annual report year ended 31 december 2015 - directasia · insurance receivables 6 4,510,362...

KPMG LLP (Registration No. T08LL1267L), an accounting limited liability partnership registered in Singapore under the Limited Liability Partnership Act (Chapter 163A) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Direct Asia Insurance (Singapore) Pte. Ltd.

Registration Number: 200822611G

Annual Report

Year ended 31 December 2015


Directors’ statement


1

Directors’ statement

We are pleased to submit this annual report to the member of the Company together with the

audited financial statements for the year ended 31 December 2015.

In our opinion:

(a) the financial statements set out on pages FS1 to FS31 are drawn up so as to give a true and

fair view of the financial position of the Company as at 31 December 2015 and the

financial performance, changes in equity and cash flows of the Company for the year

ended on that date in accordance with the provisions of the Singapore Companies Act,

Chapter 50 and Singapore Financial Reporting Standards; 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.

The Board of Directors has, on the date of this statement, authorised these financial statements

for issue.

Directors

The directors in office at the date of this statement are as follows:

Jayesh Kantilal Thaker

Graham Holmes Soutar

Jeffrey William Geroux (Appointed on 1 October 2015)

Simon Neale Birch (Resigned on 26 March 2015)

Steve Langan (Resigned on 1 October 2015)

Directors’ interests

According to the register kept by the Company for the purposes of Section 164 of the

Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the

end of the financial year (including those held by their spouses and infant children) in shares,

debentures, warrants and share options of the Company and in related corporations are as

follows:

Name of directors and corporations

in which interests are held

Holdings

at beginning

of the year

Holdings

at end

of the year

Ultimate holding company

Hiscox Ltd.

- Ordinary shares

Jayesh Kantilal Thaker 1,173 1,032


Financial statements


FS1

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

Statement of financial position

As at 31 December 2015

Note 2015 2014

$ $

Assets

Unearned premiums on reinsurance ceded 11(a) 257,831 365,203

Claims recoverable from reinsurers 11(b) 11,970,459 10,435,929

Insurance receivables 6 4,510,362 4,627,228

Amount due from a related company 7 – 1,650,969

Other receivables 8 280,090 211,984

Fixed deposits 9 4,016,355 –

Cash and cash equivalents 10 39,701,753 40,335,984

Total current assets 60,736,850 57,627,297

Non-current assets

Intangible asset 12 182,327 311,029

Equipment 13 144,596 296,372

Total non-current assets 326,923 607,401

Total assets 61,063,773 58,234,698

Liabilities

Provision for unexpired risks 11(a) 13,182,963 14,378,608

Provision for insurance claims 11(b) 25,480,074 20,660,293

Insurance payables 14 1,572,493 4,314,274

Amount due to a related company 15 3,632,697 160,158

Other payables and accruals 16 1,817,744 2,326,153

Total current liabilities 45,685,971 41,839,486

Shareholder’s equity

Share capital 17 39,500,001 36,000,001

Accumulated losses (24,122,199) (19,604,789)

Total shareholder’s equity 15,377,802 16,395,212

Total liabilities and equity 61,063,773 58,234,698




FS2


Statement of comprehensive income


Note 2015 2014

$ $

Revenue

Gross written premiums 11(a) 26,963,697 29,679,339

Change in the gross provision for unexpired risks 1,195,645 (646,395)

Gross earned premiums 11(a) 28,159,342 29,032,944

Written premiums ceded to reinsurers 11(a) (11,890,443) (17,900,178)

Reinsurers’ share of change in provision for

unexpired risks (107,372) 68,689

Reinsurance premium expense 11(a) (11,997,815) (17,831,489)

Net earned premium revenue 11(a) 16,161,527 11,201,455

Commission income 3,328,720 4,698,858

Investment income 18 266,865 88,248

Service fee income 21 148,505 –

Other income 607,857 379,928

Total income 20,513,474 16,368,489

Gross claims incurred 11(b) 23,257,436 21,118,579

Reinsurers’ share of claims incurred 11(b) (10,159,040) (12,710,538)

Net claims incurred 11(b) 13,098,396 8,408,041

Staff costs 19 3,262,183 2,553,466

Depreciation and amortisation expense 12, 13 253,370 257,952

Other operating expenses 20 8,416,935 5,609,402

Total claims and operating expenses 25,030,884 16,828,861

Loss before income tax (4,517,410) (460,372)

Income tax expense 22 – –

Loss for the year, representing total

comprehensive loss for the year (4,517,410) (460,372)




FS3


Statement of changes in equity


Share

capital

Accumulated

losses Total

$ $ $

At 1 January 2014 36,000,001 (19,144,417) 16,855,584

Net loss and total comprehensive income for

the year – (460,372) (460,372)

At 31 December 2014 36,000,001 (19,604,789) 16,395,212

At 1 January 2015 36,000,001 (19,604,789) 16,395,212

Net loss and total comprehensive income for

the year – (4,517,410) (4,517,410)

Transactions with owners, recognised

directly in equity

Contributions by and distributions to owners

Issue of ordinary shares 3,500,000 – 3,500,000

Total transactions with owners 3,500,000 – 3,500,000

At 31 December 2015 39,500,001 (24,122,199) 15,377,802




FS4


Statement of cash flows


Note 2015 2014

$ $

Cash flows from operating activities


Adjustments for:

Depreciation of equipment 13 124,668 129,250

Amortisation of intangible asset 12 128,702 128,702

Loss on disposal of equipment 13 98,413 –

Interest income 18 (266,865) (88,248)

(4,432,492) (290,668)

Changes in:

Insurance receivables 6 116,866 (269,985)

Amounts due from related company 7 1,650,969 (1,568,908)

Other receivables 8 (9,302) 74,070

Insurance payables 14 (2,741,781) 2,740,088

Amounts due to a related company 15 3,472,539 –

Other payables and accruals 16 (508,409) 1,194,569

Net change in provision for unexpired risks 11 (1,088,273) 577,706

Net change in provision for insurance claims 11 3,285,251 1,548,101

Net cash (used in)/from operating activities (254,632) 4,004,973

Cash flows from investing activities

Interest income received 208,061 88,248

Placement of fixed deposits 9 (4,016,355) –

Purchase of equipment 13 (71,305) (34,262)

Net cash used in investing activities (3,879,599) (53,986)

Cash flows from financing activity

Proceeds from issue of shares 16 3,500,000 –

Net cash from financing activity 3,500,000 –

Net (decrease)/increase in cash and cash equivalents (634,231) 4,058,959

Cash and cash equivalents at beginning of year 40,335,984 36,277,025

Cash and cash equivalents at end of year 10 39,701,753 40,335,984




FS5

Notes to the financial statements

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on [date of

signing].

1 Domicile and activities

Direct Asia Insurance (Singapore) Pte. Ltd. (the “Company”) is incorporated in the Republic of

Singapore and has its registered office at 88 South Bridge Road, Singapore 058716.

The principal activities of the Company are those of a direct general insurer licensed under the

Insurance Act, Chapter 142 and underwrite general insurance business.

The immediate holding company is Direct Asia Insurance (Holdings) Pte. Ltd., incorporated in

the Republic of Singapore. The ultimate holding company is Hiscox Ltd, incorporated in

Bermuda.

2 Basis of preparation

2.1 Statement of compliance

The financial statements have been prepared in accordance with the provisions of the Singapore

Companies Act and Singapore Financial Reporting Standards (“FRS”).

The assets and liabilities of the Company which relate to the insurance business carried on in

Singapore are subject to the requirements of the Insurance Act. Such assets and liabilities are

accounted for in the books of the “Singapore Insurance Fund” established under Section 17 of

the Insurance Act. The net assets of the Company held in the Singapore insurance fund must be

sufficient to meet the solvency requirements stipulated in Section 18 at all times. Assets held in

the Singapore insurance fund may be withdrawn only if the withdrawal meets the requirements

stipulated in Section 17 and the Company continues to be able to meet the solvency

requirements of Section 18. All other assets and liabilities are accounted for in the books of the

“Shareholders’ Fund”.

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis, except as disclosed in

the accounting policies notes below.

2.3 Functional and presentation currency

The financial statements are presented in Singapore dollars which is the Company’s functional

currency.




FS6

2.4 Use of estimates and judgments

The preparation of financial statements in conformity with FRSs requires management to make

judgements, estimates and assumptions that affect the application of accounting policies and the

reported amounts of assets, liabilities, income and expenses. Actual results may differ from

these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimates are revised and in any

future periods affected.

In particular, information about significant areas of estimation uncertainty and critical

judgements in applying accounting policies that have the most significant effect on the amount

recognised in the financial statements are included in note 4.

2.5 Change in accounting policies

A number of new standards, amendments to standards and interpretations are effective for

annual period 1 January 2015, and have been applied in preparing these financial statements.

None of these have a significant effect on the financial statements of the Company.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in

these financial statements.

3.1 Classification of insurance contracts

Contracts under which the Company accepts significant insurance risk from another party (the

policyholder) by agreeing to compensate the policyholder or other beneficiary if a specified

uncertain future event (the insured event) adversely affects the policyholder or other beneficiary

are classified as insurance contracts. Insurance risk is risk other than financial risk. Financial

risk is the risk of a possible future change in one or more of a specified interest rate, security

price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit

index or other variable, provided in the case of a non-financial variable that the variable is not

specific to a party to the contract.

Insurance risk is significant if, and only if, an insured event could cause the Company to pay

significant additional benefits. Once a contract is classified as an insurance contract, it remains

classified as an insurance contract until all rights and obligations are extinguished or expired.

3.2 Insurance contracts

Written premiums and earned premium revenue

Written premiums include premiums on contracts incepted during the financial year,

irrespective of whether they relate in whole or in part to later financial years. Written premiums

are disclosed gross of commission payable to insurance companies and intermediaries and

include adjustments to premiums written in prior financial years.




FS7

The earned portion of written premiums is recognised as revenue. Earned premium revenue

comprises premiums written during the financial year and changes in provision for unexpired

risks.

Provision for unexpired risks

The provision for unexpired risks includes a provision for unearned premiums and any

additional provision for premium deficiency. The provision for unearned premiums is calculated

using the 365th method on written premiums less commission expense for all classes of

business. An additional provision for premium deficiency is made where the expected value of

claims and expenses attributable to the unexpired periods of policies in force at the end of the

reporting period exceeds the provision for unearned premiums in relation to such policies. The

provision for unexpired risks is calculated separately by reference to classes of business which

are managed together.

Claims incurred and provision for insurance claims

Claims incurred comprise claims paid during the financial year, net of subrogation recoveries,

and changes in provision for insurance claims.

Provision for insurance claims comprises provisions for the Company’s estimate of the ultimate

cost of settling all claims incurred but unpaid at the end of the reporting period whether reported

or not, and related internal and external claims handling expenses, as well as a provision for

adverse deviation. Provision for insurance claims are assessed by reviewing individual claims

and making allowance for claims incurred but not yet reported, the effect of both internal and

external foreseeable events, such as changes in claims handling procedures, inflation, judicial

trends, legislative changes and past experience and trends. Provision for insurance claims is

discounted where there is a particularly long period from the end of the reporting period to

claims settlement and where there exists a suitable claims pattern from which to calculate the

discount.

Reinsurance

The Company cedes reinsurance in the normal course of business for the purpose of limiting its

net loss potential through the diversification of its risks. Assets, liabilities, income and expense

arising from ceded reinsurance contracts are presented separately from the related assets,

liabilities, income and expense from the related insurance contracts because the reinsurance

arrangements do not relieve the Company from its direct obligations to its policyholders.

Reinsurance premium expense and reinsurers’ share of claims incurred are presented in the

statement of profit or loss and other comprehensive income and statement of financial position

on a gross basis.

Reinsurance assets comprise reinsurers’ share of insurance contract provisions and balances due

from reinsurance companies. The amounts recognised as reinsurers’ share of insurance contract

provisions are measured on a basis that is consistent with the measurement of the provisions

held in respect of the related insurance contracts. Balances due from reinsurance companies in

respect of claims paid are included within insurance receivables on the statement of financial

position.




FS8

Reinsurance assets are assessed for impairment at each reporting date. Such assets are deemed

impaired if there is objective evidence, as a result of an event that occurred after its initial

recognition, that the Company may not recover all amounts due and that the event has a reliably

measurable impact on the amounts that the Company will receive from the reinsurer.

Commission

Commission income comprises reinsurance and profit commissions received and/or receivable.

Reinsurance commission is recognised on a basis that is consistent with the recognition of the

costs incurred on the acquisition of underlying insurance contracts. Profit commission in

respect of reinsurance contracts is recognised on an accrual basis.

Liability adequacy test

The liability of the Company under insurance contracts is tested for adequacy by comparing the

expected future contractual cash flows with the carrying amount of the insurance contract

provisions for gross unexpired risks and gross insurance claims. Where an expected shortfall is

identified, additional provisions are made for unexpired risks or insurance claims and the

deficiency is recognised in profit or loss.

3.3 Equipment

Recognition and measurement

Equipment are stated at cost less accumulated depreciation and any recognised accumulated

impairment losses. All items of equipment are initially recorded at cost.

The initial cost of equipment comprises its purchase price, including any directly attributable

costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after the equipment has been put into operation, such as repairs and

maintenance and overhaul costs, are normally charged to the profit or loss in the period in which

the costs are incurred. In situations where it can be clearly demonstrated that the expenditure

has resulted in an increase in the future economic benefits expected to be obtained from the use

of an item of equipment beyond its originally assessed standard of performance, the expenditure

is capitalised as part of the equipment.

Depreciation

Depreciation is based on the cost of an asset less its residual value.

Depreciation is recognised as an expense in profit or loss on a straight-line basis over the

estimated useful lives.

The estimated useful lives for the current and comparative years are as follows:

Furniture and fittings - 5 years

Office equipment - 5 years

Renovation - over the lease period

Computer software - 3 years

Computer hardware - 3 years

The estimated useful lives, residual values and depreciation method are reviewed at each year

end, with the effect of any changes in estimate accounted for on a prospective basis.




FS9

The gain or loss arising on disposal or retirement of an item of equipment is determined as the

difference between the sales proceeds and the carrying amounts of the asset and is recognised in

profit or loss.

3.4 Intangible assets

Intangible assets acquired separately are reported at cost less accumulated amortisation and any

recognised accumulated impairment losses. Intangible assets with finite useful lives are

amortised on a straight-line basis over their estimated useful lives using the straight-line method

on the following bases:

IDIT software licence and development cost - 7 years

The estimated useful life and amortisation are reviewed at the end of each year end, with the

effect of any changes in estimate being accounted for on a prospective basis.

Intangible assets not yet available for use are carried at cost, less any recognised impairment

loss. Amortisation of these intangible assets commences when the assets are ready for their

intended use.

3.5 Financial instruments

Non-derivative financial assets

The Company initially recognises loans and receivables and deposits on the date that they are

originated. All other financial assets are recognised initially on the trade date, which is the date

that the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the cash flows from

the asset expire, or it transfers the rights to receive the contractual cash flows on the financial

asset in a transaction in which substantially all the risks and rewards of ownership of the

financial asset are transferred.

Financial assets and liabilities are offset and the net amount presented in the statement of

financial position when, and only when, the Company has a legal right to offset the amounts and

intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Company has the following non-derivative financial assets: loans and receivables.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not

quoted in an active market. Such assets are recognised initially at fair value plus any directly

attributable transaction costs. Subsequent to initial recognition, loans and receivables are

measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise of amount due from a related company, other receivables and

cash and cash equivalents.




FS10

Cash and cash equivalents comprise cash balances and short-term deposits with maturities of 6

months that are subject to an insignificant risk of changes in their fair value, and are used by the

Company in the management of its short-term commitments. For the purpose of the statement of

cash flows, pledged deposits are excluded whilst bank overdrafts that are repayable on demand

and that form an integral part of the Company’s cash management are included in cash and cash

equivalents.

Non-derivative financial liabilities

All financial liabilities are recognised initially on the trade date at which the Company becomes

a party to the contractual provisions of the instrument. The Company derecognises a financial

liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of

financial position when, and only when, the Company has a legal right to offset the amounts and

intends either to settle on a net basis or to realise the assets and settle the liability

simultaneously.

Such financial liabilities are recognised initially at fair value plus any directly attributable

transaction costs. Subsequent to initial recognition, these financial liabilities are measured at

amortised cost using the effective interest method.

Other financial liabilities comprise other payables and accruals and amount due to a related

company.

Insurance receivables and payables are not financial assets or liabilities under FRS39 Financial

Instruments.

Share capital

An equity instrument is any contract that endures a residual interest in the assets of the

Company after taking account its liabilities.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of

ordinary shares and share options are recognised as a deduction from equity, net of any tax

effects.

3.6 Impairment

Non-derivative financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective

evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a

loss event has occurred after the initial recognition of the asset, and that the loss event had a

negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a

debtor, restructuring of an amount due to the Company on terms that the Company would not

consider otherwise, indications that a debtor or issuer will enter bankruptcy, the disappearance

of an active market for a security.




FS11

The Company considers evidence of impairment for receivables at both a specific asset and

collective level. All individually significant receivables are assessed for specific impairment.

All individually significant receivables found not to be specifically impaired are then

collectively assessed for any impairment that has been incurred but not yet identified.

Receivables that are not individually significant are collectively assessed for impairment by

grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Company uses historical trends of the probability of

default, timing of recoveries and the amount of loss incurred, adjusted for management’s

judgement as to whether current economic and credit conditions are such that the actual losses

are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the

difference between its carrying amount and the present value of the estimated future cash flows

discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss

and reflected in an allowance account against receivables. Interest on the impaired asset

continues to be recognised. When a subsequent event causes the amount of impairment loss to

decrease, the decrease in impairment loss is reversed through profit or loss.

Non-financial assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date

to determine whether there is any indication of impairment. If any such indication exists, then

the assets’ recoverable amounts are estimated. An impairment loss is recognised if the carrying

amount of an asset or its cash-generating unit (“CGU”) exceeds its estimated recoverable

amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value

less costs to sell. In assessing value in use, the estimated future cash flows are discounted to

their present value using a pre-tax discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset or CGU. For the purpose of impairment

testing, assets that cannot be tested individually are grouped together into the smallest group of

assets that generates cash inflows from continuing use that are largely independent of the cash

inflows of other assets or CGU.

Impairment losses are recognised in profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any

indications that the loss has decreased or no longer exists. An impairment loss is reversed if

there has been a change in the estimates used to determine the recoverable amount. An

impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed

the carrying amount that would have been determined, net of depreciation or amortisation, if no

impairment loss had been recognised.




FS12

3.7 Employee benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed

contributions into a separate entity and will have no legal or constructive obligation to pay

further amounts. Obligations for contributions to defined contribution pension plans are

recognised as an employee benefit expense in profit or loss in the periods during which services

are rendered by employees.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed as the related service is provided. A liability is recognised for the amount expected to

be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal

or constructive obligation to pay this amount as a result of past service provided by the

employee and the obligation can be estimated reliably.

Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. A

provision is made for the estimated liability for annual leave as a result of services rendered by

employees up to the end of the reporting period.

3.8 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as

a result of a past event, it is probable that the Company will be required to settle the obligation,

and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle

the present obligation at the end of the reporting period, taking into account the risks and

uncertainties surrounding the obligation. Where a provision is measured using the cash flows

estimated to settle the present obligation, its carrying amount is the present value of those cash

flows.

When some or all of the economic benefits required to settle a provision are expected to be

recovered from a third party, the receivable is recognised as an asset if it is virtually certain that

reimbursement will be received and the amount of the receivable can be measured reliably.

3.9 Revenue

Earned premiums from insurance contracts

The accounting policy for the recognition of gross earned premium revenue from insurance

contracts is disclosed in note 3.2.

Commission income

The accounting policy for the recognition of commission income from insurance contracts is

disclosed in note 3.2.




FS13

Investment income

Investment income comprises interest income on bank deposits. Interest income is recognised

and accounted for on an accrual basis.

3.10 Income tax expense

Income tax expense comprises tax currently payable and deferred tax. Income tax expense is

recognised in profit or loss except to the extent that it relates to items recognised directly in

equity, in which case it is recognised in equity. Taxable profit differs from profit as reported in

the statement of profit or loss and other comprehensive income because it excludes items of

income or expense that are taxable or deductible in other years and it further excludes items that

are not taxable or tax deductible.

Current tax is the expected tax payable on the taxable income or loss for the year, using tax rates

enacted or substantively enacted at the reporting date, and any adjustment to tax payable in

respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation

purposes. Deferred tax is not recognised for the temporary differences arising from the initial

recognition of assets or liabilities in a transaction that is not a business combination and that

affects neither accounting nor taxable profit. Deferred tax is measured at the tax rates that are

expected to be applied to the temporary differences when they reverse, based on the laws that

have been enacted or substantively enacted by the reporting date. Deferred tax assets and

liabilities are offset if there is a legally enforceable right to offset current tax liabilities and

assets and they relate to income taxes levied by the same tax authority on the same taxable

entity.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary

differences, to the extent that it is probable that future taxable profits will be available against

which they can be utilised. Deferred tax assets are reviewed at each reporting date and are

reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the amount of current and deferred tax, the Company takes into account the

impact of uncertain tax positions and whether additional taxes and interest may be due. The

Company believes that its accruals for tax liabilities are adequate for all open tax years based on

its assessment of many factors, including interpretations of tax law and prior experience. This

assessment relies on estimates and assumptions and may involve a series of judgements about

future events. New information may become available that causes the Company to change its

judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will

impact tax expense in the period that such a determination is made.

3.11 Operating leases When the Company has the use of the assets under operating leases, payments made under the leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease payments made. Contingent rentals arising under operating leases are charged to profit or loss in the accounting period in which they are incurred.




FS14

3.12 New standards and interpretations not adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these financial statements. The Company is currently assessing the potential impact of adopting these new standards and interpretations, on the financial statements of the Company. The new standards include FRS 109 Financial Instruments which is mandatory for adoption by the Company on 1 January 2018. FRS 109 replaces most of the existing guidance in FRS 39 Financial Instruments: Recognition and Measurement. It includes revised guidance on classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. As FRS 109, when effective, will change the existing accounting standards and guidance applied by the Company in accounting for financial instruments, the standard is expected to be relevant to the Company. The Company does not plan to adopt the standard early.

4 Critical accounting estimates and judgements in applying policies

Management is required to make judgements, estimates and assumptions about the carrying

amounts of assets and liabilities that are not readily apparent from other sources. The estimates

and associated assumptions are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the year in which the estimate is revised if the revision

affects only that period or in the period of the revision and future periods if the revision affects

both current and future periods.

The key assumptions concerning the future, and other key sources of estimation uncertainty at

the end of the reporting period, that have a significant risk of causing a material adjustment to

the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Provisions for unexpired risks and insurance claims

For the provisions for unexpired risks and insurance claims, management has relied

significantly on the actuarial valuation performed by an approved actuary in accordance with

local insurance regulatory requirements.

The description of the principal estimates and assumptions underlying the determination of

provisions for unexpired risks and insurance claims and the impact of changes in these estimates

and assumptions are discussed in the sensitivity analysis below. The sensitivity analysis has

been performed on a gross basis before accounting for reinsurance and on a net basis after

accounting for reinsurance.




FS15

Process used to determine the assumptions for measuring insurance contracts

The assumptions used in the estimation of insurance assets and liabilities are intended to result

in provisions which are sufficient to cover any liabilities arising out of insurance contracts so far

as can reasonably be foreseen.

However, given the uncertainty in establishing a provision for outstanding claims, it is likely

that the final outcome will prove to be different from the original liability established.

Provision is made at the end of the reporting period for the expected ultimate cost of settlement

of all claims incurred in respect of events up to that date, whether reported or not, together with

related claims handling expenses, less amount already paid.

The source of data used as inputs for the assumptions are typically internal to the Company,

using detailed studies that are carried out at least annually. The assumptions are checked to

ensure that they are consistent with observable market information or other published

information.

The Company pays particular attention to current trends. Where in early years, there is

insufficient information to make a reliable estimate of claims development, prudent assumptions

are used.

The estimation of incurred but not reported ("IBNR") claims is generally subject to a greater

degree of uncertainty than the estimates of claims already notified, where more information is

available. IBNR claims may often not be apparent to the Company until many years after the

occurrence of the event given rise to the claim.

Each notified claim is assessed on a separate case-by-case basis with due regard to the claim

circumstances, information available from loss adjusters and historical evidence of the size of

similar claims. Case estimates are reviewed regularly and are updated as and when new

information arises.

The provision estimation difficulties differ by class of business due to a number of reasons,

including but not limited to:

• Differences in the terms and conditions of the insurance contracts;

• Differences in the complexity of claims;

• The severity of individual claims;

• Difference in the period between the occurrence and reporting of claims.

For most classes of business, claims are typically reported reasonably soon after the claim

event, and hence tend to display lower levels of variability.

The cost of outstanding claims and the IBNR provisions are estimated using a range of

statistical methods. Such methods extrapolate the development of paid and incurred claims for

each accident quarter based upon observed development of earlier quarters and expected loss

ratios with and/or without Bornhuetter-Ferguson adjustment. The final selections are based

upon a weighted average across the results of each methodology depending upon the

reasonableness of the result that each methodology produces and the maturity of the accident

quarter.




FS16

5 Insurance and financial risk management

Risk management is integral to the whole business of the Company. Management continually

monitors the Company’s risk management process to ensure that an appropriate balance

between risk and control is achieved. They are guided by risk management policies and

guidelines set by the Board as part of its overall business strategies and philosophy. To facilitate

the task of monitoring these exposures, established processes are in force. Regular reviews by

management are also conducted to ensure effectiveness and compliance with established

policies and guidelines.

5.1 Risk management objectives and policies for mitigating insurance risk

In the normal course of its business activities, the Company is exposed to a variety of insurance

risks. These include underwriting and concentration risks. The management of these risks is

discussed below:

Underwriting risk

The underwriting strategy of the Company is to ensure that insurance risks are well-managed, in

order to enhance the long-term financial performance of the business.

The Company adopts the following measures to manage the general insurance risks:

• to select risk and control exposure in accordance to established guidelines;

• to pay claims promptly and to control claim expenses or fraud;

• to ensure optimum pricing for risks and adequate valuation of insurance liabilities; and

• to have reinsurance protection in place for delegation of insurance risks.

Reinsurance strategy

The Company reinsures a portion of the risks it underwrites in order to control its exposure to

losses and protect its capital resources.

The Company purchases a combination of proportionate and non-proportionate treaties to

reduce its net exposure for any single event.

Ceded insurances contain credit risks, and such reinsurance recoverable is reported after

impairment provisions as a result of occurred loss event. The Company monitors the financial

conditions of reinsurers on an on-going basis and reviews its reinsurance arrangement

periodically.

As the Company is required to monitor its solvency margin and capital adequacy ratio under the

Risk-Based Capital Framework introduced by the Monetary Authority of Singapore (the

“MAS”), the Company deals mainly with reinsurers approved by the immediate holding

company with good credit ratings. Prior approval is required to be sought from the Chief

Executive and management for any deviations.

Asset-liability matching

Part of management’s strategies in the management of risks is to match the timing of cash flows

of its assets and liabilities.

The Company’s significant portion of its assets can be easily liquidated to pay claims.




FS17

5.2 Terms and conditions of insurance contracts

Product features

The Company underwrites a range of general insurance products, with motor insurance policies

making up a significant portion of its general insurance portfolio. Other classes of insurance

business includes personal accident, travel and home content. The Company has ceased

underwriting of personal accident and home content business.

Motor insurance policies cover private cars and motorcycles only. The motor insurance

coverage is for losses or damages to the insured’s vehicle, death or injuries to third parties,

damages to third party property and personal accident.

Travel policies cover medical expenses, fatal accident or disability, emergency medical

evacuation, personal belongings, travel cancellation, travel delay, changes in travel plan and

sports.

In general, most of the general insurance contracts are on an annual coverage and annual

premium basis, with the exception of travel insurance which is a short-term policy as it covers

only the travel period.

Managing of risks

The key risks associated with general insurance are underwriting risk, competitive risk and

claims experience risk. The Company may also be exposed to risk of dishonest actions by

policyholders.

Underwriting risk is the risk that the Company does not charge adequate premiums appropriate

for the different risks it insures. The risk on any policy will vary according to factors such as

location, safety measures in place, age of property, vehicle etc.

Insurance risk is managed primarily through estimated pricing, product design, risk selection,

appropriate investment strategy, rating and reinsurance. The Company therefore monitors and

reacts to changes in the general economic and commercial environment in which it operates,

especially in Singapore where the Company underwrites all of its insurance risks.

5.3 Concentrations of insurance risk

A key aspect of the insurance risk faced by the Company is the extent of concentration of

insurance risk which may exist where a particular event or series of events could impact

significantly upon the Company’s liabilities. Such concentrations may arise from a single

insurance contract or through a small number of related contracts, and relate to circumstances

where significant liabilities could arise. An important aspect of the concentration of insurance

risk is that it may arise from the accumulation of risks within a number of individual classes of

business or contracts tranche.

Concentrations of risk can arise in both high-severity, low frequency events, such as natural

disasters and in situations where underwriting is biased towards a particular group, such as a

particular geographic or demographic trend.




FS18

The Company’s key methods in managing these risks are as follows:

Firstly, the risk is managed through appropriate underwriting procedures. Underwriters are not

permitted to underwrite risks unless the expected profits commensurate with the risks assumed.

Secondly, the risk is managed through the use of reinsurance. The Company purchases covers

with reputable reinsurers that provide protection on the insurance business written by the

Company above a certain net retention of risk. The costs and benefits associated with the

reinsurance programmes are being reviewed periodically.

The following tables disclose the concentration of gross and net written premiums in relation to

the type of insurance risk accepted by the Company:

2015 2014

Gross written

premium

Net written

premium

Gross written

premium

Net written

premium

$ $ $ $

Line of business:

- Motor 25,021,355 13,901,872 28,021,598 11,117,176

- Personal accident (132) (5,596) 42,221 8,204

- Home content (312) (6,280) 41,976 6,422

- Travel 1,942,786 1,183,258 1,573,544 647,359

26,963,697 15,073,254 29,679,339 11,779,161

The Company sets out the total aggregate exposure that it is prepared to accept in relation to

concentration of risks based on the guidelines given by the MAS under the Risk-Based Capital

Framework. It monitors these exposures both at the time of underwriting a risk, and on a

quarterly basis by reviewing reports which show the key aggregations of risks to which the

Company is exposed.

Sensitivity analysis

The purpose of the sensitivity analysis is to assess the relative importance of key assumptions

used in the actuarial valuation of outstanding claim and premium liabilities as at the reporting

date. As the Company only launched its business starting July 2010 and hence insufficient past

or historic data is available, it is at this point in time, more sensitive to changes in loss ratios.

In this context, the sensitivity analysis is performed on the claims liabilities net of reinsurance

recoveries and premium liabilities, based on changes in assumptions that may affect the level of

liabilities. One particular reliance is that the net sensitivity results assume that all reinsurance

recoveries are receivable in full.

The assumptions considered in the sensitivity analysis are the management expenses, claims

handling expenses (“CHE”), provision for adverse deviation (“PAD”), and Expected Ultimate

Loss Ratio. In practice, a combination of adverse and favourable changes could occur. The

sensitivity results are not intended to capture all possible outcomes. Significantly more adverse

or favourable results are possible.




FS19

Assumption

Change in

assumption

(Decrease)/Increase in profit loss

from policy liabilities

2015 2014

$ $

Ultimate loss ratio + 100 basis

points (182,969) (30,081)

Ultimate loss ratio - 100 basis points 182,969 30,081

Indirect claims handling expenses + 25% points (230,586) (197,161)

Indirect claims handling expenses - 25% points 230,586 197,161

Provision for adverse deviation + 100% points (1,148,308) (914,324)

Provision for adverse deviation - 50% points 574,154 457,162

5.4 Claims development table

The following tables show the estimates of cumulative incurred claims, including both claims

notified and IBNR for each successive accident year at each reporting date, together with

cumulative payments to date.

Gross insurance contract outstanding claims provision:

2011 2012 2013 2014 2015 Total

$ $ $ $ $ $

Estimate of cumulative claims

At the end of the accident year 9,133,340 12,991,423 16,398,532 19,896,458 22,899,842

One year later 8,015,800 11,575,231 16,759,346 19,578,771

Two years later 7,900,120 11,252,244 16,907,519

Three years later 7,816,054 11,202,211

Four years later 7,771,334

Estimate of cumulative claims 7,771,334 11,202,211 16,907,519 19,578,771 22,899,842 78,359,677

Less: Cumulative payments

At the end of the accident year (3,701,083) (6,161,868) (8,118,856) (9,180,508) (10,551,166)

One year later (5,709,227) (9,433,981) (12,643,933) (14,878,877)

Two years later (6,138,844) (10,039,354) (13,847,223)

Three years later (6,503,871) (10,354,182)

Four years later (7,173,873)

Cumulative payments (7,173,873) (10,354,182) (13,847,223) (14,878,877) (10,551,166) (56,805,321)

Gross outstanding claim liabilities 597,461 848,029 3,060,296 4,699,894 12,348,676 21,554,356

Allocated loss adjustment expenses 879,806

Provision for accident years prior to 2011 57,354

Central estimate of outstanding claims 22,491,516

Provision for adverse deviation 2,988,558

Gross provision for insurance claims 25,480,074




FS20

Net insurance contract outstanding claims provision:

2011 2012 2013 2014 2015 Total

$ $ $ $ $ $

Estimate of cumulative claims

At the end of the accident year 5,118,226 7,958,729 8,968,809 7,910,425 12,726,660

One year later 4,809,480 6,880,663 9,983,272 7,784,892

Two years later 4,740,072 6,751,347 10,101,128

Three years later 4,689,632 6,688,886

Four years later 4,640,324

Estimate of cumulative claims 4,640,324 6,688,886 10,101,128 7,784,892 12,726,660 41,941,890

Less: Cumulative payments

At the end of the accident year (2,220,650) (3,825,878) (4,015,547) (3,657,995) (6,297,642)

One year later (3,387,954) (5,582,967) (7,532,369) (5,904,934)

Two years later (3,683,306) (6,023,612) (8,264,950)

Three years later (3,902,323) (6,180,069)

Four years later (4,281,848)

Cumulative payments (4,281,848) (6,180,069) (8,264,950) (5,904,934) (6,297,642) (30,929,443)

Net outstanding claim liabilities 358,477 508,817 1,836,178 1,879,957 6,429,018 11,012,447

Allocated loss adjustment expenses 879,806

Provision for accident years prior to 2011 28,000

Central estimate of outstanding claims 11,920,253

Provision for adverse deviation 1,589,362

Net provision for insurance claims 13,509,615

5.5 Financial risk and capital risk management

The Company has documented financial risk management policies. These policies set out the

Company’s overall business strategies and its risk management philosophy. The Company’s

overall financial risk management programme seeks to minimise potential adverse effects of

financial performance of the Company. Management provides written principles for overall

financial risk management and written policies covering specific areas, such as credit risk,

liquidity risk and market risk (including interest rate risk and foreign currency risk). Such

written policies are reviewed annually by the management and periodic reviews are undertaken

to ensure that the Company’s policy guidelines are complied with.

The Company started underwriting in July 2010 and is exposed to risks associated with these

operations. There has been no change in the Company’s exposure to its financial risks or the

manner in which it manages and measures the risks. Market risk exposures are measured using

sensitivity analysis indicated below.

(i) Credit risk

Credit risk is the risk of financial loss from the failure of a customer or counterparty to settle its

financial and contractual obligations to the Company, as and when these obligations fall due.

The Company has adopted a policy of only dealing with creditworthy counterparties and

obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial

loss from defaults. The Company’s exposure and the credit rating to its counterparties are

continuously monitored and the aggregate value of transactions concluded is spread amongst

approved counterparties.




FS21

The carrying amount of reinsurers' share of insurance contract provisions, insurance and other

receivables, and cash and cash equivalents represent the Company’s maximum exposure to

credit risk.

The Company has exposure to concentration of credit risk arising from one specific reinsurer.

The underwriting department is responsible for setting guidelines about the quality of reinsurers

used.

At the end of the reporting date, there is no other significant concentration of credit risk and

exposures are well spread. The Company’s exposure to credit risk relating to its financial and

insurance assets are summarised below:

Neither past due nor

impaired

Grade*

(A to AAA) Not rated

Past due but

not impaired Total

$ $ $ $

2015

Cash and cash equivalents 39,698,853 2,900 – 39,701,753

Fixed deposits 4,016,355 – – 4,016,355

Receivables arising from insurance contracts – 4,501,634 – 4,501,634

Receivables arising from reinsurance

contracts 8,728 – – 8,728

Accrued investment income 63,441 – – 63,441

Deposits – 169,835 – 169,835

Unearned premiums on reinsurance ceded 257,831 – – 257,831

Claims recoverable from reinsurers 11,970,459 – – 11,970,459

Other receivables – 46,814 – 46,814

56,015,667 4,721,183 – 60,736,850

2014

Cash and cash equivalents 40,333,084 2,900 – 40,335,984

Receivables arising from insurance contracts – 4,627,228 – 4,627,228

Accrued investment income 4,637 – – 4,637

Deposits – 153,835 – 153,835

Unearned premiums on reinsurance ceded 365,203 – – 365,203

Claims recoverable from reinsurers 10,435,929 – – 10,435,929

Other receivables – 53,512 – 53,512

51,138,853 4,837,475 – 55,976,328

* Based on public ratings assigned by external rating agencies i.e.: Standard & Poor, Moody’s and

A.M. Best.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations

when they become due.

An important aspect of the Company’s management of financial and insurance assets and

liabilities is to ensure that cash is available to settle liabilities as they fall due. The Company

maintains sufficient cash and liquid deposits, and internally generated cash flows to finance its

activities. In normal circumstances, the majority of claims are settled with the cash at bank

balances and bank deposits available.




FS22

All financial and insurance liabilities in 2014 and 2015 are repayable or due within one year

from the end of the reporting date.

(iii) Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange

rates will affect the Company’s income or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within

acceptable parameters.

Interest rate risk

Interest rate risk is the potential changes in the value of assets and liabilities as a result of

movements in interest rates in the financial markets in which the Company operates.

The Company’s exposure to changes in interest rates relate primarily to interest earning

financial assets. Interest rate risk is managed by the Company on an ongoing basis with the

primary objective limiting the extent to which net interest expense could be affected by an

adverse movement in interest rates. However, the Company does not hedge against such

exposures.

In respect of interest-earning financial assets, the following table indicates their weighted

average effective interest rates per annum at the end of the reporting period drawn up based on

the undiscounted contractual maturities of the financial assets that will be earned on those assets

except where the Company anticipates that the cash flow will occur in a different period.

The adjustment column represents the possible future cash flows attributable to the instrument

included on the maturity analysis which are not included on the carrying value amount of

financial assets on the statement of financial position.

Weighted

average

effective

interest rate

On demand

or within

1 year Adjustment Total

% $ $ $

2015

Current account* 0.002% 9,173,643 (207) 9,173,436

Fixed rate bank deposits 0.772% 34,686,364 (144,592) 34,541,772

43,860,007 (144,799) 43,715,208

2014

Current account* 0.022% 7,607,053 (1,670) 7,605,383

Fixed rate bank deposits 0.265% 32,782,515 (54,814) 32,727,701

40,389,568 (56,484) 40,333,084

* Excludes cash in hand of $2,900 (2014: $2,900), which is non-interest bearing.

Sensitivity analysis

In managing its interest rate risk, the Company aims to reduce the impact of short term

fluctuations on its earnings to the extent possible. Over the longer term, however, any prolonged

adverse changes in interest rates would have an impact on earnings.




FS23

The analysis below is performed for reasonably possible movements in key variables with all

other variables constant.

To test the sensitivity to changes in interest rates, the level of change is assumed from -50 bps to

+50 bps. It is possible that the final outcome will be different from the estimation. The table

below gives an indication the impact on loss before tax:

Increase/(Decrease) in profit or loss

Change in variable 2015 2014

$ $

Interest rate + 50 bps 218,576 201,665

Interest rate – 50 bps (218,576) (201,665)

Foreign currency risk

Foreign currency risk is the risk incurred by the Company on assets, liabilities, income and

expense that are denominated in a currency other than the Company’s functional currency

unless the funding and the exposure in the denominated currency is matched.

The Company transacts business mainly in Singapore dollars, which is the Company’s

functional currency and therefore has minimal exposure to foreign exchange risk.

The Company does not expect a material impact on the Company’s profit or loss arising from

the effects of reasonable possible changes to foreign exchange rates at the reporting date.

(iv) Accounting classifications and fair values

The carrying amounts of financial assets and financial liabilities with a maturity of less than one

year are assumed to approximate their fair values due to their short periods to maturity.

The fair values of financial assets and liabilities, together with the carrying amounts shown in

the statement of financial position, are as follows:

Note

Loans and

receivables

Other

financial

liabilities

Total

carrying

amount Fair value

$ $ $ $

31 December 2015

Cash and cash equivalents 10 39,701,753 – 39,701,753 39,701,753

Fixed deposits 9 4,016,355 – 4,016,355 4,016,355

Other receivables 8 280,090 – 280,090 280,090

43,998,198 – 43,998,198 43,998,198

Amounts due to a related company 15 – 3,632,697 3,632,697 3,632,697

Other payables and accruals 16 – 1,817,744 1,817,744 1,817,744

– 5,450,441 5,450,441 5,450,441




FS24

Note

Loans and

receivables

Other

financial

liabilities

Total

carrying

amount Fair value

$ $ $ $

31 December 2014

Cash and cash equivalents 10 40,335,984 – 40,335,984 40,335,984

Amount due from a related

company 7 1,650,969 – 1,650,969 1,650,969

Other receivables 8 211,984 – 211,984 211,984

42,198,937 – 42,198,937 42,198,937

Amounts due to a related company 15 – 160,158 160,158 160,158

Other payables and accruals 16 – 2,326,153 2,326,153 2,326,153

– 2,486,311 2,486,311 2,486,311

5.6 Capital and regulatory risk management

The Company’s policy is to maintain a suitable capital base so as to support its underwriting

strategy. The Company is also required to maintain a minimum amount of capital as prescribed

under the Singapore Insurance Act (Chapter 142) and relevant regulations. There were no

changes in the Company’s approach to capital management during the year. The Company has

complied with the abovementioned regulatory requirements.

6 Insurance receivables 2015 2014

$ $

Receivables arising from insurance contracts:

- Instalment premiums 4,373,081 4,535,730

- Other receivables 128,553 91,498

Receivables arising from reinsurance contracts 8,728 –

4,510,362 4,627,228

All receivables arising from insurance and reinsurance contracts as at reporting date are neither

past due nor impaired. Based on business nature of the collection of receivables, the Company

believes that no impairment allowance is necessary as at the reporting date.

7 Amount due from a related company 2015 2014

$ $

Amount due from a related company:

- Non-trade – 1,650,969

Amount due from a related company is unsecured, interest-free and repayable on demand.




FS25

8 Other receivables 2015 2014

$ $

Accrued interest receivables:

- Fixed deposits and interest on cash at bank 63,441 4,637

Deposits:

- Rental 107,295 93,695

- Others 62,540 60,140

Other receivables 46,814 53,512

280,090 211,984

All receivables arising from insurance and reinsurance contracts as at reporting date are neither

past due nor impaired. Based on business nature of the collection of receivables, the Company

believes that no impairment allowance is necessary as at the reporting date.

9 Fixed deposits 2015 2014

$ $

Fixed deposits 4,016,355 –

The fixed deposits with financial institutions mature within 12 months (2014: nil) from the

financial year and with the option to roll over.

10 Cash and cash equivalents 2015 2014

$ $

Cash at banks and in hand 9,176,336 7,608,283

Short-term bank deposits 30,525,417 32,727,701

39,701,753 40,335,984

The short-term bank deposits with financial institutions mature within 6 months (2014: 6

months) from the financial year and with the option to roll over.

11 Insurance contract provisions 2015 2014

$ $

Gross

Provision for unexpired risks 13,182,963 14,378,608

Provision for insurance claims 25,480,074 20,660,293

38,663,037 35,038,901

Reinsurance

Unearned premiums on reinsurance ceded (257,831) (365,203)

Claims recoverable from reinsurers (11,970,459) (10,435,929)

(12,228,290) (10,801,132)




FS26

2015 2014

$ $

Net

Provision for unexpired risks 12,925,132 14,013,405

Provision for insurance claims 13,509,615 10,224,364

26,434,747 24,237,769

All insurance contract provisions are current (2014: current).

(a) Analysis of movements in provision for unexpired risks

‹-------------- 2015 --------------› ‹-------------- 2014 --------------›

Gross Reinsurance Net Gross Reinsurance Net

$ $ $ $ $ $

At 1 January 14,378,608 (365,203) 14,013,405 13,732,213 (296,514) 13,435,699

Premiums written 26,963,697 (11,890,443) 15,073,254 29,679,339 (17,900,178) 11,779,161

Premiums earned (28,159,342) 11,997,815 (16,161,527) (29,032,944) 17,831,489 (11,201,455)

At 31 December 13,182,963 (257,831) 12,925,132 14,378,608 (365,203) 14,013,405

(b) Analysis of movements in provision for insurance claims

‹---------------- 2015 ----------------› ‹---------------- 2014 ----------------›

Gross Reinsurance Net Gross Reinsurance Net

$ $ $ $ $ $

At 1 January 20,660,293 (10,435,929) 10,224,364 14,093,371 (5,417,108) 8,676,263

Claims paid (18,437,655) 8,624,510 (9,813,145) (14,551,657) 7,691,717 (6,859,940)

Claims incurred 23,257,436 (10,159,040) 13,098,396 21,118,579 (12,710,538) 8,408,041

At 31 December 25,480,074 (11,970,459) 13,509,615 20,660,293 (10,435,929) 10,224,364

12 Intangible asset Software

$

Cost

At 1 January 2014 900,912

Additions –

At 31 December 2014 900,912

Additions –

At 31 December 2015 900,912

Accumulated amortisation

At 1 January 2014 461,181

Amortisation 128,702

At 31 December 2014 589,883

Amortisation 128,702

At 31 December 2015 718,585

Carrying amounts

At 1 January 2014 439,731

At 31 December 2014 311,029

At 31 December 2015 182,327




FS27

13 Equipment

Fixture and

fittings

Office

equipment Renovation

Computer

software

Computer

hardware Total

$ $ $ $ $ $

Cost

At 1 January 2014 73,571 29,190 276,518 31,731 180,340 591,350

Additions 671 560 – – 35,131 36,362

Disposals – – (2,100) – (6,398) (8,498)

At 31 December 2014 74,242 29,750 274,418 31,731 209,073 619,214

Additions 18,271 1,550 – – 51,484 71,305

Disposals (29,840) – (182,118) – (30,280) (242,238)

At 31 December 2015 62,673 31,300 92,300 31,731 230,277 448,281

Accumulated depreciation

At 1 January 2014 9,422 5,058 14,998 31,731 138,781 199,990

Depreciation 26,783 6,371 67,565 – 28,531 129,250

Disposals – – – – (6,398) (6,398)

At 31 December 2014 36,205 11,429 82,563 31,731 160,914 322,842

Depreciation 16,545 5,671 69,642 – 32,810 124,668

Disposals (12,931) – (100,614) – (30,280) (143,825)

At 31 December 2015 39,819 17,100 51,591 31,731 163,444 303,685

Carrying amounts

At 1 January 2014 64,149 24,132 261,520 – 41,559 391,360

At 31 December 2014 38,037 18,321 191,855 – 48,159 296,372

At 31 December 2015 22,854 14,200 40,709 – 66,833 144,596




FS28

14 Insurance payables 2015 2014

$ $

Payables arising from insurance contracts 1,193,354 1,616,929

Payables arising from reinsurance contracts 379,139 2,697,345

1,572,493 4,314,274

15 Amount due to a related company 2015 2014

$ $

Amount due to a related company:

- Trade 3,632,697 160,158

16 Other payables and accruals 2015 2014

$ $

Other payables 346,737 1,230,019

Accrued operating expenses 808,152 884,212

GST payable (net) 619,617 174,464

Provision for unutilised staff annual leave 43,238 37,458

1,817,744 2,326,153

17 Share capital 2015 2014

Number of

shares $

Number of

shares $

At 1 January 36,000,001 36,000,001 36,000,001 36,000,001

Issued and paid during the year 3,500,000 3,500,000 – –

At 31 December 39,500,001 39,500,001 36,000,001 36,000,001

The holders of ordinary shares are entitled to receive dividends as declared from time to time

and are entitled to one vote per share at meetings of the Company. All ordinary shares rank

equally with regards to the Company’s residual assets.

On 16 December 2015, 3,500,000 ordinary shares were issued for a cash consideration of

S$3,500,000 to its immediate holding company.

Capital management policy

The Company’s policy is to maintain a suitable capital base so as to support its underwriting

strategy and capital adequacy needs. The Company defines “capital” as including all

components of equity.




FS29

The Company is also required to maintain a minimum amount of capital as prescribed under the

Singapore Insurance Act (Chapter 142) and relevant regulations. The Company was in

compliance with all externally imposed capital requirements in 2015 and 2014.

There were no changes in the Company’s approach to capital management during the year.

18 Investment income 2015 2014

$ $

Interest income from bank deposits 266,865 88,248

19 Loss for the year

Loss for the year is arrived at after charging:

2015 2014

$ $

Depreciation and amortisation expense:

- Depreciation of equipment 124,668 129,250

- Amortisation of intangible asset 128,702 128,702

253,370 257,952

Staff costs:

- Defined contribution plans 320,696 279,087

- Staff costs and other employee benefit expenses 2,941,487 2,274,379

3,262,183 2,553,466

20 Other operating expenses Note 2015 2014

$ $

Service fees charges from a related company 21 6,336,939 2,960,753

Advertising and promotion – 589,885

Bank and related charges 352,166 451,563

Directors’ fees 10,482 3,250

Foreign exchange loss (net) 337 7,623

License and other fees 238,520 329,767

Professional fees 609,777 368,376

Rental of office premises 374,778 406,010

Others 493,936 492,175

8,416,935 5,609,402




FS30

21 Holding company and related company transactions

During the year, apart from the balances and transactions disclosed elsewhere in these financial

statements, the Company had the following significant transactions with its related companies:

2015 2014

$ $

Service fee expenses paid/payable to a related

company 6,336,939 2,960,753

Service fee income received/receivable from a related

company 148,505 –

Key management personnel

Key management personnel of the Company are those persons having the authority and

responsibility for planning, directing and controlling the activities of the entity. The directors,

including the principal officer and certain executive officers are considered as key management

personnel of the Company.

The remuneration of director and key management personnel during the year was $404,202

(2014: $415,711).

22 Income tax 2015 2014

$ $

Current tax expense

Current year – –

Reconciliation of effective tax rate


Income tax using domestic statutory tax rate of 17%

(2014: 17%)

(767,960) (78,263)

Non-deductible expenses 114,835 55,357

Deferred tax assets not recognised 653,125 22,906

– –

As at the reporting date, the Company has tax losses of $19,547,539 (2014: $15,705,628) that

are available for offset against future profits, for which no deferred tax asset is recognised due

to uncertainty of its recoverability. The use of these tax losses is subject to the agreement and

compliance with certain provisions of the Singapore tax legislation and the Inland Revenue

Authority of Singapore.




FS31

23 Operating leases

Operating lease payments represent rentals payable by the Company for its office premises.

Leases are negotiated for a term of three years and rentals are fixed for the three year tenure.

During the year, $434,592 (2014: $406,010) was expensed in relation to rent for those office

premises.

As at the reporting date, the Company has outstanding commitments under non-cancellable

operating leases, which fall due as follows:

2015 2014

$ $

Within one year 456,378 374,778

Over one but within five years 280,340 593,399

736,718 968,177

annual report year ended 31 december 2015 - directasia · insurance receivables 6 4,510,362...

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