ANNUAL REPORT 2010 | 52MESSAGE FROMCHAIRMAN Last year 2010, Cambodia Economy recovered from the negative impact in 2009 and come back to positive rate with GDP growth of 6.7%. This growth was boosted by the export of Garment industry and growth in other sectors. Last year, it saw that Garment export increased by 24%; Agricultural sector increased by 5.3%; Tourism Sector increased by 16% and Investment also increased by 16%. Along with Economic growth in the year 2010, Insurance Industry was seen growing as well by attaining growth rate of 24% and generated Gross Premium of nearly 25 million USD. This was thanked to the Government which lay out the right strategy, coordination policies, regulatory and supervisory measure in respond to Global financial crisis in 2008 so that it could ensure the sustainable economic growth of the country. Furthermore, Government has diversified the economy and strengthening its core competiveness for future economic development. Hence, it is projected to attain economic growth of 6% and 6.5% for the year 2011 and 2012 respectively. Cambodia Re in 2010 performed very well by achieving gross premium growth of 17% comparing to the year 2009 and the bottom line increase by 6%. Moreover, Cambodia Re played its importance role in insurance industry in respond to the market which is badly impacted by some loss by providing technical training to enhance risk management awareness of underwriter and surveyor of local insurance companies. Even more, the company will continue to fulfill its various activities of National Reinsurance Company in order to develop insurance industry in Cambodia. Taking this opportunity, I am grateful to thank the Royal Government of Cambodia and the Ministry of Economy and Finance, especially Financial Industry Department who have been contributing to ensure macroeconomic stability and encourage for more foreign direct investment. This would bring a visualized opportunity for the growth of insurance industry and industrial development. I am also thankful for the efforts of the company’s management and staff who have been putting new ideas and innovation into practice in order to gain core competency in business operational framework. Dr. Hang Chuon Naron
ANNUAL REPORT 2010 | 6 3 MESSAGE FROM MANAGING DIRECTOR The insurance industry for the year 2010 bound back to it track of growth after being hit of the downturn in 2009 along together with the economic growth of the country. For the year 2010 operation, it was seen insurance industry increased by 24% comparing to the year 2009 with Gross Premium reached nearly 25 million USD, in which Insurance related to Engineering was dramatically increase of around 206%. However, at the end of last year, the industry was hit by flood due to the heavy rain in the capital and some provinces. Also it was noticed that Garment Factory was burn down by Fire 3 years in arrow from 2008 which badly impact the insurance and reinsurance market. For Cambodia Re’s side, its performance for the year 2010 still keep growing by achieving Gross Premium growth rate of 17% comparing to the previous year performance. The company’s Gross Premium reached to USD 2,9 million, in which Motor Business account 32.57% following by Fire Insurance 31.46%, Miscellaneous 17.97%, Medical and Health 11.86% and Engineering 4.66% and the last one Marine Cargo 1.45%. In this circumstance, Cambodia Re financial result showed that Net Profit for the year end was amounted to 508,835 USD increased by 6.2% comparing to the year 2009, and Total Asset reached to 10,844,484 USD. Finally, I would like to take this occasion to express my sincerely thanks to the Board of Director of Cambodia Re and employees who have make hard effort to bring the company to this end. Also I would like express my gratitude to the Ministry of Economic of Finance, particularly Financial Industry Department and to all insurance companies for their kind cooperation during the year operation of 2010. Dr. Chhay Rattanak Managing Director
ANNUAL REPORT 2010 | 74COMPANYROLE As set by the Royal Government of Cambodia, and the Ministry of Economic and Finance the role of Cambodia Re is as follows: To carry out reinsurance business operation of all class of risks, including general insurance and life insurance; To act directly or indirectly with insurance and reinsurance companies; To fully cooperate with the existing or prospective enterprise or companies by way of sharing participation, signing commercial contracts, buying shares, which are beneficial to Cambodia Re; To directly or indirectly participate in all industrial, commercial, financial, movable and progress of the above transaction; To be responsible for the job safety and security; To adhere to the working principles and manner as the business people do; To effectively manage all activities; To have rights and duties provided by the Government to achieve its planned objectives.
ANNUAL REPORT 2010 | 8 5 MISSION STATEMENT Our Goal : To be the Effective National Reinsurer with the Best Quality Services in Cambodia. Our Objectives : We shall achieve our goal by: Providing best reinsurance services with international standard, Delivering full customer satisfaction, Empowering Cambodia Re’s people, Innovating the reinsurance products and services in cooperation with our ceding companies in Cambodia, and Producing superior returns for our shareholders. Our Strategies : We pursue our objectives and goal by: Accepting and retroceding the compulsory cessions from local insurance companies in Cambodia, Providing information of local and international market trends on insurance and reinsurance to local insurance companies, Providing a working environment having openness and self-development, Adhering to the principles of fair service, work with shareholders and do business according to a prudential code of the business ethics so as to acquire satisfactory returns, and Enhancing the capacity of the local market to provide Reinsurance services with the best standard of reinsurance professionalism. Our Values : Cambodia Re shall build its corporate values with: Integrity—We shall deliver reinsurance quality and practices with high ethical standard to our customers and reinsurance networks, Customers—We listen to our local ceding companies and improve our reinsurance products to meet their present and future needs with their expectation, along with value-added services, Employees—Our prosperity largely depends on highly effective performance of how our employees who are working together in a safety and healthy workplace where teamwork and development are valued and recognized, Accountability—We expect superior performance and are accountable for our actions and results. Cambodia Re’s leaders set clear goals and expectations, provide and seek frequent feedback, and Financial Responsibility—We are prudent and effective in the use of our financial resources.
ANNUAL REPORT 2010 | 96COMPANYPROFILE Cambodian Reinsurance Company, known as Cambodia Re, was established under Sub-Decree No. th 07AN.KR.MK by the Royal Government of Cambodia on 24 January 2002. The Company is incorporating with the registered capital of USD 7 million for its operation regarding to the Insurance Law of Cambodia. In order to build up the capacity and financial strengths with the ideal of privatization, company reached a Joint th Venture Agreement on 16 January 2004, with Asian Insurance International (Holding) Company “AII” with the The Managing Director of Cambodia Re has been officially elected as chairman for the General Insurance Association of Cambodia (GIAC) since 12th May 2005 and from then Cambodia Re on behalf of GIAC took its lead to successfully host 5th Asian Insurance Congress 2005 which is the first congress ever organised, and many others seminars workshop, meeting for the purpose of insurance improvement and protect public interest in the industry. Since the establishment in 2002, people in Cambodia Re have been making their efforts at their best for any valuable transitions changing scenario for business in Cambodian.
ANNUAL REPORT 2010 | 10 BOARD OF DIRECTOR Dr. Hang Chuon Naron Mr. Im Sithol, H.E Koeut Rith, Mr. Teddy Hailamsash, Mr. Rath Sa Rath, Dr. Chhay Rattanak, Board Member Board Member Asian Insurance Inter- Operation Director Managing Director, national Holding “AII”, Board Member, Board Member Board Member the Employee’s Representative BOARD OF MANAGEMENT Mr. Rath Veasna Mr. Rath Sa Rath Dr. Chhay Rattanak Dr. Hang Chuon Naron
ANNUAL REPORT 2010 | 11Board of Management General business managementThe Board of Management has been set up since To bring organizational effectiveness as committed,2003 to calibrate business management and decision general business management is handled bymaking for the reason of environmental changes in Managing Director.management perspective. Board of Management The Managing Director is significantly playing a vitalcomprises of Chairman, Managing Director, role to ensure that there is organizational cost cuttingOperations Director and Chief of Account and Finance and whilst enhancing business operation. Moreover,and Human Resources and some other appointed asset management is very essential for the companypersons called for at the time of the meeting. to look after for an on-going investment.The main purpose of the Board of Management, in Empowering with his encouragement to the staff witheffect, aims at accomplishing some strategic goals reliable decisions he makes is to bring what we callderived from strategic decisions made by the Board of balanced authority distribution within organization.Directors by delivering some certain objectives and Staff training becomes another factor to enhance theirfollowing up those as closely as planned. capability when empowerment is needed. BecauseCustomer relations have become an important focus training program can help staff to absorb new learningin today business operation of Cambodia Re which and avoid risks such as complicated and unusual risks.leads to considerable effectiveness. Understandingcustomers’ value will help us bring the company’seffectiveness so that we would adopt best practices ofour reinsurance professional in the country, as well aswith our retrocession ire.In accordance with the company’s goals, to optimaloutcome by empowering subordinators to achievefunctional objectives and gaining feed back fromthem, the Board of Management is committed itselfto adapting best strategies possibly.
ANNUAL REPORT 2010 | 12 Teamwork Workgroup is fundamentally important for work efficiency to the company. Staff member is encouraged to have team building toward projects or decisions which have to be made. We have an underwriting team to assess ordinary and complicated risks ceded by ceding companies, and to make sure that the reliable information is collected as much as possible regarding any particular risk in order to better understand the risk exposure for the company whenever claim occurs between claim officer and underwriter. Our core value is that our operation people have been working together as the Think-Tank for organisational capacity building and implementation. Partnerships Cambodia Re has set up business partnership with both local and international companies: Local Partnership International Partnership Asia Insurance Company Swiss Reinsurance Company Caminco Insurance Company Toa Reinsurance Company Campubanklonpac Insurance Company Asia Capital Reinsurance Group Forte Insurance Company Malaysian Reinsurance Bernhard Infinity Insurance Company Labuan Reinsurance Company Cambodia Vietnam Insurance Company Best Reinsurance Company J.B Boda & Co(s).Pte Bangkok Insurance PT.Asuranci Central Asia Asia Hong Kong
ANNUAL REPORT 2010 | 137CAMBODIA INSURANCE MARKET OVERVIEWHistorical Development of Insurance Industry Privatization and Liberalization of the Insurance IndustryThe history of the Cambodian Insurance market wentback to 1950’s which at that time a number of French During the operation of CAMINCO for ten years, it hasInsurance companies maintained operations in been noticed that the insurance market was actuallycolonial period and for a time after Independence. in embryonic stage while people in Cambodia had notUntil 1975 a State-Owned Insurance Company, named seriously understood how much they could getSociety National assurance et Reassurances (SNAR) benefits and compensation from insurance policy. Daycarried on business in the country but ceased the after day, anyway, insurance was understandableactivities when the Khmer Rouge seized control of the better by main business organizations andcountry. Non-governmental Organizations and now even the local investor, and people.For seventeen years, no insurance business wasconducting in Cambodia. In 1990, the Cambodian Micro-Insurance also started to introduce in certainNational Insurance Company (CAMINCO) was province as pilot projects. In 1995, Asia Insuranceestablished to firstly conduct insurance business in (Cambodia) with a bulk of shares from Asian InsuranceCambodia. CAMINCO at the time was not so active International (Holding) Company entered the marketdue to lack of technical expertise, human resources, as the insurance agent of CAMINCO at that time. Theand related documents. Until the early 2000, in fact, industry was going to be fundamental growth as aagents often placed insurance direct with insurance result of expanding the market. Soon after that, Fortecompanies offshore by passing through CAMINCO. Insurance also accessed the market in 1999 as another agent of CAMINCO. Eventually, the two companies have been managing insuranceHowever, with the passing of insurance Law in June transactions as CAMINCO’s agents.2000 and subsequent Royal-Decree, and Sub-Decree,companies transact insurance business in Cambodiaare required to register at the Ministry of Economyand Finance with an authorized capital of USD 7millions. Since then development has been graduallymade.
ANNUAL REPORT 2010 | 14 In June 2000, Insurance Law was passed by the This process has been an effort of the Ministry of Cambodian Parliament, yet there was a delay in Economy and Finance where long and careful implementation of the corresponding Sub-Decree till negotiation had been made between Cambodia Re beginning 2002. The Law says that an insurance and Asian Insurance International (Holding) Company company is required to have the registered capital of “AII”. The joint Venture Agreement signed on 16 USD 7 millions to get a license from the Ministry of January 2004. This establishment was aimed at Economy and Finance. Therefore, those three supporting and providing local reinsurance capacity to companies became licensed Insurance Companies. In all direct insurers in the Kingdom of Cambodia, and early 2002, the Cambodian Reinsurance Company based on the Insurance Law which specifies that all (Cambodia Re) was established to support local reinsurance transactions has to be subjected to the 20 insurance companies. This establishment has even per cent as compulsory cession to Cambodia Re as the made contribution in order to freeze the outflow of National Reinsurance Company. premium to overseas markets. Initially, Cambodia Re was operating as a State-Owned company, the capital of which is wholly owned by the Royal Government of Cambodia (RGC). As from the start, Cambodia Re had conducted business on its own until the Company turns to be a Joint Venture from January 2004.
ANNUAL REPORT 2010 | 158 ECONOMIC REVIEW 2009Cambodian economy in 2009 was observed to have a real GDP growth around 2 per cent according toprojection of the Ministry of Economy and Finance.
ANNUAL REPORT 2010 | 16 8.1 Agriculture and Rural Development This sector so far is one of the main driving forces of the economic growth of the country and it becomes the one strategic tool for the government to ensure sustainable development. In the year 2010, the government outline plans to export one million tons of milled rice to global market by the year 2015. Last year 2010, we also see that this sector become target of various Bank to offer loan. According to the news, the largest bank of Cambodia, Acleda Bank, have loan to Agriculture sector account 12.25% and plan to increase up to 15.25% for the year 2011. In addition, the government also provide fund of 18 million for agriculture loan in the year 2010, and double this amount in the year 2011. It is also pre- paring 25 million funds to guarantee 50 percent of credit offer to the rice industry by the commercial bank. For investment, Agriculture is still a leading sector for investor‘s money.
ANNUAL REPORT 2010 | 178.2 Financial and banking sector For the year 2010, Banking and financial sector was also active. We see that number of bank increase up to 29 banks, 7 specialized banks, 25 licensed Micro Finance Institute, 2 bank representative office, 28 Credit operators and 60 NGO which running the like operation. In the year 2010, Banking Industry enjoyed the positive growth as a whole, which is estimated at 20% growth. It was seen much increase in deposit as well as loan in many banking operators. Let alone Acleda Bank the leading bank in Cambodia, had the deposit increased by 31.65% or USD 911 million, while outstanding loan increased by 36.82% to USD 744.31 million. Similarly, another big bank, Canadia Bank, also see its deposit and loan increase by 40 % and 30% respectively for the year 2010. For MFI (Micro Finance Institute) side, according to the statistic show that in the year 2010, the total loan of all 23 MFI increased by 33%. 8.3 Garment sector In the year 2010, Garment sector increase by 26% in term of export comparing to the year 2009. The Garment exports were worth a total of US$ 2.99 billion in 2010. The main buyer are from United State which worth about 2 billion, while the other to Europe around 750 million. For the year 2011, this sector is expected to continue increase as the government has increase business agreements made with other countries like Japan and Asian member.
ANNUAL REPORT 2010 | 18 8.4 Tourism Sector Tourism is also another sector that play importance role in Cambodia economy, and it contributes much to the economy growth and employment. In the year 2010, this sector generated revenue to the country roughly 1.78 billion USD increase by 16% comparing to the year 2009. It was about 2.5 million foreigner entering Cambodia in that year. Lasts year, it was also seen increase in travel and tourism companies to 392 companies from 374 in the year 2009. There is much potential for this sector to growth in the coming year when there is direct linkage between Cambodia and Europe country. As earlier, the country has agreement to have a direct fly from French to Cambodia. Even more, new tourist sit are on focus like Eco tourism. It is also seen that other international hotel brands are set to operate in the kingdom such as Marriott Hotel and Best Western.
ANNUAL REPORT 2010 | 198.5 Construction Construction sector for the year 2010 was still not favorable and still suffering from the world economic crisis along with the slowdown of value and number of construction. It was decrease around 60% during 2010 comparing to the previous year, and it was seen only small projects such as hotel, restaurant, and housing. According to Ministry of Land Management and Urbanization, in 2010 there were 2149 projects with value of USD 840 million less than the approved projects of 2230 in 2009 with worth of USD 1,988 million.8.6 Telecommunication For the year 2010, it noticed that the number of internet using is increasing in the country with the number of internet subscriber 173,675 and 29,589 in the year 2010 and 2009 respectively. To this 2010, there were 37 internet service providers. Competitiveness is also seen in small and medium business now a day in which they provide free Wi-Fi as a value added service. So there is much potential increase in the internet subscriber in the coming years.
ANNUAL REPORT 2010 | 20 9 CAMBODIAN INSURANCE REVIEW 2010 9.1 Market performance and development In general, Market achieve premium growth of 24% in 2010 to the estimated amount of 24.9 million USD. The increase driven by 4 main business such as Engineering, Miscellaneous, Medical and Health and Motor Insurance. Engineering was seen to increase by 206% which boosted by insurance on the hydro dam project; Miscellaneous grow by 26%; Medical and Health grow by 20% and Motor insurance grow by 9%. However, the market are also hit by some loss in the late of 2010 caused by food and brought the total loss of Market around 13 million. 9.2 Cambodia Re’s performance Having experienced the market with local insurance companies since 2002, we have been working on local issues in an international perspective for a radical speed of market development. We have aligned within the framework of our industrial strategic development through our communicative management process at all levels of in order to make it happen. Our strategic development is based on the understanding of constructed ideas for sustainable development with low risk and volatility. Thus, sustainability is our pivotal acceptance in our partnership. 9.2.1 Operational Performance for the last 3 year With regard to our experiences with local and overseas markets and wise-leading of our management board, Cambodia Re has been able to perform a well and satisfied underwriting result, particularly in the last 3 years. Underwriting Year Gross Preprium Increased (%) Net Preprium Increased (%) 2008 2,360,528.95 34.95% 1,334,461.00 41% 2009 2,533,852.69 7.34% 1,433,574.00 7% 2010 2,976,625.47 17.47% 1,692,561.18 18%
ANNUAL REPORT 2010 | 21 Premium by line of business Line of Business 2008 2009 2010 Engineering 131,505.97 175,484.50 138,566.15 Fire 783,792.16 836,836.00 936,526.46 Miscellaneous 363,683.81 374,814.19 534,947.99 Medical 170,066.08 225,292.00 353,139.81 Marine 59,474.83 39,172.00 43,239.53 Motor 852,006.10 882,254.00 970,205.53 TOTAL 2,360,528.95 2,533,852.69 2,976,625.47 Gross Premium 2008 By Line of Business Engineering 6% Motor 36% Fire 33% Medical Miscellaneou 7% s 15% Marine 3% Gross Premium 2009 By Line of Business Engineering 7% Motor 35% Fire 33% Medical 9% Miscellaneou s Marine 15% 1% Gross Premium 2010 By Line of Business Engineering 5% Motor 33% Fire 31% Medical 12% Miscellaneou sMarine 18% 1%
ANNUAL REPORT 2010 | 22 9.3 Property Reinsurance Property business accounted second main portfolio of Cambodia Re business. In the year 2010, Cambodia Re attain 11.91% increase in premium for Fire line of business with amounted of 936,526 USD whereas market Premium amounted to 6,174,999 USD or 1% increase from the year 2009. However, we also impact by the loss in the middle of the year from Fire and from flood at the year end due to torrential rain. So the Claim incurred was accounted to 691,185 USD of which 268,397 USD has been paid during the year. 9.4 Engineering Reinsurance For Engineering Reinsurance business, it still suffered with premium amounted to 138,566 USD or 21 % decrease from 2009. It was correlated to the construction sector in the year which was reported to be decrease 60%. However, the market premium was seen 206% increase to 3,823,890 USD . This dramatic increase was boosted by a construction project of hydro dam during the year. Also, in the year, Claim incurred amounted to 44,671 USD of which 37,320 was paid.
ANNUAL REPORT 2010 | 239.5 Motor ReinsuranceIt seems a constant growth of this line of business from year to year. In this 2010, Premium keeps growingby 10% to 970,205 USD and make it majority portfolio of Cambodia Re business. Motor Insurance inCambodia is still not compulsory insurance except for Commercial Vehicle. Likewise, Claim also increased at8% rate to 318,060 USD. However, concern is still placed on road accident which increasing from year toyear.9.6 Marine ReinsuranceMarine business is quite subjective even though in the year 2010 Garment export increase by 26% as well asother agriculture products but Marine line of business seems not to change at all for whole market premium.But for Cambodia Re’s side, it was reported increased by 10%. Claim was still limited.
ANNUAL REPORT 2010 | 24 9.7 Medical & Health Reinsurance This line of business still continues growing into the year 2010 with rate of 57% increase in premium comparing to 2009 to amount of 353,139.81. However, Claim also keeps increasing as well. In the year 2010, Claim incurred reached to 174,137 USD 80% increased comparing to year 2009. 9.8 Miscellaneous Reinsurance In the year 2010, Miscellaneous line of business was seen much increase by 42.72% to 534,948 USD. Miscellaneous business includes Product liability, Public Liability, Personal Accident, Workmen Compensation, Money and Burglary insurance. This line of business is noticed to be increase in the last few years. However, still there are more potential for growth the incoming year together with the growth of business registration. As business entity is keen to buy Personal Accident for their employee. For the year 2010, business registration was reported to be increased by 28% comparing to 2009. On the claim side, it was amounted to 116,794 USD of which 97,823 USD was paid in the year.
ANNUAL REPORT 2010 | 25 Gross Claim 2008 By Line of Business Engineering 8% Motor 21% Marine 0% Medical 9% Miscellaneous 14% Fire 48% Gross Claim 2009 By Line of Business Medical Marine Engineering 3% 0% 4% Miscellaneous Motor 4% 10% Fire 79% Gross Claim 2010 By Line of Business Engineering 4% Motor 35% Fire 31% Miscellaneous Medical 11% 19%Marine 0%
ANNUAL REPORT 2010 | 26 10 RISK FACTORS AND MANAGEMENT There is uncertainty of some risk factors involved just like any insurer practice during the year which were hereunder : 10.1 Underwriting Uncertainty Our concerns about risks in all aspects of underwriting business ceded by local pedants on both treaty and facultative basis. The primary concern is natural disaster even though Cambodia has never been facing catastrophe like flood, big storm, volcano, earthquake or tsunami; no serious claim up to now. Furthermore, some major risks and their concerns ceded to us were not known in details in the treaty base. So, whatever a decision and judgement made by any pedant toward particular risks is actually affecting Cambodia Re in respect of operational performance and financial capital support if unreliable uncertainty of risk analysis. Moreover, a facultative risk is predicament to be identified as there was a delay as usual to get risk data and information supposed to be provided by pedants. However, there must be a need for us to question further in order clarify the given data banks of that particular risk. This could become another facet of uncertainty of the underwriting succession and time consuming is sometimes is key consideration for our customers to require our acceptance in a certain period of time so that they can also respond to direct customer within a time frame.
ANNUAL REPORT 2010 | 2710.2 Retrocession ProcessingEngaging operational activities, time frame for risk processing units is vitally significant for us to report to ourpanel of reinsures. As a matter of fact, the effectiveness of our service delivery largely depends upon a chaincommunication with our local ceding companies reflected by direct customers in cooperative manner and sothen with our retrocession ire finally. Therefore, our two way risk processing to give capital support and to seekfinancial support backup is essentially centralising our think tank to underwrite particular risks, especially whenthe risk consideration is beyond our treaty capacity. Whilst the facultative risks were experienced to have had another predicament of financial support forpedants’ proposal as it has involved in too much technicality and beyond our knowledge. It is perplexed for usto seek supports from our retrocession ire for ceding risk proposal. This predicament arose because of lack ofknowledge of risks both pedants and us, and of how to spread risks by searching for best alternativeresolutions. This was a result from our limitation of capacity to write business. However, the businessperformance has been involved in a bit beyond our technicality and better improved from year to year inoperational point of view.10.3 Premium Delivery and investmentPremium Collecting has become another risk factordue to a delay of payment from pedants which couldbring us difficulty to enforce treaty though it specifiedthereon. This matter arose when there is a delay ofpayment by direct customers to pedants. Thus, it wasslowly generating cash inflow due to this matter andcould freeze company investment opportunities tothat some extend.More than this, certain companies often asked forrefund premium for the risks which almost expiry orexpired already. This, in fact, due to the competitionamong ceding companies which sometime they allow the clients to delay he premium payment beyond thepremium warranty. Thus, making Cambodia Re retrocession Aires to be in hard situation sometime.
ANNUAL REPORT 2010 | 28 11 INTERAL AUDITBackground Internal control is in the process, in effect from 1st August 2004 by the Cambodia Re’s Board of Directors, Management, and other personnel, designed to provide reasonable assurance in order to focus on the achievement of both functional and organisational objectives in the following categories: Effectiveness and efficiency of operations, Reliability of financial report, Compliance with applicable law and regulations. Internal control system would be the organisational tool that helps managers be effective and efficient while avoiding serious problems such overspending, operational failures and violation of law. Hence, the elements of internal control are hereunder: Controlling Environment: Orientating the determination of business goals, and formulation of effective organisation’s structure, defining standards of ethics and prohibitions penalties, forbidding the management and employees to engage in any activities that may lead to possible conflict of interest, mapping out of policies and working procedures. Risk Assessment: An assessment of both internal and external risks and their influential factors affecting the company’s business transactions, an analysis and determination of risk management measure, communication with respective staff members, including following up the implementation of the defined measures. Controlling Activities: A division of duties and responsibilities, a determination of authority and duties of each level of executives including amount of money they can approve, as well as a supervision of the company’s operational performance in accordance with related law. Information Technology and Communications: A convention of the Board of Directors’ meeting, documentation work for the meeting, writing the minute of meeting, formulation of the management’s accounting, including storage of documents for account recording in line with the specified standards. Monitoring: Following up and evaluating of actions to achieve a required target, making a correction in case of deviation from target outcome.
ANNUAL REPORT 2010 | 29Purpose and Auditing Framework Internal Audit is an independent appraisal function established to examine the activities of the company. The main purposes of this function are: To ensure that there is reliability of operational financial information. To have a system to ensure the compliance to the policy, planning, and regulations that cannot affect the company’s sustainable operations. To assess whether asset safeguarding has been compiled in full. To make sure the operational activities have been on track effectively and efficiently. To provide management advisory information about the adequacy and effectiveness of company’s internal control system and the quality of performance.Internal Audit Mission The mission of Internal Audit is to promote the company to achieve the set goals by the following auditing features: Internal Control and Compliance Audit: Examining the compliance of the company’s system, procedure, structure and regulation to ensure that the controls are in place and functioning, Operational Audit: Evaluating the work processing in each department in order to improve the work performance and maximising human resource capacity in the company, Special Audit Project: Checking and reviewing matter on a case-to-case basis when the need arises, Advisory Audit: Giving recommendations to improve the company’s effectiveness and efficiency. Audit reporting is one of the most important stages in an audit process. In this internal audit review, the auditing data having formulated, collected, and processed are transformed into informative report that satisfies the Management requirements.
ANNUAL REPORT 2010 | 30 12 OUTLOOK forward Cambodia Re as well as market as a whole is expected to gain momentum of development of the industry in coming years in a parallel to economic growth of the country which is projected to gain the growth of 6%, 6.5% and 6.5% in the year of 2011, 2012 and 2013 respectively. As noticed, it see more potential for growth in this industry deriving from the strategy laid out by the government to sustain its development such as increasing its capacity in production of Garment and Agricultural sector. To this end, the government focuses on improvement of various infrastructures to facilitate the strategy including irrigation system, road, electricity, and so on. Moreover, on the service sector particularly financial service, which is very active and fast growing in last few years, will see more growth after the stock exchange is set to launch in the middle of this year. Also Tourism sector hope to enjoy further growth after direct linkage between Cambodia and European country specifically French. In fact, there are growing in business registration since last year and first quarter of 2011 mainly in agro-business and agriculture, tourism, information and mining.
ANNUAL REPORT 2010 | 3113 ACTIVITIES OF CAMBODIA RE13.1 Inauguration Ceremony of Cambodia Re’s New BuildingCambodian Reinsurance Company was established on 24 January 2002 by Sub-Decree Nº 07 A.N.KR.M.K of the RoyalGovernment of Cambodia. Initially, “Cambodia Re” operating as a state-owned the company located in the samebuilding of “CAMINCO” on the corner street 13 and 106, Sangkat Wat Phnom, Khan Daun Penh, Phnom Penh. The Cambodian Reinsurance Company “Cambodia Re”, however, was moved to the new office building on 27 January 2009. This premise is belonged to the company, so it is more comfortable and convenient. The change of location could remark and respond to the development and growth of “Cambodia Re”, as well as the insurance industry as a whole.13.2 TrainingSubmitted, OECD Asian. Asian Insurance Council and East AsianInsurance congress in overseas. Moreover, Cambodia Re’s staffparticipated on many training topic different topics such as Property andEngineering, Hong Kong, Risk Management training, BusinessInterruption, International Financial Reports Standard ( IFRS ) andAdvance Microsoft-Office. We also conducted public training course on Insurance Development in Cambodia for Norton University and National University of Management students in the purpose of public awareness and confident on the insurance industry. The Company’s objective is to build up the capacity of their staff by improving their technical knowledge, and enable them to apply to their job within the local and international market in order to help Cambodia Re to become a professional reinsurance company.
ANNUAL REPORT 2010 | 32 14 REVIEW OF FINANCIAL PERFORMANCE Cambodian Reinsurance Company “Cambodia Re” (Registration No.: Co – 6063/02 Et) Balance sheet as at 31 December 2010 2010 2010 2009 Note % US$ KHR’000 % US$ KHR’000 (Note 4) (Note 4) ASSETS Non-current assets Statutory deposits 6 39 4,200,000 17,589,600 42 4,200,000 17,400,600 Property and equipment 7 18 1,953,865 8,182,787 19 1,966,299 8,146,377 Investment - - - - - - Intangible assets - - - - - - Other investment 8 8 875,000 3,664,500 9 900,000 3,728,700 Total non-current assets 65 7,028,865 29,436,887 70 7,066,299 29,275,677 Current assets Premiums receivable 9 5 604,970 2,533,614 5 521,968 2,162,514 Cash and bank balances 10 29 3,126,069 13,091,977 24 2,407,353 9,973,663 Other receivables 11 1 84,580 354,221 1 86,684 359,132 Total current assets 35 3,815,619 15,979,812 30 3,016,005 12,495,309 Total assets 100 10,844,484 45,416,699 100 10,082,304 41,770,986 LIABILITIES AND SHAREHOLDERS’ FUNDS Current liabilities Unearned premium reserve 12 8 862,193 3,610,864 7 709,834 2,940,842 Claims outstanding 13 1 108,734 455,378 1 58,677 243,099 Short-term payables - - - - - - Other payables 14 6 636,777 2,666,822 2 254,598 1,054,800 Provision for taxation - - - - - - Total current liabilities 15 1,607,704 6,733,064 10 1,023,109 4,238,741 Long-term liabilities Long-term liabilities - - - - - - Total long-term liabilities - - - - - - Shareholders’ funds Share capital 15 64 7,000,000 29,316,000 69 7,000,000 29,001,000 Minority share - - - - - - Catastrophe reserve 13 2,059,195 8,623,909 16 1,580,160 6,546,603 Retained profits 5 508,835 2,131,001 5 479,035 1,984,642 Dividend 3 -331,250 -1,387,275 - - - Total shareholders’ funds 85 9,236,780 38,683,635 90 9,059,195 37,532,245 Total liabilities and shareholders’ funds 100 10,844,484 45,416,699 100 10,082,304 41,770,986 The accompanying notes form an integral part of these financial statements
Cambodian Reinsurance Company “Cambodia Re”(Registration No.: Co – 6063/02 Et) Income Statement at 31 December 2010 2010 2009 Note US$ KHR’000 US$ KHR’000 (Note 4) (Note 4)Underwriting incomeGross premium income 2,975,291 12,460,519 2,535,094 10,502,895Premium cancelled and refunded - - - -Total premium income 2,975,291 12,460,519 2,535,094 10,502,895Reinsurance ceded -1,198,187 -5,018,007 -1,039,789 -4,307,846Net premium income 1,777,104 7,442,512 1,495,305 6,195,049Unearned premium reserve: 12 At the beginning of the year 709,834 2,972,785 705,688 2,923,665 At the end of the year -862,193 -3,610,864 -709,834 -2,940,842Premium earned 1,624,745 6,804,433 1,491,159 6,177,872Reinsurance commission 376,822 1,578,131 364,951 1,511,992Loss commission - - -5,358 -22,198Total underwriting income 16 2,001,567 8,382,564 1,850,752 7,667,666Underwriting expensesGross claims paid -871,472 -3,649,725 -2,666,999 -11,049,377Claim recoveries from reinsurers 294,664 1,234,053 2,045,175 8,473,160Net claims paid -576,808 -2,415,672 -621,824 -2,576,217Net claims outstanding: 13At the beginning of the year 58,677 245,739 81,178 336,320At the end of the year -108,734 -455,378 -58,677 -243,099Net claims incurred -626,865 -2,625,311 -599,323 -2,482,996Commission expense -600,884 -2,516,502 -513,069 -2,125,645Contribution fees -14,572 -61,028 -12,841 -53,200Total underwriting expenses 16 -1,242,321 -5,202,841 -1,125,233 -4,661,841Underwriting profit 759,246 3,179,723 725,519 3,005,825Administrative expenses 17 -1,456,398 -347,144 -1,438,218Net underwriting profit 411,491 1,723,325 378,375 1,567,607Investment incomeInterest income from Government bonds 125,863 527,114 124,697 516,620Interest income from placements with banks 120,231 503,527 101,147 419,052Others - - 1,411 5,846Total investment income 246,094 1,030,641 227,255 941,518Investment expenses - - - -Net profit from investment 246,094 1,030,641 227,255 941,518Net profit before income tax 657,585 2,753,966 605,630 2,509,125Income tax expenses 18 -148,750 -622,965 -126,595 -524,483Net profit for the year 508,835 2,131,001 479,035 1,984,642The accompanying notes form an integral part of these financial statements