THE  SAMAGGI  INSURANCE  PUBLIC  COMPANY  LIMITED
NOTES  TO  THE  FINANCIAL  STATEMENTS
FOR  THE  YEARS  ENDED  DECEMBER  31, 2005  AND  2004


1.	BASIS  FOR  PREPARATION  OF  THE  FINANCIAL  STATEMENTS  AND  OPERATION  OF  THE  COMPANY

1.1	Basis for preparation of the financial statements

The financial statements have been prepared in accordance with the regulations of the Stock Exchange of Thailand dated January 22, 2001, regarding the basis, conditions and procedures for the preparation and submission of financial statements and reports for the financial position and results of operations of listed companies B.E. 2544, and in accordance with the Registrars Notification of the Department of Insurance No. 10/2545 regarding the presentation of the financial statements of insurance company dated March 6, 2002 and in accordance with accounting standards in Thailand. 

The Company maintains its accounting records in Thai Baht and prepares its statutory financial statements in the Thai language in conformity with accounting standards and practices generally accepted in Thailand.

1.2	Operation of the Company

The Company was registered in Thailand on July 28, 1947.  The Companys main business is non-life insurance and was awarded its license to operate all classes of non-life insurance on August 2, 1984.  Its parent company is the Siam Commercial Bank Public Company Limited, a company also existing under Thai laws. The head office is located at 2/4 Samaggi Insurance Tower, 12th floor Northpark Project, Vibhavadirangsit Road Laksi, Bangkok.  

As at December 31, 2005 and 2004, the Company had total staff of 252 persons and 219 persons and staff expenses for the years ended December 31, 2005 and 2004 were approximately Baht  121.97 million and 120.98 million, respectively.


2.	SIGNIFICANT  ACCOUNTING  POLICIES

2.1	Cash and cash equivalents

Cash and cash equivalents include cash on hand and all types of deposits with banks with original maturities of 3 months or less and investment in securities - notes with original maturities of 3 months or less.

In the statement of cash flows, cash, deposits at banks and investment in securities - notes used as collateral or having original terms to maturity of over 3 months are not included in cash and cash equivalents but are presented in investing activities. 





/2



2.2	Recognition of revenues and expenses

Premium
Premium income is recognised on the date the relevant insurance policy comes into effect, after deducting premium ceded and cancelled.

Reinsurance premium
Premium income is recognised when the reinsurer places the reinsurance application or statement of accounts with the Company.

Interest and dividends
Interest is recognised as income on an accrual basis. Dividends are recognised as income on the closing date of shareholders register or on the date on which the right to receive the dividend arises.

Commissions and brokerages
Commissions and brokerages are expensed on an accrual basis.

Expenses are recognized on an accrual basis.

2.3	Investment in securities

Securities classified as available for sale are stated at fair value. Gain or loss on the change in fair value is recognized as a component of shareholders equity, shown net of deferred tax.

Securities classified as general investments are stated at cost net of reserves for impairment, if applicable.

Debt securities classified as held to maturity are stated at amortized cost. 

In case an impairment in value of an investment has occurred, a provision for impairment is recognized in the statements of income and a related reserve for impairment is established.

Premiums and discounts on debt securities are amortized and accreted to income as adjustment to interest income by using the effective interest rate method.

For equity securities which are listed securities, fair value or market value are estimated using the bidding prices at the Stock Exchange of Thailand on the last business day of the year.

Cost of securities sold are determined by the weighted average method.

2.4	Allowance for doubtful accounts and bad debt

The allowance for doubtful accounts is provided at the estimated collection losses on premium due and uncollected at the end of the year. Such estimated losses are based on the Companys collection experience.



/3



2.5	Property, plant and equipment

Land is stated at cost. Premises and equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated by the straight-line method, based on the estimated useful lives of the assets as follows:

Building and improvements	15-40  years
Others	3-5   years

2.6	Other assets

Other assets consisting of computer software are stated at cost, net of accumulated amortization.

Amortization is calculated by the straight-line method, based on the estimated useful lives of the assets as 5-10 years.

2.7	Provident fund

The Company has set up a provident fund which is contributory and it has been registered in accordance with the Provident Fund Act B.E. 2530 (1987).  The Company contributions to the fund are charged as an expense as they fall due.

2.8	Unearned premium reserve

Unearned premium reserve is accrued for in compliance with the methodology as specified in the Insurance Act B.E. 2535 (1992) as follows :

Fire, motor and miscellaneous	- Monthly average basis (the one-twenty fourth method)
Marine	- Premium written for the last three months
Travel accident  	- Premium written for the last one month

2.9	Loss reserve and outstanding claims

Outstanding claims have been provided whenever claims have been submitted at a sum as advised by the insurer. Loss reserve has been provided based on estimates made by the Companys management.

Incurred but not reported claim liabilities have been provided by calculating equal to 2.5% of retrospective 12 months net premium. 

2.10	Income tax expenses

The Company has adopted International Accounting Standard No. 12 Income Taxes as there is no applicable Thai accounting standards.  The policy is as follows:

Income tax expense is based on the taxable profit multiplied by the tax rate that has been enacted at the balance sheet date and adjusted by the affect from deferred tax accounting.


/4



Deferred tax assets and liabilities have resulted from the temporary differences between the carrying amount of assets or liabilities in the balance sheet and their tax base.  Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable taxable profit will be available against which deductible temporary differences can be utilised.  

Deferred tax expenses are charged or credited in the statements of income, except when the temporary differences relate to items credited or charged directly to equity, in which case the deferred tax is also recorded in equity.  

Deferred tax assets and liabilities are offset when they relate to income tax levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

2.11	Foreign currency transactions

Transactions during the year denominated in foreign currencies are translated into Baht at the rates of exchange prevailing at transaction dates. Monetary assets and liabilities at the balance sheet date denominated in foreign currencies are translated into Baht at the reference exchange rates established by the Bank of Thailand at that date. Gains and losses on exchange arising on settlements and translation are recognized as income or expense when incurred.

2.12	Earnings per share

Basic earnings per share are calculated by dividing net income by the number of weighted average ordinary shares outstanding at the end of the year.  In the case of a capital increase, the number of shares is weighted according to the time of subscription received for the increase in issued and paid-up share capital. The diluted earnings per share are calculated from net income for the period divided by the weighted average number of warrants on the assumption the conversion of all warrant has been made at the beginning of the period or, if later, the date of the issuance of the potential warrants,  even though it is not the exercise date yet.

2.13	Use of accounting  estimates

Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities. The actual result may differ from such estimates.


3.	RECLASSIFICATIONS

Certain reclassifications have been made to the financial statements for the year ended December 31, 2004 to conform to the presentation of the financial statements for the year ended December 31, 2005 as follows:

3.1	Amount deposit on reinsurance treaties as at December 31, 2004 of Baht 7.17 million included in amount deposit on reinsurance treaties which was previously included in due from reinsurers.

3.2	Intangible assets as at December 31, 2004 of Baht 6.05 million are separately presented in other assets which was previously included in other assets - other.

3.3	Accrued expenses and deferred premium as at December 31, 2004 of Baht 20.18 million and Baht 24.39 million, respectively, are separately presented in other liabilities which was previously included in other liabilities - other.
/5



4.	ADDITIONAL  INFORMATION  FOR  CASH  FLOW

4.1	Cash and cash equivalents consisted of the following:

UNIT : Baht

As at December 31,

2005

2004




Investment in securities  Notes
234,336,485

118,681,885
Cash and deposits at financial Institutions



  Deposits at banks - call deposits
220,536,360

112,203,614
  Deposits at banks - time deposits
100,000,000

110,000,000
  Total cash and deposits at financial institutions
320,536,360

222,203,614
Total cash, deposits at financial institutions and investment



 in securities  Notes
554,872,845

340,885,499
Less 	Notes with maturity over 3 months
(139,400,210)

(78,681,885)
	Deposits at financial institutions with maturity



 over 3 months and/or used as collateral
(100,000,000)

(110,000,000)
Cash and cash equivalents
315,472,635

152,203,614

4.2	Non-cash items
4.2.1	For the year ended December 31, 2005, cash paid to purchase property, plant and equipment are as follows:
UNIT : Baht



2005




Purchases of plant and equipment


26,740,577
Less   Cash payment for purchase of plant and



equipment


(16,328,099)
                     Liabilities recorded


10,412,478

4.2.2	As at December 31, 2005 and 2004, the surplus on revaluation of investment of Baht 4.99 million and Baht 14.69 million, respectively, in the shareholders equity, were shown net of deferred tax of Baht 1.66 million and Baht 4.90  million, respectively (see Note 18).  During the year ended December 31, 2005 and 2004, the Company has a decrease in the surplus on revaluation of investment of Baht 9.70 million (net of deferred tax of Baht 3.23 million) and Baht 200.25 million (net of deferred tax of Baht 66.75 million), respectively.

4.3 Cash flow provided by operating activities

Items to reconcile net income to net cash flows provided by (used in) operating activities for the years ended December 31, 2005 and 2004 are as follows :
 UNIT : Baht

2005

2004




Cash flows from operating activities



Net income
249,997,704

286,021,796
Items to reconcile net income to net cash flows:



   Depreciation
27,975,534

26,492,051
   Amortization of intangible assets 
1,828,972

1,770,259
   Amortization of discount on investment
(3,093,995)

(828,856)
   Amortization of premium on investment
344,258

1,421,354
/6



UNIT : Baht

2005

2004
Items to reconcile net income to net cash flows: (Continued) 



Gain on sale of assets
(2,906,874)

(357,250)
Loss (gain) on sale of securities
12,290,124

(94,519,974)
Reversal of allowance for doubtful accounts
2,150,751

1,098,705
Deferred income tax
(56,423,802)

(7,910,128)
Income from operations before changes in operating assets and



liabilities
232,162,672

213,187,957
Operating assets (increase) decrease



Amount deposit on reinsurance treaties
(8,155,035)

1,305,041
Due from reinsurers
12,302,295

(4,992,083)
Premium due and uncollected
49,080,760

(79,232,332)
Accrued income on investments
6,945,115

(8,340,450)
Deposits
(1,574,145)

(131,974)
Intangible assets
(4,480,000)

(2,100,971)
Other assets
(1,682,215)

3,563,473
Operating liabilities increase (decrease)



Unearned premium reserve
124,821,235

76,654,613
Loss reserves and outstanding claims
(6,908,729)

112,961,262
Amount withheld on reinsurance treaties
(9,389,750)

1,156,523
Due to reinsurers
(43,480,797)

25,849,735
Unearned revenues 
88,903,164

48,557,386
Accrued commissions and brokerages
47,827

4,761,630
Accrued corporate income tax
(11,200,139)

(4,493,431)
Accrued expenses
8,200,039

15,008,913
Deferred premium
4,352,337

(514,521)
Other liabilities
6,595,321

(10,183,362)
Net cash provided by operating activities
446,539,955

393,017,409


5.	INVESTMENTS  IN  SECURITIES

Investments in securities as at December 31, 2005, consisted of the following:
UNIT : Baht

Book

Gross

Gross

Fair Value

Value

Unrealized

Unrealized





Gains

Losses


Securities available for sale







Equity securities







  Listed securities







  Ordinary shares
254,145,802

19,343,815

(8,682,035)

264,807,582
  Units trusts
1,029,915,000

5,192,322

(4,332,885)

1,030,774,437

1,284,060,802

24,536,137

(13,014,920)

1,295,582,019
Debt securities







  Bonds
58,717,197

-

(79,916)

58,637,281
  Treasury bills
84,635,933

-

(136,345)

84,499,588
  Debentures
241,667,666

2,518,177

(7,168,490)

237,017,353

385,020,796

2,518,177

(7,384,751)

380,154,222
Total
1,669,081,598

27,054,314

(20,399,671)

1,675,736,241
/7


UNIT : Baht







Cost
Securities  for general  investment







Equity securities







  Other securities







  Ordinary shares






14,084,690
Total






14,084,690

UNIT : Baht

Maturities within

Amortized

1 year

2 - 5 years

6 - 10 years

Cost
Securities held to maturity







Debt securities







  Government bonds and


 




state enterprise bonds
20,650,000

60,029,964

-

80,679,964
  Notes
234,336,485

-

-

234,336,485
  Debentures
45,006,856

9,000,000

-

54,006,856

299,993,341

69,029,964

-

396,023,305
Less Allowance for impairment 







of investment - Debentures
(81,120)

-

-

(81,120)
   Total
299,912,221

69,029,964

-

368,942,185
   Total value of investment in securities






2,058,763,116

Other information related to securities held to maturity were as follows:
UNIT : Baht

Amortized

Gross

Gross

Fair Value

Cost

Unrealized

Unrealized





Gains

Losses


Securities held to maturity







Debt  securities







  Government bonds and







state enterprise bonds
80,679,964

701,461

(86,388)

81,295,037
  Notes
234,336,485

- 

(166,204)

234,170,281
  Debentures
53,925,736

219,074

-

54,144,810
   Total
368,942,185

920,535

(252,592)

369,610,128

Investments in unit trusts consisted of the following:

UNIT : Baht

Book

Gross

Gross

Fair Value

Investment 

Value

Unrealized

Unrealized



Income



Gains

Losses



(Loss)
Securities available for sale - Units trusts









Ayudhya Phatanamongkol Fund
9,915,000

-

-

9,915,000

(13,842,214)
Lum Ka Fund
290,000,000

-

(4,332,885)

285,667,115

18,676,139
SCB Pompho  Open End Fund
290,000,000

564,607

-

290,564,607

20,320,624
Asset Plus Growth Dividend Fund
290,000,000

2,433,100

-

292,433,100

13,630,000
Aberdeen Flexible Capital Fund
100,000,000

250,327

-

100,250,327

14,262,330
The Ruang Khao High Income Fund
50,000,000

1,944,288

-

51,944,288

1,488,199

1,029,915,000

5,192,322

(4,332,885)

1,030,774,437


/8



Investments in securities as at December 31, 2004, consisted of the following:
UNIT : Baht

Book

Gross

Gross

Fair Value

Value

Unrealized

Unrealized





Gains

Losses


Securities available for sale







Equity securities







  Listed securities







  Ordinary shares
337,034,556

24,393,045

(1,736,013)

359,691,588
Units trusts
1,120,000,000

8,120,620

(13,836,903)

1,114,283,717

1,457,034,556

32,513,665

(15,572,916)

1,473,975,305
Debt securities







  Bonds
32,481,337

15,512

(571,133)

31,925,716
  Debentures
205,976,319

3,498,414

(294,655)

209,180,078

238,457,656

3,513,926

(865,788)

241,105,794
Total
1,695,492,212

36,027,591

(16,438,704)

1,715,081,099








Cost
Securities  for general  investment







Equity securities







  Other securities







  Ordinary shares






13,284,790
Total






13,284,790

UNIT : Baht

Maturities within

Amortized

1 year

2 - 5 years

6 - 10 years

Cost
Securities held to maturity







Debt securities







  Government bonds and







state enterprise bonds
25,198,080

5,550,520

-

30,748,600
  Notes
118,681,885

-

-

118,681,885
  Debentures
8,081,120

53,921,067

-

62,002,187

151,961,085

59,471,587

-

211,432,672
Less Allowance for impairment 







of investment - Debentures
(81,120)

-

-

(81,120)
   Total
151,879,965

59,471,587

-

211,351,552
   Total value of investment in securities






1,939,717,441











/9



Other information related to securities held to maturity were as follows:

UNIT : Baht

Amortized

Gross

Gross

Fair Value

Cost

Unrealized

Unrealized





Gains

Losses


Securities held to maturity







Debt  securities







  Government bonds and







state enterprise bonds
30,748,600

6,055,237

-

36,803,837
  Notes
118,681,885

358,986

-

119,040,871
  Debentures
61,921,067

555,823

-

62,476,890
   Total
211,351,552

6,970,046

-

218,321,598

Investments in unit trusts consisted of the following:
UNIT : Baht

Book

Gross

Gross

Fair Value

Investment 

Value

Unrealized

Unrealized



Income



Gains

Losses




Securities available for sale - Units trusts









Ayudhya Phatanamongkol Fund
200,000,000

-

(11,925,803)

188,074,197

45,096,696
Lum Ka Fund
290,000,000

1,799,113

-

291,799,113

23,345,174
SCB Pompho  Open End Fund
290,000,000

5,897,319

-

295,897,319

21,467,214
Asset Plus Growth Dividend Fund
290,000,000

-

(1,911,100)

288,088,900

-
Aberdeen Flexible Capital Fund
50,000,000

424,188

-

50,424,188

14,265,046

1,120,000,000

8,120,620

(13,836,903)

1,114,283,717



As at December 31, 2005 and 2004, investment in securities held to maturity - state enterprise bonds with an amortised cost of Baht 14.00 million was deposited with the Registrar in accordance with the Insurance Act B.E. 2535 (1992) (see Note 13).

As at December 31, 2005, investment in securities held to maturity - government bonds with an amortised cost of Baht 3.90 million and Baht 2.00 million were pledged as collateral for drivers lawsuits and electricity usage, respectively. And as at December 31, 2004, investment in securities held to maturity - state enterprise bonds with an amortised cost of Baht 3.21 million and Baht 2.00 million were pledged as collateral for drivers lawsuits and electricity usage, respectively.

As at December 31, 2005 and 2004, the Company has an investment in private funds included in securities available for sale - stocks of Baht 79.91 million and Baht 96.41 million, respectively, with the investment term of one year with security companies as the fund manager.









/10



6.	LOANS

As at December 31, 2005 and 2004, loans consisted of the following:

UNIT : Baht

2005

 2004
Security guaranteed loans



Loan to a non - related company 
-

50,000,000
Loans to employees
719,045

724,518
 Total security guaranteed loans
719,045

50,724,518
Other loans
50,000

132,409
Total loans
769,045

50,856,927

As at December 31, 2004, the Company had a loan to a non - related company in the amount of Baht 50 million, with the principal due on January 17, 2005, and an interest rate of 2.75% per annum, paid every three months. The loan is guaranteed by a financial institution. The Company has already received repayment of such loan during 2005.

Credit lines of the loans to employees are in accordance with the welfare policy of the Companys other loans, with interest rates of 3.75% - 5.25% per annum for the year ended December 31, 2005 and 2004.


7.	CASH  AND  DEPOSITS  AT  FINANCIAL  INSTITUTIONS

As at December 31, 2004, fixed deposits amounting to Baht 10 million were pledged as collateral for bank overdrafts limit (see Note 12).





















/11



8.	PROPERTY,  PLANT  AND EQUIPMENT - NET

Property, plant and equipment - net as at December 31, 2005 and 2004, consist of the following :

UNIT : Baht

Cost

Accumulated Depreciation
Property, plant

2004

Additions

Disposal

2005

2004

Additions

Disposal

2005
and
















equipment - net

















Land
148,314,096

-

-

148,314,096

-

-

-

-

148,314,096
Buildings and improvement
394,162,724

4,699,931

-

398,862,655

(133,326,750)

(15,152,200)

-

(148,478,950)

250,383,705
Furniture and office equipment
122,140,426

7,842,616

-

129,983,042

(112,556,549)

(6,201,681)

-

(118,758,230)

11,224,812
Other equipment
2,602,726

57,775

-

2,660,501

(1,619,263)

(270,677)

-

(1,889,940)

770,561
Vehicles
38,883,306

14,140,255

(8,777,400)

44,246,161

(20,421,393)

(6,350,976)

8,305,902

(18,466,467)

25,779,694
Total 
706,103,278

26,740,577

(8,777,400)

724,066,455

(267,923,955)

(27,975,534)

8,305,902

(287,593,587)

436,472,868


















Depreciation for the year   2005
27,975,534
















Depreciation for the year   2004
26,492,051

















As of December 31, 2005 and 2004,  equipment at cost of Baht 104,003,380 and Baht 106,799,841 respectively, were fully depreciated but still in use by the Company. 








/12




9.	DUE FROM REINSURERS - NET

As at December 31, 2005 and 2004, due from reinsurers are as follows:

UNIT : Baht

2005

2004




Due from reinsurers 
1,364,686

5,995,502
Less  Allowance for doubtful accounts
(499,670)

-
Total due from reinsurers - net 	
865,016

5,995,502


10.	PREMIUM  DUE  AND  UNCOLLECTED - NET

As at December 31, 2005 and 2004, premium due and uncollected were classified by aging as follows:

UNIT : Baht

2005

2004




3 months or less 
285,368,546

329,451,180
Over 3 months up to 6 months
31,451,748

38,582,360
Over 6 months up to 12 months
10,149,110

8,840,405
More than 12 months
9,842,973

9,518,861
Total premium due and uncollected
336,812,377

386,392,806
Less  Allowance for doubtful accounts
(9,753,553)

(8,102,471)
Total premium due and uncollected - net 
327,058,824

378,290,335

As at December 31, 2005 and 2004, the premium due and uncollected over 12 months net-of the related accrued commissions and brokerages amounted to Baht 8,675,698 and Baht 7,167,433, respectively.   The Company will not pay the commissions and brokerages for uncollectable premium.


11.	INTANGIBLE - NET

Intangible assets - net as at December 31, 2005 and 2004, consist of the following:
UNIT : Baht

2005

2004




Computer software



Cost
14,489,992

10,009,992
Accumulated Amortization
(5,793,935)

(3,964,963)
Total
8,696,057

6,045,029


12.	BANK  OVERDRAFTS 

As at December 31, 2005, the Company has a credit line of bank overdrafts from a bank which is the parent company of Baht 30 million, without collateral, and interest rate of minimum overdraft rate (MOR).

As at December 31, 2004, the Company has a credit line of bank overdrafts from a bank which is the parent company of Baht 10 million which fixed deposits amounting to Baht 10 million (see Note 7)
were pledged as collateral with an interest rate of the rate of fixed deposits used for pledging as collateral plus 2% per annum.

As at December 31, 2005 and 2004, the Company has no bank overdrafts balance.
/13



13.	DEPOSITS  WITH  THE  REGISTRAR

As at December 31, 2005 and 2004, state enterprise bonds with an amortised cost of Baht 14.00 million, are deposited with the Registrar in accordance with the Insurance Act B.E. 2535 (1992) (see Note 5).


14.	LOSS RESERVES 

As at December 31, 2004, the Company has estimated the loss reserves net of reinsurance of Baht 71.60 million for the loss relating to the Tsunami catastrophe in the six southern provinces of Thailand on December 26, 2004, and has recognized the loss incurred in the income statement for the year ended December 31, 2004. Such amount of loss reserves was estimated from the surveyor report provided by the independent survey companies according to the guidelines established by the Department of Insurance.

As at December 31, 2005, the Company has paid the loss reserve net of reinsurance of Baht 42.68 million.


15.	SHARE  CAPITAL 

As at April 2, 2002, the annual ordinary shareholders meeting passed resolutions to issue five-year warrants of 30 million units to the shareholders who subscribed for the new shares at a ratio of one new share for one warrant. The warrants ware issued free of charge. The warrants have an exercise price of Baht 5 at the rate of one warrant per one ordinary share. 

As at May 29, 2002, the existing shareholders have subscribed and paid for the increased share capital of 29.72 million shares.

As at September 10, 2002, the Company has been approved by the Securities and Exchange Commission for issuing warrants to the existing shareholders who subscribed for such increased share capital. On October 29, 2002, the Board of Director considered and approved the first exercise date of the warrants which is July 1, 2005 and could be exercised on first business day of January, April, July and October, which the last exercised date will be November 14, 2007.

On June 24, 2005, the extra ordinary shareholders meeting passed a resolution to change the exercise ratio from one warrant per 1.00 ordinary share to one warrant per 1.05 ordinary share according to the condition of the warrants prospectus to purchase new ordinary shares.

As at December 31, 2005, the warrants have been converted into ordinary shares as follows:


Number of




Number of

common shares
Cash received
Date share capital

warrant


received

from exercised rights

registered as
Exercise date
units


shares

Baht

paid up











July 1, 2005
3,356,688


3,517,586


17,587,930


July 29, 2005
October 1, 2005
3,728,600


3,907,378


19,536,890


October 20, 2005
Total
7,085,288


7,424,964


37,124,820




As at December 31, 2005, the remaining unexercised warrants were 22,633,720 warrants.

/14



16.	STATUTORY  RESERVE

Pursuant to the Public Limited Companies Act B.E. 2535 (1992), the Company must allocate to a reserve fund from the annual net profit, not less then five percent of the annual net profit deducted by the  total accumulated loss brought forward (if any) until the reserve fund reaches an amount of not less than ten percent of the authorized capital.   Such reserve fund is not available for distribution as dividend.

17.	OTHER  RESERVES

As at December 31, 2005 and 2004, other reserves amounting to Baht 400 million were established without having any specific purpose.


18.	INCOME  TAX  EXPENSES

For the years ended December 31, 2005 and 2004, income tax expense consist of the following: 

UNIT : Baht

2005

2004




Income tax expense - current tax
114,007,873

65,439,038
Add (Less) Tax effect from deferred income tax 



Allowance for doubtful accounts of



premium due and uncollected
(537,688)

274,676
Unearned premium reserve
2,066,969

(7,426,510)
Loss reserve
(55,725,535)

-
Allowance for incurred but



not reported claims 
(2,079,518)

(733,571)
Other
(148,029)

87,025
Income tax expenses
57,584,072

57,640,658

	According to the Royal Decree No. 387 B.E. 2544 issued under the Revenue Code regarding the corporate income tax rate deduction dated August 28, 2001, the corporate income tax for listed companies of the Stock Exchange of Thailand has been reduced from 30% to 25% of net profit which does not exceed Baht 300 million.  This will remain in effect for five consecutive accounting periods beginning on or after September 6, 2001.

As at December 31, 2005 and 2004, deferred tax assets and liabilities which resulted from the temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base are as follows: 
UNIT : Baht

2005

2004
Deferred tax assets resulted from:



  Impairment of debentures
20,280

20,280
  Allowance for doubtful accounts of



premium due and uncollected
2,563,306

2,025,618
  Unearned premium reserve
25,113,354

27,180,323
  Loss reserve
55,725,535

-
  Incurred but not reported claims liabilities
7,653,443

5,573,925
  Other
940,231

792,201
 Total deferred tax assets
92,016,149

35,592,347




Deferred tax liabilities resulted from:



  Unrealized gain on the change in value of 



     investment - securities available for sale (Note 4.2.2) 
1,663,661

4,897,222
Total deferred tax liabilities
1,663,661

4,897,222
/15



Deferred tax assets for loss reserve as of December 31, 2005, amounting to Baht 55.73 million resulted from the treatment of loss reserve being a non-deductible expenses in calculating of corporate income tax, according to the letter from The General Insurance Association dated May 27, 2005 which is the result of a discussion with the Revenue Department by The General Insurance Association on such matter.


19.	EARNINGS  PER  SHARE

As at December 31, 2005 and 2004, the Company had 22.63 million and 29.72 million warrants outstanding, respectively, which have an exercise price of Baht 5 at the rate of one warrant per 1.05 ordinary share (see Note 15).  The calculation of the diluted earning per share is based on the assumption the exercise of the warrant holders has been made, the average fair values of the common stock for calculating the diluted earning per share for the year ended December 31, 2005 and 2004, are Baht 38.75 and Baht 46.88, respectively.   

Earnings per share for the years ended December 31, 2005 and 2004 are calculated as follows:


Net Income

Weighted Average
Earnings Per 





Number of Common
Share





Shares



2005

2004

2005

2004
2005
2004

Million

Million

Million 

Million 
Baht
Baht

Baht

Baht

Shares

Shares


Basic earnings per share









Net income
249.99

286.02

64.75

62.70
3.86
4.56
Effect of diluted equivalent ordinary shares









Warrants
-

-

25.54

26.55


Diluted earnings per share









Income available to ordinary 









shareholders plus assumed  









exercise of warrants
249.99

286.02

90.29

89.25
2.77
3.20


20.	 DIVIDENDS  PAID

On April 21, 2005, the ordinary shareholders meeting passed a resolution to pay an annual dividend for the year 2004 of Baht 4.50 per share on 59.72 million shares, totaling Baht 268.74 million.  The Company paid such dividend on April 29, 2005. 

On April 23, 2004, the ordinary shareholders meeting passed a resolution to pay an annual dividend for the year 2003 of Baht 3.50 per share on 59.72 million shares, totaling Baht 209.02 million. The Company paid such dividend on April 29, 2004. 

/16



21.	TRANSACTIONS WITH RELATED COMPANIES

A portion of the Companys assets, revenues and expenses arose from transactions with related companies. The relationship may be by shareholding or the companies may have the same group of shareholders or directors.  The Companys management believes that the Company has no significant influence over the related companies. The financial statements reflect the effects of these transactions determined on the conditions mutually agreed by the companies.  The transactions are as follows:

21.1	 Significant balances with related parties were as follows :

Unit : Baht

Relationship
As at
As at
Pricing Policy


December 31, 
December 31, 



2005
2004

Unit trusts managed by




  SCB Asset Management
Subsidiary of the parent company
290,000,000
290,000,000
On the basis of management fee in rate that the Company has offered to other companies.
Notes issued by




  The Siam Industrial Credit Pcl.
Associated company of the parent company
94,963,586
38,681,885
On the basis of interest rate that the Company has offered to other companies.
Bank deposits 




  The Siam Commercial Bank Pcl.
Parent company
196,241,273
71,621,759
On the basis of the interest rate that the  bank  has  offered  to  insurance companies.
Premium due and uncollected




  The Siam Commercial Bank Pcl.
Parent company
13,523,339
28,191,546
Price  and  conditions are the same as the Company charged to others
Accrued commissions and




 brokerages 




  The Siam Commercial Bank Pcl.
Parent company
26,380,594
27,692,249
On the basis of the commissions rate that the Company has offered to insurance sub-broker companies
Accrued other underwriting expenses




  The Siam Commercial Bank Pcl.
Parent company
8,513,640
-
Price and conditions are as in 
the contract.
 














/17



21.2	 Significant transactions with related companies were as follows :

UNIT : Baht

Relationship
Transactions for the year ended


December 31,


2005

2004
Premium written 




  The Siam Commercial Bank Pcl.
Parent company
54,847,090

49,989,970
  Others

6,914,583

6,558,733





Interest received and dividends




  The Siam Commercial Bank Pcl.
Parent company
133,154

71,891
  Siam Industrial Credit Pcl.
Associated company of




the parent company
742,230

853,158
  SCB Leasing Pcl.
Associated company of




the parent company
228,847

377,888
  SCB Asset Management Co., Ltd.
Subsidiary of the 




parent company
20,320,624

21,946,014





Claims




  The Siam Commercial Bank Pcl.
Parent company
9,605,006

14,990,161
  Others

3,866,102

1,495,946





Commissions and brokerages 




  The Siam Commercial Bank Pcl.
Parent company
142,845,085

74,961,768





Other underwriting expenses




  The Siam Commercial Bank Pcl.
Parent company
49,763,640

-





Promotional expenses




  The Siam Commercial Bank Pcl.
Parent company
-

15,248,138


22.	DISCLOSURE OF FINANCIAL INSTRUMENTS

The Company has no policy for speculation in or engage in the trading of any derivative financial instruments.

22.1 Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company.  The Company has adopted the policy to protect credit risk by having specialists appraise securities and limiting lines of loans up to the securities value in accordance with the investment for other business of non-life companies regulation of the Insurance Department.

Concentrations of credit risk are limited due to the diversifications of the customers, except for the security guaranteed loans which are few in number.


/18


   22.2	Interest rate risk

Interest rate risk refers to the risk of changes in interest rates which will affect the interest income from investments. The investments include both short-term and long-term investments that have variable interest rates.  The Company manages the risk by considering the risk of investments together with the return on such investments.

As at December 31, 2005 and 2004, significant financial assets classified by type of interest rate are as follows :
UNIT : Baht

Book Value as at December 31,

2005

2004

Variable

Fixed

Variable

Fixed

interest rate

interest rate

interest rate

interest rate








Deposits at financial institutions
220,536,360

100,000,000

112,203,614

110,000,000
Investments in securities







  Bonds
-

139,317,245

-

62,674,316
  Treasury bills
-

84,499,588

-

-
  Notes
-

234,336,485

-

118,681,885
  Debentures - net
65,546,773

225,396,316

84,611,694

186,489,451
Total
286,083,133

783,549,634

196,815,308

477,845,652

The financial instruments carrying interest at fixed rates are classified below on the basis of the length of time from the balance sheet date to the date specified for fixing of a new rate, or to the maturity date (whichever is sooner).
UNIT : Baht

Book Value as at December 31,

2005

Period specified for repricing  interest rate

Average

Within 1 year

Over 1 year

Total

Interest







Rate

Baht

Baht

Baht

%








Deposits at financial institutions
100,000,000

-

100,000,000

1.73
Investments in securities







  Bonds
79,287,281

60,029,964

139,317,245

4.62
  Treasury bills
84,499,588

-

84,499,588

3.31
  Notes
234,336,485

-

234,336,485

3.63
  Debentures - net
56,017,910

169,378,406

225,396,316

4.25
Total
554,141,264

229,408,370

783,549,634



UNIT : Baht

Book Value as at December 31,

2004

Period specified for repricing interest rate

Average

Within 1 year

Over 1 year

Total

Interest







Rate

Baht

Baht

Baht

%








Deposits at financial institutions
110,000,000

-

110,000,000

1.41
Investments in securities







  Bonds
-

62,674,316

62,674,316

6.50
  Notes
118,681,885

-

118,681,885

2.09
  Debentures - net
8,000,000

178,489,451

186,489,451

4.26
Total
236,681,885

241,163,767

477,845,652


/19



22.3	Estimated Fair Value of Financial Instruments

The fair values have been estimated by the Company using available market information and appropriate valuation methodologies.

As at December 31, 2005 and 2004, the carrying amounts of financial assets and financial liabilities which were different from the estimated fair value were as follows:

UNIT : Baht

2005

2004

Carrying Value

Fair Value

Carrying Value

Fair Value
Financial assets







Cash and deposits at 







financial institutions
320,536,360

319,754,981

222,203,614

222,203,614
Bonds
139,317,245

139,932,318

62,674,316

68,729,553
  Treasury bills
84,499,588

84,499,588

-

-
  Notes 
234,336,485

234,170,281

118,681,885

119,040,871
Stocks
278,892,272

305,454,897

372,976,378

395,734,604
Debentures 
290,943,089

291,162,163

271,101,145

271,656,968

The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein:

Financial assets - The fair values of financial assets for which their remaining terms to maturity are 90 days or less are based on carrying value.  For those with remaining terms to maturity greater than 90 days, the fair values are estimated by using a discounted cash flow analysis based on current interest rates and the remaining years to maturities. For marketable securities classified as available for sales securities, the fair values are based on the bidding prices at the Stock Exchange of Thailand on the last business day of the period. For non-marketable securities, the fair values are estimated based on net assets values.

Financial liabilities - The fair values for financial liabilities which their remaining terms to maturity are 90 days or less are based on carrying value.  For those with remaining terms to maturity greater than 90 days, the fair value are estimated by using a discounted cash flow analysis based on current interest rates for the remaining years to maturities.


23.	SUBSEQUENT  EVENT  AFTER  THE  FINANCIAL  STATEMENT  DATE

On January 1, 2006, 20.34 million warrants have been converted into 21.32 million ordinary shares, amounting Baht 106.60 million were exercised. The remaining unexercised warrant is 2.29 million warrants. Such warrants could be exercised on first business day of January, April, July and October, which the last exercised date will be November 14, 2007.

The Company registered the increase in authorized share capital with the Ministry of Commerce on January 16, 006.


24.	AUTHORIZATION  OF  FINANCIAL STATEMENTS

These financial statements are approved by the audit committee on January 25, 2006.




- 4 -


- 11 -


- 19 -

