ACE INSURANCE LIMITED 09report annual - Chubb · 2018-08-19 · ACE Singapore has also been awarded...

ACE INSURANCE LIMITED

annualreport09

14. Directors’ Report

20. Statement of Changes in Shareholders’ Equity

02. Managing Director’s Statement

04. Managment Team

06. About ACE Singapore

09. The Capabilities of ACE Singapore

13. About ACE Group

16. Statement by Directors

21. Statement of Cash Flows

17. Independent Auditor’s Report

22. Notes to the Financial Statements

18. Statement of Comprehensive Income

19. Balance Sheet

Contents FY 2

009

Managing Director’sStatement

Mack Eng, Managing Director

2009 has been an eventful year for ACE Singapore. While the global financial crisis took its toll on the Singapore economy at the start of 2009, it rebounded strongly in the second half of 2009.

The crisis was a catalyst to changing the world order. With the developed economies experiencing slower growth, a new world order has emerged powered by the emerging middle class of China, India, the rest of Asia and Latin America.

Whilst PBI is in its fledgling state, it will form our third major revenue stream, primarily through partnerships with existing partners while using state-of-the-art technology to provide an efficient and competitive platform to distribute this business.

Despite the year’s challenges, several key milestones were also achieved in 2009:

Being awarded the Service Quality Class (SQC) for Business Excellence, we are committed to improving our business management systems and processes to better serve our valued partners and policy holders.

ACE is the first insurer to be assigned the highest possible rating of ‘axAAA’ by Standard & Poor’s in its ASEAN regional scale. At the time of the assigned rating in September 2009, ACE Singapore was only one of seven institutions to be rated axAAA; reflecting the company’s strong capacity to meet its financial commitments and obligations.

Irrespective of the economic climate, we remain steadfast in delivering best in class products and services with a level of service you have come to expect of ACE. We have built a good momentum of success which, with the help of our dedicated employees, will help pave the way for continued growth in the years to come.

03

Against the back-drop of this ‘New Normal’, locally we have been able to capitalize on opportunities and niche segments, generating $132 mio GWP; exceeding the growth targets set by 15.3%. Underwriting profit was 10% above plan at $5.45 mio; the overall combined ratio was a healthy 85.2%, with Accident & Health (A&H) and Property & Casualty (P&C) having 71.1% and 82.1% combined ratios respectively. Personal & Business Insurance (PBI), in its developmental stage, has a combined ratio of 147.2%.

Against the challenging economic environment especially in the first half of the year, the Singapore operations

achieved an outstanding result. Our performance can be attributed to a few key factors: the confidence and support from our valued brokers and partners during the financial crisis, trust of our policyholders and clients in our service and product offerings, strong expertise in terms of support from our regional office colleagues and last but not least, a dedicated team of professionals whose commitment and morale remained high in the midst of the crisis.

Over the next twelve to twenty-four months, P&C will be identifying new segments with a primary focus on multinational and regional programs that leverage our strengths, namely our extensive global network, superior claims resolution and indigenous know-how. We will also work on product enhancements for a targeted suite of our corporate offerings.

On the A&H consumer front, we have a ‘best practice’ call centre supporting various sponsors’ initiatives. Our core objective is to continue to hone in on the skills and talent of our sales team through robust training and sales management support. We will also continue to develop our multi-channel competence to reach out to policyholders and end-consumers through relevant touch-points as we envisage further growth in the consumer segment.

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FY 2

009

Siti Supiaton AhmadHead of Telemarketing

Jocelyn LeeCasualty Manager

Cathy TayHead of Direct Marketing

Helen NgMarine Manager

Lana GoHuman Resource Manger

Christopher KeeIT Manager

Pamela ShekaranLegal Counsel

Mack Eng Managing Director

Jean OngChief Financial Officer

Clara KohExecutive Manager,

Property & Technical Lines

Zachary TanHead of A&H Brokerage

and Underwriting

Carolyn CheongExecutive Manager, Claims

Edwin SimFinancial Lines Manager

Kelvin LimHead of Operations

& Learning

ManagementTeam

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FY 2

009

“We have built a good momentum of success which, with the help of our dedicated employees, will help pave the way for continued growth in the years to come.”

About ACE Singapore

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FY 2

009

07

ACE Insurance in Singapore is a member of the ACE Group of Companies®, a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries and a strong presence in Asia Pacific.

Operating in Singapore since 1948, ACE has the technical expertise in risk management for all major classes of general insurance which includes Property & Casualty, Accident & Health and Personal & Business Insurance. The ‘A’ long term insurer financial strength and counterparty credit ratings by Standard & Poor’s are indicative of ACE Singapore’s robust capitalization. In addition, the company’s strong capacity to meet its financial commitments is underscored by the highest rating of ‘axAAA’ in Standard & Poor’s ASEAN regional credit scale. ACE Singapore is the first insurance company to be assigned an ASEAN credit rating which complements S&P’s global credit rating scale. ACE Singapore’s ratings are reflective of its parent’s rating outlook. (ACE’s core operating insurance companies are rated A+ for financial strength by Standard & Poor’s and A.M. Best). Over the years, the firm has established strong client relationships by offering responsive service, developing innovative products and providing market leadership built on financial strength. ACE Singapore has also been awarded the Singapore Quality Class (SQC) certification by SPRING Singapore, the national standards and accreditation body. The SQC is a national recognition given to organizations that have achieved all-round business excellence. Additional information can be found at: www.aceinsurance.com.sg

CORPORATE INSURANCEWith expertise in areas ranging from Accident and Health, Work Injury Compensation and Directors & Officers liability to Energy, Casualty and Risk Management, ACE insures businesses and corporations worldwide.

The Capabilities of ACE Singapore

ACE Insurance Limited Singapore has, through acquired companies, been serving clients with diverse and special requirements in the general insurance and reinsurance industry in Singapore since 1948. Following the acquisition of CIGNA Insurance Singapore Limited in

1999, we have grown from strength to strength.

ACE has carved a niche for itself in Singapore, as one of the leading direct marketing providers of Accident & Health insurance. We also have the technical expertise in risk management and engineering capabilities for all major classes of insurance. We focus on our clients, building strong relationships by offering responsive service, developing innovative products and providing market leadership built on financial strength.

PRODUCTS AND SERVICESAt ACE, we strive to position the brand as being synonymous with high quality and value. As such, with a product offering as diverse as our client base, we pride ourselves on our ability to meet our clients’ risk management needs. In each area of specialty listed below, we leverage global expertise and local acumen to create specific solutions to mitigate your risks.

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The Capabilities of ACE Singapore

ACE’s Accident & Health Insurance offerings provide individuals with the security they want and the coverage they need. Our superior underwriting expertise and vast international capabilities enable us to provide a robust product portfolio.

ACCIDENT & HEALTH INSURANCE

10

Personal Insurance

Personal Insurance offers a comprehensive range of personal property protection for the individual consumer; from basic home insurance for building and home contents to lifestyle coverages which include Wallet Protection, Identity Theft, Sports Liability & Equipment Insurance.

ACE’s Specialty Personal Lines work with many of the world’s leading companies to develop protection programs geared towards meeting the unique needs of today’s increasingly digital, mobile and cashless society.

PERSONAL & BUSINESS INSURANCE

Small to Medium Sized Enterprise (SME)

ACE is committed to providing first-class tailored and ‘off-the-shelf’ business insurance products, services and solutions to meet the coverage and risk management needs of a wide variety of small to medium sized enterprises (SME) or groups of self employed individuals. Our goal is to deliver cost-effective protection for the businesses within this segment through a broad range of distribution channels.

FY 2

009

11

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009

About The ACE Group

The ACE Group is one of the world’s largest providers of commercial property and casualty insurance and reinsurance. With its core operating insurance companies rated A+ for financial strength by Standard & Poor’s and A.M. Best, and with $78 billion in assets and $19 billion of gross written premiums in 2009, the ACE Group is distinguished by its underwriting expertise, superior claims handling and global franchise, which includes offices in more than 50 countries and clients in over 170 countries. The insurance companies of the ACE Group serve a diverse range of clients: multinational corporations and local businesses with property and casualty exposures; companies and affinity groups looking to provide or offer accident and health insurance programs and life insurance to their employees or members; insurers seeking reinsurance coverage; and individuals purchasing life, personal accident, supplemental health and high-valued homeowners, automobile and umbrella insurance. ACE Limited, the Swiss-incorporated parent company of the ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 stock index. The ACE Group maintains executive offices in Zurich, Bermuda and New York, among other locations, and employs more than 15,000 people worldwide. For more information, visit www.acegroup.com

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14 15

FY 2

009

Directors’Report

Directors’Report

The directors present their report to the shareholder together with the audited financial statements of the Company for the financial year ended 31 December 2009.

Directors

The directors of the Company in office at the date of this report are as follows:

Eric SandersonMack Eng Lip Chian (appointed on 1 October 2009)Stephen Barry Crouch (appointed on 1 July 2009)Daniel Andrew Albert Vanderkemp (appointed on 1 December 2009)

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Directors’ interests in shares and debentures

According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares in, or debentures of, the Company or any related corporation, except as follows:

1. This refers to restricted stock award and stock options granted by ACE Limited (incorporated in Switzerland) under the Group’s 2004 Long-Term Incentive Plans.

Directors’ contractual benefits

Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except that certain directors receive remuneration as a result of their employment with related corporations.

Share options

There were no options granted during the financial year to subscribe for unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company.

There were no unissued shares of the Company under option at the end of the financial year.

Auditors

The independent auditor, Pricewaterhouse Coopers LLP, has expressed its willingness to acceptre-appointment.

On behalf of the directors

___________________________________________ ___________________________________________

Mack Eng Lip Chian Daniel Andrew Albert VanderkempDirector Director

23 April 2010

ACE LimitedRestricted stock award1

Mack Eng Lip Chian

Stephen Barry Crouch

Daniel Andrew Albert Vanderkemp

Common shares atpar value CH33.74 each

Mack Eng Lip Chian



Restricted stock options1

Mack Eng Lip Chian



Holdings registeredin the name of director or nominee

Holdings in which a directoris deemed to have an interest

1,016

4,853

1,719

204

3

1,390

1,185

5,518

1,975–

At 31.12.09

–

–

–

–

–

–

–

–

–

At 31.12.09

1,016

4,853

1,719

204

893

1,390

1,185

5,518

1,975–

At Date of appointment

–

–

–

–

–

–

–

–

–

At Date ofappointment

16 17

FY 2

009

Statement By Directors

IndependentAuditor’s Report

In the opinion of the directors,

(a) the financial statements as set out on pages 18 to 66 are drawn up so as to give a true and fair view of the state of affairs of the Company at 31 December 2009 and of the results of the business, changes in equity and cash flows of the Company for the financial year then ended; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ACE INSURANCE LIMITED

We have audited the accompanying financial statements of ACE Insurance Limited (the “Company”) set out on pages 18 to 66, which comprise the balance sheet of the Company as at 31 December 2009, the statement of comprehensive income, statement of changes in equity and the statement of cash flows of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act (Cap. 50) (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes:

a)

b) selecting and applying appropriate accounting policies; and

c) making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion,

a)

b)

PricewaterhouseCoopers LLPPublic Accountants and Certified Public AccountantsSingapore, 23 April 2010

On behalf of the directors

___________________________________________ ___________________________________________

Mack Eng Lip Chian Daniel Andrew Albert VanderkempDirector Director

23 April 2010

devising and maintaining a system of internal accounting control sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition; and transactions are properly authorized and that they are recorded as necessary to permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets;

the financial statements of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company as at 31 December 2009, and the results, changes in equity and statement of cash flow of the Company for the financial year ended on that date; and

the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

z

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FY 2

009

The accompanying notes form an integral part of these financial statements.

Insurance premium revenueInsurance premium ceded to reinsurersNet insurance premium revenue

Fee income from insurance contractsInvestment incomeNet realized (loss) / gains on financial assetsOther operating incomeNet income

Insurance claims and loss adjustment expensesInsurance claims and loss adjustment expenses recovered from reinsurersNet insurance claims

Expenses for acquisition of insurance contractsExpenses for asset management services renderedOperating expenses:- Employee benefits- Depreciation expense- Other operating expenses

Expenses

Profit before income tax

Income tax expense

Net profit

Other comprehensive income:Fair value (loss) / gains on financial assets,available-for-saleIncome tax expense / (credit) relating to othercomprehensive income

Other comprehensive (loss) / income, net of tax

Total comprehensive income

Statement OfComprehensive Income

Note2008

$2009

$

128,212,162(90,644,076)

37,568,086

25,573,032 2,739,743

(37,590) 876,019

29,151,204

(39,817,062)

32,136,052(7,681,010)

(26,978,075)(119,469)

(14,496,626)(1,161,181)

(7,807,947)(23,465,754)

(50,563,298)

8,474,982

(1,695,201)

6,779,781

(580,762)

41,673

(539,089)

6,240,692

119,537,173(78,904,481)

40,632,692

22,094,0102,936,624

90,511490,209

25,611,354

(19,741,928)

13,521,927(6,220,001)

(24,038,229)(156,464)

(14,689,256)(1,335,524)(5,705,387)

(21,730,167)

(45,924,860)

14,099,185

(2,517,557)

11,581,628

36,845

(17,708)

19,137

11,600,765

3

4

5

6

7108

9(a)

18

Balance Sheet


Assets

Non-current assetsProperty, plant and equipment

Current assetsFinancial assets, available-for-saleInsurance receivables and other receivablesReinsurance assetsCash and cash equivalents

Total assets

Liabilities

Non-current liabilitiesInsurance liabilitiesDeferred income tax liabilities

Current liabilitiesInsurance liabilitiesInsurance payables and other payablesCurrent income tax liabilities

Total liabilities

Net assets

Shareholder’s equity

Share capitalFair value reserveRetained profits

Note2008

$2009

$

1,718,803

80,996,42550,398,351

118,834,43418,526,232

268,755,442

270,474,245

14,403,772219,000

14,622,772

162,464,54437,368,673

2,080,960201,914,177

216,536,949

53,937,296

35,000,000(241,783)

19,179,07953,937,296

2,449,024

84,920,40239,235,08896,587,49819,949,424

240,692,412

243,141,436

12,066,132433,000

12,499,132

137,423,15726,209,973

2,651,570166,284,700

178,783,832

64,357,604

35,000,000297,306

29,060,29864,357,604

10

11121314

1316

1315

9(b)

17

20 21

FY 2

009


2009Beginning of financial year

Other comprehensive income

Net profitTotal recognized income

DividendsEnd of financial year

2008Beginning of financial year

Other comprehensive income

Net profitTotal recognized income

DividendsEnd of financial year

18

19

18

19

Statement Of Changes In Shareholder’s Equity

NoteFair valuereserve

$

Retainedprofits

$Total

$

ShareCapital

$

297,306

(539,089)

–(241,783)

–(241,783)

278,169

19,137

–297,306

–297,306

29,060,298

–

6,779,78135,840,079

(16,661,000)19,179,079

29,660,662

–

11,581,62841,242,290

(12,181,992)29,060,298

64,357,604

(539,089)

6,779,78170,598,296

(16,661,000)53,937,296

64,938,831

19,137

11,581,62876,539,596

(12,181,992)64,357,604

35,000,000

–

–35,000,000

–35,000,000

35,000,000

–

–35,000,000

–35,000,000

Statement OfCash Flows


Cash flows from operating activitiesProfit after taxAdjustments for: Income tax expense Depreciation expense Property, plant and equipment written off Gain / (loss) on sale of investments Interest income Dividend incomeOperating cash flow before working capital changes

Change in operating assets and liabilities Insurance receivables and other receivables Insurance payables and other payables Net insurance liabilitiesCash generated / (used in) from operations

Net Income tax (paid)/recoveredNet cash (used in)/provided by operating activities

Cash flows from investing activitiesPurchases of property, plant and equipmentProceeds from disposal of property, plant and equipmentPurchases of investmentsProceeds from sale of investmentsInterest receivedDividends receivedNet cash from investing activities

Cash flows from financing activitiesDividends paid to shareholder of the CompanyNet cash used in financing activities

Net increase in cash and cash equivalents heldCash and cash equivalents at beginning of financial yearCash and cash equivalents at end of financial year

Note2008

$2009

$

6,779,781

1,695,2011,161,181

–37,590

(2,597,662)(142,081)

6,934,010

(33,410,199)11,158,70027,379,02712,061,538

(2,438,138)9,623,400

(430,960)–

(45,938,667)48,982,962

2,858,992142,081

5,614,408

(16,661,000)(16,661,000)

(1,423,192)19,949,42418,526,232

11,581,628

2,517,5571,335,524

1,329(90,511)

(2,815,968)(120,656)

12,408,903

2,336,126(12,178,738)

(3,882,695)(1,316,404)

(1,454,533)(2,770,937)

(316,782)12,394

(27,269,143)27,648,090

3,072,913120,656

3,268,128

(12,181,992)(12,181,992)

(11,684,801)31,634,22519,949,42414

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FY 2

009

Notes To TheFinancial Statements


These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1. General The Company is incorporated and domiciled in Singapore. The address of its registered office is 600 North Bridge Road #04-02, Parkview Square, Singapore 188778.

The Company is licensed under the Insurance Act, Chapter 142 as a direct general insurer.

The principal activity of the Company consists of underwriting of general insurance including reinsurance of all classes of risks.

2. Significant accounting policies

(a) Basis of preparation

2. Significant accounting policies (continued)

(a) Basis of preparation (continued)

(b) Revenue recognition

(c) Property, plant and equipment

FRS 1 (revised), Presentation of financial statements (effective from 1 January 2009). The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. All non-owner changes in equity are shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Company has chosen to adopt the former alternative. Where comparative information is restated or reclassified, a restated balance sheet is required to be presented as at the beginning comparative period. There is no restatement of the balance sheet as at 1 January 2008 in the current financial year.

Amendment to FRS 107 Improving Disclosures about Financial Statements (effective from 1 January 2009). The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy (see note 22). The adoption of the amendment results in additional disclosures but does not have an impact on the accounting policies and measurement bases adopted by the Company.

All property, plant and equipment are initially recognized at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses (Note 2(d)).

The cost of an item of property, plant and equipment initially recognized includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The projected cost of dismantlement, removal or restoration is recognized as part of the cost of property, plant and equipment if such obligation is incurred as a consequence of acquiring or using the asset.

Income from insurance premium is taken up as income at the commencement date of the risk less unearned premiums.

Dividend income from investments is recognized when the right to receive payment is established.

Interest income is recognized using the effective interest method.

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Company’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The area involving a higher degree of judgement or complexity, or area where assumptions and estimates are significant to the financial statements is the estimation of ultimate liability arising from claims made under insurance contracts, disclosed in Note 13.

Interpretations and amendments to published standards effective in 2009

On 1 January 2009, the Company adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for application from that date. Changes to the Company’s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS.

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FY 2

009


(d) Impairment of assets (continued)

(e) Financial assets

(1) Classification

(i) Loans and receivables

(ii) Financial assets, available-for-sale


(c) Property, plant and equipment (continued)

Depreciation is calculated using the straight line basis to allocate their depreciable amounts over their estimated useful lives as follows:

Leasehold improvements 20% - 33 1/3% Office equipment 20% Motor vehicles 33 1/3% Furniture and fittings 20% Computer equipment 20%

(d) Impairment of non-financial assets

An impairment loss of an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized for the asset in prior years. A reversal of impairment loss for an asset is recognized in the income statement.

The Company classifies its financial assets in the following categories: loans and receivables and available-for-sale. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Receivables arising from insurance contracts are classified in this category. Insurance receivables comprise of amounts due from insured, agents, brokers and reinsurers.

Financial assets, available-for-sale, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented as current assets as the Company intends to dispose off the assets whenever opportunities arise within 12 months after the balance sheet date.

The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognized in the income statement when the changes arise.

Subsequent expenditure relating to property, plant and equipment that has already been recognized is added to the carrying amount of the asset only when it is probable that future economic benefits, associated with the item, will flow to the Company and the cost of the item can be reliably measured. All other repairs and maintenance expenses are recognized in the income statement when incurred.

On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognized in the income statement.

Property, plant and equipment are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.

For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and value in use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and the recoverable amount is recognized as an impairment loss in the income statement.



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FY 2

009


(e) Financial assets (continued)

(5) Impairment

(i) Loans and receivables

(ii) Financial assets, available-for-sale


(e) Financial assets (continued)

(2) Recognition and derecognition

(3) Initial measurement Financial assets are initially recognized at fair value plus transaction costs. (4) Subsequent measurement

Purchases and sales of investments are recognized on trade-date – the date on which the Company commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

On disposal of a financial asset, the difference between the sale proceeds and its carrying amount is taken to the income statement. Any amount in the fair value reserve relating to that asset is transferred to the statementof comprehensive income.

The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognizes an allowance for impairment when such evidence exists.

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or significant delay in payments are evidence that these financial assets are impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognized against the same line item in the income statement.

The allowance for impairment loss account is reduced through the income statement in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the assets previously impaired is increased to the extent that the new carrying amount does not exceed the amortized cost had no impairment been recognized in prior periods.

Significant or prolonged declines in the fair value of the security below its cost and the disappearance of an active trading market for the security are objective evidence that the security is impaired.

If any evidence of impairment exists, the cumulative loss that was recognized in the fair value reserve is reclassified to profit or loss. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortization) and the current fair value, less any impairment loss previously recognized as an expense. The impairment losses recognized as an expense on equity securities are not reversed through profit or loss.

Financial assets, available-for-sale are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

Changes in the fair value of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed into currency translation differences on the amortized cost of the securities and other changes; the currency translation differences are recognized in the income statement and the other changes are recognized in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non monetary items) are recognized in the fair value reserve, together with the related currency translation differences.

Interest and dividend income on financial assets, available-for-sale, are recognized separately in the income statement.

Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed into currency translation differences on the amortized cost of the securities and other changes; the currency translation differences are recognized in profit or loss and the other changes are recognized in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. nonmonetary items) are recognized in the fair value reserve, together with the related currency translation differences.



28 29

FY 2

009


(h) Insurance contracts (continued)

(i) Recognition and measurement


(f) Fair value estimation

(g) Insurance liabilities

(h) Insurance contracts

The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices.

The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used where appropriate. Valuation techniques, such as discounted cash flow analyses, are also used to determine the fair values of the financial instruments.

The fair values of currency forwards are determined using actively quoted forward exchange rates. The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows discounted at actively quoted interest rates.

The fair values of current financial assets and liabilities carried at amortized cost approximate their carrying amounts.

Insurance contracts are classified into two main categories, depending on the duration of risk and whether or not the terms and conditions are fixed.

Short-term insurance contracts

These contracts are casualty, property, professional and directors and officers liability, marine and accident and health insurance contracts.

Casualty insurance contracts protect the Company’s customers against the risk of causing harm to third parties as a result of their legitimate activities. Damages covered include both contractual and non-contractual events. The typical protection offered is designed for employers who become legally liable to pay compensation to injured employees (employers’ liability) and for individual and business customers who become liable to pay compensation to a third party for bodily harm or property damage (public liability).

Property insurance contracts mainly compensate the Company’s customers for damage suffered to their properties or for the value of property lost. Customers who undertake commercial activities on their premises could also receive compensation for the loss of earnings caused by the inability to use the insured properties in their business activities (business interruption cover).

Professional and Directors and Officers insurance contracts mainly indemnify the Company’s customers against the legal liability as well as liability as a result of a breach of duty owed in a professional capacity in connection with the customer’s business.

Marine cargo and hull insurance contracts protect the Company’s customers from the financial losses resulting from marine transportation and transit which can have a drastic impact to their business.

Accident and health insurance contracts protect the Company’s customers from the consequences of events such as hospitalization, total permanent disability or death arising from accident or sickness or diagnose for dreaded diseases. Guaranteed benefits paid on occurrence of the specified insurance event are either fixed or linked to the extent of the economic loss suffered by the policyholder. There are no maturity or surrender benefits.

Political risk insurance contracts protect the Company’s customers against financial losses caused by government action or political force majeure in respect of loans (export and pre-export finance), or sales, purchase or service contracts. Credit insurance contracts protects the lenders involved in highly structured and/or secured trade transactions against default by a borrower/obligor due to either a political or credit event or protects exporters, contractors and sponsors against the calling of on-demand guarantees.

Insurance liabilities are initially measured at fair value and subsequently measured at amortized cost, using the effective interest method.

The Company issues contracts that transfer insurance risk.

Insurance contracts are those contracts that transfer significant insurance risk. Such contracts may also transfer financial risk. As a general guideline, the Company defines as significant insurance risk the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.



30 31

FY 2

009





(i) Recognition and measurement (continued)

(ii) Reinsurance contracts held

(iii) Unearned premium provision

(iv) Outstanding claims reserves

Long-term insurance contracts

These contracts are the Return of Premiums Products Plans which the premium received will be refunded after 5 years or 10 years if the policy criteria for refund are met. The ultimate outcome of this can only be determined upon the expiry of the policies under the Plan and a provision on premium refundable for this class of policies is calculated by the in-house actuary, which approximates 80% of premiums received. Provision for premiums refund made is taken against gross premium written.

Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more contracts issued by the Company and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Company under which the contract holder is another insurer (inward reinsurance) are included with insurance contracts.

The benefits to which the Company is entitled under its reinsurance contracts held are recognized as reinsurance assets. These assets consist of short-term balances due from reinsurers (insurance and other receivables), as well as longer term receivables (classified as reinsurance assets) that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amount recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognized as an expense when due.

The Company assesses its reinsurance assets for impairment on a quarterly basis. If there is objective evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the reinsurance asset to its recoverable amount and recognizes that impairment losses in the income statement. The Company gathers objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held as loans and receivables. The impairment loss is also calculated following the same method used for these financial assets. These processes are described in Note 2(e).

Outstanding claims reserves are estimates of claims which have been incurred and reported to the Company and estimates of losses which have occurred, but not yet been reported to the Company. Provision made for claims incurred but not reported (IBNR) is based on the amount calculated and determined by an Appointed Actuary as at the balance sheet date. Any deficiency is immediately charged to the income statement.

In line with Section 37(1) (b) of the Insurance Act, an actuarial investigation is made on the claims liabilities and a provision for adverse deviation at a minimum 75% level of confidence is included in the loss reserves.

Unearned premium provision are calculated using the 1/365th method, except for direct marketing business which is calculated using the 1/24th method, on gross premiums written less premiums on reinsurance and deferred acquisition costs.

Commission and other acquisition costs that vary with and are related to securing new contracts and renew existing contracts are netted off against unearned premium provision. All other costs are recognized as expenses when incurred.

Commission income and commission expense are deferred and subsequently amortized over the life of the policies as the premiums are ceded or earned.

Unearned premium provision also includes premium deficiency provisions which are derived using actuarial methods on the Company’s loss statistics.



32 33

FY 2

009


(l) Income taxes (continued)

Deferred income tax is measured:

(i)

(ii)

(m) Provisions for other liabilities and charges

(n) Employee benefits


(i) Liability adequacy test

(j) Operating leases

(k) Income taxes

At balance sheet date, liability adequacy tests are performed to ensure the adequacy of the contract liabilities net of related deferred acquisition cost. In performing these tests, current best estimates of future contractual cashflows and claims handling and administration expenses are used. Any deficiency is immediately charged to the income statement. at the tax rates that are expected to apply when the related deferred income tax asset is realised or the

deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and

based on the tax consequence that will follow from the manner in which the Company expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income taxes are recognized as income or expense in the income statement, except to the extent that the tax arises from a transaction which is recognized directly in equity. Deferred tax on temporary differences arising from the revaluation gains and losses on available-for-sale financial assets is charged or credited directly to equity in the same period the temporary differences arise.

Provisions for other liabilities and charges are recognized when the Company has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.

(1) Defined contribution plans

(2) Employee leave entitlement

Leases of assets in which significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating lease. Payments made under operating leases (net of any incentives received from the lessors) are recognized in the income statement on a straight-line basis over the period of the lease.

Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.

A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized.

Defined contribution plans are post-employment benefit plans under which the Company pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. These contributions are recognized in the financial year to which they relate.

Employee entitlements to annual leave and long service leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date.



34 35

FY 2

009


(o) Currency translation

(p) Cash and cash equivalents

(1) Functional and presentation currency

(2) Transactions and balances

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Singapore Dollars.

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at balance sheet date are recognized in the income statement.

Changes in the fair value of monetary securities denominated in foreign currencies classified as available-for-sale are analysed into currency translation differences on the amortized cost of the securities, and other changes. Currency translation differences on the amortized cost are recognized in the income statement, and other changes are recognized in fair value reserve within equity.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined. Currency translation differences on non-monetary items, whereby the gain or loss are recognized in the income statement are reported as part of the fair value gain or loss in the income statement. Currency translation differences on non-monetary items whereby the gains or losses are recognized directly in equity, such as equity investments classified as available-for-sale financial assets are included in the fair value reserve.

For the purpose of presentation in the cash flow statement, cash and cash equivalents include cash on hand, cash at bank and fixed deposits with financial institutions which are subject to an insignificant risk of change in value.


(q) Government grants

(r) Share capital

(s) Dividend

Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

Government grant shall be recognized in other operating income in profit or loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.

Ordinary shares are classified as equity.

Dividends to the Company’s shareholders are recognized when the dividends are approved for payment.



36 37

FY 2

009

3. Net insurance premium revenue

4. Investment income

5. Other operating income

Short-term insurance contracts - premium receivables - change in unearned premium provision Premium revenue arising from insurance contracts issued

Short-term reinsurance contracts - premium payables - change in unearned premium provision Premium revenue ceded to reinsurers for insurance contracts issued

Net insurance premium revenue

135,983,140(7,770,978)

128,212,162

(98,201,773)7,557,697

(90,644,076)

37,568,086

123,805,774(4,268,601)

119,537,173

(83,246,632)4,342,151

(78,904,481)

40,632,692

Available-for-sale: - dividend income - interest incomeCash and cash equivalents interest income from banks

120,6562,590,845

225,1232,936,624

2008$

142,0812,530,385

67,2772,739,743

2009$

Government grant – Job CreditsRecovery of expenses from a related corporationOther miscellaneous income

–394,482

95,727490,209

2008$

552,772239,260

83,987876,019

2009$

2008$

2009$


6. Net insurance claims

7. Employee benefits

8. Other operating expenses

Insurance claims and loss adjustment expenses - gross claims paid - change in outstanding claims

Insurance claims and loss adjustment expenses recovered - paid claims recovered - change in outstanding claims

Net insurance claims

Wages and salaries - paid by the Company - share-based remuneration expenses (Note 17)Staff related expenses

Employer’s contribution to Central Provident Fund

Management feesIT related expensesRental on operating leaseCurrency exchange loss / (gain) - netImpairment / (Writeback) of insurance receivablesProperty, plant and equipment written offOther expenses

(29,588,960) 9,847,032

(19,741,928)

22,509,839(8,987,912)13,521,927

(6,220,001)

11,694,803168,498

1,767,72513,631,026

1,058,23014,689,256

2,524,4461,157,2991,244,208(385,519)

(14,459)1,329

1,178,0835,705,387

2008$

2008$

(22,377,218)(17,439,844)(39,817,062)

17,446,81314,689,23932,136,052

(7,681,010)

12,132,604235,836

1,080,21813,448,658

1,047,96814,496,626

3,230,074899,290

1,297,432474,310161,430

–1,745,4117,807,947

2009$

2009$

The following items have been included in other operating expenses during the year.


2008$

2009$

38 39

FY 2

009

9. Income tax

(a) Income tax expense

(b) Movements in current income tax liabilities

Tax expense attributable to profit is made up of:- current income tax- deferred income tax (Note 16)

Over / (Under) provision in prior financial years- current income tax- deferred income tax (Note 16)

At beginning of financial yearIncome tax paidIncome tax refundedCurrent financial year’s tax expense on profitAt end of financial year

Profit before income tax

Tax calculated at a tax rate of 17% (2008: 18%) Effects of:- Income taxed at concessionary rate of 10%- Expenses not deductible for tax purposes- Singapore statutory stepped income exemptionTax charge

2,527,265(9,708)

2,517,557

––

2,517,557

1,578,838(1,454,533)

–2,527,2652,651,570

14,099,185

2,537,853

(327,207)334,381(27,450)

2,517,557

2008$

2008$

2008$

1,557,645(51,834)

1,505,811

309,883(120,493)

1,695,201

2,651,570(2,465,965)

27,8271,867,5282,080,960

8,474,982

1,440,747

(46,317)137,306(25,925)

1,505,811

2009$

2009$

2009$

The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax due to the following:

2009 Cost Beginning of financial year Additions Disposals End of financial year

Accumulated depreciation Beginning of financial year Depreciation charge Disposals End of financial year

Net book value End of financial year

2008 Cost Beginning of financial year Additions Disposals End of financial year

Accumulated depreciation Beginning of financial year Depreciation charge Disposals End of financial year

Net book value End of financial year

3,019,990––

3,019,990

1,825,551574,624

–2,400,175

619,815

2,897,230122,760

–3,019,990

1,153,616671,935

–1,825,551

1,194,439

879,281–

(1,405)877,876

624,715116,221

(1,405)739,531

138,345

869,31824,082

(14,119)879,281

461,925175,581(12,791)624,715

254,566

1,329,155430,960(11,750)

1,748,365

659,986270,369(11,750)918,605

829,760

1,531,005164,570

(366,420)1,329,155

785,994228,017

(354,025)659,986

669,169

36,666––

36,666

36,666––

36,666

–

36,666––

36,666

36,666––

36,666

–

6,712,296430,960(13,155)

7,130,101

4,263,2721,161,181

(13,155)5,411,298

1,718,803

6,776,053316,782

(380,539)6,712,296

3,294,5641,335,524(366,816)

4,263,272

2,449,024

1,447,204––

1,447,204

1,116,354199,967

–1,316,321

130,883

1,441,8345,370

–1,447,204

856,363259,991

–1,116,354

330,850

Leaseholdimprovements

$

Officeequipment

$

Computerequipment

$

Motorvehicles

$

Total

$

Furnitureand fittings

$

10. Property, plant and equipment



40 41

FY 2

009

2009$

19,673,2211,724,174

21,397,395

2,080,000

53,242,8334,276,197

57,519,030

80,996,425

19,045,5121,761,560

20,807,072

1,916,000

58,620,2433,577,087

62,197,330

84,920,402

2008$

Listed securities: Government securities – SGD Government securities – USD

Equity shares in companies - SGD

Loan stocks in corporations - SGD Loan stocks in corporations - USD

11. Financial assets, available-for-sale

Singapore Dollar United States Dollar

3.70%5.35%

2008

3.33%5.55%

2009

The loan stocks and government securities have maturity dates from January 2010 to December 2049 with the following weighted average effective interest rates:

The exposure of investments to interest rate risks is disclosed in Note 22(a)(iii).

Receivables from insurance and reinsurance contracts: - related companies - third parties

Less provision for impairment of receivables - third parties

Other receivables: - Prepayments - Receivables from related companies - Accrued interest receivable - Rental and other deposits - Sundry receivables

Total insurance receivables and other receivables

2,081,26535,216,22837,297,493

(463,116)36,834,377

91,205257,442812,164585,346654,554

2,400,71139,235,088

2008$

3,842,41044,911,97448,754,384

(434,101)48,320,283

96,416215,623719,031625,270421,728

2,078,06850,398,351

2009$

The carrying amounts of the insurance receivables and other receivables approximate their fair value.

The receivables from the related companies are unsecured, interest-free and have no fixed terms of repayment.

12. Insurance receivables and other receivables



42 43

FY 2

009

Gross Short-term insurance contracts: - claims reported and loss adjustment expenses - claims incurred but not reported - claims provision for adverse deviation - reserves for unearned premium provision - no claims bonus provision

Long-term insurance contracts: - Provision for premiums refund

Total insurance liabilities, gross

Recoverable from reinsurers Short-term reinsurance contracts: - claims reported and loss adjustment expenses - claims incurred but not reported - claims provision for adverse deviation - reserves for unearned premium provision Total reinsurers share of insurance liabilities

Net Short-term insurance contracts: - claims reported and loss adjustment expenses - claims incurred but not reported - claims provision for adverse deviation - reserves for unearned premium provision - no claims bonus provision

Long-term insurance contracts: - Provision for premiums refund

Total insurance liabilities, net

45,608,28432,755,89611,213,68545,273,873

2,571,419137,423,157

12,066,132

149,489,289

39,604,91424,506,312

9,332,13023,144,14296,587,498

6,003,3708,249,5841,881,555

22,129,7312,571,419

40,835,659

12,066,132

52,901,791

2008$

56,436,27937,147,21313,434,21753,044,851

2,401,984162,464,544

14,403,772

176,868,316

48,694,73528,206,82911,231,03130,701,839

118,834,434

7,741,5448,940,3842,203,186

22,343,0122,401,984

43,630,110

14,403,772

58,033,882

2009$

13. Insurance liabilities and reinsurance assets 13. Insurance liabilities and reinsurance assets (continued)

Actuarial methods, assumptions and sensitivity analysis

(a) Methods

(b) Assumptions

The following assumptions have been made in determining the gross outstanding claim liabilities:

(c) Process used to determine assumptions

Discounted average weighted term to settlement

Ultimate claim number – current year

Four standard actuarial methods (Chain ladder on Incurred and Paid Claims, Bornhuetter-Ferguson and Average Incurred Cost Development) have been applied to each class of business to determine the undiscounted insurance liabilities. The selection of an appropriate method depends on the nature of the claim development and claim volatility. The Outstanding Liability is equal to the Case Estimates in situations where no further loss development is expected.

The insurance liabilities also include an appropriate allowance for allocated and unallocated future claim handling expenses. In addition, an administration expense reserve of 4.8% of gross premiums (or gross unearned premium reserve) and excess of loss ceded premiums have been included in the premium liability.

The discounted average weighted term to settlement is calculated separately by class of business based on historical payment patterns.

The ultimate claim number for the current accident year is estimated separately by class of business by projecting the number of claims reported to date based on historical reporting patterns.

2009

Discounted average weighted term to settlement 1.24 yearsUltimate claim number – current year 7,506 casesAverage claim size – current year $5,657Unallocated claim expense rate 3.7%Discount rate 0.8%



44 45

FY 2

009

13. Insurance liabilities and reinsurance assets (continued)

(c) Process used to determine assumptions (continued)

Average claim size – current year

Unallocated claim expense rate (or indirect claim expense rate)

Discount rate

Inflation rate

(d) Sensitivity analysis

The average claim size for the current accident year is estimated separately by class of business by projecting the ultimate claims cost based on historical claim development patterns and dividing by the estimated ultimate claim number.

The unallocated claim expense rate is calculated separately by class of business based on historical unallocated claim expenses as a percentage of historical payments.

The inflation rate is implicit in the valuation models used so no explicit inflation rate is used in the valuation. Movement in average claim size provides a de facto estimate of the inflation rate implied in the valuation.

The Company conducts sensitivity analysis to quantify the exposure to risk of changes in the key underlying variables. The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in any key variable will impact the performance and equity of the Company. The table below shows how a change in each assumption will affect the outstanding claims liabilities (net) and on income statement. As no explicit inflation rate is used in the valuation no sensitivity analysis is able to be carried out for a change in the inflation rate.

The discount rate is derived from market yields of government securities at the balance sheet date.

Variables

Discounted average weighted term to settlement

Ultimate claim number - current year

Average claim size - current year

Unallocated claim expense rate

Discount rate

+0.5 years-0.5 years

+10% -10% +10% -10% +1% -1% +1% -1%

Change invariable

(74,853)62,575

1,363,701(1,363,701)

1,363,701(1,363,701)

1,021,428(1,021,428)

(241,668)234,568

Increase/(decrease) in liability

$

74,853(62,575)

(1,363,701)1,363,701

(1,363,701)1,363,701

(1,021,428)1,021,428

241,668(234,568)

Impact onprofit before

tax$


(e) Process for determining risk margin

(f) Claims development tables (for all lines)

Gross

The overall risk margin was determined after allowing for uncertainty of the outstanding claim estimate. Uncertainty was analysed for each class of business taking into account potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models and the general insurance environment.

The estimate of uncertainty is greater for long tailed classes when compared to short tail classes due to the longer time until settlement of outstanding claims.

The assumptions regarding uncertainty for each class were applied to the gross and net central estimates, and the results were aggregated to arrive at an overall provision which is intended to have a 75% probability of sufficiency. The risk margin applied in 2009 is 14.4%.

The following tables show the development of gross and net undiscounted outstanding claims relative to the ultimate expected claims for the twelve most recent accident years:

188,231,859167,758,952155,904,821173,885,807159,853,332163,181,735

163,181,735

(134,063,168)29,118,567

(74,075)29,044,492

Estimate of ultimate claims costs:- at end of accident year- one year later- two years later- three years later- four years later- five years later

Current estimate of cumulative claimsCumulative payments to dateOutstanding claims – undiscountedDiscountOutstanding claimsRisk marginClaims handling costsTotal gross outstanding claims

26,379,77418,400,67916,545,49716,366,29615,709,789

15,709,789

(13,628,340)2,081,449

(14,955)2,066,494

30,045,68026,424,19024,087,59422,413,438

22,413,438

(17,626,243)4,787,195

(40,205)4,746,990

45,913,50137,024,16237,091,297

37,091,297

(31,019,978)6,071,319

(66,174)6,005,145

32,837,30426,893,995

26,893,995

(12,215,610)14,678,385

(166,581)14,511,804

42,464,715

42,464,715

(8,134,796)34,329,919

(478,308)33,851,611

307,754,969

(216,688,135)91,066,834

(840,298)90,226,53613,434,217

3,356,956107,017,709

Accident Year1997 to 2004

$2005

$2007

$2008

$2009

$Total

$2006

$



46 47

FY 2

009


(f) Claims development tables (for all lines) (continued)

Net

(g) Movements in insurance liabilities and reinsurance assets

(i) Claims and loss adjustment expenses

(ii) Reserves for unearned premium provision

45,273,8737,770,978

53,044,851

At beginning of yearChanges in the yearAt end of year

(23,144,142)(7,557,697)

(30,701,839)

22,129,731213,281

22,343,012

41,005,2724,268,601

45,273,873

(18,801,991)(4,342,151)

(23,144,142)

22,203,281(73,550)

22,129,731

Year ended 31December Gross

$Reinsurance

$

2009 2008Gross

$Reinsurance

$Net$

Net$


(g) Movements in insurance liabilities and reinsurance assets (continued)

(iii) Refundable bonus provision

(iv) Provision for premiums refund

At beginning of year Provision for the year Refunds during the year At end of year

2,178,7155,134,916

(4,742,212)2,571,419

2008$

2,571,4194,813,170

(4,982,605)2,401,984

2009$

At beginning of year Provision for the year Refunds during the year At end of year

10,763,1001,727,978(424,946)

12,066,132

2008$

12,066,1322,856,534(518,894)

14,403,772

2009$



89,577,865(22,377,218)

39,817,062107,017,709

56,436,27950,581,430

107,017,709

At beginning of yearCash paid for claims settled in the yearChanges in the yearAt end of year

Notified claimsIncurred but not reported & PADAt end of year

(73,443,356)17,446,813

(32,136,052)(88,132,595)

(48,694,735)(39,437,860)(88,132,595)

16,134,509(4,930,405)

7,681,01018,885,114

7,741,54411,143,57018,885,114

99,424,897(29,588,960)

19,741,92889,577,865

45,608,28443,969,58189,577,865

(82,431,268)22,509,839

(13,521,927)(73,443,356)

(39,604,914)(33,838,442)(73,443,356)

16,993,629(7,079,121)

6,220,00116,134,509

6,003,37010,131,13916,134,509

Year ended 31December Gross

$Reinsurance

$

2009 2008Gross

$Reinsurance

$Net$

Net$

39,470,79142,497,85341,641,65539,341,11637,093,30437,157,128

37,157,128

(36,616,017)541,111

(1,439)539,672

Estimate of ultimate claims costs:- at end of accident year- one year later- two years later- three years later- four years later- five years later

Current estimate of cumulative claimsCumulative payments to dateOutstanding claims – undiscountedDiscountOutstanding claimsRisk marginClaims handling costsTotal gross outstanding claims

6,767,4705,486,6595,174,1584,993,7674,821,876

4,821,876

(4,513,524)308,352

(1,181)307,171

8,796,4998,571,0178,155,8077,674,113

7,674,113

(6,068,110)1,606,003

(12,664)1,593,339

8,684,4997,511,4807,024,983

7,024,983

(5,419,543)1,605,440

(10,986)1,594,454

8,140,9966,559,241

6,559,241

(4,239,787)2,319,454

(21,671)2,297,783

9,725,452

9,725,452

(2,657,727)7,067,725

(75,173)6,992,552

72,962,793

(59,514,708)13,448,085

(123,114)13,324,971

2,203,1863,356,956

18,885,113

Accident Year1997 to 2004

$2005

$2007

$2008

$2009

$Total

$2006

$

48 49

FY 2

009

14. Cash and cash equivalents

15. Insurance payables and other payables

Cash on hand Cash at bank Fixed deposits with financial institutions

80012,231,972

7,716,65219,949,424

2008$

8004,292,552

14,232,88018,526,232

2009$

Singapore Dollar United States Dollar

0.51%–

2008$

0.1%0.2%

2009$

The carrying amounts of cash and cash equivalents approximate their fair value.

The Company has fixed deposits with financial institutions with an average maturity of 1 month (2008: 1.5 months) from the end of financial year with the following weighted average effective interest rates:

The exposure of cash and cash equivalents to interest rate risks is disclosed in Note 22(a)(iii).

The carrying amounts of insurance payables and other payables approximate their fair value.

Amount due to insureds, agents, brokers and reinsurers: - related companies - third parties

Other payables: - payables to related companies - advanced premium received - share-based remuneration payable (Note 17) - sundry creditors - GST payable - accrued operating expenses

Total insurance payables and other payables

6,015,72411,737,98417,753,708

24,7264,073,625

173,1951,565,290

874,9101,744,5198,456,265

26,209,973

2008$

24,696,2765,625,147

30,321,423

330,1081,679,150

424,362894,427

1,361,4472,357,7567,047,250

37,368,673

2009$

16. Deferred income taxes

Beginning of financial year Tax credit to:- Income statement (Note 9)- Fair value reserve (Note 18)End of financial year

425,000

(9,708)17,708

433,000

2008$

433,000

(172,327)(41,673)219,000

2009$

At 1 January 2009Effects on change in tax rateCharged/(credited) to income statementCharged to equity (Note 18)At 31 December 2009

At 1 January 2008Charged/(credited) to income statementCharged to equity (Note 18)At 31 December 2008

433,000(15,890)

(156,437)(41,673)219,000

425,000(9,708)17,708

433,000

Total$

247,388(5,579)

(179,064)(41,673)

21,072

230,368(688)

17,708247,388

185,612(10,311)

22,627–

197,928

194,632(9,020)

–185,612

Others$

Acceleratedtax

depreciation$

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, are shown on the balance sheet.

The movement in the deferred income tax account is as follows:

The movement in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the year is as follows:

Deferred income tax liabilities:



50 51

FY 2

009

17. Share capital

All issued ordinary shares are fully paid.

(a) Share based remuneration

2009Beginning and end of financial year

2008Beginning and end of financial year

35,000,000

35,000,000

35,000,000

35,000,000

No. of sharesIssued

share capital$

Amountshare capital

$

ACE Limited has a restricted share grant plan, a restricted share option plan and an employee share participation plan. The total share based remuneration expenses charged to income statement was $235,836 (2008: $168,498).

Restricted share grant plan

Under ACE Limited’s 2004 Long Term Incentive Plan, 2,615 restricted common shares were awarded during the year ended 31 December 2009 and 2,010 common shares during the year ended 31 December 2008 to eligible employees of the Company. These shares vest at various dates over a 4-year period from the grant dates and any unvested shares are cancelled on termination of the employment of the eligible employees. This plan is a group scheme with expenses incurred under the scheme charged out by ACE Limited to the Company on an annual basis. The annual expense is based on an amortized calculation that is reflective of the current year’s expense portion of all restricted share grants issued in the current and prior years, and is consistent with the treatment required by FRS102. There is no liability to the Company for the unamortized portion of the restrictive stock grants issued. The amortized calculation incorporates the fair market value of ACE Limited’s common shares in determining the expenseamount. Expected future dividend payments in relation to the restrictive stock grants issued are made directly by ACE Limited to the eligible employees. The total value of the shares granted during the year was $196,056 (2008: $134,850).

17. Share capital (continued)

(a) Share based remuneration

Restricted share option plan

Under ACE Limited’s 2004 Long Term Incentive Plan, restrictive share options were granted to eligible employees of the Company. The exercisable price of these options is the fair market value of ACE Limited’s common shares at issue date. These options vest at various dates over a 3-year period from the grant date and any unvested options are cancelled on termination of employment. This plan is a group scheme with expenses incurred under the scheme charged out by ACE Limited to the Company on an annual basis. The annual expense is based on an amortized calculation that is reflective of the current year’s expense portion of all unrestricted share options issued in the current and prior years, and is consistent with the treatment required by FRS102. There is no liability to the Company for the unamortized portion of the restrictive stock options issued.

Any option not exercised or cancelled pursuant to the terms of plan will be forfeited by the tenth anniversary from the date of grant. The total value of the options granted during the year was $39,779 (2008: $33,648).

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

At 1 JanuaryGrantedForfeitedExercisedLapsedAt 31 December

53.47–

61.75

5,8102,615

–(3,640)

–4,785

Average exercise price in SGD per

shareOptions

2009

87.2379.01

––

4,7281,685(603)

––

5,810

Average exercise price in SGD per

shareOptions

2008

In 2009, 2,615 options (2008: 1,685 options) were granted at $53.47 (2008: $87.23) and 1,316 options (2008: 2,136) were exercisable. 3,640 common shares were issued during the year at $53.47 each and the related weighted average share price at the time of exercise was $61.75 per share. Nil options were exercised in 2008.

Share options outstanding at the end of the year have the following expiry date and exercise prices:

201420152016201720182019

60.4861.7578.3077.9483.6953.47

Expiry YearExercise price SGD per share

60150380615965

2,6154,785

600910

1,2401,3751,685

–5,810

2009 2008Share options



52 53

FY 2

009

17. Share capital (continued)

(a) Share based remuneration (continued)

(b) Movements in share-based remuneration reserves

The weighted average fair value of options granted during the period determined using the Black-Scholes valuation model was $17.96 (2008: $25.41) per option. The significant inputs into the model were share price of $53.47 (2008: $87.23), at the grant date, the exercise price shown above, volatility of 45.5% (2008: 31.67%), dividend yield of 2.80% (2008: 1.79%), an expected option life of 5 years and an annual risk-free interest rate of 2.80% (2008: 2.98%). The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over the last three years.

Employee share purchase plan

The Company collects monies from local eligible employees and acquires common shares in ACE Limited on behalf of the employees on a bi-annual basis. The price paid by the eligible employees is set at a discount of 15% to the fair value of the ordinary shares at the date of acquisition; this discount is incurred at the group level by ACE Limited and not charged to the Company. The total amount of discount applied to the employee share plan purchases in the current year was $17,154 (2008: $21,294).

Beginning of financial yearIncrease in equity due to value of employee services (Note 7)Transfer to share-based remuneration payables (Note 15)End of financial year

–168,498

(168,498)–

–235,836

(235,836)–

2009$

2008$

18. Fair value reserve

19. Dividends

20. Commitments

Operating lease commitments where company is a lessee

The Company leases various office spaces under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

The future aggregate minimum lease payments under non-cancellable operating leases contracted for at the reporting date but not recognized as liabilities, are as follows:

Beginning of financial yearFair value (loss) / gainsDeferred tax on fair value changesTransfer to income statement on disposalEnd of financial year

The fair value reserve is non-distributable.

278,169127,356(17,708)(90,511)297,306

297,306(618,352)

41,67337,590

(241,783)

2009$

2008$

Not later than one yearLater than one year but not later than five years

1,258,072319,136

1,577,208

2,048,0722,881,560 4,929,632

2009$

2008$

Ordinary dividends paid

Interim exempt (one-tier) dividend for 2009 of 47.60 cents (2008: 34.81 cents) per share paid 12,181,99216,661,000

2009$

2008$


Notes To TheFinancial Statements FY

200

9

54 55

21. Immediate and ultimate holding corporations

22. Financial risk management

The Company is a wholly-owned subsidiary of ACE-INA Overseas Insurance Company Limited, incorporated in Bermuda.

The ultimate holding corporation is ACE Limited, incorporated in Switzerland.

The Company’s activities expose it to a variety of financial risks. The components of the financial risk are market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk.

These financial risks arise from the investment and underwriting activities of the business. Investment activity of the business is exposed to the general and specific market movements. The underwriting activity of the business generates credit and liquidity risk through insurance and reinsurance receivables and payables.

The Company’s overall risk management focuses to mitigate potential adverse effects of these risks on the financial performance of the Company. The notes below explain the management of financial risks.

Underwriting activity governance

The underwriting activity is governed by the Company’s Risk Management Framework. In the framework, the Board of Directors has overall risk management responsibility of the Company and approves its risk management strategy ensuring key risks are identified and managed appropriately. The framework includes the following:

i) Continuous identification of risks and the management of internal controls;ii) Training and guidance of all relevant employees in the management of risk;iii) Management reporting, monitoring and action to address significant issues adversely affecting the business;iv) Implementation of loss prevention and control measures to reduce loss, injury, or damage;v) Maintenance of the highest practicable protection standards against losses to assets and business interruption;vi) Efficient management of information, records and loss recording systems;vii) Implementation of proactive strategies to limit the liability of the Company and protect its reputation;viii) Crisis management and recovery by planning for significant risks;ix) Cost benefit management of insurance and other risk control programs; andx) Clearly defined managerial responsibilities and controls.

22. Financial risk management (continued)

Investment activity governance

(a) Market risk

(i) Currency risk

The principal investment objective of the Company is to ensure that funds will be available to meet the Company’s primary insurance and reinsurance obligations. Within this broad liquidity constraint, the investment portfolio’s structure seeks tomaximise return subject to specifically-approved guidelines of overall asset classes, credit quality, liquidity, and volatility of expected returns. As such, the Company’s investment portfolio is invested primarily in investment-graded fixed-incomesecurities measured by the major rating agencies.

The management of the Company’s investment portfolio is the responsibility of the Investment Committee which is accountable to ACE Asset Management Inc., incorporated in United States of America, for monitoring, evaluating, development and coordination of the Company’s investment related activities.

The Investment Committee is chaired by the Asia Pacific Regional Chief Financial Officer and is comprised of at least three members. Under the guidance of the ACE Asset Management Inc., the Investment Committee shall:

(i) establish recommended investment guidelines that are appropriate to the prescribed asset allocation targets;(ii) monitor performance of investment returns, reporting and internal controls for all investment activities, foreign exchange, interest rate, liquidity and credit risks and to ensure appropriate systems in place for identifying and monitoring such risks; and(iii) recommend the appointment of fund managers.

The Company’s currency risk arises mainly with respect to insurance business and investment activities transactions denominated in United States Dollar. United State Dollar liabilities are backed by assets in the underlying currency. Exposures to foreign currency risks are monitored on an on-going basis.

The Company’s policy seeks to ensure an approximate currency match of assets and liabilities is maintained, with the bulk of surplus funds matched by Singapore Dollar and more modest surpluses held in United States Dollar.

The investment management function is outsourced to Western Asset Management Company Pte Limited.



56 57

FY 2

009


(a) Market risk (continued)

(i) Currency risk (continued)

The Company’s currency exposure based on the information provided to key management is as follows:

Financial assetsAvailable-for-sale financial assetsInsurance receivables and other receivablesReinsurance assetsCash and cash equivalents

Financial liabilitiesInsurance liabilitiesInsurance payables and otherpayables

Net financial assets

74,996,05435,924,790

63,752,93816,307,334

190,980,116

120,647,39229,904,470

150,551,862

79,581,75527,399,933

55,052,46314,615,620

176,649,771

101,950,87422,172,725

124,123,599

6,000,37113,274,231

54,288,4172,218,898

75,781,917

53,988,5906,484,122

60,472,712

5,338,64710,752,542

40,924,6575,333,804

62,234,650

46,366,9733,890,643

50,257,616

SGD$

SGD$

USD$

USD$

2009

2008

–1,199,330

793,079–

1,992,409

2,232,334979,881

3,212,215

–1,082,613

610,378–

1,692,991

1,171,442146,605

1,318,047

80,996,42550,398,351

118,834,43418,526,232

268,755,442

176,868,31637,368,473

214,236,789

54,518,653

84,920,40239,235,088

96,587,49819,949,424

240,692,412

149,489,28926,209,973

175,699,262

64,993,150

Others$

Others$

Total$

Total$



(i) Currency risk (continued)

ii) Equity price risk

If USD changes against the SGD by 5% (2008 : 6%) with all other variables including tax rate being held constant, the effects arising from the currency exposure will be as follows:

The Company is exposed to equity securities price risk from its investments, which are classified on the balance sheet as available-for-sale. The market values of these investments are affected by, amongst others, changes in market prices as a result of changes in the global economic conditions affecting the country where the investments are quoted.

The fluctuations in market prices due to the above factors are unforeseen and the Company monitors and responds to these changes as and when appropriate and necessary. The Company’s investment portfolio consists of one equity financial instrument amounting $2,080,000 (2008: $1,916,000 (Note 11).

If the prices for equity that is managed by external fund manager changed by 10% (2008 : 9%) with all other variables including tax rate being held constant, the effects on profit after tax and equity arising from the change in valuation of securities will be:

––

Increase/(Decrease)Listed in Singapore- increased by- decreased by

172,640(172,640)

––

141,401(141,401)

Increase / (Decrease)

2009 2008

381,092(381,092)

Increase/(Decrease)USD against SGD- strengthened- weakened

261,225(261,225)

Profit aftertax

$

Fair valuereserve

$

381,092(381,092)

1,715,578(1,715,578)

278,414(278,414)

1,715,578(1,715,578)

Retainedprofits

$

Profit aftertax

$

Increase / (Decrease)2009 2008

Fair valuereserve

$

Retainedprofits

$

Equity Equity

Profit aftertax

$

Profit aftertax

$

Equity(Fair valuereserve)

$

Equity(Fair valuereserve)

$



Financial assetsAvailable-for-sale financial assetsInsurance receivables and other receivablesReinsurance assetsCash and cash equivalents

Financial liabilitiesInsurance liabilitiesInsurance payables and other payables

Net financial assets

58 59

FY 2

009



(iii) Cashflow and fair value interest rate risks

(b) Credit risk

Cash and bank deposits- increased by (+19 bps) (2008: +10 bps)

- decreased by (-19 bps) (2008: -10 bps)

Available-for-sale financial assets- increased by (+50 bps) (2008: +50 bps)

- decreased by (-50 bps) (2008: -50 bps)

Increase / (Decrease)2009 2008

22,553

(22,553)

(996,561)

1,032,559

–

–

(996,561)

1,032,559

Profit aftertax

$

Fair valuereserve

$

22,553

(22,553)

–

–

6,344

(6,344)

(1,119,977)

1,294,303

–

–

(1,119,977)

1,294,303

6,344

(6,344)

–

–

Retainedprofits

$

Profit aftertax

$

Fair valuereserve

$

Retainedprofits

$

Equity Equity

Cashflow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Company manages its interest rate risks by placing such balances on varying maturities and interest rate terms.

The income and operating cash flows are substantially independent of the changes in market interest rates as the Company’s investment policy is to only invest in fixed income securities.

A change of 19 basis points (2008: 10 basis points) for cash and bank deposits and a change of 50 basis points (2008: 50 basis points) in interest yield across all portfolio consecutively would increase/(decrease) the market value of the investment and equity by the amounts shown as shown below. This analysis assumes that all other variables remain constant.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The major classes of financial assets of the Company are insurance receivables, investments in bonds, cash and bank deposits.


(b) Credit risk (continued) Credit risk – investment

Credit risk – insurance operations

The Company is exposed to investment credit and price risk as a result of its holdings in fixed income and equity investments. The investment guidelines seek to limit the credit risk of each of the portfolios through specifying eligible/ineligible investments; setting maximum counterparty exposures and minimum weighted credit quality and individual issuer credit quality.

The Company is exposed to credit risk as a result of its regular insurance and reinsurance activity. The areas of key exposure are:

(i) Reinsurers’ share of provision for claims outstanding; (ii) Debtors arising from reinsurers in respect of claims already paid; (iii) Amount due from direct insurance and reinsurance policyholders; and (iv) Amount due from direct insurance and reinsurance intermediaries.

Ceded reinsurance is used to manage and mitigate inwards direct insurance and reinsurance risk. Ceded reinsurance does not discharge the Company’s liability as primary insurer. If a ceded reinsurer fails to pay a claim, the Company remains liable for the payment to the policyholder.

With regard to direct insurance and reinsurance receivables, the Company operates a credit control committee to review all outstanding receivables, a process for monitoring credit risk from insurance operations.

The Company manages its credit risk through brokers and reinsurers that have good credit history. The Head Office approves such reinsurers based on a credit worthiness with a minimum A rating by the rating agencies.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet.



60 61

FY 2

009


(b) Credit risk (continued)

Credit risk – insurance operations (continued)

(i) Financial assets that are neither past due nor impaired

The credit risk for each class of financial instruments based on information provided to key management is as follows:

* Based on public ratings assigned by external rating agencies including S&P, Moody’s and A.M. Best.** Unrated includes direct customers mainly for Accidental & Health business.

Bank deposits and investments in bonds are neither past due nor impaired. Bank deposits are placed with reputable banks and financial institutions, and investments are in bonds and government-related securities. The bond portfolio and funds placed with external manager are primarily invested in investment grade securities. Insurance receivables that are neither past due nor impaired are substantially companies with good collection track record with the Company.

There is no other class of financial assets that is past due and/or impaired except for insurance receivables.

As at 31 December 2009Insurance receivablesand other receivablesAvailable-for sale financial assetsCash and cash equivalents

As at 31 December 2008Insurance receivablesand other receivablesAvailable-for sale financial assetsCash and cash equivalents

Rating*(CCC to D)

$

8,879,247

71,212,39718,525,43298,617,076

7,820,169

74,013,10719,948,624

101,780,900

2,290,342

9,644,908–

11,935,250

657,458

10,872,563–

11,530,021

39,228,762

–800

39,229,562

30,740,123

–800

30,740,923

50,398,351

80,996,42518,526,232

149,921,008

39,235,088

84,920,40219,949,424

144,104,914

–

139,120–

139,120

17,338

34,732–

52,070

Unrated**

$

Rating*(AAA to A)

$

Rating*(BBB to B)

$

Total

$


(b) Credit risk (continued) (i) Financial assets that are neither past due nor impaired (continued)

The age analysis of insurance receivables is as follows:

The basis of determining impairment is set out in the accounting policy Note 2(e)(5)(i).

(c) Liquidity risk

Neither past due nor impairedPast due but not impairedLess than 3 monthsAbove 3 months but not exceeding 9 monthsAbove 9 months

Gross amountLess: Allowance for impairment

Beginning of financial yearAllowance madeAllowance utilizedEnd of financial year

31,090,922

2,768,5601,673,7071,764,304

37,297,493

463,116(463,116)

–

477,574–

(14,458)463,116

36,653,311

7,614,3852,509,3351,977,353

48,754,384

434,101(434,101)

–

463,116161,430

(190,445)434,101

2009$

2009$

2008$

2008$

The carrying amount of insurance receivables individually determined to be impaired and the movement in the related allowance for impairment is as follows:

Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. To manage liquidity risk, the Company monitors and maintains a level of cash and cash equivalents to finance the Company’s operations and mitigate the effects of fluctuation in cash flows. The Company maintains its investment in fixed and variable income instruments which are easily convertible to cash whenever needed.



62 63

FY 2

009


(c) Liquidity risk (continued)

(d) Capital risk

The Company’s objectives when managing capital are:

As at 31 December 2009

Insurance liabilitiesInsurance payables and other payables

As at 31 December 2008

Insurance liabilitiesInsurance payables and other payables

3,317,055–

3,317,055

2,690,372–

2,690,372

78,027,714–

78,027,714

69,540,199–

69,540,199

97,451,32937,368,673

134,820,002

79,224,55326,209,973

105,434,526

Between 1 and 5years

$

Less than 1 year

$

More than 5 years

$

The table below analyses the maturity profile of the Company’s financial liabilities based on contractual undiscounted cash flows.

Comply with the insurance capital requirements as set out in the Insurance Act (Chapter 142) Insurance (Valuation and Capital) Regulations. In this respect the Company manages its capital on a basis of 120% of its minimum regulatory capital position. Management considers the current capital adequacy ratio of 252% (2008: 469%) sufficient to optimise shareholders’ return and to support the capital required to write each of its businesses in the countries where the Company operates;

Safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

Provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk.

In addition to other applicable regulatory requirements, insurers are required to maintain actuarial reserves under the Insurance Act (Chapter 142) to protect against the impact of large claims and catastrophes. The amount of the actuarial reserve is disclosed in note 13.

•

•

•


(e) Fair value measurements

(f) Insurance risk

Financial assets,available-for-sale 80,966,425–77,702,9593,293,466

Level 3$

Level 2$

Level 1$

Total$

Effective 1 January 2009, the Company adopted the amendment to FRS 107 which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

The risk under any one insurance contract is the possibility that insured event occurs and the uncertainty of the amount of the resulting claims. By the very nature of an insurance contract, this risk is random and therefore unpredictable.

The Company’s operations are diversified by line of business and the geographic spread of risk. A global approach to risk management allows the Company to underwrite and accept large insurance accounts.

Clearly defined underwriting authorities, standards and guidelines are in place in the Company. Experienced underwriting teams maintain underwriting discipline through the use of pricing models, sophisticated catastrophe and risk management methodologies, and strict risk selection criteria. Qualified actuaries from the region work closely with the underwriting teams to provide additional expertise in the underwriting process. Centrally-coordinated reinsurance management facilitates appropriate risk transfer and efficient cost-effective use of external reinsurance markets. Reinsurers utilised by the Company must meet certain financial experience requirements and are put through a stringent financial review process in order to be pre-approved by the Head Office’s Reinsurance Security Committee, comprising senior management personnel. As a result of these controls, reinsurance is placed with a select group of only the most financially secured and experienced companies in the reinsurance industry. Consistent approach to reserving practices and the settlement of claims are also ensured. In addition to these internal controls, the Company’s operating units and functional areas are subject to review by the corporate audit team that regularly carries out operational audits.

The following table presents the assets measured at fair value at 31 December 2009.

quoted price in active markets for identical assets or liabilities (Level 1);

inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and

inputs for the asset or liability that are not based on observable market data (Level 3).

•

•

•



64 65

FY 2

009


(f) Insurance risk (continued)

The concentration of insurance risk before and after reinsurance by territory in relation to the major line of business is summarized below, with reference to the carrying amount of the insurance liabilities (gross and net of reinsurance):

GrossNet

GrossNet

GrossNet

GrossNet

GrossNet

Singapore

Middle East

Other AsianCountries

Europe &USA

Total

35,512,2123,449,605

66,96526,801

1,384,323589,697

350,862134,467

37,314,3624,200,570

18,748,0842,013,247

86,36746,559

2,138,0241,098,915

640,161345,102

21,612,6363,503,823

5,762,0032,065,099

––

4,2341,910

4626

5,766,2832,067,035

2,268,713136,399

––

830,809737,125

122,598169,677

3,222,1201,043,201

13,665,5353,236,456

13–

7,896,4482,037,182

100,46846,242

21,662,4645,319,880

GrossNet

GrossNet

GrossNet

GrossNet

GrossNet

Singapore

Middle East

Other AsianCountries

Europe &USA

Total

35,798,5284,039,465

26,1889,014

1,716,392555,780

391,022134,597

37,932,1304,738,856

24,526,7393,079,962

75,16126,220

2,197,023997,913

497,323173,493

27,296,2464,277,588

4,759,6972,126,751

––

810512

4428

4,760,5512,127,291

2,550,868751,805

––

1,626,748922,892

3,982,6301,579,527

8,160,2463,254,224

14,989,4022,517,376

175,06825,333

13,508,3491,921,401

195,71523,043

28,868,5344,487,153

82,625,23412,515,359

276,41760,567

19,049,3224,398,498

5,066,7341,910,688

107,017,70718,885,112

75,956,54710,900,806

153,34573,360

12,253,8384,464,829

1,214,135695,514

89,577,86516,134,509

2009Territory

2008Territory

Financiallines

$

Financiallines

$

Accidentand health

$

Accidentand health

$

Fire

$

Fire

$

Others

$

Others

$

Total

$

Total

$

Generalliabilities

$

Generalliabilities

$

23. Related party transactions

The following transactions took place between the Company and related parties during the financial year:

(a) Sales and purchases of services

Outstanding balances at 31 December 2009, arising from sales/purchases of services, are set out in Notes 12 and 15, respectively.

(b) Key management personnel compensation

Business from related companiesPremium incomeCommission expenseClaims paid

Business to related companiesPremium cededCommission receivedClaims recovered

General expenses billed to regional office

General expenses allocated by regional office

Information processing expenses billed by a related company

Service fees billed by related companiesService fees billed to related companies

4,855,901(569,769)(258,902)

(71,538,754)17,389,64820,148,801

22,000

(2,029,965)

(650,264)

(506,592)56,257

6,690,960(640,705)(632,526)

(79,847,447)22,104,78114,939,983

1,324,974

(4,568,451)

(839,879)

(521,079)54,515

2009$

2008$

The key management personnel compensation includes salary, bonus and other emoluments (including benefits-in-kind) computed based on the cost incurred by the Company and when the Company did not incur any costs, the value of the benefit.



66

FY 2

009

23. Related party transactions (continued)

(b) Key management personnel compensation (continued)

Key management personnel compensation is analysed as follows:

24. Authorization of financial statements

Salaries and other short-term employee benefitsRestricted stock grants and share options expenses

2,341,189168,498

2,509,687

2,149,690243,935

2,393,625

2009$

2008$

The compensation to directors of the Company included in the above amounted to $716,878 (2008: $747,207).

These financial statements were authorized for issue in accordance with a resolution of the directors on 23 April 2010.


67

ACE Insurance Limited600 North Bridge Road#04-02 Parkview SquareSingapore 188778www.aceinsurance.com.sgCo.Reg.Number: 199702449H

Customer Service HotlineTel: (65) 6299 0988Fax: (65) 6298 1055Email: [email protected] hours: Mon to Fri, 9am to 5pm

ACE INSURANCE LIMITED 09report annual - Chubb · 2018-08-19 · ACE Singapore has also been awarded...

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Transcript of ACE INSURANCE LIMITED 09report annual - Chubb · 2018-08-19 · ACE Singapore has also been awarded...