Risk Factors

5. RISK FACTORS 5. RISK FACTORS Before investing in our Shares, you should pay particular attention to the fact that our Group and to a large extent our operations, are governed by the legal, regulatory and business environment in Malaysia. Our business is subject to a number of factors, many of which are outside our control. Prior to making an investment decision, you should carefully consider, along with the other matters in this Prospectus, the risks and investment considerations below. You should note that the following list is not an exhaustive list of all the risks that we face or risks that may develop in the future. Additional risks, whether known or unknown, may in the future have a material and adverse effect on us or our Shares. Risks relating to our businesses 5.1.1 Our general insurance business operates in a highly regulated environment and its continuity is SUbject to MPIB maintaining its licence and complying with all regulatory requirements Our general insurance business, which is conducted by MPIB, operates in a highly regulated environment. Its ability to carry out our general insurance business is dependent on the licence issued by BNM under the Insurance Act. Although the said licence does not have an expiry date, under the Insurance Act, the MoF can withdraw the licence at any time under certain conditions including any non-compliance with the conditions attached to the licence, the requirements of the Insurance Act and the regulations, requirements or guidelines set by BNM from time to time or if the MoF decides, amongst other circumstances, that it is in the interest of the public to do so pursuant to the Insurance Act. In the event the licence is withdrawn, there would be a material and adverse impact on our Group’s financial performance. Whilst we are not aware of the occurrence of any events or circumstances which may result in our general insurance licence being withdrawn, there can be no assurance that such events will not occur in the future. The regulations to which our general insurance business is SUbject include those that are set out in Section 7.8.1 of this Prospectus. In addition, following the approval of the MoF through BNM in respect of the Pre-IPO Reorganisation and Offer for Sale, the MoF had also imposed a condition which require us to rationalise our non-financial services businesses within 3 years from the date of completion of the restructuring of the MPHB Group, as set out in Section 10.1.2 of this Prospectus. Insurance companies are also required to comply with BNM’s CAR requirements and may be subject to other capital requirements which may be imposed by BNM from time to time. Under the RBC Framework, MPIB is required to comply with BNM’s minimum supervisory CAR requirement of 130.0% and to maintain an internal target CAR which is above BNM’s minimum supervisory CAR requirements. While, to date, IVIPIB has always complied with BNM’s minimum supervisory CAR requirements, there is no assurance that MPIB will be able to comply with BNM’s minimum supervisory CAR requirements at all times in the future. For example, a substantial underwriting loss may lead to a loss position for MPIB and reduce its retained profits, hence lowering its CAR. If MPIB is unable to comply with BNM’s CAR requirements, it may be subject to increased levels of supervisory attention or action, including being imposed with business restrictions and/or restructuring measures. Non-compliance with BNM’s CAR requirements as well as other circumstances set out in the Insurance Act, may enable the MoF, by order made under the Insurance Act, to provide for BNM to assume control of MPIB’s property, business and affairs, as the case may be, or for BNM to appoint an appointed person to do so on its behalf. As at 31 December 2012, MPIB’s CAR stood at 222.8%. 5. RISK FACTORS (cont’d)
5.1.2 We are dependent on our key management and certain key employees The success of our Group depends to a significant extent upon the abilities, experience and efforts of our key management. Our key management is as set out in Section 9.4 of this Prospectus. There can be no assurance that we will be able to retain our key management as well as to attract and retain suitable new key management in the future. Although continuous efforts are being made to retain our key management and to have a succession plan in place, there can be no assurance that we would be successful in retaining our key management or that a successor can be found should any of our key management leave such that our business will not be materially and adversely affected by any loss of our key management. We rely significantly on certain of our key employees in the insurance business, who include the chief operating officer and the portfolio heads, who have extensive and in­depth experience in and knowledge of the insurance industry and strong relationships with agencies and brokers who distribute our insurance products. The experience and knowledge of our key employees have been and are expected to continue to be pivotal to our success in the insurance business. Although we strive to retain such key employees by offering attractive remuneration and benefits, there is no assurance that we can retain our key employees at all times. Should our key employees resign and join our competitors, our business, operating results and financial condition may be materially and adversely affected. There is also a risk that the loss of any of our key employees will result in the loss of agencies or the business of brokers who have relationships with such employees. We may be unable to replace such employees with persons who are equally able to attract agencies or brokers to our distribution network or to replace them expeditiously without experiencing a consequential adverse effect on our distribution channels. 5.1.3 Our ability to compete effectively in the general insurance industry depends on our distribution channels We depend on our distribution channels such as agencies and brokers to distribute our insurance products and schemes. For the year ended 31 December 2012, approximately 67.3% of our total gross premiums were derived from agencies and brokers. We face intense competition in attracting and retaining our agencies and in developing and maintaining our business relationships with brokers. We may not always be successful in attracting and retaining agencies or establishing business relationships with brokers as other competitors may, among others, offer a more diverse range of products, better agency or broker terms, better customer service or may have bigger underwriting capacity or better relationships with agencies and brokers. If we are unsuccessful in doing so, our ability to effectively market and distribute our products and schemes may be negatively affected and this could have a material and adverse effect on our financial condition and results of operations. There can also be no assurance that our initiatives to retain and attract agencies (e.g. through our agency recognition club and by providing training) or to establish business relationships with brokers (e.g. by providing value added services to brokers and/or their clients such as insurance advisory services and seminars and training, and by jointly developing new products or schemes with brokers) will result in us gaining additional business or larger market share. Furthermore, even if we manage to grow and retain our agencies and brokers, there can be no assurance that they will be able to perform at the expected level at all times. Our financial position may be adversely affected by poor sales of our products and schemes by our agencies (including, a failure to meet sales targets by agencies) or through brokers with whom we have business relationships. 31 5. RISK FACTORS (cont’d) 5.1.4 We may not be able to reinsure our risk with reinsurers at favourable terms or at all Like all general insurance companies, we reinsure some of our underwriting obligations with reinsurers, especially for our high risk underwriting obligations. For the years ended 31 December 2010,2011 and 2012, we have ceded 47.1%, 49.9% and 48.0% of our gross premiums to the reinsurers, particularly with respect to our exposure to the fire, contractor’s all risks, marine hull insurance and liability insurance products. Reinsurance apportions part of an insurance company’s risks and helps it to manage its insurance risk exposure and capacity to underwrite other policies. There is no assurance that our reinsurers will be able to meet our reinsurance requirements at all times as the reinsurers themselves are exposed to risks relating to insurance business which include changes in political and economic conditions and the occurrence of a substantial amount of underwriting claims arising from global or major catastrophes. Accordingly, there can be no assurance that our reinsurers are able to meet our reinsurance claims at all times and in the event that the reinsurers are unable to meet our reinsurance claim, we remain liable to meet our claims obligations for the risks we have underwritten. Moreover, the aforementioned changes and occurrences may hamper a potential reinsurer’s ability to accept reinsurance proposals which may in turn limit our ability to reinsure some of our risk exposure and accept proposals. The Guidelines on General Reinsurance Arrangements issued by BNM (“Reinsurance Guidelines”) set out the minimum standards which must be observed by insurers when drawing up their reinsurance programmes. The Reinsurance Guidelines cover 4 aspects in determining the adequacy of reinsurance arrangements, namely, appropriateness of retention level, security of reinsurers, spread of reinsurers and appropriateness of reinsurance contracts. While these may assist us in securing more resilient reinsurers, the requirements also limit our ability to source or select reinsurers with most appropriate terms. Furthermore, the reinsurance market is cyclical, with periodic fluctuations in underwriting capacity in the market affecting the cost of reinsurance. Underwriting capacity and rates in the reinsurance market are determined largely by underwriting conditions in the international market, which may not be similar to those in Malaysia. Scarcity of underwriting capacity in the reinsurance market leading to increases in reinsurance rates could raise our reinsurance cost and potentially decrease our underwriting profit. 5.1.5 We face the risk of a decline in our policy holders’ confidence in our financial strength Insurance policy holders’ confidence in the financial strength of an insurance provider such as ourselves can be an important factor in their selection of insurance providers. CAR serves as a key indicator of an insurance provider’s financial resilience. Any actual or perceived reduction in IVIPIB’s CAR or other indicators of MPIB’s financial strength or an insured risk occurring could have a material and adverse effect on I\i1PIB’s financial position which may affect policy holders’ confidence in us and our reputation as a general insurance service prOVider. Any such loss of confidence may materially and adversely affect our business, operating results and financial position, as we may lose our customers or be forced to review our pricing and terms in order to retain them. 32 5. RISK FACTORS (cont’d)
5.1.6 We face insurance risk Insurance risk is an inherent risk faced by all insurance companies including us. It refers to the uncertainty regarding the occurrence, amount or timing of insurance liabilities. Insurance contracts transfer risk to insurance companies by indemnifying its customers against adverse effects arising from the occurrence of specified uncertain future events. The principal risks our Group faces under insurance contracts are that the claim experience of the risks that we accept being different from our expectations, fluctuations in timing, frequency and severity of claims, and the adequacy of premiums and reserves. Our financial performance depends on our ability to accurately assess the potential losses associated with the risks we insure and our ability to price our products and schemes accordingly. In the event that we are unable to do so, our operating results and financial position may be materially and adversely affected, the extent of which would depend on the size of the deviation in the actual claims from expectations. In addition, like other insurance companies, we establish and carry reserves as balance sheet liabilities owing to policyholders for their claims. The process of establishing these reserves is a complex exercise involving many variables and subjective judgements. Due to the nature of the underlying risks and high degree of uncertainty associated with the determination of the liabilities for outstanding claims, we may not always be able to estimate the amount that we will ultimately pay to settle these liabilities with reasonable accuracy. Our operating results and financial position may be materially and adversely affected should the actual claims be significantly higher than our estimate of the liabilities. 5.1.7 Our general insurance business is subject to fire and motor insurance tariffs requirements which may limit our ability to price our policies based on the risk which we insure Fire and motor insurance are subject to tariffs determined by PIAM with the approval of BNM which among others, specify the premium rate that can be charged by general insurance companies for fire and motor insurance products. The motor insurance tariff rates are being revised by BNM on a gradual basis commencing from 16 January 2012 with a view to the tariff being removed by 2016. The second revision which further increased the motor insurance tariff rates was implemented on 15 February 2013. The requirements of the fire insurance tariff have been last revised in 2000 and BNM is also moving towards removing the fire tariff. Pending the removal of tariffs, we are unable to adjust our premiums according to the individual risk profiles and the claims experience of the insured. Accordingly, our profitability may be adversely affected as the tariffs limit our ability to price our insurance risks effectively. 5. RISK FACTORS (cont’d)
5.1.8 We are required to participate in the MMIP All general insurance licence holders in Malaysia, including us, are collectively required to jointly share the losses incurred by the MMIP. MMIP, incepted in 1992, is an insurance pool formed by general insurance companies operating in Malaysia that underwrites insurance cover for vehicles whose owners are unable to obtain motor insurance from any individual insurer. These include motor vehicles which are more than 10 years of age and motorcycles, especially those which are no longer under a hire purchase arrangement. In recent years, the losses incurred by the MMIP have increased as more insurance companies have refused to insure vehicles of higher risk nature. For the years ended 31 December 2010, 2011 and 2012, our share of losses incurred by the MMIP were RM5.5 million, RM6.2 million and RM7.3 million respectively. Whilst such sums have not significantly affected our profitability as they have been offset by the service income which we receive from the MMIP which amounted to RM6.9 million, RM9.0 million and RM12.0 million for the years ended 31 December 2010, 2011 and 2012 respectively, there can be no assurance that our share of losses incurred by the MMIP will not have a material and adverse effect on our profitability in the future.
5.1.9 We operate in a competitive environment In respect of our insurance business, we face significant competition from other general insurance service and Takaful providers in Malaysia. We expect competition to continue to intensify, especially with the recent easing of equity ownership restrictions, whereby the maximum shareholdings of foreign owners in insurance companies in Malaysia was increased from 49.0% to 70.0% (Source: Independent Market Research report by Frost &Sullivan (“IMR Report”». According to the IIVIR Report, in 2011, our market share in the general insurance sector (excluding Takaful providers) was approximately 3.5% (3.2% in 2010) with total gross direct premiums of RM477.8 million (RM403.2 million in 2010). In 2010, we were ranked 15th among the 26 general insurance companies in Malaysia in terms of total gross direct premiums. Within the local-owned insurance company category which comprises 14 companies in Malaysia (excluding Takaful providers), our market share was 5.8% in 2010. We compete on several fronts, including premiums charged, terms and conditions of coverage, product and scheme features and after sales service provided. Our ability to compete is dependent on, among others, our distribution network, financial strength, branding, market knOWledge and experience. Some of the companies against which we compete, including those that may be substantially foreign-owned, may have greater financial, marketing, management and other resources than us. These competitors may be better positioned to attract more customers and agents and more business from brokers by being able to offer a wider range of products and schemes and provide better service. The general insurance industry also competes with the general Takaful providers. According to the IMR Report, from 2006 to 2011, the Takaful industry recorded a growth which reported CAGR of 15.8% in gross premium as compared to a CAGR of 7.1 % for the general insurance industry. 5. RISK FACTORS (cont’d) The increased competitive pressure may require us to, among others, offer policy terms which are more favourable to our customers, thereby potentially adversely affecting our profitability. In addition, we could lose our employees, agencies and business from our brokers to competitors, hence reducing our market share in the general insurance industry. Accordingly, the increased competitive pressure and any inability to compete effectively on our part may materially and adversely affect our business and financial condition. In respect of our credit business, we face competition from, among others, BAFIA­licensed financial institutions offering hire purchase and financing schemes, credit or leasing companies offering credit and leasing facilities and other money-lenders. In order to remain competitive, we may have to offer better financing rates or terms to our customers which may impact our business and profitability. There is no assurance that our credit business will be able to compete successfully against current and future competitors, or that competitive pressures will not materially and adversely affect the business and/or financial condition of our credit business.
5.1.10 We face risk relating to the adequacy of our risk management framework We have established an Enterprise Risk Management Framework to manage our exposure to risks which are inherent in the general insurance business. The risks which are covered under our Enterprise Risk Management Framework include strategic risks, operational risks, financial risks, project risks and market risks. Whilst there has not been any materialisation of risk event that may have a material and adverse effect on our business, there can be no assurance that our risk management policies, procedures and internal controls will always be adequate or effective in managing our risk exposures, especially when the risk events are unidentified or unanticipated. Any occurrence of a risk event may have a material and adverse effect on our results of operations and financial condition.
5.1.11 We face investment risk Our insurance business invests a certain portion of the premiums generated from our insurance products and schemes in private debt securities and Malaysian government securities as well as deposits with financial institutions to generate income and strengthen our financial position. Our insurance business’ investment returns may be materially and adversely affected by conditions affecting our investments, including general economic conditions, asset value, market sentiments and interest rate fluctuations. Changes in interest rates may affect the level and timing of recognition of our gains and losses on debt securities and other investments held in the investment portfolio of our insurance business. A sustained period of lower interest rates would generally reduce the investment yield of our insurance business’ investment portfolio over time as higher yielding investments mature or are redeemed and proceeds are reinvested in new investments with lower yields. Although our insurance business’ investments are guided by our internal investment policy and BNM gUidelines, there is no assurance that our investments will continuously generate income or will not result in a financial loss. There is no assurance that our insurance business and operations or our ability to meet certain regulatory requirements, such as CAR, will not be affected by investment losses that our insurance business may suffer in the future. 5. RISK FACTORS (cont’d)
5.1.12 We face the risk of misconduct by our employees, agencies and brokers Our financial position and reputation may be adversely affected if our employees, agencies and brokers misrepresent, mislead or act dishonestly or fraudulently in offering our products and schemes to our customers. Although we have taken measures to discover and prevent misconduct by our employees, agencies and brokers, there can be no assurance that the measures taken are effective and successful in detecting or preventing such misconduct at all times.
5.1.13 We are exposed to litigation and regulatory investigations We face the risk of litigation, regulatory investigations and similar actions in the course of our business, including the risk of lawsuits and other legal actions relating to failure or delay in paying out claims, sales and underwriting practices and breaches of fiduciary or other duties. Any such action may include claims for substantial or unspecified compensatory and punitive damages, as well as civil, regUlatory or criminal proceedings against our directors or employees, and the probability and amount of liability, if any, may remain unknown for significant periods of time. A substantial liability arising from a lawsuit judgment or regUlatory action could have a material and adverse effect on our liquidity, business, financial condition and operations. Moreover, even if we succeed in defending a claim, regUlatory action or investigation, we may still suffer from the consequential damage to our reputation, which could materially and adversely affect our prospects and future growth, including our ability to attract new customers, retain existing customers and recruit and retain employees. In the case of our Group, SPSSB received on 11 April 2013 a summons dated 6 March 2013 in respect of the lack of a fire certificate for Plaza Flamingo, the penalty for which (if convicted) is a fine not exceeding RM5,OOO.00, imprisonment of the person whose actions led to the said offence for a term not exceeding 3 years, or both. SPSSB is presently taking steps to ensure compliance, and we are of the view that this summons has no material impact on SPSSB. Save for the foregoing, we have not been the subject of any investigations by regulatory authorities. However, there can be no assurance that such investigations may not be initiated in the future. The litigation suits in which we are involved and which are material to us are set out in Section 15.5 of this Prospectus. 5. RISK FACTORS (cant’d)
5.1.14 Our business operations are dependent on IT systems Our insurance operations are mostly computerised. Policy M, our IT system, which supports our underwriting, reinsurance, claims and accounting and finance departments as well as our internet portal which supports our website and facilitates online business transactions, may suffer system failure and breakdown hence disrupting our business operations. Although we have a business continuity plan and disaster recovery programme, there can be no assurance that our business operations will not be affected by such IT system failure. We are currently in the process of replacing our core insurance system with a more advanced platform known as the Enterprise Insurance System C’EIS”). The EIS is expected to improve the overall operational efficiency and effectiveness of our insurance operations. The development of the EIS commenced on 3 February 2009 and is currently in the development and testing stage. Despite the system tests undertaken, there can be no assurance that the EIS will be implemented or will perform better than Policy M and that its implementation will not result in any disruption to our insurance business. There is also no assurance that any upgrades, enhancements or replacements to our IT systems which support our insurance operations will function in the manner expected and will not cause any disruptions to our daily operations leading to a loss of business and materially and adversely affecting our financial condition and performance. In addition, we face the risk of security breaches, computer viruses and malicious attacks on our computer systems. These occurrences could cause system failure, interruptions in service, loss of data or information or reduced business capacity, which could have a negative impact on our business operations. Although we have implemented proper security protection and back-ups, there is no assurance that threats of security breaches, computer viruses and malicious attacks can be eliminated or eliminated indefinitely. Whilst we have not suffered any IT system failure or threats of security breaches, computer viruses and malicious attacks in the past, there can be no assurance that such failures or breaches will not occur in the future. Any occurrences of such events may materially and adversely affect our business operations.
5.1.15 Our insurance and credit businesses are subject to fraud risks Our insurance business faces the risks of our customers providing false information or making fraudulent claims. Whilst we have put in place safeguards and processes, to verify the information supplied by our policy holders, there is no assurance that we are able to detect or prove fraud at all times. Any failure to manage this risk may result in an escalation of fraudulent claims which may materially and adversely affect our results of operations and financial condition. Our credit business depends on our ability to assess credit applications from credit applicants for loans. Similar to our insurance business, our credit business is subject to the risk of the credit applicants providing false or incomplete information, thereby affecting our ability to assess the risk relating to the loans which we extend. Any forged application, or any false or fraudulent information furnished by the credit applicants may cause credit losses to our credit business. Whilst we have in place processes and procedures to verify and assess the credit applications, there can be no assurance that we may be able to prevent all occurrences of fraud or that our operating results and financial conditions will not be materially and adversely affected in the event of any occurrence of fraud. 37 5. RISK FACTORS (cont’d) 5.1.16 The return from our investment in properties is dependent on the performance of the Malaysian property market and our JV partners The disposal of our investment in properties through JVs with property developers, may be a significant contributor to our revenue in the years in which the projects are implemented or completed. Our returns from such JVs depend largely on the performance and capabilities of our JV partners in completing the property development projects in accordance with the agreed terms of the JV. Whilst the current on-going projects, as set out in Section 7.3 of this Prospectus are expected to complete by 2023, there can be no assurance that the projects will be completed on time as a result of factors beyond our control, some of which are as discussed below. Our current JVs involve lands in Selangor and Penang. Our success in the JVs is dependent on the continued growth of the economy and specifically the performance of the property sectors of Selangor and Penang as well as the performance of the Malaysian economy. The success of our JVs is also subject to the various risks faced by property developers such as risk of failure to complete or delay in completion of property development projects, failure by JV partners to secure external financing and fluctuation in construction costs which may have a material and adverse effect on the financial position or profitability of our Group. In the event that a JV partner is unable to perform its obligations, for example, arising from insolvency or financial difficulties, we may have to locate another JV partner to complete the property development project. There can be no assurance that we will be able to do so at all times and we expect the substitution of the JV partner to be more difficult if the development on our land has commenced. The inability of a JV partner to perform its obligations may also result in legal complications, for example, arising from contracts with buyers of the development. Any such event or occurrence may result in an opportunity cost to our business and potential losses affecting our interest in the land which is being developed. Whilst we have not encountered any major disputes with our JV partners, there can no assurance that such disputes or issues will not occur in the future or that we may be able to resolve the disputes and issues amicably. 5.1.17 We may be liable to claims for specific performance and/or any actual losses or damages incurred by our JV partners Our investment division has entered into various JVs for the development of our investment properties as part of our efforts to realise the value of our investment properties. Pursuant to the terms of certain JV agreements, we may be liable to, amongst others, claims for specific performance and losses/damages (excluding anticipated profits) incurred by our JV partners by reason of or arising from an event of default committed by us. Besides that, in certain JV agreements, the shareholders of our JV partners are also entitled to terminate the JV agreements and simultaneously require us to purchase from them, all of their shares in the JV partner at a consideration of 130% of the net tangible assets of the JV partner in the event of a breach by us. In the event that such claim or termination arises, we may have to incur a significant amount of liability in rectifying our default and this may have a material and adverse effect on our cash flow, profitability and financial position. There can be no assurance that we would be able to fUlly adhere to all terms and conditions throughout the tenure of the property development projects. 5. RISK FACTORS (cont’d)
5.1.18 Our investment properties could be sUbject to compulsory acquisition Under the Land Acquisition Act 1960, the State Authority has the power to acquire any land, whether in whole or in part, which is needed: (i) for any pUblic purpose;
(ii) by any person or corporation for any purpose which in the opinion of the State Authority is beneficial to the economic development of Malaysia or any part thereof or to the public generally or any class of the public; or

(iii) for the purposes of mining or for residential, agricultural, commercial, industrial or recreational purpose or any combination of such purposes. In the event of any compulsory acquisition of our investment properties, the amount of compensation to be awarded will be based on the fair market value of our investment properties, assessed on the basis prescribed in the Land Acquisition Act 1960 and other relevant laws. We may potentially lose the ability to recognise development potential from such compulsorily acquired lands. For example, 7 pieces of our plantation land with a total acreage of 2,840.8 acres, all in Mukim Pengerang, Daerah Kota Tinggi, Johor, owned by our wholly-owned subsidiary, Kelana Megah were compulsorily acquired by the State Authority on 8 October 2012. Pursuant to this compulsory acquisition, our land, which is currently operated by a third party operator for oil palm plantation operations, has reduced from 4,644.0 acres to 1,803.2 acres. Whilst our profit-sharing partnership with the third party operator has continued, with the reduced acreage of plantation land, the profits that we derive from the land will be reduced accordingly. (The rest of this page has been intentionally left blank) 5. RISK FACTORS (cont’d) 5.1.19 Some of our landed properties do not comply with the conditions imposed on their respective land titles Land held under PM 345, Lot 13501 in Mukim Hulu Kelang, District of Gombak, State of Selangor Darul Ehsan (“Lot 13501 ‘J Our wholly-owned subsidiary, SPSSB, is the registered proprietor of Lot 13501. A Tenaga Nasional Berhad sub-station and a network pumping station which serve, among others, the Hotel Flamingo by the lake, is situated on Lot 13501. However, the condition imposed on Lot 13501 is that the land can only be used for guards’ and keepers’ quarters. The breach of the above condition on Lot 13501 may result in Lot 13501 being forfeited by the Selangor State Authority and/or a fine (of not less than RM500, and in the case of a continuing breach, a further fine of not less than RM100 for each day during which the breach continues, with the maximum fine to be determined by the Land Administrator, based upon the severity of the breach) being imposed on SPSSB, if the breach is not remedied. SPSSB has undertaken to the SC pursuant to the Offer for Sale that it will ensure compliance of the aforesaid condition no later than 31 December 2013. Additionally, during this period, there can be no assurance that our Lot 13501 will not be forfeited and/or our financial position will not be materially and adversely affected by the imposition of the fines or land forfeiture as a result of the breach of the condition. Land held under PM 854, Lot 1048, Town of Kundang, District of Gombak, Selangor Darul Ehsan (“Lot 1048’J Tibanis is the registered proprietor of Lot 1048. It is a condition endorsed on the issue document of title for Lot 1048 that the land shall be used for duck rearing. When Tibanis acquired Lot 1048, it was already tenanted and the tenant was and is still continuing to rear fish fry on the said land, in contravention of the aforementioned condition which may result in Lot 1048 being forfeited by the Selangor State Authority and/or a fine (of not less than RM500, and in the case of a continuing breach, a further fine of not less than RM 100 for each day during which the breach continues, with the maximum fine to be determined by the Land Administrator, based upon the severity of the breach) being imposed on Tibanis, if the breach is not remedied. Lot 1048 is subject to a JV agreement as set out in Section 15.4(i) of this Prospectus Whereby vacant possession is to be handed over by Tibanis to the JV partner, Pinggir Mentari Sdn Bhd, which is a wholly-owned subsidiary of BDRB (“Pinggir Mentari”) by the third quarter of 2013 and the latter is responsible to comply with any regulatory requirements including land conditions (if applicable) for its development project. In any event, Tibanis has undertaken to the SC pursuant to the Offer for Sale that it will comply with the condition by 31 December 2013 or within the time frame as stipulated in the notice requesting for compliance or rectification of the breach of the condition as may be issued by the land office, whichever is the earlier. Prior to handing over vacant possession, the tenant has been allowed to remain on Lot 1048 in order to preserve the land and to also prevent any trespassers and/or squatters on the land. As at the LPD, Pinggir Mentari has yet to make such application for the variation of land use. Approvals of applications made to the land office to comply with the land conditions and the timing for the said approvals are determined by the land office. There can be no assurance that the application for the variation of land use will be approved and that our Lot 1048 will not be forfeited and/or our financial position will not be materially and adversely affected by the imposition of the fines or land forfeiture as a result of the breach of the condition. 40 5. RISK FACTORS (cont’d)
5.1.20 Our hotel operations may be affected by the outbreak of infectious diseases The outbreak of infectious diseases such as severe acute respiratory syndrome (“SARS”), avian flu or swine flu has historically reduced the number of travellers in the affected region. Outbreaks of such or new infectious diseases could lead to some countries including Malaysia implementing immigration policies to restrict travellers coming from affected countries or regions and airlines may reduce flights to and from such affected areas. For instance, in November 2002, Malaysia and the rest of Asia were affected by an outbreak of SARS, which caused a number of countries to implement restrictions on travellers and workers from, and traffic to, SARS-affected countries. Therefore, outbreaks of infectious diseases may materially and adversely affect the operations and profitability of our hotel operations due to the reduced number of tourist arrivals and cancellation of hotel reservations. If SARS, avian flu or swine flu were to re­emerge or any other outbreaks of similar potential hazardous nature were to occur, there can be no assurance that the operations and financial position of our hotel operations will not be materially and adversely affected. 5.1.21 We may need additional capital in the future which may not be available or may be available on terms not favourable to us We may require additional capital in the future in order for us to meet regUlatory capital adequacy requirements, remain competitive, enter new businesses, pay operating expenses, conduct investment activities, meet our liquidity needs, expand our base of operations and offer new products and schemes. If our existing working capital is not sufficient to satisfy our requirements, we may have to seek new external sources. Our ability to obtain additional capital from external sources in the future is subject to a variety of uncertainties, including: (i) our future financial condition, results of operations and cash flows;
(ii) our ability to obtain the necessary regulatory approvals for capital raising on a timely basis;

(iii) any tightening of credit markets and general market conditions for debt and equity fund raising activities; and (iv) economic, political and social conditions in the geographical markets which we operate and elsewhere. Although we have not, in the past, encountered such difficulty, there can be no assurance that we will be able to obtain additional capital in a timely manner or on acceptable terms, if at all, in future. Future debt financing may include terms that restrict our financial flexibility, or our ability to manage our businesses or pay dividends. Besides that, additional capital raised through issuance of equity securities to third parties or which are not on a pro-rata manner to our shareholders may result in dilution to our shareholders’ equity interests. 5. RISK FACTORS (cont’d) In addition, pursuant to the condition imposed by MoF through the BNM’s letter dated 21 December 2012 (as varied by BNM’s letter dated 20 March 2013), the prior approval of BNM is required before our Company provides any form of financial assistance (including loans, guarantees and indemnities) to the non-financial services business companies within our Group where such financial assistance exceeds such thresholds set out in Section 10.1.2 of this Prospectus. In view of the said restrictions, there can be no assurance that we would be in a position to provide financial assistance in a timely manner or at all, to our non-financial services subsidiaries. Our inability to provide such assistance could lead to the affected companies within our Group delaying or not fulfilling their financial obligations or result in the loss of business opportunities which may have a material and adverse effect on our Group’s operations and financial position. 5.1.22 We face risks on growth and expansion through acquisitions If the insurance industry is required to consolidate to strengthen the general insurance providers or in response to other regulatory requirements or government policies, we may be required to seek businesses or entities to acquire or merge with. As we aim to ensure that all acquisitions are to the best interest of our shareholders, there can be no assurance that we will be able to successfully identify, negotiate the terms for or finance such acquisitions. Even if such targets can be found and that the acquisition is completed, any acquisition that we undertake is subject to acquisition risks, including operational, strategic, financial, accounting and tax risks, such as potential liabilities associated with the acquired business. As such, there is no assurance that we would be able to integrate such acquisitions with our current business, or to benefit from such acquisitions. 5.1.23 We are affected by changes in political, economic, regulatory and social conditions Like any other businesses in Malaysia and foreign countries, changes in political, economic, regulatory and social conditions in Malaysia and elsewhere could materially and adversely affect our Group’s business, prospects, financial performance and result of operations. Political, economic, regulatory and social uncertainties include war, terrorism, riots, expropriation, nationalisation, renegotiations or nullification of existing contracts, changes in law, regulations and political leaderships, debt and equity market volatility, inflation, taxation, interest rates and currency exchange control. 5. RISK FACTORS (cont’d)

5.2 Risks relating to our Shares 5.2.1 There has been no prior public market for our Shares There has been no prior public market for our Shares and it is uncertain whether a market will ever develop or, if a market does develop, whether it will be sustained. There can be no assurance as to the liquidity of any market that may develop for our Shares, the ability of holders to sell their Shares or the prices at which holders would be able to sell their Shares. Our Shares could trade at prices that may be lower than the Offer Price depending on many factors, including prevailing economic and financial conditions in Malaysia, our operating results and the markets for similar securities. In addition, the market for securities in emerging markets has been subject to disruptions that have caused intense volatility in the prices of securities similar to our Shares. There can be no assurance that the market for our Shares, if any, will not be subject to similar disruptions. Any disruption in such market may have a material and adverse effect on the holders of our Shares.
5.2.2 There may be a potential delay or failure of the Listing The Listing may be potentially delayed or aborted upon the occurrence of certain events, including the following: (i) we are unable to meet the public spread requirements as determined by Bursa Securities of having at least 25% of our Shares for which Listing is sought being held by a minimum of 1,000 pUblic shareholders holding not less than 100 Shares each at the point of Listing; or
(ii) revocation of the approval of Bursa Securities for the Listing and/or admission to the Official List for whatever reason.

If the Listing is aborted, investors will not receive any Offer Shares and the Selling Shareholder will return in full, without interest, all monies paid in respect of any application for the Offer Shares. If any such monies are not returned in full within 14 days after the Selling Shareholder becomes liable to do so, the provision of sub­sections 243(2) and 243(6) of the CMSA shall apply accordingly.
5.2.3 We face the risk of our Underwriters terminating the Underwriting Agreement The Underwriters may terminate the Underwriting Agreement upon the occurrence of any of the termination events set out in Section 4.13 of this Prospectus at any time before our listing on the Main Market. No assurance can be given that the Managing Underwriter or any of the Underwriters will not terminate the Underwriting Agreement if any of such situations occurs. 5. RISK FACTORS (cont’d)
5.2.4 Our Share price and trading volume may be volatile The market price of our Shares may fluctuate as a result of, among others, variations in the liquidity of the market for our Shares, differences between our actual financial operating results and those expected by investors and analysts, changes in analysts’ recommendations or projections, changes in general market conditions and broad market fluctuations. In addition, many of the risks described elsewhere in this Prospectus could materially and adversely affect the market price of our Shares. Accordingly, there can be no assurance that our Shares will not trade at prices lower than the Offer Price. Over the past few years, the Malaysian, regional and global equity markets have experienced significant price and volume volatility that have affected the share price of many companies. Share prices of many companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. There can be no assurance that the price and trading of our Shares will not be SUbject to such fluctuations in the future.
5.2.5 We may not be able to pay dividends Dividend payments are not guaranteed and our Board may decide, at its sole and absolute discretion, at any time and for any reason, not to pay dividends. If we do not pay dividends, or pay dividends at levels lower than that anticipated by investors, the market price of our Shares may be negatively affected and the value of any investment in our Shares may be reduced. In addition, BNM’s prior approval is required for the payment of dividends by our Company, MP Capital and !VIPIB pursuant to the condition imposed by MoF through BNM’s letter dated 21 December 2012 (as varied by BNM’s letter dated 20 March 2013). Please refer to Section 10.1.2 of this Prospectus for further details. Any payment of dividends may adversely affect our ability to fund unexpected capital expenditures as well as our ability to make interest and principal repayments on our debt. As a result, we may be required to borrow additional money or raise capital by issuing equity securities, which may not be possible or may not be on favourable terms or at all. Further, in the event we incur new borrowings subsequent to the Listing, we may be subject to covenants restricting our ability to pay dividends. We are an investment holding company and conduct substantially all of our operations through our subsidiaries. Accordingly, an important source of our income, and consequently an important factor to our ability to pay dividends on our Shares, is the dividends and other distributions that we may receive from our subsidiaries. Our subsidiaries’ ability to pay dividends or make other distributions to us in the future is subject to them having sufficient funds and distributable profits after setting aside funds required for their operations, other obligations or business plans. Following the Debt Novation as set out in Section 6.2 of this Prospectus, there remains an amount of RM77.6 million owing by our Company to MP Capital, Kelana Megah and Mimaland. These amounts may be repaid by our Company following the declaration of dividends by MP Capital, Kelana Megah and Mimaland. In such an event, the amount of cash received by our Company from the dividends will be reduced by the amount owing to MP Capital, Kelana Megah and Mimaland until the entire amount of RM77.6 million has been repaid by our Company. 5. RISK FACTORS (cont’d) Besides that, our subsidiaries’ ability to declare and pay dividends is subject to restrictions imposed on them in the financing facility agreements entered into between them and the respective financial institutions as well as BNM’s prior approval for payment of dividends by MP Capital or MPIB. In addition, the ability of MPIB to pay dividends on its shares is also dependent on whether its CAR position is less than its internal target CAR level or if the payment of dividend would impair its CAR position to below its internal target as set out in Section 5.1.1 of this Prospectus. Further, as our Company is a shareholder of our operating companies, our claims as such will generally rank junior to all other creditors and claimants against our operating companies. In the event of an operating company’s liqUidation, there may not be sufficient assets for our Company to recoup our investment. 5.2.6 The sale or the possible sale of a substantial number of our Shares in the public market following our IPO could adversely affect the price of our Shares Following the Offer for Sale and based on the Undertakings (excluding Excess Applications), approximately 32.9% of our issued and paid-up share capital will be held by the Promoters (other than the Selling Shareholder), and approximately 67.1 % of our issued and paid-up share capital will be held by investors participating in our IPO. The Entitled Shareholders and/or their renouncees who apply for our Offer Shares will be able to trade on the Main Market without restriction immediately upon the Listing, save for the Promoters (other than the Selling Shareholder) whose shares are subject to a moratorium in accordance with the SC’s requirements. It is also possible that the Promoters (other than the Selling Shareholder) and substantial shareholders may dispose of some or all of their Shares pursuant to their own investment objectives in the future. In addition, individual shareholders of our Company will have to reduce their Shares to a level of not more than 10.0% of our issued and paid-up share capital pursuant to the condition imposed by the MoF as set out in Section 10.1.2 of this Prospectus. If the Promoters (other than the Selling Shareholder) and/or substantial shareholders sell or are perceived as intending to sell a substantial number of our Shares, the market price for our Shares could be materially and adversely affected.

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