Allianz Malaysia Berhad: Audited Quarterly Results - 31 December 2016

Transcription

1. ALLIANZ MALAYSIA BERHAD (12428-W) AUDITED QUARTERLY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016
2. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of financial position as at 31 December 2016 - audited 31 December 2016 RM'000 31 December 2015 RM'000 Assets Property, plant and equipment Intangible assets Investment properties Deferred tax assets Reinsurance assets Investments Derivative financial assets Current tax assets Insurance receivables Other receivables, deposits and prepayments Deferred acquisitions costs Cash and cash equivalents Total assets 1 118,864 293,915 30,337 14,613 980,910 12,218,075 15,425 170 270,173 257,663 86,928 625,304 96,750 301,246 50,026 19,051 1,129,305 10,822,550 5,724 195 258,845 229,885 82,199 621,648 14,912,377 13,617,424
3. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of financial position as at 31 December 2016 - audited (continued) 31 December 2016 RM'000 31 December 2015 RM'000 Equity Share capital: Ordinary Shares Irredeemable Convertible Preference Shares ("ICPS") Reserves 173,707 172,499 2,533,317 169,309 176,897 2,275,114 Total equity attributable to owners of the Company 2,879,523 2,621,320 10,768,504 181,861 13,873 5,346 372,450 427,752 253,726 9,342 9,888,621 158,135 3,454 959 393,168 345,068 194,563 12,136 Total liabilities 12,032,854 10,996,104 Total equity and liabilities 14,912,377 13,617,424 16.58 15.48 8.32 7.57 Liabilities Insurance contract liabilities Deferred tax liabilities Derivative financial liabilities Other financial liabilities Insurance payables Other payables and accruals Benefits and claims liabilities Current tax liabilities Net asset per ordinary share (RM) Diluted net asset per ordinary share (RM) The accompanying notes form an integral part of these condensed consolidated financial statements. 2
4. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of profit or loss For the year ended 31 December 2016 Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Note (Part B) Audited Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 Operating revenue * 1,210,975 1,170,329 4,678,486 4,519,074 Gross earned premiums Premiums ceded to reinsurers 1,082,059 (117,435) 1,054,383 (133,746) 4,182,779 (492,279) 4,088,113 (583,786) 964,624 920,637 3,690,500 3,504,327 128,916 2,485 (134,246) 12,182 4,649 115,946 5,486 76,017 17,031 4,261 495,707 60,857 (27,258) 62,930 19,559 430,961 48,317 (55,644) 69,911 17,200 13,986 218,741 611,795 510,745 Gross benefits and claims paid Claims ceded to reinsurers Gross change in contract liabilities Change in contract liabilities ceded to reinsurers (485,262) 86,267 (104,746) (41,989) (461,045) 119,707 (338,664) (29,765) (2,024,262) 363,906 (887,952) (129,610) (1,684,894) 403,612 (1,040,310) (148,141) Net benefits and claims (545,730) (709,767) (2,677,918) (2,469,733) Fee and commission expense Management expenses Other operating expenses (160,840) (143,122) (7,914) (162,164) (130,957) (9,490) (623,698) (513,252) (32,836) (612,999) (464,761) (29,358) Other expenses (311,876) (302,611) (1,169,786) (1,107,118) 121,004 (31,025) 127,000 (40,736) 454,591 (142,460) 438,221 (129,350) 89,979 86,264 312,131 308,871 Net earned premiums Investment income Realised gains and losses Fair value gains and losses Fee and commission income Other operating income 4 5 6 Other income Profit before tax Tax expense 7 8 Profit for the year * Operating revenue consists of gross earned premiums and investment income. The accompanying notes form an integral part of these condensed consolidated financial statements. 3
5. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2016 Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Note (Part B) Audited Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 Profit for the year attributable to owners of the Company 89,979 86,264 Other comprehensive income/(loss), net of tax Items that will not be reclassified subsequently to profit or loss Revaluation of property, plant and equipment Tax effects thereon 9,342 (1,466) 1,861 53 9,342 (1,466) 11,050 (2,103) 7,876 1,914 7,876 8,947 (62,203) 14,946 22,152 (5,313) (3,604) 866 18,313 (4,590) (47,257) 16,839 (2,738) 13,723 (39,381) 18,753 5,138 22,670 Total comprehensive income for the year, net of tax 50,598 105,017 317,269 331,541 Profit attributable to: Owners of the Company 89,979 86,264 312,131 308,871 Total comprehensive income for the year attributable to: Owners of the Company 50,598 105,017 317,269 331,541 Items that are or may be reclassified subsequently to profit or loss Fair value of available-for-sale ("AFS") financial assets Tax effects thereon Total other comprehensive (loss)/income for the year, net of tax 312,131 308,871 Basic earnings per ordinary share (sen) 12(a) 52.95 51.50 182.27 183.08 Diluted earnings per ordinary share (sen) 12(b) 26.28 25.05 90.80 89.37 The accompanying notes form an integral part of these condensed consolidated financial statements. 4
6. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of changes in equity for the year ended 31 December 2016 - audited At 1 January 2015 Ordinary shares Preference shares RM'000 RM'000 Attributable to owners of the Company Non-distributable Life nonShare Revaluation Fair value participating premium reserve reserve fund surplus* RM'000 RM'000 RM'000 (14,493) 167,488 178,718 424,823 25,111 Revaluation of property, plant and equipment - - - 8,947 Fair value of AFS financial assets - - - Total other comprehensive income for the year Profit for the year - - Total comprehensive income for the year Contributions by and distributions to owners of the Company Conversion of Irredeemable Convertible Preference Shares to ordinary shares - - 1,821 Total transactions with owners of the Company 1,821 At 31 December 2015 169,309 RM'000 Distributable Retained earnings Total equity RM'000 RM'000 378,554 1,129,578 2,289,779 - - - 8,947 - 13,723 - - 13,723 - 8,947 - 13,723 - 70,550 238,321 22,670 308,871 - 8,947 13,723 70,550 238,321 331,541 (1,821) - - - - - - (1,821) - - - - - - 424,823 34,058 449,104 1,367,899 2,621,320 176,897 5 (770)
7. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of changes in equity for the year ended 31 December 2016 - audited (continued) At 1 January 2016 Ordinary shares Preference shares RM'000 RM'000 Attributable to owners of the Company Non-distributable Life nonShare Revaluation Fair value participating premium reserve reserve fund surplus* RM'000 RM'000 169,309 176,897 424,823 34,058 Revaluation of property, plant and equipment - - - 7,876 Fair value of AFS financial assets - - - - Total other comprehensive income/(loss) for the year Profit for the year - - - Total comprehensive income/(loss) for the year Contributions by and distributions to owners of the Company Conversion of Irredeemable Convertible Preference Shares to ordinary shares Dividends to owners of the Company - - 4,398 - Total transactions with owners of the Company 4,398 At 31 December 2016 173,707 RM'000 Retained earnings Total equity RM'000 RM'000 449,104 1,367,899 2,621,320 - - 7,876 (2,738) - - (2,738) 7,876 - (2,738) - 75,412 236,719 5,138 312,131 - 7,876 (2,738) 75,412 236,719 317,269 (4,398) - - - - - (59,066) (59,066) (4,398) - - - - (59,066) (59,066) 424,823 41,934 172,499 (770) RM'000 Distributable - (3,508) 524,516 1,545,552 2,879,523 * The Life non-participating fund surplus amount is net of deferred tax. This amount is only distributable when the surplus is transferred from the life fund to the shareholders' fund. The accompanying notes form an integral part of these condensed consolidated financial statements. 6
8. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of cash flows For the year ended 31 December 2016 Year ended 31 December 2016 RM'000 Cash flows from operating activities Profit before tax 454,591 Adjustments for: Investment income Interest income Interest expense Realised gains recorded in profit or loss Fair value gains on financial investments recorded in profit or loss Purchases of financial investments Maturity of financial investments Proceeds from sale of financial investments Change in loans and receivables Non-cash items: Change in fair value of investment properties Change in fair value of AFS financial assets Unrealised foreign exchange gain Depreciation of property, plant and equipment Amortisation of intangible assets Gain on disposal of property, plant and equipment Impairment loss on AFS financial investments Property, plant and equipment written off Insurance and other receivables: - Allowance for/ (Reversal of) impairment loss - Bad debts recovered - Bad debts written off Changes in working capital: Change in reinsurance assets Change in insurance receivables Change in other receivables, deposits and prepayments Change in insurance contract liabilities Change in deferred acquisition costs Change in other financial liabilities Change in insurance payables Change in other payables and accruals Change in benefits and claims liabilities Cash used in operations 7 Year ended 31 December 2015 RM'000 438,221 (495,707) (636) 6,161 (60,807) (4,154) (3,796,227) 668,000 1,915,808 (155,271) (430,961) (423) 5,393 (48,262) (296) (3,040,315) 659,960 974,988 (215,884) 2,008 7,890 (205) 17,339 16,256 (50) 29,404 29 (540) 22,316 17,014 15,294 (55) 56,480 501 1,813 (160) 1,284 (6,904) (144) 6,885 148,395 (13,020) (22,433) 879,883 (4,729) 4,387 (20,718) 43,437 59,163 188,908 (60,063) 22,954 1,062,530 (4,773) (10,122) 36,006 (13,199) 26,861 (318,269) (297,630)
9. ALLIANZ MALAYSIA BERHAD (12428-W) Condensed consolidated statement of cash flows For the year ended 31 December 2016 (continued) Year ended 31 December 2016 RM'000 Year ended 31 December 2015 RM'000 Cash flows from operating activities (continued) Tax paid Dividends received Interest income received (116,979) 39,843 446,375 (115,322) 30,857 393,641 50,970 11,546 Investing activities Proceeds from disposal of property, plant and equipment Acquisition of property, plant and equipment Acquisition of intangible assets 57 (13,164) (8,227) 56 (30,491) (4,605) Net cash used in investing activities (21,334) (35,040) Financing activities Dividends paid to owners of the Company Repayment of finance lease liabilities Interest paid (24,803) (1,177) (19,098) (3) (2,340) Net cash used in financing activities (25,980) (21,441) 3,656 (44,935) Net cash from operating activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January 621,648 666,583 Cash and cash equivalents at 31 December 625,304 621,648 Cash and cash equivalents comprise: Fixed and call deposits with licensed financial institutions (with maturity less than three months) Cash and bank balances 558,972 66,332 598,079 23,569 625,304 621,648 The accompanying notes form an integral part of these condensed consolidated financial statements. 8
10. ALLIANZ MALAYSIA BERHAD (12428-W) Part A: Explanatory notes to the condensed consolidated financial statements 1. Basis of preparation These condensed consolidated quarterly financial statements ("the Report") of Allianz Malaysia Berhad ("AMB" or "the Company") and its subsidiaries (AMB and its subsidiaries are collectively referred to as the "Group") as at and for the financial year ended 31 December 2016 have been prepared in accordance with: (a) The requirements of Malaysian Financial Reporting Standard ("MFRS") 134: Interim Financial Reporting and with IAS 34: Interim Financial Reporting; and (b) Paragraph 9.22 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ("Bursa Securities"). The Report does not include all information required for disclosure in the annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the financial year ended 31 December 2016. 2. Statement of compliance The following are accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company: MFRSs/ Amendments/ Interpretation Effective date Amendments to MFRS 12, Disclosure of Interests in Other Entities (Annual Improvements to MFRS Standards 2014-2016 Cycle) Amendments to MFRS 107, Statement of Cash Flows – Disclosure Initiative Amendments to MFRS 112, Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses MFRS 9, Financial Instruments (2014) MFRS 15, Revenue from Contracts with Customers Clarifications to MFRS 15, Revenue from Contracts with Customers IC Interpretation 22, Foreign Currency Transactions and Advance Consideration Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards 2014-2016 Cycle) Amendments to MFRS 2, Share-based Payment – Classification and Measurement of Share-based Payment Transactions Amendments to MFRS 4, Insurance Contracts – Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts Amendments to MFRS 128, Investments in Associates and Joint Ventures (Annual Improvements to MFRS Standards 2014-2016 Cycle) Amendments to MFRS 140, Investment Property – Transfers of Investment Property MFRS 16, Leases Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 1 January 2017 1 January 2017 1 January 2017 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2019 Yet to be confirmed The Group and the Company plan to apply the abovementioned accounting standards, amendments and interpretations: - from the annual period beginning on 1 January 2017 for those amendments that are effective for annual periods beginning on or after 1 January 2017, except for Amendments to MFRS 12 which is not applicable to the Group and the Company. - from the annual period beginning on 1 January 2018 for those accounting standards, amendments and interpretation that are effective for annual periods beginning on or after 1 January 2018, except for Amendments to MFRS 1 and Amendments to MFRS 2 which are not applicable to the Group and the Company. - from the annual period beginning on 1 January 2019 for the accounting standard that is effective for annual periods beginning on or after 1 January 2019. 9
11. ALLIANZ MALAYSIA BERHAD (12428-W) Part A: Explanatory notes to the condensed consolidated financial statements (continued) 2. Statement of compliance (continued) The initial application of the abovementioned accounting standards, amendments or interpretations are not expected to have any material financial impact to the current period and prior period financial statements of the Group and the Company except as mentioned below: MFRS 15, Revenue from Contracts with Customers MFRS 15 replaces the guidance in MFRS 111, Construction Contracts , MFRS 118, Revenue , IC Interpretation 13, Customer Loyalty Programmes , IC Interpretation 15, Agreements for Construction of Real Estate , IC Interpretation 18, Transfer of Assets from Customers and IC Interpretation 131, Revenue – Barter Transactions Involving Advertising Services . Upon adoption of MFRS 15, it is expected that the timing of revenue recognition for non-insurance contracts might be different as compared with current practices. The Group and the Company are currently assessing the financial impact of adopting MFRS 15. MFRS 9, Financial Instruments MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting. The Group and the Company are currently assessing the financial impact that may arise from the adoption of MFRS 9. MFRS 16, Leases MFRS 16 replaces the guidance in MFRS 117, Leases , IC Interpretation 4, Determining whether an Arrangement contains a Lease , IC Interpretation 115, Operating Leases – Incentives and IC Interpretation 127, Evaluating the Substance of Transactions Involving the Legal Form of a Lease . The Group and the Company are currently assessing the financial impact that may arise from the adoption of MFRS 16. Companies Act, 2016 The Companies Act, 2016 (“New Act”) was enacted to replace the Companies Act, 1965 in Malaysia with the objectives of creating a legal and regulatory structure that will facilitate business and promote accountability as well as protection of corporate directors and shareholders, taking into consideration the interest of other stakeholders. The New Act was passed on 4 April 2016 by the Dewan Rakyat (House of Representatives) and gazetted on 15 September 2016. On 26 January 2017, the Minister of Domestic Trade, Co-operatives and Consumerism announced that the date on which the New Act comes into operation, except section 241 and Division 8 of Part III of the New Act, would be 31 January 2017. There is no impact on the financial statements of the Group and the Company for financial year ended 31 December 2016 as adoption of the New Act will only be applied prospectively. 3. Items of an unusual nature The results of the Group for the financial year under review were not substantially affected by any item, transaction or event of a material and unusual nature. 4. Changes in estimates There were no material changes in the basis used for accounting estimates for the financial year ended 31 December 2016. 5. Seasonal or cyclical factors The operations of the Group for the financial year under review were not significantly affected by seasonality or cyclical factors. 6. Property, plant and equipment The Group's property, plant and equipment are stated at cost/valuation less any accumulated depreciation and any accumulated impairment losses. During the financial year under review, the Group has revalued its property, plant and equipment and the revaluation surpluses amounting to: RM’000 General insurance operation 9,342 10
12. ALLIANZ MALAYSIA BERHAD (12428-W) Part A: Explanatory notes to the condensed consolidated financial statements (continued) 7. Changes in group composition There were no changes in the composition of the Group during the financial year under review. 8. Capital commitments As at 31 December 2016 RM’000 Property, plant and equipment: Approved but not contracted for Contracted but not provided for 20,823 3,614 Software development: Approved but not contracted for Contracted but not provided for 51,742 3,121 9. Related party transactions Significant related party transactions are as follows: Transactions value Twelve months ended 31 December 2016 2015 RM’000 RM’000 Related companies* Reinsurance premium and commission (281,410) (303,350) * Related companies are companies within the Allianz SE Group. 10. Contingent liabilities On 10 August 2016, the Malaysia Competition Commission (“MyCC”) commenced an investigation into an alleged infringement by Persatuan Insurans Am Malaysia (“PIAM”) and all 22 general insurers including the Company’s general insurance subsidiary, Allianz General Insurance Company (Malaysia) Berhad (“AGIC”) of Section 4(2)(a) of the Competition Act 2010 (“CA”). The alleged infringement is in relation to the agreement reached between PIAM and the Federation Of Automobile Workshop Owners' Association Of Malaysia (“FAWOAM”) in relation to trade discount rates for parts for certain vehicle makes and labour hourly rates for PIAM Approved Repairers Scheme workshops. These rates were applied by AGIC pursuant to a members’ circular issued by PIAM, which arose from Bank Negara Malaysia’s (“BNM”) directive to PIAM to engage FAWOAM to resolve the issues of parts trade discounts and labour hourly rate. On 22 February 2017, AGIC received MyCC’s notice of proposed decision (“Proposed Decision”) that AGIC and all the other 21 general insurers who are members of PIAM have infringed one of the prohibitions under Part II of the CA. The Proposed Decision includes a proposed financial penalty of RM213,454,814 on all the 22 general insurers. AGIC, as one of the members of PIAM, will have a share of RM27,480,883 of the proposed penalty. The Proposed Decision is not final as at the date of this report and AGIC in consultation with its legal advisers will take such appropriate actions to defend its position that it has not been in infringement of Section 4(2)(a) of the CA. 11. Debt and equity securities Save for the issuance of 4,397,861 ordinary shares of RM1.00 each pursuant to the conversion of the ICPS, there were no other issuances of shares, shares buy-backs and repayment of debt and equity securities by the Group during the financial year under review. 12. Subsequent event The Allianz SE and Standard Chartered Bank entered into a 15-year bancaassurance agreement for the distribution of Allianz's general insurance products, including travel, personal accident, fire and motor insurance products, to Standard Chartered's Retail Banking clients in five key markets across Asia, namely Malaysia, Singapore, Indonesia, Hong Kong and China. The new partnership arrangements in the respective countries will be implemented during the course of 2017. 11
13. ALLIANZ MALAYSIA BERHAD (12428-W) Part A: Explanatory notes to the condensed consolidated financial statements (continued) 13. Operating segments The Group has three reportable segments, as described below, which are the Group's strategic business units. For each of the strategic business units, the Chief Executive Officer of the Company reviews internal management reports on a monthly basis. The following summary describes the operations in each of the Group's reportable segments: Reportable segments Investment holding General insurance Life insurance Principal activities Investment holding Underwriting of all classes of general insurance business Underwriting of all classes of life insurance and investment-linked business Information about reportable segments For the year ended 31 December 2016 - audited Investment holding 2016 2015 RM'000 Segment revenue Inter-segment revenue Segment results RM'000 General insurance 2016 2015 Life insurance 2016 2015 RM'000 RM'000 RM'000 RM'000 Consolidated 2016 2015 RM'000 RM'000 2,242,665 2,277,997 2,422,767 2,228,571 4,678,486 13,054 12,506 (87,763) (21,694) - - - - (4,296) (723) 320,520 322,327 138,367 4,519,074 (87,763) (21,694) 116,617 454,591 438,221 Segment assets 443,649 375,016 5,789,498 5,707,128 8,679,230 7,535,280 14,912,377 13,617,424 Segment liabilities 107,476 67,245 3,773,312 3,845,326 8,152,066 7,083,533 12,032,854 10,996,104 12
14. ALLIANZ MALAYSIA BERHAD (12428-W) Part A: Explanatory notes to the condensed consolidated financial statements (continued) 14. Dividend paid (a) A first and final ordinary share dividend of 6.50 sen per ordinary share under single tier system (2014: nil) and a first and final preference share dividend of 7.80 sen per ICPS under single tier system (2014: nil) for the financial year ended 31 December 2015 were paid on 15 June 2016 to the entitled ordinary shareholders and ICPS holders of the Company respectively whose names appeared on the Register of Members and/or Record of Depositors on 31 May 2016. (b) An interim ordinary share dividend of 9.00 sen per ordinary share under single tier system (2015: nil) and an interim preference share dividend of 10.80 sen per ICPS under single tier system (2015: nil) for the financial year ended 31 December 2016 were paid on 21 February 2017 to the entitled ordinary shareholders and ICPS holders of the Company respectively whose names appeared on the Register of Members and/or Record of Depositors on 3 February 2017. Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities 1. Review of results 1.1 Results of the current year-to-date (YTD) against preceding YTD (YTD Fourth Quarter 2016 versus YTD Fourth Quarter 2015) Operating revenue The Group recorded an operating revenue of RM4.68 billion for the financial year ended 31 December 2016, an increase of 3.5% or RM159.4 million as compared to the preceding financial year ended 31 December 2015 of RM4.52 billion due to higher gross earned premiums and investment income by RM94.7 million and RM64.7 million respectively. The general insurance operation recorded an operating revenue of RM2.24 billion for the financial year ended 31 December 2016, a marginal decrease of 1.5% or RM35.3 million as compared to the preceding financial year ended 31 December 2015 of RM2.28 billion due to the decrease in gross earned premiums by RM52.9 million. The lower gross earned premiums of the general insurance operation was due mainly to lower motor insurance caused by lower car sales in 2016. The increase in investment income was due mainly to the higher investment asset base. The life insurance operation recorded an operating revenue of RM2.42 billion for the financial year ended 31 December 2016, an increase of 8.7% or RM194.2 million as compared to the preceding financial year ended 31 December 2015 of RM2.23 billion due to the increase in gross earned premiums and investment income by RM147.6 million and RM46.7 million respectively. The increase in gross earned premiums of the life insurance operation was mainly contributed by growth in premium from agency channel and single premium from bancassurance channel. Profit before tax The Group recorded a profit before tax of RM454.6 million for the financial year ended 31 December 2016, an increase of 3.7% or RM16.4 million as compared to the preceding financial year ended 31 December 2015 of RM438.2 million. General insurance operation delivered a profit before tax of RM320.5 million for the financial year ended 31 December 2016, a decrease of 0.6% or RM1.8 million as compared to the preceding financial year ended 31 December 2015 of RM322.3 million. The decrease in profit was due mainly to lower underwriting profit, contributed by higher claims ratio. The life insurance operation recorded a higher profit before tax of RM138.4 million for the financial year ended 31 December 2016, an increase of 18.7% or RM21.8 million as compared to a profit before tax of the preceding financial year ended 31 December 2015 of RM116.6 million due to higher contribution from investment-linked protection business. 13
15. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 1. Review of results (continued) 1.1 Results of the current year-to-date (YTD) against preceding YTD (YTD Fourth Quarter 2016 versus YTD Fourth Quarter 2015) (continued) Profit before tax (continued) The investment holding segment registered a loss before tax of RM4.3 million for the financial year ended 31 December 2016 as compared to a loss of RM0.7 million for the preceding financial year ended 31 December 2015 due to higher operating expenses for the financial year under review. 1.2 Results of the current quarter against the preceding quarter (Fourth Quarter 2016 versus Third Quarter 2016) Operating revenue The Group recorded an operating revenue of RM1.21 billion for the quarter under review, an increase of 5.1% or RM59.0 million as compared to the preceding quarter ended 30 September 2016 of RM1.15 billion due to higher gross earned premiums of RM57.9 million. The general insurance operation recorded an operating revenue of RM555.9 million for the quarter under review, a marginal decrease of 0.5% or RM2.8 million as compared to the preceding quarter ended 30 September 2016 of RM558.7 million due mainly to lower of gross earned premiums from motor business in current quarter. The life insurance operation registered an operating revenue of RM651.9 million for the quarter under review, an increase of 10.5% or RM61.9 million as compared to the preceding quarter ended 30 September 2016 of RM590.0 million due mainly to increase of gross earned premiums by RM62.2 million in the current quarter as a result of higher premiums generated from agency channel. Profit before tax The Group recorded a profit before tax of RM121.0 million for the quarter under review, an increase of 10.7% or RM11.7 million as compared to the preceding quarter ended 30 September 2016 of RM109.3 million due mainly to higher profit from life insurance operation. The profit before tax of general insurance operation for the quarter under review of RM73.9 million, remained stable and as same level compared to the preceding quarter ended 30 September 2016 of RM73.9 million. The lower profit before tax was due mainly to lower underwriting profit in the current quarter arising from higher expenses incurred. The profit before tax of life insurance operation for the quarter under review of RM48.4 million, an increase of 35.6% or RM12.7 million as compared to the preceding quarter ended 30 September 2016 of RM35.7 million due mainly to higher contribution from protection business and lower insurance contract liabilities arising from higher interest rate in the current quarter. The investment holding segment registered a loss before tax of RM1.3 million for the quarter under review as compared to a loss of RM0.3 million for the preceding quarter ended 30 September 2016 due to higher operating expenses in the current quarter. 14
16. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 2. Current year prospect The Malaysia economy is expected to expand about 4% in 2017 as a result of subdued consumer and investment spending amid increased uncertainty and volatility in the global economy and financial markets. In tandem with the subdued outlook of the economy, we can also expect an equally subdued outlook for the general insurance industry. Further, the motor business will likely witness more intense competition with the phased detarification of the motor and fire products which began last year as a result of continued lower automotive sales. The life insurance industry will witness continued growth in 2017 with increasing consumer awareness on the needs for insurance protection and the current low insurance penetration rate. To remain ahead of competition, the Group will continue to focus on offering innovative products to meet protection needs and service differentiation to provide greater value proposition to customers. Both the insurance subsidiaries will continue to strengthen its distribution networks. The general insurance subsidiary expanded in non-agency distribution with the recent tied-up with Standard Chartered Bank via a regional 15 years bancassurance arrangement. The life insurance subsidiary will focus on expanding its agency force and building professional agency force to service customers. The Group will also continue its digital ambition to drive simplification across all processes and to create scalable operation platform. Investments will continue to be made in areas of digital initiatives. Whilst the Group continues to operate in a difficult macroeconomic environment, the Board is confident that with the Group’s focus on optimizing the performance of its insurance businesses it will continue its growth momentum and deliver sustainable returns to all stakeholders in 2017. 3. Profit forecast The Group did not issue any profit forecast or profit guarantee as at the date of the Report. 4. Investment income Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Interest income Dividend income Accretion of discounts Amortisation of premiums Rental income Other income 15 Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 116,056 9,609 2,057 (908) 108 1,994 103,863 9,228 1,544 (946) 118 2,139 443,696 39,843 7,208 (3,673) 209 8,424 389,229 30,857 5,689 (4,004) 913 8,277 128,916 115,946 495,707 430,961
17. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 5. Realised gains and losses Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Property, plant and equipment Realised gains on disposal Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 45 7 50 55 Financial assets Realised gains on disposal: Malaysian government securities Quoted equity securities of corporations in Malaysia Quoted equity securities of corporations outside Malaysia Quoted unit trusts in Malaysia Unquoted bonds of corporations in Malaysia Unquoted unit trusts outside Malaysia 194 9,399 87 1 330 160 650 19,634 46 3,117 95 12,527 86,983 416 3,546 955 9,835 5,985 69,383 171 6,494 5,314 Realised losses on disposal: Malaysian government securities Malaysian government guaranteed bonds Quoted equity securities of corporations in Malaysia Quoted equity securities of corporations outside Malaysia Unquoted unit trusts outside Malaysia Put options 2,016 (1,963) (5,956) (161) (118) (1,549) (9) (17,157) (14) (135) (748) (3,840) (2,373) (45,004) (330) (359) (1,549) (368) (34,907) (101) (2,071) (1,638) Total net realised gains for financial assets 2,440 5,479 60,807 48,262 Total net realised gains 2,485 5,486 60,857 48,317 16
18. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 6. Fair value gains and losses Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Investment properties Fair value (losses)/gains on investment properties Financial assets Held for trading financial assets Designated upon initial recognition financial assets Derivatives Total fair value (losses)/gains on financial assets at Fair Value Through Profit or Loss Impairment loss on AFS financial investments (1,204) 540 (2,008) (57,294) (48,973) (18,039) 67,836 7,847 8,140 (9,322) 11,551 1,925 (124,306) 83,823 4,154 (8,346) (29,404) (56,480) 76,017 (27,258) (55,644) (8,736) Total net fair value (losses)/gains Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 (134,246) 540 7,637 (4,232) (3,109) 296 7. Profit before tax Profit before tax for the financial year under review is arrived at after charging/(crediting): Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Amortisation of intangible assets Depreciation of property, plant and equipment Insurance and other receivables: - Allowance for/(Reversal of) impairment loss - Bad debts recovered - Bad debts written off Interest expense Interest income Property, plant and equipment written off Unrealised foreign exchange gain 4,331 5,138 4,021 5,452 (5,168) (61) 921 840 (228) 6 (205) (10,018) (45) 3,253 810 (124) 381 - Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 16,256 17,339 1,813 (160) 1,284 6,161 (636) 29 (205) Other than as disclosed in Notes 6 and 7, there are no exceptional items for the financial year ended 31 December 2016. 17 15,294 17,014 (6,904) (144) 6,885 5,393 (423) 501 -
19. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 8. Tax expense Individual period Three months ended 31 December 2016 2015 RM'000 RM'000 Cumulative period Twelve months ended 31 December 2016 2015 RM'000 RM'000 121,004 127,000 454,591 438,221 Tax expense Income tax Deferred tax 30,853 172 35,036 5,700 114,210 28,250 116,807 12,543 Total tax expense 31,025 40,736 142,460 129,350 Profit before tax Effective tax rate 26% 32% 31% 30% The Group's consolidated effective tax rate for the financial period under review is higher than the statutory tax rate of 24% (2015: 25%) due mainly to the following: - In addition to the 24% income tax on the assessable income of the Shareholders’ Fund, there is also an 8% income tax on the assessable investment income net of allowable deductions of the Life Fund; and - Effects of certain non-deductible expenses. 9. Status of corporate proposal announced Bank Negara Malaysia (“BNM”) has via its letter dated 26 October 2016 (“BNM Letter”) stated it has no objection in principle for the Company to commence negotiations with HSBC Insurance (Asia Pacific) Holdings Limited, JAB Capital Berhad and the Employees Provident Fund Board on the proposed acquisition of up to 100% equity interest in HSBC Amanah Takaful (Malaysia) Berhad (“Proposed Acquisition”). The Group is currently in the process of negotiation with the parties concerned on the Proposed Acquisition. 10. Borrowings and debts securities Save as disclosed below, the Group has no other outstanding borrowings and debts securities for the financial year under review. As at 31 December 2016 RM’000 Interest Bearing Amount due to holding company 54,300 A 5-year term loan from its holding company, Allianz SE, is unsecured and subject to interest of 4.3% per annum. 11. Changes in material litigations There are no material litigations pending at the date of the Report. 18
20. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 12. Earnings per ordinary share (a) Basic earnings per ordinary share Basic earnings per ordinary share of the Group are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue. Individual period Three months ended 31 December 2016 2015 Profit attributable to ordinary shareholders (RM'000) Weighted average number of ordinary shares in issue Basic earnings per ordinary share Cumulative period Twelve months ended 31 December 2016 2015 89,979 86,264 312,131 308,871 ('000) 169,938 167,488 171,251 168,712 (sen) 52.95 51.50 182.27 183.08 (b) Diluted earnings per ordinary share Diluted earnings per ordinary share of the Group are calculated by dividing the net diluted profit attributable to shareholders by the diluted weighted average number of ordinary shares in issue. Individual period Three months ended 31 December 2016 2015 Profit attributable to ordinary shareholders (RM'000) Weighted average number of ordinary shares in issue Cumulative period Twelve months ended 31 December 2016 2015 89,979 86,264 312,131 308,871 ('000) 169,938 167,488 171,251 168,712 Effect of conversion of ICPS ('000) 172,499 176,897 172,499 176,897 Diluted weighted average number of ordinary shares during the year ('000) 342,437 344,385 343,750 345,609 Diluted earnings per ordinary share (sen) 26.28 25.05 90.80 89.37 19
21. ALLIANZ MALAYSIA BERHAD (12428-W) Part B: Explanatory notes pursuant to the Main Market Listing Requirements of Bursa Securities (continued) 13. Dividend The Board of Directors declared an interim ordinary share dividend of 9.00 sen per ordinary share under single tier system (2015: nil) and an interim preference share dividend of 10.80 sen per ICPS under single tier system (2015: nil) for the financial year ended 31 December 2016 which were paid on 21 February 2017 to the entitled shareholders and ICPS holders of the Company respectively whose names appeared on the Register of Members and/or Record of Depositors on 3 February 2017. The Board of Directors does not recommend any payment of final dividend for the financial year ended 31 December 2016. 14. Disclosure of realised and unrealised earnings The breakdown of the retained earnings of the Group as at 31 December 2016, into realised and unrealised profit or loss, is as follow: As at 31.12.2016 RM'000 Total retained earnings of the Group: - Realised - Unrealised As at 31.12.2015 RM'000 2,217,954 (147,886) 1,937,022 (120,019) 2,070,068 1,817,003 The disclosure of realised and unrealised profit or loss above is solely for complying with the disclosure requirements of Bursa Securities and should not be applied for any other purposes. The determination of realised and unrealised profit or loss is based on the Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities' Listing Requirements , issued by Malaysian Institute of Accountants on 20 December 2010. 15. Auditors' report on preceding annual financial statements The auditors' report of the Group's audited financial statements for the financial year ended 31 December 2016 was not qualified. BY ORDER OF THE BOARD Ng Siew Gek Company Secretary Kuala Lumpur 24 February 2017 20