(1031978-v) (incorporated in malaysia) directors’ report and...

A V I C E N N I A C A P I T A L S D N . B H D . (1031978-V)

(Incorporated in Malaysia)

Directors’ Report and Audited Financial Statements

31 December 2018

1031978-V

AVICENNIA CAPITAL SDN. BHD. (Incorporated in Malaysia)

CONTENTS PAGE

BOARD OF DIRECTORS' PROFILE 1 - 5

DIRECTORS' REPORT 6 - 47

STATEMENT BY DIRECTORS 48

STATUTORY DECLARATION 48

INDEPENDENT AUDITORS' REPORT 49 - 52

STATEMENTS OF COMPREHENSIVE INCOME 53 - 55

STATEMENTS OF FINANCIAL POSITION 56 - 57

STATEMENTS OF CHANGES IN EQUITY 58 - 60

STATEMENTS OF CASH FLOWS 61 - 63

NOTES TO THE FINANCIAL STATEMENTS 64 - 231

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BOARD OF DIRECTORS' PROFILE

Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda

Datuk Joseph Dominic Silva

Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda ("Tan Sri Arshad") was appointed to theBoard of Directors ("Board") of Avicennia Capital Sdn. Bhd. as a Non-Independent Non-Executive Director on 20 January 2015. Tan Sri Arshad is presently the Chairman of YayasanAMIR, Maxis Berhad, Ekuiti Nasional Berhad, Icon Offshore Berhad, Yayasan Raja MudaSelangor and a member of the Board of Trustees of Yayasan Dayadiri and Chancellor ofUniversiti Selangor. He also holds directorships in several private companies.

Prior to this, Tan Sri Arshad was the Executive Chairman and Senior Partner ofPricewaterhouseCoopers Malaysia for 18 years.

Tan Sri Arshad, aged 72 is a Fellow of the Institute of Chartered Accountants in England andWales, a member of the Malaysian Institute of Accountants and a member of the MalaysianInstitute of Certified Public Accountants where he served on its Council for more than twodecades, including three years as its President.

Datuk Joseph Dominic Silva ("Datuk Dominic") was appointed to the Board of Avicennia CapitalSdn. Bhd. as a non-independent non-executive director on 20 January 2015. Datuk Dominic Silvais an experienced professional with 28 years of investments, banking and insurance sectorexperience.

Prior to co-founding DMY Capital in 2017, he was the Head of Investments at Khazanah NasionalBerhad – Malaysia’s Sovereign Investment Fund. His vast experience includes starting up newventures as well as managing and sitting on the boards of mature companies both in regulatedand unregulated sectors. He is presently a Director of CIMB Thai Bank Public Company Limited,Scicom (MSC) Berhad, DMY Capital Sdn. Bhd. and Sinar Haemodialysis Sdn. Bhd.

Datuk Dominic, aged 54 is a graduate of Finance from the University of Wales, United Kingdomand completed his Senior Management Programme at Henley Management College, UnitedKingdom. He obtained a Masters in Research from the University of Liverpool in 2017.

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BOARD OF DIRECTORS' PROFILE (CONT'D.)

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir ("Datuk Syed") was appointed to the Board ofAvicennia Capital Sdn. Bhd. as an independent non-executive director on 20 January 2015.Datuk Syed is presently the Chairman of Sun Life Malaysia Assurance Berhad and Sun LifeMalaysia Takaful Berhad. Datuk Syed currently serves as a Director of Euro Holdings Berhad,Solution Engineering Holdings Berhad, BSL Corporation Berhad, ACR ReTakaful Sea Berhadand Malakoff Corporation Berhad. He also holds directorships in several private companies.

Datuk Syed started his career in 1973 as a Senior Project Officer, School of FinancialManagement at the National Institute of Public Administration ("INTAN") and held variouspositions before his final appointment as Deputy Director (Academic). In November 1988, hejoined the Ministry of Education as a Secretary of Higher Education and thereafter assumed theposition of Deputy Secretary (Foreign and Domestic Borrowing, Debt Management) FinanceDivision, Federal Treasury. From 1993 to 1997, he joined the Board of Directors of AsianDevelopment Bank, Manila, Philippines, first as Alternate Executive Director and later asExecutive Director. Datuk Syed then joined the Ministry of Finance as Secretary, Tax AnalysisDivision and later became Deputy Secretary General (Operations). Prior to his retirement, DatukSyed was the Secretary General of the Ministry of Human Resources.

Datuk Syed, aged 72 graduated with a Bachelor of Arts (Hons.) from University Malaya in 1971.He obtained a Masters of Business Administration degree from the University of Massachussetsin 1977 and obtained a Ph.D (Business Management) from Virginia Polytechnic Institute andState University in 1986. In 2005, he obtained a Bachelor of Jurisprudence (Hons.) fromUniversity Malaya and a Certificate in Legal Practice in 2008 from the Malaysian ProfessionalLegal Board. He was admitted as an Advocate and Solicitor of the High Court of Malaya in July2009. In November 2009, he completed his Master of Law (Corporate Law) from UniversityTeknology Mara (UiTM). In June 2011, he became a member of The Chartered Institute ofArbitrators, United Kingdom and in May 2012 became a Fellow of the said Institute.

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Pushpanathan A/L S.A. Kanagarayar

Pushpanathan A/L S.A. Kanagarayar ("Pushpanathan") was appointed to the Board of AvicenniaCapital Sdn. Bhd. as an independent non-executive director on 20 January 2015. Pushpanathanis presently a Director of the Asian Institute of Finance Berhad, Bursa Malaysia Berhad, IJMCorporation Berhad, IJM Plantations Berhad, Sun Life Malaysia Assurance Berhad and Sun LifeMalaysia Takaful Berhad. He also serves as a Council Member of The Malaysian Institute ofCertified Public Accountants ("MICPA"), as the Chairman of the Listing Committee of BursaMalaysia Berhad as well as a Trustee/Board member of several foundations and non-profitorganisations.

He chairs and had chaired a number of Projects and Working Groups for the MalaysianAccounting Standards Board ("MASB"), MICPA and Malaysian Institute of Accountants ("MIA").He was the President of MICPA from 2012 to 2014, the Honorary Secretary of the FinancialReporting Foundation from 2010 to 2015, a Board Member of the MASB from 2009 to 2015 and a Council Member of MIA from 2012 to 2014. He is the Project Chairman of the InsuranceStandards Working Group of MASB on IFRS 17. He headed the MICPA Working Group, whichundertook the revision of the specimen financial statements of Model Insurance Berhad(incorporating IFRS 4, 7 and 139 disclosures).

He served as an inaugural member of the International Federation of Accountants' ("IFAC")Developing Nations Permanent Taskforce for 2004/2005 and had been actively involved in theNational Annual Corporate Report Awards, which is jointly organised by MICPA, MIA and BursaMalaysia, as the Chairman of the Adjudication and Organising Committees for 2003 till 2009.

Pushpanathan retired as a partner of Ernst & Young on 31 December 2009. He has more than 39 years of experience in providing advisory, accounting and audit services in the role of a partner-adviser for a large number of clients based in Malaysia and internationally (both private andpublic corporations) in a variety of industries, including financial services (insurance, banking andunit trust entities). He has also been involved in share valuations of corporations and providingadvice to clients on mergers and acquisitions, restructurings, takeovers, flotations, investigationsand tax planning.

Pushpanathan, aged 67 is a member of the Institute of Chartered Accountants of Scotland, theMICPA and the MIA.

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Mustafa Kemal Olgac

Dato' Dr. Nirmana Menon A/P Y.B. Menon ("Dato' Dr. Nirmala") was appointed to the Board ofAvicennia Capital Sdn. Bhd. as an Independent Non-Executive Director on 16 May 2018. Dato'Dr. Nirmala is currently a Board Member of Nestle (Malaysia) Berhad.

In a career spanning over 24 years, Dato’ Dr. Nirmala held various leadership positions within theAsian Life and Health Insurance industry. Most recently, Dato’ Dr. Nirmala was the RegionalHead for MetLife Asia based out of Hong Kong. In this role, she had management responsibilityfor MetLife’s operations in Hong Kong, Australia and South Asia, new market entry into SouthEast Asia and also led the strategic development and execution of MetLife’s Health strategy forAsia.

Prior to joining MetLife, Dato’ Dr. Nirmala was with ING for several years holding various seniorpositions, most notably President and Chief Executive Officer of ING Malaysia and RegionalHead of South Asia in Hong Kong. During her time with ING, she grew ING’s operations tobecome the second largest insurance company in the country, managing a well-balancedmultichannel operation covering Individual Life, Health and Takaful Insurance.

Dato’ Dr. Nirmala, aged 59 is a qualified medical practitioner and practised medicine for nineyears in the Malaysian public health sector. She was recognized as the “Leading Woman inFinance and Investment in Asia” via the Women in Leadership (WIL) Awards in 2011.

Kemal previously served as the Chief Executive Officer of Allianz Turkey and as the Chairman ofthe Insurance Association of Turkey and the Turkish Insurance Instittute Foundation. Kemal alsoserved as a member of the Board of Allianz Sigorta A.S. and Allianz Hayat ve Emerklilik A.S., andas Chairman of Magdeburger Sigorta A.S. and Mondial Assistance Turkey.

Mustafa Kemal Olgac ("Kemal") was appointed to the Board of Avicennia Capital Sdn. Bhd. asan Independent Non-Executive Director on 20 January 2015. Kemal is currently an IndependentDirector of Koç Holding A.S. and Acibadem Sağlik Ve Hayat Sigorta A.S. He is also theChairman of Akasya Bakım ve Yasam Merkezi A.S. He is a member of the Turkish Industry andBusiness Association and the 1907 Fenerbahçe Association.

Kemal, aged 67 graduated in Mechanical Engineering from Boğaziçi University and completedtwo Masters Degrees in Controlling Engineering from University of Wales and Fire and SafretyEngineering from Edinburgh University.

Dato' Dr. Nirmala Menon A/P Y.B. Menon

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Ooi Say Teng

Ooi Say Teng ("Ooi") was appointed to the Board of Avicennia Sdn. Bhd. as an executivedirector and Chief Executive Officer on 1 May 2017. He is currently a Director of Sun LifeMalaysia Assurance Berhad and Sun Life Malaysia Takaful Berhad. He has more than 30 yearsof experience in the insurance industry as well as extensive management experience havingheld senior leadership positions with both local and global companies in Malaysia. A graduatewith a Bachelor of Science (Honours) in Actuarial Science from The City University, London; hisareas of expertise include actuarial, operations, reinsurance, bancassurance, corporatemarketing, information technology and process improvement.

Ooi began his career back in 1983 at MCIS Insurance Berhad, and held several leadershippositions at MBA Life Assurance Berhad and UniAsia Life Assurance Berhad. In 2010, he joinedCIMB Bank Berhad as the Head of CIMB Group Insurance, before being appointed as the ChiefExecutive Officer at Sun Life Malaysia Assurance Berhad.

Ooi, aged 58 has also served as the Vice President of LIAM (Life Insurance Association ofMalaysia) in 2009. He was a Board member of Tune Insurance Malaysia Berhad and LabuanReinsurance (L) Ltd, the Deputy Chairman for Malaysia Life Reinsurance Berhad and PresidentCommissioner of CIMB Sun Life in Indonesia.

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DIRECTORS' REPORT

PRINCIPAL ACTIVITIES

RESULTS

Group CompanyRM'000 RM'000

Net (loss)/profit for the year:Continuing operations 109,320 54,299 Discontinued operations (235,091) (283,974)

(125,771) (229,675)

(Loss)/profit attributable to:Owner of the Company (196,115) (229,675) Non-controlling interests 70,344 -

(125,771) (229,675)

The directors hereby present their report together with the audited financial statements of theGroup and of the Company for the financial year ended 31 December 2018.

The Company is principally engaged in investment holding activities, whilst the principal activitiesof the subsidiaries are as stated in Note 17 to the financial statements.

There have been no significant changes to the nature of these activities during the financial year,other than the significant events as disclosed in Note 40 to the financial statements.

There were no material transfers to or from reserves or provisions during the financial year, otherthan as disclosed in the financial statements.

In the opinion of the directors, the results of the operations of the Group and of the Companyduring the financial year were not substantially affected by any item, transaction or event of amaterial and unusual nature, other than the effect of the disposal of Acibadem Saglik Ve HayatSigorta A.S. ("Acibadem") and discontinued operations of general takaful business as disclosedin the Notes 14, 17 and 40 to the financial statements.

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DIVIDENDS

ISSUES OF SHARES

RELATED COMPANIES

DIRECTORS

Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun UdaDatuk Joseph Dominic SilvaDatuk Dr. Syed Muhamad bin Syed Abdul KadirPushpanathan A/L S.A. KanagarayarMustafa Kemal OlgacDato' Dr. Nirmala Menon A/P Y.B. Menon (appointed on 16 May 2018)Ooi Say Teng

Details of the subsidiaries of the Company are disclosed in Note 17 to the financial statements.

The directors who have held office since the date of the last report and at the date of this reportare as follows:

There was no issuance of share during the financial year ended 31 December 2018.

The directors do not recommend the payment of any dividend in respect of the current financialyear.

The immediate holding company is Tulai Beach Ventures Sdn. Bhd., a company incorporatedand domiciled in Malaysia.

The penultimate holding and ultimate holding companies of the Company are KhazanahNasional Berhad, a company incorporated and domiciled in Malaysia, and Minister of Finance(Incorporated), a body corporate which was incorporated under the Minister of Finance(Incorporation) Act, 1957, respectively.

No dividend has been paid or declared by the Company since the end of the previous financialyear.

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DIRECTORS (CONT'D.)

The directors of the subsidiary companies as at the date of this report are as follows:

Sun Life Malaysia Assurance Berhad

Datuk Dr. Syed Muhamad Bin Syed Abdul KadirPushpanathan A/L S.A. KanagarayarJose Isidro Navato CamachoKarim GilaniDato’ Mohd Shukri Bin HussinY.A.M Tunku Ali Redhauddin Ibni Tuanku MuhrizOoi Say Teng

Sun Life Malaysia Takaful Berhad

Datuk Dr. Syed Muhamad Bin Syed Abdul KadirPushpanathan A/L S.A. KanagarayarJose Isidro Navato CamachoDato’ Mohd Shukri Bin HussinIzlan Bin IzhabOoi Say TengKarim Gilani

Renggis Ventures Sdn. Bhd.

Patrick Cheah Gim GuanVallo A/L MuttoGurdip Singh Sidhu A/L Gurbachan SinghChang Li Li

Burau Ventures Sdn. Bhd.Pasir Kalong Investments Limited

Patrick Cheah Gim GuanVallo A/L MuttoChang Li Li

Kuala Gula Ventures Sdn. Bhd.Tasek Bera Ventures Sdn. Bhd.Tanjung Piai Ventures Sdn. Bhd.

Patrick Cheah Gim GuanVallo A/L MuttoChang Li Li

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DIRECTORS' BENEFITS

Indemnity and Insurance Cost

Amount paid Sum insuredRM'000 RM'000

Directors and Officers Liability Insurance 74 50,000

CORPORATE GOVERNANCE

Board Responsibility and Oversight

The Board of Directors is fully committed to ensuring that the highest standards of corporategovernance is practiced throughout the Company and its subsidiaries ("Group") as afundamental obligation of discharging their duties and responsibilities to deliver long-termsustainable value and protect the interests of the Group's shareholders and other stakeholders.

Since the end of the previous financial year, no director has received or become entitled toreceive any benefit (other than benefits included in the aggregate amount of emolumentsreceived or due and receivable by the directors as shown in Note 12 to the financial statementsand the financial statements of its related corporations or the fixed salary and benefits as a full-time employee of the Company or the penultimate holding company) by reason of a contractmade by the Company or a related corporation with the director or with a firm of which thedirector is a member, or with a company in which the director has a substantial financial interest.

According to the register of directors' shareholdings maintained by the Company, none of thedirectors in office at the end of the financial year held any interest in shares, warrants, shareoptions or debentures in the Company or its related corporations during the financial year.

The following disclosure on particulars of indemnity given, to, or insurance effected for, anyDirector or officer of the Company is made pursuant to Section 289(7) of the Companies Act2016:

Neither at the end of the financial year, nor at any time during the year, did there subsist anyarrangement to which the Company was a party, whereby the directors might acquire benefits bymeans of the acquisition of shares in or debentures of the Company or any other body corporate,other than those arising from the shadow share options granted under the Khazanah NasionalBerhad Shadow Share Option Scheme and Long Term Incentive Plan, offered to eligibleemployees of Khazanah Nasional Berhad and Avicennia Capital Sdn. Bhd. respectively.

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CORPORATE GOVERNANCE (CONT'D.)

Board Responsibility and Oversight (cont'd.)

(i)

(ii)

(iii)

(iv)

Board Governance Terms of Reference

The Company's corporate governance practices are formulated based on the following statutoryrequirements, guidelines and best practices:

Financial Services Act 2013 (“FSA”), Islamic Financial Services Act 2013 (“IFSA”),Companies Act 2016 and any legislation which re-enacts or supersedes any of theforegoing Acts;

The Constitution of the Company and Corporate Governance principles set out in thepolicy documents and guidelines issued by Bank Negara Malaysia (“BNM”);

Principles and recommendations of the Malaysian Code on Corporate Governance 2017,issued by the Securities Commission Malaysia; and

The Board Governance Terms of Reference will be reviewed periodically.

The Board is fully committed and responsible for the overall governance and conduct of theGroup's business by providing strategic guidance, having succession plans, closely monitoringcorporate goals, accountability to the shareholder and ensuring the Group's intended controls,compliance, risk management and reporting processes are effective, and has the powers andduties set out in the Board Governance Terms of Reference. The principal duties andresponsibilities of the Board are:

The Corporate Governance Guide: Towards Boardroom Excellence, 3rd Edition issued byBursa Malaysia Securities Berhad.

The Board has established a Board Governance Terms of Reference, which provides guidanceto the Board in the fulfilment of its roles, duties and responsibilities. The primary objective of theBoard Governance Terms of Reference is to set out the mandate and outline the roles andresponsibilities of the Board, the composition of the Board, the Board's authorities, schedule ofmatters reserved for the Board, the establishment of the Board Committees, processes andprocedures for convening Board meetings, the Board's assessment and review of itsperformance, compliance with ethical standards, Board's access to information and advice, anddeclarations of conflict of interest. The Board Governance Terms of Reference was lastreviewed and approved on 14 December 2016. The Board Governance Terms of Reference ismade available on the Company's corporate website at http://www.avicenniacapital.com.

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Board Governance Terms of Reference (cont'd.)

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

Matters Formally Reserved for the Board

(i) Matters on the appointments and structures of the Board, Board Committees, Subsidiaries'Boards, CEO and Senior Management;

Reviewing and approving the Company’s risk appetite, strategic plan and other initiativeswhich would, singularly or cumulatively, have a material impact on the Company’s riskprofile;

Overseeing the selection, performance, remuneration and succession plans of the ChiefExecutive Officer ("CEO"), control functional heads and other members of seniormanagement, such that the Board is satisfied with the collective competence of seniormanagement to effectively lead the operations of the Company;

Monitoring the performance of the CEO and senior management personnel;

Overseeing the implementation of the Company’s governance framework and internalcontrol framework, and periodically review whether these remain appropriate in light ofmaterial changes to the size, nature and complexity of the Company’s operations;

Promoting, together with senior management, a sound corporate culture within theCompany which reinforces integrity and ethical, prudent and professional behaviour;

Reviewing and approving the budgets and business plans tabled by management;

Overseeing and approving the recovery and resolution as well as business continuityplans for the Company to restore its financial strength, and maintain or preserve criticaloperations and critical services when it comes under stress; and

Promoting timely and effective communication between the Company and BNM onmatters affecting or that may affect the safety and soundness of the Company.

The Board has collective responsibilities for promoting the long-term sustainability and successof the Group by providing entrepreneurial leadership within a framework of prudence andeffective controls. In doing so, the Board commits to high standards of integrity and ethics.Specific matters reserved for the Board's consideration and decision include:

Reviewing and promoting sustainability through appropriate environmental, social andgovernance considerations in the Company’s business strategies;

Reviewing and approving material transactions to be undertaken by the Company;

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Matters Formally Reserved for the Board (cont'd.)

(ii)

(iii)

(iv)

Board Composition

Board of Directors

Members Status of Directorship

Y.M. Raja Tan Sri Dato' Seri Arshad Non-Independent Non-Executivebin Raja Tun Uda Director, Chairman

Datuk Joseph Dominic Silva Non-Independent Non-ExecutiveDirector

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Independent Non-Executive Director Pushpanathan A/L S.A. Kanagarayar Independent Non-Executive Director Mustafa Kemal Olgac Independent Non-Executive Director Dato' Dr. Nirmala Menon A/P Y.B. Menon Independent Non-Executive Director

(appointed on 16 May 2018)Ooi Say Teng Executive Director, Chief Executive

Officer

Matters on the remuneration of the Board, Board Committees, CEO and SeniorManagement;

Matters on the annual business and strategic plans, financial and capital investments,divestments, all policy matters of the Company, delegation of authorities and any majorchanges in the strategic direction of the Group; and

Matters on the annual budgets, financial and capital plans, financial statements, quarterlyreporting, dividends and such other matters related to managing risks, controls andfinancial decisions.

The current Board is constituted of individuals of high calibre with diverse background whichcollectively has the necessary skills, experience and qualifications to effectively manage theCompany and to discharge the roles and responsibilities of the Board. The Board members areall experienced in the management of businesses from both international and domestic marketswith diverse academic backgrounds and have skills in the areas of banking, finance, accounting,legal, human resources, economics, insurance, business management and informationtechnology.

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Board of Directors (cont'd.)

(i) four (4) Independent Non-Executive Directors;

(ii) two (2) Non-Independent Non-Executive Directors; and

(iii) one (1) Executive Director (CEO).

Governance Processes

Appointment and Re-election of Directors

As at the date of this Statement, there are seven (7) members on the Board, comprising:

The present composition complies with BNM's requirement that at least 50% of board membersare independent directors.

The roles and responsibilities of the non-executive Chairman and members of the Board aredistinct and separate from the role of the Executive Director/Chief Executive Officer to ensure abalance of power and authority for an effective Board.

The directors are professionals from diverse backgrounds with wide-ranging expertise,experience and skills and the Board recognises diversity as an important criteria used indetermining the composition to ensure that different perspectives are considered for overalleffectiveness and strength of the Board. The consideration for diversity includes the right blendof skills, expertise, experience, gender, age, cultural, ethnicity, nationality and educationalbackgrounds.

Pursuant to the guidelines issued by BNM, the appointment of new directors and re-appointmentof directors upon the expiry of their tenure, are subject to prior approval of BNM.

Any proposed appointment of new or re-appointment of directors will be assessed by theNominating and Remuneration Committee ("NRC") before recommending for approval of the fullBoard. In evaluating the appointment of new directors, the NRC looks for diversity of skills,qualifications and experience of the candidates. To ensure that the candidate has the character,experience, integrity, competency and time to effectively discharge his/her role as a director, theNRC will assess the fitness and propriety of the candidates in accordance with BNM's Policy onFit and Proper persons criteria. The following criteria are considered by the NRC:

The appointment of Dato' Dr. Nirmala Menon A/P Y.B. Menon as an Independent Non-ExecutiveDirector has provided a gender diversity to the composition of the Board.

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Governance Processes (cont'd.)

Appointment and Re-election of Directors (cont'd.)

• Probity, personal integrity and reputation;• Competence and capability; and• Financial integrity.

Continuous Professional Development

The Board recognises the importance of training and through the NRC continuously, evaluatesand determines the training needs of directors.

The Company has put in place a Directors’ Orientation Programme for newly appointed Directorsto familiarise themselves with the Group’s business operations. The directors are provided withthe opportunity to participate in relevant training programmes on an ongoing basis in areasrelating to the insurance and financial industry to keep themselves abreast with the latestdevelopments in the marketplace. This includes the Financial Institutions Directors’ Education("FIDE") Core Programme which promotes high-impact Boards by strengthening Boardcompetencies in dealing with corporate governance, risk management and strategic issuesfaced by the financial services industry.

During the financial year ended 31 December 2018, the directors have attended relevant trainingprogrammes to further enhance their knowledge and skills to enable them to effectivelydischarge their duties and responsibilities.

All directors comply with the prescribed maximum number of directorships allowed and none ofthem are active politicians. The final decision on the appointment of a candidate recommendedby the NRC rests with the full Board before an application is submitted to BNM for approval.

Upon appointment, the new director will attend an in-house orientation program within threemonths of the appointment date where a briefing on the operations and business strategies willbe given by the Senior Management to familiarise the director with the industry and the Group.Directors are also regularly updated on all developments and new requirements affecting theirresponsibility and are constantly kept abreast of their obligations.

The appointment of Dato' Dr. Nirmala Menon A/P Y.B. Menon as the Independent Non-Executive Director of the Company was approved by BNM on 15 May 2018 for a period of threeyears and her appointment is effective from 16 May 2018.

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Governance Processes (cont'd.)

Fit and Proper Requirements

Board Meetings

The directors are persons of calibre, credibility and integrity. Collectively they bring with them awide range of business and management experience, skills and specialised knowledge andsuitable criteria that are required to lead and oversee the affairs of the Company.

All directors are required to undergo a fit and proper assessment before appointment and havecontinuously fulfilled the "fit and proper person” criteria as prescribed under the FinancialServices Act 2013 (“FSA”) and BNM’s Guidelines on Fit and Proper criteria for Key ResponsiblePersons.

All directors are required to make an annual declaration that they fulfilled the minimum criteria of“a fit and proper person” as prescribed in Sections 59(1), (2) and (3) of the FSA. Suchdeclarations are tabled for review at a NRC meeting and presented to the Board.

The Board requires all its members to devote sufficient time to effectively discharge their dutiesas Directors, and to use their best endeavours to attend meetings.

Board meetings and Board Committee meetings are scheduled in advance of the financial yearto enable directors to plan ahead and fit the meeting schedules. Special Board meetings areconvened between the scheduled meetings to deliberate urgent proposals or matters thatrequire expeditious decisions or deliberations by the Board.

In order for the Board meetings to be more effective and to ensure in-depth deliberations ofmatters, the meeting agendas are sequenced taking into account the complexity of the mattersto be tabled for approval, discussion or notation by the Board. The meeting agendas are set bythe Chairman of the Board or Chairmen of Board Committees respectively in consultation withthe CEO and Company Secretary.

The agendas and meeting papers are distributed in advance at least seven (7) days prior to themeetings for all Board and Board Committee meetings to allow the directors sufficient time toperuse and understand the papers so that they can contribute effectively during the meetings.

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Board Meetings (cont'd.)

The Board has a regular annual schedule of matters which are tabled to the Board for theirapproval and/or notation which includes business strategies, business operations and financialperformance updates, unaudited quarterly and half-yearly results, annual financial statements,investment updates, capital management, updates from Chairmen of the respective BoardCommittees on the salient matters deliberated, risk appetite and profile and matters related toinvestor relations.

Whenever necessary, senior management team members or external advisors may also beinvited to attend Board meetings and Board Committee meetings to provide further clarity onmatters discussed to enable the Board and Board Committees to arrive at a considered andinformed decision. In support of the carbon footprint reduction initiatives, the Company hasmoved towards electronic meeting papers since December 2016.

Presentations to the Board are prepared and delivered in a manner that provides clearcomprehensive information to facilitate effective deliberations and decision making. Boarddeliberations, decisions and conclusions including dissenting views made at Board meetingsalong with clear actions to be taken by responsible parties are appropriately recorded in theminutes.

Where the Board is considering a matter in which a director has interest, the relevant directorimmediately discloses his interest and abstains from participating in the discussions or decisionmaking on the subject matter. The Board is constantly advised and updated on statutory andregulatory requirements pertaining to their duties and responsibilities. As and when the needarises, directors are also provided with the relevant information and training to prepare them toappraise key business, financial, operational, risk, compliance, corporate, legal and regulatorymatters.

Directors may participate in meetings via video or tele-conferencing if they are unable to attendthe meeting in person and their participation via such a conference shall be deemed to constituteattendance for the counting of quorum.

Board resolutions passed by way of circular resolutions are practiced sparingly by the Board andwill not be practised to approve complex matters which require rigorous deliberation, discussionand consideration by the Board. All such circular resolutions passed by the Board shall be tabledat the next Board meeting for information.

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Meeting Attendance

Name Attended %

Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda 4/4 100%Datuk Joseph Dominic Silva 3/4 75%Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 4/4 100%Pushpanathan A/L S.A. Kanagarayar 4/4 100%Mustafa Kemal Olgac 4/4 100%Dato' Dr. Nirmala Menon A/P Y.B. Menon (appointed

on 16 May 2018) 3/3 100%4/4 100%

Access To Information

Number of meetings

The Board met four (4) times during the financial year to deliberate and consider a variety ofsignificant matters that required its guidance and approval.

Details of each Director’s attendance during the financial year are listed as follows:

All directors have complied with the minimum requirements on attendance at Board meetings ofat least 75%.

Between Board meetings, the Board may be informed or updated by the management onimportant issues and/or major developments of matters discussed in the Board meetings.

In addition to matters which require the Board’s approval, the Board is consistently beinginformed and updated on matters in relation to business operations, financial and businessreviews and development, strategy, information on business propositions including industrydevelopments, business development proposals, risk management reviews, regulatory updates,compliance and other operational matters. The Board is also informed of the decisions andsalient issues deliberated at the Board Committees by the Chairmen of the respective BoardCommittees, and the minutes of the Board Committees are tabled accordingly at the Boardmeetings.

All Directors have direct access to the Senior Management and have unrestricted access to allinformation and documents relevant to the business and affairs of the Company. The Board mayalso at anytime interact directly with, or request further explanation, information or updates onany aspect of the Group’s operations or business concerns from the Management.

Ooi Say Teng

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Access To Information (cont'd.)

Independent Professional Advice

Board Committees

The Board delegates certain of its responsibilities to the Board Committees, which operate withinclearly defined Terms of Reference, primarily to assist the Board in discharging itsresponsibilities.

Professional advisers, consultants, auditors and solicitors appointed by the Company to adviseon corporate proposals are invited to the Board meetings to brief the Board on their advice andopinions as well as to address issues that are of concern to the directors. Directors may seekexternal independent professional advice at the expense of the Company, to assist them inmaking well-informed decisions whether as a full Board or in their individual capacity.

Annual Assessment of Performance of The Board, Board Committees and IndividualDirectors

The Group has implemented paperless meetings where board materials are uploaded to asecured board server for the Directors to download to their tablets. This initiative has made theprocess of creating, distributing and reviewing confidential board materials more efficient andsecure, by speeding up the process of board pack dissemination. This initiative also enhancesthe Group’s corporate social responsibility in line with carbon footprint initiatives.

The NRC annually evaluates the effectiveness of the Board as a whole, Board Committees andthe contribution of each individual director through a set of self-assessment questionnairesprepared internally. The evaluation process involves peer and self-review assessments, wheredirectors assess their own as well as their fellow directors' performance against a set criteriaincluding the skills they bring, responsibilities, competency and behavioural analysis and theircontributions at meetings. The results of the annual assessments are tabled to the NRC andBoard for deliberation.

During the financial year ended 31 December 2018, no major concerns were raised.

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(i) Audit Committee;(ii) Risk Management Committee;(iii) Nominating and Remuneration Committee; and(iv) Long Term Incentive Plan Committee.

(i) Audit Committee

Members Designation

Pushpanathan A/L S.A. Kanagarayar Independent Non-Executive Director,Chairman

Y.M. Raja Tan Sri Dato' Seri Arshad Non Independent Non-Executivebin Raja Tun Uda Director

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Independent Non-Executive Director

Name Attended %

Pushpanathan A/L S.A. Kanagarayar 4/4 100%Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda 4/4 100%Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 4/4 100%

The Audit Committee (“AC”) as at the date of this report comprises three members, themajority of whom are independent non-executive directors. The composition of the AC isas follows:

A total of four (4) AC meetings were held during the financial year ended 31 December2018 and attendance of each existing director is as follows:

Number of meetings

Although the Board has granted such discretionary authority to these Board Committees todeliberate and decide on certain key and operational matters, the ultimate responsibility for finaldecisions lie with the Board. All deliberations and decisions taken by the Board Committees aredocumented and presented as Board papers for deliberation at Board meetings. The Boardreviews the Committees’ terms of reference from time to time to ensure their relevance. TheBoard currently has the following four (4) Committees:

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Board Committees (cont'd.)

(i) Audit Committee (cont'd.)

(i)

(ii)

(i)

(ii)

(iii)

(iv)

(v)

(vi)

The AC’s Terms of Reference (“TOR”) are in compliance with BNM's CorporateGovernance Guidelines. The purpose of the AC is to assist the Board in fulfilling thefollowing key responsibilities:

to provide independent oversight of the financial reporting and audit process; and

The AC shall, amongst others, have the following powers, roles and functions:

review, where necessary, with the Management and the external auditors the resultsof the external audit which impact the financial results of the Company or itsfinancial group;

to review the internal audit plan, scope, procedures and frequency;

review and assess the accuracy and completeness of the information in the annualreport and related regulatory documents before submission to BNM, the CompaniesCommission of Malaysia or other regulatory authority;

ensuring adequate checks and balances as well as systems and controls are inplace.

support the Board in ensuring that there is a reliable and transparent financialreporting process;

review the scope of the internal audit programme, internal audit findings and torecommend actions to be taken by management;

before the publication of financial statements and reports, review the annual andsemi-annual financial statements and reports with the Management and the externalauditors and consider whether such statements and reports are complete andconsistent with the information available to the AC members;

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The AC shall, amongst others, have the following powers, roles and functions (cont'd.):

(vii)

(viii)

(ix)

(x)

(xi)

(xii)

(xiii)

(xiv)

(xv)

(xvi)

review the effectiveness of internal controls and risk management processes,including information technology security and control and ensure that seniormanagement is taking necessary corrective actions in a timely manner to addresscontrol weaknesses, non-compliance with laws, regulatory requirements, policiesand other issues identified by the internal audit and other control functions;

review provisions for impairment of assets as well as overseeing the impairmenttesting process established by the Management in ensuring the carrying value of thefinancial instruments, physical and non-physical assets is not significantly misstated;

select external auditors for appointment and to recommend their reappointment andcompensation to the Board or, where necessary, their removal;

assess objectively, the performance and independence of the external auditors (byreviewing and assessing the various relationships between the external auditor andthe Company or its financial group);

review the external auditors' management letter findings and responses thereto;

review the effectiveness of the monitoring system for compliance with laws,regulations and BNM's requirements;

ensure the independence of the internal audit function;

ensure that there are no unjustified restrictions or limitations on the internal auditors'activities or access to information and records;

ensure that the internal audit function is adequately resourced and staffed withcompetent and well-trained employees;

on a regular basis, meet separately with the Head of Internal Audit to discuss anymatters that the AC or internal audit believes should be discussed privately;

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(xvii)

(xviii)

(xix)

(xx)

(xxi)

(xxii)

•

•

•

•

•

engage with the external auditors to foster a quality audit in accordance with theexpectations as per BNM’s External Auditor Guidelines. At a minimum, this shallinclude:

maintaining regular, timely, open and honest communication with the externalauditor, and requiring the external auditor to report to the AC onsignificant matters; and

ensuring that Senior Management is taking necessary corrective actions in atimely manner to address the external audit findings and recommendations.

review the operating and capital expenditure budgets with Management;

review the accuracy and adequacy of the Directors’ report, corporate governancedisclosures, and interim financial reports in relation to the preparation of financialstatements;

making recommendations to the Board on the appointment, removal andremuneration of the external auditor;

monitoring and assessing the independence of the external auditor including byapproving the provision of non-audit services by the external auditor;

monitoring and assessing the effectiveness of the external audit, including bymeeting with the external auditor without the presence of Senior Managementat least twice a year;

review the findings of any examinations by BNM or other regulatory agencies, andany observations or suggestions of the internal and external auditors;

review that all related party transactions are at arm’s length basis before beingtabled before the Board for approval;

attend adequate amount of training annually designed to enable the AC members tobetter fulfil their responsibilities;

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(xxiii)

(xxv)

(xxvi)

(ii) Risk Management Committee

Members Designation

Mustafa Kemal Olgac Independent Non-Executive Director,Chairman


Pushpanathan A/L S.A. Kanagarayar Independent Non-Executive Director,

Dato' Dr. Nirmala Menon A/P Y.B. Menon Independent Non-Executive Director

Name Attended %

Mustafa Kemal Olgac 4/4 100%Datuk Joseph Dominic Silva 3/4 75%Pushpanathan A/L S.A. Kanagarayar 4/4 100%Dato' Dr. Nirmala Menon A/P Y.B. Menon (appointed as

RMC member on 11 June 2018) 2/2 100%

monitor compliance with the Board’s conflicts of interest process;

review third-party opinions on the design and effectiveness of the Company’sinternal control framework; and

verify and give assurance that the allocation of shares to the eligible employeesunder the Long Term Incentive Plan (“LTIP”) at the end of each financial year are incompliance with the LTIP By-laws as disclosed to the eligible employees.

The Risk Management Committee (“RMC”) comprises three independent non-executivedirectors and a non-independent non-executive director. The composition of the RMC isas follows:

A total of four (4) RMC meetings were held during the financial year ended 31 December2018 and attendance of each existing director is as follows:

Number of meetings

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(ii) Risk Management Committee (cont'd.)

A. Risk Management

A1. Review and recommend to the Board the following matters:

(i) material risk exposures;(ii) risk appetite statements/profile; and(iii) scenario testings and their outcome.

A2. In relation to risk management, to perform the following:

(i)

(ii)

(iii)

(iv)

(v)

Relating to the Group Capital Adequacy Ratio (“GCAR”), Group CapitalSufficiency Indicator (“GCSI”), Group Supervisory Target Capital Level(“GSTCL”) of 130% set by BNM, Group Individual Target Capital Level(“GITCL”) and the minimum level of GCAR for the Company.

appropriate levels of capital through the risk profile of the financial group;

In addition, the Committee’s responsibilities shall include the review of the following areasand report the same to the Board:

direct and oversee the formulation of the Company’s overall risk managementframework and strategies, including policies, procedures, systems, capabilitiesand parameters to identify, assess and manage risks to ensure their relevanceand appropriateness to the Company’s position and business;

report to the Board, key business risks and seek its approval on themanagement of key business risks that are aligned to the Company’s riskappetite;

monitor the effectiveness and progress of management of key business risksand accordingly report to the Board the status of the key business risks; and

The main responsibility of the Committee is to direct and oversee the formulation of astructured mechanism in the Company to inculcate a strong governance, compliance,ethical, integrity and risk management culture within the Company.

report, advise and recommend to the Board, the overall risk appetite, riskexposures, risk tolerance, risk portfolio composition, and strategy on managingbusiness risks;

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(ii) Risk Management Committee (Cont'd.)

A. Risk Management (cont'd.)

A2. In relation to risk management, to perform the following (cont'd.):

(vi)

A3.

B. Governance

B1.

B2.

B3.

B4.

RMC shall support and recommend to the Board for the adoption of sound corporategovernance principles for ensuring the establishment of a clear governancestructure appropriate to the nature, size and complexity of the Group and itssubsidiaries. In relation to governance, RMC shall perform the following:

recommend to the Board, the approval of, and/or amendments to, theCompany's risk management framework and strategies, including policies,procedures, systems, capabilities and parameters.

Ensure a proactive risk management culture so that risk managementprocesses and controls are applied and embedded in the day-to-day businessand operational activities.

Direct and oversee the formulation of the Company’s governance frameworkthat clearly define roles and responsibilities for the effective oversight andimplementation of group-wide policies with a view to inculcate a high integrityand ethical environment and promote good governance practices consistentlywithin the Company and across the Group;

Direct and oversee the formulation of the Company’s programs and policies tosupport and implement the Company’s governance framework and endorse thepolicies for the Board’s approval;

Monitor the status and progress of formulation and implementation of therelated governance framework and policies and report accordingly to theBoard; and

Recommend to the Board the approval of, and/or amendments to, theCompany’s governance framework and policies.

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C.

C1.

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

D.

D1.

(i)

(ii)

at least annually, evaluate the effectiveness of the Company’s overallmanagement of compliance risk;

to evaluate the effectiveness of the Company’s compliance function and overallmanagement of compliance risk; and

to accord high attention and strengthen compliance functions, resources andinfrastructure.

Ethics and Integrity

In relation to ethics and integrity, to perform the following:

oversee and maintain Avicennia’s Compliance Framework, Code of Conductand Supplier Code of Business Ethics which provide guidelines on conduct,raising concerns, confidentiality, conflicts, integrity and fair treatment and shallbe applicable to all employees, consultants and business partners of theCompany; and

direct and oversee the Company’s integrity and ethical practices and culture.

discuss compliance issues regularly, ensuring that adequate time and priority isprovided in the board agenda to deliberate compliance issues and that suchissues are resolved effectively and expeditiously;

Compliance

In relation to compliance, shall assist the Board in the following:

ensure a compliance framework is in place to facilitate the right complianceculture in the day-to-day business and operational activities;

to approve compliance framework/policies and material amendments tocompliance framework/ policies and oversee their implementation;

approve the establishment of the compliance function and the position of thecompliance officer, and ensure that the compliance function and thecompliance officer are provided with appropriate standing, authority andindependence;

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E.

E1.

(i)

(ii)

(iii)

F.

F1.

G.

G1.

G2.

(iii) Nominating and Remuneration Committee

The Terms of Reference of the Nominating and Remuneration Committee ("NRC") are incompliance with the guidelines on the functions and responsibilities of the committees forinsurers issued under BNM’s Guidelines BNM/RH/GL 003-1 on Minimum Standards forPrudential Management of Insurers (Consolidated).

Reporting - Governance/Compliance and Risk Management

To review any reporting of such matters relating to the Company’s governance,compliance, ethics, integrity and risk management to the relevant authorities.

To be apprised of any other risks and compliance related issues.

To approve the contingency plan for dealing with various extremeinternal/external events and disasters.

Others

Resources and accessibility

Ensure there are adequate resources and systems in place to mitigate risk andimplement good governance/compliance practices, and ensure that:

staff responsible for implementing functions such as risk management andgovernance/compliance functions shall perform such functions independentlyand shall not be involved in the Company’s or the financial group’s risk takingor other business activities;

adequately resourced and staffed with competent, experienced and well trainedstaff to effectively monitor risk management and compliance of the Group andits entities with respect to legal and regulatory requirements, and undertakesuch mitigation functions; and

full access to systems, manuals and other information are available for thepurpose of performing the risk management and compliance functions.

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(iii) Nominating and Remuneration Committee (cont'd.)

Members Designation

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Independent Non-Executive Director Chairman



Mustafa Kemal Olgac Independent Non-Executive Director

Name Attended %

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 5/5 100%Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda 5/5 100%Datuk Joseph Dominic Silva 4/5 80%Mustafa Kemal Olgac 5/5 100%

(i)

• • • •

(ii)

performance evaluations and development; andcomposition;

As at the date of this report, the NRC comprises two independent non-executive directors,and two non-independent non-executive directors. The composition of the NRC is asfollows:

A total of five (5) NRC meetings were held during the financial year ended 31 December2018 and attendance of each existing director is as follows:

Number of meetings

The main responsibilities of the Committee are to:

support the Board in carrying out its functions in the following matters concerningthe Board, CEO/Executive Director, Senior Management and Company Secretary:

nominations, appointments and removals;

fit and proper assessments.

support the Board in actively overseeing the design and operation of the Company’sremuneration system; and

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(iii)

A.

A1.

A2.

B.

B1.

B2.

B3.

The main responsibilities of the Committee are to (cont'd.):

Recommend to the Board the appointment of suitable persons (includingexecutives of Avicennia) for the nominations and appointments as Non-Executive Directors at Avicennia’s subsidiaries and special purpose vehicles.

In addition, the Committee’s responsibilities shall include, but are not limited to, thefollowing:

Recommend to the Board, the establishment of new compensation andbenefits/policies/plans and the terms and conditions of service for theCompany's employees (including CEO/Executive Director and SeniorManagement).

Appointment of Directors (including relevant compensation)

Oversee the general composition of the Board (size, skill and balance betweenIndependent Directors and Non-Independent Directors) and to recommend tothe Board appropriate policy relating thereto.

periodically review the remuneration of the Directors, particularly on whetherremuneration remains appropriate to each Director’s contribution, taking intoaccount the level of expertise, commitment and responsibilities undertaken.

Human Resource Policies and Stategies

Recommend to the Board, revisions or reviews of the existing compensationand benefits/policies/plans and the terms and conditions of service for theCompany's employees (excluding CEO/Executive Director and SeniorManagement).

Recommend to the Board, suitable persons for appointment as members of theBoard and Board Committees of the Company taking into account the size ofthe Board and Board Committees and the required skills, experience,qualification and other core competencies of members.

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B.

B4.

B5.

B6.

C.

C1.

C2.

C3.

C4. Recommend the termination or removal of the company secretary if he/she isdisqualified and no longer complies with any of the fit and proper requirementsas may be specified by BNM under the FSA/IFSA.

Recommend to the Board, the remuneration framework for Non-ExecutiveDirectors, covering fees, meeting allowances and other related costs.

Establish and implement processes for assessing the effectiveness of theBoard and the Board Committees as a whole.

Performance/Fit and Proper Assessment of Board of Directors

Assess the performance and effectiveness of individuals and collectivemembers of the Board and Board Committees of the Company, as well as theprocedure for the assessment and to make the necessary recommendations tothe Board.

Assess the fitness and propriety of the directors of the Company as well as theCompany Secretary in accordance with BNM’s Fit and Proper Policy to ensurethat they are not disqualified and comply with the fit and proper requirementsas may be specified under the FSA/IFSA and to make the necessaryrecommendations to the Board.

Recommend the termination or removal of a director from the Board if thedirector concerned is ineffective, errant and negligent in discharging his/herduties or if a director becomes disqualified and no longer complies with any ofthe fit and proper requirements as may be specified by BNM under theFSA/IFSA.

In addition, the Committee’s responsibilities shall include, but are not limited to, thefollowing (cont'd.):

Appointment of Directors (including relevant compensation)

Recommend to the Board, the Non-Executive Directors who are retiring (byrotation) for re-election and termination of membership of individual directorsfor any reasons whatsoever.

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C.

C5.

C6.

C7.

C8.

C9.

D.

D1.

D2.

D3.

D4.

Performance/Fit and Proper Assessment of Board of Directors (cont'd.)

Consider and recommend solutions on issues of conflict of interest affectingdirectors, if any.

Consider and recommend to the Board any other measures to upgrade theeffectiveness of the Board and the Board Committees of the Company.

Ensure that all directors of the Company receive appropriate and continuoustraining to keep abreast of all the latest developments in the industry.

Propose to the Board the duties and responsibilities of Non-ExecutiveDirectors, including the membership and chairmanship of Board Committees.

Appointments of Senior Management (including the relevant remuneration andcompensation)

Consider establishing minimum requirements for the CEO (i.e. on the requiredmix of skills, experience, qualification and other core competencies required ofa senior officers position).

Recommend to the Board the recruitment, appointment, promotion,confirmation and termination of service, as well as the remuneration package,the compensation and benefits policies, the terms and conditions, including jobgrade and review thereof of the CEO/Executive Director and SeniorManagement.

Recommend to the Board the remuneration framework of the CEO/ExecutiveDirector and the Senior Management. The Committee may obtain independentprofessional advice and any other information necessary in determining theframework.

Recommend to the Board any proposals of the CEO/Executive Director andSenior Management (if any) remuneration and benefits including share options,service, incentive plans, contracts and compensation payments for approval.

Provide adequate training and orientation for new directors with respect to thebusiness, structure and management of the Company as well as theexpectations of the Board with regards to their contributions to the Company.

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D.

D5.

D6.

E.

E1.

E2.

E3.

E4.

F.

F1.

Appointments of Senior Management (including the relevant remuneration andcompensation) (cont'd.)

Consider compensation and/or severance payments for the CEO/ExecutiveDirector and Senior Management in the event of early termination of theiremployment/service contracts.

Performance/Fit and Proper Assessment of Senior Management

Review all benefits and entitlements of the CEO/Executive Director and SeniorManagement (if any).

Review and evaluate the performance of the CEO/Executive Director and tomake the necessary recommendations to the Board on his/her total rewardsand terms and conditions of service.

Oversee the review and performance evaluation of Senior Management andmake the necessary recommendations to the Board on the appropriate rewardsand revisions of their terms and conditions of service.

Assess the fitness and propriety of the CEO/Executive Director and SeniorManagement in accordance with BNM’s Fit and Proper Policy to ensure thatthey are not disqualified and comply with the fit and proper requirements asmay be specified under the FSA and make the necessary recommendations tothe Board.

Recommend the termination or removal of Senior Management if they areineffective, errant and negligent in discharging their duties or they becomedisqualified and no longer comply with any fit and proper requirements as maybe specified by BNM under the FSA.

Remuneration

Recommend to the Board annually, the remuneration for each Director,CEO/Executive Director and Senior Management of the Company.

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G.

G1.

G2.

H.

H1.

(iv) Long Term Incentive Plan Committee

Members Designation

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Independent Non-Executive Director Chairman



Name Attended %

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 1/1 100%Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda 1/1 100%Datuk Joseph Dominic Silva 1/1 100%

Recommend to the Board on total rewards for the Company employees basedon annual reviews.

As at the date of this report, the Long Term Incentive Plan Committee ("LTIP") comprisesone independent non-executive director and two non-independent non-executive directors.The composition of the LTIP committee is as follows:

Succession Planning and Talent Management

Oversee and regularly review the succession plans for the Board to promoteboard renewal and address any vacancies.

Oversee the succession planning and talent management of theCEO/Executive Director and Senior Management.

Others

One (1) LTIP meeting was held during the financial year ended 31 December 2018 andattendance of each existing director is as follows:

Number of meetings

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(iv) Long Term Incentive Plan Committee (cont'd.)

(i)

(ii)

(iii)

(iv)

(v)

(vi)

undertake other duties as requested by the Board from time to time;

arrange for periodic reviews of its own performance and, at least annually, review itsconstitution and terms of reference to ensure it is operating at maximumeffectiveness and recommend any changes it considers necessary to the board forapproval;

subject to the provisions of the Plan, construe and interpret the Plan and grantsunder it, to define the terms therein and to recommend to the Board to establish,amend and revoke rules and regulations relating to the Plan and its administration.The LTIP Committee, in the exercise of this power may correct any defect, anyomission, or reconcile any inconsistency in the Plan or in any agreement providingfor an option(s) in a manner and to the extent it shall deem necessary to expediteand make the Plan fully effective;

determine all questions of policy and expediency that may arise in the administrationof the Plan; and

generally exercise such powers and do all acts and things and enter into anytransactions, agreements, deeds, documents or arrangements, make rules,regulations or impose terms and conditions or delegate part of its power relating tothe administration of the Plan, which the LTIP Committee may in its discretionconsider to be necessary or desirable for giving full effect to the Plan.

The objective of the LTIP Committee is to support the Board in carrying out itsresponsibility as prescribed in the LTIP By-Laws and the LTIP Committee shall implementand administer the Plan in such manner as it shall in its discretion deem fit and with suchpowers and duties as conferred upon it by the Board.

The responsibilities and duties of the Committee are to exercise all the powers andundertake the duties and responsibilities stated in the LTIP By-Laws as being vested in the Committee and shall include, but not limited to, the following:

report its activities, including how it has discharged its responsibilities, to the Boardon a regular basis and promptly provide to the Board copies of the minutes of themeetings of the Committee;

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Risk Management Framework

(i)

(ii)

(iii)

Key Processes of Internal Control

The Risk Management Department maintains an updated database of all material risks inthe Comprehensive Risk Assessment ("CRA"). The CRA measures the likelihood andseverity of the risks identified and these are reported on an annual basis to the RMC.

The Risk Management Department assesses and identifies the significant risks faced bythe Company such as business strategic risks, market risks, credit risks and operationalrisks, which included areas related to regulatory and compliance issues, financial,underwriting and claims risks. The mitigation plans and control measures were formulatedand implemented to address these risks and were monitored in terms of their timelinessand effectiveness.

The disclosure of the Company’s risk management policies are set out under Notes 37 and 38 inthe financial statements.

The Board is committed to maintaining a sound system of internal controls that cover riskmanagement, financial, operational and compliance controls. The Board is responsible fordetermining key strategies and policies for significant risks and control issues while Managementis responsible for the effective implementation of the Board's policies by identifying, monitoringand managing risks. The Board is committed to ensure that effective risk management andinternal control systems are in place within the Company and its subsidiaries and continuouslyreviews the adequacy and integrity of these processes and internal control systems.

The Board has the overall responsibility to ensure the maintenance of the risk managementframework for the Company in order to provide reasonable assurance for effective and efficientoperations, internal financial controls and compliance with laws and regulations. There is acontinuous process present for identifying, evaluating and managing the significant risks facedby the Company. This process is periodically reviewed by the RMC and the Board.

A formal risk management framework has been maintained in the Company by the RiskManagement Department which is headed by the Chief Actuary and Risk Officer.

During the financial year, the following risk management initiatives were undertaken by the RiskManagement Department:

On a quarterly basis, the Risk Management Department reviewed the risks identified andreported its risk assessment results to the RMC and the Board for consideration.

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Key Processes of Internal Control (cont'd.)

(i) Clear and Defined Organisational Structure

(ii) Management Committee

(iii) Management Authority Limit

(iv) Compliance Framework

The other key processes that the Board has established to provide effective internal controlinclude:

The Company has established an organisational structure with clearly defined lines ofresponsibility, authority limits and accountability aligned to its business and operationalrequirements and control environment. Relevant Board Committees with specificresponsibilities delegated by the Board are established to provide oversight governanceover the Company’s activities. The Board Committees have the authority to examinematters under their terms of reference as approved by the Board and report to the Boardwith their observations and recommendations.

Management Committee is established to support the CEO in the stewardship of theGroup to centrally monitor the Group's performance, co-ordinate and align the Group'smanagement and business operations to achieve the Company's vision, mission,strategies, through good corporate governance principles and best business and controlpractices based on the directions, guidance, decisions and policies of the Board and theBoard Committees.

The Management Committee meets once a month or more frequently as circumstancesdictate. The Management Committee held 18 meetings during the financial year ended 31December 2018.

The Board’s approving authority is delegated to the Management through formal anddefined operational limits of authority that governs business procedures and decisionmaking process in the Company. The authority limits incorporate segregation of dutiesand, checks and balances in the delegation of authority.

The Board recognises that compliance function forms an integral part of the Company'srisk management and internal control, as a strong compliance culture reflects a corporateculture of high integrity and ethics. The Company's compliance function is driven by theGovernance Department and its main role is to facilitate, advise, monitor and educate thebusiness units to act in accordance with laws, regulations and guidelines. The Compliancefunction is also responsible to identify and assess any legal, compliance and fraud risksthat the Company may be exposed to and roll out any compliance relatedinitiatives/requirements from the regulators.

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(iv) Compliance Framework (cont'd.)

(i) Code of Conduct ("CoC") and Supplier Code of Business Ethics;(ii) Personal Data Protection Act Policy;(iii) Whistleblowing Policy;(iv) Conflicts of Interest Policy;(v) Anti-Fraud Policy;(vi) Anti-Bribery and Anti-Corruption Policy; and(vii) Anti-Money Laundering Policy.

(v) Conflicts of Interest

The other key processes that the Board has established to provide effective internal controlinclude (cont'd.):

In line with good governance, the compliance function reports independently to the RiskManagement Committee. Appropriate governance structure has been established withclear reporting lines for the Avicennia group of companies, to the extent permitted by locallaws and regulations, to facilitate compliance information flows and reporting to theCompany's Governance Department.

The following compliance policies have been approved by the Board to ensure ethics andinternal control principles are embedded in the business operations:

The CoC and the above policies are subject to continuous review and improvement toensure relevance and effectiveness, and reflect the changing risks and processenhancements. These documents are made available in a shared folder for ease ofaccess by the employees.

The Company has in place a Conflicts of Interest Policy to provide guidance to employeeson how to identify, minimise and manage conflicts of interest and/or potential conflicts ofinterest in the course of carrying out the company's business activities.

In ensuring that the decision making process is transparent and in the best interest of theCompany, all directors and employees including the CEO are required to declare theirconflicting interest on an annual basis. In addition, declaration is also required for anycircumstances that may give rise to a potential conflict of interest situation during thecourse of carrying out their duties.

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(v) Conflicts of Interest (cont'd.)

(vi) Whistleblowing

The main objectives of this Policy are to provide:

•

• avenue to escalate the matter if one is not satisfied with the outcome; and• assurance that whistleblowers are protected from possible reprisal or victimisation.

a process for anyone to raise concerns on matters such as the Company’s CoC,legal issues, accounting and audit matters and receive feedback on actions taken;

The directors are required to make a declaration at the Board meeting in the event thatthey have interests in the proposals or subject matters being considered by the Board,including where such interest arises through close family members, in line with therequirements on disclosure of director’s interests. A director who has a direct or deemedinterest in a subject matter presented at the Board/Board Committee meetings shallabstain from deliberation and voting on the said subject matter.

The Company has in place a Whistleblowing Policy (“Policy”) to encourage transparentand ethical conduct within the Company. This Policy allows individuals to report all allegedacts of wrongdoing within the Company.


In addition to the Whistleblowing Policy, the Company has in place an Anti-Fraud Policyand Anti-Bribery and Anti-Corruption Policy. These policies define the type of misconduct,the investigation process, reporting procedures and the roles and responsibilities ofemployees.

The Anti-Bribery and Anti-Corruption Policy also requires integrity based backgroundscreening to be conducted before any third party vendor is engaged. Only cleared vendorswill be engaged.

Reports or complaints received are treated with strict confidentiality and the Company willreview concerns, including anonymous complaints, which employees or external partiesmay, in confidence, raise about possible misconduct or improprieties within the Companyand the concerns shall be independently investigated and reported to the RMC and ACaccordingly.

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(vii) Related Party Transactions

(viii) Communication

•

•

•

•

•

Documentation of important policies, guidelines and procedures in the form ofoperating manuals/ workflows and made available in the Company's shared folder;

Management Committee comprising the Senior Management Team meets regularlyto discuss the financial performance, plans, strategies, operational risk andcompliance issues of the Company;

Regulatory updates, Company's policies, guidelines and procedures as well asmarket information are disseminated through the Company's shared folder in atimely manner.


Implementation of induction programmes for all newly recruited employees coveringamongst others, background of the Company, Code of Conduct, internal policies,guidelines and procedures and declarations of interest;

Conduct regular staff dialogues/briefings; and

The Company complied with the requirements of BNM’s Guidelines on Related PartyTransactions (BNM/RH/GL/018-6) in respect of its related party undertakings.

Other than the provision of financial services which are on normal commercial terms andin the ordinary course of business, all material related party transactions have beendisclosed in the audited financial statements in accordance with MFRS 124 Related PartyDisclosures.

The directors who hold office do not have any direct or indirect interest, which is in conflictwith their duty or interest as directors, as referred to in Section 58 of the Financial ServicesAct, 2013.

To support an effective flow of information within the Company, and to ensure thatimportant information reaches the appropriate personnel in a timely manner, the Companyhas in place the following practices:

1031978-V


40



(ix) Talent management and succession planning

(x) Independence of external auditors

(xi) Financial reporting

The professionalism and competency of employees are enhanced through continuoustraining and development programmes and a structured recruitment process. Aperformance planning and appraisal system of employees is in place with established keyperformance indicators and competencies subject to annual review. The Boardencourages employees to adopt a culture of continuous learning for personal competencyand career development.

The Company, as part of its ongoing efforts in promoting a culture of high performanceand talent retention, has in place a systematic approach to identify and develop talent forlong term succession planning.

The Company has adopted a policy that the provision of non-audit services by theexternal auditors shall be approved by the AC. The Company will assess and alwaysensure that the external auditors’ ability to conduct audits objectively and independently isnot impaired, or perceived to be impaired. Unless specifically allowed by the AC, theCompany only engages the services of the external auditors for audit assurance andincome tax matters. The AC also reviews the total fees earned by the external auditorsfrom non-audit services rendered to the Company for assurance that the independence ofthe external auditors is not impaired.

The Board has overall oversight responsibility for ensuring that accounting records areproperly kept and that the Company’s financial statements are prepared in accordancewith the Malaysian Financial Reporting Standards (“MFRS”), International FinancialReporting Standards (“IFRS”), the provisions of the Companies Act, 2016 in Malaysia, theFinancial Services Act, 2013 and relevant regulatory requirements.


1031978-V


41



(xii) Remuneration

•

• establish appropriate performance measurement with a focus on risk;

be aligned with the Company’s business strategies, objectives, values, long-termgoals and interests;

On the recommendation of the NRC, the Board has recommended the Directors’ fees,including Board Committees’ fees in respect of the financial year ended 31 December2018 and Directors’ other benefits and shareholder's approval was sought on 16 July 2018.

The details on the aggregate remuneration of the Directors of the Company (comprisingremuneration received and/or receivable from the Company during the financial yearended 31 December 2018) are disclosed in Note 12 to the financial statements.

The objective of the Company’s policy on Directors’ remuneration is to attract and retainDirectors needed to steer the Company towards achieving its goals effectively. Thedetermination of the Non-Executive Directors’ remuneration is a matter for the Board as awhole. The level of remuneration of Non-Executive Directors is linked to their level ofresponsibilities.

All Non-Executive Directors are paid fixed annual director fees and meeting attendanceallowance for each Board and Board Committee meeting attended. In addition, Non-Executive Directors also receive other benefits-in-kind including Directors & OfficersLiability Insurance and medical benefits.

The Company has established a Remuneration Policy which outlines the mandatoryrequirements that must be reflected in the design of management of performance andremuneration arrangements across the Company. The objective of this Policy is to provideguidance in relation to matters that fall under the Company’s remuneration system.

The remuneration strategy of the Company is designed around the following principles to:


Senior Management

Non-Executive Directors

1031978-V


42



(xii) Remuneration (cont'd.)

•

•

•

• ensure robust governance and control processes.

The remuneration of the Company is made up of the following components:

•

•


The Remuneration Policy covers all employees, including Senior Management of theCompany. Senior Management in this context means the Chief Executive Officer andChief Officers who report directly to him.

Type DescriptionFixed components Fixed remuneration package consist of monthly base salary and

fixed allowances. It is determined by the individual’s level ofskills, competencies, responsibilities, type of job function,market demands and performance. The fixed remunerationrepresents the most important part of the total remuneration.

Variable components Variable remuneration is designed to drive and rewardperformance based on annual financial and non-financialmeasures which are aligned with prudent risk taking andconsistent with the longer term strategy of the Company. Aportion of the variable remuneration is in the form of annualperformance bonus (“Short-Term Incentives”) and the remainingportion is a deferred component comprising of shares which arevested over a period of no less than 3 years (“Long-TermIncentives”).

enable the Company to attract, develop and retain high-performing and motivatedindividual employees;

encourage employees to continue to perform and create sustainable results; and

offer a competitive remuneration package which is aligned with the industry andcomply with all relevant statutory rules and regulations;

The remuneration strategy of the Company is designed around the following principles to(cont'd.):

Senior Management (cont'd.)

1031978-V


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The remuneration of the Company is made up of the following components (cont'd.):

•

• •

Performance assessment and risk adjustment

Type Description

The Company actively manages the performance of employees to ensure a robust linkbetween remuneration outcomes and the achievement of the Company’s strategy.

Employee performance is assessed against both, what an employee achieves and howhe/she achieves it. Formal assessments occur annually, at the end of the performanceyear. Assessment outcomes directly influence an employee’s short term incentive andlong term incentive outcomes.

Variable components Short-Term Incentive, which is discretionary and notcontractually guaranteed, will only be attributed to theemployees when a minimum achievement for the key businessperformance of the Company is met. Purpose of the Short-TermIncentives is to reward performance and at the same time drivethe right values and behaviors.

Senior Management (cont'd.)

A Long-Term Incentive Plan (“LTIP”) has been implemented tomanage the Long-Term Incentives. Under the LTIP scheme, theattribution of the incentive to employees will only materialise ifthe long-term objective defined within the LTIP, which is in linewith the Company’s business strategy, is met.

resignation; and

Any deferred variable remuneration that has not been paid or vested to employees issubject to forfeiture or adjustment in the event of their:

misconduct/poor performance.

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Performance assessment and risk adjustment (cont'd.)

Senior management and material risk takers

• Chief Executive Officer• Chief Financial Management Officer• Chief Actuary and Risk Officer• Chief Strategy Officer

2018Unrestricted Deferred

RM'000 RM'000Fixed remuneration:

Cash-based 4,120 -

Individual objectives represent “what” the employee is expected to achieve. For SeniorManagement, objectives are set within a balanced scorecard framework with thescorecard categories aligned to the Company’s strategy. Scorecard objectives arecascaded down and documented in each employee’s Performance Evaluation Form at thecommencement of the performance year.

Total value of remuneration awards paid and payable to the Company's seniormanagement and other material risk takers during the financial year was as follows:

Number ofpersons

5*

An employee’s performance will be measured based on both financial and non-financialobjectives. In addition to achieving their objectives, employees are also assessed basedon the Company’s core values/key behaviours.

To safeguard the independence and authority of employees engaged in Risk and Controlfunctions, including the functions of Compliance, Risk and Audit, the compensation foremployees in Risk and Control functions do not have strong linkages to the performanceof any business areas they oversee. The performance metrics of these employees arebased principally on the achievement of the objectives of their job functions, rather than onthe financial performance of the Company.

Senior management and material risk takers of the Company, as defined by Bank NegaraMalaysia in their policy document on Corporate Governance, are as follows:

1031978-V


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Senior management and material risk takers (cont'd.)

2018Unrestricted Deferred

RM'000 RM'000

Variable remuneration:Cash-based 2,324 - Shares and share-linked remuneration - 1,830 Others 19 -

*

OTHER STATUTORY INFORMATION

(a)

(i)

(ii)

(b)

(i)

(ii)

5*

Number ofpersons

5*

the values attributed to current assets in the financial statements of the Group andof the Company misleading.

3

Includes the remuneration paid and payable to the previous Chief GovernanceOfficer and Chief Actuary and Risk Officer who had resigned during the financialyear.

At the date of this report, the directors are not aware of any circumstances which wouldrender:

the amount written off for bad debts or the amount of the provision for doubtful debtsin the financial statements of the Group and of the Company inadequate to anysubstantial extent; and

Before the statement of comprehensive income and statement of financial position of theGroup and of the Company were made out, the directors took reasonable steps:

to ascertain that proper action had been taken in relation to the writing off of baddebts and the making of provision for doubtful debts and satisfied themselves thatall known bad debts had been written off and that adequate provision had beenmade for doubtful debts; and

to ensure that any current assets which were unlikely to realise their value as shownin the accounting records in the ordinary course of business had been written downto an amount which they might be expected so to realise.

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OTHER STATUTORY INFORMATION (CONTD.)

(c)

(d)

(e) As at the date of this report, there does not exist:

(i)

(ii)

(f) In the opinion of the directors:

(i)

(ii)

(g)

(h)

At the date of this report, the directors are not aware of any circumstances which havearisen which would render adherence to the existing method of valuation of assets orliabilities of the Group and of the Company misleading or inappropriate.

At the date of this report, the directors are not aware of any circumstances not otherwisedealt with in this report or the financial statements of the Group and of the Company whichwould render any amount stated in the financial statements misleading.

any charge on the assets of the Group and of the Company which has arisen sincethe end of the financial year which secures the liabilities of any other person; or

any contingent liability in respect of the Group and of the Company which has arisensince the end of the financial year.

no contingent or other liability has become enforceable or is likely to becomeenforceable within the period of twelve months after the end of the financial yearwhich will or may affect the ability of the Company to meet its obligations as andwhen they fall due; and

no item, transaction or event of a material and unusual nature has arisen in theinterval between the end of the financial year and the date of this report which islikely to affect substantially the results of the Group and of the Company for thefinancial year in which this report is made.

For purposes of paragraphs (e)(ii) and (f)(i) above, contingent or other liabilities do notinclude liabilities arising from contracts of insurance or takaful underwritten in the ordinarycourse of business of the insurance and takaful subsidiaries.

Before the statements of financial position and income statements of the Group weremade out, the directors took reasonable steps to ascertain that there was adequateprovision for its insurance/takaful liabilities in accordance with the valuation methodsspecified in the Risk-Based Capital ("RBC") Framework for insurers and takaful operatorsissued by Bank Negara Malaysia.

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STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2018

Group Group Company Company2018 2017 2018 2017

Note RM'000 RM'000 RM'000 RM'000

Continuing operations:

Operating revenue 3 1,205,255 1,184,673 88,851 47,951

Gross earned premiums/ contributions 4(a) 1,056,799 1,047,633 - - Earned premiums/contributions

ceded to reinsurers/retakaful operators 4(b) (127,267) (115,688) - -

Net earned premiums/contributions 929,532 931,945 - -

Fee and commission income 5 252 234 - - Investment income 6 148,456 137,040 88,851 47,951 Realised (losses)/gains, net 7 (2,184) 969 116 (4) Fair value (losses)/gains, net 8 (48,014) 63,863 527 1,286 Other operating income 9 10,485 4,339 368 59 Other revenue 108,995 206,445 89,862 49,292

Gross benefits and claims paid 10(a) (443,618) (480,281) - - Claims ceded to reinsurers and

retakaful operators 10(b) 93,757 111,638 - - Gross change in contract

liabilities 10(c) (141,440) (218,305) - - Change in contract liabilities

ceded to reinsurers and retakaful operators 10(d) 22,626 15,825 - -

Net benefits and claims (468,675) (571,123) - -

Fee and commission expenses 11 (116,967) (115,487) - - Other operating expenses 12 (317,886) (283,538) (35,476) (19,468) Other expenses (434,853) (399,025) (35,476) (19,468)

Profit before taxation fromcontinuing operations 134,999 168,242 54,386 29,824

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STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2018 (CONT'D.)


Note RM'000 RM'000 RM'000 RM'000

Profit before taxation fromcontinuing operations 134,999 168,242 54,386 29,824

Zakat (240) (430) - - Taxation 13 (25,439) (37,227) (87) (14) Net profit for the year from

continuing operations 109,320 130,585 54,299 29,810

Discontinued operations:Net (loss)/profit for the year from

discontinued operations 14 (235,091) 51,102 (283,974) - Net (loss)/profit for the year (125,771) 181,687 (229,675) 29,810

Other comprehensive income/(loss):

Items that may be reclassified subsequently to profit or loss:

Net fair value changes of AFS financial assets

- Gain on fair value changes, net 446 1,511 - - - Transfer from profit or loss upon

disposal 1,355 967 - - Tax effect relating to AFS financial

assets (968) (561) - - Other comprehensive income from

continuing operations for the year 833 1,917 - -

Other comprehensive loss fromdiscontinued operationsfor the year 14 (101,688) (51,609) - -

Total comprehensive (loss)/income for the year (226,626) 131,995 (229,675) 29,810

1031978-V


55

STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2018 (CONT'D.)


Note RM'000 RM'000 RM'000 RM'000

Comprising of: - Continuing operations 110,153 132,502 54,299 29,810 - Discontinued operations 14 (336,779) (507) (283,974) -

(226,626) 131,995 (229,675) 29,810

(Loss)/profit attributable to:

Owner of the Company (196,115) 104,400 (229,675) 29,810 Non-controlling interests 70,344 77,287 - -

(125,771) 181,687 (229,675) 29,810

Total comprehensive (loss)/income attributable to:

Owner of the Company (297,395) 53,730 (229,675) 29,810 Non-controlling interests 70,769 78,265 - -

(226,626) 131,995 (229,675) 29,810

The accompanying accounting policies and explanatory notes form an integral part of thefinancial statements.

1031978-V


56

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018

Group Group Company CompanyNote 2018 2017 2018 2017

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

AssetsProperty and equipment 15 63,917 56,549 546 932 Intangible assets 16 404,472 444,430 40 114 Investment in subsidiaries 17 - - 901,121 901,072 Goodwill on consolidation 18 392,337 392,337 - - Financial assets 19 3,566,056 3,346,152 188,500 111,539 Reinsurance and retakaful assets 20 185,168 159,280 - - Insurance and takaful receivables 21 46,608 37,336 - - Other receivables 22 748,627 23,146 732,668 10,256 Cash and bank balances 24 55,188 57,354 6,543 14,122

5,462,373 4,516,584 1,829,418 1,038,035 Assets of disposal group

classified as held for sale 14 - 1,523,764 - 1,008,094 Total Assets 5,462,373 6,040,348 1,829,418 2,046,129

EquityShare capital 25 1,990,014 1,990,014 1,990,014 1,990,014 Other reserves 27 49,092 37,728 17,106 17,247 (Accumulated losses)/

retained earnings (119,776) 167,108 (199,373) 30,302 Reserve of disposal group

classified as held for sale 14 - (183,540) - - Shareholder's funds 1,919,330 2,011,310 1,807,747 2,037,563 Non-controlling interests 646,028 620,535 - - Total Equity 2,565,358 2,631,845 1,807,747 2,037,563

1031978-V


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STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018 (CONT'D.)

Group Group Company CompanyNote 2018 2017 2018 2017

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

LiabilitiesInsurance and takaful contract

liabilities 28 2,583,166 2,424,431 - - Insurance and takaful payables 29 51,624 33,878 - - Financial liabilities 31 12,881 36,528 - - Other payables 32 123,887 116,070 21,648 8,558 Deferred tax liabilities 23 122,973 123,152 - - Current tax liabilities 2,484 4,303 23 8

2,897,015 2,738,362 21,671 8,566 Liabilities associated with disposal

group classified as held for sale 14 - 670,141 - - Total Liabilities 2,897,015 3,408,503 21,671 8,566

Total Equity and Liabilities 5,462,373 6,040,348 1,829,418 2,046,129


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STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018

Immediateholding and Reserve of

other related disposal groupShare companies' Other classified as Distributable Non-

capital advances reserves held for sale retained controlling Total(Note 25) (Note 26) (Note 27) (Note 14) earnings Total interests equity

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Group

At 1 January 2017 1,976,486 41 (120,348) - 109,304 1,965,483 584,281 2,549,764

Profit for the year - - - - 104,400 104,400 77,287 181,687 Total comprehensive (loss)/income - arising during the year - - (38,070) - (12,600) (50,670) 978 (49,692)

- - (38,070) - 91,800 53,730 78,265 131,995 Transactions with ownerImmediate holding company's

advances received during the year - 13,528 - - - 13,528 - 13,528 Issuance of ordinary shares 13,528 (13,528) - - - - - - Related companies' advances settled

during the year - (41) - - - (41) - (41) Dividend paid - - - - (33,996) (33,996) (42,011) (76,007) Grant of LTIP to employees - - 12,606 - - 12,606 - 12,606 Attributable to disposal group held for

sale (Note 14) - - 183,540 (183,540) - - - - Total transactions with owner 13,528 (41) 196,146 (183,540) (33,996) (7,903) (42,011) (49,914)

At 31 December 2017 1,990,014 - 37,728 (183,540) 167,108 2,011,310 620,535 2,631,845

<--------------------------------- Attributable to Owner of the Company --------------------------------><------------------------- Non - distributable -------------------------->

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STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT'D.)

Immediateholding and Reserve of Distributable

other related disposal group retainedShare companies' Other classified as earnings/ Non-

capital advances reserves held for sale accumulated controlling Total(Note 25) (Note 26) (Note 27) (Note 14) losses Total interests equity

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Group

At 1 January 2018 1,990,014 - 37,728 (183,540) 167,108 2,011,310 620,535 2,631,845

(Loss)/profit for the year - - - - (196,115) (196,115) 70,344 (125,771) Total comprehensive income/(loss) - arising during the year - - 11,505 (98,025) (14,760) (101,280) 425 (100,855)

- - 11,505 (98,025) (210,875) (297,395) 70,769 (226,626) Transactions with ownerDividend paid - - - - - - (45,276) (45,276) Grant of LTIP to employees - - (141) - - (141) - (141) Transfer to retained earnings - - - 76,009 (76,009) - - Disposal of subsidiary (Note 17) - - - 205,556 - 205,556 - 205,556 Total transactions with owner - - (141) 281,565 (76,009) 205,415 (45,276) 160,139

At 31 December 2018 1,990,014 - 49,092 - (119,776) 1,919,330 646,028 2,565,358

<------------------------- Non - distributable --------------------------><--------------------------------- Attributable to Owner of the Company -------------------------------->

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STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018 (CONT'D.)

Immediate Long-term Distributableholding incentive retained

Share company's plan earnings/capital advances reserve accumulated

(Note 25) (Note 26) (Note 33) losses TotalRM'000 RM'000 RM'000 RM'000 RM'000

Company

At 1 January 2017 1,976,486 - 4,641 34,488 2,015,615 Total comprehensive income - - - 29,810 29,810 Immediate holding

company's advances received during the year - 13,528 - - 13,528 Issuance of ordinary shares 13,528 (13,528) - - - Grant of LTIP to employees - - 12,606 - 12,606 Dividend paid - - - (33,996) (33,996) At 31 December 2017 1,990,014 - 17,247 30,302 2,037,563

At 1 January 2018 1,990,014 - 17,247 30,302 2,037,563 Total comprehensive income - - - (229,675) (229,675) LTIP movement during

the year - - (141) - (141) At 31 December 2018 1,990,014 - 17,106 (199,373) 1,807,747

<----------- Non - distributable ----------->


1031978-V


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STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018


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

Cash flows from operating activities(Loss)/profit before taxation from: - Continuing operations 134,999 168,242 54,386 29,824 - Discontinued operations (218,300) 62,759 (283,974) -

(83,301) 231,001 (229,588) 29,824

Adjustments for:Depreciation of property and

equipment 9,877 9,734 431 484 Amortisation of intangible assets 75,915 74,691 76 100 Write off of property and equipment 902 37 1 - Net fair value losses/(gains) 43,968 (65,869) - - Realised gains on disposal of financial assets (99,041) (83,076) - - Realised (gains)/losses on disposal of property and equipment (2) (91) - 4 Loss on disposal of subsidiary 299,968 - 283,974 - Investment income (165,712) (146,659) (88,851) (47,951) Long term incentive plan (141) 12,606 1,585 2,537 Impairment losses on other insurance

and retakaful receivables - 797 - - Writeback of expense liabilities (16,662) (19,765) - -

Operating profit/(loss) before changes in assets and liabilities 65,771 13,406 (32,372) (15,002)

Decrease/(increase) in financial assets 554,038 (275,610) (76,961) (3,751) Increase in reinsurance and

retakaful assets (17,401) (20,402) - - (Increase)/decrease in insurance and

takaful receivables and other receivables (745,991) 649 (722,412) (9,963)

Increase in insurance and takaful contract liabilities 125,099 238,981 - -

Decrease in investment contract liabilities and financial liabilities (12,546) (9,901) - -

1031978-V


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STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT'D.)


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

(Decrease)/increase in insurance andtakaful payables, provisions and

other payable (15,668) 121,393 13,105 1,091 Investment income received 165,712 146,659 88,851 47,951 Taxation paid (57,491) (65,997) (87) (14) Zakat paid (430) (220) - - Net cash flows generated from/(used in)

operating activities 61,093 148,958 (729,876) 20,312 Cash flows from investing activitiesPurchase of property and equipment (17,549) (9,547) (46) (413) Purchase of intangible assets (526) (46,353) (2) (1) Proceeds from disposal of property

and equipment 92 91 - - Decrease in investment in subsidiaries - - 724,120 - (Increase)/decrease in amount due from subsidiaries - - (1,775) 9,862 Net cash flows (used in)/generated from

investing activities (17,983) (55,809) 722,297 9,448

Cash flows from financing activitiesProceeds from issuance of ordinary shares - 13,528 - 13,528 Immediate holding and other related companies' advances paid - (41) - (13,528) Immediate holding and other related companies' advances received - - - 13,528 Dividend paid - (33,996) - (33,996) Dividend paid to non-controlling interests (45,276) (42,011) - - Net cash flows used in financing activities (45,276) (62,520) - (20,468)

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STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT'D.)


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

Net changes in cash and cash equivalents (2,166) 30,629 (7,579) 9,292 Cash and cash equivalents at beginning of year 57,354 145,310 14,122 4,830 Attributable to disposal group

held for sale (Note 14) - (118,585) - - Cash and cash equivalents at end of year (Note 24) 55,188 57,354 6,543 14,122


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NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2018

1. CORPORATE INFORMATION

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The principal activity of the Company is investment holding. The principal activities of thesubsidiaries of the Group are described in Note 17 to the financial statements.

There have been no significant changes to the nature of these activities during the financialyear, other than as disclosed in Note 40 to the financial statements.

The Company is a private limited liability company, incorporated and domiciled in Malaysia.The registered office of the Company is located at Suite 15.08, Level 15, GTower, 199Jalan Tun Razak, 50400 Kuala Lumpur.

The immediate holding company is Tulai Beach Ventures Sdn. Bhd., a companyincorporated and domiciled in Malaysia.

The penultimate holding and ultimate holding companies of the Company are KhazanahNasional Berhad, a company incorporated and domiciled in Malaysia, and Minister ofFinance (Incorporated), a body corporate which was incorporated under the Ministry ofFinance (Incorporation) Act, 1957, respectively.

The financial statements were authorised for issue by the Board of Directors in accordancewith a resolution of the directors on 27 March 2019.

The financial statements of the Company have been prepared in accordance with theprovisions of the Companies Act 2016 ("CA 2016"), Malaysian Financial ReportingStandards ("MFRS") issued by the Malaysian Accounting Standards Board ("MASB")and International Financial Reporting Standards ("IFRS") issued by the InternationalAccounting Standards Board ("IASB").

The financial statements have been prepared on a historical cost basis, except forthose financial instruments which have been measured at their fair values andinsurance liabilities which have been measured in accordance with the valuationmethods specified in the Risk-Based Capital ("RBC") Framework for Insurers issued byBank Negara Malaysia ("BNM").

The Group and the Company's Malaysian subsidiaries, SunLife Malaysia AssuranceBerhad ("SLMA") and SunLife Malaysia Takaful Berhad ("SLMT"), have met theminimum capital requirements as prescribed by the Risk-Based Capital Framework forInsurers and Takaful Operators ("the RBC Framework") issued by BNM as at thereporting date.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

2.1 Basis of preparation (cont'd.)

2.2

(a)

⦁

⦁

⦁

⦁

Financial assets and financial liabilities are offset and the net amount is reported in thestatement of financial position only when there is a legally enforceable right to offsetthe recognised amounts and there is an intention to settle on a net basis, or to realisethe assets and settle the liability simultaneously. Income and expenses are not offset inthe income statement unless required or permitted by any accounting standard orinterpretation, as specifically disclosed in the accounting policies of the Group and theCompany.

The financial statements are presented in Ringgit Malaysia ("RM") and all values arerounded to the nearest thousand (RM'000) except when otherwise indicated.

Standards, amendments to published standards and interpretations that areeffective, and issued but not yet effective

Standards, amendments to published standards and interpretations that areeffective

The amendments and improvements to published standards and interpretationsthat have been adopted by the Group and the Company for the first time for thefinancial year beginning on or after 1 January 2018 are as follows:

MFRS 2 Classification and Measurement of Share-based PaymentTransactions (Amendments to MFRS 2)

The amendments to MFRS 2 address three main areas:

The effects of vesting conditions on the measurement of a cash-settled share-based payment transaction;

The classification of a share-based payment transaction with net settlementfeatures for withholding tax obligations; and

Accounting where a modification to the terms and conditions of a share-basedpayment transaction changes its classification from cash settled to equitysettled.

Transfers of Investment Property (Amendments to MFRS 140)

The amendments clarify when an entity should transfer property, includingproperty under construction or development into, or out of investment property.

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2.2

(a)

⦁

⦁

Standards, amendments to published standards and interpretations that areeffective, and issued but not yet effective (cont'd.)

Standards, amendments to published standards and interpretations that areeffective (cont'd.)

Transfers of Investment Property (Amendments to MFRS 140) (cont'd.)

The amendments state that a change in use occurs when the property meets,or ceases to meet, the definition of investment property and there is evidenceof the change in use.

A mere change in management’s intentions for the use of a property does notprovide evidence of a change in use.

IC Interpretation 22 Foreign Currency Transactions and AdvanceConsideration

The interpretation clarifies that in determining the spot exchange rate to use oninitial recognition of the related asset, expense or income (or part of it) on thederecognition of a non-monetary asset or non-monetary liability relating to advanceconsideration, the date of the transaction is the date on which an entity initiallyrecognises the non-monetary asset or non-monetary liability arising from theadvance consideration. If there are multiple payments or receipts in advance, thenthe entity must determine a date of the transactions for each payment or receipt ofadvance consideration.

The adoption of these amendments did not have any impact on the current periodor any prior period and is not likely to affect future periods.

MFRS 9 Financial Instruments and Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts

MFRS 9 Financial Instruments

MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 andestablishes three primary measurement categories for financial assets: amortisedcost, fair value through profit or loss and fair value through other comprehensiveincome (“OCI”). The basis of classification depends on the entity's business modeland the cash flow characteristics of the financial asset. Investments in equityinstruments are always measured at fair value through profit or loss with anirrevocable option at inception to present changes in fair value in OCI (provided theinstrument is not held for trading). A debt instrument is measured at amortised costonly if the entity is holding it to collect contractual cash flows and the cash flowsrepresent principal and interest.

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2.2

(a)

MFRS 9 Financial Instruments (cont'd.)

The amendments introduce two alternative options for entities issuing contractswithin the scope of MFRS 4, notably a temporary exemption and an overlayapproach. The temporary exemption enables eligible entities to defer theimplementation date of MFRS 9 for annual periods beginning before 1 January2021.



MFRS 9 Financial Instruments and Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts (cont'd.)

For liabilities, the standard retains most of the MFRS 139 requirements. Theseinclude amortised cost accounting for most financial liabilities, with bifurcation ofembedded derivatives. The main change is that, in cases where the fair valueoption is taken for financial liabilities, the part of a fair value change due to anentity's own credit risk is recorded in other comprehensive income rather than inprofit or loss, unless this creates an accounting mismatch.

MFRS 9 introduces an expected credit loss model on impairment that replaces theincurred loss impairment model used in MFRS 139. The expected credit loss modelis forward-looking and eliminates the need for a trigger event to have occurredbefore credit losses are recognised.

Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts

In December 2016, the MASB issued Amendments to MFRS 4 to address issuesarising from the different effective dates of MFRS 9 and the upcoming newinsurance contracts standard (MFRS 17). Amendments to MFRS 4 is issued by theMASB in respect of its application in Malaysia. It is equivalent to the Amendmentsto IFRS 4 as issued by the IASB.

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2.2

(a)

i.ii.



It has not previously applied any version of MFRS 9; andIts activities are predominantly connected with insurance on its annualreporting date that immediately precedes 1 April 2016.


The overlay approach allows an entity applying MFRS 9 to reclassify between profitor loss and other comprehensive income, an amount that results in the profit orloss at the end of the reporting period for the designated financial assets being thesame as if an entity had applied MFRS 139 to these designated financial assets.

An entity can apply the temporary exemption from MFRS 9 for annual periodsbeginning on or after 1 January 2018. An entity may start applying the overlayapproach when it applies MFRS 9 for the first time.

Impact as a result of the adoption of MFRS 9 and Amendments to MFRS 4

Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts (cont'd.)

The Group and the Company have performed assessments on the requirementsunder MFRS 9 and Amendments to MFRS 4, and have reached the followingconclusions:

An entity may apply the temporary exemption from MFRS 9 if:

Group

The Group will be applying the temporary exemption under Amendments to MFRS4 to defer the adoption of MFRS 9 until 1 January 2021, which is in line with theadoption of MFRS 17 Insurance Contracts, as the Group’s activities arepredominantly connected with insurance, and on the basis of meeting thepredominance “insurance related industry” test under Amendments to MFRS 4,whereby the Group’s insurance liabilities are more than 90% of the Group’s totalliabilities.

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2.2

(a)

MFRS 15 Revenue from Contracts with Customers

(i) Identify the contract with the customer;(ii) Identify the performance obligations in the contract;(iii) Determine the transaction price;(iv) Allocate the transaction price to each distinct good or service; and(v) Recognise the revenue




Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts (cont'd.)

Group (cont'd.)

The additional disclosures as required under Amendments to MFRS 4 are set outin Note 43 to the financial statements.

Company

The Company, which is an investment holding company does not meet the criteriastipulated under MFRS 4 to apply either the temporary exemption or overlayapproach. Accordingly, it has adopted MFRS 9 on 1 January 2018.

The adoption of MFRS 9 does not have any impact to its financial results andfinancial position as there is no change in terms of classification and measurementof the financial assets of the Company.

MFRS 15 establishes a new five-step model that will apply to revenue arising fromcontracts with customers. MFRS 15 will supersede the current revenue recognitionguidance including MFRS 118 Revenue, MFRS 111 Construction Contracts andthe related interpretations when it becomes effective. The five-step model is asfollows:

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2.2

(a)

MFRS 15 Revenue from Contracts with Customers (cont'd.)



All other new standards, amendments to published standards and interpretationsthat are effective for the current financial year are not relevant to the Group and theCompany.

Applying the five-step model, an entity recognises revenue when (or as) aperformance obligation is satisfied and provided to the customer, which is when thecustomer obtains control over the goods or services provided. The point at whichrevenue is able to be recognised may shift some revenue which is currentlyrecognised at a point in time at the beginning of the contract or at the end of acontract, to be recognised over the contract term and vice versa

In addition to the above, an entity should recognise revenue which depicts thetransfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled to in exchange for thosegoods or services. Any bundled goods or services that are distinct must beseparately recognised.

The Group and Company have performed the assessment of the impact of MFRS15 on their business and it does not have a financial impact to the Group andCompany’s financial results and financial position, as most of the revenue streamsof the Group and the Company, other than those arising from insurance contractsand financial instruments held, which are scoped out of MFRS 15, are alreadyrecognised in accordance with the principles of MFRS 15.

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2.2

(b)

Effective forannual periods

beginning onDescription or after

MFRS 9 Prepayment Features with Negative Compensation (Amendments to MFRS 9) 1 January 2019MFRS 16 Leases 1 January 2019MFRS 128 Long-term Interests in Associates and Joint Ventures (Amendments to MFRS 128) 1 January 2019Annual Improvements to MFRS Standards 2015–2017 Cycle 1 January 2019IC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019MFRS 119 Plan Amendment, Curtailment or Settlement (Amendments to MFRS 119) 1 January 2019Revised Conceptual Framework for Financial Reporting 1 January 2020Amendments to MFRS 3 - Definition of a Business 1 January 2020Amendments to MFRS 101 and MFRS 108 - Definition

of Material 1 January 2020MFRS 17 Insurance Contracts 1 January 2021Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Deferred


Standards and amendments to published standards that are issued but notyet effective

The standards, amendments, improvements to published standards andinterpretations that are issued but not yet effective up to the financial year end ofthe Group and the Company are disclosed below. The Group and the Companyintend to adopt these new pronouncements, if applicable, when they becomeeffective.

http://www.masb.org.my/pdf_file/Amendments%20to%20MFRS%203%20Business%20Combinations.pdf

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2.2

(b)

MFRS 16 Leases

MFRS 17 Insurance Contracts

The right-of-use asset is depreciated in accordance with the principle in MFRS 116“Property, Plant and Equipment” and the lease liability is accreted over time withinterest expense recognised in the income statement.

Based on the Group’s and the Company’s assessment, there is no expectedmaterial impact of this standard to their financial statements.


Standards and amendments to published standards that are issued but notyet effective (cont'd.)

MFRS 16 will replace MFRS 117 Leases, IC Interpretation 4 Determining whetheran Arrangement contains a Lease, IC Interpretation 115 Operating Lease-Incentives and IC Interpretation 127 Evaluating the Substance of TransactionsInvolving the Legal Form of a Lease.

Under MFRS 16, a lease is a contract (or part of a contract) that conveys the rightto control the use of an identified asset for a period of time in exchange forconsideration. MFRS 16 introduces a single accounting model for a lessee andeliminates the classification of leases by the lessee as either finance leases (onbalance sheet) or operating leases (off balance sheet).

MFRS 17 applies to insurance contracts issued, to all reinsurance contracts and toinvestment contracts with discretionary participating features if an entity also issuesinsurance contracts. For fixed-fee service contracts whose primary purpose is theprovision of services, an entity has an accounting policy choice to account for themin accordance with either MFRS 17 or MFRS 15 “Revenue”. An entity is allowed toaccount for financial guarantee contracts in accordance with MFRS 17 if the entityhas asserted explicitly that it regarded them as insurance contracts. Insurancecontracts, (other than reinsurance) where the entity is the policyholder are notwithin the scope of MFRS 17. Embedded derivatives and distinct investment andservice components should be unbundled and accounted for separately inaccordance with the related MFRSs. Voluntary unbundling of other components isprohibited.

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2.2

(b)

MFRS 17 Insurance Contracts (cont'd.)

(a)

(b)


Standards and amendments to published standards that are issued but notyet effective (cont'd.)

Variable Fee Approach should be applied for insurance contracts that specify alink between payments to the policyholder and the returns on the underlyingitems.

Simplified Premium Allocation Approach if the insurance coverage period is ayear or less;

The requirements of MFRS 17 align the presentation of revenue with otherindustries. Revenue is allocated to the periods in proportion to the value of theexpected coverage and other services that the insurer provides in the period, andclaims are presented when incurred. Investment components are excluded fromrevenue and claims. Insurers are required to disclose information about amounts,judgements and risks arising from insurance contracts.

The Group are in the process of assessing the financial impact of applying MFRS17 onto their financial statements.

MFRS 17 requires a current measurement model where estimates are remeasuredat each reporting period. The measurement is based on the building blocks ofdiscounted, probability-weighted cash flows, a risk adjustment and a contractualservice margin (“CSM”) representing the unearned profit of the contract. An entityhas a policy choice to recognise the impact of changes in discount rates and otherassumptions that are related to financial risks either in profit or loss or in othercomprehensive income.

Alternative measurement models are provided for the different insurancecoverages:

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2.3 Summary of significant accounting policies

(a) Subsidiaries and basis of consolidation

(i) Investment in subsidiaries

(ii) Basis of consolidation

(i)

(ii)

(iii) The ability to use its power over the investee to affect its returns.

(i)

(ii)

The Company controls an investee if and only if the Company has all thefollowing:

Power over the investee (i.e. existing rights that give it the current abilityto direct the relevant activities of the investee);

Exposure, or rights, to variable returns from its involvement with theinvestee; and

The size of the Company’s holding of voting rights relative to the size anddispersion of holdings of the other vote holders;

Potential voting rights held by the Company, relative to other vote holdersor other parties;

When the Company has less than a majority of the voting rights of an investee,the Company considers relevant facts and circumstances in assessing whetherit has power over the investee, including:

In the Company's separate financial statements, investment in subsidiaries areaccounted for at cost less impairment losses. On disposal of such investments,the difference between net disposal proceeds and their carrying amounts isincluded in profit or loss.

The consolidated financial statements comprise of the financial statements ofthe Company and its subsidiaries as at the reporting date. The financialstatements of the subsidiaries used in the preparation of the consolidatedfinancial statements are prepared for the same reporting date as theCompany, using consistent accounting policies for transactions and events insimilar circumstances.

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2.3 Summary of significant accounting policies (cont'd.)

(a) Subsidiaries and basis of consolidation (cont'd.)

(ii) Basis of consolidation (cont'd.)

(iii) Rights arising from other contractual arrangements; and

(iv)

(iii) Business combinations

Any additional facts and circumstances that indicate that the Companyhas, or does not have, the current ability to direct the relevant activities atthe time that decisions need to be made, including voting patterns atprevious shareholders’ meetings.

Losses within a subsidiary are attributed to the non-controlling interests even ifthat results in a deficit balance.

When the Company has less than a majority of the voting rights of an investee,the Company considers relevant facts and circumstances in assessing whetherit has power over the investee, including (cont'd.):

Acquisitions of subsidiaries are accounted for using the acquisition method.The cost of an acquisition is measured as the aggregate of the considerationtransferred, measured at fair value on acquisition date and the amount of anynon-controlling interests in the acquiree. The Group elects on a transaction-by-transaction basis whether to measure the non-controlling interests in theacquiree either at fair value or at the proportionate share of the acquiree’sidentifiable net assets. Transaction costs incurred are expensed and includedin administrative expenses.

Subsidiaries are consolidated when the Company obtains control over thesubsidiary and ceases when the Company loses control of the subsidiary. Allintra-group balances, income and expenses and unrealised gains and lossesresulting from intra-group transactions are eliminated in full.

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(iii) Business combinations (cont'd.)

(iv) Changes in ownership interest of existing subsidiaries

The cost of an acquisition is measured as the aggregate of the fair values, atthe date of exchange, of the assets given, liabilities incurred or assumed, andequity instruments issued, plus any costs directly attributable to the acquisition.Any excess of the cost of the acquisition over the Group's interest in the netfair value of the identifiable assets, liabilities and contingent liabilitiesrepresents goodwill. Any excess of the Group's interest in the net fair value ofthe identifiable assets, liabilities and contingent liabilities over the cost ofacquisition is recognised immediately in profit or loss on the date of acquisition.

Changes in the Group’s ownership interests in subsidiaries that do not result inthe Group losing control over the subsidiaries are accounted for as equitytransactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relativeinterests in the subsidiaries. The resulting difference is recognised directly inequity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss calculated as thedifference between (i) the aggregate of the fair value of the considerationreceived and the fair value of any retained interest and (ii) the previouscarrying amount of the assets and liabilities of the subsidiary and any non-controlling interest, is recognised in profit or loss. The subsidiary’s cumulativegain or loss which has been recognised in other comprehensive income andaccumulated in equity are reclassified to profit or loss or where applicable,transferred directly to retained earnings. The fair value of any investmentretained in the former subsidiary at the date control is lost is regarded as thecost on initial recognition of the investment.

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(v) Transactions with non-controlling interests

(b) Intangible assets

(i) Goodwill

(ii) Other intangible assets

Non-controlling interests represent the portion of profit or loss and net assetsin subsidiaries not held by the Group and are presented separately in profit orloss of the Group and within equity in the consolidated statements of financialposition, separately from parent shareholders' equity. Transactions with non-controlling interests are accounted for using the entity concept method,whereby, transactions with non-controlling interests are accounted for astransactions with owners. On acquisition of non-controlling interests, thedifference between the consideration and book value of the share of the netassets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity.

Goodwill acquired in a business combination is initially measured at cost.Following the initial recognition, goodwill is measured at cost less anyimpairment losses. Goodwill is reviewed for impairment, annually or morefrequently if events or changes in circumstances indicate that the carryingvalue may be impaired, in accordance to Note 2.3(j) to the financialstatements. Gains and losses on the disposal of an entity include the carryingamount of goodwill relating to the entity sold.

Acquired computer software licences are capitalised on the basis of the costsincurred to acquire and bring to use the specific software. These costs areamortised over their estimated useful lives of 5 years.

Costs associated with maintaining computer software programmes arerecognised as an expense when incurred. Costs that are directly associatedwith identifiable software systems controlled by the Group, and that willprobably generate economic benefits exceeding costs beyond one year, arerecognised as intangible assets. Computer sofware development costsrecognised as assets are amortised using the straight line method over theirestimated useful lives, not exceeding a period of 5 years.

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(b) Intangible assets (cont'd.)

(ii) Other intangible assets (cont'd.)

Value of Business Acquired ("VOBA") and Bancassurance relate to the in-force contracts for the insurance and takaful businesses acquired during theperiod and the Bancassurance Agreement entered into between CIMB BankBerhad ("CIMB") and SunLife Malaysia Assurance Berhad and SunLifeMalaysia Takaful Berhad. VOBA is amortised on a straight line basis over itsestimated useful life of 5 years as the profits after 5 years are not estimated tocontribute materially to the total VOBA. Bancassurance is amortised on astraight line basis over its estimated useful life of 20 years as thebancassurance agreement signed between the parties is for a tenure of 20years from the agreement date of 12 April 2013.

At each date of the statement of financial position, the Group assesseswhether there is any indication of impairment. If such indications exist, ananalysis is performed to assess whether the carrying amount of the asset isfully recoverable. A write down is made if the carrying amount exceeds therecoverable amount.

Gains or losses arising from derecognition of an intangible asset are measuredas the difference between the net disposal proceeds and the carrying amountof the asset and are recognised in profit or loss when the asset isderecognised.

Intangible assets acquired separately are measured on initial recognition atcost. Following initial recognition, an intangible asset is carried at cost less anyaccumulated amortisation and any accumulated impairment losses. Theexclusive partnership agreement provides the Group with an exclusive right tothe use of the partnership network. The fee for this right is amortised over itspartnership agreement term using the straight line method. The asset isreviewed for impairment whenever events or changes in circumstancesindicate the carrying amount may not be recoverable.

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(c) Property and equipment and depreciation

Computer equipment 3 - 5 years Office equipment 3 - 10 years Furniture, fittings and renovation 5 - 15 years Renovation 5 years Motor vehicles 5 years Buildings 50 years

(d) Financial assets

An item of property and equipment is derecognised upon disposal or when nofuture economic benefits are expected from its use or disposal. Any gain or loss onderecognition of the asset is included in the profit or loss in the year the asset isderecognised.

When financial assets are recognised initially, they are measured at fair value,plus, in the case of financial assets not at fair value through profit or loss, directlyattributable transaction costs.

All items of property and equipment are initially recorded at cost. The cost of anitem of property and equipment is recognised as an asset if, and only if, it isprobable that future economic benefits associated with the item will flow to theGroup and to the Company and the cost of the item can be measured reliably.

Subsequent to initial recognition, property and equipment are stated at cost lessaccumulated depreciation and any accumulated impairment losses.

Freehold land is not depreciated as it has an infinite life. Work-in-progress is notdepreciable until the asset is ready for its intended use.

Depreciation of property and equipment is provided for on a straight-line basis overthe estimated useful life of the assets as follows:

The residual value, useful life and depreciation method are reviewed at eachfinancial year-end, and adjusted prospectively, if appropriate.

Financial assets are recognised in the statements of financial position when, andonly when, the Group and the Company become a party to the contractualprovisions of the financial instruments.

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(d) Financial assets (cont'd.)

(i) Financial Assets at FVTPL

-

-

The Group determines the classification of financial assets at initial recognition andthis depends on the purpose for which the financial assets were acquired ororiginated. The categories include financial assets at fair value through profit orloss ("FVTPL"), loans and receivables ("LAR"), available-for-sale ("AFS") and held-to-maturity("HTM") financial assets.

Financial assets at FVTPL include financial assets held-for-trading ("HFT") andfinancial assets designated upon initial recognition at FVTPL. Financial assetsare classified as HFT if they are acquired for the purpose of selling orrepurchasing in the near term. HFT financial assets also include derivativesand separated embedded derivatives.

Financial assets can only be designated at FVTPL upon initial recognitionwhen the following criteria are met:

The Group

the designation eliminates or significantly reduces the inconsistenttreatment that would otherwise arise from measuring the assets orliabilities or recognising gains or losses on a different basis; or

the assets and liabilities are part of a group of financial assets, financialliabilities or both which are managed and their performance evaluated ona fair value basis, in accordance with a documented risk management orinvestment strategy.

Subsequent to initial recognition, financial assets at FVTPL are measured atfair value. Any gains or losses arising from changes in fair value arerecognised in profit or loss. Net gains or net losses on financial assets atFVTPL do not include exchange differences, interest/profit and dividendincome. Exchange differences, interest/profit and dividend income on financialassets at FVTPL are recognised separately in profit or loss as part of otherlosses or other income and investment income respectively. Derivatives arepresented as assets when the fair value is positive and as liabilities when thefair value is negative.

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(ii) LAR

(iii) HTM Financial Assets

(iv) AFS financial assets

After initial recognition, AFS financial assets are measured at fair value. Anygains or losses from changes in fair value of the financial asset are recognisedin other comprehensive income, except that impairment losses, foreignexchange gains and losses on monetary instruments and interest calculatedusing the effective interest method are recognised in profit or loss. Thecumulative gain or loss previously recognised in other comprehensive incomeis reclassified from equity to profit or loss as a reclassification adjustment whenthe financial asset is derecognised. Interest income calculated using theeffective interest method is recognised in profit or loss. Dividends on an AFSequity instrument are recognised in profit or loss when the Group's right toreceive payment is established.

Financial assets with fixed or determinable payments that are not quoted in anactive market are classified as LAR. For the accounting policies with respect toinsurance/takaful receivables and reinsurance/retakaful assets, refer to Note2.3(q) and Note 2.3(p) respectively.

Subsequent to initial recognition, receivables are measured at amortised costusing the effective interest method. Gains and losses are recognised in profitor loss when the receivables are derecognised or impaired, and through theamortisation process.

Financial assets with fixed or determinable payments and fixed maturity areclassified as HTM when the Group has the positive intention and ability to holdthe financial asset to maturity.

The Group (cont'd.)

Subsequent to initial recognition, HTM investments are measured at amortisedcost using the effective interest method. Gains and losses are recognised inprofit or loss when the HTM investments are derecognised or impaired, andthrough the amortisation process.

AFS are financial assets that are designated as available for sale or are notclassified in any of the three preceding categories.

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(iv) AFS financial assets (cont'd.)

The Company

(i) Initial recognition and measurement

Investments in equity instruments whose fair value cannot be reliablymeasured are measured at cost less impairment loss.

A financial asset is derecognised where the contractual right to receive cash flowsfrom the asset has expired. On derecognition of a financial asset in its entirety, thedifference between the carrying amount and the sum of the consideration receivedand any cumulative gain or loss that had been recognised in other comprehensiveincome is recognised in profit or loss.

The Group (cont'd.)

Financial assets are classified, at initial recognition, and subsequentlymeasured at amortised cost, fair value through other comprehensive income(OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on thefinancial asset’s contractual cash flow characteristics and the Company’sbusiness model for managing them.

In order for a financial asset to be classified and measured at amortised costor fair value through OCI, it needs to give rise to cash flows that are ‘solelypayments of principal and interest (SPPI)’ on the principal amount outstanding.This assessment is referred to as the SPPI test and is performed at aninstrument level.

The Company’s business model for managing financial assets refers to how itmanages its financial assets in order to generate cash flows. The businessmodel determines whether cash flows will result from collecting contractualcash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within atime frame established by regulation or convention in the market place (regularway trades) are recognised on the trade date, i.e., the date that the Companycommits to purchase or sell the asset.

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The Company (cont'd.)

(ii) Subsequent measurement

• Financial assets at amortised cost (debt instruments)

•

•

• Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets heldfor trading, financial assets designated upon initial recognition at fair valuethrough profit or loss, or financial assets mandatorily required to be measuredat fair value. Financial assets are classified as held for trading if they areacquired for the purpose of selling or repurchasing in the near term.Derivatives, including separated embedded derivatives, are also classified asheld for trading unless they are designated as effective hedging instruments.Financial assets with cash flows that are not solely payments of principal andinterest are classified and measured at fair value through profit or loss,irrespective of the business model. Notwithstanding the criteria for debtinstruments to be classified at amortised cost or at fair value through OCI, asabove, debt instruments may be designated at fair value through profit or losson initial recognition if doing so eliminates, or significantly reduces, anaccounting mismatch.

Financial assets at fair value through OCI with recycling of cumulativegains and losses (debt instruments)

Financial assets designated at fair value through OCI with no recycling ofcumulative gains and losses upon derecognition (equity instruments); and

For purposes of subsequent measurement, financial assets are classified infour categories:

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(iii) Derecognition

(e) Cash and cash equivalents

(f) Leases

(i) As lessee

Finance leases, which transfer to the Group substantially all the risks andrewards incidental to ownership of the leased item, are capitalised at theinception of the lease at the fair value of the leased asset or, if lower, at thepresent value of the minimum lease payments. Any initial direct costs are alsoadded to the amount capitalised. Lease payments are apportioned betweenthe finance charges and reduction of the lease liability so as to achieve aconstant rate of interest on the remaining balance of the liability. Financecharges are charged to profit or loss. Contingent rents, if any, are charged asexpenses in the periods in which they are incurred.

Leased assets are depreciated over the estimated useful lives of the assets.However, if there is no reasonable certainty that the Group will obtainownership by the end of the lease term, the asset is depreciated over theshorter of the estimated useful life and the lease term.

Cash and cash equivalents comprise cash on hand, cash at bank and deposits withfinancial institutions with original maturities of three months or less that are readilyconvertible to known amounts of cash and which are subject to an insignificant riskof changes in value, net of bank overdrafts. It excludes deposits which are held forinvestment purpose.

A financial asset (or, where applicable, a part of a financial asset or part of agroup of similar financial assets) is primarily derecognised (i.e., removed fromthe Company’s statement of financial position) when the rights to receive cashflows from the asset have expired. On derecognition of a financial asset in itsentirety, the difference between the carrying amount and the sum of theconsideration received is recognised in profit or loss.

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(f) Leases (cont'd.)

(i) As lessee (cont'd.)

(ii) As lessor

(g) Financial liabilities

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include derivativesentered into by the Group that do not meet the hedge accounting criteria.Derivative liabilities are initially measured at fair value and subsequently statedat fair value, with any resultant gains or losses recognised in profit or loss. Netgains or losses on derivatives include exchange differences.

Under MFRS 9, the fair value change due to an entity's own credit risk isrecognised in the other comprehensive income rather than profit or loss,unless this creates an accounting mismatch. This is only applicable to theCompany.

Operating lease payments are recognised as an expense in profit or loss on astraight-line basis over the lease term. The aggregate benefit of incentivesprovided by the lessor is recognised as a reduction of rental expense over thelease term on a straight-line basis.

Leases where the Group retains substantially all the risks and rewards ofownership of the asset are classified as operating leases. Initial direct costsincurred in negotiating an operating lease are added to the carrying amount ofthe leased asset and recognised over the lease term on the same bases asrental income.

Financial liabilities, within the scope of MFRS 139 Financial Instruments:Recognition and Measurement, are recognised in the balance sheet when, andonly when, the Group and the Company become a party to the contractualprovisions of the financial instrument. Financial liabilities are classified as eitherfinancial liabilities at fair value through profit or loss or other financial liabilities.

Financial liabilities are classified according to the substance of the contractualarrangements entered into and the definitions of a financial liability.

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(g) Financial liabilities (cont'd.)

(ii) Other financial liabilities

(h) Provisions

(i) Foreign currencies

(i) Functional and presentation currency

The individual financial statements of each entity in the Group are measuredusing the currency of the primary economic environment in which the entityoperates ("the functional currency"). The consolidated financial statements arepresented in Ringgit Malaysia ("RM"), which is also the Company’s functionalcurrency.

The Group's other financial liabilities include other payables. Other payablesare recognised initially at fair value plus directly attributable transaction costsand subsequently measured at amortised cost using the effective interestmethod. Gains and losses are recognised in profit or loss when the liabilitiesare derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability isextinguished.

Provisions are recognised if, as a result of a past event, the Group has a presentlegal or constructive obligation that can be estimated reliably, and it is probable thatan outflow of economic benefits will be required to settle the obligation.

Provisions are reviewed at each reporting date and adjusted to reflect the currentbest estimate. If it is no longer probable that an outflow of economic resources willbe required to settle the obligation, the provision is reversed.

If the effect of the time value of money is material, provisions are discounted usinga current pre tax rate that reflects, where appropriate, the risks specific to theliability. When discounting is used, the increase in the provision due to the passageof time is recognised as a finance cost.

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(i) Foreign currencies

(ii) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functionalcurrencies of the Company and its subsidiaries and are recorded on initialrecognition in the functional currencies at exchange rates approximating thoseruling at the transaction dates. Monetary assets and liabilities denominated inforeign currencies are translated at the rate of exchange ruling at the reportingdate.

Non-monetary items denominated in foreign currencies that are measured athistorical cost are translated using the exchange rates as at the dates of theinitial transactions. Non-monetary items denominated in foreign currenciesmeasured at fair value are translated using the exchange rates at the datewhen the fair value was determined.

Exchange differences arising on the settlement of monetary items or ontranslating monetary items at the reporting date are recognised in profit or lossexcept for exchange differences arising on monetary items that form part ofthe Group’s net investment in foreign operations, which are recognised initiallyin other comprehensive income and accumulated under foreign currencytranslation reserve in equity. The foreign currency translation reserve isreclassified from equity to profit or loss of the Group on disposal of the foreignoperation.

Exchange differences arising on the translation of non-monetary items carriedat fair value are included in profit or loss for the period except for thedifferences arising on the translation of non-monetary items in respect of whichgains and losses are recognised directly in equity. Exchange differencesarising from such non-monetary items are also recognised directly in equity.

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(i) Foreign currencies (cont'd.)

(iii) Foreign operations

(j) Impairment

(i) Non-financial assets

Goodwill and fair value adjustments arising on the acquisition of foreignoperations are treated as assets and liabilities of the foreign operations andare recorded in the functional currency of the foreign operations and translatedat the closing rate at the reporting date.

The Group assesses at each reporting date whether there is an indication thatan asset may be impaired. If any such indication exists, or when an annualimpairment assessment for an asset is required, the Group makes an estimateof the asset’s recoverable amount.

An asset's recoverable amount is the higher of an asset's fair value less coststo sell and its value in use. For the purpose of assessing impairment, assetsare grouped at the lowest levels for which there are separately identifiablecash flows (cash-generating units ("CGU")).

The assets and liabilities of foreign operations are translated into RM at therate of exchange ruling at the reporting date and income and expenses aretranslated at exchange rates at the dates of the transactions. The exchangedifferences arising on the translation are taken directly to other comprehensiveincome. On disposal of a foreign operation, the cumulative amount recognisedin other comprehensive income and accumulated in equity under foreigncurrency translation reserve relating to that particular foreign operation isrecognised in profit or loss.

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(j) Impairment (cont'd.)

(i) Non-financial assets (cont'd.)

Impairment losses are recognised in profit or loss.

(ii) Insurance/takaful receivables

In assessing value in use, the estimated future cash flows expected to begenerated by the asset are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value ofmoney and the risks specific to the asset. Where the carrying amount of anasset exceeds its recoverable amount, the asset is written down to itsrecoverable amount. Impairment losses recognised in respect of a CGU orgroups of CGUs are allocated first to reduce the carrying amount of anygoodwill allocated to those units or groups of units and then, to reduce thecarrying amount of the other assets in the unit or groups of units on a pro-ratabasis.

An assessment is made at each reporting date as to whether there is anyindication that previously recognised impairment losses may no longer exist ormay have decreased. A previously recognised impairment loss is reversed onlyif there has been a change in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognised. If that isthe case, the carrying amount of the asset is increased to its recoverableamount. That increase cannot exceed the carrying amount that would havebeen determined, net of depreciation, had no impairment loss been recognisedpreviously. Such reversal is recognised in profit or loss. Impairment loss ongoodwill is not reversed in a subsequent period.

Insurance/takaful receivables are assessed at each reporting date whetherthere is any objective evidence of impairment as a result of one or more eventshaving an impact on the estimated future cash flows of the asset. Lossesexpected as a result of future events, no matter how likely, are not recognised.An objective evidence of impairment is deemed to exist where the principal orinterest or both for insurance receivables is past due for more than 90 days or3 months, as prescribed in the Guidelines on Financial Reporting for Insurersissued by Bank Negara Malaysia and other applicable guidelines by otherjurisdictions.

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(ii) Insurance/takaful receivables (cont'd.)

(iii) Financial assets

Loans and receivables

An impairment loss in respect of insurance/takaful receivables is recognised inprofit or loss and is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows discounted at theasset’s original effective interest rate. The carrying amount of theinsurance/takaful receivables is reduced through the use of an allowanceaccount.

If, in a subsequent period, the fair value of insurance receivables increasesand the increase can be objectively related to an event occurring after theimpairment loss was recognised in profit or loss, the impairment loss isreversed, to the extent that the asset’s carrying amount does not exceed whatthe carrying amount would have been had the impairment not been recognisedat the date the impairment is reversed. The amount of the reversal isrecognised in profit or loss.

The Group and the Company assess at each reporting date whether there isany objective evidence that a financial asset is impaired.

To determine whether there is objective evidence that an impairment loss onfinancial assets has been incurred, the Group considers factors such as theprobability of insolvency or significant financial difficulties of the debtor anddefault or significant delay in payments.

For certain categories of financial assets, such as trade receivables, assetsthat are assessed not to be impaired individually are subsequently assessedfor impairment on a collective basis based on similar risk characteristics.

Objective evidence of impairment for a portfolio of receivables could includethe Group’s past experience of collecting payments, an increase in the numberof delayed payments in the portfolio past the average credit period andobservable changes in national or local economic conditions that correlate withdefault on receivables.

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(iii) Financial assets (cont'd.)

Loans and receivables (cont'd.)

AFS financial assets

If any such evidence exists, the amount of impairment loss is measured as thedifference between the asset’s carrying amount and the present value ofestimated future cash flows discounted at the financial asset’s original effectiveinterest rate. The impairment loss is recognised in profit or loss. The carryingamount of the financial asset is reduced by the impairment loss directly for allfinancial assets.

If in a subsequent period, the amount of the impairment loss decreases andthe decrease can be related objectively to an event occurring after theimpairment was recognised, the previously recognised impairment loss isreversed to the extent that the carrying amount of the asset does not exceedits amortised cost at the reversal date. The amount of reversal is recognised inprofit or loss.

Significant or prolonged decline in fair value below cost, significant financialdifficulties of the issuer or obligor, and the disappearance of an active tradingmarket are considerations to determine whether there is objective evidencethat investment securities classified as available-for-sale financial assets areimpaired.

If an available-for-sale financial asset is impaired, an amount comprising thedifference between its cost (net of any principal payment and amortisation) andits current fair value, less any impairment loss previously recognised in profit orloss, is transferred from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed inprofit or loss in the subsequent periods. Increase in fair value, if any,subsequent to impairment loss is recognised in other comprehensive income.For available-for-sale debt investments, impairment losses are subsequentlyreversed in profit or loss if an increase in the fair value of the investment canbe objectively related to an event occurring after the recognition of theimpairment loss in profit or loss.

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(k) Non-current assets (or disposal group) held for sale and discontinuedoperations

• represents a separate major line of business or geographical area of operations;

•

•

is part of a single co-ordinated plan to dispose of a separate major line ofbusiness or geographical area of operations; or

is a subsidiary acquired exclusively with a view of resale.

Non-current assets (or disposal group) are classified as held for sale if theircarrying amount will be recovered principally through a sale transaction rather thanthrough continuing use. The condition is regarded as met only when the sale ishighly probable and the asset is available for immediate sale in its presentcondition, management has committed to the sale, and the sale is expected tohave been completed within one year from the date of classification.

Immediately before the initial classification of non-current assets (or disposalgroup) as held for sale, the carrying amount of non-current assets (or componentof a disposal group) is remeasured in accordance with applicable MFRS.Thereafter, the non-current assets (or disposal group) are measured at the lower ofcarrying amount and fair value less costs to sell.

Any impairment loss on a disposal group is first allocated to goodwill, and then toremaining assets and liabilities on pro rata basis, except that no loss is allocated tofinancial assets, deferred tax assets and investment property, which continue to bemeasured in accordance with MFRS. Impairment losses on initial classification asheld for sale and subsequent gains or losses on remeasurement are recognised inthe income statements. Gains are not recognised in excess of any cumulativeimpairment loss.

Property, plant and equipment and intangible assets are not depreciated oramortised once classified as held for sale. Equity accounting on associates ceasesonce the associates are classified as held for sale.

A disposal group qualifies as discontinued operation if it is a component of theGroup and of the Company that either has been disposed of, or is classified asheld for sale and:

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(k) Non-current assets (or disposal group) held for sale and discontinuedoperations (cont'd.)

(l) Equity instruments

(i) Ordinary shares

(ii) Immediate holding and related companies' advances

(m) Employee benefits

(i) Short term benefits

Discontinued operations are excluded from the results of continuing operations andare presented as a single amount as profit or loss after tax from discontinuedoperations in the income statements.

Ordinary shares are recorded at the proceeds received, net of directlyattributable incremental transaction costs. Ordinary shares are classified asequity.

Dividends on ordinary shares are recognised in equity in the period in whichthey are declared.

Immediate holding and related companies' advances are recorded at theamount of proceeds received, net of transaction costs and are classified asequity in the statement of financial position.

Wages, salaries, bonuses and social security contributions are recognised asan expense in the year in which the associated services are rendered byemployees. Short term accumulating compensated absences such as paidannual leave are recognised when services are rendered by employees thatincrease their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised whenthe absences occur.

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(m) Employee benefits (cont'd.)

(i) Short term benefits (cont'd.)

(ii) Long term incentive plan

Defined contribution plans are post-employment benefit plans under which theGroup and the Company pay fixed contributions into separate entities or fundsand will have no legal or constructive obligations to pay further contributions ifany of the funds do not hold sufficient assets to pay all employee benefitsrelating to employee services in the current and preceeding financial years.

Such contributions are recognised as an expense in the profit and loss asincurred. As required by law, companies in Malaysia make such contributionsto the Employees Provident Fund ("EPF").

Eligible employees within the Group receive remuneration in the form ofRestricted Shares Units ("RSU") under the Company's Long Term IncentivePlan ("LTIP") as consideration for services rendered. The cost of these LTIPtransactions with employees is measured by reference to the fair value of theRSU at the date on which the RSUs are granted. This cost is recognised inprofit or loss, with corresponding increase in the LTIP reserve over the vestingperiod. The cummulative expense recognised at each reporting date until thevesting date reflects the extent to which the vesting period as expired and theGroup's best estimate of the number of RSUs that will ultimately vest. Thecharge or credit to profit or loss for a period represents the movement incummulative expense recognised at the beginning and end of that period.

No expense is recognised for RSUs that do not ultimately vest, except forRSUs where vesting is conditional upon a market or non-vesting condition,which is treated as vested irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/orservice conditions are satisfied. The LTIP reserve in respect of unvested RSUis transferred to retained earnings upon expiry of the LTIP. When the RSUsare exercised, the LTIP reserve is transferred accordingly to share capital ifnew shares are issued.

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(n) Income tax

(i) Current tax

(ii) Deferred tax

Deferred tax liabilities are recognised for all temporary differences, except:

-

-

Current tax assets and liabilities are measured at the amount expected to berecovered from or paid to the tax authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted bythe reporting date.

Current taxes are recognised in profit or loss except to the extent that the taxrelates to items recognised outside profit or loss, either in other comprehensiveincome or directly in equity.

Deferred tax is provided using the liability method on temporary differences atthe reporting date between the tax bases of assets and liabilities and theircarrying amounts for financial reporting purposes.

where the deferred tax liability arises from the initial recognition ofgoodwill or of an asset or liability in a transaction that is not a businesscombination and, at the time of the transaction, affects neither theaccounting profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments insubsidiaries, associates and interests in joint ventures, where the timingof the reversal of the temporary differences can be controlled and it isprobable that the temporary differences will not reverse in the foreseeablefuture.

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(n) Income tax (cont'd.)

(ii) Deferred tax (cont'd.)

-

-

Deferred tax assets are recognised for all deductible temporary differences,carried forward unused tax credits and unused tax losses, to the extent that itis probable that taxable profit will be available against which the deductibletemporary differences, and the carry forward unused tax credits and unusedtax losses can be utilised except:

where the deferred tax asset relating to the deductible temporarydifference arises from the initial recognition of an asset or liability in atransaction that is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss;and

in respect of deductible temporary differences associated withinvestments in subsidiaries, associates and interests in joint ventures,deferred tax assets are recognised only to the extent that it is probablethat the temporary differences will reverse in the foreseeable future andtaxable profit will be available against which the temporary differencescan be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting dateand reduced by the extent that it is no longer probable that sufficient taxableprofit will be available to allow all or part of the deferred tax asset to be utilised.Unrecognised deferred tax assets are reassessed at each reporting date andare recognised to the extent that it has become probable that future taxableprofit will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that areexpected to apply to the year when the asset is realised or the liability issettled, based on tax rates and tax laws that have been enacted orsubstantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognisedoutside profit or loss. Deferred tax items are recognised in correlation to theunderlying transaction either in other comprehensive income or directly inequity.

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(n) Income tax (cont'd.)

(ii) Deferred tax (cont'd.)

(o) Product classification

The insurance and takaful subsidiaries of the Group issue contracts that containinsurance/takaful risk or both insurance/takaful underwriting risk and financial risk.

Financial risk is the risk of a possible future change in one or more of a specifiedinterest/profit rate, financial instrument price, commodity price, foreign exchangerate, index of price or rate, credit rating or credit index or other variable, provided inthe case of a non-financial variable that the variable is not specific to a party to thecontract. Insurance/takaful underwriting risk is risk other than financial risk.

Insurance/takaful contracts are those contracts that transfer significantinsurance/takaful risks.

An insurance/takaful contract is a contract under which the Group (the insurer) hasaccepted significant insurance/takaful risk from another party (the policyholders) byagreeing to compensate the policyholders if a specified uncertain future event (theinsured event) adversely affects the policyholders. As a general guideline, theinsurance and takaful subsidiaries of the Group define whether significantinsurance/takaful risk has been accepted by comparing benefits paid or payableon the occurrence of an insured event against benefits paid or payable if theinsured event does not occur.

A takaful contract is a contract under which the takaful operator (the provider) hasagreed to administer takaful risk faced by participants by agreeing to compensatethe participants from the Tabarru' Fund if a specified uncertain future event (theinsured event) adversely affects the participants. As a general guideline, theGroup's takaful subsidiary defines significant takaful risk to be the possibility ofhaving to pay benefits on the occurrence of a takaful event that are at least 5%more than the benefits payable if the takaful event did not occur.

Deferred tax assets and deferred tax liabilities are offset, if a legallyenforceable right exists to set off current tax assets against current taxliabilities and the deferred taxes relate to the same taxable entity and the sametax authority.

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(o) Product classification (cont'd.)

(a) likely to be a significant portion of the total contractual benefits;

(b)

(c) that are contractually based on the:

(i) performance of a specified pool of contracts or a specified type of contract;

(ii)

(iii) the profit or loss of the Group, fund or other entity that issues the contract.

Surpluses in the DPF fund are distributable to policyholders/participants andshareholders of the Group's subsidiaries in accordance with the relevant termsunder the insurance/takaful contracts. The Group's insurance and takafulsubsidiaries however have the discretion over the amount and timing of thedistribution of these surpluses to policyholders and shareholders and subject to theadvice of the subsidiaries' Appointed Actuaries.

Investment contracts are those contracts that do not transfer significantinsurance/takaful risks.

Surpluses in the non-DPF fund arising during the year are recognised in thestatement of comprehensive income and the unallocated surplus where the amountof surplus allocation to shareholders has yet to be determined by the end of thefinancial period is held in equity.

Once a contract has been classified as insurance/takaful contract, it remains aninsurance/takaful contract for the remainder of its life-time, even if theinsurance/takaful risks reduce significantly during this period, unless all rights andobligations are extinguished or expire. Investment contracts can, however, bereclassified as insurance/takaful contracts after inception if insurance/takaful risksthereon become significant.

Insurance/takaful contracts are further classified as being either with or withoutdiscretionary participation features ("DPF"). DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits that are:

whose amount or timing is contractually at the discretion of the issuer; and

realised and/or unrealised investment returns on a specified pool ofassets held by the issuer; or

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(o) Product classification (cont'd.)

(p) Reinsurance/retakaful assets

Unallocated surpluses of the DPF funds where the amount of surplus allocation toeither policyholders or shareholders has yet to be determined by the end of thefinancial period are held within insurance contract liabilities.

For financial options and guarantees which are not closely related to the hostinsurance/takaful contract, bifurcation is required to measure these embeddedderivatives separately at fair value through profit or loss. However, bifurcation is notrequired if the embedded derivative is itself an insurance/takaful contract, or if thehost insurance/takaful contract is measured at fair value through profit or loss.

An investment-linked insurance/takaful contract is an insurance/takaful contractwith an embedded derivative linking payments on the contract to units of an internalinvestment fund set up by the Group's insurance/takaful subsidiary with theconsideration received from the contract holders. This embedded derivative meetsthe definition of an insurance/takaful contract and is therefore not accounted forseparately from the host insurance/takaful contract. The liability for such contractsis adjusted for all changes in the fair value of the underlying assets.

When insurance/takaful contracts contain both a financial risk component and asignificant insurance/takaful risk component and the cash flows from the twocomponents are distinct and can be measured reliably, the underlying amounts areunbundled. Any premiums/contributions relating to the insurance/takaful riskcomponents are accounted for on the same basis as insurance/takaful contractsand the remaining element is accounted for as a deposit through the statement offinancial position similar to investment contracts.

The Group's insurance and takaful subsidiaries cede insurance/takaful risk in thenormal course of business for all of their businesses. Reinsurance/retakaful assetsrepresent balances due from reinsurance/retakaful operators respectively.Amounts recoverable from reinsurers/retakaful operators are estimated in amanner consistent with the outstanding claims provision or settled claimsassociated with the reinsurer's/retakaful's policies and are in accordance with therelated reinsurance/retakaful contracts.

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(p) Reinsurance/retakaful assets (cont'd.)

(q) Insurance and takaful receivables

If there is objective evidence that the insurance and takaful receivables areimpaired, the Group reduces the carrying amount as described in Note 2.3(j)(ii).

Reinsurance/retakaful arrangements, entered into by the insurance and takafulsubsidiaries of the Group, that meet the classification requirements ofinsurance/takaful contracts as described in Note 2.3(o) are accounted for as notedbelow. Arrangements that do not meet these classification requirements areaccounted for as financial assets.

Reinsurance/retakaful assets represent amounts recoverable from reinsurers orretakaful operators for insurance/takaful contract liabilities which have yet to besettled at the reporting date. Amounts recoverable from reinsurers or retakafuloperators are measured consistently with the amounts associated with theunderlying insurance/takaful contracts and the terms of the relevantreinsurance/retakaful arrangements.

At each reporting date, or more frequently, the insurance and takaful subsidiariesof the Group assess whether objective evidence exists that reinsurance/retakafulassets are impaired. Objective evidence of impairment for reinsurance/retakafulassets are similar to those noted for insurance/takaful receivables as described inNote 2.3(j)(ii).

If any such evidence exists, the amount of the impairment loss is measured as thedifference between the asset's carrying amount and the present value of estimatedfuture cash flows discounted at the financial asset's original effective interest rate.The impairment loss is recognised in profit or loss.

Reinsurance assets and retakaful assets or liabilities are derecognised when thecontractual rights are extinguished or expire or when the contract is transferred toanother party.

Insurance receivables are recognised when due and measured on initialrecognition at the fair value of the consideration received or receivable.Subsequent to initial recognition, insurance receivables are measured at amortisedcost, using the effective yield method.

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(q) Insurance and takaful receivables (cont'd.)

(r) Life insurance contract liabilities

(i) Actuarial liabilities

Insurance/takaful receivables are derecognised when the derecognition criteria forfinancial assets, as described in Note 2.3(d), have been met.

The life insurance contract liabilities of the Group comprise actuarial liabilities,unallocated surplus and net asset value attributable to unit holders.

Actuarial liabilities are recognised when contracts are entered into andpremiums or contributions are charged.

These liabilities are measured by using a prospective actuarial valuationmethod. The liability is determined as the sum of the present value of futureguaranteed benefits and, in the case of a participating life policy, appropriatelevel of non-guaranteed benefits, and the expected future management anddistribution expenses, less the present value of future gross considerationsarising from the policy discounted at the appropriate risk discount rate.

The liability is based on best estimate assumptions and with due regard tosignificant recent experience. An appropriate allowance for provision of riskmargin for adverse deviation from expected experience is made in thevaluation of non-participating life policies, the guaranteed benefits liabilities ofparticipating life policies, and the non-unit liabilities of investment-linkedpolicies. The valuation basis, including the determination of the appropriate risk discount rate, is in accordance with the RBC Framework and relevantguidelines of the respective jurisdictions.

The liability in respect of policies of a participating insurance contract is takenas the higher of the guaranteed benefit liabilities or the total benefit liabilities atthe contract level derived as stated above.

In the case of a life policy where a part of, or the whole of the premiums areaccumulated in a fund, the accumulated amount, as declared to the policyowners, are set as the liabilities if the accumulated amount is higher than thefigure as calculated using the prospective actuarial valuation method.

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(r) Life insurance contract liabilities (cont'd.)

(i) Actuarial liabilities (cont'd.)

(ii) Unallocated surplus

With respect to the subsidiary in Turkey, life mathematical provisions arerecorded to reflect the liability of the Group against the policyholders for long-term life policies and calculated as the differences between the net presentvalue of premiums collected in return of the risk covered by the subsidiary andthe liabilities to policyholders. Life mathematical provisions are the sum of theremainder of collected premiums. Life mathematical provisions are computedon the basis of actuarial mortality assumptions which are applicable for Turkishinsurance companies.

In the case of an insurance subsidiary of the Group, surpluses of contractsunder the Participating Life fund are attributable to policyholders andshareholders and the amount and timing of distribution to both thepolicyholders and shareholders are determined by an actuarial valuation of thelong term liabilities to policyholders at the date of the statement of financialposition and is made in accordance with the relevant local requirements andthe determination by the insurance subsidiary's Appointed Actuaries.

Where policies or extensions of a policy are collectively treated as an asset atthe fund level under the valuation method adopted, the value of such asset iseliminated through zerorisation.

With respect to an insurance subsidiary of the Group, for a 1-year life policy ora 1-year extension to a life policy covering contingencies other than death orsurvival, the liability for such life insurance contracts comprises the provisionfor unearned premiums and unexpired risks, as well as for claims outstanding,which includes an estimate of the incurred claims that have not yet beenreported to the Group.

Adjustments to the liabilities at each reporting date are recorded in the Lifefund. Profits originating from margins of adverse deviations on run-offcontracts, are recognised in the Life fund over the lives of the contracts,whereas losses are fully recognised in the Life fund during the first year of run-off.

The liability is derecognised when the contract expires, is discharged or iscancelled.

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(r) Life insurance contract liabilities (cont'd.)

(ii) Unallocated surplus (cont'd.)

(iii) Net asset value attributable to unit holders

(s) Family takaful contract liabilities

(i) Liabilities attributable to the certificate holders

Surpluses in the non-DPF fund arising during the year are recognised in thestatement of comprehensive income and the unallocated surplus where theamount of surplus allocation to shareholders has yet to be determined by theend of the financial period is held in equity.

Unallocated surpluses of the DPF funds where the amount of surplusallocation to either policyholders or shareholders has yet to be determined bythe end of the financial period are held within insurance contract liabilities.

For financial options and guarantees which are not closely related to the hostinsurance contract and/or investment contract with DPF, bifurcation is requiredto measure these embedded derivatives separately at fair value through profitor loss. However, bifurcation is not required if the embedded derivative is itselfan insurance contract and/or investment contract with DPF, or if the hostinsurance contract and/or investment contract itself is measured at fair valuethrough profit or loss.

The unit liability of investment-linked policy is equal to the net asset value ofthe Investment-linked funds, which represents net premium received andinvestment returns credited to the policy less deduction for mortality, morbiditycosts and expense charges.

Family takaful contract liabilities comprise liabilities attributable to the certificateholders, claims liabilities and available-for-sale reserve.

Actuarial liabilities are recognised when contracts are entered into andcontributions are charged.

The actuarial liabilities are based on the relevant statutory requirementsapplicable to the takaful subsidiary of the Group. The actuarial liabilities arederecognised when the takaful contract expires, is discharged or is cancelled.

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(s) Family takaful contract liabilities (cont'd.)

(ii) Claims liabilities

(iii) Fair value adjustment on AFS financial assets

(t) General takaful/insurance contract liabilities

(i) Outstanding claims provision

Outstanding claims provision are based on the estimated ultimate cost of allclaims incurred but not settled at the date of the statement of financial position,whether reported or not, together with related claims handling costs andreduction for the expected value of salvage and other recoveries. Delays canbe experienced in the notification and settlement of certain types of claims,therefore, the ultimate cost of these claims cannot be known with certainty atthe date of the statement of financial position.

The liability is calculated at the reporting date using a range of standardactuarial claim projection techniques based on empirical data and currentassumptions. The liability is not discounted for the time value of money. Noprovision for equalisation or catastrophe reserves is recognised. The liabilitiesare derecognised when the contract expires, is discharged or is cancelled.

The amounts payable under a family takaful certificate in respect of benefitsand claims, including settlement costs, are accounted for using the case-by-case method as further described in Note 2.3(x)(i) on the accounting policy forbenefits and claims expenses for family takaful contracts.

Where unrealised gains or losses arise on AFS financial assets of the non-surplus sharing family takaful fund, the adjustment to the takaful contractliabilities equal to the effect that the realisation of those gains or losses at theend of the reporting period would have on those liabilities is recognised directlyin the other comprehensive income.

The Group's general takaful and general insurance contract liabilities are in respectof the General Takaful business which had been discontinued on 30 June 2018and the disposal of a subsidiary which was completed as of 31 December 2018respectively as disclosed in Notes 14 and 17 to the financial statements.

The general takaful/insurance contract liabilities of the Group comprise outstandingclaims provisions and unearned contribution/premium reserve.

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(t) General takaful/ Insurance contract liabilities (cont'd.)

(ii) Unearned contribution/premium reserve

- 1/365th method for all classes of general takaful/insurance business; and

- Non-annual certificates are time-apportioned over the period of the risks.

(u) Other insurance and takaful payables

Generally, the reserve is released over the term of the contract and isrecognised as contribution income.

Other insurance and takaful payables are recognised initially at fair value plusdirectly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Unearned contribution/premium reserve ("UCR" or "UPR") represents theportion of the gross contributions of takaful certificates/ gross premium writtennet of the related retakaful contributions/ reinsurance premium ceded toqualified retakaful operators/ reinsurance company that relate to the unexpiredperiods of the certificates/ policies at the end of the financial year.

In determining UCR/UPR at the date of statement of financial position, themethod that most accurately reflects the actual unearned contribution is usedas follows:

UCR/UPR is determined on net contribution reduced by the correspondingpercentage of accounted gross direct business commission, agency relatedexpenses and management expenses and within the guidelines of therespective jurisdictions.

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(v) Premium/contribution Income

(i) Life insurance/family takaful business

(ii) General insurance/takaful business

Net creation of units, which represents premiums/contributions paid bypolicyholders/participants as payment for a new contract or subsequentpayments to increase the amount of that contract, are reflected in profit or loss.Net creation of units is recognised on a receipt basis.

At the end of the financial year, all due premiums are accounted for to theextent that they can be reliably measured and it is still within the grace periodallowed for payment or covered by the cash surrender value of the policies.

Premium income is recognised on the date on which the policy commences.Premiums also include any adjustments arising in the accounting period forpremiums receivable in respect of business written in prior accounting periods.Rebates that form part of the premium rate, such as no-claim rebates, arededucted from the gross premiums when due. Premiums are shown beforededuction of commissions given or received.

Contribution income is recognised in the financial period as soon as theamount of the contributions can be reliably measured in accordance with theprinciples of Shariah. Contributions from direct business are recognised duringthe financial period upon the issuance of certificates. Gross contributions inrespect of risks incepted for which certificates have not been issued as of thedate of the statement of financial position are accrued at the date.

Premiums or contributions represent consideration paid for an insurance or takafulcontract, respectively, and is accounted for as follows:

Premium/contribution income is recognised as soon as the amount of thepremium/contribution can be reliably measured. Initial premium/contribution isrecognised from inception date and subsequent premiums/contributions arerecognised on due dates.

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(w) Benefits and Claims Expenses

(i) Life insurance/family takaful business

-

-

(ii) General takaful/insurance business

(x) Commission expenses and management expenses

(i) Life insurance business

Benefits and claims expenses incurred during the financial year are recognisedwhen a claimable event occurs and/or the insurer/takaful operator is notified.

Gross commission and agency expenses, which are costs directly incurred insecuring premium on insurance policies, net of income derived from reinsurersin the course of ceding premiums to reinsurers, are charged to profit or loss inthe year in which they are incurred.

Benefits and claims expenses, including settlement costs lessreinsurance/retakaful recoveries, are accounted for using the case basismethod and for this purpose, the amounts payable under a policy/certificateare recognised as follows:

maturity and other policy/certificate benefit payments due on specifieddates are treated as claims payable on the due dates; and

Claims and loss adjustment expenses are charged to profit or loss as incurredbased on the estimated liability for compensation owed to certificate/policyholders or third parties damaged by the certificate/policy holders. They includedirect and indirect claims settlement costs and arise from events that haveoccurred up to the end of the reporting period even if they have not yet beenreported to the Company.

death, surrender and other benefits without due dates are treated asclaims payable on the date of receipt of intimation of death of the assuredor occurrence of contingency covered.

Recoveries on reinsurance/retakaful claims are accounted for in the samefinancial year as the original claims are recognised.

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(x) Commission expenses and management expenses (cont'd.)

(ii) Family takaful business

(iii) General takaful/insurance business

Commissions and management expenses are borne by the family takaful fundin the profit or loss at an agreed percentage of the gross contribution, inaccordance with the principles of "Wakalah" as approved by the takafulsubsidiary's Shariah Committee and agreed between the participants and thetakaful subsidiary.

These expenses are transferred to the takaful subsidiary's shareholders' fundvia wakalah fee and are recognised as incurred and properly allocated to theperiod in which it is probable that they will give rise to income.

At each date of the statement of financial position, the takaful subsidiaryestimates its net future expense cash flows required on the maintenance of thefamily takaful fund. If the estimate shows that there is a deficiency in the netfuture expense cash flows, the deficiency is immediately charged to the profitor loss of the shareholders' fund with a corresponding credit to the provision ofexpense liabilities.

Commissions and management expenses are borne by the general takafulfund in the profit or loss at an agreed percentage of the gross contribution, inaccordance with the principles of "Wakalah" as approved by the takafulsubsidiary's Shariah Committee and agreed between the participants and thetakaful subsidiary.

These expenses are transferred to the takaful subsidiary's shareholders' fundvia wakalah fee and are recognised as incurred and properly allocated to theperiod in which it is probable that they will give rise to income.

Commission expense is commission paid to intermediaries and is recognisedin the income statement.

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(y) Other revenue recognition

(i) Interest/profit income

(ii) Dividend income

(iii) Rental income

Rental income is recognised on a time proportion basis.

(iv) Gain or loss on disposal of investments

(v) Wakalah fees

(z) Fees and commission expenses

Wakalah fees represent fees charged by the shareholder's fund to managetakaful certificates issued by the general and family takaful funds under theprinciple of wakalah and are recognised as soon as the contributions to whichthey relate can be reliably measured in accordance with the principles ofShariah.

Gross commission and agency expenses, which are costs directly incurred insecuring premiums on insurance policies, and income derived from reinsurers inthe course of ceding of premiums to reinsurers, are charged/credited to profit orloss in the financial period in which they are incurred.

Revenue is recognised when it is probable that the economic benefits associatedwith the transactions will flow to the enterprise and the amount of the revenue canbe measured reliably.

Interest/profit income are recognised using the effective interest/profit ratemethod.

Dividend income is recognised when the Group's right to receive payment isestablished.

Gain or loss on disposal of investment is recognised upon the satisfaction of allterms of the sale of the investments.

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(aa) Zakat

(ab) Fair value measurement

(a)

(b)

The Group uses valuation techniques that are appropriate in the circumstancesand for which sufficient data are available to measure fair value, maximising theuse of relevant observable inputs and minimising the use of unobservable inputs.

Zakat represents tithes payable by the takaful subsidiary to comply with theprinciples of Shariah and is only provided for when an obligation exists as at thedate of the statement of financial position.

The Group measures financial instruments, such as, derivatives, and financialinvestments, at fair value at each reporting date. Fair values of financialinstruments measured at amortised cost are disclosed in Note 39.

The fair value of an asset or a liability is measured using the assumptions thatmarket participants would use when pricing the asset or liability, assuming thatmarket participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a marketparticipant's ability to generate economic benefits by using the asset in its highestand best use or by selling it to another market participant that would use the assetin its highest and best use.

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for theasset or liability

The principal or the most advantageous market must be accessible to by the Group.

Fair value is the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurementdate. The fair value measurement is based on the presumption that the transactionto sell the asset or transfer the liability takes place either:

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(ab) Fair value measurement (cont'd.)

Level 1:

Level 2:

Level 3:

2.4 Significant accounting estimates and judgments

The preparation of financial statements in accordance with MFRS requires the use ofcertain accounting estimates and exercise of judgments. Estimates and judgments arecontinuously evaluated and are based on past experience, reasonable expectations offuture events and other factors.

The key assumptions concerning the future and other key sources of estimationuncertainty at the reporting date, that have a significant risk of causing materialjudgment to the carrying amounts of assets and liabilities within the next financial yearare as discussed below:

Quoted (unadjusted) market prices in active markets for identical assetsor liabilities

Valuation techniques for which the lowest level input that is significant tothe fair value measurement is directly or indirectly observable

Valuation techniques for which the lowest level input that is significant tothe fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on arecurring basis, the Group determines whether transfers have occurred betweenLevels in the hierarchy by re-assessing categorisation (based on the lowest levelinput that is significant to the fair value measurement as a whole) at the end ofeach reporting date.

All assets and liabilities for which fair value is measured or disclosed in the financialstatements are categorised within the fair value hierarchy, described as follows,based on the lowest level input that is significant to the fair value measurement asa whole:

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2.4 Significant accounting estimates and judgments (cont'd.)

(a) Impairment of investment in subsidiaries

(b) Uncertainty in Accounting Estimates

Life insurance and family takaful businesses

The Company assesses at each reporting date whether there is any objectiveevidence that the investment is impaired. To determine whether there is objectiveevidence of impairment, the Company considers factors such as, amongst others,prolonged shortfall between indicative fair value and carrying amount, significantchanges with adverse effects on the investment and deteriorating financialperformance of the investment.

Depending on their nature and the industries in which the investments relate to,judgements are made by management to select suitable methods of valuation suchas, amongst others, discounted cash flow, realisable net asset value and sectoraverage price-earnings ratio methods.

Once a suitable method of valuation is selected, management makes certainassumptions concerning the future to estimate the recoverable amount of theinvestment. Depending on the specific individual investment, assumptions made bymanagement may include, amongst others, assumptions on expected future cashflows, revenue growth, discount rate used for purposes of discounting future cashflows which incorporate the relevant risks, and expected future outcome of certainpast events.

The carrying amount of investment in subsidiaries as at 31 December 2018 wasRM901,072,000 (2017: RM901,072,000) as disclosed in Note 17 to the financialstatements. During the financial year ended 31 December 2017, a total ofRM1,008,094,000 was classified as assets held for sale as disclosed in Note 14 tothe financial statements. As at 31 December 2018, this amount was derecognisedupon disposal of a subsidiary as disclosed in Note 17 to the financial statements.

There are several sources of uncertainty that need to be considered in theestimation of life insurance and family takaful liabilities.

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(b) Uncertainty in Accounting Estimates (cont'd.)

Life insurance and family takaful businesses (cont'd.)

Lapse and surrender rates are based on the Group's life and family takafulbusinesses' historical experience of lapses and surrenders.

Life insurance contract liabilities are determined in accordance with regulatoryframework. All life insurance liabilities are valued using a prospective actuarialvaluation based on the sum of the present value of future benefits and expensesless future gross considerations arising from the policies discounted at theappropriate risk discount rate.

The main assumptions used for life insurance/family takaful business relate tomortality, morbidity, investment returns, expenses, lapse and surrender rates anddiscount rates. The Group's life insurance subsidiaries base mortality and morbidityon established industry and Malaysian and Turkish tables which reflect historicalexperiences, adjusted when appropriate to reflect the Group's unique riskexposure, product characteristics, target markets and own claims severity andfrequency experiences.

There may be significant reporting lags between the occurrence of an insuredevent and the time it is actually reported. Following the identification andnotification of an insured loss, there may still be uncertainty as to the magnitude ofthe claim. There are many factors that will determine the level of uncertainty suchas inflation, judicial interpretations, legislative changes and claims handlingprocedures.Estimates are also made as to future investment income arising from the assetsbacking the life insurance contracts. These estimates are based on current marketreturns as well as expectations about future economic and financial developments.

Assumptions on future expenses are based on current expense levels, adjusted forexpected expense inflation adjustments, if appropriate.

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General insurance and General takaful business

(i) The Group's claims incurred development to-date;

(ii) Net contribution remaining after deducting Wakalah fee; and

(iii) The industry loss experience.

The Group's general insurance and general takaful subsidiaries estimated IBNRclaims based on computation by an in-house actuary and an independent actuarialfirm respectively. Different methods can be used to analyse past data and projectpast patterns into the future. The actuarial firm had considered the Ultimate LossRatio ("ULR") method for the estimation of IBNR claims for the Motor Act classwhich was completely run-off this year, while the Link Ratio method with aBornhuetter-Ferguson ("BF") adjustment on a paid claims basis was considered forthe rest of the business classes.

The ULR method requires a selected ULR to be applied to the net earnedcontribution in order to project the amount of ultimate claims incurred for each lossyear. Then claims incurred for known claims are subtracted from the projectedultimate claims incurred for each loss year in order to estimate the amount of IBNRclaims. Assumptions regarding the ULR vary by class of business and take intoaccount the following:

The BF method can be seen as a combination of the ULR and unadjusted LinkRatio methods. An adopted ULR is selected based on the resultant loss ratios fromthe Link Ratio method, where appropriate, taking into consideration historicalexperience, industry loss ratios as well as incurred claims ratios to-date. Theoutstanding claims are calculated using the expected payment pattern (based onthe average grossing up factors over the most recent three years) and anexternally determined estimate of ultimate claims incurred for each loss year(determined by multiplying the adopted ULR with the net earned contribution). TheIBNR is determined by subtracting the case estimate from the estimatedoutstanding claims.

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General insurance and General takaful business (cont'd.)

(i)

(ii)

(iii)

(iv)

(c) Impairment of goodwill

Number of deaths: While estimating number of deaths in a year, the historicalmortality experiences are used.

Future investment income: This estimate is based on current market returns aswell as expectations about future economic and financial developments.

Average premium per insured: The assumption is based on historical trends inaverage premium amounts per insured and economic expectations that mayaffect the average premium amount.

At least once annually the Group determines whether goodwill is impaired. Thisrequires an estimation of the value-in-use of the cash generating units to which thegoodwill is allocated. Estimating the value-in-use requires the Group to make anestimate of the expected future cash flows from the cash generating unit and alsoto apply a suitable discount rate in order to calculate the present value of thosecash flows. The carrying amount of the Group’s goodwill as at 31 December 2018was RM392,337,000 (2017: RM392,337,000) as disclosed in Note 18 to thefinancial statements. During the financial year ended 31 December 2017, a total ofRM445,962,000 was classified as assets held for sale as disclosed in Note 14 tothe financial statements. As at 31 December 2018, this amount was derecognisedupon disposal of a subsidiary as disclosed in Note 17 to the financial statements.

For estimation of future benefit payments and premium arising from long-terminsurance contracts for the Turkish business, four parameters have significantimpacts:

The lapse and surrender rates: The estimated rates are derived from pastexperience. In its estimation, the Group also takes into consideration theeconomic crisis or positive economic developments that will affect the rateseither in a positive or a negative way.

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(d) Amortisation and impairment of other intangible asset

2.5 MFRS 9 Transition disclosures

The Company

(a) Classification of financial assets on the date of initial application of MFRS 9

(b) Impact of adopting MFRS 9 at 1 January 2018

The Company's financial assets are investments in unit trust funds classified asFVTPL under MFRS 139. On the adoption of MFRS 9, the financial assets remainclassified as FVTPL with carrying amount at RM111,539,000 (original carryingamount under MFRS 139: RM111,539,000).

The initial adoption of MFRS 9 did not result in any reclassification or impact to thereserves and retained earnings of the Company.

Intangible assets with finite lives are amortised over their useful economic lives andassessed for impairment whenever there is an indication that the intangible assetmay be impaired. The amortisation period and the amortisation method for anintangible asset with a finite useful life are reviewed at least at each financial yearend. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset are accounted for by changing theamortisation period or method, as appropriate and treated as changes inaccounting estimates. The amortisation expense on intangible assets with finitelives is recognised in the income statements in the expense category consistentwith the function of the intangible asset.

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3. OPERATING REVENUE

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Gross premiums/contributions (Note 4) 1,056,799 1,047,633 985,092 1,044,120 Investment income (Note 6) 148,456 137,040 17,256 9,619

1,205,255 1,184,673 1,002,348 1,053,739

2018 2017RM'000 RM'000

Company

Investment income (Note 6) 88,851 47,951

4. NET EARNED PREMIUMS/CONTRIBUTIONS

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

(a) Gross earned premiums/contributions

Life insurance contracts 620,209 560,718 3,884 8,269 General insurance contracts - - 961,746 989,072 Family takaful contracts 436,590 486,915 - - General takaful contracts - - 19,462 46,779

1,056,799 1,047,633 985,092 1,044,120

(b) Earned premiums/contributions ceded toreinsurers/retakaful operators

Life insurance contracts (72,589) (57,444) (923) (1,719) General insurance contracts - - (17,451) (17,857) Family takaful contracts (54,678) (58,244) - - General takaful contracts - - (4,686) (4,917)

(127,267) (115,688) (23,060) (24,493)

Continuing operations Discontinued operations


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4. NET EARNED PREMIUMS/CONTRIBUTIONS (CONT'D.)

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Net earned premiums/contributions 929,532 931,945 962,032 1,019,627

5. FEE AND COMMISSION INCOME

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Reinsurance/retakaful commission income 252 234 - -

Others - - 382 432 252 234 382 432

6. INVESTMENT INCOME

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Interest income from bank deposits 7 - 15,488 17,364 Interest income from financial assets:

AFS financial assets 50,116 44,610 (3,331) (3,785)FVTPL financial assets 77,903 71,106 - - Loans and receivables 8,223 8,916 221 342HTM financial assets - - (161) (260)

Dividend income from quoted andunquoted securities 11,871 11,890 - -

Rental income 494 518 - - Others (158) - 5,039 (4,042)

148,456 137,040 17,256 9,619




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6. INVESTMENT INCOME (CONT'D.)

2018 2017RM'000 RM'000

Company

Interest income from financial assets:FVTPL financial assets 4,178 2,831

Dividend income from subsidiary company 84,673 45,120

88,851 47,951

7. REALISED (LOSSES)/GAINS, NET

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Realised (losses)/gains on disposal of:

Property and equipment 2 91 - - AFS financial assets (2,698) 878 17,343 29,174 FVTPL financial assets 512 - 82,022 49,798 HTM financial assets - - 1,862 3,226

(2,184) 969 101,227 82,198

2018 2017RM'000 RM'000

Company

Realised gains/(loss) on disposal of:

Property and equipment - (4) FVTPL financial assets 116 -

116 (4)

Continuing operations

Discontinued operationsContinuing operations

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8. FAIR VALUE (LOSSES)/GAINS, NET

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Net fair value (losses)/gains on financial assets at FVTPL (48,014) 63,863 4,046 2,006

2018 2017RM'000 RM'000

Company

Net fair value gain on financial assets at FVTPL 527 1,286

9. OTHER OPERATING INCOME

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Investment management fees 2,857 2,440 - - Writeback of impairment loss

(Note 21) 8 1 36 1,239 Others 7,620 1,898 10,203 5,813

10,485 4,339 10,239 7,052

2018 2017RM'000 RM'000

Company

Others 368 59368 59



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10. NET BENEFITS AND CLAIMS

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

(a) Gross benefits and claimspaid

Insurance/takaful contracts:Life (252,711) (285,009) (2,795) (2,514) General - - (785,918) (810,831) Family takaful (190,907) (195,272) - - General takaful - - (4,885) (5,263)

(443,618) (480,281) (793,598) (818,608)

(b) Claims ceded to reinsurers and retakaful operators

Insurance/takaful contracts:Life 45,755 50,621 599 122 General - - 18,724 19,310 Family takaful 48,002 61,017 - - General takaful - - 1,622 2,051

93,757 111,638 20,945 21,483

(c) Gross change in contract liabilities

Insurance/takaful contracts:Life (79,616) (54,554) 70 (1,108) General - - (35,511) (22,137) Family takaful (61,824) (163,751) - - General takaful - - 2,245 (1,997)

(141,440) (218,305) (33,196) (25,242)


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10. NET BENEFITS AND CLAIMS (CONT'D.)

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

(d) Change in contract liabilities ceded to reinsurers and retakaful operators

Insurance/takaful contracts:Life 17,469 (33,692) (33) 163 General - - 653 2,614 Family takaful 5,157 49,517 - - General takaful - - (2,139) (641)

22,626 15,825 (1,519) 2,136

(e) Change in investment contract liabilities

Insurance contracts:Life - - (1,181) (3,060)

Net benefits and claims (468,675) (571,123) (808,549) (823,291)

11. FEE AND COMMISSION EXPENSES

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Costs incurred for the acquisition of insurance/takaful contracts expensed in the financialyear 116,967 115,487 70,075 91,671



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12. OTHER OPERATING EXPENSES

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Staff costs (Note 12(a)) 105,158 100,867 70,947 71,757 Directors' fees and allowances 2,376 2,595 - - Shariah committee remuneration 172 156 - 22 Auditors' remuneration:

Statutory audit:- member firm of Ernst & Young

Global 112 112 83 106 - other firms 781 682 - -

Non-audit fees- member firm of Ernst & Young

Global 1,901 332 - - - other firms 57 93 - -

Amortisation of intangible assets (Note 16) 39,131 32,285 36,784 42,406 Depreciation of property and equipment (Note 15) 8,496 7,923 1,381 1,811 Impairment loss on other insurance

and retakaful receivables (Note 21(c)) - 20 - 777 Write-off of property and equipment 1 - - - (Note 15)Marketing and advertising expenses 102,547 94,124 76 601 Legal and consulting fees:

- Legal and other consulting fees 17,935 525 1,862 2,586 - Reversal of prior year

overprovision - (654) - - Stamp duty and filing expenses 630 706 349 1,209 Rental expenses 824 764 2,380 2,617 Write back of expense liabilities (16,662) (19,765) - - Electronic data processing expenses 8,845 7,612 1,228 1,329 Other expenses 45,582 55,161 19,800 17,992

317,886 283,538 134,890 143,213


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12. OTHER OPERATING EXPENSES (CONT'D.)

2018 2017RM'000 RM'000

Company

Staff costs (Note 12(a)) 13,955 15,697 Directors' fees and allowances (Note 12(b)(ii)) 821 765 Auditors' remuneration:

Member firm of Ernst & Young Global- statutory audit 75 75 - non-audit fees 91 72

Depreciation of property and equipment (Note 15) 431 484 Amortisation of intangible assets (Note 16) 76 100 Write-off of property and equipment (Note 15) 1 - Legal and consulting fees:

- Legal and other consulting fees 17,921 470 - Reversal of prior year overprovision - (654)

Marketing and advertising expenses - 87 Rental of premises 679 626 Rental of office equipment 17 17 Other expenses 1,409 1,729

35,476 19,468

(a) Staff costs consist of the following:

2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000

Group

Salaries and bonus 74,644 68,921 55,709 49,488 Defined contribution plan 12,571 11,971 7,115 7,288 Long term incentive plan (Note 33) 4,030 8,435 (4,171) 4,171 Other staff benefits 13,913 11,540 12,294 10,810

105,158 100,867 70,947 71,757


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2018 2017RM'000 RM'000

Company

Salaries and bonus 8,715 9,018 Defined contribution plan 2,385 2,924 Long term incentive plan (Note 33) 1,585 2,537 Other staff benefits 1,270 1,218

13,955 15,697

(a) Staff costs consist of the following:

(b) Directors' fees, allowances, salary and other benefits consist of the following:

2018 2017RM'000 RM'000

Company

(i) Executive director:Salaries and bonus 2,867 1,603Other benefits 1,497 2,210

4,364 3,813(ii) Non-executive directors:

Fees and allowances 821 765

5,185 4,578

Included in the staff costs are the salary and other benefits of the executive directors andkey menagement personnel of the Company and the Group. Details of the executivedirector of the Company is disclosed in Note 12(b)(i) and key management personnel ofthe Group and the Company are disclosed in Note 36(e).

The executive director is the Chief Executive Officer ("CEO") of the Company.

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(b) Directors' fees, allowances, salary and other benefits consist of the following (cont'd.):

CompanyFixed

remunerationShares and

share-linkedCash-based Cash-based instruments Others Total

RM'000 RM'000 RM'000 RM'000 RM'0002018

Executive director:Ooi Say Teng 1,617 1,862 876 9 4,364

Non-executive directors:Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda 156 14 - - 170 Datuk Joseph Dominic Silva 126 11 - - 137 Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 134 14 - - 148 Pushpanathan A/L S.A. Kanagarayar 118 12 - - 130 Dato' Nirmala Menon A/P Y.B. Menon 63 5 - - 68 Mustafa Kemal Olgac 155 13 - - 168

2,369 1,931 876 9 5,185

Variable remuneration

All the remuneration awards above are non-deferred remuneration except for shares and share-linked instruments. During the financialyear, there was no payment for shares and share-linked instruments.

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SubsidiariesFixed



RM'000 RM'000 RM'000 RM'000 RM'0002018

Non-independent, Non-executive director:Ooi Say Teng 180 12 192

Non-executive directors:Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda - - - - - Datuk Joseph Dominic Silva - - - - - Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 320 27 - - 347 Pushpanathan A/L S.A. Kanagarayar 270 28 - - 298 Dato' Nirmala Menon A/P Y.B. Menon - - - - - Mustafa Kemal Olgac 415 180 - - 595

1,185 247 - - 1,432



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CompanyFixed



RM'000 RM'000 RM'000 RM'000 RM'0002017

Executive director:Ooi Say Teng 929 995 1,884 5 3,813

Non-executive directors:Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda 156 17 - - 173 Datuk Joseph Dominic Silva 126 18 - - 144 Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 134 18 - - 152 Pushpanathan A/L S.A. Kanagarayar 118 12 - - 130 Mustafa Kemal Olgac 151 15 - - 166

1,614 1,075 1,884 5 4,578



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SubsidiariesFixed



RM'000 RM'000 RM'000 RM'000 RM'0002017

Executive director:Ooi Say Teng 481 1,264 193 10 1,948

Non-executive directors:Y.M. Raja Tan Sri Dato' Seri Arshad bin Raja Tun Uda - - - - - Datuk Joseph Dominic Silva - - - - - Datuk Dr. Syed Muhamad bin Syed Abdul Kadir 323 29 - - 352 Pushpanathan A/L S.A. Kanagarayar 296 36 - - 332 Mustafa Kemal Olgac 396 184 - - 580

1,496 1,513 193 10 3,212



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13. TAXATION

2018 2017RM'000 RM'000

Group

Tax expense for the financial year:

Malaysian income tax - current year - Continuing operations 26,586 34,028 - Discontinued operations - 2,667 Foreign income tax - current year - Discontinued operations 27,707 18,962

54,293 55,657 Deferred tax:

Relating to origination and reversal of temporary differences: - Continuing operations (Note 23) (1,147) 3,199 - Discontinued operations (10,916) (9,972)

Total income tax expense 42,230 48,884

2018 2017RM'000 RM'000

Group

(Loss)/profit before tax:Continuing operations 134,999 168,242 Discontinued operations (218,300) 62,759

(83,301) 231,001

Taxation at Malaysian statutory tax rate (19,992) 55,440 Effect of different tax rates in foreign jurisdictions (3,076) (3,711) Income not subject to tax (54,840) (55,584) Expenses not deductible for tax purposes 130,086 58,413 Tax credit set off available in Malaysia (5,209) (4,419) Overprovision in prior year (4,739) (1,255)

42,230 48,884

Domestic current income tax is calculated at the statutory tax rate of 24% (2017: 24%) ofthe estimated assessable profit for the year. Income tax of other jurisdictions is calculated atthe rates prevailing in the respective jurisdictions.

The reconciliation between tax expense and the product of accounting profit/(loss) of theGroup multiplied by the applicable corporate tax rate for the years ended 31 December 2018and 31 December 2017 are as follows:

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13. TAXATION (CONT'D.)

2018 2017RM'000 RM'000

Group

Statements of comprehensive income:Deferred income tax related to other comprehensive income:

- Fair value changes on AFS investments (Note 23) (968) (1,837)

Company

Tax expense for the financial year: 87 14

2018 2017RM'000 RM'000

Company

(Loss)/profit before tax (229,588) 29,824

Taxation at Malaysian statutory tax rate (55,101) 7,158 Income not subject to tax (21,479) (11,816) Expenses not deductible for tax purposes 76,669 4,674 Overprovision in prior year (2) (2)

87 14

14.

(a) Divestment of Acibadem Saglik Ve Hayat Sigorta A.S.

On 17 August 2018, the Group via Burau Ventures Sdn. Bhd. (a subsidiary held throughPasir Kalong Investments Limited) entered into a Share Purchase Agreement with BupaInternational Markets Limited ("Bupa") for the disposal of its entire equity interest inAcibadem for a total cash consideration of USD176,580,301 equivalent toRM724,120,496 (exchange rate: USD1:RM4.1008). On 31 December 2018, the disposalwas completed following fulfillment of all conditions precedent to the sale. Accordingly,Acibadem ceased to be a subsidiary of the Group as of 31 December 2018.

The reconciliation between tax expense and the product of accounting (loss)/profit of theCompany multiplied by the applicable corporate tax rate for the years ended 31 December2018 and 31 December 2017 are as follows:

DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FORSALE

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14.

(b)

Statement of Comprehensive Income

Note 2018 2017RM'000 RM'000

Group

Operating revenue 3 1,002,348 1,053,739

Gross earned contributions 4(a) 985,092 1,044,120 Earned contributions ceded to reinsurers

retakaful operators 4(b) (23,060) (24,493)

Net earned contribution 962,032 1,019,627

Fee and commission income 5 382 432 Investment income 6 17,256 9,619 Realised gains, net 7 101,227 82,198 Fair value gains, net 8 4,046 2,006 Other operating income 9 10,239 7,052 Other revenue 133,150 101,307

Discontinuation of General Takaful Business

DISCONTINUED OPERATIONS AND DISPOSAL GROUP CLASSIFIED AS HELD FORSALE (CONT'D.)

The Islamic Financial Services Act 2013 ("IFSA") requires all composite TakafulOperators to segregate their composite licences into separate Family Takaful andGeneral Takaful licences by 1 July 2018. In compliance with this Act, Sun Life TakafulMalaysia Berhad ("SLMT") had relinquished its composite Takaful Licence and wasgranted a Family Takaful licence by the Minister of Finance to conduct its FamilyTakaful Business. Accordingly, SLMT had ceased to underwrite any new generaltakaful business.

As at 31 December 2018, all general takaful related assets and liabilities in the notesto the financial statements are in respect of the discontinued general takaful business.

The combined financial results in respect of the discontinued operations (i.e. Acibadem andGeneral Takaful Business) included in the profit for the year are set out as below.

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14.

Statement of Comprehensive Income (cont'd.)

Note 2018 2017RM'000 RM'000

Group

Gross benefits and claims paid 10(a) (793,598) (818,608) Claims ceded to reinsurers and retakaful

operators 10(b) 20,945 21,483 Gross change in contract liabilities 10(c) (33,196) (25,242) Change in contract liabilities ceded to

reinsurers and retakaful operators 10(d) (1,519) 2,136 Gross change in investment contract liabilities 10(e) (1,181) (3,060) Net benefits and claims (808,549) (823,291)

Fee and commission expenses 11 (70,075) (91,671) Other operating expenses 12 (134,890) (143,213) Other expenses (204,965) (234,884)

Profit before taxation 81,668 62,759 Taxation 13 (16,791) (11,657) Profit after tax of discontinued operation 64,877 51,102

Loss on disposal of subsidiary 17 (299,968) -

(Loss)/profit from discontinued operations (235,091) 51,102

Other comprehensive loss:

Items that may be reclassified subsequently to profit or loss:

Net fair value changes of AFS financial assets- Gain on fair value changes, net (6,656) 7,714 - Transfer to profit or loss upon disposal (822) (56)

Tax effect relating to AFS financial assets 1,554 (1,530) Foreign currency translation differences (95,764) (57,730) Actuarial gains on employee severance indemnity - (7) Other comprehensive loss for the year (101,688) (51,609)

Total comprehensive loss for the year (336,779) (507)

DISCONTINUED OPERATION AND DISPOSAL GROUP CLASSIFIED AS HELD FORSALE (CONT'D.)

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14.

Statement of Comprehensive Income (cont'd.)

Note 2018 2017RM'000 RM'000

Company

Loss on derecognition of investment in subsidiary 17 (283,974) -

Loss from discontinued operations (283,974) -

Statement of Financial Position

Note 2017RM'000

Group

Assets:Property and equipment 15 4,111 Intangible assets 16 144,714 Goodwill 18 445,962 Financial assets 19 611,399 Reinsurance and retakaful assets 20 17,564 Insurance and takaful receivables 21 164,052 Other receivables 22 17,377 Cash and bank balances 24 118,585 Assets of disposal group classified as held for sale 1,523,764

Liabilities:Insurance and takaful contract liabilities 28 398,308 Insurance and takaful payables 29 149,799 Investment contract liabilities 30 14,298 Financial liabilities 31 321 Other payables 32 92,223 Deferred tax liabilities 23 12,166 Current tax liabilities 3,026 Liabilities directly associated with disposal group classified as held for sale 670,141

The following assets and liabilities of the disposal groups were classified as held for sale inrelation to the discontinued operations as at 31 December 2017:


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14.

Statement of Financial Position (cont'd.)

Note 2017RM'000

Group

Net assets directly associated with assets classified as held for sale 853,623

Reserves of disposal group classified as held for sale:AFS reserve 27 5,599 Foreign currency translation reserve 27 (110,214) Legal reserve 27 7,494 Premium paid on acquisition of non-controlling interest 27 (86,419) Reserve of disposal group classified as held for sale (183,540)

Note 2017RM'000

Company

Assets:Investment in subsidiaries 17 1,008,094

Statement of cash flows disclosures

2017RM'000

Group

Cash Flows from:Operating activities 17,012 Investing activities 17,189 Financing activities (491) Net cash inflows 33,710

The following asset was classified as held for sale on the Company's statement of financialposition in relation to the discontinued operations as at 31 December 2017:


The following assets and liabilities of the disposal groups were classified as held for sale inrelation to the discontinued operations as at 31 December 2017 (cont'd.):

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15. PROPERTY AND EQUIPMENT

Freehold Furniture Computerland and and and office Motor Work in

buildings fittings equipment Renovation vehicles progress TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Group

2018

Cost/Valuation

At 1 January 34,178 (2,105) 31,432 4,798 893 2,310 71,506 Additions - - 3,737 249 - 11,942 15,928 Disposals - - (13) - (289) - (302) Write-off - - (3) - - - (3) Reclassification - - 5,551 572 287 (6,410) - Reclassified to intangible

assets (Note 16) - - - - - (57) (57) At 31 December 34,178 (2,105) 40,704 5,619 891 7,785 87,072

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15. PROPERTY AND EQUIPMENT (CONT'D.)



Group

2018

Accumulated depreciation and impairment

At 1 January (6,271) (2,155) 20,851 2,396 136 - 14,957 Charge for the year 382 28 7,149 599 338 - 8,496 Disposals - - (7) - (289) - (296) Write-off - - (2) - - - (2) At 31 December (5,889) (2,127) 27,991 2,995 185 - 23,155

Net carrying amount

At 31 December 40,067 22 12,713 2,624 706 7,785 63,917

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Group

2017

Cost/Valuation

At 1 January 35,487 8,512 22,916 4,559 511 3,768 75,753 Additions - 671 2,342 239 333 5,962 9,547 Disposals - (52) (31) - (357) - (440) Write-off - - (1) - - - (1) Reclassification - - 6,206 - 406 (6,612) - Reclassified to intangible

assets (Note 16) - - - - - (808) (808) Transfer to assets of a

disposal group (Note 14) (1,084) (9,354) - - - - (10,438) Currency translation differences (225) (1,882) - - - - (2,107) At 31 December 34,178 (2,105) 31,432 4,798 893 2,310 71,506

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Group

2017

Accumulated depreciation and impairment

At 1 January (6,221) 3,071 14,238 1,731 280 - 13,099 Charge for the year 414 1,808 6,634 665 213 - 9,734 Disposals - (26) (20) - (357) - (403) Write-off - - (1) - - - (1) Transfer to assets of a

disposal group (Note 14) (388) (5,939) - - - - (6,327) Currency translation differences (76) (1,069) - - - - (1,145) At 31 December (6,271) (2,155) 20,851 2,396 136 - 14,957

Net carrying amount

At 31 December 40,449 50 10,581 2,402 757 2,310 56,549

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Furniture Computerand and office Motor

fittings equipment Renovation vehicles TotalRM'000 RM'000 RM'000 RM'000 RM'000

Company

2018

Cost

At 1 January 137 555 1,180 454 2,326 Additions - 40 6 - 46 Write-off - (3) - - (3) At 31 December 137 592 1,186 454 2,369

Accumulated depreciation

At 1 January 89 462 723 120 1,394 Charge for the year 28 69 243 91 431 Write-off - (2) - - (2) At 31 December 117 529 966 211 1,823

Net carrying amount

At 31 December 20 63 220 243 546

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Furniture Computerand and office Motor

fittings equipment Renovation vehicles TotalRM'000 RM'000 RM'000 RM'000 RM'000

Company

2017

Cost

At 1 January 146 524 1,132 121 1,923 Additions - 32 48 333 413 Disposals (9) - - - (9) Write-off - (1) - - (1) At 31 December 137 555 1,180 454 2,326

Accumulated depreciation

At 1 January 66 319 480 51 916 Charge for the year 28 144 243 69 484 Disposals (5) - - - (5) Write-off - (1) - - (1) At 31 December 89 462 723 120 1,394

Net carrying amount

At 31 December 48 93 457 334 932

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16. INTANGIBLE ASSETS

Softwareand

VOBA and related Partnership Bancassurance costs fee Total

RM'000 RM'000 RM'000 RM'000Group

2018

Cost/Valuation

At 1 January 523,731 29,877 43,900 597,508 Addition - 17 - 17 Write-off - - (901) (901) Reclassified from property

and equipments (Note 15) - 57 - 57 Disposal of subsidiary - (15,190) - (15,190) At 31 December 523,731 14,761 42,999 581,491

Accumulated amortisation and impairment

At 1 January 128,788 23,528 762 153,078 Charge for the year 28,943 5,894 4,294 39,131 Disposal of subsidiary - (15,190) - (15,190) At 31 December 157,731 14,232 5,056 177,019

Net carrying amount

At 31 December 366,000 529 37,943 404,472

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16. INTANGIBLE ASSETS (CONT'D.)

SoftwarePVFP and

VOBA and and AHG related Partnership Bancassurance contracts costs fee Total

RM'000 RM'000 RM'000 RM'000 RM'000Group

2017

Cost/Valuation

At 1 January 523,731 301,392 35,091 - 860,214 Addition - - 2,453 43,900 46,353 Reclassified from property

and equipments(Note 15) - - 808 - 808

Transfer to assets of adisposal group

(Note 14) - (301,392) (7,208) - (308,600) Currency translation

differences - - (1,267) - (1,267) At 31 December 523,731 - 29,877 43,900 597,508


At 1 January 97,490 124,607 20,824 - 242,921 Charge for the year 31,298 35,956 6,675 762 74,691 Transfer to assets of a

disposal group (Note 14) - (160,563) (3,323) - (163,886)

Currency translation - differences - - (648) - (648)

At 31 December 128,788 - 23,528 762 153,078

Net carrying amount

At 31 December 394,943 - 6,349 43,138 444,430

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16. INTANGIBLE ASSETS (CONT'D.)

2018 2017RM'000 RM'000

Company

Cost/Valuation

At 1 January 307 306 Addition 2 1 At 31 December 309 307


At 1 January 193 93 Charge for the year 76 100 At 31 December 269 193

Net carrying amount

At 31 December 40 114

17. INVESTMENT IN SUBSIDIARIES

2018 2017RM'000 RM'000

Company

Unquoted shares in Malaysia, at cost 900,735 1,777,824 Advances to subsidiaries* 386 131,342 Transfer to assets of a disposal group (Note 14) - (1,008,094)

901,121 901,072

*

Software andrelated costs

The advances given to subsidiaries, in substance, form part of the Company's netinvestment in the subsidiaries, and it is stated at cost less accumulated impairmentlosses.

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17. INVESTMENT IN SUBSIDIARIES (CONT'D.)

Details of the subsidiaries of the Company are as follows:

Country of Principal 2018 2017Name of company incorporation activity % %

Renggis Ventures Sdn. Bhd. Malaysia Investment 96% 96%holding

Held through RenggisVentures Sdn. Bhd.

Sun Life Malaysia Assurance Malaysia Underwriting of 48.96% 48.96%Berhad* life insurance

and investment-linked business

Sun Life Malaysia Takaful Malaysia Management 48.96% 48.96%Berhad* of family

takaful and investment-linked takafulbusiness aswell as GeneralTakaful businesstill 30 June 2018

Pasir Kalong Investments Malaysia Investment 100% 100%Limited holding

Held through Pasir KalongInvestments Limited

Burau Ventures Sdn. Bhd. Malaysia Investment 100% 100%holding

Group effective interest

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Details of the subsidiaries of the Company are as follows (cont'd.):

Country of Principal 2018 2017Name of company incorporation activity % %

Held through BurauVentures Sdn. Bhd.

Acibadem Saglik Ve Hayat Turkey Underwriting of - 100%Sigorta A.S. (Note 17(a)) life insurance,

PA and healthinsurance

Kuala Gula Ventures Malaysia Investment 100% 100%Sdn. Bhd. holding

Tanjung Piai Ventures Malaysia Investment 100% 100%Sdn. Bhd. holding

Tasik Bera Ventures Malaysia Investment 100% 100%Sdn. Bhd. holding

* Audited by a firm of Chartered Accountants other than Ernst & Young

(a) Disposal of Acibadem Saglik Ve Hayat Sigorta A.S. ("Acibadem")

Group effective interest

On 17 August 2018, the Group via Burau Ventures Sdn. Bhd. (a subsidiary held throughPasir Kalong Investments Limited) entered into a Share Purchase Agreement with BupaInternational Markets Limited ("Bupa") for the disposal of its entire equity interest inAcibadem for a total cash consideration of USD176,580,301 equivalent toRM724,120,496 (exchange rate: USD1:RM4.1008). On 31 December 2018, the disposalwas completed following the fulfillment of all conditions precedent to the sale.Accordingly, Acibadem ceased to be a subsidiary of the Group as of 31 December 2018.

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(a) Disposal of Acibadem Saglik Ve Hayat Sigorta A.S. ("Acibadem") (Cont'd.)

Acibadem Group CompanyRM'000 RM'000

Assets:Property and equipment 3,164 - Intangible assets 107,468 - Investment in subsidiary - 1,008,094 Goodwill 445,962 - Financial assets 496,205 - Reinsurance and retakaful assets 9,077 - Insurance and takaful receivables 167,390 - Other receivables 25,277 - Deferred tax assets 10,102 - Current tax assets 6,744 - Cash and bank balances 97,780 -

1,369,169 1,008,094

Liabilities: - Insurance and takaful contract liabilities 364,672 - Insurance and takaful payables 115,695 - Investment contract liabilities 8,925 - Financial liabilities 133 - Other payables 49,205 - Deferred tax liabilities 12,007 -

550,637 -

Net assets disposed of 818,532 1,008,094

Details of net assets disposed of and cash flows arising at the date of disposal were asfollows:

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(a) Disposal of Acibadem Saglik Ve Hayat Sigorta A.S. ("Acibadem") (Cont'd.)

Loss on disposal/derecognition of investment in subsidiary


Consideration receivable* (Note 22) 724,120 724,120 Net assets disposed of/derecognised (818,532) (1,008,094) Loss on disposal before reclassification adjustments (94,412) (283,974) Cumulative loss on AFS financial assets in respect of

the disposal subsidiary reclassified from equity to profit or loss 420 -

Cumulative foreign exchange loss in respect of the net assets of the disposal subsidiary reclassified from equity to profit or loss (205,976) -

Loss on disposal of subsidiary/derecognition of investment in subsidiary (Note 14) (299,968) (283,974)

Net cash inflows arising from the disposal of Acibadem were as follows:


Consideration receivable* (Note 22) 724,120 724,120 Less: Cash and cash equivalent balances disposed of (97,780) - Net cash inflows 626,340 724,120

*

Details of net assets disposed of and cash flows arising at the date of disposal were asfollows (cont'd.):

The loss on disposal is included in the profit for the year from discontinued operations.

As at the financial year ended 31 December 2018, the total consideration ofUSD176,580,301 equivalent to RM724,120,496 was recorded as considerationreceivable as disclosed in Note 22 to the financial statements due to the totalconsideration proceeds being still in transit. Subsequent to the financial year ended31 December 2018, the total consideration of USD176,580,301 was fully received bythe Group on 18 January 2019.

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18. GOODWILL ON CONSOLIDATION

2018 2017 2017RM'000 RM'000 RM'000

Group

Goodwill on consolidation 392,337 392,337 445,962

(a) Impairment tests for goodwill

Allocation of goodwill

2018 2017 2017RM'000 RM'000 RM'000

Insurance and Takaful underwriting 392,337 392,337 445,962

(b) Key assumptions used in recoverable amount

The recoverable amount of a CGU is determined based on the following methodology:

(i) where investments are listed, principally the market value is used.

(ii)

(iii) where investments themselves are investment holding in nature, the marketvalue of the underlying value-in-use is calculated using cash flow projections orearnings and book multiples of a comparable listed company in the same marketand in the same industry.

where investments are not investment holding in nature and where theunderlying entity is unlisted, value-in-use is applied.

The goodwill that arose from the acquisition of the subsidiaries in the previous period aremainly related to the value of the expected synergies and future business arising fromthese accquisitions. Goodwill has been allocated to the Group's cash generating unit("CGU") identified according to the following business segments:


Discontinued

operations

The carrying amount of the Group’s goodwill as at 31 December 2018 was RM392,337,000(2017: RM838,299,000 from continuing and discontinued operations) of whichRM445,962,000 was derecognised upon disposal of a subsidiary as disclosed in Note 17 tothe financial statements.


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18. GOODWILL ON CONSOLIDATION (CONT'D.)

(b) Key assumptions used in recoverable amount (cont'd.)

(i) Company earnings and book multiples

(ii) Growth rate

(iii) Discount rate

19. FINANCIAL ASSETS

2018 2017 2017RM'000 RM'000 RM'000

Group

At carrying value:Financial assets at FVTPL 2,178,135 2,079,451 1,472 AFS financial assets 1,164,280 1,060,015 462,531 Held-to-maturity investments - - 45,721 Loans and receivables 223,641 206,686 101,675

3,566,056 3,346,152 611,399

The discount rates used are pre-tax and reflect specific risks relating to theinsurance and takaful segments.

The following describes each key assumption on which management has based itsevaluation to undertake impairment testing of goodwill:

The following table summarizes the carrying values of the financial assets of the Group andthe Company:


The average growth rate used in the cash flow projections are consistent withthe long term average growth rate for the industry in Malaysia and in Turkey.

Earnings and book multiples are chosen based on acknowledged market normsfor the insurance and takaful industry in Malaysia.

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19. FINANCIAL ASSETS (CONT'D.)

The Group's financial investments are summarised by type of investments as follows:

2018 2017 2017RM'000 RM'000 RM'000

Corporate bonds 1,125,482 1,050,255 25,552 Foreign government bonds * - - 77,066 Eurobonds issued by the

Turkish Government * - - 374,084 Investment in unit trust funds

and investment-linked funds 407,927 366,617 2,646 Malaysian Government Securities 760,938 684,828 12,127 Cagamas 15,898 30,995 - Quoted equity securities 178,544 214,915 - Unquoted equity securities 174 174 - Unquoted Sukuk 822,015 762,046 16,537 Fixed and call deposits with licenced financial

institutions * 211,260 195,882 97,736 Policy loans 11,722 10,124 - Accrued interest and profit 32,096 30,316 5,651

3,566,056 3,346,152 611,399

Financial assets that mature after 12 months:- AFS 1,112,327 1,034,809 437,950 - FVTPL 1,515,081 1,316,117 - - HTM - - 45,721

2,627,408 2,350,926 483,671

Financial assets at FVTPLAt fair value:

Corporate bonds 1,125,482 1,050,255 - Investment in unit trust funds and

investment-linked funds 407,927 366,617 - Malaysian Government Securities 442,503 409,052 - Cagamas 5,775 20,980 - Quoted equity securities 178,544 214,915 - Unquoted equity securities 174 174 - Accrued interest and profit 17,730 17,458 1,472

2,178,135 2,079,451 1,472


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2018 2017 2017RM'000 RM'000 RM'000

AFS financial assetsAt fair value:

Corporate bonds * - - 25,552 Foreign government bonds including bonds

subject to repurchase transaction * - - 31,345 Eurobonds issued by the Turkish

Government* - - 374,084 Investment in unit trust funds and

investment-linked funds - - 2,646 Cagamas 10,123 10,015 - Malaysian Government Investment Issues 318,435 275,776 12,127 Unquoted Sukuk 822,015 762,046 16,537 Accrued profit 13,707 12,178 240

1,164,280 1,060,015 462,531

Held-to-maturity investmentsAt carrying value:

Foreign government bonds * - - 45,721

The fair value of the HTM investments in 2017 are RM46,426,090.

2018 2017 2017RM'000 RM'000 RM'000

LARAt carrying value:

Fixed and call deposits with licencedfinancial institutions * 211,260 195,882 97,736

Policy loans 11,722 10,124 - Accrued interest 659 680 3,939

223,641 206,686 101,675

Total 3,566,056 3,346,152 611,399

Discontinued operations




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*

2018 2017RM'000 RM'000

Group

Blocked securities - 113,576

2018 2017RM'000 RM'000

Company

Financial assets at FVTPL:Investment in unit-trust funds 188,500 111,539

20. REINSURANCE AND RETAKAFUL ASSETS

2018 2017 2017RM'000 RM'000 RM'000

Group

Reinsurers' share of:Life insurance contract liabilities 92,206 72,020 1,128 General insurance contract liabilities - - 9,348

92,206 72,020 10,476

In order to protect the interests of policyholders, under the Insurance Law in Turkey,insurance companies are obliged to deposit investments within two months into a blockedaccount with a state bank in favour of the Turkish Treasury. Accordingly the followingguarantees have been issued to the Turkish Treasury based on the financial results of thesubsidiary:

Included in these financial assets are assets backing liabilities as one of the Company'ssubsidiaries, Acibadem, is obliged to pay all eligible surpluses obtained from theseassets to the policyholders.

As at 31 December 2018, the abovementioned Turkish subsidiary was disposed of by theGroup as disclosed in the Note 17 to the financial statements.


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20. REINSURANCE AND RETAKAFUL ASSETS (CONT'D.)

2018 2017 2017RM'000 RM'000 RM'000

Group

Retakaful operators' share of:Family takaful certificate liabilities 92,417 87,260 - General takaful certificate liabilities 545 - 7,088

92,962 87,260 7,088

185,168 159,280 17,564

Reinsurance/retakaful assets within 12 months 49,254 43,024 14,099 Reinsurance/retakaful assets after 12 months 135,914 116,256 3,465

185,168 159,280 17,564

21. INSURANCE AND TAKAFUL RECEIVABLES

Continuing operations2018 2017 2017

RM'000 RM'000 RM'000Group

Due premiums/contributions including agents/brokers and co-insurers/co-takaful balances 15,631 27,352 121,882

Due from insurance/takaful and reinsurance companies/ retakaful operators 31,666 9,992 51,229

Loans to the policyholders - - 562 47,297 37,344 173,673

Allowance for impairment losses (689) (8) (9,621) 46,608 37,336 164,052

Receivable within 12 months 46,608 37,336 164,052 Receivable after 12 months - - -

46,608 37,336 164,052



The reinsurance/retakaful assets are neither past due nor impaired.

As at 31 December 2018, the retakaful assets in relation to general takaful certificateliabilities are transferred to and managed by the shareholder fund of the Takaful subsidiaryuntil the expiry of the certificates.

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21. INSURANCE AND TAKAFUL RECEIVABLES (CONT'D.)

2018 2017 2017RM'000 RM'000 RM'000

Group

Gross amounts of recognised other insurance/takaful receivables 63,049 47,886 164,123

Less: Gross amounts of recognised other insurance/takaful payable set off in the statement of financial position (Note 29) (16,441) (10,550) (71)

Net amounts of other insurance/takaful receivables presented in the statement

of financial position 46,608 37,336 164,052

(a) Ageing analysis of other insurance and takaful receivables:

2018 2017 2017RM'000 RM'000 RM'000

Group

Not past due 46,608 37,336 141,005 Past due but not impaired - - 23,047 Past due and impaired 689 8 9,621

47,297 37,344 173,673

These balances are amounts which have been offset and the gross to net balances are asdisclosed below:

There are no financial instruments subjected to an enforceable master netting arrangementor financial collateral (including cash collateral) pledged or received as at 31 December 2018(2017: Nil).

The carrying amounts disclosed above approximate the fair values due to the relatively short-term maturity of these balances as at the date of the statement of financial position.




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21. INSURANCE AND TAKAFUL RECEIVABLES (CONT'D.)

(b)

2018 2017 2017RM'000 RM'000 RM'000

Group

Less than 90 days - - 23,035 Between 91 days to 365 days - - 12

- - 23,047

(c) Movement in the impairment loss account:

2018 2017 2017RM'000 RM'000 RM'000

Group

At 1 January 8 11,982 11,976 Impairment loss recognised during the

year (Note 12) - 20 777 Write off against loans to policyholders - (17) 5 Writeback of impairment loss (Note 9) (8) (1) (1,239) Currency translation differences - - (1,898) Transfer from/(to) assets of a disposal

group (Note 14) 689 (11,976) - At 31 December 689 8 9,621

Ageing analysis of other insurance and takaful receivables that are past due but notimpaired:

No collateral was held as security for this impaired asset.




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22. OTHER RECEIVABLES

2018 2017 2017RM'000 RM'000 RM'000

Group

Income accruals - - 12,915 Amount due from related parties 3,144 1,356 52 Amount due from local brokers - 455 - Miscellaneous receivables 3,263 2,727 - Subscription to LIAM shares 2,147 2,147 - Prepayments 2,103 3,754 3,557 Dividend receivables 667 750 - Deposits 473 458 51 Tax receivables 10,113 593 - Consideration receivable (Note 17(a)) 724,120 - - Others 2,597 10,906 802

748,627 23,146 17,377

Receivable within 12 months 746,180 20,713 17,377 Receivable after 12 months 2,447 2,433 -

748,627 23,146 17,377

2018 2017RM'000 RM'000

Company

Deposits 197 186 Sundry receivables 3 - Due from subsidiaries:

- Fee receivables 4 - - LTIP granted to subsidiary companies

(Note 27) 8,344 10,070 Consideration receivable (Note 17(a)) 724,120 -

732,668 10,256

Receivable within 12 months 724,127 - Receivable after 12 months 8,541 10,256

732,668 10,256



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22. OTHER RECEIVABLES (CONT'D.)

The other receivables (except for prepayments) are neither past due nor impaired.

23. DEFERRED TAXATION

2018 2017RM'000 RM'000

Group

At 1 January (123,152) (138,815) Recognised in profit or loss (Note 13) 1,147 6,773 Recognised in other comprehensive income (Note 13) (968) (1,837) Currency translation differences - (1,439) Transfer to assets of a disposal group (Note 14) - 12,166 At 31 December (122,973) (123,152)

Presented after appropriate offsetting as follows:

Deferred tax assets (5,500) (4,746) Deferred tax liabilities (117,473) (118,406)

(122,973) (123,152)

Current 7,000 1,799 Non-current (129,973) (124,951)

(122,973) (123,152)

Deferred tax liabilities of the Group:

Revaluation -Accelerated financial Intangible

depreciation assets assets TotalRM'000 RM'000 RM'000 RM'000

2018

At 1 January (435) (18,390) (99,581) (118,406) Recognised in profit or loss 33 (6,046) 6,946 933 At 31 December (402) (24,436) (92,635) (117,473)

The components and movements of deferred tax liabilities and assets of the Group duringthe financial year are as follows:


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23. DEFERRED TAXATION (CONT'D.)

Deferred tax liabilities of the Group (cont'd.):

Revaluation -Accelerated financial Intangible

depreciation assets assets TotalRM'000 RM'000 RM'000 RM'000

2017

At 1 January (203) (12,895) (139,122) (152,220) Recognised in profit or loss (237) (5,495) 17,583 11,851 Transfer to assets of a

disposal group (Note 14) 5 - 21,958 21,963 At 31 December (435) (18,390) (99,581) (118,406)

Deferred tax assets of the Group:

Provision Revaluation - Otherfor financial temporary

liabilities assets differences TotalRM'000 RM'000 RM'000 RM'000

2018

At 1 January 3,902 (9,645) 997 (4,746) Recognised in profit or loss (3,547) 3,761 - 214 Recognised in other

comprehensive income - (968) - (968) At 31 December 355 (6,852) 997 (5,500)

2017

At 1 January 15,916 (3,649) 1,138 13,405 Recognised in profit or loss 230 (5,332) 24 (5,078) Recognised in other

comprehensive income (1,249) (588) - (1,837) Transfer to assets of a

disposal group (Note 14) (9,556) (76) (165) (9,797) Currency translation differences (1,439) - - (1,439) At 31 December 3,902 (9,645) 997 (4,746)

The components and movements of deferred tax liabilities and assets of the Group duringthe financial year are as follows (cont'd.):

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24. CASH AND BANK BALANCES

2018 2017 2017RM'000 RM'000 RM'000

Group

Cash in hand and at bank 55,188 57,354 15,868 Fixed and call deposits with

licensed banks andother financial institutions - - 102,717

55,188 57,354 118,585

Company

Cash in hand and at bank 6,543 14,122

25. SHARE CAPITAL

2018 2017 2018 2017 '000 '000 RM'000 RM'000

Issued and fully paid-up:

At 1 January 1,990,014 1,976,486 1,990,014 1,976,486 Issued during the year - 13,528 - 13,528 At 31 December 1,990,014 1,990,014 1,990,014 1,990,014


During the financial year ended 31 December 2018, the Company has not issued anyordinary shares. In the financial year ended 31 December 2017, the Company increased itsissued and paid-up ordinary share capital from RM1,976,486,651 to RM1,990,014,889 byway of issuance of 13,528,238 ordinary shares for the settlement of amount due toimmediate holding company of RM13,528,238. The new ordinary shares issued rank paripasu in all respects with the ordinary shares in issue as of the date of issuance.

AmountNumber of ordinary

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26. IMMEDIATE HOLDING AND OTHER RELATED COMPANY'S ADVANCES

The terms of the immediate holding and other related company's advances are as follows:

(i)

(ii) The advances have no fixed tenure; and

(iii) The advances are repayable at the sole discretion of the Company.

27. OTHER RESERVES

2018 2017RM'000 RM'000

Group

Foreign currency translation reserves (note (i)) 2 2 Fair value reserves of AFS financial assets (note (ii)) 1,360 1,694 Legal reserves (note (iii)) - - Non-participating Life Fund reserves (note (iv)) 30,624 18,785 Capital redemption reserves (note (v)) - - Long term incentive plan reserve (note(vi)) 17,106 17,247 Premium paid on acquisition on non-controlling interest (note (vii)) - -

49,092 37,728

The Company shall have the discretion to decide whether to pay any interest as well asthe quantum of such interest;

Accordingly, the immediate holding and other related company's advances are classified asequity.

During the financial year ended 31 December 2018, the Company did not receive anyadvance from its immediate holding company. In the financial year ended 31 December2017, the Company issued ordinary share capital of 13,528,238 as a consideration forsettlement of the amount due to immediate holding company of RM13,528,238.

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27. OTHER RESERVES (CONT'D.)

2018 2017RM'000 RM'000

Group (cont'd.)

Movement in the reserves:

(i) Foreign currency translation reserves (Note (a))

At 1 January 2 (52,479) Total other comprehensive losses - (57,733) Transfer to disposal group held for sale (Note 14) - 110,214 At 31 December 2 2

(ii) Fair value reserves of AFS financial assets (Note (b))

At 1 January 1,694 227 Total other comprehensive income 410 7,066 Transfer to disposal group held for sale (Note 14) - (5,599) Transfer to profit or loss upon disposal of subsidiary (744) - At 31 December 1,360 1,694

(iii) Legal reserves (Note (c))

At 1 January - 5,624 Transfer from distributable retained profits - 1,870 Transfer to disposal group held for sale (Note 14) - (7,494) At 31 December - -

(iv) Non-participating Life Fund reserves (Note (d))

At 1 January 18,785 8,024 Transfer from distributable retained profits 11,839 10,761 At 31 December 30,624 18,785

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2018 2017RM'000 RM'000

(v) Capital redemption reserves (Note (e))

At 1 January - 34 Transfer to share capital pursuant to Companies Act 2016* - (34) At 31 December - -

*

(vi) Long term incentive plan reserve (Note (f))

At 1 January 17,247 4,641 Total comprehensive (loss)/income (141) 12,606 At 31 December 17,106 17,247

(vii) Premium paid on acquisition of non-controllinginterest (Note (g))

At 1 January - (86,419) Transfer to disposal group held for sale (Note 14) - 86,419 At 31 December - -

Total 49,092 37,728

2018 2017RM'000 RM'000

Company

Long term incentive plan reserves (Note (f)) 17,106 17,247

(a)

(b)

The effect of application of the Companies Act 2016.

Fair value adjustment reserve represents the cumulative fair value changes, net of tax,of available-for-sale financial assets until they are disposed of or impaired.

The foreign currency translation reserve represents exchange differences arising fromthe translation of the financial statements of foreign operations whose functionalcurrencies are different from that of the Group's presentation currency.

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(c)

(d)

(e)

(f)

(g)

28. INSURANCE AND TAKAFUL CONTRACT LIABILITIES

GroupGross Reinsurance Net

RM'000 RM'000 RM'0002018

Continuing operationsLife insurance (Note (a)) 1,522,107 (92,206) 1,429,901 Family Takaful (Note (c)) 1,059,143 (92,417) 966,726 Shareholders Fund (Note (e)) 1,916 (545) 1,371

2,583,166 (185,168) 2,397,998

The legal reserve of the Group that is maintained by the Group's subsidiary in Turkey isin compliance with the requirements of the Turkish Commercial Code and are notdistributable as cash dividends.

As at 31 December 2018, the legal reserve was transferred to retained earnings of theGroup upon disposal of the subsidiary as disclosed in Note 17 to the financial statements.

The long term incentive plan ("LTIP") reserve represents the RSU granted to eligibleemployees of the Company and the Group (Note 33). The reserve is made up of thecummulative value of services received from the employees recorded over the vestingperiod commencing from the grant date of the RSU, and is reduced by the expiry orexercise of the RSU.

The premium paid on acquisition of non-controlling interest resulted from the acquisitionof a non-controlling interest in a subsidiary company where the acqusition cost exceededthe carrying amount of the non-controlling interest.

As at 31 December 2018, the premium paid on acquisition of non-controlling interest wastransferred to retained earnings of the Group upon disposal of the subsidiary asdisclosed in Note 17 to the financial statements.

During the financial year ended 2017, the capital redemption reserve of the Groupmaintained by the Group's subsidiary in Malaysia had been transferred to the sharecapital of the subsidiary pursuant to the transitional provisions set out in Section 618(2)of the Companies Act, 2016.

Reserves comprise unallocated surpluses from Non-Participating Life fund (net ofdeferred tax). This amount is only distributable upon the annual recommendation by theAppointed Actuaries of the insurance subsidiaries to transfer the Non-Participating Lifefund surplus to the Shareholders' fund.

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28. INSURANCE AND TAKAFUL CONTRACT LIABILITIES (CONT'D.)

GroupGross Reinsurance Net

RM'000 RM'000 RM'0002017

Continuing operationsLife insurance (Note (a)) 1,435,489 (72,020) 1,363,469 Family Takaful (Note (c)) 988,942 (87,260) 901,682

2,424,431 (159,280) 2,265,151

Discontinued operationsLife insurance (Note (a)) 9,065 (1,128) 7,937 General insurance (Note (b)) 350,507 (9,348) 341,159 General Takaful (Note (d)) 38,736 (7,088) 31,648

398,308 (17,564) 380,744

The reinsurance/retakaful assets are neither past due nor impaired.

(a) The life insurance contract liabilities are further analysed as follows:

Gross Reinsurance NetRM'000 RM'000 RM'000

2018

Continuing operationsActuarial liabilities 1,271,899 (75,199) 1,196,700 Claims liabilities 28,279 (17,007) 11,272 Net asset value attributable to unitholders 221,929 - 221,929

1,522,107 (92,206) 1,429,901

2017

Continuing operationsActuarial liabilities 1,192,178 (57,730) 1,134,448 Claims liabilities 21,277 (14,290) 6,987 Unallocated surplus 1,472 - 1,472 Life mathematical reserves - - - Net asset value attributable to unitholders 220,562 - 220,562

1,435,489 (72,020) 1,363,469

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(a) The life insurance contract liabilities are further analysed as follows (cont'd.):


2017

Discontinued operationsActuarial liabilities 189 (57) 132 Claims liabilities 1,347 (247) 1,100 Life mathematical reserves 7,529 (824) 6,705

9,065 (1,128) 7,937

Movements of life insurance contract liabilities:


2018

At 1 January 1,435,489 (72,020) 1,363,469 Premium income 254,429 (59,475) 194,954 Other revenue 33,924 (1,566) 32,358 Experience/benefit variation 16,592 (5,300) 11,292 Net benefits and claims (214,567) 60,916 (153,651) Other expenses (63,376) 7,048 (56,328) Change in reserves :- Discounting (12,612) 535 (12,077) - Assumptions (4,355) 410 (3,945) - Policy movements 69,686 (20,037) 49,649 Movement in claims liabilities 7,002 (2,717) 4,285 Movement in unallocated surplus (1,472) - (1,472) NAV attributable to unitholders 1,367 - 1,367 At 31 December 1,522,107 (92,206) 1,429,901

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(a) The life insurance contract liabilities are further analysed as follows (cont'd.):

Movements of life insurance contract liabilities (cont'd.):


2017

At 1 January 1,384,451 (104,294) 1,280,157Premium income 180,476 (62,418) 118,058Other revenue 36,711 (2,872) 33,839Experience/benefit variation (6,154) 3,634 (2,520)Net benefits and claims (206,433) 61,495 (144,938)Other expenses (54,512) 7,984 (46,528)Change in reserves :- Discounting 23,759 (2,016) 21,743- Assumptions (46,165) 38,199 (7,966)- Policy movements 83,008 (10,763) 72,245Movement in claims liabilities 1,623 (2,304) (681)Movement in unallocated surplus 853 - 853NAV attributable to unitholders 48,415 - 48,415Transfer to disposal group held for sale

(Note 14) (9,065) 1,128 (7,937) Currency translation differences (1,478) 207 (1,271)At 31 December 1,435,489 (72,020) 1,363,469

(b) The general insurance contract liabilities are further analysed as follows:


2017

Provision for outstanding claims (i) 43,010 (7,290) 35,720 Provision for IBNR 5,219 (221) 4,998 Unearned premium reserve (ii) 302,278 (1,837) 300,441

350,507 (9,348) 341,159


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(b) Movements of general insurance contract liabilities (cont'd.):

Movements of general insurance contract liabilities:

(i) Claim liabilities


2017

At 1 January 29,704 (6,143) 23,561 Claims incurred in the current

accident year 848,146 (23,616) 824,530 Movements in claims incurred in prior

accident years (16,990) 1,874 (15,116) Claims paid during the year (810,831) 19,310 (791,521) Currency translation differences (7,019) 1,285 (5,734) At 31 December 43,010 (7,290) 35,720

(ii) Premium liabilities


2017

At 1 January 294,603 (1,054) 293,549 Premiums written in the year 1,053,456 (18,921) 1,034,535 Premiums earned during the year (989,072) 17,857 (971,215) Currency translation differences (56,709) 281 (56,428) At 31 December 302,278 (1,837) 300,441



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(c) The family takaful contract liabilities are further analysed as follows:

Gross Retakaful NetRM'000 RM'000 RM'000

2018

Actuarial liabilities 992,021 (76,487) 915,534 Claims liabilities 35,593 (15,930) 19,663 Unallocated surplus 24,609 - 24,609 AFS fair value adjustment 6,920 - 6,920

1,059,143 (92,417) 966,726

2017

Actuarial liabilities 933,239 (73,774) 859,465 Claims liabilities 23,805 (13,486) 10,319 Unallocated surplus 33,087 - 33,087 AFS fair value adjustment (1,189) - (1,189)

988,942 (87,260) 901,682

Movements of family takaful contract liabilities:


2018

At 1 January 988,942 (87,260) 901,682 Contribution income 26,514 (60,925) (34,411) Investment returns 34,000 (2,364) 31,636 Experience/benefit variation (11,052) 2,176 (8,876) Net benefits and claims (144,216) 74,838 (69,378) Other expenses (14,811) 9,353 (5,458) Change in reserves:

- Policy movements 150,661 (25,791) 124,870 Changes in AFS reserves 8,109 - 8,109 Movement in claims liabilities 11,788 (2,444) 9,344 Movement in unallocated surplus (8,478) - (8,478) NAV attributable to unitholders 17,686 - 17,686 At 31 December 1,059,143 (92,417) 966,726

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(c) The family takaful contract liabilities are further analysed as follows (cont'd.):

Movements of family takaful contract liabilities (cont'd.):


2017

At 1 January 826,493 (37,743) 788,750 Contribution income 34,345 (51,556) (17,211) Investment returns 29,548 (956) 28,592 Experience/benefit variation (1,017) 774 (243) Net benefits and claims (111,420) 55,106 (56,314) Other expenses (1,112) (35,184) (36,296) Change in reserves:

- Policy movements 194,623 (12,750) 181,873 Changes in AFS reserves (520) - (520) Movement in claims liabilities 6,513 (4,951) 1,562 Movement in unallocated surplus 7,021 - 7,021 NAV attributable to unitholders 4,468 - 4,468 At 31 December 988,942 (87,260) 901,682

(d) The general takaful contract liabilities are further analysed as follows:


2018

Provision for claims reportedby certificateholders - - -

Provision for IBNR - - - Provision for outstanding claims - - - Unearned contribution reserve - - - Available-for-sale fair value adjustment - - - Unallocated surplus - - -

- - -


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(d) The general takaful contract liabilities are further analysed as follows (cont'd.):


2017

Provision for claims reportedby certificateholders 4,705 (2,040) 2,665

Provision for IBNR 11,203 (3,424) 7,779 Provision for outstanding claims 15,908 (5,464) 10,444 Unearned contribution reserve 10,228 (1,624) 8,604 Available-for-sale fair value adjustment (49) - (49) Unallocated surplus 12,649 - 12,649

38,736 (7,088) 31,648

Movements of general takaful contract liabilities


2018

Claim liabilities (i) - - - Premium/contribution liabilities (ii) - - - Unallocated surplus of general takaful fund - - - AFS reserves - - -

- - -

2017

Claim liabilities (i) 15,908 (5,464) 10,444 Premium/contribution liabilities (ii) 10,228 (1,624) 8,604 Unallocated surplus of general takaful fund 12,649 - 12,649 AFS reserves (49) - (49)

38,736 (7,088) 31,648



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Movements of general takaful contract liabilities (cont'd.)

Claim liabilities


2018


accident year 2,065 (401) 1,664 Movements in claims incurred in

prior accident years (11,172) 3,698 (7,474) Claims paid during the year (4,885) 1,622 (3,263) Provision for IBNR transfer to

Shareholders' Fund (1,342) 497 (845) Provision for outstanding claims transfer

to Shareholders' Fund (574) 48 (526) At 31 December - - -

2017


accident year 10,290 (3,347) 6,943 Movements in claims incurred in

prior accident years (12,898) 1,937 (10,961) Claims paid during the year (5,263) 2,051 (3,212) At 31 December 15,908 (5,464) 10,444

Discontinued operations(i)

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Movements of general takaful contract liabilities (cont'd.)

Contribution liabilities


2018

At 1 January 10,228 (1,624) 8,604 Contributions written in the year 16,412 (3,216) 13,196 Contributions earned during the year (26,640) 4,840 (21,800) At 31 December - - -

2017

At 1 January 8,757 (1,034) 7,723 Contributions written in the year 48,250 (5,507) 42,743 Contributions earned during the year (46,779) 4,917 (41,862) At 31 December 10,228 (1,624) 8,604

(e) The Shareholders' Fund takaful contract liabilities are further analysed as follows:


2018

Provision for claims reportedby certificateholders 574 (48) 526

Provision for IBNR 1,342 (497) 845 Provision for outstanding claims 1,916 (545) 1,371


(ii)Discontinued operations

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(e) The Shareholders' Fund takaful contract liabilities are further analysed as follows (cont'd.):

Claims liabilities


2018

At 1 January - - - Provision for IBNR transfer to

Shareholders' Fund 1,342 (497) 845 Provision for outstanding claims transfer

to Shareholders' Fund 574 (48) 526 At 31 December 1,916 (545) 1,371

29. INSURANCE AND TAKAFUL PAYABLES

2018 2017 2017RM'000 RM'000 RM'000

Group

Due to agencies and intermediaries 6,766 8,929 6,691 Due to reinsurers and retakaful operators

and cedants 44,858 24,949 5,792 Due to medical networks and pharmacies - - 137,316

51,624 33,878 149,799





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29. INSURANCE AND TAKAFUL PAYABLES (CONT'D.)

2018 2017 2017RM'000 RM'000 RM'000

Group

Gross amounts of recognised insurance/takaful payables 68,065 44,428 149,870

Less: Gross amounts of recognised insurance/ takaful receivables set off in the statement of financial position (Note 21) (16,441) (10,550) (71)

Net amounts of insurance/takaful payablespresented in the statement of financial

position 51,624 33,878 149,799

30. INVESTMENT CONTRACT LIABILITIES

2017RM'000

Group

Investment contract liabilities (Note 14) 14,298

Investment contract liabilities within 12 months 2,725 Investment contract liabilities after 12 months 11,573

14,298



These balances are amounts which have been offset and the gross to net balances are asdisclosed below:

There are no financial instruments subjected to an enforceable master netting arrangementor financial collateral (including cash collateral) pledged or received as at 31 December 2018(2017: Nil).

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30. INVESTMENT CONTRACT LIABILITIES (CONT'D.)

31. FINANCIAL LIABILITIES

2018 2017 2017RM'000 RM'000 RM'000

Group

Outstanding purchases of investment securities 1,448 6,632 - Unprocessed proposals 9,410 4,884 - Other financial liabilities 2,023 25,012 321

12,881 36,528 321

Payable within 12 months 46,072 35,500 321 Payable after 12 months (33,191) 1,028 -

12,881 36,528 321

A subsidiary, Acibadem, has contracts that entitles the holders to a minimum guaranteedcrediting rate per annum, or, when higher, a bonus rate declared by Acibadem from theeligible surplus available to date. Acibadem has an obligation to eventually pay to contractholders at least 90% - 95% of the eligible surplus (i.e., all interest earned from the assetsbacking these contracts) and holds 5% to 10% as fee for administration of the operations.

Since Acibadem is obliged to pay all eligible surplus obtained on these assets to the contractholders, Acibadem recognises 90% to 95% of the eligible surplus as investment contractliabilities.

Acibadem was disposed of during financial year ended 31 December 2018 as disclosed inNotes 14 and 17 to the financial statements.


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32. OTHER PAYABLES

2018 2017 2017RM'000 RM'000 RM'000

Group

Provision for bonus 25,101 27,464 8,736 Provision for legal cases - 767 916 Reserves for vacation pay liability - - 1,575 Profit share provisions for health insurance

agreements - - 14,292 Other provisions 14,284 336 - Amount due to related parties 831 163 299 Deposits and advances received 2,233 3,271 40,680 Sundry payables and other accrued liabilities 81,438 84,069 25,725

123,887 116,070 92,223

Payable within 12 months 123,887 116,070 90,181 Payable after 12 months - - 2,042

123,887 116,070 92,223

2018 2017RM'000 RM'000

Company

Provision for bonus 4,730 7,081 Provision for expenses 14,102 - Sundry payables and other accrued liabilities 2,816 1,477

21,648 8,558

The amount due to related parties is unsecured, interest free and has no fixed repaymentterms.

Sundry payables and other accrued liabilities of the Company are interest free and arenormally settled on an average term of 30 days (2017: 30 days).


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33. LONG TERM INCENTIVE PLAN

The salient features of the LTIP are as follows:

(a)

(b)

(c)

(d)

Movement of the plan during the financial year

No. WASP No. WASP000 RM'000 000 RM'000

Granted as at 1 January 21,175 17,247 6,877 4,641 Movement during the year:

Company (91) 1,585 921 2,537 Subsidiaries (5,783) (1,726) 13,377 10,069

Granted as at 31 December 15,301 17,106 21,175 17,247

The grant is personal to the grantee and cannot be assigned, encumbered, transferredor otherwise disposed of in any manner whatsoever.

The eligibility of participation in the LTIP is defined in the LTIP By-Laws and the LTIPcommittee has the discretion to waive any of the eligibility criteria.

The Long Term Incentive Plan ("LTIP" or "the plan") was effective on 1 June 2016 and is aplan where the Group will grant Restricted Share Units ("RSU") of the Company to eligibleemployees in the Group and the Company in accordance with the LTIP By-Laws.

The following table illustrates the number and weighted average share prices ("WASP") of,and movements in, the plan during the financial year:

Group/CompanyGroup/Company2018 2017

The LTIP shall be in force for a period of four (4) years from the effective date unlessterminated by the Board of Directors prior to the expiration of the plan ("LTIP period") inaccordance with the By-Laws. All unvested RSUs comprised in any grant (whether fullyor partially) shall cease to be capable of vesting upon expiration of the LTIP period ortermination of the plan.

The total number of RSUs which may be made available under the plan shall not exceedin aggregate a number equivalent to five percent (5%) of the issued and paid-up ordinaryshare capital of the Company, at any point in time when the grants are made over theLTIP period. The granted RSUs shall vest progressively to the eligibile employee inaccordance with the LTIP By-Laws.

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33. LONG TERM INCENTIVE PLAN (CONT'D.)

Fair value of the plan granted

34. OPERATING LEASE COMMITMENTS PAYABLE


2018 2017 2017RM'000 RM'000 RM'000

Group

Within one year 239 1,044 1,171 After one year but not more than five years 87 1,313 1,742

326 2,357 2,913

Company

Within one year 694 740After one year but not more than five years 406 1,174

1,100 1,914

The future minimum rentals payable under operating leases for the Group's and theCompany's rentals of offices are as follows:

The EVA method separately values the Adjusted Net Worth ("ANW") of the Company andthe value of future earnings. The ANW of the Company represents the value of theCompany’s equity assuming that the Company earns only the investors’ required return onnet worth in all future periods.

Valuations in excess of the net worth must therefore be the result of earnings in excess ofthe investors’ required earnings. These earnings in excess of the investors’ requiredearnings are referred to as “Economic Value Added”. The EVA earnings in all future periodscan be discounted and then added to the ANW to obtain the equity value of the Company.

The AV method separately values 3 components of a life insurer:- Adjusted Net Worth- Value of In-Force business- Value of New business

The fair value of the plan granted is estimated at the grant date using the Economic ValueAdded ("EVA") method and Appraisal Valuation ("AV") method, taking into account the termsand conditions upon which the plan was granted.


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35. OTHER COMMITMENTS AND CONTINGENCIES

2018 2017RM'000 RM'000

Approved and contracted for:Property and equipment

Group 3,742 3,731Company - 19

Approved but not contracted for:Property and equipment

Group 4,833 5,134

36. SIGNIFICANT RELATED PARTY DISCLOSURES

(a)

2018 2017RM'000 RM'000

Group

ExpensesDividend paid to Tulai - (33,996)

In addition to the transactions detailed elsewhere in the financial statements, the Group hadthe following transactions with related parties during the financial year:

A number of transactions are entered into with related parties in the normal course ofbusiness. These transactions were carried out on terms and conditions negotiated betweenthe related parties.

Transactions with Tulai Beach Ventures Sdn. Bhd. ("Tulai"), the holding company andKhazanah Nasional Berhad ("KNB"), the penultimate holding company:


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36. SIGNIFICANT RELATED PARTY DISCLOSURES (CONT'D.)

(b)

2018 2017RM'000 RM'000

Group

(Income)/expenses

Premiums/contribution earned from CIMB Bank/CIMB Principal (21,073) (17,976)

Interest/profit earned from deposits in CIMB Bank/CIBB (404) (1,359)Commission paid to CIMB Bank and CIBB 107,479 97,200Sales and marketing expenses paid to CIMB Bank,

CIMB Principal 50,239 27,707Rental income received from CIMB Bank (505) (560)Rental expenses paid to SLMAB 72 73Investment management fee paid to CIMB Principal 690 843Insurance expenses paid to CIMB Howden 79 1Sales and marketing expenses paid to CIMB Bank

and CIBB 298 11,992Partnership fees paid to CIMB-Principal 8,000 8,480Contribution income received from CIMB - Principal (159) (188)Contribution income received from Yayasan Khazanah (112) (98)Profit income earned from deposits placed with CIBB (698) (806)Contribution income received from CIBB (2,948) (2,799)Recharges of expenses paid to CIMB -Principal 100 -

In addition to the transactions detailed elsewhere in the financial statements, the Group hadthe following transactions with related parties during the financial year (cont'd.):

Transactions with CIMB Bank Berhad ("CIMB Bank"), CIMB Principal Asset ManagementBerhad ("CIMB Principal"), CIMB Islamic Bank Berhad ("CIBB"), CIMB Group HoldingsBerhad ("CIMBG"), CIMB Investment Bank Berhad ("CIMB"), CIMB Wealth AdvisorBerhad ("CWAB") and CIMB Howden Insurance Brokers Sdn. Bhd. ("CIMB Howden"),the associates of the penultimate holding company:

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(c) Transaction wih subsidiary company:

2018 2017RM'000 RM'000

Company

Income

Dividend received from RVSB 84,673 45,120

(d)

2018 2017RM'000 RM'000

Group

Statement of financial position

Bank balances 45,956 41,973Fixed and call deposits with financial institutions 1,915 1,851Quoted equity securities 32,615 36,298Unquoted corporate debt securities - 125,618Unit trust funds 160,837 47,616Unquoted Sukuk 252,651 131,493Amount due to related parties (27,802) (35,762)Money market placement with CIBB/ CIMB 20,269 26,116

(e) Key management personnel

Key management personnel are those persons having the authority and responsibility forplanning, directing and controlling the activities of the Group and the Company eitherdirectly or indirectly. The key management personnel of the Group and the Companycomprised the Board of Directors and Chief Executive Officer.

In addition to the transactions detailed elsewhere in the financial statements, the Group hadthe following transactions with related parties during the financial year (cont'd.):

Balances with related companies within the KNB Group, the penultimate holdingcompany:

The amount due to related parties are unsecured, non-interest bearing and have no fixedrepayment terms. Other balances with related companies are held in accordance withnormal trade terms applicable to such financial instruments.

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(e) Key management personnel (cont'd.)

2018 2017RM'000 RM'000

Group

Wages and salaries 5,718 4,658 Other benefits 2,249 2,824 Directors' fees and allowances 2,483 2,595

10,450 10,077

Company

Wages and salaries 2,867 1,603 Other benefits 1,497 2,210 Directors' fees and allowances 821 765

5,185 4,578

37. INSURANCE/TAKAFUL RISK

Total compensation paid and payable to the Group's and the Company’s keymanagement personnel during the financial year was as follows:

Insurance/takaful risk is the risk that inadequate or inappropriate underwriting, claimsmanagement, product design and pricing will expose the Group to financial loss and mayresult in the inability to meet its liabilities.

The Group's insurance/takaful businesses are exposed to a range of insurance/takaful risksfrom various products. In providing financial advisory services coupled with insurance andtakaful protection, the Group has to manage risks such as mortality (the death ofpolicyholders), morbidity (ill health), persistency, product design and pricing.

The mortality and morbidity risks are managed through the use of reinsurance/retakaful totransfer excessive risk exposures, using appropriate actuarial techniques as well as othermitigation measures.

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37. INSURANCE/TAKAFUL RISK (CONT'D.)

(a) Risk management framework

To promote a consistent and rigorous approach to risk management, the subsidiarieshave a set of formal risk management policies that set out the control standards for thesubsidiaries' operations. As the business responds to changing market conditions andcustomer needs, the subsidiaries' management regularly monitors the appropriatenessof the subsidiaries' risk policies to ensure that they remain up-to-date.

In addition, the subsidiaries have in place an Asset-Liability Management ("ALM")framework, where the subsidiaries monitor their assets and liabilities matching positions.The objective is to meet the subsidiaries' investment policies where the subsidiaries arerequired to match assets as closely as possible with liabilities of the appropriate amount,type and duration to minimise ALM risk.

Given the risks above, the life insurance and takaful subsidiaries have recognised riskmanagement as an integral part of the subsidiaries' business objectives and is critical forthe subsidiaries to achieve continued profitability and sustainable growth in shareholders'value. This includes putting in place a Risk Management Framework ("RMF").

To ensure the effective functioning of the RMF, the subsidiaries established theirrespective Risk Management Committees ("RMC") and the RMC are supported by theEnterprise Risk Management Committees, the Asset and Liability Committees and theInvestment Committees.

Persistency (or lapse) risk is managed through frequent monitoring of experience. Wherepossible, the potential financial impact of lapses is reduced by the product design includingrepricing where appropriate and allowed under the contract. Persistency risk is alsomitigated through persistency management, sharing best practices in the setting of lapseassumptions, product design requirements, experience monitoring and requiredmanagement actions.

Poorly designed or inadequately priced products can lead to both financial loss andreputation risk to the Group. Policies have been developed to support the Group throughproduct cycle development process, financial analysis and pricing.

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37. INSURANCE/TAKAFUL RISK (CONT'D.)

(b) Life and general insurance actuarial liabilities

GroupReinsurance

andGross retakaful Net

RM'000 RM'000 RM'0002018

Continuing operationsWhole life 44,406 1,321 45,727 Term assurance 213,928 (7,273) 206,655 Endowment 250,982 (1,101) 249,881 Mortgage 721,204 (67,607) 653,597 Others 41,379 (539) 40,840

1,271,899 (75,199) 1,196,700

2017

Continuing operationsWhole life 28,406 2,254 30,660Term assurance 180,376 (8,078) 172,298Endowment 241,767 (1,084) 240,683Mortgage 698,278 (50,232) 648,046Others 43,351 (590) 42,761

1,192,178 (57,730) 1,134,448

Discontinued operationsWhole life 189 (57) 132

189 (57) 132

The life insurance contracts are in Malaysia.

The table below shows the concentration of actuarial liabilities by type of contract for lifeinsurance:

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37. INSURANCE RISK (CONT'D.)

(b) Life and general insurance actuarial liabilities (cont'd.)

Reinsuranceand

Gross retakaful NetRM'000 RM'000 RM'000

Group

2017

Discontinued operationsPersonal accident 6,018 (3,349) 2,669 Miscellaneous 344,489 (5,999) 338,490

350,507 (9,348) 341,159

Key assumptions

Discount rate

The discount rate used for non-participating policies, guaranteed benefit liabilities ofparticipating policies and the non-unit liability of investment-linked policies is the yieldobserved on Malaysian Government Securities ("MGS") of the appropriate duration.This applies only to the Malaysian subsidiaries.

(i)

The table below shows the concentration of insurance contract liabilities by type ofcontract for general insurance:

The key assumptions to which the estimation of liabilities is particularly sensitive are asfollows:

The general insurance contracts are in Turkey and the subsidiary engaged in generalinsurance business was disposed of on 31 December 2018.

Material judgment is required in determining the liabilities and in the choice ofassumptions. Assumptions in use are based on past experience, current internal data,external market indices and benchmarks which reflect current observable market pricesand other published information. Assumptions and prudent estimates are determined atthe date of valuation and no credit is taken for possible beneficial effects of voluntarywithdrawals. Assumptions are further evaluated on a continuous basis in order to ensurerealistic and reasonable valuations.

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Key assumptions (cont'd.)

(i) Discount rate (cont'd.)

Mortality and morbidity rates

Lapse and surrender rates

Expenses

In the case of the non-guaranteed benefits liabilities of participating policies, thediscount rate is based on the expected fund yield of the participating fund, net of taxon investment income of the participating fund. The best estimate investment returnfor participating business is derived from the expected returns of the respectiveinvestment classes. For guaranteed benefits liabilities, the discount rate is similar tothat of non-participating policies.

Mortality and morbidity rates represents the expected claims experience of theGroup.

The Group bases mortality and morbidity on local established industry tables whichreflect historical experiences, adjusted when appropriate to reflect the insurer'sunique risk exposure, product characteristics, target markets and its own claimsseverity and frequency experiences. For those contracts that insure longevity risk, anallowance is made for expected future mortality improvements.

(ii)

(iii)

Lapse and surrender rates are used to determine the expected persistency of thebusiness i.e. policyholders renew their policies etc. These rates are based on theinsurer's historical experience of lapses and surrenders.

Expense assumptions represent the expected amount that will be incurred inservicing the policies over its expected life. Assumptions on future expenses takeinto consideration current expense levels and the expected expense inflation. Anexpenses overrun is recognised if the expected expenses (both maintenance andacquisition) exceed the pricing assumptions.

(iv)

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Unallocated loss adjustment expenses ("ULAE")

(c) Family takaful actuarial liabilities

The table below shows the concentration of actuarial liabilities by type of contract:


Group

2018

Whole life 337,154 (38,239) 298,915 Endowment 44,589 (334) 44,255 Mortgage 508,243 (37,914) 470,329 Others 102,035 - 102,035

992,021 (76,487) 915,534

2017

Whole life 376,690 (44,495) 332,195 Endowment 27,015 (346) 26,669 Mortgage 502,015 (28,933) 473,082 Others 27,519 - 27,519

933,239 (73,774) 859,465

The family takaful contracts are in Malaysia.

The methodology used in deriving the ULAE is the same as last year. A loading isapplied directly to the best estimates for loss and allocated loss adjustment expenseto provide for the ULAE.

(iv)

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(c) Family takaful actuarial liabilities (cont'd.)

Key assumptions

Discount rate

Mortality and morbidity rates

Lapse and surrender rates

Material judgment is required in determining the liabilities and in the choice ofassumptions. Assumptions in use are based on past experience, current internal data,external market indices and benchmarks which reflect current observable market pricesand other published information. Assumptions and prudent estimates are determined atthe date of valuation and no credit is taken for possible beneficial effects of voluntarywithdrawals. Assumptions are further evaluated on a continuous basis in order to ensurerealistic and reasonable valuations.

The key assumptions to which the estimation of liabilities is particularly sensitive are asfollows:

The discount rates used in the determination of Participants Risk Fund ("PRF")cashflows are based on the yield observed on Government Investment Issues ("GII")of the appropriate duration.

Mortality and morbidity rates represent the expected claims experience of the takafuloperator. The takaful operator determines mortality and morbidity rates using localestablished industry tables which reflect historical experiences, adjusted whereappropriate to reflect the takaful operator's unique risk exposure, productcharacteristics, target markets and own claims severity and frequency experiences.For those contracts that are exposed to longevity risk, allowance is made forexpected future mortality improvements.

(ii)

(i)

Lapse and surrender rates are used to determined the expected persistency of thebusiness i.e. the expectation that participants will renew their certificates etc.. Theserates are based on the takaful operator's historical experience of lapses andsurrenders.

(iii)

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(c) Family takaful actuarial liabilities (cont'd.)


Expenses

(d) General takaful actuarial liabilities

The table below shows the concentration of actuarial liabilities by type of contract:


Group

2018

Fire 894 (344) 550 Personal Accident 1,022 (201) 821

1,916 (545) 1,371


2017

Fire 13,012 (2,999) 10,013Personal Accident 13,124 (4,089) 9,035

26,136 (7,088) 19,048

The general takaful contracts are in Malaysia.

Expense assumptions represent the expected amount that will be incurred inservicing the certificates over their expected lives. Assumptions on future expensestake into consideration current expense levels and the expected expense inflation.

(iv)



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(d) General takaful actuarial liabilities (cont'd.)

Key assumptions

(e) Sensitivities

Sensitivity analysis for the insurance and takaful business

The analysis below is performed for reasonably possible movements in keyassumptions with all other assumptions held constant, showing the impact on grossand net actuarial liabilities, gross and net takaful claims liabilities, profit before taxand equity. The correlation of assumptions will have a significant effect indetermining the ultimate actuarial and claims liabilities, but to demonstrate the impactdue to changes in assumptions, assumptions had to be changed on an individualbasis. It should be noted that movements in these assumptions are non-linear.Sensitivity information will also vary according to the current economic assumptions.The analysis is done as part of the regulatory requirement for stress testing and isdone on an annual basis.

The principal assumptions underlying the estimation of liabilities is that the Company'sfuture claims development will follow a similar pattern to past claims developmentexperience. This includes assumptions in respect of average claim costs, claim handlingcosts, claim inflation factors and average number of claims for each accident year.

As per normal practice for financial statements, the methodology used in deriving theprovision for expenses is consistent with prior year. Loadings are applied directly to thecentral estimate of claims liabilities, the central estimate of URR and UCR to derive theexpense liabilities.

Additional qualitative judgments are used to assess the extent to which past trends maynot apply in the future, for example, isolated occurrence, changes in market factors suchas public attitude to claiming, economic conditions, as well as internal factors, such as,portfolio mix, policy conditions and claims handling procedures. Judgment is further usedto assess the extent to which external factors, such as, judicial decisions andgovernment legislation may affect the estimates.

(i)

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(e) Sensitivities (cont'd.)

(i) Sensitivity analysis for the insurance and takaful business (cont'd.)

Group Change in Impact on Impact on Impact onbest estimate gross actuarial net actuarial profit before Impact onassumptions liabilities liabilities tax equity

% RM'000 RM'000 RM'000 RM'0002018

Life insuranceMortality/morbidity +10 74,503 13,484 (13,408) (10,726) Expenses +10 8,655 8,655 (8,631) (6,905) Lapse and surrender rates +10 6,409 7,720 (7,354) (5,883) Discount rate -1 116,555 111,311 (110,153) (88,122)

Family takafulMortality/morbidity +10 57,214 9,667 (4,068) (3,162) Expenses +10 8,883 8,883 (8,883) (8,883) Lapse and surrender rates +10 11,392 12,926 (10,968) (10,697) Discount rate -1 18,349 12,871 (8,315) (7,792)

General takafulULRs for all business classes for all loss years +10 2,549 1,579 (854) (649) ULRs for Personal Accident class for all loss years +20 1,504 1,464 (791) (602) ULRs for Fire class for all loss years +20 3,594 1,694 (916) (696)

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% RM'000 RM'000 RM'000 RM'0002017

Life insuranceMortality/morbidity +10 72,164 13,402 (13,323) (10,760) Expenses +10 8,997 8,997 (8,969) (7,175) Lapse and surrender rates +10 5,167 5,712 (5,843) (4,778) Discount rate -1 118,160 114,658 (113,454) (90,777)

General insuranceULRs for all business classes for all loss years +10 49,438 49,438 (49,438) (49,438) ULRs for Personal Accident class for all loss years +20 98,875 98,875 (98,875) (98,875)

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% RM'000 RM'000 RM'000 RM'0002017

Family takafulMortality/morbidity +10 53,679 8,981 (3,409) (2,638) Expenses +10 8,226 8,226 (8,226) (8,226) Lapse and surrender rates +10 8,317 9,597 (7,578) (7,390) Discount rate -1 20,135 15,669 (9,927) (9,348)

General takafulULRs for all business classes for all loss years +10 7,164 4,002 (2,130) (1,618) ULRs for Personal Accident class for all loss years +20 9,545 5,566 (3,040) (2,311) ULRs for Fire class for all loss years +20 5,076 2,680 (1,340) (1,018)

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(f) Claims development table

Analysis of claims development - Gross takaful certificate liabilities

Before2012 2012 2013 2014 2015 2016 2017 2018 Total

Accident year RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Estimate of cumulative claims:At the end of accident year 9,012 11,692 17,009 21,254 14,871 14,978 10,290 764 1 year later 8,520 9,532 19,325 16,487 13,925 10,129 4,512 - 2 years later 7,618 7,185 12,652 12,483 9,936 7,550 - - 3 years later 5,560 2,949 9,608 9,081 6,949 - - - 4 years later 4,023 3,176 9,300 8,856 - - - - 5 years later 3,873 3,158 9,175 - - - - - 6 years later 3,822 3,123 - - - - - - 7 years later 3,822 - - - - - - - Estimate of gross cumulative claims to date (A) 3,822 3,123 9,175 8,856 6,949 7,550 4,512 764 44,751

The following tables show the takaful subsidiary's estimated incurred claims, including both claims notified and IBNR for each successive accident year at the endof each reporting period, together with cumulative payments to date. The management of the takaful subsidiary believes the estimate of total claims outstandingas at the financial year end are adequate. The takaful subsidiary gives consideration to the probability and magnitude of future experience being more adversethan assumed and exercises a degree of caution in setting reserves when there is considerable uncertainty.

As at 31 December<------------------------------------------------Discontinued operations------------------------------------------------->

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(f) Claims development table (cont'd.)

Analysis of claims development - Gross takaful certificate liabilities (cont'd.)

Before2012 2012 2013 2014 2015 2016 2017 2018 Total


Estimate of cumulative payments to date:At the end of accident year (1,939) (1,333) (2,934) (1,932) (3,209) (3,817) (2,429) (764) 1 year later (3,366) (2,548) (8,157) (8,150) (6,514) (6,164) (4,512) - 2 years later (3,699) (2,880) (8,783) (8,502) (6,811) (7,550) - - 3 years later (3,708) (2,887) (8,942) (8,543) (6,949) - - - 4 years later (3,808) (3,123) (8,975) (8,856) - - - - 5 years later (3,808) (3,123) (9,175) - - - - - 6 years later (3,822) (3,123) - - - - - - 7 years later (3,822) - - - - - - - Gross cumulative claims paid to date (B) (3,822) (3,123) (9,175) (8,856) (6,949) (7,550) (4,512) (764) (44,751)

Gross general takaful claim liabilities - - - - - - - - -

<------------------------------------------------Discontinued operations------------------------------------------------->As at 31 December

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Analysis of claims development - Net of retakaful

Before2012 2012 2013 2014 2015 2016 2017 2018 Total


Estimate of cumulative claims:At the end of accident year 4,271 4,852 9,219 9,312 10,555 10,412 6,943 723 1 year later 3,476 4,783 7,449 8,667 9,793 6,148 3,192 - 2 years later 3,501 3,618 6,859 5,822 6,289 4,495 - - 3 years later 2,476 1,735 3,799 2,866 4,074 - - - 4 years later 1,808 1,788 3,726 2,781 - - - - 5 years later 1,750 1,753 3,535 - - - - - 6 years later 1,744 1,746 - - - - - - 7 years later 1,744 - - - - - - - Estimate of net cumulative claims to date (A) 1,744 1,746 3,535 2,781 4,074 4,495 3,192 723 22,290

Estimate of cumulative payments to date:At the end of accident year (891) (757) (1,957) (1,114) (2,024) (2,509) (1,770) (723) 1 year later (1,473) (1,626) (2,891) (2,658) (3,883) (3,741) (3,192) - 2 years later (1,720) (1,694) (3,292) (2,567) (4,004) (4,495) - - 3 years later (1,721) (1,699) (3,402) (2,588) (4,074) - - - 4 years later (1,741) (1,746) (3,435) (2,781) - - - - 5 years later (1,741) (1,746) (3,535) - - - - - 6 years later (1,744) (1,746) - - - - - - 7 years later (1,744) - - - - - - - Net cumulative claims paid to date (B) (1,744) (1,746) (3,535) (2,781) (4,074) (4,495) (3,192) (723) (22,290)

Net general takaful claim liabilities - - - - - - - - -


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Analysis of claims development - Gross takaful certificate liabilities

Before2011 2011 2012 2013 2014 2015 2016 2017 Total


Estimate of cumulative claims:At the end of accident year 11,983 9,012 11,692 17,009 21,254 14,871 14,978 10,290 1 year later 5,967 8,520 9,532 19,325 16,487 13,925 10,129 - 2 years later 4,030 7,618 7,185 12,652 12,483 9,936 - - 3 years later 3,921 5,560 2,949 9,608 9,081 - - - 4 years later 4,113 4,023 3,176 9,300 - - - - 5 years later 3,629 3,874 3,158 - - - - - 6 years later 3,574 3,822 - - - - - - 7 years later 3,735 - - - - - - - Estimate of gross cumulative claims to date (A) 3,735 3,822 3,158 9,300 9,081 9,936 10,129 10,290 59,451

Estimate of cumulative payments to date:At the end of accident year (860) (1,939) (1,333) (2,934) (1,932) (3,208) (3,817) (2,429) 1 year later (3,220) (3,366) (2,548) (8,157) (8,150) (6,514) (6,164) - 2 years later (3,330) (3,699) (2,880) (8,783) (8,502) (6,811) - - 3 years later (3,351) (3,708) (2,887) (8,942) (8,543) - - - 4 years later (3,354) (3,808) (3,123) (8,975) - - - - 5 years later (3,574) (3,808) (3,123) - - - - - 6 years later (3,574) (3,822) - - - - - - 7 years later (3,676) - - - - - - - Gross cumulative claims paid to date (B) (3,676) (3,822) (3,123) (8,975) (8,543) (6,811) (6,164) (2,429) (43,543)

Gross general takaful claims liabilities 59 - 35 325 538 3,125 3,965 7,861 15,908


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Before2011 2011 2012 2013 2014 2015 2016 2017 Total


Estimate of cumulative claims:At the end of accident year 3,302 4,271 4,852 9,219 9,312 10,555 10,411 6,943 1 year later 3,063 3,476 4,783 7,449 8,667 9,793 6,148 - 2 years later 2,199 3,501 3,618 6,859 5,822 6,289 - - 3 years later 2,071 2,476 1,735 3,799 2,866 - - - 4 years later 2,069 1,808 1,788 3,726 - - - - 5 years later 1,995 1,750 1,753 - - - - - 6 years later 1,985 1,744 - - - - - - 7 years later 2,020 - - - - - - - Estimate of net cumulative claims to date (A) 2,020 1,744 1,753 3,726 2,866 6,289 6,148 6,943 31,489

Estimate of cumulative payments to date:At the end of accident year (508) (891) (757) (1,957) (1,114) (2,023) (2,508) (1,770) 1 year later (1,741) (1,473) (1,626) (2,891) (2,658) (3,883) (3,741) - 2 years later (1,762) (1,720) (1,694) (3,292) (2,567) (4,004) - - 3 years later (1,765) (1,721) (1,699) (3,402) (2,588) - - - 4 years later (1,765) (1,741) (1,746) (3,435) - - - - 5 years later (1,985) (1,741) (1,746) - - - - - 6 years later (1,985) (1,744) - - - - - - 7 years later (2,017) - - - - - - - Net cumulative claims paid to date (B) (2,017) (1,744) (1,746) (3,435) (2,588) (4,004) (3,741) (1,770) (21,045)

Net general takaful claims liabilities 3 - 7 291 278 2,285 2,407 5,173 10,444


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Before2012 2012 2013 2014 2015 2016 2017 2018 Total


Estimate of cumulative claims:At the end of accident year - - - - - - - 727 1 year later - - - - - - 529 2 years later - - - - - 16 3 years later - - - - - 4 years later - - - - 5 years later - - 58 6 years later - - 7 years later 12 Estimate of gross cumulative claims to date (A) 12 - 58 - - 16 529 727 1,342

The following tables show the takaful subsidiary's estimated incurred claims, including both claims notified and IBNR for each successive accident year at the endof each reporting period, together with cumulative payments to date. The management of the takaful subsidiary believes the estimate of total claims outstandingas at the financial year end are adequate. The takaful subsidiary gives consideration to the probability and magnitude of future experience being more adversethan assumed and exercises a degree of caution in setting reserves when there is considerable uncertainty.

<--------------------------------------------------Continuing operations--------------------------------------------------->As at 31 December

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Before2012 2012 2013 2014 2015 2016 2017 2018 Total


Estimate of cumulative payments to date:At the end of accident year - - - - - - - 132 1 year later - - - - - - 137 2 years later - - - - - 17 3 years later - - - - - 4 years later - - - - 5 years later - - 238 6 years later - - 7 years later 50 Gross cumulative claims paid to date (B) 50 - 238 - - 17 137 132 574

Gross general takaful claim liabilities 62 - 296 - - 33 666 859 1,916

<--------------------------------------------------Continuing operations--------------------------------------------------->As at 31 December

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Before2012 2012 2013 2014 2015 2016 2017 2018 Total


Estimate of cumulative claims:At the end of accident year - - - - - - - 414 1 year later - - - - - - 356 2 years later - - - - - 17 3 years later - - - - - 4 years later - - - - 5 years later - - 57 6 years later - - 7 years later 1 Estimate of net cumulative claims to date (A) 1 - 57 - - 17 356 414 845

Estimate of cumulative payments to date:At the end of accident year - - - - - - - 132 1 year later - - - - - - 137 2 years later - - - - - 17 3 years later - - - - - 4 years later - - - - 5 years later - - 238 6 years later - - 7 years later 2Net cumulative claims paid to date (B) 2 - 238 - - 17 137 132 526

Net general takaful claim liabilities 3 - 295 - - 34 493 546 1,371

As at 31 December<--------------------------------------------------Continuing operations--------------------------------------------------->

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(f) Claims development table

Analysis of claims development - Gross insurance contract liabilities

Before2011 2011 2012 2013 2014 2015 2016 2017 Total


Estimate of cumulative claims:At the end of accident year - 150,207 186,961 246,469 357,983 465,470 659,203 801,781 1 year later - 151,213 187,463 248,254 357,734 467,810 660,628 - 2 years later - 151,326 186,754 246,379 357,585 467,293 - - 3 years later - 150,828 186,316 246,710 357,273 - - - 4 years later - 150,698 186,248 246,747 - - - - 5 years later - 150,682 186,240 - - - - - 6 years later - 150,658 - - - - - - 7 years later 1,293 - - - - - - - Estimate of gross cumulative claims to date (A) 1,293 150,658 186,240 246,747 357,273 467,293 660,628 801,781 2,871,913

The table below indicates the impact of various changes in assumptions which are within a reasonable range of possible outcomes given the uncertainties involved in theestimation process. The table demonstrates the effect of change in key assumptions whilst other assumptions remain unchanged, if these assumptions were changed in asingle calender year. The correlation of assumptions will have significant effect in determining the ultimate claims liabilities, but to demonstrate the impact on the claimsliabilities due to changes in assumptions, these assumption changes had to be done on an individual basis. It should also be stressed that these assumptions are non-linearand larger or smaller impacts cannot easily be gleaned from these results.

As at 31 December<-----------------------------------------------------Discontinued operations-------------------------------------------------->

There is no estimate of cummulative incurred claims, including both claims and IBNR by accident year as at 31 December 2018 as the subsidiary engaged in generalinsurance business has been disposed of on 31 December 2018.

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Analysis of claims development - Gross insurance contract liabilities

Before2011 2011 2012 2013 2014 2015 2016 2017 Total


Estimate of cumulative payments to date:At the end of accident year - (147,459) (181,456) (240,831) (349,898) (455,724) (638,996) (764,606) 1 year later - (150,568) (185,731) (245,788) (355,282) (466,379) (656,901) - 2 years later - (150,583) (186,452) (246,002) (355,353) (466,438) - - 3 years later - (150,609) (186,207) (245,925) (355,365) - - - 4 years later - (150,550) (186,214) (245,933) - - - - 5 years later - (150,554) (186,216) - - - - - 6 years later - (150,550) - - - - - - 7 years later - - - - - - - - Gross cumulative claims paid to date (B) - (150,550) (186,216) (245,933) (355,365) (466,438) (656,901) (764,606) (2,826,009)

Movement of best estimate of gross claim liabilities (A) - (B) 1,293 108 24 814 1,908 855 3,727 37,175 45,904 Claim reserves (2,894) IBNR 5,219

48,229

<-----------------------------------------------------Discontinued operations-------------------------------------------------->As at 31 December

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Analysis of claims development - Net of reinsurance

Before2011 2011 2012 2013 2014 2015 2016 2017 Total


Estimate of cumulative claims:At the end of accident year - 132,957 165,317 218,806 317,787 412,591 585,271 711,631 1 year later - 133,748 165,777 219,564 316,731 414,394 586,395 - 2 years later - 133,915 165,137 218,625 316,530 413,954 - - 3 years later - 133,479 164,750 218,903 316,326 - - - 4 years later - 133,322 164,721 218,923 - - - - 5 years later - 133,310 164,712 - - - - - 6 years later - 133,298 - - - - - - 7 years later 506 - - - - - - - Estimate of net cumulative claims to date (A) 506 133,298 164,712 218,923 316,326 413,954 586,395 711,631 2,545,745

Estimate of cumulative payments to date:At the end of accident year - (130,649) (161,162) (213,984) (310,775) (404,193) (567,397) (678,865) 1 year later - (133,301) (164,947) (218,320) (315,554) (413,341) (583,132) - 2 years later - (133,314) (164,909) (218,510) (315,607) (413,377) - - 3 years later - (133,315) (164,691) (218,441) (315,618) - - - 4 years later - (133,261) (164,698) (218,449) - - - - 5 years later - (133,265) (164,700) - - - - - 6 years later - (133,261) - - - - - - 7 years later - - - - - - - - Net cumulative claims paid to date (B) - (133,261) (164,700) (218,449) (315,618) (413,377) (583,132) (678,865) (2,507,402)

Movement of best estimate of net claim liabilities (A) - (B) 506 37 12 474 708 577 3,263 32,766 38,343 Claim reserves (2,623) IBNR 4,998

40,718

As at 31 December<-----------------------------------------------------Discontinued operations-------------------------------------------------->

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38. FINANCIAL RISKS

(a) Credit risk

The Group is exposed to financial risks arising from its operations and the use of financialinstruments. The key financial risks include credit, liquidity, market and foreign currencyrisks. The Group has an approved set of guidelines and policies as well as internal controlswhich set out its overall business strategies to manage these risks. The Group's overallfinancial risk management objective is to enhance shareholders' value through effectivemanagement of the Group's risks. Although this guiding principle and objective is consistentthroughout the Group, the Group consists of subsidiaries with their own governing Boardsthat will apply and determine the implementation of these policies in respect of eachindividual company.

The Company manages this risk by following the holding company's policies and guidelinesand also seeks approval from the Board with regards to all financial risk managementmatters.

The following sections provide details regarding the Group's exposure to theabovementioned financial risks and the objectives, policies and processes for themanagement of these risks.

Credit risk is the risk of loss that may arise on outstanding financial instruments should acounterparty default on its obligations. The Group’s exposure to credit risk arisesprimarily from corporate bonds and Sukuk purchased. For other financial assets(including investment securities and cash and bank balances), the Group minimisescredit risk by dealing exclusively with high credit rated counterparties.

Credit risk or the risk of counter parties defaulting is monitored and controlled by theapplication of credit approval, limits, monitoring procedures and regulatory limits incertain jurisdictions. The Group is also exposed to credit risk through the use ofreinsurance and retakaful. Reinsurance and retakaful arrangements are only placed withproviders and operators who meet the Group's counterparty credit standards.

The Group only purchases corporate bonds, Sukuks, other investment securities andfinancial assets of high credit rating, of low credit risk and which meet the financialcriteria set by the Group. The use of credit rating agencies would depend on theavailability of the rating done by a reputable international rating agency failing which thelocal credit rating agency is used.

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38. FINANCIAL RISKS (CONT'D.)

(a) Credit risk (cont'd.)

Exposure to credit risk

Financial assets that are neither past due nor impaired

Financial assets that are either past due or impaired

At the reporting date, the Company's exposure to credit risk arises mainly from otherreceivables and is not rated. The Company's maximum exposure to credit risk isrepresented by the carrying amount of the financial asset.

Information regarding financial assets, insurance and takaful receivables, otherreceivables and reinsurance assets that are neither past due nor impaired is disclosed inNote 19, 20, 21, 22 and 38 respectively.

Information regarding financial assets that are either past due or impaired is disclosed inNote 19 and 38 to the financial statements.

At the reporting date, the Group's maximum exposure to credit risk is represented by thecarrying amount of each class of financial asset recognised in the statement of financialposition.

Deposits with banks and other financial institutions that are neither past due nor impairedare placed with or entered with reputable financial institutions or companies with nohistory of default.

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Group Not subject Investment- Past due Past dueto linked but not and

AAA AA A BBB Not rated credit risk funds impaired impaired TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

2018

Financial assets at FVTPL

Continuing operationsCorporate bonds 112,243 387,834 62,706 - 528,791 - 33,908 - - 1,125,482 Investment in unit trust funds and

investment-linked funds - - - - - 10,195 397,732 - - 407,927 Malaysian Government Securities - - - - 440,015 - 2,488 - - 442,503 Cagamas 5,775 - - - - - - - - 5,775 Quoted equity securities - - - - - 134,643 43,901 - - 178,544 Unquoted equity securities - - - - - 174 - - - 174 Accrued interest and profit 2,437 3,703 841 - 10,395 - 354 - - 17,730

120,455 391,537 63,547 - 979,201 145,012 478,383 - - 2,178,135


Continuing operationsCagamas 10,123 - - - - - - - - 10,123 Malaysian Government

Investment Issues - - - - 318,435 - - - - 318,435 Unquoted Sukuk 178,126 231,224 - - 412,665 - - - - 822,015 Accrued profit 2,609 2,369 - - 8,729 - - - - 13,707

190,858 233,593 - - 739,829 - - - - 1,164,280

The table below provides information regarding the credit risk exposure of the Group by classifying assets according to the Group's credit ratings of counterparties:

Neither past–due nor impaired

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2018

LAR

Continuing operationsFixed and call deposits with licensed

financial institutions 103,833 91,715 - - 1,143 - 14,569 - - 211,260 Policy Loans - - - - 11,722 - - - - 11,722 Accrued interest 96 90 - - 467 - 6 - - 659

103,929 91,805 - - 13,332 - 14,575 - - 223,641

Continuing operationsReinsurance and retakaful assets - 133,792 11,835 - 39,541 - - - - 185,168 Insurance and takaful receivables - - - - 47,297 - - - (689) 46,608 Other receivables - - - - 746,890 - 1,737 - - 748,627 Cash and bank balances 46,263 1,394 272 - 7,084 - 175 - - 55,188 Total 461,505 852,121 75,654 - 2,573,174 145,012 494,870 - (689) 4,601,647


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2017

Financial assets at FVTPL

Continuing operationsCorporate bonds 91,311 387,250 81,722 - 454,802 - 35,170 - - 1,050,255 Eurobonds issued by the

Turkish Government - - - - - - - - - - Investment in unit trust funds and

investment-linked funds - - - - - 22,941 343,676 - - 366,617 Malaysian Government Securities - - - - 406,564 - 2,488 - - 409,052 Cagamas 20,980 - - - - - - - - 20,980 Quoted equity securities - - - - - 162,046 52,869 - - 214,915 Unquoted equity securities - - - - - 174 - - - 174 Accrued interest and profit 2,289 3,672 1,216 - 9,946 - 335 - - 17,458

114,580 390,922 82,938 - 871,312 185,161 434,538 - - 2,079,451

Discontinued operationsAccrued interest and profit - - - 1,472 - - - - - 1,472

- - - 1,472 - - - - - 1,472


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2017


Continuing operationsCagamas 10,015 - - - - - - - - 10,015 Malaysian Government

Investment Issues - - - - 275,776 - - - - 275,776 Unquoted Sukuk 172,101 212,832 - - 377,113 - - - - 762,046 Accrued profit 2,574 1,936 - - 7,668 - - - - 12,178

184,690 214,768 - - 660,557 - - - - 1,060,015

Discontinued operationsCorporate bonds - - - 25,552 - - - - - 25,552 Foreign government bonds

including bonds subject to repurchase transaction - - - 31,345 - - - - - 31,345

Eurobonds issued by the Turkish Government - - - 374,084 - - - - - 374,084

Investment in unit trust funds andinvestment-linked funds - - - 2,646 - - - - 2,646

Malaysian Government Investment Issues - - - - 12,127 - - - - 12,127

Unquoted Sukuk - 6,634 - - 9,903 - - - - 16,537 Accrued profit - 25 - - 215 - - - - 240

- 6,659 - 430,981 24,891 - - - - 462,531


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2017

Held-to-maturity investments

Discontinued operationsForeign government bonds - - - 45,721 - - - - - 45,721

LAR

Continuing operationsFixed and call deposits with licensed

financial institutions 67,555 118,367 - - 1,096 - 8,864 - - 195,882 Policy loans - - - - 10,124 - - - - 10,124 Accrued interest 29 223 - - 421 - 7 - - 680

67,584 118,590 - - 11,641 - 8,871 - - 206,686

LAR

Discontinued operationsFixed and call deposits with licensed

financial institutions 10,335 - - 87,401 - - - - - 97,736 Accrued interest 56 - - 3,883 - - - - - 3,939

10,391 - - 91,284 - - - - - 101,675


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2017

Continuing operationsReinsurance and retakaful assets - 123,570 2,288 - 33,422 - - - - 159,280 Insurance and takaful receivables - - - - 37,344 - - - (8) 37,336 Other receivables - - - - 22,526 - 620 - - 23,146 Cash and bank balances 40,781 818 1 - 14,988 - 766 - - 57,354 Total 407,635 848,668 85,227 - 1,651,790 185,161 444,795 - (8) 3,623,268

Discontinued operationsReinsurance and retakaful assets - 684 5,107 2,898 8,875 - - - - 17,564 Insurance and takaful receivables - - - - 164,668 - - 128 (744) 164,052 Other receivables - - - - 17,377 - - - - 17,377 Cash and bank balances 2,000 343 - 116,061 181 - - - - 118,585 Total 12,391 7,686 5,107 688,417 215,992 - - 128 (744) 928,977


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(b) Liquidity risk

Maturity profiles

On demandCarrying or within 1 to 3 3 to 5 5 to 15 Over 15 No Investment-

Group value one year years years years years maturity linked funds TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

2018

Non-derivative financial liabilities

Continuing operationsInsurance and takaful contract liabilities 2,583,166 242,354 267,679 325,347 1,326,679 917,424 24,609 257,020 3,361,112 Insurance and takaful payables 51,624 51,624 - - - - - - 51,624 Financial liabilities 12,881 45,020 (4,712) (3,270) (26,092) (30,843) - 1,020 (18,877) Other payables 123,887 123,499 - - - - - 388 123,887

Investment-linked fund liabilities are repayable or transferable upon notice by policyholders and are disclosed separately under the "investment-linkedfunds" column. Repayments which are subject to notice are treated as if such notice were to be given immediately.

The table below summarises the maturity profile of the Group’s liability at the reporting date based on contractual undiscounted repayment obligations. Allliabilities are presented on a contractual cash flow basis except for the insurance contract liabilities which are presented with their expected cash flows.

The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that it is able to meet its obligationsas they fall due.

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s andthe Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities.

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(b) Liquidity risk (cont'd.)

Maturity profiles

On demandCarrying or within 1 to 3 3 to 5 5 to 15 Over 15 No Investment-

Group value one year years years years years maturity linked funds TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

2017

Non-derivative financial liabilities

Continuing operationsInsurance and takaful contract liabilities 2,424,431 282,250 296,744 302,462 1,175,858 748,024 34,559 246,787 3,086,684 Insurance and takaful payables 33,878 33,878 - - - - - - 33,878 Financial liabilities 36,528 35,595 6,216 3,634 (6,127) (18,455) - - 20,863 Other payables 116,070 130,840 - - - - - 275 131,115

Discontinued operationsInsurance and takaful contract liabilities 398,308 382,770 4,904 435 22 - - - 388,131 Insurance and takaful payables 149,799 149,800 - - - - - - 149,800 Investment contract liabilities 14,298 5,949 3,801 2,220 2,111 215 - - 14,296 Financial liabilities 321 321 - - - - - - 321 Other payables 92,223 94,351 2,043 - - - - - 96,394

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(b) Liquidity risk (cont'd.)

2018 2017On demand On demand

or within or within one year one year

RM'000 RM'000Company

Other payables 21,648 8,558

(c) Interest and profit rate risk

Sensitivity analysis

Impacton profit

Changes in before Impactvariables taxation on equity

RM'000 RM'000Group

2018Interest/profit rates +100 bp (117,456) (107,208) Interest/profit rates -100 bp 133,711 121,384

Interest and profit rate risk is the risk that the fair value or future cash flows of theGroup’s financial instruments will fluctuate because of changes in market interest/profitrates.

The Group actively manages its interest and profit rate risk by maintaining a portfolio offinancial instruments, including derivatives guided by its investment guidelines andpolicies, and regular reviews of its investment portfolio, interest/profit rates and marketexpectations. The use of derivatives is strictly for hedging purposes only and is nonspeculative.

The following table demonstrates the sensitivity to a reasonably possible change ininterest rates, with all other variables held constant, of the Group’s profit before tax andequity:

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(c) Interest and profit rate risk (cont'd.)

Sensitivity analysis (cont'd.)

Impacton profit


RM'000 RM'000

2017Interest/profit rates +100 bp (90,076) (90,657) Interest/profit rates -100 bp 100,603 100,129

(d) Price risk


Impacton profit


RM'000 RM'000Group

2018 +20% of Price market share 17,240 12,492

-20% of Price market share (17,240) (13,792)

Equity/investment risk management includes due diligence in screening the investmentproposals according to the Group investment guidelines and procedures, and complywith stipulated limits specified by a certain jurisdiction.

Equity price risk is the risk that the fair value or future cash flows of the Group’s equityinstruments will fluctuate because of changes in equity prices (other than interest orexchange rates).

The Group is exposed to equity price risk arising from its financial assets and financialliabilities whose values will fluctuate as a result of changes in market prices.

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(d) Price risk (cont'd.)


Impacton profit


RM'000 RM'0002017 +20% of Price market share 15,643 9,208

-20% of Price market share (20,340) (15,459)

(e) Currency risk


Foreign currency risk is the risk that the fair value or future cash flows of a financialinstrument will fluctuate because of changes in foreign exchange rates.

The following table demonstrates the sensitivity to a reasonably possible change inrespective foreign currency exchange rates, with all other variables held constant, ofthe Group’s profit before tax:

As the Group’s main foreign exchange risk from recognised assets and liabilities arisesfrom reinsurance transactions for which the balances are expected to be settled andrealised in less than a year, the impact arising from sensitivity in foreign exchange ratesis deemed minimal as the Group has no significant concentration of foreign currencyrisk as at 31 December 2018.

As at 31 December 2018, the Group’s primary transactions are carried out in RinggitMalaysia (“RM”). As the Group’s business is conducted primarily in Malaysia, theGroup’s financial assets are also primarily maintained in Malaysia as required under theFSA/IFSA and hence, primarily denominated in the same currency as its insurancecontract liabilities. Thus, the main foreign exchange risk from recognised assets andliabilities arises from transactions other than those in which insurance contract liabilitiesare expected to be settled.

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(e) Currency risk (cont'd.)


Impacton profit


RM'000 RM'000Group

2017USD/TRY- Strengthened +10% (691) (6) - Weakened -10% 691 6

EUR/TRY- Strengthened +10% (207) (161) - Weakened -10% 207 161

39. FAIR VALUE

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2:

The fair values of other insurance and takaful receivables, other receivables, otherinsurance and takaful payables, financial liabilities, and provisions and other payables of theGroup and the Company approximate carrying amounts due to their relatively short termmaturity.

The Group uses the following hierarchy for determining and disclosing the fair value offinancial instruments by valuation technique:

Other techniques for which all inputs that have a significant effect on therecorded fair value are observable, either directly or indirectly. These includequoted prices for similar assets and liabilities in active markets, quoted pricesfor identical or similar assets and liabilities in inactive markets, inputs that areobservable that are not prices (such as interest rates, credit risks, etc) andinputs that are derived from or corroborated by observable market data.

No analysis was performed for the impact on profit before taxation and impact on equityas at 31 December 2018 as the foreign subsidiary has been disposed of on 31December 2018.

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39. FAIR VALUE (CONT'D.)

Level 3:

(a) Fair value measurement hierarchy

Quoted Observable Unobservablemarket price input input

Level 1 Level 2 Level 3 TotalRM'000 RM'000 RM'000 RM'000

Assets and liabilities measured at fair value

Financial assetsFinancial assets designated as fair value through profit or loss

Continuing operations- Corporate bonds - 1,125,482 - 1,125,482 - Investment in unit trust funds and investment-linked funds 407,927 - - 407,927 - Malaysian Government

Securities - 442,503 - 442,503 - Cagamas - 5,775 - 5,775 - Quoted equity

securities 178,544 - - 178,544 - Unquoted equity

securities - - 174 174 - Accrued interest

and profit - 17,730 - 17,730 586,471 1,591,490 174 2,178,135

Techniques that use inputs that have a significant effect on the recorded fairvalues that are not based on observable market data.

The Group held the following financial instruments carried at fair value in the statement offinancial position:

Fair value measurement using

Quantitative disclosures of fair value measurement hierarchy for assets andliabilities as at 31 December 2018:

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(a) Fair value measurement hierarchy (cont'd.)



Assets and liabilities measured at fair value (cont'd.)

Financial assets (cont'd.)Available-for-sale investments

Continuing operations- Cagamas - 10,123 - 10,123 - Malaysian Government

Investment Issues - 318,435 - 318,435 - Unquoted Sukuk - 822,015 - 822,015 - Accrued profit - 13,707 - 13,707

- 1,164,280 - 1,164,280

There has been no transfer between Level 1 and 2 fair values during the financial year.


Quantitative disclosures of fair value measurement hierarchy for assets andliabilities as at 31 December 2018: (cont'd.)

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Financial assetsFinancial assets designated as fair value through profit or loss

Continuing operations- Corporate bonds - 1,050,255 - 1,050,255 - Investment in unit

trust funds andinvestment-linkedfunds 366,617 - - 366,617

- MalaysianGovernment Securities - 409,052 - 409,052

- Cagamas - 20,980 - 20,980 - Quoted equity

securities 214,915 - - 214,915 - Unquoted equity

securities - - 174 174 - Accrued interest

and profit - 17,458 - 17,458 581,532 1,497,745 174 2,079,451

Discontinued operations- Accrued interest and profit - 1,472 - 1,472

- 1,472 - 1,472


As at 31 December 2017, the Group held the following financial instruments carried atfair value in the statement of financial position:

Quantitative disclosures of fair value measurement hierarchy for assets andliabilities as at 31 December 2017:

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Financial assets (cont'd.)Available-for-sale investments

Continuing operations- Cagamas - 10,015 - 10,015 - Malaysian Governme - 275,776 - 275,776 - Unquoted Sukuk - 762,046 - 762,046 - Accrued profit - 12,178 - 12,178

- 1,060,015 - 1,060,015

Discontinued operations- Corporate bonds 25,552 - - 25,552 - Foreign government

bonds including bonds subject to repurchase transaction 31,345 - - 31,345

- Eurobonds issued by the TurkishGovernment 374,084 - - 374,084

- Investment in unittrust funds andinvestment-linkedfunds - 2,646 - 2,646

- MalaysianGovernmentInvestment Issues - 12,127 - 12,127

- Unquoted Sukuk - 16,537 - 16,537 - Accrued profit - 240 - 240

430,981 31,550 - 462,531



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Financial liabilities

Discontinued operationsInvestment contract liabilities 14,298 - - 14,298

14,298 - - 14,298

There has been no transfer between Level 1 and 2 fair values during the financial year.

40. SIGNIFICANT EVENTS

(a) Disposal of Acibadem Saglik Ve Hayat Sigorta A.S. ("Acibadem")



The following are the significant events of the Group during the financial year ended 31December 2018:

On 17 August 2018, the Group via Burau Ventures Sdn. Bhd. (a subsidiary heldthrough Pasir Kalong Investments Limited) entered into a Share Purchase Agreementwith Bupa International Markets Limited ("Bupa") for the disposal of its entire equityinterest in Acibadem for a total cash consideration of USD176,580,302 equivalent toRM724,120,496. The disposal was completed on 31 December 2018. Accordingly,Acibadem ceased to be subsidiary of the Group as of 31 December 2018.

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40. SIGNIFICANT EVENTS (CONT'D.)

(b) Discontinuation of General Takaful Business

41. CAPITAL MANAGEMENT

42.

Certain comparative figures of other operating expenses as disclosed in Note 12 have beenreclassified in order to conform to changes in the current year's presentation. Thesereclassifications have no financial impact on the statement of financial position, thestatement of comprehensive income, the statement of changes in equity and statement ofcash flows of the Group and the Company.

The Group and certain subsidiaries of the Group are subject to externally imposed capitalrequirements. These externally imposed capital requirements have been complied with bythose subsidiaries for the financial year ended 31 December 2018. The Group's capitaladequacy ratio as at 31 December 2018 meets the minimum local statutory requirement.

The Group regularly reviews and manages its capital structure and makes adjustments to it,in light of changes in economic conditions. To maintain or adjust the capital structure, theGroup may adjust the dividend payment to shareholders, return capital to shareholders orissue new shares. Although this guiding principle and objective is consistent throughout theGroup, the Group consists of subsidiaries with their own governing Boards andmanagement that will apply different key measurements for their capital structuremanagement.

The primary objective of the Group’s capital management is to ensure that it maintainshealthy capital ratios in order to support its business and maximise shareholder value.

With effect from 1 July 2018, pursuant to the requirements under Sections 16 and 286of the Islamic Financial Services Act 2013, Sun Life Takaful Malaysia ("SLMT") hadsurrendered its composite takaful licence and was granted a Family Takaful licence bythe Minister of Finance to carry on its Family Takaful business. Accordingly, SLMT hadceased to underwrite any new general takaful business.

COMPARATIVE FIGURES

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43.

GroupResult of the Mandatorily

2018 cash flows Amortised measured Designated Totalcharacteristics FVOCI Cost at FVTPL at FVTPL fair value

Fair values test (SPPI) RM'000 RM'000 RM'000 RM'000 RM'000

Unquoted corporate debt securities SPPI - - - 1,091,639 1,091,639 Malaysian Government Securities SPPI 318,435 - - 442,503 760,938 Cagamas SPPI 10,123 - - 5,775 15,898 Unquoted Sukuk SPPI 822,015 - - - 822,015 Accrued interest and profit SPPI 13,707 192 - 17,661 31,560 Loans and receivables SPPI - 223,641 - - 223,641 Cash and bank balances SPPI - 55,188 - - 55,188 Unquoted corporate debt securities Non-SPPI - - 28,597 5,246 33,843 Quoted equity securities Non-SPPI - - - 178,544 178,544 Investment in unit trust funds and

investment-linked funds Non-SPPI - - 407,927 - 407,927 Unquoted equity securities Non-SPPI - - - 18,220 18,220 Accrued interest and profit Non-SPPI - - 524 12 536

1,164,280 279,021 437,048 1,759,600 3,639,949

ADDITIONAL DISCLOSURES UNDER AMENDMENTS TO MFRS 4 INSURANCE CONTRACT LIABILITIES

In order to compare with entities applying MFRS 9, the amendments require deferring entities to disclose additional information includingcontractual cash flows characteristics and credit exposure of the financial assets. The following table presents the Group’s financial assets bytheir contractual cash flows characteristics, which indicate if they are solely payments of principal and interest on the principal outstanding(“SPPI”):

<------------------------------------Continuing operations--------------------------------------->

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43.

Result of the Mandatorily2017 cash flows Amortised measured Designated Total

characteristics FVOCI Cost at FVTPL at FVTPL fair valueFair values test (SPPI) RM'000 RM'000 RM'000 RM'000 RM'000

Unquoted corporate debt securities SPPI - - - 1,011,269 1,011,269 Malaysian Government Securities SPPI 275,776 - - 409,052 684,828 Cagamas SPPI 10,015 - - 20,980 30,995 Unquoted Sukuk SPPI 762,046 - - - 762,046 Accrued interest and profit SPPI 12,178 216 - 16,846 29,240 Loans and receivables SPPI - 206,470 - - 206,470 Cash and bank balances SPPI - 57,354 - - 57,354

Unquoted corporate debt securities Non-SPPI - - 33,746 5,240 38,986 Quoted equity securities Non-SPPI - - - 214,915 214,915 Investment in unit trust funds and

investment-linked funds Non-SPPI - - 366,617 - 366,617 Unquoted equity securities Non-SPPI - - - 13,576 13,576 Accrued interest and profit Non-SPPI - - 599 13 612

1,060,015 264,040 400,962 1,691,891 3,416,908

ADDITIONAL DISCLOSURES UNDER AMENDMENTS TO MFRS 4 INSURANCE CONTRACT LIABILITIES (CONT'D.)


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43.

Changes in fair values Result of the Mandatorilycash flows Amortised measured Designated Total

characteristics FVOCI Cost at FVTPL at FVTPL fair value1.1.2018 to 31.12.2018 test (SPPI) RM'000 RM'000 RM'000 RM'000 RM'000

Corporate bonds SPPI - - - - - Unquoted corporate debt securities SPPI - - - 9,226 9,226 Malaysian Government Securities SPPI 2,352 - - 21 2,373 Cagamas SPPI 100 - - (205) (105) Unquoted Sukuk SPPI 7,727 - - - 7,727 Unquoted corporate debt securities Non-SPPI - - (123) 6 (117) Quoted equity securities Non-SPPI - - - (26,041) (26,041) Unquoted equity securities Non-SPPI - - - 2,322 2,322 Investment in unit trust funds and

investment-linked funds Non-SPPI - - (33,146) - (33,146) 10,179 - (33,269) (14,671) (37,761)



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43.

The following table shows the gross carrying amounts of financial assets by credit quality:

FVOCIAmortised - debt

Cost* instruments Total2018 RM'000 RM'000 RM'000

AAA 112,435 190,858 303,293 AA 97,874 233,593 331,467 A - - - Non-rated^ 13,332 739,829 753,161 Total 223,641 1,164,280 1,387,921

^ Consists of Malaysian Government Securities, low risk assets and policy loans which have low credit risk.* Financial assets at amortised cost relate to loans and receivables only.



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230


44. INSURANCE AND TAKAFUL FUNDS

INCOME STATEMENTS/REVENUE ACCOUNTS BY FUNDS

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Gross earned premiums/contributions 2,041,891 2,091,753 (285) - 961,746 989,072 624,093 568,987 19,462 46,779 436,875 486,915 Earned premiums/contributions ceded to reinsurers/retakaful (150,327) (140,181) - - (17,451) (17,857) (73,512) (59,163) (4,686) (4,917) (54,678) (58,244) Net earned premiums/contributions 1,891,564 1,951,572 944,295 971,215 550,581 509,824 14,776 41,862 382,197 428,671

Fee and commission income 634 666 (183,242) (199,720) 183,624 200,152 - - - - 252 234 Investment income 165,712 146,660 (130,754) (89,230) 182,399 129,337 69,972 66,048 1,164 1,768 42,931 38,737 Realised gains and losses 99,043 83,171 - - 101,196 80,886 1,034 1,405 (489) 2 (2,698) 878 Fair value gains/(losses) (43,968) 65,869 251 (3,377) 5,519 8,933 (33,969) 47,522 - - (15,769) 12,791 Other operating income/(expenses), net 20,724 31,156 (367) (59) 18,146 28,554 2,768 2,509 83 75 94 77 Other revenue 242,145 327,522 490,884 447,862 39,805 117,484 758 1,845 24,810 52,717

Gross benefits and claims paid (1,237,216) (1,298,889) - - (785,918) (810,831) (255,506) (287,523) (4,885) (5,263) (190,907) (195,272) Claims ceded to reinsurers 114,702 133,122 - - 18,724 19,310 46,354 50,743 1,622 2,051 48,002 61,018 Gross change in contract/certificate liabilities (174,636) (243,547) (251) 3,377 (35,511) (22,137) (79,295) (59,039) 2,245 (1,997) (61,824) (163,751) Change in contract/certificate liabilities ceded to reinsurers/retakaful 21,107 17,961 - - 653 2,614 17,436 (33,529) (2,139) (641) 5,157 49,517 Gross change in investment contract liabilities (1,181) (3,060) - - - - (1,181) (3,060) - - - - Net benefits and claims (1,277,224) (1,394,413) (802,052) (811,044) (272,192) (332,408) (3,157) (5,850) (199,572) (248,488)

Fee and commission expenses (187,042) (207,158) 185,798 202,205 (126,493) (131,700) (63,105) (61,248) (9,391) (16,695) (173,851) (199,720) Other operating expenses (452,776) (446,522) (69,570) (76,847) (258,051) (239,668) (120,719) (113,952) - (11,704) (4,436) (4,351) Other expenses (639,818) (653,680) (384,544) (371,368) (183,824) (175,200) (9,391) (28,399) (178,287) (204,071)

Profit before tax 216,667 231,001 248,583 236,665 134,370 119,700 2,986 9,458 29,148 28,829

Loss on disposal (299,968) - (299,968) - - - - - - - - -

Zakat (240) (430) - - (240) (430) - - - - - - Taxation (42,230) (48,884) 16,284 16,987 (59,169) (52,797) (1,128) (8,083) 1,304 (2,602) 479 (2,389) Net (loss)/profit for the year (125,771) 181,687 189,174 183,438 133,242 111,617 4,290 6,856 29,627 26,440

* The consolidation elimination indicates the group inter-fund elimination.** Included in the previous financial year are assets and liabilities of Turkish subsidiary disposed of as at 31 December 2018 as disclosed in Note 14 to the financial statements.*** Relates to results from General Takaful business classified as discontinued operation as disclosed in Note 14 to the financial statements.

Family FundTotal Shareholders' and General Funds** Life Fund** General Takaful Fund***Consolidation

elimination*

1031978-V

AVICENNIA CAPITAL SDN. BHD.(Incorporated in Malaysia)

231

45. INSURANCE AND TAKAFUL FUNDS (CONT'D.)

STATEMENTS OF FINANCIAL POSITION BY FUNDS

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

AssetsProperty and equipment 63,917 60,659 405 405 1,624 5,309 61,888 54,945 - - - - Intangible assets 404,472 589,144 366,000 541,279 33,442 41,997 5,030 5,868 - - - - Investment in subsidiaries - - (1,845,560) (4,864,920) 1,845,560 4,864,920 - - - - - - Goodwill on consolidation 392,337 838,299 392,337 838,299 - - - - - - - - Financial assets 3,566,056 3,957,551 (47,537) (48,056) 974,220 1,458,264 1,630,268 1,551,470 - 39,295 1,009,105 956,578 Reinsurance and retakaful assets 185,168 176,845 - - 545 9,349 92,206 73,148 - 7,088 92,417 87,260 Insurance and takaful recevables 46,608 201,388 - - - 158,003 12,426 9,836 - 3,073 34,182 30,476 Other receivables 738,530 39,930 (1,723,279) (261,369) 2,442,159 276,484 15,560 23,616 - 5 4,090 1,194 Deferred tax assets - - - (8,951) - 9,579 - - - 236 - (864) Deferred acquistion costs - - - (32,826) - 32,680 - 146 - - - - Current tax assets 10,097 593 - (16,585) (16,006) - 26,103 17,178 - - - - Cash and bank balances 55,188 175,939 - - 15,062 137,680 21,508 23,814 - 2,524 18,618 11,921 Total Assets 5,462,373 6,040,348 5,296,606 6,994,265 1,864,989 1,760,021 - 52,221 1,158,412 1,086,565

Equity and liabilitiesShare capital 1,990,014 1,990,014 (3,514,842) (3,443,619) 5,504,856 5,433,633 - - - - - - Immediate holding and other related

companies' advances - - (4,214) (262,505) 4,214 262,505 - - - - - - Other reserves 49,092 (145,812) (69,230) (139,338) 118,322 (8,198) - 1,724 - - - - Retained earnings/(accumulated loss) (119,776) 167,108 307,081 (416,413) (426,857) 582,380 - 1,141 - - - - Shareholder's funds 1,919,330 2,011,310 5,200,535 6,270,320 - 2,865 - - - -

Non-controlling interest 646,028 620,535 646,028 620,535 - - - - - - - -

Total Equity 2,565,358 2,631,845 5,200,535 6,270,320 - 2,865 - - - -

LiabilitiesInsurance and takaful contract liabilities 2,583,166 2,822,739 (47,537) (48,056) 1,916 350,506 1,561,092 1,483,791 - 38,736 1,067,695 997,762 Insurance and takaful payables 51,624 183,677 - - 100 146,952 9,946 13,121 - 2,170 41,578 21,434 Investment contract liabilities - 14,298 - - - - - 14,298 - - - - Financial liabilities 12,881 36,849 - - 121 28,633 12,760 8,216 - - - - Other payables 123,887 208,293 (266,513) (255,288) 63,787 151,063 280,288 233,846 - 11,315 46,325 67,357 Deferred tax liabilities 122,973 135,318 91,593 108,545 30,124 22,889 903 3,884 - - 353 - Current tax liabilities 2,484 7,329 - (16,585) 23 23,902 - - - - 2,461 12 Total Liabilities 2,897,015 3,408,503 96,071 723,945 1,864,989 1,757,156 - 52,221 1,158,412 1,086,565

` `

Total equity and liabilities 5,462,373 6,040,348 5,296,606 6,994,265 1,864,989 1,760,021 - 52,221 1,158,412 1,086,565

* The consolidation elimination indicates the group inter-fund elimination.** Included in the previous financial year are assets and liabilities of Turkish subsidiary disposed of as at 31 December 2018 as disclosed in Note 14 to the financial statements.*** Relates to assets and liabilities of General Takaful business classified as discontinued operation as disclosed in Note 14 to the financial statements.

Family FundTotal Consolidation elimination* Shareholders' and General Funds** Life Fund** General Takaful Fund***

(1031978-v) (incorporated in malaysia) directors’ report and...

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