Investor Relations Corporate Information Chairman's Statement

Chairman's Statement

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of KSK Group Berhad (KSK or Group) for the financial year ended 31 December 2012 (FYE 2012).

FINANCIAL REVIEW

2012 was a significant year for the Group having completed the disposal of the Group's core insurance subsidiary, Kurnia Insurans (M) Berhad (KIMB) to AmG Insurance Berhad for a cash consideration of RM1.627 billion, on 26 September 2012 (KIMB Disposal). KIMB has grown to become a household name in Malaysia from humble beginnings two decades ago, and we believe that the business is in good hands and will continue to grow and benefit from the resources and expertise of its new owner.

We are pleased to announce that for the year under review, the Group recorded net profit of RM872.527 million (2011: RM47.325 million) mainly due to the gain recognised from the KIMB Disposal, which translated to an earnings per share (EPS) of 58.36 sen (2011: 3.18 sen).

The Group's net assets value (NAV) stood at RM1.170 billion as at 31 December 2012 (31 December 2011: RM389.2 million). This translates into a NAV per share of 78.00 sen as at 31 December 2012 (31 December 2011: 26.15 sen). The increase in NAV was also mainly due to the gain recognised from the KIMB Disposal.

We are also pleased to report encouraging growth from our insurance operations in Indonesia and Thailand. For the financial year under review, PT KSK Insurance Indonesia (KII) recorded significant growth in gross premium of 62% year-on-year, while the gross premium of KSK Insurance (Thailand) Public Company Limited (KIT) grew by a commendable 13% year-on-year. We have made substantial progress since we commenced the transformation programmes for KII and KIT, which has further reinforced the companies' operational platform, including a strengthened management team, enhanced new products pipeline, value added services and established the infrastructure necessary for rapid growth. Having penned down a focused strategy for organic growth, we are also ready to grow and expand our insurance franchise through opportunistic acquisitions.

OPERATIONS REVIEW

KSK Group

The year 2012 was a momentous year for us at the Group. The KIMB Disposal was completed in the third quarter, with that the Group was able to set a whole new course for itself into the future whilst strengthening our insurance business in Thailand and Indonesia and exploring new opportunities in Malaysia and the region. With the disposal of the Kurnia brand, the Group initiated a group wide rebranding exercise that echoed the Group's aspirations.

Following the KIMB Disposal and rebranding exercise, the Group looks forward to becoming a leading conglomerate in the region and will explore new opportunities that come its way. Above all, the Group remains steadfast to ensuring continuous progress and creating value for its stakeholders.

In 2012, the Group had undertaken a group wide rebranding exercise and adopted the 'KSK' brand name. The colour representation for our new 'KSK' brand is warm red, synonymous with passion, boldness and energy. This complements the five founding principles of the Group which are resilience, trustworthiness, team work, innovation and entrepreneurial spirit.

Consequent to the KIMB Disposal, the Company was classified as "Cash Company" pursuant to Paragraph 8.03(1) and Practice Note 16 of the Main Market Listing Requirements.

Indonesia

On 17 February 2012, KII launched the e-Policy system to better serve its customers, agents and brokers as the e-Policy provides quick and easy issuance of insurance policies to customers. KII is the first insurer in Indonesia to provide such e-Policy services whereby policies can be issued online by agents and brokers. Besides the benefit of quick policy issuance, e-Policy also allows for increased portability whereby policy can be stored in digital form. In addition, customers can also perform payments on the spot using e-Payment, which has already been integrated with e-Policy. KII's e-Policy facilities are available for motor vehicle, marine cargo and personal accident coverage. Plans are underway to extend the e-Policy facilities to include more classes of insurance products and to increase its accessibility through the smartphone platform.

KII has also launched an e-Surveyor mobile system in 2012. The e-Surveyor is an IT based solution that enables claim processes to be conducted faster and mobile, anywhere and anytime by using mobile devices. The e-Surveyor enables KII surveyors to send damaged vehicles' photos and survey reports to KII's Head Office in Jakarta to facilitate quick claims assessment. The e-Surveyor mobile system will enhance the claim process efficiency, shorten the overall claim approval process, and as a result improve customers' experience. Working in tandem with e-Surveyor is the Short Messaging Service (SMS) notification service to provide our insured updates on their claim status.

Thailand

KIT launched three new products in conjunction with its rebranding exercise in September 2012. The first is KSK Insurance 5+ motor insurance which is a new product that in its basic form includes collision and flood damage and can be extended to include theft and fire. This is a market leading product which was developed with the customer's needs in mind.

The new Home Insurance package includes cover for loss against floods, windstorms and earthquakes, and also provides for rental costs of temporary accommodation in the event of a disaster.

Also new is the Personal Accident policy which provides 24-hour worldwide coverage and loss of income for up to one year.

KSK Careline, a 24-hours call centre was also launched during the rebranding period to handle inbound accident notifications and to assist customers on claims and policy issues.

INDUSTRY OUTLOOK

We are optimistic about the growth potential in both Indonesia and Thailand. The potential to grow in these two markets remains positive as these economies have remained resilient despite softer external turbulent economic conditions. In 2012, the Indonesian economy enjoyed an economic growth of 6.23% whilst the Thai economy enjoyed an economic growth of 6.4%.

Indonesia

Fitch Ratings has maintained its stable outlook for 2013 for the Indonesian insurance sector based on its 2013 outlook report for the Indonesian insurance industry. Such rating was based largely on its view that most insurers are likely to maintain their financial fundamentals in 2013. This is supported by a developing domestic market, sustainable growth in premiums and strengthening regulatory requirements. Fitch expects steady premium growth in the coming year, driven by Indonesian population's greater affluence, the vast, underpenetrated market and increasing catastrophe awareness. Serving a huge population of over 230 million, Indonesia's insurance market demonstrates vast potential, with insurance penetration at a low 1.7% of gross domestic product in 2011.

Thailand

In 2012, the insurance business in Thailand achieved total premium of THB569.90 billion, increasing 21.48% year-on-year with a penetration rate at 5.02%. Total premium from the non-life insurance for 2012 was THB179.43 billion, increasing 27.96% year-onyear. 2012 was the year in which the strength of the Thai insurance business was put to test. The business was able to come out stronger than before after countless obstacles including the aftermath of the 2011 flood catastrophe as evident in the growth rate for 2012. The Office of Insurance Commission, Thailand anticipates continued growth in 2013, albeit at a slower rate, with expected total premiums of about THB660 billion or 16% growth rate. Of that number, the life insurance business is expected to garner about THB449 billion or 18% growth rate, whereas the non-life insurance business is expected to garner about THB211 billion or 15% growth rate. The predicted insurance penetration rate at the end of 2013 is 5.38%.

LOOKING FORWARD

Our looking forward priorities are clear. We will continue to focus our efforts and resources on our insurance business in Indonesia and Thailand as we execute our organic growth strategies. We will push for greater returns on our investments in Indonesia and Thailand and we will continue to build on the improvements that we have made. We also look forward to building the business with strategic acquisitions to expand our insurance footprint in Indonesia, Thailand and beyond.

At the time of writing, the Company has proposed a selective capital reduction and repayment exercise (Proposed SCR). The Proposed SCR entails a capital repayment of a proposed cash amount of RM0.65 for each KSK share held by the entitled shareholders of the Company on an entitlement date to be determined. The Proposed SCR will be presented to the shareholders for consideration at an extraordinary general meeting to be convened.

APPRECIATION

On behalf of the Board of Directors, I would like to take this opportunity to extend my heartfelt and deepest gratitude to all our stakeholders, including our loyal shareholders, customers, business partners and media for their continuous support and faith in our Group. We also extend our gratitude to all the relevant authorities for their continuous support and guidance.

Finally, I would also like to express my sincere appreciation to our employees, who represent the Group's greatest investment. The success of the Group is because of your contribution, commitment and unified ambition. I thank you for your contribution and look forward to celebrate another exciting chapter of progress and prosperity with you.

Tan Sri Dato' Paduka Kua Sian Kooi
Executive Chairman
KSK Group Berhad
31 May 2013