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8 STATUTORY FINANCIAL STATEMENTS 31 DECEMBER 2012

9 CONTENTS Page CORPORATE INFORMATION ii DIRECTORS REPORT 1-10 STATEMENT BY DIRECTORS 11 STATUTORY DECLARATION 11 INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS BALANCE SHEETS 14 STATEMENTS OF INCOME 15 STATEMENTS OF COMPREHENSIVE INCOME 16 STATEMENTS OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS i

10 CORPORATE INFORMATION BOARD OF DIRECTORS Executive Director Emmanuel Jean Louis Nivet (appointed on 14 September 2012) Jahanath A/L Muthusamy (resigned on 14 September 2012) Non-Executive Directors Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) (Chairman) Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Tan Sri Dato Hashim bin Meon Kang Beng Hoe Oh Teik Tatt Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Ramli bin Putih (resigned on 1 October 2012) Ngo Siew Pod (resigned on 31 December 2012) SECRETARY Aisah Bevi binti Abdul Rahman AUDITORS PricewaterhouseCoopers REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Ground Floor, Wisma Boustead 71 Jalan Raja Chulan Kuala Lumpur ii

11 DIRECTORS REPORT The Directors have pleasure in submitting their report together with the audited financial statements of the Group and Company for the financial year ended 31 December PRINCIPAL ACTIVITY The Group and Company are principally engaged in the underwriting of all classes of general insurance business. There have been no significant changes in the nature of this activity of the Group and Company during the financial year. FINANCIAL RESULTS Group RM'000 Company RM'000 Net profit for the financial year 89,819 90,119 DIVIDENDS Since the end of the previous financial year, the Company paid an interim gross dividend of 8.40 sen per share, less income tax at 25% totaling RM7,500,000 in respect of the financial year ended 31 December 2012 on 17 December The Directors do not recommend any final dividend for the financial year ended 31 December ISSUE OF SHARES No shares were issued by the Company during the financial year. RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the financial year are as disclosed in the financial statements. INSURANCE LIABILITIES Before the financial statements of the Group and Company were made out, the Directors took reasonable steps to ascertain that there was adequate provision for insurance liabilities in accordance with the valuation methods specified in Part D of the Risk-Based Capital Framework ( RBC Framework ) issued by Bank Negara Malaysia ( BNM ) for insurers. 1

12 DIRECTORS REPORT (CONTINUED) BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and Company were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of impaired debts and the making of impairment allowance for impaired debts, and satisfied themselves that all known impaired debts had been written off and adequate allowance had been made for impaired debts. At the date of this report, the Directors are not aware of any circumstances that would render the amount written-off for impaired debts or the amount of the impairment allowance for impaired debts in the financial statements of the Group and Company inadequate to any substantial extent. CURRENT ASSETS Before the financial statements of the Group and Company were made out, the Directors took reasonable steps to ascertain 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 Group and Company have been written down to amounts 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 the current assets in the financial statements of the Group and Company misleading. 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 Group and 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 Group and Company which has arisen since the end of the financial year which secures the liabilities of any other person, or any contingent liability in respect of the Group and Company that has arisen since the end of the financial year. No contingent or other liability of the Group and 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 substantially affect the ability of the Group and Company to meet their obligations 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 Group and Company. 2

13 DIRECTORS REPORT (CONTINUED) 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 Group and Company, which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and 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 Group and Company for the financial year in which this report is made. CORPORATE GOVERNANCE The Board and management have reviewed the Group s and Company s corporate governance structures and procedures with reference to BNM Prudential Framework of Corporate Governance JPI/GPI 25 (Consolidated) for Insurers ( the Framework ), and are satisfied that the Company has complied with all the prescriptive applications in the Framework. Where applicable, best practices are adopted to improve the standard of the Group s and Company s corporate governance. There is no departure from the Framework principles applicable to general insurance business. Composition of the Board of Directors ( the Board ) The composition of the Board during the period since the date of the last report is as follows: Admiral Datuk Mohd Ramly bin Abu Bakar, (Retired) (Chairman) Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Tan Sri Dato Hashim bin Meon Kang Beng Hoe Oh Teik Tatt Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Emmanuel Jean Louis Nivet (appointed on 14 September 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Jahanath A/L Muthusamy (resigned on 14 September 2012) Ramli bin Putih (resigned on 1 October 2012) Ngo Siew Pod (resigned on 31 December 2012) 3

14 DIRECTORS REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Composition of the Board of Directors ( the Board ) (continued) In accordance with Article 131 of the Company s Articles of Association, Mr Oh Teik Tatt, retires by rotation at the forthcoming Annual General Meeting and, being eligible, offer himself for re-election. In accordance with Article 134(1) of the Company s Articles of Association, Mr. Kang Beng Hoe retires at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election. The Board comprises individuals with a wide range of professional skills and operational experience: Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Admiral Datuk Mohd Ramly bin Abu Bakar holds a Master of Arts degree in International Relations and Strategic Studies and a Diploma in Political Science. In the rank of Admiral, he was the Chief of the Royal Malaysian Navy until his retirement in He is presently Director of a number of local companies. He engages in charity efforts that benefit navy widows and handicapped children. Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Gen. Tan Sri Ahmad Saruji bin Che Rose RMAF, (Retired) holds a Masters Degree in Defence Studies and an Advanced Diploma in Defence Resources Management. He was the Chief of the Royal Malaysian Air Force from 1996 to 2001 and was an Independent Director of a number of defence related companies namely, Airod Sdn Bhd, SME Aerospace Sdn Bhd and Aerospace Technology System Corporation (ATSC). After retirement from government service in 2001, he served as Chairman of BH Insurance (M) Bhd (formerly Royal & Sun Alliance Insurance Bhd.). He was appointed as an Independent Director of the Company on 2 June Tan Sri Dato Hashim bin Meon Tan Sri Dato Hashim bin Meon holds a Master of Public Administration degree from University of Southern California, Los Angeles, USA, and has held several senior government positions during his long career. He now sits on the Board of a number of local companies, and also the Board of Trustees of several Non-Governmental Organisations ( NGOs ). He was appointed as a Director of the Company in January Mr. Kang Beng Hoe Mr. Kang Beng Hoe, a Fellow of the Chartered Tax Institute of Malaysia (formerly known as the Malaysian Institute of Taxation) was in the forefront of professional tax practice for more than thirty years. He headed the Malaysian tax practice of a major international accounting firm until retirement as the Senior Executive Director. He was retained as an Advisor of the practice until Mr Kang was appointed as a Director of the Company in August 2006, and as a Director of AXA Management Services Bhd. (formerly known as BH Insurance (M) Bhd.) on 30 April Mr. Oh Teik Tatt Mr. Oh Teik Tatt is a graduate in Agricultural Science from University of Malaya and was the Managing Director of Tractors Malaysia Holdings Berhad for 11 years until his retirement in He was the Chairman of Landmarks Bhd and is on the Board of a number of companies. He is also the Chairman of CEO Solutions Sdn Bhd, a consultancy group. He has been an independent Director of the Company since November

15 DIRECTORS REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Composition of the Board of Directors ( the Board ) (continued) Ms. Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Ms. Gaelle Olivier holds a qualification in engineering and actuary studies. She started her career at Credit Lyonnais and then joined AXA Group in 1998, occupying various positions in France and in Japan, in asset management, Life & P&C insurance operations and at Group level. She is currently the Chief Executive Officer of AXA General Insurance Asia and also a director of AXA Asia Regional Center Pte Ltd, Bharti AXA General Insurance Company Limited, AXA General Insurance Hong Kong Limited, AXA General Insurance China Limited, AXA Insurance Singapore Pte Limited, AXA Technology Singapore Pte Limited, Win Property (Shanghai Links) Limited. She was appointed as Director of the Company on 2 July Mr. Emmanuel Jean Louis Nivet (appointed on 14 September 2012) Mr. Emmanuel Nivet graduated from Ecole Superieure de Commerce et d Administration des Enteprises (ESCAE), France and a decade later he obtained his engineering qualification from Institut Superieur de Securite Incendie, Franceis. Prior to joining the Company, he was the Chief Executive Officer of AXA Corporate Solutions, UK Branch. He is currently the Chief Executive Officer and Executive Director of the Company. Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Dr. Victor Kuk holds a First Class Honours degree in Bachelor of Engineering, Aeronautical Engineering from University of Manchester, PhD in Engineering from Oxford University and a Master degree in Business Administration from Warwick Business School. He joined AXA s Regional Centre in Singapore in 2001 and has since been responsible for various operational functions within Asia. In 2006, he was appointed the Chief Executive Officer of AXA General Insurance Hong Kong and in February 2010, he was appointed the Chief Executive Officer, South East Asia and Greater China. He was appointed as Director of the Company on 17 January Jahanath A/L Muthusamy (resigned on 14 September 2012) Mr Jahanath is a Fellow of the Chartered Insurance Institute. He joined the Company in 1979 and in 2002, whilst holding the position of Senior Executive Vice President, he was seconded to Indonesia as the President Director of PT Asuransi AXA Indonesia until October In November 2006, he was appointed as President/Chief Executive Officer ( CEO ) of the Company. Mr Jahanath has also been appointed a Board member of AXA Management Services Bhd. (formerly known as BH Insurance (M) Bhd.) since 30 April Ramli bin Putih (resigned on 1 October 2012) En. Ramli holds a Bachelor of Science Degree from Universiti Putra Malaysia, and he presently sits on the board of several local companies. He has held various senior positions in government linked companies, and has vast experience in business operations and management. He was appointed as Director of the Company on 2 June Ngo Siew Pod (resigned on 31 December 2012) Ms Ngo is a Fellow of the Chartered Association of Certified Accountants and until her retirement at the end of 2010, held the position of Regional Chief Financial Officer, AXA Asia Pacific General Insurance. She is a board member of several companies of the AXA Group in the region. She was appointed as a Director of the Company in

16 DIRECTORS REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Attendance at Board Meeting The Board holds regular meetings, with additional meetings being convened as necessary. All members complied with the minimum attendance requirements for the Board meetings during the financial year ended 31 December Directors Training Except Mr Emmanuel Nivet and Ms Gaelle Olivier, all Directors have attended the Corporate Directors Training Programme. The Directors also participated in additional trainings conducted by the Companies Commission of Malaysia, BNM and other external training co-ordinators to better equip themselves to effectively discharge their duties. Audit Committee The Audit Committee ( AC ) comprises five Directors, three of whom are independent Directors. The composition of the AC is as follows: Kang Beng Hoe Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Oh Teik Tatt Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Ngo Siew Pod (resigned on 31 December 2012) Chairman (Independent) Member (Non-Independent) Member (Independent) Member (Independent) Member (Non-Independent) The responsibilities of the AC include, but are not limited to the following: (i) (ii) (iii) Review the overall condition, in particular, the financial status of the Company, its internal controls and audit programme. Review with external auditors, the scope of their audit and audit reports, including their findings and any action to be taken. Select independent auditors for appointment by the Company s Board each year. There were six (6) meetings held in the current financial year and all members attended these meetings. 6

17 DIRECTORS REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Remuneration Committee The Remuneration Committee ( RC ) was established in The composition of the RC is as follows: Kang Beng Hoe Chairman (Independent) Oh Teik Tatt Member (Independent) Tan Sri Hashim bin Meon Member (Non-Independent) Gaelle Marie Blandine Olivier Member (Non-Independent) (appointed on 2 July 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Member (Non-Independent) Ramli bin Putih (resigned on 1 October 2012) Member (Non-Independent) Ngo Siew Pod (resigned on 31 December 2012) Member (Non-Independent) The responsibilities of the RC are as follows: (i) (ii) Develop a policy on remuneration of Directors and senior executives, and determine the remuneration packages of individual Directors under conditions of objectivity and full transparency in accordance with Guideline JPI/GPI 25 issued by BNM. Examine and recommend the Directors fees and allowances in accordance with market practice or as prescribed by the shareholders of the Company. There were two (2) meetings held in the current financial year and other than Dr. Victor Kuk Ho Ming (who was absent during the second meeting), all members attended both the meetings. Risk Management Committee The Risk Management Committee ( RMC ) was established in The composition of the RMC is as follows: Oh Teik Tatt Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Kang Beng Hoe Gen. Tan Sri Ahmad Saruji bin Che Rose (RMAF), (Retired) Ngo Siew Pod (resigned on 31 December 2012) Chairman (Independent) Member (Non-Independent) Member (Independent) Member (Independent) Member (Non-Independent) The responsibilities of the RMC are as follows: (i) (ii) (iii) Review and recommend risk management strategies, policies and risk tolerance for the Board s approval. Review and assess the adequacy of risk management policies and framework for identifying, measuring, monitoring and controlling risks as well as the extent to which these are operating effectively. Ensure adequate infrastructure, resources and systems are in place for an effective risk management, for example ensuring that staff responsible for implementing risk management system, perform their duties independently of the Company s risk taking activities. There were four (4) meetings held in the current financial year and all members attended these meetings. 7

18 DIRECTORS REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Nomination Committee The Nomination Committee ( NC ) was established in The composition of the NC is as follows: Oh Teik Tatt Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) Tan Sri Dato Hashim bin Meon Gaelle Marie Blandine Olivier (appointed on 2 July 2012) Dr. Victor Kuk Ho Ming (resigned on 17 May 2012) Ramli bin Putih (resigned on 1 October 2012) Ngo Siew Pod (resigned on 31 December 2012) Chairman (Independent) Member (Non-Independent) Member (Non-Independent) Member (Non-Independent) Member (Non-Independent) Member (Non-Independent) Member (Non-Independent) The responsibilities of the NC are as follows: (i) (ii) (iii) Overseeing the overall composition of the Board in terms of the appropriate size and mix of skills, the balance between executive, non-executive and independent Directors and other core competencies required. Recommending and assessing the nominees for directorship, the Directors to fill Board committees as well as nominees for the CEO position including assessment and recommendation on the Directors to be re-appointed at the Annual General Meeting of the Company. On an annual basis, review and evaluate 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 CEO. There were two (2) meetings held in the current financial year and except for Admiral Datuk Mohd Ramly bin Abu Bakar (Retired); (who was absent during the first meeting), all members attended both the meetings. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Group and Company are parties, with the object or objects of enabling Directors of the Group and Company to acquire benefits by means of the acquisition of shares in or debentures of the Group and Company or any other body corporate, other than the AXA Group Share Plan scheme which applies to all employees of the Group and Company and the options over the shares in the ultimate holding corporation as disclosed in this report. Since the end of the previous financial year, no Director of the Group and Company has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors disclosed in Note 25 to the financial statements) by reason of a contract made by the Group and Company or a related corporation with a Director or with a firm of which he is a member, or with a company in which the Director has a substantial financial interest, except that certain Directors receive remuneration as Directors/Executives of the related corporations. 8

19 DIRECTORS REPORT (CONTINUED) DIRECTORS INTERESTS According to the register of Directors shareholdings, the interest of the Directors in office at the end of the financial year in shares in the Company and its related corporation were as follows: The ultimate holding corporation, AXA Number of ordinary shares of 2.29 Euros each At / date of At appointment Acquired Disposed Ngo Siew Pod Emmanuel Jean Louis Nivet 1, ,955 Gaelle Marie Blandine Olivier 13, ,572 Options over shares in the ultimate holding corporation, AXA, granted to the Directors are as follows: Options over ordinary shares of 2.29 Euros each At / date of At appointment Granted Exercised Forfeited Ngo Siew Pod 31, (3,680) 28,183 Emmanuel Jean Louis Nivet 13, ,775 Gaelle Marie Blandine Olivier 146,975 - (23,132) - 123,843 Other than the above, none of the other Directors in office at the end of the financial year held any interest in shares in, or debentures of, the Company or its related corporations during the financial year. ULTIMATE HOLDING CORPORATION The Directors regard AXA, a corporation incorporated in France, as the ultimate holding corporation. 9

20 DIRECTORS REPORT (CONTINUED) AUDITORS The auditors, PricewaterhouseCoopers, have indicated their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution dated 9 May ADMIRAL DATUK MOHD RAMLY BIN ABU BAKAR (RETIRED) DIRECTOR EMMANUEL JEAN LOUIS NIVET DIRECTOR Kuala Lumpur 10

21 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965 We, Admiral Datuk Mohd Ramly bin Abu Bakar (Retired) and Emmanuel Jean Louis Nivet, being two of the Directors of AXA Affin General Insurance Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 14 to 95 are drawn up so as to show a true and fair view of the financial position of the Group and Company as at 31 December 2012 and of the financial performance and cash flows of the Group and Company for the financial year ended on that date in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act, Signed on behalf of the Board of Directors in accordance with their resolution dated 9 May ADMIRAL DATUK MOHD RAMLY BIN ABU BAKAR (RETIRED) DIRECTOR EMMANUEL JEAN LOUIS NIVET DIRECTOR Kuala Lumpur STATUTORY DECLARATION PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965 I, Emmanuel Jean Louis Nivet, the Director primarily responsible for the financial management of AXA Affin General Insurance Berhad, do solemnly and sincerely declare that the financial statements set out on pages 14 to 95 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, EMMANUEL JEAN LOUIS NIVET Subscribed and solemnly declared by the abovenamed Emmanuel Jean Louis Nivet at Kuala Lumpur in Malaysia on 9 May 2013, before me. COMMISSIONER FOR OATHS 11

22 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF (Company No. ) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of AXA Affin General Insurance Berhad, which comprise the balance sheets as at 31 December 2012 of the Group and Company, and the statements of income, comprehensive income, changes in equity and cash flows of the Group and Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 14 to 95. Directors Responsibility for the Financial Statements The Directors of the Group and Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and comply with the provisions of the Companies Act, 1965, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Group s and Company s preparation of the financial statement that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and comply with the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and Company as of 31 December 2012 and of its financial performance and cash flows for the financial year then ended. PricewaterhouseCoopers (AF 1146), Chartered Accountants, Level 10, 1 Sentral, Jalan Travers, Kuala Lumpur Sentral, P.O. Box 10192, Kuala Lumpur, Malaysia T: +60 (3) , F: +60 (3) , 12

23 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF (CONTINUED) (Company No. ) REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) (b) (c) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiary have been properly kept in accordance with the provisions of the Act. We are satisfied that the financial statements of the subsidiary that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. Our audit report on the financial statements of the subsidiary did not contain any qualification or any adverse comment made under Section 174(3) of the Act. OTHER MATTERS 1. As stated in Note 2 to the financial statements, the Group and Company adopted Malaysian Financial Reporting Standards on 1 January 2012 with a transition date of 1 January These standards were applied retrospectively by the Directors to the comparative information in these financial statements, including the balance sheets as at 31 December 2011 and 1 January 2011, and the statements of income, comprehensive income, changes in equity and cash flows for the financial year ended 31 December 2011 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and Company for the financial year ended 31 December 2012 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 December 2012 and financial performance and cash flows for the financial year then ended. 2. This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants JAYARAJAN A/L U. RATHINASAMY (No. 2059/06/14(J)) Chartered Accountant Kuala Lumpur 9 May

24 BALANCE SHEETS AS AT 31 DECEMBER Notes Group Company Group Company Group Company RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Assets - Property, plant and equipment 5 16,446 16,446 15,844 15,844 16,557 16,557 Intangible asset software 6 6,279 6,279 5,185 5,185 3,262 3,262 Goodwill 7 165, , , , , ,822 Investment in a subsidiary 8-220, , ,693 Other investments 9 1,280,881 1,280,881 1,063,124 1,063,124 1,049,843 1,049,843 Available-for-sale financial assets 736, , , , , ,918 Loans and receivables 544, , , , , ,925 Reinsurance assets , , , , , ,067 Insurance receivables , , , ,810 80,704 80,704 Other receivables 12 35,520 35,487 43,810 43,810 26,313 26,313 Deferred tax asset 16 3,662 3, Tax recoverable ,219 11,219 7,428 7,428 Cash and cash equivalents 21,507 21,476 28,930 28,687 20,277 17,277 Total assets 1,865,074 2,085,398 1,616,703 1,885,118 1,605,273 1,900,966 Equity and liabilities Share capital , , , , , ,048 Share premiums 71,597 71,597 71,597 71,597 71,597 71,597 Retained earnings , , , , , ,809 Available-for-sale reserve 14,015 11,648 22,621 20,254 24,115 21,748 Revaluation reserve 9,342 9,342 7,917 7,917 7,917 7,917 Share option reserve 2,271 2,271 2,270 2,270 2,274 2,274 Total equity 557, , , , , ,393 Insurance contract liabilities , , , , , ,873 Deferred tax liabilities ,563 3,251 Borrowings , , , , , ,000 Insurance payables , , , , , ,144 Other payables 19 44, ,603 29, ,743 34, ,305 Tax payable 14,835 14, ,972 - Total liabilities 1,307,743 1,527,671 1,134,511 1,402,830 1,138,164 1,433,573 Total equity and liabilities 1,865,074 2,085,398 1,616,703 1,885,118 1,605,273 1,900,966 The accompanying notes form an integral part of the financial statements. 14

25 STATEMENTS OF INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER Note Group Company Group Company RM'000 RM'000 RM'000 RM'000 Operating revenue , , , ,724 Gross earned premiums 21(a) 792, , , ,869 Premiums ceded to reinsurers 21(b) (142,477) (142,477) (210,065) (210,065) Net earned premiums 649, , , ,804 Investment income 22 42, ,917 34,833 74,855 Realised gains and losses 23 17,794 17,794 7,214 7,214 Fair value gains and losses 24 (346) (48,616) (982) (31,017) Reinsurance commission income 35,421 35,421 28,692 28,692 Other operating revenue Other revenue 95, ,694 70,388 80,375 Gross claims paid 15(i) (373,836) (373,836) (367,990) (367,990) Claims ceded to reinsurance 15(i) 70,929 70,929 96,117 96,117 Gross change to claims liabilities (93,408) (93,408) (35,005) (35,005) Change to claims liabilities ceded to reinsurers (274) (274) (26,921) (26,921) Net claims incurred (396,589) (396,589) (333,799) (333,799) Commission expense (103,403) (103,403) (87,454) (87,454) Management expenses 25(a) (112,399) (112,350) (107,273) (107,111) Finance costs 25(b) (12,033) (12,033) (13,208) (13,208) Other operating expenses (500) (500) - - Other expenses (228,335) (228,286) (207,935) (207,773) Profit before taxation 120, ,536 20,458 30,607 Taxation 26 (30,577) (46,417) (3,877) (14,214) Net profit for the financial year 89,819 90,119 16,581 16,393 Basic earnings per share (sen) The accompanying notes form an integral part of the financial statements. 15

26 STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER Group Company Group Company RM'000 RM'000 RM'000 RM'000 Net profit for the financial year 89,819 90,119 16,581 16,393 Other comprehensive income Available-for-sale reserve: Net loss arising during the financial year (Note 9(c)) (11,475) (11,475) (1,992) (1,992) Tax effect thereon (Note 16) 2,869 2, (8,606) (8,606) (1,494) (1,494) Revaluation reserve: Surplus arising during the financial year 1,500 1, Tax effect thereon (Note 16) (75) (75) - - 1,425 1, Total comprehensive income for the financial year 82,638 82,938 15,087 14,899 The accompanying notes form an integral part of the financial statements. 16

27 STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 Share Share Revaluation Share option AFS Retained GROUP Note capital premiums reserve reserve reserve earnings Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 1 January ,048 71,597 7,917 2,270 22, , ,192 Total comprehensive income for the financial year - - 1,425 - (8,606) 89,819 82,638 Valuation of employee services share options Dividend paid in respect of the financial year ended 31 December (7,500) (7,500) At 31 December ,048 71,597 9,342 2,271 14, , ,331 At 1 January ,048 71,597 7,917 2,274 24, , ,109 Total comprehensive income for the financial year (1,494) 16,581 15,087 Valuation of employee services share options (4) - - (4) At 31 December ,048 71,597 7,917 2,270 22, , ,192 17

28 STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 (CONTINUED) Non-distributable Distributable Share Share Revaluation Share option AFS Retained COMPANY Note capital premiums reserve reserve reserve earnings Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 1 January ,048 71,597 7,917 2,270 20, , ,288 Total comprehensive income for the financial year - - 1,425 - (8,606) 90,119 82,938 Valuation of employee services share options Dividend paid in respect of the financial year ended 31 December (7,500) (7,500) At 31 December ,048 71,597 9,342 2,271 11, , ,727 At 1 January ,048 71,597 7,917 2,274 21, , ,393 Total comprehensive income for the financial year (1,494) 16,393 14,899 Valuation of employee services share options (4) - - (4) At 31 December ,048 71,597 7,917 2,270 20, , ,288 The accompanying notes form an integral part of the financial statements. 18

29 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER Group Company Group Company RM'000 RM'000 RM'000 RM'000 Operating Activities Net profit for the financial year 89,819 90,119 16,581 16,393 Investment income (42,556) (106,917) (34,833) (74,855) Realised gains and losses (17,794) (17,794) (7,214) (7,214) Fair value gains and losses , ,017 Taxation 30,577 46,417 3,877 14,214 Purchase of AFS financial assets (295,064) (295,064) (189,999) (189,999) Proceeds from disposal of AFS financial assets 43,881 43,881 44,217 44,217 Proceeds from maturity of AFS financial assets 90,000 90,000 85,000 85,000 Share-based compensation 1 1 (4) (4) Non-cash items: Depreciation of property, plant and equipment 2,102 2,102 2,865 2,865 Amortisation of intangible asset - software 2,644 2,644 1,995 1,995 (Write-back of)/allowance for impairment of insurance receivables (706) (706) 3,633 3,633 Changes in working capital: (Increase)/decrease in loans and receivables (53,996) (53,996) 54,660 54,660 (Increase)/decrease in reinsurance assets (46,335) (46,335) 75,108 75,108 Increase in insurance receivables (5,147) (5,147) (45,739) (45,739) Decrease/(increase) in other receivables 8,290 8,323 (17,497) (16,829) Increase in insurance contract liabilities 128, ,143 33,573 33,573 Increase in insurance payables 15,564 15,564 29,356 29,356 Increase/(decrease) in other payables 15,029 (33,139) (5,386) (36,230) Cash (used in)/generated from operating activities (35,202) (83,288) 51,175 21,161 Dividend income received 3,202 67,563 3,119 43,166 Interest income received 42,455 42,455 28,659 28,634 Income tax paid (5,432) (21,495) (13,366) (20,617) Net cash inflows from operating activities 5,023 5,235 69,587 72,344 19

30 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 (CONTINUED) Group Company Group Company RM'000 RM'000 RM'000 RM'000 Investing Activities Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment (1,477) (1,477) (2,696) (2,696) Purchase of intangible asset - software (3,738) (3,738) (3,378) (3,378) Net cash outflows from investing activities (4,946) (4,946) (5,934) (5,934) Financing Activities Repayment of borrowings - - (55,000) (55,000) Dividend paid to shareholders (7,500) (7,500) - - Net cash outflows from financing activities (7,500) (7,500) (55,000) (55,000) Net (decrease)/increase in cash and cash equivalents (7,423) (7,211) 8,653 11,410 Cash and cash equivalents at the beginning of the financial year 28,930 28,687 20,277 17,277 Cash and cash equivalents at the end of the financial year 21,507 21,476 28,930 28,687 Cash and cash equivalents comprise: Cash and bank balances 21,507 21,476 28,930 28,687 The accompanying notes form an integral part of the financial statements. 20

31 NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER PRINCIPAL ACTIVITIES AND GENERAL INFORMATION The Company, a public limited liability company incorporated and domiciled in Malaysia, is principally engaged in the underwriting of all classes of general insurance business. There have been no significant changes in the nature of the activities during the financial year. The Directors regard AXA, a corporation incorporated in France, as the ultimate holding corporation. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 9 May BASIS OF PREPARATION The financial statements of the Group and Company have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies, and comply with Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards and the provisions of the Companies Act, The financial statements of the Group and Company for the financial year ended 31 December 2012 are the first set of financial statements prepared in accordance with MFRS, including MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards. The Group and Company have consistently applied the same accounting policies in its opening MFRS statement of financial position at 1 January 2011 (transition date) and throughout all years presented as if these policies had always been in effect. Subsequent to the transition in the financial reporting framework to MFRS on 1 January 2012, the comparative information has not been audited under MFRS. However, the comparative balance sheets as at 31 December 2011, comparative statements of income, comprehensive income, changes in equity and cash flows for the financial year then ended have been audited under the previous financial reporting framework, Financial Reporting Standards ( FRS ) in Malaysia. There is no impact from the transition from FRS to MFRS on the Group and Company s reported financial position, financial performance and cash flows. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the financial year. It also requires the Directors to exercise their judgement in the process of applying the Group s and Company s accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4 to the financial statements. 21

32 2 BASIS OF PREPARATION (CONTINUED) (a) Standards, amendments to published standards and interpretations to existing standards that are applicable and relevant to the Group and Company but not yet effective. The Group and Company will apply the new standards amendments to standards and interpretations in the following period: Financial year beginning on/after 1 January 2013 MFRS 13 Fair Value Measurement (effective from 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across MFRS. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in MFRS 7 Financial instruments: Disclosures, but apply to all assets and liabilities measured at fair value, not just financial ones. The Group and Company will apply this standard from financial period beginning on 1 January Amendment to MFRS 7 Financial Instruments: Disclosures (effective from 1 January 2013) requires more extensive disclosures for using quantitative information about recognised financial instruments that are offset in the statement of financial position and those that are subject to master netting or similar arrangements irrespective of whether they are offset. The Group and Company will apply this standard from financial period beginning on 1 January Amendment to MFRS 101 Presentation of items of Other Comprehensive Income (effective from 1 July 2012) requires entities to separate items presented in other comprehensive income in the statement of comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future. The amendments do not address which items are presented in other comprehensive income. The Group and Company will apply this standard from financial period beginning on 1 January Amendment to MFRS 119 Employee Benefits (effective from 1 January 2013) makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. MFRS 119 shall be withdrawn on application of this amendment. The Group and Company will apply this standard from financial period beginning on 1 January

33 2 BASIS OF PREPARATION (CONTINUED) (a) Standards, amendments to published standards and interpretations to existing standards that are applicable and relevant to the Group and Company but not yet effective (continued) Financial year beginning on/after 1 January 2014 Amendment to MFRS 132 Financial Instruments: Presentation (effective from 1 January 2014) does not change the current offsetting model in MFRS 132. It clarifies the meaning of currently has a legally enforceable right of set-off that the right of set off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business. It clarifies that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the MFRS 132 offsetting criteria. The Group and Company will apply this standard from financial period beginning on 1 January Financial year beginning on/after 1 January 2015 MFRS 9 Financial Instruments Classification and Measurement of Financial Assets and Financial Liabilities (effective from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss ( FVTPL ). Entities with financial liabilities designated at FVTPL recognise changes in fair value due to changes in the liability s credit risk directly in other comprehensive income. There is no subsequent recycling of the amounts in other comprehensive income to profit and loss, but accumulated gains or losses may be transferred within equity. The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply. MFRS 7 requires disclosure on transition from MFRS 139 to MFRS 9. The Group and Company will apply this standard from financial period beginning on 1 January The Group and Company are reviewing the adoption of the above accounting standards, amendments to published standards and interpretations to existing standards and will complete the process prior to the reporting requirement deadline. The Group and Company have not finalised consideration of any financial impact of the adoption of the above accounting standards. 23

34 3 SIGNIFICANT ACCOUNTING POLICIES (a) Subsidiaries Subsidiaries are those entities over which the Group has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. See accounting policy Note 3(d) on goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the gain is recognised directly in the statement of income. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. This may indicate an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The gain or loss on disposal of a subsidiary which is the difference between net disposal proceeds and the Group s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the statement of income attributable to the parent. (b) Investment in a subsidiary Investment in a subsidiary is stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(g) on impairment of financial assets. 24

35 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Property, plant and equipment Property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. All items of property and equipment are initially recorded at cost. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred. Subsequent costs recognition, property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Land and buildings, which are substantially occupied by the Group and Company for their operations, are classified under property, plant and equipment. Land and buildings are initially stated at cost and subsequently revalued by the Directors, based on independent valuation of the open market value on the existing use basis carried out by professional valuers. The valuation of the land and buildings is carried out once in every three years or earlier if the carrying values of the revalued assets are materially higher and/or lower than the market values. When the land and buildings are revalued, any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset. The net amount is then restated as the revalued amount of the asset. The surplus arising on revaluation is credited to an asset revaluation reserve account except that a surplus, to the extent that such surplus is related to and not greater than a deficit arising on revaluation previously recorded as an expense, is credited to the income statement. A deficit arising on revaluation is recognised as an expense except that, to the extent that such a deficit is related to a surplus which was previously recorded as a credit to the asset revaluation reserve account and which has not been subsequently reversed or utilised, it is charged directly to that account. Freehold land is not depreciated as it has infinite life. Depreciation of property and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, the following rates: Freehold building Motor vehicles Office and computer equipment Furniture, fixtures and fittings 50 years 5-6 years 3-5 years 5-10 years The residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each balance sheet date. 25