PROGRESSIVE INSURANCE BHD (Company number 19002 - P) Unaudited Interim Financial Statements For The Period 1 January 2013 to 30 June 2013
PROGRESSIVE INSURANCE BHD (19002-P) CONTENTS PAGE Statement of Financial Position 1 Income Statement 2 Statement of Comprehensive Income 3 Statement of Changes in Equity 4 Statement of Cash Flows 5-6 Notes to the Financial Statements 7-16
PROGRESSIVE INSURANCE BHD (19002-P) UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013 Note 30.06.2013 31.12.2012 ASSETS Property, plant and equipment 11,223,483 11,797,434 Investments: 227,757,498 219,678,229 - Available-for-sale ("AFS") financial assets 2 (a) 161,272,637 155,733,888 - Financial assets at fair value through profit or loss ("FVTPL") 2 (b) 66,484,861 63,944,341 Reinsurance assets 9 94,756,510 92,886,867 Loans and other receivables 3 136,555,954 136,120,700 Tax recoverable 4,071,078 1,218,159 Insurance receivables 26,275,187 34,623,784 Cash and bank balances 8,599,979 8,518,342 TOTAL ASSETS 509,239,689 504,843,515 EQUITY AND LIABILITIES Share capital 100,000,000 100,000,000 Reserves 79,751,540 84,883,099 TOTAL EQUITY 179,751,540 184,883,099 Insurance contract liabilities 9 261,952,361 234,673,047 Deferred tax liabilities 2,115,048 1,570,438 Other financial liabilities 39,542,444 44,448,404 Insurance payables 20,744,298 34,575,591 Other payables 5,133,998 4,692,936 TOTAL LIABILITIES 329,488,149 319,960,416 TOTAL EQUITY AND LIABILITIES 509,239,689 504,843,515 The accompanying notes form an integral part of the financial statements. 1
PROGRESSIVE INSURANCE BHD (19002-P) UNAUDITED INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 2013 Note 30.06.2013 30.06.2012 Operating revenue 101,230,790 89,408,051 Gross written premiums 9 (ii) 94,785,123 83,982,515 Change in unearned premiums provision (8,842,590) (8,635,799) Gross earned premiums 9 (ii) 85,942,533 75,346,716 Gross written premiums ceded to reinsurers 9 (ii) (43,094,993) (37,029,245) Change in unearned premiums provision 76,399 762,423 Premiums ceded to reinsurers 9 (ii) (43,018,594) (36,266,822) Net earned premiums 42,923,939 39,079,894 Investment income 6,318,445 5,343,610 Realised gains and losses 3,033,259 1,662,650 Fair value gains and losses 2,094,240 2,233,456 Commission income 10,026,500 8,896,786 Other operating income 759,948 656,123 Other income 22,232,392 18,792,625 Gross claims paid (31,060,105) (30,329,767) Claims ceded to reinsurers 9,383,836 11,948,143 Gross change in contract liabilities (18,436,724) (6,264,965) Change in contract liabilities ceded to reinsurers 1,793,244 (1,617,819) Net claims incurred (38,319,749) (26,264,408) Commission expenses (12,696,506) (10,071,252) Management expenses (13,777,314) (12,374,780) Other expenses (26,473,820) (22,446,032) Profit before taxation 362,762 9,162,079 Tax expense - (2,650,000) Net profit for the year 362,762 6,512,079 Earnings per share (sen) 0 7 The accompanying notes form an integral part of the financial statements. 2
PROGRESSIVE INSURANCE BHD (19002-P) STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2013 30.06.2013 30.06.2012 Net profit for the period 362,762 6,512,079 Other comprehensive losses Fair value change on AFS financial assets: Gain on fair value changes 270,730 427,919 Income tax relating to components of other comprehensive income: AFS financial assets (46,300) (106,000) Revaluation of land and building - - Other comprehensive losses for the period, net of tax 224,430 321,919 Total comprehensive income for the period 587,192 6,833,998 The accompanying notes form an integral part of the financial statements. 3
PROGRESSIVE INSURANCE BHD (19002-P) UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2013 Non-distributable Distributable Property Available for Share revaluation sale ("AFS") Retained Total capital reserve reserve earnings equity At 1 January 2013 100,000,000 2,617,432 1,963,142 80,302,525 184,883,099 Total comprehensive income/(loss) for the year - - 224,430 362,762 587,192 Dividend paid during the year (Note 6) - - - (5,718,750) (5,718,750) At 30 June 2013 100,000,000 2,617,432 2,187,572 74,946,537 179,751,541 The accompanying notes form an integral part of the financial statements. 4
PROGRESSIVE INSURANCE BHD (19002-P) UNAUDITED STATEMENT OF CASH FLOW FOR THE PERIOD ENDED 30 JUNE 2013 30.06.2013 30.06.2012 Cash flow from operating activities Profit before taxation 362,762 9,162,079 Investment income: Realised gains recorded in income statement (3,033,259) (1,662,650) Fair value gains recorded in income statement (2,094,240) (2,233,456) Purchase of AFS financial assets (13,419,500) (7,216,240) Proceeds from disposal of AFS financial assets 8,224,380 4,932,750 Purchase of FVTPL financial assets (22,166,065) (9,829,833) Proceeds from disposal of FVTPL financial assets 24,629,227 11,255,728 Non-cash items: Depreciation of property, plant and equipment 840,600 720,120 Net amortisation of discounts 50,916 4,004 Allowance for impairment of insurance receivables 828,000 720,000 Gain on disposal of property, plant and equipment - (41,611) Changes in working capital: (Increase)/decrease in loans and receivables (9,401,229) 7,873,376 Decrease / (increase) in insurance assets and liabilities 16,643,480 (3,176,747) Decrease in insurance receivables 7,520,597 11,399,841 Increase in insurance contract liabilities 8,766,192 7,882,784 Increase in fixed and call deposits 8,837,306 201,214 Decrease in insurance payables (13,831,294) (18,951,327) Decrease in other payables (4,336,228) (3,020,526) Cash generated from operating activities 8,421,645 8,019,506 Income tax paid (2,354,609) (3,127,058) Net cash generated from operating activities 6,067,036 4,892,448 5
PROGRESSIVE INSURANCE BHD (19002-P) UNAUDITED STATEMENT OF CASH FLOW (CONTD.) FOR THE PERIOD ENDED 30 JUNE 2013 30.06.2013 30.06.2012 Investing Activities Proceeds from disposal of property, plant and equipment - 59,612 Purchase of property, plant and equipment (266,649) (685,752) Net cash used in investing activities (266,649) (626,140) Financing Activity Dividends paid to shareholders, representing net Cash used in financing activity (5,718,750) (2,850,000) Net increase in cash and cash equivalents 81,637 1,416,308 Cash and cash equivalents at beginning of year 8,518,342 4,591,272 Cash and cash equivalents at end of the period 8,599,979 6,007,580 The accompanying notes form an integral part of the financial statements. 6
PROGRESSIVE INSURANCE BHD (19002-P) NOTES TO THE INTERIM FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES 1 Basis of Preparation (a) Statement of Compliance The interim financial statements of the Company is unaudited and have been prepared in accordance with Malaysian Financial Reporting Standard (MFRS), International Financial Reporting Standards and the requirements of the Companies Act, 1965, the Insurance Act, 1996 (repealed on 30 June, 2013) and the Financial Services Act, 2013 (effective on 30 June 2013) in Malaysia. The accounting policies and presentation adopted by the Company for the interim financial statements are consistent with those adopted by the Company's audited annual financial statements for the year ended 31 December, 2012 however, interim financial statements do not include full information as required for annual financial statements hence, it should be read in conjunction with the Company's audited financial statements. The interim financial statements of the Company have also been prepared on a historical cost basis, except as disclosed in the accounting policies. The Company has met the minimum capital requirements as prescribed by the Risk- Based Capital Framework for insurers ("the Framework") issued by BNM as at the reporting date. The financial statements are presented in Ringgit Malaysia (), which is the Company's functional currency. 7
SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (b) Standards issued Effective date Description Amendments to MFRS 101, Presentation of Financial Statements July 2012 - Presentation of Items of Other Comprehensive Income MFRS 3, Business Combinations (IFRS Business Combinations issued January 2013 by IASB in March 2004) MFRS 10, Consolidated Financial Statements January 2013 MFRS 11, Joint Arrangements January 2013 MFRS 12, Disclosure of Interests in Other Entities January 2013 MFRS 13, Fair Value Measurement January 2013 MFRS 119, Employee Benefits January 2013 MFRS 127, Consolidated and Separate Financial Statements January 2013 (IAS 27 as revised by IASB in 2003) MFRS 128, Investments in Associates and Joint Ventures January 2013 Amendments to MFRS 1, First-time Adoption of Malaysian Financial January 2013 Reporting Standards - Government Loans Amendments to MFRS 1, First-time Adoption of Malaysian Financial January 2013 Reporting Standards (Annual Improvements 2009-2011 Cycle) Amendments to MFRS 7, Financial Instruments: Disclosures - Offsetting January 2013 Financial Assets and Financial Liabilities Amendments to MFRS 101, Presentation of Financial Statements January 2013 (Annual Improvements 2009-2011 Cycle) Amendments to MFRS 116, Property, Plant and Equipment January 2013 (Annual Improvements 2009-2011 Cycle) The initial application of the aforesaid standards did not have any material financial impact to the current financial statements. 8
2 INVESTMENTS (a) AFS Financial Assets 30.06.2013 31.12.2012 Malaysian Government Securities - - Corporate debt securities 46,945,358 41,561,785 Wholesale unit trust funds 114,327,279 114,172,103 Total 161,272,637 155,733,888 (b) Financial Assets at FVTPL 30.06.2013 31.12.2012 Held for trading: Unit trusts funds 16,975,200 16,472,468 Equity securities 49,509,661 47,471,873 Total 66,484,861 63,944,341 The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Level 3: inputs other than quoted prices included within level 1 that are observable for the assets and liabilities, either directly (i.e. as price) or indirectly (i.e. derived from prices); inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). 9
2 INVESTMENTS (CONTD.) As at 30 June, 2013, the fair value of the Company's investments based on the above hierarchy are as follows: Total Level 1 Level 2 AFS financial assets: Corporate debt securities 46,945,358-46,945,358 Wholesale unit trust funds 114,327,279 114,327,279-161,272,637 114,327,279 46,945,358 Financial assets at FVTPL: Unit trust funds 16,975,200 16,975,200 - Equity securities 49,509,661 49,509,661-66,484,861 66,484,861 - The Company did not have any financial instruments carried at fair value using Level 3 valuation techniques. 10
3 LOANS AND OTHER RECEIVABLES 30.06.2013 31.12.2012 Other receivables: Other receivables, deposits and prepayment 1,083,418 784,666 Income due and accrued 1,222,950 1,798,276 Amount due from MMIP 25,678,362 15,305,045 Amounts owing from sale of shares/mature 753,560 1,577,743 bonds 28,738,290 19,465,730 Fixed and call deposits with: Licensed banks in Malaysia 68,817,664 77,654,970 Other financial institutions 39,000,000 39,000,000 107,817,664 116,654,970 Total loans and other receivables 136,555,954 136,120,700 Included in the fixed and call deposits are cash collaterals received from policyholders of 37,936,622 (2012: 42,880,299) for guarantee issued on behalf of policyholders (Note 4 ). 11
4 OTHER FINANCIAL LIABILITIES 30.06.2013 31.12.2012 Cash collateral deposits received from 37,936,622 42,880,299 from policyholders Interest on cash collateral deposits received from policyholders 1,605,822 1,568,105 39,542,444 44,448,404 The carrying amounts disclosed above approximate fair value at the end of the reporting period. 5 OTHER PAYABLES 30.06.2013 31.12.2012 Other payables 5,133,998 4,528,103 Accrued expenses - 164,833 5,133,998 4,692,936 The carrying amounts disclosed above approximate fair value at the end of the reporting period. 6 DIVIDENDS PAID During the interim period ended 30 June, 2013, the Company paid a final dividend in respect of the financial year ended 31 December 2012 of 7.625% less 25% taxation on 100,000,000 ordinary shares amounting to a total dividend of 5,718,750 (7.6 sen per ordinary share) on 23 May, 2013. 12
7 OPERATING LEASE ARRANGEMENTS The Company as lessee The Company has entered into non-cancellable operating lease arrangements for the use of certain office premises. These leases have an average life of between 1 and 10 years with certain contracts carrying renewal options in the contracts. These contracts include fixed rentals over the tenure of the lease period. The Company also leases office equipment under non-cancellable operating lease agreements with an automatic yearly renewal option unless a written termination notice is served by either party. The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at reporting date but not recognised as liabilities are as follows: Future minimum rental payments: 30.06.2013 31.12.2012 Not later than 1 year 17,450 37,536 Later than 1 year and not later than 5 years 317,837 388,373 Later than 5 years 1,800,000-2,135,287 425,909 13
PROGRESSIVE INSURANCE BHD 9 INSURANCE CONTRACT LIABILITIES 30. 06. 2013 31.12.2012 Gross Reinsurance Net Gross Reinsurance Net Provision for claims reported by policyholders 134,432,966 (61,938,219) 72,494,747 125,693,049 (62,924,782) 62,768,267 Provision for incurred but not reported claims ("IBNR") 36,613,956 (5,844,546) 30,769,410 27,571,198 (3,132,601) 24,438,597 Claims handling expenses 1,402,863-1,402,863 1,272,206-1,272,206 Provision of risk margin for adverse deviations ("PRAD") 12,684,501 (7,026,774) 5,657,727 12,161,109 (6,958,912) 5,202,197 Claim liabilities (i) 185,134,286 (74,809,539) 110,324,747 166,697,562 (73,016,295) 93,681,267 Premiums liabilities (ii) 76,818,075 (19,946,971) 56,871,104 67,975,485 (19,870,572) 48,104,913 261,952,361 (94,756,510) 167,195,851 234,673,047 (92,886,867) 141,786,180 14
9 INSURANCE CONTRACT LIABILITIES (CONT'D) 30. 06. 2013 31.12.2012 Gross Reinsurance Net Gross Reinsurance Net (i) Claims Liabilities At 1 January 166,697,562 (73,016,295) 93,681,267 135,202,584 (62,385,883) 72,816,701 Claims incurred in the current accident year 206,685,920 (89,250,730) 117,435,190 125,981,593 (40,706,373) 85,275,220 Movements in claims incurred in prior accident years (157,189,091) 78,073,650 (79,115,441) (36,736,773) 5,565,005 (31,171,768) Claims paid during the year (31,060,105) 9,383,836 (21,676,269) (57,749,842) 24,510,956 (33,238,886) At 30.06.2013 / 31.12.2012 185,134,286 (74,809,539) 110,324,747 166,697,562 (73,016,295) 93,681,267 (ii) Premium Liabilities At 1 January 67,975,485 (19,870,572) 48,104,913 62,454,299 (23,473,655) 38,980,644 Premiums written in the year 94,785,123 (43,094,993) 51,690,130 160,862,983 (73,239,779) 87,623,204 Premiums earned during the year (85,942,533) 43,018,594 (42,923,939) (155,341,797) 76,842,862 (78,498,935) At 30.06.2013 / 31.12.2012 76,818,075 (19,946,971) 56,871,104 67,975,485 (19,870,572) 48,104,913 15
10. REGULATORY CAPITAL REQUIREMENTS The Company is required to comply with the mandatory capital requirement prescribed in the RBC Framework which is imposed pursuant to Section 23 of the Insurance Act, 1996. Under the RBC Framework, insurance companies are required to satisfy a minimum capital adequacy ratio of 130% and the Company has a capital adequacy ratio in excess of the minimum requirement. The capital structure of the Company, as prescribed under the RBC Framework is provided below: 30.06.2013 31.12.2012 '000 '000 Eligible Tier 1 Capital Share capital (paid-up) 100,000 100,000 Retained earnings 74,947 80,303 Tier 2 Capital Eligible reserves 4,805 4,580 179,752 184,883 Amount deducted from capital (3,008) (1,773) Total capital available 176,744 183,110 16