Lonpac Insurance Bhd (Company No T) (Incorporated in Malaysia)

Transcription

1 Lonpac Insurance Bhd (Company No T) (Incorporated in Malaysia) Financial statements for the year ended 31 December 2016 together with Directors and Auditors reports

2 Lonpac Insurance Bhd (Company No T) (Incorporated in Malaysia) Contents Page Directors report 1-39 Statement of financial position 40 Statement of profit or loss 41 Statement of profit or loss and other comprehensive income 42 Statement of changes in equity Statement of cash flow Notes to the financial statements Statement by Directors 136 Statutory declaration 137 Auditors report

3 Lonpac Insurance Bhd (Company No T) (Incorporated in Malaysia) 1 Directors report for the year ended 31 December 2016 The Directors have pleasure in submitting their report together with the audited financial statements of the Company for the financial year ended 31 December Principal activity The Company is engaged principally in the underwriting of all classes of general insurance business. There has been no significant change in the nature of this principal activity during the financial year. Results RM 000 Profit for the year attributable to owner of the Company 256,998 Reserves and provisions There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements. Dividends Since the end of the previous financial year, the Company paid: i) a second interim single tier dividend of sen per ordinary share totaling RM100,000,000 in respect of the financial year ended 31 December 2015 on 4 February 2016; and ii) a first interim single tier dividend of sen per ordinary share totaling RM60,000,000 in respect of the financial year ended 31 December 2016 on 19 July The second interim single tier dividend recommended by the Directors in respect of the year ended 31 December 2016 is sen per ordinary share totaling RM110,000,000. The Directors do not recommend any final dividend to be paid for the financial year under review.

4 2 Directors of the Company Directors who served since the date of the last report are: Tan Sri Dato Sri Dr. Teh Hong Piow Tee Choon Yeow Lee Chin Guan Tan Kok Guan Quah Poh Keat Chan Kwai Hoe Dato Haji Abdul Aziz bin Dato Dr. Omar (retired on 28 January 2016) Directors interests in shares As the Company is a wholly-owned subsidiary of another corporation, the interests in the shares of the holding company of all the Directors, who are also Directors of the holding company, are shown in the Directors report of the holding company. Directors benefits Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salaries of full time employees of the Company or of related corporations as disclosed in Note 25 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, other than a Director who has significant financial interests in companies which traded with the Company in the ordinary course of business as disclosed in Note 31 to the financial statements. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Issue of shares and debentures There were no changes in the authorised, issued and paid-up capital of the Company during the financial year. There were no debentures issued during the financial year. Options granted over unissued shares No options were granted to any person to take up unissued shares of the Company during the financial year.

5 3 Board of Directors Name and designation (i.e. independent, non-independent non-executive, executive, chairman) of each director Name Tan Sri Dato Sri Dr. Teh Hong Piow Mr Tee Choon Yeow Mr Lee Chin Guan Mr Tan Kok Guan Mr Quah Poh Keat Ms Chan Kwai Hoe Designation Non-Independent Non-Executive Chairman Non-Independent Non-Executive Director Independent Non-Executive Director Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director The Directors do not have any direct interest in the shares of the Company. Pursuant to Schedule 3 of Financial Services Act 2013, the aggregate interest in shares held by Directors in Lonpac, are as follows :- Name Aggregate Interest in Shares Tan Sri Dato Sri Dr. Teh Hong Piow 44.19% Mr Tee Choon Yeow 0.29% Mr Lee Chin Guan 0.68% Mr Tan Kok Guan 0.16% Mr Quah Poh Keat - Ms Chan Kwai Hoe - External Professional Commitments According to Bank Negara Malaysia s ( BNM ) Policy Document on Corporate Governance and Lonpac s Board Charter, Directors must not have competing time commitment that impair their ability to discharge their duties effectively. To ensure that, each Director must not hold more than 5 directorships in listed issuers. While there is no restriction on directorships in non-listed issuers, Directors should avoid over commitment in multiple directorships which may affect their performance in carry out their role as Directors of the Company. Name Directorship in listed issuer Tan Sri Dato Sri Dr. Teh Hong Piow 2 Mr Tee Choon Yeow 1 Mr Lee Chin Guan 1 Mr Tan Kok Guan 1 Mr Quah Poh Keat 3 Ms Chan Kwai Hoe 1

6 4 Board of Directors (continued) The following are the Chairman and members of each board committee 1. Audit Committee Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Ms Chan Kwai Hoe Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Independent Non-Executive Director 2. Nominating Committee Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Mr Tan Kok Guan Ms Chan Kwai Hoe Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Executive Director Member Independent Non-Executive Director 3. Remuneration Committee Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director

7 5 Board of Directors (continued) 4. Risk Management and Compliance Committee Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Ms Chan Kwai Hoe Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Independent Non-Executive Director The following are the number of meetings convened by the board and each board committee: Type of Meeting No. of Meeting convened in year Board of Directors Audit Committee 9 3. Nominating Committee 8 4. Remuneration Committee 3 5. Risk Management and Compliance Committee 7

8 6 Board of Directors (continued) The following is the attendance of each Director at board and board committee meetings during the financial year: 1. Board of Directors Meeting Name Designation Attendance Tan Sri Dato Sri Dr. Teh Hong Piow Non-Independent Non-Executive Chairman 13/14 Mr Tee Choon Yeow Non-Independent Non-Executive Director 14/14 Mr Lee Chin Guan Independent Non-Executive Director 14/14 Mr Tan Kok Guan Executive Director 14/14 Mr Quah Poh Keat Non-Independent Non-Executive Director 14/14 Ms Chan Kwai Hoe Independent Non-Executive Director 14/14 2. Audit Committee Meeting Name Designation Attendance Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Ms Chan Kwai Hoe 3. Remuneration Committee Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Independent Non-Executive Director 9/9 9/9 9/9 9/9 Name Designation Attendance Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director 3/3 3/3 3/3

9 7 Board of Directors (continued) 4. Nominating Committee Name Designation Attendance Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Mr Tan Kok Guan Ms Chan Kwai Hoe Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Executive Director Member Independent Non-Executive Director 8/8 8/8 8/8 8/8 8/8 5. Risk Management and Compliance Committee Name Designation Attendance Mr Lee Chin Guan Mr Tee Choon Yeow Mr Quah Poh Keat Ms Chan Kwai Hoe Chairman Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Non-Independent Non-Executive Director Member Independent Non-Executive Director 7/7 7/7 7/7 7/7 The maximum tenure of an Independent Non-Executive Director (INED) shall be upon him having served 9 years from the date of his first appointment as Director or upon the expiry of his prevailing term of appointment as Director as approved by BNM, whichever is the later date. Upon reaching such maximum tenure, the INED shall, subject to the approval of BNM for his re-appointment as Director, remain as a Director but shall be re-designated as Non- Independent Non-Executive Director.

10 8 Board of Directors (continued) Profile of Directors The following are the profile of the Directors of the Company: TAN SRI DATO SRI DR. TEH HONG PIOW NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN Tan Sri Dato Sri Dr. Teh Hong Piow, aged 86, male, was appointed to the Board of the Company on 3 May 1999 and has served as Chairman of the Company since then. He is also a Non-Independent Non-Executive Director and Chairman of Lonpac Insurance Bhd s holding company, LPI Capital Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. Tan Sri Dato Sri Dr. Teh is a banker by profession. He began his banking career in 1950 and has 67 years experience in the banking and finance industry. He founded Public Bank Bhd in 1965 at the age of 35. Tan Sri Dato Sri Dr. Teh had won both domestic and international acclaim for his outstanding achievements as a banker and the Chief Executive Officer of a leading financial services group. Awards and accolades that he had received include :- Asia s Commercial Banker of the Year 1991 The ASEAN Businessman of the Year 1994 Malaysia s Business Achiever of the Year 1997 Malaysia s CEO of the Year 1998 Best CEO in Malaysia 2004 The Most PR Savvy CEO 2004 The Asian Banker Leadership Achievement Award 2005 for Malaysia Award for Outstanding Contribution to the Development of Financial Services in Asia 2006 Lifetime Achievement Award 2006 Award for Lifetime Achievement in Corporate Excellence, Dedication and Industry 2006 Asia s Banker of High Distinction Award 2006 The BrandLaureate Brand Personality Award 2007 ASEAN Most Astute Banker Award 2007

11 9 Board of Directors (continued) Profile of Directors (continued) TAN SRI DATO SRI DR. TEH HONG PIOW (continued) NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN (continued) Lifetime Entrepreneurship Achievement Award 2007 The Pila Recognition Award 2007 Asian Banker Par Excellence Award 2008 Best CEO in Malaysia 2009 Asia s Banking Grandmaster 2010 Asian Corporate Director Recognition Award 2010 for Malaysia Value Creator: Malaysia s Outstanding CEO 2010 The BrandLaureate - Tun Dr. Mahathir Mohamad Man of the Year Award Best CEO (Investor Relations) 2011 for Malaysia Asian Corporate Director Recognition Award 2011 for Malaysia The BrandLaureate Premier Brand Icon Leadership Award 2011 Best CEO (Investor Relations) 2012 for Malaysia Asian Corporate Director Recognition Award 2012 for Malaysia Best CEO (Investor Relations) 2013 for Malaysia Asian Corporate Director Recognition Award 2013 for Malaysia BrandLaureate Banker of the Year Award Best CEO (Investor Relations) 2014 for Malaysia Asian Corporate Director Recognition Award 2014 for Malaysia Banker Extraordinaire 2015 Global Chinese Entrepreneur Lifetime Achievement Award 2015 BrandLaureate "Icon of Icons - The King of Banking" Asia s Best CEO (Investor Relations) 2015 for Malaysia

12 10 Board of Directors (continued) Profile of Directors (continued) TAN SRI DATO SRI DR. TEH HONG PIOW (continued) NON-INDEPENDENT NON-EXECUTIVE CHAIRMAN (continued) William "Bill" Seidman Lifetime Leadership Achievement in Financial Service Industry Award 2015 Asian Corporate Director Recognition Award 2015 for Malaysia Asia s Best CEO (Investor Relations) 2016 for Malaysia Tan Sri Dato Sri Dr. Teh was awarded the Medal For the Course of Vietnamese Banking by the State Bank of Vietnam in 2002 for his contributions to the Vietnamese banking industry over the past years. Tan Sri Dato Sri Dr. Teh was conferred the Recognition Award 2007 by the National Bank of Cambodia in appreciation of his excellent achievement and significant contribution to the banking industry in Cambodia. Tan Sri Dato Sri Dr. Teh was conferred the Royal Order of Monisaraphon, Commander by The Royal Government of The Kingdom of Cambodia in 2016, in recognition of his outstanding leadership and immense social economic contributions towards the progress and development of Cambodia over the last 24 years. He is the first Malaysian banker ever to receive the Royal Order. In recognition of his contributions to society and the economy, he was conferred the Doctor of Laws (Honorary) from University of Malaya in Tan Sri Dato Sri Dr. Teh had served in various capacities in public service bodies in Malaysia; he was a member of the Malaysian Business Council from 1991 to 1993; a member of the National Trust Fund from 1988 to 2001; a founder member of the Advisory Business Council since 2003; and a member of the IPRM Accreditation Privy Council. He is an Emeritus Fellow of the Malaysian Institute of Management and is a Fellow of the Asian Institute of Chartered Bankers; the Chartered Institute of Bankers, United Kingdom; the Institute of Administrative Management, United Kingdom; and the Governance Institute of Australia. He is the Chairman of Public Bank Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. His directorships in other companies are as Chairman of Public Investment Bank Bhd, Public Mutual Bhd, Public Islamic Bank Bhd, Public Financial Holdings Ltd, Public Bank (Hong Kong) Ltd and Cambodian Public Bank Plc, and several other subsidiaries of Public Bank Bhd. Tan Sri Dato Sri Dr. Teh attended 13 Board Meetings which were held during the financial year ended 31 December 2016.

13 11 Board of Directors (continued) Profile of Directors (continued) MR. TEE CHOON YEOW NON-INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. Tee Choon Yeow, aged 64, male, was appointed to the Board of the Company on 3 May He was the Chief Executive Officer of the Company until his retirement in He served as a Non-Independent Non-Executive Director of the Company thereafter. He is also an Independent Non-Executive Director and Co-Chairman of Lonpac Insurance Bhd s holding company, LPI Capital Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. Presently, Mr. Tee serves as a member of the Audit, Nominating, Remuneration and Risk Management & Compliance Committees of the Company. Mr. Tee holds a Bachelor s Degree in Commerce from the University of Canterbury, New Zealand. He joined the Company as an Accountant in He is a Chartered Accountant of the Institute of Chartered Accountants, New Zealand and the Malaysian Institute of Accountants and a Fellow of the CPA Australia. He is an Independent Non-Executive Director of Matang Berhad. Mr. Tee attended all the 14 Board Meetings which were held during the financial year ended 31 December MR. LEE CHIN GUAN INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. Lee Chin Guan, aged 58, male, was re-appointed to the Board of the Company on 8 October He last served as Independent Non-Executive Director of the Company from 22 May 1995 to 9 October He is also an Independent Non-Executive Director of Lonpac Insurance Bhd s holding company, LPI Capital Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. Presently, Mr. Lee serves as Chairman of the Audit, Nominating, Remuneration and Risk Management & Compliance Committees of the Company. Mr. Lee qualified as a Barrister-at-Law from the Middle Temple, United Kingdom in He also holds a Bachelor s Degree in Science (Hons.) from the University of Manchester Institute of Science & Technology, England and Degrees in Law from Cambridge University, Oxford University and Chicago-Kent College of Law. His directorships in other companies are as Director of Public Financial Holdings Ltd, Public Bank (Hong Kong) Ltd and Public Finance Ltd. Mr. Lee attended all the 14 Board Meetings which were held during the financial year ended 31 December 2016.

14 12 Board of Directors (continued) Profile of Directors (continued) MR. TAN KOK GUAN EXECUTIVE DIRECTOR Mr. Tan Kok Guan, aged 60, male, was appointed to the Board of the Company on 3 May He was the Chief Executive Officer (CEO) of the Company since 2008 until he was appointed as CEO/ Executive Director to the holding company, LPI Capital Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad, on 8 July Thereafter, Mr. Tan was appointed as Executive Director of the Company on 10 January Presently, Mr. Tan serves as a member of the Nominating Committee of the Company. Mr. Tan holds a Bachelor s Degree with Honours in Science from the University of London, United Kingdom and a Master s Degree in Business Administration from the University of Hawaii. He is also a Chartered Insurer of the Chartered Insurance Institute in London and an Associate of the Malaysian Insurance Institute in Kuala Lumpur. Mr. Tan attended all the 14 Board Meetings which were held during the financial year ended 31 December MR. QUAH POH KEAT NON-INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. Quah Poh Keat, aged 64, male, was appointed to the Board of the Company on 2 January He is also an Independent Non-Executive Director of Lonpac Insurance Bhd s holding company, LPI Capital Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. Presently, Mr. Quah serves as a member of the Audit, Nominating, Remuneration and Risk Management & Compliance Committees of the Company. He is a Fellow of the Malaysian Institute of Taxation and the Association of Chartered Certified Accountants; and a Member of the Malaysian Institute of Accountants, the Malaysian Institute of Certified Public Accountants and the Chartered Institute of Management Accountants. Mr. Quah was a partner of KPMG since October 1982 and was appointed Senior Partner (also known as Managing Partner in other practices) in October 2000 until 30 September He retired from the firm on 31 December Mr. Quah is experienced in auditing, tax and insolvency practices and has worked in Malaysia and the United Kingdom; his field of expertise includes restructuring, demergers and privatisation.

15 13 Board of Directors (continued) Profile of Directors (continued) MR. QUAH POH KEAT (continued) NON-INDEPENDENT NON-EXECUTIVE DIRECTOR (continued) His directorships in other companies are as Director of Public Mutual Bhd, Public Financial Holdings Ltd, Public Bank (Hong Kong) Ltd, Cambodian Public Bank Plc, Campu Lonpac Insurance Plc and Campu Securities Plc, and other subsidiaries of Public Bank Bhd. His directorships in other public companies listed on the Main Market of Bursa Malaysia Securities Berhad include Kuala Lumpur Kepong Berhad and Paramount Corporation Berhad. Mr. Quah attended all the 14 Board Meetings which were held during the financial year ended 31 December MS. CHAN KWAI HOE INDEPENDENT NON-EXECUTIVE DIRECTOR Ms. Chan Kwai Hoe, aged 60, female, was appointed to the Board of the Company on 1 July She is also an Independent Non-Executive Director of Lonpac Insurance Bhd s holding company, LPI Capital Bhd, a public company listed on the Main Market of Bursa Malaysia Securities Berhad. Presently, Ms. Chan serves as a member of the Audit, Nominating and Risk Management & Compliance Committees of the Company. Ms. Chan holds a Bachelors Degree in Analytical Economics, University of Malaya (Honours). Ms. Chan has gained extensive experience during her tenure with Bank Negara Malaysia (BNM). She has been involved in operations and policy formulation relating to the insurance industry, as well as in supervision, having overseen the financial health and proper market conduct of a select group of insurers, brokers and adjusters. She was also in charge of the Learning, Knowledge and Customer Relationship Management of 13 departments of BNM, and managed a project to put in place the Financial Services Act 2013 and Islamic Financial Services Act She retired from BNM in May 2012 and acted as Advisor to the Chief Executive Officer of Perbadanan Insurans Deposit Malaysia, mainly on issues relating to FIDE (Financial Institutions Directors Education Programme) Forum until March Ms. Chan attended all the 14 Board Meetings which were held during the financial year ended 31 December 2016.

16 14 Board of Directors (continued) Profile of Directors (continued) None of the Directors has: Any family relationship with any Director and/ or major shareholder of Lonpac Insurance Bhd. Any conflict of interest in any business arrangement involving Lonpac Insurance Bhd. Any convictions for any offences within the past 5 years other than traffic offences. Any public sanction or penalty imposed by the relevant regulatory bodies during the financial year. All the Directors are Malaysians. Trainings attended The following are the trainings attended by the Directors :- Talk on "Analytics: Get Paralysed If You Don't Analyse" by Professor Ujwal Kayande of Melbourne Business School CG Breakfast Series for Directors: "Improving Board Risk Oversight Effectiveness" CG Breakfast Series for Directors: "Future of Auditor Reporting The Game Changer for Boardroom" Independent Directors Programme: "The Essence of Independence" Sustainability Engagement Series for Directors/ Chief Executive Officers Audit Committee Institute Breakfast Roundtable 2016 FIDE FORUM Dialogue with Deputy Governor on the Corporate Governance Concept Paper CG Breakfast Series with Directors: "The Strategy, the Leadership, the Stakeholders and the Board" Advocacy Sessions on Management Discussion & Analysis for Chief Executive Officers and Chief Financial Officers of Listed Issuers CG Breakfast Series with Directors: "The Cybersecurity Threat and How Board Should Mitigate the Risks" Briefing on Directors Register Implementation Launch of the Directors Register Implementation of FIDE FORUM s Directors Register 3rd Distinguished Board Leadership Series "Effective Board Evaluation" FIDE FORUM's Directors Register: "Identify the Right Board Talent" Kuala Lumpur Kepong Bhd Managers Conference 2016

17 15 Trainings attended (continued) Malaysian Insurance Institute Directors' Training FIDE Core Programme (Module A Insurance) FIDE Core Programme (Module B Insurance) Fin Tech: Business Opportunity or Disruptor by Markus Gnirck and Veiverne Yuen CEOs' Industry Networking Cocktail 28th East Asian Insurance Congress ("EAIC'") 2017 Malaysian Insurance Summit "Technology-based Innovation that Counts" by Steven Lewis, Patrick Menard and Shankar Kanabiran, Ernst & Young "Strategy to Leverage Technology for Business Solutions" by Arun Biswas, Sushil Anand, Vincent Kasten and David Batrouney (IBM) MFRS and Regulatory Requirement Updates Board and Board Committees The Company has complied with all the prescriptive requirements of, and adopts management practices that are consistent with the principles prescribed under the Policy Document on Corporate Governance issued by Bank Negara Malaysia. Responsibilities of the Board and Board Committees (A) The duties and responsibilities of the Board are as follows:- The Board has the overall responsibility for promoting the sustainable growth and financial soundness of the Company, and for ensuring reasonable standards of fair dealing, without undue influence from any party. This includes a consideration of the long-term implications of the Board s decisions on the Company and its customers, officers and the general public. In fulfilling this role, the Board must:- (i) (ii) Approve the risk appetite, business plans and other initiatives which would, singularly or cumulatively, have a material impact on the Company s risk profile; Oversee the selection, performance, remuneration and succession plans of the CEO, control function heads and other members of senior management, such that the Board is satisfied with the collective competence of senior management to effectively lead the operations of the Company; (iii) Oversee the implementation of the Company s governance framework and internal control framework, and periodically review whether these remain appropriate in the light of material changes to the size, nature and complexity of the Company s operations; (iv) Promote, together with senior management, a sound corporate culture within the Company which reinforces ethical, prudent and professional behaviour;

18 16 Responsibilities of the Board and Board Committees (continued) (v) Promote sustainability through appropriate environmental, social and governance considerations in the Company s business strategies; (vi) Oversee and approve the recovery and resolution as well as business continuity plans for the Company to restore its financial strength, and maintain or preserve critical operations and critical services when it comes under stress; and (vii) Promote timely and effective communication between the Company and BNM on matters affecting or that may affect the safety and soundness of the Company. (A) The duties and responsibilities of the Committees are as follows:- Audit Committee The duties and responsibilities of the Audit Committee ( AC ) are as follows:- 1. Internal Audit Governance (i) The AC should :- (a) ensure that the Internal Audit Department ( IAD ) is distinct and has the appropriate status within the overall organisational structure for the IAD to effectively accomplish its objectives. (b) ensure the effective organisation of the IAD in respect of the professionalism, capacity and competency of the internal audit personnel. (c) review and approve the audit scope, procedures and frequency. (d) ensure that reporting relationships of the internal audit staff do not impede the exercise of independent judgment by the internal auditors. In particular, internal audit reports should not be subject to the clearance of the chief executive officer or any executive director. (e) ensure no restrictions are placed on access by the internal auditors to any of the Company s records, assets, personnel or processes, which are relevant to the conduct of the audits. (f) ensure appropriateness of the risk assessment methodology employed by the internal audit function to determine the frequency and scope of audits, having regard to the nature, size and complexity of the Company s operations. (g) ensure compliance with internal audit standards.

19 17 Responsibilities of the Board and Board Committees (continued) (h) ensure coordination between internal and external auditors. (ii) The AC members should review key audit reports and ensure that senior management is taking the necessary corrective action in a timely manner to address control weaknesses, non-compliance with laws, regulatory requirements, policies and other problems identified by the internal audit and other control functions. (iii) The AC should note any significant disagreements between the chief internal auditor and the rest of the senior management team, irrespective of whether these have been resolved, in order to identify any impact the disagreements may have on the audit process or findings. (iv) The AC should establish a mechanism to assess the performance and effectiveness of the internal audit function. (v) The AC should ensure on an ongoing basis that the IAD has adequate and competent resources, given the size and complexity of the Company s operations. Hence, the AC should :- (a) approve the appointment, remuneration, performance evaluation, removal and redeployment of the Chief Internal Auditor ( CIA ) and senior officers of the internal audit function. (b) be informed on any resignation of the internal audit staff and reasons therefore, and provide resigning staff with an opportunity to submit reasons for their resignations. (vi) The AC should ensure that internal audit staff receive necessary training to perform audit work. In this respect, there should be a programme of continuing education and training to enable the internal auditors to keep abreast of business trends and latest developments at both the institutional and industry levels, as well as to enhance technical skills required to effectively support the internal audit function. 2. External Audit Appointment of External Auditor (i) The AC is responsible for making recommendations to the Board on the appointment, removal and remuneration of the external auditor. (ii) The AC should :- (a) review and assess various relationships between the external auditor and the Company or any other entity that may impair or appear to impair the external auditors judgment or independence in respect of the Company (including affiliations resulting from the Company s employment of former employees of the external auditor in senior positions within the Company).

20 18 Responsibilities of the Board and Board Committees (continued) (b) review and assess fees paid to the external auditor, considering the following :- the economic importance of the Company (in terms of total fees paid) to the external auditor. fees paid for non-audit services as a proportion of total fees. whether an effective, comprehensive and complete audit could be reasonably conducted for the audit fee paid. The fees should not impair or appear to impair the external auditor s judgment or independence in respect to the Company. (c) investigate reasons for any request made by management to dismiss the external auditor, or any resignation by the external auditor. The results of the investigation should be disclosed to the full Board together with the AC s recommendations on the proposed actions to be taken. The decisions of the Board in relation to the AC s recommendations should be documented in the Board minutes, with a copy of the relevant minutes extended to BNM. Provision of Non-Audit Services by the External Auditor (i) (ii) In monitoring and assessing the independence of the Company s external auditor, any provision of non-audit services by the Company s external auditor should be approved by the AC before the commencement of the service, or whenever there is a significant change in the level of services provided. The AC must ensure that the provision of non-audit services to the Company would not impair the external auditor s independent judgment in carrying out the financial audit of the Company s financial statements. In addition, the following services should not be outsourced to the external auditor: (a) (b) (c) any services relating to the determination of an amount to be recorded in the financial statements of the Company or work normally undertaken by the appointed actuary (including appraisal or valuation services). financial information systems design and implementation business process evaluations or reviews that extend to the Company s internal controls or financial systems. (iii) The AC s decisions with respect to the provision of non-audit services should be documented in a statement, which outlines whether or not it believes the level of provision of non-audit services by the external auditor is compatible with maintaining auditor independence (together with supporting reasons).

21 19 Responsibilities of the Board and Board Committees (continued) Audit Plan, Findings and Recommendations (i) The AC should review with the external auditors, the :- (a) (b) audit plan prior to the commencement of the annual audit. financial statements (before being presented to the Board), including: whether the auditors report contained any qualifications, which must be properly discussed and acted upon to address the cause of the auditors concerns. significant changes and adjustments in the presentation of financial statements. major changes in accounting policies and principles. alternative accounting treatments discussed with management and the ramifications of the alternatives. compliance with relevant laws and accounting standards. material fluctuations in the statements. significant variations in audit scope. significant commitments or contingent liabilities. validity of going concern assumptions. (c) (d) (e) audit reports, including obligatory reports to BNM. any significant disagreements between the external auditor and management irrespective of whether they have been resolved. any other findings, issues or reservations faced by the external auditor arising from interim and financial audits. (ii) The AC should maintain regular, timely, open and honest communication with the external auditor, and requiring the external auditor to report to the AC on significant matters. (iii) The AC should ensure that senior management is taking necessary corrective actions in a timely manner to address external audit findings and recommendations. (iv) The AC should monitor and assess the effectiveness of the external audit, including by meeting with the external auditor without the presence of senior management at least annually.

22 20 Responsibilities of the Board and Board Committees (continued) 3. Risk Management and Internal Control (i) (ii) To review the adequacy and effectiveness of risk management and internal control systems instituted within the Company. To review third-party opinions on the design and effectiveness of the Company s internal control framework. 4. Business Continuity Management (i) Pursuant to the Guidelines on Business Continuity Management ( BCM ) issued by BNM, the AC should review the following :- (a) (b) The written assessment prepared by IAD on the observation of the Business Continuity Plan and Disaster Recovery Plan testings. The audit report prepared by the IAD on an annual basis on the level of commitment to BCM and overall preparedness against the Company s BCM policies and regulatory requirements. (ii) Pursuant to Guidelines on Business Continuity Management, an executive summary of the audit report on BCM which includes comments from the AC, should be submitted to BNM, after being presented to the AC. 5. Other Responsibilities (i) The AC should also :- (a) (b) (c) (d) (e) review the accuracy and adequacy of the Directors report, corporate governance disclosures, financial reports and preliminary announcements in relation to the preparation of financial statements. review and update the Board on any related party transactions and conflicts of interest situations that may arise within the Company including any transaction, procedure or conduct that raises questions of management integrity. ensure that the Company to publish its accounts after the laying of its accounts at its annual general meeting. ensure that the Company s accounts are prepared in a timely and accurate manner for regulatory, management and general reporting purposes, with regular reviews carried out on the adequacy of provisions made. ensure that supervisory issues raised BNM are resolved in a timely manner. (ii) The AC should support the Board in ensuring that there is a reliable and transparent financial reporting process within the financial institution. (iii) The AC should also be responsible for any other functions as may be determined by the Board.

23 21 Responsibilities of the Board and Board Committees (continued) Nominating Committee The duties and responsibilities of the Nominating Committee are:- (i) (ii) To establish the minimum requirements on the skills, knowledge, expertise, experience, qualifications and other core competencies of a Director and of the Chief Executive Officer. To oversee the overall composition of the Board and Board Committees in terms of the appropriate size, required mix of skills, experience and core competencies, and adequacy of balance between Executive Directors, Non-Executive Directors and Independent Directors through annual review. (iii) To assess and recommend the nominees for directorship, the directors to fill Board Committees, as well as nominees for the position of Chief Executive Officer and Company Secretary. (iv) To establish a mechanism for the formal assessment on the effectiveness of the Board and Board Committees as a whole, the contribution by each director to the effectiveness of the Board, the contribution of the Board s various committees and the performance of the Chief Executive Officer and Company Secretary. (v) To assess the Directors, Chief Executive Officer, Company Secretary and Other Key Responsible Persons on an annual basis to ensure that they:- (a) (b) (c) (d) (e) fulfill fit and proper criteria as stated in the Company s Policy and Procedures on Fit and Proper for Key Responsible Persons and Company Secretary (Policy and Procedures on Fit and Proper); are not disqualified under Section 59 of Financial Services Act 2013 (not required for Company Secretary); comply with the fit and proper requirements as may be specified by Bank Negara Malaysia (BNM) under Section 60 of Financial Services Act 2013; is not disqualified under Section 139C of Companies Act 1965 (for Company Secretary only); and comply with the statutory and regulatory requirements. (vi) To review the succession plans for the approval of the Board to promote Board renewal and address the vacancies.

24 22 Responsibilities of the Board and Board Committees (continued) Nominating Committee (continued) (vii) To ensure that all directors undergo appropriate induction programmes and receive continuous training. (viii) To oversee appointment, succession planning and performance evaluation of Chief Executive Officer, Company Secretary and Other Key Responsible Persons, and recommend to the Board for approval. (ix) To recommend to the Board on removal of a Director/Chief Executive Officer/Company Secretary/Other Key Responsible Person if he is ineffective, errant or negligent in discharging his responsibilities. (x) To carry out assessment on the Independent Directors to determine whether a director is independent pursuant to the guidelines issued by BNM. (xi) To assess the Directors at least annually, and as and when the Board becomes aware of information that may materially compromise the Director s fitness and propriety, or any circumstance that suggests that the Director is ineffective, errant or otherwise unsuited to carry out his responsibilities. Remuneration Committee (i) (ii) To oversee and recommend to the Board the manner of design and operation of the remuneration system for Directors, Chief Executive Officer, Company Secretary and Other Key Responsible Persons. To review and deliberate on the remunerations for Directors, Chief Executive Officer, Company Secretary and Other Key Responsible Persons to commensurate with their performance and contributions to the Company, and recommend to the Board for approval.

25 23 Responsibilities of the Board and Board Committees (continued) Risk Management and Compliance Committee Risk Management (i) (ii) To review and recommend risk management strategies, policies and risk tolerance/ appetite for the Board of Directors (Board) s approval. To assist the Board to 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, including :- (a) To ensure adequate infrastructure, resources and systems are in place for an effective risk management, including ensuring that the staff responsible for implementing risk management systems perform those duties independently of the Company s risk taking activities; (b) To review the management s periodic reports on risk exposure, risk portfolio composition and risk management activities; (c) To review and assess the risk capital profiles to ensure adequacy of capital available in the insurance and shareholders funds to support the capital requirement as specified by the relevant authorities; (d) To assist the Board in reviewing the Company s capital management framework and ensuring that senior management discharges its responsibilities for the development and effective implementation of the Internal Capital Adequacy Assessment Process (ICAAP)/ Own Risk & Solvency Assessment (ORSA); and (e) To assist the Board to ensure that the investment of insurance funds is in accordance with the Company s approved investment and risk management policy. (iii) To review the outsourcing risk management programme and policies for the Board s approval and to assist the Board to oversee its implementation, including:- (a) To review the management s evaluation on the materiality of all existing and prospective outsourcing arrangements, based on the framework approved by the Board; (b) To ensure that the approved outsourcing policies and procedures are implemented appropriately; (c) To review the management s periodic review on the outsourcing policies and procedures implemented to ensure their continued effectiveness in managing outsourcing risks; and

26 24 Responsibilities of the Board and Board Committees (continued) Risk Management and Compliance Committee (continued) Risk Management (continued) (d) To ensure that management communicates to the RMCC information pertaining to material outsourcing risks in a timely manner. (iv) To assist the Board to oversee the overall stress testing programme, including:- (a) (b) (c) To approve policies and key components of the stress testing; To ensure that the stress testing approaches and modeling techniques are appropriate and commensurate with the Company s risk profile; and To ensure that adequate governance and internal controls are in place for the management of stress testing models. Compliance To assist the Board to review the Compliance Policy and oversee its implementation, including:- (i) (ii) To recommend the establishment of the compliance function and the position of the Chief Compliance Officer (CCO) for the Board s approval and ensure that the CCO and compliance function are provided with appropriate standing, authority and independence; To ensure that all compliance issues are resolved effectively and expeditiously; (iii) To evaluate at least annually, the effectiveness of the overall management of compliance risk; (iv) To recommend to the Board on the sharing of compliance function responsibilities between compliance and other functions, if any; and (v) To engage with the CCO on a regular basis to discuss issues faced by the compliance function and ensure that the CCO is supported with sufficient resources to perform his duties effectively. Risk Management and Compliance (i) (ii) To review reports related to risk management and compliance and recommend for Board s approval for submission to the relevant regulatory authorities, where applicable; and To perform any other functions in relation to risk management and compliance as may be agreed to by the RMCC and the Board.

27 25 Remuneration policy The Remuneration Policy for the employees of the Company enables the furtherance of the Company s vision and missions. Remuneration to the employees of the Company shall reward and be used to align individual performances with the Company s short and long term goals. Employee remunerations shall be supported by a robust performance management system underpinned by the fundamentals of sound risk management, ethics and corporate responsibility. Components within a remuneration structure may consist of mandatory elements with the flexibility for combinations of fixed and variable components to ensure effective alignment to the Company s objectives and relevance to the industry in which it operates. In line with its core values, the Company s remuneration policy rests on these five (5) key principles :- Business Focused Remunerations shall be relevant and be aligned towards the achievement of the Company s business results. There must be no conflict of interests. Remunerations should drive employees diligence, dedication and competency level towards successful implementation of the Company s goals and strategies. Prudent The remuneration structure and quantum must reinforce the importance of sustainability, encourage ethical behaviours and sound risk management, as opposed to short-term view on remuneration without consideration of consequences. Informed The performance assessor must have adequate quantitative and qualitative measurements of performance before any recommendation on remuneration is made. The assessments upon which remunerations are recommended must be practicable, measureable and objective. Fair Total remuneration packages must take into account of market environment factors including the dynamics and scale of the Company s business, its financial position and the market condition, in addition to individual merits. There must be no discrimination, biased treatment or any form of exploitation. Proper, fair and logical justification must ensue. Transparent There must be clear and timely communication of remuneration linked to the specified job requirements. Employees should understand the expectations set out and seek for clarification where necessary.

28 26 Scope of remuneration policy The remuneration policy applies to all levels and segments of employees within the Company including the senior management, business development, technical, control and support employees. Reward components Fixed Remuneration Salary A base-level fixed monthly cash remuneration to reflect the level of individual responsibility, the level of skill, competency and experience, the dynamics of our business and the Company s competitiveness within the industry. Salaries are normally reviewed annually. Salary levels and total remuneration of key responsible persons are considered by the Remuneration Committee. Salary increases for all employees are considered by the senior management, ranged from 2.3% to 15.8% based on employee performance scoring in Where there is exceptional sustained contribution resulting in significant increase in responsibility and promotion, salary increases ranged from 15% to 25%, depending on the level of responsibility. Benefits Support provisions in the form of cash or in-kind to facilitate business operations to reflect the scale of our business and its competitiveness within the industry. The benefits reflect, to a certain extent, the industry norm. Benefits schemes are structured to vary according to job level, nature of work and give basic assistance to employees at various stages in their life. Taxable value of the benefits may fluctuate depending on the latest tax ruling and individual employees financial positions. Variable Remuneration Performance Bonus A variable level of lump sum cash remuneration to reflect employee performance based on the achievement of business plan and its strategies. Based on performance relative to financial and non-financial measures and targets reflected in the Company s business plan. Average bonuses given based on level of achievement to business plan in year 2016.

29 27 Remuneration framework Remuneration structure Remunerations are rewards for performances and behaviours expected of employees by the Company that are relevant and effective to the progress of its business. In order to gauge these performances and behaviours for proper remuneration purposes, a vigorous performance management system is in place to assess the employees. The system incorporates key performance indicators aligned to the Company s short and long term goals, checks for sound risk management, ethics and accountability. Although performance assessment of an individual employee is a matter between the employee and his/her immediate supervisor, the process is guided by performance management and remuneration policies, consulted with HR and moderated by the senior management, with the exception of unionised employees of our Singapore branch office as they are subjected to the collective agreement. At the end of each performance year, business results and individual with team performances against scorecard objectives form the basis of remuneration decisions. Every remuneration recommendation is prepared, approved and recorded appropriately. Where statutory requirements apply, remunerations are submitted accordingly. Key Areas Affecting Employee Remuneration Marketing Employees Production Employees Support Employees Control Employees Key Performance Areas Profitability - Productivity - Growth - Resilience Compliance Competencies People Skills Conceptual Skills Technical Skills

30 28 Remuneration structure (continued) Different permutations of weightages are applied onto these key areas for different categories of employees of various functions and ranks. The weightages are assigned by percentage in accordance to the level of relevancy and each category of employees impact on the Company s performance. During assessment, employees are scored on how well they fare in each critical performance areas and their competency level specific to and as required in the role they undertake. Employees in control functions are not assessed on the Company s key performance areas such as profitability, productivity and growth. The roles of enterprise risk management, compliance and internal audit departments are not linked to the results of the business activities to ensure their remuneration is determined independent of the business activities they supervise. Their variable remuneration component is set on the basis of the achievement of non-commercial objectives relevant to their positions. Components within the remuneration structure consist of mandatory elements with the flexibility on the mix of fixed and variable components. Nevertheless, the remuneration structure must remain practical and simple to understand. The structure is continuously monitored to ensure alignment to the Company s objectives, local employment market and industry in which the Company operates. Existingly, the Company s existing remuneration structure comprise of three (3) basic reward components, namely salary (fixed), benefit and compensation (fixed) and performance bonus (variable). For the time being, stock options or share purchasing programmes are not applicable at the Company. Salary All employees in the Company receive a fixed salary, consisting of a base salary paid monthly according to position and function. The salary level is evaluated on an annual basis with no secured or contractual increase. Increment rates are granted based on performance scoring and position levels. These rates are predetermined and revised as and when necessary to reflect the performance of the Company. Entry level salary base for school leavers, diploma and degree holders are predetermined and reviewed as and when necessary for competitive positioning. Base salaries for experienced candidates are guided by the Company s internal salary scale whilst taking into account the employment market condition within the industry.