Lawsuit cases mentioned in the footnote to financial statement no. 23.3 with claim litigation of THB 1,375 Million , does it involve with terrorism case occurred in 2012? And how?
Such lawsuits stated in the footnote to financial statement are some generally occurred in the business operation which can be classified into two major cases as follows;
- The insureds claimed for different amount from what actually had been assessed as stated in coverage in the policy
- The victims (who are not the insureds but they are the litigants damaged from acts of the insured) sued for the claim According to the fact, such cases can have more than one defendant such as insurance companies, reinsurance companies (as co-defendant), insurance companies of the defendant, etc. The plaintiffs can filed many defendants with high value of claim amount. The Company liability in each case is limited per the Company had insured, normally is a lot lesser than the claimed amount. There are few Cases that the Company is the first defendant. Besides, the Company had already set the reserve for the claims that are likely to incur as Mentioned in question (2) Moreover, the estimation of such claim reserve had been done by the claim expert. Also it was carefully and thoroughly considered based on the lost adjustor report and lawyers assigned for each case per the Company regular practice.
According to the fact, such cases can have more than one defendant such as insurance companies, reinsurance companies (as co-defendant), insurance companies of the defendant, etc. The plaintiffs can filed many defendants with high value of claim amount. The Company liability in each case is limited per the Company had insured, normally is a lot lesser than the claimed amount. There are few Cases that the Company is the first defendant. Besides, the Company had already set the reserve for the claims that are likely to incur as Mentioned in question (2)
Moreover, the estimation of such claim reserve had been done by the claim expert. Also it was carefully and thoroughly considered based on the lost adjustor report and lawyers assigned for each case per the Company regular practice.
From (1) The Company recorded provision for loss reserves before ceding regarding claim litigation in the financial statements of Baht 252.8 million. Has the amount be accounted for in the Statement of Comprehensive Income or only booked as liability in the Statement of Financial Position?
The provision has been booked as a liability in the Statement of Financial Position and also the Statement of Comprehensive Income under Double Entry Method. It must be booked to both statements by Debit Claim expenses (Profit & Loss) and Credit Loss reserves (Liabilities). The estimation of provision on loss reserves is in accordance with Thai Accounting Standard no.37 (TAS37) - Contingent Liabilities & Assets. Moreover, the External Auditor has to review and verify the adequacy of the provision, if the provision is not appropriate the External Auditor can express a qualified opinion in the Auditor's report.
This operational expense arose from what expense?
Details of the operational expense was disclosed in the footnote to financial statement no.17 of the first quarter and second quarter financial statement as at June 30, 2011. The reporting standard specifies to disclose such details for the user of financial statement to acknowledge it. Please check the details of the expense in the footnote to financial statement. Besides, the advertisement expense was included in the operational expense. In the second quarter, the Company launched the advertisement called "Khun Panda" which communicated about the importance on motor claim under the slogan "easy to communicate, pay as promise , quick repair by Muang Thai Insurance, call 1484" Expense for this advertisement was in accordance with the annual budget as planned.
Does this operational expense tend to continually increase? If it does, it will increase for how many quarters so far?
To forecast its tendency for such expense on the numerical perspective, it seems that such expense increased from -183 to -235 for the second quarter ended June 30, 2011. However, if look into proportion of the total premium, the increase of expense slightly increased comparing with the growth of total earned premium. If excluding the advertisement expense which is not the normal expense, the advertisement focuses on the Company image and service which affects earned premium in a long term, comparison of operational expense for second quarter with total earned premium shows that the first moderately decreased while the latter increased.
If the operational expense stops increasing, will such amount of money be the fixed cost? Meaning in the future, will it decrease?
Change of the operational expense depends on the amount of money or proportion per earned premium. In term of the amount of money may increase but the proportion may be different. Overall picture of this expense consists of fixed costs such as depreciation, office building rental and staff's salary, etc. and some variable costs such as public utility cost, bank fees, post mail expense, etc. Normally, the Company has been controlling such expense. The Company annually set the budget which controls various expenses to be consistent with the budget by arranging internal project to build cooperation for reducing expenses, saving energy and improving environment, etc. These projects will help to reduce the increase of operational expense.
What does the Company expect from the increase of the operational expense (such as growth of earned premium, the Company is more well-known or popular, etc)?
In the Company's operation, the operational expense as stated in question no. 3 does not change consistently with the sale amount or every direct premium but an increase of the expense that has changed is part of the sale growth and market expansion, for example the Company increases number of staff, expands the working area, opens new branches and enhances IT system capability, etc. The Company has to carefully and organizingly consider the cost which will generate profit, so the operational expense will occur later. It had not been set before estimating the business or premium growth. The operational expense is the financial figure that will be estimated accompanying growth of earned premium and planned consistently with the Company's strategy.