Audited Financial Statements - Tokio Marine...shareholder, Tokio Marine Holdings, Inc. (“TMHD”)...

Audited Financial StatementsFor the Financial Year ended 31 December 2014

Tokio Marine Life Insurance Singapore Ltd.(Incorporated in Singapore. Registration Number: 194800055D)

And Its Subsidiary

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD (Incorporated in Singapore) AND ITS SUBSIDIARY

ANNUAL REPORT For the financial year ended 31 December 2014

Contents

Page Directors’ Report 1 Corporate Governance 3 Statement by Directors 6 Independent Auditor’s Report 7 Statement of Comprehensive Income 8 Balance Sheet 9 Consolidated Statement of Changes in Equity 10 Statement of Changes in Equity - Company 11 Consolidated Statement of Cash Flows 12 Notes to the Financial Statements 14

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY DIRECTORS’ REPORT For the financial year ended 31 December 2014

1

The directors present their report to the members together with the audited financial statements of the Company and of the Group for the financial year ended 31 December 2014. Directors The directors of the Company in office at the date of this report are as follows: Ong Sim Ho Lee King Chi Arthur Tay Choon Peng Lance Kichiichiro Yamamoto Tan Cheng Han (appointed on 26 June 2014) 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 or 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 share capital of the Company or its related corporations, except as follows:

Holdings registered in name of director

At

31.12.2014 At

1.1.2014 Company (No. of ordinary stock units) Lee King Chi Arthur (as nominee of Asia General Holdings Ltd) 1 1 Immediate Holding Company - Asia General Holdings Limited (No. of ordinary shares) Lee King Chi Arthur (as nominee of Tokio Marine & Nichido Fire Insurance Co. Ltd) 1 1

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY DIRECTORS’ REPORT For the financial year ended 31 December 2014

2

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 as disclosed in the accompanying financial statements and in this report, and except that certain directors received remuneration from the holding company and related corporations in their capacities as directors and/or executives of those related corporations. Share options There were no options granted during the financial year to subscribe for unissued ordinary stock units/shares of the Company or its subsidiary. No stock units/shares have been issued during the financial year by virtue of the exercise of options to take up unissued ordinary stock units/shares in the Company or its subsidiary. There were no unissued ordinary stock units/shares of the Company or its subsidiary under option at the end of the financial year. Independent auditor The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment. On behalf of the directors Ong Sim Ho Director

Tay Choon Peng Lance Director

18 March 2015

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY CORPORATE GOVERNANCE For the financial year ended 31 December 2014

3

Introduction Tokio Marine Life Insurance Singapore Ltd. (“the Company”) believes in having high standards of corporate governance, and is committed to making sure that effective self-regulatory corporate practices exist to protect the interests of its shareholders and maximise long term shareholder value. So long as it is not in conflict with the regulations and laws of Singapore, the Company’s Board of Directors shall abide and/or give due consideration to the requests and requirements of the Company’s ultimate majority shareholder, Tokio Marine Holdings, Inc. (“TMHD”) as part of the Tokio Marine Group’s governance and oversight. Management Organisation The Board of Directors

The Board of Directors is responsible for decisions on important matters relating to the execution of the Company’s business and establishing an effective internal control system. The Board of Directors are assisted by the board-level committees and management level committees in the implementation of the Corporate Governance Policies and internal controls in accordance to Tokio Marine Group’s requirement. Board-level Committees

a. Investment Committee

The Investment Committee (“IC”) administers the investment policies of the Company on behalf of the Board of Directors. The Investment Committee is responsible for managing the Company’s investment activities, including formulation of the Company’s investment strategy, principles and procedures for the investment function.

b. Audit Committee

The Audit Committee (“AC”) assists the Board of Directors in fulfilling its oversight responsibilities for the Company’s internal control processes, financial reporting processes, the internal and external audit processes and the processes for monitoring compliance with laws and regulations and the code of conduct. The AC communicates and coordinates with other Board-level committees and maintains strong, positive working relationships with the management, both the external and internal auditors and other committee advisers.


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Board-level Committees (continued) c. Nomination & Remuneration Committee

The Nomination & Remuneration Committee (”NRC”) serve as a advisory body to the Board of Directors and is responsible for appointment and nomination of directors, assisting in performance evaluation of directors, review and recommend remuneration to the directors, review and recommend the remuneration of the Company’s senior executive management, formulation of the performance evaluation framework for the Company’s senior executive management.

d. IT Steering Committee

The IT Steering Committee (“ITSC”) is responsible for the formulation of the IT plans and strategies to meet business objectives and strategies of the Company. The ITSC is also responsible for monitoring and evaluating the Company’s overall IT performance, which includes prioritising and monitoring major IT projects.

Management-level Committees

a. Management Committee

The Management Committee (“MC”) is the main management body of the Company, where members advise and assist the CEO in decision-making on all key strategic and operational issues.

b. Product Development Committee

The Product Development Committee (“PDC”) is responsible for driving the Company’s product strategy.

c. Risk Management Committee

The Risk Management Committee (“RMC”) is responsible for maintaining sound, robust and effective risk management processes which are appropriate to the nature, scale and complexity of the Company’s business, to safeguard the interests of the Company’s shareholders and policyholders.


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Management-level Committees (continued) d. Compensation Committee

The Compensation Committee (“CC”) is responsible for remuneration issues for all employees of the Company, except for members of the CC and other selected senior employees, whose remuneration is determined by the Board Nomination & Remuneration Committee.

e. Underwriting and Reinsurance Committee

The Underwriting and Reinsurance Committee (“URC”) administers the Underwriting and Reinsurance Policies on behalf of the Board of Directors. URC is responsible for formulating an effective reinsurance strategy for the Company, including recommending reinsurer(s) based on an approved set of criteria, implementing an effective reinsurance administration programme, reviewing the risk tolerance of the Company, implementing adequate controls and monitoring tools within the reinsurance programme, approving and reviewing reinsurance arrangements based on the Board-approved Underwriting and Reinsurance Policy, reviewing this policy and seeking Board’s approval for any changes to the policy at least once a year.

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY STATEMENT BY DIRECTORS For the financial year ended 31 December 2014

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In the opinion of the directors, (a) the financial statements of the Company and the consolidated financial

statements of the Group set out on pages 8 to 98 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group at 31 December 2014 and of the results of the business, changes in equity of the Company and of the Group and the cash flows of the Group 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. On behalf of the directors Ong Sim Ho Director

Tay Choon Peng Lance Director

18 March 2015

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TOKIO MARINE LIFE INSURANCE SINGAPORE LTD.

Report on the Financial Statements We have audited the accompanying financial statements of Tokio Marine Life Insurance Singapore Ltd. (the “Company”) and its subsidiary (the “Group”) set out on pages 8 to 98, which comprise of the balance sheets of the Company and of the Group as at 31 December 2014, the statements of comprehensive income, statements of changes in equity of the Company and of the Group, and the consolidated statement of cash flows of the Group 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 of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditor’s Responsibility Our 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 controls relevant to the entity’s preparation of the financial statements that give a true and fair view 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 controls. An audit also involves 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, the financial statements of the Company and the consolidated financial statements of the Group 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 and of the Group as at 31 December 2014, and the results and changes in equity of the Company and of the Group and the cash flows of the Group for the financial year ended on that date. Report on Other Legal and Regulatory Requirements In our opinion, 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. Public Accountants and Chartered Accountants Singapore, 18 March 2015

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 31 December 2014

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

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The Group The Company

Notes 2014

$'000 2013 $'000

2014 $'000

2013 $'000

Income Gross premiums 1,622,154 1,201,190 1,207,653 834,942 Less: Reinsurance premiums (64,935) (50,357) (40,297) (25,978) Net premiums 1,557,219 1,150,833 1,167,356 808,964

Fees and commission income 6(a) 7,548 3,623 5,937 2,471 Other income 6(b) 234,308 203,838 140,897 100,257 Other gains – net 6(c) 31,006 85,979 22,272 39,648 Net rental income 1,734 2,780 851 723 Total income 1,831,815 1,447,053 1,337,313 952,063 Outgo Claims under policies, paid and outstanding: - Death (35,386) (33,605) (16,779) (14,491) - Maturity (248,112) (365,426) (134,943) (256,045) - Others (69,851) (76,064) (17,354) (17,482) - Surrenders including bonus (87,939) (76,240) (16,220) (16,347) - Annuities (6,695) (6,515) (6,695) (6,515) - Change in Life Assurance Fund, net of

reinsurance 9(ii), 24 (1,063,793) (616,933) (919,072) (464,537) (1,511,776) (1,174,783) (1,111,063) (775,417) Operating expenses and commission Commission and agency expenses (217,200) (178,972) (165,151) (131,641) Employee compensation 6(d) (43,408) (43,067) (22,148) (24,550) Depreciation 6(e) (2,911) (2,875) (1,124) (1,000) Amortisation 19 (7,335) (4,827) (318) (47) Other operating expenses 6(f) (36,929) (31,574) (17,301) (17,154) Total expenses (1,819,559) (1,436,098) (1,317,105) (949,809)

Profit before income tax 12,256 10,955 20,208 2,254 Income tax credit/(expense) 5 653 (12) 2,187 1,902 Net profit for the financial year 12,909 10,943 22,395 4,156 Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:

Financial assets, available-for-sale - fair value (losses)/gains 2,144 (3,963) 2,148 (3,346) - reclassification upon disposal 6(c) (857) (516) (608) (512) - deferred tax (193) 799 (262) 656

Currency translation differences arising from consolidation (1,328) (2,958) - -

Other comprehensive (loss)/income, net of tax (234) (6,638) 1,278 (3,202)

Total comprehensive income 12,675 4,305 23,673 954

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY BALANCE SHEET As at 31 December 2014


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Notes 2014

$'000 2013 $'000

2014 $'000

2013 $'000

ASSETS Cash and cash equivalents 7 504,348 388,600 290,463 258,831 Trade receivables 1,668 2,094 1,042 1,175 Outstanding premium and agents’ balances 8 18,217 18,673 8,779 9,756 Reinsurance assets 9 59,417 32,397 57,169 31,692 Financial assets, available-for-sale 10 5,897,402 4,866,591 4,268,093 3,240,501 Financial assets at fair value through profit or

loss 11 223,540 258,667 41,878 33,965 Financial assets, held-to-maturity 12 298,349 245,535 - - Derivative financial instruments 13 1,808 2,108 - - Other assets 14 62,792 52,572 35,134 27,312 Loans 15 233,648 231,357 36,580 32,831 Investment properties 16 19,530 20,022 9,406 9,694 Investment in a subsidiary 17 - - 40,952 40,952 Property, plant and equipment 18 68,068 69,070 33,437 33,919 Intangible assets 19 1,466 8,080 1,466 1,093 TOTAL ASSETS 7,390,253 6,195,766 4,824,399 3,721,721

LIABILITIES Claims admitted or intimated 161,741 132,244 39,390 30,758 Trade payables 136,018 116,527 80,013 70,807 Other payables 20 43,257 45,772 18,922 27,723 Current tax liabilities 10,801 9,123 7,920 7,315 Deferred tax liabilities 21 320,696 264,740 303,621 243,053 Staff retirement benefits 22 506 369 369 239 Agents’ retirement benefits 23 11,201 10,575 754 831 Derivative financial instruments 13 32,866 2,176 32,866 2,176 Life Assurance Fund 24 6,475,163 5,423,511 4,175,837 3,192,385 TOTAL LIABILITIES 7,192,249 6,005,037 4,659,692 3,575,287 EQUITY Share capital and reserves Share capital 25 36,000 36,000 36,000 36,000

Capital reserve 4,800 4,800 - - Fair value reserve 1,891 797 1,253 (25) Foreign currency translation reserve (12,636) (11,308) - - Retained earnings 167,949 160,440 127,454 110,459 TOTAL EQUITY 198,004 190,729 164,707 146,434 TOTAL LIABILITIES AND EQUITY 7,390,253 6,195,766 4,824,399 3,721,721

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the financial year ended 31 December 2014


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Notes Share capital

Capital reserve

Fair value reserve

Foreign currency

translation reserve

Retained earnings Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 January 2014 36,000 4,800 797 (11,308) 160,440 190,729

Dividends relating to 2013 paid 32 - - - - (5,400) (5,400) Total comprehensive income/(loss) - - 1,094 (1,328) 12,909 12,675

Balance at 31 December 2014 36,000 4,800 1,891 (12,636) 167,949 198,004

Balance at 1 January 2013 36,000 4,800 4,477 (8,350) 156,897 193,824 Transfer to Life Assurance Fund 24 - - - - (2,000) (2,000) Dividends relating to 2012 paid 32 - - - - (5,400) (5,400) Total comprehensive (loss)/income - - (3,680) (2,958) 10,943 4,305 Balance at 31 December 2013 36,000 4,800 797 (11,308) 160,440 190,729

The foreign currency translation reserve and fair value reserve are not distributable.

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY STATEMENT OF CHANGES IN EQUITY - COMPANY For the financial year ended 31 December 2014


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Notes Share capital

Fair value reserve

Retained earnings Total

$’000 $’000 $’000 $’000

Balance at 1 January 2014 36,000 (25) 110,459 146,434

Dividends relating to 2013 paid 32 - - (5,400) (5,400)

Total comprehensive income - 1,278 22,395 23,673 Balance at 31 December 2014 36,000 1,253 127,454 164,707

Balance at 1 January 2013 36,000 3,177 113,703 152,880 Transfer to Life Assurance Fund 24 - - (2,000) (2,000) Dividends relating to 2012 paid 32 - - (5,400) (5,400) Total comprehensive (loss)/income - (3,202) 4,156 954 Balance at 31 December 2013 36,000 (25) 110,459 146,434

The fair value reserve is not distributable.

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2014


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2014

$'000 2013

$'000 Cash flows from operating activities Profit before income tax 12,256 10,955 Change in life assurance fund, net of reinsurance 1,063,793 616,933

1,076,049 627,888 Adjustments for:

Depreciation of property, plant and equipment 2,572 2,023 Depreciation of investment properties 339 852 Amortisation of intangible asset 7,335 4,827 Loss on disposal of property, plant and equipment 4 147 Property, plant and equipment written off - 209 Gain on disposal of investment property - (2,157) Loss/(gain) on disposal of: - Financial assets, available-for-sale (43,499) (56,975) - Financial assets, held-to-maturity 4 (672)

Allowance for impairment: - Financial assets, available-for-sale 8,923 (386)

Fair value (gains)/losses: - Financial assets at fair value through profit or loss (5,083) (29,230) - Forward foreign exchange contracts 35,931 10,174 - Warrants 264 - - Currency exchange on foreign currency denominated

debt securities

(26,771)

(7,713) Dividend income (68,822) (56,397) Interest income (165,405) (147,441) Rental Income (1,734) (2,780) Increase/(decrease) in allowance for impairment of

outstanding premiums and agents’ balances

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102 Provision for staff retirement benefits 139 114 Provision for agents’ retirement benefits 1,697 1,520

(254,061) (283,783) Changes in working capital:

Receivables and other current assets (5,741) (11,776) Reinsurance assets (8,102) (7,295)

Claims admitted or intimated 31,234 516 Trade and other payables 18,065 60,729

35,456 42,174 Income tax paid (16,101) (9,874) Payment of staff retirement benefits - (25) Payment of agents’ retirement benefits (904) (1,080)

(17,005) (10,979) Net cash provided by operating activities 840,439 375,300

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2014


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Note 2014 $'000

2013 $'000

Cash flows from investing activities Purchase of property, plant and equipment (2,188) (1,196) Purchase of intangible assets (691) (693) Proceeds from disposal of property, plant and equipment 27 72 Proceeds from disposal of investment properties - 3,660 Purchase of: - Financial assets, available-for-sale (2,721,520) (1,927,770) - Financial assets, held-to-maturity (65,257) (32,877) - Financial assets at fair value through profit or loss (40,798) (42,041) - Derivative financial instruments (5,240) (10,239)

Proceeds from disposal of: - Financial assets, available-for-sale 1,807,362 1,296,690 - Financial assets, held-to-maturity 8,338 37,178 - Financial assets at fair value through profit or loss 77,106 108,205 - Derivative financial instruments - 227

Proceeds from repayment of/(disbursement of) loans (5,689) 2,374 Rental received 1,763 2,665 Dividend received 68,035 55,019 Interest received 161,682 149,811 Net cash from/(used in) investing activities (717,070) (358,915)

Cash flows from financing activities Dividends paid to shareholders of the Company (5,400) (5,400) Net cash used in financing activities (5,400) (5,400)

Net increase in cash and cash equivalents held 117,969 10,985 Cash and cash equivalents at beginning of financial year 388,600 383,052 Effects of currency translation on cash and cash equivalents (2,221) (5,437) Cash and cash equivalents at end of financial year 7 504,348 388,600

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2014

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

1. General Information Tokio Marine Life Insurance Singapore Ltd. (the “Company”) is incorporated and domiciled in Singapore. The address of its registered office is 20 McCallum Street, Tokio Marine Centre, #07-01, Singapore 069046. The principal activity of the Company and its subsidiary is life assurance business.

2. Significant accounting policies 2.1 Basis of preparation

These 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 Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Notes 3 and 4. Interpretations and amendments to published standards effective in 2014 On 1 January 2014, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for application from that date. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS. The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group’s and Company’s accounting policies and had no material effect on the amounts reported for the current or prior financial years, except for the following:

FRS 112 Disclosures of Interests in Other Entities

The Group has adopted the above new FRS on 1 January 2014. The amendment is applicable for annual periods beginning on or after 1 January 2014. It sets out the required disclosures for entities reporting under the new FRS 110 Consolidated Financial Statements and FRS 111 Joint Arrangements, and replaces the disclosure requirements currently found in FRS 27 (revised 2011) Separate Financial Statements and FRS 28 (revised 2011) Investments in Associates and Joint Ventures.


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2. Significant accounting policies (continued) 2.1 Basis of preparation (continued)

Interpretations and amendments to published standards effective in 2014 (continued)

FRS 112 Disclosures of Interests in Other Entities (continued)

The Group has applied FRS 112 retrospectively in accordance with the transitional provisions (as amended subsequent to the issuance of FRS 112 in September 2011) in FRS 112 and amended for consolidation exceptions for ‘investment entity’ from 1 January 2014. The Group has incorporated the additional required disclosures into the financial statements.

2.2 Insurance contracts

(a) Discretionary participation feature

The Group issues contracts that transfer mainly insurance risk. Insurance contracts are those contracts that transfer significant insurance risk. Such contracts may also transfer financial risk. As a general guideline, the Group defines as significant insurance risk the possibility of having to pay benefits on the occurrence of an insured event that are at least 1% more than the benefits payable if the insured event did not occur at some point during the contract. Investment contracts are those contracts that transfer financial risk with no significant insurance risk. Currently the Group does not issue investment contracts. A number of insurance contracts contain a discretionary participation feature (“DPF”). This feature entitles the holder to receive, as a supplement to guaranteed benefits, additional bonuses:

- that are likely to be a significant portion of the total contractual

benefits; - whose amount or timing is contractually at the discretion of the

Group; and - that are contractually based on:

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

(ii) realised and/or unrealised investment returns on a specified

pool of assets held by the Group; or (iii) the profit or loss of the Group, fund or other entity that issues

the contract.


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2. Significant accounting policies (continued)

2.2 Insurance contracts (continued)

(a) Discretionary participation feature (continued) Local statutory regulations and the terms and conditions of these contracts set out the bases for the determination of the amounts on which the additional discretionary benefits are based (the DPF eligible surplus) and within which the Group may exercise its discretion as to the quantum and timing of their payment to contract holders. At least 90% of the eligible distributions must be attributed to the contract holders as a group, while the amount and timing of the distribution to individual contract holders are at the discretion of the Group, approved by the Board of Directors based on the advice of the Appointed Actuaries.

(b) Recognition and measurement

� Participating Insurance Contracts

These contracts insure events associated with human life (for example death or survival) over a long duration. The contract holders participate in profits of the participating life fund by sharing a significant portion of insurance risk. Profits are distributed to the contract holders by way of a regular cash dividend, reversionary bonus, or terminal dividend or bonus.

Liabilities from these contracts are determined using the prospective discounted cashflow method. Insurance contract liabilities are determined based on a series of relevant assumptions by the Company’s and the subsidiary’s Appointed Actuaries for all territories that the Company and the subsidiary operate in. Details of the methods used to determine the liabilities are provided in Note 3.

� Non-Participating Insurance Contracts

Non-Participating Insurance Contracts, which pay guaranteed benefits on the occurrence of specified insurance events, can be classified into two main categories: Individual and Group Insurance Contracts.

The Non-Participating Individual Insurance Contracts insure human life events (for example death, dread disease or survival) over the duration of the contract.

Details of the methods used to determine the liabilities are provided in Note 3.


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2. Significant accounting policies (continued) 2.2 Insurance contracts (continued)

(b) Recognition and measurement (continued)

� Non-Participating Insurance Contracts (continued)

Non-Participating Group Insurance Contracts are short-duration life insurance contracts mainly issued to employers to insure their commitment to their employees in terms of the employees’ benefit plans. The guaranteed benefits paid on occurrence of the specified insurance event (for example death or disability) are either fixed or linked to the extent of the economic loss suffered by the assured. There are no maturity or surrender benefits.

� Investment-Linked Contracts

These contracts insure human life events (for example death or survival) over a long duration. Liabilities for Investment-Linked Contracts consist of unit and non-unit reserves. Unit reserves, comprising mainly the contract holders’ account balances, are linked to the unit prices. Non-unit reserves are held for claims, expenses or other net cash outflows, as well as to serve as additional margin for adverse deviations. Non-unit reserves are determined by projecting future cashflows of non-unit income (such as bid offer spread, policy fee, mortality charge and other annual charges) and outgo (including operating, distribution, claims and other expenses). Details of the methods used to determine the liabilities are provided in Note 3.

(c) Premiums

Premiums from Participating, Non-Participating and Investment-Linked Insurance Contracts are recognised on their respective due dates and within grace period of one month for premiums due before the financial year end. Premiums not received on due date and within grace period of one month for premiums due before the financial year end are recognised as revenue in profit or loss with the corresponding outstanding premiums reported in the balance sheet. Outstanding premiums are carried at amortised cost, which approximate fair value. Premiums due after but received before the financial year end are recorded as advance premiums and this item is included in trade payables in the balance sheet.


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(c) Premiums (continued) Premiums from insurance contracts which remain outstanding beyond the contractual date would automatically trigger premium loans which are taken against the cash value standing to the credit of the policy. Where the cash value is insufficient to activate a premium loan, the policy lapses and the contract between the Group and the contract holder is deemed cancelled without further liabilities accruing from either party.

(d) Claims

Full provision is made for the estimated cost of all life assurance claims notified but not settled at the balance sheet date using best estimates available at that time. Provision is made for claims incurred but not reported at the balance sheet date using best estimates available at that time.

(e) Commission

The commission expense is incurred or accrued for premiums paid or due within the grace period of one month before the financial year end. The commission expense arising from advance premiums is not accrued in the financial statements until the premiums are due and recognised as revenue in profit or loss.

(f) Liability adequacy test

At each balance sheet date, liability adequacy tests are performed to ensure the adequacy of the insurance contract liabilities. In performing these tests for the Group, current best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities are used. For Singapore and Brunei business and Malaysia’s Investment Linked products, any negative reserves are set to zero for prudence. The tests are conducted on liabilities net of reinsurance assets. The results of liability adequacy tests for the Group are shown in the tables below: Group

Participating Non-

participating Investment-

linked $’000 $’000 $’000 1. Reported insurance contract liabilities 5,202,915 419,121 99,227 2. Gross Premium Reserve 1,697,961 347,052 97,357 Excess of reported insurance contract liabilities (1-2) 3,504,954 72,069 1,890


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(f) Liability adequacy test (continued) Company

Participating Non-

participating Investment-

linked $’000 $’000 $’000 1. Reported insurance contract liabilities 3,440,128 217,165 41,370 2. Gross Premium Reserve 913,728 171,756 40,382 Excess of reported insurance contract liabilities (1-2) 2,526,400 45,409 988

From the results, it is clear that the reported liabilities for each respective line of business for the Group and the Company are greater than the best estimate liabilities obtained by cash flow method. As such, no shortfall needs to be recorded in the income statement.

(g) Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts in Note 2.2(b) are classified as reinsurance contracts held. The benefits to which the Group is entitled under its reinsurance contracts are recognised as reinsurance assets. These assets consist of short term balances due from reinsurers as well as long term receivables that are dependent on expected claims and benefits arising under the related reinsured insurance contract. Amounts 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 insurance contract. Reinsurance liabilities are primarily premium payable for reinsurance contracts and are recognised as an expense when due. The Group assesses its reinsurance assets for impairment at each balance sheet date. An allowance for impairment loss is established using the same method used for loans and receivables. These processes are described in Note 2.10.

2.3 Revenue recognition

Revenue is recognised as follows:

(a) Premiums

The policy in respect of recognition of premiums is disclosed in Note 2.2(c).


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2.3 Revenue recognition (continued) (b) Fees and commission income

Fees and commission income comprise mainly of commission and service fee income, which includes income earned from the provision of administration services. This fee income is recognised as revenue over the period in which the services are rendered. If the fees are for service to be provided in future periods, then they are deferred and recognised over those periods.

(c) Interest income

Interest income is recognised using the effective interest method.

(d) Dividend income

Dividend income is recognised when the right to receive payment is established.

(e) Rental income

Rental income from operating leases on investment properties is recognised on a straight-line basis over the lease term.

2.4 Group accounting

Subsidiaries

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency of policies adopted by the Group. The acquisition method of accounting is used to account for business combinations by the Group.


21

2. Significant accounting policies (continued) 2.4 Group accounting (continued)

Subsidiaries (continued) The consideration transferred for the acquisition of a subsidiary or business comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Please refer to Note 2.8 for the accounting policy on investments in subsidiaries.

2.5 Property, plant and equipment

(a) Measurement

(i) Land and buildings

Land and buildings are initially recognised at cost. Freehold land is subsequently carried at cost less accumulated impairment losses. Leasehold land and buildings are subsequently carried at cost less accumulated depreciation and accumulated impairment losses (Note 2.9).

(ii) Other property, plant and equipment

All other items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and impairment losses (Note 2.9).

(iii) Components of cost

The cost of an item of property, plant and equipment initially recognised 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 costs is also included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.


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2. Significant accounting policies (continued) 2.5 Property, plant and equipment (continued)

(b) Depreciation

Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:

Useful lives Leasehold land and buildings Shorter of 50 years and the lease term Motor vehicles 5 years Furniture and equipment 3 - 10 years The residual values, estimated and 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 recognised in profit or loss when the changes arise.

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when incurred.

(d) Disposal

On disposal of an item of property, plant and equipment, the difference between the net disposals proceeds and its carrying amount is recognised in profit or loss.

2.6 Intangible assets

(a) Bancassurance rights

The bancassurance agreement provides an exclusive right to the use of the bancassurance network. The agreement fee is amortised over its useful life of 5 years using the straight-line method. It is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. See accounting policy Note 2.9 on Impairment of non-financial assets.


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2.6 Intangible assets (continued) (b) Acquired computer software licences Acquired computer software licences are initially capitalised at cost which

includes the purchase prices (net of any discounts and rebates) and other directly attributable costs of preparing the asset for its intended use. Direct expenditures including employee costs, which enhance or extend the performance of computer software beyond its specifications and which can be reliably measured, are added to the original cost of the software. Costs associated with maintaining the computer software are recognised as an expense when incurred.

Computer software licences are subsequently carried at cost less

accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives of four to ten years.

The amortisation period and amortisation method of intangible assets other than goodwill are reviewed at least at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.

2.7 Investment properties

Investment properties include those portions of buildings that are held for long-term rental yields and/or for capital appreciation and land under operating leases that are held for long-term capital appreciation or for a currently indeterminate use.

Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation is calculated using a straight-line method to allocate the depreciable amounts over the estimated useful lives of 50 years. The residual values, useful lives and depreciation method of investment properties are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are included in profit or loss when the changes arise. The cost of major renovation and improvement is capitalised and the carrying amounts of the replaced components are recognised in profit or loss. The cost of maintenance, repairs and minor improvement is recognised in profit or loss when incurred. On disposal of an investment property, the difference between the disposal proceeds and its carrying amount is recognised in profit or loss.


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2. Significant accounting policies (continued) 2.8 Investment in a subsidiary

Investment in a subsidiary is stated at cost less accumulated impairment losses (Note 2.10) in the Company’s balance sheet. On disposal, the difference between net disposal proceeds and the carrying amount of the investment is recognised in profit or loss.

2.9 Structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes: (a) restricted activities, (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors, (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). The Group considers all of its investments in funds to be investments in unconsolidated structured entities. The Group invests in funds whose objectives range from achieving medium to long term capital growth. The funds are managed by related and unrelated asset managers and apply various investment strategies to accomplish their respective investment objectives. The funds finance their operations by issuing redeemable shares/units which entitles the holder to a proportional stake in the respective fund’s net assets. The Group holds redeemable shares/units in each of these funds. The change in fair value of the funds classified as fair value through profit or loss is included in the Consolidated Statement of Comprehensive Income in “net investment income/(losses) and fair value gains/(losses)”. The change in fair value of the funds classified as available-for-sale is included in the Consolidated Balance Sheet within the fair value reserve and the Life Assurance Fund.


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2. Significant accounting policies (continued) 2.10 Impairment of non-financial assets

Property, plant and equipment Intangible assets Investment in a subsidiary Investment properties Property, plant and equipment, intangible assets, investment in a subsidiary and investment properties are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing of these assets, the recoverable amount (i.e. the higher of the fair value less cost to sell and the 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, the 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 recoverable amount is recognised as an impairment loss in profit or loss. An impairment loss for 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 recognised. The carrying amount of an 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 any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss is recognised in profit or loss.

2.11 Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity and available-for-sale. The classification depends on the nature of the assets and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. The designation of financial assets at fair value through profit or loss is irrevocable.


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2.11 Financial assets (continued)

(a) Classification (continued)

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

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the short term. Financial assets designated at fair value through profit or loss at inception are those that are managed and their performance are evaluated on a fair value basis, in accordance with the Group’s investment strategy. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months after the balance sheet date.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are presented as “Cash and cash equivalents”, “Trade receivables”, “Outstanding premium and agents’ balances”, and “Loans” on the balance sheet.

(iii) Financial assets, held-to-maturity

Financial assets, held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as Financial assets, available-for-sale. They are presented as non-current assets, except for those maturing within 12 months after the balance sheet date which are presented as current assets.


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2. Significant accounting policies (continued) 2.11 Financial assets (continued)

(a) Classification (continued)

(iv) Financial assets, available-for-sale

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 non-current assets unless management intends to dispose off the assets within 12 months after the balance sheet date.

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

On disposal of a financial asset, the difference between the sale proceeds and the carrying amount is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is transferred to profit or loss.

(c) Initial measurement

Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are recognised immediately as expenses.

(d) Subsequent measurement

Financial assets, both available-for-sale and at fair value through profit or loss, are subsequently carried at fair value. Loans and receivables and financial assets, held-to-maturity are subsequently carried at amortised cost using the effective interest method. Changes in the fair value of financial assets at fair value through profit or loss, including the effects of currency translation, interest and dividends, are recognised in profit or loss when the changes arise.


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(d) Subsequent measurement (continued)

Interest and dividend income on financial assets, available-for-sale are recognised separately in profit or loss. 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 amortised cost of the securities and other changes; the currency translation differences are recognised in profit or loss and the other changes are recognised in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fair value reserve, together with the related currency translation differences.

(e) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. (i) Loans and receivables/Financial assets, held-to-maturity

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective 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 recognised against the same line item in profit or loss. The allowance for impairment loss account is reduced through profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior periods.


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(e) Impairment (continued)

(ii) Financial assets, available-for-sale In addition to the objective evidence of impairment described in Note 2.10(e)(i), a significant or prolonged decline in the fair value of an equity security below its cost is considered as an indicator that the financial asset is impaired. The cumulative loss that was recognised in the fair value reserve is transferred to profit or loss. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss previously recognised as an expense. The impairment losses recognised as an expense on equity securities are not reversed through profit or loss.

2.12 Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in the

balance sheet when there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.13 Trade and other payables

Trade and other payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest method.

2.14 Derivative financial instruments

A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into and is subsequently carried at its fair value. Fair value changes for derivative financial instruments that do not qualify for hedge accounting are recognised in profit or loss in the financial year when the changes arise. Transaction costs incurred in buying and selling derivative instruments are recognised in the profit or loss account when incurred. All derivatives are carried at assets when fair value is positive and as liabilities when fair value is negative.


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2. Significant accounting policies (continued) 2.15 Fair value estimation of financial assets and liabilities

The fair value of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) is 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 price. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as estimated discounted cash flow analyses, are also used to determine fair values of the financial instruments.

The fair values of currency forwards are determined using actively quoted forward exchange rates. The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.

2.16 Operating leases

(a) When the Group is the lessee:

The Group leases certain assets from third parties.

Leases of assets where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in profit or loss on a straight-line basis over the period of the lease.

(b) When the Group is the lessor:

Leases of investment properties where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases. Rental income from operating leases (net of any incentives given to the lessees) is recognised in profit or loss on a straight-line basis over the lease term.


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2.17 Income tax Current income tax for current and prior periods is recognised 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 recognised 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 of 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 transaction.

A deferred income tax liability is recognised on temporary differences arising on investment in a subsidiary, associated companies and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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

Deferred income tax is measured:

(i) 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

(ii) based on the tax consequence that would follow from the manner in which

the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income tax are recognised as income or expenses in profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from the fair value gains and losses on Financial assets, available-for-sale are charged or credited directly to Equity/Life assurance fund in the same period the temporary differences arise.


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2. Significant accounting policies (continued) 2.18 Provisions

Provisions for agents’ retirement benefits are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

Agents’ retirement benefits are provided for the Group’s tied agents and are calculated in accordance with the terms and conditions of the Agency Agreement.

2.19 Employee compensation

(a) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund and Employees Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The Group’s contributions are recognised as employee compensation expenses when they are due. No legal or constructive obligation exists to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. The Group’s contribution to defined contribution plans are recognised in the financial year to which they relate.

(b) Employee leave entitlement

Employee entitlements to annual leave and long service leave are recognised 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.

(c) Staff retirement benefits

Retirement benefits are provided for executive staff. The benefit accrued was computed based on the length of service of the employees and his last drawn salary less the employer’s contribution to the employee’s Central Provident Fund or Employees Provident Fund.


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2. Significant accounting policies (continued) 2.20 Currency translation

(a) Functional and presentation currency

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

(b) Transactions and balances

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

(c) Translation of Group entities’ financial statements

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities are translated at the closing rates at the date

of the balance sheet; (ii) income and expenses for each income statement are translated at

the average exchange rate (unless the average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and

(iii) all resulting currency translation differences are recognised in other

comprehensive income and accumulated in the foreign currency translation reserve.


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2. Significant accounting policies (continued) 2.21 Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and deposits with financial institutions which are subject to an insignificant risk of change in value.

2.22 Dividends to Company’s shareholders Dividends to the Company’s shareholders are recognised when the dividends are

approved for payment.

3. Insurance contracts Insurance contract liabilities are determined based on a series of relevant assumptions made by the actuary of the respective companies in all the territories that the Group operates in.

(a) Methodology

A prospective cashflow method, known as gross premium valuation method, is used to compute insurance contract liabilities. Under the gross premium valuation approach, broadly speaking, the insurance contract liabilities are determined by first projecting future cash flows using realistic assumptions and then discounting these cash flow streams at appropriate interest rates.

For this liability valuation method, assumptions are needed for: � Mortality and morbidity � Persistency � Discount rate � Renewal expenses and inflation � Expected future bonus (for participating policies) For participating policies, the insurance contract liabilities include provision for future payments arising for both guaranteed and non-guaranteed benefits. In addition, the insurance contract liabilities are derived not only by aggregating the insurance contract liability of all policies in the fund, but are also dependent on the value of assets backing the liabilities and the extent to which benefits are guaranteed. The insurance contract liabilities of the non-participating or investment-linked fund are calculated by aggregating the insurance contract liability of all policies in the fund.


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3. Insurance contracts (continued)

(a) Methodology (continued) Additional provision is made in the liability valuation assumptions to allow for any adverse deviation from the best estimate experience and to reflect the inherent uncertainty of the best estimate of the insurance liabilities. Methodology used to calculate provision for adverse deviation is consistent with generally accepted actuarial practice. For Singapore, it is also consistent with the guidance published by the Singapore Actuarial Society.

(b) Process to determine assumptions

All assumptions are reviewed and updated, if necessary, each year in order to value insurance contract liabilities that reflect the Company’s experience. The assumptions are required to be on best estimate basis.

� Mortality and morbidity

Assumptions for death and total and permanent disability (TPD) rates used in each territory are based on annual investigation into their respective mortality and morbidity experiences over the recent years, and are generally expressed as a percentage of a standard table or reinsurer’s risk premium rates. For all territories, morbidity assumptions for Dread Disease benefits are based on a percentage of the reinsurer’s risk premium rates. For Singapore, Brunei and Malaysia, the mortality assumption remains unchanged from last year.

� Persistency

For each territory, an investigation into the Group’s experience over recent years was performed. This investigation is conducted with respect to product classes, policy duration and premium payment mode (regular or single premium) as persistency rates are expected to vary by these factors. An allowance is then made for any trends in the data to arrive at a best estimate of future persistency rates. For Singapore and Brunei, an enhancement was made in the investigation to reflect reinstatements and partial surrenders, as well as to exclude the effect from free-look cancellations. For Malaysia, there has been a general deterioration in persistency. The assumptions have been suitably revised to reflect this.


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3. Insurance contracts (continued) (b) Process to determine assumptions (continued)

� Discount rate

For the Participating business, discount rates used to value insurance contract liabilities for each territory is determined based on the best estimate net investment return.

To determine the best estimate investment returns, the Group has broken down the assets in the fund as at the reporting date into various asset classes and has applied long term expected returns to each class. A weighted average rate of investment return is then derived by combining different proportions of the various asset classes. A weighted average return is computed based on a notional asset mix and the long term expected return of each asset class. The assumed investment expense is subtracted from the results to arrive at the best estimate investment return. This is done separately for suitable subgroups of assets within the fund (single and regular premium products). For Singapore and Brunei, the discount rate assumptions for Participating business have been revised downward. For Malaysia, the discount rate used for short term single premium participating products was reduced. The assumption for other products remain unchanged from the previous year. Contract liabilities for non-participating business and minimum condition liability of the participating business are computed by discounting policy cash flows using risk-free interest rates. The risk-free rates used are derived from the gross yields to redemption of benchmark government securities as at the date of valuation in line with regulatory requirements.

� Renewal expenses and inflation

For each territory, expense analyses are carried out regularly to determine the long-term unit cost assumptions. The analysis is done by dividing the current level of expense with the business volume. Adjustments are made to reflect expected changes in expense levels or business volume in the future, if any, to arrive at the long term best estimate unit cost assumptions. Different expense inflation is used for each territory, reflecting their respective interest rate and general economic environment. The inflation assumption for Singapore and Brunei remains at 2% per annum. For Malaysia, this remains at 3% per annum.


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3. Insurance contracts (continued) (b) Process to determine assumptions (continued)

� Additional assumptions for investment-linked contracts

For investment-linked insurance policies, additional estimates are made for unit fund growth rate, fund management charge and investment and administration expenses. These assumptions are used for calculating the liabilities and are updated at each reporting date to reflect the best estimates. - Unit growth rate: For Malaysia, its determined by taking into

consideration the average actual unit price growth rate weighted by unit fund values. For Singapore, the unit growth rate is set to an average risk free return consistent with the risk free discount rate and average in-force duration of the product group in question. There is no investment-linked business in Brunei.

- Fund management charge: Current actual rates of fund management charge the Company levies are used in the valuation. For Singapore, the actual average rate was used. There is a slight downward revision compared to the previous year. No changes for Malaysia.

- Investment expenses: A portfolio average of investment and other related expenses, as determined based on an internal expense analysis, for investment linked funds are used. For Singapore, there is a slight downward revision compared to the previous year. No changes for Malaysia.

- Take-up rate for premium holding option: For Singapore, the take-up rate for the option to cease premium payment while the policy remains in-force is set based on industry experience.

There are no changes to other assumptions from the previous year.


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3. Insurance contracts (continued) (c) Assumptions used

Singapore and Brunei Malaysia Mortality and morbidity Death, TPD and DD:

Between 64% and 100% of reinsurance rates, depending on product type, age and gender.

Death, TPD and DD: Between 45% to 97.5% of standard mortality table depending on product type.

Discount rate (best estimate)

Par Fund: between 3.65% and 5.12% Par Fund: 3.86% to 5.98% (after tax investment return).

Risk-free discount rate (For guaranteed benefits for Min. Condition Liability (MCL))

Derivation based on MAS Notice 319 Malaysian Government Security (MGS) rate as at 31/12/2014 (Obtained from BondWeb - bond rating agency prescribed by Bank Negara Malaysia (BNM)).

Persistency Based on Company’s experience.

Based on subsidiary’s assumptions.

Management expenses Based on past actual expenses with

adjustment for future trend, expressed as unit costs per in-force policy and percentage of premiums.

Based on subsidiary’s assumptions (expressed as unit costs per in-force policy and percentage of premiums).

Distribution expenses Based on actual payments, expressed

as percentage of premiums and percentage of commissions.

Maximum limit based on BNM’s “Guidelines on Operating Cost Control” (OCC).

Expense inflation rate 2% p.a. 3% p.a.

(d) Insurance contract liabilities

Figures in S$‘000 Singapore and Brunei Malaysia 2014 2013 2014 2013 Participating Business 3,440,128 2,620,012 1,762,787 1,730,938 Non-Participating Business 217,165 216,841 201,956 170,577 Investment-Linked Business 41,370 34,761 57,857 51,305

The insurance contract liabilities exclude the deferred tax liabilities related to the Participating Business and are net of reinsurance assets.

(e) Sensitivity analysis

The Company conducted sensitivity analyses of the value of insurance liabilities disclosed to movements in the assumptions used in the estimation of insurance liabilities. The analyses are based on a change in an assumption while holding all other assumptions constant.


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3. Insurance contracts (continued)

(e) Sensitivity analysis (continued) In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated, for example: � change in interest rate and change in market values; and � change in lapses and future mortality.

For liabilities under Participating contracts (where total insurance contract liabilities take the value of the policy assets of the Participating fund), changes in these assumptions will not cause a change to the reported insurance contract liability unless the guaranteed liabilities under the stressed assumptions exceeds the value of assets backing liabilities. The sensitivities are based on liabilities net of reinsurance assets.

� Singapore and Brunei - Participating and Non-Participating Business

Change in liability Change in 2014 2013 Variable variable Value Percentage Value Percentage $’000 (%) $’000 (%) Worsening of annuitant mortality +25% -4,658 -0.13% -4,486 -0.14% Improvement in annuitant mortality -25% 5,311 0.15% 5,013 0.15% Worsening of assurance mortality

and morbidity +25% 9,749 0.27% 4,889 0.15% Improvement in assurance mortality

and morbidity -25% -7,906 -0.22% -3,657 -0.11% Worsening of lapse rate +25% 176 -0.00% -428 -0.01% Improvement in lapse rate -25% 48 0.00% 324 0.01% Increase in nominal discount rate +100bps -11,023 -0.30% -8,226 -0.25% Lowering of nominal discount rate -100bps 12,261 0.34% 8,295 0.26% Worsening of expense +25% 2,357 0.06% 1,219 0.04% Improvement in expense -25% -2,252 -0.06% -1,511 -0.05%

Liabilities of non-linked insurance contracts are most sensitive to changes in discount rates.

� Singapore - Investment-linked insurance contracts

Change in liability Change in 2014 2013 Variable variable Value Percentage Value Percentage $’000 (%) $’000 (%) Worsening of assurance mortality

and morbidity +25% 4 0.01% 14 0.04% Improvement in assurance mortality

and morbidity -25%

-3 -0.01% -13 -0.04% Worsening of lapse rate +25% -37 -0.09% -41 -0.12% Improvement in lapse rate -25% 55 0.13% 57 0.16% Increase in nominal discount rate +100bps -40 -0.10% -35 -0.10% Lowering of nominal discount rate -100bps 39 0.09% 34 0.10% Worsening of expense +25% 231 0.56% 158 0.45% Improvement in expense -25% -100 -0.24% -124 -0.36%


40

3. Insurance contracts (continued) (e) Sensitivity analysis (continued)

Liabilities of investment-linked insurance contracts are most sensitive to changes in management expense. � Malaysia - Participating & Non-Participating Business

Change in liability 2014 2013 Variable Change in

variable Value in Value in

RM’000 $’000 (%) RM’000 $’000 (%)

Worsening of assurance mortality and morbidity +25% 68,851 26,094 1.33% 55,830 21,494 1.13%

Improvement in assurance mortality and morbidity -25% -68,948 -26,131 -1.33% -56,089 -21,594 -1.14%

Worsening of lapse rate +25% 11,194 4,242 0.22% 9,074 3,494 0.18% Improvement in lapse rate -25% -12,410 -4,704 -0.24% -10,556 -4,064 -0.21% Increase in nominal

discount rate +100bps -39,368 -14,921 -0.76% -30,354 -11,686 -0.62% Lowering of nominal

discount rate -100bps 47,217 17,895 0.91% 36,718 14,137 0.75% Worsening of expense +25% 16,656 6,313 0.32% 13,892 5,348 0.28% Improvement in expense -25% -16,453 -6,236 -0.32% -13,730 -5,286 -0.28%

Liabilities of non-linked insurance contracts are affected most by changes in mortality rates.

� Malaysia - Investment-linked insurance contracts

Change in liability 2014 2013

Variable Change in variable

Value in Value in RM’000 $’000 (%) RM’000 $’000 (%)

Worsening of assurance

mortality +25% 3,464 1,313 2.27% 2,323 894 1.74% Improvement in assurance

mortality -25% -3,433 -1,301 -2.25% -2,305 -887 -1.73% Worsening of lapse rate +25% -281 -107 -0.18% -260 -100 -0.20% Improvement in lapse rate -25% 306 116 0.20% 282 109 0.21% Increase in nominal

discount rate +100bps

-2,345 -889 -1.54% -2,456 -946 -1.84% Lowering of nominal

discount rate -100bps

2,630 997 1.72% 2,776 1,069 2.08% Worsening of expense +25% 1,189 450 0.78% 799 308 0.60% Improvement in expense -25% -577 -219 -0.38% -434 -167 -0.33%

The liabilities of investment-linked insurance contracts are most sensitive to changes in mortality rates. There are no annuity policies for the Malaysia business.


41

4. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Liabilities of insurance business

The estimation of the ultimate liability arising from claims made under life insurance contracts is the Group’s most critical accounting estimate. The process for estimating the liabilities of insurance business is described in Note 3.

(b) Impairment of financial assets, available-for-sale

The Group reviews its financial assets for objective evidence of impairment on a quarterly basis during the investment committee meeting. Financial assets are considered to be impaired if there has been a significant or prolonged period of decline in fair value below its cost or if there is objective evidence of impairment. The consideration of this requires management’s judgement. The Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. If actual experience differs negatively from the assumptions and other considerations used in the consolidated financial statements, unrealised losses currently in equity may be recognised in profit or loss in future periods.

(c) Determining the fair value of unquoted investments

The Group holds financial assets which are not quoted on active markets, particularly its fixed income portfolio. The majority of the unquoted fixed income investments is debt securities issued by government and public authorities and by private sector corporations. The fair values of these financial assets are based on quotations from independent third parties, such as brokers. The quotations from these third parties may change drastically due to market and economic conditions. The Group uses recent arm’s length transactions or reference to instruments that are substantially the same or at cost if these are not available to value its unlisted equities. The assumption for valuation at cost will be affected by change in credit risk and interest rate and may have a negative impact on the financial statements.


42

4. Critical accounting estimates and judgements (continued)

(d) Uncertain tax positions

The Group is subject to income taxes in numerous jurisdictions. In determining the income tax liabilities, management has estimated the amount of capital allowances and the taxability/deductibility of certain income/expenses (“uncertain tax positions”) at each tax jurisdiction.

The Group has significant open tax assessments with a tax authority at the balance sheet date. As management believes that the tax positions are sustainable, the Group has not recognised any additional tax liability on these uncertain tax positions.

5. Income taxes (a) Income tax (credit)/expense

The Group The Company 2014 $’000

2013 $’000

2014 $’000

2013 $’000

Life Assurance Fund On the profit for the financial year:

Singapore income tax 6,812 5,017 6,812 5,017 Foreign income tax 10,200 9,662 - -

Deferred tax (Note 21) 45,304 51,471 47,578 50,594 62,316 66,150 54,390 55,611

Under provision in preceding financial years: Singapore income tax 1,633 6,764 1,633 6,764 Foreign income tax - 5 - -

63,949 72,919 56,023 62,375

Shareholders’ fund On the results for the financial year:

Singapore income tax (372) 370 (372) 370 Foreign income tax 1,536 1,861 - -

Deferred tax (Note 21) (2) (17) - - 1,162 2,214 (372) 370

Over provision of Singapore income tax in preceding financial year (1,815) (2,272) (1,815) (2,272)

Under provision of foreign income tax in preceding financial years - 70 - -

(653) 12 (2,187) (1,902)


43

5. Income taxes (continued) (b) The tax expense on profit differs from the amount that would arise using the

Singapore standard rate of income tax due to the following:


2013 $’000

2014 $’000

2013 $’000

Profit before tax 12,256 10,955 20,208 2,254 Change in Life Assurance Fund, net of

reinsurance 1,063,793 616,933 919,072 464,537

1,076,049 627,888 939,280 466,791 Tax calculated at Singapore statutory

tax rate of 17% 182,928 106,741 159,678 79,354 Tax calculated at concessionary tax rate (2,430) (699) (2,430) (699) Effect of different tax rates in other

countries (10,021) (13,020) - - Income not subject to tax (42,041) (33,793) (10,723) (6,351) Expenses not deductible for tax purpose 28,506 26,216 956 758 Tax effect of overseas branch 277 303 277 303 Effect of concessionary tax rate on

participating fund (28,013) (29,789) (28,013) (29,789) Tax effect of change in actuarial

valuation (65,614) 12,301 (65,614) 12,301 Others (114) 104 (113) 104 63,478 68,364 54,018 55,981

6(a). Fees and commission income The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Management fee rebates and

commission income 7,548 3,623 5,937 2,471


44

6(b). Other income The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Investment income Dividend income - Financial assets, available-for-sale 65,932 52,041 48,037 34,579

- Financial assets at fair value through

profit or loss 2,889 4,356 - - - Subsidiary - - 14,554 -

68,821 56,397 62,591 34,579

Interest income - Loans 16,853 17,014 2,535 2,341

- Fixed deposits 6,415 5,947 995 615 - Financial assets, available-for-sale 127,141 111,003 74,694 62,722


profit or loss 1,715 1,426 - - - Financial assets, held-to-maturity 13,281 12,051 - - 165,405 147,441 78,224 65,678

Government grant - wage credit

scheme 82 - 82 - 234,308 203,838 140,897 100,257

6(c). Other gains - net The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Fair value gains/(losses)


profit or loss 5,083 29,230 2,313 1,429 - Derivatives (35,931) (10,174) (35,931) (10,174)

(30,848) 19,056 (33,618) (8,745) Financial assets, available-for-sale

-Transfer from Life Assurance Fund on

disposal (Note 24) 42,642 56,457 28,300 41,036 -Transfer from equity on disposal 857 516 608 512

- Currency exchange gains on debt

securities (Note 10) 26,771 7,713 26,771 7,713

- Impairment losses (made)/written

back (Note 10) (8,923) 386 - (108) 61,347 65,072 55,679 49,153

Financial assets, held-to-maturity - Net (loss)/gains on early redemption (4) 672 - -

Gain on disposal of investment property - 2,157 - -

Loss on disposal of property, plant and

equipment (4) (147) - (127)

Property, plant and equipment written

off - (209) - (22) Currency exchange gains/(losses) - net 190 (671) 209 (636)

Others 325 49 2 25 31,006 85,979 22,272 39,648


45

6(d). Employee compensation The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Employee compensation Wages and salaries 38,602 38,335 19,955 22,341 Employer’s contribution to defined

contribution plans including Central Provident Fund and Employees’ Provident Fund 4,667 4,618 2,063 2,103

Staff retirement benefits 139 114 130 106 43,408 43,067 22,148 24,550

6(e). Depreciation The Group The Company 2014

$’000 2013 $’000

2014 $’000

2013 $’000

Depreciation of property, plant and

equipment: - Leasehold land and buildings 1,443 950 255 255 - Motor vehicles 83 101 47 61

- Furniture and equipment 1,046 972 533 395 Total depreciation (Note 18) 2,572 2,023 835 711

Depreciation of investment properties:

Buildings (Note 16) 339 852 289 289 2,911 2,875 1,124 1,000

6(f). Other operating expenses


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Rental expenses 735 361 591 217

Investment management fees to a

fellow subsidiary 6,306 5,270 4,277 4,013

Maintenance of property, plant and

equipment 1,844 1,354 1,330 720 Professional fees 1,416 1,357 1,416 1,093 Management fee to a fellow subsidiary 2,542 3,624 1,378 2,614

Advertising 1,802 2,531 326 1,519 Computer services and expenses 963 1,140 6 6 Medical fees 1,262 836 875 542 Printing and stationery 833 718 145 170 Utilities 769 838 58 57

Other expenses 18,457 13,545 6,899 6,203 36,929 31,574 17,301 17,154


46

7. Cash and cash equivalents (a)


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Cash at bank and on hand 222,973 196,424 208,565 183,808 Fixed deposits with financial institutions 281,375 192,176 81,898 75,023 504,348 388,600 290,463 258,831

(b) The fixed deposits with financial institutions at the balance sheet date had an

average maturity of 2 months (2013: 3 months) from the end of the financial year with the following weighted average effective interest rates per annum:

The Group The Company 2014 2013 2014 2013 Singapore Dollar 0.63% 0.47% 0.63% 0.47% Malaysian Ringgit 3.80% 3.49% - -

(c) The fixed deposits with financial institutions are analysed as follows:


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Fixed deposits maturing within 12 months 281,375 192,176 81,898 75,023

Fixed deposits maturing after 12 months - - - - Total fixed deposits with financial

institutions 281,375 192,176 81,898 75,023

8. Outstanding premium and agents’ balances


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Outstanding premium and agents’ balances 13,918 13,451 6,493 6,242

Amounts due from brokers 5,154 6,039 2,601 3,935 19,072 19,490 9,094 10,177 Less: Provision for impairment Balance at beginning of financial year (817) (722) (421) (488) (Increase)/decrease in allowance for

impairment (45) (102) 106 67 Currency translation differences 7 7 - - Balance at end of financial year (855) (817) (315) (421) Due within 12 months 18,217 18,673 8,779 9,756


47

9. Reinsurance assets

The Group The Company 2014 2013 2014 2013

$’000 $’000 $’000 $’000

Reinsurers’ share of claims admitted or intimated 34,788 26,697 32,540 25,992

Reinsurance assets arising from policy liabilities 24,629 5,700 24,629 5,700

59,417 32,397 57,169 31,692

(i) Reinsurers’ share of claims admitted or intimated


2014 2013 2014 2013 $’000 $’000 $’000 $’000

Reinsurers’ share of claims admitted or intimated 34,788 26,697 32,540 25,992

Movement in reinsurers’ share of claims admitted or intimated:

Balance at beginning of financial year 26,697 19,413 25,992 19,070

Currency translation differences (11) (11) - - Amount received for claims settled during the financial year (21,802) (5,545) (21,109) (5,213)

Claims notified during the financial year 29,904 12,840 27,657 12,135

Balance at end of financial year 34,788 26,697 32,540 25,992 Due within 12 months 34,788 26,697 32,540 25,992

(ii) Reinsurance assets arising from policy liabilities


$’000 $’000 $’000 $’000

Reinsurance assets 24,629 5,700 24,629 5,700 Movement in reinsurance assets:

Balance at beginning of financial year 5,700 4,598 5,700 4,598

Due to assumption changes 134 605 134 605 Due to risk free rate changes 322 (384) 322 (384) Due to movement during the year 18,473 881 18,473 881

Balance at end of financial year 24,629 5,700 24,629 5,700


48

10. Financial assets, available-for-sale


$’000 $’000 $’000 $’000

Balance at beginning of financial year 4,866,591 4,307,497 3,240,501 2,883,468 Currency translation differences (27,634) (49,171) - - Additions 2,721,520 1,927,770 2,226,343 1,191,389 Carrying value of disposals (1,807,362) (1,296,690) (1,365,705) (801,315) Amortisation of effective interest (2,653) (3,226) (4,467) (4,792) Fair value gains on foreign exchange on

debt securities (Note 6(c)) 26,771 7,713 26,771 7,713 Impairment losses (made)/written back

(Note 6(c)) (8,923) 386 - (108) Fair value gains/(losses) transferred to

Life Assurance Fund (Note 24) 126,948 (23,725) 142,502 (32,508) Fair value net gains/(losses) transferred

to equity 2,144 (3,963) 2,148 (3,346) Balance at end of financial year 5,897,402 4,866,591 4,268,093 3,240,501

Due within 12 months 1,503,955 1,040,610 1,421,543 969,802 Due after 12 months 4,393,447 3,825,981 2,846,550 2,270,699

Financial assets, available-for-sale are analysed as follows:


$’000 $’000 $’000 $’000 Quoted securities: - Equity securities - Singapore 1,407,356 842,181 1,404,115 838,776 - Equity securities - Malaysia 477,411 477,157 - - - Debt securities - Singapore 1,565,029 1,430,094 1,565,029 1,430,094 - Debt securities - Malaysia 1,195,452 1,174,518 93,473 77,268 - Debt securities - Others 871,798 482,712 871,798 482,712 - Investment in funds 350,734 427,797 333,659 411,623

5,867,780 4,834,459 4,268,074 3,240,473

Unquoted securities - Equity securities - Malaysia 2,805 5,774 - - - Investment in funds 26,817 26,358 19 28 29,622 32,132 19 28

5,897,402 4,866,591 4,268,093 3,240,501


49

11. Financial assets at fair value through profit or loss


$’000 $’000 $’000 $’000

Debt securities 32,671 27,723 - - Equity securities 59,885 113,364 - - Investment in funds 130,984 117,580 41,878 33,965

223,540 258,667 41,878 33,965

Due within 12 months 223,540 258,667 41,878 33,965

Financial assets at fair value through profit or loss are analysed as follows:


$’000 $’000 $’000 $’000 Quoted securities: - Equity securities 59,885 113,270 - - - Investment in funds 130,984 117,580 41,878 33,965

Unquoted securities: - Equity securities - 94 - - - Debt securities 32,671 27,723 - - 223,540 258,667 41,878 33,965

12. Financial assets, held-to-maturity

The Group

2014 $’000

2013 $’000

Government and public authority securities 218,896 178,294 Debt securities in corporations 79,453 67,241 298,349 245,535

Due within 12 months 10,246 7,718 Due after 12 months 288,103 237,817

The fair values of the financial assets, held-to-maturity at the balance sheet date are analysed as follows: The Group

2014 $’000

2013 $’000

Government and public authority securities 219,314 177,020 Debt securities in corporations 82,567 70,205 301,881 247,225


50

13. Derivative financial instruments (a)


$’000 $’000 $’000 $’000

Warrants 1,808 2,108 - - Foreign exchange contracts (32,866) (2,176) (32,866) (2,176) Derivative financial (liabilities)/assets (31,058) (68) (32,866) (2,176)

Presented as: Derivative financial assets 1,808 2,108 - - Derivative financial liabilities (32,866) (2,176) (32,866) (2,176)

(31,058) (68) (32,866) (2,176)

(b) Warrants

The Group 2014 2013

$’000 $’000

Warrants due after 12 months 1,808 2,108

(c) Foreign exchange contracts

At 31 December, the contractual amounts and the fair value of the Group and the Company’s outstanding foreign exchange contracts are as follows:

The Group and the Company

Description Contract

notional amount Fair value liabilities 2014 $’000

2013 $’000

2014 $’000

2013 $’000

United States Dollar 974,751 473,726 32,866 2,176

2014 $’000

2013 $’000

Balance at beginning of financial year 2,176 132 Fair value losses recognised in profit or loss 30,690 2,044 Balance at end of financial year 32,866 2,176


51

14. Other assets - current The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Accrued investment income 51,459 42,467 28,814 21,172 Club memberships 105 106 105 106 Due from subsidiary - non-trade - - 52 - Due from intermediate holding company - non-trade - 16 - 16

Due from fellow subsidiary - non-trade 88 182 70 167 Due from related companies - non-trade 28 82 - - Receivable from sale of investment 5,109 4,776 1,928 2,311 Prepayments 5,426 3,307 3,641 2,674 Other receivables 577 1,636 524 866

62,792 52,572 35,134 27,312

Amounts due from subsidiary, fellow subsidiaries, related companies and intermediate holding company are unsecured, non-interest bearing and repayable on demand.

15. Loans - current The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Loans secured on properties 378 418 - - Cash and non-forfeiture loans on

policies within the surrender value 232,914 230,563 36,574 32,793 Other secured loans 350 338 - - Unsecured loans 6 38 6 38

233,648 231,357 36,580 32,831

16. Investment properties (a) The Group

Freehold land Buildings Total

$’000 $’000 $’000 2014 Cost At 1 January 2014 3,685 21,874 25,559 Currency translation differences (62) (127) (189) Transfer to property, plant and equipment (Note 18(a)) 3 19 22 At 31 December 2014 3,626 21,766 25,392

Accumulated depreciation At 1 January 2014 - 5,537 5,537 Currency translation differences - (14) (14) Depreciation charge (Note 6(e)) - 339 339 At 31 December 2014 - 5,862 5,862

Net book value at 31 December 2014 3,626 15,904 19,530


52

16. Investment properties (continued) (a) The Group (continued)


$’000 $’000 $’000 2013 Cost At 1 January 2013 8,165 46,909 55,074 Currency translation differences (280) (1,122) (1,402) Transfer to property, plant and equipment (Note 18(a)) (4,200) (22,307) (26,507) Disposals - (1,606) (1,606) At 31 December 2013 3,685 21,874 25,559

Accumulated depreciation At 1 January 2013 - 10,870 10,870 Currency translation differences - (234) (234) Transfer to property, plant and equipment (Note 18(a)) - (5,848) (5,848) Depreciation charge (Note 6(e)) - 852 852 Disposals - (103) (103) At 31 December 2013 - 5,537 5,537

Net book value at 31 December 2013 3,685 16,337 20,022

The following amounts are recognised in profit or loss: The Group 2014 2013 $’000 $’000 Rental income (net) 1,734 2,780 Direct operating expenses arising from: - Investment properties that generate rental income (1,920) (1,770) - Investment properties that do not generate rental income (1,553) (723)

(b) The Company


$’000 $’000 $’000 2014 Cost At 1 January 2014 and 31 December 2014 59 14,433 14,492

Accumulated depreciation At 1 January 2014 - 4,798 4,798 Depreciation charge (Note 6(e)) - 288 288 At 31 December 2014 - 5,086 5,086

Net book value at 31 December 2014 59 9,347 9,406


53

16. Investment properties (continued) (b) The Company (continued)


$’000 $’000 $’000 2013 Cost At 1 January 2013 and 31 December 2013 59 14,433 14,492

Accumulated depreciation At 1 January 2013 - 4,509 4,509 Depreciation charge (Note 6(e)) - 289 289 At 31 December 2013 - 4,798 4,798

Net book value at 31 December 2013 59 9,635 9,694

The following amounts are recognised in profit or loss: The Company 2014 2013 $’000 $’000 Rental income (net) 851 723 Direct operating expenses arising from: - Investment properties that generate rental income (226) (232) - Investment properties that do not generate rental income - -

The fair values of the investment properties for the Group and the Company as at 31 December 2014 were approximately $115,958,000 (2013: $119,235,000) and $68,600,000 (2013: $74,500,000) respectively. Included in the fair values of the investment properties were $115,958,000 (2013: $119,235,000) and $68,600,000 (2013: $74,500,000) attributable to the Life Assurance Fund of the Group and the Company respectively. The investment properties of the Group were valued by independent professional valuers based on the properties’ highest-and-best use using the sales comparison approach at the balance sheet date. These are registered as Level 3 of the fair value measurement hierarchy. Under the sales comparison approach, the recent sale prices of properties in close proximity are adjusted for differences in key attributes such as tenure, location, condition of the properties. The most significant input into this valuation approach is selling price per square foot.


54

17. Investment in a subsidiary The Company

2014 2013 $’000 $’000

(a) Unquoted equity shares, at cost 40,952 40,952

(b) The subsidiary of the Company is as follows:

Name of subsidiary Principal activities

Country of incorporation

and place of business

Cost of investment

% of paid up capital held by the Company

2014 $’000

2013 $’000

2014 %

2013 %

Tokio Marine Life Insurance Malaysia Bhd.* Life assurance Malaysia 40,952 40,952 100 100

* Audited by PricewaterhouseCoopers, Malaysia.

18. Property, plant and equipment (a) The Group

Freehold land

Leasehold land Buildings

Motor vehicles

Furniture and

equipment Total $’000 $’000 $’000 $’000 $’000 $’000

2014 Cost At 1 January 2014 26,823 1,037 51,012 844 11,569 91,285 Currency translation differences (104) (18) (655) (8) (113) (898) Transfer from investment

properties (Note 16(a)) (3) - (19) - - (22) Additions - 695 94 1,399 2,188 Disposals - - - (58) (4) (62) Write offs - - - - (10) (10) At 31 December 2014 26,716 1,019 51,033 872 12,841 92,481

Accumulated depreciation At 1 January 2014 - 96 12,772 462 8,885 22,215 Currency translation

Differences - (2) (231) (4) (97) (334) Depreciation charge (Note 6(e)) - 8 1,435 83 1,046 2,572 Disposals - - - (27) (4) (31) Transfer from investment

properties (Note 16(a)) - - - - - - Write offs - - - - (9) (9) At 31 December 2014 - 102 13,976 514 9,821 24,413

Net book value at

31 December 2014 26,716 917 37,057 358 3,020 68,068


55

18. Property, plant and equipment (continued) (a) The Group (continued)

Freehold land

Leasehold land Buildings

Motor vehicles

Furniture and

equipment Total $’000 $’000 $’000 $’000 $’000 $’000

2013 Cost At 1 January 2013 22,689 1,171 29,149 862 13,242 67,113 Currency translation differences (66) (40) (566) (18) (283) (973) Transfer from investment

properties (Note 16(a)) 4,200 - 22,307 - - 26,507 Additions - - 122 - 1,074 1,196 Disposals - (94) - - (412) (506) Write offs - - - - (2,052) (2,052) At 31 December 2013 26,823 1,037 51,012 844 11,569 91,285

Accumulated depreciation At 1 January 2013 - 95 6,196 367 10,279 16,937 Currency translation

Differences - (5) (213) (6) (239) (463) Depreciation charge (Note 6(e)) - 9 941 101 972 2,023 Disposals - (3) - - (284) (287) Transfer from investment

properties (Note 16(a)) - - 5,848 - - 5,848 Write offs - - - - (1,843) (1,843) At 31 December 2013 - 96 12,772 462 8,885 22,215

Net book value at

31 December 2013 26,823 941 38,240 382 2,684 69,070

(b) The Company

Freehold land Buildings

Motor vehicles

Furniture and

equipment Total $’000 $’000 $’000 $’000 $’000

2014 Cost At 1 January 2014 20,766 12,765 353 4,959 38,843 Additions - - - 353 353 Disposals - - - (4) (4) At 31 December 2014 20,766 12,765 353 5,308 39,192

Accumulated depreciation At 1 January 2014 - 786 285 3,853 4,924 Depreciation charge (Note 6(e)) - 255 47 533 835 Disposals - - - (4) (4) At 31 December 2014 - 1,041 332 4,382 5,755

Net book value at

31 December 2014 20,766 11,724 21 926 33,437


56

18. Property, plant and equipment (continued) (b) The Company (continued)

Freehold

land Buildings Motor

vehicles

Furniture and

equipment Total $’000 $’000 $’000 $’000 $’000

2013 Cost At 1 January 2013 20,766 12,765 353 4,914 38,798 Additions - - - 524 524 Disposals - - - (412) (412) Write offs - - - (67) (67) At 31 December 2013 20,766 12,765 353 4,959 38,843

Accumulated depreciation At 1 January 2013 - 531 224 3,787 4,542 Depreciation charge (Note 6(e)) - 255 61 395 711 Disposals - - - (284) (284) Write offs - - - (45) (45) At 31 December 2013 - 786 285 3,853 4,924

Net book value at

31 December 2013 20,766 11,979 68 1,106 33,919

19. Intangible assets The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

Composition: Bancassurance rights (Note (a)) - 6,987 - - Computer software licences (Note (b)) 1,466 1,093 1,466 1,093 1,466 8,080 1,466 1,093

(a) Bancassurance rights

The Group 2014 $’000

2013 $’000

Cost At 1 January 23,290 24,124 Currency translation differences (399) (834) At 31 December 22,891 23,290

Accumulated amortisation At 1 January 16,303 12,063 Currency translation differences (429) (540) Amortisation charge 7,017 4,780 At 31 December 22,891 16,303

Net book value at 31 December - 6,987


57

19. Intangible assets (continued)

(a) Bancassurance rights (continued)

The Subsidiary entered into a mutually exclusive 5-year bancassurance relationship with a Malaysian bank commencing on 1 July 2010 with an option to extend for a further 5 years at the end of the first term.

(b) Computer software licences

The Group and the Company

2014 $’000

2013 $’000

Cost At 1 January 1,140 447 Additions 691 693 At 31 December 1,831 1,140

Accumulated amortisation At 1 January 47 - Amortisation charge 318 47 At 31 December 365 47

Net book value at 31 December 1,466 1,093

20. Other payables


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Investment creditors 2,119 7,839 38 4,480 Due to related companies - non-trade 2,007 2,233 1,565 2,233 Unclaimed dividend 579 563 579 563 Accrued management expenses 21,963 19,831 5,469 9,681 Rental deposits and advances 1,473 1,353 216 183 GST payables 358 293 358 293 Other non-trade payables 14,758 13,660 10,697 10,290 43,257 45,772 18,922 27,723

Due within 12 months 43,257 45,772 18,922 27,723

Amounts due to related companies are unsecured, non-interest bearing and repayable on demand.


58

21. Deferred income taxes

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


2013 $’000

2014 $’000

2013 $’000

Deferred tax liabilities - Settled after 12 months 320,696 264,740 303,621 243,053

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


2014 $’000

2013 $’000

2014 $’000

2013 $’000

At 1 January 264,740 224,049 243,053 201,783 Currency translation differences (324) (792) - - Transfer from Life Assurance Fund

(Note 5(a) and Note 24) 45,304 51,471 47,578 50,594 Tax charge/(credit) to Life Assurance

Fund (Note 24) 10,647 (9,172) 12,728 (8,668) Tax credit to profit or loss (Note 5(a)) (2) (17) - - Tax charge/(credit) to equity 331 (799) 262 (656) At 31 December 320,696 264,740 303,621 243,053

The movement in deferred tax liabilities (prior to offsetting of balances within the same jurisdiction) during the period is as follows: The Group Deferred tax liabilities

Accelerated tax

depreciation

Fair value

reserve

Other temporary differences Total

$’000 $’000 $’000 $’000 2014 At 1 January 2014 116 31,766 232,858 264,740 Currency translation differences - (172) (14) (186) Transfer from Life Assurance Fund (Note 24) 135 - 45,169 45,304 Tax credit to Life Assurance Fund (Note 24) - 10,647 - 10,647 Tax credit to profit or loss (Note 5(a)) - - (2) (2) Tax charge to equity - 193 - 193 At 31 December 2014 251 42,434 278,011 320,696


59

21. Deferred income taxes (continued)

The Group (continued) Deferred tax liabilities (continued)

Accelerated tax

depreciation

Fair value

reserve


$’000 $’000 $’000 $’000 2013 At 1 January 2013 114 42,407 181,528 224,049 Currency translation differences - (670) (122) (792) Transfer from Life Assurance Fund (Note 24) 2 - 51,469 51,471 Tax charge to Life Assurance Fund (Note 24) - (9,172) - (9,172) Tax credit to profit or loss (Note 5(a)) - - (17) (17) Tax credit to equity - (799) - (799) At 31 December 2013 116 31,766 232,858 264,740

The Company Deferred tax liabilities

Accelerated tax

depreciation

Fair value

reserve


$’000 $’000 $’000 $’000

2014 At 1 January 2014 116 13,593 229,344 243,053 Transfer from Life Assurance Fund (Note 24) 135 - 47,443 47,578 Tax charge to Life Assurance Fund (Note 24) - 12,728 - 12,728 Tax charge to equity - 262 - 262 At 31 December 2014 251 26,583 276,787 303,621

2013 At 1 January 2013 114 22,917 178,752 201,783 Transfer from Life Assurance Fund (Note 24) 2 - 50,592 50,594 Tax charge to Life Assurance Fund (Note 24) - (8,668) - (8,668) Tax credit to equity - (656) - (656) At 31 December 2013 116 13,593 229,344 243,053

22. Staff retirement benefits The Group The Company

2014 $’000

2013 $’000

2014 $’000

2013 $’000

At 1 January 369 285 239 133 Currency translation differences (2) (5) - - Amount paid during the financial year - (25) - - Increase in provision for the financial

year 139 114 130 106 At 31 December 506 369 369 239

Due after 12 months 506 369 369 239


60

23. Agents’ retirement benefits


2014 $’000

2013 $’000

2014 $’000

2013 $’000

At 1 January 10,575 10,467 831 880 Currency translation differences (167) (332) - - Amount paid during the financial year (904) (1,080) (153) (92) Increase in provision for the financial

year 1,697 1,520 76 43 At 31 December 11,201 10,575 754 831

Due within 12 months 1,352 1,261 - - Due after 12 months 9,849 9,314 754 831

24. Life Assurance Fund (a) The Group

Unallocated surplus

Policy liabilities

Fair value reserve Total

$'000 $'000 $’000 $’000 2014 At 1 January 2014 275,779 4,830,136 317,596 5,423,511

Currency translation differences (1,925) (35,657) (3,197) (40,779) Fair value gains on Financial assets,

available-for-sale (Note 10) - - 126,948 126,948 Fair value changes transferred to profit or

loss on disposal during the financial year (Note 6(c)) - - (42,642) (42,642)

Tax on fair value changes (Note 21) - - (10,647) (10,647) Net gains recognised directly in Life

Assurance Fund - - 73,659 73,659 Change in Life Assurance Fund - Due to assumption changes - 4,252 - 4,252 - Due to risk free rate changes - 3,940 - 3,940 - Due to movement during the year 73,906 1,000,624 - 1,074,530

Change in Life Assurance Fund 73,906 1,008,816 - 1,082,722 Deferred tax expense (133) (45,171) - (45,304) Income tax expense (6,414) (12,232) - (18,646) At 31 December 2014 341,213 5,745,892 388,058 6,475,163


61

24. Life Assurance Fund (continued) (a) The Group (continued)

Unallocated surplus

Policy liabilities


$’000 $’000 $’000 $’000 2013 At 1 January 2013 221,614 4,408,381 395,744 5,025,739

Currency translation differences (2,401) (68,795) (7,138) (78,334) Fair value loss on Financial assets,

available-for-sale (Note 10) - - (23,725) (23,725) Fair value changes transferred to profit or


Tax on fair value changes (Note 21) - - 9,172 9,172 Net loss recognised directly in Life

Assurance Fund - - (71,010) (71,010) Change in Life Assurance Fund - Due to assumption changes - 2,833 - 2,833 - Due to risk free rate changes - (19,802) - (19,802) - Due to movement during the year 61,912 573,092 - 635,004

Change in Life Assurance Fund 61,912 556,123 - 618,035 Transfer from equity 2,000 - - 2,000 Deferred tax expense (196) (51,275) - (51,471) Income tax expense (7,150) (14,298) - (21,448) At 31 December 2013 275,779 4,830,136 317,596 5,423,511

Included in the Life Assurance Fund are the unallocated surplus and fair value reserves of $361,516,000 (2013: $281,912,000) of the non-participating and investment-linked funds that are attributable to shareholders.

(b) The Company

Unallocated surplus

Policy liabilities


$’000 $’000 $’000 $’000 2014 At 1 January 2014 204,907 2,877,314 110,164 3,192,385

Fair value gains on Financial assets,

available-for-sale (Note 10) - - 142,502 142,502 Fair value changes transferred to profit or


Tax on fair value changes (Note 21) - - (12,728) (12,728) Net gains recognised directly in Life

Assurance Fund - - 101,474 101,474 Change in Life Assurance Fund - Due to assumption changes - 2,964 - 2,964 - Due to risk free rate changes - 3,023 - 3,023 - Due to movement during the year 41,530 890,484 - 932,014

Change in Life Assurance Fund 41,530 896,471 - 938,001 Deferred tax expense - (47,578) - (47,578) Income tax expense (5,530) (2,915) - (8,445) At 31 December 2014 240,907 3,723,292 211,638 4,175,837


62

24. Life Assurance Fund (continued) (b) The Company (continued)

Unallocated surplus

Policy liabilities


$'000 $'000 $’000 $’000 2013 At 1 January 2013 173,473 2,503,484 175,040 2,851,997

Fair value losses on Financial assets,

available-for-sale (Note 10) - - (32,508) (32,508) Fair value changes transferred to profit or


Tax on fair value changes (Note 21) - - 8,668 8,668 Net losses recognised directly in Life

Assurance Fund - - (64,876) (64,876) Change in Life Assurance Fund - Due to assumption changes - 1,662 - 1,662 - Due to risk free rate changes - (10,823) - (10,823) - Due to movement during the year 34,712 440,088 - 474,800

Change in Life Assurance Fund 34,712 430,927 - 465,639 Transfer from equity 2,000 - - 2,000 Deferred tax expense - (50,594) - (50,594) Income tax expense (5,278) (6,503) - (11,781) At 31 December 2013 204,907 2,877,314 110,164 3,192,385

Included in the Life Assurance Fund are the unallocated surplus and fair value reserves of $254,931,000 (2013: $210,798,000) of the non-participating and investment-linked funds that are attributable to shareholders.

During the prior financial year, there was a transfer from the retained earnings of the Shareholders’ Fund to the Life Assurance Fund of the Brunei Branch of $2,000,000. There was no such transfer in the current financial year.

25. Share capital

The Group and the Company Issued share capital

No. of ordinary stock units Amount

’000 $’000

Beginning and end of financial year 36,000 36,000

All issued ordinary stock units (with no par value) are fully paid.


63

26. Related party transactions (a) Other than disclosed elsewhere in the financial statements, the following

significant transactions took place between the Group, the Company and related parties during the financial year on terms agreed between the parties concerned:


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Office rent paid to a fellow subsidiary 466 202 466 202 Dividend paid to immediate holding

company 4,630 4,629 4,630 4,629 Insurance premium received from a

fellow subsidiary 148 68 148 68 Investment management fees paid to a

fellow subsidiary 3,072 2,943 3,072 2,943 Expenses incurred on behalf by fellow

subsidiaries 1,442 1,508 916 1,494 Expenses incurred on behalf of fellow

subsidiaries 173 116 51 30 Expenses incurred on behalf of

intermediate holding company 87 108 87 108 Staff secondment expense paid to

intermediate holding company 178 212 178 212 Reinsurance premium payable to a fellow

subsidiary - 1,222 - 1,222 Reinsurance claims recoverable from a

fellow subsidiary - 1,650 - 1,650 Guarantee fee paid to an intermediate

holding 103 4 103 4

(b) Key management personnel compensation Key management personnel compensation is analysed as follows:


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Salaries and other short-term employment benefits 958 839 958 839

Directors’ post-employment benefits including contributions to CPF 12 12 12 12

Directors’ fees 282 273 210 210


64

27. Immediate holding company and ultimate holding corporation

The Company’s immediate holding company is Asia General Holdings Limited, incorporated in Singapore. The ultimate holding corporation is Tokio Marine Holdings, Inc incorporated in Japan.

28. Commitments (a) Capital commitments

Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements is as follows:

The Group 2014 2013 $’000 $’000

Capital commitments 47,963 441

(b) Operating lease commitments - where the Group is the lessee

The future minimum lease payables under non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities, are as follows:


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Not later than one year 1,467 1,409 1,360 1,323

Between one and five years 1,717 2,743 1,441 2,518 3,184 4,152 2,801 3,841

Included in operating lease commitments is the lease of the agency office. Rental expense on the lease of agency office amounting $729,000 (2013: $668,000) is recorded under “Commission and agency expenses” on the statement of comprehensive income.

(c) Operating lease commitments - where the Group is the lessor The future aggregate minimum lease receivables under non-cancellable operating

leases contracted for at the balance sheet date but not recognised as receivables are as follows:


2013 $’000

2014 $’000

2013 $’000

Not later than one year 3,746 3,281 848 870

Between one and five years 2,677 1,442 317 833 6,423 4,723 1,165 1,703


65

29. Insurance and financial risk management (A) Insurance risk

The risk under any one life insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits will vary from year to year from the estimate. A more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. Each life insurance company in Singapore is also required to conduct stress testing on the financial condition on an annual basis to assess its ability to withstand adverse deviations in various assumptions. For Malaysia, a dynamic solvency testing is performed annually to monitor its solvency position. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk covered.

(a) Long-term insurance contracts (All insurance contracts other than Group

insurance contracts)

(i) Frequency and severity of claims

For contracts where death is the insured risk, the most significant factors that could increase the overall frequency of claims are epidemics (such as AIDS or SARS) or wide spread changes in lifestyle, such as eating, smoking and exercise habits, resulting in earlier or more claims than expected. For contracts where survival is the insured risk, the most significant factor is continued improvement in medical science and social conditions that would increase longevity.

Undue concentration by amounts could have an impact on the severity of benefit payments on a portfolio basis.


66

29. Insurance and financial risk management (continued)

(A) Insurance risk (continued)

(a) Long-term insurance contracts (All insurance contracts other than Group insurance contracts) (continued)

(i) Frequency and severity of claims (continued)

For non-participating contracts where the benefits are fully guaranteed and future premiums are fixed, there are no mitigating terms and conditions that reduce the insurance risk accepted. For participating contracts, the participating nature of these contracts results in a significant portion of the insurance risk being shared with the policyholders. In addition, for Singapore contracts offering Dread Disease (after 1 July 2003) and stand-alone medical benefits, the Group generally has the right to vary the non-guaranteed future premium rates if claim experience deteriorates in the future.

For investment-linked contracts, the Group charges for mortality and morbidity risks on a monthly basis. It has the right to alter these charges based on its mortality and morbidity experience and hence minimise its exposure to these risks. Delays in implementing increases in charges and market or regulatory restraints over the extent of the increases may reduce its mitigating effect.

The Group manages these risks through its underwriting strategy and reinsurance arrangements. The Group has developed its underwriting strategy for accepting insurance risks, including selection and approval of risks to be insured, use of limits, appropriate risk classification and premium level. For Singapore and Brunei, the Group has a retention limit of up to $1,300,000 on any single life insured who purchased individual life products, with a lower limit of $300,000 applicable to lives who purchased only mass market (as opposed to High Net Worth) products. RGA International Reinsurance Company Ltd remains as the main incumbent reinsurer.


67


(A) Insurance risk (continued)

(a) Long-term insurance contracts (All insurance contracts other than Group insurance contracts) (continued)


For Malaysia, the Group also manages the insurance risk by ceding insurance amounts above retention of RM200,000 (approximately $76,000) per life to reinsurers through traditional reinsurance arrangements. The tables below presents the concentration of insured benefits across three bands of insured benefits per individual life assured, separately for non-linked and investment-linked business. These tables do not include annuity contracts. Singapore

Benefits assured ($’000) per life assured at the end of 2014

Total benefits insured ($’000)

for Non-Linked Business (Singapore) Before Reinsurance After Reinsurance (Estimated) 0 - 500 15,872,421 76.29% 12,503,600 87.93 500 - 1,000 2,135,783 10.27% 1,030,572 7.25% More than 1,000 2,797,015 13.44% 685,685 4.82% Total 20,805,219 100.00% 14,219,857 100.00%

Benefits assured (in terms of Sum at Risk, $’000) per life assured at the end of 2014

Total benefits insured (in terms of Sum at Risk, $’000) for Linked Business (Singapore)

Before Reinsurance After Reinsurance (Estimated)

0 - 100 62,664 40.09% 57,960 44.91% 100 - 200 45,439 29.07% 39,250 30.41% More than 200 48,195 30.84% 31,853 24.68% Total 156,298 100.00% 129,063 100.00%


68

29. Insurance and financial risk management (continued) (A) Insurance risk (continued)


insurance contracts) (continued)


Malaysia

Benefits assured (RM’000) per life assured at the end of 2014

Total benefits insured (RM’000)

for Non-Linked Business (Malaysia) Before Reinsurance After Reinsurance (Estimated) Equivalent Equivalent RM$’000 $’000 RM$’000 $’000 0 - 500 46,924,498 17,784,385 90.58% 38,445,076 14,570,684 93.32% 500 - 1,000 3,547,016 1,344,319 6.85% 2,906,058 1,101,396 4.60% More than 1,000 1,329,132 503,741 2.57% 1,088,953 412,713 2.08% Total 51,800,646 19,632,445 100.00% 42,440,087 16,084,793 100.00%

Benefits assured (RM’000) per life assured at the end of 2014

Total benefits insured (RM’000) for Linked Business (Malaysia)

Before Reinsurance After Reinsurance (Estimated) Equivalent Equivalent RM$’000 $’000 RM$’000 $’000 0 - 100 2,120,393 803,629 60.22% 1,801,159 682,639 59.89% 100 - 200 746,301 282,848 21.19% 633,942 240,264 21.76% More than 200 654,639 248,108 18.59% 556,080 210,755 18.35% Total 3,521,333 1,334,585 100.00% 2,991,181 1,133,658 100.00%

The following table for annuity insurance contracts illustrates the concentration of risk based on three bands that group these contracts in relation to the amount payable per annum as if the annuity were in payment at the year end. The Group does not hold any reinsurance contracts against the liabilities carried for these contracts. Singapore Annuity payable ($’000) per annum per life assured at the end of 2014 0 - 10 5,674 80.65% 10 - 20 665 9.45% More than 20 697 9.90% Total 7,036 100.00%

Malaysia There is no annuity business in force as at 31 December 2014.


69

29. Insurance and financial risk management (continued) (A) Insurance risk (continued)


insurance contracts) (continued)

(ii) Sources of uncertainty in the estimation of future benefit payments and premium receipts

Uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts arises from the unpredictability of long-term changes in overall levels of mortality, morbidity and the variability in contract holder behaviour.

The Group performs regular experience analyses, including mortality, morbidity, investment return, management expenses, and policy persistency. The objective is to compare the current best estimate assumptions with actual experiences, to identify any unexpected changes that would materially impact the Company’s financial position. The Group reviews and updates the assumptions (where the basis are not prescribed) used in the estimation of its insurance contract liabilities regularly to ensure its relevance and appropriateness. In addition, on a yearly basis, the Group also carries out a bonus investigation to ascertain the sustainability of current bonus scales.

(b) Short-term life insurance contracts (Group Insurance Contracts)

(i) Frequency and severity of claims

These contracts are mainly issued to employers as part of their employee benefit plans. The risk of death and disability may be affected by the nature of the industry in which the employer operates, in addition to other factors stated above. The Group manages these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling. The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk. Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew individual polices, it can impose deductibles and it has the right to reject the payment of a fraudulent claim.


70

29. Insurance and financial risk management (continued) (A) Insurance risk (continued) (b) Short-term life insurance contracts (Group Insurance Contracts) (continued)


In addition, an authority table and underwriting guidelines are established to ensure that business underwriting is conducted with appropriate authorisation in accordance to level of seniority in the respective Company.

The reinsurance arrangement includes an excess of loss as the basic reinsurance layer with a retention limit of $100,000 per life for Group Term Life, Personal Accident and Dread Disease benefits. The Group Disability Income benefit is reinsured on a quota share arrangement. These are supplemented by surplus and catastrophe reinsurance cover. Group Insurance business in Malaysia is insignificant.

(ii) Sources of uncertainty in the estimation of future claim payments

Uncertainty in the estimation of future claims payments for short-term life insurance contracts arises from the unpredictability of mortality and morbidity experience for unexpired coverage as at valuation date, and uncertainty over the timing and amount of late reporting of claims that have incurred as at valuation date. The Group analyses each year the loss ratios in recent past in order to refresh the assumption about claims experience of various product lines.

(B) Group Risk Management Policies

The Group being a member of the Tokio Marine Group of Companies takes into consideration the risk management philosophy and business strategy of Tokio Marine Group when managing the risk. The Group aims to assume and manage risks that are consistent with maintaining its internal capital target return and supporting its business objectives. The Group is selective in its approach to risk taking, striking a balance between risk accepted and the reward it can derive from accepting that risk.


71

29. Insurance and financial risk management (continued) (B) Group Risk Management Policies (continued)

The respective Boards of Directors are responsible for the overall establishment, supervision and review of all risk management processes in the Company and Subsidiary. The Boards of Directors are assisted by the respective Risk Management Committees (the “RMC”) chaired by the Chief Executive Officers and comprises senior management in the identification, evaluation and assessment of risks in the Company and Subsidiary.

The Boards of Directors’ responsibilities associated with risk governance include the following: 1. Approving the philosophy to risk management; 2. Establishing risk appetite and limits; 3. Approving Risk Management Policy and other associated policies; 4. Ensuring that systems and controls are in place to manage risks

effectively within the Group according to approved policies; 5. Reviewing risk information presented by the Group’s management; 6. Setting a consistent tone-from-the-top on risk matters.

The Head of Departments of various departments in the Group will assist the RMC in all risk management activities and are responsible for the implementation of any controls, measures or policies put in place by RMC as part of risk management process. The Group’s risks are categorised into broad categories to streamline the risk management processes and are not meant to be restrictive as to the risk identification and evaluation process. The following are the 3 broad categories of risk faced by the Group: 1. Business Risk 2. Operational Risk 3. Financial Risk

Business risk arising from the Group’s business strategy, the environment in which the Group operates, and its ability to provide suitable products and services to customers often have a direct impact on business results should such risks occur and not be mitigated. There is also risk of loss or harm to policyholders arising from undesirable market conduct practices such as fraud committed by the Group and/or its financial adviser representatives, and/or their inability or unwillingness to comply with the requisite market and business conduct requirements. The Group has in place measures to control and optimise the Group’s exposure to business risk in pursuit of the Group’s business objectives.


72

29. Insurance and financial risk management (continued) (B) Group Risk Management Policies (continued)

Operational risk may arise from inadequate or failed internal processes and controls, poor corporate governance or from external events such as sudden disasters crippling the operations of the Group. Such risks, although difficult to quantity, have the potential to impose significant costs upon, and possibly seriously upset, the financial soundness and ongoing business of the Group. Business Continuity Risk is the risk of not being able to resume normal business operation in view of disruption which includes civil, economic, natural disasters etc. Such risks may cause the Group to be unable to continue business as a going concern due to significant financial losses or the destruction of lives and infrastructures arising from natural disasters. The Group has in place measures to control and minimise the Group’s exposure to operational risks. Financial risk pertaining to market risk is kept under close monitoring by the Investment Committee, which is elaborated in the next section. To maintain financial soundness, the Group is using the statutory Risk-based Capital Requirement (“RBC”) as a proxy for capital adequacy assessment. RBC Framework ensures that a company holds the statutory minimum amount of capital to appropriately support its overall business operations in consideration of its size and risk profile. The framework discourages the amount of risk a company can take as it requires a company with a higher amount of risk to hold a higher amount of capital. On risk concentration, extra capital will be held in accordance to the Insurance Regulations when concentration limits are exceeded.

(C) Investment Committees

The Company’s Investment Committee is responsible for managing the Company’s investment activities and has appointed Tokio Marine Asset Management International Pte. Ltd. as the Investment Manager for the non investment-linked funds. The Subsidiary’s investment activities are managed through an in-house investment team headed by the Chief Investment Officer. The Investment Committees are responsible for formulation of the Company’s and Subsidiary’s investment strategy, principles, policies and procedures for the investment function. The Investment Committees set the credit limits and procedures to manage the market and credit risks faced by the Company and Subsidiary.


73

29. Insurance and financial risk management (continued) (C) Investment Committees (continued)

The Company establishes suitable investment limits - Strategic Asset Allocation (“SAA”) for each asset class that are in line with the Company’s broad investment strategy, subject to an overall risk tolerance and requirements from shareholders, regulations and policyholders. The setting of SAA limits pays due regard to asset-liability management, which puts priority on ensuring the ability to pay all contractual policyholder benefits and expense obligations. The primary aim is to generate relatively stable investment returns for the portfolio over the long-term. The SAA limits are reviewed on an annual basis, recognising among other things, changes in business in-force and the economic environment, so as to ensure that they remain appropriate and are consistent with the asset-liability management strategies required to support any new products. The monitoring of market risks include the quantification of the Group’s exposure to interest rate, currency, equity price and credit risks. The Group is exposed to market risk arising from its investment in debt securities, equities and properties. Changes in interest rates, foreign exchange rates, and equity prices will impact the financial positions of the Group as any reaction to market changes will affect the present and future earnings of the Group for the life insurance operations and shareholders’ equity. The Investment Committees are responsible and have oversight over the investment teams to manage market risk actively through setting of investment policy and strategic asset allocation. The investment limits are set and monitored at various levels to ensure that all investment activities are within the guidelines set by the Investment Committees. The following is a brief description of the Group’s various exposures to market risk. The liabilities assumptions used for Asset Liability Management (“ALM”) purpose are the same as those disclosed in Note 3(c) in Assumptions used for insurance contracts. Capital held as a consequence of a mismatch between assets and liabilities are in accordance to the Insurance (Valuation & Capital) Regulations 2004.


74


(C) Investment Committees (continued) (a) Interest rate risk The Group is exposed to interest rate risk primarily through investments in debt instruments. The Group manages the interest rate risk after taking into consideration the underwriting and investment risks. The Company produces a quarterly Investment and ALM report for the Investment Committee to monitor the duration, convexity of its fixed income portfolio and projected policy cash-flow. The Investment Committee of the respective Company and Subsidiary would receive quarterly updated on their exposure to interest rate as part of the fixed income review.

TABLE 29(A): The tables below illustrate the interest rate exposure of the Group’s financial assets and liabilities:

The Group In Singapore Dollar Fixed Rate Floating Rate

Non-Interest Bearing Total

$’000 $’000 $’000 $’000 As at 31 December 2014 FINANCIAL ASSETS Financial assets, held-to-maturity 298,349 - - 298,349 Financial assets, available-for-sale 3,340,694 291,586 2,265,122 5,897,402 Financial assets at fair value through

profit or loss 32,671 - 190,869 223,540 Derivative financial instruments - - 1,808 1,808 Secured loans - - 728 728 Unsecured loans 6 - - 6 Policy loans 36,574 - 196,340 232,914 Reinsurance assets - - 59,417 59,417 Outstanding premium and agents’ balances - - 18,217 18,217 Trade receivables - - 1,668 1,668 Other assets - - 62,792 62,792 Cash and cash equivalents 81,898 - 422,450 504,348 3,790,192 291,586 3,219,411 7,301,189

FINANCIAL LIABILITIES Claims admitted or intimated - - 161,741 161,741 Trade payables - - 136,018 136,018 Other payables - - 43,257 43,257 Derivative financial instruments - - 32,866 32,866

- - 373,882 373,882


75


(C) Investment Committees (continued)

(a) Interest rate risk (continued)

TABLE 29(A): The tables below illustrate the interest rate exposure of the Group’s financial assets and liabilities: (continued)

The Group In Singapore Dollar Fixed Rate Floating Rate


$’000 $’000 $’000 $’000 As at 31 December 2013 FINANCIAL ASSETS Financial assets, held-to-maturity 245,535 - - 245,535 Financial assets, available-for-sale 3,087,325 - 1,779,266 4,866,591 Financial assets at fair value through

profit or loss 27,723 - 230,944 258,667 Derivative financial instruments - - 2,108 2,108 Secured loans - - 756 756 Unsecured loans 38 - - 38 Policy loans 32,792 - 197,771 230,563 Reinsurance assets - - 32,397 32,397 Outstanding premium and agents’ balances - - 18,673 18,673 Trade receivables - - 2,094 2,094 Other assets - - 52,572 52,572 Cash and cash equivalents 75,024 - 313,576 388,600 3,468,437 - 2,630,157 6,098,594

FINANCIAL LIABILITIES Claims admitted or intimated - - 132,244 132,244 Trade payables - - 116,527 116,527 Other payables - - 45,772 45,772 Derivative financial instruments - - 2,176 2,176

- - 296,719 296,719

TABLE 29(A)(i): The tables below illustrate the interest rate exposure of the Company’s financial assets and liabilities:

The Company In Singapore Dollar Fixed Rate Floating Rate


$’000 $’000 $’000 $’000 As at 31 December 2014 FINANCIAL ASSETS Financial assets, available-for-sale 2,238,714 291,586 1,737,793 4,268,093 Financial assets at fair value through

profit or loss - - 41,878 41,878 Unsecured loans 6 - - 6 Policy loans 36,574 - - 36,574 Reinsurance assets - - 57,169 57,169 Outstanding premium and agents’ balances - - 8,779 8,779 Trade receivables - - 1,042 1,042 Other assets - - 35,134 35,134 Cash and cash equivalents 81,898 - 208,565 290,463 2,357,192 291,586 2,090,360 4,739,138 FINANCIAL LIABILITIES Claims admitted or intimated - - 39,390 39,390 Trade payables - - 80,013 80,013 Other payables - - 18,922 18,922 Derivative financial instruments - - 32,866 32,866

- - 171,791 171,791


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(a) Interest rate risk (continued)

TABLE 29(A)(i): The tables below illustrate the interest rate exposure of the Company’s financial assets and liabilities: (continued)

The Company In Singapore Dollar Fixed Rate Floating Rate


$’000 $’000 $’000 $’000 As at 31 December 2013 FINANCIAL ASSETS Financial assets, available-for-sale 1,990,075 - 1,250,426 3,240,501 Financial assets at fair value through

profit or loss - - 33,965 33,965 Unsecured loans 38 - - 38 Policy loans 32,793 - - 32,793 Reinsurance assets - - 31,692 31,692 Outstanding premium and agents’ balances - - 9,756 9,756 Trade receivables - - 1,175 1,175 Other assets - - 27,312 27,312 Cash and cash equivalents 75,024 - 183,807 258,831

2,097,930 - 1,538,133 3,636,063

FINANCIAL LIABILITIES

Claims admitted or intimated - - 30,758 30,758 Trade payables - - 70,807 70,807 Other payables - - 27,723 27,723 Derivative financial instruments - - 2,176 2,176

- - 131,464 131,464

A study of fixed income securities yield movement during the previous periods has been undertaken a 100 bps change in yield across the different curves is considered to be a reasonable basis for interest rate sensitivity analysis. The table below summarises the impact on profit after tax, equity and Life Assurance Fund based on a 100 bps parallel shift in the yield curves:

Singapore Operations

Impact on profit after tax Impact on equity

Impact on Life Assurance Fund

In Singapore Dollar 2014 2013 2014 2013 2014 2013 Change in variables $’000 $’000 $’000 $’000 $’000 $’000 Interest rate +100bps - - (5,898) (5,330) (161,846) (111,731) -100bps - - 5,898 5,330 161,846 111,731

Malaysia Operations

Impact on profit after tax Impact on equity

Impact on Life Assurance Fund

In Singapore Dollar 2014 2013 2014 2013 2014 2013 Change in variables $’000 $’000 $’000 $’000 $’000 $’000 Interest rate +20bps (2013: +20bps) (2) (1) (25) (8) (1,329) (347) -20bps (2013: - 20bps) 2 1 25 8 1,366 340


77


(b) Foreign currency risk The Group is exposed to foreign exchange risk primarily from transactions denominated in foreign currencies pertaining to investment activities. The Investment Committees manage foreign currency risk by setting limits and monitoring the exposure to foreign currency on a regular basis. Currency risk arising from fixed income investments in foreign currency instruments is generally hedged using foreign currency forward exchange contracts to manage these exposures, which are relatively certain in their timing and extent.

TABLE 29(B): The tables below show the foreign exchange position of the Group’s financial assets and liabilities by major currencies:

The Group In Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000 As at 31 December 2014 FINANCIAL ASSETS Financial assets, held-to-maturity - 298,349 - - 298,349 Financial assets, available-for-sale 3,578,738 1,626,068 692,596 - 5,897,402 Financial assets at fair value through

profit or loss 41,878 94,616 - 87,046 223,540 Derivative financial instruments - 1,808 - - 1,808 Secured loans - 728 - - 728 Unsecured loans 6 - - - 6 Policy loans 32,838 196,340 13 3,723 232,914 Reinsurance assets 44,183 2,247 12,982 5 59,417 Outstanding premium and agents’

balances 7,541 9,438 1,144 94 18,217 Trade receivables 847 626 195 - 1,668 Other assets 34,837 27,658 - 297 62,792 Cash and cash equivalents 247,982 213,931 35,590 6,845 504,348

3,988,850 2,471,809 742,520 98,010 7,301,189

FINANCIAL LIABILITIES Claims admitted or intimated 38,781 122,352 - 608 161,741 Trade payables 63,289 56,006 16,452 271 136,018 Other payables 18,787 24,335 - 135 43,257

120,857 202,693 16,452 1,014 341,016

Net financial assets 3,867,993 2,269,116 726,068 96,996 6,960,173 Less: Foreign exchange contracts

(net) - - 707,934 - 707,934 Less: Net financial assets

denominated in the respective entities’ functional currencies 3,864,750 2,269,070 - - 6,133,821

Currency exposure 3,242 46 18,134 96,996 118,418


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(b) Foreign currency risk (continued)

TABLE 29(B): The tables below show the foreign exchange position of the Group’s financial assets and liabilities by major currencies: (continued)

The Group In Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000 As at 31 December 2013 FINANCIAL ASSETS Financial assets, held-to-maturity - 245,535 - - 245,535 Financial assets, available-for-sale 2,456,744 1,622,685 787,162 - 4,866,591 Financial assets at fair value through

profit or loss 33,965 142,168 - 82,534 258,667 Derivative financial instruments - 2,108 - - 2,108 Secured loans - 756 - - 756 Unsecured loans 38 - - - 38 Policy loans 29,435 197,770 30 3,328 230,563 Reinsurance assets 20,810 705 10,882 - 32,397 Outstanding premium and agents’

balances 8,423 8,917 1,192 141 18,673 Trade receivables 990 919 185 - 2,094 Other assets 26,912 25,260 - 400 52,572 Cash and cash equivalents 251,182 129,832 1,673 5,913 388,600

2,828,499 2,376,655 801,124 92,316 6,098,594

FINANCIAL LIABILITIES Claims admitted or intimated 30,426 101,487 - 331 132,244 Trade payables 57,377 45,733 13,317 100 116,527 Other payables 27,209 18,049 - 514 45,772

115,012 165,269 13,317 945 294,543

Net financial assets 2,713,487 2,211,386 787,807 91,371 5,804,051 Less: Foreign exchange contracts


denominated in the respective entities’ functional currencies 2,710,086 2,211,338 - - 4,921,424

Currency exposure 3,401 48 410,427 91,371 505,247


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TABLE 29(B)(i): The tables below show the foreign exchange position of the Company’s financial assets and liabilities by major currencies:

The Company In Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000 As at 31 December 2014 FINANCIAL ASSETS Financial assets, available-for-sale 3,575,497 - 692,596 - 4,268,093 Financial assets at fair value through

profit or loss 41,878 - - - 41,878 Unsecured loans 6 - - - 6 Policy loans 32,838 - 13 3,723 36,574 Reinsurance assets 44,182 - 12,982 5 57,169 Outstanding premium and agents’

balances 7,541 - 1,144 94 8,779 Trade receivables 847 - 195 - 1,042 Other assets 34,837 - - 297 35,134 Cash and cash equivalents 247,982 46 35,590 6,845 290,463

3,985,608 46 742,520 10,964 4,739,138

FINANCIAL LIABILITIES Claims admitted or intimated 38,781 - - 609 39,390 Trade payables 63,290 - 16,452 271 80,013 Other payables 18,787 - - 135 18,922

120,858 - 16,452 1,015 138,325

Net financial assets 3,864,750 46 726,068 9,949 4,600,813 Less: Foreign exchange contracts


denominated in the Company’s functional currency 3,864,750 - - - 3,864,750

Currency exposure - 46 18,134 9,949 28,129


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TABLE 29(B)(i): The tables below show the foreign exchange position of the Company’s financial assets and liabilities by major currencies: (continued)

The Company In Singapore Dollar SGD RM USD Others Total

$’000 $’000 $’000 $’000 $’000 As at 31 December 2013 FINANCIAL ASSETS Financial assets, available-for-sale 2,453,339 - 787,162 - 3,240,501 Financial assets at fair value through

profit or loss 33,965 - - - 33,965 Unsecured loans 38 - - - 38 Policy loans 29,435 - 30 3,328 32,793 Reinsurance assets 20,810 - 10,882 - 31,692 Outstanding premium and agents’

balances 8,423 - 1,192 141 9,756 Trade receivables 990 - 185 - 1,175 Other assets 26,912 - - 400 27,312 Cash and cash equivalents 251,182 63 1,673 5,913 258,831

2,825,094 63 801,124 9,782 3,636,063

FINANCIAL LIABILITIES Claims admitted or intimated 30,426 - - 332 30,758 Trade payables 57,373 17 13,317 100 70,807 Other payables 27,209 - - 514 27,723

115,008 17 13,317 946 129,288

Net financial assets 2,710,086 46 787,807 8,836 3,506,775 Less: Foreign exchange contracts


denominated in the Company’s functional currency 2,710,086 - - - 2,710,086

Currency exposure - 46 410,427 8,836 419,309

(c) Equity price risk The Group is exposed to equity price risk primarily through its investments in quoted equities instruments. The Group is directly exposed to equity price risk for investments made and bears all or most of the volatility in returns and investment performance risk. Equity price risk also exists in investment-linked products which are borne directly by the policyholders. The impact to the Group is that the revenues of the insurance operations (management fees) are linked to the value of the underlying investment-linked products.


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(c) Equity price risk (continued)

The Group has determined the target percentage of equity exposure to the total investment portfolio. The Group’s investment in equity must be within the Tactical Asset Allocation boundaries approved by the Investment Committees. In addition, the Investment Committees also set and monitor limits for exposure to various sectors of the equity market. The table below summarises the Group’s and Company’s exposure to the equity securities across different markets.


2014

% 2013

% 2014

% 2013

% Market Singapore Exchange 58 42 80 65 KLSE 23 30 - -

Others including unlisted

equities 19 28

20 35 Total 100 100 100 100

(i) Sensitivity analysis

The analysis below is performed for reasonable possible movements in key variables with all other variables constant. In practice, the estimated future change may not be accurate particularly in periods of market turmoil. Actual results may differ substantially from these estimates.

The Group invests primarily in the Singapore and Asian stock markets for its Singapore operations and Malaysia and Asian stock market for its Malaysia operations. Therefore the Group has chosen MCSI Singapore, MCSI Asia Ex-Japan and KLSE index as representative market indices for all the equities held on the balance sheet date. In this analysis, equity and index exposures are grouped by appropriate market indices, as determined by the Group, and the applicable shock is applied to each market exposure. In addition, the Group makes adjustments or assumptions where it determines this to be necessary or appropriate.


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(c) Equity price risk (continued) (i) Sensitivity analysis (continued)

The Singapore Operations has approximately 10% of its overseas assets that have foreign currency exposure. The exposure to Singapore Dollar (SGD) for the subsidiary, Malaysian Ringgit (MYR) for the Company and other currencies for the Group at Group level relating to investment securities are not material. As the Group also invests in bonds, a study of movement in risk-free rate is undertaken for all the bonds held on the balance sheet date. For investment-linked funds, the risk exposure for the Group is limited only to the underwriting aspect as all investment risks are borne by the policyholders. The table below summarises the Group’s sensitivity analysis based on investment holdings as of 31 December 2014. The parameters used are for illustration purpose only.

Singapore Operations

Impact on

profit after tax Impact on equity Impact on

Life Assurance Fund In Singapore Dollar 2014 2013 2014 2013 2014 2013 Change in variables $’000 $’000 $’000 $’000 $’000 $’000 Equities +10% MSCI Singapore - - 117 - 103,275 71,229 -10% MSCI Singapore - - (117) - (103,275) (71,229) +10% MSCI Asia Ex

Japan - - 261 228 46,506 40,935 -10% MSCI Asia Ex Japan - - (261) (228) (46,506) (40,935)

Malaysia Operations

Impact on

profit after tax Impact on equity Impact on

Life Assurance Fund In Singapore Dollar 2014 2013 2014 2013 2014 2013 Change in variables $’000 $’000 $’000 $’000 $’000 $’000 Equities +10% Change in KLSE

Index (2013: +10%) - - 149 54 63,179 64,840 -10% Change in KLSE

Index (2013: -10%) - - (149) (54) (63,179) (64,840)


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(d) Alternative investment risk The Group is exposed to alternative investment risk through investments in direct real estate investments in Singapore and Malaysia, but the exposure is minimal. (e) Credit risk

The Group is exposed to credit risk through (i) investments in cash, money market and debt instruments (ii) lending activities (iii) exposure to counterparty’s credit in group and reinsurance contracts. For all three types of exposures, financial loss may materialise as a result of default by the borrower or counterparty. For investments in cash, money market and debt instruments, financial loss may also materialise as a result of a default by the issuer on coupon payment or even the principal amount that causes a widening of credit spread or a downgrade of credit rating. The Group has internal limits by issuer or counterparty and by investment grades. These limits are actively monitored to manage the credit and concentration risk. These limits are reviewed on a regular basis by the Investment Committees.

The creditworthiness of reinsurers is assessed on an annual basis by reviewing their financial strength through published credit ratings and other publicly available financial information. The Group manages its lending activities by extending loans against collateral pledged to the Group. Regular monitoring and review of the payments of loans are performed by the Group to identify any non-performing loan. Any non-performing loan identified is communicated to the management. Based on the suggestions from the management on the possible course of recovery and provision of these loans, appropriate action is taken.


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(e) Credit risk (continued)

The table below shows the maximum exposure to credit risk for the components of the balance sheet. The table also provides information regarding the credit risk exposure of the Group by classifying assets according to the Group’s credit ratings of counterparties.

TABLE 29(C): The tables below show the credit ratings of financial assets held by the Group:

Neither past-due nor impaired Past due

or impaired Total

Investment Grade*

(AAA to A-)

Investment Grade* (BBB to

BB+)

Non Investment

Grade* (BB to C) Not Rated

Not Rated

The Group $’000 $’000 $’000 $’000 $’000 $’000 In Singapore Dollar As at 31 December 2014 HTM1 - Government and public

authority securities 3,763 - - 215,133 - 218,896 HTM - Unquoted debentures in

corporations 79,453 - - - - 79,453 AFS2 - Quoted government and public

authority securities 550,490 78,983 9,479 578,934 - 1,217,886 AFS - Quoted debentures 1,314,734 400,975 - 700,152 - 2,415,861 AFS - Equities: - - - 1,989,624 274,031 2,263,655 FVTPL3 - Unquoted debentures 32,671 - - - - 32,671 FVTPL - Equities - - - 190,869 - 190,869 Derivative financial instruments - - - 1,808 - 1,808 Secured loans - - - 728 - 728 Unsecured loans - - - 6 6 Policy loans - - - 232,914 - 232,914 Reinsurance assets - - - 59,417 - 59,417 Trade receivables - - - 626 1,042 1,668 Outstanding premium and agents’

balances - - - - 18,217 18,217 Other assets - - - 62,792 - 62,792 Cash and cash equivalents 259,741 30,076 - 214,531 - 504,348

2,240,852 510,034 9,479 4,247,534 293,290 7,301,189

1 “HTM” refers to financial assets, held-to-maturity 2 “AFS” refers to financial assets, available-for-sale 3 “FVTPL” refers to financial assets at fair value through profit or loss


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TABLE 29(C): The tables below show the credit ratings of financial assets held by the Group: (continued)


or impaired Total

Investment Grade*

(AAA to A-)


BB+)

Non Investment


Not Rated

The Group $’000 $’000 $’000 $’000 $’000 $’000 In Singapore Dollar As at 31 December 2013 HTM4 - Government and public

authority securities 3,816 - - 174,478 - 178,294 HTM - Unquoted debentures in

corporations 67,241 - - - - 67,241 AFS5 - Quoted government and public

authority securities 550,880 39,876 15,746 574,004 - 1,180,506 AFS - Quoted debentures 1,157,726 226,433 5,448 517,211 - 1,906,818 AFS - Equities - - - 1,589,277 189,990 1,779,267 FVTPL6 - Unquoted debentures 27,723 - - - - 27,723 FVTPL - Equities - - - 230,944 - 230,944 Derivative financial instruments - - - 2,108 - 2,108 Secured loans - - 756 - 756 Unsecured loans - - - 38 - 38 Policy loans - - - 230,563 - 230,563 Reinsurance assets - - - 32,397 - 32,397 Trade receivables - - - 919 1,175 2,094 Outstanding premium and agents’

balances - - - - 18,673 18,673 Other assets - - - 52,572 - 52,572 Cash and cash equivalents 220,181 38,523 - 129,896 - 388,600

2,027,567 304,832 21,194 3,535,163 209,838 6,098,594

4 “HTM” refers to financial assets, held-to-maturity 5 “AFS” refers to financial assets, available-for-sale 6 “FVTPL” refers to financial assets at fair value through profit or loss


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(C) Investment Committees (continued)


TABLE 29 (C)(i): The tables below show the credit ratings of financial assets held by the Company:


or impaired Total

Investment Grade*

(AAA to A-)


BB+)

Non Investment


Not Rated

The Company $’000 $’000 $’000 $’000 $’000 $’000 In Singapore Dollar As at 31 December 2014 AFS8 - Quoted government and public

authority securities 514,356 78,983 9,479 271,332 - 874,150 AFS8 - Quoted debentures 575,441 400,975 - 679,734 - 1,656,150 AFS8 - Equities - - - 1,543,043 194,750 1,737,793 FVTPL9 - Equities - - - 41,878 - 41,878 Unsecured loans - - - 6 - 6 Policy loans - - - 36,574 - 36,574 Reinsurance assets - - - 57,169 - 57,169 Trade receivables - - - - 1,042 1,042 Outstanding premium and agents’

balances - - - - 8,779 8,779 Other assets - - - 35,134 - 35,134 Cash and cash equivalents 259,741 30,076 - 646 - 290,463

1,349,538 510,034 9,479 2,665,516 204,571 4,739,138

As at 31 December 2013 AFS8 - Quoted government and public

authority securities 513,941 39,876 15,746 276,598 - 846,161

AFS8 - Quoted debentures 414,102 226,433 5,448 497,930 - 1,143,913 AFS8 - Equities - - - 1,123,376 127,051 1,250,427 FVTPL9 - Equities - - - 33,965 - 33,965 Unsecured loans - - - 38 - 38 Policy loans - - - 32,793 - 32,793 Reinsurance assets - - - 31,692 - 31,692 Trade receivables - - - - 1,175 1,175 Outstanding premium and agents’

balances - - - - 9,756 9,756 Other assets - - - 27,312 - 27,312 Cash and cash equivalents 220,181 38,523 - 127 - 258,831

1,148,224 304,832 21,194 2,023,831 137,982 3,636,063

_______________________ 8 “AFS” refers to financial assets, available-for-sale 9 “FVTPL” refers to financial assets at fair value through profit or loss


87


(e) Credit risk (continued) The financial assets, available-for-sale, which are not rated comprise mainly bonds issued by statutory authorities or companies listed on the Singapore Stock Exchange or the Kuala Lumpur Stock Exchange. The issues were not rated as the issuer did not obtain any credit rating from the respective rating agencies during the launch. Such issues although not rated are issued by companies which have sound financial and high credit worthiness. The credit worthiness is monitored by the investment manager through alert via Bloomberg on any downgrade news related to any investment in the debt portfolio. The Group’s business portfolio includes mortgage loans as well as other unsecured loans to staff or advisers. Mortgage loans are generally secured by collateral. The amount of loan is based on the valuation of collateral as well as an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of the types of collateral and the valuation parameters. The fair value of collaterals, held by the Group as lender, for which it is entitled to sell or pledge in the event of default is as follows:

TABLE 29(D): The tables below show the status of loans given by the Group:

The Group

Type of collaterals

Carrying amount of loans

Fair value of collaterals

$’000 $’000 As at 31 December 2014 Loan secured by properties Properties 378 724 Secured loans Computers 350 - Unsecured loans - 6 - 734 724

As at 31 December 2013 Loan secured by properties Properties 418 1,455 Secured loans Computers 338 - Unsecured loans - 38 - 794 1,455


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TABLE 29(D)(i): The tables below show the status of loans given by the Company:

Financial assets of the Group (including AFS - unquoted debentures, outstanding premium and agents’ balances, loan secured by properties and trade receivables) are neither past due nor impaired except for $19,259,000 (2013: $19,848,000) which are past due but not impaired; and $855,000 (2013: $817,000) which are past due and impaired. Financial assets of the Company (including AFS - unquoted debentures, outstanding premium and agents’ balances, loan secured by properties and trade receivables) are neither past due nor impaired except for $9,821,000 (2013: $10,931,000) which are past due but not impaired; and $315,000 (2013: $421,000) which are past due and impaired. In respect of those financial assets which are past due but not impaired, there was no objective evidence that the amount due cannot be collected. The objective evidence includes significant financial difficulties of the counterparty and the probability that the counterparty will enter bankruptcy.

(f) Fair value measurements The following table presents the assets and liabilities measured at fair value and classified by level of the following fair value measurement hierarchy: (a) Quoted prices (unadjusted) in active markets for identical assets or

liabilities (Level 1); (b) Inputs other than quoted prices included within Level 1 that are

observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and

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

The Company Type of

collaterals

Carrying amount of loans

Fair value of collaterals

$’000 $’000 As at 31 December 2014 Unsecured loans - 6

As at 31 December 2013 Unsecured loans - 38 -


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(C) Investment Committees (continued) (f) Fair value measurements (continued)

Level 1 Level 2 Level 3 Total The Group $’000 $’000 $’000 $’000

As at 31 December 2014 Financial assets, available-for-sale 2,194,988 3,699,590 2,824 5,897,402 Financial assets at fair value though profit or loss 59,885 163,655 - 223,540 Financial assets held-to-maturity - 298,349 - 298,349 Derivatives financial instruments 1,808 - - 1,808 Total assets 2,256,681 4,161,594 2,824 6,421,099

Derivative financial instruments - 32,866 - 32,866 Total liabilities - 32,866 - 32,866

As at 31 December 2013 Financial assets, available-for-sale 2,055,160 2,805,639 5,792 4,866,591 Financial assets at fair value though profit or loss 113,270 145,303 94 258,667 Financial assets held-to-maturity - 245,535 - 245,535 Derivatives financial instruments 2,108 - - 2,108 Total assets 2,170,538 3,196,477 5,886 5,372,901


The Company As at 31 December 2014

Financial assets, available-for-sale 1,697,261 2,570,813 19 4,268,093 Financial assets at fair value though profit or loss - 41,878 - 41,878

Total assets 1,697,261 2,612,691 19 4,309,971

Derivative financial instruments - 32,866 - 32,866

Total liabilities - 32,866 - 32,866

As at 31 December 2013

Financial assets, available-for-sale 1,558,424 1,682,059 18 3,240,501 Financial assets at fair value though profit or loss - 33,965 - 33,965

Total assets 1,558,424 1,716,024 18 3,274,466


The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the last current bid prices. These instruments are included in Level 1.


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(f) Fair value measurements (continued)

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group 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 to estimate fair value for long-term debt for disclosure purposes. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date. These investments are included in Level 2 and comprise debt investments and derivative financial instruments. In infrequent circumstances, where a valuation technique for these instruments is based on significant unobservable inputs, such instruments are included in Level 3.

The following table presents the changes in Level 3 instruments:


2014 $’000

2013 $’000

2014 $’000

2013 $’000

Balance at beginning of financial year 5,886 2,386 18 205 Currency translation differences (100) (76) - -

Purchases 612 2,511 - - Disposals (1,395) (1,761) - (47) Fair value gains/(losses) recognised in:

- other comprehensive income 1 (140) 1 (140) - profit or loss (2,180) 2,966 - - Balance at end of financial year 2,824 5,886 19 18

Total gains/(losses) for the period included in profit or loss for assets and liabilities held at the end of financial year (2,180) 2,966 - -

During the financial years ended 31 December 2014 and 2013, there is no transfer of investments between Level 1 and 2 and in and out of Level 3 of the fair value hierarchy. The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated based on quoted market prices for dealer quotes for similar instruments by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of current borrowings approximates their carrying amount.


91


(g) Offsetting financial assets and financial liabilities

The Group and the Company has the following financial instruments subject to enforceable master netting arrangements or similar agreement as follows:

Derivative financial liabilities

$’000 The Group and the Company 31 December 2014 Gross amount 32,868 Less: Gross amount set off in balance sheet (2) Net amount presented in balance sheet 32,866 Net exposure 32,866

The Group and the Company 31 December 2013 Gross amount 2,902 Less: Gross amount set off in balance sheet (726) Net amount presented in balance sheet 2,176 Net exposure 2,176

(h) Investment in funds

The funds invested in by the Group may utilise a variety of financial instruments in their trading strategies, including equity and debt securities as well as an array of derivative instruments. Several of these financial instruments contain varying degrees of off-balance sheet risk whereby changes in market values of the securities underlying the financial instruments may be in excess of the amounts recorded on each portfolio fund’s statement of financial position. However, as the Group has limited interests in these funds, the Group’s risk with respect to such transactions is limited to its capital balance in each fund.


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(h) Investment in funds (continued)

The Group’s holding in a fund, as a percentage of the fund’s total net asset value, will vary from time to time dependent on the volume of subscriptions and redemptions at the fund level. It is possible that the Group may, at any point in time, hold a majority of a fund’s total units in issue. The Group’s maximum exposure to loss from its interests in fund is equal to the total fair value of its investments in the funds. Once the Group has disposed of its shares/units in a portfolio fund, the Group ceases to be exposed to any risk from that fund. The following table summarise the Group’s holdings in funds by risk of concentration with respect to geographic region and investment strategy of the funds:

% of the investment

in funds

Market Value

(S$’000) The Group 31 December 2014 Investment strategy Long only 100% 508,535

Geography Singapore 0.3% 1,541 Malaysia 8.9% 45,164 Asia 87.9% 446,996 Others 2.9% 14,834 100.0% 508,535


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(h) Investment in funds (continued)

The following table summarise the Company’s holdings in funds by risk of concentration with respect to geographic region and investment strategy of the funds:

% of the investment

in funds

Market Value

(S$’000) The Company 31 December 2014 Investment strategy Long only 100.0% 375,556

Geography Singapore 0.4% 1,541 Asia 95.8% 359,950 Others 3.8% 14,065 100.0% 375,556

30. Capital management

The Group’s capital management objective is to hold sufficient capital in order to � Ensure obligations to policyholders are met with a high degree of certainty. � Provide capacity to take risk and generate a reasonable return on capital

for shareholders. � Fulfill expectations of regulators and rating agencies about the Company’s

capital adequacy. The Group currently uses capital requirements under the respective regulatory regimes it operates in as a proxy for capital adequacy assessment. Each regime prescribes a minimum amount of capital that must be held to fulfil statutory solvency requirements in each country that it operates in and must be met at all times throughout the year. As part of the statutory requirements, the Company and its Malaysian subsidiary report their capital position quarterly. Internally, the Group also sets its own minimum capital position with consideration for the above objectives.


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30. Capital management (continued) In Singapore, under the Risk-based Capital Framework regulated by the Monetary Authority of Singapore (MAS), the minimum capital adequacy ratio is 120%. As at 31 December 2014, the capital adequacy ratio is 239% (2013: 245%), which is the ratio of available capital of $1,903 million (2013: $1,568 million) to the total risk requirement of $796 million (2013: $640 million). The current internal target is minimum capital adequacy ratio of 200% under normal circumstances. In Malaysia, under the Risk-based Capital Framework regulated by the Bank Negara Malaysia (BNM), the minimum requirement for each insurance entity is 130%. As at 31 December 2014, the capital adequacy ratio is 287% (2013: 297%), which is the ratio of available capital of $889 million (2013: $946 million) to the total risk requirement of $310 million (2013: $318 million). The current internal target is capital adequacy ratio of 185%. Liquidity Risks Liquidity risk arises when a company is unable to meet its obligations on a timely basis; especially so when the investment portfolio is largely made up of illiquid assets. Under normal circumstances, the liquidity demands of an insurance company are often determined through ongoing operations, continuous premium income, sale of disposable assets and borrowings. For insurers, the expected liquidity needs are often determined through projection of outflows from the in-force insurance policy contract liabilities; the liabilities include renewal commissions, claims and other benefits (maturity and surrender). While the nature of these outflows is deemed to be largely stable and can be assumed at outset, the Group remains susceptible to exceptional experiences (surrender or catastrophic events) for its insurance portfolio. Also, companies may be subject to unexpected liquidity tightening due to adverse implications from the wider economic factors (domestic or global) or undue volatilities and unexpected losses experienced within investments. Liquidity risk is reduced by having insurance contract liabilities that are well diversified by product and policyholder. The Group designs insurance products to encourage policyholders to maintain their policies in-force, thereby generating a diversified and stable flow of recurring premium income. The Group adopts prudent liquidity risk management by monitoring daily operating liquidity and cash movements to ensure liquidity is available and cash is employed optimally. The Group has cash and cash equivalents of $504 million (2013: $389 million) to meet its liquidity requirements.


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30. Capital management (continued)

Liquidity Risks (continued)

The following table shows the contractual maturity profile of the Group’s financial liabilities. As all the financial liabilities are current, the carrying value approximates the undiscounted cash flows.

The Group

In Singapore Dollar (millions) 2014 <1 Year 1- 5 years > 5 years

Claims admitted or intimated 162 - -

Trade payables 136 - -

Other payables 43 - -

In Singapore Dollars (millions) 2013




The Company

In Singapore Dollar (millions) 2014 <1 Year 1- 5 years > 5 years

Claims admitted or intimated 39 -

Trade payables 80 -

Other payables 19 -

In Singapore Dollars (millions) 2013




The following table shows the expected contractual maturity profile of the Group’s insurance contract liabilities. All insurance contract liabilities values are approximates of the undiscounted cash flows and are net of reinsurance assets.

In Singapore Dollars (millions) 2014 <1 Year 1- 5 years > 5 years

Insurance contract liabilities 205 (72) (26,045)

In Singapore Dollars (millions) 2013 <1 Year 1- 5 years > 5 years

Insurance contract liabilities (100) (33) (21,690)


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30. Capital management (continued)

Liquidity Risks (continued) Demands for funds can usually be met through ongoing normal operations, premiums received, sale of assets or borrowings. Unexpected demands for liquidity may be triggered by negative publicity, deterioration of the economy, reports of problems in other companies in the same or similar lines of business, unanticipated policy claims, or other unexpected cash demands from policyholders. Expected liquidity demands are managed through a combination of treasury, investment and asset-liability management practices, which are monitored on an ongoing basis. Actual and projected cash inflows and outflows are monitored and a reasonable amount of assets are kept in liquid instruments at all times. The projected cash flows from the in-force insurance policy contract liabilities consist of renewal premiums, commissions, claims, maturities and surrenders. Renewal premiums, commissions, claims and maturities are generally stable and predictable. Surrenders can be more uncertain although it has been quite stable over the past several years. Unexpected liquidity demands are managed through a combination of product design, diversification limits, investment strategies and systematic monitoring. The existence of surrender penalty in insurance contracts also protects the Group from losses due to unexpected surrender trends as well as reduces the sensitivity of surrenders to changes in interest rates.

31. Net fair values of financial assets and liabilities The financial assets and the financial liabilities of the Group and the Company

comprise current assets (except tax recoverable and prepayments), loans, financial assets at fair value through profit or loss, financial assets available-for-sale, financial assets held-to-maturity, derivative financial instruments, current liabilities (except current tax liabilities), staff retirement benefits and agents’ retirement benefits. The fair values of these financial assets and liabilities (except held-to-maturity financial assets) at 31 December 2014 approximate their carrying amounts as shown in the balance sheet. The fair values of held-to-maturity financial assets are disclosed in Note 12.


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32. Dividends

The Group

and the Company

2014 $’000

2013 $’000

Ordinary dividends paid Final dividend paid in respect of the previous

financial year of $0.15 per share 5,400 5,400

At the next Annual General Meeting, a final dividend of $0.15 per ordinary stock amounting to $5,400,000 will be recommended. These financial statements do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the financial year ending 31 December 2015.

33. New accounting standards and interpretations

Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2015 or later periods and which the Group has not early adopted:

� FRS 40 Investment Property (effective for annual periods beginning on or

after 1 July 2014)

The standard is amended to clarify that FRS 40 and FRS 103 are not mutually exclusive. The guidance in FRS 40 assists preparers to distinguish between investment property and owner-occupied property. Preparers also need to refer to the guidance in FRS 103 to determine whether the acquisition of an investment property is a business combination.

The Group will apply this amendment after 1 January 2015.

� FRS 113 Fair Value Measurement (effective for annual periods beginning on

or after 1 July 2014)

The amendment clarifies that the portfolio exception in FRS 113, which allows an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis, applies to all contracts (including non-financial contracts) within the scope of FRS 39.

This amendment is not expected to have any significant impact on the financial statements of the Group.

The management anticipates that the adoption of these new standards,

amendments and interpretation to existing standards in the future periods will not have a material impact on the financial statements of the Group and the Company in the period of their initial adoption.

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD. AND ITS SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2014

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34. Comparatives

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. The reclassifications have been made to better reflect the nature of the items.

The revised presentation does not result in a change in the Group’s and the Company’s profit before and after tax. The restatement of prior year’s figures is as follows:

The Group

As restated

As previously disclosed

$’000 $’000Balance SheetReinsurance assets 32,397 -Reinsurers’ share of claims admitted or intimated - 26,697Life Assurance Fund (5,423,511) (5,417,811)Net total (5,391,114) (5,391,114)

The Company

As restated

As previously disclosed

$’000 $’000Balance SheetReinsurance assets 31,692 -Reinsurers’ share of claims admitted or intimated - 25,992Life Assurance Fund (3,192,385) (3,186,685)Net total (3,160,693) (3,160,693)

35. Events occurring after balance sheet date

On 12 March 2015, the directors approved the subscription of 126,000,000 ordinary shares for Malaysian Ringgit 1.00 per share in the capital of its subsidiary, Tokio Marine Life Insurance Malaysia Berhad, for a total consideration of RM126 million. The subscription is still incomplete at the time these financial statements have been authorised for issue.

36. Authorisation of financial statements

These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Tokio Marine Life Insurance Singapore Ltd. on 18 March 2015.

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