MAA Assurance's Annual Report 2005 - Zurich

2 Financial Highlights 

4 MAA Branch Offices 

6 Board Of Directors 

8 Senior Management Team 

9 Corporate Information 

11 Chief Executive Officer’s Statement 

14 Appraisal Value On The Life Insurance Business 

Of Malaysian Assurance Alliance Berhad 

Contents 

19 Directors’ Report 

26 Statement By Directors 

26 Statutory Declaration 

27 Report Of The Auditors To The Members Of 

Malaysian Assurance Alliance Berhad 

28 Balance Sheet As At 31 December 2005 

29 Income Statement For The Financial Year 

Ended 31 December 2005 

30 General Insurance Revenue Account For The 

Financial Year Ended 31 December 2005 

31 General Insurance Revenue Account For The 

Financial Year Ended 31 December 2004 

32 Life Fund Balance Sheet As At 

31 December 2005 

33 Life Insurance Revenue Account For The 


34 Statement Of Changes In Equity For The 


35 Cash Flow Statement For The Financial Year 

Ended 31 December 2005 

37 Notes To The Financial Statements - 

31 December 2005

Financial Highlights 

Five Years in Review 

2001 

RM'000 

2002 

RM'000 

2003 

RM'000 

2004 

RM'000 

2005 

RM'000 

Profit Before Taxation 50,419 53,212 87,052 71,261 4,035 

Total Assets 4,028,641 4,330,780 5,136,141 5,753,483 5,974,548 

Gross Premium Income 

-Life Insurance Division 

Total Life New 

Business Premiums 

1,768,115 839,800 1,132,513 1,276,293 1,395,505 

1,348,193 419,144 678,444 800,202 898,396 


-General Insurance Division 

345,835 416,511 430,174 364,753 424,253 

2 

100,000 

6,000,000 

80,000 

60,000 

87,052 

71,261 

4,800,000 

3,600,000 

4,028,641 

4,330,780 

5,136,141 

5,753,483 

5,974,548 

40,000 

50,419 

53,212 

2,400,000 

20,000 

1,200,000 

4,035 

0 

0 

2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 

Profit Before Taxation (RM'000) 

Total Assets (RM'000) 

2,000,000 

1,500,000 

1,600,000 

1,768,115 

1,200,000 

1,348,193 

05

Financial 0 Highlights (continued) 

2001 2002 2003 2004 2005 

Profit Before Taxation (RM'000) 

4,035 

0 

2001 2002 2003 2004 2005 

Total Assets (RM'000) 

2,000,000 

1,500,000 

1,600,000 

1,768,115 

1,200,000 

1,348,193 

1,200,000 

800,000 

839,800 

1,132,513 

1,276,293 

1,395,505 

900,000 

600,000 

678,444 

800,202 

898,396 

400,000 

300,000 

419,144 

0 

2001 2002 2003 2004 2005 

0 

2001 2002 2003 2004 2005 


- Life Insurance Division (RM'000) 

Total Life New 

Business Premiums (RM'000) 

500,000 

Whole Life 1.5% 

Investment Link 12.7% 

3 

400,000 

300,000 

345,835 

416,511 

430,174 

364,753 

424,253 

Temporary 8.2% 

Riders 4.3% 

Others 2.7% 

Life-Product Mix 

(New Business Premiums) 

Endowment 70.6% 

200,000 

Fire 14.9% 

Misc 15.7% 

100,000 

Personal Lines 5.9% 

Marine 4.7% 

Motor Cycle 9.8% 

Motor Vehicle 49% 

0 

2001 2002 2003 2004 2005 


- General Insurance Division (RM'000) 

General-Product Mix 

(Total Gross Premiums)

langkawi 

kangar 

alor setar 

gurun 

kulim sungai petani sibu 

penang 

butterworth 

nibong tebal 

taiping 

ipoh 

sri manjung 

sitiawan 

bentong 

rawang 

shah alam 

kuala lumpur 

petaling jaya 

klang 

banting 

seremban 

melaka 

batu pahat 

kota bahru 

kuala terengganu 

kemanan 

kuantan 

mentakab 

kajang 

kuala pilah 

segamat 

muar 

kluang 

johor bahru 

bintulu 

miri 

limbang 

labuan 

beaufort 

kota kinabalu 

ranau 

sandakan 

lahad datu 

tawau 

keningau 

sarikei 

kuching 

MAA Branch Offices 

WILAYAH PERSEKUTUAN 

HEAD OFFICE 

11th Floor, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur 

4 

• Unit 01-02, Mezzanine Floor, Crown Regency Service Apartments, 12, Jalan P. Ramlee, 50250 Kuala Lumpur 

• T.01-U.05-1, Jalan P 9E/1, Presint 9, 62250 Putrajaya 

• Lot 9 Ground Floor, Lazenda Commercial Centre, Phase 3, Jalan O.K.K Abdullah 87007 F.T. Labuan 

• No.58, 58-1 & 58-2, Jalan Prima, Vista Magna Metro Prima, 52100 Kepong, Kuala Lumpur 

(SERVICING BRANCH) 

• Lot 401 H(A)4th Floor, Suria KLCC Shopping Center, 50088 Kuala Lumpur 

• Lot M29, Central Market (Mezzanine Floor), Jalan Hang Kasturi, 50050 Kuala Lumpur 

• Lot F002, 1st Floor, Sungei Wang Plaza, Jalan Sultan Ismail, 50250 Kuala Lumpur 

• Lot NP1-01, Lower Ground. Floor, Mid Valley Megamall, Lingkaran Syed Putra, 59200 Kuala Lumpur 

SELANGOR 

• Wisma MAA, 14, 16, 18, 20 & 22, Jalan SS 3/5, Taman Sentosa, 47300 Petaling Jaya 

• Wisma MAA, 77, 79, 81, 83 & 85, Lorong Tiong, Taman Orkid, 41050 Klang 

• No. 15 & 15A, Jalan R2/2, Rawang Integrated Industrial Park, 48000 Rawang 

• No. 184, Ground & 1st Floor, Jalan Sultan Abdul Samad, 42700 Banting 

• Lot 29, 1st & 2nd Floor, Lot 31, Ground Floor, 31A 1st Floor & 31B 2nd Floor, Kajang Plaza, Jalan Dato Seri P.Alagendra 2, 43000 Kajang 

• No.27, Jln. Tg. Ampuan Zabedah 9/J, Seksyen 9, 40100 Shah Alam 


• F2.38A, 1st Floor, Sunway Pyramid, No. 3, Jalan PJS 11/15, Bandar Sunway, 46150 Petaling Jaya 

• Lot F37B Subang Parade, 1st Floor, Subang Parade Shopping Centre, 47500 Subang Jaya 

• Lot K07, Ground Floor, IOI Mall, Batu 9, Jalan Puchong, Bandar Puchong Jaya, 47100 Puchong 

KEDAH 

• No.41 Pusat Dagangan Kelana Mas, 07000 Kuah, Langkawi 

• Wisma MAA, No.117 & 118, Jalan Pengkalan, Taman Pekan Baru, 08000 Sungai Petani 

• No.18-E & 18-F, 1st & 2nd Floor, Jalan Raya, 08300 Gurun 

• No.274, Ground Floor & 1st Floor, Lorong Keranji, Taman Keranji 2, 09000 Kulim 

• No.535, Ground, 1st and 2nd Floor, Jalan Tengah, 05100 Alor Setar 


• Lot S-28, 2nd Floor, No.888, Star Parade Complex, Jalan Teluk Wanjah, 05200 Alor Setar 

PERLIS 

• No.8, 2nd Floor, 10, Jalan Sena Indah 1, Taman Sena Indah, 01000 Kangar 

PENANG 

• Menara MAA, No.170 Jalan Argyll, 10250 Penang 

• Wisma MAA, 7126-7128, Jalan Bagan Jermal, Taman Bintang, 12300 Butterworth 

• Ground Floor & 1st Floor, 46 & 48, Jalan Besar, Taman Merbah, 14300 Nibong Tebal, Seberang Prai 


• Lot 3A-03-12, 3rd Floor, Kompleks Bukit Jambul, Jalan Rumbai, 11900 Bayan Lepas 

• Rumah Alumni, Universiti Sains Malaysia, 11800 Minden

PERAK 

• No.23, 1st & 2nd Floor, Jalan Raja Omar, Taman Selamat, 32000 Sitiawan 

• No.16 & 17, Jalan SM 1C/15, Fasa 1C4, Bandar Baru Sri Manjung, 32040 Sri Manjung 

• No.102, Ground Floor, Jalan Taming Sari, 34000 Taiping 

• Wisma MAA, 65, Persiaran Greenhill, 30450 Ipoh 

• No. 5A, Ground, 1st & 2nd Floor, Jalan Laman Intan, Bandar Baru Teluk Intan, 36000 Teluk Intan 

TERENGGANU 

• Wisma MAA, No.134 Jalan Sultan Zainal Abidin, 20000 Kuala Terengganu 

• K-5371, Jalan Jakar, 24000 Kemaman 

NEGERI SEMBILAN 

• Menara MAA, No. 1, Jalan Lintang, 70200 Seremban 

• No.5 Ground & 1st Floor, 6 Ground Floor, Taman Bukit Pilah Perdana, Jalan Angkasa Ria 72000 Kuala Pilah 


• F30, 1st Floor, Seremban Parade, Lot 4973, Jalan Dato’ Bandar Tunggal, 70000 Seremban 

PAHANG 

• No.53, Jalan Tun Razak, 28400 Mentakab 

• Lot 3 Ground Floor & 1st Floor, Pusat Perniagaan Ketari, 28700 Bentong 

• Wisma MAA, A-1, Jalan Stadium, 25200 Kuantan 

MELAKA 

• Wisma MAA,184-B (2nd Floor)185,186 &187, Taman Melaka Raya, 75000 Melaka 

JOHOR 

• Menara MAA Ground, 8th & 9th Floor, 15, Jalan Dato Abdullah Tahir, 80300 Johor Bahru 

• Wisma MAA, 11A & 15, Jalan Syed Hamid Sagaff, 86000 Kluang 

• Wisma MAA, 1, Jalan Emas, Taman Batu Hampar, 85000 Segamat 

• Wisma MAA, No.21-5, 21-6, Jalan Zabedah, 83000 Batu Pahat 

• Wisma MAA, 34, Jalan Bakri, 84000 Muar 

KELANTAN 

• Lot No.499-500, Seksyen 12, Jalan Pengkalan Chepa, 15400 Kota Bharu 

SABAH 

• Menara MAA, Ground & 3rd Floor, 6 Lorong Api-api 1, 88000 Kota Kinabalu 

• MDLD 3715 1st Floor & 3716 Ground & 1st Floor, Lot 39-40, Bandar Wilayah, Jalan Bunga Raya, 91100 Lahad Datu 

• Wisma MAA, Lot 1 & 2 , TB224, Town Extension II, 91000 Tawau 

• Block 11 Lot 9 1st & 2nd Floor, Lot 10 Ground, 1st & 2nd Floor, Bandar Indah, Commercial Centre Mile 4 Jalan Utara, 90000 Sandakan 

• Lot 1, Ground & 1st Floor, Pedasa Commercial Complex, 89000 Keningau 

• Lot 3, 1st Floor, Cerah Commercial Centre, Jalan Baharu, 89800 Beaufort 

• Lot 1 Ground & 1st Floor, Block E Bangunan SEDCO, Phase 7, 89300 Ranau 


• Lot G5, Ground Floor, KK Plaza, Jalan Lapan Belas, 88000 Kota Kinabalu 

5 

SARAWAK 

• Menara MAA, Level 8, Lot 86 Section 53, Jalan Ban Hock/Central Timur, 93300 Kuching 

• Lot 838 & 839, Block 9 MCLP, Jalan Merpati, 98000 Miri 

• 10 C, 10D & 10E,Ground & 1st Floor, Wisma Bintang Timur, Brooke Drive, 96000 Sibu 

• Ground Floor, No. 215 Parkcity Commerce Square, Jalan Tun Ahmad Zaidi, Bintulu 97000 

• No.15 Jalan Getah, 96100 Sarikei 

• Lot 2019, Ground Floor, Jalan Pandaruan, 98700 Limbang 


• Wisma Saberkas Lot 3.10A, Parcel No.90-4-15, Wisma Saberkas Building Complex, Jalan Tun Abang Haji Openg, 93000 Kuching 

• Wisma Sanyan Lot 1.11, Level 1, Wisma Sanyan, No.1 Jalan Sukan, 96000 Sibu

Board Of Directors 

1 

Tunku Dato’ Ya’acob bin Tunku 

Tan Sri Abdullah 

Non-Independent Non-Executive Chairman 

1 

2 

General Dato’ Sri Hj Suleiman 

bin Mahmud (Rtd) 

Independent Non-Executive Director 

2

3 

4 

5 

Datuk Ramlan bin Abdul Rashid 

Executive Director/ Chief Executive Officer 

Yeo Took Keat 

Non-Independent Non-Executive Director 

Dato’ Iskandar Michael bin Abdullah 

Independent Non-Executive Director 

3 

45

Senior Management Team 

head office 

standing left to right 

Azhani Bin Abdul Wahab Vice President - Fixed Income Investments Daniel Han Yong Keng Vice President - Bancassurance A.M. Zaliff Adahan Executive Vice 

President - Financial and Group Insurance Danny Choong Yick Kheong Vice President - Finance David Chang Kok Fah Senior Vice President - Branch Admin. & Central 

Services Datuk Ramlan Bin Abdul Rashid Executive Director / Chief Executive Officer Serena Thio Hui Ming Vice President - Actuarial & Strategic Planning Kevin 

Choong Wui Teck Vice President - Composite Insurance Muhammad Devan Bin Abdullah Asst. Vice President - Governance, Systems & Cost Mgt Soon Teck Onn Asst. 

Vice President -Investment Linked Fund Mgt Chen Kim Loong Vice President - Investment Services 


8 

John Leong Choon Wai 

Deputy President - Life Insurance 

Robert Lee Kon Chon 

President - Life Insurance 

Lee Fooi Ming 

Vice President - Life Technical Services 

(not in picture) 

Chan Yok Chor 

Asst. Vice President - Life Product Development 

Leng Bong Yong 

Asst. Vice President - Life Marketing, South Region 

James Lau Mee Kiin 

Asst. Vice President - Life Marketing, North Region 

life division 


Goh Eng Choo 

Asst. Vice President - General Relationship Marketing 

Rama Krishnan Nair 

Vice President - General Technical Services 

Abdul Khalid Bin Salleh 

Vice President - General Broking 

Goh Ching On 

Executive Vice President - General Claims Management 

Sia Chon Meng 

President - General Insurance 

David Tan See Dip 

Executive Vice President - General Corporate Client & 

Schemes, H.O. 

Toh Cheng Hock 

Asst. Vice President - General Special Schemes 1 

Zainal Abidin Muhammad 

Asst. Vice President - General Technical & Risk Placement (2) 

Rosliza Binti Md Yusoff 

Asst. Vice President - General Motor Claims 

Tan Kang Han 

Asst. Vice President - General Marketing, Central Region 

general division 

(not in picture) 

Liew Chi Fui 

Asst. Vice President - General Marketing, East Region

Corporate Information 

BOARD OF DIRECTORS 

Tunku Dato’ Ya'acob bin Tunku Tan Sri Abdullah 


Dato’ Iskandar Michael bin Abdullah 

General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) 

Yeo Took Keat 

REGISTERED OFFICE 

Suite 20.03, 20th Floor, Menara MAA, 

12, Jalan Dewan Bahasa, 

50460 Kuala Lumpur 

Telephone No.: 03-2141 3060 

Facsimile No.: 03-2141 3061 

SECRETARIES 

Yeo Took Keat (MIA No.3308) 

Lily Yin Kam May (MAICSA No.0878038) 

AUDITORS 

PricewaterhouseCoopers 

Chartered Accountants 

PRINCIPAL PLACE OF BUSINESS 

11th Floor, Menara MAA, 

12, Jalan Dewan Bahasa, 


Telephone No.: 03-2146 8000 

Facsimile No.: 03-2142 5863 

APPOINTED ACTUARY - LIFE 

Zainal Abidin Mohd Kassim 

Mercer Zainal Consulting Sdn. Bhd. 

9

Corporate Information (continued) 

PANEL OF REINSURERS 2006 

General Reinsurers 

Rating 

Rating 

10 

Hannover Ruckversicherung, AG 

Malaysian Branch 

#1 Suite 31-1, 31st Floor Wisma UOA II, 

21, Jalan Pinang, 50450 Kuala Lumpur 

Munich Reinsurance Company, 

Malaysian Branch 

Suite 13.1, Level 13, Menara IMC, 

8, Jalan Sultan Ismail, 50250, Kuala Lumpur 

Sirius International Insurance Corporation 

(PUBL), Labuan Branch 

c/o MNI Offshore Insurance (L) Ltd., 

Level 11(B) Block 4, Office Tower, 

Financial Park Labuan Complex, 

Jalan Merdeka, 87000 W.P. Labuan. 

24, Raffles Place, #10-01/02, Clifford Centre, 

Singapore 048621 

Malaysian Reinsurance Berhad 

12th Floor, Bangunan Malaysian Re, 

No 17, Lorong Dungun, Damansara Heights, 


Labuan Reinsurance (L) Limited 

Level 4 (B) Main Office Tower, 

Financial Park Labuan, Jalan Merdeka, 

87000 W.P. Labuan 

Everest Reinsurance Co 

20 Cecil Street, #08-06, Equity Plaza, 


AXA Re Asia Pacific Pte Ltd 

152 Beach Road, #27-01, Gateway East, 


China International Reinsurance Co Ltd, 

Labuan Branch 

c/o MNI Offshore Insurance (L) Ltd, Block 4, 

Office Tower, Level 11(B), Financial Park, 

Labuan Complex, Jalan Merdeka, 87000 W.P. 

Labuan 

AA- 

(S&P) 

A+ 

(S&P) 

A- 

(S&P) 

BBBpi 

(S&P) 

B++ 

(AM Best) 

AA- 

(S&P) 

AA- 

(S&P) 

A- 

(S&P) 

Partner Reinsurance Co Ltd., Labuan Branch 

Level 11(B), Block 4 Office Tower Financial Park 

Labuan Complex, Jalan Merdeka, 

87000 W.P. Labuan. 

Management Office : 

2, Battery Road, #23-01 Maybank Tower, 


Odyssey America Reinsurance Corporation, 

Singapore Branch 

9, Raffles Place, #37-01, Republic Plaza, 


Mitsui Sumitomo Reinsurance Ltd., 

Labuan Branch 

Level 13 (F2) Main Office Tower, Financial Park 

Labuan, Jalan Merdeka, 87000 W.P. Labuan. 

Marketing Office: 

Lot 14(A), 14th Floor, UBN Tower, 10 Jalan P. 

Ramlee, 50250 Kuala Lumpur. 

Caisse Centrale de Reassurance, 

Labuan Branch 

c/o MNI Offshore Insurance (L) Ltd, Level 11(B), 

Block 4, Office Tower, Financial Park Labuan 

Complex, Jalan Merdeka, 87000 W.P. Labuan 

Swiss Reinsurance Company 

28th Floor, Menara Keck Seng, 

203, Jalan Bukit Bintang, 55100 Kuala Lumpur 

B.E.S.T. Reinsurance 

Far East Regional Office 

Suite 3A, Level 8, Block 3A, Plaza Sentral, 

Jalan Stesen Sentral 5, Kuala Lumpur Sentral, 


Limit - Lloyd's Syndicate 0566 STN 

Limit 566, Plantation Place, 30 

Fenchurch Street, London, EC3M 3BD 

Wellington - Lloyd's Syndicate 2020 WEL 

Wellington Underwriting, 88 Leadenhall 

Street, London, EC3A 3BA 

AA- 

(S&P) 

A- 

(S&P) 

AA- 

(S&P) 

AAA 

(S&P) 

AA 

(S&P) 

BBB 

(S&P) 

A 

(S&P) 

A 

(S&P) 

MAA International Assurance Ltd 

21st Floor, Menara MAA, 

12, Jalan Dewan Bahasa, 50460 Kuala Lumpur 

n/a 

Momentum Underwriting Management 

Limited (MUM) 

as agents for 100% Transatlantic Reinsurance Company 

Momentum Underwriting Management, 

37-39 Lime Street, London, EC3M 7AY 

AA 

(S&P) 

Life Reinsurers 

Malaysian Life Reinsurance Group Berhad 

3B/21-3, Block 3B, Level 21, Plaza Sentral, 

Jalan Stesen 5, Kuala Lumpur Sentral, 


Rating 

A- 

(S&P) 

Cologne Reinsurance Company plc. 

Singapore Branch 

9 Raffles Place, #24-01 Republic Plaza, 


Rating 

AAA 

(S&P) 

SCOR Vie Singapore Branch 

143 Cecil Street, #20-04 GB Building, 


Munich Re Singapore Branch 

20 Collyer Quay, #13-01 Tung Centre, 


A- 

(S&P) 

A+ 

(S&P) 

Hannover Rueckversicherung, 

AG Malaysia Branch 

Suite 31-1, 31st Floor, Wisma UOA II, 

21, Jln Pinang, 50450 Kuala Lumpur. 


21st Floor, Menara MAA, 

12, Jalan Dewan Bahasa, 50460 Kuala Lumpur 

AA- 

(S&P) 

n/a

Chief Executive 

Officer’s Statement 

11 

The Malaysian economy remained resilient 

with a Gross Domestic Product (GDP) 

growth of 5.3% in 2005 despite the high 

oil prices, increasing pressure on inflation 

and the downturn in the global electronics 

cycle in the first half of the year. The 

economic growth was again driven by the 

private sector and favourable financial 

conditions in the country. All sectors with 

the exception of the construction sector 

registered positive growth, as the 

Malaysian Government and Bank Negara 

Malaysia continued to adopt supportive 

macroeconomic policies to position the 

economy for sustainability and long-term 

growth. 

Despite the challenging economic 

environment, the Company was able to 

sustain its performance with the on-going 

cost efficiency strategies, productivity 

enhancement and introduction of 

innovative products. 

PERFORMANCE REVIEW 

For the year under review, the Company’s total operating revenue grew by 

10.5% to RM2.1 billion (2004: RM1.9 billion). 

The Company’s profit before tax was RM4.0 million for the current year 

under review (2004: RM71.3 million). The lower profit registered was due 

mainly to downturn in the stock market resulting in losses in disposal of 

equities and provisions for diminution in value of investments. 

As at 31 December 2005, the Company’s total assets stood at RM6.0 billion, 

an increase of 3.4% over 2004 of RM5.8 billion. 

REVIEW BY BUSINESS DIVISIONS 

LIFE INSURANCE DIVISION 

The Life Insurance Division posted a moderate growth of 9.4% in its total 

premium income to RM1,396 million (2004: RM1,276 million), largely from 

single premium business, in particular endowment and investment-linked 

plans. The continued premium growth was attributed to MAA’s extensive 

network of branches countrywide (currently numbering 76), its sizeable 

agency force that underpin its distribution capacity and brand awareness. 

The current low interest rate regime and the shift in consumer preference 

from plain protection to savings/investments type of policies have 

contributed to the increased sales of investment-linked products and 

endowment plans. 

In terms of annualised new business premiums, a measure of the year’s new 

sales activity, the Life Insurance Division has registered a commendable 

growth of 12.3% to RM898.4 million (2004: RM800.2 million). This 

outperforms the 6.9% growth recorded by the industry, which reflects MAA’s 

ability to further penetrate the market.

Chief Executive Officer’s Statement (continued) 

12 

The Life Insurance Division recorded a lower profit before tax 

from RM50.8 million in 2004 to RM12.9 million in 2005. The 

lower profit before tax in 2005 was due mainly to downturn in 

the stock market resulting in losses in disposal of equities and 

provisions for diminution in value of investments, coupled with 

increase in cash bonus payment and medical claims from 

medical policies. Notwithstanding the transfer of profit to 

Shareholders’ Fund account, the overall Life Insurance Fund 

Surplus, remains healthy with a cumulative surplus carried 

forward of RM504.0 million as at 31 December 2005. 

In line with the growing importance of financial planning 

services in the country, MAA will continue to focus its effort on 

agency training via the enrolment of agents to the Certified 

Financial Planner (CFP) course, and the Registered Financial 

Planner (RFP) programme. The aim of which is to enhance 

professionalism by equipping agents with financial planning 

knowledge, and the skills and competency to cope with rising 

consumer demand as well as competition from other financial 

services. Towards this end, with effect from 1 January 2005, 

the Life Insurance Association of Malaysia (“LIAM”) has 

implemented new ruling requiring life insurance agents who 

have been in the industry for more than one (1) year to attend 

module 1 and module 2 of the RFP programme, to train agents 

to become financial planners. As at end December 2005, 

MAA’s agency force stood at 12,773 (2004: 15,802). Moving 

forward, MAA’s primary emphasis will be to elevate the level of 

professionalism and knowledge of its agents to improve sales 

productivity rather than growing the sales force. 

The Division has noted the public’s changing demand trend 

towards investment-linked plans. The Group expects this trend 

to continue in the future, and is currently planning even more 

exciting investment-linked plans to meet this ever-increasing 

demand. 

Plans that have been successfully launched during the year, 

include the investment-linked MaaxLife Series (i.e. upgraded 

version of Maax Wanita, MaaxUmaat and MaaxEducation), 

Maaster Yield Guaranteed Plan, 2nd tranche of Maaster 

Capital Guaranteed Plan, personal accident plans, PA500, 

insurance plan for senior citizens, the SeniorGold and 

relaunched of its signature healthcare plans, MedicaLife 200 

and MedicaGen 200. 

MAA places great importance on meeting customers’ 

satisfaction. Towards this end, it will maintain its strategies and 

the various initiatives that it had already embarked on, 

including the development of a Customer Satisfaction Index 

(“CSI”) to enhance and raise the quality of our services to 

customers. 

On the industry front, 2006 may see the launch of a new 

common branded Annuity Plan by the National Insurance 

Association of Malaysia (“NIAM”), which will be a singlepremium 

investment-linked product. Towards this end, LIAM 

has also submitted to the EPF, a proposal for a participant 

investment withdrawal scheme, for single-premium 

investment-linked plans, which are similar to the existing 

withdrawal investment scheme for unit trusts. All these efforts 

are made to offer the public at large the opportunities of wider 

investment choices and most importantly retirement planning 

and wealth management. 

GENERAL INSURANCE DIVISION 

The General Insurance Division recorded a growth of 16.3% in 

gross written premium to RM424.3 million (2004: RM364.8 

million), outperformed the industry growth of 7.8% in 2005. 

After embarked on a cleanup in 2004 of its underwriting 

portfolio by systematically purging loss-making agencies and 

clients, and at the same time implemented more stringent 

underwriting terms, the Division refocuses its strategies again 

and adopts a more product-oriented approach to grow the 

business in 2005. 

Motor vehicle business premiums increased by 13.0% to 

RM208.0 million (2004: RM184.0 million) whilst non-motor 

premiums increased by 19.7% to RM216.3 million (2004: 

RM180.7 million). 

Motor vehicle business continues to be the dominant class, 

with a portfolio share of 49.0% of the total gross premium 

income of the Division (2004: 50.4%). Non-motor portfolio 

share have increased, with Fire Insurance, Miscellaneous 

business, Motor Cycle and Marine business accounting for 

14.9%, 21.6%, 9.8% and 4.7% respectively (2004: 16.2%, 

20.2%, 9.5% and 3.7%). 

As a result of the stringent claims controls and underwriting 

measures implemented, the claim ratio for 2005 improved 

further to 62.2% (2004: 66.3%). This coupled with 

improvement in treaty renewal terms has enabled the General 

Insurance Division to record underwriting profit, although 

small, for the second consecutive year of RM0.6 million (2004: 

RM0.8 million). 

Notwithstanding the improvement in the underwriting 

performance, the Division recorded a loss before tax of RM9.4 

million from a profit of RM17.3 million in 2004. The loss was 

due mainly to downturn in the stock market resulting in losses 

in disposal of equities and provisions for diminution in value of 

investments. 

The Division has since 2004 adopted a Centralised Processing 

philosophy to provide better controls using Information 

Technology. The Division rolled out a revamped General 

Insurance System (GIS), which focuses on full automation of 

the Division’s core processes in 2004 starting with motor 

section and completed it with the non-motor sections at end 

2005. 

Since 2001, the General Insurance Industry has made proposals 

to the regulators to rebalance the motor vehicle insurance 

premium tariff, which was last revised in 1978, or 28 years ago. 

A revised tariff is needed to meet the ever increasing cost of 

vehicle spare-parts, vehicle theft frequencies and higher court 

awards. The proposed new tariff take into account new factors 

which were previously ignored, namely: geographical location, 

sex, age and claims history of the driver, and details of the 

vehicle’s make and model. To-date, a decision on this matter is 

still pending. 

In our continuing efforts to provide better services to our 

customers, in addition to the existing MotorClub Breakdown 

Assistance service nationwide, the Division will roll out the 

Accident Assistance Scheme in 2006, where on the scene 

assistance will be rendered for all called-in accidents and 

collisions. At the same time, the Division will also be looking at 

providing free of charge comprehensive fire risk assessment 

and prevention services to its fire policyholders. This will help 

fire policyholders to enjoy better premium rates with improved 

and effective fire prevention systems and concurrently, help to 

mitigate incidence of fire occurrence. 

INVESTMENT DIVISION 

Amidst the challenging investment climate during the year, the 

Company’s total investment income increased marginally by 

2.7% to RM260.6 million (2004: RM253.7 million). This 

improvement was due mainly to the timely portfolio structure 

adopted during the year, as a result of maintaining a generally

Chief Executive Officer’s Statement (continued) 

conservative investment philosophy that emphasises capital 

preservation, profitability and consistent income flows. Fixed 

income investments are expected to remain the core portfolio 

asset, with corporate bonds being the preferred instrument. 

In additions, moving forward we may reassess the investment 

portfolio of Life non-participating fund and the General fund 

by reducing the quoted equity portfolio to shelter the Group’s 

earnings against the volatility of the equity market. 

Nevertheless, the Company will constantly review and revise its 

strategies to take advantage of the expected strong economic 

and financial environment in the coming years. 

BRAND EQUITY 

The Company will continue with its philosophy of brand equity 

as one of our most important assets to maintain the strong 

corporate image that we have developed to-date. This image 

has been the mainstay of our continued growth, in revenues 

and in profits, and has been the pillar that has kept our clients 

and our agents loyal to us. 

In this respect, ownership of our own office buildings, of which 

there are 48 in numbers, throughout Malaysia with excellent 

visibility, has provided our clients and agents with the 

confidence to continue to place their trust in our Company. 

The Company is also the most visible insurer in the advertising 

and media arena. Our image is most notably remembered in 

our television commercials (the only insurer appearing regularly 

on TV), road and highway billboards (over 58 sites throughout 

Malaysia), newsprint advertisements (at least one insertion in 

major newspapers a week), as well as concerted public 

relations activities and charity programmes. 

Our tag-line is well recognised, “Say Yes to MAA. Say Yes To 

Solid Financial Security”. 

QUALITY FOCUS 

The Company is also proud to report that for the last six years, 

the Company has been able to retain its ISO 9001 quality 

status. Its on-going focus on maintaining tip-top IT systems and 

internal processes, staff training and education programs help 

to ensure that our clients and agents get the best possible 

service. Only through a focused effort on quality, can the 

Company guarantee our success in the future. 

The Company has further enhanced its cutting-edge standards 

by adopting Six Sigma programme in 2005. 

INFORMATION TECHNOLOGY 

The Company will continue with its effort to invest in the latest 

information technologies to further enhance its operational 

and cost efficiency. Towards this end, MAA has formulated a 5 

year Information Technology (“IT”) Strategy Plan with the main 

aim to support future business requirements. The IT Strategy 

Plan will address main issues of: 

• organisation alignment for effective IT strategy execution 

• application development, automation and system integration 

• datawarehousing, data mining and business intelligence 

• e-business strategy process modeling initiative 

CORPORATE GOVERNANCE 

The Company has in place systems and checks to ensure good 

corporate governance and reporting in line with best practices 

and also consistent with the principles prescribed under the 

Prudential Framework of Corporate Governance for Insurers 

issued by Bank Negara Malaysia. 

VALUATION OF INSURANCE BUSINESS 

As in prior years, the Company has engaged an external 

actuary to compute the Appraisal Value of its Life Insurance 

Business, following the same valuation technique used 

internationally to value life insurance businesses. The Appraisal 

Value is the discounted cash flow of profits to the shareholder, 

from policies sold in the past (“embedded value”) and from 

future policy sales (“structural value”). 

Based on the Appraisal Value, as set out on page 14 to 17, the 

life insurance portfolio is assigned three (3) values, based on 

assumed future growth scenarios, namely RM2.3 billion, 

RM2.9 billion and RM3.7 billion. 

If one were to value the general insurance business at 85% of 

2005 gross premium income of RM424.3 million, this would 

value the Division at RM361 million. 

The combined life and general insurance divisions are thus 

valued at RM4.1 billion (Full Valuation), RM3.3 billion (Mid 

Valuation) and RM2.7 billion (Low Valuation). 

The Board is constantly monitoring this valuation as it will be 

used as the base for any future merger or acquisition 

negotiations. 

PROSPECTS 

Bank Negara Malaysia reported in its Annual Report 2005 that 

the Malaysian economy in 2006 is expected to strengthen 

further albeit the environment of a more favourable global 

conditions. With real GDP projected to grow at a faster rate of 

6%, driven by strengthening export performance and resilient 

domestic demand, coupled with the Government launching 

the Ninth Malaysia Plan which sets out the foundation for 

further development and strengthening the prospects for the 

Malaysian economy, the insurance industry is poised to register 

favourable growth in the years ahead. 

The Company is well aware of the many challenges ahead and 

the increasing competitive environment it is facing. Towards 

this end, the Company will continue its initiative to invest in the 

latest technologies to further enhance operations efficiency, 

strengthening distribution system, human resource and agency 

development and developing innovative products to improve 

further the quality of services to customers. 

We are optimistic of achieving better results in the years ahead 

through the various strategies undertaken to position itself as 

one of the leading insurance company in Malaysia. 

ACKNOWLEDGEMENT AND APPRECIATION 

I would to like express my deepest appreciation to the 

management team, staff and agency force for their continued 

commitment, dedication, loyalty and contributions to ensure 

the continued growth and success of the Company. 

I would also like to take this opportunity to extend our 

appreciation to Bank Negara Malaysia and the regulatory 

bodies for their continued guidance and support; to our valued 

customers and business associates for their invaluable support, 

confidence and trust they have placed in us. 

Finally, I would like to thank my fellow Board members for their 

stewardship and contribution to the Company. 

DATUK RAMLAN BIN ABDUL RASHID 

Executive Director/Chief Executive Officer 

13

Appraisal Value On The Life Insurance Business 

Of Malaysian Assurance Alliance Berhad 

20 April 2006 

The Directors 

Malaysian Assurance Alliance Berhad 

22nd Floor, Menara MAA 

12, Jalan Dewan Bahasa 


Dear Sirs 

Introduction 

We have been engaged by Malaysian Assurance Alliance Berhad (“MAA” or “the Company”) to perform an appraisal 

valuation of its life insurance business as at 31 December 2005. The appraisal valuation was carried out based on a set of 

assumptions that the management of MAA consider reasonable and realistic, taking into consideration the past performance 

of MAA, its operating structure, the economic growth of Malaysia and the stage of development of the life insurance industry 

in Malaysia. 

Assumptions 

MAA has projected a total new business premium for the year 2006 of RM1,190 million. This includes RM830 million in 

premiums from the Single Premium Fixed Dividend Endowment Plan. Premium received for this FDE plan amounted to RM618 

million in 2005. 

The following set of assumptions has been used in the appraisal valuation: 

14 

i) Base year total new business (2006) 

Projected New Business 

Growth in 2005 

Projected Premium 

(RM million) 

Conventional Business 

- Par 118% 32 

- Non Par 23% 174 

- FDE 42% 830 

Investment Linked Business 

- Regular Premium 16% 54 

- Single Premium 26% 100 

Total Projected New Business in 2006 1,190

Appraisal Value On The Life Insurance Business Of 

Malaysian Assurance Alliance Berhad (continued) 

ii) Subsequent New Business Growth (2007 onwards) 

The range of expected subsequent new business growth is as follows: 

Year 

Range of expectation 

Scenario A Scenario B Scenario C 

Low Medium High 

2007-2015 10% p.a. 15% p.a. 20% p.a. 

2016 onwards 3% p.a. 3% p.a. 3% p.a. 

iii) Investment returns Par Plans 7.0% p.a. 

Annuity business 

7.0% p.a. 

Non Par Plans (excluding FDE) 

6.5% p.a. 

FDE Plans 

5.5% p.a. 

iv) Discount rates Business in force 9% p.a. 

New business 

12% p.a. 

Appraisal Value 

Due to the long-term nature of the life insurance business, reserves (the life fund) are set asideto meet future liabilities. Profits 

are only expected to emerge gradually over the years. An Appraisal Value takes into account the expected future cash flows 

and discounts future surpluses at a suitable rate. It is equal to the sum of the Embedded Value and the Structural Value. 

The Embedded Value is the assessment of the present value of distributions that will accrue to the shareholders over the future 

lifetime of all existing policies. 

The Structural Value is the assessment of the life business’s ability to generate profits from its assets – as evidence by past 

performance – by continuing to write new business on profitable terms. It incorporates, among others, the value of the 

existing agency structure. It is based on the assumption that the projected mix of new business in 2006 and the profitability 

thereof is representative of the future flow of new business. Any change in the mix of new business (for example an increase 

in investment linked business at the expense of traditional business) would affect the valuation. It is also heavily dependent 

on the capitalization factor used to gross up the value of one year’s business. 

15



The Appraisal Value of MAA’s life insurance business as at 31 December 2005 is as follows (RM million): 

Range of expected business growth rate Scenario A Scenario B Scenario C 

Embedded Value: 

Conventional 439.42 439.42 439.42 

Investment Linked 101.89 101.89 101.89 

Total Embedded Value 541.31 541.31 541.31 

Structural Value: 

Conventional 1,038.89 1,373.88 1,825.83 

Investment Linked 742.74 1,010.96 1,378.69 

Total Structural Value 1,781.63 2,384.84 3,204.52 

Appraisal Value: 

Conventional 1,478.31 1,813.30 2,265.25 

Investment Linked 844.63 1,112.85 1,480.58 

Total Appraisal Value 2,322.94 2,926.15 3,745.83 

The Appraisal Value has been calculated based on the above set of assumptions of new business growth and the Company’s 

expected future experience regarding agency costs, termination rates, claim payments, management expenses, taxation and 

bonuses that are consistent with the Company’s past experience. 

The Appraisal Value excludes the value of the Shareholders’ Fund and the General Insurance Business of the Company. 

16 

Reliance 

In preparing this report, we have relied on an extensive range of information, qualitative and quantitative, supplied by the 

Company. We have relied where possible on written materials including descriptive, financial and statistical information, and 

we have supplemented our understanding by interviews and other discussions with executives of the Company. While we have 

reviewed all information supplied to us for reasonableness and consistency, we have relied on the Company for accuracy and 

completeness of all information supplied. 

We have relied on the Company for assumptions as to the expected future growth of its business. The Company is targeting 

growth of its lines of business ranging from 16% to 118%. The high growth assumption is in respect to MAA’s participating 

new business which is relatively small and registered a negative growth in 2004/5 due to uncertainties created by 

regulatory changes. 

The following table sets out the Company’s actual sales performance against that projected/targeted for each year. The 

fluctuation in the investment linked business is mainly due to the volume of new business achieved for single premium type 

plans being lower than expected. 

% of Sales Target Achieved 2005 2004 2003 2002 2001 

Ordinary Life (excluding FDE) 79% 122% 74% 80% 73% 

Investment Linked 56% 122% 23% 67% 22%



Comments on Results 

The Appraisal Value of the Company has increased by 4.3% over the year to RM2,323 million (at 9% base discount rate on 

Scenario Growth A). The Embedded Value of the Life Fund has increased significantly by 24% or RM106 million. The increase in 

the Embedded Value is mainly due to contribution from profitable regular premium investment linked business. The Structural Value 

is broadly unchanged compared to last year. There is currently a Quota Share reinsurance arrangement with MAA Labuan for some 

lines of business secured from. This has been factored in our calculations. 

Limitations 

This report has been prepared at the request of the Directors of MAA for the purpose of disclosure of the Company’s Appraisal 

Value in the Annual Report of MAA and MAA Holdings Berhad respectively and it may not be used for any other purpose. 

This report has been prepared on the basis of the information provided to us and our understanding of the business of MAA. 

Nevertheless, the reader should be aware that future events cannot be predicted with certainty and, as a result, deviations 

from any financial estimates referred to in this report and pertaining to the future are normal and are to be expected. 

The reader should also understand that an Appraisal Value is a subjective assessment and is cautioned that the figures in this 

statement should not be used as the sole basis for determining MAA’s final value to an investor. 

Yours faithfully 

Zainal Abidin Mohd Kassim, FIA 

Principal and Actuary 

Mercer Zainal Consulting Sdn Bhd 

17

FINANCIAL STATEMENTS 

2005

Directors’ Report 

The directors have pleasure in submitting their report together with the audited financial statements of the Company for the 

financial year ended 31 December 2005. 

PRINCIPAL ACTIVITIES 

The Company is engaged principally in the underwriting of life insurance business, including investment-linked and annuity 

business, and all classes of general insurance business. There have been no significant changes in the nature of these activities 

during the financial year. 

FINANCIAL RESULTS 

RM'000 

Net profit for the financial year 4,782 

DIVIDENDS 

The dividends paid or declared by the Company since the end of the previous financial year are as follows: 

In respect of the financial year ended 31 December 2004, 

a final gross dividend of 55 sen per share, less income tax, 

was declared on 28 April 2005 and paid on the following dates: 

RM'000 

- 28 April 2005 25,600 

- 19 July 2005 26,000 

- 21 September 2005 7,800 

59,400 

The directors now recommend the payment of a final gross dividend of 15 sen per share on 150,000,000 ordinary shares, less 

income tax, amounting to RM16,200,000 which is subject to approval at the forthcoming Annual General Meeting of the 

Company. 

19 

RESERVES AND PROVISIONS 

All material transfers to or from reserves and provisions during the financial year are shown in the financial statements. 

PROVISION FOR OUTSTANDING CLAIMS 

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

ascertain that there was adequate provision for incurred claims, including Incurred But Not Reported ("IBNR") claims. 

BAD AND DOUBTFUL DEBTS 

Before the income statement and balance sheet of the Company were made out, the directors took reasonable steps 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 allowance had been 

made for doubtful debts. 

At the date of this report, the directors are not aware of any circumstances which would render the amount written off for 

bad debts or the amounts of the allowance for doubtful debts in the financial statements of the Company inadequate to any 

substantial extent. 

CURRENT ASSETS 

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

ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values 

as shown in the accounting records of the Company have been written down to an amount which they might be expected so 

to realise. 

At the date of this report, the directors are not aware of any circumstances which would render the values attributed to current 

assets in the financial statements of the Company misleading.

Directors’ Report (continued) 

VALUATION METHODS 

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the 

existing methods of valuation of assets or liabilities of the Company misleading or inappropriate. 

CONTINGENT AND OTHER LIABILITIES 

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

(a) 

(b) 

any charge on the assets of the Company which has arisen since the end of the financial year which secures the liabilities 

of any other person; or 

any contingent liability in respect of the Company which has arisen since the end of the financial year. 

No contingent or other liability of the Company has become enforceable or is likely to become enforceable within the period 

of twelve months after the end of the financial year which, in the opinion of the directors, will or may affect the ability of the 

Company to meet its obligations as and when they fall due. 

For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising from contracts of insurance 

underwritten in the ordinary course of business of the Company. 

CHANGE OF CIRCUMSTANCES 

At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the 

financial statements of the Company, which would render any amount stated in the financial statements misleading. 

ITEMS OF AN UNUSUAL NATURE 

20 

The results of the operations of the Company for the financial year were not, in the opinion of the directors, substantially 

affected by any item, transaction or event of a material and unusual nature. 

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or 

event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations 

of the Company for the financial year in which this report is made. 

CORPORATE GOVERNANCE 

Statement of compliance with the Prudential Framework of Corporate Governance for Insurers - JPI/GPI 25 

The Board is satisfied that, the Company has complied with all prescriptive requirements of, and adopts the JPI/GPI25: 

Prudential Framework of Corporate Governance for Insurers, and JPI13/2003: Corporate Governance Standards, issued by 

Bank Negara Malaysia. The Board has continued its commitment in ensuring that the highest principles and best practices in 

corporate governance are practised as a fundamental part of discharging its responsibilities to protect and enhance 

shareholder value and the financial performance of the Company. 

Board responsibilities and oversight 

The Board has an overall responsibility to lead the Company, including providing directions in term of the Company’s corporate 

objectives and business strategies, overseeing the conduct of business of the Company, implementing an appropriate system 

of risk management and ensuring the adequacy and integrity of the Company’s internal control and reporting procedures. 

The Board currently comprises five directors with skills and experience in diverse range of business, financial, technical and 

public service background. The Board is represented by four non-executive directors and one executive director. Of the four 

non-executive directors, two of them are independent non-executive directors who participate fully in decision making of key 

issues regarding the Company. The roles and activities of the Chairman and the Chief Executive Officer are distinct and 

separate. 

The Board meets at least six times a year with additional meetings being convened as necessary. For the financial year ended 

31 December 2005, the Board met six times. All the directors satisfied the minimum attendance of at least 75% of the Board 

meetings held during the financial year ended 31 December 2005. 

The appointments to the Board were approved by Bank Negara Malaysia. All appointments and reappointments of Board 

members are subject to evaluation and review by the Nomination Committee, and approved by the Board before the


CORPORATE GOVERNANCE (continued) 

Board responsibilities and oversight (continued) 

applications are submitted to Bank Negara Malaysia for approval. 

The principal responsibilities of the Board include reviewing and approving a strategic plan, overseeing the Company's 

business, formalising documentation on matters specifically reserved for its decision and ensuring that the Company's internal 

controls and reporting procedures are adequate. 

The composition of the Board during the period since the date of last report is as follows: 

Chairman : Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah – Non-independent Non-executive 

Member : Dato’ Iskandar Michael bin Abdullah – Independent Non-executive 

Datuk Ramlan bin Abdul Rashid – Executive Director / Chief Executive Officer 

General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) – Independent Non-executive and appointed on 26.4.2005 

Yeo Took Keat – Non-independent Non-executive and appointed on 24.2.2005 

Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah – Non-independent Non-executive and resigned on 11.5.2005 

Major General Lai Chung Wah (Rtd) – Independent Non-executive and resigned on 11.5.2005 

The Board has established a number of board committees and senior management committees. Each committee operates 

within defined terms of reference. Board committees are the Audit Committee, the Nomination Committee, the 

Remuneration Committee and the Risk Management Committee. Senior management committees include the Executive 

Committee, the Investment Committee, the Management Committee, the Cost Control Committee, the Human Resource 

Committee, the Quality Steering Committee, the Information Technology Committee and the Governance Working 

Committee. The Board Committees are chaired by an independent non-executive director, while the senior management 

committees are chaired by the Executive Director/Chief Executive Officer. 

Nomination Committee 

The members of the Nomination Committee are as follows: 

Chairman : Dato’ Iskandar Michael bin Abdullah – Independent Non-executive 

Member : Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah – Non-independent Non-executive 

General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) – Independent Non-executive and appointed on 1.6.2005 


Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah – Non-independent Non-executive and resigned on 11.5.2005 


21 

The Nomination Committee is chaired by an independent non-executive director. The Company has submitted application for 

appointment of additional non-executive director to BNM, which will fulfil minimum criteria for the Committee composition. 

In considering the right candidate for appointment to the Board, the Nomination Committee takes into account the required 

mix of skills, experience and other core competencies that is necessary to enable the Company to achieve its corporate 

objectives and fulfil its fiduciary responsibilities. The Nomination Committee is also responsible for the annual review of the 

effectiveness of the Board and individual directors. 

The Nomination Committee functions on Terms of Reference approved by the Board. The principal duties and responsibilities 

of Nomination Committee are: 

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

(vii) 

To establish minimum requirements for the board and the chief executive officer to perform their responsibilities 

effectively; 

To recommend and assessing the nominees for directorship, the directors to fill board committees, as well as nominees 

for the chief executive officer position. This includes assessing directors and the chief executive officer proposed for 

appointment, before an application for approval is submitted to BNM; 

To oversee the overall composition of the board in terms of the appropriate size and skills, the balance between 

executive directors, non-executive and independent directors, and mix of skills and other core competencies required, 

through annual reviews; 

To establish the mechanism for formal assessment and assessing the effectiveness of the board as a whole, the 

contribution by each director to the effectiveness of the board, the contribution of the board’s various committees and 

the performance of the chief executive officer; 

To recommend to the board on the removal of a director/chief executive officer if he is ineffective, errant or negligent 

in discharging his responsibilities; 

To ensure all directors undergo appropriate induction programmes and receive continuous training; and 

To oversee appointment, management succession planning and performance evaluation of key senior officers, and 

recommending to the board the removal of key senior officers if they are ineffective, errant and negligent in 

discharging their responsibilities.




The number of meetings attended by each member of the Nomination Committee during the financial year ended 31 

December 2005 are as follows: 

Name of Directors 

No. of Attendance 

Dato’ Iskandar Michael bin Abdullah 4/4 

Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah 4/4 

General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) 3/3 

Yeo Took Keat 3/3 

Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah 1/1 

Major General Lai Chung Wah (Rtd) 1/1 

In the opinion of the Nomination Committee, the Board has a balanced mix of skills and experience required for the business 

of the Company. 

Remuneration Committee 

The members of the Remuneration Committee are as follows: 

Chairman : General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) – Independent Non-executive and appointed on 1.6.2005 


Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah – Non-independent Non-executive and appointed on 1.6.2005 

Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah – Non-independent Non-executive and resigned on 

11.5.2005 


22 

The Remuneration Committee is made up of non-executive directors and chaired by an independent non-executive director. 

It is responsible for developing a remuneration policy that is sufficient to attract and retain directors and key senior officers of 

calibre needed to manage the Company successfully. 

The Remuneration Committee functions on Terms of Reference approved by the Board. The principal duties and 

responsibilities of Remuneration Committee are as follows: 

(i) 

To recommend a framework of remuneration for directors, chief executive officer and key senior officers. The 

remuneration policy shall: 

(a) be documented and approved by the full board and any changes there to should be subject to the endorsement of 

the full board; 

(b) reflect the experience and level of responsibility borne by individual directors, the chief executive officer and key 

senior officers; 

(c) be sufficient to attract and retain directors, chief executive officer and key senior officers of calibre needed to 

manage the company successfully; and 

(d) be balanced against the need to ensure that the funds of the insurers are not used to subsidise excessive remuneration 

packages. 

(ii) 

To recommend specific remuneration packages for directors, chief executive officer and key senior officers. The 

remuneration packages shall: 

(a) 

(b) 

(c) 

(d) 

be based on an objective consideration and approved by the full board; 

take due consideration of the assessments of the nominating committee of the effectiveness and contribution of the 

director, chief executive officer or key senior officers concerned; 

not be decided by the exercise of sole discretion of any one individual or restricted individuals; and 

be competitive and is consistent with the insurer’s culture, objective and strategy. 

The number of meetings attended by each member of the Remuneration Committee during the financial year ended 31 






Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah 1/1 


Major General Lai Chung Wah (Rtd) 0/0




Risk Management Committee 

The members of the Risk Management Committee are as follows: 

Chairman : General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) – Independent Non-executive and appointed on 1.6.2005 



Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah – Non-independent Non-executive and resigned on 

11.5.2005 


The Risk Management Committee is chaired by an independent non-executive director and constantly reviews the risk factors 

of the Company to ensure risks at all levels are managed effectively. It will also formulate risk management policies, action 

plans and evaluate the adequacy of overall risk management policies and procedures. 

The Risk Management Committee functions on Terms of Reference approved by the Board. The principal duties and 

responsibilities of Risk Management Committee are as follows: 

(i) 

(ii) 

(iii) 

(iv) 

(v) 

To set up a risk management structure; 

To review and recommend risk management strategies, policies and risk tolerance for the Board’s approval; 

To review and assess the adequacy of risk management policies and framework for identifying, measuring, monitoring 

and controlling risks; 

To ensure that there are adequate infrastructure, resources and systems in place for an effective risk management; and 

To review the management’s periodic reports on risk exposure, risk portfolio composition and risk management activities. 

The number of meetings attended by each member of the Risk Management Committee during the financial year ended 31 






Yeo Took Keat 2/2 


Major General Lai Chung Wah (Rtd) 1/1 

23 

Management accountability 

The Company has an organisation structure showing all reporting lines as well as clearly documented job description for all 

management and executive employees. The officers of the Company have knowledge of their respective authority and 

operating limits, which are documented in the Company's Internal Control Procedures. 

The human resource procedures of the Company provide for the setting of goals and training of each staff. The Company 

conducts formal appraisals for each staff on an annual basis. 

The Company has established procedures to avoid and to deal with any conflict of interest situation. None of the Directors 

and senior management of the Company has, in any circumstances, conflict of interest referred to in Sections 54 and 55 of 

the Insurance Act, 1996. 

The Board has approved a communication policy that is applicable to all levels of staff of the Company. 

Corporate independence 

The Company has complied the requirements of BNM’s guidelines on Related Party Transactions (JPI/GPI 19) in respect of all 

its related party undertakings. Necessary disclosures were made to the Board and where required, the Board’s prior approval 

for the transaction has also been obtained. All material related party transactions have been disclosed in the financial 

statements.



Internal controls 

The responsibility of maintaining a system of internal controls rests with the Board. The Company has established internal 

controls which cover all levels of personnel and business processes that ensure the Company's operations are run in an 

effective and efficient manner as well as safeguarding the assets of the Company and stakeholders' interest. 

Continuous assessment of the effectiveness and adequacy of internal controls, which includes an independent examination of 

controls by the internal audit function, ensures corrective action where necessary, is taken in a timely manner. The internal 

audit function reports directly to the Board through the Audit Committee, and its findings and recommendations are 

communicated to Senior Management and all levels of staff concerned. The Chief Internal Auditor has unrestricted access to 

the Chairman and members of the Audit Committee and the internal audit function perform their duties within the ambit of 

the Audit Charter approved by the Audit Committee and the Board. 

The Information Technology (IT) Committee is responsible for establishing effective information technology and information 

systems plans, authorising IT related expenditure based on authority limits, and monitoring the progress of approved projects. 

The requirements of BNM’s Guidelines on Management of IT Environment (GPIS-1) have been complied. 

Risk Management 

The Risk Management Committee (“RMC”) meets regularly, at least every quarter in a financial year to review risk 

management reports of the Company. The RMC has categorised risks into nine key risk factors affecting the Company namely 

product risk, human risk, regulatory risk, operational risk, financial risk, external risk, customer risk, integrity risk and supplier 

risk. 

The Company has established, within its risk management framework, a structural approach to enterprise-wide risk 

management. The process involves risk identification and assessment process whereby all department heads of the Company 

are required to assess their operations and identify risks under each of the key risk factors affecting their operations, identify 

existing controls in place to manage those risks and risk transferred, and the probability of the risks occurring and its impact. 

24 

Public accountability 

As a custodian of public funds, the Company's dealings with the public are always conducted fairly, honestly and professionally. 

All staff and agents of the Company are required to comply with the Code of Ethics and Conduct. 

Financial reporting 

The Board is responsible for ensuring the proper maintenance of accounting records of the Company. Reports on the financial 

condition and performance of the Company are reviewed at the Board, Executive Committee and Management Committee 

meetings. Financial statements and reports are lodged with the regulatory and supervisory authorities, and annual financial 

statements prepared in accordance with applicable regulations and approved accounting standards are audited. 

DIRECTORS 

The directors who have held office during the period since the date of the last report are as follows: 

Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah 

Dato' Iskandar Michael bin Abdullah 


Yeo Took Keat (appointed on 24.2.2005) 

General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) (appointed on 26.4.2005) 

Tunku Dato' Seri Iskandar bin Tunku Tan Sri Abdullah (resigned on 11.5.2005) 

Major General Lai Chung Wah (Rtd) (resigned on 11.5.2005) 

Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah and Dato’ Iskandar Michael bin Abdullah retire in accordance with the 

Company's Articles of Association and being eligible, offer themselves for re-election. 

DIRECTORS’ BENEFITS 

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements 

with the object or objects of enabling directors of the Company to acquire benefits by means of the acquisition of shares in, 

or debentures of, the Company or any other body corporate. 

Since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit 

(other than benefits disclosed as directors' remuneration, fees paid to a company in which certain directors have an interest 

and benefits provided to directors disclosed in the notes 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 IN SHARES 

According to the register of directors' shareholdings, particulars of interests of directors in office at the end of the financial 

year in shares in the ultimate holding company, MAA Holdings Berhad, are as follows: 

Number of ordinary shares of RM1 each 

At 1.1.2005 or 

At 

Allotment Date Acquired Disposed 31.12.2005 

Tunku Dato' Ya'acob 

bin Tunku Tan Sri Abdullah 

- Direct 618,750 - - 618,750 

- Indirect* 51,889,342 - - 51,889,342 

Datuk Ramlan bin 

Abdul Rashid 

- Direct 3,333 - - 3,333 

Yeo Took Keat 

- Direct 40,000 - - 40,000 

* Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965, held through Iternum Melewar Sdn Bhd, a 

company in which the abovenamed directors have an interest. 

By virtue of the abovenamed directors' interest in the shares of the Company's ultimate holding company, they are also 

deemed to have a substantial interest in the shares of the Company and other subsidiary companies of the ultimate holding 

company, to the extent the ultimate holding company has an interest. 

None of the other directors in office at the end of the financial year held any interests in shares in, or debentures of, the 

Company or its related corporations during the financial year. 

ULTIMATE HOLDING COMPANY 

The directors regard MAA Holdings Berhad, a company incorporated in Malaysia, as the ultimate holding company of the 

Company. 

25 

AUDITORS 

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. 

Signed on behalf of the Board of Directors in accordance with their resolution dated 24 March 2006. 


DIRECTOR 

YEO TOOK KEAT 

DIRECTOR 

Kuala Lumpur

Statement By Directors Pursuant To 

Section 169 (15) Of The Companies Act, 1965 

We, Datuk Ramlan bin Abdul Rashid and Yeo Took Keat, being two of the directors of Malaysian Assurance Alliance Berhad, 

state that, in the opinion of the directors, the financial statements set out on pages 19 to 78 are drawn up so as to show a 

true and fair view of the state of affairs of the Company as at 31 December 2005 and of its results and cash flows for the 

financial year ended on that date in accordance with MASB approved accounting standards in Malaysia and the provisions of 

the Companies Act, 1965. 

Signed on behalf of the Board of Directors in accordance with their resolution dated 24 March 2006. 


DIRECTOR 

YEO TOOK KEAT 

DIRECTOR 

Kuala Lumpur 

26 

Statutory Declaration Pursuant To 

Section 169 (16) Of The Companies Act, 1965 

I, Datuk Ramlan bin Abdul Rashid, the director primarily responsible for the financial management of Malaysian Assurance 

Alliance Berhad, do solemnly and sincerely declare that the financial statements set out on pages 19 to 78 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 Datuk Ramlan bin Abdul Rashid at Kuala Lumpur in Malaysia on 

10 April 2006, before me. 

MOHD RADZI BIN YASIN 

COMMISSIONER FOR OATHS

Report Of The Auditors To The Member Of 

Malaysian Assurance Alliance Berhad (company no. 8029 A) 

We have audited the financial statements set out on pages 19 to 78. These financial statements are the responsibility of the 

Company’s directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements 

and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other 

purpose. We do not assume responsibility to any other person for the content of this report. 

We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan 

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial 

statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as 

well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 

opinion. 

In our opinion: 

(a) 

the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and MASB 

approved accounting standards in Malaysia so as to give a true and fair view of: 

(i) 

(ii) 

the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and 

the state of affairs of the Company as at 31 December 2005 and of the results and cash flows of the Company for 

the financial year ended on that date; 

and 

(b) 

the accounting and other records and the registers required by the Act to be kept by the Company have been properly 

kept in accordance with the provisions of the Act. 

27 

PRICEWATERHOUSECOOPERS 

(No. AF: 1146) 

Chartered Accountants 

JAYARAJAN A/L U. RATHINASAMY 

(No. 2059/06/06 (J)) 

Partner of the firm 

Kuala Lumpur 

10 April 2006

Balance Sheet 

As At 31 December 2005 

Note 2005 2004 

RM'000 RM'000 

ASSETS 

GENERAL AND SHAREHOLDERS’ FUND ASSETS 

Property, plant and equipment 3(a) 10,358 11,795 

Investments 4(a) 446,450 498,875 

Loans 5 77,128 81,474 

Tax recoverable 11,090 8,390 

Deferred tax assets 6 8,505 2,664 

Receivables 7(a) 99,409 138,830 

Cash and bank balances 18,126 1,221 

TOTAL GENERAL AND SHAREHOLDERS’ FUND ASSETS 671,066 743,249 

TOTAL LIFE FUND ASSETS (Page 32) 5,303,482 5,010,234 

TOTAL ASSETS 5,974,548 5,753,483 

LIABILITIES 

28 

GENERAL AND SHAREHOLDERS’ FUND LIABILITIES 

Provision for outstanding claims 8 256,698 273,768 

Payables 9(a) 95,944 103,843 

Current tax liabilities 9,170 20,577 

TOTAL GENERAL AND SHAREHOLDERS’ FUND LIABILITIES 361,812 398,188 

TOTAL LIFE FUND LIABILITIES (Page 32) 522,807 626,478 

884,619 1,024,666 

Unearned premium reserves 10 136,961 118,150 

Life policyholders’ fund 11 4,780,675 4,383,756 

4,917,636 4,501,906 

TOTAL LIABILITIES 5,802,255 5,526,572 

SHAREHOLDERS' EQUITY 

Share capital 12 150,000 150,000 

Retained earnings 13 22,293 76,911 

172,293 226,911 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 5,974,548 5,753,483 

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

Income Statement 

For The Financial Year End 31 December 2005 


RM'000 

RM'000 

OPERATING REVENUE 15 2,080,400 1,894,790 

SHAREHOLDERS’ FUND 

Investment income 16(a) 1,065 4,577 

Other operating expenses - net 17(a) (536) (1,384) 

Management expenses 18 57 (52) 

SURPLUS/(DEFICIT) TRANSFERRED FROM INSURANCE 

REVENUE ACCOUNTS: 

586 3,141 

- General insurance (9,400) 17,337 

- Life insurance 12,879 50,813 

Profit from operations 4,065 71,291 

Finance costs 19 (30) (30) 

PROFIT BEFORE TAXATION 4,035 71,261 

TAXATION 20 747 (20,814) 

NET PROFIT FOR THE FINANCIAL YEAR 4,782 50,447 

GROSS DIVIDENDS PER SHARE (sen) 21 15.0 55.0 

29 

EARNINGS PER SHARE (sen) 22 3.2 33.6 


General Insurance Revenue Account 

For The Financial Year Ended 31 December 2005 

Marine, 

Motor Motor Aviation Misce- 

Note Fire vehicles cycles & Transit llaneous Total 

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

Gross premium 63,254 207,988 41,466 19,932 91,613 424,253 

Reinsurance (39,052) (29,797) (6,036) (16,926) (40,168) (131,979) 

Net premium 24,202 178,191 35,430 3,006 51,445 292,274 

(Increase)/decrease 

in unearned premium 

reserves 10 (1,415) (10,113) (3,521) 61 (3,823) (18,811) 

Earned premium 22,787 168,078 31,909 3,067 47,622 273,463 

Net claims incurred 23 (16,741) (118,222) (16,381) (1,592) (17,099) (170,035) 

Net commission 528 (15,743) (3,447) (154) (6,207) (25,023) 

Underwriting surplus 

before management 

expenses 6,574 34,113 12,081 1,321 24,316 78,405 

Management expenses 18 (77,789) 

Underwriting surplus 616 

30 

Investment income 16(b) 19,552 

Other operating 

expenses – net 17(b) (29,568) 

Deficit transferred to 

Income Statement (9,400) 


General Insurance Revenue Account 

For The Financial Year Ended 31 December 2004 

Marine, 


Note Fire vehicles cycles & Transit llaneous Total 

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

Gross premium 58,972 184,016 34,603 13,376 73,786 364,753 

Reinsurance (39,028) (25,368) (4,850) (10,405) (24,777) (104,428) 

Net premium 19,944 158,648 29,753 2,971 49,009 260,325 

(Increase)/decrease 

in unearned premium 

reserves 10 (822) 25,300 3,530 300 (355) 27,953 

Earned premium 19,122 183,948 33,283 3,271 48,654 288,278 

Net claims incurred 23 (12,463) (125,505) (25,939) (1,690) (25,400) (190,997) 

Net commission 62 (15,364) (2,658) (159) (7,339) (25,458) 

Underwriting surplus 

before management 

expenses 6,721 43,079 4,686 1,422 15,915 71,823 

Management expenses 18 (71,061) 

Underwriting surplus 762 

Investment income 16(b) 22,370 

Other operating 

expenses – net 17(b) (5,795) 

31 

Surplus transferred to 

Income Statement 17,337 


Life Fund Balance Sheet 

As At 31 December 2005 


RM'000 RM'000 

ASSETS 

Property, plant and equipment 3(b) 31,674 36,443 

Investments 4(b) 3,916,680 3,847,737 

Loans 5 852,175 751,162 

Tax recoverable 10,994 5,374 

Deferred tax assets 6 11,095 1,806 

Receivables 7(b) 161,297 89,031 


Investment-linked fund assets 24 296,049 236,936 

TOTAL LIFE FUND ASSETS 5,303,482 5,010,234 

LIABILITIES 

Provision for outstanding claims 8 12,336 14,103 

Payables 9(b) 495,673 594,217 

Current tax liabilities 149 5,786 

Deferred tax liabilities 6 - 152 

Provision for life agents’ retirement benefits 14 5,001 5,575 

Investment-linked fund liabilities 24 9,648 6,645 

TOTAL LIFE FUND LIABILITIES 522,807 626,478 

32 

LIFE POLICYHOLDERS’ FUND 11 4,780,675 4,383,756 

TOTAL LIFE FUND LIABILITIES AND 

LIFE POLICYHOLDERS’ FUND 5,303,482 5,010,234 


Life Insurance Revenue Account 



RM'000 

RM'000 

Gross premium 1,395,505 1,276,293 

Reinsurance (42,517) (54,551) 

Net premium 1,352,988 1,221,742 

Gross benefits paid and payable: 

Death (42,384) (43,928) 

Maturity (488,498) (311,954) 

Cash bonus (163,260) (143,059) 

Surrender (157,742) (121,797) 

Annuity (701) (570) 

Others (48,869) (37,756) 

Reinsurance recoveries 7,162 11,618 

Net benefits paid and payable (894,292) (647,446) 

458,696 574,296 

Commission and agency expenses (132,578) (122,013) 

Management expenses 18 (90,817) (89,850) 

235,301 362,433 

Investment income 16(c) 228,556 219,811 

Other operating (expenses)/income - net 17(c) (24,236) 53,403 

Surplus from operations 439,621 635,647 

Finance costs 19 (15) (6) 

Surplus before taxation 439,606 635,641 

Taxation 20 (8,019) (20,229) 

33 

Surplus for the financial year after taxation 431,587 615,412 

(Deficit)/surplus from investment - linked fund 24 (21,789) 3,125 

Net surplus before changes in policy reserves 

for the financial year 409,798 618,537 

Life policyholders’ fund at beginning 

of financial year 4,383,756 3,816,032 

Surplus transferred to Income Statement (12,879) (50,813) 

Life policyholders’ fund at end of financial year 4,780,675 4,383,756 


Statement Of Changes In Equity 



Issued and fully paid 

ordinary shares 

of RM1 each Distributable 

No. of Nominal Retained 

Note shares value earnings Total 

'000 RM'000 RM'000 RM'000 

As at 1 January 2005 150,000 150,000 76,911 226,911 

Net profit for the financial year - - 4,782 4,782 

Dividends for the financial 

year ended 31 December 2004 - - (59,400) (59,400) 

As at 31 December 2005 150,000 150,000 22,293 172,293 

2004 

As at 1 January 2004 150,000 150,000 102,064 252,064 

Net profit for the financial year - - 50,447 50,447 

Dividends for the financial 

year ended 31 December 2003 21 - - (75,600) (75,600) 

34 

As at 31 December 2004 150,000 150,000 76,911 226,911 


Cash Flow Statement 


CASH FLOWS FROM OPERATING ACTIVITIES 


RM'000 

RM'000 

Net profit for the financial year 4,782 50,447 

Adjustments for: 

Loss/(gain) on disposal of investments - net 55,920 (83,931) 

Allowance for diminution in value of investments 115,334 36,183 

Decrease in value of investments in 

investment-linked business 9,741 6,272 

Depreciation of property, plant and equipment 12,198 11,832 

(Gain)/loss on disposal of property, plant and equipment (128) 437 

Increase in allowance for doubtful debts of loans 97 - 

Other provision 19,602 - 

Increase/(decrease) in unearned premium reserves 18,811 (27,953) 

Life fund surplus before changes in policy reserves 409,798 618,537 

Investment income (260,642) (253,744) 

Provision for agents’ retirement benefits 1,490 2,084 

Transfer of life fund surplus to Income Statement (12,879) (50,813) 

Increase in allowance for doubtful debts 2,392 607 

Bad debts written off - 510 

Tax expense 6,986 41,730 

Profit from operations before changes in operating 

assets and liabilities 383,502 352,198 

Increase in receivables (71,491) (5,563) 

(Decrease)/increase in payables (68,527) 128,548 

Decrease in provision for outstanding claims (18,837) (11,912) 

(Increase)/decrease in fixed and call deposits (30,038) 17,585 

(Increase)/decrease in loans (96,764) 90,461 

Interest received 199,448 194,747 

Dividends received 43,080 32,938 

Other investment income received 17,037 12,342 

Payments of agents’ retirement benefits (2,064) (2,290) 

Proceeds from disposal of investments 1,952,804 1,159,938 

Purchases of investments (2,172,767) (1,743,006) 

Purchase of investment properties (75,472) (170,786) 

Proceeds from disposal of investment properties 70,737 87,944 

Other provision (19,602) - 

35 

Cash generated from operations 111,046 143,144 

Income taxes paid (47,918) (31,292) 

NET CASH INFLOW FROM OPERATING ACTIVITIES 25 63,128 111,852 


Cash Flow Statement 

For The Financial Year Ended 31 December 2005 (continued) 

CASH FLOWS FROM INVESTING ACTIVITIES 


RM'000 RM'000 

Purchase of property, plant and equipment (6,954) (11,745) 

Proceeds from disposal of property, plant 

and equipment 1,090 19 

NET CASH OUTFLOW FROM INVESTING ACTIVITIES 25 (5,864) (11,726) 

CASH FLOW FROM FINANCING ACTIVITIES 

Dividends paid (59,400) (75,600) 

NET CASH OUTFLOW FROM FINANCING ACTIVITIES 25 (59,400) (75,600) 

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 25 (2,136) 24,526 

CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 48,722 24,196 

CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 25 46,586 48,722 

36 


Notes To The Financial Statements - 31 December 2005 

1 PRINCIPAL ACTIVITIES AND GENERAL INFORMATION 

The Company is engaged principally in the underwriting of life insurance business, including investment-linked and 

annuity business, and all classes of general insurance business. There have been no significant changes in the nature 

of these activities during the financial year. 

The Company is a public limited liability company, incorporated and domiciled in Malaysia. 

The registered office and principal place of business of the Company are as follows: 

Registered office 

Suite 20.03, 20th Floor 

Menara MAA 



Principal place of business 

11th Floor, Menara MAA 



The holding company and the company regarded by the directors as the ultimate holding company is MAA Holdings 

Berhad, a company incorporated in Malaysia. 

The number of employees as at the end of the financial year in the Company was 1,356 (2004:1,319). 

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the 

Directors on 24 March 2006. 

2 SIGNIFICANT ACCOUNTING POLICIES 

The following accounting policies have been used consistently in dealing with items which are considered material in 

relation to the financial statements. 

37 

(a) Basis of preparation 

The financial statements of the Company have been prepared under the historical cost convention modified by 

the valuation of investments in the investment-linked business at market value, and comply with MASB approved 

accounting standards in Malaysia, the provisions of the Companies Act, 1965, the Insurance Act, 1996 and 

relevant Guidelines and Circulars issued by Bank Negara Malaysia (“BNM”) in all material aspects. 

The preparation of financial statements in conformity with MASB approved accounting standards in Malaysia 

requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and 

disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts 

of revenues and expenses during the reported financial year. Although these estimates are based on the 

Directors’ best knowledge of current events and actions, actual results may differ from estimates. 

(b) Property, plant and equipment 

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. 

Depreciation of property, plant and equipment is provided so as to write off the cost of each asset on a straight 

line basis over the estimated useful life of the assets. The annual depreciation rates are as follows: 

Furniture, fittings and equipment 10% - 20% 

Motor vehicles 10% 

Renovation 10% 

At each balance sheet date, the Company assesses whether there is any indication of impairment. If such 

indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. 

A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 2(e) 

on impairment of assets.

Notes To The Financial Statements - 31 December 2005 (continued) 

2 SIGNIFICANT ACCOUNTING POLICIES (continued) 

(b) Property, plant and equipment (continued) 

Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are credited or 

charged to the income statement and/or revenue accounts. 

Repairs and maintenance are charged to the income statement and/or revenue accounts during the financial year 

in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when 

it is probable that future economic benefits in excess of the originally assessed standard of performance of the 

existing asset will flow to the Company. Major renovations are depreciated over the remaining useful life of the 

related asset. 

(c) 

Investment properties 

Investment properties acquired prior to 1 January 1994 are stated at the net book value. Subsequent acquisitions 

are stated at cost and include related and incidental expenditure incurred. Investment properties are not 

depreciated. The carrying amount of investment properties is reduced to recognise impairment losses. 

At each balance sheet date, the Company assesses whether there is any indication of impairment. If such 

indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. 

A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 2(e) 

on impairment of assets. 

On disposal of an investment property, the difference between net disposal proceeds and its carrying amount is 

charged or credited to the income statement and/or revenue accounts. 

(d) Investments 

38 

Malaysian Government Securities, Treasury bills, Bank Negara Malaysia papers, Cagamas papers and other 

unquoted approved debt securities as specified by BNM are stated at cost adjusted for the amortisation of 

premiums or accretion of discounts, calculated on constant yield basis, from the date of purchase to maturity 

date. The amortisation of premiums and accretion of discounts are recognised in the income statement and/or 

revenue accounts. 

Quoted investments are stated at the lower of cost and market value, determined on an aggregate portfolio basis 

by category of investments except that if diminution in value of a particular investment is not regarded as 

temporary, specific allowance is made against the value of that investment. Market value is determined by 

reference to the stock exchange closing price at the balance sheet date. 

Unquoted investments are shown at cost and an allowance for diminution in value is made where, in the opinion 

of the directors, there is a decline other than temporary in the value of such investment. Where there has been 

a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the 

financial year in which the decline is identified. 

Investments of investment-linked business are valued at the market value at balance sheet date for quoted 

investments and at the prices quoted by financial institutions at the balance sheet date for unquoted investments. 

Any increase or decrease in value of these investments is recognised in the statement of income and expenditure 

of the investment-linked fund. 

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is credited 

or charged to the income statement and/or revenue accounts. 

(e) Impairment of assets 

The carrying values of assets are reviewed for impairment when there is an indication that the assets might be 

impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. 

The recoverable amount is the higher of the net realisable value and the value in use, which is measured by 

reference to discounted cash flows. Recoverable amounts are estimated for individual assets, or, if it is not 

possible, for the cash-generating unit. 

An impairment loss is charged to the income statement and/or revenue accounts immediately. 

A subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment 

loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net 

of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the 

income statement and/or revenue accounts immediately.



(f) 

Derivative instruments 

Derivative instruments, comprising mainly Kuala Lumpur Composite Index futures, are initially recognised in the 

balance sheet at cost and are subsequently remeasured at the market values. Changes in market values and gains 

or losses arising on disposal of derivative instruments are credited or charged to the income statement and/or 


(g) Receivables 

Trade receivables are carried at invoiced amount less an allowance made for doubtful debts. 

Known bad debts are written off and specific allowances are made for any premiums including agents balances 

or reinsurance balances which remain outstanding for more than six months from the date on which they 

become receivable except for motor premiums for which allowance is made for amount outstanding for more 

than 30 days, and for all debts which are considered doubtful. 

(h) Employee benefits 

Short term employee benefits 

Wages, salaries, paid annual leave, bonuses and non-monetary benefits, which are short-term employee benefits, 

are accrued in the financial year in which the associated services are rendered by employees of the Company. 

Post employment benefits 

The Company has post-employment benefit schemes for eligible employees, which are defined contribution 

plans. 

(i) 

(j) 

The Company’s contributions to defined contribution plans, including the Employees’ Provident Fund, are 

charged to the income statement and/or revenue accounts in the financial year to which they relate. Once the 

contributions have been paid, the Company has no further payment obligations. 

Provision for life agents’ retirement benefits 

The Company operates a retirement benefits scheme for its eligible life agents, calculated in accordance with the 

terms and conditions as per respective Agent Retirement Plan Arrangement. 

The retirement benefits earned by the eligible life agents on and subsequent to year 2001 were funded through 

investments in an investment-linked fund managed by the Company. 

The retirement benefits earned by the eligible life agents who opted to remain in the scheme prior to year 2001 

were unfunded and have been recorded as provision for life agents’ retirement benefits. 

In accordance with the requirements of the FRS Standard 119 - Employee Benefits, the scheme is treated as a 

funded defined benefit scheme or an unfunded defined benefit scheme as appropriate. 

General insurance underwriting results 

The general insurance underwriting results are determined for each class of business after taking into account 

reinsurances, commissions, unearned premiums and claims incurred. 

Premium income 

Premium income is recognised in a financial year in respect of risks assumed during that particular year. Premiums 

from direct business are recognised during the financial year upon the issuance of insurance policies. Premiums 

in respect of risks incepted for which insurance policies have not been raised as of the balance sheet date are 

accrued at that date. 

Inward treaty reinsurance premiums are recognised on the basis of periodic advices received from ceding insurers. 

Outward reinsurance premiums are recognised in the same accounting period as the original policy to which the 

reinsurance relates. 

39



(j) 

General insurance underwriting results (continued) 

Unearned premium reserves (“UPR”) 

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 year. 

In determining the UPR at the balance sheet date, the method that most accurately reflects the actual unearned 

premium is used, as follows: 

- 25% method for marine cargo, aviation cargo and transit business; 

- 1/24th method for all other classes of Malaysian general business policies reduced by the percentage of 

accounted gross direct business commissions to the corresponding premium, not exceeding limits specified by 

BNM; and 

- time apportionment method for policies with insurance periods other than 12 months. 

Provision for claims 

A liability for outstanding claims is recognised in respect of both direct insurance and inward reinsurance. The 

amount of outstanding claims is the best estimate of the expenditure required together with related expenses 

less recoveries to settle the present obligation at the balance sheet date. 

Provision is also made for the cost of claims, together with related expenses, incurred but not reported (“IBNR”) 

at the balance sheet date, based on an actuarial valuation by an independent qualified actuary. 

Acquisition costs 

The cost of acquiring and renewing insurance policies net of income derived from ceding reinsurance premiums 

is recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. 

40 

(k) Life insurance underwriting results 

The surplus transferable from the life fund to the income statement is based on the surplus determined by an 

annual actuarial valuation of the long term liabilities to policyholders. 

Premium income 

Premium income includes premium recognised in the life fund and the investment-linked fund. 

Premium income of the life fund is recognised as soon as the amount of the premium can be reliably measured. 

First premium is recognised from inception date and subsequent premium is recognised when it is due. 

At the end of the financial year, all due premiums are accounted for to the extent that they can be reliably 

measured. 

Outward reinsurance premiums are recognised in the same accounting period as the original policies to which 

the reinsurance relates. 

Premium income of the investment-linked fund includes net creation of units which represents premiums paid 

by policyholders as payment for a new contract or subsequent payments to increase the amount of that contract. 

Net creation of units is recognised on a receipt basis. 

Commission and agency expenses 

Commission and agency expenses, which are costs directly incurred in securing premium on insurance policies, 

net of income derived from reinsurers in the course of ceding of premium to reinsurers, are charged to the 

revenue account in the financial year in which they are incurred. 

Provision for claims 

Claims and settlement costs that are incurred during the financial year are recognised when a claimable event 

occurs and/or the insurer is notified. 

Recoveries on reinsurance claims are accounted for in the same financial year as the original claims are 

recognised.



(k) Life insurance underwriting results (continued) 

Claims and provisions for claims arising on life insurance policies including settlement costs, less reinsurance 

recoveries, are accounted for using the case basis method and for this purpose, the benefits payable under a life 

insurance policy are recognised as follows: 

(a) 

(b) 

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

dates; 

death, surrender and other benefits without due dates are treated as claims payable, on the date of receipt 

of intimation of death of the assured or occurrence of contingency covered. 

(l) 

Other revenue recognition 

Interest income on loans is recognised on an accrual basis except where a loan is considered non-performing, i.e. 

where repayments are in arrears for more than six months, in which case recognition of such interest is 

suspended. Subsequent to suspension, interest is recognised on the receipt basis until all arrears have been paid. 

Other interest income including the amount of amortisation of premiums and accretion of discounts is recognised 

on a time proportion basis that takes into account the effective yield of the asset. 

Rental income is recognised on an accrual basis except where default in payment of rent has already occurred 

and rent due remains outstanding for over six months, in which case recognition of rental income is suspended. 

Subsequent to suspension, income is recognised on the receipt basis until all arrears have been paid. 

Lease rental income net of payment lease rental expenses made under operating lease of the same properties is 

recognized on the straight line basis over the lease term. 

Dividend income is recognised when the right to receive payment is established. 

(m) Foreign currencies 

Foreign currency transactions in the Company are accounted for at exchange rates prevailing at the transaction 

dates. Foreign currency monetary assets and liabilities are translated at exchange rates prevailing at the balance 

sheet date. Exchange differences arising from the settlement of foreign currency transactions and from the 

translation of foreign currency monetary assets and liabilities are included in the income statement and/or 


41 

There were no foreign currency monetary assets and liabilities at the balance sheet date. 

(n) Income taxes 

Current tax expense is determined according to the tax laws of the jurisdiction in which the Company operates 

and includes all taxes based upon the taxable profits. 

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the 

amounts attributed to assets and liabilities for tax purpose and their carrying amounts in the financial statements. 

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against 

which the deductible temporary differences or unused tax losses can be utilised. 

Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax. 

(o) Dividends 

Dividends are recognised as liabilities when the obligation to pay is established. 

(p) Contingent liabilities and contingent assets 

The Company does not recognise a contingent liability but discloses its existence in the financial statements. A 

contingent liability is a possible obligation that arises from past events whose existence will be confirmed by 

uncertain future events beyond the control of the Company or a present obligation that is not recognised 

because it is not probable that an outflow of resources will be required to settle the obligation. A contingent 

liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot 

be measured reliably.



(p) Contingent liabilities and contingent assets (continued) 

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain 

future events beyond the control of the Company. The Company does not recognise contingent assets but 

discloses its existence where inflow of economic benefits are probable, but not virtually certain. 

(q) Provisions 

Provisions are recognised when the Company has a present legal constructive obligation as a result of past events, 

when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable 

estimate of the amount can be made. 

(r) 

Cash and cash equivalents 

Cash and cash equivalents consist of cash and bank balances excluding fixed and call deposits, that are readily 

convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 

(s) 

Financial instruments 

Description 

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial 

liabilitor equity instrument of another enterprise. 

A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from 

another enterprise, a contractual right to exchange financial instruments with another enterprise under 

conditions that are potentially favourable, or an equity instrument of another enterprise. 

42 

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to 

another enterprise, or to exchange financial instruments with another enterprise under conditions that are 

potentially unfavourable. 

The particular recognition method adopted for financial instruments recognised on the balance sheet is disclosed 

in the individual accounting policy note associated with each item. 

Fair value estimation for disclosure purpose 

The Company’s basis of estimation of fair values for financial instruments is as follows: 

- Malaysian Government Securities and Treasury bills/Bank Negara Malaysia papers are based on the indicative 

market prices. 

- Quoted investments are based on quoted market prices. 

- Cagamas papers and unquoted corporate debt securities are based on the prices quoted by a minimum of 

two financial institutions. 

- Loans receivable with variable rate which the Company reprices in the event of significant changes in the 

market rate of return are considered to approximate their carrying value. 

- Fixed rate loans receivable are estimated by discounting the estimated future cash flows based on the 

contracted maturity of the loans. The discount rates are based on the current market rates. 

- Loans receivable which are considered non-performing are generally determined on an individual basis by 

taking the gross loan exposure less specific allowance and interest-in-suspense. 

- Other financial assets and liabilities with a maturity period of less than one year are assumed to approximate 

their carrying values.


3 PROPERTY, PLANT AND EQUIPMENT 

Furniture, 

fittings and Motor 

equipment vehicles Renovation Total 

RM'000 RM'000 RM'000 RM'000 

(a) GENERAL AND SHAREHOLDERS’ FUNDS 

Net book value 

At 1 January 2005 5,985 2,706 3,104 11,795 

Additions at cost 2,265 775 92 3,132 

Disposal at net book value - (663) - (663) 

Depreciation charge for the financial year (2,702) (543) (661) (3,906) 

At 31 December 2005 5,548 2,275 2,535 10,358 

At 31 December 2005 

Cost 22,843 3,350 7,847 34,040 

Accumulated depreciation (17,295) (1,075) (5,312) (23,682) 

Net book value 5,548 2,275 2,535 10,358 

At 31 December 2004 

Cost 20,339 4,460 7,755 32,554 


Net book value 5,985 2,706 3,104 11,795 

Depreciation charge for the financial 

year ended 31 December 2004 (2,118) (220) (600) (2,938) 

43 

(b) LIFE FUND 

Net book value 

At 1 January 2005 15,960 3,415 17,068 36,443 

Additions at cost 2,385 621 816 3,822 

Disposals at net book value (1) (298) - (299) 

Depreciation charge for the financial year (4,648) (421) (3,223) (8,292) 

At 31 December 2005 13,696 3,317 14,661 31,674 

At 31 December 2005 

Cost 56,257 5,290 40,528 102,075 


Net book value 13,696 3,317 14,661 31,674 

At 31 December 2004 

Cost 53,884 5,264 39,712 98,860 


Net book value 15,960 3,415 17,068 36,443 

Depreciation charge for the financial 

year ended 31 December 2004 (5,204) (467) (3,223) (8,894)


4 INVESTMENTS 


2005 2004 

Carrying Market Carrying Market 

value value value value 

RM'000 RM'000 RM'000 RM'000 

Investment properties, at cost 

Freehold land and buildings 92,710 93,208 

Leasehold land and buildings 18,953 18,704 

111,663 111,912 

Malaysian Government Securities/ 

Treasury bills/Bank Negara 

Malaysia papers, at cost 43,885 41,827 39,445 38,716 

Amortisation of premiums - net (2,184) (1,444) 

41,701 38,001 

Cagamas papers, at cost 29,974 34,995 

Accretion of discounts/ 

(amortisation of premiums) - net 27 (1) 

30,001 34,994 

44 

Quoted in Malaysia: 

Equity securities of corporations, at cost 66,431 47,163 149,645 142,785 

Allowance for diminution in value (19,315) (7,358) 

47,116 142,287 

Corporate debt securities, at cost 13,158 8,679 9,917 5,930 


8,679 5,930 

Unquoted: 

Equity securities of corporations, at cost 6,650 6,650 


1,276 1,276 

Corporate debt securities, at cost 73,919 68,143 

Accretion of discounts - net 1,023 1,129 

74,942 69,272 

Unit trusts, at cost 11,111 20,498 

Allowance for diminution in value (216) - 

10,895 20,498 

Investment-linked units, at cost 3,353 3,353 

Fixed and call deposits with: 

Licensed banks 116,643 63,537 

Licensed finance companies 181 5,031 

Other corporations - 2,784 

116,824 71,352 

TOTAL INVESTMENTS - GENERAL 

AND SHAREHOLDERS' FUNDS 446,450 498,875


4 INVESTMENTS (continued) 

(a) GENERAL AND SHAREHOLDERS’ FUNDS (continued) 

The fair values of the investment properties at 31 December 2005 were estimated by the Directors to be 

approximately RM117,140,449 (2004: RM116,068,944). 

The maturity structure of Malaysian Government Securities/Treasury bills/Bank Negara Malaysia papers, Cagamas 

papers, corporate debt securities, fixed and call deposits above is as follows: 


RM’000 RM’000 

Investments maturing within 12 months 155,889 98,989 

Investments maturing after 12 months 116,258 120,560 

272,147 219,549 

The titles to certain investment properties of the general and shareholders’ fund amounting to RM30,700,428 

(2004: RM30,700,428) are in the process of being transferred to the Company. Risks, rewards and effective titles 

to the investment properties have been passed to the Company upon unconditional completion of the 

acquisition of those properties. The Company has submitted the relevant documents to the authorities for 

transfer of legal titles to the Company and is awaiting the process and formalising of this transfer to be 

completed. 

(b) LIFE FUND 




RM'000 RM'000 RM'000 RM'000 

Investment properties, at cost 

Freehold land and buildings 699,914 720,698 

Leasehold land and buildings 193,599 154,857 

45 

893,513 875,555 


Treasury bills/Bank Negara 

Malaysia papers, at cost 319,354 311,969 292,034 289,725 

Amortisation of premiums - net (10,053) (8,034) 

309,301 284,000 

Cagamas papers, at cost 149,644 206,155 

Accretion of discounts/ 

(amortisation of premiums) - net 301 (1,081) 

149,945 205,074 


Equity securities of corporations,at cost 698,857 582,346 688,149 657,753 


581,808 654,907



(b) LIFE FUND (continued) 




RM'000 RM'000 RM'000 RM'000 

Corporate debt securities, at cost 39,397 24,875 42,385 31,743 


24,875 29,590 

Unit trusts, at cost 11,587 10,159 8,264 6,665 


10,141 6,665 

Unquoted: 

Equity securities of corporations, at cost 2,147 2,147 

Allowance for diminution in value (53) (22) 

2,094 2,125 

46 

Corporate debt securities, at cost 1,200,295 974,589 

Accretion of discounts - net 16,428 17,056 

Allowance for diminution in value (10,000) - 

1,206,723 991,645 

Unit trusts, at cost 97,785 86,661 

Allowance for diminution in value (7,198) - 

90,587 86,661 


Allowance for diminution in value (131) (72) 

2,869 2,928 



Licensed finance companies 100 12,800 

Other corporations 117,310 81,597 

644,824 708,587 

TOTAL INVESTMENTS - LIFE FUND 3,916,680 3,847,737




The fair values of the investment properties at 31 December 2005 were estimated by the Directors to be 

approximately RM957,176,236 (2004: RM950,357,275). 

The maturity structure of Malaysian Government Securities/Treasury bills/Bank Negara Malaysia papers, Cagamas 

papers, corporate debt securities, fixed and call deposits above is as follows: 


RM'000 

RM'000 

Investments maturing within 12 months 1,029,987 845,523 

Investments maturing after 12 months 1,305,681 1,373,373 

2,335,668 2,218,896 

The titles to certain investment properties of the life fund amounting to RM313,389,880 (2004: RM313,389,880) 

are in the process of being transferred to the Company. Risks, rewards and effective titles to the investment 

properties have been passed to the Company upon unconditional completion of the acquisition of those 

properties. The Company has submitted the relevant documents to the authorities for transfer of legal titles to 

the Company and is awaiting the process and formalising of this transfer to be completed. 

47



(c) 

INVESTMENT-LINKED FUND 




RM'000 RM'000 RM'000 RM'000 


Equity securities of corporations, at cost 84,950 82,200 122,418 129,964 

Unrealised capital (loss)/gain - net (2,750) 7,546 

82,200 129,964 

Corporate debt securities, at cost 36 29 255 523 

Unrealised capital (loss)/gain - net (7) 268 

29 523 

Unit trust, at cost 2,760 3,460 - - 

Allowance for diminution in value 700 - 

3,460 - 

48 

Unquoted: 

Corporate debt securities, at cost 109,498 56,508 

Accretion of discounts - net 1,276 704 

Unrealised capital gain - net 1,337 1,224 

112,111 58,436 


Unrealised capital gain - net 172 155 

4,172 4,155 



Other corporations 25,739 - 

82,019 33,690 

TOTAL INVESTMENTS - 

INVESTMENT-LINKED FUND 283,991 226,768



(c) 

INVESTMENT-LINKED FUND (continued) 

The maturity structure of corporate debt securities, fixed and call deposits above is as follows: 


RM'000 RM'000 

Investments maturing within 12 months 87,351 41,244 

Investments maturing after 12 months 106,808 51,405 

194,159 92,649 

5 LOANS 

General and 

Shareholders’ 

funds 

Life fund 

2005 2004 2005 2004 

RM'000 RM'000 RM'000 RM'000 

Policy loans - - 243,817 218,414 

Mortgage loans 40,176 37,351 366,977 377,654 

Other secured loans 66,661 81,205 266,952 171,933 

Unsecured loans 69 65 3,650 230 

106,906 118,621 881,396 768,231 

Interest-in-suspense (22,922) (29,193) (27,980) (17,069) 

Allowance for doubtful debts (6,856) (7,954) (1,241) - 

77,128 81,474 852,175 751,162 

49 

Receivable within 12 months 72,665 54,276 671,799 435,684 

Receivable after 12 months 4,463 27,198 180,376 315,478 

77,128 81,474 852,175 751,162


6 DEFERRED TAX 

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. 

The following amounts, determined after appropriate offsetting, are shown in the balance sheet: 

General and 

Shareholders’ 

Investmentfunds 

Life fund linked fund 

2005 2004 2005 2004 2005 2004 

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

Deferred tax assets 8,505 2,664 11,095 1,806 154 - 

Deferred tax liabilities - - - (152) (163) (735) 

8,505 2,664 11,095 1,654 (9) (735) 

At 1 January 2,664 484 1,654 (599) (735) (1,237) 

Credited/(charged) to 

income statement/ 

revenue accounts (Note 20): 

- property, plant and 

equipment 793 (306) 1,201 87 - - 

- investments 5,048 2,486 8,240 2,166 726 502 

5,841 2,180 9,441 2,253 726 502 

50 

At 31 December 8,505 2,664 11,095 1,654 (9) (735) 

Subject to income tax: 

Deferred tax assets 

(before offsetting) 

Investments 9,729 4,681 12,040 3,818 154 - 

Offsetting (1,224) (2,017) (945) (2,012) - - 

Deferred tax assets 

(after offsetting) 8,505 2,664 11,095 1,806 154 - 

Deferred tax liabilities 

(before offsetting) 

Property, plant and 

equipment (1,224) (2,017) (945) (2,164) - - 

Investments - - - - (163) (735) 

(1,224) (2,017) (945) (2,164) (163) (735) 

Offsetting 1,224 2,017 945 2,012 - - 

Deferred tax liabilities 

(after offsetting) - - - (152) (163) (735) 

The deferred tax liabilities arising from the temporary differences associated with the unallocated surplus carried 

forward of the life fund to be transferred to the shareholders’ fund have not been disclosed in the financial statements 

due to the subjectivity in determining the amount to be transferred.


7 RECEIVABLES 


Trade receivables 


RM’000 RM’000 

Due premiums including agents, brokers and 

co-insurers balances 82,527 81,693 

Due from reinsurers and cedants 18,047 19,732 

100,574 101,425 

Allowance for doubtful debts (27,186) (24,793) 

Other receivables 

73,388 76,632 

Assets held under Malaysian Motor Insurance Pool 2,450 1,733 

Amount due from life fund 14,016 53,086 

Outstanding proceeds from disposal of investments 528 - 

Investment income due and accrued 2,409 3,008 

Deposits, prepayment and other receivables 6,618 4,371 

26,021 62,198 

99,409 138,830 

(b) LIFE FUND 

Trade receivables 

Due premiums including agents, brokers and 

co-insurers balances 46,100 34,688 

51 


Amount due from investment-linked fund 5,358 2,466 

Outstanding proceeds from disposal of investments 60,912 1,525 

Investment income due and accrued 35,232 34,175 

Deposits, prepayment and other receivables 13,695 16,177 

115,197 54,343 

161,297 89,031 

(c) 



Amount due from life fund 2,899 1,502 

Outstanding proceeds from disposal of investments 1,391 1,816 

Investment income due and accrued 1,385 766 

Deposits, prepayment and other receivables 264 166 

5,939 4,250


8 PROVISION FOR OUTSTANDING CLAIMS 

General and 

Shareholders’ funds 

Life fund 


RM'000 RM'000 RM'000 RM'000 

Provision for outstanding claims 370,464 379,164 23,981 23,494 

Less: Recoverable from reinsurers (113,766) (105,396) (11,645) (9,391) 

Net outstanding claims 256,698 273,768 12,336 14,103 

9 PAYABLES 


RM’000 

RM’000 


Trade payables 

Due to agents, brokers and co-insurers 30,930 47,400 

Due to reinsurers and cedants 18,588 9,179 

Reinsurers’ deposits withheld 3,112 1,184 

52,630 57,763 

52 

Other payables 

Cash collaterals held for bond business 24,064 24,654 

Unclaimed monies 3,156 3,574 

Other payables and accruals 16,094 17,852 

43,314 46,080 

95,944 103,843 

(b) LIFE FUND 

Trade payables 

Due to agents and insureds 366,272 305,212 

Due to reinsurers and cedants 8,795 20,505 

Reinsurers’ deposits withheld - 113,572 

Premium deposits 45,411 49,438 


420,478 488,727 

Unclaimed monies 5,237 8,172 

Rental deposit 6,074 6,046 

Accrued interest payable 26,117 21,092 

Amount due to shareholders’ fund 14,016 53,086 

Amount due to investment-linked fund 2,899 1,502 


75,195 105,490 

495,673 594,217


9 PAYABLES (continued) 


Reinsurance deposits withheld of the life fund for the previous financial year was in respect of a quota share 

reinsurance treaty entered into the by the Company in 1997 for certain non-participating life business written on 

or prior to 31 December 1997. Under the terms of the treaty, the Company withholds reinsurance deposits of 

an amount equivalent to the reduction in the liabilities to policyholders at the respective balance sheet dates, 

arising from their treaty arrangement. 

On 1 January 2005, the Company terminated the treaty arrangement. As a result of this termination, the 

Company is no longer required to withhold any reinsurance deposit on this treaty arrangement; and premiums 

in respect of the terminated block of business is reassumed and is reflected under ‘Other Income’ as described in 

note 17(c) to the financial statements. Similarly, this resulted in an increase in liabilities to policyholders’ of the 

same amount, as described in note 11 to the financial statements. 

(c) 




RM’000 

RM’000 


Amount due to life fund 5,358 2,466 

8,944 5,307 

10 UNEARNED PREMIUM RESERVES 

GENERAL FUND 

Marine, 


Fire vehicles cycles & Transit llaneous Total 

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

53 


At beginning of financial year 9,807 72,566 13,266 940 21,571 118,150 

Increase/(decrease) in reserves 1,415 10,113 3,521 (61) 3,823 18,811 

At end of financial year 11,222 82,679 16,787 879 25,394 136,961 

2004 

At beginning of financial year 8,985 97,866 16,796 1,240 21,216 146,103 

Increase/(decrease) in reserves 822 (25,300) (3,530) (300) 355 (27,953) 

At end of financial year 9,807 72,566 13,266 940 21,571 118,150


11 LIFE POLICYHOLDERS’ FUND 


RM’000 

RM’000 

Actuarial liabilities 

At beginning of financial year 3,784,477 3,298,590 

Add: Increase in policy reserves: 

- on normal business during the year 216,899 330,737 

- on reassumed business previously ceded 113,572 - 

Bonus allocated to participating policyholders, 

including interim bonus from normal surplus 175,013 155,150 

505,484 485,887 

Less: Interim Bonus (13,301) - 

At end of financial year 4,276,660 3,784,477 

Unallocated surplus 

At beginning of financial year 599,279 517,442 

54 

Add: Surplus arising during the financial year 92,628 287,800 

Less: Bonus allocated to policyholders, 

including interim bonus from normal surplus (175,013) (155,150) 

Transfer to Income Statement (12,879) (50,813) 

(95,264) 81,837 

At end of financial year 504,015 599,279 

Life policyholders’ fund at end of financial year: 

Actuarial liabilities 4,276,660 3,784,477 

Unallocated surplus 504,015 599,279 

4,780,675 4,383,756 

The liabilities to policyholders for ordinary life non-participating policies as at 31 December 2004 were stated after 

deduction of reinsurance deposits of RM113,572,000 as disclosed in note 9(b) to the financial statements. 

As at 1 January 2005, the Company terminated its quota share reinsurance treaty which was originally entered into 

in 1997. Under the terms of the treaty, the Company withholds reinsurance deposits equal to the actuarial valuation 

on the life fund on the block of business reinsured. As a result of the termination, the liabilities to policyholders for 

ordinary life non-participating policies for the financial year ended 31 December 2005, increased by RM113,572,000, 

representing the liabilities of the previously ceded non-participating life business, that the Company has now to 

reassume as part of its business. 

12 SHARE CAPITAL 


RM'000 

RM'000 

Authorised ordinary shares of RM1 each; 

At beginning and end of financial year 500,000 500,000 

Issued and fully paid ordinary shares of RM1 each; 

At beginning and end of financial year 150,000 150,000


13 RETAINED EARNINGS 

The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 and tax exempt income under 

Section 12 of the Income Tax (Amendment) Act, 1999 to frank all of its retained earnings at 31 December 2005, if 

paid out as dividends. 

14 PROVISION FOR LIFE AGENTS’ RETIREMENT BENEFITS 

Life fund 


RM’000 

RM’000 


Provision for the financial year 1,490 2,084 

Utilised during the financial year (2,064) (2,290) 


Payable within 12 months 419 407 

Payable after 12 months 4,582 5,168 

5,001 5,575 

The amount recognised in the Company’s balance sheet is analysed as follows: 


RM’000 

RM’000 

Present value of funded obligations 15,240 11,562 

Fair value of plan assets (15,240) (11,562) 

Status of funded plan - - 

Present value of unfunded obligations 5,001 5,575 

55 

Liability in the balance sheet 5,001 5,575 

The expense recognised in the life insurance revenue account under commission and agency expenses may be 

analysed as follows: 


RM’000 

RM’000 

Current service cost 1,301 1,852 

Interest cost 189 232 

1,490 2,084 

The actual return on plan asset was RM1,527,000 (2004: RM809,000). 

Present value of funded obligations is always equal to the fair value of plan assets of funded retirement benefit 

scheme as actual payment to agents is based on actual fair value of plan assets at the time of retirement. The 

Company assume that all agents who have served the Company for more than 10 years would continue to serve the 

Company until their age of retirement and eligible for the retirement benefit.


15 OPERATING REVENUE 

Shareholders’ General Life Investmentfund 

fund fund linked fund Total 

RM'000 RM'000 RM'000 RM'000 RM'000 


Gross premium income - 424,253 1,271,386 124,119 1,819,758 

Investment income (note 16) 1,065 19,552 228,556 11,469 260,642 

2004 

1,065 443,805 1,499,942 135,588 2,080,400 

Gross premium income - 364,753 1,197,450 78,843 1,641,046 

Investment income (note 16) 4,577 22,370 219,811 6,986 253,744 

4,577 387,123 1,417,261 85,829 1,894,790 

16 INVESTMENT INCOME 

(a) SHAREHOLDERS’ FUND 


RM’000 RM’000 

56 

Interest income from: 

Unquoted corporate debt securities 121 524 

Fixed and call deposits 280 568 

Mortgage loans - 1,101 

Other secured and unsecured loans - 2,136 

401 4,329 

Amortisation of premiums from unquoted corporate 

debts securities - (1) 

Gross dividends from: 

Quoted equity securities of corporations 131 111 

Unquoted unit trusts 648 25 

779 136 

Gross rental income 216 367 

Less: Rates and maintenance for investment properties (331) (254) 

(115) 113 

1,065 4,577


16 INVESTMENT INCOME (continued) 

(b) GENERAL FUND 


RM’000 

RM’000 


Malaysian Government Securities/Treasury bills/ 

Bank Negara Malaysia papers 2,589 2,531 

Cagamas papers 1,212 1,253 

Corporate debt securities: 

- quoted in Malaysia 667 - 

- unquoted 3,891 3,676 

Mortgage loans 2,720 969 

Other secured and unsecured loans 2,878 7,542 

Fixed and call deposits 2,599 3,293 

16,556 19,264 

(Amortisation of premiums)/accretion of discounts from: 


Bank Negara Malaysia papers (1,227) (1,109) 

Cagamas papers 7 (19) 


(795) (583) 

Gross dividends from equity securities of corporations: 

Quoted equity securities of corporations 3,188 2,731 

Unquoted unit trusts 166 43 

57 

3,354 2,774 

Gross rental income 1,825 2,555 

Less: Rates and maintenance for investment properties (1,393) (1,640) 

432 915 

Investment income - others 5 - 

19,552 22,370




RM’000 

RM’000 

(c) 

LIFE FUND 



Bank Negara Malaysia papers 14,885 12,524 

Cagamas papers 6,727 7,865 


- quoted in Malaysia 2,469 356 

- unquoted 68,327 49,647 

Mortgage loans 36,162 50,459 

Policy loans 18,682 16,861 

Other secured and unsecured loans 14,891 18,269 

Fixed and call deposits 18,267 22,161 

180,410 178,142 

(Amortisation of premiums)/accretion of discounts from: 


Bank Negara Malaysia papers (4,209) (4,851) 

Cagamas papers (129) (545) 

Unquoted corporate debt securities 10,646 7,882 

58 

6,308 2,486 

Gross dividends from equity securities of corporations: 


Unquoted unit trusts 3,069 4,697 

33,631 26,630 

Gross rental income 21,063 23,305 

Less: Rates and maintenance for investment properties (12,895) (10,752) 

8,168 12,553 

Investment income - others 39 - 

228,556 219,811



(d) INVESTMENT-LINKED FUND 


RM’000 

RM’000 



- quoted in Malaysia 11 16 

- unquoted 4,098 2,199 

Fixed and call deposits 1,506 879 

5,615 3,094 

Accretion of discounts from unquoted corporate 

debt securities 538 494 

Gross dividends from: 


11,469 6,986 

17 OTHER OPERATING (EXPENSES)/INCOME - NET 

(a) SHAREHOLDERS’ FUND 

Gain on disposal of: 

Quoted equity securities of corporations - 50 

Unquoted corporate debt securities 303 - 

Unquoted unit trusts 73 - 

59 

376 50 

Allowance for diminution in value of 

investments in quoted equity securities of corporations (928) (1,389) 

Increase in allowance for doubtful debts on loans (44) (37) 

Gain on disposal of property, plant and equipment 53 - 

Others 7 (8) 

16 (45) 

(536) (1,384)


17 OTHER OPERATING (EXPENSES)/INCOME - NET (continued) 

(b) GENERAL FUND 


RM’000 

RM’000 

(Loss)/gain on disposal of: 

Equity securities of corporations quoted in Malaysia (20,647) 3,033 


Unit trusts - 1,388 

Investment properties 686 (1,292) 

KL Composite Index Futures - (647) 

(19,960) 2,498 

Allowance for diminution in value of investments: 

Quoted equity securities of corporations (11,029) (3,504) 

Unit trusts (216) - 

Quoted corporate debt securities (493) (3,987) 

(11,738) (7,491) 

Gain/(loss) on disposal of property, plant and equipment 71 (443) 

Decrease in allowance for doubtful debts on loans 1,142 - 

Others 917 (359) 

60 

(c) 

2,130 (802) 

Other operating expenses - net (29,568) (5,795) 

LIFE FUND 


Quoted equity securities of corporations (39,197) 57,194 

Unquoted corporate debt securities 8,694 - 

Unquoted unit trusts (117) 20,584 

Corporate debt securities 2,205 2,159 

Investment properties 12,288 128 

KL Composite Index Futures - (4,594) 

(16,127) 75,471


17 OTHER OPERATING (EXPENSES)/INCOME - NET (continued) 


RM’000 

RM’000 

(c) 

LIFE FUND (continued) 

(Allowance for)/write back of diminution in value of investments: 

Equity securities of corporations quoted in Malaysia (83,807) (17,327) 

Unit trusts (7,104) 2,781 

Investment-linked units - 38 

Quoted corporate debt securities (1,727) (12,795) 

Unquoted corporate debt securities (10,000) - 

Unquoted shares (30) - 

(102,668) (27,303) 

Increase in allowance for doubtful debts on loans (1,239) - 

Gain on disposal of property, plant and equipment 4 6 

Reassumed premiums previously ceded (i) 113,572 - 

Other provisions (ii) (19,602) - 

Others 1,824 5,229 

94,559 5,235 

(24,236) 53,403 

i) Reassumed premiums previously ceded in the life fund is in respect of termination of treaty agreement as 

described in Note 9(b) to the financial statement. 

ii) 

During the financial year, the Company, for prudence purposes, has made a provision of RM19.6 million 

being loss of investment moneys managed by an external fund manager arising from the negligence of a 

custodian. The Company has initiated legal proceedings to recover the losses from the custodian. 

61 

(d) INVESTMENT-LINKED FUND 


Quoted equity securities of corporations (20,634) 5,957 

Unquoted corporate debt securities 408 - 

Quoted corporate debt securities 17 - 

(20,209) 5,957 

Decrease in value of investments (9,741) (6,272) 

Investment charges (3,594) (2,859) 

(13,335) (9,131) 

(33,544) (3,174)


18 MANAGEMENT EXPENSES 

Shareholders’ fund General fund Life fund 


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

Staff cost (including 

executive directors): 

- Salaries and bonus - - 29,713 27,857 24,916 23,867 

- Retirement benefits - - 7,399 7,765 7,092 6,301 

- - 37,112 35,622 32,008 30,168 

62 

Depreciation/(writeback 

of provision) of property 

plant and equipment (59) 50 3,965 2,888 8,292 8,894 

Auditors’ remuneration 2 - 67 71 86 111 

Fees paid to a company 

in which certain directors 

have an interest - - 15 15 15 15 

Allowance for doubtful debts - - 2,392 607 - - 

Bad debts written off - - - 510 - - 

Office rental - - 2,151 1,954 3,766 3,665 

Rental of office equipment - - 422 418 - 518 

Training expenses - - 1,185 2,259 5,303 4,598 

Repairs and maintenance - - 1,856 2,029 4,541 6,631 

EDP expenses - - 5,423 5,121 6,067 5,292 

Advertising and 

promotional expenses - - 6,263 5,446 6,684 5,976 

Other expenses - 2 16,938 14,121 24,055 23,982 

(57) 52 40,677 35,439 58,809 59,682 

(57) 52 77,789 71,061 90,817 89,850 

Included in management 

expenses were emoluments 

received by directors of the 

Company during the financial 

year: 

Executive directors: 

- salaries - - 300 300 300 300 

- bonus - - 55 50 55 50 

- defined contribution plan - - 74 66 73 66 

- other emoluments - - 115 97 115 97 

Non-executive directors: 

- fees - - 224 189 223 189 

- other emoluments - - 16 140 16 140 

- - 784 842 782 842 

The estimated monetary value of benefits provided to directors during the financial year by way of usage of the 

Company’s assets amounted to RM35,200 (2004: RM31,600). 

The remuneration, including benefits-in-kind, attributable to the CEO of the Company during the financial year 

amounted to RM1,182,400 (2004: RM1,056,904).


19 FINANCE COSTS 

Shareholders’ fund General fund Life fund 


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

Interest expenses on 

bank overdraft 30 30 - - 15 6 

The unsecured bank overdraft facilities of the shareholders’ fund, general fund and life fund of the Company have a 

limit of RM3.5 million, RM2.0 million and RM3.0 million (2004: RM3.5 million, RM2.0 million and RM3.0 million) 

respectively. During the financial year, the interest rate charged was 8.5% (2004: 8.2%) per annum. 

There were no overdraft facilities utilised at the balance sheet date. 

20 TAXATION 

General and 

Investment- 

Shareholders’ funds Life fund linked fund 


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

Current tax 5,094 22,994 17,460 22,482 440 1,189 

Deferred tax (Note 6) (5,841) (2,180) (9,441) (2,253) (726) (502) 

Tax (income)/expense (747) 20,814 8,019 20,229 (286) 687 

Current tax 

Current financial year 5,077 22,994 16,791 22,482 651 1,189 

Underprovision/(over) 

in prior financial years 17 - 669 - (211) - 

63 

Deferred tax 

Origination and 

reversal of temporary 

differences (4,016) (2,180) (9,441) (2,253) (726) (502) 

Benefit from previously 

unrecognised tax loss (1,825) - - - - - 

(747) 20,814 8,019 20,229 (286) 687 

Numerical reconciliation between the average 

effective tax rate and the Malaysian tax rate: 


% % 

Malaysian tax rate 28 28 

Tax effects of: 

- expenses not deductible for tax purposes (2) 1 

Temporary differences not recognised in previous financial years (45) - 

Average effective tax rate (19) 29


20 TAXATION (continued) 

The taxation charge in the income statement of the Company relates to income attributable to the general and 

shareholders’ funds. 

The taxation charge on the life fund is based on the method prescribed under the Income Tax Act, 1967 for life 

business. 

The temporary differences not recognised in previous financial years is in respect of the loan provision of 

RM6,517,000 from which benefits of deferred tax of RM1,825,000 were not recognised in prior years. 

In the financial years ended 31 December 2001 and 31 December 2002, the Company made additional tax provisions 

of RM28,525,000 in its financial statements as a result of additional tax assessments raised by the Inland Revenue 

Board in respect of the apportionment of the actuarial surplus of the life insurance fund to the shareholders’ fund for 

the financial years from 31 December 1994 to 31 December 1997, using the method set out by the Ministry of 

Finance in computing the amount of surplus to be apportioned (“apportioned basis”). 

In December 2004, the tax legislation was amended through an amendment to the Finance (No. 2) Act, 1998. With 

this amendment, the actuarial surplus is to be taxed based on the actual actuarial surplus transferred to the 

shareholders’ fund for the affected financial years, and not on an apportioned basis. 

Accordingly, in the financial year ended 31 December 2004, the Company has reversed the additional tax provision 

of RM28,525,000 made in the previous financial years, by recognising an over provision of the same amount in the 

income statement with a corresponding reduction in the current tax liabilities. 

21 DIVIDENDS 

Dividends declared or proposed in respect of the financial year ended 31 December 2005 are as follows: 

64 


Gross Amount of Gross Amount of 

dividend dividend, dividend dividend, 

per share net of tax per share net of tax 

Sen RM’000 Sen RM’000 

Proposed final dividend 15 16,200 55 59,400 

At the forthcoming Annual General Meeting, a final gross dividend in respect of the financial year ended 31 

December 2005 of 15 sen per share (2004: 55 sen), less income tax, amounting to 

RM16,200,000 (2004: RM59,400,000) will be proposed for shareholders’ approval. These financial statements do 

not reflect this final dividend which will be accrued as a liability in the financial year ending 31 December 2006 when 

approved by shareholders. 

22 EARNINGS PER SHARE 

The basic earnings per ordinary share has been calculated by dividing the Company's net profit for the financial year 

of RM4,782,000 (2004: RM50,447,000) by the number of ordinary shares of the Company in issue of 150,000,000 

(2004: 150,000,000) shares.


23 NET CLAIMS INCURRED 

Marine, 


Fire vehicles cycles & Transit llaneous Total 

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

GENERAL FUND 


Gross claims paid less salvage 24,729 153,840 31,458 7,626 24,938 242,591 

Reinsurance recoveries (12,992) (26,153) (5,196) (5,367) (5,778) (55,486) 

Net claims paid 11,737 127,687 26,262 2,259 19,160 187,105 

Net outstanding claims: 

At end of financial year 17,517 152,978 42,416 5,127 38,660 256,698 

At beginning of financial year (12,513) (162,443) (52,297) (5,794) (40,721) (273,768) 

Net claims incurred 16,741 118,222 16,381 1,592 17,099 170,035 

2004 

Gross claims paid less salvage 21,855 163,240 28,163 4,851 38,609 256,718 

Reinsurance recoveries (12,650) (29,994) (4,781) (1,391) (12,188) (61,004) 

Net claims paid 9,205 133,246 23,382 3,460 26,421 195,714 

Net outstanding claims: 

At end of financial year 12,513 162,443 52,297 5,794 40,721 273,768 

At beginning of financial year (9,255) (170,184) (49,740) (7,564) (41,742) (278,485) 

65 

Net claims incurred 12,463 125,505 25,939 1,690 25,400 190,997


24 INVESTMENT-LINKED FUND 

BALANCE SHEET 


RM'000 

RM'000 

ASSETS 

Investments (note 4(c)) 283,991 226,768 

Tax recoverable 1,023 162 

Deferred tax assets (note 6) 154 - 

Receivables (note 7(c)) 5,939 4,250 


296,049 236,936 

LIABILITIES 

Payables (note 9(c)) 8,944 5,307 

Current tax liabilities 541 603 

Deferred tax liabilities (note 6) 163 735 

9,648 6,645 

NET ASSET VALUE OF FUNDS 286,401 230,291 

REPRESENTED BY: 

66 

UNITHOLDERS’ ACCOUNT 


Net creation of units 83,200 48,442 

Net surplus for the financial year after taxation (21,789) 3,125 

291,702 231,719 

Distribution during the financial year (5,301) (1,428) 


INCOME STATEMENT 

Investment income (note 16(d)) 11,469 6,986 

Other operating expense (note 17(d)) (33,544) (3,174) 

Surplus before taxation (22,075) 3,812 

Taxation (note 20) 286 (687) 

Net surplus for the financial year after taxation (21,789) 3,125


25 CASH FLOW SEGMENT INFORMATION 


Shareholders’ General Life Investment 

fund fund fund linked Total 

RM'000 RM'000 RM'000 RM'000 RM'000 

Cash flows from: 

Operating activities 59,287 19,361 (1,407) (814) 76,427 

Investing activities 226 (2,569) (3,519) - (5,862) 

Financing activities (59,400) - (13,301) - (72,701) 

Net increase/(decrease) in cash 

and cash equivalents 113 16,792 (18,227) (814) (2,136) 

Cash and cash equivalents: 

At beginning of financial year 180 1,041 41,745 5,756 48,722 

At end of financial year 293 17,833 23,518 4,942 46,586 

2004 

Cash flows from: 

Operating activities 75,583 1,142 33,573 1,554 111,852 

Investing activities - (4,765) (6,961) - (11,726) 

Financing activities (75,600) - - - (75,600) 

Net (decrease)/increase in cash 

and cash equivalents (17) (3,623) 26,612 1,554 24,526 

Cash and cash equivalents: 

At beginning of financial year 197 4,664 15,133 4,202 24,196 

At end of financial year 180 1,041 41,745 5,756 48,722 

67


26 CAPITAL AND OTHER COMMITMENTS 

Capital expenditure not provided for in the financial statement are as follows: 

General and 


Life fund 


RM’000 RM’000 RM’000 RM’000 

Authorised and contracted for: 

- acquisition of investment properties 450 1,035 35,415 2,637 

______ 

Authorised but not contracted for: 

- acquisition of investment properties - - 59,000 16,302 

During the financial year ended 31 December 2001, the Company’s holding company issued RM120 million 6-year 

structured serial bonds ("the Bonds"). In connection with this issuance, the Company signed a Dividend Upstream 

Agreement with its holding company on 6 August 2001. Under the agreement, the Company shall, so long as the 

Bonds remain outstanding with the holding company, declare and pay by a date to be agreed each year, a minimum 

dividend which after deduction of its holding company’s projected tax and operating expenses for the year, would 

leave its holding company with a net amount of RM20 million. Such declaration and payment of dividend shall be 

subject to the availability of distributable reserves, legal and regulatory constraints. 

27 NON-CANCELLABLE OPERATING LEASE COMMITMENTS 

68 

General and 


Life fund 

Future Future Future Future 

minimum minimum minimum minimum 

lease sublease lease sublease 

payments receipts payments receipts 

RM’000 RM’000 RM’000 RM’000 


Not later than 1 year 1,553 875 5,247 2,228 

Later than 1 year and not later than 5 years 3,106 1,750 10,494 4,456 

4,659 2,625 15,741 6,684 

2004 

Not later than 1 year 1,553 875 5,247 2,228 

Later than 1 year and not later than 5 years 4,659 2,625 15,741 6,684 

6,212 3,500 20,988 8,912


28 RELATED PARTY DISCLOSURES 

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other 

significant related party disclosures. 

The other related parties of, and their relationship with the Company, are as follows: 

Related parties 

Relationship 

MAA Holdings Berhad 

MAA Corporation Sdn Bhd 

Malaysian Alliance Property Services Sdn Bhd 

MAAKL Mutual Bhd 

MAA Corporate Advisory Sdn Bhd 

Maagnet Systems Sdn Bhd 

Wira Security Services Sdn Bhd 

Meridian Asset Management Sdn Bhd 

Multioto Breakdown Assistance Sdn Bhd 

Chelsea Parking Services Sdn Bhd 

Menang Bernas Sdn Bhd 


MAA Bancwell Trustee Berhad 

Mithril Berhad 

Mitra Malaysia Sdn Bhd 

Trace Management Services Sdn Bhd 

Melewar Group Berhad 

Melewar Industrial Group Berhad 

Melewar Equities Sdn Bhd 

Greensilk Sdn Bhd 

Central Market Development Sdn Bhd 

Sistem Sewa Kereta Malaysia Sdn Bhd 

Melewar Apex Sdn Bhd 

Melewar Integrated Engineering Sdn Bhd 

Masterconsult Sdn Bhd 

MAA-Medicare Kidney Foundation 

Charity Fund 

The Budimas Charitable Foundation 

Malaysian Merchant Marine Berhad 

Ultimate holding company 

Subsidiary company of ultimate holding company 

Subsidiary company of related company 










Associated company of ultimate holding company 

Associated company of ultimate holding company 

Company controlled by person connected to 

Director of the Company 

Company controlled by Director and persons 

connected to Director of the Company 





Major shareholder of ultimate holding company 

Company controlled by person connected 








Indirect interest in major shareholder by 


Company controlled by Director & persons 

connected to certain Director of the Company 

Charitable dialysis centre established by 

related company 

Charitable foundation of which Director is Trustee 

Indirect interest in major shareholder by 


69


28 RELATED PARTY DISCLOSURES (continued) 

Related party balances 

Related party balances at 31 December 2005 are included in the following note to the financial statements: 

Due to reinsurers and cedants (Note 9(a)): 


RM'000 

RM'000 

Reinsurance balances payable to MAA International 

Assurance Ltd 6,150 5,037 

Investments (Note 4): 

Quoted equity securities of Mithril Berhad, at carrying value: 

- General and Shareholders funds 158 409 

- Life fund 172 443 

Quoted corporate debt securities of Mithril Berhad, 

at carrying values: 

- General and Shareholders funds 8,679 5,931 

- Life fund 24,875 21,623 

70


28 RELATED PARTY DISCLOSURES (continued) 

Significant related party transactions 

The significant related party transactions during the financial year, which were carried out on terms, conditions, and 

prices obtainable in transactions with unrelated parties, are set out below. 


RM'000 

RM'000 

Transactions with MAA International Assurance Ltd: 

Reinsurance premium paid 56,683 50,828 

Reinsurance claims recovered (23,486) (25,851) 

Reinsurance commission received (7,511) (12,283) 

Premium income received from related parties: 

Sistem Sewa Kereta Malaysia Sdn Bhd - 81 

Melewar Industrial Group Berhad - 101 

Rental income received from related parties: 

MAA International Assurance Ltd (124) - 

The Budimas Charitable Foundation (52) - 

Trace Management Services Sdn Bhd (70) (114) 

Melewar Group Berhad (28) (105) 

Greensilk Sdn Bhd (138) (139) 

MAA Corporation Sdn Bhd (520) (520) 

MAA Holdings Berhad (210) (210) 

MAA-Medicare Kidney Foundation Charity Fund (78) (82) 

MAAKL Mutual Bhd (557) (281) 

Maagnet Systems Sdn Bhd (419) (583) 

Wira Security Services Sdn Bhd (363) (363) 

Melewar Equities Sdn Bhd (84) (84) 

MAA Corporate Advisory Sdn Bhd (166) (166) 

Sistem Sewa Kereta Malaysia Sdn Bhd (120) (48) 

Melewar Apex Sdn Bhd (175) (38) 

Melewar Integrated Engineering Sdn Bhd (155) (102) 

Mithril Berhad (170) (477) 

Multioto Breakdown Assistance Sdn Bhd (90) (182) 

Menang Bernas Sdn Bhd (67) (70) 

71 

Other transactions with related parties: 

Property management fees paid to Malaysian 

Alliance Property Services Sdn Bhd 3,200 2,700 

Rental expense paid to Central Market 

Development Sdn Bhd 61 61 

Purchase of air tickets and travel packages from 

Mitra Malaysia Sdn Bhd 2,929 2,818 

Assets management fees paid to Meridian Asset 

Management Sdn Bhd 405 1,443 

System support and maintenance fees paid to Maagnet 

Systems Sdn Bhd 6,266 4,756 

Purchase of Islamic Preference Shares in 

Malaysian Merchant Marine Bhd 20,856 - 

Purchase of loan stocks from Mithril Berhad 8,219 - 

Purchase of unit-trusts in MAAKL Mutual Bhd 10,000 - 

Additional retirement benefit fund managed by 

MAA Bancwell Trustee Berhad 1,311 1,605 

Security services charges paid to Wira Security 

Services Sdn Bhd 2,900 3,122 

Security services charges paid to MAA Holdings Berhad 473 580 

Purchase of computers from Maagnet Systems Sdn Bhd 1,923 3,582 

Parking charges paid to Chelsea Parking Services Sdn Bhd 292 152 

Rental expenses paid to Mithril Berhad 6,800 5,100 

Rental and utility deposits paid to Mithril Berhad - 2,267 

Breakdown service assistance charges paid to Multitoto 

Breakdown Assistance Sdn Bhd 2,153 326 

Purchase of food and beverage vouchers paid to Menang 

Bernas Sdn Bhd 437 152


29 FINANCIAL INSTRUMENTS 

Financial risk management objectives and policies 

The risks which the Company is exposed to are underwriting risk, credit risk, settlement risk, market risk, liquidity risk 

and equity price risk. The Company carried out its financial risk management through internal control procedures, 

standard operating procedures, investment strategy and adherence to all rules and regulations as stipulated by the 

Guidelines for investments issued by Bank Negara Malaysia. 

Underwriting risk 

Underwriting risk represents the inherent risk in insurance of incurring higher claims costs than expected. This is due 

to the random nature of claims, changes in legal or economic conditions or behavioral patterns affecting the 

frequency and severity of claims. 

The Company seeks to manage underwriting risks through the following means: 

• Maintaining a measure of conservatism with respect to the adequacy of insurance premium rate levels and 

provisions with respect to insurance liabilities; 

• Writing a balanced mix and spread of business, geographically and between classes of business; 

• Observing underwriting guidelines which cover exclusions, loadings and cover limits; 

• Transferring risk through a program of reinsurance that seeks to limit the exposure to any one risk or life as well 

as protect the overall retained portfolio from a general deterioration in claims as well as catastrophic events. 

Credit risk 

Credit risk is the risk of loss from the default by a debtor or counter party. Credit risks arise in the Company’s lending 

and investment activities. Credit risk is risk/reward oriented whereby the level of credit analysis is a function of the 

amount, tenure, structure or coverage and the general risk entered into. 

72 

Minimum credit quality only applies to investments in private debt securities with a minimum rating of BBB-/BBB3 (at 

date of investment) comparable to Malaysian Credit Rating Corporation (“MARC”) and Rating Agency of Malaysia 

(“RAM”) respectively. The Company however intends to maintain a minimum A/A2 portfolio average under current 

returns objectives. The Company does not solely depend on the ratings provided but as in all credit applications, 

reviews the credit based on publicly available issuer information together with in-house analysis based on information 

provided by the borrower/issuer, peer group comparisons, industry comparisons and other quantitative tools. 

Debtor recoverability and risk concentration monitoring are part of credit risk management which is reviewed 

regularly. Allowance for doubtful debts is made on those loans (or part of remaining amount) where the level of 

security has been impaired. 

The Company’s credit risk exposure is analysed as follows: 

Carrying amount 

Analysed by rating 


Quoted Unquoted Quoted Unquoted 

corporate corporate corporate corporate 

debt debt debt debt 

securities securities Loans securities securities Loans 

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

Government Guaranteed - 26,619 - - 26,694 - 

AAA - 172,895 - - 83,574 - 

AA - 352,855 - - 293,095 - 

A - 670,096 - - 557,976 - 

BBB 33,554 139,402 - 27,554 107,458 - 

BB or lower - - - - 30,821 - 

D - 31,909 - - - - 

Non-investment grade 29 - 929,303 8,489 19,735 832,636 

33,583 1,393,776 929,303 36,043 1,119,353 832,636 

The rating categories are based on the gradings of MARC and RAM.


29 FINANCIAL INSTRUMENTS (continued) 

Credit risk (continued) 

Carrying amount 

Analysed by industry 


Quoted Unquoted Quoted Unquoted 

corporate corporate corporate corporate 

debt debt debt debt 

securities securities Loans securities securities Loans 

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

Agriculture, forestry, 

fisheries - 158,118 102 - 149,197 102 

Construction - 5,049 - - 34,930 - 

Finance - 221,810 156,551 7,966 140,892 159,537 

Industrial/Manufacturing 33,583 142,203 - 28,077 104,173 - 

Infrastructure - 297,953 - - 209,983 - 

Power - 229,030 - - 149,236 - 

Property - 181,793 469,643 - 142,466 395,079 

Trading/Services - 157,820 57,125 - 188,476 56,141 

Others - - 245,882 - - 221,777 

33,583 1,393,776 929,303 36,043 1,119,353 832,636 

The Company encountered occurrence of rating default events for two unquoted corporate debt securities. The 

terms in one of the security have been renegotiated and is under indulgence. The other security has been called an 

event of default, the Company has initiated a litigation suit against its issuer and others for alleged breach of contract 

and/or negligence. The repayment capability of the former security hinges on a refinancing exercise that the issuer is 

undergoing while the latter will rely on the recovery or claim from the outcome of the civil suit. 

73 

Settlement risk 

Settlement risk arises when there is an exchange of value for the same or different value dates and is not verified or 

expected until the Company has paid or delivered its obligation to the trade. All transactions currently entered into 

are mainly with approved counter parties for settlement methods. 

Market risk 

Market risk is the risk of loss due to adverse changes or volatility of prices in financial markets on the Company’s 

investments. 

Interest rate risk is the market risk due to movements in interest rates and may affect valuation and reinvestment 

issues to the Company. The Investment Committee actively monitors such developments as well as discusses changes 

in maturity profiles of assets and liabilities to minimise overall mismatch.



Market risk (continued) 

The following table provides information about financial assets and financial liabilities, showing the weighted average 

effective interest rate and the earlier of the contractual repricing or maturity date for each lass of interest-bearing 

financial instrument in the balance sheet: 

Financial assets 


Interest bearing: 

Contractual repricing or maturity 

Weighted 

Non- date (whichever is earlier) Total average 

interest Up to 1 to 5 More than carrying effective 

bearing 1 year years 5 years amount interest rate 

RM’000 RM’000 RM’000 RM’000 RM’000 % 

74 

Investments: 

Malaysian Government 

Securities/Treasury 

bills/Bank Negara 

Malaysia papers - 180,365 170,637 - 351,00 3.25 

Cagamas papers - 119,917 60,029 - 179,946 3.55 


- quoted 29 - 11,832 21,722 33,583 5.45 

- unquoted - 194,680 794,072 405,024 1,393,776 6.59 

Equity securities of 

corporations 

- quoted 711,124 - - - 711,124 - 

- unquoted 3,370 - - - 3,370 - 

Unit trusts and 

investment-linked 

units 

- quoted 13,601 - - - 13,601 - 

- unquoted 111,876 - - - 111,876 - 

Fixed and call deposits - 778,236 - 65,431 843,667 3.03 

840,000 1,273,198 1,036,570 492,177 3,641,945 

Loans: 

Policy loans - 243,817 - - 243,817 7.57 

Mortgage loans - 236,654 123,230 24,262 384,146 10.53 

Other secured loans - 263,800 37,223 56 301,079 11.04 

Unsecured loans - 193 68 - 261 4.24 

- 744,464 160,521 24,318 929,303 

Other receivables: 

Investment income 

due and accrued - 39,026 - - 39,026 - 

Others 95,081 - - - 95,081 - 

95,081 39,026 - - 134,107







Weighted 




RM’000 RM’000 RM’000 RM’000 RM’000 % 

Financial assets (continued) 

Cash and bank balances 46,586 - - - 46,586 - 

981,667 2,056,688 1,197,091 516,495 4,751,941 

Other financial assets* 124,214 - 

Total financial assets 4,876,155 

Other assets: 

Properties, plant and 

equipment 42,032 - 

Investment properties 1,005,176 - 

Tax recoverable 23,107 - 

Deferred tax assets 19,754 - 

Other debtors and 

receivables 8,324 - 

1,098,393 

Total assets 5,974,548 

75 

Financial liabilities 

Other payables 85,336 - - - 85,336 - 

Other financial liabilities* 5,694,589 - 

Total financial liabilities 5,779,925 

Other liabilities: 

Current tax liabilities 9,860 - 

Deferred tax liabilities 163 - 

Other liabilities 12,307 - 

22,330 

Total liabilities 5,802,255




2004 



Weighted 




RM’000 RM’000 RM’000 RM’000 RM’000 % 


76 

Investments: 

Malaysian Government 

Securities/Treasury 

bills/Bank Negara 

Malaysia papers - 20,536 301,465 - 322,001 3.35 

Cagamas papers - 60,253 179,815 - 240,068 3.57 


- quoted 523 7,966 14,932 12,622 36,043 6.12 

- unquoted - 148,351 706,800 264,202 1,119,353 6.98 

Equity securities of 

corporations 

- quoted 927,158 - - - 927,158 - 

- unquoted 3,401 - - - 3,401 - 

Unit trusts and 

investment-linked 

units 

- quoted 6,665 - - - 6,665 - 

- unquoted 117,595 - - - 117,595 - 

Fixed and call deposits - 748,127 - 65,502 813,629 3.05 

1,055,342 985,233 1,203,012 342,326 3,585,913 

Loans: 

Policy loans - 218,414 - - 218,414 7.57 

Mortgage loans - 110,434 179,655 104,397 394,486 10.15 

Other secured loans - 160,885 58,476 79 219,440 10.78 

Unsecured loans - 227 69 - 296 3.99 

- 489,960 238,200 104,476 832,636 

Other receivables: 

Investment income 

due and accrued - 37,949 - - 37,949 - 

Others 67,013 - - - 67,013 - 

67,013 37,949 - - 104,962




2004 



Weighted 




RM’000 RM’000 RM’000 RM’000 RM’000 % 


(continued) 

Cash and bank balances 48,722 - - - 48,722 - 

1,171,077 1,513,142 1,441,212 446,802 4,572,233 

Other financial assets* 117,216 - 

Total financial assets 4,689,449 

Other assets: 

Properties, plant and 

equipment 48,238 - 

Investment properties 987,467 - 

Tax recoverable 13,926 - 

Deferred tax assets 4,470 - 

Other debtors and 

receivables 9,933 - 

1,064,034 

Total assets 5,753,483 

77 

Financial liabilities 

Other payables 116,838 - - - 116,838 - 

Other financial liabilities* 5,371,569 - 

Total financial liabilities 5,488,407 

Other liabilities: 

Current tax liabilities 26,966 - 

Deferred tax liabilities 887 - 

Other liabilities 10,312 - 

38,165 

Total liabilities 5,526,572 

* Disclosure information for financial assets and liabilities that relate to rights and obligations arising under 

insurance contracts and employee benefits are not shown as they are excluded from the scope of FRS 132 2004 

- Financial Instruments: Disclosure and Presentation.



Liquidity risk 

Liquidity risk is the risk that the Company is unable to meet its financial obligations when due. To ensure and avoid 

such occurrences, an adequate cushion in the form of cash and very liquid investments is always maintained. The 

Investment Committee is informed on a weekly basis of all known obligations outstanding together with unplanned 

obligation reserve (as projected by the actuary) to monitor mismatches in the investment portfolio. 

Equity price risk 

The equity investment portfolio of the Company is exposed to movements in equity markets. The Company monitors 

its equity price risk through regular stress testing. The Company uses historical stock betas, index levels and equity 

prices, and estimates the volatility and correlation of each of these share prices and index levels to calculate the gain 

or loss that could occur over a defined period of time, given a certain index level. 

The Company uses derivative financial instruments (index futures contracts) as a means of hedging against the impact 

of negative market movements on the value of assets in the portfolio so as to reduce and eliminate risks. The 

Company's policy is to trade in derivatives only to hedge existing financial market risk and not for the purpose of 

speculation. 

In respect of the risks associated with the use of derivative financial instruments, price risk is controlled through the 

setting of exposure limits, which are subject to detailed monitoring and review. 

Fair values 

The carrying amount of the financial assets and liabilities of the Company at the balance sheet date approximated 

their fair values, except as set out below: 

78 

Financial assets: 


Carrying 

Carrying 

amount Fair value amount Fair value 

RM'000 RM'000 RM'000 RM'000 

Investments: 


Treasury bills/Bank Negara Malaysia 

Papers 351,002 353,796 322,001 328,441 

Cagamas papers 179,946 180,274 240,068 242,230 

Corporate debt securities 

- quoted 33,583 33,583 36,043 38,196 

- unquoted 1,393,776 1,424,225 1,119,353 1,145,271 

Equity securities of corporations 

- quoted 711,124 711,710 927,158 930,502 

Unit trusts and investment-linked units 

- quoted 13,601 13,619 6,665 6,665 

- unquoted 111,876 112,752 117,595 132,371 

Fixed and call deposits 843,667 849,542 813,629 818,360 

3,638,575 3,679,501 3,582,512 3,642,036 

Mortgage loans 384,146 402,917 394,486 414,333 

Other secured loans 301,079 312,561 219,440 221,618 

685,225 715,478 613,926 635,951 

4,323,800 4,394,979 4,196,438 4,277,987

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MAA Assurance's Annual Report 2005 - Zurich

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