CEOS SHAREHOLDINGS

The interests of the Directors and CEO of Tune Ins Holdings Berhad in the Shares and options over shares in the Company and its related corporations based on the Companys Register of Directors Shareholdings are as follows: Directors Razman Hafidz Bin Abu Zarim 100,000 Tan Sri Dr Anthony Francis Fernandes 100,000 Dato Kamarudin Bin Meranun 81,900 Tan Hong Kheng 100,000 Ng Soon Lai @ Ng Siek Chuan 100,000 Chief Executive Officer Peter Dixon Miller 75,000 0.01

Direct Indirect No. of % of No. of % of Shares Held Issued Shares Shares Held Issued Shares
0.01
(1) 72.03 0.01 541,535,080
0.01 0.01 0.01
541,535,080 (1) 72.03
NOTES: (1) Deemed interested by virtue of Section 6A of the Act through a shareholding of more than 15% in TMSB and AAB. The TIH Employees Share Option Scheme of the Company was effective on 20 February 2013. Therefore, there were no options offered to and exercised by, or shares granted to and vested in Directors during the financial year.
THIRTY (30) LARGEST SHAREHOLDERS

% of No. of Issued Share Shares Held Capital Name of Shareholders 1. Tune Money Sdn. Bhd. 419,858,080 55.85 2. AirAsia Berhad 121,677,000 16.19 3. Cartaban Nominees (Asing) Sdn. Bhd. 36,816,000 4.90 SSBT Fund HG22 for Smallcap World Fund, Inc. 4. Cartaban Nominees (Asing) Sdn. Bhd. 13,112,000 1.74 SSBT Fund HG19 for Global Small Capitalization (Am Funds Inssr) 5. HSBC Nominees (Asing) Sdn. Bhd. 11,171,778 1.49 BBH and Co Boston for Genesis Asean Opportunities Fund (Gemofplc) 6. HSBC Nominees (Asing) Sdn. Bhd. 9,412,700 1.25 TNTC for Baring Pacific Fund 7. Citigroup Nominees (Asing) Sdn. Bhd. 9,125,400 1.21 UBS Ag for Aps Asia Pacific Master Hedge Fund 8. HSBC Nominees (Asing) Sdn. Bhd. 8,858,700 1.18 BBH and Co Boston for Smaller Companies Portfolio (Gemofl) 9. HSBC Nominees (Asing) Sdn. Bhd. 6,624,800 0.88 BNY Brussels for VFM Emerging Markets Trust 10. HSBC Nominees (Tempatan) Sdn. Bhd. 5,700,000 0.76 HSBC (M) Trustee Bhd for Hwang Select Opportunity Fund (3969) 11. HSBC Nominees (Asing) Sdn. Bhd. 5,000,000 0.67 Exempt An for JPMorgan Chase Bank, National Association (U.A.E.) 12. Citigroup Nominees (Asing) Sdn. Bhd. 3,900,000 0.52 CGML IPB for Pedder Street Asia Absolute Return Master Fund Limited 13. HSBC Nominees (Asing) Sdn. Bhd. 3,676,700 0.49 TNTC for APS Fund 14. Citigroup Nominees (Asing) Sdn. Bhd. 3,595,100 0.48
ANNUAL REPORT 2012
133
ANALYSIS OF SHAREHOLDINGS (CONTD)
GSCO for M. Kingdon Offshore Master Fund L. P.
% of No. of Issued Share Name of Shareholders Shares Held Capital 15. ECML Nominees (Tempatan) Sdn. Bhd. 3,300,000 Libra Invest Berhad for ECM Libra Foundation (E00181) 16. Citigroup Nominees (Asing) Sdn. Bhd. 2,956,000 GSCO for Prince Street Opportunities Ltd 17. Malacca Equity Nominees (Tempatan) Sdn. Bhd. 2,764,100 Exempt An for Phillip Capital Management Sdn. Bhd. (EPF) 18. HSBC Nominees (Asing) Sdn. Bhd. 2,706,000 BNYM SA/NV for CF Canlife Asia Pacific Fund 19. HSBC Nominees (Tempatan) Sdn. Bhd. 2,600,000 HSBC (M) Trustee Bhd for Hwang Asia Quantum Fund (4579) 20. HSBC Nominees (Asing) Sdn. Bhd. 2,528,000 Exempt An for Credit Suisse Securities (Europe) Limited (CLTAC N-Treaty) 21. HSBC Nominees (Asing) Sdn. Bhd. 2,500,000 Exempt An for Skandinaviska Enskilda Banken Ab (Finnish Clients) 22. Malacca Equity Nominees (Tempatan) Sdn. Bhd. 2,415,000 Exempt An for Phillip Capital Management Sdn. Bhd. 23. DB (Malaysia) Nominee (Tempatan) Sendirian Berhad 2,400,000 Deutsche Trustees Malaysia Berhad for Hong Leong Growth Fund 24. Citigroup Nominees (Asing) Sdn. Bhd. 2,382,900 GSCO for Kingdon Associates 25. HSBC Nominees (Asing) Sdn. Bhd. 2,261,800 Exempt An for BNP Paribas Securities Services (Singapore SGD) 26. HSBC Nominees (Asing) Sdn. Bhd. 2,240,100 Exempt An for The Bank of New York Mellon (BNYM AS E&A) 27. HSBC Nominees (Asing) Sdn. Bhd. 2,200,000 BBH and Co Boston for Prusik Asian Smaller Companies Fund Public Limited Company 28. ECML Nominees (Tempatan) Sdn. Bhd. 2,000,000 Libra Invest Berhad for ECM Libra Foundation (Roger Tan) (F00181) 29. Cartaban Nominees (Asing) Sdn. Bhd. State Street London Fund JY74 for the Pacific Basin Equity Fund (RIC PLC) 1,998,100 30. BSNC Corporation Berhad 1,400,000 0.44 0.39 0.37 0.36 0.35 0.34 0.33 0.32 0.32 0.32 0.30 0.30 0.29 0.27 0.27 0.19
134
ANNUAL REPORT 2012
LIST OF PROPERTIES
Registered/ Beneficial Owner Title/Address Description/ Existing Use Tenure Date of Land Area and acquisition Built up Area Audited NBV as at 31 December 2012 RM000 4,836
TIMB
No. 36, Jalan Ampang, 50450 Kuala Lumpur
A 4-storey intermediate shop-office which we use as our Head Office
Freehold
27/12/ 1997
5,048.26 sq ft with builtup area of 19,859.39 sq ft (main floor) and 322.91 sq ft (ancillary) 5,952.43 sq ft with builtup area of 17,322.99 sq ft (main floor) and 1,086.93 sq ft (ancillary)
TIMB
No. 38, Jalan Ampang, 50450 Kuala Lumpur
A 3 -storey intermediate shop-office which we use as our Head Office, save for a room with an area of 221 sq ft has been leased to AIOI Nissay Dowa Insurance Agency Singapore Pte Ltd for a term of one year commencing 1 April 2012 A 4-storey corner shopoffice which has been leased to CIMB Bank Berhad for a term of three years commencing 1 August 2011 A 4-storey intermediate shop-office which we use as our store save for the ground floor and the first floor measuring an area of 3,492 sq ft. has been leased to Amekim Furnishing Sdn Bhd for a term of two years commencing 1 May 2012 and currently used as home furnishing store dealing with curtains
Freehold
23/03/ 1983
3,743
TIMB
No. 77, Jalan Kapar, 41400 Klang, Selangor
Freehold
18/05/ 2000
5,295.83 sq ft with builtup area of 20,209.00 sq ft (main floor) and 987.04 sq ft (ancillary) 1,765.27 sq ft with built-up area of 6,765.97 sq ft (main floor) and 220.01 sq ft (ancillary)
2,395
TIMB
No. 37, Jalan 3/62A, Bandar Manjalara, 52200 Kepong, Kuala Lumpur
Leasehold for 99 years ending 25 August 2077
06/04/ 1996
529
PROXY FORM
(Company No. 948454-K) Incorporated in Malaysia
FORM OF PROXY
I/We ____________________________________________________________________________________________________________
(FULL NAME IN BLOCK LETTERS)
NRIC No./Co No.: _________________________________________________ of _____________________________________________

(COMPULSORY) (ADDRESS)
being a Member TUNE INS HOLDINGS BERHAD (the Company) hereby appoint __________________________________
(FULL NAME IN BLOCK LETTERS)
NRIC No.:________________________________________________________ of _____________________________________________

(COMPULSORY) (ADDRESS)
and/or ____________________________________________________ NRIC No.: _____________________________________________

(FULL NAME IN BLOCK LETTERS) (COMPULSORY)
of ______________________________________________________________________________________________________________
(ADDRESS)
as my / our proxy(ies) to vote in my / our name and on my / our behalf at the Second Annual General Meeting of the Company to be held on Wednesday, 19 June 2013 at 10.00 a.m. and at any adjournment of such meeting and to vote as indicated below: Resolutions Ordinary No. 1 No. 2 No. 3 No. 4 No. 5 No. 6 No. 7 No. 8 No. 9
Description
Ordinary Business Receive the Audited Financial Statements and Reports Approval of Directors Fees for financial year ended 31 December 2012 Approval of Directors Fees with effect from financial year ending 31 December 2013 Re-election of Razman Hafidz bin Abu Zarim Re-election of Tan Sri Dr. Anthony Francis Fernandes Re-election of Dato Kamarudin Bin Meranun Re-election of Tan Hong Kheng Re-election of Ng Soon Lai @ Ng Siek Chuan Re-appointment of Auditors Special Business Authority to allot shares pursuant to Section 132D of the Companies Act, 1965 Proposed Shareholders Ratification of Recurrent Related Party Transactions
For
Against
No. 10 No. 11
Proposed Shareholders Mandate for Recurrent Related Party Transactions No. 12 (Please indicate with an X in the spaces provided how you wish your votes to be cast. If you do not do so, the proxy will vote or abstain from voting as he thinks fit)
No. of shares held: CDS Account No.: : __________% First Proxy The proportion of Second Proxy : __________% my/our holding to be represented by my/our proxies are as follows: Date:
NOTES ON APPOINTMENT OF PROXY a.
Signature of Shareholder/Common Seal
A member must be registered in the Record of Depositors at 5.00 p.m. on 12 June 2013 (General Meeting Record of Depositors) in order to attend and vote at the Meeting. A depositor shall not be regarded as a Member entitled to attend the Meeting and to speak and vote thereat unless his name appears in the General Meeting Record of Depositors. Any changes in the entries on the Record of Depositors after the abovementioned date and time shall be disregarded in determining the rights of any person to attend and vote at the Meeting.
b. c. d. e.
A member entitled to attend and vote is entitled to appoint up to two proxies (or in the case of a corporation, to appoint a representative), to attend and vote in his stead. There shall be no restriction as to the qualification of the proxy(ies). The Proxy Form in the case of an individual shall be signed by the appointor or his attorney, and in the case of a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. Where a member appoints two proxies, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (omnibus account), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.
f.
The Proxy Form or other instruments of appointment shall not be treated as valid unless deposited at the Registered Office of the Company at B-13-15, Level 13, Menara Prima Tower B, Jalan PJU 1/39, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than forty-eight (48) hours before the time set for holding the meeting. Faxed copies of the duly executed form of proxy are not acceptable.
Please fold here
Postage Stamp
The Company Secretary, TUNE INS HOLDINGS BERHAD (948454-K) B-13-15, Level 13, Menara Prima Tower B Jalan PJU 1/39, Dataran Prima 47301 Petaling Jaya Selangor Darul Ehsan Malaysia.
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TUNE INS HOLDINGS BERHAD

FINANCIAL STATEMENTS_40 ANALYSIS OF SHAREHOLDINGS_131 LIST OF PROPERTIES_134 PROXY FORM

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

NOTICE OF ANNUAL GENERAL MEETING

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

NOTICE OF ANNUAL GENERAL MEETING (CONTD)

whichever is the earliest.

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

NOTICE OF ANNUAL GENERAL MEETING (CONTD)

OTHER ORDINARY BUSINESS

NOTES ON APPOINTMENT OF PROXY

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

NOTICE OF ANNUAL GENERAL MEETING (CONTD)

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

RAZMAN HAFIDZ BIN ABU ZARIM

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

BOARD OF DIRECTORS (CONT'D)

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

BOARD OF DIRECTORS (CONTD)

DATO KAMARUDIN BIN MERANUN (DATO KAMARUDIN)

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

BOARD OF DIRECTORS (CONT'D)

TAN HONG KHENG

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

BOARD OF DIRECTORS (CONT'D)

NG SOON LAI @ NG SIEK CHUAN

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

PETER DIXON MILLER

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

TUNE INS HOLDINGS BERHAD (TIH)

Tune Money (Labuan) Ltd (TIL)

Tune Money Gen Re Ltd (TMGR)

Tune Money Life Re Ltd (TMLR)

Direct General Insurance (TIMB)

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

CHAIRMANS MESSAGE (CONTD)

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

we give you a peace of mind in protecting your sanctuary

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

CEOS MESSAGE (CONT'D)

TUNE INS HOLDINGS BERHAD

ANNUAL REPORT 2012

CEOS MESSAGE (CONTD)