Zurich General Takaful Malaysia Berhad

Reports And Statutory

Financial Statements
31 DECEMBER 2019
About Zurich Zurich General Takaful Malaysia
General Takaful Berhad (ZGTMB) is one of
in Malaysia Malaysia’s leading general takaful
operators. It is a member of
Zurich Insurance Group and the
sole provider of
shariah-compliant general takaful
products within Zurich. With
more than a decade of Takaful
market expertise, ZGTMB offers
an extensive range of general
takaful solutions spanning motor,
travel, property, financial and
personal lines, small to medium
enterprises as well as large
industrial risks. Together with its
dedicated employees, agency
force, distributors and partners,
supported by its nationwide
branch network, ZGTMB is
committed to help its customers
understand and protect their
valuable assets and businesses
from risks.
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CONTENTS PAGE

CORPORATE GOVERNANCE STATEMENT 1 - 16

DIRECTORS’ REPORT 17 - 22

STATEMENT BY DIRECTORS 23

STATUTORY DECLARATION 23

SHARIAH COMMITTEE’S REPORT 24 - 26

INDEPENDENT AUDITORS’ REPORT 27 - 30

FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION 31 - 32

STATEMENT OF PROFIT OR LOSS 33 - 34

STATEMENT OF COMPREHENSIVE INCOME 35

STATEMENT OF CHANGES IN EQUITY 36

STATEMENT OF CASH FLOWS 37

NOTES TO THE FINANCIAL STATEMENTS 38 - 131

 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT

Introduction

Zurich General Takaful Malaysia Berhad (“ZGTMB” or “the Company”) is committed to effective
corporate governance for the benefit of its shareholders, customers, employees and other
stakeholders based on the principles of fairness, transparency and accountability.

The Board of Directors (“the Board”) is satisfied that the Company has complied with all prescriptive
requirements of including the principles of Shariah, and adopts the Corporate Governance policy
document (BNM/RH/PD 029-9) issued by Bank Negara Malaysia (“BNM”) since the commencement
of the business of the Company on 1 June 2018. The Board has continued its commitment in
ensuring that the highest principles and best practices in corporate governance are practised as a
fundamental part of discharging its responsibilities to protect and enhance shareholders value and
the financial performance of the Company.

The Board

The Board is responsible for the overall governance of the Company by ensuring strategic guidance,
internal control, risk management and reporting procedure are in place. The Board exercises due
diligence and care in discharging its duties and responsibilities to ensure compliance with relevant
rules, regulations directives and guidelines in addition to adopting best practices and act in the best
interest of its shareholders.

The Board Charter

The Board Charter set out the Board’s roles, responsibilities and procedures of the Board and the
Board Committees of the Company in accordance with the principles of corporate governance
prescribed in the Corporate Governance Policy Document issued by BNM. The Board regularly
reviews the Charter and ensure it remains consistent and relevance to the Board’s objectives and
responsibilities, and all regulations/laws in connection thereto.

Composition of the Board

The Directors of the Company in office during the period since the date of the last report are as
follows:

Name of Directors Designations

Nabil Nazih El-Hage Chairman, Independent Non-Executive Director
Dr Md Khalil bin Ruslan Independent Non-Executive Director
Onn Kien Hoe Independent Non-Executive Director
Dr Mohd Nordin bin Mohd Zain Independent Non-Executive Director
Hasnah binti Omar
Independent Non-Executive Director
(Appointed on 5 August 2019)
Kevin John Wright
Executive Director
(Appointed on 3 February 2020)
David Jerry Fike
Executive Director
(Resigned on 25 May 2019)

1
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Composition of the Board (continued)

The Board comprises five (5) Independent Non-Executive Directors and one (1) Executive Director,
each from diverse backgrounds and qualifications and bring a wide range of professional skills and
operational experience to the Board. Collectively, they provide the necessary business acumen,
knowledge, capabilities and competencies to the Company. The roles and activities of the Chairman
and Chief Executive Officer (“CEO”) are distinct and separate.

The appointments to the Board were approved by BNM. All appointments and reappointments of
Board members are subject to evaluation and review by the Nomination and Remuneration
Committee, and approved by the Board before the applications are submitted to BNM for approval.

Roles and Responsibilities of the Board

The Board sets the strategic direction and vision of the Company. It has an overall responsibility for
promoting the sustainable growth and financial soundness of the Company, and for ensuring
reasonable standards of fair dealing, without undue influence from any party. This includes a
consideration of long-term implications of the Board’s decisions on the Company and its customers,
officers and general public. In fulfilling this role, the Board shall:

(a) approve the risk appetite, business plans and other initiatives which would, singularly or
cumulatively, have a material impact on the Company’s risk profile;

(b) oversee the selection, performance, remuneration and succession plans of the CEO, control
function heads and other members of senior management, such that the Board is satisfied with
the collective competence of senior management to effectively lead the operations of the
Company;

(c) oversee the implementation of the Company’s governance framework and internal control
framework, and periodically review whether these remain appropriate in light of material changes
to the size, nature and complexity of the Company’s operations;

(d) promote, together with senior management, a sound corporate culture within the Company
which reinforces ethical, prudent and professional behavior;

(e) promote sustainability through appropriate environmental, social and governance

considerations in the Company’s business strategies;

(f) oversee and approve the recovery and resolution as well as business continuity plans for the
Company to restore its financial strength, and maintain or preserve critical operations and critical
services when it comes under stress;

(g) promote timely and effective communication between the Company and BNM on matters
affecting or that may affect the safety and soundness of the Company; and

(h) promote Shariah compliance in accordance with expectations set out in the policy document on
Shariah Governance (BNM/RH/PD/028-100).

2
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Profile of Directors

Nabil Nazih El-Hage

American, Male
Independent Non-Executive Director / Chairman

Mr. Nabil Nazih El-Hage was appointed as Independent Non-Executive Director / Chairman of the
Company upon obtaining approval from Bank Negara Malaysia on 1 June 2018.

Mr. Nabil graduated ‘cum laude’ in Electronic Engineering from Yale University in 1980. He then
earned his Master of Business Administration (“MBA”) with the highest honours – as a Baker Scholar
– from Harvard Business School in 1984, where he was awarded the Henry Ford Foundation Award
for the Best First-Year academic record, the Loeb-Rhoades Fellowship for Excellence in Finance, the
Copeland (Marketing) Award nomination, and a Dean’s Doctoral Fellowship.

Mr. Nabil is the founder and chairman of the AEE International, dba Academy of Executive Education
(“AEE”), which provides high-quality executive education programmes to corporate clients. AEE (and
its predecessor companies) have also developed a highly-acclaimed corporate governance
programme for Malaysian financial institutions, as commissioned by Bank Negara Malaysia. He is
also the Programme Director for Bank Negara Malaysia’s Financial Institutions Directors’ Education
(“FIDE”) programme.

Mr. Nabil has served on several boards of directors of private and public listed companies. From
2003 to 2010, Mr. Nabil was on the faculty of Harvard Business School, where he was, at various
times, Professor of Management Practice, Thomas Henry Carroll / Ford Foundation Adjunct
Professor of Business Administration, and Senior Associate Dean for External Relations. At Harvard
Business School, Mr. Nabil taught courses on Private Equity, Corporate Finance, and Corporate
Governance.

Mr. Nabil also serves as the Contracts Committee Chairman of the MassMutual mutual fund group
($35 billion under management), member of its Audit Committee and designated "Financial Expert”.
His previous appointments include chairman of the Audit Committee of an NYSE-listed Property and
Casualty insurance company. He has served on the boards of directors of over 15 companies,
including six public listed ones. He has also served on the Audit Committee of several companies
and was a past president of The Yale Club of Boston.

Mr. Nabil is also the Independent Non-Executive Director / Chairman of Zurich General Insurance
Malaysia Berhad.

3
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Profile of Directors (continued)

Dr. Md Khalil bin Ruslan

Malaysian, Male
Independent Non-Executive Director
Chairman of Nomination and Remuneration Committee
Member of Audit Committee
Member of Risk Management Committee
Member of Shariah Committee

Dr. Md Khalil bin Ruslan was appointed as Independent Non-Executive Director of the Company
upon obtaining approval from Bank Negara Malaysia on 15 March 2018. He is the Chairman of the
Nomination and Remuneration Committee of the Company. He is also a member of the Risk
Management Committee, Audit Committee and Shariah Committtee of the Company.

Dr. Khalil obtained his Bachelor of Shariah from University of Malaya in 1985 and Masters of
Comparative Law (MCL) in 1988 from International Islamic University. Subsequently in year 2000,
he attained his PHD (Islamic Commercial Transaction) from University of Edinburgh, Scotland, United
Kingdom. He is currently an Associate Professor at Law Faculty, University of Malaya, Kuala Lumpur.

Onn Kien Hoe

Malaysian, Male
Independent Non-Executive Director
Chairman of Audit Committee
Member of Risk Management Committee
Member of Nomination and Remuneration Committee

Mr Onn Kien Hoe was appointed as Independent Non-Executive Director of the Company upon
obtaining approval from Bank Negara Malaysia on 1 June 2018. He is the Chairman of the Audit
Committee of the Company. He is also a member of the Nomination and Remuneration Committee
and Risk Management Committee of the Company.

Mr. Onn completed his professional qualification with the Association of Chartered Certified
Accountants (U.K.) in 1988 and has been in the accounting profession since then. He is also a
member of the Malaysian Institute of Accountants (“MIA”) and Malaysian Institute of Certified Public
Accountants.

Mr. Onn is a partner with Crowe Malaysia, an internationally affiliated accounting firm which is the
fifth largest in Malaysia. His role includes acting as the Co-Head of the Corporate Advisory Division
of Crowe Malaysia. Mr Onn has served as an examiner for the Malaysian Institute of Certified Public
Accountants and as a member of the Interpretation Committee of the Malaysian Accounting
Standards Board.

Mr Onn currently serves as the Independent Non-Executive Director of Zurich Takaful Malaysia
Berhad. He also sits on the Board of Avillion Berhad and several private limited companies.

4
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Profile of Directors (continued)

Dr. Mohd Nordin bin Mohd Zain

Malaysian, Male
Independent Non-Executive Director
Chairman of Risk Management Committee
Member of Audit Committee
Member of Nomination and Remuneration Committee

Dr Nordin Mohd Zain was appointed as Independent Non-Executive Director of the Company upon
obtaining approval from Bank Negara Malaysia on 1 June 2018. He is the Chairman of the Risk
Management Committee. He is also a member of the Audit Committee and Nomination and
Remuneration Committee of the Company.

Dr. Nordin obtained his doctorate degree in Strategic Management from Strathclyde University,
United Kingdom in 1995 and Masters and Bachelor degrees in Accounting from the USA in 1983 and
1981 respectively.

Dr Nordin has 34 years of experience in various capacities in banking, education, regulatory agency
and professional practice. He started his career in internal audit and corporate banking for 6 years,
in academic for 10 years, as a Chief Executive Officer for the Malaysian Accounting Standards Board
(“MASB”) for 10 years and as a Partner in Deloitte for 8 years.

He is a Chartered Accountant member of MIA, a Fellow member of CPA Australia (“FCPA”), a Fellow
of IPA Australia (“FIPA”) and was serving as a council member of MIA, a council member of CPA
Australia, as well as a founding board member of the Malaysian Accounting Standards Board. He
also served as a member of Corporate Law Reforms Committee of the Registrar of Companies

Dr Nordin currently sits on the board of international bodies such as Accounting & Auditing
Organization for Islamic Financial Institution (“AAOIFI”) in Bahrain UAE, the Institute of Public
Accountants Australia in Melbourne, and serves as an investment committee member of a subsidiary
of AIA Berhad. He used to serve as a member of Public Accountants Oversight Committee in Brunei.

Dr Nordin also serves as an Independent Non-Executive Director of UDA Holdings Berhad and
AmBank Islamic Berhad.

5
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Profile of Directors (continued)

Hasnah binti Omar

Malaysian, Female
Independent Non-Executive Director
Member of Audit Committee
Member of Risk Management Committee
Member of Nomination and Remuneration Committee

Cik Hasnah binti Omar was appointed as an Independent Non-Executive Director of the Company
upon obtaining approval from Bank Negara Malaysia on 5 August 2019. Cik Hasnah is a member of
the Audit Committee, Risk Management Committee and Nomination and Remuneration Committee
of the Company.

Cik Hasnah graduated and received her BA (Hons) from University of Malaya in 1981 and holds a
Masters in Public Administration from Harvard University, USA in 1991. Cik Hasnah also holds a
Masters in Banking Law (Islamic and Conventional) from International Islamic University of Malaysia
in 2010.

Cik Hasnah has vast experience in finance, banking and capital market having worked in various
capacities with Bank Negara Malaysia (“BNM”) or Bank, Securities Commission (“SC”), and the
Asian Development Bank (“ADB”), Manila, Philippines.

In 1981, Cik Hasnah joined BNM, where she largely worked in the Bank Examination Department of
BNM which was responsible for the examinations of commercial banks, merchant banks, discount
houses and finance companies. She led the examinations of a number of financially distressed banks
during 1980s. For about one and the half years she served as the Head of Public Affairs Unit of the
Bank, among others, assisting Governor and Senior Management in managing the press and public
perception of BNM’s policies.

Cik Hasnah worked with SC from 1991 until 2013, culminating her career in SC as the Director of
Market Oversight Business Group. She was actively involved in the Brokers Monitoring System
during the Asian Market Crisis 1997/1998. She was also responsible for the formulation and
implementation of the Compliance Function Framework for the industry, as well as the formulation of
Risk-based Capital for stockbroking companies. She was primarily responsible for the formulation
and implementation of Brokers’ Consolidation Policy and together with BNM contributed to the
formulation of regulatory framework for investment banks. Cik Hasnah represented SC as a member
of Financial Stability Committee of Financial Services Authority of Labuan (“FSA”) and as a board
member of Capital Market Compensation Fund.

Cik Hasnah spent two years, from January 2009 to December 2010 with ADB in Manila on a
secondment basis. Among others, she advised ADB on Islamic finance matters, she was a Mission
Leader for the Financial Sector and Capital Markets Sovereign Loan Program and Technical
Assistance (“TA”) for Vietnam, and involved in sovereign loan programs and TA for Thailand,
Indonesia, and Philippines. She was a Co-Mission Leader for the ASEAN Regional Capital Markets
Integration TA. She returned to serve the SC in January 2011 until 2013.

Cik Hasnah is currently the Chairman and Independent Non-Executive Director of MIDF Amanah
Assets Management Berhad and Zurich Takaful Malaysia Berhad. She also sits on the Boards of
Malaysian Industrial Development Finance Berhad (“MIDF”) and Zurich Life Insurance Malaysia
Berhad. She has been serving as a member of the Appeals Committee of the Securities Industry
Dispute Resolution Centre since 2015.

6
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Profile of Directors (continued)

Kevin John Wright

Australian, Male
Executive Director

Mr. Kevin John Wright was appointed as Executive Director of the Company upon obtaining approval
from Bank Negara Malaysia on 3 February 2020.

Mr. Wright has vast experience in the financial services sector in New Zealand and Australia as well
as South East Asia covering Malaysia, Indonesia, Singapore, Thailand, Philippines, Hong Kong and
India. Mr. Wright possesses a high degree of familiarity with other Asia Pacific markets such as South
Korea and Japan. Mr. Wright has over 34 years’ experience in Life and Non-Life Insurance, 15 years
of which were in international markets with a focus on South East Asia, Asia Pacific and India.

Mr. Wright has solid executive management with cross-functional experience in Development,
Management of Operations, Strategic Planning and Execution, Business and Financial Management,
Relationship Building, Organizational Leadership, Customer Relationship Management and Team
Development & Leadership, capable of performing in a broad range of executive, financial and
commercially oriented positions.

Mr. Wright has held a number of diverse roles in other financial institutions such as the Chief
Executive Officer (“CEO”) South East Asia and India of AXA Asia and responsible for operations in
Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore and Thailand between years 2011 to
2014. He also served as a Board Member for all the above mentioned countries and Member of
Regional Executive Committee of AXA Asia. Prior to this, he held various other senior executive roles
within Australia and Asia Pacific region. He is also a former wicket-keeper who represented Australia
in 10 test matches.

Mr. Wright is also the Executive Director of Zurich General Insurance Malaysia Berhad.

7
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Directors’ Training

All Directors have attended a formal induction programme to familiarise themselves with the
Company’s strategy and operations, financial highlights, risk management strategy, internal control
environment, legal and compliance requirements, and human resource initiatives. The induction
programme is conducted by the Chief Executive Officer and various Head of Departments. The
Directors are also informed of their duties under the Companies Act, Board Charter, Constitution
and Board Committees’ Terms of Reference.

As required by BNM, the Directors have also attended the Financial Institutions Directors’ Education
(“FIDE”) Programme accredited by the ICLIF Leadership and Governance Centre.

The Directors are encouraged to attend programmes and seminars to keep abreast with the latest
developments in the industry and marketplace and to enhance the discharge of their duties.

Board Meetings

The Board is scheduled to meet at least six (6) times a year with additional meetings being convened
as necessary. For the financial year ended 31 December 2019, the Board met thirteen (13) times.
All the Directors satisfied the minimum attendance of at least 75% of the Board meetings.

The number of meetings attended by each member of the Board is as follows:

No. of
Board Meetings
Name of Directors Attended

Nabil Nazih El-Hage, Chairman 12/13

Dr Md Khalil bin Ruslan 11/13
Onn Kien Hoe 12/13
Dr Mohd Nordin bin Mohd Zain 13/13
Hasnah binti Omar (Appointed on 5 August 2019) 6/6
Kevin John Wright (Appointed on 3 February 2020) -
David Jerry Fike (Resigned on 25 May 2019) 5/5

Board Committees

The Board delegates specific responsibilities to a number of Board Committees. The Board
Committees are the Audit Committee, the Nomination and Remuneration Committee, the Risk
Management Committee and the Shariah Committee. The Board Committees are chaired by an
Independent Non-Executive Director.

Each Board Committee operates within defined terms of reference. The Board Committees have the
authority to examine particular issues, but they report to the Board with their decisions and/or
recommendations and the ultimate responsibility on all matter’s rests with the Board.

8
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Committees (continued)

Audit Committee (“AC”)

The principal objectives of the AC are to assist the Board in discharging its statutory duties and
responsibilities relating to accounting and reporting practices of the Company. The AC meets
regularly with senior management, the internal auditors and the external auditors to review the
Company’s financial reporting, the nature and scope of audit reviews and the effectiveness of the
systems of internal control and compliance.

The AC functions on the Terms of Reference approved by the Board. The principal duties and
responsibilities of AC are:

(i) To approve internal auditors’ audit plan, review the adequacy of the scope, functions,
resources and competency and that it has the necessary authority to carry out its work;

(ii) To review the results of internal audit process and ensure that appropriate actions are taken
on the recommendations given by the internal auditors;

(iii) To consider the appointment of the external auditors, the audit fee and any question of
resignation or dismissal;

(iv) To discuss with the external auditors before the audit commences, the nature and scope of
audit;

(v) To provide assurance that the financial information presented by management is relevant,
reliable and timely;

(vi) To oversee compliance with relevant laws and regulations and observance of a proper code
of conduct; and

(vii) To determine the quality, adequacy and effectiveness of the Company’s internal control
environment.

The AC meets at least once every quarter, or more frequently as circumstances dictate. During the
financial year ended 31 December 2019, the AC held seven (7) meetings to review the Company’s
financial reporting, the nature and scope of audit reviews and the effectiveness of the systems of
internal control and compliance.

The members and number of meetings attended by each member of the AC is as follows:

No. of
AC Meetings
Members Attended
Onn Kien Hoe, Chairman 6/7
Dr Md Khalil bin Ruslan 7/7
Dr Mohd Nordin bin Mohd Zain 7/7
Hasnah binti Omar (Appointed on 5 August 2019) 3/3

9
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Committees (continued)

Nomination and Remuneration Committee (“NRC”)

The NRC assist the Board in fulfilling its fiduciary responsibilities relating to assessment of the
nomination and selection process of Board members and Senior Management, review of the
remuneration framework of Board members and Senior Management, annual review of the
effectiveness of the Board, Board Committees, individual Directors and Chief Executive Officer. In
considering the right candidate for appointment to the Board, the NRC takes into account the required
mix of skills, experience and other core competencies that are necessary to enable the Company to
achieve its corporate objectives and fulfill its fiduciary responsibilities.

The NRC functions on the Terms of Reference approved by the Board. The principal duties and
responsibilities of NRC are:

(i) To develop and recommend a formal, clear and transparent remuneration policy and
framework for fixing the remuneration for Directors, Chief Executive Officer, key senior officers
(including the expatriates, if any) and members of Shariah Committee of the Company;

(ii) To recommend specific remuneration packages for Directors, Chief Executive Officer, key
senior officers (including the expatriates, if any) and members of Shariah Committee of the
Company;

(iii) To ensure that the remuneration for individuals within the Company be aligned with prudent
risk-taking and appropriately adjusted for risks. The remuneration outcomes must be
symmetric with risk outcomes; and

(iv) To review and assess the nomination and selection of the Board, Senior Management
(including Chief Executive Officer and expatriates), members of Shariah Committee and
Company Secretary, the performance of the Board, Chief Executive Officer and Shariah
Committee, fit and proper assessments, succession planning and training and development
needs.

The members and number of meetings attended by each member of the NRC during the financial
year ended 31 December 2019 is as follows:

No. of
NRC Meetings
Members Attended
Dr Md Khalil bin Ruslan, Chairman 8/8
Onn Kien Hoe 7/8
Dr Mohd Nordin bin Mohd Zain 8/8
Hasnah binti Omar (Appointed on 5 August 2019) 4/4

10
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Committees (continued)

Risk Management Committee (“RMC”)

The RMC reviews the risk management framework of the Company to ensure risks at all levels are
managed effectively. It also reviews risk management policies; action plans and evaluates the
adequacy of overall risk management policies and procedures.

The RMC functions on the Terms of Reference approved by the Board. The principal duties and
responsibilities of RMC are as follows:

(i) To review and recommend risk management strategies, policies and risk tolerance to the
Board for approval;

(ii) To review and assess the adequacy of risk management policies and framework for
identifying, measuring, monitoring and controlling risks;

(iii) To ensure that there are adequate infrastructure, resources and systems in place for an
effective risk management;

(iv) To review the management’s periodic reports on risk exposure, risk portfolio composition and
risk management activities; and

(v) To provide oversight over technology-related matters which include review of technogy
frameworks, review and recommendation of technology risk appetite, risk tolerance for
technology related events, ensure key performance indicators and forward looking risk
indicatiors are in place, adequacy of IT and cybersecurity strategic plans and effective
implementation of sound and robust technology risk management framework (“TRMF”) and
cyber resilience framework (“CRF”) and ensure that risk assessments undertaken in relation
to material technology application submitted to BNM are robust and comprehensive.

The members and number of meetings attended by each member of the RMC during the financial year
ended 31 December 2019 is as follows:

No. of
RMC Meetings
Members Attended
Dr Mohd Nordin bin Mohd Zain. Chairman 4/4
Dr Md Khalil bin Ruslan 4/4
Onn Kien Hoe 4/4
Hasnah binti Omar (Appointed on 5 August 2019) 2/2

11
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Committees (continued)

Shariah Committee (“SC”)

The SC is entrusted by the Board to ensure that the Company’s operations and products offered are
in accordance with the Shariah. All matters which require Shariah Committee’s opinion and decisions
are deliberated at the Shariah Committee’s meetings with the attendance of the Management and the
representatives from the Shariah Division. Thereon, the said matters are brought to the attention of
the Board for an informed decision making.

The SC functions on the Terms of Reference approved by the Board. The principal duties and
responsibilities of SC are as follows:

1. Responsibility and accountability

The SC is expected to understand that in the course of discharging the duties and
responsibilities as a SC member, they are responsible and accountable for all Shariah
decisions, opinions and views provided by them. The SC is also expected to perform an
oversight role on Shariah matters related to the Company’s business operations and
activities.

2. Advise the Board and the Company

The SC shall advise the Board and provide input to the Company on any matters related to
Shariah in order for the Company to comply with Shariah principles at all times.

3. Endorse Shariah policies and procedures

The SC is expected to endorse Shariah policies and procedures prepared by the Company
and to ensure the contents do not contain any elements which are not in line with Shariah.

4. Endorse and validate relevant documentations

To ensure that the products of the Company comply with Shariah principles, the SC must
approve:
(i) The terms and conditions contained in the forms, contracts, agreements or other legal
documentations used in executing the transactions; and

(ii) The product manual, marketing advertisements, sales illustrations and brochures used
to describe the product.

5. Assess work carried out by Shariah review and Shariah audit

To assess the work carried out by Shariah review and Shariah audit in order to ensure
compliance with Shariah principles which forms part of their duties in providing their
assessment of Shariah compliance and accurate information in the annual report.

6. Assist related parties on Shariah matters

The related parties of the Company such as its legal counsel, auditor or consultant may seek
advice on Shariah matters from the SC and the SC is expected to provide the necessary
assistance to the requesting party.

7. Advise on matters to be referred to the Shariah Advisory Council (“SAC”)

The SC may advise the Company to consult the SAC of Bank Negara Malaysia on Shariah
matters that could not be resolved.

12
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Committees (continued)

Shariah Committee (“SC”) (continued)

8. Provide written Shariah opinions

The SC is required to record any opinion given. In particular, the SC shall prepare written
Shariah opinions in the following circumstances:
(i) Where the Company make reference to the SAC for advice, or
(ii) Where the Company submit applications to BNM for new product approval.

The members and number of meetings attended by each member of the SC during the financial year
ended 31 December 2019 is as follows:

No. of
SC Meetings
Members Attended
Dr Yusri bin Mohamad, Chairman 8/8
Dr Md Khalil bin Ruslan 7/8
Dr Luqman bin Haji Abdullah 8/8
Dr Mohamad Abdul Hamid 7/8
Dr Zulkifli bin Hasan 6/8

Other Key Elements of Risk Management and Internal Control

Organisational structure and management accountability

The Company has an organisation structure showing all reporting lines as well as clearly
documented job description for all management and executive employees. The officers of the
Company have knowledge of their respective authority and operating limits, which are documented
in the Company's Internal Control Procedures.

The human resource procedures of the Company provide for the setting of goals and training of each
staff. The Company conducts formal appraisals for each staff on an annual basis.

The Company has established procedures to avoid and to deal with any conflict of interest situation.
None of the Directors and senior management of the Company has, in any circumstances, conflict
of interest referred to in Part B, paragraph 14 of BNM Guidelines on Corporate Governance, and
paragraph 67 of the Islamic Financial Services Act, 2013 (“IFSA”).

Corporate independence

The Company has complied with the requirements of BNM’s Guidelines on Related Party
Transactions (BNM/RH/GL018-6) in respect of all its related party undertakings. Necessary
disclosures were made to the Board and where required, the Board’s prior approval for the
transaction has also been obtained. All material related party transactions have been disclosed in
the financial statements.

13
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Other Key Elements of Risk Management and Internal Control (continued)

Internal controls

The responsibility of maintaining a system of internal controls rests with the Board. The Company
has established internal controls which cover all levels of personnel and business processes that
ensure the Company's operations are run in an effective and efficient manner as well as
safeguarding the assets of the Company and stakeholders' interest.

Continuous assessment of the effectiveness and adequacy of internal controls, which includes an
independent examination of controls by the internal audit function, ensures corrective action where
necessary, is taken in a timely manner. The internal audit function reports directly to the Board
through the Audit Committee, and its findings and recommendations are communicated to the senior
management and all levels of staff concerned. The Chief Internal Auditor has unrestricted access to
the Chairman and members of the Audit Committee, and the internal audit function performs their
duties within the ambit of the Audit Charter approved by the Audit Committee and the Board.

The IT Steering Committee is responsible for establishing effective information technology and
information systems plans, authorising information technology (“IT”) related expenditure based on
authority limits, and monitoring the progress of approved projects. The Company has increased the
security controls for the IT systems, and have put in place business resumption and contingency
plans to ensure continued operations of mission critical functions. The requirements of BNM’s
Guidelines on Management of IT Environment (GPIS-1) and Guidelines on Business Continuity
Management (BNM/RH/GL/013-3) have been complied.

Risk management

The RMC meets regularly, at least four (4) times a year, to review risk management reports of the
Company. The RMC has categorised risks into six (6) risk types affecting the Company namely
Property and Casualty Risk, Market Risk, Credit Risk, Operational Risk, Strategic Risk and
Reputation Risk and Capital Management / Liquidity Risk.

The Company has established, within its risk management framework, a structured approach to
enterprise-wide risk management. The process involves risk identification and assessment process
whereby all department heads of the Company are required to assess their operations and identify
risks affecting their operations, identify existing controls in place to mitigate those risks and the
probability of the risks occurring and its impact severity.

Public accountability

As a custodian of public funds, the Company's dealings with the public are always conducted fairly,
honestly and professionally. All staff and agents of the Company are required to comply with the
Code of Ethics and Conduct.

14
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Other Key Elements of Risk Management and Internal Control (continued)

Financial reporting

The Board is responsible for ensuring the proper maintenance of accounting records of the Company.
Reports on the financial condition and performance of the Company are reviewed at the Board,
Executive Committee and Management Committee meetings. Financial statements and reports
are lodged with the regulatory and supervisory authorities, and annual financial statements prepared
in accordance with applicable regulations and approved accounting standards are audited.

Remuneration policy

The Company’s remuneration policy is based on Zurich Insurance Group Limited (“ZIGL”)’s
remuneration philosophy. The Company operates a balanced and effectively managed remuneration
system, which is aligned with risk considerations and provides for competitive total remuneration
opportunities to attract, retain, motivate and reward employees to deliver outstanding performance.

The remuneration system is also an important element of the risk management framework and is
designed to not encourage inappropriate risk taking through effective governance and a clearly
defined performance management process which supports the overall business strategy and plans.
Aligned with the Company’s corporate governance standards, there are separate responsibilities for
the business planning and performance management process and for the implementation of the
remuneration system.
The Board of Directors reviews and approves the remuneration rules regularly, at least once a year,
and amends them, as necessary, from time to time. The Board of Directors may approve
amendments to the remuneration architecture in general or to the applicable plans including
exceptions to the short-term incentive plan and/or long-term incentive plan target amounts, to the
performance criteria, vesting and/or performance periods and related retention periods.
With respect to the regular review and the oversight of the implementation of the Remuneration
Rules, the Board of Directors is supported by the Nomination and Remuneration Committee and
respective monitoring process.
The guiding principles of the remuneration philosophy as set out in the Company’s Remuneration
Rules are as follows:

 The remuneration architecture is simple, transparent and can be put into practice.
 Remuneration is tied to long-term results for individuals who have a material impact on the
Company’s risk profile.
 The structure and level of total remuneration are aligned with the Company’s risk policies and
risk-taking capacity.
 A high-performance culture is promoted by differentiating total remuneration based on the
relative performance of business and individuals.
 Expected performance is clearly defined through a structured system of performance
management and this is used as the basis for remuneration decision.
 Variable remuneration awards are linked to key performance factors which include the
performance of the Company, business units, functions, as well as individual achievements.

15
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Remuneration policy (continued)

The guiding principles of the remuneration philosophy as set out in the Company’s Remuneration
Rules are as follows: (continued)

 The Company’s Short Term Incentive Plan (“STIP”), General Insurance Performance Plan
(“GIPP”) and Long Term Incentive Plan (“LTIP”), used for variable remuneration, are linked to
appropriate performance criteria and the overall expenditure on variable pay is considered in
connection with its long term economic performance.
 The structure of the LTIP links remuneration with the future development of performance and
risk by including features for deferred remuneration.
 Employees are provided with a range of benefits based on local market practices, taking into
account the ZIGL’s risk capacity on pension funding and investments.

Total remuneration and its composition may be influenced by factors such as scope and complexity
of the role, level of responsibility, risk exposure, business performance and affordability, individual
performance, internal equity, and legal requirements.
Total remuneration can include elements of base salary and variable remuneration.
 Base salary is the fixed pay for the role performed determined by the scope and complexity of
the role and is reviewed regularly. Overall base salary structures are positioned to manage
salaries around the relevant market medians. Key factors to be taken into account are the
individual’s overall experience and performance.
 The variable remuneration architecture is aligned with the achievement of the key financial
objectives and the execution of the business strategy, risk management framework and
operational plans, via short-term and long-term incentive plans. The plan designs are reviewed
regularly by the Nomination and Remuneration Committee and the Board of Directors. The
incentive plans are discretionary and can be terminated, modified, changed or revised, at any
time, except for previously awarded grants.
 Variable remuneration is structured such that on average there is a higher weighting towards
the longer-term sustainable performance for the most senior employees of the Company,
including the individuals with the most impact on the Company’s risk profile for key risk takers.
This ensures that a significant portion of the variable pay for the senior group is deferred to
promote the risk awareness of the participants and to encourage the participants to operate the
business in a sustainable manner.

16
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

DIRECTORS' REPORT

The Directors have pleasure in presenting their report together with the audited financial statements
of the Company for the financial year ended 31 December 2019.

PRINCIPAL ACTIVITIES

The Company is a public company limited by shares incorporated under the Companies Act, 2016
on 15 December 2017 and domiciled in Malaysia. It commenced its principal activity of underwriting
of all classes of general takaful business on 1 June 2018 following the transfer of the general takaful
business from Zurich Takaful Malaysia Berhad to the Company pursuant to a Business Transfer
Scheme (“Business Transfer”) approved and confirmed by the High Court of Malaya in accordance
with Islamic Financial Services Act 2013 (“IFSA”) on 27 April 2018. Details of the business transfer
are as disclosed in Note 3 to the financial statements.

There has been no significant change in the nature of this principal activity during the financial year.

FINANCIAL RESULTS
RM’000
Net profit for the financial year 26,157

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other
than as disclosed in the financial statements.

In the opinion of the Directors, the results of the operations of the Company during the financial year
were not substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS

No dividend was declared or paid by the Company during the financial year. The Directors do not
recommend the payment of any dividend for the current financial year.

17
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

DIRECTORS' REPORT (CONTINUED)

SHARE CAPITAL

There was a change in the share capital of the Company during the financial year. The share capital
movement is shown below:

The ordinary shares were issued and fully paid by cash as follows:

Number of shares Share

Date capital
RM
28 January 2019 7,563,025 18,000,000
8 March 2019 16,806,723 40,000,000

The total number of shares issued by the Company stands at 283,369,750 ordinary shares as at 31
December 2019.

DIRECTORS OF THE COMPANY

Directors who served since the date of last report and appointed during the year to date of this report:

Name of Directors Designation

Nabil Nazih El-Hage Chairman, Independent Non-Executive Director
Dr Md Khalil bin Ruslan Independent Non-Executive Director
Onn Kien Hoe Independent Non-Executive Director
Dr Mohd Nordin bin Mohd Zain Independent Non-Executive Director
Hasnah binti Omar (Appointed on 5 Independent Non-Executive Director
August 2019)
Kevin John Wright Executive Director
(Appointed on 3 February 2020)
David Jerry Fike (Resigned on 25 Executive Director
May 2019)

Nabil Nazih El-Hage who retired pursuant to Clause 106 of the Company’s Constitution is re-elected
as Director of the Company.

Hasnah binti Omar who is retired pursuant to Clause 112 of the Company’s Constitution is re-elected
as Director of the Company.

18
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

DIRECTORS' REPORT (CONTINUED)

DIRECTORS' BENEFITS

Since the end of previous financial year, no Director of the Company has received or become entitled
to receive a benefit (other than benefits included in the aggregate amount of emoluments received
or due and receivable by the Directors or the fixed salary of a full-time employee of the Company as
disclosed in Note 26 (a) to the financial statements) by reason of a contract made by the Company
or a related corporation with a 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.

During and at the end of the financial year, no arrangement subsisted to which the Company is a
party, with the object or objects of enabling Directors of the Company to acquire benefits by means
of the acquisition of shares in or debentures of the Company or any other body corporate.

INDEMNITY AND INSURANCE COST

The Company through its ultimate holding corporation, Zurich Insurance Group Ltd.(“ZIGL”), has
maintained a Directors’ and Officers’ Liability Insurance (“Group’s D&O Insurance”) on a group basis
up to an aggregate limit of USD350 million against any legal liability incurred by the Directors and
Officers in the discharge of their duties while holding office in the Company. The Company has also
placed a Directors’ and Officers’ Liability Insurance with a local insurer up to the deductible amount
under the Group’s D&O Insurance. The Directors and Officers shall not be indemnified by such
insurance for any deliberate negligence, fraud, intentional breach of law or breach of trust proven
against them.

The total amount paid and payable for indemnity insurance effected for the Directors of the Company
for the financial year amounts to RM3,399.

There was no indemnity given to, or insurance effected for auditors of the Company during the
financial year.

DIRECTORS’ INTERESTS

ZIGL, the ultimate holding corporation of the Company, has designed a Group Long Term Incentive
Plan (“the Plan”) for the Group’s most senior executives for the accomplishment of key Group
performance measures. Participants are granted performance-based target shares under the Plan
with the vesting of these target grants subject to specific performance achievements over a three-
year period.

No director in office at the end of the financial year held any interests in shares in the Company or
its related corporations during the financial year.

DIRECTORS’ REMUNERATION

Details of Directors’ remuneration are set out in Note 26(a) to the financial statements.

19
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

DIRECTORS' REPORT (CONTINUED)

OTHER STATUTORY INFORMATION

(a) Before the financial statements of the Company were made out, the Directors took reasonable
steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and
the making of allowance for doubtful debts, and satisfied themselves that all known bad
debts had been written off and that adequate provision had been made for doubtful debts;
and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the
accounting records in the ordinary course of business had been written down to an amount
which they might be expected so to realise.

(b) At the date of this report, the Directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the allowance for doubtful debts in the
financial statements of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Company
misleading.

(c) At the date of this report, the Directors are not aware of any circumstances which have arisen
which would render adherence to the existing method of valuation of assets or liabilities of the
Company misleading or inappropriate.

(d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt
with in this report or financial statements of the Company which would render any amount stated
in the financial statements misleading.

(e) As at the date of this report, there does not exist:

(i) any charge on the assets of the Company which has arisen since the end of the financial
year which secures the liabilities of any other person; or

(ii) any contingent liability of the Company which has arisen since the end of the financial year.

(f) In the opinion of the Directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable
within the period of twelve months after the end of the financial year which will or may affect
the ability of the Company to meets its obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval
between the end of the financial year and the date of this report which is likely to affect
substantially the results of the operations of the Company for the financial year in which this
report is made, except for the subsequent event disclosed in Note 41 to the financial
statements.

20
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

DIRECTORS' REPORT (CONTINUED)

OTHER STATUTORY INFORMATION (CONTINUED)

For the purpose of paragraphs (e) and (f), contingent and other liabilities do not include liabilities
arising from contracts of takaful underwritten in the ordinary course of business of the Company.

(g) Before the financial statements of the Company were made out, the Directors took reasonable
steps to ascertain that there were adequate provisions for its takaful liabilities in accordance with
the valuation methods specified Part D of the Risk-Based Capital (“RBC”) Framework for Takaful
Operators issued by BNM.

AUDITORS’ REMUNERATION

Details of auditors’ remuneration are set out in Note 26 to the financial statements.

IMMEDIATE, PENULTIMATE AND ULTIMATE HOLDING COMPANIES

The Directors regard Zurich Holdings Malaysia Berhad, a company incorporated in Malaysia, as the
immediate holding company of the Company. The penultimate holding and ultimate holding
corporations are Zurich Insurance Company Ltd. and Zurich Insurance Group Ltd., respectively. Both
companies are incorporated in Switzerland.

SUBSEQUENT EVENT

Details of the subsequent event are disclosed in Note 41 to the financial statements.

21
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

SHARIAH COMMITTEE REPORT

In the name of Allah, the Beneficent, the Merciful

In carrying out the roles and the responsibilities of the Zurich General Takaful Malaysia Berhad’s
Shariah Committee (“SC”) as prescribed in the Shariah Governance Framework for Islamic Financial
Institutions issued by Bank Negara Malaysia (“BNM”) and in compliance with our letter of
appointment, we hereby submit our report for the financial year ended 31 December 2019.

The Management of the Company is responsible to ensure that its conduct of businesses, dealing
and activities are in accordance with the Shariah rules, principles and resolution made by the relevant
Shariah authorities. Therefore, it is our responsibility to institute an independent opinion based on
our review on the conduct and businesses entered by the Company to produce this report.

We had seven (7) seating of scheduled meetings and two (2) special meeting during the financial
year in which we reviewed inter alia products, transactions, services, processes and documents of
the Company.

In carrying out our roles and responsibilities, we have obtained all the relevant information and
explanations which we consider necessary in order to provide us with fair evidences to give
reasonable assurance that the Company has complied with the Shariah rules and principles.

At the management level, the Head of Shariah who reports to us oversees the conduct and
effectiveness of the internal Shariah compliance functions i.e. Shariah Advisory, Research & Training
and Shariah Review which is further substantiated by Shariah Risk which resides in the Risk
Management Department and Shariah Audit that resides in the Internal Audit Department. The roles
of these functions are facilitating new research & product development activities, refining existing
products & procedures, providing Shariah training, managing Shariah non-compliance risks,
conducting Shariah audit & review on departments and/or branches and coordinating with us on any
matter that requires our decision.

The following are the major developments that took place during the financial year which comes
under our purview:

Shariah Governance

We have approved in our meetings, initiatives in strengthening the Shariah governance of the
Company which include the review and update of the Shariah Non-Compliance Event Reporting
Guideline, Shariah Framework, Takaful Operational Model, Shariah Charter and Purification Policy
that aim, among others, to improve and strengthen the Shariah governance and compliance culture
in Zurich Malaysia.

Shariah Non-Compliance Reporting (SNCR)

In 2019, the Company recorded two Shariah non-compliance incidents relating to inappropriate
income and expense recognition, and monthly billing. All these incidences had been reported into
Operational Risk Integrated Online Network (“ORION”). Rectification plan for these incidents had
been approved by Shariah Committee and monitored accordingly.

24
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

SHARIAH COMMITTEE REPORT (CONTINUED)

Shariah Review

The Shariah Review function plays a vital role in achieving the objective of ensuring Shariah
compliance of the Company by regularly conducting review on the reviewable areas as instructed by
us. The exercise as such is to examine and evaluate of the Company’s level of compliance to Shariah,
a remedial rectification measures to resolve non-compliances and control mechanism to avoid
recurrences. The review exercise is aimed to be carried out on the product process as well as on
overall business operations of the Company.

There were two (2) review exercises that were approved by the Shariah Committee on the Shariah
Review Plan for 2019 and they were exercised on a quarterly basis. The reports were deliberated in
our meetings to confirm that the Company had complied with the rulings issued by the Shariah
Advisory Council of Bank Negara Malaysia, Shariah Advisory Council of Securities Commission (for
investment related matters) including arising from our decisions.

The reports were presented to us covering the following products:

i) General Accident Product
ii) Outsourcing Implementation (Ad-hoc Review)

Shariah Audit

The Internal Audit function performs independent assessments on the Company’s activities and
internal control environment, governance processes as well as compliance with Shariah
requirements. The Internal Audit Plan encompasses with Shariah audit was presented to Shariah
Committee on 13 May 2019. For 2019, the Shariah Audit function has performed the Shariah Audit
for the Company as per the Internal Audit Plan.

Business Zakat and Purification

During the financial year, the Company has performed their responsibility to perform zakat as guided
by the Zakat Policy that was approved by us

We have also reviewed the financial statement of the Company and confirmed that the financial
statements are in compliance with the Shariah rules and principles.

Based on the above, in our opinion:

1. The contracts, transactions and dealings entered into by the Company during the financial year
ended 31 December 2019 that were reviewed are in compliance with the Shariah rules and
principles;

2. The allocation of profit and charging of losses relating to investment account conformed to the
basis that has been approved by us in accordance with Shariah principles;

3. The computation, payment and distribution of business zakat are in compliance with the Shariah
rules and principles;

25
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019

2019 2018
General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
ASSETS Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment 5 532 - 532 1,035 - 1,035

Right-of-use assets 6 4,429 - 4,429 - - -
Intangible assets 7 28,191 - 28,191 20,475 - 20,475
Investments 8 136,634 393,559 530,193 78,297 248,229 326,526
Takaful receivables 9 - 52,868 52,868 - 43,926 43,926
Retakaful assets 10 - 127,310 127,310 - 139,413 139,413
Other receivables 11 19,153 828 971 37,710 1,720 2,032
Current tax assets - - - - 752 752
Deferred tax assets 18 10,019 2,805 12,824 1,439 3,289 4,728
Cash and cash equivalents 12 228,760 175,433 404,193 180,576 184,723 365,299
TOTAL ASSETS 427,718 752,803 1,161,511 319,532 622,052 904,186

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

31
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 (CONTINUED)

2019 2018

General General

Takaful Takaful Takaful Takaful

Operator Fund Company Operator Fund Company
LIABILITIES Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Takaful contract liabilities 13 - 659,576 659,576 - 510,640 510,640

Lease liabilities 14 4,747 - 4,747 - - -
Takaful payables 15 - 35,645 35,645 - 45,316 45,316
Other payables 16 26,842 53,736 61,568 31,035 66,096 59,732
Expense liabilities 17 32,152 - 32,152 14,609 - 14,609
Current tax liabilities 6,662 3,846 10,508 1,681 - 1,681
TOTAL LIABILITIES 70,403 752,803 804,196 47,325 622,052 631,978

SHAREHOLDERS’ EQUITY

Share capital 19 317,000 - 317,000 259,000 - 259,000

Retained earnings 20(a) 39,251 - 39,251 13,125 - 13,125
Available-for-sale reserve 20(b) 1,064 - 1,064 83 - 83
357,315 - 357,315 272,208 - 272,208

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY 427,718 752,803 1,161,511 319,532 622,052 904,186

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

32
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF PROFIT OR LOSS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Gross earned contributions 21 - 621,362 621,362 - 401,749 401,749

Contribution ceded to retakaful operators 21 - (48,660) (48,660) - (62,717) (62,717)
Net earned contributions 21 - 572,702 572,702 - 339,032 339,032

Wakalah fee income 205,806 - - 136,361 - -

Surplus sharing from general takaful fund 4,750 - - 4,240 - -
Investment income 22 10,133 20,037 30,170 7,514 9,131 16,645
Realised gain 23 76 286 362 - 112 112
Fee and commission income 24 - 9,623 9,623 - 8,598 8,598
Other operating income – net - 2,386 2,386 - 1,301 1,301
Other income 220,765 32,332 42,541 148,115 19,142 26,656
Total revenue 220,765 605,034 615,243 148,115 358,174 365,688

Gross benefits and claims paid 25 - (288,854) (288,854) - (204,070) (204,070)

Claims ceded to retakaful operators 25 - 28,219 28,219 - 59,328 59,328
Gross change to contract liabilities 25 - (112,444) (112,444) - (26,583) (26,583)
Change in contract liabilities ceded to
25 - (13,260) (13,260) - (44,597) (44,597)
retakaful operators
Net benefits and claims - (386,339) (386,339) - (215,922) (215,922)

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

33
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF PROFIT OR LOSS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Wakalah fee expenses - (205,806) - - (136,361) -

Fee and commission expenses 24 (73,638) - (73,638) (51,694) - (51,694)
Management expenses 26 (85,782) - (85,782) (73,908) - (73,908)
Expense liabilities (17,543) - (17,543) (3,156) - (3,156)
Other operating expenses (231) - (231) (645) - (645)
Other expenses (177,194) (205,806) (177,194) (129,403) (136,361) (129,403)

Total underwriting surplus from

43,571 12,889 51,710 18,712 5,891 20,363
operations

Surplus attributable to participants - (4,750) (4,750) (4,240) (4,240)

Surplus attributable to Takaful Operator - (4,750) - - (4,240) -
Profit before taxation 43,571 3,389 46,960 18,712 (2,589) 16,123

Zakat (1,089) - (1,089) - - -

Taxation 27 (16,325) (3,389) (19,714) (3,151) 2,589 (562)
Net profit for the financial year/period 26,157 - 26,157 15,561 - 15,561

Basic earning per share (SEN) 29 0.09 - - 0.11 - -

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

34
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net profit for the financial year/period 26,157 - 26,157 15,561 - 15,561

Other comprehensive income:

Items that may be subsequently

reclassified to profit or loss:

Fair value change on available-for-sale

financial assets, net of deferred tax:
- Gross fair value change arising
1,367 - 1,367 109 - 109
during the financial year/period
- Gross fair value transferred to
(76) - (76) - - -
statement of profit or loss
- Deferred tax 18 (310) - (310) (26) - (26)

Other comprehensive income for the

financial year/period, net of tax 981 - 981 83 - 83
Total comprehensive income for the
27,138 - 27,138 15,644 - 15,644
financial year/period

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

35
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
Issued and fully
paid ordinary Non-
shares distributable Distributable
Available-
Share for-sale Retained
capital reserve earnings Total
RM’000 RM’000 RM’000 RM’000

At 1 January 2019 – as previously reported 259,000 83 13,125 272,208

Effects of adoption of MFRS16 “Leases” (Note 2.2 (c)) - - (31) (31)
At 1 January 2019 – as restated 259,000 83 13,094 272,177
Issuance of shares during the financial year (Note 19) 58,000 - - 58,000
Net profit for the financial year - - 26,157 26,157
Other comprehensive income for the financial year - 981 - 981
At 31 December 2019 317,000 1,064 39,251 357,315

At date of incorporation * - - *
Issuance of shares during the financial period (Note 19) 259,000 - - 259,000
Net profit for the financial period - - 15,561 15,561
Reorganisation reserve # - - (2,436) (2,436)
Other comprehensive income for the financial period - 83 - 83
At 31 December 2018 259,000 83 13,125 272,208

* Represents 2 ordinary shares.

# Reorganisation reserve represents the difference in net assets and liabilities acquired at the beginning of the financial period and the consideration paid.

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

36
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31

DECEMBER 2019
15 DECEMBER
2017 to 31
Note 2019
DECEMBER
2018
RM’000 RM’000
OPERATING ACTIVITIES

Cash (utilised in)/generated from operating

30 (17,090) 99,246
activities
Investment income received 28,602 16,121
Income tax paid (19,913) (3,545)
Net cash (outflows)/inflows from operating
(8,401) 111,822
activities

INVESTING ACTIVITIES

Insurance proceeds in relation to property,

5 301 -
plant and equipment
Purchase of property, plant and equipment 5 (3) (567)
Purchase of intangible assets 7 (10,000) (20,000)
Net cash outflows from investing activities (9,702) (20,567)

FINANCING ACTIVITIES

Proceeds from issuance of shares 19 58,000 259,000

Repayment of subordinated obligation 3 - (73,000)
Reorganisation reserve - (2,436)
Payment of lease liabilities 14 (1,003) -
Net cash inflows from financing activities 56,997 183,564

Net increase in cash and cash equivalents 38,894 274,819

Cash and cash equivalents at the beginning of
the financial year/date of incorporation 365,299 *
Cash and cash equivalents arising from
3
Business Transfer - 40,647
Cash and cash equivalents arising from
General Takaful Portfolio Acquisition 39 - 49,833
Cash and cash equivalents at the end of the
financial year/period 404,193 365,299

Cash and cash equivalents comprise:

Cash and bank balances 12 61,721 212,387
Fixed deposits with licensed financial institution
12
with maturities less than 3 months 342,472 152,912
404,193 365,299
* Represents RM2
The accompanying notes form an integral part of these financial statements.

37
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION

The Company is a public limited liability company incorporated under the Companies Act, 2016 on
15 December 2017 and domiciled in Malaysia. It commenced its principal activity of underwriting of
all classes of general takaful business on 1 June 2018 following the transfer of the general takaful
business from Zurich Takaful Malaysia Berhad to the Company pursuant to a Business Transfer
Scheme (“Business Transfer”) approved and confirmed by the High Court of Malaya in accordance
with Islamic Financial Services Act 2013 (“IFSA”) on 27 April 2018.

There has been no significant change in the nature of this principal activity during the financial year.

The registered office and principal place of business of the Company are as follows:

Registered office

Level 25, Mercu 3,

No. 3, Jalan Bangsar, KL Eco City,
59200 Kuala Lumpur.

Principal place of business

Level 26 - 28, Mercu 3,

No. 3, Jalan Bangsar, KL Eco City,
59200 Kuala Lumpur.

The Directors regard Zurich Holdings Malaysia Berhad as the immediate holding company, a
company incorporated and domiciled in Malaysia. The penultimate holding and ultimate holding
companies are Zurich Insurance Company Ltd. and Zurich Insurance Group Ltd., respectively. Both
companies are incorporated in Switzerland.

Zurich Insurance Group Ltd. is listed on the SIX Swiss Exchange and produces financial statements
available for public use.

The financial statements were authorised for issue by the Board of Directors in accordance with a
resolution of the Directors on 30 April 2020.

2. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been used consistently in dealing with items which are
considered material in relation to the financial statements.

2.1 Basis of preparation

The financial statements of the Company has been prepared under the historical cost convention
except as disclosed in this summary of significant accounting policies, and in accordance with the
Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards
(“IFRS”), and comply with the requirements of the Companies Act, 2016 in Malaysia.

38
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

The inclusion of separate financial information of the Takaful funds and the Takaful Operator
together with the Company-level financial statements in the statement of financial position, the
statements of comprehensive income, changes in equity and cash flows as well as certain relevant
notes to the financial statements represents additional supplementary information presented in
accordance with the requirements of BNM pursuant to the Islamic Financial Services Act, 2013 in
Malaysia to separate assets, liabilities, income and expenses of the Takaful funds from its own. The
accounting policies adopted for the Takaful Operator and Takaful funds from its own. The accounting
policies adopted for the Takaful Operator and Takaful funds are uniform for like transactions and
events in similar circumstances.

The Company has met the minimum capital requirements as prescribed by the Risk-Based Capital
Framework for Takaful Operators (“the RBCT Framework”) as at the date of the statement of
financial position.

The preparation of financial statements in conformity with MFRS requires the use of certain critical
accounting estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reported period. It also requires the Directors to
exercise their judgement in the process of applying the Company’s accounting policies. Although
these estimates and judgement are based on the Directors’ best knowledge of current events and
actions, actual results may differ from estimates.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements are disclosed in Note 4 to the financial
statements.

The preparation of financial statements in comfornity of MFRS requires the use of terminology under
relevant standards. The use of key terms such as “insurance”, “reinsurance” in the financial
statements refers to Shariah compliant Takaful or Islamic insurance transactions, assets or liabilities.

Financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional
currency. All the values in these financial statements have been rounded to the nearest thousand
(RM’000), except when indicated otherwise.

39
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations

(i) Standards, amendments to published standards and interpretations to existing standards

that are applicable and effective to the Company

The new accounting standards, amendments to published standards and interpretations

that are applicable and effective for the Company’s financial year beginning on 1 January
2018 are as follows:

 MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and
establishes three primary measurement categories for financial assets: amortised cost,
fair value through profit or loss and fair value through other comprehensive income
(“OCI”). The basis of classification depends on the entity's business model and the
cash flow characteristics of the financial asset. Investments in equity instruments are
always measured at fair value through profit or loss with an irrevocable option at
inception to present changes in fair value in OCI (provided the instrument is not held
for trading). A debt instrument is measured at amortised cost only if the entity is holding
it to collect contractual cash flows and the cash flows represent principal and profit.

For liabilities, the standard retains most of the MFRS 139 requirements. These include
amortised cost accounting for most financial liabilities, with bifurcation of embedded
derivatives. The main changes are:

(a) for financial liabilities classified as fair value through profit or loss (“FVTPL”), the
fair value changes due to own credit risk should be recognised directly to OCI.
There is no subsequent recycling to profit or loss; and

(b) when a financial liability measured at amortised cost is modified without this
resulting in derecognition, a gain or loss, being the difference between the original
contractual cash flows and the modified cash flows discounted at the original
effective profit rate, should be recognised immediately in profit or loss.

MFRS 9 introduces an expected credit loss model on impairment that replaces the
incurred loss impairment model used in MFRS 139. The expected credit loss model
is forward-looking and eliminates the need for a trigger event to have occurred before
credit losses are recognised.

40
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations (continued)

(i) Standards, amendments to published standards and interpretations to existing standards

that are applicable and effective to the Company (continued)

The new accounting standards, amendments to published standards and interpretations

that are applicable and effective for the Company’s financial year beginning on 1 January
2018 are as follows: (continued)

 Amendments to MFRS 4 - Applying MFRS 9 “Financial Instruments” with MFRS 4

“Insurance Contracts”.

The amendments allow entities to avoid temporary volatility in profit or loss that might
result from adopting MFRS 9 before the forthcoming new insurance contracts standard.
This is because certain financial assets have to be measured at fair value through profit
or loss under MFRS 9; whereas, under MFRS 4, the related liabilities from insurance
contracts are often measured on amortised cost basis.

The amendments provide 2 different approaches for entities:

• a temporary exemption from MFRS 9 for entities that meet specific requirements;
and
• the overlay approach.

Both approaches are optional.

The temporary exemption enables eligible entities to defer the implementation date of
MFRS 9 for annual periods beginning before 1 January 2021 at the latest. An entity
may apply the temporary exemption from MFRS 9 if its activities are predominantly
connected with insurance whilst the overlay approach allows an entity to adjust profit
or loss for eligible financial assets by removing any accounting volatility to other
comprehensive income that may arise from applying MFRS 9.

Based on the analysis performed, the Company was eligible to apply the temporary
exemption as the predominance ratio reflecting the share of liabilities connected to
insurance to total liabilities exceeded 90 percent. No reassessment of eligibility was
required during subsequent annual periods up to and including 2019 as there is no
significant change in the activities performed by the Company. Due to the strong
interaction between underlying assets held and the measurement of insurance
contracts, the Company decided to use the option to defer the full implementation of
MFRS 9 until MFRS 17 “Insurance Contracts” becomes effective on 1 January 2021.

For further information on the effects from MFRS 9, Note 40 shows the fair value and
carrying value of financial assets separately between financial assets with contractual
cash flows that are solely payments of principal and profit (“SPPI”) and other financial
assets. Other financial assets consist of assets with contractual cash flows that are not
SPPI and assets measured at fair value through profit or loss under MFRS 139.

41
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations (continued)

(i) Standards, amendments to published standards and interpretations to existing standards

that are applicable and effective to the Company (continued)

The new accounting standards, amendments to published standards and interpretations

that are applicable and effective for the Company’s financial year beginning on 1 January
2019 are as follows:

 IC Interpretation 23 “Uncertainty over Income Tax Treatments” provides guidance on

how to recognise and measure deferred and current income tax assets and liabilities
where there is uncertainty over a tax treatment.

If an entity concludes that it is not probable that the tax treatment will be accepted by
the tax authority, the effect of the tax uncertainty should be included in the period when
such determination is made. An entity shall measure the effect of uncertainty using the
method which best predicts the resolution of the uncertainty.

IC Interpretation 23 will be applied retrospectively.

 Amendments to MFRS 119 “Employee Benefits – Plan Amendment, Curtailment or

Settlement” makes it mandatory that when a plan amendment, curtailment or settlement
occurs, the current service cost and the net interest for the period after the
remeasurement are determined using the assumptions used for the remeasurement.

The amendment also clarifies the effect that plan amendment, curtailment or settlement
has on the requirements regarding the asset ceiling.

 MFRS 16 “Leases” supersedes 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”.

Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to
control the use of an identified asset for a period of time in exchange for consideration.

MFRS 16 eliminates the classification of leases by the lessee as either finance leases
(on balance sheet) or operating leases (off balance sheet). MFRS 16 requires a lessee
to recognise a “right-of-use” of the underlying asset and a lease liability reflecting future
lease payments for most leases.

The right-of-use asset is depreciated in accordance with the principle in MFRS 116
“Property, Plant and Equipment” and the lease liability is accreted over time with profit
expense recognised in profit or loss.

For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue
to classify all leases as either operating leases or finance leases and account for them
differently.

42
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations (continued)

(i) Standards, amendments to published standards and interpretations to existing standards

that are applicable and effective to the Company (continued)

The new accounting standards, amendments to published standards and interpretations

that are applicable and effective for the Company’s financial year beginning on 1 January
2019 are as follows: (continued)

 MFRS 16 “Leases” supersedes 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”. (continued)

The Company has adopted MFRS 16 for the first time in the 2019 financial statements
which resulted in changes in accounting policies. The Company has applied MFRS 16
with the date of initial application of 1 January 2019 by applying the simplified
retrospective transition method.

The practical expedients elected and the detailed of the changes in accounting policies
on leases are disclosed in Note 2.2. The details in accounting policies on leases are
disclosed separately in Note 2.3(d)

 Annual Improvements to MFRSs 2015 – 2017 Cycle:

Amendments to MFRS 112 “Income Taxes” clarify that where income tax
consequences of dividends on financial instruments classified as equity is recognised
(either in profit or loss, other comprehensive income or equity) depends on where the
past transactions that generated distributable profits were recognised. Accordingly,
the tax consequences are recognised in profit or loss when an entity determines
payments on such instruments are distribution of profits (that is, dividends). Tax on
dividend should not be recognised in equity merely on the basis that it is related to a
distribution to owners.

(ii) Standards, amendments to published standards and interpretations to existing standards

that are applicable to the Company but not yet effective

(a) Effective from financial year beginning on or after 1 January 2020

 The Conceptual Framework for Financial Reporting (Revised 2018)

The MASB also issued Amendments to References to the Conceptual Framework

in MFRS Standards ('Amendments'), to update references and quotations to
fourteen (14) Standards so as to clarify the version of Conceptual Framework these
Standards refer to, for which the effective date above applies. The amendments
should be applied retrospectively in accordance with MFRS 108 unless
retrospective application would be impracticable or involve undue cost or effort.

43
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations (continued)

(ii) Standards, amendments to published standards and interpretations to existing standards

that are applicable to the Company but not yet effective (continued)

(a) Effective from financial year beginning on or after 1 January 2020 (continued)

 Amendments to MFRS 101 “Presentation of Financial Statements”- Definition of

Material and Amendments to MFRS 108 Accounting Policies, Changes in
Accounting Estimates and Errors - Definition of Material.

Amendments to the definition of material (Amendments to MFRS 101 and MFRS

108). The amendments clarify the definition of materiality and use a consistent
definition throughout MFRSs and the Conceptual Framework for Financial
Reporting.

The definition of ‘material’ has been revised as “Information is material if omitting,

misstating or obscuring it could reasonably be expected to influence decisions that
the primary users of general purpose financial statements make on the basis of
those financial statements, which provide financial information about a specific
reporting entity.”

The amendments also:

 clarify that an entity assesses materiality in the context of the financial

statements as a whole.
 explain the concept of obscuring information in the new definition. Information is
obscured if it has the effect similar as omitting or misstating of that information.
For example, material transaction is scattered throughout the financial
statements, dissimilar items are inappropriately aggregated, or material
information is hidden by immaterial information.
 Clarify the meaning of ‘primary users of general purpose financial statements’ to
whom those financial statements are directed, by defining them as ‘existing and
potential investors, lenders and other creditors’ that must rely on general purpose
financial statements for much of the financial information they need.

The amendments shall be applied prospectively.

44
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations (continued)

(ii) Standards, amendments to published standards and interpretations to existing standards

that are applicable to the Company but not yet effective (continued)

(a) Effective from financial year beginning on or after 1 January 2020 (continued)

 Amendments to MFRS 3 “Business Combination” – Definition of a Business

The amended definition of a business requires an acquisition to include an input and

a substantive process that together significantly contribute to the ability to create
outputs. The definition of term ‘outputs’ is amended to focus on goods and services
provided to customers, generating investment income and other income, and it
excludes returns in the form of lower costs and other economic benefits.

The amendments will likely result in more acquisitions being accounted for as asset
acquisitions.

(b) Effective from financial year beginning on or after 1 January 2021

 MFRS 17 “Insurance Contracts” replaces MFRS 4 “Insurance Contracts”.

MFRS 17 applies to insurance/ takaful contracts issued, to all reinsurance/ retakaful

contracts and to investment contracts with discretionary participating features if an
entity also issues insurance/ takaful contracts. For fixed-fee service contracts whose
primary purpose is the provision of services, an entity has an accounting policy
choice to account for them in accordance with either MFRS 17 or MFRS 15 “Revenue
from Contracts with Customers”. An entity is allowed to account financial guarantee
contracts in accordance with MFRS 17 if the entity has asserted explicitly that it
regarded them as insurance/ takaful contracts. Insurance/ takaful contracts, (other
than reinsurance/ retakaful) where the entity is the policyholder/ participant are not
within the scope of MFRS 17. Embedded derivatives and distinct investment and
service components should be “unbundled” and accounted for separately in
accordance with the related MFRSs. Voluntary unbundling of other components are
prohibited.

MFRS 17 requires a current measurement model where estimates are remeasured

at each reporting period. The measurement is based on the building blocks of
discounted, probability-weighted cash flows, a risk adjustment and a contractual
service margin (“CSM”) representing the unearned profit of the contract. An entity
has a policy choice to recognise the impact of changes in discount rates and other
assumptions that related to financial risks either in profit or loss or in other
comprehensive income.

45
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) Standards, amendments to published standards and interpretations (continued)

(ii) Standards, amendments to published standards and interpretations to existing standards

that are applicable to the Company but not yet effective (continued)

(b) Effective from financial year beginning on or after 1 January 2021 (continued)

Alternative measurement models are provided for the different insurance coverages:

 Simplified Premium/Contribution Allocation Approach if the insurance/ takaful

coverage period is a year or less; and

 Variable Fee Approach should be applied for insurance/ takaful contracts that
specify a link between payments to the policyholders/participants and the returns
on the underlying items.

The requirements of MFRS 17 align the presentation of revenue with other industries.
Revenue is allocated to the periods in proportion to the value of the expected
coverage and other services that the insurer provides in the period, and claims are
presented when incurred. Investment components are excluded from revenue and
claims. Takaful operators are required to disclose information about amounts,
judgements and risks arising from insurance/ takaful contracts.

On 17 March 2020, The International Accounting Standards Board (“IASB”)

tentatively decided to defer the effective date of IFRS 17 “Insurance Contracts” and
the temporary exemption of the adoption of IFRS 9 for insurers to annual reporting
periods beginning on or after 1 January 2023. The IASB expects to issue the
amendments to IFRS 17 in second quarter of 2020.

The Company plans to adopt the new standard on the required effective date. The
Company started a gap analysis project for the evaluation of the key gaps arising
from MFRS 17. The Company expects that the new standard will result in changes
to the accounting policies for takaful contract liabilities of the Company and is likely
to have a significant impact on its financial position, results and equity, together with
significant changes to presentation and disclosure. From year 2020 onward, the
focus would primarily be on finalising the implementation efforts and analysing the
effects of MFRS 17 on the financial statements.

Other than MFRS 9, MFRS 16 and MFRS 17, the above standards, amendments to published
standards and interpretations to existing standards are not anticipated to have any significant
impact on the financial statements of the Company in the year of initial application.

All other new amendments to published standards and interpretations to existing standards
issued by MASB effective for financial periods subsequent to 1 January 2020 are not relevant
to the Company.

46
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Changes in accounting policies upon adoption of MFRS 16

During the financial year, the Company changed its accounting policies on leases upon adoption of
MFRS 16. The Company has elected to use the simplified retrospective transition method and to
apply a number of practical expedients as provided in MFRS 16.

Under the simplified retrospective transition method, the 2018 comparative information was not
restated and the cumulative effects of initial application of MFRS 16 where the Company is a lessee
were recognised as an adjustment to the opening balance of retained earnings as at 1 January 2019.
The comparative information continued to be reported under the previous accounting policies
governed under MFRS 117 “Leases” and IC Int. 4 “Determining whether an Arrangement Contains
a Lease”.

In addition, the Company has elected not to reassess whether a contract is, or contains a lease as
at 1 January 2019. Instead, for contracts entered into before the transition date the Company relied
on its assessment made applying MFRS 117 and IC Int. 4.

The Company as a lessee

(a) Leases classified as operating leases under MFRS 117
On adoption of MFRS 16, the Company recognised lease liabilities in relation to leases Which
had previously been classified as ‘operating leases’ under the principles of MFRS 117. These
liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 1 January 2019.

The associated right-of-use (“ROU”) assets for property leases were measured on a
retrospective basis as if the new requirements has always been applied. Other ROU assets
were measured at the amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in the statement of
financial position as at 31 December 2018.

In applying MFRS 16 for the first time, the Company has applied the following practical
expedients permitted by the standard to leases previously classified as operating leases under
MFRS 117:
 the use of a single discount rate to a portfolio of leases with reasonably similar
characteristics;
 reliance on previous assessments on whether leases are onerous;
 the accounting for operating leases with a remaining lease term of less than 12 months as
at 1 January 2019 as short-term leases;
 the exclusion of initial direct costs for the measurement of the ROU asset at the DIA; and
 the use of hindsight in determining the lease term where the contract contains options to
extend or terminate the lease.

47
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Changes in accounting policies upon adoption of MFRS 16 (continued)

The Company as a lessee (continued)

(a) Leases classified as operating leases under MFRS 117 (continued)

The Company has elected not to recognise ROU assets and lease liabilities for short term leases
that have a lease term of 12 months or less and some leases of low-value assets (e.g. printing
and photocopy machines).

The Company recognises the lease payments associated with these leases as an expense on
a straight-line basis over the lease term.

The Company had also derecognised the asset or liability related to favourable or unfavourable
terms of an operating lease acquired as part of a business combination and adjusted the
carrying amount of the ROU asset with the same amount as at 1 January 2019.

(b) Impact of on transition

On transition to MFRS 16, the Company recognised additional ROU assets and additional
lease liabilities. The impact on transition is summarised below:

01.01.2019
RM’000

Right-of-use assets 5,637

Deferred tax assets 10
Lease liabilities (5,538)
Other liabilities (140)
Retained earnings 31

The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 4.20% per annum.

The reconciliation between the operating lease commitments disclosed applying MFRS 117 at
31 December 2018 to the lease liabilities recognised as at 1 January 2019 is as follows:

01.01.2019
RM’000

Operating lease commitment as at 31 December 2018 3,627

Discounted using the lessee incremental borrowing rate as at 1 January
3,426
2019
Add: Extension options reasonably certain to be exercised 2,112
Lease liabilities recognised as at 1 January 2019 5,538

48
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Changes in accounting policies upon adoption of MFRS 16 (continued)

The Company as a lessee (continued)

(b) Impact of on transition (continued)

01.01.2019
RM’000
Of which are:
Current lease liabilities 1,087
Non-current lease liabilities 4,451
5,538

(c) Impact on for the financial year

As a result of applying MFRS 16, in relation to the leases that were previously classified as
operating leases, the Company has recognised RM4,429,000 of ROU assets and
RM4,747,000 of lease liabilities as at 31 December 2019.

In relation to those leases under MFRS 16, the Company has recognised depreciation charge
and finance expenses, instead of operating lease expense. During the financial year ended 31
December 2019, the Company has recognised depreciation charge of RM1,208,000 and
finance expenses of RM212,000 from these leases.

2.3 Summary of significant accounting policies

(a) Capital reorganisation

Where a newly incorporated entity which does not meet the definition of a business is set
up to effect a transfer of business from another entity under common control, such
acquisition does not meet the definition of a business combination in accordance with MFRS
3 “Business Combinations”.

The transfer of the general takaful business from Zurich Takaful Malaysia Berhad to the
Company that is ultimately controlled by the same party has no economic substance.
Therefore, this transfer is accounted for as a capital reorganisation in the financial
statements of the Company. Accordingly, the business transfer has been accounted for as
if it has existed in the Company since the beginning of the financial period. The assets and
liabilities of the general takaful business are incorporated at their pre-combination carrying
amounts without any fair value changes.

The difference between net assets and liabilities acquired at the beginning of the financial
period and the consideration paid is accounted for as a reorganisation reserve.

49
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(b) Property, plant and equipment and depreciation

Property, plant and equipment are initially stated at cost. These include expenditures that
are directly attributed to the acquisition of the assets.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Company and the cost of the asset can be measured reliably. The
carrying amount of the replaced part is derecognised. All other repairs and maintenance are
charged to profit or loss during the financial period in which they are incurred.

Subsequent to initial recognition, property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses.

Property, plant and equipment are depreciated on a straight-line basis to write off the cost
of the assets, to their residual values over their estimated useful lives. The expected useful
lives of the assets are as follows:

Computer hardware 5 years

Motor vehicles 5 to 10 years

Residual values and useful lives of assets are reviewed and adjusted, if appropriate, at each
date of the statement of financial position.

At each date of the statement of financial position, the Company assesses whether there is
any indication of impairment. If such indications exist, an analysis is performed to assess
whether the carrying amount of the asset is fully recoverable. A write down is made if the
carrying amount exceeds the recoverable amount. See accounting policy Note 2.3(j) to the
financial statements on impairment of non-financial assets.

Gains and losses on disposals are determined by comparing proceeds with carrying
amounts and are credited or charged to profit or loss.

(c) Intangible assets

Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to
acquire and bring in use the specific software. These costs are amortised over their
estimated useful lives.

Costs associated with maintaining computer software programmes are recognised as an

expense when incurred. Costs that are directly associated with the production of identifiable
and unique software systems controlled by the Company, and that will probably generate
economic benefits exceeding costs beyond one year, are recognised as intangible assets.
Direct costs include the software development employee costs and appropriate portion of
relevant overheads to prepare the asset for its intended use.

50
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(c) Intangible assets (continued)

Computer software (continued)

Computer software costs recognised as assets are amortised using the straight-line method
over their estimated useful lives for three to five years, with the useful lives being reviewed
annually.

Computer software under development is not amortised until the asset is ready for its
intended use.

Other intangible assets

Other intangible assets are the exclusive bancatakaful agreement with Alliance Islamic Bank
Berhad for the distribution of the Company’s Takaful products, and direct customer
relationship acquired through the acquisition of general takaful portfolio from a third party.
These assets are measured at cost less any accumulated amortisation and any impairment
losses. Amortisation is recognised in profit or loss on a straight-line basis over the estimated
useful lives of 15 years.

At each reporting date, the Company assesses whether there is any indication of impairment
of its intangible assets. Where an indication of impairment exists, the carrying amount of the
asset is assessed and written down immediately to its recoverable amount as set out in note
2(j) on impairment.

(d) Leases

Accounting policies applied from 1 January 2019

The Company as a lessee

From 1 January 2019, leases are recognised as right-of-use (“ROU”) asset and a
corresponding liability at the date on which the leased asset is available for use by the
Company (i.e. the commencement date).

Contracts may contain both lease and non-lease components. The Company allocates the
consideration in the contract to the lease and non-lease components based on their relative
stand-alone prices. However, for leases of properties for which the Company is a lessee, it
has elected the practical expedient provided in MFRS 16 not to separate lease and non-
lease components. Both components are accounted for as a single lease component and
payments for both components are included in the measurement of lease liability.

51
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(d) Leases (continued)

Accounting policies applied from 1 January 2019 (continued)

The Company as a lessee (continued)

(i) Lease term

In determining the lease term, the Company considers all facts and circumstances that
create an economic incentive to exercise an extension option, or not to exercise a
termination option. Extension options (or periods after termination options) are only
included in the lease term if the lease is reasonably certain to be extended (or not to
be terminated).

The Company reassesses the lease term upon the occurrence of a significant event or
change in circumstances that is within the control of the Company and affects whether
the Company is reasonably certain to exercise an option not previously included in the
determination of lease term, or not to exercise an option previously included in the
determination of lease term. A revision in lease term results in remeasurement of the
lease liabilities. See accounting policy below on reassessment of lease liabilities.

(ii) ROU asset

The ROU asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is
located.

The ROU asset is subsequently measured at cost, less accumulated depreciation and
impairment loss (if any). The ROU assets is depreciated over the shorter of the of
asset’s useful life and the lease term using the straight-line method. The ROU asset
isadjusted for certain remeasurement of lease liability.

The amortisation period are as follows:

• Leasehold premises 2 – 6 years

(iii) Lease liability

The lease liability is initially measured at the present value of the lease payments that
are not paid at the commencement date, discounted using the lessee’s incremental
borrowing rate.

52
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(d) Leases (continued)

Accounting policies applied from 1 January 2019 (continued)

The Company as a lessee (continued)

(iii) Lease liability (continued)

The lease liability is measured at amortised cost using the effective profit rate method.
It is remeasured when there is a change in future lease payments arising from a change
in an index or rate, if there is a change in the Company’s estimate of the amount
expected to be payable under a residual value guarantee or if the Company changes
its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made
to the carrying amount of the ROU asset or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.

(iv) Short-term leases and leases of low-value assets

The Company has elected not to recognise ROU assets and lease liabilities for short-
term leases that have a lease term of 12 months or less and leases of low-value assets.
Payments associated with short-term leases and all leases of low-value assets are
recognised on a straight-line bases as an expense in profit or loss.

Accounting policies applied until 31 December 2018

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment,
or series of payments, the right to use an asset for an agreed period of time.

(i) Accounting by lessee

Leases of assets where a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to profit
or loss on the straight line basis over the lease period.

(e) Investments and other financial assets

The Company classifies its financial assets into the following categories: financial assets
measured at fair value through profit or loss (“FVTPL”), financing receivables and available-
for-sale (“AFS”) financial assets.

The classification depends on the purpose for which the investments were acquired or
originated. Management determines the classification of its investments at initial recognition
and re-evaluates this at every reporting date.

53
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(e) Investments and other financial assets (continued)

(i) Financial assets measured at FVTPL

The Company classifies investments acquired for the purpose of selling in the short-
term as held-for-trading, as FVTPL. Derivatives are also classified as held-for-trading
unless they are designated as hedges.

These investments are initially recorded at fair value and transaction costs are
expensed in profit or loss. Subsequent to initial recognition, these assets are
remeasured at fair value. Fair value adjustments and realised gains and losses are
recognised in profit or loss.

(ii) Financing receivables

Financing receivables category comprises debt instruments that are not quoted in an
active market (including fixed deposits with licensed Islamic financial institutions with
maturities more than 3 months).

Financial assets categorised as financing receivables are subsequently measured at

amortised cost using the effective profit method.

(iii) AFS financial assets

AFS financial assets are non-derivative financial assets that are either designated in
this category or not classified in any of the other assets’ categories. These
investments are initially recognised at fair value. After initial measurement, AFS
financial assets are remeasured at fair value.

Fair value gains and losses of monetary and non-monetary financial assets are
reported in the statement of comprehensive income and reported as a separate
component of equity until the investment is derecognised or investment is determined
to be impaired.

Fair value gains and losses of monetary instruments denominated in a foreign

currency are analysed between translation differences resulting from changes in
amortised cost of the instrument and other changes in the carrying amount of the
instrument.

The translation differences on monetary instruments are recognised in profit or loss;

translation differences on non-monetary instruments are reported in the statement of
comprehensive income and shown as a separate component of equity until the
investment is derecognised.

On derecognition or impairment, the cumulative fair value gains and losses previously
reported in equity is transferred through the statement of comprehensive income to
profit or loss.

54
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(f) Fair value of financial instruments

The fair value of financial instruments that are actively traded in organised financial markets
is determined by reference to quoted or published (closing) price at the date of the statement
of financial position.

For investments in unit and real estate investment trusts, fair value is determined by
reference to published (closing) price at the date of the statement of financial position.

For financial instruments where there is no active market, the fair value is determined by
using valuation techniques. The Company uses its judgement to select a variety of methods
and make assumptions that are mainly based on market conditions existing at the end of
each reporting period. Such techniques include using recent arm’s length transactions,
reference to the current market value of another instrument which is substantially the same,
discounted cash flows analysis and/or option pricing models. For discounted cash flow
techniques, estimated future cash flows are based on management’s best estimates and
the discount rate used is a market related rate for a similar instrument. Certain financial
instruments are valued using pricing models that consider, among other factors, contractual
and market prices, co-relation, time value of money, credit risk, yield curve volatility factors
and/or prepayment rates of the underlying positions. The use of different pricing models and
assumptions could produce materially different estimates of fair values.

The fair value of floating rate, over-night and time deposits with financial institutions is their
carrying value. The carrying value is the cost of the deposit/placement and accrued profit.
The fair value of fixed profit/yield-bearing deposits is measured using estimated discounted
cash flow techniques. Expected cash flows are discounted at current market rates for similar
instruments at the date of the statement of financial position.

If the fair value cannot be measured reliably, these financial instruments are measured at
cost, being the fair value of the consideration paid for the acquisition of the instrument or
the amount received on issuing the financial liability. All transaction costs directly attributable
to the acquisition are also included in the cost of the investment.

(g) Recognition of financial assets

All regular way of purchases and sales of financial assets are recognised on trade date
which is the date that the Company commits to purchase or sell the asset. Regular way
purchases or sales of financial assets require delivery of assets within the period generally
established by regulation or convention of market price.

(h) Financial instrument - Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from them have
expired or where they have been transferred, and the Company has also transferred
substantially all risks and rewards of ownership. On decognition of a financial asset, the
difference between the carrying amount and the sum of the consideration received and any
cumulative gain or loss that was recognised in other comprehensive income is reclassified
to profit or loss.

55
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(i) Impairment of financial assets

The Company assesses at each date of the statement of financial position, whether there is
objective evidence that a financial asset or a group of financial assets is impaired. A
financial asset is impaired and impairment losses are incurred if, and only if, there is
objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact
on the estimated future cash flows of the financial asset that can be reliably estimated.

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on assets carried at amortised

cost has been incurred, the amount of the impairment loss is measured as the
difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future expected credit losses that have not been incurred)
discounted at the financial asset’s original effective profit rate/yield. The carrying
amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognised in profit or loss.

The Company first assesses whether objective evidence of impairment exists

individually for financial assets that are individually significant, and individually or
collectively for financial assets that are not individually significant. If it is determined
that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, the asset is included in a group of financial assets
with similar credit risk characteristics and that group of financial assets is collectively
assessed 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. The impairment assessment is performed at the
date of the statement of financial position.

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. Any subsequent
reversal of an impairment loss is recognised in profit or loss, to the extent that the
carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) AFS financial assets

In the case of equity investments classified as AFS, a significant or prolonged decline

in the fair value of the financial asset below its cost is an objective evidence of
impairment, resulting in the recognition of an impairment loss.

56
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(i) Impairment of financial assets (continued)

(ii) AFS financial assets (continued)

If an AFS financial asset is impaired, an amount comprising the difference between

its cost (net of any principal repayment and amortisation) and its current fair value,
less any impairment loss previously recognised in the profit or loss, is transferred from
equity through the statement of comprehensive income to profit or loss. Reversals of
impairment losses on debt instruments classified as AFS are reversed through profit
or loss if the increase in the fair value of the instruments can be objectively related to
an event occurring after the impairment losses were recognised in profit or loss.

(j) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment. Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable.

An impairment loss is recognised for the amount by which the carrying amount of the assets
exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair
value less costs to sell and the value-in-use. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets that suffered impairment are reviewed for
possible reversal of impairment at each reporting date.

An impairment loss is charged to profit or loss immediately. A subsequent increase in the

recoverable amount of an asset is treated as reversal of the previous impairment loss and
is recognised to the extent of the carrying amount of the asset that would have been
determined (net of amortisation and depreciation) had no impairment loss been recognised.
The reversal is recognised in profit or loss immediately.

(k) Takaful receivables

Takaful receivables are recognised when due and measured at initial recognition at the fair
value of the consideration received or receivable. Subsequent to initial recognition, takaful
receivables are measured at amortised cost, using the effective yield method.

If there is objective evidence that the takaful receivable is impaired, the Company reduces
the carrying amount of the takaful receivable accordingly and recognise that impairment loss
in profit or loss. The Company gathers objective evidence that a takaful receivable is
impaired using the same process adopted for financial assets carried at amortised cost. The
impairment loss is calculated under the same method used for these financial assets. These
processes are described in Note 2.3(i) to the financial statements.

Takaful receivables are derecognised when the derecognition criteria for financial assets,
as described in Note 2.3(h) to the financial statements, have been met.

57
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and deposits held at call with financial
institutions with original maturity of three months or less that are readily convertible to a
known amount of cash and which are subject to an insignificant risk of changes in value.

(m) Contingent liabilities and contingent assets

The Company does not recognise a contingent liability but discloses its existence in the
financial statements. A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by uncertain future events beyond the control of
the Company or a present obligation that is not recognised because it is not probable that
an outflow of resources will be required to settle the obligation. A contingent liability also
arises in the extremely rare case where there is a liability that cannot be recognised
because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be
confirmed by the occurrence or non-occurrence of one of more uncertain future events
beyond the control of the Company. The Company does not recognise contingent assets
but discloses their existence where inflows of economic benefits are probable, but not
virtually certain.

(n) Provisions

Provisions are recognised when the Company has a present obligation, either legal or
constructive, as a result of a past event and it is probable that an outflow of resources will
be required to settle the obligation, and a reliable estimate of the amount can be made.

Provisions are reviewed at each date of the statement of financial position and adjusted to
reflect the current best estimate. If it is no longer probable that an outflow of resources
embodying economic benefits 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.
Where discounting is used, the increase in the provision due to the passage of time is
recognised as finance cost.

(o) Other financial liabilities and takaful payable

Other financial liabilities and takaful payables are recognised when due and measured on
initial recognition at the fair value of the consideration received less directly attributable
transaction costs. Subsequent to initial recognition, they are measured at amortised cost
using the effective yield method.

58
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(o) Other financial liabilities and takaful payable (continued)

A financial liability and a takaful payable are derecognised when the obligation under the
liability is extinguished. When an existing financial liability is replaced by another from the
same lender on substantially modified, such an exchange or modification is treated as a
derecognition 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.

(p) Equity instruments

Ordinary share capital

The Company has issued ordinary shares that are classified as equity. Ordinary shares are
recorded at nominal value.

Dividends on ordinary share capital

Dividends on ordinary shares are recognised as a liability and deducted from equity when
they are approved by the Company’s shareholders. Interim dividends are deducted from
equity when they are paid. No provision is made for a proposed dividend.

(q) Takaful product classification

A takaful contract is an arrangement based on mutual assistance under which takaful

participants agree to contribute to a common fund (General Risk Fund) providing for mutual
financial benefits payable to the takaful participants or their beneficiaries on the occurrence
of pre-agreed events.

Contracts where insignificant takaful risks are accepted by the Funds are classified as
service contracts. The Company defines Takaful risk to be significant by comparing benefits
paid with benefits payable if the takaful event did not occur. Based on this definition, all
Takaful contracts issued by the Company met the definition of Takaful contracts as at the
date of this statement of financial position.

Once a contract has been classified as a takaful contract, it remains a takaful contract for
the remainder of its lifetime, even if the takaful risk reduces significantly during this period,
unless all rights and obligations are extinguished or expired.

(r) General Takaful Fund

Contribution income

Contribution for direct and co-takaful business is recognised in respect of risks assumed
during the particular financial year as soon as the amount can be reliably measured, based
on issuance of certificates, and in accordance with the principles of Shariah as advised by
the Company’s Shariah Committee.

59
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(r) General Takaful Fund (continued)

Contribution income (continued)

Contributions in respect of risks incepted before the reporting date for which certificates are
issued subsequent to the end of reporting date are accrued for at the reporting date.

Inward retakaful contributions are accounted for upon notification by the ceding companies
or upon receipt of the statement of accounts.

Outward retakaful contributions are recognised in the same financial year as the original
certificate to which the retakaful relates.

Takaful contract liabilities recognition

Takaful Fund’s contract liabilities consist of claim liabilities and contribution liabilities are
recognised when contracts are entered into and contributions are charged.

(a) Claim liabilities

Liability for outstanding claims is recognised in respect of direct takaful business

and co-takaful business. The claim liabilities are the best estimate together with
related provision of risk margin for adverse deviation less retakaful recoveries, if
any, to settle the present contractual obligations at the reporting date.

Provision for outstanding claims is based on the estimated ultimate cost of all claims
incurred but not settled at the reporting date, whether reported or not, together with
related claims handling costs and reduction for the expected value of salvage and
other recoveries. Delays can be experienced in the notification and settlement of
certain types of claims; therefore, the ultimate claim costs cannot be known with
certainty at the reporting date.

The liability is calculated at the reporting date using a range of standard actuarial
claim projection techniques based on empirical data and actuarial assumptions. The
liability is not discounted for the time value of money and is derecognised when the
contract expired, discharged or cancelled.

As with all projections, there are elements of uncertainty and thus the projected
future claims experience may be different from actual claims experience due to the
level of uncertainty involved in projecting future claims experience based on past
claims experience. These uncertainties arise from changes in underlying risks,
changes in spread of risks, timing and amounts of claims settlement as well as
uncertainties in the projection model and underlying assumptions. However, these
uncertainties are partly addressed by holding the claim liabilities at 75% confidence
level as per required by Bank Negara Malaysia (“BNM”) Guidelines on Valuation
Basis for Liabilities of General Takaful Business.

60
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(r) General Takaful Fund (continued)

Takaful contract liabilities recognition (continued)

(b) Contribution liabilities

The unearned contribution reserves (“UCR”) represent contributions received after

wakalah fee deduction for risks that have not yet expired. Generally, the reserve is
released over the term of the contract and is recognised in statement of profit or
loss of the General Takaful Fund.

Contribution liabilities refer to the higher of: -

I. the aggregate of the Unearned Contribution Reserves (“UCR”); or

II. the best estimate value of the Unexpired Risk Reserves (“URR”) at the
valuation date and the Provision of Risk Margin Deviation (“PRAD”) and
calculated at the overall fund level.

UCR represents the portion of the contributions of takaful certificates written that
relate to the unexpired periods of the certificates at the end of the financial period.

In determining the UCR at the date of the statement of financial position, the method
that most accurately reflects the actual unearned contribution is used, as follows:

• 25% method for marine cargo, aviation cargo, and transit business; and
• 1/365th method for all other classes of direct and facultative inwards business
with a further reduction for wakalah fee expenses to reflect the Wakalah
business principle

At each reporting date, the Company assesses whether the UCR is sufficient to
cover all expected future cash flows relating to future claims plus the additional risk
margin against current takaful contracts. The Company applies a risk margin to
achieve the same probability of sufficiency of future claims as is achieved by the
estimate of the outstanding claims liabilities, see note 4(c).

(s) Retakaful

The Company cedes Takaful risk in the normal course of business for all of their businesses.
Retakaful assets represent balances due from retakaful companies. Amounts recoverable
from retakaful are estimated in a manner consistent with the outstanding claims provision or
settled claims associated with the retakaful operator’s policies and are in accordance with
the related retakaful contracts.

Ceded retakaful arrangements do not relieve the Company from their obligations to
participants. Contributions and claims are presented on a gross basis for both ceded and
assumed retakaful.

61
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(s) Retakaful (continued)

Retakaful assets are reviewed for impairment at each reporting date or more frequently
when an indication of impairment arises during the reporting period. Impairment occurs
when there is objective evidence as a result of an event that occurred after initial recognition
of the retakaful asset that the Company may not receive all outstanding amounts due under
the terms of the contract, and the event has a reliably measurable impact on the amounts
that the Company will receive from the retakaful operators. The impairment loss is recorded
in the profit or loss.

The Company also assume retakaful risk in the normal course of business for general
takaful contracts when applicable.

Contributions and claims on assumed retakaful are recognised as revenue or expenses in

the same manner as they would be if the retakaful were considered direct business, taking
into account the product classification of the retakaful business. Retakaful liabilities
represent balances due to retakaful operator. Amounts payable are estimated in a manner
consistent with the related retakaful contract.

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

Retakaful contracts that do not transfer significant takaful risk are accounted for directly
through the statement of financial position. These are deposit assets or financial liabilities
that are recognised based on the consideration paid or received less any explicit identified
contributions or fees to be retained by the takaful fund. Investment income on these
contracts is accounted for using the effective yield method when accrued.

(t) Expense Liabilities

The expense liabilities of the Takaful Operator’s fund consist of expenses cost to service all
in-force certificates as well as to process all future claims. The expense liabilities are
released over the term of the Takaful certificate and recognised in the profit or loss of the
Takaful Operator Fund.

The expense liabilities are reported at the higher of the aggregate of Unearned Wakalah
Fee (“UWF”) and Unexpired Expense Risk (“UER”) together with related provision of risk
margin for adverse deviation as at the end of the financial year.

Unearned Wakalah Fee (“UWF”)

The UWF represent the portion of wakalah fee income allocated for management expenses
of General Takaful certificates that relate to the unexpired periods of certificates at the end
of the financial year. The method used in computing UWF is consistent with the calculation
of UCR.

62
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(t) Expense Liabilities (continued)

Unexpired Expense Risk (“UER”)

The UER is the estimated expenses costs to service all in-force certificates as well as to
process all outstanding claims and future incurred losses as at valuation date. In estimating
the UER, the following costs are considered:

• Unallocated adjustment expenses with respect to the claims liabilities;

• Unallocated adjustment expenses with respect to the unexpired risk future loss; and
• On-going certificate servicing cost arising from the unearned portion of the contribution
collected.

The Company applies a risk margin to achieve the same probability of sufficiency of future
expenses as is achieved by the estimate of the outstanding claims liabilities.

(u) Wakalah Fee

The wakalah fee is defined as a fee arranged under wakalah contract where the Takaful
Operator is entitled to receive fees for carrying out the authorised task that have been
delegated to the Takaful Operator. The wakalah fee is an income to the Takaful Operator
and is charged to the participant and correspondingly recognised as an expense in the
respective funds’ profit or loss. The fee can be a fixed amount or as a percentage ratio of
the contribution or fund value. The manner of payment can be in one lump sum or in several
payments. This is in accordance with the principal of wakalah as approved by the Shariah
Committee and the fee is determined and agreed between the participant and the Takaful
Operator at the time of entering into the contract.

Commission, acquisition costs and management expenses of the General Takaful Funds
are borne by the Takaful Operator and included as a component of wakalah fee income.

(v) Commission and acquisition costs

Commission and acquisition costs are borne by the Takaful Operator in the Takaful Operator
Fund’s profit or loss at an agreed percentage for each certificate underwritten. This is in
accordance with the principles of wakalah as approved by the Shariah Committee and is as
agreed between the participants and the Company.

Gross commission and agency expenses, which are costs directly incurred in securing
contributions on takaful certificates, and income derived from retakaful companies in the
course of ceding contributions to retakaful, are charged to profit or loss in the period in which
they are incurred.

63
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(w) Other revenue recognition

Investment income is recognised on a time proportion basis that takes into account the
effective yield of the asset. Profits including the amount of amortisation of contribution and
accretion of discount are recognised on a time proportion basis taking into account the
principal outstanding and the effective date over the period to maturity, when it is determined
that such income will accrue to the Company.

Dividend income is recognised in the profit or loss when the right to receive payment is
established.

Realised gain or loss arising on disposals of investments are credited or charged to the profit
or loss.

(x) Zakat

Zakat represents alms payable by the Company to comply with the principles of Shariah
and as approved by the Shariah Committee of the Company. Zakat is only provided for
when obligation exists at the reporting date.

(y) Income taxes

Tax expense for the financial year comprises current and deferred income tax. The income
tax expense or credit for the year is the tax payable on the current year’s taxable income
based on applicable income tax rate for each jurisdiction adjusted by changes in deferred
tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax
is recognised in the profit or loss, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case the tax is also recognised in
other comprehensive income or directly in equity, respectively.

The current income tax charge is determined according to the tax laws enacted of the
jurisdiction in which the Company operates and includes all taxes based upon taxable profit.

Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities. This liability
is measured using the single best estimate of the most likely outcome.

Deferred tax is provided for in full, using the liability method. In principle, deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax assets are
recognised for all deductible temporary differences, unused tax losses and unused tax
credits to the extent that it is probable that future taxable profits will be available against
which the deductible temporary differences, unused tax losses and unused tax credits can
be utilised. Deferred tax is not recognised if the temporary difference arises from the initial
recognition of an asset or liability in a transaction which is not a business combination and
at the time of the transaction, affects neither accounting profit nor taxable profit.

64
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.3 Summary of significant accounting policies (continued)

(y) Income taxes (continued)

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

Deferred tax is measured at the tax rates that are expected to apply in the period when the
asset is realised or the liability is settled, based on tax rates that have been enacted or
substantively enacted at the date of the statement of financial position.

(z) Employee benefits

Short-term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as expenses in
the financial period in which the associated services are rendered by employees. Short-
term accumulating compensated absences such as paid annual leave is recognised when
services are rendered by employees that increase their entitlement to future compensated
absences. Short-term non-accumulating compensated absences such as sick leave is
recognised when the absences occur.

Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Company
pays fixed contributions or variable contributions into separate entities or funds and will
have no legal or constructive obligation to pay further contributions if any of the funds do
not hold sufficient assets to pay all employee benefits relating to the employee services in
the current and preceding financial period. Such contributions are recognised as an
expense in profit or loss as incurred. As required by law, the Company makes such
contributions to the Employees Provident Fund (“EPF”).

Once the contributions have been paid, the Company has no further payment obligations.

65
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS TRANSFER

On 31 May 2018, the Minister of Finance, via BNM’s letter granted a licence to the Company to
commence general takaful business with effect from 1 June 2018 pursuant to a Business Transfer
Scheme (“Business Transfer” or “the Scheme”) which was approved and confirmed by the High
Court of Malaya on 27 April 2018 in accordance with Part VII of the Islamic Financial Services Act
2013 (“IFSA”).

The consideration for the transfer of the assets and liabilities of the general takaful business as at
1 June 2018 was RM1. The business transfer was accounted for as capital reorganisation as
described in Note 2.3(a) of the financial statements. On 1 June 2018, Zurich Takaful Malaysia
Berhad (“ZTMB”) transferred the entire assets, liabilities and undertakings of its general takaful
business to the Company under the Business Transfer Scheme pursuant to section 112(1) of the
IFSA, as presented below. The comparative figures as at 1 January 2018 are also presented as if
the general takaful business has existed in the Company since the beginning of the financial period.
As at 1.6.2018 As at 1.1.2018
General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
ASSETS RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property, plant and

1,055 - 1,055 369 - 369
equipment
Intangible assets 1,045 - 1,045 1,887 - 1,887
Financing
- 1,687 1,687 74,184 321 74,505
receivables
AFS financial assets - 155,175 155,175 - 159,692 159,692
Takaful receivables - 36,074 36,074 - 45,916 45,916
Retakaful assets - 168,669 168,669 - 188,794 188,794
Other receivables - 441 441 12,208 3,530 12,771
Current tax assets 489 - 489 703 - 703
Deferred tax assets - 2,165 2,165 - 2,434 2,434
Cash and cash
14,895 111,983 126,878 2,020 38,627 40,647
equivalents
TOTAL ASSETS 17,484 476,194 493,678 91,371 439,314 527,718

LIABILITIES

Takaful contract
- 430,633 430,633 - 390,834 390,834
liabilities
Takaful payables - 25,402 25,402 - 30,381 30,381
Other payables 12,727 18,131 30,858 14,702 15,785 27,520
Expense liabilities 4,757 - 4,757 3,669 - 3,669
Current tax liabilities - 2,028 2,028 - 2,314 2,314
Subordinated
- - - 73,000 - 73,000
obligation
TOTAL
17,484 476,194 493,678 91,371 439,314 527,718
LIABILITIES

66
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS TRANSFER (CONTINUED)

Under the capital reorganisation basis of accounting, the financial results of the general takaful business are presented as if the general takaful business has
existed in the Company since the beginning of the financial period (15 December 2017). Hence, the financial results of the general takaful business from the
period from 15 December 2017 to 31 May 2018 before the transfer from ZTMB to the Company on 1 June 2018 are included the Company’s statement of
profit or loss for the financial period from 15 December 2017 to 31 December 2018. For information and comparison purposes, the Company’s statement of
profit or loss for the period for 7 months from 1 June 2018 to 31 December 2018 are presented below.
1.6.2018 to 31.12.2018 15.12.2017 to 31.12.2018
General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Gross earned contributions - 258,873 258,873 - 401,749 401,749

Contribution ceded to retakaful
- (28,161) (28,161) - (62,717) (62,717)
operators
Net earned contributions 230,712 230,712 - 339,032 339,032

Wakalah fee income 89,016 - - 136,361 - -

Surplus sharing from general
4,240 - - 4,240 - -
takaful fund
Investment income 6,439 5,638 12,077 7,514 9,131 16,645
Fee and commission income - 3,581 3,581 - 8,598 8,598
Realised gains and losses - - - - 112 112
Other operating income – net - 187 187 - 1,301 1,301
Other income 99,695 9,406 15,845 148,115 19,142 26,656
Total revenue 99,695 240,118 246,557 148,115 358,174 365,688

67
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS TRANSFER (CONTINUED)

1.6.2018 to 31.12.2018 15.12.2017 to 31.12.2018

General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Gross benefits and claims paid - (142,568) (142,568) - (204,070) (204,070)

Claims ceded to retakaful operators - 33,748 33,748 - 59,328 59,328
Gross change to contract liabilities - (568) (568) - (26,583) (26,583)
Change in contract liabilities ceded
- (36,092) (36,092) - (44,597) (44,597)
to retakaful operators
Net claims - (145,480) (145,480) - (215,922) (215,922)

Wakalah fee expenses - (89,016) - - (136,361) -

Fee and commission expenses (33,049) - (33,049) (51,694) - (51,694)
Management expenses (50,287) - (50,287) (73,908) - (73,908)
Expense liabilities (2,068) - (2,068) (3,156) - (3,156)
Other operating expenses - - - (645) - (645)
Other expenses (85,404) (89,016) (85,404) (129,403) (136,361) (129,403)

Total underwriting surplus from

14,291 5,622 15,673 18,712 5,891 20,363
operations

68
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS TRANSFER (CONTINUED)

1.6.2018 to 31.12.2018 15.12.2017 to 31.12.2018

General General
Takaful Takaful Takaful Takaful
Operator Fund Company Operator Fund Company
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Surplus attributable to participants - (4,240) (4,240) - (4,240) (4,240)

Surplus attributable to Takaful
- (4,240) - - (4,240) -
Operator
Zakat - - - - - -
Profit before taxation 14,291 (2,858) 11,433 18,712 (2,589) 16,123

Taxation (1,166) 2,858 1,692 (3,151) 2,589 (562)

Net profit for the financial period 13,125 - 13,125 15,561 - 15,561

69
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

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

The Company makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, rarely equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.

(a) The ultimate liability arising from claims incurred under takaful contracts

The estimation of claims “Incurred But Not Reported” (“IBNR”) is subjected to a greater
degree of uncertainty than the estimation of cost of notified claims to the Company. IBNR
claims may not be apparent to the insured until many years after the event giving rise to
the claim. The long-tailed classes of business will typically display greater uncertainty
between initial estimates and final outcomes because there is a greater degree of difficulty
in estimating IBNR reserves. For the short-tailed classes, claims are generally typically
reported soon after the claim event, and hence tend to display lower level of uncertainty.

The Company uses a variety of estimation techniques, generally based upon actuarial
analyses of historical experience, which assume that the development pattern of the current
claims will be consistent with past experience. Due to the fact that the ultimate claims
liabilities are dependent upon the outcome of future events, allowance is made with the
following consideration:

 Changes in the Company’s processes which might accelerate or slow down the
development claims, compared with the data from previous period;
 Changes in the legislation environment;
 Changes in the mix of business;
 Impact of large losses;
 The attitudes of claimants towards settlement of their claims;
 The effects of social and economic inflation; and
 Medical and technological developments.

Large and/or significant weather-related events impacting each relevant business class are
generally assessed separately (whenever it is deemed as appropriate), being measured on
a case by case basis or projected separately in order to allow for the effect of the
development and incidence of these claims.

Where possible the Company adopts multiple techniques to estimate the required level of
liabilities. The final estimates were selected after due consideration was given to the
strengths and weaknesses of the various techniques used and the information available at
hand.

Liabilities are evaluated gross of retakaful. A separate estimate is made of the amounts
that will be recoverable based upon the gross liabilities.

70
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(b) Assets arising from retakaful contracts

Retakaful recoveries are also computed with the considerations described above. In
addition, the recoverability of these assets is assessed on a periodic basis so that the
balance is reflective of the amounts that will ultimately be received.

(c) Actuarial assumptions and methods

The process for determining the value of outstanding claims liabilities including the cost of
claims handling is described below.

The methods used to establish the ultimate cost of claims include the following:

 Projecting ultimate numbers of claims and multiplying by projected ultimate

average cost;
 Projecting ultimate claim payments;
 Projecting ultimate incurred claim amounts; and
 Applying plan or forecast loss ratios to earned contributions.

Additional qualitative judgements are also used to assess the extent to which past trends
may not apply in the future. Thus, there is uncertainty surrounding changes to these
patterns from whatever cause and known facts of individual claims at hand.

Projected retakaful assets are derived applying net to gross ratios observed on claims and
contributions.

Projected payments are implicitly allowed for future inflation since any recent inflationary
effects are likely to be incorporated in the Company’s outstanding claims and hence
reflected in the valuation process.

For the above reasons, a risk margin for adverse deviation (“PRAD”) is added to the central
estimate established above. The establishment of the risk margin takes into account the
variability of the outcome of each line of business and the diversification benefit of writing
a number of lines of business. In accordance with Bank Negara Malaysia’s ‘Risk-Based
Capital Framework for Takaful Operators; the Company has established the level of risk
margin to provide a probability of adequacy of 75%.

(d) Assumptions applied for MFRS 16 “Leases”

Determination of incremental borrowing rate

The lease liabilities are measured at the present value of the remaining lease payments
over the lease term, discounted using the Company’s incremental borrowing rate as the
rate implicit in the lease is generally not readily determinable.

Extension and termination options

Any options to extend or terminate a lease that the Company is reasonably certain to
exercise are included in the lease term. The right-of-use asset is initially recognised at an
amount equal to the lease liability adjusted for lease prepayments made or lease incentives
received, initial direct costs and any estimated costs to dismantle or restore the leased
asset.

71
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(d) Assumptions applied for MFRS 16 leases (continued)

The lease term will be considered to extend beyond the non-cancellable period if the lessee
has an extension option that is considered to be reasonably certain to exercise, or an
termination option that is considered to be reasonably certain not to exercise.

The Company has several lease contracts that include extension and termination options.
The Company has included the renewal period as part of the lease term as the Company
is reasonably certain to exercise the option to extend the lease. The Company considers
all relevant facts and circumstances that create an economic incentive to exercise or not to
exercise the option including any expected changes in facts and circumstances from the
commencement date until the exercise date of the option.

72
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. PROPERTY, PLANT AND EQUIPMENT

Computer Motor
hardware vehicle Total
RM'000 RM'000 RM'000
Cost
At 1 January 2019 828 377 1,205
Additions 3 - 3
Disposal - (377) (377)
At 31 December 2019 831 - 831

Accumulated depreciation
At 1 January 2019 138 32 170
Charge for the financial year (Note 26) 161 44 205
Disposal - (76) (76)
At 31 December 2019 299 - 299

Net carrying amount

At 31 December 2019 532 - 532

Computer Motor
hardware vehicle Total
RM'000 RM'000 RM'000
Cost
At date of incorporation - - -
Arising from Business Transfer (Note 3) 1,269 - 1,269
Additions 190 377 567
Reclassification (Note 5) 580 - 580
Write-offs (1,211) - (1,211)
At 31 December 2018 828 377 1,205

Accumulated depreciation
At date of incorporation - - -
Arising from Business Transfer (Note 3) 900 - 900
Charge for the financial period (Note 26) 449 32 481
Write-offs (1,211) - (1,211)
At 31 December 2018 138 32 170

Net carrying amount

At 31 December 2018 690 345 1,035

73
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

6. RIGHT-OF-USE ASSETS

The Company’s leases are operating lease agreements entered in respect of rented premises.
Rental contracts are typically made for fixed periods of 2 to 6 years but may have extension periods.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions.

The lease agreements do not impose any covenants, but leased assets may not be used as security
for borrowing purpose.

2019
RM'000
Cost
At 1 January 2019 as previously reported -
Adjustments on adoption of MFRS 16 6,029
At 1 January 2019 - restated 6,029
Additions -
Expiration of lease contracts -
At 31 December 2019 6,029

Accumulated depreciation
At 1 January 2019 as previously reported -
Adjustments on adoption of MFRS 16 392
At 1 January 2019 as restated 392
Charge for the financial year (Note 26) 1,208
At 31 December 2019 1,600

Net carrying amount

At 31 December 2019 4,429

74
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7. INTANGIBLE ASSETS

Self- Other
developed intangible
software asset Total
RM'000 RM'000 RM'000
Cost
At 1 January 2019 1,886 20,000 21,886
Additions - 10,000 10,000
At 31 December 2019 1,886 30,000 31,886

Accumulated amortisation
At 1 January 2019 1,189 222 1,411
Charge for the financial year (Note 26) 506 1,778 2,284
At 31 December 2019 1,695 2,000 3,695

Net carrying amount

At 31 December 2019 191 28,000 28,191

Self- Other
developed intangible
software asset Total
RM'000 RM'000 RM'000
Cost
At date of incorporation - - -
Arising from Business Transfer (Note 3) 2,481 - 2,481
Additions - 20,000 20,000
Reclassification (Note 5) (580) - (580)
Write-offs (15) - (15)
At 31 December 2018 1,886 20,000 21,886

Accumulated amortisation
At date of incorporation - - -
Arising from Business Transfer (Note 3) 594 - 594
Charge for the financial period (Note 26) 610 222 832
Write-offs (15) - (15)
At 31 December 2018 1,189 222 1,411

Net carrying amount

At 31 December 2018 697 19,778 20,475

75
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7. INTANGIBLE ASSETS (CONTINUED)

The self-developed software costs are in relation to internal development expenditure incurred for the
software systems controlled by the Company that do not form an integral part of the hardware. These
systems will generate economic benefits exceeding costs beyond one year.

Other intangible assets relate to the exclusive bancatakaful agreement with Alliance Islamic Bank
Berhad and direct customer relationship acquired through the acquisition of general takaful portfolio
from a third party. These assets are measured at cost less any accumulated amortisation and any
impairment losses. Both assets are amortised over its useful life of 15 years using straight-line method.

The following key assumptions have been used in the cash flow projections in respect of bancatakaful
agreement:
Key assumptions 2019
Bancatakaful average annualised gross written contribution growth rate 12.25%
Discount rate - pre tax 8.11%

Sensitivity to changes in key assumptions

Management considers that it is not reasonably possible for the abovementioned key assumptions to
change so significantly that would result in an impairment.

8. INVESTMENTS

The Company’s investments are summarised by measurement categories as follows

General
Takaful Takaful
Operator Fund Company
At 31 December 2019 RM’000 RM’000 RM’000

Financing receivables (a) - 1,560 1,560

Available-for-sale (“AFS”) financial assets (b) 136,634 391,999 528,633
136,634 393,559 530,193
The following investments mature after
12 months:
AFS financial assets 125,423 343,532 468,955

General
Takaful Takaful
Operator Fund Company
At 31 December 2018 RM’000 RM’000 RM’000

Financing receivables (a) - 1,500 1,500

Available-for-sale (“AFS”) financial assets (b) 78,297 246,729 325,026
78,297 248,229 326,526
The following investments mature after
12 months:
AFS financial assets 73,222 204,837 278,059

76
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. INVESTMENTS (CONTINUED)

(a) Financing receivables

General
Takaful Takaful
Operator Fund Company
At 31 December 2019 RM’000 RM’000 RM’000

Amortised cost:
Fixed deposit with licensed financial
- 1,560 1,560
institutions
- 1,560 1,560

General
Takaful Takaful
Operator Fund Company
At 31 December 2018 RM’000 RM’000 RM’000

Amortised cost:
Fixed deposit with licensed financial
- 1,500 1,500
institutions
- 1,500 1,500

As at 31 December 2019, the fixed deposit of RM1,560,000 (2018: RM1,500,000) has a maturity year of
more than 3 months placed with a licensed Islamic bank.

77
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. INVESTMENTS (CONTINUED)

(b) AFS financial assets

General
Takaful Takaful
Operator Fund Company
At 31 December 2019 RM’000 RM’000 RM’000

Fair value:
Islamic debt securities, unquoted 136,634 391,999 528,633
136,634 391,999 528,633

General
Takaful Takaful
Operator Fund Company
At 31 December 2018 RM’000 RM’000 RM’000

Fair value:
Malaysian Government Securities/ -
2,030 2,030
Government Investment Issues
Islamic debt securities, unquoted 78,297 244,699 322,996
78,297 246,729 325,026

(c) Carrying value of financial instruments

The movements in the Company’s financial assets (excluding loans and receivables) are
summarised in the table below by measurement category.
2019 2018
RM’000 RM’000
At 1 January/date of incorporation 325,026 -
Arising from Business Transfer (Note 3) - 159,692
Purchases 295,691 191,555
Disposals (sale and redemptions) (99,539) (28,135)
Realised profit/(loss) in statement of profit and loss (Note 23) 362 112
Fair value gains recorded in:
- Other comprehensive income 1,291 109
- Takful contract liabilities 5,350 262
Amortisation/interest adjustment 452 1,431
At 31 December 528,633 325,026

The fair value hierarchy of investments is disclosed in Note 34 to the financial statements.

78
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. TAKAFUL RECEIVABLES

General
Takaful
Fund Company
At 31 December 2019 RM’000 RM’000

Due contributions including agents/brokers and co-insurers 46,332 46,332

Due from retakaful and cedants 14,544 14,544
60,876 60,876
Allowance for impairment (8,008) (8,008)
52,868 52,868

General
Takaful
Fund Company
At 31 December 2018 RM’000 RM’000

Due contributions including agents/brokers and co-insurers 37,317 37,317

Due from retakaful and cedants 16,523 16,523
53,840 53,840
Allowance for impairment (9,914) (9,914)
43,926 43,926

The carrying amounts disclosed above approximate fair values at the date of the statement of financial
position.

79
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

10. RETAKAFUL ASSETS

General
Takaful
At 31 December 2019 Fund Company
RM’000 RM’000
Retakaful of takaful contracts
Claims liabilities (Note 13(i)) 114,079 114,079
Unearned contribution reserves (Note 13(ii)) 13,231 13,231
127,310 127,310

General
Takaful
At 31 December 2018 Fund Company
RM’000 RM’000
Retakaful of takaful contracts
Claims liabilities (Note 13(i)) 127,431 127,431
Unearned contribution reserves (Note 13(ii)) 11,982 11,982
139,413 139,413

The carrying amounts approximate fair values at the date of the statement of financial position.

11. OTHER RECEIVABLES

General
Takaful Takaful
Operator Fund Company
At 31 December 2019 RM’000 RM’000 RM’000

Other receivables, deposits and prepayments 143 828 971

Inter-fund balances
Amount due from General Takaful Fund 14,260 - -
Surplus receivable from General Takaful
4,750 - -
Fund
19,010 - -
19,153 828 971

80
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11. OTHER RECEIVABLES (CONTINUED)

General
Takaful Takaful
Operator Fund Company
At 31 December 2018 RM’000 RM’000 RM’000

Other receivables, deposits and prepayments 312 1,720 2,032

Inter-fund balances
Amount due from General Takaful Fund 33,158 - -
Surplus receivable from General Takaful
4,240 - -
fund
37,398 - -
37,710 1,720 2,032

The carrying amounts approximate fair values at the date of the statement of financial position.

12. CASH AND CASH EQUIVALENTS

General
Takaful Takaful
Operator Fund Company
At 31 December 2019 RM’000 RM’000 RM’000

Cash and bank balances 14,074 47,647 61,721

Fixed deposits with licensed financial
institutions with maturities of less than 3 214,686 127,786 342,472
months
228,760 175,433 404,193

General
Takaful Takaful
Operator Fund Company
At 31 December 2018 RM’000 RM’000 RM’000

Cash and bank balances 57,664 154,723 212,387

Fixed deposits with licensed financial
institutions with maturities of less than 3 122,912 30,000 152,912
months
180,576 184,723 365,299

81
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13. TAKAFUL CONTRACT LIABILITIES

The Takaful contract liabilities and movements are further analysed as follows:

Re-
Gross Net
takaful
At 31 December 2019 RM'000 RM'000 RM'000

Provision for claims 275,152 (85,446) 189,706

Provision for incurred but not reported claims
95,974 (16,955) 79,019
(“IBNR”)
Provision for adverse deviation (“PRAD”) 33,356 (11,678) 21,678
Claim liabilities (i) 404,482 (114,079) 290,403
Unearned contribution reserves (ii) 202,876 (13,231) 189,645
AFS fair value adjustment (iii) 4,373 - 4,373
Unallocated surplus (iv) 47,845 - 47,845
659,576 (127,310) 532,266

(i) Claims liabilities

At 1 January 326,757 (127,431) 199,326
Claims incurred in the current year 360,694 (16,524) 344,170
Claims paid during the financial year
(288,854) 28,219 (260,635)
(Note 25(a) and 25(b))
Movement in PRAD 5,885 1,657 7,542
At 31 December 404,482 (114,079) 290,403

(ii) Unearned contribution reserves

At 1 January 170,544 (11,982) 158,562
Contribution written in the financial year
653,694 (49,909) 603,785
(Note 21(a) and 21(b))
Contribution earned during the financial year
(621,362) 48,660 (572,702)
(Note 21(a) and 21(b))
At 31 December 202,876 (13,231) 189,645

82
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13. TAKAFUL CONTRACT LIABILITIES (CONTINUED)

The Takaful contract liabilities and movements are further analysed as follows:

Deferred
Gross Net
tax
RM'000 RM'000 RM'000
(iii) AFS reserve
At 1 January 404 - 404
Fair value movements arising from AFS
5,350 (1,381) 3,969
financial assets
At 31 December 2019 5,754 (1,381) 4,373

Re-
Gross Net
takaful
RM'000 RM'000 RM'000
(iv) Unallocated surplus
At 1 January 12,935 - 12,935
Surplus during the financial year 44,410 - 44,410
Surplus distributed during the year (9,500) - (9,500)
At 31 December 2019 47,845 - 47,845

83
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13. TAKAFUL CONTRACT LIABILITIES (CONTINUED)

Re-
Gross Net
takaful
At 31 December 2018 RM'000 RM'000 RM'000

Provision for claims 209,534 (94,159) 115,375

Provision for incurred but not reported claims
89,562 (20,029) 69,533
(“IBNR”)
Provision for adverse deviation (“PRAD”) 27,661 (13,243) 14,418
Claim liabilities (i) 326,757 (127,431) 199,326
Unearned contribution reserves (ii) 170,544 (11,982) 158,562
AFS fair value adjustment (iii) 404 - 404
Unallocated surplus (iv) 12,935 - 12,935
510,640 (139,413) 371,227

(i) Claims liabilities

At date of incorporation - - -
Arising from Business Transfer (Note 3) 265,705 (158,941) 106,764
Arising from General Takaful Portfolio
22,316 (14,017) 8,299
Acquisition
Claims incurred in the current period 240,127 (16,348) 223,779
Claims paid during the financial period
(204,070) 59,328 (144,742)
(Note 25(a) and 25(b))
Movement in PRAD 2,679 2,547 5,226
At 31 December 326,757 (127,431) 199,326

(ii) Unearned contribution reserves

At date of incorporation - - -
Arising from Business Transfer (Note 3) 114,678 (29,853) 84,825
Arising from General Takaful Portfolio
16,845 631 17,476
Acquisition
Contribution written in the financial period
440,770 (45,477) 395,293
(Note 21(a) and 21(b))
Contribution earned during the financial period
(401,749) 62,717 (339,032)
(Note 21(a) and 21(b))
At 31 December 170,544 (11,982) 158,562

84
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13. TAKAFUL CONTRACT LIABILITIES (CONTINUED)

Deferred
Gross Net
tax
RM'000 RM'000 RM'000
(iii) AFS reserve
Arising from Business Transfer (Note 3) 142 - 142
Fair value movements arising from AFS
262 - 262
financial assets
At 31 December 2018 404 - 404

Re-
Gross Net
takaful
RM'000 RM'000 RM'000
(iv) Unallocated surplus
At date of incorporation - - -
Arising from Business Transfer (Note 3) 10,309 - 10,309
Arising from General Takaful Portfolio
14,778 - 14,778
Acquisition
Deficit during the financial period (3,672) - (3,672)
Surplus distributed during the financial period (8,480) - (8,480)
At 31 December 2018 12,935 - 12,935

14. LEASE LIABILITIES

2019 2018
RM'000 RM'000

Non-current lease liabilities 3,317 -

Current lease liabilities 1,430 -
Total lease liabilities 4,747 -

Reconciliation of movement of liabilities to cash flows arising from financing activities.

2019
RM'000
At 1 January 2019 as restated 5,538
Payment of lease liabilities (1,003)
Accrued interest 212
At 31 December 2019 4,747

85
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

15. TAKAFUL PAYABLES

General
Takaful
Fund Company
At 31 December 2019 RM’000 RM’000

Due to agents and intermediaries 11,038 11,038

Due to retakaful operators and cedants 24,607 24,607
35,645 35,645

General
Takaful
Fund Company
At 31 December 2018 RM’000 RM’000

Due to agents and intermediaries 23,107 23,107

Due to retakaful operators and cedants 22,209 22,209
45,316 45,316

The carrying amounts disclosed above approximate the fair values at the date of the statement of
financial position.

16. OTHER PAYABLES

General
Takaful Takaful
Operator Fund Company
At 31 December 2019 RM’000 RM’000 RM’000

Amount due to a related company 5,445 - 5,445

Deposits contribution - 481 481
Accruals for staff costs 452 - 452
Other payables and accruals 20,945 34,245 55,190
26,842 34,726 61,568
Inter-fund balances
Amount due to Takaful Operator - 14,260 -
Surplus payable to Takaful Operator - 4,750 -
- 19,010 -
26,842 53,736 61,568

86
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

16. OTHER PAYABLES (CONTINUED)

General
Takaful Takaful
Operator Fund Company
At 31 December 2018 RM’000 RM’000 RM’000

Amount due to a related company 9,310 - 9,310

Deposits contribution - 487 487
Accruals for staff costs 437 - 437
Other payables and accruals 21,287 28,211 49,498
31,034 28,698 59,732
Inter-fund balances
Amount due to Takaful Operator - 33,158 -
Surplus payable to Takaful Operator - 4,240 -
- 37,398 -
31,034 66,096 59,732

The carrying amounts disclosed above approximate the fair values at the date of the statement of
financial position.

87
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17. EXPENSE LIABILITIES

Takaful
Operator
Fund Company
RM’000 RM’000

At 1 January 2019 14,609 14,609

Expense incurred during the financial year 17,543 17,543
At 31 December 2019 32,152 32,152

Takaful
Operator
Fund Company
RM’000 RM’000

At date of incorporation - -
Arising from Business Transfer (Note 3) 3,669 3,669
Arising from General Takaful Portfolio
7,775 7,775
acquisition
Expense incurred during the financial period 3,165 3,165
At 31 December 2018 14,609 14,609

At the end of the financial year, the Company’s reported higher aggregate of Unearned Wakalah Fee
(“UWF”) than the Unexpired Expense Risk (“UER”) together with related provision of risk margin for
adverse deviation as at the end of the financial year.

As at 31 December 2019 RM'000

(a) Unearned wakalah fee (“UWF”) 32,152

(b) Unexpired expense risk (“UER”) 12,928

As at 31 December 2018 RM'000

(b) Unearned wakalah fee (“UWF”) 14,609

(b) Unexpired expense risk (“UER”) 10,128

88
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. DEFERRED TAXATION

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal
authority.

Net deferred tax assets shown on the statement of financial position have been determined after
considering appropriate offsetting as follows:

General
Takaful Takaful
Operator Fund Company
As at 31 December 2019 RM’000 RM’000 RM’000

Deferred tax assets

At 1 January 2019 1,439 3,289 4,728

Credited/(charged) to statement of profit or loss
(Note 27)
- unutilised tax savings from general takaful
- 1,830 1,830
portfolio acquisition
- unutilised tax losses - (892) (892)
- investments 44 415 459
- provisions 2,509 - 2,509
- property, plant and equipment 247 - 247
- leases 93 - 93
- allowance for impairment loss - (456) (456)
- expense liabilities 5,987 - 5,987
10,319 4,186 14,505

Charged to comprehensive income:

- available-for-sale reserve (310) - (310)
Charged to retained earnings:
- leases 10 - 10
Charged to takaful contract liabilities:
- available-for-sale reserve - (1,381) (1,381)
At 31 December 2019 10,019 2,805 12,824

89
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. DEFERRED TAXATION (CONTINUED)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal
authority.

Net deferred tax assets shown on the statement of financial position have been determined after
considering appropriate offsetting as follows:

General
Takaful Takaful
Operator Fund Company
As at 31 December 2018 RM’000 RM’000 RM’000

Deferred tax assets

At date of incorporation - - -
Arising from Business Transfer (Note 3) - 2,434 2,434
Arising from General Takaful Portfolio
- 19 19
acquisition
Credited/(charged) to statement of profit or loss
(Note 27)
- unutilised tax losses 892 892
- property, plant and equipment (173) - (173)
- allowance for impairment loss - (56) (56)
- expense liabilities 1,638 - 1,638
1,465 3,289 4,754

Charged to comprehensive income:

- available-for-sale reserve (26) - (26)
At 31 December 2018 1,439 3,289 4,728

90
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. DEFERRED TAXATION (CONTINUED)

General
Takaful Takaful
31 December 2019 Operator Fund Company
RM’000 RM’000 RM’000
Subject to income tax:

Deferred tax assets (before offsetting)

- allowance for impairment loss - 1,922 1,922
- property plant and equipment 74 - 74
- expense liabilities 7,625 - 7,625
- arising from General Takaful Portfolio
- 1,849 1,849
acquisition
- provisions 2,509 - 2,509
- leases 103 - 103
10,311 3,771 14,082
Offsetting (292) (966) (1,258)
Deferred tax assets after offsetting 10,019 2,805 12,824

Deferred tax liabilities (before offsetting)

- investments (292) (966) (1,258)

Offsetting 292 966 1,258

Deferred tax liabilities after offsetting - - -

General
Takaful Takaful
31 December 2018 Operator Fund Company
RM’000 RM’000 RM’000
Subject to income tax:

Deferred tax assets (before offsetting)

- allowance for impairment loss - 2,378 2,378
- expense liabilities 1,638 - 1,638
- unutilised tax losses - 892 892
- arising from General Takaful Portfolio
- 19 19
acquisition
1,638 3,289 4,927
Offsetting (199) - (199)
Deferred tax assets after offsetting 1,439 3,289 4,728

Deferred tax liabilities (before offsetting)

- investments (26) - (26)
- property, plant and equipment (173) - (173)
(199) - (199)
Offsetting 199 - 199
Deferred tax liabilities after offsetting - - -

91
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

19. SHARE CAPITAL

Number Share
of shares capital
RM'000

Issued and fully paid up

At 1 January 2019 259,000,002 259,000
Issued during the financial year 24,369,748 58,000
At 31 December 2019 283,369,750 317,000

Number Share
of shares capital
RM'000

Issued and fully paid up

At date of incorporation 2 *
Issued during the financial period 259,000,000 259,000
At 31 December 2018 259,000,002 259,000

* Represents 2 ordinary shares.

The Company was incorporated with a share capital of RM2.00 comprises of 2 ordinary shares. During
the financial year, the Company increased its share capital to 283,369,750 (2018: 259,000,002) by the
allotment of 24,369,748 (2018: 259,000,000) new ordinary shares. As at 31 December 2019, the issued
and paid-up share capital of the Company is RM317,000,000 (2018: 259,000,002).

20. RESERVES

(a) Retained earnings

Under the single-tier tax system which came into effect from 1 January 2008, companies are not
required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment
purposes. Dividends paid under this system are tax exempted in the hand of the shareholders.

As at 31 December 2019, the Company is already under the single-tier tax system. The Company
may distribute single-tier exempt dividends to its shareholders out of its retained earnings. Pursuant
to Section 60(1) of the Islamic Financial Services Act, 2013, the Company is required to obtain BNM’s
written approval prior to declaring or paying any dividend. Pursuant to the RBC Framework for
Takaful Operators, the Company shall not pay dividends if its Capital Adequacy Ratio position is less
than its internal target capital level or if the payment of dividend would impair its Capital Adequacy
Ratio position to below its internal target.

(b) Available-for-sale reserve

The available-for-sale reserve of the Company represents the fair value gains or losses of the
available-for-sale financial assets, net of deferred tax.

92
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

21. NET EARNED CONTRIBUTIONS

15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
RM’000 RM'000

(a) Gross earned contributions

- Takaful contracts (Note 13(ii)) 653,694 440,770
- Change in gross contribution liabilities (32,332) (39,021)
621,362 401,749

(b) Contributions ceded to reinsurers

- Takaful contracts (Note 13(ii)) (49,909) (45,477)
- Change in retakaful contribution liabilities 1,249 (17,240)
(48,660) (62,717)

Net earned contributions 572,702 339,032

22. INVESTMENT INCOME

2019
General
Takaful Takaful
Operator Fund Company
RM’000 RM’000 RM’000
AFS financial assets
Hibah/profit income
- Malaysian Government
Securities/Government - 6 6
Investment Issues
- corporate debt securities unquoted in
3,733 15,326 19,059
Malaysia
Accretion /amortisation
- corporate debt securities unquoted in
(173) (1,396) (1,569)
Malaysia
3,560 13,936 17,496

Financing receivables
Hibah/profit income
- fixed deposits from licensed Islamic
6,573 6,101 12,674
financial institutions
10,133 20,037 30,170

93
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

22. INVESTMENT INCOME (CONTINUED)

15 DECEMBER
2017 TO 31
DECEMBER
2018
General
Takaful Takaful
Operator Fund Company
RM’000 RM’000 RM’000
AFS financial assets
Hibah/profit income
- Malaysian Government
Securities/Government - 131 131
Investment Issues
- corporate debt securities unquoted in
1,176 7,952 9,128
Malaysia
Accretion /amortisation
- Malaysian Government
Securities/Government - (4) (4)
Investment Issues
- corporate debt securities unquoted in
(51) (616) (667)
Malaysia
1,125 7,463 8,588
Financing receivables
Hibah/profit income
- fixed deposits from licensed Islamic
6,389 1,668 8,057
financial institutions
7,514 9,131 16,645

23. REALISED GAINS AND LOSSES

2019
General
Takaful Takaful
Operator Fund Company
RM’000 RM’000 RM'000

AFS financial assets

Realised gains:
- Malaysian Government Securities/
- 4 4
Government Investment Issues
- Corporate debt securities unquoted
76 282 358
in Malaysia
76 286 362

94
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

23. REALISED GAINS AND LOSSES (CONTINUED)

15 DECEMBER
2017 TO 31
DECEMBER 2018
General
Takaful Takaful
Operator Fund Company
RM’000 RM’000 RM'000

AFS financial assets

Realised gains:
- Malaysian Government Securities/
- - -
Government Investment Issues
- Corporate debt securities unquoted
- 112 112
in Malaysia
- 112 112

24. FEE AND COMMISSION

15
DECEMBER
2017 TO 31
DECEMBER
2019 2018
RM’000 RM'000

(a) Fee and commission income

Retakaful commission income recognised in General
Takaful Fund 9,623 8,598

(b) Fee and commission expenses

Gross commission expenses recognised in Takaful
Operator (73,638) (51,694)

25. NET CLAIMS INCURRED

15
DECEMBER
2017 TO 31
DECEMBER
2019 2018
RM'000 RM'000

(a) Gross benefits and claims paid (288,854) (204,070)

(b) Claims ceded to retakaful operators 28,219 59,328
(c) Gross change in contract liabilities (112,444) (26,583)
(d) Change in contract liabilities ceded to retakaful
(13,260) (44,597)
operators

95
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

26. MANAGEMENT EXPENSES

15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
RM'000 RM'000
Staff costs (including Chief Executive Officer):
- salaries and bonus 2,680 2,293
- defined contribution plans 439 318
- other employee benefits 650 634
3,769 3,245

Directors’ remuneration (Note 26(a)) 509 362

Auditors’ remuneration:
- statutory audit 250 318
- audit related services 5 5
- tax related services 14 68
Shariah committee remuneration 105 64
Other professional fees 282 345
Office rental 347 1,257
Depreciation of property, plant and equipment (Note 5) 205 481
Amortisation of intangible assets (Note 7) 2,284 832
Depreciation of right-of-use assets (Note 6) 1,208 -
Training expenses 229 145
Repairs and maintenance expenses 559 240
Information technology expenses 4,794 2,480
Advertising, promotional and entertainment expenses 8,066 4,621
Printing and stationery expenses 4,813 2,744
Postage, courier and telephone charges 272 362
Breakdown service assistance expenses 4,014 2,676
Outsourcing costs paid to related party 31,930 29,221
Other expenses 22,127 24,442
81,504 70,301

Total management expenses 85,782 73,908

96
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

26. MANAGEMENT EXPENSES (CONTINUED)

The remuneration attributable to the Chief Executive Officer ("CEO") of the Company during the
financial year, as included in staff salaries and bonus, amounted to RM1,537,000.

(a) Directors’ remuneration

The Directors’ remuneration and other emoluments during current financial year / period are as
follows:

2019
Fees Allowance Total
RM'000 RM'000 RM'000
Non-Executive Directors
- Nabil Nazih El-Hage 167 - 167
- Onn Kien Hoe 62 39 101
- Dr Md Khalil bin Ruslan 62 38 100
- Dr Nordin Mohd Zain 62 40 102
- Hasnah Binti Omar 25 14 39
378 131 509

2018
Fees Allowance Total
RM'000 RM'000 RM'000
Non-Executive Directors
- Nabil Nazih El-Hage 98 - 98
- Onn Kien Hoe 36 15 51
- Dr Md Khalil bin Ruslan 50 17 67
- Dr Nordin Mohd Zain 36 15 51

220 47 267

General takaful fund’s share of

ZTMB’s directors’ remuneration and
other emoluments in respect of
financial period from 1 January 2018
to 31 May 2018 72 23 95
292 70 362

97
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

26. MANAGEMENT EXPENSES (CONTINUED)

The number of Executive and Non-Executive Directors whose total remuneration received or
receivable during the current financial year/period are analysed by the following bands:

Number of Directors
2019 2018

Executive Director:
RM100,000 and below 1 1

Non-Executive Directors:
RM 1 - RM100,000 2 4
RM100,001 – RM200,000 3 -

27. TAXATION

2019
General
Takaful Takaful
Operator Fund Company
RM’000 RM’000 RM’000
Current tax:
Current financial year 17,299 8,171 25.470
Under/(over) provision of tax 7,906 (3,885) 4,021
25,205 4,286 29,491
Deferred tax (Note 18) (8,880) (897) (9,777)
Tax expense 16,325 3,389 19,714

15 DECEMBER
2017 TO 31
DECEMBER
2018
General
Takaful Takaful
Operator Fund Company
RM’000 RM’000 RM’000
Current tax:
Current financial period 2,328 (341) 1,987
Under/(over) provision of tax arising from the
2,288 (1,412) 876
Business Transfer
4,616 (1,753) 2,863
Deferred tax (Note 18) (1,465) (836) (2,301)
Tax expense/(income) 3,151 (2,589) 562

The income tax for the Company is calculated based on the tax rate of 24% of the estimated
assessable profit for the financial year/period.
98
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. TAXATION (CONTINUED)

A reconciliation of income tax expense applicable to profit before taxation at statutory income tax
rate to income tax expenses at the effective income tax rate of the Company is as follows:

15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
RM’000 RM'000

Profit before taxation 45,871 16,123

Taxation at Malaysian statutory tax rate of 24% 11,009 3,870

Income not subject to tax - (4,184)
Expenses non-deductible for tax purposes 9,003 -
Previously unrecognised deductible temporary
(4,319) -
differences
Under-provision of tax in prior year/period 4,021 876
Tax expense 19,714 562

28. DIVIDENDS

The Directors have not recommended the payment of any dividend for the current financial year.

29. EARNINGS PER SHARE

The basic earnings per ordinary share are calculated by dividing the profit for the financial year
attributable to equity holders of the Company by the weighted average number of ordinary shares in
issue during the financial year.

Diluted earnings per share are not presented as there were no dilutive potential ordinary shares as
at the date of the statement of financial position.

15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
RM’000 RM'000

Profit attributable to ordinary equity holders 26,157 15,561

Weighted average number of shares in issue 279,774 142,670

Basic earnings per share (sen) 0.09 0.11

99
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

30. CASH FLOWS

15 DECEMBER
Note 2019 2017 TO 31
DECEMBER 2018
RM'000 RM'000

Net profit for the financial year/period 26,157 15,561

Adjustments for:
Depreciation of property, plant and
5 205 481
equipment
Amortisation of intangible assets 7 2,284 832
Depreciation of right-of-use assets 6 1,208 -
Write-back for impairment of takaful
(1,906) (229)
receivables
Investment income 22 (30,170) (16,645)
Realised gains 23 (362) (112)
Tax expense 27 19,714 562
Expense on lease liabilities 14 212 -

Changes in working capital:

Decrease in retakaful assets 12,103 62,767
Increase in investments (196,487) (91,322)
(Increase)/decrease in takaful receivables (7,036) 2,640
Decrease in other receivables 2,453 11,427
Increase in takaful contract liabilities 144,967 65,605
Increase in other payables 1,696 24,649
(Decrease)/increase in takaful payables (9,671) 12,090
Increase in expense liabilities 17,543 10,940
Cash (utilised in)/generated from
(17,090) 99,246
operating activities

100
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

31. SIGNIFICANT RELATED PARTY DISCLOSURES

(a) Related parties and relationship

The related parties and their relationship with the Company as at 31 December 2019 are
as follows:

Name of company Relationship

Zurich Holdings Malaysia Berhad (“ZHMB”) Immediate holding company
Zurich Insurance Company Ltd. (“ZICL”) Penultimate holding company
Zurich Shared Services Malaysia Sdn. Bhd.
Subsidiary of ZICL
(“ZSSM”)
Zurich Services Malaysia Sdn. Bhd. (“ZSM”) Subsidiary of ZICL
Zurich Life Insurance Malaysia Berhad Subsidiary of ZICL
Zurich Takaful Malaysia Berhad Subsidiary of ZHMB
Zurich General Insurance Malaysia Berhad Subsidiary of ZHMB

(b) Related party transactions

In the normal course of business, the Company undertakes various transactions with other
companies deemed related by virtue of being subsidiary and associated companies of ZIGL,
collectively known as ZIGL Group, at agreed terms and prices.

The significant related party transactions during the financial year with related parties are
as follows:

15
DECEMBER
2017 TO 31
DECEMBER
2019 2018
RM’000 RM'000

Trade

Subsidiary of Immediate holding company

Contribution and commission 34 -

Non-trade

Subsidiary of Immediate holding company

Outsourcing income / expenses 27,485 25,145
Reimbursement costs 2,425 2,177

Subsidiary of Penultimate holding company

Outsourcing income / expenses 4,445 4,076
Reimbursement costs 1,945 625

101
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

31. SIGNIFICANT RELATED PARTY DISCLOSURES (CONTINUED)

(c) Related party balances

The significant outstanding balances of the Company with its related parties as at 31
December are as follows:

2019 2018
RM’000 RM'000

Amount due from related companies:

Takaful receivables 34 -
Other receivables 319 424

Amount due to related companies:

Other payables (5,799) (9,734)

(d) Key management personnel’s remuneration

The remuneration of the key management personnel during the financial year / period are
as follows:

15 DECEMBER
2017 TO 31
2019
DECEMBER
2018
RM'000 RM'000

Salary 815 636

Defined contribution plans 139 78
954 714

Key management personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the entity, directly or indirectly. The key
management personnel of the Company include the Chief Executive Officer and other key
responsible persons of the Company.

102
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

32. RISK MANAGEMENT FRAMEWORK

Risk Governance Structure

The Company adopts three lines of defence model approach to governance and enterprise risk
management. The Company’s risk governance structure and risk reporting requirement are
incorporated in the Company’s Risk Management Framework. The Framework explains the
underlying approach and defines an on-going and consistent process for identifying, analysing,
evaluating, treating, monitoring and reporting significant risks faced by the business units, divisions,
stakeholders and ultimately, the Company. It also outlines the key aspects of the risks management
process and identifies the main reporting procedures.

The adoption of the Framework is the responsibility of the Board with some of the responsibilities
delegated to the Risk Management Committee including oversight over technology-related matters.
The Company has established senior management committees which act as a platform for two-way
communication between the Management and the Board. The Committees are the Asset, Liability
Management Investment Committee (ALMIC) and the various Senior Management Committees for
General Businesses. All these committees are chaired by the Chief Executive Officer or a member
of the key management team.

They are responsible to oversee the development and assess the effectiveness of risk management
policies, review risk exposure and portfolio composition, and ensure that infrastructure, resources
and systems are put in place for effective risk management activities.

The Company places strong emphasis on ensuring Shariah Compliance in all its activities, and put
in place a comprehensive control, monitoring and reporting procedures to manage and mitigate
potential shariah non-compliance incidences.

Governance and Regulatory Framework

The Company is required to comply with the IFSA and BNM Regulations, as applicable.

The Company is also required to comply with all Zurich Group’s policies and standards. If there is
any conflict with the local laws or regulations, the local laws and regulations have priority while the
stricter rules will apply where possible.

103
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

32. RISK MANAGEMENT FRAMEWORK (CONTINUED)

Capital Management

The Company’s capital management policy is to create shareholders value, maintain a strong capital
position with sufficient buffer to meet policyholders’ obligations and regulatory requirements, and
make strategic investments for business growth.

The minimum Capital Adequacy Ratio (“CAR”) under the RBCT Framework regulated by BNM is
130% for each takaful operator. The Company complied with the minimum CAR as at 31 December
2019.

The regulated capital of the Company as at 31 December 2019 comprised of Available Capital of
RM368,739,000. (2018: RM261,040,000).

The capital structure of the Company as at 31 December 2019, as prescribed under the RBCT
Framework, is shown below:

2019 2018
RM'000 RM'000

Tier 1 Capital
Paid-up share capital 317,000 259,000
Reserve including retained earnings 87,095 26,059
404,095 285,059

Tier 2 Capital
Available-for-sale reserve 5,437 487

Deduction:
Other intangible assets (28,000) (19,778)
Deferred tax assets (12,824) (4,728)

Total Capital Available 368,708 261,040

104
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK

The Company underwrites various general takaful contracts, which are mostly on annual coverage
and annual contribution basis, the exception being short term contribution such as Marine Cargo
which covers the duration in which the cargo is being transported. The Company also underwrites
some non-annual certificates with coverage period of more than one year such as Long-Term Fire
Homeowner, Contractor’s All Risks and Workmen’s Compensation. A majority of the takaful
business written by the Company is Motor and Fire. Other lines of business include Health,
Personal Accident, Engineering, Liability, Bond and other Miscellaneous classes.

The Company’s underwriting strategy is to build balanced portfolios based on a large number of
homogeneous risks. This reduces the variability of the portfolio’s outcome. The underwriting strategy
is set out in an annual business plan that establishes the classes of business to be written, and the
industry sectors in which the Company is prepared to underwrite. This strategy is cascaded by the
business units to individual underwriters through detailed underwriting authorities that set out the
limits that any one underwriter can write by line of size, class of business, geographically and
industry in order to ensure appropriate risk selection within the portfolio. The underwriters have the
right to refuse the renewal or to change the terms and condition of the contract at renewal. The
Company’s Executive Committee meets periodically to review certain management information
including contribution income and key ratios by line of business.

The table below sets out the concentration of the general takaful contracts - claims liabilities by type
of takaful contracts issued:

2019
Re-
Gross Net
takaful
RM'000 RM'000 RM'000
Fire 59,475 (39,698) 19,777
Motor 224,259 (18,553) 205,706
Marine, Aviation and Transit 8,975 (5,589) 3,386
Miscellaneous 111,773 (50,239) 61,534
At 31 December 404,482 (114,079) 290,403

2018
Re-
Gross Net
takaful
RM'000 RM'000 RM'000
Fire 58,276 (43,072) 15,204
Motor 166,624 (32,104) 134,520
Marine, Aviation and Transit 8,622 (5,366) 3,256
Miscellaneous 93,235 (46,889) 46,346
At 31 December 326,757 (127,431) 199,326

105
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK (CONTINUED)

Key Assumptions

The principal assumption underlying the estimation of liabilities is that the Company’s future claims
development will follow a similar pattern to past claims development experience. This includes
assumptions in respect of initial expected loss ratios, average claim costs, claim handling costs,
claim inflation factors and average number of claims for each accident year.

Additional qualitative judgements are used to assess the extent to which past trends may apply in
the future, for example, isolated occurrence, changes in market factors such as public attitude to
claiming, economic conditions, as well as internal factors, such as, portfolio mix, policy conditions
and claims handling procedures. Judgement is further used to assess the extent to which external
factors, such as judicial decisions and government legislation, may affect the estimates.

Other key circumstances affecting the reliability of assumptions include variation in profit rates,
delays in settlement and changes in foreign currency rates.

Sensitivities

The takaful claims liabilities are sensitive to the key assumptions shown below. It has not been
possible to quantify the sensitivity of certain assumptions, such as, legislative changes or uncertainty
in the estimation process.

The analysis below is performed on the total portfolio for reasonably possible movements in key
assumptions with all other assumptions held constant, showing the impact on gross and net claims
liabilities, profit before tax and equity. The correlation among assumptions will have a significant
effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in
assumptions, assumptions had to be changed on an individual basis. It should be noted that
movements in these assumptions are non-linear.

Impact on Impact on Impact

gross net on profit
Change in claims claims before Impact
assumptions liabilities liabilities tax on equity
RM'000 RM'000 RM'000 RM'000

31 December 2019
Average claim cost +10% 40,279 28,912 (28,912) (21,973)
Average number of
+10% 50,193 38,915 (38,915) (29,575)
claims

Impact on Impact on Impact

gross net on profit
Change in claims claims before Impact
assumptions liabilities liabilities tax on equity
RM'000 RM'000 RM'000 RM'000

31 December 2018
Average claim cost +10% 30,132 18,754 (18,754) (14,253)
Average number of
+10% 31,220 19,961 (19,961) (15,170)
claims

106
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK (CONTINUED)

Claims Development Table

The following tables show the estimate of cumulative incurred claims, including both claims notified
and IBNR for each successive accident year at each reporting period, together with cumulative
payments to-date.

In setting provisions for claims, the Company considers to the probability and magnitude of future
experience being more adverse than assumed and exercises a degree of caution in setting reserves
when there is considerable uncertainty. In general, the uncertainty associated with the ultimate
claims experience in an accident year is greatest when the accident year is at an early stage of
development, and the margin necessary to provide the necessary confidence in adequacy of
provision is relatively at its highest. As claims develop and the ultimate cost of claims becomes more
certain, the relative level of margin maintained should decrease.

107
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK (CONTINUED)

Gross General Takaful Claims Liabilities for 2019:

Prior 2013 2014 2015 2016 2017 2018 2019 Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Accident Year:
At end of the accident year 122,510 173,322 153,400 186,898 172,090 254,552 371,126
One year later 113,516 150,108 140,108 167,895 163,196 257,548
Two years later 108,045 136,885 137,760 159,460 160,558
Three years later 109,963 122,018 140,401 162,319
Four years later 108,039 117,332 139,991
Five years later 112,723 124,892
Six years later 109,532
Current estimate of cumulative claims
109,532 124,892 139,991 162,319 160,558 257,548 371,126
incurred

At end of accident year 33,270 40,160 43,447 53,291 59,301 106,603 178,461
One year later 67,240 93,627 90,643 115,463 113,620 187,064
Two years later 85,084 106,477 106,009 130,448 131,411
Three years later 91,757 106,286 125,668 135,805
Four years later 94,874 109,182 130,885
Five years later 96,642 109,999
Six years later 97,277
Cumulative payments to-date 97,277 109,999 130,885 135,805 131,411 187,064 178,461
16,062 12,255 14,893 9,106 26,514 29,147 70,484 192,665 371,126
Direct and facultative inwards

Best Estimate of Claim Liabilities 371,126

Fund PRAD at 75% Confidence Level 33,356
Gross General Takaful Claim Liabilities 404,482

108
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK (CONTINUED)

Gross General Takaful Claims Liabilities for 2018:

Prior 2012 2013 2014 2015 2016 2017 2018 Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Accident Year:
At end of the accident year 75,801 122,510 173,322 153,400 186,898 172,090 254,552
One year later 73,172 113,516 150,108 140,108 167,895 163,196
Two years later 71,157 108,045 136,885 137,760 159,460
Three years later 72,160 109,963 122,018 140,401
Four years later 77,392 108,039 117,332
Five years later 70,866 112,723
Six years later 70,879
Current estimate of cumulative claims
70,879 112,723 117,332 140,401 159,460 163,196 254,552
incurred

At end of accident year 18,204 33,270 40,160 43,447 53,291 59,301 106,603
One year later 45,537 67,240 93,627 90,643 115,463 113,620
Two years later 51,451 85,084 106,477 106,009 130,448
Three years later 56,490 91,757 106,286 125,668
Four years later 62,033 94,874 109,182
Five years later 66,254 96,642
Six years later 66,562
Cumulative payments to-date 66,562 96,642 109,182 125,668 130,448 113,620 106,603
9,208 4,317 16,081 8,150 14,733 29,012 49,576 147,949 279,026
Direct and facultative inwards
Claims liabilities of transferred business 4,927 858 1,335 10,225 575 670 519 961 20,070

Best Estimate of Claim Liabilities 299,096

Fund PRAD at 75% Confidence Level 27,661
Gross General Takaful Claim Liabilities 326,757

109
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK (CONTINUED)

Net General Takaful Claims Liabilities for 2019:

Prior 2013 2014 2015 2016 2017 2018 2019 Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Accident Year:
At end of the accident year 28,156 35,176 60,770 75,207 91,768 231,143 350,374
One year later 25,865 35,319 57,828 70,521 88,627 232,186
Two years later 26,826 33,785 54,011 68,732 87,683
Three years later 26,211 29,566 52,618 68,097
Four years later 25,438 28,869 52,957
Five years later 25,563 29,703
Six years later 25,751
Current estimate of cumulative claims 25,751 29,703 52,957 68,097 87,683 232,186 350,374
incurred

At end of accident year 9,537 10,445 19,313 27,600 31,247 99,480 175,488
One year later 18,208 23,279 39,635 50,983 64,250 172,484
Two years later 22,095 26,790 45,416 58,053 73,147
Three years later 22,878 26,088 48,527 59,601
Four years later 23,463 26,794 49,725
Five years later 23,782 26,998
Six years later 23,839
Cumulative payments to-date 23,839 26,998 49,725 59,601 73,147 172,484 175,488

Direct and facultative inwards 3,256 1,912 2,705 3,232 8,496 14,536 59,702 174,886 268,725

Best Estimate of Claim Liabilities 268,725

Fund PRAD at 75% Confidence Level 21,678
Net General Takaful Claim Liabilities 290,403

110
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. TAKAFUL RISK (CONTINUED)

Net General Takaful Claims Liabilities for 2018:

Prior 2012 2013 2014 2015 2016 2017 2018 Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Accident Year:
At end of the accident year 17,662 28,156 35,176 60,770 75,207 91,768 231,143
One year later 17,635 25,865 35,319 57,828 70,521 88,627
Two years later 16,905 26,826 33,785 54,011 68,732
Three years later 16,821 26,211 29,566 52,618
Four years later 16,515 25,438 28,869
Five years later 16,181 25,563
Six years later 15,909
Current estimate of cumulative claims 15,909 25,563 28,869 52,618 68,732 88,627 231,143
incurred

At end of accident year 5,573 9,537 10,445 19,313 27,600 31,247 99,480
One year later 12,654 18,208 23,279 39,635 50,983 64,250
Two years later 14,142 22,095 26,790 45,416 58,053
Three years later 14,936 22,878 26,088 48,527
Four years later 15,196 23,463 26,794
Five years later 15,402 23,782
Six years later 15,458
Cumulative payments to-date 15,458 23,782 26,794 48,527 58,053 64,250 99,480

Direct and facultative inwards 2,161 451 1,781 2,074 4,091 10,680 24,376 131,663 177,277

Claims liabilities of transferred business 1,110 683 1,077 2,383 541 647 435 755 7,631

Best Estimate of Claim Liabilities 184,908

Fund PRAD at 75% Confidence Level 14,418
Net General Takaful Claim Liabilities 199,326

111
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

34. FAIR VALUE MEASUREMENTS

(a) Determination of fair value and fair value hierarchy

The Company classifies fair value measurement using a fair value hierarchy that reflects
the significant of the inputs used in making the measurements. The fair value hierarchy has
the following levels:

Level 1 - Quoted market price

Included in the quoted price category are financial instruments that are measured in whole
or in part by reference to published quotes in an active market. A financial instrument is
regarded as quoted in an active market if quoted prices are readily and regularly available
from an exchange, secondary market via dealer and broker, pricing service or regulatory
agency, and those prices represent actual and regularly occurring market transactions on
an arm’s length basis.

Level 2 - Valuation Techniques - Market observable input

Financial instruments in this category are measured using a valuation technique based on
assumptions that are supported by prices from observable current market transactions. It
includes financial instruments for which pricing is obtained via pricing services, but where
prices have not been determined in an active market, instruments with fair values based on
broker quotes and discounted cash flows, the price of the most recent transactions may be
used provided that there has not been a significant change in economic circumstances since
the time of the transaction, or if the conditions have changed, that price should be adjusted
to reflect the change in conditions by reference to current prices for similar financial
instruments and investment in unit and property trusts with fair values obtained via
investment bankers and/or fund managers.

Level 3 - Valuation Techniques - Unobservable input

Non-market observable inputs mean that fair values are determined in whole or in part using
a valuation technique based on assumptions that are neither supported by prices from
observable current market transactions in the same instrument nor are they based on
available market data. The main asset classes in this category are unquoted equity
securities, un-rated securities and debt securities from organisations in default. Valuation
techniques of these portfolios are used to the extent that observable inputs are not available,
thereby allowing for situations in which there is little, if any, market activity for the instrument
at the measurement date. However, the fair value measurement objective remains the same,
that is, an exit price from the perspective of the Company. Therefore, unobservable inputs
reflect the Company’s own assumptions about the assumptions that market participants
would use in pricing the instrument (including assumptions about risk). These inputs are
developed based on the best information available, which might include the Company’s own
data and judgements.

112
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

34. FAIR VALUE MEASUREMENTS (CONTINUED)

(b) Financial instruments and non-financial assets carried at fair value

The following tables show the Company’s financial instruments and non-financial assets
which are measured at fair value at the reporting date analysed by the various levels within
the fair value hierarchy:

Level 1 Level 2 Level 3 Total

RM'000 RM'000 RM'000 RM'000

31 December 2019
AFS financial assets:
- Corporate debt securities - 528,633 - 528,633
- 528,633 - 528,633

Level 1 Level 2 Level 3 Total

RM'000 RM'000 RM'000 RM'000

31 December 2018
AFS financial assets:
- Malaysian Government
Securities/ Government - 2,030 - 2,030
Investment Issues
- Corporate debt securities - 322,996 - 322,996
- 325,026 - 325,026

113
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

35. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangement
and similar arrangement are as follows:

Gross amount Gross amount Amount

recognised as offset in the presented in
financial statement of the statement
assets/ financial of financial
liabilities position position
RM'000 RM'000 RM'000

31 December 2019
Financial assets:
Takaful receivables 53,782 (914) 52,868

Financial liabilities:
Takaful payables 37,449 (1,804) 35,645

Gross amount Gross amount Amount

recognised as offset in the presented in
financial statement of the statement
assets/ financial of financial
liabilities position position
RM'000 RM'000 RM'000

31 December 2018
Financial assets:
Takaful receivables 44,373 (447) 43,926

Financial liabilities:
Takaful payables 45,763 (447) 45,316

There are no financial instruments subjected to an enforceable master netting arrangement or

financial collateral (including cash collateral) pledged or received as at 31 December 2019 and 2018.

114
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK

The Company is exposed to financial risks, including credit risk, liquidity risk, market risk and
operational risk during the normal course of its business. The Company has in place, established
procedures and guidelines to monitor the risks on an on-going basis.

Credit Risk

The Company has exposure to credit risk, which is the risk that one party to a financial instrument
will cause a financial loss to the other party by failing to discharge an obligation. Credit risk is
assumed through three (3) main mechanisms.

i) The assumption of credit risk through investment strategies relating to financial assets;
ii) Credit risk created through retakaful, where a retakaful asset represents an obligation of the
retakaful operators to the entity; and
iii) Receivables within the business, where the entity owed payment or services by a third party.
Most typically this is arising from sale of takaful policies.

Minimum credit quality applies to investments in private debt securities/bonds with a minimum rating
of A-/A2 (at the date of investment) provided by Malaysian Rating Corporation Berhad (“MARC”)
and Rating Agency Malaysia Berhad (“RAM”) respectively. The Company however intends to
maintain an average rating of AA in the overall bond portfolio under current investment strategy and
objectives. The Company does not solely depend on the rating report provided but as in all credit
assessments/reviews are based on publicly available issuer information together with in-house
analysis based on information provided by the borrower/issuer, peer group comparisons, industry
comparisons and other quantitative tools.

Retakaful is used to manage takaful risk. This does not, however, discharge the Company’s liability
as primary insurer. If a retakaful operator fails to pay a claim for any reason, the Company remains
liable for the payment to the policyholder. The creditworthiness of retakaful operator is considered
on an annual basis by reviewing their financial strength prior to finalisation of any contract.

The Company manages its credit risk in respect of receivables by establishing defined tolerance on
credit periods, putting in place collection procedures and rigorously monitoring its credit portfolio.

115
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Credit Risk (continued)

Credit Exposure

The table below shows the maximum exposure to credit risk for the components on the statement
of financial position which are subject to credit risk:

2019
General
Takaful Takaful
Operator Fund Company
Note RM’000 RM’000 RM’000
AFS financial assets:
- Islamic debt securities 8(b) 136,634 391,999 528,633
Financing receivables 8(a) - 1,560 1,560
Takaful receivables 9 - 52,868 52,868
Retakaful assets* - 114,079 114,079
Other receivables # 19,128 828 946
Cash and cash equivalents 228,760 175,433 404,193
384,522 736,767 1,102,279

2018
General
Takaful Takaful
Operator Fund Company
Note RM’000 RM’000 RM’000
AFS financial assets:
- Malaysian Government Securities/
8(b) - 2,030 2,030
Government Investment Issues
- Islamic debt securities 8(b) 78,297 244,699 322,996
Financing receivables 8(a) - 1,500 1,500
Takaful receivables 9 - 43,926 43,926
Retakaful assets* - 127,431 127,431
Other receivables # 37,645 1,720 1,967
Cash and cash equivalents 180,576 184,723 365,299
296,518 606,029 865,149

*Retakaful assets exclude unearned contribution reserve

#Exclude prepayments of RM25,000 as at 31 December 2019 (2018: RM65,000)

116
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Credit Risk (continued)
Credit Exposure by Credit Rating
The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit rating of
counterparties.

Neither past-due nor impaired

Non-investment
Investment grade Not rated
grade
Past due
Government but not Impaired Total
Guaranteed (AAA to BBB) (BB to C) impaired
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

31 December 2019
AFS financial assets:
- Malaysian Government Securities/
- - - - - - -
Government Investment Issues
- Islamic debt securities 70,918 457,715 - - - - 528,633
Financing receivables - 1,560 - - - - 1,560
Takaful receivables
- Gross - 6,924 - 31,618 14,326 8,008 60,876
- Allowance for impairment - - - - - (8,008) (8,008)
Retakaful assets - 61,416 - 53,878 - (1,215) 114,079
Other receivables - - - 946 - - 946
Cash and cash equivalents - 404,193 - - - - 404,193
70,918 931,808 - 86,442 14,326 (1,215) 1,102,279

117
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Credit Risk (continued)

Credit Exposure by Credit Rating (continued)

The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit rating of
counterparties.

Neither past-due nor impaired

Non-investment
Investment grade Not rated
grade
Past due
Government but not Impaired Total
Guaranteed (AAA to BBB) (BB to C) impaired
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

31 December 2018
AFS financial assets:
- Malaysian Government Securities/
2,030 - - - - - 2,030
Government Investment Issues
- Islamic debt securities 82,164 240,832 - - - - 322,996
Financing receivables - 1,500 - - - - 1,500
Takaful receivables
- Gross - 10,638 - 14,285 19,003 9,914 53,840
- Allowance for impairment - - - - - (9,914) (9,914)
Retakaful assets - 70,642 648 55,208 - 933 127,431
Other receivables - - - 1,967 - - 1,967
Cash and cash equivalents - 365,299 - - - - 365,299
84,194 688,911 648 71,460 19,003 933 865,149

118
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Credit Risk (continued)
Credit Exposure by Credit Rating (continued)

The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the RAM and MARC credit ratings of
counterparties. AAA is the highest possible rating. Assets that fall outside the range of AAA to BBB are classified as speculative grade.

Government BBB1 to BB and

AAA to AA A1 to A3 Not rated Impaired Total
Guaranteed BBB3 below
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

31 December 2019
AFS financial assets:
- Malaysian Government
Securities/ Government - - - - - - - -
Investment Issues
- Islamic debt securities 70,918 440,077 17,638 - - - - 528,633
Financing receivables - 1,560 - - - - - 1,560
Takaful receivables
- Gross - 21,250 - - - 31,618 8,008 60,876
- Allowance for impairment - - - - - - (8,008) (8,008)
Retakaful assets - 24,283 37,133 - - 53,878 (1,215) 114,079
Other receivables - - - - - 946 - 946
Cash and cash equivalents - 404,193 - - - - - 404,193
70,918 891,363 54,771 - - 86,442 (1,215) 1,102,279

The Company actively manages its investment mix to ensure that there is no significant concentration of credit risk.

119
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Credit Risk (continued)

Credit Exposure by Credit Rating (continued)

The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the RAM and MARC credit ratings of
counterparties. AAA is the highest possible rating. Assets that fall outside the range of AAA to BBB are classified as speculative grade.

Government BBB1 to BB and

AAA to AA A1 to A3 Not rated Impaired Total
Guaranteed BBB3 below
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

31 December 2018
AFS financial assets:
- Malaysian Government
Securities/ Government 2,030 - - - - - - 2,030
Investment Issues
- Islamic debt securities 82,164 240,832 - - - - - 322,996
Financing receivables - 1,500 - - - - - 1,500
Takaful receivables
- Gross - 29,641 - - - 14,285 9,914 53,840
- Allowance for impairment - - - - - - (9,914) (9,914)
Retakaful assets - 25,182 45,460 - 648 55,208 933 127,431
Other receivables - - - - - 1,967 - 1,967
Cash and cash equivalents - 253,207 112,092 - - - - 365,299
84,194 550,362 157,552 - 648 71,460 933 865,149

The Company actively manages its investment mix to ensure that there is no significant concentration of credit risk.

120
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Credit Risk (continued)

Age Analysis of Financial Assets Past Due But Not Impaired

A financial asset is deemed past due when the counterparty has failed to make payment when the
outstanding amount is contractually due.

3 months 7 months
Up to 3 to to > 12
months 6 months 12 months months Total
RM'000 RM'000 RM'000 RM'000 RM'000

31 December 2019
Takaful receivables - 11,150 1,956 1,220 14,326

31 December 2018
Takaful receivables - 16,575 2,377 51 19,003

Impaired Financial Assets

At 31 December 2019, based on a combination of collective and individual assessment of

receivables, there are impaired takaful receivables of RM8,008,000 (2018: RM9,914,000). For
assets to be classified as “past-due and impaired”, contractual payments must be in arrears for more
than 90 days. In addition, full impairment is made on takaful receivables exhibiting objective
evidence of impairment such as outstanding debts exceeding 180 days. The Company records
impairment allowance for takaful receivables in separate “allowance for impairment” accounts.

A reconciliation of the allowance for impairment loss of takaful receivables is as follows:

2019 2018
RM’000 RM'000

At 1 January 2019 9,914 -

Arising from Business Transfer - 10,143
Write-back for the financial year / period (1,906) (229)
At 31 December 8,008 9,914

No collateral is held as security for any past due or impaired assets.

121
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated
with financial liabilities. In respect of catastrophic events, there is also a liquidity risk associated with
the timing differences between gross cash outflows and expected retakaful recoveries. The
Company’s policy is to maintain adequate liquidity to meet its liquidity needs under all conditions.

There are guidelines on asset allocations, portfolio limit structures and maturity profiles of assets, in
order to ensure sufficient funding is available to meet takaful and investment contracts obligations.

The Company’s excess-of-loss retakaful contract contains clauses permitting the Company to make
cash call claims and receive immediate payment for large loss should claims events exceed a certain
amount.

122
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Liquidity Risk (continued)

Maturity Profile

The table below summarises the maturity profile of the Company’s financial assets and financial liabilities based on remaining undiscounted contractual
obligations, including profit payable and receivable.

For takaful contract liabilities and retakaful assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised
takaful liabilities. Contribution liabilities and the retakaful’s share of contribution liabilities have been excluded from the analysis.

Carrying value Up to a year 1 – 3 years 3 – 5 years 5 - 15 years No maturity date Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
31 December 2019
Financial assets:
AFS financial assets 528,633 78,994 242,202 189,535 82,952 - 593,683
Financing receivables 1,560 1,560 - - - - 1,560
Retakaful assets* 114,079 84,187 27,289 2,483 120 - 114,079
Takaful receivables 52,868 52,868 - - - - 52,868
Other receivables# 946 946 - - - - 946
Cash and cash equivalents 404,193 404,193 - - - - 404,193
1,102,279 622,748 269,491 192,018 83,072 - 1,167,329
Financial liabilities:
Takaful contract liabilities* 404,482 284,804 108,778 10,399 501 - 404,482
Lease liabilities 4,747 1,430 2,448 869 - - 4,747
Other liabilities 61,568 61,568 - - - - 61,568
Takaful payables 35,645 35,645 - - - - 35,645
506,442 383,447 111,226 11,268 501 - 506,442
*Exclude unearned contribution reserve, AFS reserve and unallocated surplus
#Exclude prepayments

123
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Liquidity Risk (continued)

Maturity Profile (continued)

The table below summarises the maturity profile of the Company’s financial assets and financial liabilities based on remaining undiscounted contractual
obligations, including profit payable and receivable.

For takaful contract liabilities and retakaful assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised
takaful liabilities. Contribution liabilities and the retakaful’s share of contribution liabilities have been excluded from the analysis.

Carrying value Up to a year 1 – 3 years 3 – 5 years 5 - 15 years No maturity date Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
31 December 2018
Financial assets:
AFS financial assets 325,026 60,798 107,657 144,467 59,753 - 372,675
Financing receivables 1,500 1,500 - - - - 1,500
Retakaful assets* 127,431 90,811 33,193 3,289 138 - 127,431
Takaful receivables 43,926 43,926 - - - - 43,926
Other receivables# 1,967 1,967 - - - - 1,967
Cash and cash equivalents 365,299 365,299 - - - - 365,299
865,149 564,301 140,850 147,756 59,891 - 912,798
Financial liabilities:
Takaful contract liabilities* 326,757 231,733 86,251 8,423 350 - 326,757
Other liabilities 59,732 59,732 - - - - 59,732
Takaful payables 45,316 45,316 - - - - 45,316
431,805 336,781 86,251 8,423 350 - 431,805
*Exclude unearned contribution reserve, AFS reserve and unallocated surplus
#Exclude prepayments

124
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Liquidity Risk (continued)

The table below summarises the current/non-current classification of assets:

Current* Non-current Total

RM'000 RM'000 RM'000
31 December 2019
Property, plant and equipment - 532 532
Right-of-use assets - 4,429 4,429
Intangible assets - 28,191 28,191
AFS financial assets 78,994 449,639 528,633
Financing receivables 1,560 - 1,560
Retakaful assets 127,310 - 127,310
Takaful receivables 52,868 - 52,868
Other receivables 971 - 971
Deferred tax assets - 12,824 12,824
Cash and cash equivalents 404,193 - 404,193
665,896 495,615 1,161,511

Current* Non-current Total

RM'000 RM'000 RM'000
31 December 2018
Property, plant and equipment - 1,035 1,035
Intangible assets - 20,475 20,475
AFS financial assets 60,798 264,228 325,026
Financing receivables 1,500 - 1,500
Retakaful assets 139,413 - 139,413
Takaful receivables 43,926 - 43,926
Other receivables 2,032 - 2,032
Current tax assets 752 - 752
Deferred tax assets - 4,728 4,728
Cash and cash equivalents 365,299 - 365,299
613,720 290,466 904,186

* Expected recovery or settlement within 12 months from the date of the statement of financial position.

125
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Market Risk

Market risk is the risk of financial loss in the Company investment’s valuation due to adverse changes
or volatility of prices in economic and financial markets. Market risk comprises three types of risk i.e.
foreign exchange rates (currency risk), market rates/profit yields and market prices (price risk).

The Company manages market risk through setting of investment policy and asset allocation,
approving portfolio limit structure and risk management methodologies, approving hedging, and
alternative risk transfer strategies. Investment limits monitoring is in place at various levels to ensure
that all investment activities are aligned with the Company’s risk management principles and
philosophies. Compliance with established financial risk limits forms an integral part of the risk
governance and financial reporting framework.

Profit Rates/Profit Yield Risks

Profit rate risk is part of market risk as any adverse movements in profit rates/ profit yield may affect
the Company investment’s fair valuation and reinvestment issues to the Company. ALMIC actively
monitors such developments as well as discuss changes in maturity profiles of the assets and liabilities
to minimise overall mismatch.

The Company has no significant concentration of profit rate/profit yield risk.

The analysis below is performed for reasonably possible movements in key variables with all other
variables held constant, showing the impact of profit before tax and takaful contract liabilities (due to
changes in fair value of fixed and floating rate/yield financial instruments) and equity (that reflects
adjustments to profit before tax and re-valuing fixed rate/yield AFS financial assets).

The sensitivity analysis below illustrates impact of 50bps increase/decrease in profit rate/ profit yield
to investment value based on portfolio holdings as at 31 December 2019, holding other variables
constant.

2019
Impact on Impact on
profit before Impact on Takaful contract
tax equity* liabilities
Changes in variables RM’000 RM’000 RM’000
Takaful
Operator

RM +50 basis points - (1,753) -

RM -50 basis points - 1,801 -

General
Takaful Fund

RM +50 basis points - - (4,769)

RM -50 basis points - - 4,901

* Impact on equity/ takaful contract liabilities reflects adjustments for tax, where applicable.

126
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

36. FINANCIAL RISK (CONTINUED)

Profit Rates/Profit Yield Risks (continued)

2018
Impact on Impact on
profit before Impact on Takaful contract
tax equity* liabilities
Changes in variables RM’000 RM’000 RM’000
Takaful
Operator

RM +50 basis points - (945) -

RM -50 basis points - 965 -

General
Takaful
Fund

RM +50 basis points - - (3,064)

RM -50 basis points - - 3,137

37. OPERATIONAL RISK

Operational risk arises from inadequate or failed performance of business functions or internal
processes. Exposure to this risk can cause deficiencies or breakdowns in internal controls or
processes, technology and external events such as interruption of business operations due to a
breakdown of IT systems, landslide or flood.

The Company has developed a comprehensive Standard Operating Procedures (“SOP”) to enable all
relevant departments to implement measures, monitor and control the risk in order to avoid or reduce
future losses. The Risk Management Department is assigned to facilitate the relevant departments in
identifying and evaluating their operational risks and control weaknesses via a structured risk
assessment process.

38. COMPLIANCE RISK

Compliance risk is the risk arising from violations of, or non-conformance with business principles,
internal policies and procedures, related laws, rules and regulations (i.e. BNM, Malaysian Takaful
Association (“MTA”), Perbadanan Insurans Deposit Malaysia (“PIDM”)) governing the takaful industry,
products and activities.

Consequently, the exposure to this risk can damage the Company’s reputation, lead to legal or
regulatory sanctions and /or financial loss.

The Legal Department and Compliance Department are assigned to look into all compliance aspects
in observing the regulatory requirements (e.g. BNM, MTA, PIDM). It has developed internal policies
and procedures (e.g. Anti-Money Laundering Framework, Introduction of New Products Framework,
Outsourcing Framework) to align with the laws and guidelines issued by the authorities.

127
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

39. GENERAL TAKAFUL PORTFOLIO ACQUISITION

On 1 August 2018, the Company has entered into a Business Transfer Agreement (“BTA”) with HSBC
Amanah Takaful (Malaysia) Berhad (“HSBCAT”) to acquire its general takaful portfolio with effect
from 3 November 2018. This BTA was approved and confirmed by the High Court of Malaya on 25
September 2018 in accordance with Part VI of the Islamic Financial Services Act 2013.

On 3 November 2018, HSBCAT transferred its entire general takaful business assets together with
the assumed liabilities to the Company, as presented below.

RM’000
ASSETS

Takaful receivables 421

Retakaful assets 13,386
Other receivables 688
Deferred tax assets 19
Cash and cash equivalents 49,833
TOTAL ASSETS 64,347

LIABILITIES

Takaful contract liabilities 53,939

Takaful payables 2,845
Other payables 7,563
TOTAL LIABILITIES 64,347

In addition to the above, the Company has also assumed expense liabilities of RM7,775,000 for the
portfolio acquired. The above transfer of general takaful portfolio was accounted for as acquisition of
separate assets and liabilities.

The Company has also recorded an intangible asset of RM20 million, reflecting the customer
relationship acquired. The basis of the intangible asset is described in Note 2.3(c) of the financial
statements.

128
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

40. ADDITIONAL DISCLOSURE UNDER AMENDMENTS TO MFRS 4 INSURANCE CONTRACT

LIABILITIES

The Company has applied the temporary exemption from the adoption of MFRS 9 “Financial
Instruments” from 1 January 2018 to no later than 1 January 2021 (see Note 2.1(a)).

In order to compare with entities applying MFRS 9, the amendments require deferring entities to
disclose additional information including contractual cash flows characteristics and credit exposure of
the financial assets. The following table presents the Company’s financial assets by their contractual
cash flows characteristics, which indicate if they are solely payments of principal and profit on the
principal outstanding (“SPPI”).

a) The following table shows the carrying amount under MFRS 139 for financial assets with SPPI
cash flow analysed by credit quality:

Government
Guaranteed AAA to AA A1 to A3 Total
RM'000 RM'000 RM'000 RM'000
31 December 2019
AFS financial assets:
Islamic debt securities, unquoted 70,918 440,077 17,638 528,633
Financing receivables:
Fixed deposits with licensed financial
institutions with maturities of less - 342,472 - 342,472
than 3 months
70,918 782,549 17,638 871,105

Government
Guaranteed AAA AA Total
RM'000 RM'000 RM'000 RM'000
31 December 2018
AFS financial assets:
Malaysian Government Securities/
Government Investment Issues 2,030 - - 2,030
Islamic debt securities, unquoted 82,164 79,644 161,188 322,996
Financing receivables:
Fixed deposits with licensed financial
institutions with maturities of less - 92,912 60,000 152,912
than 3 months
- 25,182 45,460 477,938

129
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

40. ADDITIONAL DISCLOSURE UNDER AMENDMENTS TO MFRS 4 INSURANCE CONTRACT

LIABILITIES (CONTINUED)

b) Fair value / carrying amount:

Financial
assets with Other
SPPI cash financial
flow assets Total
RM'000 RM'000 RM'000

Fair value at 31 December 2019 871,105 231,174 1,102,279

Fair value changes during the financial year 6,641 - 6,641
Financial assets that do not have low credit
risk:
- Fair value / carrying amount at 31
-
December 2019 under MFRS 139 N/A N/A

N/A – not applicable

Financial
assets with Other
SPPI cash financial
flow assets Total
RM'000 RM'000 RM'000

Fair value at 31 December 2018 477,938 387,211 865,149

Fair value changes during the financial period
371 - 371
Financial assets that do not have low credit
risk:
- Fair value / carrying amount at 31
December 2018 under MFRS 139 - N/A N/A

N/A – not applicable

130
 Company No.
201701045981 (1260157-U)

ZURICH GENERAL TAKAFUL MALAYSIA BERHAD

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

41. SUBSEQUENT EVENT

In the first quarter 2020, the rapid spread of the Covid-19 has been declared a pandemic. Globally,
increasing measures are being taken to contain it, and these have led to a significant volatility in the
financial markets and resulting in an adverse impact on the global business and economic activity.

With the rapid development of Covid-19 outbreak in Malaysia, the Government issued a Movement
Control Order (“MCO’) beginning from 18 March 2020 until 31 March 2020. The MCO was
subsequently extended to 12 May 2020.

The MCO imposes limitation on movement of people, suspension of non-essential business

operations, travel restrictions and quarantine measures. The Government has also introduced
various economic stimulus plans to assist the citizens and businesses.

During the MCO period, Zurich General Takaful Malaysia Berhad has ensured that the Company
continues to provide core takaful services to its customers. The Company expects that the impact of
Covid-19 may have a knock-on effect on the business operations and performance of the Company
in the coming financial year. Due to uncertainty of when the outbreak will be fully contained, it is
challenging to predict the exact extent of the impact to the Company at this juncture. Nevertheless,
the Company will continue to monitor the situation and will take actions as needed to ensure it
remains viable as a Company.

131
Zurich General Takaful Malaysia Berhad
Registration No. 201701045981 (1260157-U)
Level 23A, Mercu 3, No. 3, Jalan Bangsar, KL Eco City, 59200 Kuala Lumpur, Malaysia
Tel: 03-2109 6000 Fax: 03-2109 6888 Call Centre: 1-300-888-622
www.zurich.com.my