First Capital Insurance Limited
First Capital Insurance Limited
A member of the Fairfax Group
ANNUAL REPORT 2009
6 Raffles Quay
#21-00 Singapore 048580
Tel No.: 6222 2311 Fax No.: 6222 3547
Website: http://www.first-insurance.com.sg
30-0967 FIRST CAPITAL INSURANCE AR'10_COVER_09.indd 1
ANNUAL REPORT 2009
6/15/10 5:53 PM
Mr. Athappan, Chief Executive of First Capital with Mr. V. Prem Watsa,
Chairman and Chief Executive Officer of Fairfax and former President of
USA, Mr. George Bush, during the “luncheon – meet with the President”
event in Singapore organised by Fairfax Group in November 2009.
Corporate
Data
DIRECTORS
Mr. Sammy Sum Yu Chan
Mr. Chandran Ratnaswami
Mr. Ramaswamy Athappan
Mr. Brandon W. Sweitzer
Mr. Tan Teck Meng
CHIEF EXECUTIVE
Mr.Ramaswamy Athappan
SECRETARY
Mr. Gerard Seah
REGISTERED OFFICE
6 Raffles Quay
#21-00
Singapore 048580
AUDITOR
PricewaterhouseCoopers
ANNUAL REPORT 2009
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Management
Team
MANAGEMENT TEAM
Senior Management
Mr. Gobinath Arvind Athappan, Chief Operating Officer
Mr. T. U. Shetty, General Manager
Mr. V. Sridharan, General Manager
Heads of Department
Mr. Tan Hue Peng, Senior Manager
Ms. Chin Oi Leng, Senior Manager
Ms. Sue Ann Tan Siew Kim, Senior Manager
Mr. Jimmy Lim Teong Keng, Senior Manager
Mr. R. Vaidyanathan, Manager
Mr. Low Weng Seng, Manager
Ms. Kwok Pui Chee, Manager
Ms. Ang Chwee Lin, Manager
Ms. G. Neelamalar, Deputy Manager
Ms. Mary Nelson, Deputy Manager
Ms. Sujatha Yegnarayanan, Assistant Manager
Mr. Chia Kok Foo, Assistant Manager
2
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
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Contents
Directors’ Report
Statement by Directors
11
Independent Auditor’s Report
12
Statements of comprehensive income
14
General Insurance Revenue Accounts
15
Balance Sheets
16
Statements of Changes in Equity
18
Consolidated Cash Flow Statement
19
Notes to the Financial Statements
20
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
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Financial Highlights
GROSS AND NET WRITTEN PREMIUM
FIRE
80
70
60
50
2002
2003
2004
2005
2006
2007
2008
2009
40
30
20
10
Gross
Premium
S$’million
Net
Premium
S$’million
7.9
10.9
18.4
21.9
42.6
62.2
69.6
66.1
3.8
2.5
4.3
5.0
10.7
13.9
11.4
13.2
Gross
Premium
S$’million
Net
Premium
S$’million
3.5
6.0
6.8
11.1
64.4
77.5
110.4
162.4
2.5
3.9
3.3
4.0
13.5
21.5
32.6
46.9
0
2002
2003
2004
2005
2006
2007
2008
2009
MARINE
180
160
140
120
2002
2003
2004
2005
2006
2007
2008
2009
100
80
60
40
20
0
2002
2003
2004
2005
2006
2007
2008
2009
Gross Premium
Net Premium
4
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Financial Highlights
MOTOR
50
45
40
35
30
2002
2003
2004
2005
2006
2007
2008
2009
25
20
15
10
Gross
Premium
S$’million
Net
Premium
S$’million
5.5
5.3
4.9
8.0
9.1
9.4
13.2
46.0
5.0
4.8
4.7
4.9
6.2
6.1
12.3
35.0
Gross
Premium
S$’million
Net
Premium
S$’million
13.6
15.6
21.7
28.0
42.9
69.7
87.7
85.4
9.4
6.1
14.0
14.1
19.6
32.6
33.9
36.5
5
0
2002
2003
2004
2005
2006
2007
2008
2009
MISCELLANEOUS
100
90
80
70
60
2002
2003
2004
2005
2006
2007
2008
2009
50
40
30
20
10
0
2002
2003
2004
2005
2006
2007
2008
2009
Gross Premium
Net Premium
ANNUAL REPORT 2009
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Financial Highlights (continued)
TOTAL GROSS AND NET PREMIUM
400
350
300
2002
2003
2004
2005
2006
2007
2008
2009
250
200
150
100
Gross
Premium
S$’million
Net
Premium
S$’million
30.5
37.8
51.8
69.0
159.0
218.8
280.9
359.9
20.7
17.3
26.3
28.0
50.0
74.1
90.2
131.6
50
Gross Premium
0
2002
2003
2004
2005
2006
2007
2008
2009
Net Premium
GROSS PREMIUM COMPOSITION
Year 2009
Marine
45%
Misc
24%
Motor
13%
Fire
18%
Year 2002
Fire
Marine
Motor
Misc
Marine
11%
Year
2009
S$’000
Year
2002
S$’000
66,146
162,377
45,982 85,364
7,941
3,481
5,517
13,634
Fire
26%
Misc
45%
Motor
18%
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Financial Highlights
TECHNICAL PROVISION COMPARED
TO NET PREMIUM
300
250
225
200
150
2002
2003
2004
2005
2006
2007
2008
2009
125
100
75
50
Total
Provision
S$’million
Net
Premium
S$’million
33.8
35.9
46.5
53.2
74.3
105.0
152.4
216.9
20.8
17.4
26.3
28.0
50.0
74.1
90.2
131.6
25
Total Provision
0
2002
2003
2004
2005
2006
2007
2008
2009
Net Premium
TOTAL ASSETS
600
550
500
450
400
2002
2003
2004
2005
2006
2007
2008
2009
350
300
250
200
150
Toal
Assets
S$’million
85.2
105.8
119.2
156.8
230.2
323.6
424.1
596.1
100
50
Total Assets
0
2002
2003
2004
2005
2006
2007
2008
2009
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
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Financial Highlights
TOTAL INVESTMENT AND INVESTMENT INCOME
550
500
450
400
350
300
Total
Investment
S$’million
250
200
2003
2004
2005
2006
2007
2008
2009
150
100
50
0
2003
2004
2005
2006
2007
2008
Interest/
Divident
Income
S$’million
79.9
94.7
119.0
184.6
266.5
348.2
508.4
2.7
2.5
3.6
43.2
10.3
8.0
25.7
2009
Total Investment
Interest/Divident Income
8
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
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Directors’ Report
For the financial year ended 31 December 2009
The directors present their report to the members together with the audited consolidated financial statements of the Group and the
statement of comprehensive income, general insurance revenue account, balance sheet and statement of changes in equity of the
Company for the financial year ended 31 December 2009.
Directors
The directors of the Company in office at the date of this report are as follows:
Sammy Sum Yu Chan
Chandran Ratnaswami
Ramaswamy Athappan
Brandon Sweitzer
Tan Teck Meng
Arrangements to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable
the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other
body corporate.
Directors’ interests in shares or debentures
According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest
in the share capital or debentures of the Company or related corporations, except as follows:
Holdings registered
in name of
director or nominee
At 31.12.2009
Holdings in which a director is deemed
to have an interest
At 1.1.2009
At 31.12.2009
At 1.1.2009
Ultimate Holding Corporation
Fairfax Financial Holdings Limited
(Common or Subordinate voting shares of
no par value each)
Sammy Sum Yu Chan
24,719
24,719
-
-
Chandran Ratnaswami
10,326
10,326
-
-
965
100
-
-
1#
1#
-
-
Brandon W. Sweitzer
The Company
First Capital Insurance Limited
(Ordinary shares of $1 each)
Ramaswamy Athappan
# The share is held in trust for the immediate holding corporation, Fairfax Asia Limited.
ANNUAL REPORT 2009
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Directors’ Report
(continued)
For the financial year ended 31 December 2009
Directors’ contractual benefits
Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract
made by the Company or a related corporation, with the director or with a firm of which he is a member or with a company in which
he has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report, and except that
certain directors have received remuneration in their role as executives of related corporations.
Share options
There were no share options granted during the financial year to subscribe for unissued shares of the Company or its subsidiaries.
No shares have been issued during the financial year by virtue of the exercise of options to take up unissued ordinary shares of the
Company or its subsidiaries.
There were no unissued shares of the Company or its subsidiaries under option at 31 December 2009.
Independent auditor
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the directors
RAMASWAMY ATHAPPAN
Director
SAMMY SUM YU CHAN
Director
Singapore
30 March 2010
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Statement by Directors
In the opinion of the directors,
(a)
the financial statements set out on pages 14 to 62 are drawn up so as to give a true and fair view of the state of affairs of the
Company and of the Group at 31 December 2009, and of the results of the business and changes in equity, of the Company
and of the Group and cash flows of the Group for the financial year then ended; and
(b)
at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they fall due.
On behalf of the directors
RAMASWAMY ATHAPPAN
Director
SAMMY SUM YU CHAN
Director
Singapore
30 March 2010
ANNUAL REPORT 2009
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Independent Auditor’s Report
To the members of the First Capital Insurance Limited
We have audited the accompanying financial statements of First Capital Insurance Limited (the “Company”) and its subsidiary (the
“Group”) set out on pages 14 to 62 which comprise the consolidated financial statements of the Group, and the statement of
comprehensive income, general insurance revenue account, balance sheet and statement of changes in equity of the Company for the
financial year ended 31 December 2009, and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of
the Singapore Companies Act (Cap. 50) (“the Act”) and Singapore Financial Reporting Standards. This responsibility includes:
(a)
devising and maintaining a system of internal accounting control sufficient to provide a reasonable assurance that assets are
safeguarded against loss from unauthorised use or disposition; and transactions are properly aurthorised and that they are
recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain
accountability of assets;
(b)
selecting and applying appropriate accounting policies; and
(c)
making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
12
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Opinion
In our opinion,
(a)
the statements of comprehensive income, general insurance revenue account, balance sheet and statement of changes in
equity of the Company and the consolidated financial statements of the Group are properly drawn up in accordance with the
provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of
the Company and of the Group as at 31 December 2009, and the results and changes in equity of the Company and of the
Group and the cash flows of the Group for the financial year ended on that date; and
(b)
the accounting and other records required by the Act to be kept by the Company and by the subsidiary incorporated in
Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
PricewaterhouseCoopers LLP
Public Accountants and
Certified Public Accountants
Singapore,
30 March 2010
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
13
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Statements of Comprehensive Income
For the financial year ended 31 December 2009
Group
Note
Gross insurance premium
revenue
Underwriting profit from
general insurance business
Company
2009
2008
2009
2008
$
$
$
$
359,869,145
280,918,510
359,869,145
280,918,510
23,446,295
23,406,925
23,447,796
23,409,729
Net investment income
4
21,498,149
4,503,539
21,497,952
4,502,528
Other operating income
5
1,203,747
4,095,892
1,203,747
4,095,892
46,148,191
32,006,356
46,149,495
32,008,149
(5,405,451)
(4,860,000)
(5,421,428)
(4,860,000)
40,742,740
27,146,356
40,728,067
27,148,149
- Fair value gains
33,662,509
588,140
33,662,509
588,140
- Disposals
(4,491,294)
–
(4,491,294)
–
Other comprehensive income
29,171,215
588,140
29,171,215
588,140
Total comprehensive income
69,913,955
27,734,496
69,899,282
27,736,289
Profit before income tax
Income tax expense
Net profit for the financial year
8(a)
Other comprehensive income:
Financial assets, available-for-sale
The accompanying notes form an integral part of these financial statements.
14
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
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General Insurance Revenue Accounts
For the financial year ended 31 December 2009
Group
Note
2009
$
Company
2008
$
2009
$
2008
$
General Insurance Business
Gross insurance premium revenue
359,869,145
280,918,510
359,869,145
280,918,510
Reinsurance premium ceded to
reinsurers
(228,311,368)
(190,707,470)
(228,311,368)
(190,707,470)
Net insurance premium revenue
131,557,777
90,211,040
131,557,777
90,211,040
Change in reserve for unexpired
risks
18(c)
(24,312,692)
(26,245,293)
(24,312,692)
(26,245,293)
Change in reserve for unexpired
risks on reinsurance ceded
18(c)
13,312,371
18,585,804
13,312,371
18,585,804
Change in net reserve for
unexpired risks
18(c)
(11,000,321)
(7,659,489)
(11,000,321)
(7,659,489)
Net premiums earned
120,557,456
82,551,551
120,557,456
82,551,551
Gross claims paid
(93,695,525)
(89,456,345)
(93,695,525)
(89,456,345)
Claims recovered from reinsurers
46,888,104
63,273,411
46,888,104
63,273,411
(46,807,421)
(26,182,934)
(46,807,421)
(26,182,934)
(80,956,657)
(67,576,239)
(80,956,657)
(67,576,239)
27,380,855
27,859,398
27,380,855
27,859,398
(100,383,223)
(65,899,775)
(100,383,223)
(65,899,775)
Gross commissions
Commission recoverable from
reinsurers
(47,021,308)
(39,845,739)
(47,021,308)
(39,845,739)
59,692,459
56,018,876
59,692,459
56,018,876
Net commissions earned
12,671,151
16,173,137
12,671,151
16,173,137
Net claims paid
18(a)
Change in loss reserves
Change in claims recoverable from
reinsurers
Net claims incurred
18(a)
Employee benefits
7
(6,863,869)
(7,236,909)
(6,863,869)
(7,236,909)
Depreciation expense
16
(319,214)
(344,505)
(319,214)
(344,505)
Other operating expenses
6
(2,216,006)
(1,836,574)
(2,214,505)
(1,833,770)
(9,399,089)
(9,417,988)
(9,397,588)
(9,415,184)
23,446,295
23,406,925
23,447,796
23,409,729
Underwriting profit transferred
to statement of comprehensive
income
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
15
6/15/10 5:07 PM
Balance Sheets
As at 31 December 2009
Group
Note
Company
2009
2008
2009
2008
$
$
$
$
ASSETS
Current assets
Cash and cash equivalents
9
94,879,220
211,662,860
11
33,931,507
–
- insurance receivables
12
60,365,792
52,393,027
- other receivables
13
6,383,383
2,800,530
- mortgage loans
14
12,697,576
2,807,160
Reinsurance assets
18
175,683,763
383,941,241
94,799,585
211,582,548
33,931,507
–
60,365,405
52,392,640
6,383,356
2,800,176
12,697,576
2,807,160
134,990,537
175,683,763
134,990,537
404,654,114
383,861,192
404,573,061
Financial assets
Debt securities:
- available -for-sale financial assets
Loans and receivables
Non-current assets
Property, plant and equipment
16
9,959,874
9,792,343
9,959,874
9,792,343
Investments in subsidiary
15
–
–
300,000
300,000
Equity securities:
- available-for-sale
11
166,048,237
103,887,212
166,048,237
103,887,212
Debt securities:
- available-for-sale
11
103,594,435
20,519,287
103,594,435
20,519,287
- at fair value through profit or loss
10
97,255,805
–
97,255,805
–
14
10,960,222
20,263,277
10,960,222
20,263,277
387,818,573
154,462,119
388,118,573
154,762,119
771,759,814
559,116,233
771,979,765
559,335,180
Financial assets
Loans and receivables
- mortgage loans
Total assets
The accompanying notes form an integral part of these financial statements.
16
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Group
Note
Company
2009
2008
2009
2008
$
$
$
$
LIABILITIES
Current liabilities
Trade and other payables
- trade payables
17(a)
100,493,011
84,016,567
100,470,405
83,993,961
- other payables
17(b)
20,088,940
6,464,695
20,084,354
6,460,409
–
–
524,079
524,079
Due to a subsidiary - trade
Current income tax liabilities
5,556,852
5,193,915
5,556,852
5,177,938
Deferred income tax liabilities
19
100,000
50,000
100,000
50,000
Insurance liabilities
18
364,129,355
261,563,241
364,129,355
261,563,241
490,368,158
357,288,418
490,865,045
357,769,628
Non-current liabilities
17(a)
2,752,649
1,917,998
2,752,649
1,917,998
Insurance liabilities
18
28,492,593
25,789,358
28,492,593
25,789,358
Deferred income tax liabilities
19
6,645,000
533,000
6,645,000
533,000
37,890,242
28,240,356
37,890,242
28,240,356
Total liabilities
528,258,400
385,528,774
528,755,287
386,009,984
NET ASSETS
243,501,414
173,587,459
243,224,478
173,325,196
26,500,000
26,500,000
26,500,000
26,500,000
250,000
250,000
250,000
250,000
33,458,222
4,287,007
33,458,222
4,287,007
Retained earnings
183,293,192
142,550,452
183,016,256
142,288,189
Total equity
243,501,414
173,587,459
243,224,478
173,325,196
Trade payables
EQUITY
Share capital
20
General reserve
Fair value reserve
21
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
17
6/15/10 5:16 PM
Statement of Changes in Equity
For the financial year ended 31 December 2009
Share
Capital
General reserve
Fair value
reserve
Retained
earnings
Total
$
$
$
$
$
Group
Balance at 1 January 2009
26,500,000
250,000
4,287,007
142,550,452
173,587,459
–
–
29,171,215
40,742,740
69,913,955
Balance at 31 December 2009
26,500,000
250,000
33,458,222
183,293,192
243,501,414
Balance at 1 January 2008
26,500,000
250,000
3,698,867
115,404,096
145,852,963
–
–
588,140
27,146,356
27,734,496
26,500,000
250,000
4,287,007
142,550,452
173,587,459
26,500,000
250,000
4,287,007
142,288,189
173,325,196
–
–
29,171,215
40,728,067
69,899,282
Balance at 31 December 2009
26,500,000
250,000
33,458,222
183,016,256
243,224,478
Balance at 1 January 2008
26,500,000
250,000
3,698,867
115,140,040
145,588,907
–
–
588,140
27,148,149
27,736,289
26,500,000
250,000
4,287,007
142,288,189
173,325,196
Total comprehensive income for
the year
Total comprehensive income for
the year
Balance at 31 December 2008
Company
Balance at 1 January 2009
Total comprehensive income for
the year
Total comprehensive income for
the year
Balance at 31 December 2008
The accompanying notes form an integral part of these financial statements.
18
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Consolidated Cash Flow Statement
For the financial year ended 31 December 2009
Note
Cash flows from operating activities
Total profit
Adjustments for:
Income tax expense
Depreciation
Gain on disposal of property, plant and equipment
Gain on disposal of available-for-sale financial assets
Impairment loss on available-for-sale financial assets
Dividend income
Interest income
Amortisation of premium on debt securities-available-for sale
Amortisation of premium on debt securities
– at fair value through profit or loss
Marked-to-mark gain on financial assets, at fair value through
profit or loss
Unrealised currency translation losses on available-for sale
financial assets
Operating cash flow before working capital change
Change in operating assets and liabilities
Trade and other receivables
Reserve for unexpired risks
Loss reserves
Payables
2009
$
2008
$
40,742,740
27,146,356
5,405,451
319,214
–
(5,010,294)
1,389,564
(6,928,194)
(9,875,454)
7,445
4,860,000
344,505
(93)
–
–
(2,087,906)
(6,986,362)
–
(826,291)
–
(7,031,066)
–
2,481,001
–
20,674,116
23,276,500
(8,242,198)
24,312,692
80,956,657
31,111,974
(19,726,081)
26,245,293
67,576,239
26,620,381
(40,693,226)
(46,445,202)
108,120,015
1,574,584
(4,992,514)
77,547,130
3,119,588
(5,788,001)
104,702,085
74,878,717
(486,745)
–
(168,744,174)
–
(89,398,448)
(3,750,000)
25,999,438
–
(49,008)
93
(111,922,440)
(70,814,590)
–
(10,214,277)
8,420,550
96,303,594
–
4,250,000
3,162,639
5,143,706
6,908,283
4,142,376
Dividend received
6,764,493
2,087,906
Net cash used in investing activities
(221,309,091)
(70,887,513)
Net (decrease)/increase in cash and cash equivalents
(116,607,006)
3,991,204
Cash and cash equivalents at beginning of the financial year
211,078,234
207,087,030
94,471,228
211,078,234
Reinsurance assets
Cash generated from operations
Interest received
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Purchases of available-for-sale financial assets
Purchases of held-to-maturity financial assets
Purchases of financial assets, at fair value through profit or loss
Mortgage loans granted
Proceeds from sale/redemption of available-for-sale financial assets
Proceeds from redemption of held-to-maturity financial assets
Proceeds from redemption of financial assets,
at fair value through profit and loss
Mortgage loans repayments received
Interest received
Cash and cash equivalents at end of the financial year
9
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
19
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Notes to the Financial Statements
For the financial year ended 31 December 2009
These notes form an integral part of and should be read in conjuction with the accompanying financial statements
1.
General
The Company is incorporated and domiciled in Singapore. The address of its registered office is 6 Raffles Quay #21-00
Singapore 048580.
The principal activity of the Company is to carry on the business of general insurance and reinsurance of all classes of insurance
business and to perform investment functions incidental thereto. The principal activity of its subsidiary is set out in Note 16 to
the financial statements. There have been no significant changes in the nature of these activities during the year.
2
Significant accounting policies
2.1
Basis of preparation
These financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The
financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies
below.
The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process
of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions.
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 3.
Interpretations and amendments to published standards effective in 2009
On 1 January 2009, the Company adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory
for application from that date. Changes to the Group’s accounting policies have been made as required, in accordance with the
relevant transitional provisions in the respective FRS and INT FRS.
The following are the new or amended FRS that are relevant to the Group:
FRS 1 (Revised) - ‘Presentation of financial statements’ (effective from 1 January 2009). The revised standard prohibits the
presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity.
All non-owner changes in equity are shown in a performance statement, but entities can choose whether to present one
performance statement (the statements of comprehensive income) or two statements (the income statement and statements
of comprehensive income). The Group has chosen to adopt the former alternative. Where comparative information is restated
or reclassified, a restated balance sheet is required to be presented as at the beginning comparative period. There is no
restatement of the balance sheet as at 1 January 2008 in the current financial year.
Amendment to FRS 107: ‘Improving Disclosures about Financial Instruments’ (effective from 1 January 2009). The amendment
requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure
of fair value measurements by level of a fair value measurement hierarchy (see note 22). The adoption of the amendment
results in additional disclosures but does not have an impact on the accounting policies and measurement bases adopted by
the Group.
20
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2.
Significant accounting policies (continued)
2.2
Revenue recognition
Premium income on direct insurance business is recognised at the time a policy is issued, which approximates the inception
date of the risk. Reinsurance premium income is recognised at the time of receipt of the returns and advices from cedants and
brokers.
Interest income on short-term bank deposits, corporate bonds and mortgage loans is accounted for using the effective interest
method. Dividends from equity investments are taken up in the profit or loss in the accounting period in which the right to
receive payment is established.
2.3
Group Accounting
Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and
operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent
of non-controlling interest.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date on which control ceases.
In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between
group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Please refer to the paragraph “Investments in subsidiaries” for the accounting policy on investments in subsidiaries in the
separate financial statements of the Company.
2.4
Product classification
All the Group’s existing products are insurance contracts as defined in FRS 104 ‘Insurance Contracts’. Insurance contracts
are defined as those containing significant insurance risk at the inception of the contract, or where at inception of the contract
there is a scenario with commercial substance where the level of insurance risk may be significant over time. The significance
of insurance risk is dependent on both the probability of an insurance event and the magnitude of its potential effect.
Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime,
even if the insurance risk reduces significantly during the period.
ANNUAL REPORT 2009
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
2.
Significant accounting policies (continued)
2.5
Reinsurance
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts
issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts
held. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance)
are included with insurance contracts. The benefits to which the Group is entitled under its reinsurance contracts held are
recognised as reinsurance assets.
2.6
Loss reserves
Claims are charged against the insurance revenue account when incurred based on the estimated liability for compensation
owed to policyholders or for damage suffered by third party claimants. They comprise direct and indirect claims settlement
costs including loss adjustment expenses and professional fees, and arise from events that have occurred up to the balance
sheet date.
Loss reserves and reinsurance and other recoveries are assessed by reviewing individual claims, advice from ceding and
broking companies, and making allowance for claims incurred but not reported taking into consideration foreseeable events,
past experience and trends. These loss reserves are reviewed by actuaries. Any reduction or increase in the provision is
dealt with in the insurance revenue account of the year in which the reduction or increase arises. Any difference between the
estimated cost and subsequent settlement is dealt with in the insurance revenue account of the year in which settlement takes
place.
As explained in Note 3, the assumptions used to estimate the provision require judgement and are subject to uncertainty.
In line with section 37(1)(b) of the Singapore Insurance Act, an actuarial investigation is made on the claims liabilities, and a
provision for adverse deviation at a minimum 75 percent level of confidence is included in the loss reserves.
Claim liabilities is an amount not less than the value of the expected future payments in relation to all claims incurred prior to
the valuation date (other than payments which have fallen due for payment before the valuation date), whether or not they
have been reported to the insurer, including any expense expected to be incurred in settling those claims and provision for any
adverse deviation from the expected experience, calculated based on the 75 per cent level of sufficiency.
2.7
Premium liabilities
Premium liabilities relate to reserves established to cover the unexpired portion of premium written. Premium liabilities are
calculated as an amount not less than the aggregate unearned premium reserves or the unexpired risk reserves, whichever is
higher.
Unearned premium reserves are calculated on gross premiums written during the financial year less premiums on reinsurances,
using the following methods:
For direct business
1/365th method
For reinsurance business
- Proportional treaties
- Facultative
22
40% method
1/365th method
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2.
Significant accounting policies (continued)
2.7
Premium liabilities (continued)
Where the 1/365th method is used, provision for unearned premiums is determined after allowing for acquisition costs.
Unexpired risk reserve as at the balance sheet date is calculated based on the requirements under section 19 of the Insurance
(Valuation and Capital) Regulations 2004 and Insurance (Valuation and Capital) (Amendment) Regulations 2005 and 2007.
Unexpired risk reserve as at the balance sheet date is the sum of the value of the expected future payments arising from future
events insured under policies in force as at the valuation date, including any expenses expected to be incurred in administering
the policies and settling relevant claims and any provision for any adverse deviation from the expected experience, calculated
based on the 75 percent level of sufficiency.
2.8
Reinsurance – Assumptions and methods
The Group limits its exposure to loss within insurance operations through participation in reinsurance arrangements. Amounts
recoverable from reinsurers are estimated in a manner consistent with the assumptions used for ascertaining the underlying
policy benefits and are presented in the balance sheet as reinsurer’s share of technical provisions.
Even though the Group may have reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and
thus a credit exposure exists with respect to reinsurance ceded, to the extent that any reinsurer is unable to meet its obligations
assumed under such reinsurance agreements.
2.9
Property, plant and equipment
(a)
Measurement
(i)
Land and buildings
Land and buildings are initially recorded at cost. No depreciation is provided on freehold land; however the carrying
value is adjusted for any impairment losses. Buildings are subsequently stated at cost less accumulated depreciation
and accumulated impairment losses.
(ii)
Other property, plant and equipment
All other items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less
accumulated depreciation and accumulated impairment losses.
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23
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
2.
Significant accounting policies (continued)
2.9
Property, plant and equipment(continued)
(b)
Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straightline method to allocate their depreciable amounts over their estimated useful lives as follows:
Building on freehold land
40 years
Office equipment
5 years
Furniture and fittings
5 years
Computer equipment
3 years
Motor vehicles
10 years
The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and
adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in the income statement when
the changes arise.
(c)
Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying
amount of the asset when it is probable that future economic benefits associated with the item will flow to the Group and the
cost can be reliably measured. All other repair and maintenance expense is recognised in profit or loss when incurred.
(d)
Disposal
On disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and its carrying
amount is recognised in profit or loss.
2.10
Investments in subsidiaries
Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company’s balance sheet. On
disposal of investments in subsidiaries, the difference between disposal proceeds and the carrying amounts of the investments
are recognised in profit or loss.
2.11
Impairment of non-financial assets
Property, plant and equipment
Investment in subsidiary
Property, plant and equipment and investments in subsidiary are tested for impairment whenever there is any objective evidence
or indication that these assets may be impaired.
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2.
Significant accounting policies (continued)
2.11
Impairment of non-financial assets(continued)
For the purpose of impairment testing, the recoverable amount (i.e. the higher of fair value less cost to sell and the value-in-use)
is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those
from other assets. If this is the case, the recoverable amount is determined for the Cash Generating Unit (“CGU”) to which the
asset belongs to.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the
asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impariment loss in profit or loss,
unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease to the
extent of any previously recorded revaluation.
An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its
revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined
(net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.
A reversal of impairment loss for an asset is recognised in profit or loss, unless the asset is carried at revalued amount, in which
case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued
asset was previously recognised in profit or loss, a reversal of that impairment is also recognised in profit or loss.
2.12
Financial assets
(a)
Classification
The Group classifies its investments in financial assets in the following categories: at fair value through profit or loss,
loans and receivables, held-to-maturity, and available-for-sale. The classification depends on the purpose for which the
assets were acquired. Management determines the classification of its financial assets at initial recognition.
(i)
Financial assets, at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value
through profit or loss at inception. A financial asset is classified as held as trading if it is acquired principally
for the purpose of selling in the short term. Financial assets designated as at fair value through profit or loss at
inception are those that are managed and their performances are evaluated on a fair value basis, in accordance
with a documented Group investment strategy. Derivatives are also categorised as held for trading unless they
are designated as hedges. Assets in this category are presented as current assets if they are either held for
trading or are expected to be realised within 12 months after the balance sheet date.
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
25
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
2.
Significant accounting policies (continued)
2.12
Financial assets (continued)
(a)
Classification (continued)
(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Receivables arising from insurance contracts are also classified in this category and
are reviewed for impairment as part of the impairment review of loans and receivables.
They are presented as current assets, except for those maturing later than 12 months after the balance sheet
date which are presented as non-current assets.
(iii)
Financial assets, held-to-maturity investments
Financial assets, held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Group’s management has the positive intention and ability to hold to
maturity.
If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole
category would be tainted and reclassified as available-for-sale. They are presented as non-current assets,
except for those maturing within 12 months after the balance sheet date which are presented as current assets.
(iv)
Financial assets, available-for-sale financial assets
Financial assets, available-for-sale financial assets are non-derivatives that are either designated in this category
or not classified in any of the other categories. They are presented as non-current assets unless management
intends to dispose of the assets within 12 months after the balance sheet date.
(b)
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date – the date on which the Group
commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a
financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any
amount in the fair value reserve relating to that asset is transferred to profit or loss.
(c)
Initial measurement
Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value
through profit and loss, which are recognised at fair value. Transaction costs for financial assets at fair value through
profit and loss are recognised immediately in profit or loss.
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2.
Significant accounting policies (continued)
2.12
Financial assets (continued)
(d)
Subsequent measurement
Financial assets, both available-for-sale financial assets and at fair value through profit or loss are subsequently carried
at fair value. Loans and receivables and financial assets held-to-maturity are carried at amortised cost using the
effective interest method.
Changes in the fair values of financial assets, at fair value through profit or loss are recognised in profit or loss when
the changes arise. The effects of currency translation, interest and dividend income are recognised separately in profit
or loss.
Interest and dividend income on financial assets, available-for-sale are recognised separately in profit or loss. Changes
in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed
into currency translation differences on the amortised cost of the securities and other changes; the currency translation
differences are recognised in profit or loss and the other changes are recognised in the fair value reserve. Changes
in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fair value reserve,
together with the related currency translation differences.
(e)
Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of
financial assets is impaired and recognises an allowance for impairment when such evidence exists.
(i)
Loans and receivables / Financial assets, held to maturity
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or
significant delay in payments are objective evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance account which is
calculated as the difference between the carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are recognised against the
same line item in profit or loss.
The allowance for impairment loss account is reduced through profit or loss in a subsequent period when the
amount of impairment loss decreases and the related decrease can be objectively measured. The carrying
amount of the asset previously impaired is increased to the extent that the new carrying amount does not
exceed the amortised cost had no impairment been recognised in prior periods.
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First Capital Insurance Limited and its Subsidiary
27
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
2.
Significant accounting policies (continued)
2.12
Financial assets (continued)
(e)
Impairment (continued)
(ii)
Financial assets, available-for-sale
Significant or prolonged declines in the fair value of the security below its cost and the disappearance of an
active trading market for the security are objective evidence that the security is impaired.
The cumulative loss that was recognised in the fair value reserve is transferred to profit or loss. The cumulative loss
is measured as the difference between the acquisition cost (net of any principal repayments and amortisation)
and the current fair value, less any impairment loss previously recognised in profit or loss on debt securities.
The impairment losses recognised in profit or loss on equity securities are not reversed through profit or loss.
2.13
Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and
derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets
are the current bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices.
The fair values of financial Instruments that are not traded in an active market are determined by using valuation techniques. The
Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet
date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such
as discounted cash flow analyses, are also used to determine the fair values of the financial instruments.
The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.
2.14
Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the
tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred Income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill
or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or
loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investment in subsidiary, except where the
Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which
the deductible temporary differences and tax losses can be utilised.
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2.
Significant accounting policies (continued)
2.14
Income taxes (continued)
Deferred income tax is measured:
(i)
at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income
tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance
sheet date; and
(ii)
based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date,
to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax
arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business
combination is adjusted against goodwill on acquisition.
2.15
Provisions
Provisions for other liabilities and charges are recognised when the Group has a present legal or constructive obligation as a
result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount
has been reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax
discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The
increase in the provision due to the passage of time is recognised in profit or loss as finance expense.
Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes
arise.
2.16
Employee compensation
Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate
entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid. The Group’s contributions are recognised as employee compensation
expense when they are due.
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First Capital Insurance Limited and its Subsidiary
29
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
2.
Significant accounting policies (continued)
2.17
Currency translation
(a)
Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of the primary
economic environment in which the entity operates (“functional currency”). The functional currency of the Group is the
Singapore dollar. The financial statements are presented in Singapore dollars.
(b)
Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional
currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement
of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the
closing rates at the balance sheet date are recognised in profit or loss.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date
when the fair values are determined.
2.18
Cash and cash equivalents
For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand and
deposits with financial institutions which are subject to an insignificant risk of change of value. Amounts pledged as collateral
are excluded from cash and cash equivalents.
2.19
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are
deducted against the share capital account.
2.20
Dividends to Company’s shareholders
Dividends to the Company’s shareholders are recognised when the dividends are approved for payment.
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3.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
(a)
Insurance liabilities
Assumptions and sensitivities
(i)
Process used to decide on assumptions
The major classes of general insurance written by the Group include property, motor, workmen’s compensation,
professional indemnity and marine hull and cargo. For general insurance contracts, claims provisions (comprising
provision for claims reported by policyholders and claims incurred but not reported (“IBNR”)) are established to cover
the ultimate cost of settling the liabilities in respect of claims that have occurred and are estimated based on known
facts at the balance sheet date.
The best estimates of claim liabilities have been determined from the projected ultimate claim liabilities based on the
incurred loss development, the paid loss development, the Bornhuetter Ferguson, or the expected loss ratio methods.
Claims paid and incurred claims net of reinsurance recoveries were obtained for each of the last 12 years, as well as
for 1997 and prior, and shown in a triangular form by accident/underwriting year and development year. Then, ratios of
claim amounts at successive development years were calculated to build loss development factor triangles.
For most classes of business, the incurred loss development method, or the average of the ultimate loss estimates from
the paid and incurred loss development methods, have been used to select the ultimate best estimates for the 2007
and prior accident/underwriting years. The Bornhuetter Ferguson method, along with the expected loss ratio method,
was also considered in the selection of the ultimate loss estimates for the 2008 and 2009 accident/underwriting years,
and for classes of business with a small claims sample or in cases where little claim information was available as of the
valuation date.
The claims data includes external claims handling expenses, but does not include internal claims handling expenses.
A provision for internal claims expenses (ULAER) has been determined for the direct and facultative business based
on the ratio of paid ULAE to net average of paid and incurred losses of 7.5%. This method assumes that most of the
expenses incurred in the claims department result from opening and closing claim files, while also accounting for work
performed by the claims department during the time the claim remained opened. This ULAE percentage was applied
to one half of the total of the case reserves plus the narrow (i.e. truly incurred but unreported claims, estimated as 1/12
of the claim amounts estimated to have been incurred in the latest accident year) plus wide-sense IBNR (including both
narrow IBNR and expected case development) at the line and accident year level.
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 31
First Capital Insurance Limited and its Subsidiary
31
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
3.
Critical accounting estimates and judgements (continued)
(a) Insurance liabilities (continued)
(i)
Process used to decide on assumptions (continued)
Acquisition expenses are assumed to have been incurred at the date of writing the policy and hence do not form part
of the loss reserving exercise.
Non-reinsurance recoveries, including salvage and subrogation, are not specifically analyzed in the valuation. However,
they would implicitly be allowed for in the valuation method, where past recovery patterns are assumed to continue
into the projected future years.
The best estimates for premium liabilities are determined such that the total premium liability provision would be
sufficient to pay for future claims and expenses in servicing the unexpired policies as of the valuation date.
A discounting factor for future investment earnings has been applied to claim and premium provisions. The selected
discount rate of 1.28% is consistent with posted five year Government bond yields.
No explicit inflation adjustment has been made to claim amounts payable in the future. This inflation is, however,
implicitly allowed for in the valuation method, where past inflation patterns are assumed to continue into the projected
future years.
In deriving the 75% confidence level for claims liability, the claims modeling software, ICRFS-PLUS used a Probabilistic
Trend Family (PTF) modelling framework to identify a model for an incremental loss development array. The variability in
the data is summarised by the model and described using four components of interest – trends in the three directions:
development period, accident period and calendar period, and the variability of the data about the trend structure. The
process variability is an integral part of the model. The selected PAD loading is based on the ratio of the 75th percentile
estimate to the mean estimate of the total claims reserves from the model.
(ii)
Change in assumptions and sensitivity analysis
The Company maintains separate insurance funds – Singapore Insurance Fund and Offshore Insurance Fund - for
each class of insurance business carried on by the Company that relates to Singapore policies and offshore policies
respectively. The Company’s claims liabilities are analysed on a fund level basis i.e. Singapore Insurance Fund (SIF) and
Offshore Insurance Fund (OIF) and not at Company level.
The actual loss development on SIF direct and facultative business on an accident year basis was in line with
expectation. Actual loss development on SIF direct and treaty business on an underwriting year basis was better than
expected by $2.7M. Overall, SIF business experienced reported loss development of $9.2M, which was better than
expected by $2.8M. This year, for better pricing and monitoring, three large direct accounts, SMRT Taxi and Comfort
Taxi fleet program, as well as Singapore Law Society professional indemnity direct business, are separated out from
Motor and Miscellaneous lines respectively and analyzed on an underwriting year basis.
32
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 32
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3.
Critical accounting estimates and judgements (continued)
(a) Insurance liabilities (continued)
(ii)
Change in assumptions and sensitivity analysis (continued)
The ultimate loss estimates on SIF business for this year’s valuation are lower than last year’s by $0.7M or 0.4%, mainly
due to decrease in estimates for inward treaties.
The claims liabilities on SIF business using current assumptions is $111.4M. If last year’s loss development, discount
and PAD loading factors had been used then the claims liabilities would have been slightly higher, at $112.0M. The
difference stems from lower ultimate loss estimates, as discussed above.
For OIF direct and facultative classes of business on an accident year basis, the actual incurred loss development was
better than expected by $2.0M, most of which stemmed from the Marine Hull 2008 accident year. The OIF direct and
treaty business on an underwriting year basis experienced slightly better than expected development, of $0.5M, mostly
from underwriting year 2003 and 2004. Overall, OIF business experienced reported loss development of $2.6M, which
was better than expected by $2.5M.
The ultimate loss estimates on OIF business for this year’s valuation are lower than last year’s by $1.6M or 4.2%, mostly
due to decreases in the estimates for direct and facultative Hull and Fire business.
The claims liabilities on OIF business using current assumptions is S$52.3M. If last year’s loss development and
ultimate loss ratios, discount and PAD loading factors had been used, then the claims liabilities would have been higher,
at S$53.5M. The difference stems mainly from lower ultimate loss estimates, as discussed above.
(iii)
Sensitivity analysis
There is uncertainty inherent in the estimation process; the actual amount of ultimate claims can only be ascertained
once all claims are closed. If the undiscounted reserve estimate is incorrect by 10%, then it could change by +/-$9.4M
for SIF and +/-$4.3M for OIF. The provision for adverse deviation would incorporate such adverse scenarios. If the
loading for adverse deviation were increased 10%, then the total reserve estimate would increase by approximately
$2.8M, or 1.7%.
(b)
Investments in financial assets
Impairment of available-for-sale financial assets
The Group follows the guidance of FRS 39 in determining when an investment is considered impaired. This determination
requires significant judgment. The Group evaluates, among other factors, the duration and extent to which the fair value of an
investment is less than its cost, the financial health of and near-term business outlook of the issuer of the instrument, including
factors such as industry and sector performance, changes in technology and operational and financing cash flow.
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 33
First Capital Insurance Limited and its Subsidiary
33
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
4.
Investment income
The Group
The Company
2009
2008
2009
2008
$
$
$
$
Dividend income from quoted equities
Dividend income from unquoted equities
6,928,194
1,322,483
6,928,194
1,322,483
-
765,423
-
765,423
Gain on disposal of quoted equities
252,724
-
252,724
-
Gain on disposal of debt securities
Marked-to-market gains on fair value
through profit or loss financial assets
Interest income
4,757,570
-
4,757,570
-
7,031,066
-
7,031,066
-
9,875,455
6,986,362
9,875,258
6,985,351
Amortisation of discount/premium
818,846
-
818,846
-
Investment expenses
(1,079,910)
-
(2,614,593) (1,389,564) (1,079,910)
Impairment of investments (Note 11)
(2,614,593) (1,389,564) Net loss on foreign exchange
(4,161,549) (3,490,819)
(4,161,549) (3,490,819)
Net investment income
21,498,149
4,503,539
21,497,952
4,502,528
-
5.
Other operating income
The Group and the Company
2009
2008
$
$
Brokerage income
2,828,943
1,995,612 Net currency exchange (loss)/gain
(1,665,994) 2,344,028 Gain on disposal of property, plant & equipment
- 93 Write back / (Impairment) of receivables
5,031 (262,872)
Miscellaneous income
35,767 19,031 1,203,747 4,095,892 6.
Expenses by nature
The Group
2009
$
The Company
2008
$
2009
$
2008
$
Professional fees
363,585
366,795
362,177
364,221
Rental & occupancy expense
390,944
218,298
390,944
218,298
Management fees
250,000
250,000
250,000
250,000
Director’s fees
71,000
72,000
71,000
72,000
Advertising and promotional expenses
349,576
232,120
349,576
232,120
Donation
250,000
50,000
250,000
50,000
Travelling expenses
159,786
189,270
159,786
189,270
Other operating expenses
381,115
458,091
381,022
457,861
2,216,006
1,836,574
2,214,505
1,833,770
34
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
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7.
Employee compensation
The Group and the Company
Wages and salaries
Other benefits
Employer’s contribution to defined contribution
plans including Central Provident Fund
8.
Income taxes
(a)
Income tax expense
2009
2008
$
$
6,121,053 292,593 6,669,209
217,374
450,223 350,326
6,863,869 7,236,909
The Group
2009
2008
$
$
Tax expense attributable to profit is made up of:
Current income tax - Singapore
Deferred income tax (Note 19)
Tax charge
4,900,000 50,000 (40,000)
5,550,000 4,860,000 (144,549) -
5,405,451 4,860,000 5,500,000
Overprovision in prior financial years
- Current income tax
The Company
2009
2008
$
$
Tax expense attributable to profit is made up of:
Current income tax - Singapore
5,500,000 4,900,000 Deferred income tax (Note 19)
50,000 (40,000)
Tax charge
5,550,000 4,860,000 (128,572) -
5,421,428 4,860,000 Overprovision in prior financial years
- Current income tax
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 35
First Capital Insurance Limited and its Subsidiary
35
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
8.
Income taxes (continued)
The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax is as
explained below:
The Group
Profit before tax
Tax calculated at a tax rate of 17%
(2008: 18%)
Effects of:
The Company
2009
2008
2009
2008
$
$
$
$
46,148,191
32,006,356
7,845,192
5,761,144
46,149,495
32,008,149
7,845,414
5,761,467
- Income not subject to tax
(998,807) (141,411)
(998,807) (141,411)
- Expenses not deductible for tax purposes
26,905
22,772
26,905
22,772
-
(1,741)
-
(1,741)
(1,751,482) (992,188)
(1,751,482) (992,188)
(25,925) (27,450)
(25,925) (27,450)
222
323
-
-
- Others
453,895
238,551
453,895
238,551
Tax charge
5,550,000
4,860,000
5,550,000
4,860,000
- Effect of different tax rates in
other countries
- Effect of income taxed at rate of 10%
- Singapore statutory stepped
income exemption
- Deferred tax (liabilities)/assets
not recognised
During the financial year, the Singapore corporate tax rate was reduced from 18% to 17% for the year of assessment 2010
and onwards.
(b)
Movement in current income tax liabilities
The Group
The Company
2009
2008
2009
2008
$
$
$
$
Beginning of financial year
5,193,915
6,081,916
5,177,938
6,065,939
Income tax paid
(4,992,514) (5,788,001)
(4,992,514) (5,788,001)
Tax expense
5,500,000
4,900,000
5,500,000
4,900,000
Over-provision in prior financial years
(144,549) -
(128,572) -
End of financial year
5,193,915
5,177,938
5,556,852
5,556,852
36
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 36
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9.
Cash and cash equivalents
The Group
The Company
2009
2008
2009
2008
$
$
$
$
Cash at bank and on hand
10,934,199
10,895,439
10,926,486
10,886,525
Short-term bank deposits
83,945,021
200,767,421
83,873,099
200,696,023
94,879,220
211,662,860
94,799,585
211,582,548
Cash and cash equivalents were denominated in the following currencies:
The Group
Singapore Dollar
The Company
2009
2008
2009
2008
$
$
$
$
32,910,004
174,510,167
32,830,369
174,429,855
United States Dollar
61,770,675
36,937,251
61,770,675
36,937,251
Others
198,541
215,442
198,541
215,442
94,879,220
211,662,860
94,799,585
211,582,548
Short-term bank deposits at the balance sheet date had an average maturity of 3 months (2008: 1 month) from the end of the
financial year with the following weighted average effective interest rates:
The Group and the Company
2009
2008
Singapore Dollar
0.91%
0.66%
United States Dollar
0.99%
2.31%
Included in short-term bank deposits are balances of $407,992 (2008: $584,626) of the Group and the Company held as cash
collaterals in respect of performance bonds issued on behalf of customers.
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
37
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
9.
Cash and cash equivalents (continued)
For the purposes of the consolidated cash flow statement, the consolidated cash and cash equivalents comprised the following:
The Group
Cash and bank balances (as above)
2009
2008
$
$
94,879,220 211,662,860 (407,992) (584,626)
94,471,228 211,078,234 Less: Short-term bank deposits held as collateral in
respect of performance bonds issued on behalf
of customers
Cash and cash equivalents per consolidated cash flow statement
10.
Financial assets, at fair value through profit and loss
The Group and the Company
2009
2008
$
$
At fair value on initial recognition
Debt securities
- Listed
37,664,316 -
- Unlisted
59,591,489 -
97,255,805 -
The debt securities are fixed rate bonds with maturity of more than one year and weighted average effective interest rate of
3.70%.
11.
Financial assets, available-for-sale
The Group and the Company
38
2009
2008
$
$
Beginning of financial year
Currency translation differences
(2,481,001) -
Additions
168,744,174 111,922,440 Impairment losses (Note 4)
(1,389,564) -
Disposals
(25,999,438) (8,420,550)
Fair value recognised in equity (Note 21)
40,293,509 301,140 End of financial year
303,574,179 124,406,499 124,406,499 20,603,469 First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 38
6/15/10 5:16 PM
11.
Financial assets, available-for-sale (continued)
Available-for-sale financial assets are analysed as follows:
The Group and the Company
2009
2008
$
$
Current portion - Equity securities
- -
Non-current portion - Equity securities
166,048,237 103,887,212 Current portion - Debt securities
33,931,507 -
Non-current portion - Debt securities
103,594,435 20,519,287 Total - Debt Securities
137,525,942 20,519,287 Total - Equity & Debt Securities
303,574,179 124,406,499 - listed
157,182,265 95,527,958 - unlisted
8,865,972 8,359,254 Total
166,048,237 103,887,212 - listed
97,602,366 -
- unlisted
39,923,576 20,519,287 Total
137,525,942 20,519,287 Total available-for-sale financial assets
303,574,179 124,406,499 Equity securities:
Debt securities:
The debt securities are fixed rate bonds with maturity of more than one year and weighted average effective interest rate of
5.45% (2008: 4.89%).
12.
Insurance receivables
The Group
Amount due from insureds, agents,
brokers and reinsurers
Less: Allowance for impairment
of receivables
The Company
2009
2008
2009
2008
$
$
$
$
53,043,992
(531,115) (650,965)
52,393,027
60,896,907
60,365,792
53,043,076
(530,586) (650,436)
52,392,640
60,895,991
60,365,405
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 39
First Capital Insurance Limited and its Subsidiary
39
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
12.
Insurance receivables (continued)
Balances due from insureds, agents, brokers and reinsurers were denominated in the following currencies:
The Group
Singapore Dollar
13.
The Company
2009
2008
2009
2008
$
$
$
$
30,739,253
28,780,168
30,738,337
28,779,252
United States Dollar
24,533,555
20,894,368
24,533,555
20,894,368
Others
5,624,099
3,369,456
5,624,099
3,369,456
60,896,907
53,043,992
60,895,991
53,043,076
Other receivables
The Group
The Company
2009
2008
2009
2008
$
$
$
$
Deposits
81,375
47,736
81,375
47,736
Other receivables and prepayments
2,614,691
2,378,897
2,614,691
2,378,897
Accrued interest & dividends
3,687,317
373,897
3,687,290
373,543
6,383,383
2,800,530
6,383,356
2,800,176
Other receivables are denominated in the following currencies:
The Group
Singapore Dollar
United States Dollar
The Company
2009
2008
2009
2008
$
$
$
$
2,770,392
2,519,472
3,612,991
281,058
6,383,383
2,800,530
2,770,365
2,519,118
3,612,991
281,058
6,383,356
2,800,176
14.
Mortgage loans
The Group and the Company
Mortgage loans maturing within 1 year
2009
2008
$
$
12,697,576
2,807,160
10,960,222
20,263,277
23,657,798
23,070,437
Mortgage loans maturing after 1 year
Mortgage loans are secured with interest rates ranging from 1.40% to 10.0% per annum (2008: 1.70% to 10.0% per annum).
40
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
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15.
Investments in subsidiary
Name of subsidiary
Prime Underwriting
Managers (Pte) Ltd
16.
Country of
incorporation and
business
Principal activities
Run-off of a pool of
general insurance
business
Equity holding held by the
Company
Singapore
Cost of investment
2009
%
2008
%
2009
$
100
100
300,000
2008
$
300,000
Property, plant and equipment
The Group and the Company
Furniture
Motor
Office
and
vehicles
Equipment
fittings
Building
Land
Total
$
$
$
$
$
$
Cost
At 1 January 2008
227,650
1,606,693
444,443
Additions
-
37,898
11,110
-
Disposals
-
-
-
and 1 January 2009 227,650
1,643,641
455,553
168,284
(950) 2,350,000
7,264,164
11,892,950
-
49,008
-
(950)
7,264,164
11,941,008
At 31 December 2008
2,350,000
Additions
-
318,461
Disposals
-
(8,023)
At 31 December 2009 227,650
1,954,079
616,599
2,350,000
1,291,257
182,592
293,750
181,565
82,755
-
-
486,745
(7,238) -
-
(15,261)
7,264,164
12,412,492
-
1,805,110
58,750
-
344,505
-
-
(950)
Accumulated depreciation
At 1 January 2008
37,511
Depreciation charge
21,435
Disposals
-
and 1 January 2009 58,946
1,471,872
265,347
352,500
-
2,148,665
21,434
134,374
104,656
58,750
-
319,214
-
(8,023)
-
-
(15,261)
80,380
1,598,223
362,765
411,250
-
2,452,618
147,270
355,856
253,834
1,938,750
7,264,164
9,959,874
168,704
171,769
190,206
1,997,500
7,264,164
9,792,343
(950) -
At 31 December 2008
Depreciation charge
Disposals
At 31 December 2009
(7,238) Net book value
31 December 2009
31 December 2008
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 41
First Capital Insurance Limited and its Subsidiary
41
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
17.
Trade and other payables
(a)
Trade payables
At the balance sheet date, the carrying amounts of balances due to agents, brokers and reinsurers approximated their fair
values. Balances due to agents, brokers and reinsurers are denominated in the following currencies:
The Group
2009
The Company
2008
$
2009
$
2008
$
$
Singapore Dollar
76,509,802
79,621,527
76,487,196
79,598,921
United States Dollar
23,681,085
7,734,672
23,681,085
7,734,672
3,054,773
(1,421,634)
3,054,773
(1,421,634)
103,245,660
85,934,565
103,223,054
85,911,959
Others
(b)
Other payables
The Group
The Company
2009
2008
2009
2008
$
$
$
$
Cash collateral
1,020,724
584,626
1,020,724
584,626
Accrued operating expenses
1,638,727
678,690
1,634,759
674,722
17,429,489
5,201,379
17,428,871
5,201,061
20,088,940
6,464,695
20,084,354
6,460,409
Other creditors
Other payables are denominated in the following currencies:
The Group
Singapore Dollar
United States Dollar
2008
2009
2008
$
$
$
$
13,041,853
7,047,087
20,088,940
42
The Company
2009
6,464,695
13,037,267
-
7,047,087
6,464,695
20,084,354
6,460,409
6,460,409
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 42
6/15/10 5:16 PM
18.
Insurance liabilities and reinsurance assets
The Group and the Company
Gross
2009
2008
$
$
Insurance liabilities
- premium liabilities
128,720,524
104,407,832
- loss reserves
263,901,424
182,944,767
Total insurance liabilities, gross
392,621,948
287,352,599
75,534,895
62,222,524
- claims recoverable from reinsurers
100,148,868
72,768,013
Total reinsurers’ share of insurance liabilities
175,683,763
134,990,537
53,185,629
42,185,308
- loss reserves
163,752,556
110,176,754
Total insurance liabilities, net
216,938,185
152,362,062
364,129,355
261,563,241
28,492,593
25,789,358
392,621,948
287,352,599
Reinsurance assets
- premium liabilities on reinsurance ceded
Net
- premium liabilities
Insurance liabilities are disclosed as follows:
Current
Non-current
(a)
Movements in loss reserves are as follows:
The Group and the Company
2009
2008
$
$
Balance at the beginning of the financial year
110,176,754
70,459,913
Net claims paid
(46,807,421)
(26,182,934)
Claims incurred
100,383,223
65,899,775
Balance at the end of the financial year
163,752,556
110,176,754
(b)
Loss development triangles
Reproduced below is an exhibit that shows the development of claims over a period of time on a gross and net of reinsurance
basis. The tables show the cumulative incurred claims, including both notified and IBNR claims, for each successive accident
and underwriting year at each balance sheet date, together with cumulative claims as at the current balance sheet date.
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 43
First Capital Insurance Limited and its Subsidiary
43
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
18.
(b)
Insurance liabilities and reinsurance assets (continued)
Loss development triangles (continued)
Insurance claims (Gross)
Direct & Fac Lines Accident Year Basis
As at December 31, 2009
Accident Year
Estimate of ultimate claim
costs:
- At end of accident year
2005
2006
2007
2008
2009
19,693,631
36,598,216
- one year later
19,137,249
34,617,479
66,902,675
128,691,984
129,148,967
67,719,786
132,531,037
- two years later
19,392,638
24,862,143
63,144,585
- three years later
15,222,259
25,036,791
- four years later
14,846,468
Current estimate of cumulative
claims
14,846,468
25,036,791
63,144,585
132,531,037
Cumulative payments to date
(12,963,389)
(20,520,182)
(48,792,668)
(84,839,173)
Liability recognised in Actuarial
Valuation
1,883,079
4,516,609
14,351,917
47,691,864
129,148,967
Total
364,707,848
(21,231,169) (188,346,581)
107,917,798
176,361,267
2009
Total
Direct/Treaty Lines Underwriting Year Basis
As at December 31, 2009
UnderwritingYear
Estimate of ultimate claim
costs:
- At end of underwriting year
2005
2006
2007
2008
806,251
7,773,971
5,754,861
11,436,715
- one year later
1,464,891
12,284,734
22,433,802
21,781,352
25,596,028
- two years later
8,406,611
16,254,680
25,016,246
- three years later
6,356,634
14,928,396
- four years later
6,604,151
Current estimate of cumulative
claims
6,604,151
14,928,396
25,016,246
21,781,352
25,596,028
93,926,173
Cumulative payments to date
(5,223,174)
(8,390,633)
(14,062,426)
(10,640,274)
(2,796,352)
(41,112,859)
Liability recognised in Actuarial
Valuation
1,380,977
6,537,763
10,953,820
11,141,078
22,799,676
52,813,314
Total All Lines (Direct & Fac. & Treaty)
Liability recognised in Actuarial
Valuation
Reserve in respect of prior
years
Total reserve
PAD, Discounting + ULAE
Total reserve included in
Actuarial Valuation
Total reserve included in the
balance sheet
44
229,174,581
4,342,514
233,517,096
30,335,009
263,852,105
263,901,424
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 44
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18.
Insurance liabilities and reinsurance assets (continued)
(b)
Loss development triangles (continued)
Insurance claims (Net)
Direct & Fac Lines Accident Year Basis
As at December 31, 2009
Accident Year
Estimate of ultimate claim
costs:
- At end of accident year
2005
2006
2007
2008
2009
Total
10,976,887
21,224,681
26,873,890
47,375,908
65,973,291
- one year later
9,732,856
17,021,879
22,646,732
47,907,057
- two years later
9,484,246
12,222,702
21,217,322
- three years later
7,000,216
12,236,979
- four years later
7,022,375
Current estimate of cumulative
claims
7,022,375
12,236,979
21,217,322
47,907,057
65,973,291
154,357,024
Cumulative payments to date
(5,913,911)
(9,701,135)
(15,166,301)
(26,181,003)
(10,471,773)
(67,434,123)
Liability recognised in Actuarial
Valuation
1,108,464
2,535,844
6,051,021
21,726,054
55,501,518
86,922,901
Direct/Treaty Lines Underwriting Year Basis
As at December 31, 2009
UnderwritingYear
Estimate of ultimate claim
costs:
- At end of underwriting year
2005
2006
2007
2008
2009
Total
806,251
7,773,971
4,613,606
10,086,746
18,482,806
- one year later
1,464,891
12,596,542
16,258,475
18,070,051
- two years later
1,605,629
12,103,044
17,099,494
- three years later
3,912,815
10,409,310
- four years later
4,001,785
Current estimate of cumulative
claims
4,001,785
10,409,310
17,099,494
18,070,051
18,482,806
68,063,446
Cumulative payments to date
(2,654,479)
(4,381,234)
(8,470,858)
(8,985,748)
(817,866)
(25,310,185)
Liability recognised in Actuarial
Valuation
1,347,306
6,028,076
8,628,636
9,084,303
17,664,940
42,753,261
Total All Lines (Direct & Fac. & Treaty)
Liability recognised in Actuarial
Valuation
Reserve in respect of prior
years
129,676,162
3,692,070
133,368,232
Total reserve
PAD, Discounting + ULAE
30,335,009
Total reserve included in
Actuarial Valuation
163,703,241
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 45
First Capital Insurance Limited and its Subsidiary
45
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
18.
Insurance liabilities and reinsurance assets (continued)
(c)
Movements in premium liabilities are as follows:
The Group and the Company
2009
Balance at the beginning of the financial year
Transfer from insurance revenue accounts
Balance at the end of the financial year
Gross
Reinsurance
Net
$
$
$
104,407,832
(62,222,524)
42,185,308
24,312,692
(13,312,371)
11,000,321
128,720,524
(75,534,895)
53,185,629
The Group and the Company
2008
Reinsurance
Net
$
$
$
Balance at the beginning of the financial year
78,162,539
(43,636,720)
34,525,819
Transfer from insurance revenue accounts
26,245,293
(18,585,804)
7,659,489
104,407,832
(62,222,524)
42,185,308
Balance at the end of the financial year
19.
Gross
Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets
against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts,
determined after appropriate offsetting, are shown on the balance sheets as follows:
The Group and the Company
2009
2008
$
$
Deferred income tax liabilities:
- to be settled within one year
- to be settled after one year
46
100,000
50,000
6,645,000
533,000
6,745,000
583,000
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 46
6/15/10 5:16 PM
19.
Deferred income taxes (continued)
Movement in deferred income tax account is as follows:
The Group and the Company
Accelerated tax
depreciation
$
Fair value gains
$
50,000
533,000
Others
$
Total
$
2009
Beginning of financial year
-
583,000
-
50,000
6,112,000
-
6,112,000
100,000
6,645,000
-
6,745,000
90,000
820,000
-
910,000
-
-
(40,000)
-
(287,000)
-
(287,000)
50,000
533,000
-
583,000
Charged to:
- Income statement (Note 8(a))
50,000
- Equity (Note 21)
-
End of financial year
2008
Beginning of financial year
Credited to:
- Income statement (Note 8(a))
- Equity (Note 21)
End of financial year
(40,000) The Group’s and Company’s deferred tax liabilities have been computed based on the corporate tax rate and tax laws prevailing
at balance sheet date.
20.
Share capital of the Company
The Company’s share capital comprises of fully paid-up 25,000,000 (2008: 25,000,000) ordinary shares with no par value,
amounting to a total of S$26,500,000 (2008: S$26,500,000).
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 47
First Capital Insurance Limited and its Subsidiary
47
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
21.
Fair value reserve
The Group and the Company
Beginning of financial year
2009
2008
$
$
3,698,867
4,287,007
Financial assets, available-for-sale
Fair value gains (Note 11)
40,293,509
301,140
Tax on fair value changes (Note 19)
(6,631,000)
287,000
588,140
33,662,509
Transfer to income statement on disposal
Tax effect (Note 19)
End of financial year
22.
(5,010,294)
-
519,000
-
(4,491,294) 4,287,007
33,458,222
Management of insurance and financial risk
Exposure to insurance, credit, interest rate and currency risks arise in the normal course of business. The management of these
risks is discussed below:
The Company is a Singapore based direct insurer. The table below sets out the composition of gross written premium for
current year by class of business.
Singapore
%
Others
%
Marine and aviation
33
67
Fire
14
27
Motor
20
Workmen’s compensation
Miscellaneous accident
-
8
-
25
6
100
100
The Company’s overall business strategy, its tolerance of risks and its general risk management philosophy are determined by
management in accordance with prevailing economic and operating conditions.
48
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 48
6/15/10 5:16 PM
22.
Management of insurance and financial risk (continued)
(a)
Underwriting risk
Underwriting risks include the risk of incurring higher claims costs than expected owing to the random nature of claims
and their frequency and severity and the risk of change in legal or economic conditions or behavioural patterns affecting
insurance pricing and conditions of insurance or reinsurance cover. This may result in the insurer having either received
insufficient premiums for the risks it has agreed to underwrite and hence not having adequate funds to invest and
pay claims, or that claims are in excess of those expected. The Company seeks to minimise underwriting risks with a
balanced mix and spread of business classes of business and by observing underwriting guidelines and limits, and high
standards applied to the security of reinsurers. The Company adopted the actuary’s view on its claims and premium
liabilities at balance sheet date.
The table below sets out the concentration of the claims and premium liabilities (in percentage terms) at balance sheet
date: -
Marine and aviation
(b)
Gross claims
liabilities
Net claims
liabilities
%
%
40
Gross premium Net premium
liabilities
liabilities
%
33
27
%
23
Fire
17
10
16
13
Motor
16
23
9
20
Workmen’s compensation
11
17
8
16
Miscellaneous accident
16
17
40
28
100
100
100
100
Credit risk
Credit risk represents the loss that would be recognised if counterparties to insurance, reinsurance and investment
transactions failed to perform as contracted. Credit evaluations are performed on all new brokers, reinsurers, financial
institutions and other counterparties by reviewing credit grades provided by rating agencies and other publicly
available financial information. The exposure to individual counterparties is managed by maintaining records of the
payment history for significant contract holders with whom the Group regularly transacts. The exposure to individual
counterparties is also managed by other mechanisms, such as the right to offset where counterparties are both debtors
and creditors of the Group.
As the Group does not hold any collateral, the maximum exposure to credit risk for each class of financial assets is the
carrying amount of that class of financial assets presented on the balance sheet.
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 49
First Capital Insurance Limited and its Subsidiary
49
6/15/10 5:16 PM
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 50
6/15/10 5:16 PM
Credit risk (continued)
(b)
(continued)
-
-
358,274
15,225,088
11,569,038
22,641,926
2,253,876
AA
15,225,088
918,013
22,641,926
2,253,876
AA
131,307
20,068,970
AAA
11,569,038
131,307
20,068,970
AAA
Reinsurance assets
Loans and receivables
Investment in debt securities
Cash and cash equivalents
Neither past due not impaired
Analysis of financial assets:
Reinsurance assets
Loans and receivables
Investment in debt securities
Cash and cash equivalents
Group
As at 31 December 2009
14,476,620 452,256
26,674,651
71,526,475 BBB
14,476,620 2,769,017
26,674,651
71,526,475 BBB
ANNUAL REPORT 2009
113,652,535
3,708,057
67,166,074
21,097,317
A
113,652,535
4,610,021
67,166,074
21,097,317
A
-
-
20,760,482
46,749,005
89,877,543
1,552
Not Rated/
Analysed
20,760,482
58,827,749
89,877,543
1,552
Not Rated/
Analysed
50
175,683,763
51,423,082
234,781,747
94,879,220
Total
175,683,763
67,280,290
234,781,747
94,879,220
Total
First Capital Insurance Limited and its Subsidiary
-
24,183
8,352,583
BB
-
24,183
8,352,583
BB
The credit risk exposure for financial assets categorised by Standard & Poors (S&P) rating (or equivalent when not available from S&P) is as follows:
Management of insurance and financial risk (continued)
22.
For the financial year ended 31 December 2009
Notes to the Financial Statements
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 51
6/15/10 5:16 PM
Loans and receivables
Reinsurance assets
Reinsurance assets
Loans and receivables
Investment in debt securities
Cash and cash equivalents
Group
As at 31 December 2008
Loans and receivables
-
8,582,337
-
- - Outstanding for
8,014,785
2,334,133
9,120,166 2,324 - ANNUAL REPORT 2009
23,781,105
1,606,085
- 124,175,673 BBB
15,326,093
- - - 2,316,761 BBB
Total Overdue
- 66,277,131
A
2,668,898
1,125,540 21,208,505
AA
4,634,741
- - 901,964
A
>12 months
- 559,739
AA
7-12 months
- -
- - 19,393,747
AAA
8,022,454
4-6 months
Investment in debt securities
Ageing analysis for past due
but not impaired
Cash and cash equivalents
Past due but not impaired
Group
AAA
Credit risk (continued)
(b)
As at 31 December 2009
Management of insurance and financial risk (continued)
22.
-
-
- -
- -
- - - - 85,492,144
51,901,980
-
1,551
Not Rated/
Analysed
- 11,547,629
Not Rated/
Analysed
-
-
51
134,990,537
55,844,522
20,519,287
211,662,860
Total
-
15,326,093
Total
First Capital Insurance Limited and its Subsidiary
BB
BB
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 52
6/15/10 5:16 PM
Investment in debt securities
Loans and receivables
Reinsurance assets
Loans and receivables
Ageing analysis for past due
but not impaired
Cash and cash equivalents
- - 7-12 months
3,433,514
7,827,351
Outstanding for
- 377,094
4-6 months
- -
- - AA
AAA
Past due but not impaired
1,957,039
1,125,540 21,208,505
8,014,785
-
19,393,747
-
8,582,337
AA
(continued)
Reinsurance assets
Loans and receivables
Investment in debt securities
Cash and cash equivalents
Neither past due not impaired
Analysis of financial assets:
Group
AAA
Credit risk (continued)
(b)
As at 31 December 2008
Management of insurance and financial risk (continued)
22.
For the financial year ended 31 December 2009
Notes to the Financial Statements
- - - - 12,884,421
Total Overdue
- 2,312 BBB
9,120,166 12 - 124,175,673 BBB
ANNUAL REPORT 2009
1,623,556
>12 months
- 1,227,983
A
23,781,105
378,102
- 66,277,131
A
- -
- - -
-
- -
- - - 11,277,032
Not Rated/
Analysed
85,492,144
39,973,983
-
1,551
Not Rated/
Analysed
-
-
52
-
12,884,421
Total
134,990,537
42,309,136
20,519,287
211,662,860
Total
First Capital Insurance Limited and its Subsidiary
BB
BB
22.
Management of insurance and financial risk (continued)
(c)
Market risk
(i)
Currency risk
The Group is exposed to foreign exchange rate fluctuations because of its foreign currency denominated
investments, bank deposits and insurance policies. Exposures to foreign currency risks on investments and
bank deposits are monitored on an ongoing basis. The exposures to foreign currency risks on insurance
policies are reviewed annually. The currency giving rise to this foreign currency risk is primarily the US dollar.
The Group does not consider the Group’s exposure to foreign currency exchange fluctuations to be significant
and, therefore the Group does not enter into derivative contracts to manage this risk.
The table below summarises the Group’s exposures to foreign currency exchange rate movements as at 31
December 2009. The Group’s assets and liabilities at carrying amounts are included in the table, categorised
by currency at their carrying amount. All the amounts are denominated in Singapore dollars.
As at 31 December 2009
Group
SGD
USD
Other
Cash and cash equivalents
32,910,004
61,770,675
Financial assets, at fair value
through profit and loss
74,897,416
22,358,389
229,087,247
57,167,443
Financial assets,
available-for-sale
Loans and receivables
Total
198,541
94,879,220
-
97,255,805
71,148,629
3,338,303
303,574,179
28,146,546
5,624,099
90,938,088
-
175,683,763
Reinsurance Assets
175,683,763
Financial assets
569,745,873
183,424,239
9,160,943
762,331,055
89,551,655
30,728,172
3,054,773
123,334,600
-
392,621,948
Trade and other payables
-
Insurance liabilities
392,621,948
Total liabilities
482,173,603
30,728,172
3,054,773
515,956,548
87,572,270
152,696,067
6,106,170
246,374,507
Net financial assets
-
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 53
First Capital Insurance Limited and its Subsidiary
53
6/15/10 5:16 PM
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
22.
Management of insurance and financial risk (continued)
(c)
Market risk (continued)
(i)
Currency risk (continued)
As at 31 December 2008
Group
Cash and cash equivalents
SGD
USD
Other
Total
174,510,167
36,937,251
215,442
211,662,860
Financial assets,
available-for-sale
77,189,584
43,675,845
3,541,070
124,406,499
Loans and receivables
54,370,077
21,175,426
3,369,456
78,914,959
-
134,990,537
Reinsurance Assets
134,990,537
Total assets
441,060,365
101,788,522
7,125,968
549,974,855
86,086,222
7,734,672
(1,421,634)
92,399,260
-
287,352,599
Trade and other payables
-
Insurance liabilities
287,352,599
Total liabilities
373,438,821
7,734,672
(1,421,634)
379,751,859
67,621,544
94,053,850
8,547,602
170,222,996
Net financial assets
-
If the foreign currencies change against the Singapore dollar by 1% (2008: 5%) with all other variables including
tax rate being held constant the effects arising from the net financial asset position will be as follows:
2009
2009
2008
2008
Increase / (Decrease)
Profit after tax
Equity
Profit after tax
Equity
$
$
$
$
Foreign currencies against
SGD
54
- Strengthened
729,327
644,312
2,395,381
2,042,132
- Weakened
(729,327)
(644,312)
(2,395,381)
(2,042,132)
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 54
6/15/10 5:16 PM
22.
Management of insurance and financial risk (continued)
(c)
Market risk (continued)
(ii)
Price risk
The Group is exposed to equity securities price risk arising from the investments held by the Group which are
classified on the consolidated balance sheet as available-for-sale financial assets. These securities comprise
those listed in Singapore and overseas exchanges, as well as unquoted investments. To manage its price riks
arising from investments in equity securities, the Group diversifies its portfolio.
If prices for listed equity securities change by 5% (2008: 5%) with all other variables including tax rate being held
constant, the effects on equity will be:
Group
Change in variables
2009
2008
Impact on
Equity
Impact on
Equity
Listed
+5%
5,987,292
1,412,837
Listed
-5%
(5,987,292)
(1,412,837)
The Group has recorded its investment in securities listed in the United States at cost as the ultimate corporation
has confirmed its intention to purchase the shares from the Group at a price equivalent to the original purchase
price. This price support only occurs if the shares are sold back to the ultimate holding corporation. Hence the
Group’s investment in these securities is not subject to price risk.
The Group’s unquoted equity investments are stated at cost and hence are subjected to minimal price risks.
Management periodically assesses whether there is objective evidence that the investments are impaired and
writes down the value of the investment accordingly when such evidence exists.
ANNUAL REPORT 2009
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 55
First Capital Insurance Limited and its Subsidiary
55
6/15/10 5:16 PM
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 56
6/15/10 5:16 PM
22.
(c)
Financial assets
Loans and receivables
- - 1,555,825
$
- -
1,141,751
$
Less than 6
months
6 to 12 months
-
7,000,070
10,960,222 $
More than
1 year
<--------- Variable rates ----------->
1,001,069
10,000,000 10,248,427 $
$
- - -
-
40,353,476
$
Over 5 years
166,048,237
66,749,175
10,934,199
$
Non-interest
bearing
56
400,829,984
90,406,973
94,879,220
$
Total
First Capital Insurance Limited and its Subsidiary
153,496,694
ANNUAL REPORT 2009
32,930,438
-
73,696,594
$
Less than 6
months
6 to 12 months 1 to 5 years
<-------------------- Fixed rates --------------------->
The tables below set out the Group’s exposure to interest rate risks. Included in the tables are the assets and liabilities at carrying amounts, categorised by the
earlier of contractual repricing or maturity date.
Cash and cash equivalents Assets
(continued)
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value
interest rate risk is the risk that the fair value of financial instrument will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk
primarily arising from its interest-bearing short-term bank deposits, interest-bearing debt securities and interest-bearing loan and receivables. Strict investment
guidelines are used to monitor the risks in the Group’s investments.
Interest rate risk
At 31 December 2009
Group
(iii)
Market risk (continued)
Management of insurance and financial risk (continued)
For the financial year ended 31 December 2009
Notes to the Financial Statements
30-0967 FIRST CAPITAL INSURANCE AR'10_TEXT2.indd 57
6/15/10 5:16 PM
(c)
Financial assets
- 1,555,825
- - - 1,141,751
$
-
- 10,173,056 $
More than
1 year
- -
194,187,384
$
- 109,583
6,580,037 $
- -
10,090,222 $
Less than 6
months
6 to 12 months 1 to 5 years
-
-
20,519,287
$
Over 5 years
<-------------------- Fixed rates --------------------->
103,887,212
55,193,557
10,895,439
$
Non-interest
bearing
124,406,499
78,263,994
211,662,860
$
Total
ANNUAL REPORT 2009
First Capital Insurance Limited and its Subsidiary
57
If interest rates increase/decrease by 0.03% (2008: 0.50%) with all other variables including tax rate being held constant, the profit after tax will be higher/lower
by $5,361 (2008: $555,655). Other comprehensive income and profit after tax would have been higher/lower by $114,408 (2008: $1,579,338) and $130,120
(2008: Nil) respectively as a result of market value fluctuations on the debt securities portfolio based on the above movements in interest rates.
Loans and receivables
Cash and cash equivalents Assets
$
Less than 6
months
6 to 12 months
<--------- Variable rates ----------->
Interest rate risk (continued)
At 31 December 2008
Group
(iii)
Market risk (continued)
Management of insurance and financial risk (continued)
22.
Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
22.
Management of insurance and financial risk (continued)
(d)
Liquidity risk
The Group manages liquidity risk by maintaining sufficient cash and marketable securities to meet normal operating
commitments. The Group’s cash management process assesses the liquidity of assets held to ensure that assets can
be realised on a reasonably timely basis to settle policyholder liabilities.
The Group is required to satisfy the solvency requirements prescribed by the Singapore Insurance Act. The Group will
assess at each quarter as well as annually whether solvency requirements have been met as part of their reporting
process to the Monetary Authority of Singapore, which is the regulatory body for insurance companies in Singapore.
Appropriate actions are taken by management to ensure the Group maintains a sound financial position throughout the
year and in the long term.
Management believes that the Company’s liquid assets and net cash provided by operations will enable it to meet any
foreseeable cash requirements.
The table below analyses the maturity profile of the financial liabilities of the Group based on contractual undiscounted
cash flows.
Group
As at 31 December 2009
Less than 1 year
1 to 5 years
Above 5 years
-
123,334,600
130,126,400
9,703,794
392,621,948
132,879,049
9,703,794
515,956,548
Trade and other payables
120,581,951
2,752,649
Insurance liabilities
252,791,754
Total
373,373,705
Total
Group
As at 31 December 2008
Trade and other payables
58
Less than 1 year
1 to 5 years
Above 5 years
Total
90,481,262
1,880,358
37,640
92,399,260
Insurance liabilities
189,871,746
90,478,826
7,002,027
287,352,599
Total
280,353,008
92,359,184
7,039,667
379,751,859
First Capital Insurance Limited and its Subsidiary ANNUAL REPORT 2009
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22.
Management of insurance and financial risk (continued)
(e)
Capital risk
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern and to comply with capital adequacy requirements prescribed by the Singapore Insurance Act as an authorised
insurer to carry on insurance business in or from Singapore, so that it can continue to provide returns for shareholders,
by pricing products and services commensurate with the level of risk.
Regulatory capital requirements require the Group to hold assets sufficient to cover liabilities. The Group will assess at
each quarter as well as annually whether the capital adequacy requirements as defined by the Singapore Insurance Act
have been met as part of their reporting process to the Monetary Authority of Singapore.
The table below shows the minimum amount of capital that must be held by the Company in addition to their insurance
liabilities. The minimum required capital must be maintained at all times throughout the year.
2009
2008
Capital Adequacy Ratio Held
230%
278%
Minimum regulatory Capital Adequacy Ratio
120%
120%
The Group and the company are in compliance with all externally imposed capital requirements for the financial years
ended 31 December 2008 and 2009.
(f)
Fair value measurements
Effective 1 January 2009 the Company adopted the amendment to FRS 107 which requires disclosure of fair value
measurements by levels of fair value measurement hierarchy as follows:
(i)
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(ii)
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(is as prices) or indirectly (ie derived from prices) (Level 2); and
(iii)
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
ANNUAL REPORT 2009
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First Capital Insurance Limited and its Subsidiary
59
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
22.
Management of insurance and financial risk (continued)
(f)
Fair value measurements (continued)
The following table presents our assets and liabilities measured at fair value at 31 December 2009.
Group
Level 1
Level 2
Level 3
Total
$
$
$
$
Assets
Available-for-sale financial assets
- Equity securities
- Debt securities
157,182,265
-
8,865,972
166,048,237
-
137,525,942
-
137,525,942
-
97,255,805
-
97,255,805
157,182,265
234,781,747
8,865,972
400,829,984
Financial assets at fair value
through profit or loss
- Debt securities
Total assets
The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is
based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by
the Company is the current bid price. These instruments are included in Level 1.
The fair value of debt securities classified as available-for-sale financial assets and financial assets at fair value through
profit or loss are based on over-the-counter quotes at the balance sheet date. These are based on market observable
inputs such as benchmark yields, reported trades and broker-dealer quotes available for these investments. These
investments are included in Level 2.
The fair value of credit linked notes classified as financial assets at fair value through profit or loss included under Level
2 is determined by using valuation techniques. The valuation method used takes into account the credit spread of the
issuer and the underlying and currency swap points.
Available-for-sale equity securities that do not have quoted market values in active markets are included in level 3. The
fair value of these securities is determined based on the net asset values of the underlying portfolios.
23.
Immediate and ultimate holding corporation
The immediate holding corporation is Fairfax Asia Limited, incorporated in Barbados. The ultimate holding corporation is Fairfax
Financial Holdings Limited, incorporated in Canada.
60
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24.
Related party transactions
In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the
Group and related parties at terms agreed between the parties.
(a)
Business transactions
The Group and The Company
2009
2008
$
$
Revenue
Premiums received from related party corporations
753,726
-
Commissions received from related party corporations
6,105,320
3,642,444
Claims recovered from related party corporations
3,651,285
1,185,992
Expenses
Premiums paid to related party corporations
(b)
9,115,528
20,291,251
Commissions paid to related party corporations
139,210
Management fees
250,000
250,000
Key management personnel compensation
Key management personnel compensation is analysed as follows:
The Group and the Company
Salaries and other short-term employee benefits
Employer’s contribution to defined contribution
plans including Central Provident Fund
25.
2009
2008
$
$
2,583,640
4,027,911
14,253
25,201
2,597,893
4,053,112
New or revised accounting Standards and Interpretations
Certain new accounting standards, amendments and interpretations to existing standards have been published that are
mandatory for accounting periods beginning on or after 1 January 2010 or later periods and which the Group has not early
adopted. The Group’s assessment of the impact of adopting those standards, amendments and interpretations that are
relevant to the Group is set out below:
ANNUAL REPORT 2009
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61
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Notes to the Financial Statements
(continued)
For the financial year ended 31 December 2009
25.
New or revised accounting Standards and Interpretations (continued)
(a) Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (effective for
annual periods beginning on or after 1 July 2009)
This amendment clarifies how the principles that determine whether a hedged risk or portion of cash flows is eligible for
designation should be applied in particular situations. The Group will apply this amendment from 1 January 2010, but it
is not expected to have a material impact to the financial statements.
(b) INT FRS 117 Distributions of Non-Cash Assets to Owners (effective for annual periods beginning on or after 1 July
2009)
INT FRS 117 clarifies how the Group should measure distributions of assets, other than cash, to its owners. INT FRS
117 specifies that such a distribution should only be recognised when appropriately authorised, and that the dividend
should be measured at the fair value of the assets to be distributed. The difference between the fair value and the carrying
amount of the assets distributed should be recognised in profit or loss. INT FRS 117 applies to pro rata distributions of
non-cash assets except for distributions to a party or parties under common control.
The Group will apply the INT FRS 117 from 1 January 2010, but it is not expected to have a material impact on the
financial statements.
(c) FRS 27 (revised) Consolidated and Separate Financial Statements (effective for annual periods beginning on or after
1 July 2009)
FRS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no
change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies
the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss
is recognised in profit or loss. The Group will apply FRS 27 (revised) prospectively to transactions with minority interests
from 1 January 2010.
26.
Authorisation of financial statements
These financial statements were authorised for issue in accordance with a resolution of the Directors on 30 March 2010.
62
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First Capital Insurance Limited
First Capital Insurance Limited
A member of the Fairfax Group
ANNUAL REPORT 2009
6 Raffles Quay
#21-00 Singapore 048580
Tel No.: 6222 2311 Fax No.: 6222 3547
Website: http://www.first-insurance.com.sg
30-0967 FIRST CAPITAL INSURANCE AR'10_COVER_09.indd 1
ANNUAL REPORT 2009
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