Bangkok Insurance Public Company Limited Report and financial statements 31 December 2014

Transcription

1 Bangkok Insurance Public Company Limited Report and financial statements 31 December 2014

2 Independent Auditor s Report To the Shareholders of Bangkok Insurance Public Company Limited I have audited the accompanying financial statements of Bangkok Insurance Public Company Limited, which comprise the statement of financial position, in which the equity method is applied as at 31 December 2014, and the related statements of comprehensive income, changes in owners equity and cash flows, in which the equity method is applied, for the year then ended, and a summary of significant accounting policies and other explanatory information, and have also audited the separate financial statements of Bangkok Insurance Public Company Limited for the same period. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Thai Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Thai Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

3 I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bangkok Insurance Public Company Limited as at 31 December 2014, and its financial performance and cash flows for the year then ended, in accordance with Thai Financial Reporting Standards. Rachada Yongsawadvanich Certified Public Accountant (Thailand) No EY Office Limited Bangkok: 18 February

4 Bangkok Insurance Public Company Limited Statement of financial position As at 31 December 2014 Financial statements in which the equity method is applied Separate financial statements Note 31 December December December December 2013 Assets Cash and cash equivalent 6, ,421, ,513, ,421, ,513,401 Accrued investment income 65,771,940 61,514,771 65,771,940 61,514,771 Premium receivables - net 7, 28 2,412,889,277 2,437,253,035 2,412,889,277 2,437,253,035 Reinsurance assets - net 8, 28 6,491,850,664 12,586,506,304 6,491,850,664 12,586,506,304 Investment assets Investments in securities 9, 28, 29, 30 Available-for-sale investments - net ,076,089,254 25,680,780,648 32,076,089,254 25,680,780,648 Held-to-maturity investments - net 9.2 6,788,062,183 3,848,359,012 6,788,062,183 3,848,359,012 Other investments - net ,575, ,642, ,575, ,642,795 Loans - net 10, 27 1,892,719,507 1,893,084,309 1,892,719,507 1,893,084,309 Investments in associates ,896, ,100, ,256, ,256,122 Investment properties - net ,402, ,067, ,402, ,067,450 Premises and equipment - net 13 1,140,604,817 1,015,520,066 1,140,604,817 1,015,520,066 Intangible assets - net ,772, ,949, ,772, ,949,992 Deferred tax assets ,392,240 1,054,544, ,392,240 1,054,544,613 Other assets Land leasehold rights 64,008,344 64,446,778 64,008,344 64,446,778 Others 398,774, ,644, ,774, ,644,766 Total assets 53,574,230,742 50,706,928,123 53,521,590,565 50,665,084,062 The accompanying notes are an integral part of the financial statements.

5 Bangkok Insurance Public Company Limited Statement of financial position (continued) As at 31 December 2014 Financial statements in which the equity method is applied Separate financial statements Note 31 December December December December 2013 Liabilities and owners' equity Liabilities Income tax payable 19,024,341-19,024,341 - Due to reinsurers 16, 28 2,155,211,087 2,528,047,999 2,155,211,087 2,528,047,999 Insurance contract liabilities Loss reserves and outstanding claims 17, 28 8,031,188,380 12,829,596,028 8,031,188,380 12,829,596,028 Premium reserves 18 7,333,611,311 7,110,475,219 7,333,611,311 7,110,475,219 Employee benefit obligations ,612, ,508, ,612, ,508,230 Commission payables 372,512, ,200, ,512, ,200,476 Deferred tax liabilities ,738,374,621 3,447,716,988 4,730,478,594 3,441,440,379 Other liabilities Premiums received in advance 1,468,291,255 1,267,447,073 1,468,291,255 1,267,447,073 Liabilities under finance lease agreements 20, 28 56,605,680 69,838,503 56,605,680 69,838,503 Accrued expenses 430,302, ,995, ,302, ,995,634 Others 630,142, ,083, ,142, ,083,359 Total liabilities 25,602,877,403 29,033,909,509 25,594,981,376 29,027,632,900 Owners' equity Share capital Registerred, issued and paid-up 106,470,000 ordinary shares of Baht 10 each (31 December 2013: 76,050,000 ordinary shares of Baht 10 each) 21 1,064,700, ,500,000 1,064,700, ,500,000 Premium on share capital 1,442,500,000 1,442,500,000 1,442,500,000 1,442,500,000 Retained earnings Appropriated Statutory reserve 21, ,470,000 76,050, ,470,000 76,050,000 Other reserve 3,100,000,000 3,100,000,000 3,100,000,000 3,100,000,000 Unappropriated 3,335,768,964 2,528,207,100 3,291,024,814 2,492,639,648 Other component of equity Revaluation surplus on available-for-sale investments - net of income taxes ,921,914,375 13,765,761,514 18,921,914,375 13,765,761,514 Total owners' equity 27,971,353,339 21,673,018,614 27,926,609,189 21,637,451,162 Total liabilities and owners' equity 53,574,230,742 50,706,928,123 53,521,590,565 50,665,084, The accompanying notes are an integral part of the financial statements. Directors

6 Bangkok Insurance Public Company Limited Statement of comprehensive income For the year ended 31 December 2014 Financial statements in which the equity method is applied Separate financial statements Note Profit or loss: Revenues Net earned premium 24, 28 10,827,807,296 10,056,059,566 10,827,807,296 10,056,059,566 Fees and commission income 24 1,082,789,171 1,048,462,369 1,082,789,171 1,048,462,369 Total revenues 11,910,596,467 11,104,521,935 11,910,596,467 11,104,521,935 Expenses Underwriting Claims and losses adjustment expenses 24 5,773,987,497 5,470,971,598 5,773,987,497 5,470,971,598 Commissions and brokerages 24 2,228,405,002 2,150,685,845 2,228,405,002 2,150,685,845 Other underwriting expenses 24 1,457,076,772 1,306,073,826 1,457,076,772 1,306,073,826 Contribution to Road Accident Victims Protection Company Limited 24 30,106,008 30,423,223 30,106,008 30,423,223 Operating expenses 24, ,386,282 1,200,954, ,386,282 1,200,954,410 Total underwriting expenses 10,298,961,561 10,159,108,902 10,298,961,561 10,159,108,902 Profits from underwriting 1,611,634, ,413,033 1,611,634, ,413,033 Net investment revenue 974,751, ,722, ,751, ,722,239 Gains on investments 24,043, ,441,634 24,043, ,441,634 Share of profits from associates ,796,116 4,023, Other income 156,841, ,143, ,841, ,143,800 Profits from operations 2,778,068,397 2,209,744,094 2,767,272,281 2,205,720,706 Contribution to the Office of Insurance Commission 33,310,725 33,004,072 33,310,725 33,004,072 Contribution to the General Insurance Fund 31 37,888,406 37,505,090 37,888,406 37,505,090 Contribution to the Victims Compensation Fund 2,457,633 2,483,528 2,457,633 2,483,528 Finance costs 3,743,925 4,680,238 3,743,925 4,680,238 Profits before income tax expenses 2,700,667,708 2,132,071,166 2,689,871,592 2,128,047,778 Less: Income tax expenses ,920, ,605, ,301, ,001,772 Profits for the year 2,305,746,864 1,748,465,886 2,296,570,166 1,745,046,006 Other comprehensive income or loss: Gains on revaluation of available-for-sale investments 6,445,191, ,987,980 6,445,191, ,987,980 Less: Income taxes 15.2 (1,289,038,215) (114,597,596) (1,289,038,215) (114,597,596) Other comprehensive income for the year 5,156,152, ,390,384 5,156,152, ,390,384 Total comprehensive income for the year 7,461,899,725 2,206,856,270 7,452,723,027 2,203,436,390 Earnings per share: 27 Basic earnings per share Profits for the year The accompanying notes are an integral part of the financial statements.

7 Bangkok Insurance Public Company Limited Statements of cash flows For the year ended 31 December 2014 Financial statements in which the equity method is applied Separate financial statements Note Cash flows from operating activities Direct premium written 15,377,164,139 14,785,036,728 15,377,164,139 14,785,036,728 Cash received (paid) for reinsurance (959,633,963) 5,110,361,844 (959,633,963) 5,110,361,844 Losses incurred on direct insurance (6,587,408,042) (12,796,888,921) (6,587,408,042) (12,796,888,921) Commissions and brokerages on direct insurance (2,060,997,284) (1,915,333,038) (2,060,997,284) (1,915,333,038) Other underwriting expenses (1,788,626,600) (1,642,482,695) (1,788,626,600) (1,642,482,695) Net investment revenue 1,000,510, ,781,076 1,000,510, ,781,076 Other income 154,420, ,890, ,420, ,890,633 Operating expenses (834,111,000) (687,829,235) (834,111,000) (687,829,235) Income taxes (111,030,803) (160,629,678) (111,030,803) (160,629,678) Net cash provided by operating activities 4,190,287,006 3,787,906,714 4,190,287,006 3,787,906,714 Cash flows from investing activities Cash flows from Investments in securities 2,085,891,221 7,372,320,310 2,085,891,221 7,372,320,310 Investments in fixed deposits 5,398,920,635 1,595,239,072 5,398,920,635 1,595,239,072 Loans 843,524, ,980, ,524, ,980,971 Premises and equipment 3,091,942 2,667,975 3,091,942 2,667,975 Cash from investing activities 8,331,428,282 9,529,208,328 8,331,428,282 9,529,208,328 Cash flows used in Investments in securities (2,001,996,952) (8,502,344,145) (2,001,996,952) (8,502,344,145) Investments in fixed deposits (8,338,623,805) (4,234,907,151) (8,338,623,805) (4,234,907,151) Loans (843,654,929) (342,159,477) (843,654,929) (342,159,477) Intangible assets (49,977,849) (46,068,174) (49,977,849) (46,068,174) Land leasehold rights (5,400,000) - (5,400,000) - Premises and equipment (331,588,228) (318,433,945) (331,588,228) (318,433,945) Cash used in investing activities (11,571,241,763) (13,443,912,892) (11,571,241,763) (13,443,912,892) Net cash provided by investing activities (3,239,813,481) (3,914,704,564) (3,239,813,481) (3,914,704,564) Cash flows from financing activities Cash dividend paid to shareholders (1,163,565,000) (912,586,875) (1,163,565,000) (912,586,875) Net cash used in financing activities (1,163,565,000) (912,586,875) (1,163,565,000) (912,586,875) Net decrease in cash and cash equivalents (213,091,475) (1,039,384,725) (213,091,475) (1,039,384,725) Cash and cash equivalents at beginning of the year 517,513,401 1,556,898, ,513,401 1,556,898,126 Cash and cash equivalents at end of the year 6 304,421, ,513, ,421, ,513, The accompanying notes are an integral part of the financial statements.

8 Bangkok Insurance Public Company Limited Statement of changes in owners' equity For the year ended 31 December 2014 Financial statements in which the equity method is applied Issued and Retained earnings Other component of equity Revaluation surplus on availablepaid-up Premium on Appropriated for-sale investments - Note share capital share capital Statutory reserve Other reserve Unappropriated net of income taxes Total Balance as at 1 January ,500,000 1,442,500,000 76,050,000 3,100,000,000 1,692,328,089 13,307,371,130 20,378,749,219 Cash dividend paid (912,586,875) - (912,586,875) Total comprehensive income for the year ,748,465, ,390,384 2,206,856,270 Balance as at 31 December ,500,000 1,442,500,000 76,050,000 3,100,000,000 2,528,207,100 13,765,761,514 21,673,018,614 Balance as at 1 January ,500,000 1,442,500,000 76,050,000 3,100,000,000 2,528,207,100 13,765,761,514 21,673,018,614 Appropriated to statutory reserve ,420,000 - (30,420,000) - - Stock dividend issued ,200, (304,200,000) - - Cash dividend paid (1,163,565,000) - (1,163,565,000) Total comprehensive income for the year ,305,746,864 5,156,152,861 7,461,899,725 Balance as at 31 December ,064,700,000 1,442,500, ,470,000 3,100,000,000 3,335,768,964 18,921,914,375 27,971,353, The accompanying notes are an integral part of the financial statements.

9 Bangkok Insurance Public Company Limited Statement of changes in owners' equity (continued) For the year ended 31 December 2014 Separate financial statements Issued and Retained earnings Other component of equity Revaluation surplus on availablepaid-up Premium on Appropriated for-sale investments - Note share capital share capital Statutory reserve Other reserve Unappropriated net of income taxes Total Balance as at 1 January ,500,000 1,442,500,000 76,050,000 3,100,000,000 1,660,180,517 13,307,371,130 20,346,601,647 Cash dividend paid (912,586,875) - (912,586,875) Total comprehensive income for the year ,745,046, ,390,384 2,203,436,390 Balance as at 31 December ,500,000 1,442,500,000 76,050,000 3,100,000,000 2,492,639,648 13,765,761,514 21,637,451,162 Balance as at 1 January ,500,000 1,442,500,000 76,050,000 3,100,000,000 2,492,639,648 13,765,761,514 21,637,451,162 Appropriated to statutory reserve ,420,000 - (30,420,000) - - Stock dividend issued ,200, (304,200,000) - - Cash dividend paid (1,163,565,000) - (1,163,565,000) Total comprehensive income for the year ,296,570,166 5,156,152,861 7,452,723,027 Balance as at 31 December ,064,700,000 1,442,500, ,470,000 3,100,000,000 3,291,024,814 18,921,914,375 27,926,609, The accompanying notes are an integral part of the financial statements.

10 Bangkok Insurance Public Company Limited Table of contents for notes to financial statements For the year ended 31 December 2014 Note Content Page 1. General information Basis of preparation New financial reporting standards Summary of significant accounting policies Significant accounting judgments and estimates Cash and cash equivalents Premium receivables Reinsurance assets Investments in securities Loans and accrued interest income Investments in associates Investment properties Premises and equipment Intangible assets Deferred tax assets and liabilities/income tax expenses Due to reinsurers Loss reserves and outstanding claims Premium reserves Employee benefit obligations Liabilities under finance lease agreements Share capital Stock and cash dividend Statutory reserve Underwriting information reported by insurance categories Operating expenses Employee expenses Earnings per share Related party transactions Assets placed with the Registrar Assets reserved with the Registrar Contribution to the General Insurance Fund Operating lease commitments Bank guarantees Litigation Segment information Financial instruments Capital management Approval of financial statements... 51

11 Bangkok Insurance Public Company Limited Notes to financial statements For the year ended 31 December General information 1.1 Corporate information Bangkok Insurance Public Company Limited ( the Company ) is a public company incorporated under Thai Law and domiciled in Thailand. The Company is principally engaged in the provision of non-life insurance. The Company s registered office is located at No. 25 Bangkok Insurance Building, South Sathon Road, Bangkok. 1.2 Severe flood situation In the fourth quarter of 2011, there was severe flooding in Thailand. The floods materially affected the financial statements of the Company. The Company has recognised such impact in its financial statements until 31 December 2014 as follows: (Unit: Million Baht) Claims Recoverable from Gross claims reinsurers Net claims Loss reserves 1, (1,422.33) Claims 32, (25,219.43) 7, Total 34, (26,641.76) 7, Claims recoverable from reinsurers under the Excess of Loss contracts (2,151.43) Net claims recognised in profit or loss 5, Reconciliation of net claims recognised in profit or loss: Net claims - recognised as expense from 2011 to end of , Net claims - recognised as revenue during the year ended 31 December 2014 (1) (158.12) Net claims recognised in profit or loss 5, (1) Recognised as a deduction item in Claims and losses adjustment expenses in the statement of comprehensive income. The Company sets aside loss reserves and insurance reserve refundable from reinsurers based on best estimates, with reference to supporting documentation and surveyors reports. 1

12 2. Basis of preparation 2.1 Basis for preparation of financial statements in which the equity method is applied The financial statements have been prepared in accordance with Thai Financial Reporting Standards enunciated under the Accounting Professions Act B.E. 2547, and in accordance with Thai accounting practices related to insurance and the accounting and reporting guidelines prescribed by the Office of Insurance Commission ( OIC ). The presentation of the financial statements has been made in compliance with the Declaration of the Insurance Commission dated 27 May The financial statements have been prepared on a historical cost basis except where otherwise disclosed in Note 4 to the financial statements regarding a summary of significant accounting policies. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements. 2.2 Separate financial statements The separate financial statements, which present investments in associates under the cost method, have been prepared solely for the benefit of the public. 3. New financial reporting standards Below is a summary of financial reporting standards that became effective in the current accounting year and those that will become effective in the future. 3.1 Financial reporting standards that became effective in the current accounting year Conceptual Framework for Financial Report (revised 2014) Accounting Standards: TAS 1 (revised 2012) Presentation of Financial Statements TAS 7 (revised 2012) Statement of Cash Flows TAS 12 (revised 2012) Income Taxes TAS 17 (revised 2012) Leases TAS 18 (revised 2012) Revenue TAS 19 (revised 2012) Employee Benefits TAS 21 (revised 2012) The Effects of Changes in Foreign Exchange Rates TAS 24 (revised 2012) Related Party Disclosures 2

13 Accounting Standards (continued): TAS 28 (revised 2012) Investments in Associates TAS 31 (revised 2012) Interests in Joint Ventures TAS 34 (revised 2012) Interim Financial Reporting TAS 36 (revised 2012) Impairment of Assets TAS 38 (revised 2012) Intangible Assets Financial Reporting Standards: TFRS 2 (revised 2012) Share-based Payment TFRS 3 (revised 2012) Business Combinations TFRS 5 (revised 2012) Non-current Assets Held for Sale and Discontinued Operations TFRS 8 (revised 2012) Operating Segments Accounting Standard Interpretations: TSIC 15 Operating Leases - Incentives TSIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease TSIC 29 Service Concession Arrangements: Disclosures TSIC 32 Intangible Assets - Web Site Costs Financial Reporting Standard Interpretations: TFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities TFRIC 4 Determining whether an Arrangement contains a Lease TFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds TFRIC 7 Applying the Restatement Approach under TAS 29 Financial Reporting in Hyperinflationary Economies TFRIC 10 Interim Financial Reporting and Impairment TFRIC 12 Service Concession Arrangements TFRIC 13 Customer Loyalty Programmes TFRIC 17 Distributions of Non-cash Assets to Owners TFRIC 18 Transfers of Assets from Customers Accounting Treatment Guidance for Stock Dividend 3

14 The above-mentioned financial reporting standards were amended primarily to align their content with the corresponding International Financial Reporting Standards. Most of the changes were directed towards revision of wording and terminology, and provision of interpretations and accounting guidance to users of the accounting standards. The Company s management has assessed the effects of these financial reporting standards and believe that they are not relevant to the Company s business or they do not have any significant impact on these financial statements. 3.2 Financial reporting standards that will become effective in the future The Federation of Accounting Professions has issued a number of revised and new financial reporting standards that become effective for fiscal years beginning on or after 1 January 2015 onwards. These financial reporting standards were aimed at alignment with the corresponding International Financial Reporting Standards, with most of the changes directed towards revision of wording and terminology, and provision of interpretations and accounting guidance to users of accounting standards. The Company s management believe that they will not have any significant impact on the financial statements in the year in which they are adopted. However, some of the financial reporting standards involve changes to key principles and are relevant to the Company s business and its financial statement preparation. Those standards are summarised below. TAS 19 (revised 2014) Employee Benefits This revised standard requires that the entity recognise actuarial gains and losses immediately in other comprehensive income while the existing standard allows the entity to recognise such gains and losses immediately in profit or loss, or in other comprehensive income or loss, or to recognise them gradually in profit or loss. At present, the Company immediately recognises actuarial gains and losses in profit or loss in the period in which they occur. The assessment of the management of the Company is that when the revised standard is applied in 2015 and the method of recognising those gains and losses is changed to immediately recognise them in other comprehensive income or loss, there will not have any significant impact on the Company s financial statements. 4

15 TFRS 4 Insurance Contracts The objective of TFRS 4 is to specify the financial reporting for insurance contracts issued by any entity until the second phase of its project on Insurance Contracts is completed. This TFRS requires disclosure that identifies and explains the amounts in an insurer s financial statements arising from insurance contracts and prohibits provisions for claim reserves on events not yet incurred at the end of the reporting period. In addition, it requires an adequacy test on recognised insurance contract liabilities and an impairment test on reinsurance assets. However, this TFRS exempts an insurer temporarily from some requirements of other TFRSs, including the requirement to consider the framework in selecting accounting policies for insurance contracts. The Company s management is still evaluating the first-year impact of TFRS 4 to the financial statements for the year in which TFRS 4 will be adopted and has yet to reach a conclusion. TFRS 10 Consolidated Financial Statements TFRS 10 prescribes requirements for the preparation of consolidated financial statements and replaces the part dealing with consolidated financial statements as included in TAS 27 Consolidated and Separate Financial Statements. This standard changes the principles used in considering whether control exists. Under this standard, an investor is deemed to have control over an investee if it has rights, or is exposed, to variable returns from its involvement with the investee, and it has the ability to direct the activities that affect the amount of its returns, even if it holds less than half of the shares or voting rights. This important change requires the management to exercise a lot of judgment when reviewing whether the Company and its subsidiary have control over the investees and determine which entities have to be included for preparation of the consolidated financial statements. The management of the Company believes that this standard will not have any significant impact on its financial statements. TFRS 12 Disclosure of Interests in Other Entities This standard stipulates disclosures relating to an entity s interests in subsidiaries, joint arrangements and associates, including structured entities. This standard has therefore no impact on the Company s financial statements. 5

16 TFRS 13 Fair Value Measurement This standard provides guidance on how to measure fair value and stipulates disclosures related to fair value measurements. Entities are to apply the guidance under this standard if they are required by other financial reporting standards to measure their assets or liabilities at fair value. The effect of the change from the adoption of this standard is to be recognised prospectively. Based on the preliminary analysis, the management of the Company believes that this standard will not have any significant impact on the Company s financial statements. 4. Summary of significant accounting policies 4.1 Revenue recognition (a) Premium income Premium income consists of direct premium and reinsurance premium less premium of the canceled policies and premium refunded to the policy holders and adjust with unearned premium reserve. Direct premium is recognised as revenue when the insurance policy comes into effect. For long-term insurance policies with a coverage period of longer than 1 year, premiums are recorded as premiums received in advance and will be gradually recognised as revenue on a yearly basis over the coverage period. Reinsurance premium is recognised as revenue when the reinsurer places the reinsurance application or the statement of accounts with the Company. (b) Commission and brokerage fee income Commission and brokerage fees from ceded premium are recognised as revenue over the period in which the related services are rendered. (c) Investment revenues Interest income on investments is recognised as revenue on an accrual basis based on the effective interest rate. Interest income on loans is recognised as revenue over the term of the loans based on the amount of outstanding principal. No accrual is made for loans with interest default over six continuous months. Interest income on deposits is recognised as revenue over the term of deposits on an accrual basis. Dividends on investments are recognised as revenue when the right to receive the dividend is established. 6

17 (d) Gains (losses) on investments Gains (losses) on investments are recognised as revenue or expense on the transaction dates. 4.2 Expenses recognition (a) Ceded premium Ceded premium is recognised as expenses when the insurance risk is transferred to another reinsurer. (b) Commission and brokerage fee expenses Commission and brokerages fee expenses are expended when incurred (c) Claims and losses adjustment expenses Claims and losses adjustment expenses consist of claims and losses adjustment expenses of direct insurance and reinsurance, and include the amounts of claims, related expenses, and loss adjustments of current and prior period incurred during the year, less residual value and other recoveries (if any) and claims refundable from reinsurers. Claims and losses adjustment expenses of direct insurance are recognised upon the receipt of the claims advice from the insured, based on the claims notified by the insured and estimates made by the Company s management. The maximum value of claims estimated is not however, to exceed the sum-insured under the relevant policy. Claims and losses adjustment expenses of reinsurance are recognised as expenses when the reinsurer places the loss advice with the Company. 4.3 Cash and cash equivalents Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid investment with an original maturity of three months or less and not subject to withdrawal restrictions. 4.4 Premium receivables and allowance of doubtful accounts Premium receivables from both direct insurance and reinsurance are stated at their net realisable values. The Company set up an allowance for doubtful accounts based on the estimated loss that may incur in collection of the premium receivables, on the basis of 7

18 collection experiences, analysis of debtor aging and a review of current status of the premium receivables as at the end of the reporting period. 4.5 Reinsurance assets and due to reinsurers Reinsurance assets Reinsurance assets are stated at the outstanding balances of (a) amount due from reinsurers, (b) amounts deposited on reinsurance, and (c) insurance reserves refundable from reinsurers. Amounts due from reinsurers consist of accrued commission and brokerage income, claims and various other items receivable from reinsurers, excluding reinsurance premium receivable, less allowance for doubtful accounts. The Company records allowance for doubtful accounts for the estimated losses that may be incurred due to inability to make collection, taking into account collection experience and the status of receivables from reinsurers as at the end of the reporting period. Insurance reserves refundable from reinsurers are estimated based on the related reinsurance contracts of premium reserves and loss reserves and outstanding claims in accordance with the regulation regarding insurance reserve calculation Due to reinsurers Due to reinsurers are stated at the outstanding balance of (a) amounts due to reinsurers, which consist of outward premium payables and other reinsurance payables to reinsurers, excluding claims, and (b) amounts withheld on reinsurance. The Company presents net amount of due to and from the same reinsurance party (reinsurance assets or amounts due to reinsurers) when the following criteria for offsetting are met. (1) The Company has a legal right to offset amounts presented in the statements of financial position, and (2) The Company intends to receive or pay the net amount recognised in the statements of financial position, or to realise the asset at the same time as it pays the liability. 8

19 4.6 Investments in securities The Company measures investments in securities according to classification of investments as follows: (a) (b) (c) Available-for-sale investments are stated at fair value. Changes in the fair value of these investments are recorded in other comprehensive income, and will be recorded in profit or loss when the investments are disposed of. Investments in held-to-maturity debt securities are recorded at amortised cost. The premium/discount is amortised/accreted by the effective interest rate method with the amortised/accreted amount presented as an adjustment to the interest income. Investments in non-marketable equity securities, which the Company classifies them as general investments, are stated at cost net of allowance for impairment loss (if any). The fair value of marketable securities is based on the latest bid price of the last working day of the year of the Stock Exchange of Thailand. The fair value of debt instruments is determined based on yield rates quoted by the Thai Bond Market Association. The fair value of investment units is determined from their net asset value. In the event the Company reclassifies investments from one type to another, such investments will be readjusted to their fair value as at the reclassification date. The difference between the carrying amount of the investments and the fair value on the date of reclassification are recorded in profit or loss or recorded as revaluation surplus or deficit on available-for-sale investments in owners equity, depending on the type of investment that is reclassified. The Company records purchases and sales of investments in equity securities on trade dates and records purchases and sales of investments in debt securities on settlement dates. On disposal of an investment, the difference between net disposal proceeds and the cost of the investment is recognised in profit or loss. The weighted average method is used for computation of the cost of an investment. 9

20 4.7 Loans and allowance for doubtful accounts Loans are stated at net realisable value. Allowance for doubtful accounts on loans is provided for the estimated losses that may be incurred in collection of loans based on an evaluation of the current status of the debtors taking into consideration the recovery risk and the value of collateral. 4.8 Investment in associates Financial statements in which the equity method is applied Investments in associates as presented in the financial statements, in which the equity method is applied, is recorded initially at cost and adjusted to reflect the proportionate share of the associate s operating results and dividend income Separate financial statements Investments in associates as presented in the separate financial statements is stated at cost net of allowance for impairment loss (if any). Loss on impairment is recorded as an expense in profit or loss. 4.9 Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and allowance for impairment loss (if any). Depreciation of investment properties is calculated by reference to their costs on the straight-line basis over estimated useful lives of 30 years (over the lease period). Depreciation of the investment properties is recognised as expenses in profit or loss Premises and equipment and depreciation Land is stated at cost. Buildings and equipment are stated at cost less accumulated depreciation and allowance for impairment loss (if any). Depreciation of buildings and equipment is calculated by reference to their costs on a straight-line basis over the following estimated useful lives: Buildings - 20 years and 30 years (over the lease period) Condominium units - 20 years Office furniture, fixture and equipment - 3 years and 5 years Motor vehicles - 5 years 10

21 Depreciation is recognised in profit or loss. No depreciation is provided for land and construction in progress. An item of premises and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on disposal of an asset is included in profit or loss when the asset is derecognised Intangible assets and amortisation Intangible assets acquired are recognised at cost. Following the initial recognition, intangible assets are carried at cost less accumulated amortisation and allowance for impairment loss (if any). Intangible assets with finite lives are amortised on a systematic basis over the economic useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to profit or loss. Intangible assets with finite useful lives, which are computer softwares, have economic benefit lives of 5 and 10 years Impairment of assets At the end of each reporting period, the Company performs impairment reviews in respect of property, buildings and equipment and intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. An impairment loss is recognised in profit or loss when the recoverable amount of an asset, which is the higher of the asset s fair value less costs to sell and its value in use is less than the carrying amount. In the assessment of asset impairment if there is any indication that previously recognised impairment losses may no longer exist or may have decreased, the Company estimates the asset s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimations used to determine the asset s recoverable amount since the last impairment loss was recognised. The increased carrying amount of the asset attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. 11

22 4.13 Premium reserves As at the end of the reporting period, the Company compares the amounts of unexpired risk reserve with unearned premium reserves, and if unexpired risk reserve is higher that unearned premium reserve, the difference is recognised and the unexpired risk reserves are therefore presented in the financial statements. (a) Unearned premium reserve Unearned premium reserve is calculated based on direct premium before deducting premium ceded as follows: Fire, marine, transportation (hull), motor and miscellaneous Transportation (cargo), travelling accident with coverage periods of not over six-months - Monthly average basis (the one-twenty fourth basis) - 100% of premiums as from the effective date of the inforce policies over the insurance coverage period (b) Unexpired risk reserves Unexpired risk reserves are the reserves for the claims that may be incurred in respect of in-force policies. Unexpired risk reserves are set aside using an actuarial method, at the best estimate of the claims that are expected be incurred during the remaining coverage period, based on historical claims data Loss reserves and outstanding claims Outstanding claims are recorded at the amount to be actually paid. Loss reserves are provided upon receipt of claim advices from the insured based on the claims notified by the insured and estimates made by the Company s management. The maximum value of claims estimate is, however, not to exceed the sum-insured under the relevant policy. The Company sets aside additional reserves for claims incurred but not yet reported (IBNR) to the Company, which is calculated using an actuarial method based on a best estimate of claims which are expected to be paid in respect of losses occurring before or as at the reporting period for both reported and not reported losses, and net of recorded claims. 12

23 4.15 Employee benefits Short-term employee benefits Salaries, wages, bonuses and contributions to the social security fund are recognised as expenses when incurred Post-employment benefits Defined contribution plan The Company and its employees have jointly established a provident fund. The fund is monthly contributed by employees and by the Company. The fund s assets are held in a separate trust fund and the Company s contributions are recognised as expenses when incurred. Defined benefit plan The Company has obligations in respect of the severance payments it must make to employees upon retirement under labor law. The Company treats these severance payment obligations as a defined benefit plan. The obligations under the defined benefit plan are determined based on actuarial techniques, using the projected unit credit method. Actuarial gains and losses arising from post-employment benefits are recognised immediately in profit or loss. The obligations under the defined benefit plan comprise the present value of the defined benefit obligation less unrecognised past service cost and unrecognised actuarial gains or losses Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 13

24 4.17 Long-term leases Leases of equipment and vehicles which transfer substantially all the risks and rewards of ownership to the Company as a lease are classified as finance leasee. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to profit or loss over the lease period. The equipment acquired under finance leases is depreciated over the useful life of the asset. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term Foreign currencies The financial statements are presented in Baht, which is also the Company s functional currency. Transactions in foreign currency are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Baht at the exchange rate ruling at the end of reporting period. Gains and losses on exchange are recorded as revenues or expenses in profit or loss Income taxes Income tax expense represents the sum of corporate income taxes currently payable and deferred income taxes. Current income taxes Current income taxes are provided in the accounts at the amount expected to be paid to the taxation authorities, based on taxable profits determined in accordance with tax legislation. Deferred income taxes Deferred income taxes are provided on temporary differences between the tax bases of assets and liabilities and its carrying amounts at the end of each reporting period, using the tax rates enacted at the end of the reporting period. 14

25 The Company recognises deferred tax liabilities for all taxable temporary differences while it recognises deferred tax assets for all deductible temporary differences and tax losses carried forward to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilised. At each reporting period, the Company reviews and reduces the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilised. The Company records deferred income taxes directly to equity if they relate to items that are recorded directly to equity Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include associates and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company s operations. 5. Significant accounting judgments and estimates The preparation of financial statements in conformity with Thai Financial Reporting Standards at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures and actual results could differ from these estimates. Significant judgments and estimates are as follows: 5.1 Allowance for doubtful accounts on premium receivables and amounts due from reinsurers In determining an allowance for doubtful accounts on premium receivables and amounts due from reinsurers, the management needs to make judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition. 15

26 5.2 Allowance for impairment loss on investments in equity securities The Company treats available-for-sale investments, general investments and investments in associates as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is significant or prolonged requires the management judgment. 5.3 Premises and equipment and depreciation In calculating depreciation of buildings and equipment, the management is required to make estimates of the useful lives and residual values of the Company s buildings and equipment and to review estimate useful lives and residual values when circumstance changes. In addition, the management is required to review premises and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that its recoverable amount is lower than the carrying amount. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review. 5.4 Intangible assets and allowance for impairment loss The initial recognition and measurement of intangible assets, and subsequent impairment testing require management to make estimates of cash flows to be generated by the asset, including the choice of a suitable discount rate used in calculation of the present value for those cash flows. 5.5 Deferred tax assets Deferred tax assets are recognised for deductible temporary differences to the extent that it is probable that taxable profit will be available against which the temporary differences can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of estimate future taxable profits. 16

27 5.6 Loss reserves and outstanding claims At the end of the reporting period, the Company has to estimate loss reserves and outstanding claims taking into account two parts, which are the claims incurred and reported, and the claims incurred but not yet reported (IBNR), the latter of which requires actuarial technique such as the Chain Ladder and Bornheutter-Ferguson methods in estimation of reserves. The main assumptions underlying such techniques relate to historical experience, including the development of claim estimates, losses incurred and paid, average costs per claim and number of claims, etc. However, such estimates are forecasts of future outcomes, and actual results could differ. 5.7 Unexpired risk reserves Unexpired risk reserves are calculated using an actuarial method, based on a best estimate of the claims expected to incur over the remaining coverage period of the insurance contracts. Estimating the reserves requires the management to exercise judgment, with reference to historical data and the best estimates available at the time. 5.8 Obligations under the defined benefit plan The obligations under the defined benefit plan are determined based on actuarial techniques. Such determination is made based on various assumptions, including discount rate, future salary incremental rate, mortality rate and staff turnover rate. 5.9 Litigation The Company has contingent liabilities as a result of litigation claims. The Company s management has used judgment to assess the results of the litigation and believes that losses incurred will not exceed the recorded amounts as at the end of reporting period Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgment regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement. 17

28 5.11 Fair value of financial instruments In determining the fair value of financial instruments that are not traded in an open market or for which quoted market prices are not readily available, the management exercises judgment in estimating the fair value of such financial instruments, using the generally accepted valuation method. The inputs used in such fair value calculation are comparable to those from the observable markets, taking into consideration of liquidity and correlation and long-term volatility in value of financial instruments. 6. Cash and cash equivalents 31 December Cash on hand 2,734,655 1,769,543 Deposits at banks with no fixed maturity date 101,636, ,743,858 Deposits at banks with fixed maturity date 6,988,113,446 4,223,359,012 Total cash and deposits at financial institutions 7,092,484,109 4,365,872,413 Less: Deposits at banks with an original maturity period of longer than 3 months (6,738,062,183) (3,798,359,012) Deposits at banks subject to withdrawal restrictions (50,000,000) (50,000,000) Cash and cash equivalents 304,421, ,513,401 As at 31 December 2014 and 2013, fixed deposits of Baht 50 million were placed with a bank to secure bank overdraft facilities. As at 31 December 2014 and 2013, the Company s saving accounts, fixed deposits and short-term investments carried interests between 0.38 and 3.50 percent per annum and between 0.50 and 3.35 percent per annum, respectively. 18