annual report07 cover-eng3 - thai re · 2015. 7. 3. · annual report 2007 5 this increase leads to...
TRANSCRIPT
C o n t e n t s
1 Introduction
2 Financial Highlights
4 Letter to Shareholder
7 Milestones
8 Directors and Executive Officers of the Registrant
13 Organization Chart
14 Type of Business
19 Industry Situation and Competition
21 Risk Factors
25 Shareholders and Management Structure
34 Corporate Governance
38 Company and Society
39 Related Party Transaction
42 Management/s Discussion and Analysis
of Financial Condition and Result of Operations
50 Ten Year Summary
51 Financial Statements
Introduction
About The Company Thai Reinsurance Public Co., Ltd. was formerly registered on July 18, 1978 as a limited company under
the Civil and Commercial Law, dubbed then as the Thai Reinsurance Company Limited, with an initial registered capital of Baht 30 Million, it was established under the joint ownership of all the Life and Non-Life insurance companies in Thailand with the support and cooperation from all those related to the field of insurance both from the private and government sectors.
The company had been authorized by the Ministry of Commerce to carry out all types of life and non-life reinsurance activities with the main objective of strengthening the Thai insurance industry and the economy as a whole by supporting retention of premium within Thailand and limiting the exposure on foreign exchange. On December 30, 1993, the company went public. Its present registered capital is Baht 1,187.8 million with paid-up capital of Baht 1,187.4 million.
Other References Share Registrar/ Transfer Agent Thailand Securities Depository Co., Ltd.
The stock exchange of Thailand Bldg. 4 th , 6-7th Fl., 62 Rachadapisek Rd., Klongtoey Bangkok 10110 Tel: 0-2359-1200 Fax: 0-2359-1259
Auditors Sophon Permsirivallop, No. 3182 Certified Public Accountant (Thailand) Ernst & Young Lake Rachada Office Complex 33rd Fl., 193/136-137 NewRachadapisek Rd., Bangkok 10110 Tel: 0-2264-0777 Fax: 0-2661-9192
Internal Auditors A.M.T. Associates Office Ltd. 491/27 Silom Plaza, Silom Road,Silom, Bangrak, Bangkok 10500 Tel. 0-2234-1676 Fax. 0-2237-2133
Legal Advisor C.B. Law Office Ltd. Satorn Thani 2 Bldg. 10th Fl., 92/61 North Sathorn Rd., Bangrak Bangkok 10500 Tel: 0-2233-5399 Fax: 0-2236-4980
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General Information Company & Head Office Name Thai Reinsurance Pcl. Registered Number PCL Registration No. 246 Location 223/1 Soi Ruamruedee, Witthayu Rd., Lumpini, Pathumwan
Bangkok 10330 Tel: 0-2256-6822 Fax: 0-2256-6832 Home Page www.thaire.co.th Registered Capital 1,187,764,000 ordinary shares of Baht 1 each,
Total 1,187,764,000 Baht Issued and paid-up 1,187,354,940ordinary shares of Baht 1 each,
Total 1,187,354,940 Baht Nature of Business Provision of reinsurance (Non-life insurance business)
Financial Highlights
Net Written Premium(Million)
2,0542,282
2,544 2,6132,967
2003 2004 2005 2006 2007
Net Profit (Million)
395450 482 461
515
2003 2004 2005 2006 2007
Total Assets (Million)
4,434 4,417 4,649 4,626 4,972
2003 2004 2005 2006 2007
Total Capital Funds (Shareholder’s Equity)
2,461 2,361 2,360 2,336 2,474
2003 2004 2005 2006 2007
Growth(%) 2007 2006 2005 2007/2006 2006/2005 Operating Result ( ) Million baht Gross Written Premium 4,543 4,024 3,764 12.90 6.91 Net Written Premium 2,967 2,613 2,544 13.53 2.71 Profit before tax 656 612 627 7.17 (2.33) Net Profit 515 461 482 11.80 (4.37) Net Profit per Share (Baht) 0.43 0.39 0.41 11.24 (4.88)
Growth(%) 2007 2006 2005 2007/2006 2006/2005 Financial Status at the end of Year (Million Baht) Total Assets 4,972 4,626 4,649 7.46 (0.48) Total Liabilities 2,476 2,270 2,289 9.08 (0.85) Paid-up capital 1,187 1,187 1,180 0.00 0.61 Total Capital Funds (Shareholder’s Equity)
2,474 2,336 2,360 5.89 (0.98)
Book Value per share 2.08 1.97 1.99 5.58 (1.01) Dividend per Share (Baht) 0.36 0.36 0.36 0.00 0.00
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Return on Equity (Percentage)
17.9
20.419.7
21.4
18.7
17.0
19.0
21.0
2003 2004 2005 2006 2007
Return on Assets (Percentage)
9.9
10.7
10.29.8
10.6
8.0
9.0
10.0
11.0
2003 2004 2005 2006 2007
Combined Ratio(Percentage)
84.487.1 86.2 85.8
97.2
80.0
90.0
100.0
2003 2004 2005 2006 2007
Return on Investments(Percentage)
12.1
7.09.7
8.1 7.8
0.0
5.0
10.0
2003 2004 2005 2006 2007
2007 2006 2005 Financial Ratio (Percentage) Return on Revenue 15.7 15.8 16.5 Return on Net Written Premium 17.4 17.6 18.9 Return on Equity 21.4 19.7 20.4 Return on Assets 10.7 9.9 10.6 Return on Investments 7.8 8.1 9.7 Combined Ratio 85.8 86.2 87.1
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Letter to Shareholder An
nual
Rep
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2007
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In what has been an eventful and challenging year for the industry and Thaire. I am pleased to report that we finished the year with good earnings and a strong balance sheet. Thaire team remained intensely focused on our business objectives, continuing to innovate with new products and services to meet our customers’ needs. In 2001 we laid out a series of Thaire priorities and key growth strategies. They were to remain customer focused, identifying new business opportunities, emphasizing new product development, and focusing on controlling costs. I believe we made good progress in each of these areas during the past years.
Thaire’s net income totaled Baht 520.5 million in 2007, an increase of 12.5 percent over 2006. On a per share basis, Thaire earned Baht 0.43 in 2007, up from Baht 0.39 per share. This performance was attained with the maintenance of our loss fluctuation reserve being maintained at the same level from the start of the year to the end of the year 2007, at Baht 70 million.
Thaire’s total shareholder’s equity at December 31, 2007 was Baht 2.47 billion. Cash flow from our insurance operations and our balance sheet remain strong. For 2007, we achieved a ROE of 21.0 percent, on par with the ten year average which stands at 20.3 percent, remaining among the highest ROE organizations in our industry.
Thaire’s ability to report solid earnings and cash flow in the face of unfavorable economic conditions reflects the diversity and strength of our major businesses – General Insurance, Life Insurance and Servicing Companies; all are well positioned in the Thai market. We remained intensely focused on our business objectives, continuing to innovate with new products and services to meet our customers’ needs.
In 2007, we have made progress in upgrading Thaire’s ratings. Standard & Poor’s rated our long-term local Currency Counterparty Credit (CCR) and Financial Strength Rating (FSR) at BBB+ (Good) with positive outlook, now it is rated A- (Good) with stable outlook. At this level, Thaire’s rating is among the highest of any insurance and financial services organization in the country.
We are proud of being awarded in 2007 by Thai Institute of Directors Association the Board of the Year for the high standards of practice throughout the year of our Board of Directors.
We have remained focused in growing our non life business with targeted opportunities amidst a softening market for our more conventional business such as the property and marine lines. We have concentrated our strengths in 2007 on areas that produce the highest margins such as the creation of new products that service the retail markets. In collaboration with a number of those in the market we have also succeeded in developing new distribution channels for these products such a bancassurance, telemarketing and worksite marketing. All of the mentioned reflects in the expansion of our business in 2007 with an increase of 13.0 percent in our general gross reinsurance premium from Baht 3.72 billion to Baht 4.20 billion. At the same time our net reinsurance premium increased by 13.8 percent, from Baht 2.32 billion to Baht 2.64 billion. As previously mentioned a main driving force for our growth was our miscellaneous business increasing sharply year on year by 30.8 percent.
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This increase leads to our treaty reinsurance business by growing by over 57.0 percent in 2007. For the year under review our underwriting result for Non Life business increased by 11.8 percent to Baht 398.4 million from Baht 356.3 million in 2006. For 2007, the overall loss ratio for our Non Life business was 44.9 percent and combined ratio was 82.2 percent, representing a slight improvement over the same period in the previous year which had an overall loss ratio of 45.2 percent and a combined ratio of 82.9 percent.
We have in the past been able to maintain high margins from our life business at around 20 percent, and that margin still remains acceptable. For this reason we have maintained our keen intention on growing this line of business. We maintain a strong business relationship with most local and joint venture life companies that are in the market. Through which we have mainly concentrated in the support of a range of new products, one in particular addresses the needs of the owners of small to medium sized enterprises. For 2007, the recorded gross reinsurance premium for life business increased by 11.3 percent, from Baht 304.4 million to Baht 338.7 million. For the period our net reinsurance premium increased by 11.1 percent, from Baht 295.0 million to Baht 327.7 million. In 2007, the adjusted underwriting profit was Baht 73.0 million for our Life business, representing a decrease of 9.0 percent from Baht 80.3 million that was recorded in the previous year. The life reinsurance premium now accounts for 11.0 percent of our total net premium income. We are confident that within the next couple of years this figure will exceed 15.0 percent. Life business is considered to be less volatile, and hence increasing this part of our business will improve the volatility of our overall portfolio.
We have been specifically diversifying our interests to better service the needs of our clients in the past 3 years by initiating 5 subsidiaries, being TR Training, Thai Re Services, First-Tech, Electronic Motor Claims Services, and Thai Insurers Datanet. We are starting to see real positive results from our efforts in 2007, with gross income from these subsidiaries growing to Baht 53.0 million from Baht Baht 29.0 million in the previous year. There’s a clear sign that our subsidiaries would contribute more and more to the diversification of our earnings in the future, especially considering the fact that 3 years ago the gross income was only at Baht 10.0 million.
We have maintained a careful investment strategy that’s focused on the long term. Amidst a slowdown in the economy in 2007 there was a slight increase in our investment income to Baht 295.0 million from Baht 293.5 million in the previous year, or representing an increase of 1.0 percent. The average investment yield for 2007 was 7.79 percent, or representing a slight decrease of 0.29 percentage points under what was recorded in the previous year. This is considered to be favorable compared to an estimate of 6 percent of others in the same sector.
We maintain our support for charities that are focused on rural development. We have realized that education and healthcare is not something that everybody can afford, many take it for granted. We believe that the various funds for education and healthcare that are supported by us could make a difference for some of the underprivileged people. We believe that responsible corporate citizenship is the hallmark of business leadership. Both of our funds and also through our volunteer work, we hope to bring care and encouragement to the people in need as well as create a positive atmosphere for the community. In 2007, our total support for our funds increased from the previous year by Baht 100,000 to Baht 2.5 million.
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We are ready for the challenges ahead in 2008. In the coming year the market will soften on certain lines of business and there will be an increased amount of capacity in the marketplace. Our underwriting team is ready to face the challenges by targeting expansion of business by offering the right solutions to our customers. We will capitalize on every new opportunity ahead and remain optimistic about our ability to operate at an acceptable profitability level. It is our aim to become much more than a conventional reinsurer by developing new products, new services and new distribution channels that will evolve around reinsurance business for the local market. We will maintain our interest in assisting small to medium sized companies in the local market to meet economies of scale with lower operating expense ratios through the utilization of our services. We are indeed very excited about the future.
We continue to evolve as a leading organization in our industry, we rely on the commitment of our high quality employees, our strength depends on their diligence and ongoing dedication to our company. In closing, we would also like to thank our shareholders and clients for the continued support of Thai Re. Together, we have a brighter future.
Surachai Sirivallop President & CEO
Milestones
July 2005 :
�Distinction in Maintaining Excellent Corporate Governance Report� and �Nominee for Best Performance �
Financials� Awarded from Stock Exchange of Thailand
October 2005 :
The international ratings Standard & Poor's approvaled the financial strength rating of the company to BBB+
(Stable) with positive outlook.
November 2005 :
Evaluated by the Thai Institute of Directors as one of the most outstanding Thai public companies for the 1st
Quartile and to qualify for a position in the final round for �The Best Board of Directors� for 2004/2005
July 2006 :
Distinction in Maintaining Excellent Corporate Governance Report and nominated for Best Performance �
Financials awarded from Stock Exchange of Thailand
October 2006 :
Rated by the Thai Institute of Directors as �Very Good� Thai public companies
November 2006 :
The international ratings Standard & Poor's affirmed the financial strength rating of the company to increase from
BBB+ (Stable outlook) to BBB+ (Positive outlook).
August 2007:
Distinction in Annual General Shareholders' Meeting for 2007 - Financials awarded by The Stock Exchange of
Thailand
December 2007:
The international ratings Standard & Poor's has upgraded the long-term local currency counterparty credit rating
(CCR) and Financial Strength Rating (FSR) to ;A-; (Stable outlook) from ;BBB+' (Positive Outlook) on our company.
December 2007:
Received the Board of The Year for �Distinctive Practices Awards 2006/2007� from Thai Institute of Directors or
IOD in cooperation with The Stock Exchange of Thailand, Board of Trade of Thailand, Federation of Thai
Industries, Thai Bankers' Association, Thai Listed Companies Association, and Federation of Thai Capital Market
Organizations.
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Board Members
1. Mr. Suchin Wanglee Age 71 Independent Chairman, Chairman of the Remuneration and Nominating Committee, Director of Investment Committee
Shareholding % Shareholding 0.26 Education Electrical Engineering, Northrop Institute of Technology, USA. Training Courses Chairman 2000, by Thai Institute of Directors Association Experience Chairman of The Navakij Insurance Plc.; Director of Thai Commercial
Insurance Plc.; Director of Falcon Insurance, President of General Insurance Association (GIA)
2. Mr. Chai Sophonpanich Age 64 Independent Vice Chairman, Director of the Remuneration, Nominating and Investment Committee
Shareholding % Shareholding 0.23 Education B.SC. University of Colorado, USA. Training Courses Directors Certification Program(DCP) and Chairman 2000, by Thai Institute
of Directors Association Experience President and Chairman of Bangkok Insurance Plc. ; Chairman of
Charoong Thai Wire & Cable Plc., Furakawa Metal (Thailand) Plc. and Bumrungrad Hospital Plc.; Director of The Amata Corporation plc.; Director of General Insurance Association (GIA)
3. Dr. Kopr Kritayakirana Age 87 Independent Director Shareholding % Shareholding 0.02 Education Ph.D. Physic, Havard University, USA. Training Courses Directors Certification Program(DCP) , by Thai Institute of Directors
Association Experience Advisor to the National Science and Technology Development Agency;
Director and Audit committee of Siam Commercial Leasing Plc. And SICCO Securities Plc.; Director of Banpu plc.;
4. Mr. Kerati Panichewa Age 48 Independent Director Shareholding % Shareholding 0.11 Education MBA. College of Notredame, USA. Training Courses Directors Certification Program(DCP) , by Thai Institute of Directors
Association Experience Managing Director of Krung Thai Panich Insurance Co., Ltd. 5. Mr. Jiraphant Asvatanakul Age 48 Independent Director Shareholding % Shareholding 0.03 Education Master of Accounting, University of Texas at Austin, USA. Training Courses Directors Certification Program(DCP) by Thai Institute of Directors
Association
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6. Mr Charuek Kungwanphanich Age 58 Independent Director Shareholding % Shareholding - Education Bachelor of Statistic, Chulalongkorn University Training Courses Directors Certification Program(DCP) , Director Accreditation Program
(DAP), Finance for Non-Finance Directors Program(FN) by Thai Institute of Directors Association
Experience Managing Director of Dhipaya Insurance Plc.; Director of Road Accident Victims Protection Co.,Ltd. And National Credit Bureau Co.,Ltd.
7. Mr. Chanin Roonsamrarn Age 60 Independent Director, Director of the Audit and Remuneration Committee Shareholding % Shareholding - Education MS. Fort Hays State University, USA. Training Courses Directors Certification Program(DCP) and Chairman 2000, by Thai Institute
of Directors Association Experience Managing Director and CEO of The Siam Industrial Credit Plc.; Chairman
of SICCO Securities Plc.; Chairrman of SICCO Advisory Co.,Ltd.; Human Resource and Remuneration Committee of Samaggi Insurance Plc. Director of the Remuneration, Nominating, Audit and Independent Home Product Center Plc.
8. Dr. Suchart Sangkasem Age 60 Independent Director Shareholding % Shareholding - Education Ph.D. Economics, University of Miami, USA Experience Deputy Chief Executive Officer of Phatra Insurance Plc.; 9. Mr. Adisorn Tantianangul Age 60 Independent Director Shareholding % Shareholding - Education B.A. (English), Assumption Commercial College Training Courses Directors Certification Program(DCP) , by Thai Institute of Directors
Association Experience Managing Director of The Ayudhaya Insurance Plc.; Director of General
Insurance Association (GIA) 10. Mr. Arnop Porndhiti Age 60 Independent Director and Director of the Remuneration Committee Shareholding % Shareholding 0.03 Education Diploma of Management, European Centre for Continuing Education,
Insead,France. Experience President of MSIG Insurance (Thai) Co.,Ltd.; Vice President of Marine
Insurance (GIA) 11. Mr. Apirak Thaipatanagul Age 63 Independent Director Shareholding % Shareholding 0.01 Education M.S. Actuarial Sciences, University of Iowa, USA. Experience Managing Director and Chairman of Thai Life Insurance Co., Ltd.;
Chairman of Thai Life Assurance Association
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12. Mr. Aswin Kongsiri Age 61 Independent Director , Nominating Committee and Director of the Audit Committee
Shareholding % Shareholding - Education B.S. (honor student) Philosophy, Politics and Economics, Oxford
University,UK. Training Courses Directors Certification Program(DCP) and Chairman 2000, by Thai Institute
of Directors Association Experience Independent Director, Nominating and Remuneration Committee of
EGCOMP; Director and Executive Director of Krung Thai Bank PCL. ; Director and Audit Committee of Padaeng Industry PCL. ; Chairman of CH - Karnchang PCL. ; Director of Thai- German Ceramic Industry PCL. ; Director, Chairman of Risk Management Committee and Chairman of Nominating Committee of BAFS PCL.
13. Mr. Udom Vichayabhai Age 71 Independent Director, Chairman of the Audit Committee and Director of the Investment Committee
Shareholding % Shareholding - Education BBA., Boston University, USA. Training Courses Directors Certification Program(DCP) ,Director Accreditation Program(DAP),
Chairman 2000 and Audit Committees Program (ACP) by Thai Institute of Directors Association
Experience Director and Director of Audit Committee Thai-German Ceramic Plc., Laguna Resort & Hotel Plc.; Director of Alcon Packaging Strongpack Plc. And Thai Wah Food Products Plc. ; Chairman of Puket Fantacy Public Co.,Ltd.
14. Miss Potjanee Thanavaranit Age 61 Independent Director Shareholding % Shareholding 0.01 Education M.B.A. Syracuse University, New York, U.S.A. (USAID Scholarship) Experience Second Vice – President of the National Legislative Assembly, Council of
State (Group 3 – Monetary Laws), Economic Advisor to the Council for National Security, Chairperson of Thailand Insurance Institue, Chairman of Nominating and Remuneration Committee of Univentures Pcl., Director and Audit Committee of Bangkok Insurance,
15. Mr. Surachai Sirivallop Age 66 President & CEO and Director of the Investment Committee Shareholding % Shareholding 0.12 Education Bachelor of Laws, Thamasat University Training Courses Directors Certification Program(DCP) by Thai Institute of Directors
Association Experience Regional Manager of AIU Far East, Hong Kong; Managing Director of AIG
Reinsurance Co., Ltd., Hong Kong; Vice President of General Insurance Association
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Management Team
1. Mr. Surachai Sirivallop Age 66 President and Chief Executive Officer Education Bachelor of Laws, Thammasat University Experience Regional Manager of AIU Far East, Hong Kong; Managing Director of
AIG Reinsurance Co., Ltd., Hong Kong; Vice President of General Insurance Association
2. Mr. Chuanchai Cheausamut Age 59 Executive Vice President Education Bachelor of Business Administration (Accounting), Chulalongkorn
University Experience Comptroller of New Hampshire Insurance Co., Senior Vice President -
Finance & Operations of Thai Reinsurance Plc. 3. Mr. Prawit Thongtanakul Age 41 Executive Vice President Education Master of Structural Steel Design, Imperial College. University of
London Experience Profit Centre Manager, AIG Insurance; Client Manager, Swiss
Reinsurance 4. Mrs. Thitaporn Tarakij Age 48 Senior Vice President – Accounting, Finance & Operations Education M.B.A, Kasetsart University Experience Vice President-Accounting & Finance of Thai Reinsurance Plc. 5. Mr. Theera Bunnag Age 38 Senior Vice President – International Department Education Diploma in Hotel Management, Les Roches, Switzerland Experience Vice President–International Department of Thai Reinsurance Plc. 6. Mr. Chamroen Phusit Age 45 Vice President – Investment Department Education Bachelor of Business Administration (Finance), Dhurakijpundit
University; Mini MBA, Thamasart university Experience Assistant Vice President - Investment of Thai Reinsurance Plc. 7. Mrs. Nantinee Chinwanno Age 44 Vice President - Customer Support Department Education M.B.A, University of Missouri, USA Experience Assistant Vice President - Customer Support of Thai Reinsurance Plc. 8. Ms. Sasithorn Suk-Amporn Age 44 Vice President - Accounting / Finance & Operation Support Education Bachelor of Business Administration (Accounting)-Honor ,
Chulalongkorn University Experience Assistant Vice President - Accounting & Finance of
Thai Reinsurance Plc. 9. Mr. Thanakorn Sirisawatwong Age 41 Vice President - Information Technology Department Education M.I.S., University of West Florida, USA Experience Manager – Information Technology of Pan Millennium Co.Ltd. and
Thai Star Shipping Co.Ltd. 10. Dr. Suthon Chutiniyomkarn Age 38 Vice President - Education Residency in Internal Medicine, Mahidol University Experience Medical Director, BUPA Thailand
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11. Mr. Chanaphan Piriyaphan Age 37 Vice President – Business Development Department Education M.B.A, New York Institute of Technology, USA, ANZIIF Experience Assistant Vice President - Business Development of
Thai Reinsurance Plc. 12. Mrs. Nalina Bodharamik Age 37 Vice President - Business Development Department Education M.B.A, University of West Florida, USA; ANZIIF Experience Assistant Vice President - Business Development of
Thai Reinsurance Plc. 13. Mrs. Chanya Tancharoen Age 54 Vice President - Business Development Education Diploma of Secretary, Illinois Commercial College Experience Assistant Vice President, New Hampshire Insurance Company 14. Ms. Pojaman Fuangaromya Age 33 Assistant Vice President – Business Development Department Education M.B.A., Seattle University, USA Experience Credit Analysis, EXIM Bank ; Manager - Business Development of
Thai Reinsurance Plc. 15. Mr. Adulsak Ratanasawake Age 37 Assistant Vice President - Research and Statistics Department Education Master of Applied Statistic (Acturial Science), NIDA Experience Research and Statistics Division Manager of Thai Reinsurance Plc.
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Organization Chart
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There are all together four companies affiliated or subsidiary companies that have separate roles, as follows: The Our Group
Company & Head Office Nature of Business Capital Registered/ Issued & Paid up
(Million Baht)
Percentage Owned (%)
Thaire Life Assurance Co., Ltd. 223/1 Soi Ruamruedee, Witthayu Rd., Lumpini, Pathumwan Bangkok 10330 Tel: 0-2651-4222 Fax: 0-2256-6828
Provision of Reinsurance (Life insurance business)
500 / 500 100
TR Training Co., Ltd. Regent House 14th Fl., 183 Rajadamri Rd., Lumpini, Pathumwan Bangkok 10330 Tel: 0-2255-6165-6 Fax: 0-2255-6427
Training service and advisory in insurance
0.5 / 0.5 100
Thai Re Services Co., Ltd. Regent House 14th Fl., 183 Rajadamri Rd., Lumpini, Pathumwan Bangkok 10330 Tel: 0-2255-6425-6 Fax: 0-2255-6427
Provide claim management and operation support for insurance business such as policies printing
60/60 100
First tech Solution Co.,Ltd. Regent House 14th Fl., 183 Rajadamri Rd., Lumpini, Pathumwan Bangkok 10330 Tel: 0-2255-6420-4 Fax: 0-2255-6427
Provide Business Process Outsourcing for Domestic Insurance companies
50/50 80
Thai Insurer Datanet Co., Ltd. (TID) 100/1 Wong Wanich A 16th Fl., Rama IX Rd., Huaw Khwang Bangkok 10320 Tel: 0-2247-7200 Fax: 0-2247-7214
Provision of computer Service 30 / 30 41
EMCS Thai Co.,Ltd. (EMCS) Regent House 10th Fl., 183 Rajadamri Rd., Lumpini, Pathumwan Bangkok 10330 Tel: 0-2650-5700 Fax: 0-2651-9091
Provision of computer service in relation to motor insurance claims
40 / 40 69
Thai Reinsurance Public Co., Ltd. and its affiliated or subsidiary companies are mainly involved in the reinsurance business with all of the local Non-Life & Life insurance companies, a select number of overseas business relationships are also maintained. The gross written premium is divided into the following main categories:
Type of Business
Thai Reinsurance
Thai Re Life
TR Training
Thai Re Services
First Tech
EMCS
TID
100 % 100 % 100 % 80 % 49 % 41 %
20 %
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Juristic Person in witch the company holds shares more than 10%
Company & Head Office Nature of Business Capital Registered/ Issued & Paid up (Million Baht)
Percentage Owned (%)
Thai Insurance Institute Limited (T.I.I.) 3354/32 Manorom Building 10th floor, Rama IV Rd., Klongtoey Bangkok 10110 Tel: 0-2671-7440-1 Fax: 0-2671-7427
Provision of insurance training
21.5 / 21.5 20
1. Expansion of the life insurance segment
To diversify and maintain our company’s sources of revenue, The Company has aimed to increase the proportion of income from the life insurance segment, of which the performance is typically considered more predictable than the non-life insurance segment. (Statistically speaking, it is easier to forecast the possibility of deaths of the insured than that of accidents / disasters _ the insurance business has understandably been more volatile and involves more risks than its counterpart.) In 1999, The Company launched a five-year plan to increase the ratio of the life insurance segment to five percent of the total premiums. The company has initiated a strategic partnership with Scor Vie, the world’s leading insurance company based in France. The main clients targeted are the new line of insurance companies in the process of expansion. The company is pleased to report that it has surpassed its initial five-per cent goal within the period of three years only. At present, the life insurance segment constitutes eleven percent of the net insurance premiums and continues to grow satisfactorily. The segment is likely to become of greater significance in years to come.
2. From reinsurer to service provider
Beside the reinsurance business, the core operation of the group, The Company aims to expand its base to become a leading service provider in the related field. This will eventually constitute the third major source of revenue (beside the reinsurance and other investments), as well as reduce the potential volatility within the sector. There are currently all together five companies affiliated and subsidiary companies in this sector which will create revenue on service fees in the near future.
The majority of the business in our portfolio is Fire reinsurance from the domestic market. The portfolio mix of our business between 2007 and 2006 is as per the following table:
2007 %
2006 %
• Non Life Reinsurance - Domestic Fire 44.4 48.8 Marine 7.0 7.5 Motor 5.2 3.9 Misc. 32.1 27.3 87.7 87.5 - International 1.3 1.2 Total Non-Life Reinsurance 89.0 88.7 • Life Reinsurance 11.0 11.3
Total 100.0 100.0
Our Business Goals
Type of Product and Services
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The Life and Non Life reinsurance services that are provided by Thai Reinsurance are categorized as either Non Market Agreement or Market Agreement business. The following are explanations for both of the categories of business: The Non Market Agreement Business 1. Facultative reinsurance The business that is known as Facultative reinsurance is the reinsurance provided for an individual risks on terms and conditions that have been agreed specifically for that risk. Making up approximately 29 percent of the total gross written premium at the present. 2. Treaty reinsurance Under treaty arrangements Thai Reinsurance agrees to accept the risks offered by the insurance companies, known as cessions, without the option of declining. Treaty arrangements of Thai Reinsurance are with both local and overseas insurance companies. Making up approximately 71 percent of the total gross written premium at the present. 1. The Market Agreement Business There was originally two benefits that would be resulting from the establishment of Thai Reinsurance over 20 years ago for the local insurance market. The first being an increased spread of premium and retention of the local insurance business that would have normally been reinsured overseas. The second being the gathering of valuable statistics that could be eventually utilized for the development of the entire local insurance industry, hence the existence of the Market Agreements between all of the current local Non Life and Life insurance companies and Thai Reinsurance. Since the formation of the various Market Agreements, Thai Reinsurance has arranged common account Excess of Loss protection for the benefit of all of the member companies. Most of the Market Agreements for Non Life business are proportional contracts being on quota share basis that Thai Reinsurance has with the insurance companies. The classes of the business that included are Fire, Motor as per Motor Vehicle Accident Victims Act 1992, Marine, and Miscellaneous excluding particular types of insurances. The mentioned classes of business could include proportional reinsurance, retrocession, and by consideration of the maximum sum insured per risk. Particular stipulation is made in the market agreements of commission, reporting, payment method, and etc. The market agreement contracts terminate at the end of each year and they are automatically renewed every year except in the situation where one of the parties gives a cancellation notice in 3 months in advance prior to the end of that particular year. Life business also follows similar procedure as Non Life business. Market Agreement for Non Life businesses is handled by Thai Reinsurance’s subsidiary, ThaiRe Life. The Market Agreements have been arranged with most of the Life insurance companies in Thailand.
Reinsurance Services and Sources of Business
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Detail of Reinsurance and Retrocession of Thai Reinsurance follow the market contract.
Reinsurance Premium 1. Five percent of the Non-Life Insurance policy (exclude voluntary motor) that the members (Insurance companies that registered in Thailand) release for all cedants under the previous condition (5% Quota Share). 2. 10% of the Fire policy and All Risks Policy from members (Insurance companies that registered in Thailand) that have sum insured more than THB 30 million which we release direct to our cedants follow the Thailand Fire Pool condition. 3. 5% - 10% of the reinsurance type 1st Surplus of the Life Insurance that most of Domestic Life Insurance companies.
Thai RE
Retrocession Premium Net Premium
Approximately 50% - 70% of (1) bring retrocession premium back to members by the
Approximately 90% of (2) bring retrocession premium back to members by the condition
Approximately 11 of (3) bring retrocession premium back to 7 of 13 members follow the condition
Thai Re keeps the risk approximately 40% of (1)
Thai Re keep the risk approximately 10%of (2)
Thai Re keep the risk approximately 89% of (3)
In general following any loss event the reinsured notifies all of the reinsurers the shares of their exposure through the specific reinsurance that has been arrange between the two parties. For facultative reinsurance the process follows the above with each loss being compensated to the reinsured on a case by case basis. For treaty reinsurance the compensation is made to the reinsured only after the amount of loss exceeds the minimum that is specified in the treaty, that would be per month or per quarter. For all of the small losses below the minimum would be paid in advance by the reinsured. At the same time the company also processes all losses that are exceeding Excess of Loss limits with its reinsurers accordingly.
Risk Management
The company’s has always had a strategy of retaining as much as possible the portfolio of its business. By doing so the company has to arrange a set of Excess of Loss programs that would protect its business that it retains. The way that the Excess of Loss program are arranged take into account the overall exposure of the company to any single risk loss or a multiple of losses from a natural catastrophe that could affect the financial stability of the company. The maximum limit that the company has to retain following any loss event would be Baht 90 million per property loss, Baht 30 Million for Marine loss, and Baht 50 million for Miscellaneous loss.
2. Other Contract It is general business contract that the company and it’s subsidiary do with the other insurance companies in both domestic and international. The difference between other contract and Market Agreement is the other contract that the company do not have to return the retrocession back to the parties. The income from the other contract is 43% from our net reinsurance income.
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Claim
The revenue structure of the company and its subsidiaries come from 2 main parts, being from reinsurance and investment. The following table provides and overview of the revenue structure of the company:
The products and services of the company and its subsidiaries can be summarized per the following: 1. “Market Agreement” This business comes from all Life and Non-Life Insurance Companies in Thailand. It serves the objective of the Department of Insurance which requires part of the premiums written in Thailand to be retained. At present this business makes up approximately 30% of the whole volume of premium in the company’s portfolio. 2. “Voluntary Business” This business constitutes all the business which is not considered to be Market Agreement from all Life and Non-Life Insurance Companies in Thailand. It is the business that the company has to compete with other reinsurers. The strategy of the company is to maximize its market share in the Thai Market. From this strategy the company’s objective would be to increase the Voluntary business from 45% in 2000 to 72% of the gross written premium in 2007. It can be observed that the portfolio mix of the company has changed dramatically to be more balanced when compared to the portfolio mix in 2000. For example, Fire insurance in year 2000 represented 60% of the portfolio mix compared to 45% in 2007; the difference of 15% has been replaced by miscellaneous class of business which are all new products developed to be sold through new channels of distribution such as bancassurance, telemarketing and worksite marketing.
Revenue Structure
Products and Services
2007 2006 2005 Business Group
Support by Amount Percent Amount Percent Amount Percent
1. Net Underwriting Profit /1 Thai Re &ThaiRe-Life (only ThaiRe)
348.8 [277.3] 52.7 317.8
[237.7] 51.8 270.2 [240.0] 43.0
2. Net Investment Income/2 Thai Re &ThaiRe-Life (only ThaiRe)
299.7 [435.5] 45.3 297.6
[274.4] 48.5 356.3 [344.8] 56.7
3. กําไรจากการใหบริการ บริษัทยอย 12.9 2.0 (1.4) (0.3) 1.6 0.3 รวม 661.4 100.0 614.0 100.0 628.1 100.0
Note 1 Net profit from insurance mean profit from insurance premium after deduct the expense 2 Profit form Investment includes the profit from share dividend, benefit interest, and other interests.
Unit : Million Baht
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Industry Situation and Competition
The characteristic of Thai Market can be classify into 2 groups as follow: 1. The first group, consists of insurance companies that make up 19 percent of the total business written
in Thailand for 2007. The business written by them would be on a direct basis, through co-insurance or even reinsurance.
2.The second group, consists of professional reinsurance companies, Thai Reinsurance included, that make up 81 percent of the remainder of the business that written in Thailand for 2007. The business written by them would be only reinsurance.
Based on the information that has been provided by Office of Insurance Commission the growth of the insurance industry is progressing well. The direct premium of the Non-Life insurance market in 2007 was Baht 99,022 million, representing an increase of 4% from 2006. At the same time the Non-Life reinsurance premium was Baht 28,788 million, down by 1% from 2006. The direct premium of the Life insurance for 2007 increased by 11% from 2005 to Baht 188,779 million. The Life reinsurance premium for 2007 was up by 5% from 2006 to Baht 4,560 million.
Non-Life Insurance Life Insurance Million THB Proportion Million THB Proportion Million THB Proportion
Direct Premium Insurance 99,022 100.0 188,779 100.0 Reinsurance Premium 28,788 29.1 100.0 4,560 2.4 100.0 - Domestic Reinsurance Premium of ThaiRe 4,204 4.2 14.6 399 0.2 7.4 Reinsurance Premium of other companies 5,399 5.5 18.8
- International 19,186 19.4 66.6 Source from - Office of Insurance Commission
- Thai Reinsurance Public Co., Ltd.
From the information that is presented in the above table, there is 29 percent of the total direct premiums of the Non Life insurance industry in 2007 was for reinsurance, 33 percent was reinsured locally and 67 percent was reinsure internationally. Also from the information that is presented in the above table, it is clear that 2.4 percent of the total direct premiums of the Life insurance industry in 2007 was for reinsurance.
The market share for our company of the Non Life reinsurance market is around 15.0 percent and 7.0 percent for Life reinsurance market.
There are opportunities that the company could explore since we already specialize in this market with the following competitive advantages:
1. The company is the only professional Thai reinsurer with shareholder that are from the domestic Life and Non Life insurance industries greater than 50 companies and they also our important cedants.
2. The company have market agreement with every non-life insurance companies in Thailand for 5 percent of every policies and 5-10 percent for life insurance through the 1st Surplus Treaties.
3. The government’s policy of locally retaining as much business as possible by increasing the limit of retention for Fire, Miscellaneous, and Marine insurance.
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4. Solid position as the country’s leading domestic reinsurance company with a long established market knowledge and relationship with the primary market.
5. A strong financial stability and steadily growing shareholder’s equity. The company currently has solvency ratio 83% from Net premium.
We have a relentless focus on profitable growth. The foundation for our growth is well established - a strong financial position, having the support from the our customers that make up the majority of both Life and Non Life insurance companies in the local market, 71 from 96 are non-life insurance and the rest are life insurance, intensively maintaining an innovative product range to serve them, and a powerful entrepreneurial culture.
A customer focused, entrepreneurial approach to doing business has been deeply engrained in our culture. By managing our business through highly focused business units that are all profit centers, we have maintained the discipline and focus of owner-entrepreneurs. The business units are compensated for sustainable, long-term results through programs that measure and reward performance, benefiting our shareholders and customers.
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The company has conducted a study of the various risk factors that could have an effect on the operations from all perspectives, being those risk factors that have affected the company in the past and also those that are expected to possibly affect the company in the future. Having identified the various factors the company has commenced with the preparation of an Enterprise Risk Management program that is to be conducted by a team of technicians & scholars. The program will have as part once complete in 2009.
The program has as part a set of strategies that would properly manage each of the risk factors that could affect the company directly or indirectly and positively or negatively. The set of strategies would efficiently provide elimination or minimization from negative risk factors, and at the same time provide business opportunities for the positive risk factors. The strategies of the program would be monitored in accordance with the necessities per the level and type of exposure.
The company would for example have to follow strategies to manage risk factors from the underwriting of business such as the pricing of reinsurance, developing of new products, designing of retrocession program, managing of assets & investments, setting of budgets and the monitoring of the performance of the company that take into consideration the risk factors. The company believes that the strategies would have in the long run a positive benefit and they would also provide a competitive edge over competitors.
The risk factors affecting the reinsurance business are per the following:
1. Strategic Risk
This type of risk can originate from both the internal and external of the company. Internal would be originating from the faulty planning, issuing, following and monitoring of strategies of the company. External would originate from the changes in the business environment like customer requirements, the practice of the competition, changes in technology, brand awareness, and stagnation. The faults could occur when the company does not take into consideration all the types of risks that could affect the company, being both internal and external types. For example the current listing of clients of the company show that they are in majority Thai companies with a high percentage being of small size and are family owned. Once the Thai market is liberated, these companies could be facing problems from foreign companies that are better managed and have at their disposal higher capital to invest in their operations through acquisitioning and merging of companies. This activity would result in the lessoning of the reinsurance requirement by those companies. It is generally considered that the foreign companies have a competitive edge over Thai companies when it comes to technology that could be used to improve the management of companies and also the portfolio of new products not readily available in the market that could be marketed to the needs of the consumer.
The liberalisation of the market would also allow new reinsurance companies to be established in the market by local parties or by foreigners as branch operations.
It is felt that the liberalisation of the market would not take place within the next few years, hence there should not be any major effect on the company due to the fact that the companies in the market still requires the reinsurance support as before from the company in order to increase their risk appetite and also to spread their risk. Another factor that supports this understanding is the fact that the Department of Insurance still maintains the regulation for reinsurance to be partially placed locally in order to maximise the retention of premiums.
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The management of risk
The management of the Strategic Risk is through the development of an annual strategy that takes into consideration the long term strategy of the company. The Board of Directors of the company do have a strong influence on the development of both the annual and long term strategies of the company. The strategies are constantly monitored in order to see if it is being followed and to make necessary changes in accordance with the latest market conditions.
With 30 years of being in the reinsurance business, the company has gained much experience and also has amassed a sizeable database of market statistics which are used to manage the level of risk when developing dynamic strategies to serve its clients as non-conventional reinsurance company that is ready to change with the demands of the market, taking into consideration with best results for the lowest cost. The strategies to date have been effective in allowing the company to change with the market conditions and to do it in to most effective way possible with a mind set in the flexibility of its management structure and the ideology of the employees whom have become keen entrepreneurs.
2. Operational Risk
This type of risk could originate from the lack of proper management of issues that are related to all areas of the operations of the company. Such issues could be from both the internal and external factors that could have varying degrees of severity to the abilities of the company to conduct business.
The most evident issue at hand when focusing on Operational Risk is the management of human resources of the company, meaning the readiness in numbers of employees to service all of the clients and the quality of those that are available to professional service the clients with their needs. The maintenance of key employees in the company is an important issue when concerning the management of human resources.
The other issues that are involving the Operational Risk are linked to the internal administrations and workings of the company. Such links are the securitisation of authority of the duties that are performed by the various levels of employees, the control of underwriting & investment guidelines, the maintenance of retrocession guidelines, and management of loss settlement.
The management of risk
The company manages the Operational Risk per the following points: • The clear division between the Board of Directors and the management of the company. A complete
Organisational Structure and a detailed Company Manual has been established that indicates the various positions at all levels and the responsibilities within the company.
• The constant monitoring of the workings of the company that are abiding to the established business strategies and policies.
• The supporting of the business processes that ensures regular evaluations. • The setting of the risk management programs that evaluate risk levels of the company at all times. • The quarterly reporting per the requirements of the auditors. • The securing of all of the important information & database that relates to the operations of the company
in case of emergency situations that might occur.
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• The understanding of the need for skilled employees in the local market is evident for the company, especially with the market growing at a fast pace with many companies expanding their services. To minimise the effect on the company from the movement of employees to alternative employments in the market, the company has built a reserve of employees at critical positions, implemented an Employee Stock Option Plan, upgraded the working environment, and initiated a compensation plan that’s marked to the market.
• The management of the Hazard Risk is through the prudent underwriting of business utilising the underwriting guidelines. In order to manage the level of risk from the business that has been underwritten, the company arranges for its portfolio of business a complete excess of loss retrocession program which is considered to be the most effective way to protect the company against the exposures of doing such business even when there’s an occurrence of catastrophes.
• The planning of a complete Business Continuity Plan that would take immediate affect after business interruption.
3. Insurance Risk
This type of risk originates from the conduct of insurance business by the company. For example, there are risk from the pricing of insurance, the estimating of the aggregate exposures, the allocating of the premium & claims reserves, the underwriting prudence through guidelines, and the judgment of catastrophe exposures, the understanding of the policy holder behavior and the development of new products.
The management of risk
The company manages the Insurance Risk per the following points: • The management of risk is through the balancing of the level of risk by underwriting business from
across the country to provide a good level of geographic spread and also by underwriting multiple lines of business to gain a varied portfolio. Both of the mentioned ways of management remain flexible in practice depending on the market conditions.
• The establishing of an elaborate underwriting manual that’s taken into consideration of the latest market statistics. The underwriting manual is constantly updated to keep in pace with the market conditions by the skilled underwriters of the company.
• The maintenance of adequate levels of capital • The company has a policy of conservatively setting the reserving that carefully considers the level of
exposure. There is also a policy of having a reserving for losses to match the exposure. Apart for the two mentioned reserves the company also has in place the Loss Fluctuation Reserve that is there as a stabilizer for the performance of the underwriting result.
• The bringing together of market statistics and knowledge to form the business strategy of the company in order to target business opportunities and to develop new products to gain the competitive advantage.
4. Market Risk
This type of risk originates from the fluctuation in the foreign currency exchange rate, the change in the interest rate, the alteration in the pricing of derivatives in the money & financial markets, the differentiation in the pricing of assets, and the fluctuation in the pricing of real-estate. These mentioned points would have varying effects on the level of income, the pricing of assets & liabilities and also the capital of the company.
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The management of risk The company manages the Insurance Risk per the following points:
• The management of risk is through the careful analysis of the investment opportunities on a regular basis that contribute to a balanced investment portfolio.
• The investment strategy of the company takes into serious consideration the regulations that are applied for both the Life & Non Life insurance markets. The regulations clearly specify the type and amount of investment that are allowed by companies in the market so that failure of companies from investment risk is minimised.
• The establishing of an investment strategy that’s taken into consideration of the latest market & economic conditions, and at the same time being conservative enough just to maintain an adequate return that is constant in performance. With investments being considered as one of the main sources of business, the investment strategy of the company is being constantly monitored by the Investment Committee whom has a duty to report to the Board of Directors.
5. Credit Risk
This type of risk originates from the exposure from all forms of payments due to the company, for example losses that are due from retrocessionaires or from other similar contractual obligations that involve credit risk.
The management of risk The management of the Credit Risk is through the detailed analysis of the financial status of those
retrocessionaires and those with similar contractual obligations that involve credit risk. For example the company relies on the judgement of international ratings agencies such as Standard & Poor’s for the Financial Strength Rating level which is acceptable at “A –“ for all of the retrocessionaires.
6. Liquidity Risk
This type of risk originates from the situation that the company is unable to pay for losses entirely or partially to clients. The reason for this is due to complications in the timely conversion of assets to cash to support the required amounts by clients.
The management of risk The management of the Liquidity Risk is through the prudent investment and reserving strategy which
would not provide complications when conversions are required for payment of losses to clients.
7. Emerging Risk
This type of risk originates from the exposure from risks that are not known entirely at present but would have a critical affect on the company in the future. These risks could be difficult to detect, could have a low frequency in terms of occurrence, and could gradually materialise. The company is in danger from these risks when it does not have proper knowledge of the business & natural environment that it is operating. The standard of detection of these risks is also important for the company. The examples of Emerging Risk are changes to the political environment, alterations to the regulations, climate change, and innovation in technologies.
The management of risk The management of risk is through the complete study of all possible risk that could have an effect on the company for the foreseeable future and to have for each risk a concise plan of how to manage it in order to obliterate or lessen the eventual impact.
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Shareholders and Management Structure
The top-ten shareholders of Thai Reinsurance as at September 17, 2007 are as per the following table:
Shareholders
Name No. of Shares Ratio (%) 1. Albouys Nominees Ltd. 76,249,300 6.42 2. Government of Singapore Investment Corporation 71,587,200 6.03 3. Thai Trust Fund 68,728,100 5.79 4. Thai NVDR Co.,Ltd. 57,312,100 4.83 5. The Viriyah Insurance Co.,Ltd. 57,248,350 4.82 6. Bangkok Insurance Public Co.,Ltd. 46,698,540 3.93 7. Aberdeen Glowth Trust Fund 40,640,400 3.42 8. The Navakij Insurance Public Co.,Ltd. 33,754,630 2.84 9. Somers (U.K.) limited Public Co.,Ltd. 33,350,300 2.81 10. Krungthai Panich Insurance Co.,Ltd. 31,819,870 2.68 517,388,790 43.57 11. Other Shareholders 669,966,150 56.43
Total 1,187,354,940 100.00
It is noted that the company do not have any absolute major shareholder who can dictate policies on the direction of the company, and managing the company by himself or his group. In addition, company never releases any bonds or transfer securities that affect the right of shareholders.
MMaannaaggeemmeenntt
Management Structure Apart for the 15 members of the Board of Directors of the company there are also three additional
Committees that have been created. Firstly, Audit Committee that was created to foresee auditing duties. Secondly, Remuneration Committees that was created to foresee remuneration duties. Lastly, the Investment Committee that was created to foresee investment duties. The Board of Directors is allowed to set-up any specific Committee as necessary.
Board of Directors The company’s Board of Directors, would direct policy, monitor and supervise the management of the
company and its subsidiaries. With no particular shareholder having a clear majority, the task of appointing the members of the Board of Directors is achieved by voting at the shareholders meeting.
Committees As at December 31, 2007, 12 of the 15 members of Board of Directors of the company are independent
Directors with no responsibilities in day to day basis operation in both the company and the subsidiaries. It can be observed that the committees are independent from management of the company. They also do not represent any shareholders or any groups of shareholder that could have a majority amount of shares. It’s necessary to mention that 14 out of 15 Board of Directors of the company have succeeded the IOD or similar international courses.
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Director The company’s Board of Directors has the responsibility to set the vision, mission, strategy, goal,
planning of budgets for the company. They also have the responsibility to shareholders in monitoring and managing the company achieve the vision, mission, and maintain policies. Limitation of the Authorities and Responsibility
Board of Directors has to work under the Law, objectives and the regulations of the company with honesty and have to be aware of the benefits to the company. Board of Directors is responsible for reviewing, voting and directing the company’s policies as follow:
• Release company Policy in day to day basis and authorize for the long-term plan. • Review the management structure, working solutions, and annual budget. • Hire or terminate the executives & consider adjusting the salaries, fringe benefits and evaluation of the President and CEO performance. • Consider about the employee salary rate and fringe benefits • Assign duties for the management level • Follow up and evaluate the performance of those at management level Board of Directors is responsible in assigning the level of authority to the President & CEO, and in turn
it’s his responsibility to assign authority to others that are below the rank, avoiding any conflict of interest at the same time.
Normally the Chairman and the President & CEO are responsible to give an orientation to new Board’s members. To be more effective in monitoring of the new members of the Board of Director’s, the companies will arrange the orientation for new Board’s member.
Board of Director has responsibility of electing one of the Directors as Chairman and President & CEO. The elected person will hold that position for one year and have to be elected again in the following year after the first General Meeting of the shareholders. For absolute effectiveness to handle the making of policies monitoring of day-to-day operations the Chairman and President & CEO have to be different persons. The Board of Directors also has the responsibility to elect the Vice Chairman and Secretary General of the Board of Directors.
Board of Directors has 4 General meetings a year, once a quarter, and may have occasional meetings for the special case such as for the consideration of the budget, annual directions, and monitoring of operations, etc. The Secretary General has to send the meeting notification, the agenda of meeting, and related documents to the directors at lease 10 days in advance. In general the meeting takes around 2 hours to complete. The reports of the meetings that are approved by the Board of Directors are stored for rechecking again by the related department.
Board of Directors is responsible to evaluate the performance and ability of problem solving of sub committees and give suggestion for the improvement for the year. In evaluating the 2006 performance, Board of Directors had completed the questionnaire and it can be concluded that the overall result for year 2007 is acceptable in every part with good corporate governance, conflict of interest, and management in mind. The Board of Directors is also responsible to provide the management of the company with its vision, mission, strategies, and budget plan. It is also responsible for the following up process in order to make sure that all is done properly.
In 2007 there were 4 General meetings; Board of Directors that attended are as per the following:
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Remuneration (1) Name Position Attendant Conference
fee Gratuity Total
1 Mr. Suchin Wanglee Chairman and Independent Director 4/4 100,000 898,000 998,000
2 Mr. Chai Sophonpanich Vice-Chairman 4/4 100,000 673,500 773,500 3 Dr. Kopr Kritayakirana Independent Director 2/4 60,000 449,000 509,000 4 Mr. Kerati Panichewa Independent Director 3/4 75,000 449,000 524,000 5 Mr. Charuek Kungwanphanich Director 2/4 60,000 449,000 509,000 6 Mr.Jiraphant Asvatanakul Independent Director 4/4 100,000 449,000 549,000 7 Mr. Chanin Roonsamrarn Independent Director 4/4 100,000 449,000 549,000 8 Mr. Adisorn Tantianankul Independent Director 4/4 100,000 449,000 549,000 9 Dr. Sucharti Sungkasem Independent Director 4/4 100,000 449,000 549,000 10 Mr. Arnop Porndhiti Independent Director 4/4 100,000 449,000 549,000 11 Mr. Apirak Thaipatanagul Independent Director 4/4 100,000 449,000 549,000 12 Mr. Aswin Kongsiri Independent Director 4/4 100,000 449,000 549,000 13 Mr. Udom Vichaiyabhai Independent Director 3/4 75,000 449,000 524,000 14 Mr. Surachai Sirivallop Independent Director 4/4 100,000 449,000 549,000 15 Ms. Potjanee Thanavaranit(2) Independent Director 3/3 75,000 - 75,000
Total 1,345,000 6,959,500 8,304,500
Note. 1.Remuneration of the Board of Directors as mentioned above includes only the remuneration for the Directors only, however, the other remuneration that are paid for the Sub-Directors (if any) will be indicated in the related topic.
2. Please note that Ms. Potjanee Thanavaranit is in charge of Director of the company since the General Shareholder Meeting on April 11, 2007. According to this the number of Directors of the Company from 14 Directors to 15 Directors.
Definition of Independent Director
The Independent Directors means persons whom are having all of the qualifications that are required by the Securities and Exchange Commission and are also required by the Stock Exchange of Thailand, per the following:
1. The person is not able to hold shares more than 5% for the voting in the parent company or related company. Those that may have conflict of interest are also not able to be Independent Directors.
2. The person is not able to have any responsibilities in the management of the company by being an officer or advisor who receives salary. It is also not possible for that person to be an auditor, lawyer, or management executive of the company and its subsidiary or any juristic person who may have conflict of interests.
3. The person is not able to have any direct or indirect related business or conflict of interests in terms of monetary gain and management of the company and its subsidiary or has part in the decision making for the company.
The meaning of related business or conflicts of interests are per the following points: (a) The person is not able to have interest or controlling power in a related business that has a total sum
of reinsurance or retrocession more than 10% of reinsurance premium in that particular year. (b) The person is not able to have any deposits, treasury notes, or other investments in any funds that the
person has management authority more than 10% for the overall assets.
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4. The person is not able to have any close relationship with executives, major shareholders of the company and its subsidiaries or the any other person that have conflict of interests. Furthermore, the person is not a representative for the protection of the interest of Directors or major shareholders.
5. The person can manage the task at hand without any interferences or concerns with the interests that relate to the benefits. They have to be independent from the influence of any person or group or any circumstances.
6. Every year the Board of Directors will evaluate the performance and the qualification of the Directors.
Committee It is the company’s policy to encourage effective supervisory activities and fully recognize the rights and
equality of all shareholders. This is evident through procedures of the Meeting of Shareholders, during which all shareholders rights are dictated by the one share, one vote rule and all votes are not transferable. The company’s management structure is created with transparency and without conflict of interest.
The company sets up its committees to supervise every particular aspect of management, as follows; • The Audit Committee • The Nomination Committee • The Remuneration Committee • The Investment Committee The authority, duty and responsibility of each committee is assigned by the Board of Directors and
clearly specified in the guidelines for the Board of Directors and relevant charters. Risk management and control, two important factors in business operations, are assessed and controlled via policy, strategy and measure established by the company. The Investment Committee also identifies measures to cope with any emergency situations that may occur.
The Audit Committee The Audit Committee of Thai Reinsurance was set up on 24 February 1999 with three members, whom
have been appointed by the Board of Directors to constantly meet in order to perform the directing and overseeing duties that were accordingly assigned by the Board of Directors. The Audit Committee is responsible for communicating with the Board of Directors and Auditor on matters pertaining to the correctness of preparation of financial statements under recognized accounting principles and in line with the information that the Audit Committee has been receiving. In addition, the Audit Committee has also been responsible for considering the appropriateness of the internal control system and reporting to the Board of Directors. The Audit Committee has made positive remarks to the Board of Directors following their recent review. The committee will hold their responsibilities for 3 years. The committee members are as per the following:
Name Position Attendant in year 2007 Conference fee 1. Mr. Udom Vichaiyabhai Deputy head of Auditor Committee 4/4 185,000 2. Mr. Chanin Roonsamrarn Auditor Committee 4/4 130,000 3. Mr. Aswin Kongsiri Auditor Committee 3/4 95,000
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Name Position Attendant in year 2007 Conference fee
1. Mr. Suchin Wanglee Deputy head of Nominating Committee 2/2 25,000
2. Mr. Chai Sophonpanich Nominating Committee 2/2 25,000
3. Mr. Chanin Roonsamrarn Nominating Committee 2/2 25,000
4. Mr. Udom Vichaiyabhai Nominating Committee 2/2 25,000
5. Mr. Aswin Kongsiri Nominating Committee 2/2 25,000
The Audit Committee has responsibilities over the following activities: 1. Review and approve the financial report 2. Review the control system within the company for the effectiveness 3. Propose the auditor of the company and assign the remuneration in account audit. It must be noted that the account audit has to choose 4 years time. 4. Monitoring the company to abide by the law and to follow company’s regulations. 5. Avoid and protect the conflict of interest between related persons. 6. Make and submit the audit report to the Board of Directors 7. Make a report to the shareholder by publishing their findings in the Annual Report. 8. Audit committee has to meet at least 4 times a year and may invite the management team to attend the meeting to provide them the information required. 9. Collaborate with account audit and internal audit in order to inspect the direction of the company. 10. Reporting of acts of dishonesty, unusual or major fault for internal control. The audit committee has a right to inspect and report to Board of Director.
Nominating Committee The Nominating Committee was set up on 18 November 2004, consists of 5 members, which have been
appointed by the Board of Directors to constantly meet in order to find appropriate replacement persons for positions within the company that are vacant. The Committee will have responsibilities for 3 years. The members of the Committee are as per the following:
The Nominating Committee has responsibility over the following: 1. Considering the standards, qualification levels, and the related systems for the company’s
Directors that have completed their term. 2. Considering the person that has past the above and present their findings to the Board of Directors
and/or General Meeting of shareholders. 3. Considering and proposing the right person to take the position of President & CEO and other
executives when required. Remuneration Committee The Remuneration Committee of the company was set up on 23 May 2002 with four members being
appointed by the Board of Directors. The Committee constantly meets in order to set the remuneration standards. The Committee will be responsible for 3 years. The Committee Members are as per following:
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Name Position Attendant in year 2007 Conference fee
1. Mr. Suchin Wanglee Investment Committee None None 2. Mr. Chai Sophonpanich Investment Committee None None 3. Mr. Udom Vichaiyabhai Investment Committee None None 4. Mr. Surachai Sirivallop Investment Committee None None
The Investment Committee has also the right to setup the Sub-Committee to handle the occasional special
projects. Executive As at 31 December 2007, executives that are defined by the Securities & Exchange Commission are the
following persons:
Name Position 1. Mr. Surachai Sirivallop President and CEO 2. Mr. Chuanchai Cheausamut Executive Vice-President 3. Mr. Prawit Thongtanakul Executive Vice-President 4. Ms. Thitaporn Tarakij Senior Vice-President 5. Mr. Theera Bunnag Senior Vice-President
Name Position Attendant in year 2007 Conference fee 1. Mr. Suchin Wanglee Deputy head of Nominating Committee 1/1 25,000 2. Mr. Chai Sophonpanich Nominating Committee 1/1 25,000 3. Mr. Chanin Roonsamrarn Nominating Committee 1/1 25,000 4. Mr. Arnop Porndhiti Nominating Committee 1/1 25,000
The Remuneration Committee has the following responsibilities: 1. Design the structure of remuneration and other benefit for Directors, Advisors and the Committee
Members of the company and its subsidiaries. 2. Design remuneration policies for executives that contribute to the performance of the company. 3. Assign the remuneration for the Directors and present to General Meeting for shareholders. 4. Consider for remuneration from positions above Vice - President before voting in General Meeting
for shareholders. In 2007, the Remuneration Committee had 1 meeting to set up the standard of remunerations. The
Remuneration Committee had provided the Board of Directors with instructions on the remuneration of the President & CEO, and the Management of the company for 2007
Investment Committee The Investment Committee of the company was set up on 28 February 1994 consisting of four members,
which have been appointed by the Board of Directors to constantly meet in order to review investments. The committee will be responsible for 3 years. The Committee Members are as per the following:
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The President & CEO has responsibilities as per the following: 1. Managing by law, regulation, objectives with utmost honesty, and has full awareness of the benefits
of the company as expected from the Board of Directors. 2. Managing all responsibilities that are related to hiring, dismissing, moving of positions, and the
setting of punishments. Adjust the salaries for all employees of the company but this does not include the employees that the Board of Director or the company regulations specifically assign.
3. Set up the working systems, job descriptions and directions of the company without any conflict to the company regulations without the permission of the Board of Directors.
4. Managing business along with the company regulations and set up the authority for employees at every level.
5. Managing all business transactions that the company has to deal with except for those the President & CEO has a conflict of interest. For business transactions that have conflict of interest, the permission of the Board of Directors would be required. The President & CEO may also set up a representative to handle the specific transaction.
6. The President & CEO is able to permit the Executive Vice President to stand in his position to make decision if the President is not available to perform decisions by himself on routine transactions, specific transactions the decision making of the Chairman is required. In case the position of President & CEO is vacant and a replacement is not available, Board of Directors has to choose one of the Directors or the executive to act as the President & CEO temporarily.
Secretary General and Audit committee Mr. Chuanchai Cheausamut Nominating Directors and Executives System Authorities and Duties Directors have to work under the law, objectives, company regulations, and resolutions from the
Shareholder General or Extraordinary Meetings. Nominating the Directors
Prior to appointment of any new Directors of the company permission has to be authorized from the Shareholder Meeting. Prior to the company being publicly listed the promotion of a Director of the company never past the Nominating Committee. The company gives the right to Shareholders to propose candidates to be elected in the General Shareholder’s Meeting as members of Board of Directors by propose in company’s website or by wording in the General Shareholder’s Meeting.
Voting Voting is the system to exercise the right of the shareholder, with the following conditions: 1. Each shareholder has the right to vote in relation to amount of shares held. 2. Each shareholder has the right to vote and represent other shareholders that have permitted him or
her to do so. 3. Those that have the majority of votes form shareholders become Directors. For every General Shareholders Meeting, one third of the Directors have to resign from the position. For
the first and second year the Directors have to randomly resign. From the third year onwards, the first in first out system has to be applying for the directors that have to resign. The directors who had resigned can apply to be nominated again.
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Apart for the above reasons the Directors can also resign from the following reasons: 1. Death 2. Resignation 3. Lack of the qualification or having been forced to resign by the laws that publicly listed companies
must follow 4. Resignation forced by shareholders with a resolution unanimous resolution of at least achieving
three forth of the available votes at the General Shareholders Meeting. 5. Resignation forced upon by the court of law If a vote is not possible for any reason for promote new Director. The Board of Directors have to
nominate themselves a qualified candidate to be elected in the next General Shareholders Meeting unless the term of that particular Director will expire within 2 month. The resolution of the Board of Directors that nominate the candidate must represent at lease three fourth of the remaining Directors. The candidate that becomes the Director can only remain in the position for the remaining time of the previous Director.
It must be noted that the shareholders that vote for the Director have to commit their entire right to vote for one candidate without separating their right to others.
Executive nominating The Nominating Committee are responsible to find Directors and executives of the company. The remunerations are per the following in 2006:
No. of
Member Salary
(THB1,000)(2) Conference fee (THB 1,000) (3)
Gratuity (THB1,000)
Other benefit(4)
Total (THB 1,000)
Board of Director(1) 15 - 1,345 6,960 - 8,305
Audit Committee 3 - 410 - - 410
Remuneration Committee 4 - 100 - - 100
Nominating Committee 5 - 125 125
Director and Executive (2) 5 30,477 - - 1,880 32,357
Total 30,477 1,980 6,960 1,880 41,297 Note. 1. The figure stated includes the remuneration for the Directors. 2. The figure stated includes Salary and Bonuses for Management of the Subsidiary. 3 .The figure stated includes the conference fee for each quarter. 4. The figure states includes the money that the company paid for the Board of Directors for Provident Fund
Human Resource As at December 31, 2007 Thai Reinsurance had 146 employees as per the following allocations:
Department Employees Business Development 23 Operation Support 21 Finance and Accounting 18 Other 37 Total Thai Reinsurance 99 Subsidiaries 47 Total 146
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Remunerations of the employees Remunerations of employees are based on salary surveys that are conducted on an annual basis with
comparisons of other companies in the insurance and financial industries in Thailand. In 2007 the company spent Baht 110 million in remunerations; this is equivalent to 61 percent of the operating cost. The details are per the following:
Remunerations (Million Baht) 2006 Salary and overtime fee 55.3 Bonus 18.1 Provident Fund 4.9 Other Allowance 6.4
Total Thai Reinsurance 84.7 Subsidiaries 25.5
Total 110.2
Human Resource Development Policy
The company realises that developing the skills of employees very important, hence the initiation of the “Training Road Map” program for each employee which is aimed at improving the skills of the employees and also developing a high level of cooperation amongst particular teams and also across divisions in the company.
In 2007, the company sent 82 employees to the 108 training courses, which matched the requirements of employees as per the following:
Course Number of Course Number of Participants Within Thailand – Other place 100 68 - With in Thai Re 5 82 Other Countries 2 2 LOMA and ANZIF 1 1
Labor Dispute We are pleased to inform that the company has never experienced a labor dispute.
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Corporate Governance
The company has followed the Code of Best Practices for Directors of Listed Companies issued by the Stock Exchange of Thailand and other international practices to ensure transparency, quality in management and operation, business ethics and fairness to all stakeholders. There are 5 categories to the practices as followed:
1. Rights of shareholder The company gave importance and operates with of the rights of shareholders in mind. As an investor and
also owner of company, they have rights in purchase or sell of their shares, rights to have a share in company’s profit, rights to receive information adequately and quickly, rights to attend General Shareholders’ Meeting and rights to express their opinion, rights to vote in electing or dismiss Board of Director , appointing of auditor etc. Followings are our guidelines:
• Establish a written governance policy since 2002 which covers the responsibility to take care of rights of shareholders.
• In 2007 the company held General Shareholder Meeting on 11 April 2007 with 9 members of Board of Director. Invitation document was posted on the website 34 days prior to the meeting with letters mailed to shareholders 10 days prior to the meeting.
• Shareholders can submit queries, opinion or suggestion in advance via letter or internet to the company secretary before the meeting so they can be answered during the meeting
• Facilitate the shareholders by organize the meeting before Songkran Day so that it will not crash with other company’s shareholder meeting. Personnel and equipment were assigned to facilitate the registration.
• The chairman allows shareholders to query and express their opinions in each agenda. Any queries were answered to satisfactory.
• Meeting reports, with all important issue such as explanations, questions, opinions, voting procedure and the result, were completed and posted on the company’s website within 12 days after the meeting. On top of that, video and audio recordings of the meeting were recorded into VCD for other shareholders and other interested party who could not attend the meeting.
2. Fair treatment to all shareholders
Every shareholder, be a major or minor shareholder, an institution or foreign investors, were treated fairly and equally without discrimination following this guideline
• Grant rights to shareholder to propose the name to be elected to the Board of Director and propose agenda for the future meeting in advance. Last year it was set in January 2007 for 30 days. Shareholder can send the name via letter or email to the company secretary to pass on to Nomination Committee for further consideration. Other than that, shareholder can propose the name directly during the General Shareholder Meeting which in 2007 there was another name proposed for the election
• Encourage shareholder who could not attend the meeting to authorize other person or director to attend the meeting and vote using authorization letter that allows voting. In April 2007, 42 shareholders authorized independent directors to attend the meeting in their names.
• Give out voting card for every agenda especially voting of director that individual voting is practiced
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• Have a control system to prevent unauthorized usage of internal information by directors, management and staff as detailed in Shareholder and Management structure
• Have directors, management and concerned personnel declared their involvement to the Board of Director. Directors, management and concerned personnel who have conflict of interest are not allowed to be in the decision making process of authorizing a transaction that he has interest in.
3. Roles of stakeholder. The company is responsible for all stakeholders namely, shareholders, staff, customers, business partner,
competitors and overall public. With consideration to the rights of stakeholders as stated in the law or agreements made with the company, a written business ethic clearly state the rights of stakeholders and the company has duty to protect those rights from being violated.
• Shareholders Above the basic rights stated in the law, company regulation grants various rights to shareholders, such as rights to attend the shareholder meeting and vote, rights to freely express their opinions and rights to receive fair share of profit. The company also allows shareholders to give opinion or complain about the operation via the company website. Every input will be passed on to the relevant person for further action.
• Employee As our business is a service business in nature, employees are considered our most important asset. We emphasize on the continuous development of our human resources. The numeration is monitor to be in comparable range with the industry. Office environment and equipments are ready to facilitate the work. Every year the company conducts a satisfactory survey and brings the result to improve the working environment. Details on number, pay and human development policy can be found in Shareholder and management structure.
• Customer, business partner and competitors The company has a strict policy regarding treatment to customers, business partner and competitors in the frame of legal trading. Following ethic are set to guide staff in dealing with customers, business partner and competitors:
1. Deal with honesty and have moral in working with other parties 2. Treat customer fairly and without discrimination. Avoid inappropriate action such as cartel, or release
customer secret for the benefit of third party. 3. Strengthen the relationship between the company and business partner. 4. Disclosure of customer information is strictly not allowed unless authorize by customer or to comply
with law or disclose for the benefit of insurance industry or public. 5. Must ensure that published information is accurate. 6. Must follow the company policy with honesty in mind. Not giving or taking bribe no matter in what form.
Not support or act illegally against laws or relevant announcement. Not acting or support action that can pose threat to economy or national security, including not transfer or conceal or sell of properties acquired through illegal means
In the past year the company had received no complain regarding customers, business partners or competitors.
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• Society and environment The company has set guidelines in our business ethic for all staff to follow 1. Maximize the use of natural resources with least amount of waste and try to find replacement of natural
resources with present and future environment in mind. 2. Try to recycle any used material in the company 3. Keep the work environment clean and tidy at all times 4. Improve safety standard to minimize accidental damage to properties and environment Other than that the company feels its responsibility to support social activity which is one of our objectives to
do business for the most benefit to insurance industry and overall economy of the country. The activities that the company involved in are listed in Company and Society
4. Disclosure and transparency Other than disclose financial report to public according to the law within the timeframe, the company also
discloses following information to display our transparency • To ensure that company’s actions are fair and correct, the company established business ethic and
guideline for management and staff since 2000. We posted the said guideline along with Good Governance Policy and general rules on the Intranet so that all involved parties can access. Revision is done periodically
• Include the report of Board of Director responsibility towards Financial Report in the annual report • Disclose the role of each committee and sub-committee, number of meetings and attendance of each
member in the past year. Details are in Shareholders and Management structure • Disclose the policy of management and executive staff numeration including means and amount to pay
each member for being a member in sub-committee and director in subsidiary. Details in Shareholders and Management structure.
• The company has assigned a managing director to be in-charge of “investor relation”. To contact, please call 02-256-6822 or send email to [email protected]. In 2007 there were 16 meetings with investing analysts and fund managers.
5. Board of Director responsibility 1. Board of Director Structure The company Board of Director comprises of 15 highly knowledgeable and widely accepted members. Of
the 15, 1 is from management team. There are 12 independent directors, according to the company’s definition, which comply with the rule set by Securities and Exchange Commission. The term of directors is 3 years with no limit to the number of terms each person can hold since the company needs to have insurance specialist in the Board.
Biography of each director is in Directors and Executive Officers of the registrant The Board has liberty to choose a member to chair the Board. Chairman, vice-chairman and secretary are
to be elected annually in the first Board meeting after the General Shareholder Meeting. To separate the role of policy setting, auditing and management, the chairman and CEO is different person. Executive Director is also a President of management team. So far Board of Director has elected independent director to hold the position of President of Board of Director.
In the past year, the Board appoints the secretary to advice regarding the rules and laws that the Board must know and also to enforce the decision of the Board.
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2. Sub-Committee 4 sub-committees are set up by the Board of Director, namely Audit Committee, Remuneration Committee,
Nomination Committee and Investment Committee. Majority of members of each sub-committee are independent director with the chairperson who is independent director act as chairperson to Nomination committee and Numeration committee. Details of roles of sub-committee can be found in Shareholders and Management structure.
3. Role and responsibility of Board of Director Details of role and responsibility of different committee can be found in Shareholders and Management
structure. Committee set up business ethic and policy of company in written since 2000 and 2002 respectively. Committee has written the guideline to consider Conflict of Interest which state that person with conflict of
interest cannot make certain decision. The decision is based on the interest of Company and shareholders. Audit committee is responsible for the suitability of transactions and report to Board of Director every quarter.
Committee set a policy of risk management for the whole organization. Now Enterprise Risk Management is being implemented to improve efficiency of risk management system. Report is made regularly to the Board of director. For more details, please see Risk Factors
4. Board of Director meeting Normally Board of Director hold meeting every quarter according to the schedule set up one year in
advance. Special session can be called if needed. In 2007, Board of Director had 4 sessions. Chairman and CEO will organize the agenda and topic to be put in agenda. Each member can raise any issue to be put in the agenda. The secretary will send notification letters and the agenda of meeting and related documents at least 14 days in advance. During the meeting, high level management staff may join in some session to acknowledge the policy and execute it with efficiency. Every member can express their opinion freely during the meeting. The voting will take the majority vote as principle with no director with conflict of interest in that agenda. In general the meeting takes about 2 hours to complete. The complete report of meeting with approval from Board of Director is to be kept for recheck by relevant authorities.
5. Self-evaluation of board of director Board of Director let each member evaluate overall performance of the board annually in order to revise the
achievement and problem faced in the past year. The result of evaluation will be used as a guideline to improve the work of board of director. In 2007 evaluation, Corporate Governance Center’s evaluation form is used. Every directors did the evaluation and overall result showed that directors found that they highly agree with 6 topics of evaluation. The mean score of evaluation is 3.87 out of 4.
6. Remuneration Details on remuneration can be found in Shareholders and Management structure. 7. Development of directors and management Board of directors support and facilitate training of all directors and personal relevant to company
governance with the aim of improving the operation by passing information relate to training course to relevant staff from time to time.
In case new director is appointed and the director is not familiar with business of the company, chairman and CEO has the duty to brief and supply information that will be useful to operation including role of director to the newly appointed director
In addition, the company has prepared the plan for inheritance of high rank management for more than 5 years. Managing director and Nomination committee are in charge of administration of the plan and report to board of director
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The company realizes that being part of the industry and community is of utmost importance. Hence it is the duty of the company to adhere to its responsibilities by following certain guidelines that would be beneficial for the industry and society. The following are the guideline in 2007:
a) Benefits for insurance industry
1. Providing the Life and Non Life industry with training and consulting on an array of insurance topics 2. Providing an integral role for the centralization of research on the statistics of the industry that is
submitted through the market agreements. 3. Providing support for risk management for the industry through the risk survey that are conducted by
professional surveyors. 4. Providing a key role in the management of the “Uar-Artorn” Personal Accident project that was initiated
by the government policy so that the people from the glass-root would have insurance coverage. 5. Providing collaboration between the Department of Insurance, Thai Life Assurance Association, and The
General Insurance Association in order to support the general insurance industry in Thailand. The company is pleased to inform that it is the second year in succession that “Support for the Development Insurance Industry Award“is being awarded.
b) Benefits for Society:
A. General Social Activities 1. The company runs a project that aims to provide scholarships for under privileged students from
Sakonakorn and Mukdarharn provinces. The scholarships provided by the company are for middle to higher levels of education. The project has already given a total scholarship amount of Baht 1,600,000 in 2007.
2. Health care – The company has also associated itself with a project that aim to provide proper sanitation in school that are located in under developed provinces and it has donated Baht 600,000 in this year.
3. The company has donated money towards foundation for children in Kanchanaburi Province, Sai Jai Thai Foundation Under Royal Patronage, and the temple.
The company has donated for the general social activities an amount totaling Baht 2,500,000 in 2007, Beside benefits for society, The Company has supported the public benefit activities. For example,
preparing the vehicle for a group of Thaire’s employee going to Thai Red Cross Society.
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Relate Party Transactions
There are a certain number of the members of the company’s Board of Directors that are involved in the management of local insurance companies, hence Connected Transactions are arising out of the ongoing business relationships that are through the reinsurance services provided by the company. Another form of Connected Transaction that are arises is when the company have invested in securities of the insurance companies that are managed by some of the Board of Directors.
The following is a list of those members of the company’s Board of Directors that are involved in the management of insurance companies that have Connected Transactions in year 2007 as follow:
1. Reinsurance Services
Relate Party Transactions
(Unit : Million Baht)
Written Premium Account Receivable Premium Ceded Account Payable Company Involved
2007 2006 2007 2006 2007 2006 2007 2006 Name of Director
Deves Ins. Pcl. - 66.4 - - - 7.8 - - Mrs. Kanda Xivivadh Krungthai Panich Ins. Co., Ltd. 255.0 52.7 4.3 3.7 15.7 15.6 1.2 1.3 Mr. Kerati Panichewa Dhipaya Ins. Pcl. 565.5 505.4 40.0 41.9 126.3 92.2 10.7 9.1 Mr. Charuek Kungwanphanich Road Accident Victims Protection Co.,Ltd. - (0.6) - - (3.7) 16.7 - 6.4
Mr. Charuek Kungwanphanich Mr. Jiraphant Asvatanakul
Thaivivat Ins. Pcl. 116.5 134.1 3.7 1.3 14.9 25.9 1.5 1.4 Mr. Jiraphant Asvatanakul The Siam Commercial Samaggi Insurance Plc.
190.2 138.2 21.2 12.5 50.9 39.3 8.1 7.6 Mr. Chanin Roonsamrarn
Bangkok Insurance Pcl. 387.9 339.0 29.5 40.7 131.9 90.4 11.8 10.0 Mr. Chai Sophonpanich The Navakij Ins. Pcl. 130.6 95.4 7.4 7.8 29.8 31.0 2.8 3.2 Mr. Sujin Wanglee The Thai Commercial Ins. Pcl. 1.0 - - - - 17.4 - - Mr. Sujin Wanglee Phatra Ins. Pcl. 120.3 109.5 8.1 23.3 55.4 35.5 4.7 3.7 Dr.Sucharti Sungkasem Thai Life Ins. Co., Ltd. 1.9 7.7 0.4 0.3 1.1 0.9 0.3 0.3 Mr. Apirak Thaipatanagul The Ayudhya Ins. Pcl. 182.1 134.1 10.8 12.3 33.1 29.0 2.9 2.5 Mr. Adisorn Tantianankul MSIG Ins. (Thai) Co., Ltd. 182.9 115.5 8.6 11.1 48.2 44.3 4.3 3.6 Mr. Arnop Porndhiti
Total 2,133.9 1,697.8 134.0 154.9 503.6 446.0 48.3 49.1
Note : It is necessary to note that the relationship between the deposit premium and account payable that the company has with Deves Insurance PCL. was terminated since April 12, 2006 so it will not show in the 2006 and 2007 accounting year.
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2. Other services (Perform by subsidiary company) (Unit : Million Baht)
Rendering of services
Accounts receivable
Revenue received in advance Company Involved
2007 2006 2007 2006 2007 2006 List of Committee
Krungthai Panich Ins. Co., 0.1 0.1 - - - - Mr. Kerati Panichewa Thaivivat Ins. Pcl. 0.1 0.1 - - - - Mr. Jiraphant Asvatanakul The Siam Commercial Samaggi Insurance Plc.
9.3 0.1 6.5 - 7.0 - Mr. Chanin Roonsamrarn
Bangkok Insurance Pcl. 0.1 0.1 - - - - Mr. Chai Sophonpanich The Navakij Ins. Pcl. 0.1 0.1 - - - - Mr. Sujin Wanglee The Thai Commercial Ins. Pcl. 3.8 0.1 0.3 - 0.1 - Mr. Sujin Wanglee Phatra Ins. Pcl. 0.1 0.1 - - - - Dr.Sucharti Sungkasem MSIG Ins. (Thai) Co., Ltd. 0.1 0.1 - - - - Mr. Arnop Porndhiti
Total 13.7 0.8 6.8 - 7.1 -
3. Investment in Securities (Unit : Million Baht)
Investment Fund Dividend
Receivable Company Involved Type of Investment
2007 2006 2007 2006 List of Committee
The Siam Commercial Samaggi Insurance Plc. Common Stock 28.9 26.5 1.8 - Mr. Chanin Roonsamrarn
The Siam Industrial Credit Pcl. Note 35.5 12.5 - - Mr. Chanin Roonsamrarn Bangkok Insurance Pcl. Common Stock 315.9 262.9 14.2 11.2 Mr. Chai Sophonpanich Bamrungraj Hospital Plc. Common Stock 52.3 27.2 0.5 0.4 Mr. Chai Sophonpanich Furakawa Metal (T) Pcl. Common Stock 1.2 1.7 0.1 0.1 Mr. Chai Sophonpanich Charoong Thai Wire & Cable Pcl. Common Stock 1.2 1.5 0.1 - Mr. Chai Sophonpanich Phatra Insurance Plc. Common Stock 37.1 31.8 13.1 2.4 Dr. Sucharti Sungkasem The Ayudhaya Insurance Plc. Common Stock 24.2 - 0.6 - Mr. Adisorn Tantianankul Bangkok Aviation Fuel Services Plc. Common Stock - 7.9 0.3 0.6 Mr. Aswin Kongsiri Total 496.3 372.0 30.7 14.7
All of the mentioned investments in the table above were in the Stock Exchange of Thailand as long term
investment. All of these are performing well and have provided a good level of dividends. It is necessary to note that the company has an investment policy not to do “Cross Holding”. The maximum share that the company invests in related parties will not exceed 2%.
In addition, companies that have transaction with our group as per the following:
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(Unit : Million Baht) Total Outstanding
Company Involved List of expenses 2007 2006 2007 2006
Pricing Policy
Thaire Life Assurance Co., Ltd. Proportion of average expenses 2.2 2.0 0.7 0.5 Par Value Thai Insurers Datanet Co., Ltd. Data processing service fee 0.0 0.4 0.0 0.0 Cost-plus TR Training Average expense that company collect 0.5 0.5 0.1 0.0 Par Value TR Training Training cost that company collect 2.3 2.1 0.1 0.0 Market Value First Tech. Proportion of average expenses 0.5 0.8 0.0 0.1 Par Value Thai Re Services Proportion of average expenses 2.6 0.6 0.2 0.1 Par Value
The reasons behind the Related Parties Transactions
The existence of Connected Transactions that insurance companies have with us is considered to be beneficial to the future development of business of the company, likewise it is felt that the Connected Transactions that Thai Reinsurance has with its subsidiaries or affiliates are also beneficial.
The standardization and authorization of the related transactions.
According to the regulations set by the Stock Exchange of Thailand, all the companies with relate transactions with the subsidiaries. The company has to be responsible for appropriate levels of controls and inspections by making sure that directors have no conflict of interest as mention in previous chapter, however, this does not include routine transactions of the company such as purchasing. It is necessary for the company to publish the information about the types and values of the related transactions and also to provide the reason why they choose to do related transactions for the annual shareholders meeting. Prior to any conduct of a related transaction by the company permission from Stock Exchange of Thailand is required. For all existing related transactions that are comparable with market price and also must be ongoing for many years, automatically acquire the authorization of the auditor. A quarterly report is generated for the Audit Committee on the related transactions that fall into the mention category.
Trend of the related transactions in the future
The company still has a policy to continue the related transactions with the intention to follow previous standards
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Management’s Discussion and Analysis of Financial Condition and Result of Operations
Our recorded results for 2007 was Baht 520.5 million of net income, or representing an increase of 12.5 percent from the prior year, or Baht 0.43 per share was achieved compared to Baht 462.6 million and Baht 0.39 per share that was reported in 2006. Our shareholder's equity totaled Baht 2.47 billion at year-end, and the return on equity was 19 percent, compared to 20 percent that was recorded in the previous year.
We are growing with profitability across our portfolio of Life & Non Life reinsurance business with many initiatives being taken to accelerate our progress in the years ahead. In 2007 we recorded a 12.9 percent increase in our gross reinsurance premium to Baht 4.54 billion from Baht 4.02 billion that was achieved in the previous year. At the same time our net reinsurance premium also was up by 13.8 percent to Baht 2.97 billion from Baht 2.61 billion. We have remained focused in growing our non life business with targeted opportunities amidst a softening market for our more conventional business such as the property and marine lines. We have concentrated our strengths in 2007 on areas that produce the highest margins such as the creation of new products that service the retail markets. In collaboration with a number of those in the market we have also succeeded in developing new distribution channels for these products such as bancassurance, telemarketing and worksite marketing. All of the mentioned reflects in the expansion of our business in 2007 with an increase of 13.0 percent in our general gross reinsurance premium from Baht 3.72 billion to Baht 4.20 billion. At the same time our net reinsurance premium increased by 13.8 percent, from Baht 2.32 billion to Baht 2.64 billion. As previously mentioned a main driving force for our growth was our miscellaneous business increasing sharply year on year by 30.8 percent. This increase leads to our treaty reinsurance business by growing by over 57.0 percent in 2007. For the year under review our underwriting result for Non Life business increased by 11.8 percent to Baht 398.4 million from Baht 356.3 million in 2006. For 2007, the overall loss ratio for our Non Life business was 44.9 percent and combined ratio was 82.2 percent, representing a slight improvement over the same period in the previous year which had an overall loss ratio of 45.2 percent and a combined ratio of 82.9 percent.
We have in the past been able to maintain high margins from our life business at around 20 percent, and that margin still remains acceptable. For this reason we have maintained our keen intention on growing this line of business. We maintain a strong business relationship with most local and joint venture life companies that are in the market. Through which we have mainly concentrated in the support of a range of new products, one in particular addresses the needs of the owners of small to medium sized enterprises. For 2007, the recorded gross reinsurance premium for life business increased by 11.3 percent, from Baht 304.4 million to Baht 338.7 million. For the period our net reinsurance premium increased by 11.1 percent, from Baht 295.0 million to Baht 327.7 million. In 2007, the adjusted underwriting profit was Baht 73.0 million for our Life business, representing a decrease of 9.0 percent from Baht 80.3 million that was recorded in the previous year. The life reinsurance premium now accounts for 11.0 percent of our total net premium income. We are confident that within the next couple of years this figure will exceed 15.0 percent. Life business is considered to be less volatile, and hence increasing this part of our business will improve the volatility of our overall portfolio.
Overview
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Review of Operations
The company's operation is divided into two parts, the first is Non-Life (representing 89.9 percent of our combined net premium income) and the second is Life reinsurance (representing 11.1 percent of our combined net premium income). Because of our size, being focused on providing reinsurance services to the domestic market remains our priority. As an established local reinsurance company with over 20 years of experience we have managed to acquire a firm understanding of the market and the future potential.
With the market statistics that we have gathered, it is felt that we can remain very competitive by servicing our client’s needs.
( in thousand Baht, except ratios ) 2007 2006 % Growth
Gross Premium Written 4,542,960 4,023,889 12.9 Net Premium Written 2,966,552 2,612,941 13.5 Underwriting Profit (Loss) 481,144 439,189 9.6 Loss Ratio 44.2 44.7 Total Expense Ratio (Underwriting & Operating) 38.8 41.6 Combined Loss and Expense Ratio 83.0 86.3
Through a selective process we were able to expand our business in 2007. We continued to target new and renewing business in order to compliment our portfolio, the majority being short-tail business that is in Thailand. In 2007, the recorded general gross reinsurance premium increased by 12.9 percent, from Baht 4.02 billion to Baht 4.54 billion, at the same time the net reinsurance premium increased by 13.8 percent, from Baht 2.61 billion to Baht 2.97 billion.
We have maintained a careful investment strategy that’s focused on the long term. Amidst a slowdown in the economy in 2007 there was a slight drop in our investment income to Baht 295.0 million from Baht 293.5 million in the previous year, or representing a decrease of 1.0 percent. The average investment yield for 2007 was 7.79 percent, or representing a slight decrease of 0.29 percentage points under what was recorded in the previous year. This is considered to be favorable compared to an estimate of 6 percent of others in the same sector.
We value the importance of our financial strength. In 2007, we have made progress in upgrading Thaire’s ratings. Standard & Poor’s rated our long-term local currency Counterparty Credit (CCR) and Financial Strength Rating (FSR) at BBB+ (Good) with positive outlook, now it is rated A- (Good) with stable outlook. At this level, our rating is among the highest of any insurance and financial services organization in the country.
Reinsurance Results
We are growing with profitability across our portfolio of Life & Non Life reinsurance business with many initiatives being taken to accelerate our progress in the years ahead. In 2007 we recorded a 12.9 percent increase in our gross reinsurance premium to Baht 4.54 billion from Baht 4.02 billion that was achieved in the previous year. At the same time our net reinsurance premium also was up by 13.5 percent to Baht 2.97 billion from Baht 2.61 billion.
This Review of Operations discusses the performances of Thai Re in 2007 made by each business segment.
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For 2007 our underwriting result was good, with Baht 481.1 million being achieved compared to Baht 439.2 million that was achieved in the previous year. This result is acceptable when considering the higher frequency of losses for 2007. For 2007, the overall loss ratio for our Non Life business was 44.2 percent and combined ratio was 83.0 percent, representing a slight improvement over the previous year’s loss ratio of 44.7 percent and combined ratio of 86.3.
As in the previous year our company's portfolio mix remained basically unchanged for 2007 with a major portion of the overall net premium written being Fire business, 44.0 percent. Other classes such as Miscellaneous 31.0 percent, Marine 7.0 percent, Motor 5 percent and Life 11.1 percent completing the remainder of the portfolio mix.
Domestic Non-Life Reinsurance
In 2007, the business generated from the domestic market represents 92.0 percent of our overall written premium. The overall gross premium written was Baht 4.16 billion for the year under review, representing an increase of 12.9 percent from Baht 3.69 billion of the previous year. The net written premium was up by 13.7 percent in 2007, from Baht 2.29 billion that was recorded in the previous year to Baht 2.60 billion.
Our underwriting results grew by 13.7 percent for 2007 with Baht 408.1 million being achieved compared to Baht 359.0 million that was recorded in the previous year. The overall loss ratio for 2007 was 44.2 percent and combined ratio was 83.8 percent, representing a slight improvement compared to the overall loss ratio of 44.7 percent and combined ratio of 84.1 percent that was recorded in 2006.
At January 1st, 2007 the loss fluctuation reserve was Baht 70 million and by December 31st, 2007 it had remained unchanged.
( in thousand Baht, except ratios ) 2007 2006 % Growth
Gross Premium Written 4,204,237 3,687,588 13.0 Net Premium Written 2,638,810 2,286,067 13.8 Underwriting Profit (Loss) 408,098 356,266 13.7 Loss Ratio 44.2 45.2 Combined Loss and Expense Ratio 83.8 82.9
Through a selective process we were able to expand our business in 2007. We continued to target new and renewing business in order to compliment our portfolio, the majority being short-tail business that is in Thailand. In 2007, the recorded general gross reinsurance premium increased by 12.9 percent, from Baht 4.02 billion to Baht 4.54 billion, at the same time the net reinsurance premium increased by 13.8 percent, from Baht 2.61 billion to Baht 2.97 billion.
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Fire This segment of our business includes Fire and Industrial All Risk classes of insurance, constituting 54.2
percent of the total domestic Non-Life gross written premium and 50.1 percent of the total net written premium. In the year under review, the total gross written premium was Baht 2.30 billion, edging up by 4.5 percent compared to the previous year. In 2007, the net written premium remained the same at Baht 1.3 billion
This segment of our business recorded an underwriting profit of Baht 152.8 million in 2007 compared to Baht 195.2 million that was achieved in the previous year, or representing a drop of 21.7 percent. The contributory factor for the decrease in the underwriting profit for the year under review was the higher frequency of losses for this segment of our business. The combined ratio for 2007 was an acceptable 88.4 percent or representing a change of 4 percentage points from 84.7 percent that was recorded for the previous year.
In 2008 we will be continuing to devote as much attention as possible to this segment of our business as in the previous years. We believe that our ability and commitment to continue a targeted approach at gaining new and also renewing attractive business opportunities is unwavering.
Miscellaneous This segment of our business includes all classes of reinsurance except Fire, Marine and Motor business.
The main classes for this segment of our business are the various engineering classes and personal & group accident business. After Fire this segment of our business represents the second largest portion of our company's portfolio mix, constituting 35.2 percent of the total domestic Non-Life gross written premium and 36.1 percent of the total net written premium. The overall gross premium written of miscellaneous business amounted to Baht 1.5 billion for the year 2007 versus Baht 1.1 billion at the end of 2006, representing a jump of 36.4 percent. The net written premium recorded an increase of 33.5 percent to Baht 953.2 million from Baht 714.0 million. To achieve a more balance portfolio of business there has been much attention devoted by us to expand this segment of our business, and in 2007 there was marked increase in the development of new products that were sold through new distribution channels in conjunction with selected clients.
In 2007, the underwriting profit recorded a significant increase of 160.0 percent to Baht 161.8 million, versus Baht 60.8 million that was recorded in the previous year. The loss ratio for the year under review was 41.1 percent versus 50.3 percent that was recorded in 2006. The 81.5 percent combined ratio that was recorded for 2007 represented a 5.4 percentage point improvement on what was recorded in the previous year.
In 2008, it's expected that stimulus for the growth of this segment of our business should be from the further success of our Customer Service Division in developing a wider portfolio of interesting new products for our clients and also exploring new channels of distribution that are catering to the niche markets. The new products that we have already been developed are Cancer Insurance, Household Package, SME Package, Health Per Diem, Accident Per Diem, and Loan Protection. Moreover, they have been working hard in 2007 to service key clients with the ongoing development of the bancassurance scheme that should solidify our competitive advantage in the marketplace.
Motor This segment of our business has benefited from the increase in the volume for car sales in the domestic
market in 2007, more specifically the high-sum bracket. The Motor gross written premium was Baht 127.1 million, increasing 23.0 percent compared to Baht 103.3 million that was achieved in 2006. The net written premium for 2006 went up by 51.4 percent, from Baht 102.3 million that was recorded one year earlier to Baht 154.9 million in 2007
For 2007 the result of this segment of our business rose by 19.0 percent to Baht 43.2 million versus Baht 36.3 million that was recorded in the preceding year. The combined ratio that was recorded for the year under review was 66.0 percent
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In 2008, it's expected that there would be able to further expand this segment of our business through a selective approach on particular opportunities. Marine
This segment of our business includes both Marine Hull and Cargo classes of reinsurance business, the latter constituting the bulk of our portfolio mix for this segment of our business. Amidst a year with a general softening of the market and decrease in the volume for both domestic and foreign cargo business, the Marine gross written premium was Baht 287.7 million, up by 4.4 percent compared to Baht 275.6 million that was achieved one year earlier.
In 2007, the underwriting profit for this segment of our business decreased by 25.3 percent, from Baht 64.0 million to Baht 47.8 million that was recorded in the previous year. The combined ratio for this segment of our business in 2007 increased to 76.6 percent from 67.4 percent that was recorded in the previous year.
In 2008, it's expected that if there’s to be growth in this line of our business, then there would have to be general improvement in the economy which should support improved volume of both domestic and foreign cargo.
Oversea Non-Life Reinsurance
( in thousand Baht, except ratios ) 2007 2006 % Growth
Gross Premium Written 39,869 31,902 25.0 Net Premium Written 39,365 31,902 23.4 Underwriting Profit (Loss) 9,740 2,665 265.5 Loss Ratio 29.5 39.7 Combined Loss and Expense Ratio 75.8 87.8
This segment of our business includes all classes of reinsurance from overseas markets. The classes for this segment of our business are predominantly Fire, Marine and Miscellaneous treaty business. It’s evident that we still maintain our focus on domestic rather than overseas business, however, we do consider business opportunities with particular markets around the region. In 2007, this segment of our business represented only 0.9 percent of our company's total Non-Life gross written premium. For the year under review the gross written premium was Baht 39.9 million or 25.0 percent up from the previous year.
This segment of our business recorded a marked underwriting profit of Baht 9.7 million in 2007 compared to Baht 2.7 million in underwriting profit that was achieved in the previous year, or representing a strong gain of 265.5 percent. The combined ratio for 2007 was 75.8 percent or representing a significant improvement of 12 percentage points over 87.8 percent that was recorded for the previous year.
In 2008, the stimulus for growth of this segment of our business is our intention to participate an aviation reinsurance facility that focuses support for national carriers across Asia.
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Life Reinsurance
This segment of our business includes all classes of Ordinary and Group Life reinsurance, the latter representing the majority of the portfolio.
We have achieved steady growth of this segment of our business in the last couple of years. In 2007, there was an increase of 11.3 percent recorded for the gross written premium of Baht 338.7 million, compared to Baht 304.4 million that was achieved in the previous year. The net written premium for the year under review was Baht 327.7 million, or representing an improvement of 11.1 percent from Baht 294.9 million that was achieved in year 2006.
The underwriting profit for the 2007 was Baht 73.0 million, or representing a slight decline of 9.0 percent from Baht 80.3 million that was achieved in the previous year. The combined ratio for 2007 was an impressive 70.6 percent, compared to what was recorded in the previous year.
We will continue to pursue further growth opportunities in 2008 with a keen desire to improve our position. We are encouraged by our strong relationship with clients that have been developing in the last couple of years. For the year under review life reinsurance accounted for 11.0 percent of our total net premium income, within the next couple of years we are certain that this figure will exceed 15 percent.
Since the establishment of the cooperation agreement with SCOR in 1997, we have successfully pursued a specific objective of being a leader in the domestic Life reinsurance market.
( in thousand Baht, except ratios ) 2007 2006 % Growth
Gross Premium Written 338,723 304,399 11.3 Net Premium Written 327,742 294,972 11.1 Underwriting Profit (Loss) 73,047 80,258 (9.0) Loss Ratio 40.9 41.0 Combined Loss and Expense Ratio 76.5 70.6
We have maintained a careful investment strategy that’s focused on the long term. Amidst a slowdown in the economy in 2007 there was a slight increase in our investment income to Baht 295.0 million from Baht 293.5 million in the previous year, or representing an increase of 1.0 percent. The average investment yield for 2007 was 7.79 percent, or representing a slight decrease of 0.29 percentage points under what was recorded in the previous year. This is considered to be favorable compared to an estimate of 6 percent of others in the same sector. Our continued approach, as previous years, to maintain a conservative investment strategy has resulted in our acquisition of equity that will provide superior securities and reasonable rates of return on the long-term. For 2007, our total investment portfolio was Baht 3.90 billion compared to Baht 3.70 billion for the previous year.
Investment
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( in Million Baht, except ratios) 31 December 2007 31 December 2006
Amount Proportion(%) Amount Proportion(%) Bonds and Treasury bills 552 14.2 235 6.4 Stock Shares /1 722 18.5 597 16.2 Debentures 508 13.0 610 16.5 Notes 216 5.6 289 7.8 Deposits 252 6.5 352 9.6 Loan 7 0.2 4 0.1 Investment Units 1,637 42.0 1,598 43.4 Total 3,894 100.0 3,685 100.0
Remark /1 Included Investment in subsidiaries
Outlook for 2007
We have a relentless focus on the growth of profitability. The foundation of our growth is well established with a strong financial position, having the support from the our customers that make up the majority of both Life and Non Life insurance companies in the local market, intensively maintaining an innovative product range that's readily available to our customers, and promoting a powerful entrepreneurial culture within our company.
Financial Rationale
The overall financial strength of the company is considered to be very stable. It is evident that the shareholders earn The overall financial strength of our company is considered to be very stable. It is evident that the shareholders for 2007 an R.O.E. of 21.0 percent, on par with the ten year average which stands at 20.3 percent, remaining among the highest ROE organizations in our industry. The overall return on assets was 10.7 percent, a slight increase when compare to 9.9 percent in previous year. The combined ratio for the period under review was acceptable as per the table below.
2007 2006 Loss Ratio 44.2% 44.7% Commissions 37.1% 36.9% Operating Expenses 4.5% 4.8% Combined Ratio 85.8% 86.4%
The reserve fund of our company is above the international standard set by S&P as it can be seen in the ratio in technical and reserve as at 31 December 2007 is still keeping to the standard 150 percent.
Financial Status
At year end of 2007, company and it’s subsidiaries total asset Baht 4,972 million, representing an increase of 7.5% from 2006. The total assets include investment returns 78 percent, debts and amount recoverable from reinsurers 12 percent, equipment and other assets 10 percent.
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The asset in investment includes corporate and government bonds, stock, debenture, note, deposit, loan, and unit trusts, registered capital share, accrued income on investments that are accounted for under the equity method that consider investment in subsidiary and associated companies, and allowance for impairment in investment as per the accounting standards. The allowance at year end was nil.
The collection of account receivables remains efficient with around Baht 185 million still to be collected from reinsurers. The company set the account receivables turnover at 68 days.
Another type of asset is amount that is deposited for reinsurance. This is part of the reinsurance premium that the reinsured holds in some contracts. Normally the reinsureds would hold 40 percent from reinsurance premium and will return the deposit premium plus interest around 0.5–1 percent at the completion of the calendar year, this amount to around Baht 426 million.
Liability The total liability as at 31 December 2007 was Baht 2,476 million, increasing from Baht 2,270 million
from the previous year. Furthermore, the claim reserves and claims outstanding stood at around Baht 782 million. The company
uses the conservative way to set up the mentioned. It can be said that the company had set up the Loss Fluctuation Reserve separate from the Claims reserves that use for prompt adjustments of the losses. The company had set up reserves for IBNR several years before Department of Insurance released the policy to force all of the insurance companies set up reserves at 2.5% of net insurance premium (effect since 2002). Claim reserves and claims outstanding as at 31 December 2007, inclusive of Loss Fluctuation Reserve and IBNR reserves was Baht 142 million.
Liquidity It is evident that in year 2007, the company’s liquidity is sufficient. This was the result from our policy
that creates Loss Fluctuation Reserve. Cash flow in year 2007 will be present as follow: Unit : Million Baht
Cash and Equivalents from last year 392.8 Net cash flows from operating activities 587.3 Cash received from share subscription 0.0 Net cash flows used in investing activities (263.2) Dividend Paid (427.4) Cash and Equivalents at end of year 289.5
As at December 31, 2007 the company and it’s subsidiaries had cash flow around Baht 290 million. This is considered to be enough for routine operations. The proportion of cash flow is 0.7 times the amount of assets compared to liabilities. If the company requires emergency cash, the company can transform the short term investment into cash to pay for any large claims.
Investment Cost None.
Capital Resources As at 2007 year end, the proportion of liability to the shareholder is1.0 times, similar to the previous year.
The company never sources capital from loans or other trust funds. The share value in the hands of the shareholder is Baht 2,474 million. The par value at year end was
2.08 Baht per share.
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1998
2,719,125 1,586,083
192,243 233,278 299,107
35.98% 50.02% 86.00%
0.30
2,887,277 2,293,161 1,333,568
560,840 1,274,930
2.27 0.40
1999
2,529,907 1,655,704
220,611 229,484 323,061
30.93% 51.50% 82.43%
0.31
3,344,647 2,610,251 1,389,351
841,260 1,628,809
1.94 0.35
2000
2,683,893 1,783,770
276,587 183,524 348,190
33.05% 51.54% 84.59%
0.33
3,208,617 2,504,968 1,392,780
841,260 1,569,709
1.87 0.40
2001
2,841,442 1,877,953
274,404 129,299 305,903
38.40% 49.75% 88.15%
0.28
3,288,748 2,527,782 1,286,088 1,010,612 1,798,455
1.78 0.30
2002
3,118,707 2,191,989
204,243 209,937 332,353
45.37% 43.81% 89.18%
0.30
3,615,735 2,912,081 1,409,548 1,010,612 1,948,539
1.93 0.30
2003
3,055,080 2,054,295
67,343 403,721 394,639
51.67% 45.51% 97.18%
0.37
4,433,824 3,721,399 1,548,885 1,129,274 2,461,204
2.12 0.30
2004
3,394,989 2,282,419
265,781 260,980 450,328
38.07% 46.31% 84.38%
0.39
4,417,493 3,683,919 1,656,873 1,166,926 2,360,585
2.02 0.36
2005
3,763,671 2,544,048
257,586 352,847 481,781
44.95% 42.19% 87.14%
0.41
4,648,537 3,597,421 1,875,184 1,180,250 2,354,213
1.99 0.36
2006
4,023,889 2,612,941
317,759 294,076 462,280
44.68% 41.56% 86.24%
0.39
4,621,760 3,684,737 1,950,659 1,187,355 2,333,869
1.97 0.36
2007
4,542,960 2,966,553
348,785 295,214 515,131
44.24% 41.52% 85.76%
0.43
4,971,526 3,893,544 1,994,257 1,187,355 2,474,100
2.08 0.36
(Note 1)
(Note 2) (Note 3) (Note 4) (Note 5) (Note 6)
Operations )Thousand Baht( Gross Written Premiums
Net Written Premiums Net Underwriting Profit
Net Investment Income Net Profit
Ratio(%) Loss Ratio
Expense Ratio Combined Ratio
Earning per share )Baht(
Selected Financial Information )Thousand Baht( Total Assets
Total Invested Assets Technical Reserve
Paid-up Capita Total Capital Funds )Shareholders’ Equity(
Book Value per share )Baht( Dividend per share )Baht(
Note : 1. Net of other operating expenses 2. Loss incurred expressed as a percentage of earned premiums 3. A ratio of total incurred expenses to net written premiums 4. Adjusted to par value of Baht 10 for comparison purposes 5. Since year 2000, the amount of Total Assets is the net result that has taken into consideration the amount Due from/to each insurer. 6. Aggregation of Unpaid losses, Unearned premium reserve and Life policy reserve
Ten Year Summary
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Report on the Board of Director’s Responsibility towards the Financial Statements
The Board of Directors is responsible for the financial statements of the company and its subsidiaries, and the financial information appearing in the annual report and on the Internet. As such, the financial statements are prepared in accordance with generally accepted accounting practices in Thailand, by utilizing appropriate accounting policies, consistency and cautious discretion, and the best methods for calculating estimates. Moreover, sufficient important information is disclosed in the footnotes to the financial statements.
The Board of Directors has called for the establishment and implementation of an effective internal control system, to ensure reasonable confidence that the reporting of accounting data is accurate, comprehensive and sufficient to support assets. At the same time, any possible weakness could be found in advance so as to prevent malfeasance or significant misconduct or wrongdoing.
Moreover, the Board of Directors has appointed the Audit Committee, which includes a non-management member, to supervise and be responsible for the quality of financial data and the system for internal controls. The opinion of the Audit Committee on this matter is contained in the annual report.
Furthermore, it is the opinion of the Board of Directors that the Company’s internal control system is, overall, satisfactory and capable of creating confidence in the credibility of the 2007 financial statements of the company and its subsidiaries.
Suchin Wanglee Surachai Silivallop
Chairman President &CEO
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Audit Committee Report
The Audit Committee comprises 3 Directors: Mr. Udom Vichaiyabhai as a Deputy Head of Audit Committee, Mr. Aswin Kongsiri, and Mr. Chanin Roonsamrarn as a Committee Members, was appointed by the Board of Directors on 1999 and has met four times in 2006 to perform the directing and overseeing duties that were assigned by the Board of Directors.
The Audit Committee has examined the Company’s year-end financial statements of 2006, with consultation with the Management Board and Auditor. It has been found that the financial statements were prepared under the recognized accounting principles, are correct and in line with the information that the Audit Committee has received. In addition, the Audit Committee has also considered the appropriateness of the internal control system, and has already provided relevant comments to the Board of Directors.
In the past year, the Audit Committee attended by Management, Internal Audit officers and external auditors. The following matters were reviewed.
1. The Company’s financial reports were reviewed prior to disclosure to the Stock Exchange of Thailand and Securities Exchange Commission.
2. Selection and proposal of appointment of the Company’s auditors, including consideration of audit fees.
3. Approval for the annual internal audit plans; acknowledgement of internal controls reports and follow-up of recommended amendments, as well as support and development of a more effective internal audit department through the authorization to hire a co-sourcing consultant. The advisor is to participate in the operations of the internal audit department, employing the method of risk – based audit approach for various corporate areas and inspection of internal controls. This also extends to the Company’s subsidiaries. A repeated emphasis was made to management to improve those areas of the internal controls that had some weaknesses.
4. As at 2006, the company itself decided to change the internal auditor from KPMG Phoomchai Advisory Co., Ltd. to be A.M.T. Associate that have Prof. Katesaree Narongdaj as Managing Director for more clarity of the auditing process since Ernst & Young also conduct the company’s account audit. Following the auditing process the auditor summarized that the company had implemented a successful IT program that was specially developed to support the auditing process.
5. Follow-up of the Company and its subsidiaries’ progress and compliance with legislation and restrictions relevant to its operation.
6. Consultations with the external auditors concerning duties and scope, in order to enhance efficiency and reduce overlapping tasks conducted by the external auditors and the internal auditors.
7. Conduct self-evaluation of the Audit Committee to consider its performance over the past year. The findings are used as guidelines for its development and improvement.
8. Inspection of the related transaction report.
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The Audit Committees has agreed that the company had a satisfactory level of internal control, risk management, good management, good corporate governance and with efficient monitoring system. The company is also practicing to date standardized and transparent accounting and financial reporting systems, which are reviewed time to time. In addition, the company has been following all laws and regulations for the insurance industry. The Audit Committee had proposed to the Board of Directors in the General Shareholder Meeting to promote Mr. Sophon Permsirivallop(No.3182) and/or Ms. Nonglak Pumnoi (No.4172) and/or Ms. Siraporn Ouaanunkun (No.3844) form Ernst & Young to be Account Audits for the company in year 2006 with the Audit Fee of Baht 1,070,000, increasing from year 2005 by Baht 310,000 or 41%. The Audit Committee is of the opinion that the overall internal controls of the Company are satisfactory, efficient and effective in line with international standards.
Udom Vichayabhai Chairman of the Audit Committee
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Report of Independent Auditor
To The Board of Directors and Shareholders of Thai Reinsurance Public Company Limited I have audited the accompanying consolidated balance sheet of Thai Reinsurance Public Company Limited and its subsidiaries as at 31 December 2007, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year then ended, and the separate financial statements of Thai Reinsurance Public Company Limited for the same year. These financial statements are the responsibility of the management of the Company and its subsidiaries as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated financial statements of Thai Reinsurance Public Company Limited and its subsidiaries, and the separate financial statements of Thai Reinsurance Public Company Limited for the year ended 31 December 2006, as presented herein for comparative purposes, were audited by another auditor of our firm who expressed an unqualified opinion on those statements, under her report dated 7 February 2007.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Thai Reinsurance Public Company Limited and its subsidiaries and of Thai Reinsurance Public Company Limited as at 31 December 2007, the results of their operations and cash flows for the year then ended, in accordance with generally accepted accounting principles.
Without qualifying my opinion on the above financial statements, I draw attention to the matter as discussed in Note 5 to the financial statements whereby, effective 1 January 2007, the Company changed its accounting policy for recording investments in subsidiaries and associate in the separate financial statements from the equity method to the cost method. The Company has thus restated the separate financial statements as at 31 December 2006 and for the year then ended to reflect this accounting change. In my opinion, the adjustments made for the preparation of such financial statements are appropriate and have been properly applied.
Without qualifying my opinion on the above financial statements, I draw attention to the matter as discussed in Note 6, a subsidiary changed in accounting policy for recording deferred income tax for compliance with the accounting policy of the Company during the second quarter of the current year. The Company has thus restated the consolidated financial statements as at 31 December 2006 and for the year then ended to reflect this accounting change. In my opinion, the adjustments made for the preparation of such financial statements are appropriate and have been properly applied. Sophon Permsirivallop Certified Public Accountant (Thailand) No. 3182 Ernst & Young Office Limited Bangkok: 8 February 2008
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Balance Sheets AS AT 31 DECEMBER 2007 AND 2006
(Unit: Baht) CONSOLIDATED THE COMPANY ONLY
Note 2007 2006 2007 2006
Assets Investments in securities Bonds 531,692,900 225,159,755 170,501,752 162,182,589 Treasury bills 19,862,550 9,979,537 - - Notes 215,500,000 288,509,303 140,000,000 216,000,000 Stocks 698,671,727 572,545,677 658,847,197 523,213,286 Debentures 508,453,931 609,712,922 376,126,214 419,664,662 Units trust 1,636,946,928 1,598,433,705 1,466,415,625 1,485,608,487 Total investments in securities - net 8,9 3,611,128,036 3,304,340,899 2,811,890,788 2,806,669,024 Loans Mortgage loans 6,724,025 2,964,312 6,724,025 2,964,312 Others 772,484 1,015,213 763,165 893,073 Total loans 7,496,509 3,979,525 7,487,190 3,857,385 Investments in subsidiaries 10 - 620,098,885 275,598,885 Investments in associate 11 22,962,356 24,613,459 12,537,120 11,999,400 Cash and deposit at financial institutions 251,956,312 351,803,645 196,983,851 224,745,552 Property, building and equipment - net 12 53,911,769 15,346,365 16,264,910 12,216,778 Amounts deposited on reinsurance 9 425,626,238 392,154,954 386,703,399 357,295,321 Due from reinsurers - net 9, 14, 16 185,496,756 244,023,420 172,979,558 234,892,872 Accrued income on investments 23,467,152 22,207,855 16,266,730 17,487,257 Other assets Deferred tax assets 22 265,057,390 191,493,311 252,125,544 177,845,125 Deferred excess of loss 18,615,854 31,266,008 18,615,854 31,266,008 Intangible assets - net 13 75,698,759 32,306,852 10,030,080 10,662,406 Receivable from sales of securities 1,198,386 - - - Others 9 28,910,715 12,700,111 16,094,355 8,568,043 TOTAL ASSETS 4,971,526,232 4,626,236,404 4,538,078,264 4,173,104,056
The accompanying notes are an integral part of the financial statements.
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(Unit: Baht) CONSOLIDATED THE COMPANY ONLY
Note 2007 2006 2007 2006
Liabilities and shareholders' equity Liabilities Life premium reserve 163,871,047 147,486,047 - - Unearned premium reserve 1,048,837,024 932,981,268 1,048,837,024 932,981,268 Loss reserves and outstanding claims 15 781,549,075 870,192,046 771,139,859 855,458,281 Amounts withheld on reinsurance 39,262,229 16,811,531 39,262,229 16,811,531 Due to reinsurers 9, 16, 17 127,501,410 125,439,746 111,284,396 117,171,554 Other liabilities Corporate income tax payable 81,521,015 65,767,994 60,062,384 50,492,911 Deferred tax liabilities 22 62,519,085 37,416,397 54,589,603 29,933,616 Dividend payable 35,308,664 41,384,076 35,308,664 41,384,076 Payable from purchases of securities 47,080,675 - 47,080,675 - Long-term liability from asset acquisition 32,731,385 - - - Liability under lease agreement 7,727,417 - 4,985,818 - Others 9 47,745,086 32,037,734 32,965,186 27,110,252 Total liabilities 2,475,654,112 2,269,516,839 2,205,515,838 2,071,343,489 Shareholders' equity Share capital 18 Registered 1,187,764,000 ordinary shares of Baht 1 each 1,187,764,000 1,187,764,000 1,187,764,000 1,187,764,000 Issued and paid-up 1,187,354,940 ordinary shares of Baht 1 each 1,187,354,940 1,187,354,940 1,187,354,940 1,187,354,940 Premium on share capital 163,438,070 163,438,070 163,438,070 163,438,070 Surplus on revaluation of investments - net 8 85,750,741 41,921,359 67,248,616 24,461,536 Retained earnings Appropriated Statutory reserve 19 General reserve 138,800,417 126,799,771 118,776,400 118,776,400 Emergency reserve 106,000,000 106,000,000 106,000,000 106,000,000 Unappropriated 44,000,000 44,000,000 44,000,000 44,000,000 Equity attributable to the company's shareholders 748,756,194 666,940,113 645,744,400 457,729,621 Minority interest - equity attributable to minority 2,474,100,362 2,336,454,253 2,332,562,426 2,101,760,567 shareholders' of subsidiaries 21,771,758 20,265,312 - - Total shareholders' equity 2,495,872,120 2,356,719,565 2,332,562,426 2,101,760,567 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,971,526,232 4,626,236,404 4,538,078,264 4,173,104,056
The accompanying notes are an integral part of the financial statements.
Balance Sheets (Continue) AS AT 31 DECEMBER 2007 AND 2006 An
nual
Rep
ort
2007
56
Statements of Earning AS AT 31 DECEMBER 2007 AND 2006
2006 Total
4,023,889,350
(1,410,948,097) 2,612,941,253
(75,473,746)
2,537,467,507
1,133,676,472
948,094,810 16,507,067
2,098,278,349
439,189,158
2007 Total
4,542,960,092
(1,576,407,245) 2,966,552,847
(132,240,756) 2,834,312,091
1,253,919,794 1,050,040,828
49,206,791 2,353,167,413
481,144,678
Total
4,204,237,023
-1,565,426,265 2,638,810,758
-115,855,756
2,522,955,002
1,126,703,958
938,946,815 49,206,686
2,114,857,459
408,097,543
Miscellaneous
1,477,872,439 -524,655,186 953,217,253
-78,938,825 874,278,428
359,498,573 308,652,851
44,359,887 712,511,311
161,767,117
Motor
155,933,895
-1,064,529 154,869,366
-27,777,953 127,091,413
54,836,129 28,423,522
634,172 83,893,823
43,197,590
Marine and transportation
289,448,415 -80,069,281 209,379,134
91,134
209,470,268
67,517,547 91,344,574
253,329 159,115,450
50,354,818
Non-life
Fire
2,280,982,274 -959,637,269
1,321,345,005
-9,230,112 1,312,114,893
644,851,709 510,525,868
3,959,298 1,159,336,875
152,778,018
CONSOLIDATED
Life
338,723,069 -10,980,980 327,742,089
-16,385,000 311,357,089
127,215,836 111,094,013
105 238,309,954
73,047,135
(Unit: Baht)
Underwriting income
Premium written (Note 9) Less : Premium ceded (Note 9) Net premium written Life policy and unearned premium reserve (Increase) decrease from previous year Total underwriting income
Underwriting expenses
Losses incurred during the year (Note 9,15) Commissions and brokerages (Note 9) Other underwriting expenses Total underwriting expenses
Income on underwriting
Annual Report 2007
57
2006 Total
174,847,010 128,165,238
119,890 303,132,138 (9,631,959)
293,500,179 732,689,337
27,222,371 (28,595,700)
(1,373,329)
575,971
1,299,873 2,282,227
2007 Total
227,813,503
77,572,399 -
305,385,902 (10,382,897) 295,003,005 776,147,683
51,987,976 (39,086,195)
12,901,781
211,057
738,309 3,784,600
Total
Miscellaneous
Motor
Marine and transportation
Non-life
Fire
CONSOLIDATED
Life
(Unit: Baht)
Investment income
Interest and dividends (Note 9,11) Gains on securities trading Reversal of loss on impairment of investments Total investment income
Investment expenses Income on investments
Total income on underwriting and investments
Services income (Note 9) Services expenses (Note 21) Income (loss) on services Share of income (loss) on investments in associated companies Accounted for under the equity method (Note 11) Management fee income (note 21) Other income
Statements of Earning ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007 58
Statements of Earning ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
2006 Total
76,136,015 12,807,732
57,568 (2,234,247)
9,866,000 24,797,264
121,430,332
614,043,747 (151,427,347) 462,616,400
(1,869,443) 460,746,957
0.389 1,182,943,083
0.388
1,186,367,149
2007 Total
86,833,427 10,092,230
534,404 392,578
8,939,500 25,567,790
132,359,929
661,423,501 (140,949,267) 520,474,234
(5,343,440) 515,130,794
0.434 1,187,354,940
0.434
1,187,354,940
Total
Miscellaneous
Motor
Marine and transportation
Non-life
Fire
CONSOLIDATED
Life
(Unit: Baht)
Operating expenses
Personnel expenses (Note 21) Premises and equipment expenses Taxes and duties (Reversal of) doubtful accounts Directors' remuneration (Note 9) Other expenses Total operating expenses
Income before income tax
Corporate income tax (note 22) Income after income tax
Net income attributable to minority interest Net income for the year
Basic earnings per share (note 23) Net income
Basic earnings per share (note 23) Weighted average number of ordinary shares (shares)
Diluted earnings per share (note 23) Net income
Diluted earnings per share (note 23) Weighted average number of ordinary shares(shares)
Annual Report 2007
59
2006 Total
3,719,489,765
(1,401,520,600) 2,317,969,165
(64,661,424) 2,253,307,741
1,017,079,982
860,790,121 16,637,749
1,894,507,852
358,799,889
149,526,959 126,410,838
119,890
Total
4,204,237,023
(1,565,426,265) 2,638,810,758 (115,855,756) 2,522,955,002
1,126,703,958
938,946,815 49,206,686
2,114,857,459
408,097,543
373,654,248
63,714,555 -
Miscellaneous
1,477,872,439 (524,655,186)
953,217,253 (78,938,825) 874,278,428
359,498,573 308,652,851
44,359,887 712,511,311
161,767,117
Motor
155,933,895 (1,064,529)
154,869,366 (27,777,953) 127,091,413
54,836,129 28,423,522
634,172 83,893,823
43,197,590
Marine and transportation
289,448,415 (80,069,281) 209,379,134
91,134 209,470,268
67,517,547 91,344,574
253,329 159,115,450
50,354,818
THE COMPANY ONLY
2007
Non-life
Fire
2,280,982,274 (959,637,269) 1,321,345,005
(9,230,112) 1,312,114,893
644,851,709 510,525,868
3,959,298 1,159,336,875
152,778,018
(Unit: Baht)
Underwriting income
Premium written (Note 9) Less : Premium ceded (Note 9) Net premium written Unearned premium reserve (increase) decrease from previous year Total underwriting income
Underwriting expenses
Losses incurred during the year (Note 9,15) Commissions and brokerages (Note 9) Other underwriting expenses Total underwriting expenses
Income on underwriting
Investment income
Interest and dividends (Note 9,10,11) Gains on securities trading Reversal of loss on impairment of investments
Statements of Earning ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007 60
2006 Total
276,057,687
(9,217,921) 266,839,766 625,639,655
1,299,873 6,304,316
75,019,715 12,795,033
37,218 (2,234,247)
9,866,000 25,634,382
121,118,101
Total
437,368,803
(9,131,213) 428,237,590 836,335,133
738,309 6,555,354
84,863,144 10,078,205
262,763 392,578
8,939,500 26,264,600
130,800,790
Miscellaneous
Motor
Marine and transportation
THE COMPANY ONLY
2007
Non-life
Fire
(Unit: Baht)
Total investment income
Investment expenses Income on investments
Total income on underwriting and investments
Management fee income (Note 20) Other income Operating expenses
Personnel expenses (Note 21) Premises and equipment expenses Taxes and duties (Reversal of) doubtful accounts Directors' remuneration (Note 9) Other expenses Total operating expenses
Statements of Earning ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007
61
2006 Total
512,125,743 (120,539,368) 391,586,375
0.331
1,182,943,083
0.330 1,186,367,149
Total
712,828,006 (103,499,160) 609,328,846
0.513
1,187,354,940
0.513 1,187,354,940
Miscellaneous
Motor
Marine and transportation
THE COMPANY ONLY
2007
Non-life
Fire
(Unit: Baht)
Income before corporate income tax
Corporate income tax (Note 22) Net income for the year
Basic earnings per share (Note 23)
Net income Weighted average number of ordinary shares (shares) Diluted earnings per share (Note 23)
Net income Weighted average number of ordinary shares (shares)
The accompanying notes are an integral part of the
Statements of Earning ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007 62
Total
2,359,595,267 346,687
7,130,556
2,367,072,510 9,066,655
(64,896,895)
(1,489,700)
- 460,746,957
(425,650,117) 11,870,155
11,870,155
2,356,719,565
2,352,243,165
Minority interest
5,382,497 -
3,012,660
8,395,157 - -
-
- -
11,870,155
11,870,155
20,265,312
18,374,033
Unappropriated
629,139,026 346,687
4,117,896
633,603,609 - -
-
(1,760,336) 460,746,957
(425,650,117) -
-
666,940,113
664,354,992
Statutory reserve
44,000,000 -
44,000,000 - -
-
- - - -
-
44,000,000
44,000,000
General reserve
106,000,000 -
106,000,000 - -
-
- - - -
-
106,000,000
106,000,000
Retained earnings
Appropriated Statutory reserve
125,039,435 -
125,039,435 - -
-
1,760,336 - - -
-
126,799,771
126,799,771
Subscription received in
advance from exercise of warrants
1,489,700 -
1,489,700 - -
(1,489,700)
- - - -
-
-
Surplus on Revaluation
of investments
106,818,254 -
106,818,254 -
(64,896,895)
-
- - - -
-
41,921,359
41,921,359
Premium on share capital
161,476,695 -
161,476,695 1,961,375
-
-
- - - -
-
163,438,070
163,438,070
CONSOLIDATED
Issued and paid-up
share capital
1,180,249,660 -
1,180,249,660 7,105,280
-
-
- - - -
-
1,187,354,940
1,187,354,940
(Unit: Baht)
Balance as at 1 January 2006 - as previously reported
Prior year adjustment Cumulative effect of the change in accounting policy for deferred income tax in a subsidiary Balance as at 1 January 2006 - as restated
Converted warrants to ordinary shares Surplus on revaluation of investments Subscription received in advance from exercise of warrants Statutory reserve (Note 19) Net income for the year - as restated Dividend paid (Note 25) Balance as at 1 January 2006 - as restated Net income attributable to minority shareholders of subsidiaries Balance as at 31 December 2006 - as restated
Balance as at 31 December 2006 - as previously reported
Statements of Changes in Shareholders’ Equity AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007
63
Total
4,476,400
2,356,719,565
43,829,382 -
515,130,794 (427,447,778)
6,133,711
(3,836,994)
5,343,440
2,495,872,120
Minority interest
1,891,279
20,265,312
- - - - -
(3,836,994)
5,343,440
21,771,758
Unappropriated
2,585,121
666,940,113
- (12,000,646) 515,130,794
(427,447,778) 6,133,711
-
-
748,756,194
Statutory reserve
-
44,000,000
- - - - -
-
-
44,000,000
General reserve
-
106,000,000
- - - - -
-
-
106,000,000
Retained earnings
Appropriated
Statutory reserve
-
126,799,771
- 12,000,646
- - -
-
-
138,800,417
Subscription received in
advance from exercise of warrants
Surplus on Revaluation
of investments
-
41,921,359
43,829,382 - - - -
-
-
85,750,741
Premium on share capital
-
163,438,070
- - - - -
-
-
163,438,070
CONSOLIDATED
Issued and paid-up
share capital
-
1,187,354,940
- - - - -
-
-
1,187,354,940
(Unit: Baht)
Cumulative effect of the change in accounting policy for deferred income tax in a subsidiary (Note 6)
Balance as at 31 December 2006 - as restated
Surplus on revaluation of investments Statutory reserve (Note 19) Net income for the year Dividend paid (Note 25) Reversal of dividend payable (Note 26)
Minority shareholders of subsidiaries decrease from the acquisition of additional shares of the Company (Note 10) Net income attributable to minority of subsidiaries shareholders Balance as at 31 December 2007
Statements of Changes in Shareholders’ Equity ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007 64
Total
2,354,212,833
346,687
(159,937,993)
2,194,621,527 9,066,655
(66,374,173)
(1,489,700)
391,586,375 (425,650,117) 2,101,760,567
2,333,869,195
Unappropriated
635,402,124
346,687
(143,955,448)
491,793,363 -
-
-
391,586,375 (425,650,117)
457,729,621
672,378,426
Statutory reserve
44,000,000
-
-
44,000,000 -
-
-
- -
44,000,000
44,000,000
General reserve
106,000,000
-
-
106,000,000 -
-
-
- -
106,000,000
106,000,000
Retained earnings
Appropriated Statutory reserve
118,776,400
-
-
118,776,400 -
-
-
- -
118,776,400
118,776,400
Subscription received in
advance from exercise of warrants
1,489,700
-
-
1,489,700 -
-
(1,489,700)
- - -
-
Surplus on Revaluation
of investments
106,818,254
-
(15,982,545)
90,835,709 -
(66,374,173)
-
- -
24,461,536
41,921,359
Premium on share capital
161,476,695
-
-
161,476,695 1,961,375
-
-
- -
163,438,070
163,438,070
THE COMPANY ONLY
Issued and paid-up
share capital
1,180,249,660
-
-
1,180,249,660 7,105,280
-
-
- -
1,187,354,940
1,187,354,940
(Unit: Baht)
Balance as at 1 January 2006 - as previously reported
Prior year adjustment Cumulative effect of the change in accounting policy for investments in subsidiaries and associate (Note 5) Balance as at 1 January 2006 - as restated
Converted warrants to ordinary shares
Surplus on revaluation of investments - as restated
Subscription received in advance from exercise of warrants Net income for the year - as restated Dividend paid (Note 25) Balance as at 31 December 2006 - as restated Balance as at 1 January 2006 - as previously reported
Statements of Changes in Shareholders’ Equity ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007
65
Total
(232,108,628)
2,101,760,567
42,787,080
609,328,846 (427,447,778)
6,133,711
2,332,562,426
Unappropriated
(214,648,805)
457,729,621
-
609,328,846 (427,447,778)
6,133,711
645,744,400
Statutory reserve
-
44,000,000
-
- -
-
44,000,000
General reserve
-
106,000,000
-
- -
-
106,000,000
Retained earnings
Appropriated Statutory reserve
-
118,776,400
-
- -
-
118,776,400
Subscription received in
advance from exercise of warrants
-
-
-
- -
-
-
Surplus on Revaluation
of investments
(17,459,823)
24,461,536
42,787,080
- -
-
67,248,616
Premium on share capital
-
163,438,070
-
- -
-
163,438,070
THE COMPANY ONLY
Issued and paid-up
share capital
-
1,187,354,940
-
- -
-
1,187,354,940
(Unit: Baht)
Cumulative effect of the change in accounting policy for investments in subsidiaries and associate (Note 5)
Balance as at 31 December 2006 - as restated
Surplus on revaluation of investments
Net income for the year Dividend paid (Note 25)
Reversal of dividend payable (Note 26)
Balance as at 31 December 2007
The accompanying notes are an integral part of the financial
Statements of Changes in Shareholders’ Equity ( Continue ) AS AT 31 DECEMBER 2007 AND 2006
Annual Report 2007 66
Statements of Cash Flows AS AT 31 DECEMBER 2007 AND 2006
(Unit: Bath) CONSOLIDATED THE COMPANY ONLY
2007 2006 2007 2006
Cash flows from (used in) operating activities Net premium written from reinsurance 3,028,378,165 2,570,754,907 2,700,137,110 2,293,495,401 Net losses incurred from reinsurance (1,342,562,765) (1,133,675,026) (1,211,022,380) (1,021,757,718) Net commissions and brokerages from reinsurance (1,050,040,828) (948,094,810) (938,946,815) (860,790,121) Other underwriting expenses (49,206,791) (16,507,067) (49,206,686) (16,637,749) Net investment income 293,929,190 284,632,676 246,580,775 262,011,808 Service income 51,987,976 27,222,371 - - Service expense (29,309,875) (29,765,504) - - Other income 2,315,101 2,658,503 5,090,795 6,627,046 Operating expenses (120,056,520) (116,079,499) (120,063,007) (115,779,687) Corporate income tax (194,782,788) (188,467,059) (164,221,110) (163,102,743) Others (3,388,651) 1,529,600 - - Net cash flows from operating activities 587,262,214 454,209,092 468,348,682 384,066,237 Cash flows from (used in) investing activities Cash flows from investing activities Investments in securities 1,984,598,965 2,850,994,880 1,771,517,096 2,631,955,269 Loans 1,335,173 1,078,382 1,222,352 972,821 Dividend received from subsidiaries and associate (Note 2,399,880 1,199,940 182,399,817 1,199,940 Equipment 2,217,900 1,918,847 2,202,900 1,786,275 Cash flows from investing activities 1,990,551,918 2,855,192,049 1,957,342,165 2,635,914,305 Cash flows used in investing activities Investments in securities (2,183,581,060) (2,990,466,835) (1,666,726,590) (2,735,383,435) Loans (4,852,157) (3,410,801) (4,852,157) (3,183,100) Investment in subsidiaries (Note 10, 11) (5,037,720) - (345,037,720) (59,999,020) Equipment (60,252,053) (15,030,110) (10,388,303) (4,262,484) Cash flows used in investing activities (2,253,722,990) (3,008,907,746) (2,027,004,770) (2,802,828,039) Net cash flows from (used in) investing activities (263,171,072) (153,715,697) (69,662,605) (166,913,734) Cash flows from (used in) financing activities Cash received from share subscription - 7,577,892 - 7,576,955 Dividend paid (427,447,778) (425,650,117) (427,447,778) (425,650,117) Net cash flows used in financing activities -427,447,778 (418,072,225) -427,447,778 (418,073,162) Net increase (decrease) in cash and cash equivalents -103,356,636 (117,578,830) -28,761,701 (200,920,659) Cash and cash equivalents at beginning of year 392,812,948 510,391,778 250,745,552 451,666,211 Cash and cash equivalents at end of year (Note 22) 289,456,312 392,812,948 221,983,851 250,745,552
The accompanying notes are an integral part of the financial statements.
Annual Report 2007
67
Note to Consolidated Financial Statements AS AT 31 DECEMBER 2007 AND 2006
1. GENERAL INFORMATION Thai Reinsurance Public Company Limited (“The Company”) is a public company incorporated and domiciled in Thailand. The Company is principally engaged in the provision of reinsurance. The Company’s registered address is at 223/1 Soi Ruamruedee, Wireless Road, Lumpini, Pathumwan, Bangkok. 2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547, Thai Accounting practices related to insurance and the accounting and reporting guidelines prescribed by the regulatory authority of insurance business except for the early adoption of Accounting Standard No. 56 “Accounting for Income Tax” which is in line with International Accounting Standard (IAS) No. 12 “Income Taxes” (revised 1996). The presentation of the financial statements has been made in compliance with the order of the Registrar dated 6 March 2002, as empowered under the Accounting Act B.E. 2543. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies. 3. BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of Thai Reinsurance Public Company Limited and its subsidiaries (hereinafter called “the Group”) as follows:
Percentage of Shareholding by
the Company
Subsidiary’s total assets as a percentage to the
consolidated total assets
Subsidiary’s total revenues as a
percentage to the consolidated total
revenues
Company’s Name
2007 2006
Country of incorporation
2007 2006 2007 2006 Thaire Life Assurance Co., Ltd. 100.00 100.00 Thailand 17.28 13.56 11.26 10.79 Nature of Business : Provision of life reinsurance TR Training and Consulting Co., Ltd. 100.00 100.00 Thailand 0.07 0.02 0.29 0.26 Nature of Business : Provision of training and consulting services EMCS Thai Co., Ltd. 69.00 57.75 Thailand 0.87 0.55 1.02 0.76 Nature of Business : Provision of computer services in relation to motor losses Firstech Solutions Co., Ltd 80.00 80.00 Thailand 1.61 1.01 0.13 0.05 Nature of Business : Outsourcing service Thaire Services Co., Ltd. 100.00 100.00 Thailand 1.36 0.38 0.33 0.01 Nature of Business : Losses claim management services
Material balances and transactions between the Company and its subsidiary companies, investments in the subsidiaries in the Company’s account and the subsidiaries’ share capital have been eliminated from the consolidated financial statements. The results of subsidiaries and associates are included in the consolidated financial statements from the date of acquisition or until the effective date of disposal by the Company. The separate financial statements, which present investments in subsidiaries, jointly controlled entities and associates presented under the cost method, have been prepared solely for the benefit of the public.
Annu
al R
eport
20
07
68
4. ADOPTION OF NEW ACCOUNTING STANDARDS The Federation of Accounting Professions has issued Notifications No. 9/2550, 38/2550 and 62/2550 regarding Accounting Standards. The notifications mandate the use of the following new Accounting Standards.
a) Thai Accounting Standards which are effective for the current year TAS 44 (revised 2007) Consolidated Financial Statements and Separate Financial Statements TAS 45 (revised 2007) Investments in Associates TAS 46 (revised 2007) Interests in Joint Ventures
These accounting standards become effective for the financial statements for fiscal years beginning on or after 1 January 2007. During the first quarter of the current year, the Company changed its accounting policy for recording investments in subsidiaries and associated company in the separate financial statements in order to comply with the revised Thai Accounting Standards No. 44 and 45 as discussed in Note 5.
b) Thai Accounting Standards which are not effective for the current year TAS 25 (revised 2007) Cash Flow Statements TAS 29 (revised 2007) Leases TAS 31 (revised 2007) Inventories TAS 33 (revised 2007) Borrowing Costs TAS 35 (revised 2007) Presentation of Financial Statements TAS 39 (revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors TAS 41 (revised 2007) Interim Financial Reporting TAS 43 (revised 2007) Business Combinations TAS 49 (revised 2007) Construction Contracts TAS 51 Intangible Assets
These accounting standards will become effective for the financial statements for fiscal years beginning on or after 1 January 2008. The management has assessed the effect of these revised accounting standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied.
5. CHANGE IN ACCOUNTING POLICY FOR RECORDING INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE IN THE SEPARATE FINANCIAL STATEMENTS
During the first quarter of the current year, the Company changed its accounting policy for recording investments in subsidiaries and associate in the separate financial statements from the equity method to the cost method, in compliance with Accounting Standard No. 44 (Revised 2007) regarding “Consolidated Financial Statements and Separate Financial Statements”, under which investments in subsidiaries, jointly controlled entities and associates are to be presented in the separate financial statements under the cost method. In this regard, the Company has restated the previous period’s separate financial statements as though the investments in the subsidiaries and associate had originally been recorded using the cost method. The change has the effect of increasing net income in the separate income statement for the year ended 31 December 2007 by Baht 94.20 million (Baht 0.08 per share) and decreasing net income in the separate income statement for the year ended 31 December 2006 by Baht 69.16 million (Baht 0.06 per share). The cumulative effect of the change in accounting policy has been presented under the heading of “Cumulative effect of the change in accounting policy for investments in subsidiaries and associate” in the separate statements of changes in shareholders’ equity.
Such change in accounting policy affects only the accounts related to investments in subsidiaries, and associate in the Company’s separate financial statements, with no effect to the consolidated financial statements
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6. CHANGE IN ACCOUNTING POLICY FOR RECORDING DEFERRED INCOME TAX IN A SUBSIDIARY
COMPANY In the second quarter of the current year, a subsidiary of the Company adopted an accounting policy
regarding deferred income tax for compliance with the accounting policy’s of the Company. The Company has therefore restated its prior year’s consolidated financial statements as though the subsidiary had always applied deferred income tax accounting. This had the effect of decreasing consolidated net income for the year ended 31 December 2007 and 2006 by Baht 3.36 million (Baht 0.003 per share) and Baht 1.53 million (Baht 0.001 per share), respectively. The cumulative effects of the change in accounting policy has been presented under the heading of “Cumulative effect of the change in accounting policy for deferred income tax of a subsidiary” in the consolidated statements of changes in shareholders’ equity.
Such change in accounting policy affects only the accounts related to deferred income tax in the Company’s consolidated financial statements, with no effect to the separate financial statements. 7. SIGNIFICANT ACCOUNTING POLICIES
7.1 Revenue recognition (a) Reinsurance Premium Reinsurance Premium is recognised when the reinsurer submits the reinsurance application or the
statement of accounts is submitted to the Group. (b) Interest and dividends Interest income is recognised as interest accrues based on the effective rate method. Dividends are
recognised when the right to receive the dividends is established. (c) Interest from loans Interest income is accrued over the term of the loans based on the amount of principal outstanding. (d) Management fee income Management fee income from the Ua Arthorn personal accident insurance scheme is recognised as
income each quarter. The management fee is calculated at a percentage of the gross premium received under with the Ua Arthorn personal accident scheme agreement.
(e) Rendering of services Service revenue is recognized when services have been rendered taking into account the stage of
completion. 7.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand, cash at bank, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions. 7.3 Unearned premium reserve Unearned premium reserve is set aside in compliance with the methods specified in the Insurance Against Loss Act, as follows: Fire, motor and miscellaneous - Treaty - Monthly average basis (the one-twenty fourth basis) Fire and miscellaneous - Facultative - Daily average basis (the one-three hundred and sixty fifth basis) Marine and transportation - Net reinsurance premium written for the last three months
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7.4 Life policy reserve Life policy reserve is reserve for insurance policy for 1-year or less which is determined based on the full unearned premium reserve and the period of coverage. 7.5 Loss reserves and outstanding claims Outstanding claims are provided for upon receipt of a claim advice from the reinsurer, in accordance with the amount claimed by that reinsurer. The Group provides reserves against loss which may have been incurred, but not yet reported at 2.5 percent of net premium written for the last 12 months in compliance with the Notification of the Ministry of Commerce governing the appropriation of unearned premium reserve. In addition, the Group provides reserves against losses which may have been incurred under fire, marine and transportation and miscellaneous insurance, but not yet reported at the end of the year (IBNR). Those provisions are estimated based on the management’s judgment and past experience, and are added back for corporate income tax purposes. 7.6 Commissions and brokerages Commissions and brokerages are expended when they occur. 7.7 Investments
(a) Investments in securities held for trading are stated at fair value. Gains or losses arising from changes in the carrying amounts of securities are included in determining income.
(b) Investments in available-for-sale securities are stated at fair value. Changes in the carrying amounts of securities are recorded as separate items in shareholders’ equity until the securities are sold, when the changes are then included in determining income.
(c) Investments in debt securities, both due within one year and expected to be held to maturity, are recorded at amortised cost. The premium/discount on debt securities is amortised by the effective rate method with the amortised amount presented as an adjustment to the interest income.
(d) Investments in non-marketable equity securities, which the Company classifies as other investments, are stated at cost net of allowance for loss on diminution in value (if any).
(e) Investment in associate is accounted for in the consolidated financial statements using the equity method.
(f) Investments in subsidiaries and associate are accounted for in the separate financial statements using the cost method. The fair value of marketable securities is based on the latest bid price of the last working day of the year as quoted on the Stock Exchange of Thailand. The fair value of debt instruments is determined based on the required rate of return or the yield rates quoted by the Thai Bond Market Association. The fair value of unit trusts is determined from their net asset value. The weighted average method is used for computation of the cost of investments. In the event the Company reclassifies investments in securities, such investments are adjusted to their fair value as at the reclassification date .Differences between the carrying amount of the investments and their fair value on that date are included in determining income or recorded as surplus (deficit) from change in the value of investments in shareholders’ equity, depending on the type of investment which is reclassified.
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7.8 Property, building and equipment and depreciation
Property, building and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any). Depreciation of building and equipment are calculated by reference to their costs on the straight-line basis over the following estimated useful lives:
Building - 20 years Leasehold improvement - 10 years, 3 years (over the period of lease) Motor vehicles - 5 years Office equipment and furniture - 5 years Computer - 3 years, 5 years
Depreciation is included in determining income. No depreciation is provided on land.
7.9 Intangible assets and amortisation
Intangible assets are stated at cost less accumulated amortisation. Amortisation is calculated by reference to cost on a straight-line basis over the expected future period, for which the assets are expected to generate economic benefit, as follows:
Computer software - 5 years, 10 years
The amortisation is included in determining income.
7.10 Related party transactions
Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company.
They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company’s operations.
7.11 Due from reinsurers
Due from reinsurers is carried at its net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experience and analysis of debtor aging.
7.12 Long-term leases
Leases of equipment which transfer substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to the income statements over the lease period. The equipment acquired under finance leases is depreciated over the useful life of the asset.
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7.13 Income tax (a) Current tax Income tax is provided for in the accounts based on the taxable profits determined in accordance with tax legislation. (b) Deferred Tax Deferred income tax is calculated based on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts, by using the enacted tax rate at the balance sheet date. The Group recognises deferred tax liabilities for taxable temporary differences and recognises deferred tax assets for deductible temporary differences and tax losses carried forward. The Group recognises deferred tax assets to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilized. At each balance sheet date, the Group reviews and reduces the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. The Group records deferred tax directly to equity if the tax relates to items that are recorded directly to equity.
7.14 Foreign currencies
Foreign currency transactions are translated into Baht at the rates ruling on the transaction dates. Assets and liabilities denominated in foreign currencies outstanding at the balance sheet date are translated into Baht at the exchange rates ruling on the balance sheet date.
Gains and losses on exchange are included in determining income.
7.15 Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. Where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement. An asset’s recoverable amount is the higher of fair value less costs to sell and value in use.
7.16 Employee benefits
Salary, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred.
7.17 Contingent asset
Contingent asset are recognised when the Group has a present future benefits as a result of a past event, it is that an inflow of resources embodying economic benefits will be required to settle the benefits, and a reliable estimate can be made of the amount of the obligation.
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7.18 Contingent liability Contingent liability are recognised when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
7.19 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances, affecting amounts reported in these financial statements and related notes. Actual results could differ from these estimates.
8. INVESTMENTS IN SECURITIES Consolidated (Unit: Baht)
31 December 2007 31 December 2006 Cost / Cost amortised Fair value
Cost / Cost amortised Fair value
Trading Securities Units trust 60,000,000 74,821,680 50,000,000 57,264,059 Surplus on revaluation of investments 14,821,680 - 7,264,059 -
Total trading securities 74,821,680 74,821,680 57,264,059 57,264,059 Available-for-sale securities Stocks 578,795,367 694,001,127 502,434,210 569,090,677 Units trust 1,554,829,948 1,562,125,248 1,550,268,127 1,541,169,646 Surplus on revaluation of investments 122,501,060 - 57,557,986 - Total available-for-sale securities 2,256,126,375 2,256,126,375 2,110,260,323 2,110,260,323 Held-to-maturity debt securities - net 1,275,509,381 1,133,361,517 Other investments Ordinary shares 4,670,600 33,455,000 Less: Allowance for impairment - -30,000,000 Other investments - net 4,670,600 3,455,000 Total investments in securities - net 3,611,128,036 3,304,340,899
Held-to-maturity debt securities as at 31 December 2007 will mature as follows: (Unit: Baht)
Period to maturity Within 1 year 1-5 years Over 5 years
Total
Held-to-maturity debt securities Bonds 150,759,350 380,933,550 - 531,692,900 Treasury bills 19,862,550 - - 19,862,550 Notes 200,000,000 15,500,000 - 215,500,000 Debentures - net 110,000,000 302,615,930 95,838,001 508,453,931 Total 480,621,900 699,049,480 95,838,001 1,275,509,381
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Separate financial statements (Unit: Baht)
31 December 2007 31 December 2006 Cost / Cost amortised Fair value
Cost / Cost amortised Fair value
Trading Securities Units trust 60,000,000 74,821,680 50,000,000 57,264,059 Surplus on revaluation of investments 14,821,680 - 7,264,059 - Total trading securities 74,821,680 74,821,680 57,264,059 57,264,059 Available-for-sale securities Stocks 565,236,964 654,176,597 480,044,756 519,758,286 Units trust 1,384,464,126 1,391,593,945 1,435,442,576 1,428,344,428 Surplus on revaluation of investments 96,069,452 - 32,615,382 - Total available-for-sale securities 2,045,770,542 2,045,770,542 1,948,102,714 1,948,102,714 Held-to-maturity debt securities - net 686,627,966 797,847,251 Other investments Ordinary shares 4,670,600 33,455,000 Less: Allowance for impairment - (30,000,000) Other investments - net 4,670,600 3,455,000 Total investments in securities - net 2,811,890,788 2,806,669,024
Held-to-maturity debt securities as at 31 December 2007 will mature as follows: (Unit: Baht)
Period to maturity Within 1 year 1-5 years Within 1 year
Total 1-5 years
Held-to-maturity debt securities Bonds 49,793,735 120,708,017 - 170,501,752 Notes 140,000,000 - - 140,000,000 Debentures - net 95,000,000 212,500,900 68,625,314 376,126,214 Total 284,793,735 333,208,917 68,625,314 686,627,966
Surplus on revaluation of investments as at 31 December 2007 and 2006 consist of: (Unit: Thousand Baht)
Consolidated Separate financial statements 31 December 2007 31 December 2006 31 December 2007 31 December 2006
Surplus on revaluation of investments of The Company 96,069,452 32,615,382 96,069,452 32,615,382
Surplus on revaluation of investments of Subsidiaries
26,431,608 24,942,604 - -
Total 122,501,060 57,557,986 96,069,452 32,615,382 Less: Deferred tax liabilities (36,750,319) (15,636,627) (28,820,836) (8,153,846) Surplus on revaluation of investments - net 85,750,741 41,921,359 67,248,616 24,461,536
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As at 31 December 2007, the Group pledged investments in bonds of Baht 34 million (The Company only: Baht 14 million). (2006: Baht 34 million, The Company only: Baht 14 million)) as security with the Registrar in accordance with the Life Assurance and the Insurance Act B.E. 2535.
As at 31 December 2007, the subsidiary pledged the investments in bonds of Baht 35 million (2006: Baht 30 million) as life assurance policy reserve with the Life Assurance Registrar in accordance with Section 24 of the Life Assurance Act. B.E. 2535.
Additional information The Company has the following investments in the unit trust of open-end funds:
Percentage of holding units trust as at 31 December 2007 31 December 2006
(Percent) (Percent) Tawee-phon Fixed Income Fund - 99.94 Ayudhya Chaimongkol Fund - 99.80
The Company does not treat the investments of open-end funds as above as investments in associated and subsidiary companies because the Company has no management control over these funds and no significant influence over their financial or operational policies. The funds are independently managed by fund managers in accordance with the details of the fund projects and are under the supervision of the Office of Securities and Exchange Commission (“SEC”).
9. RELATED PARTY TRANSACTIONS
In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. The relationships between the Group and its related parties are summarized below:
Name of related parties Relationship with the Group The Siam Industrial Credit Plc. Related by way of common directors and shareholding Bangkok Insurance Plc. Related by way of common directors and shareholding Phatra Insurance Plc. Related by way of common directors and shareholding The Ayudhaya Insurance Plc. Related by way of common directors and shareholding Bamrungraj Hospital Plc. Related by way of common directors and shareholding The Siam Commercial Samaggi Insurance Plc. Related by way of common directors and shareholding Dhipaya Insurance Plc. Related by way of common directors and shareholding The Navakij Insurance Plc. Related by way of common directors and shareholding Thaivivat Insurance Plc. Related by way of common directors and shareholding Krungthai Panich Insurance Co., Ltd. Related by way of common directors and shareholding MSIG Insurance (Thai) Co., Ltd. Related by way of common directors and shareholding The Falcon Insurance Plc. Related by way of common directors and shareholding Thai Life Insurance Co., Ltd. Related by way of common directors and shareholding Road Accident Victims Protection Co., Ltd. Related by way of common directors Bangkok Aviation Fuel Services Plc. Related by way of common directors
During the years, the Company and its subsidiaries had significant business transactions with related parties, which have been concluded on commercial terms and bases specified in the agreements between the Company and those companies, and in the ordinary course of their businesses, are summarised below.
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(Unit: Thousand Bath) Consolidated Separate financial statements
For the year ended 31 December
2007 2006 2007 2006 Premium written Dhipaya Insurance Plc. 565,498 505,380 565,498 505,380 Bangkok Insurance Plc. 387,876 339,011 387,876 339,011 Krungthai Panich Insurance Co., Ltd. 254,959 52,720 254,959 52,720 The Siam Commercial Samaggi Insurance Plc. 190,179 138,199 190,179 138,199 MSIG Insurance (Thai) Co., Ltd. 182,875 115,452 182,875 115,452 The Ayudhaya Insurance Plc. 182,109 134,130 182,109 134,130 The Navakij Insurance Plc. 130,645 95,410 130,645 95,410 Phatra Insurance Plc. 120,346 109,542 120,346 109,542 Thaivivat Insurance Plc. 116,507 134,140 116,507 134,140 Thai Life Insurance Co., Ltd. 1,929 7,747 - - The Falcon Insurance Plc. 1,008 - 1,008 - Road Accident Victims Protection Co., Ltd. - (584) - (584) The Deves Insurance Plc. - 66,442 - 66,442 Total premium written 2,133,931 1,697,589 2,132,002 1,689,842 Dividend income Bangkok Insurance Plc. 14,210 11,223 11,969 9,144 Phatra Insurance Plc. 13,132 2,372 13,132 2,372 The Siam Commercial Samaggi Insurance Plc. 1,811 - 1,811 - Other 1,592 1,168 1,247 740 Total dividend income 30,745 14,763 28,159 12,256 Commission income Bangkok Insurance Plc. 49,915 42,845 49,915 42,845 Dhipaya Insurance Plc. 49,509 43,885 49,508 43,885 Phatra Insurance Plc. 19,482 15,050 19,482 15,050 The Siam Commercial Samaggi Insurance Plc. 19,331 16,067 19,331 16,067 MSIG Insurance (Thai) Co., Ltd. 19,014 18,117 19,014 18,117 The Navakij Insurance Plc. 15,066 18,892 15,066 18,892 The Ayudhaya Insurance Plc. 12,721 12,082 12,721 12,082 Thaivivat Insurance Plc. 7,402 9,689 7,402 9,689 Krungthai Panich Insurance Co., Ltd. 6,746 6,790 6,746 6,790 Thai Life Insurance Co., Ltd. 221 296 - - Total commission income 199,407 183,713 199,185 183,417
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(Unit: Baht) Consolidated Separate financial statements
For the year ended 31 December
2007 2006 2007 2006 Claim recoverable income Bangkok Insurance Plc. 52,320 48,758 52,320 48,758 Dhipaya Insurance Plc. 47,044 40,149 47,044 40,149 Phatra Insurance Plc. 23,942 18,557 23,942 18,557 MSIG Insurance (Thai) Co., Ltd. 22,046 18,863 22,046 18,863 The Siam Commercial Samaggi Insurance Plc 21,694 17,739 21,694 17,738 The Navakij Insurance Plc. 16,722 12,920 16,722 12,920 The Ayudhaya Insurance Plc. 15,896 13,593 15,896 13,593 Thaivivat Insurance Plc. 9,513 7,256 9,513 7,256 Krungthai Panich Insurance Co., Ltd. 7,329 6,648 7,329 6,649 Thai Life Insurance Co., Ltd. 381 224 - - Total claim recoverable income 216,887 184,707 216,506 184,483 Premium Cede Bangkok Insurance Plc. 131,868 90,374 131,868 90,374 Dhipaya Insurance Plc. 126,320 92,229 126,320 92,229 Phatra Insurance Plc. 55,381 35,511 55,381 35,511 The Siam Commercial Samaggi Insurance Plc 50,914 39,346 50,914 39,346 MSIG Insurance (Thai) Co., Ltd. 48,249 44,333 48,249 44,333 The Ayudhaya Insurance Plc. 33,072 28,991 33,072 28,991 The Navakij Insurance Plc. 29,811 48,414 29,811 48,414 Krungthai Panich Insurance Co., Ltd 15,741 15,554 15,741 15,554 Thaivivat Insurance Plc. 14,866 25,943 14,866 25,943 Thai Life Insurance Co., Ltd. 1,113 934 - - Road Accident Victims Protection Co., Ltd (3,687) 16,699 (3,687) 16,699 The Deves Insurance Plc. - 7,792 - 7,792 Total premium cede 503,648 446,120 502,535 445,186 Commission expense Dhipaya Insurance Plc. 175,062 174,030 175,062 174,030 Bangkok Insurance Plc. 114,332 120,179 114,332 120,179 MSIG Insurance (Thai) Co., Ltd. 67,430 36,623 67,430 36,623 The Siam Commercial Samaggi Insurance Plc 66,396 48,023 66,396 48,023 The Ayudhaya Insurance Plc. 62,742 44,440 62,742 44,440 Krungthai Panich Insurance Co., Ltd. 56,550 20,380 56,550 20,380 The Navakij Insurance Plc. 53,953 43,082 53,953 43,082 Thaivivat Insurance Plc. 41,840 52,473 41,840 52,473 Phatra Insurance Plc. 39,311 41,334 39,311 41,334 The Falcon Insurance Plc. 353 - 353 - Thai Life Insurance Co., Ltd. 137 268 - - Total commission expense 678,106 580,832 677,969 580,564
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(Unit: Baht) Consolidated Separate financial statements
For the year ended 31 December
2007 2006 2007 2006 Claim expense Bangkok Insurance Plc 219,702 133,265 219,702 133,265 MSIG Insurance (Thai) Co., Ltd 92,110 2,606 92,110 2,606 Dhipaya Insurance Plc. 76,770 159,497 76,770 159,497 Phatra Insurance Plc 68,619 59,871 68,619 59,871 The Navakij Insurance Plc. 65,453 37,371 65,453 37,371 The Ayudhaya Insurance Plc. 44,864 31,128 44,864 31,128 Krungthai Panich Insurance Co., Ltd. 40,877 8,740 40,877 8,740 Thaivivat Insurance Plc. 20,268 26,245 20,268 26,245 The Siam Commercial Samaggi Insurance Plc 13,169 88,528 13,169 88,528 The Falcon Insurance Plc. 32 - 32 - Thai Life Insurance Co., Ltd. - 2,606 - - Total claim expense 641,864 549,857 641,864 547,251 Service income (Including in service income) The Siam Commercial Samaggi Insurance Plc 9,316 99 - - The Falcon Insurance Plc. 3,842 81 - - Other 582 769 - - Total Service Income 13,740 949 - -
The pricing policy for premium written, premium ceded, commission income and commission expense is made with reference to the normal ceded rates, which depends on the type of insurance and the reinsurance contract. Claim expense and claim recoverable income are record as per identified in each contract. Service income is made with reference to the normal term of business. Dividend income is the declared amount.
The Company had the following significant balances of assets and liabilities with its related companies:
(Unit: Baht) Consolidated Separate financial statements
2007 2006 2007 2006 Investment in security - Note The Siam Industrial Credit Plc. 35,500,000 12,509,303 - - Total investment in security - Note 35,500,000 12,509,303 - - Investment in securities - Stock Bangkok Insurance Plc. 315,852,404 262,880,412 276,027,874 221,423,022 Bamrungraj Hospital Plc. 52,325,000 27,239,400 52,325,000 27,239,400 Phatra Insurance Plc. 37,077,600 31,780,800 37,077,600 31,780,800 The Ayudhaya Insurance Plc. 24,156,330 - 24,156,330 - The Siam Commercial Samaggi Insurance Plc. 28,859,814 26,492,176 28,859,814 26,492,176 Bangkok Aviation Fuel Services Plc. - 7,875,000 - - Others 2,387,450 3,123,150 2,387,450 3,123,150 Total investment in securities - Stock 460,658,598 359,390,938 420,834,068 310,058,548
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(Unit: Thousand Bath) Consolidated Separate financial statements
2007 2007 2007 2006 Amounts deposited on reinsurance Dhipaya Insurance Plc. 64,907,435 46,738,503 64,907,435 46,738,503 The Navakij Insurance Plc. 23,692,438 15,699,635 23,692,438 15,699,635 Bangkok Insurance Plc. 20,832,886 15,614,320 20,832,886 15,614,320 Thaivivat Insurance Plc. 12,116,610 10,142,210 12,116,610 10,142,210 Phatra Insurance Plc. 10,317,261 10,208,396 10,317,261 10,208,396 The Siam Commercial Samaggi Insurance Plc. 9,795,081 10,398,437 9,795,081 10,398,437 Krungthai Panich Insurance Co., Ltd. 5,476,935 4,013,234 5,476,935 4,013,234 The Ayudhaya Insurance Plc. 3,728,193 3,585,831 3,728,193 3,585,831 Road Accident Victims Protection Co., Ltd. - 5,439,553 - 5,439,553 Total amounts deposited on reinsurance 150,866,839 121,840,119 150,866,839 121,840,119 Due from (to) reinsurers Dhipaya Insurance Plc. 29,214,333 32,742,300 29,214,333 32,742,300 Bangkok Insurance Plc. 17,687,840 30,689,896 17,687,840 30,689,896 The Siam Commercial Samaggi Insurance Plc. 13,143,088 4,950,882 13,143,088 4,950,882 The Ayudhaya Insurance Plc. 7,903,341 9,842,420 7,903,341 9,842,420 The Navakij Insurance Plc. 4,600,119 4,601,809 4,600,119 4,601,809 MSIG Insurance (Thai) Co., Ltd. 4,339,130 7,540,275 4,339,130 7,540,275 Phatra Insurance Plc. 3,326,563 19,587,057 3,326,563 19,587,057 Krung Thai Panich Insurance Co., Ltd. 3,090,312 2,477,005 3,090,312 2,477,005 Thaivivat Insurance Plc. 2,257,961 (19,107) 2,257,961 (19,107) Thai Life Insurance Co., Ltd. 50,014 3,070 - - The Falcon Insurance Plc. 5,927 - 5,927 - Road Accident Victims Protection Co., Ltd. - (6,437,962) - (6,437,962) Total amount due from (to) reinsurers 85,618,628 105,977,645 85,568,614 105,974,575 Accounts receivable (Including in other assets) The Siam Commercial Samaggi Insurance Plc. 6,501,634 - - - Other 274,583 - - - Total ccounts receivable (Including in other assets) 6,776,217 - - - Revenue received in advance (Including in other liabilities) The Siam Commercial Samaggi Insurance Plc. 7,011,554 - - - The Falcon Insurance Plc. 106,826 - - - Total revenue received in advance (Including in other liabilities) 7,118,380 - - -
Transactions with subsidiary and associated companies are not significant, and therefore no disclosure of such transactions is made.
Directors and management’s remuneration In 2007 the Group paid salaries, meeting allowances and gratuities to their directors and management totaling
Baht 47 million (Separate financial statements: Baht 41.3 million) (2006: Baht 46.1 million, Separate financial statements: Baht 41.1 million).
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10. INVESTMENTS IN SUBSIDIARIES
Paid-up Capital Percentage holding 2007 2006 2007 2006
Company’s Name Nature of Business Country of Incorporation Thousand
Baht Thousand
Baht Percent Percent
Investment in subsidiaries directly held by the Company Thaire Life Assurance Co., Ltd. Provision of life reinsurance Thailand 500,000 200,000 100.00 100.00
TR Training and Consulting Co., Ltd.
Provision of training and consulting services
Thailand 500 500 100.00 100.00
EMCS Thai Co., Ltd. Provision of computer services in relation to motor losses Thailand 40,000 40,000 49.00 37.75
Firstech Solutions Co.,Ltd. Outsourcing service Thailand 50,000 50,000 80.00 80.00
Thaire Services Co., Ltd.
Losses claim management services Thailand 60,000 20,000 100.00 100.00
Investment in subsidiary held through Thaire Life Assurance Co., Ltd.
EMCS Thai Co.,Ltd. Provision of computer services in relation to motor losses Thailand 40,000 40,000 20.00 20.00
(Unit: Thousand Baht) Separate financial statements
Cost Method Dividend received for the year ended 31 December
Company’s Name
2007 2007 2007 2006
Subsidiaries Thaire Life Assurance Co., Ltd. 500,000 200,000 180,000 - TR Training and Consulting Co., Ltd. 500 500 - - EMCS Thai Co., Ltd. 19,600 15,100 - - Firstech Solutions Co., Ltd. 39,999 39,999 - - Thaire Services Co., Ltd. 60,000 20,000 - -
Total 620,099 275,599 180,000 -
On 23 April 2007, a resolution of the Annual General Meeting of Thaire Life Assurance Co., Ltd.’s shareholders authorised a proposal to increase the subsidiary’s share capital from Baht 200 million to Baht 500 million, through the issue of 30,000,000 additional ordinary shares with a par value of Baht 10 each. The subsidiary has already registered the additional share capital with the Commerce Ministry. In order to maintain its percentage holding in the subsidiary, the Company invests Baht 300 million in the additional shares of the subsidiary during the current year.
As at 14 August 2007, the Company acquired 900,000 ordinary shares of EMCS Thai Company Limited, with a par value of Baht 5 each, at a price of Baht 4.5 million. This represents 11.25% of the paid-up share capital of that company. Total investment in that company increases to Baht 19.6 million or 49% of the paid-up share capital.
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On 21 September 2007, a resolution of the Annual General Meeting of Thaire Services Co., Ltd.’s shareholders authorised a proposal to increase the subsidiary’s share capital from Baht 20 million to Baht 60 million, through the issue of 4,000,000 additional ordinary shares with a par value of Baht 10 each. The subsidiary has already registered the additional share capital with the Commerce Ministry. In order to maintain its percentage holding in the subsidiary, the Company invest Baht 40 million in the additional shares of the subsidiary during the current year.
11. INVESTMENTS IN ASSOCIATE 11.1 Details of investments in associate entities:
Paid-up Capital Percentage holding 2007 2006 2007 2006 Company’s Name Nature of Business Country of
Incorporation Thousand Baht
Thousand Baht Percent Percent
Investments in associate Thai Insurer Datanet Co., Ltd.
Provision of computer services
Thailand 30,000 30,000 40.99 39.99
(Unit: Thousand Baht) Consolidated Separate financial statements Equity Method Cost Method Company’s Name Nature of Business
Country of Incorporation
2007 2006 2007 2006 Associate Thai Insurer Datanet Co., Ltd.
Provision of computer services Thailand 22,962 24,613 12,537 11,999
(Unit: Thousand Baht) Consolidated Separate financial statements
Share of income/loss from investments in associates during the year Dividend received during the year Company’s Name
2007 2006 2007 2006 Associate Thai Insurer Datanet Co., Ltd. 211 576 2,400 1,200
11.2 Summarised financial information of associate (Unit: Million Baht)
Total assets as at 31
December
Total liabilities as at 31 December
Total revenues for the year ended 31
December
Net income (loss) for the year ended 31
December Company’s name
2007 2006 2007 2006 2007 2006 2007 2006 Thai Insurer Datanet Co., Ltd. 60.7 60.6 4.6 4.9 35.4 42.3 (0.2) 6.9
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As at 31 December 2007, the value of the Company’s investment in an associate was determined under the equity method on the basis of financial information for recording in the Company’s consolidated financial statement provided by the associate’s management. This was unreviewed by its external auditor since, due to time constraints; the associate’s management was unable to arrange for its financial statements to be reviewed.
12. PROPERTY, BUILDING AND EQUIPMENT
Movements of the property, building and equipment account during the year ended 31 December 2007 are summarised below: Consolidated
(Unit: Baht)
Land Building Leasehold improvement
Motor vehicles
Office equipment
and furniture Computer Total
Cost 31 December 2006 - - 25,224,037 9,603,139 22,189,963 24,214,102 81,231,241 Purchases 18,200,000 11,800,000 608,947 6,900,000 3,912,892 4,611,536 46,033,375 Disposals - - (39,040) (5,600,000) (142,677) (591,500) (6,373,217) 31 December 2007 18,200,000 11,800,000 25,793,944 10,903,139 25,960,178 28,234,138 120,891,399 Accumulated depreciation 31 December 2006 - - 21,923,152 8,443,954 15,444,860 20,072,910 65,884,876 Depreciation for the year - - 563,808 994,182 3,165,902 2,733,986 7,457,878 Depreciation of disposals
- - (39,039) (5,599,998) (142,662) (581,425) (6,363,124)
31 December 2007 - - 22,447,921 3,838,138 18,468,100 22,225,471 66,979,630 Net Book Value - - 22,447,921 3,838,138 18,468,100 22,225,471 66,979,630 31 December 2006 - - 3,300,885 1,159,185 6,745,103 4,141,192 15,346,365 31 December 2007 18,200,000 11,800,000 3,346,023 7,065,001 7,492,078 6,008,667 53,911,769 Depreciation charges in income statements 2006 8,701,777 2007 7,457,878
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Separate financial statements (Unit: Baht)
Leasehold improvement Motor vehicles Office equipment and
furniture Computer Total
Cost 31 December 2006 25,224,037 9,211,412 19,540,984 18,620,136 72,596,569 Purchases 608,947 6,900,000 244,566 1,657,089 9,410,602 Disposals (39,040) (5,600,000) (142,677) (567,500) (6,349,217) 31 December 2007 25,793,944 10,511,412 19,642,873 19,709,725 75,657,954 Accumulated depreciation 31 December 2006 21,923,152 8,319,388 13,389,543 16,747,708 60,379,791 Depreciation for the year 563,808 915,837 2,291,577 1,591,217 5,362,439 Depreciation for disposals (39,039) (5,599,999) (142,662) (567,4860) (6,349,186) 31 December 2007 22,447,921 3,635,226 15,538,458 17,771,439 59,393,044 Net Book Value 31 December 2006 3,300,885 892,024 6,151,441 1,872,428 12,216,778 31 December 2007 3,346,023 6,876,186 4,104,415 1,938,286 16,264,910 Depreciation charges in income statements 2006 7,364,278 2007 5,362,439
As at 31 December 2007, certain equipment items have been fully depreciated but are still in use. The original cost of those assets amounted to approximately Baht 75.35 million (2006: Baht 68.7 million) (The Company only: Baht 75.35 million, 2006: Baht 68.7 million).
13. INTANGIBLE ASSET
Movements of the intangible asset account during the year ended 31 December 2007 and 2006 are summarised below:
(Unit :Baht) Consolidated Separate financial statements
2007 2006 2007 2006 Computer software 32,306,852 15,556,171 10,662,406 11,179,241 Additions 46,950,064 18,963,341 977,700 1,019,000 Amortisations (3,558,157) (2,212,660) (1,610,026) (1,535,835) Net 75,698,759 32,306,852 10,030,080 10,662,406 Amortisation expenses included in 3,558,157 2,243,969 1,610,026 1,535,835
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14. DUE FROM REINSURERS Due from reinsurers are aged, based on due dates, as follows:
(Unit: Baht) Consolidated Separate financial statements Overdue
2007 2006 2007 2006 Not yet due 173,414,012 205,802,829 166,355,713 203,882,454 Overdue 1 - 3 months 32,451,221 36,593,821 29,720,984 33,687,903 3 - 12 months 24,612,207 18,905,453 23,540,030 16,194,157 Over 12 months 9,431,897 17,297,074 7,775,412 15,704,115 Total due from reinsurers 239,909,337 278,599,177 227,392,139 269,468,629 Less : Major loss (46,882,412) (27,438,166) (46,882,412) (27,438,166) Allowance for doubtful accounts (7,530,169) (7,137,591) (7,530,169) (7,137,591) Total due from reinsurers - net 185,496,756 244,023,420 172,979,558 234,892,872
15. LOSS RESERVES AND OUTSTANDING CLAIMS/LOSSES INCURRED DURING THE YEAR
Consolidated (Unit: Thousand Baht)
Non-life Life
Fire Marine and
transportation Motor Miscellaneo
us Total
Outstanding claims as at 31 December 2007 2,959 367,533 44,708 26,259 198,525 639,984 Loss reserves Balance as at 1 January 2007 7,375 90,843 11,963 2,598 27,926 140,705 Increase (decrease) in IBNR loss Balance as at 31 December 2007 75 855 32 81 -183 860 Total loss reserves and outstanding claims 7,450 91,698 11,995 2,679 27,743 141,565 Losses incurred during the year 10,409 459,231 56,703 28,938 226,268 781,549 Increase (decrease) in loss reserves during the year 127,141 643,997 67,486 54,755 359,681 1,253,060
Total losses incurred in income statements
75 855 32 81 (183) 860
Outstanding claims as at 127,216 644,852 67,518 54,836 359,498 1,253,920
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Separate financial statement (Unit: Thousand Baht)
Fire Marine and
transportation Motor Miscellaneous Total
Outstanding claims as at 31 December 2007 367,533 44,708 26,259 198,525 637,025 Loss reserves 90,843 11,963 2,598 27,926 133,330 Balance as at 1 January 2007 Increase (decrease) in IBNR loss 855 32 81 (183) 785 Balance as at 31 December 2007 91,698 11,995 2,679 27,743 134,115 Total loss reserves and outstanding claims 459,231 56,703 28,938 226,268 771,140 Losses incurred during the year 643,997 67,486 54,755 359,681 1,125,919 Increase (decrease) in loss reserves during the year 855 32 81 (183) 785 Total losses incurred in income statements 644,852 67,518 54,836 359,498 1,126,704
16. CONTINGENT ASSET These comprise the following:
(Unit: Thousand Baht) Consolidated Separate financial statements
2007 2006 2007 2006
Commission receivable from reinsurance 68,300 72,509 68,300 72,509
17. CONTINGENT LIABILITY These comprise the following:
(Unit: Thousand Baht) Consolidated Separate financial statements
2007 2006 2007 2006
Commission payable from reinsurance 145,375 114,850 128,751 107,693
18. SHARE CAPITAL AND WARRANT
During the year 2006, the warrant holders exercised 5.84 million warrants, and the Company has already registered the additional share capital with the Commerce Ministry. As at 31 December 2006 there are 0.11 million outstanding warrants held by senior employees and 0.3 million outstanding warrants held by existing shareholders which have not been exercised. These remaining warrants expired on 11 September 2006 and 6 November 2006, respectively and can no longer be exercised to purchase ordinary shares.
19. STATUTORY RESERVE
Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside a statutory reserve at least 5 percent of its net income after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution
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Under Section 1202 of the Civil and Commercial Code, the subsidiaries are required to set aside a statutory reserve equal to at least 5% of its net income each time the subsidiaries pays out a dividend, until such reserve reaches 10% of the subsidiaries’ registered share capital. The statutory reserve could not use to offset with deficit and could not use for dividend payment.
On 23 April 2007, the Annual General Meeting of the subsidiary’s shareholder no. 7/2007 approved to allocate retained earnings to statutory reserve amounting to Baht 12,000,646.
20. UA ARTHORN PERSONAL ACCIDENT INSURANCE SCHEME / COMMITMENT
The Company was appointed the project manager for the Ua Arthorn personal accident insurance scheme (“Scheme”) under a syndicated agreement among 50 member non-life insurance and life assurance companies, whereby the member companies provide personal accident insurance on a pool basis to public, government official and student. Under the terms of the agreement all member companies are jointly responsible for any losses incurred by the Scheme, and the Company receives a management fee as compensation for its work. During the year, the Company recorded management fee income amounting to Baht 0.74 million (2006: Baht 1.30 million). During the year 2006, the member companies of Ua Arthorn Student Accident Insurance Program approved a resolution to liquidate such program. The Company, as the project manager, has closed the books of the program and is in the process of liquidating it.
As at 31 December 2007 the financial statements of the projects, which were prepared by the Company’s management and have not yet been reviewed by an auditor, present the following asset and liability balances:
Assets & Liabilities Commence Balance of assets and liabilities in the financial statements
Ua Arthorn Accident Insurance Program September 2003 62.29 Million Baht Ua Arthorn Student Accident Insurance Program May 2004 0.04 Million Baht
21. NUMBER OF EMPLOYEES AND RELATED COSTS Consolidated Separate financial statements
2007 2006 2007 2006
Number of employees at the end of year 147 140 99 100 Employee cost for the year (Million Baht) 110 93 85 75
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22. CORPORATE INCOME TAX / DEFERRED INCOME TAX
Income tax expenses for the year ended 31 December 2007 and 2006 consist of: (Unit: Thousand Baht)
Consolidated Separate financial
statements For the year ended 31 December
2007 2006
(Restated) 2007 2006
Income tax on taxable income 194,387 159,185 149,466 126,364 Deferred income tax income (53,438) (7,758) (45,967) (5,825) Income tax expense as included in income statements 140,949 151,427 103,499 120,539
Components of deferred income tax presented in balance sheets as at 31 December 2007 and 2006 are as follows:
(Unit: Thousand Baht)
Consolidated Separate financial
statements For the year ended 31 December
2007 2006
(Restated) 2007 2006
Deferred tax assets Loss reserves 234,465 163,577 231,342 159,157 Others 30,592 27,916 20,784 18,688 Total deferred tax assets 265,057 191,493 252,126 177,845 Deferred tax liabilities Surplus on revaluation of investments 36,750 15,637 28,821 8,154 Unearned premium reserve 25,057 21,392 25,057 21,392 Others 712 387 712 388 Total deferred tax liabilities 62,519 37,416 54,590 29,934
23. BASIC EARNINGS PER SHARE / RECONCILIATION OF DILUTED EARNINGS PER SHARE
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net income for the year by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share is calculated by dividing net income for the year by the weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued.
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Consolidated (Unit: Baht)
Net income Weighted average number of
shares Earnings per
Share For the years ended 31 December
2007 2006 2007 (Share) 2006 (Share) 2007 2006 Basic earnings per share Net income 515,130,794 460,746,957 1,187,354,940 1,182,943,083 0.434 0.389 Dilutive effect of warrants - - - Diluted earnings per share 3,424,066 Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares
515,130,794 460,746,957 1,187,354,940 1,186,367,149 0.434 0.388
Separate financial statements (Unit: Baht)
Net income Weighted average number of shares
Earnings per Share
For the years ended 31 December
2007 2006 2007 (Share) 2006 (Share) 2007 2006 Basic earnings per share Net income 609,328,846 391,586,375 1,187,354,940 1,182,943,083 0.513 0.331 Dilutive effect of warrants Diluted earnings per share - - - 3,424,066 Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares
609,328,846 391,586,375 1,187,354,940 1,186,367,149 0.513 0.330
24. PROVIDENT FUND
The Company and its employees have jointly established a provident fund in accordance with the Provident Fund Act (B.E. 2530). The fund is contributed to by both the employees and the Company on a monthly basis, at rates ranging from 5 to 10 percent of the employees’ basic salaries, based on the length of employment, and will be paid to employees upon termination in accordance with the fund rules. The fund is managed by Ayudhya Fund Management Company Limited.
During the year 2007, the Company and its subsidiary contributed Baht 6 million to the fund (2006: Baht 5 million).
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25. DIVIDEND PAID Dividends declared in 2007 and 2006 consisted of the following:
Approved by Total dividend (Million Baht)
Dividend per share (Baht)
a) Dividend from net earnings of 2005 Annual General Meeting of the Shareholders on 12 April 2006 212.7 0.18
b) Interim dividends on operating results for the six-month period ended 30 June 2006
Board of Directors’ meeting on 31 August 2006
213.0 0.18
Total dividend for the year of 2006 425.7 0.36
a) Dividend from net earnings of 2006 Annual General Meeting of the Shareholders on 11 April 2007 213.7 0.18
b) Interim dividends on operating results for the six-month period ended 30 June 2007
Board of Directors’ meeting on 31 August 2007
213.7 0.18
Total dividend for the year of 2007 427.4 0.36
26. REVERSAL OF DIVIDEND PAYABLE During the current year the Company reversed dividend payable amounting to Baht 6.1 million for which the statutory period per civil and commercial law has expired. The effect of such reversal has already been appropriately reflected in the Company’s financial statements, in unallocated retained earnings.
27. STATEMENTS OF CASH FLOWS Cash and cash equivalents as reflected in the statements of cash flows consist of: (Unit: Baht)
Consolidated Separate financial statements 2007 2006 2007 2006
Cash and deposits of financial institutions 251,956,312 351,803,645 196,983,851 224,745,552 Deposits at other financial institutions 215,500,000 288,509,303 140,000,000 216,000,000 Less : Amounts with maturity of more than 3 months (178,000,000) (247,500,000) (115,000,000) (190,000,000) Cash and cash equivalents 289,456,312 392,812,948 221,983,851 250,745,552
28. FINANCIAL INFORMATION BY SEGMENT The Group’s main business is the reinsurance business and other related services. The Group has only one geographical segment because the Group operates only in Thailand. No disclosure of financial information by segment is made because other related service business’s revenue and assets represent only 2% and 4% of total revenues and total assets, respectively, which are immaterial.
29. COMMITMENT The Group has entered into several lease agreements in respect of the lease of office building space and motor vehicles. Future minimum rentals payable under these leases as at 31 December 2007 are as follows:
Payable within : 31 December 2007 1 year 4.1 2 to 5 years 0.6 Total 4.7
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30. FINANCIAL INSTRUMENTS
30.1 Financial risk management The Group’s financial instruments, as defined under Thai Accounting Standard No. 48 “Financial
Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, amount due to/ due from reinsurer, loans and investments. The financial risks associated with these financial instruments and how they are managed in described below. Credit risk The Group is exposed to credit risk primarily with respect to amount due from reinsurer, and loans. The Group manages the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. In addition, the Group does not have high concentration of credit risk since it has a large customer base. The maximum exposure to credit risk is limited to the carrying amounts of receivables and loan as stated in the balance sheet. Interest rate risk Interest rate risk is the risk that the value of a financial instrument and cash flow will fluctuate due to changes in market interest rates.
Consolidated
(Unit: Thousand Baht) Book Value as at 31 December 2007
Floating interest rate Floating interest rate
Deposits at financial institutions 162,874 89,000 Investments in securities Bonds - 531,693 Treasury bills - 19,863 Notes 33,500 182,000 Debentures - net 76,415 432,039 Total 272,789 1,254,595
The financial instruments carrying interest at fixed rates are classified below, according to the period from the balance sheet date to the contractual reprising date or to the maturity date (whichever date is earlier):
(Unit: Thousand Baht)
Within 1 year Over 1 year Total Average interest rate (percent per annum)
Deposits at financial institutions 89,000 - 89,000 4.38 Investments in securities Bonds 318,310 213,383 531,693 3.57 Treasury bills 19,863 - 19,863 3.13 Notes 182,000 - 182,000 3.50 Debentures - net 232,407 199,632 432,039 4.02 Total 841,580 413,015 1,254,595
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The company only (Unit: Thousand Baht)
Book Value as at 31 December 2007
Floating interest rate Floating interest rate
Deposits at financial institutions 131,949 65,000
Investments in securities
Bonds - 170,502
Notes 30,000 110,000
Debentures - net 49,203 326,924
Total 211,152 672,426
The financial instruments carrying interest at fixed rates are classified below, according to the period from the balance sheet date to the contractual repricing date or to the maturity date (whichever date is earlier):
(Unit: Thousand Baht) Within 1 year Over 1 year Total Average interest rate
Deposits at financial institutions 65,000 - 65,000 4.88 Investments in securities Bonds 94,865 75,637 170,502 3.56
Notes 110,000 - 110,000 3.60
Debentures - net 197,501 129,423 326,924 3.94
Total 467,366 205,060 672,426
Foreign currency risk
The Group’s exposure to foreign currency risk arises mainly from foreign currency denominated underwriting, reinsurance with foreign reinsurers that is denominated in foreign currencies. The Group does not utilise forward foreign currency contracts to mitigate its exposure to foreign currency risk.
A subsidiary’s exposure to foreign currency risk arises mainly from long-term liability for asset acquisition with foreign company.
As at 31 December 2007, the balances of financial assets and liabilities denominated in foreign currencies are summarised below.
Financial assets
Financial liabilities
Average exchange rate as at 31 December 2007 Foreign currency
(Million) (Million) (Baht per 1 foreign currency unit)
US dollar - 0.97 33.8850 Singapore dollar 0.04 - 23.0484 Korean Won 0.12 - 0.0357
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30.2 Fair value
A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by depending on the nature of the instrument. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique if the appropriate market price cannot be determined, depending on the nature of the instrument. The following methods and assumptions were used by the Group in estimating the fair values of financial instruments: -
Investment in securities
The fair value of equity securities and debt securities are based on their quoted market prices. The fair value of other securities, the investments in subsidiaries and associated companies cannot be properly calculated, and therefore no disclosure is made. The fair value of deposits at financial institutions, and notes with maturity periods of less than 90 days is based on their carrying value. For those with maturity periods longer than 90 days, fair value is estimated using a discounted cash flow analysis based on the current interest rate and the remaining period to maturity.
Secured loans
For floating interest rate loans with no significant credit risk, fair value is based on carrying value. The fair value of fixed interest rate loans is estimated using a discounted cash flow analysis based on the current interest rate.
31. RECLASSIFICATION
In addition to the change in accounting policy as mentioned in Note 5 and Note 6, which affects the previously reported net income and shareholder’s equity, certain other amounts in the financial statements for the year ended 31 December 2006 have been reclassified to conform to the current year’s classification but with no effect to previously reported net income or shareholders' equity other than from the change in accounting policy.
32. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were authorised for issue by the Company’s Board of Directors on 8 February 2008.
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Thaire Life Assurance Co.,Ltd.
Subsidiary Companies:
Thai Insurers Datanet Co.,Ltd.
EMCS Thai Co.,Ltd.