Company Registration No D

48 

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(1)

LIBERTY INSURANCE PTE LTD

Directors’ Report and Audited Financial Statements 31 December 2014

(2)

ANNUAL REPORT

For the financial year ended 31 December 2014

Contents

Page

Directors’ report

1

Statement by directors

3

Independent auditor’s report

4

Statement of comprehensive income

6

Revenue account

7

Balance sheet

8

Statement of changes in equity

9

Statement of cash flows

10

(3)

The directors are pleased to present their report to the member together with the audited financial statements of Liberty Insurance Pte Ltd (the "Company") for the financial year ended 31 December 2014.

Directors

The directors of the Company in office at the date of this report are: Luciano Suzuki

Chang Sucheng Chase (appointed on 3 December 2014) Celine Rose

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 objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors' interests in shares and debentures

No director who held office at the end of the financial year, had, according to the register of director's shareholdings required to be kept under Section 164 of the Singapore Companies Act, Chapter 50, an interest in shares or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.

Directors' contractual benefits

Except as disclosed in the financial statements, since the end of the previous financial year, no director of the Company 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 the director is a member, or with a company in which the director has a substantial financial interest. Share options

During the financial year, there were:

(i) no options granted by the Company to any person to take up unissued shares in the Company; and

(ii) no share issued by virtue of any exercise of option to take up unissued shares of the Company.

(4)

DIRECTORS’ REPORT

Auditor

Ernst & Young LLP have expressed their willingness to accept reappointment as auditor.

On behalf of the board of directors,

Chang Sucheng Chase Director

Celine Rose Director

Singapore 30 March 2015

(5)

We, Chang Sucheng Chase and Celine Rose, being two of the directors of Liberty Insurance Pte Ltd (the “Company”), do hereby state that, in the opinion of the directors,

(a) the accompanying balance sheet, statement of comprehensive income, revenue account, statement of changes in equity and statement of cash flows together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2014 and the results, changes in equity and cash flows of the Company for the financial year ended on that date; 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 board of directors,

Chang Sucheng Chase Director

Celine Rose Director

Singapore 30 March 2015

(6)

INDEPENDENT AUDITOR’S REPORT

For the financial year ended 31 December 2014

Independent Auditor’s Report to the Member of Liberty Insurance Pte Ltd Report on the Financial Statements

We have audited the accompanying financial statements of Liberty Insurance Pte Ltd (the

"Company") set out on pages 6 to 46, which comprise the balance sheet of the Company as at 31 December 2014, and the statement of comprehensive income, revenue account, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Cap. 50 (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 account and balance sheet 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 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 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation 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 control. An audit also includes evaluating the appropriateness of the 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.

(7)

Opinion

In our opinion, the financial statements of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company as at 31 December 2014 and the results, changes in equity and cash flows of the Company 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.

Ernst & Young LLP Public Accountants and Chartered Accountants Singapore

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STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 31 December 2014

Notes 2014 2013

$'000 $'000

Underwriting profit transferred from

revenue account 30,545 20,794

Investment and other income 4 4,059 3,648

Profit before income tax 34,604 24,442

Income tax 7 (5,276) (2,902)

Profit and comprehensive income for the year 29,328 21,540

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

(9)

2014 2013

Fire Marine

Workmen’s compensation

Accident &

Health Motor Misc Total Total

Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Income

Gross written premiums 7,680 5,199 28,857 21,848 63,265 37,024 163,873 156,915

Outward reinsurance premium (3,666) (1,511) (1,061) (1,515) (2,328) (8,547) (18,628) (17,045)

Net written premiums 4,014 3,688 27,796 20,333 60,937 28,477 145,245 139,870

Increase in net provision for unearned premiums 14 (141) 173 (472) (1,845) 224 (1,049) (3,110) (7,158)

Net earned premiums 3,873 3,861 27,324 18,488 61,161 27,428 142,135 132,712

Outgoing

Net claims paid 13 (1,229) (1,052) (11,536) (9,931) (27,906) (12,830) (64,484) (61,856)

Increase in outstanding claims (642) 331 (2,441) 287 2,360 96 (9) (6,625)

Net claims incurred 13 (1,871) (721) (13,977) (9,644) (25,546) (12,734) (64,493) (68,481)

Net fees and commissions expense (843) (1,073) (3,405) (4,946) (10,973) (4,637) (25,877) (23,784)

Management expenses 5 (568) (544) (4,069) (2,819) (9,186) (4,034) (21,220) (19,653)

Underwriting profit transferred to the

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BALANCE SHEET

For the financial year ended 31 December 2014

Notes 2014 2013

$'000 $'000

ASSETS

Non-current assets

Property and equipment 8 22,988 23,644

Investment in subsidiary 9 24,558 24,558

Financial assets, held to maturity 10 114,457 88,612

Club membership 11 - 25

Loans 12 - 64

Short term investments 18 5,000 -

167,003 136,903 Current assets

Reinsurers’ share of outstanding claims 13 10,419 10,760 Reinsurers’ share of provision for

unearned premiums 14 7,128 6,464

Deferred acquisition costs 15 14,493 13,807

Due from agents, brokers and reinsurers 16 25,565 28,794

Other debtors 17 2,047 3,268

Financial assets, held to maturity 10 17,003 30,110

Short term investments 18 138,934 63,333

Cash and cash equivalents 19 26,075 94,378

241,664 250,914

Total assets 408,667 387,817

LIABILITIES Current liabilities

Outstanding claims 13 103,889 104,221

Provision for unearned premiums 14 97,109 93,335

Reinsurers’ share of deferred acquisition costs 15 1,986 1,844

Due to agents, brokers and reinsurers 5,179 7,090

Other creditors 20 39,275 30,919

Provision for income tax 7 6,786 6,169

254,224 243,578 Non-current liabilities

Deferred tax liabilities 21 795 919

Total liabilities 255,019 244,497

NET ASSETS 153,648 143,320

EQUITY

Share capital 32,250 32,250

Revenue earnings 121,398 111,070

Total equity 153,648 143,320

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

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Share capital

Retained earnings

Total equity

$'000 $'000 $'000

2014

Balance at 1 January 32,250 111,070 143,320

Total comprehensive income - 29,328 29,328

Dividend paid* - (19,000) (19,000)

Balance at 31 December 32,250 121,398 153,648

2013

Balance at 1 January 32,250 89,530 121,780

Total comprehensive income - 21,540 21,540

Balance at 31 December 32,250 111,070 143,320

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STATEMENT OF CASH FLOWS

For the financial year ended 31 December 2014

2014 2013

$'000 $'000 Operating activities

Profit before income tax 34,604 24,442

Adjustments for:

Depreciation of property and equipment (note 8) 2,049 1,924 Adjustment to property and equipment (note 8) - 166 (Gain)/loss on disposal of property and equipment (note 4) (43) 4 Amortisation of premium on fixed income securities (note 10) 941 936

Interest income (note 4) (4,405) (3,759)

Increase in net outstanding claims 9 6,625

Increase in net provision for unearned premium (note 14) 3,110 7,158 Increase in net deferred acquisition costs (note 15) (544) (1,095) Provision for impairment of club membership (note 11) 25 -

Tax on dividend written off (note 7) 80 -

Operating cash flows before changes in working capital 35,826 36,401

Decrease in debtors 4,591 1,613

Increase in creditors 6,445 1,838

Decrease in fixed deposits held in trust

for policyholders 3,000 4,054

Decrease/(increase) in cash and bank balances held in trust

for policyholders 695 (2,912)

Cash flows from operations 50,557 40,994

Interest received 4,264 3,794

Income tax paid (note 7) (4,863) (2,244)

Net cash provided by operating activities 49,958 42,544

Investing activities

Purchase of property and equipment (note 8) (1,642) (1,436) Proceed from disposal of property and equipment 292 - Purchase of financial assets, held to maturity (43,579) (19,805) Proceeds from maturity of financial assets, held to maturity 29,900 25,111 Increase in short term investments (80,601) (44,000)

Repayment of staff loans 50 56

Repayment of term loan - 5

Write-off of term loan 14 -

Net cash flows used in investing activities (95,566) (40,069)

Financing activities

Dividend paid to immediate holding company (19,000) -

Net cash flows used in financing activities (19,000) -

Net (decrease)/increase in cash and cash equivalents (64,608) 2,475

Cash and cash equivalents at 1 January 86,581 84,106

Cash and cash equivalents at 31 December (note 19) 21,973 86,581

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

(13)

1. Corporate information

Liberty Insurance Pte Ltd (the “Company”) is incorporated and domiciled in Singapore. The Company is a wholly owned subsidiary of Liberty Citystate Holdings Pte Ltd, a company incorporated in Singapore, which is also its immediate holding company. The ultimate holding company is Liberty Mutual Holding Company Inc., a mutual insurance company organised under the laws of the Commonwealth of Massachusetts in the United States of America. The registered office and principal place of business of the Company is located at 51 Club Street, #03-00, Liberty House, Singapore 069428.

The principal activities of the Company are underwriting & reinsurance of general insurance business and investment holding. There have been no significant changes in the nature of these activities during the year.

2. Summary of significant accounting policies 2.1 Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards ("FRS").

The financial statements have been prepared on a historical cost basis.

The financial statements are presented in Singapore Dollars (SGD or $) and all values in the tables are rounded to the nearest thousands ($’000), except when otherwise indicated.

2.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Company has adopted the following new and revised standards which are effective for annual financial periods beginning on or after 1 January 2014.

• FRS 27 Separate Financial Statements • FRS110 Consolidated Financial Statements

• Amendment to FRS 32 Offsetting of Financial Assets and Financial Liabilities The adoption of these standards did not have any significant effect on the financial performance or position of the Company.

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

2.3 Standards Issued but not yet effective

The Company has not adopted the following applicable improvements to FRS that have been issued but not yet effective:

Description

Effective for annual periods beginning on or after

Improvements to FRSs 1 July 2014

Amendments to FRS 16 Property, Plant and Equipment

and FRS 38 Intangible Assets 1 July 2014 Amendments to FRS 24 Related Party Disclosures 1 July 2014 Amendments to FRS 102 Share Based Payment 1 July 2014 Amendments to FRS 113 Fair Value Measurement 1 July 2014 The directors expect that the adoption of the above improvements to FRS will have no material impact on the financial statements in the period of initial application.

2.4 Basis of consolidation

The Company does not present consolidated financial statements as it is a wholly-owned subsidiary of Liberty Citystate Holdings Pte Ltd, a company incorporated in Singapore, which presented previously, consolidated financial statements.

Starting from financial year ended 31 December 2003, Liberty Citystate Holdings Pte Ltd is exempted from Section 202 of the Companies Act to present consolidated financial

statements, as consolidated financial statements are presented under its intermediate holding company, Liberty UK and Europe Holdings Limited. The registered office of Liberty UK and Europe Holdings Limited is Eversheds House, 70 Great Bridgewater Street, Manchester M1 5ES, United Kingdom.

2.5 Foreign currency (i) Functional currency

The financial statements are presented in Singapore Dollars, which is also the Company’s functional currency.

(ii) Transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Company and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss.

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2.6 Property and equipment

All items of property and equipment are initially recorded at cost. Subsequent to recognition, property and equipment other than leasehold land are measured at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is computed on a straight line basis over the estimated useful lives of the assets as follows:

Leasehold building - 2% Computer and office equipment - 20% Furniture, fittings and fixtures - 20%

Machinery - 20%

Motor vehicles - 20%

No depreciation is provided on leasehold land with more than 50 years to expiry of the lease. Assets under work-in-progress included in property and equipment are not depreciated as these assets are not available for use.

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual values, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in the profit or loss in the year the asset is derecognised.

2.7 Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

Impairment losses of continuing operations are recognised in profit or loss, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

(16)

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

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.

2.8 Subsidiary

A subsidiary is an investee that is controlled by the Company. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In the Company’s financial statements, investment in subsidiary is accounted for at cost less impairment losses.

2.9 Financial assets

Initial recognition and measurement

Financial assets are recognised when, and only when, the Company becomes a party to the contractual provisions of the financial instrument. The Company determines the classification of its financial assets at initial recognition.

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

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows: (i) Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

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(ii) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the

amortisation process.

(iii) Available-for-sale financial assets

Available-for-sale financial assets include equity and debt securities. Equity

investments classified as available-for sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is de-recognised. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

De-recognition

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired or when it transfers the contractual rights to receive the cash flows on the asset in a transaction in which substantially all the risks and rewards of ownership of the asset is transferred. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchase or sale of a financial asset

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

(18)

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

2.10 Financial liabilities

Initial recognition and measurement

Financial liabilities are recognised when, and only when, the Company becomes a party to the contractual provisions of the financial instrument. The Company determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.

Subsequent measurement

After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

De-recognition

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

2.11 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the balance sheets, when and only when, there is a currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

2.12 Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired.

i) Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and

collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.

(19)

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss.

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred; the Company considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

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

ii) Financial assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

iii) Available-for-sale financial assets

In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant financial difficulty of the issuer or obligor, (ii)

information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not be

recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from other comprehensive income and recognised in profit or loss. Reversals of impairment losses in respect of equity instruments are not recognised in profit or loss; increase in their fair value after impairment are recognised directly in other comprehensive income.

(20)

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

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increases can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed in profit or loss.

2.13 Club membership

Club membership is carried at cost less accumulated impairment losses. No amortisation is provided as management has assessed the useful life of the club membership to be

indefinite. Club membership is tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired. The useful life of a club membership is reviewed annually to determine whether the useful life assessment continues to be supportable.

2.14 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value with maturities 3 months or less from date of acquisition.

2.15 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be

required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

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2.16 Provision for unearned premiums

Provision for unearned premiums comprises the sum of unearned premium reserves and premium deficiency reserves. Premium deficiency reserves are derived using actuarial methods on loss statistics and are recognised when the expected value of claims and expenses attributable to the unexpired periods of policies in force at the balance sheet date for any line of business exceeds the unearned premium reserves.

The unearned premium reserves are computed on the following basis:

(i) 365th method for all direct and facultative reinsurance classes of business other than marine cargo, for which 25% is applicable;

(ii) in the case of all classes of treaty reinsurance business, other than marine cargo, 40% of the premiums and for marine cargo, 25% of the premium; and

(iii) the actual acquisition cost is taken into account in the computation in respect of direct and facultative reinsurance business, except for marine cargo.

2.17 Deferred acquisition cost

Commission and other acquisition costs incurred during the financial period that vary with and are related to securing new insurance contracts and or renewing existing insurance contracts, are recognised as expenses in profit or loss. If these costs relate to subsequent financial periods, they are deferred to the extent that these are recoverable out of future revenue margins.

Deferred acquisition costs (“DAC”) are calculated using the 365th method on actual commission.

An impairment review is performed at each reporting date and, if required, the carrying value is written down to the recoverable amount.

2.18 Reinsurance

The Company assumes and/or cedes reinsurance in the normal course of business. Reinsurance assets primarily include balances due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts due to reinsurers are determined in a manner consistent with the associated reinsured policies and in accordance with the reinsurance contract.

Amounts recoverable from reinsurers are assessed for impairment at each reporting date. Such assets are deemed impaired if, and only if, there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company will expect to receive from the reinsurer. The impairment loss is recognised in profit and loss.

Reinsurance assets comprise reinsurers’ share of insurance contract provisions. The

amounts recognised as reinsurers’ share of insurance contract provisions are measured on a basis that is consistent with the measurement of the provisions held in respect of the related insurance contracts.

Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party.

(22)

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

2.19 Employee benefits

(i) Defined contribution plan

The Company make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension scheme are recognised as an expense in the period in which the related service is performed.

(ii) Employees' leave entitlement

Employees' entitlements to annual leave are recognised as a liability when they are accrued to the employees. The undiscounted liability for leave expected to be settled wholly before three months after the end of the reporting period is recognised for services rendered by employees up to the end of the reporting period.

2.20 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

(i) Premium income

Gross written premiums are recognised at the time of commencement of the risk or, in the case of reinsurance, it is taken up in the insurance underwriting account based on reinsurance closings received up to the time of closing of the books, and earned over the term of the related policy coverage.

At initial recognition of premiums, an unearned premium provision is established equal to the amount of written premium. Premium is then recognised as earned over the policy term in accordance with the period of insurance service, by recording changes in the unearned provision against premium income.

Outward reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct insurance business.

(ii) Commission income

Commission income comprises of reinsurance commissions received or receivable from reinsurers and is recognised as an income in the profit or loss.

(iii) Investment income

Interest income, and amortised discount or premium on quoted and unquoted bonds (using effective interest rate method) are recognised on an accrual basis unless collectability is in doubt.

(23)

2.21 Income taxes

(i) Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or

substantively enacted by the end of the reporting period, in the countries where the Company operates and generates taxable income.

Current income taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

(ii) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except: - Where the deferred tax liability arises from the initial recognition of an asset or

liability in a transaction that is not a business combination and, at the time of the transaction, affects nether the accounting profit nor taxable profit or loss; and - In respect of taxable temporary differences associated with investments in

subsidiary, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

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

- Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

(24)

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

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting period.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

2.22 Related parties

A related party is defined as follows:

(i) A person or a close member of that person’s family is related to the Company if that person:

(a) Has control or joint control over the Company; (b) Has significant influence over the Company; or

(c) Is a member of the key management personnel of the Company or of a parent of the Company.

(ii) An entity is related to the Company if any of the following conditions applies:

(a) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

(b) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); (c) Both entities are joint ventures of the same third party;

(d) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(e) The entity is a post-employment benefit plan for the benefits of employees of either the Company or an entity related to the Company. If the Company is itself of such a plan, the sponsoring employers are also related to the Company; (f) The entity is controlled or jointly controlled by a person identified in (i);

(g) A person identified in (i)(a) has significant influence over the entity or is member of the key management personnel of the entity (or of a parent of the entity).

(25)

3. Significant accounting judgement and estimates

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affects the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting period. Uncertainty about these assumptions and estimates could result in

outcomes that require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

In the process of applying the Company’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements.

Insurance contract liabilities

(a) Claims admitted or intimidated but not paid

Claims are charged against the insurance revenue account when incurred based on the estimated liability for compensation owed to policyholders or damage suffered by third party claimants. They comprise direct and indirect claims settlement costs including loss adjustment expenses and professional fees, and arise from events that have occurred up to balance sheet date even if they have not been reported to the Company.

Provision is made for the estimated cost of all claims incurred but not settled at the date of the balance sheet less reinsurance recoveries, using the best information available at the time. In addition, provision for claims incurred but not reported is made based on the independent actuarial assessment as at balance sheet date as required under the Insurance Act.

The Company does not discount its liabilities for outstanding claims. Any deduction or increase in the provision is dealt with in the insurance revenue account in the year in which the reduction or increase arises. Any difference between the estimated cost and subsequent settlement is dealt with in the insurance revenue account in the year in which settlement takes place.

As explained in notes 3(e) and 3(f), the assumptions used to estimate the provision require judgement and are subject to uncertainty.

(b) Terms and conditions

The major classes of general insurance written by the Company include Motor, Workmen’s Compensation, Fire, Marine, Cargo, Medical and Personal Accident and General Liability. Risks under these policies usually cover a 12 month duration,

although Marine Cargo policies may cover a single shipment of goods (as opposed to a fixed duration of time), and project-related Workmen’s Compensation and Extended Warranty policies may provide cover for a period of several years.

For general insurance contracts, claims provisions (comprising provisions for claims reported by policyholders and claims incurred but not yet reported) are established to cover the ultimate cost of settling the liabilities in respect of claims that have occurred and are estimated based on known facts at the balance sheet date.

The provisions are refined quarterly as part of a regular ongoing process as claims experience develops, certain claims are settled and further claims are reported.

(26)

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

(c) Liability adequacy test

At each balance sheet date, a liability adequacy test is performed to ensure the adequacy of unearned premiums. In performing the test, the current best estimate of premium liabilities is used. Premium liabilities are defined as the value of future

contractual cash flows related to unexpired periods of risk underwritten by the company as at the valuation date, including claims handling and policy administration expenses, as well as investment income from assets backing such liabilities. Any inadequacy is immediately charged to the profit or loss account by establishing an unexpired risk provision

(d) Estimation process

The claims provision estimation process involves estimation of reserves for outstanding reported claims (case reserves), and estimation of additional reserves for incurred but not reported (IBNR) claims and expected future movements in the estimated ultimate liabilities associated with outstanding reported claims (IBNER). Case reserves are set and periodically reviewed by the claims department. IBNR and IBNER reserves are set by management of the Company based on past experience. The total claims liability reserve is subject to a quarterly actuarial adequacy review and a formal actuarial report on the adequacy of the booked reserves is issued to the Monetary Authority of

Singapore on an annual basis.

In forming their view on the adequacy of the claims provisions, actuaries use a variety of statistical projection techniques like the Chain Ladder and Bornhuetter Ferguson methods. Claims provisions are separately analysed by geographical area and class of business. Large claims are usually excluded from the statistical analysis and reviewed on an individual basis.

The claims provisions are intended to provide at 75% level of assurance of adequacy, and as such include a Provision for Adverse Deviation (PAD) beyond the expected value (best estimate) of the claims liabilities.

The best estimate of premium liabilities is determined such that the total liability provision would be sufficient to pay for future claims and expenses in servicing the unexpired periods of policies underwritten by the company as of the valuation date. In calculating these premium liabilities for the various classes, the ultimate incurred loss of the individual class for the latest accident year is generally used to determine a suitable ultimate loss ratio

(e) Assumptions

The principle assumption underlying the actuarial estimate of the claims liabilities is that the past claims development experience of the Company is indicative of likely future claims development, both in terms of expected claim amounts and variability around those expected amounts. In estimating the required claims provisions, actuaries also consider trends in claims frequency and severity, rate of settlement, and the impact of changes in the underwriting and claims handling policies of the Company, as well as the impact of external factors such as market practices, judicial decisions and government legislation. There is typically a lot of judgment involved in estimating the claims liabilities, particularly for small and volatile portfolios of business.

(27)

(f) Sensitivity

Because of the delays that arise between the occurrence of a claim and its subsequent notification and eventual settlement, the outstanding claims provisions are not known with certainty at the balance sheet, and must instead be estimated as explained above. Consequently, the ultimate liabilities will vary as a result of subsequent developments. Differences resulting from reassessment of the ultimate liabilities are recognized in subsequent financial statements.

The table below is intended to illustrate the level of uncertainty within the claims reserves.

Three scenarios are shown:

(i) The impact (based on the actuarial model) of reducing the estimated claims provision from the level that provides a 75% level of assurance to the best estimate (or expected outcome) level.

(ii) The impact of increasing the actuarially estimated claims provision from the level that provides a 75% level of assurance to the level that provides a 95% level of assurance.

(iii) The impact of increasing all individually estimated case reserves by 5%, illustrating the sensitivity of the claims provision to the individual estimates formulated by loss adjusters.

Increase/ (decrease) of net claims

liabilities

Increase/ (decrease) in profit before tax $’000 $’000

2014

Reduce claims provision from 75% adequacy

level to best estimate (6,291) 6,291

Increase claims provision from 75% adequacy

level to 95% adequacy level 13,346 (13,346) Increase reported claim case reserves by 5% 3,531 (3,531)

2013

Reduce claims provision from 75% adequacy

level to best estimate (3,007) 3,007

Increase claims provision from 75% adequacy

level to 95% adequacy level 9,195 (9,195) Increase reported claim case reserves by 5% 3,082 (3,082)

(28)

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

(g) Reinsurance – Assumptions and methods

The Company limits its exposure to loss within insurance operations through participation in reinsurance arrangements. Amount recoverable from reinsurers are estimated in manner consistent with the assumptions used for ascertaining the underlying policy benefits and are presented in the balance sheet as reinsurer’s share of technical provisions. Premiums ceded and reinsurance claims recoveries are presented in the revenue account and balance sheet on a gross basis.

Even though the Company may have reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure exists with respect to reinsurance ceded, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance agreements.

(h) Classification of contracts

Contracts which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder or other beneficiary if a specific uncertain future event (the insured event) adversely affects the policyholder or other beneficiary, are classified as insurance contracts.

The significance of insurance risk is dependent on both the probability of an insurance event and magnitude of its potential effect. As a general guideline, the Company determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.

These contracts are regarded as insurance contracts for the purposes of FRS 104 Insurance Contracts and are classified as such in these financial statements.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period.

(29)

4. Net Investment and other income

2014 2013

$’000 $’000

Interest income from:

- fixed deposits 916 329

- fixed income government securities 1,657 1,601

- fixed income corporate securities 1,832 1,829

4,405 3,759

Amortisation of premium on fixed income securities (note 10) (941) (936)

Investment expenses (222) (365)

Foreign exchange losses (35) (78)

Gain on disposal of property and equipment 43 - Accounting service fee income from related party (note 26) 50 50

Other income 759 1,218

4,059 3,648

5. Management expenses

The following items have been included in arriving at management expenses:

2014 2013

$’000 $’000

Auditor’s remuneration 116 111

Depreciation of property and equipment (note 8) 2,049 1,924

Loss on disposal of property and equipment - 4

Staff costs expense (note 6) 16,716 16,903

Bad debts (note 16) 152 437

As at 31 December 2014, the Company had 197 (2013: 184) employees. Included in the staff costs expense an amount of $2,693,000 (2013: $3,667,000) which was allocated to net claims incurred as part of unallocated loss adjustment expenses.

6. Staff costs expense

2014 2013

$’000 $’000

Staff costs expense (including directors):

Salaries and bonuses 13,249 14,032

Central Provident Fund contributions 1,443 1,119

Other staff costs 2,024 1,752

(30)

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

7. Income tax expense

The major components of income tax expense for the year ended 31 December:

2014 2013

$’000 $’000

Current tax

- Current income tax 5,998 3,902

- Over provision in respect of prior years (598) (1,255) 5,400 2,647

Deferred tax (note 21) (124) 255

Income tax expense recognised in profit or loss 5,276 2,902

A reconciliation of the statutory tax rate to the Company's effective tax rate applicable to profit before taxation for the financial year ended 31 December is as follows:

2014 2013

$’000 $’000

Profit before income tax 34,604 24,442

Tax at Statutory rate of 17% (2013: 17%) 5,883 4,155

Adjustments:

Income not subject to tax (53) -

Non deductible expenses 226 176

Effect of partial tax exemption (26) (26)

Effect of income at concessionary tax rate (199) (148)

Over provision of tax in current year 43 -

Over provision in respect of prior years (598) (1,255) Income tax expense recognised in profit or loss 5,276 2,902 The movement of the provision for income tax is as follows:

2014 2013

$’000 $’000

Balance at 1 January 6,169 5,766

Current year tax expense 5,400 2,647

Tax on dividend written off 80 -

Tax paid during the year (4,863) (2,244)

(31)

8. Property and Equipment

Leasehold land

Leasehold building

Computer and office equipment

Furniture, fixtures

and fittings Machinery

Motor

vehicles Total

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

2014 Cost

Balance at 1 January 10,341 10,259 11,277 1,305 3 298 33,483

Adjustment - - 11 - - - 11

Additions - - 1,372 22 - 248 1,642

Disposal - - (224) (43) - (436) (703)

Balance at 31 December 10,341 10,259 12,436 1,284 3 110 34,433

Accumulated depreciation

Balance at 1 January - 2,274 6,798 570 1 196 9,839

Depreciation charge - 167 1,572 255 1 54 2,049

Adjustment - - 11 - - - 11

Disposal - - (220) (42) - (192) (454)

Balance at 31 December - 2,441 8,161 783 2 58 11,445

Net Book value

(32)

NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 31 December 2014

Leasehold land

Leasehold building

Computer and office equipment

Furniture, fixtures

and fittings Machinery

Motor

vehicles Total

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

2013 Cost

Balance at 1 January 10,341 10,371 10,147 1,243 3 298 32,403

Reclassification - (112) (31) (23) - - (166)

Additions - - 1,351 85 - - 1,436

Adjustments - - (190) - - - (190)

Balance at 31 December 10,341 10,259 11,277 1,305 3 298 33,483

Accumulated depreciation

Balance at 1 January - 2,109 5,524 331 1 136 8,101

Depreciation charge - 165 1,460 239 - 60 1,924

Adjustments - - (186) - - - (186)

Balance at 31 December - 2,274 6,798 570 1 196 9,839

Net Book value

Balance at 31 December 10,341 7,985 4,479 735 2 102 23,644

(33)

9. Investment in subsidiary

2014 2013

$’000 $’000

Unquoted equity shares, at cost 24,558 24,558

The details of the subsidiary company are as follows:

Name

Country of

incorporation Principal activities

Percentage of equity held

2014 2013

% %

Liberty International

Insurance Limited* Hong Kong

Life and General

Insurance business 68 68 *Audited by Ernst & Young, Hong Kong

10. Financial assets, held to maturity

Carrying value

Market Value $’000 $’000 2014

Quoted investments

Government securities, at costs 68,267 67,331

Less: Amortisation of premiums (1,171) -

67,096 67,331

Corporate bonds, at costs 59,802 59,118

Less: Amortisation of premiums (538) -

59,264 59,118

Total quoted investments 126,360 126,449

Unquoted investments

Corporate bonds, at costs 5,188 5,143

Less: Amortisation of premiums (88) -

Total unquoted investments 5,100 5,143

Total investments 131,460 131,592

Current portion - matures within the next 12 months 17,003 17,052 Non Current portion – matures after the next 12 months 114,457 114,540 131,460 131,592

(34)

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

Carrying value

Market Value $’000 $’000 2013

Quoted investments

Government securities, at costs 64,879 63,227

Less: Amortisation of premiums (1,608) -

63,271 63,227

Corporate bonds, at costs 49,824 49,226

Less: Amortisation of premiums (482) -

49,342 49,226

Total quoted investments 112,613 112,453

Unquoted investments

Corporate bonds, at costs 6,176 5,989

Less: Amortisation of premiums (67) -

Total unquoted investments 6,109 5,989

Total investments 118,722 118,442

Current portion - matures within the next 12 months 30,110 30,223 Non Current portion – matures after the next 12 months 88,612 88,219 118,722 118,442

The Company categories fair value measurements using a fair value hierarchy that is dependent on the valuation inputs used as follows:

i) Level 1 – Quoted prices (unadjusted) in active market for identical assets or liabilities that the Group can access at the measurement date,

ii) Level 2 – Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and

iii) Level 3 – Unobservable inputs for the asset or liability.

Fair value measurements that use inputs of different hierarchy levels are categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The fair value of quoted investments is determined by quoted prices listed on a recognised exchange, independent broker quotations or published prices at the close of business on the balance sheet date. As at 31 December 2014, there was no impairment loss recognised (2013: Nil).

The fair value measurement for quoted and unquoted investments has met the requirements of Level 1 and Level 2, respectively.

(35)

Movements in amortisation of premiums on acquisition of investments are as follows:

2014 2013

$’000 $’000

Balance at 1 January 2,157 1,871

Amortisation during the financial year (note 4) 941 936 Premiums released on redemption of investment upon

maturity (1,301) (650)

Balance at 31 December 1,797 2,157

During the financial year ended 31 December 2014, investments that were fiduciary deposits held in trust for policyholders of $10,045,000 were transferred to bank balances held in trust for policy holders. In 2013, fiduciary deposits held in trust for policyholders of $10,045,000 were included in investments.

11. Club membership

2014 2013

$’000 $’000

Club membership, at cost 103 103

Less: Impairment loss (103) (78)

- 25

12. Loans

2014 2013

$’000 $’000

Staff loans, secured (note 26) 50 93

Less: Current portion (note 17) (50) (50)

Non-current portion - 43

Term loan - 21

- 64

Staff loans represent outstanding balances on two car loans to staff under an approved car benefit scheme of the Company which are secured against the cars owned by the staff, and are receivable over remaining 12 monthly instalments. Staff loans are non-interest bearing. The fair value of the staff loans are estimated using the discounted cash flows method, based on current market lending rates for similar types of loan arrangements. At the end of the reporting period, the carrying amounts of staff loans approximate their fair values.

During the financial year ended 31 December 2014, the Company has written off the term loan and donated it to the Singapore College of Insurance.

(36)

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

13. Outstanding claims

2014 2013

$’000 $’000

Gross outstanding claims 103,889 104,221

Reinsurers’ share of outstanding claims (10,419) (10,760) 93,470 93,461 The carrying amount relating to the reinsurers’ share of the outstanding claims approximates their fair values as they are subject to normal trade credit terms.

Movement in outstanding claims:

Gross Reinsurance Net

$’000 $’000 $’000

2014

Balance at 1 January 104,221 (10,760) 93,461

Claims paid during the year (68,206) 3,722 (64,484) Claims incurred during the year 67,874 (3,381) 64,493

Balance at 31 December 103,889 (10,419) 93,470

2013

Balance at 1 January 98,529 (11,693) 86,836

Claims paid during the year (67,369) 5,513 (61,856) Claims incurred during the year 73,061 (4,580) 68,481

Balance at 31 December 104,221 (10,760) 93,461

The table below shows the development of claims over a period of time on a net of

reinsurance basis. It shows the cumulative incurred claims, including both notified and IBNR claims, for each successive accident year at each balance sheet date, together with

cumulative claims as at the current balance sheet date.

Claims development is shown for the last five accident years, with the liability held as at the current balance sheet date for accident years 2009 and prior being shown as a separate item.

Accident Year 2010 2011 2012 2013 2014 Total

$’000 $’000 $’000 $’000 $’000 $’000

End of accident year 65,471 63,618 75,698 81,656 79,173 365,616

1 year later 65,424 58,344 60,841 70,919 255,528

2 years later 61,767 60,244 60,209 182,220

3 years later 62,917 57,776 120,693

4 years later 62,670 62,670

Cumulative claims incurred 62,670 57,776 60,209 70,919 79,173 330,747

Cumulative payments to date (56,218) (51,577) (48,428) (50,251) (33,903) (240,377)

Liability recognised in the

balance sheet 6,452 6,199 11,781 20,668 45,270 90,370

Outstanding liability pertaining to

accident year 2009 and before 3,100

(37)

14. Provision for unearned premiums

2014 2013

$’000 $’000

Unearned premium reserves 97,109 93,335

Reinsurers’ share of unearned premium reserves (7,128) (6,464) 89,981 86,871 Movement in unearned premium reserves:

Gross Reinsurance Net

$’000 $’000 $’000

2014

Balance at 1 January 93,335 (6,464) 86,871

Movement during the year 3,774 (664) 3,110

Balance at 31 December 97,109 (7,128) 89,981

2013

Balance at 1 January 86,314 (6,601) 79,713

Movement during the year 7,021 137 7,158

Balance at 31 December 93,335 (6,464) 86,871

15. Deferred acquisition costs

2014 2013

$’000 $’000

Deferred acquisition costs 14,493 13,807

Reinsurers’ share of deferred acquisition costs (1,986) (1,844) 12,507 11,963 Movement in deferred acquisition costs:

Gross Reinsurance Net

$’000 $’000 $’000

2014

Balance at 1 January 13,807 (1,844) 11,963

Movement during the year 686 (142) 544

Balance at 31 December 14,493 (1,986) 12,507

2013

Balance at 1 January 12,668 (1,800) 10,868

Movement during the year 1,139 (44) 1,095

Figure

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References

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