BIMB Integrated Annual Report 2017

45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (b) Takaful The key features of Takaful Malaysia’s market risk management practices and policies are as follows: – A group-wide market risk policy setting out the evaluation and determination of components of market risk for the Takaful Malaysia Group. Compliance with the policy is monitored and reported monthly to Takaful Malaysia’s Risk Management Committee (“RMC”) and exposures and breaches are reported as soon as practicable. – Set asset allocation, portfolio limit structure and diversification benchmark to ensure that assets back specific contract liabilities and that assets are held to deliver income and gains for certificate holders in line with terms of the respective contracts expectations of policies. Takaful Malaysia’s policies on asset allocation, portfolio limit structure and diversification benchmark have been set in line with Takaful Malaysia’s risk management policy after taking cognisance of the regulatory requirements in respect of maintenance of assets and solvency. Takaful Malaysia also issue unit-linked investment policies. In the unit-linked business, the certificate holders bear investment risk on the assets held in the unit-linked funds as the certificate benefits are directly linked to value of the assets in the funds. Takaful Malaysia’s exposure to market risk on this business is limited to the extent that income arising from asset management charges is based on the value of the assets in the funds. (i) Profit yield risk Profit yield risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market profit yield. Floating rate/yield instruments expose Takaful to cash flow risk, whereas fixed rate/yield instruments expose Takaful to fair value risk. Takaful Malaysia’s profit risk policy requires its Management to manage the risk by maintaining an appropriate mix of variable and fixed rate/yield instruments. The policy also requires Takaful management to manage the maturities of profit-bearing financial assets and liabilities. Floating rate/yield instruments will be re-priced at intervals of not more than one (1) year. Profit on fixed rate/yield instruments is priced at inception of the financial instrument and is fixed until maturity. The profit yield profile of the Takaful Malaysia Group and its subsidiaries’ significant profit-bearing financial instruments, based on carrying amounts as at the end of the reporting period is as follows: TAKAFUL TAKAFUL FAMILY GENERAL MALAYSIA OPERATOR TAKAFUL TAKAFUL GROUP FIXED RATE INSTRUMENTS RM’000 RM’000 RM’000 RM’000 2017 AFS financial assets 446,354 2,703,050 344,758 3,494,162 FVTPL financial assets 4,255 87,035 – 91,290 HTM financial assets 10,034 496,490 10,000 516,524 Financing and receivables 454,344 1,387,484 195,043 2,036,871 914,987 4,674,059 549,801 6,138,847 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 269 Overview Value Creation Accountability Financial Statements Sustainability Performance Data Shareholders Information 21 st AGM Information Management Discussion & Analysis i a