Opinion of Independent Financial Advisor On the Acquisition of Assets from Connected Persons

(Translation)

Opinion of Independent Financial Advisor

On the Acquisition of Assets from Connected Persons and Application for a Waiver from the Requirement to Make a Tender Offer for All

Securities of the Business by Virtue of the Resolution of the Shareholders’ Meeting of the Business

for

Sri Ayudhya Capital Public Company Limited

Prepared by

Asia Plus Advisory Company Limited

1 December 2017

Opinion of the Independent Financial Advisor

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Table of Contents

Executive Summary 4

1. Opinion on the Acquisition of Assets from Connected Persons 11

1.1. Nature and Details of the Transaction 11

1.1.1. Nature of the Transaction 11

1.1.2. Date of the Transaction 11

1.1.3. Relevant Parties 11

1.1.4. Details of Assets to be Acquired or Disposed 14

1.1.5. Type and Size of the Transaction 14

1.1.6. Total Value of Consideration 16

1.1.7. Shareholders with No Right to Vote on the Transaction 17

1.2. Details of Target Companies 17

1.2.1. Allianz General Insurance Public Company Limited (‚AZTH‛) 17

1.2.2. Allianz Ayudhya Assurance Public Company Limited (‚AZAY‛) 26

1.3. Profile of the Company 37

1.3.1. Nature of Business Operation 37

1.3.2. List of Shareholders 38

1.3.3. Board of Directors 39

1.3.4. Revenue Breakdown 40

1.3.5. Operating Results and Financial Position 40

1.3.6. Industry Overview 48

1.4. Reasonableness of the Transaction 51

1.4.1. Objectives and Rationale of Entering into the Transaction 51

1.4.2. Advantages and Disadvantages of Entering and not Entering into the Transaction 51

1.4.3. Risks from Entering into the Transactions 56

1.4.4. Advantages and Disadvantages of Entering into the Transaction with a Connected Persons 57

1.4.5. Necessity of Entering into the Transaction with a Connected Persons and Reason the Company Does not Enter into the Transaction with an Unrelated Party 59

1.5. The Fairness of the Transaction Price 59

1.5.1. The Valuation of AZTH and AZAY 59


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1.5.2. The Valuation of AYUD 77

1.5.3. Conclusion of the IFA’s opinion on the price of the Transaction 91

1.6. Reasonableness of the Conditions of the Transactions 92

1.6.1. Conditions of the Transactions 92

1.6.2. Opinion of the Independent Financial Advisor on the Reasonableness of the Conditions of the Transactions 94

1.7. Other Information 95

2. Opinion of the IFA on the request for Shareholders’ meeting resolution to approve acquisition of new securities without requirement to make a tender offer for all securities of the Business (Whitewash) 96

2.1. Details of Transaction 96

2.2. Conditions of the Transaction 96

2.3. Opinion of the IFA on Policies and Business Operation Plan proposed by the Applicants 96

2.3.1. Policies and Business Operation Plans 97

2.3.2. Management Structure 97

2.3.3. Policy on Related Party Transactions 98

2.4. Total Voting Rights that the Applicants would be entitled to after the Acquisition of Securities and to be entitled to in the Future without Tender Offer Requirement 98

2.5. Potential Impact to Shareholders 99

2.5.1. Dilution effect on the existing shareholders 99

2.5.2. Potential risk of checks and balances and control over the Company by minority shareholders 99

2.6. Advantages and Disadvantages of Entering and not Entering into the Transaction 99

2.7. The Fairness of the price of the newly issued shares offered to the Applicants 99

2.8. Completeness and accuracy of the list of names and number of shares held by related persons under Section 258 of the Applicant 100

3. Conclusion of the Independent Financial Advisor’s Opinion 100


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Important Note:

This report was prepared in Thai and this English version is a translation of the Thai report. While every effort was made to ensure the accuracy of the translation, there could be some inconsistency between the Thai report and the English translation. In any case, the Thai report shall take precedence and be considered the official IFA report over its English translation.

Executive Summary

Pursuant to the resolutions of the Board of Directors’ meeting of Sri Ayudhya Capital Public Company Limited (the ‚Company‛ or ‚AYUD‛) No. 7/2017 held on 21 November 2017 has considered the potential cooperation in insurance business in Thailand between the Company and the Allianz Group and approved to propose to the Extraordinary General Meeting of Shareholders for consideration and approval of the following agenda:

1. The purchase and acceptance of the transfer of the entire business of Allianz General Insurance Public Company Limited (‚AZTH‛) which includes all of AZTH’s assets, liabilities, employees, representatives, agents, accounts receivable, account payable, non-life insurance reserves, contracts and insurance policies by Sri Ayudhya General Insurance Public Company Limited (‚SAGI‛), the subsidiary of the Company at the total price of THB 1,253,794,000 (‚Acceptance of the EBT from AZTH‛);

2. The purchase of additional 34,810,000 ordinary shares in Allianz Ayudhya Assurance Public Company Limited (‚AZAY‛) equivalent to approximately 11.80% of the total shares sold in AZAY from Allianz SE and CPRN (Thailand) Limited (‚CPRNT‛) (‚Purchase of AZAY Shares‛). It will cause the Company’s shareholding in AZAY to increase from approximately 20.17% to approximately 31.97% of the total shares sold in AZAY; and

3. The increase of registered capital from THB 250,000,000 to THB 346,500,000 by issuing 96,500,000 new ordinary shares with a par value of THB 1 each (the ‚Newly Issued Shares‛), representing 27.85% of the total voting shares in the Company after completion of the registration of the increase of paid-up capital (the ‚Capital Increase Registration‛) and the allocation and offering for sale of the Newly Issued Shares to Allianz SE and CPRNT as follows:

3.1. The allocation and offering for sale of 23,466,105 of Newly Issued Shares to CPRNT (the ‚Newly Issued Shares for EBT Acceptance‛) at the offering price of THB 53.43 per share, totaling approximately THB 1,253,794,000

In this regard, CPRNT will make the payment for Newly Issued Shares for EBT Acceptance in cash, and the Company will use the entire proceeds derived from this portion to purchase newly issued shares in SAGI, in order to provide SAGI with funds for the Acceptance of the EBT from AZTH. (‚Share Allocation for EBT Acceptance‛)


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3.2. The allocation and offering for sale of 73,033,895 of Newly Issued Shares to Allianz SE and CPRNT (the ‚Newly Issued Shares for AZAY Share Purchase‛) at the offering price of THB 53.43 per share, totaling approximately THB 3,902,201,000 as consideration to Allianz SE and CPRNT for the Purchase of AZAY Shares.

In this regard, Allianz SE and CPRNT will transfer 34,810,000 shares in AZAY, representing approximately 11.80% of the total share sold in AZAY, at the price of THB 112.10 per share, totaling THB 3,902,201,000 to the Company for the payment of the Newly Issued Shares for AZAY hare Purchase in lieu of cash payment (‚Share Allocation for AZAY Share Purchase‛). The Company’s shareholding in AZAY will increase from 59,500,280 shares, or approximately 20.17% of the total shares sold in AZAY, to 94,310,280 shares, or approximately 31.97% of the total shares sold in AZAY.

The Share Allocation for EBT Acceptance and the Share Allocation for AZAY Share Purchase are collectively referred to as the ‚Share Allocations‛.

The objectives of entering into these Transactions are mainly for enhancing business co-operation between AYUD and Allianz Group including improving operational efficiency, and minimizing repetitive costs and expenses. All conditions and timeframe have to be fulfilled within 30 June 2018 or the date all parties agreed in written. The shareholding of the Company, its subsidiary, and related companies before and after entering into these transactions are illustrated below.


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1. Acceptance of the EBT from AZTH 2. Purchase of AZAY Shares 3. Share Allocations Remarks * Detail of other shareholders of AYUD before and after the transactions are shown on 1.3.2 ** Detail of other shareholders of AZAY before and after the transactions are shown on 1.2.2.2

The Acceptance of the EBT from AZTH and the Purchase of AZAY Shares are the assets acquisition transactions under the Notification of the Capital Market Supervisory Board No. TorJor. 20/2551 re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets, dated 31 August 2008 (as amended) and the Notification of the Board of Governors of the Stock Exchange of Thailand re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition or Disposal of


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Assets, 2004, dated 29 October 2004 (as amended) (collectively referred to as the ‚Notifications on Acquisition or Disposal of Assets‛). The total size of these transactions, based on the Company’s consolidated financial statements as of 30 September 2017, and AZTH’s and AZAY’s financial statements as of 30 September 2017, as reviewed by their respective auditors, is equivalent to 52.97%. These transactions are categorized as Type 1 transactions. In addition, Allianz SE and CPRNT are considered connected persons of the Company. Therefore, the Acceptance of the EBT from AZTH, the Purchase of AZAY Share and the Share Allocations are connected transactions under the Notification of the Capital Market Supervisory Board No. TorJor. 21/2551 re: Rules on Connected Transactions, dated 31 August 2008 (as amended) and the Notification of the Board of Governors of the Stock Exchange of Thailand re: Disclosure of Information and Other Acts of Listed Companies Concerning Connected Transactions, 2003, dated 19 November 2003 (as amended) (collectively referred to as the ‚Notifications on Connected Transactions‛). The total size of these transactions is equivalent to 87.61% of the Company’s net tangible assets (the ‚NTA‛) based on its consolidated financial statements as of 30 September 2017,as reviewed by the Company’s auditor, which is more than 3% of the Company’s NTA.

To enter into the Transactions, the Company needs to disclose the Information Memorandum regarding the Transaction to the Stock Exchange of Thailand (the ‚SET‛) and to convene the shareholders’ meeting to approve the Transactions. To be approved, the Transactions need a vote of not less than three-fourths of the total number of votes of the shareholders attending the meeting and having the right to vote, excluding the votes of the shareholders who have interest on the matter. The Company is required to arrange for an Independent Financial Advisor to provide the opinion on the reasonableness of the Transactions and the fairness of the Transactions price to the shareholders and propose to the Audit Committee, including send the opinion to the SET and the shareholders. The opinion shall be sent out with the invitation letter, stating the names and number of shares of the shareholders who have no right to vote, to its shareholders no less than 14 days prior to the meeting.

After entering into the Transactions, the aggregate shareholding of Allianz SE, CPRNT, and their person under section 258 in the Company will increase from 17.3% to 40.34% approximately of the total voting shares in the Company, which exceeds the trigger point of 25% of the total voting shares in the Company. Therefore, Allianz SE and CPRNT will have to make a tender offer for all securities of the Company according to section 247 of the Securities and Exchange Act B.E. 2535 (1992) (as amended) (‚SEC Act‛) and the Notification of the Capital Market Supervisory Board No. ThorJor. 12/2554 Re: Rules, Conditions and Procedures for the Acquisition of Securities for Business Takeover, dated 13 May 2011 (as amended). However, Allianz SE and CPRNT wish to obtain a waiver from making a tender offer for all securities of the Company by virtue of the resolution of the Shareholders Meeting (Whitewash) in accordance with the Notification of the Office of the Securities and Exchange Commission No. SorJor. 36/2546 Re: Rules for the Application for a Waiver from the Requirement to Make a Tender Offer for All Securities of the Business by Virtue of the Resolution of the Shareholders Meeting of the Business, dated 17 November 2003 (as amended). Allianz SE and CPRNT need a vote of not less than three-fourths of the total number of votes


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of the shareholders attending the meeting and having the right to vote, of which the voting rights of Allianz SE shall be excluded.

The Board of Directors’ Meeting No. 7/2017 held on 21 November 2017 approved the convening of the Extraordinary General Meeting of the Shareholders No. 1/2018 on 19 January 2018 (‚EGM‛) to approve the aforementioned Transactions and appointed Asia Plus Advisory Company Limited (the ‚Independent Financial Advisor‛ or the ‚IFA‛) as the Independent Financial Advisor to provide opinions on the Transactions to comply with Corporate Governance principles regarding transparency and information disclosure so that the Company’s shareholders have sufficient information to decide on the matter put to vote. The Independent Financial Advisor prepared this report to provide our opinions on the following Transactions:

1. Opinion on the acquisition of assets from connected persons with respect to the reasonableness of the transaction, the fairness of the price and conditions for the transaction; and

2. Opinion on the application for a waiver from the requirement to make a tender offer for all securities of the Company by virtue of the resolution of the shareholders’ meeting of the Company with respect to the business management policy and plan proposed by the Applicants, total voting rights the Applicants would be entitled to after the acquisition of securities and to be entitled in the future without tender offer requirement, potential impact on the shareholders, fairness of the securities price offered to the Applicants, and completeness and accuracy of the list of names and number of shares held by the related person of the Applicants under Section 258 for further consideration by the shareholders of the Company.

The IFA is a qualified Financial Advisor under the supervision of the Securities and Exchange Commission (the ‚SEC‛) and has no relationship with either the Company or any of the related parties in the Transactions.

In preparing the report, the IFA relied on the information and document provided by the Company, interviews with the management of the Company SAGI AZTH and AZAY, information in the Information Memorandum regarding the Transactions (collectively called ‚IM‛), Capital Increase Report Form, Draft Request Form for Shareholders’ Meeting Resolution to Approve Acquisition of New Securities without Requirement to Make a Tender Offer for All Securities of the Business (‚Draft Form 247-7‛), valuation reports of SAGI AZTH and AZAY, the Company, SAGI, AZTH and AZAY’s information in public domain, and other information gathered from public sources. The IFA properly conducted the due diligence of information with due care in accordance with professional practice for this report. However, the IFA cannot give any representation or warranty on the accuracy or the completeness of the information obtained from the Company and/or the management of the Company. Additionally, the report was prepared based on the current information obtainable during the preparation of this report in order to provide opinions relating to the acquisition of assets from connected persons and the application for a waiver from the requirement to make a tender offer for all securities of the Company by virtue of the resolution of the shareholders’ meeting of the Company. All


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the assumptions found in this report were based on the possibility of occurrence during the time this report was prepared. Therefore, should there be any changes in the future which have the impact on the Company’s operations; both the Company and the shareholders could be affected.

The sole purpose of this report is to provide opinion to the Company’s shareholders on the acquisition of assets from connected persons and the application for a waiver from the requirement to make a tender offer for all securities of the Company by virtue of the resolution of the shareholders’ meeting of the Company. Nevertheless, the final decision rests primarily with the individual shareholders. The shareholders should study the information contained in this report along with other related information provided and use his/her own judgment in making the final decision.

After reviewing the relevant information the IFA was able to obtain and analyze the conditions of the Transactions, advantages and disadvantages from entering into the Transactions, and potential risks from the Transactions, the IFA opinion can be summarized as follows:

Entering into the Transactions is reasonable since the advantages are the increase of selling channels and expansion of customer base, the integration benefits to the business of the Company, increase non-life insurance market share including revenues and financial strength, Increase return on investment by increase shareholding in AZAY. Even though entering into the Transactions has some disadvantages such as the net loss of AZTH, dilution effect on the existing shareholders, and potential risk of checks & balances and control over the business by minority shareholders. The IFA is of an opinion that the advantages from the Transactions outweigh the disadvantages when considering the co-operation and synergy obtained from Allianz Group. Therefore, the IFA deems the Transaction as reasonable. Regarding the key conditions of the Transactions, the IFA is of an opinion that the conditions are reasonable as they were set in relevant to the related rules and regulations and to meet the objectives of entering into the Transactions.

For the fairness of transaction price, the IFA estimated the appropriate price for the Transaction as follows:

1. Acceptance of the EBT from AZTH: The estimated value range of AZTH is THB 1,352 – 1,567 million based on the actuarial valuation approach. The transaction price is THB 1,253,794,000, which is THB 98.2 – 312.7 million lower than the aforementioned appropriate transaction price estimated by the IFA. The IFA is of an opinion that the transaction price for the Acceptance of the EBT is reasonable.

2. Purchase of AZAY Shares: The estimated value range of the Transaction is THB 3,111 – 3,658 million based on the actuarial valuation approach. The transaction price is THB 3,902,201,000 which is THB 243.9 – 791.3 million higher than the aforementioned appropriate transaction price estimated by the IFA. However, the IFA applied the discount for lack of marketability for the valuation of AZAY since AZAY is not a listed company in the SET.


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Due to the acquisition of assets agenda, connected transaction agenda, and the whitewash agenda are related to, and conditional upon, each other.; therefore, if any of these items is not approved the EGM, the other related items will not be proposed to the EGM for its consideration, and the items that have already been approved shall be deemed to be cancelled. Therefore, IFA considers the aggregate transaction by combining the estimated value of the Acceptance of the EBT from AZTH and the Purchase of AZAY Shares, the combined value is THB 4,462.9 – 5,224.8 million. The transaction price of THB 5,155.995 million is, therefore, in the appropriate transaction price range, which is THB 693 million, or 15.53% higher than the lower end of the appropriate price range and THB 68.8 million or 1.32% lower than the higher end of the appropriate price range. The IFA is of an opinion that the combined transaction price of the Transaction is reasonable.

3. Share Allocations: The estimated value range of AYUD’s share is THB 53.37 – 59.54 per share based on the sum of the parts approach. The transaction price of THB 53.43 per share is in such price range, which is THB 0.06 per share, or 0.10% higher than the lower end of the appropriate price range and THB 6.11 per share or 10.26% lower than the higher end of the appropriate price range. The IFA is of an opinion that the transaction price for the Share Allocations is reasonable.

The IFA is of an opinion that the shareholders should vote in favor of approving the Transactions. Nevertheless, the final decision rests primarily with the individual shareholders. The shareholders should study the information contained in this report along with other related information provided and use his/her own judgment in making the final decision.


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1. Opinion on the Acquisition of Assets from Connected Persons

1.1. Nature and Details of the Transaction

1.1.1. Nature of the Transaction

Pursuant to the resolutions of the board of Directors’ meeting of the Company No. 7/2017 held on 21 November 2017 has considered the potential cooperation in insurance business in Thailand between the Company and the Allianz Group and approved to propose to the Extraordinary General Meeting of Shareholders for consideration and approval of the following agenda:

1. Acceptance of the EBT from AZTH 2. Purchase of AZAY Shares 3. The increase of registered capital from THB 250,000,000 to THB 346,500,000 by Share

Allocations

In this regard, the Company has disclosed the details of the Transactions on 23 November 2017 to the SET. Those Transactions have to be approved by the Shareholders’ Meeting, of which the Board of Directors of the Company has approved the convening of the Extraordinary General Meeting of the Shareholders No. 1/2018 on 19 January 2018.

1.1.2. Date of the Transaction

The Company will proceed with the aforementioned Transactions after the conditions precedent specified in the Share Subscription and Purchase Agreement (‚SPA‛) are satisfied or are waived as provided for thereunder. The conditions precedent that must be satisfied include, inter alia, the receipt of the approval from shareholders’ meeting of the Company and SAGI on the agenda related to the Transactions, the receipt of the approval from the Office of Insurance Commission (‚OIC‛) for SAGI to accept the transfer of entire business from AZTH, and other related acts, the receipt of the approval from the SEC for the private placement related to the Transactions.

1.1.3. Relevant Parties

Transaction no. 1 : The Acceptance of the EBT from AZTH Purchaser : SAGI Seller : AZTH

Nature of relationship :

SAGI is the subsidiary of the Company with approximately 100% of its total shares held by


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the Company.

Regarding AZTH, Allianz SE and CPRNT hold about 25% and 75% of its total shares, respectively. In this regards, Allianz SE is one of the major shareholders of the Company, holding 42,104,000 shares, or approximately 16.84% of the total voting shares of the Company as of 29 August 2017 which is the latest book closing date of the Company. In addition, CPRNT is also the person under section 258 (6) of Allianz SE pursuant to the SEC Act; therefore, AZTH is a related person of the Company. Transaction no. 2 : Purchase of AZAY Shares Purchaser : AYUD Seller : Allianz SE and CPRNT


As mentioned earlier, Allianz SE is one of the major shareholders of the Company and CPRNT is the person under section 258 (6) of Allianz SE; therefore, Allianz SE and CPRNT are related persons of the Company.

Transaction no. 3 : To consider and approve the Company to offer and allocate the newly issued shares to Allianz Group

Issuer : AYUD Subscriber : Allianz SE and CPRNT


As mentioned earlier, Allianz SE is one of the major shareholders of the Company and CPRNT is the person under section 258 (6) of Allianz SE; therefore, Allianz SE and CPRNT are related persons of the Company.

In summary, the shareholding of the Company, its subsidiary, and related companies before and after entering into these transactions are illustrated below:


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1. Acceptance of the EBT from AZTH 2. Purchase of AZAY Shares 3. Share Allocations Remarks * Detail of other shareholders of AYUD before and after the transactions are

shown on 1.3.2 ** Detail of other shareholders of AZAY before and after the transactions are

shown on 1.2.2.2


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1.1.4. Details of Assets to be Acquired or Disposed

Details of acquired assets are as follows:

1. The entire business of AZTH which includes all of AZTH’s assets, liabilities, employees, representatives, agents, accounts receivable, account payable, non-life insurance reserves, contracts and insurance policies as of the date the Acceptance of the EBT from AZTH is completed. Therefore, the total value of consideration for the Acceptance of the EBT from AZTH is the value payable by SAGI to AZTH for the purchase and acceptance of the transfer of the entire business of AZTH, totaling of THB 1,253,794,000.

2. The 34,810,000 ordinary shares of AZAY with a par value of THB 10 each, representing 11.80% of the total issued and paid-up shares of AZAY. Therefore, the total value of consideration for the purchase of 34,810,000 shares of AZAY is the offering price THB 112.10 per share, totaling of approximately THB 3,902,201,000.

In this connection, AYUD will increase its registered capital from THB 250,000,000 to THB 346,500,000 by issuing 96,500,000 of new ordinary shares of with a par value of THB 1, representing approximately 27.85% of total voting shares after the completion of Capital Increase Registration and allocating such shares as follows:

1. The allocation of 23,466,105 of newly issued shares of AYUD to CPRNT at the offering price of THB 53.43 per share, totaling approximately THB 1,253,794,000. In this regards, CPRNT will make the payment for Newly Issued Shares for EBT Acceptance in cash, and the Company will use the proceeds derived from this portion to purchase newly issued shares in SAGI, in order to provide SAGI with funds for the Acceptance of the EBT from AZTH.

2. The allocation of 73,033,895 of newly issued shares of AYUD to Allianz SE and CPRNT at the offering price of THB 53.43 per share, totaling approximately THB 3,902,201,000 as the consideration for the Purchase of AZAY Shares from Allianz SE and CPRNT.

1.1.5. Type and Size of the Transaction

The Acceptance of the EBT from AZTH and the Purchase of AZAY Shares are deemed an acquisition of assets pursuant to the Notifications on Acquisition or Disposal of Assets. In addition, Allianz SE and CPRNT are the connected persons of the Company; therefore, the Acceptance of the EBT from AZTH, the Purchase of AZAY Shares, and Share Allocations are deemed connected transactions pursuant to the Notifications on Connected Transactions. Details of the size calculation are as follows:


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1.1.5.1. Size of the Assets Acquisition Transaction

1.1.5.1.1. The Acceptance of the EBT from AZTH

The size of the transactions, based on the Company’s consolidated financial statements as of 30 September 2017, and AZTH’s financial statements as of 30 September 2017, as reviewed by their respective auditors is as follows:

Criteria Calculation Transaction

Size Value of Assets =

%Shareholding NTA

NTA of the Company

= 543.73

7,316.54

7.43%

Net Profit - N/A since AZTH realized net loss -

Value of Total Consideration = Amount of Total Consideration

Total Assets of the Company

= 1,253.79

11,049.76

11.35%

Value of Securities Issued in Consideration of the Acquisition of Assets

= Total shares issued for assets acquisition

Total issued and paid-up shares of the Company

= 23.47

250.00

9.39%

From the table above, the size of the Transaction calculated according to the Value of Total Consideration criteria is 11.35%.

1.1.5.1.2. The Purchase of AZAY Shares

The size of the transactions, based on the Company’s consolidated financial statements as of 30 September 2017, and AZAY’s financial statements as of 30 September 2017, as reviewed by their respective auditors is as follows:


Size Value of Assets =

%Shareholding NTA

NTA of the Company

= 11.80% 15,795.63

7,316.54

25.47%

Net Profit* = %Shareholding Net Profit

Net Profit of the Company

= 11.80% 1 380.69

391.42

41.62%


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Size Value of Total Consideration =

Amount of Total Consideration

Total Assets of the Company

= 3,902.20

11,049.76

35.31%

Value of Securities Issued in Consideration of the Acquisition of Assets

= Total shares issued for assets acquisition

Total issued and paid-up shares of the Company

= 73.03

250.00

29.21%

Remark * If calculate from last 12-months net profit of AZAY and the Company amounting THB 1,659.46 million and THB 490.57 million respectively, the size of the transactions of Net profit criteria will be 39.92%.

From the table above, the size of the Transaction calculated according to the Net Profit criteria is 41.62%.

As a result, the total size of these Transactions is 52.97%. These transactions are categorized as Type 1 transactions pursuant to the Notifications on Acquisition or Disposal of Assets.

1.1.5.2. Size of the Connected Transaction

The size of the transactions, based on the Company’s consolidated financial statements as of 30 September 2017 as reviewed by the auditor is as follows:

Size of the Transaction = Amount of Total Consideration

NTA of the Company

1,253.79 3,902.20 1,253.79

7,316.54 87.61%

As a result, the Transaction is classified as a connected Transaction of listed companies regarding assets and services that needs to be approved by the general meeting of the shareholders pursuant to the Notifications on Connected Transactions as the Transaction value is more than THB 20 million or 3% of NTA, whichever is greater.

1.1.6. Total Value of Consideration

The total values of consideration of each Transaction are as follows: 1. The total value of consideration for the Acceptance of the EBT from AZTH is the value

payable by SAGI to AZTH for the purchase and acceptance of the transfer of the entire business of AZTH, totaling of THB 1,253,794,000.

2. The total value of consideration for the purchase of 34,810,000 shares of AZAY is the offering price of the Newly Issued Shares for AZAY Share Purchase, totaling of


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approximately THB 3,902,201,000, of which will be paid by SAGI from the proceeds from its capital increase.

3. The total value of consideration for the Share Allocations is the offering price of 96,500,000 newly issued shares at THB 53.43 per share, totaling approximately THB 5,155,995,000 of which the Company will use its 73,033,895 newly issued shares at the offering price of THB 53.43 per share to pay as the consideration.

1.1.7. Shareholders with No Right to Vote on the Transaction

Allianz SE who is one of the major shareholders of the Company and AZAY who is the related party of Allianz SE collectively holding of 43,263,000 shares in the Company, or representing approximately 17.31% of total voting shares of the Company as of the latest book closing date (29 August 2017), have no right to vote on the Transaction.

1.2. Details of Target Companies

Target companies consist of AZTH and AZAY. Details are as follows:

1.2.1. Allianz General Insurance Public Company Limited (“AZTH”)

1.2.1.1. Nature of Business Operations

AZTH was founded on June 4, 1997 by an investment between Allianz Group which is the one of leading insurance companies in Europe and Charoen Pokphand Group. AZTH has been operating non-life insurance businesses for more than 17 years, including motor insurance, personal accident insurance, personal property insurance, burglary insurance, contractors all risks, liability insurance, transportation insurance and credit insurance.

1.2.1.2. List of Shareholders

AZTH has the total issued and paid-up capital of THB 650 million comprised of 65 million ordinary shares at the par value of THB 10 per share. AZTH had the first largest shareholders before doing the transactions as follow:

No. Shareholder Names Before transaction*

No. of shares No. of shares

1 Allianz SE 16,249,999 25.00

2 CPRN (Thailand) Co., Ltd. 48,750,001 75.00

Total 65,000,000 100.00

Remark * Shareholder list as of Register book closing date, June 1, 2017 ** The ultimate shareholder of CPRNT is Allianz SE


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1.2.1.3. Board of Directors

As of November 21, 2017 the board of AZTH consists of the following 7 directors:

No. Name Position

1 Mrs. Napaporn Landy Director

2 Mr. Zakri Mohd Khir Director

3 Mr. Narong Chulajata Director

4 Miss Sirinthip Chotithammaporn Director, President, and Chief Executive Officer

5 Miss Orawan Tejapaibul Director

6 Mr. Apichati Sivayathorn Director

7 Mr. Montri Puangpool Director, and Vice President – Financial

1.2.1.4. Revenue Breakdown

Unit: THB million 2014 % 2015 % 2016 % Jan – Sep

2017 %

Net earned premium 1,239.0 76.84 1,191.9 77.40 1,203.2 77.64 1,089.0 80.10 Fees and commission income 300.4 18.63 272.6 17.70 272.8 17.60 207.3 15.25 Net investment income 61.4 3.81 58.5 3.80 45.2 2.92 27.4 2.02% Gain (losses) on investment (0.1) 0.00 0.2 0.01 (2.6) (0.17) - - Other income 11.7 0.72 16.8 1.09 31.1 2.01 35.8 2.63% Total revenues 1,612.4 100.00 1,540.0 100.00 1,549.8 100.00 1,359.6 100.00

1.2.1.5. Operating Results and Financial Position

1.2.1.5.1. Summary of financial statement

Summary of Statements of financial position, Statements of comprehensive income, Statements of cash flows, and Financial ratios for the years ending 31 December 2014 to 31 December 2016 and nine-month periods ended 30 September 2017 are as shown below:

Financial information Unit 31 Dec 31 Dec 31 Dec 30 Sep 2014 2015 2016 2017

Statement of Financial Position Asset

Cash and cash equivalents MB 798.8 653.9 633.0 329.5 Accrued investment income MB 19.1 15.5 8.3 7.3 Premium receivable, net MB 236.6 239.6 279.8 636.1 Reinsurance assets MB 2,230.4 1,844.2 1,404.6 1,558.5


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Amount due from reinsurance, net MB 148.4 279.0 165.8 183.5 Investments assets MB 1,702.9 1,757.3 1,722.7 1,815.4 Leasehold improvements and equipment, net MB 26.6 22.6 37.4 35.6 Intangible assets, net MB 10.7 9.7 25.1 26.5 Deferred tax assets MB 76.1 92.8 135.1 156.6 Other assets MB 36.7 50.3 73.5 98.8

Total assets MB 5,286.5 4,964.9 4,485.4 4,847.8 Liability and Equity

Liability Income tax payable MB 2.8 5.1 - - Amount due to reinsurance MB 767.4 868.3 815.7 979.7 Insurance liabilities MB 3,351.2 2,935.3 2,563.4 2,869.4 Employee benefit obligations MB 18.9 21.9 21.2 22.4 Other liabilities MB 131.3 164.6 274.3 249.5

Total Liabilities MB 4,271.5 3,995.3 3,674.6 4,120.9 Shareholder’s equity

Authorized share capital MB 650.0 650.0 650.0 650.0 Issued and paid-up share capital MB 650.0 650.0 650.0 650.0 Retained earnings MB 361.5 306.4 146.0 59.8 Other component of equity MB 3.5 13.3 14.9 17.0

Total shareholder’s equity MB 1,015.0 969.7 810.8 726.8 Liabilities and total shareholder’s equity MB 5,286.5 4,964.9 4,485.4 4,847.8

Financial information Unit 31 Dec 31 Dec 31 Dec 30 Sep 30 Sep 2014 2015 2016 2016 2017

Statement of comprehensive income Revenues Gross written premiums MB 2,853.0 2,657.3 2,857.4 2,185.2 2,502.2 Less premiums ceded to reinsurers MB (1,623.4) (1,500.2) (1,547.4) (1,217.8) (1,232.8) Net premiums written MB 1,229.6 1,157.1 1,310.0 967.4 1,269.4 Add (less) Change and Reinsurers’ share of change in

unearned premium reserve MB 9.4 34.8 (106.8) (88.2) (180.4)

Net earned premium MB 1,239.0 1,191.9 1,203.2 879.2 1,089.0 Fee and commission income MB 300.4 272.6 272.8 206.0 207.3 Total underwriting revenues MB 1,539.4 1,464.5 1,476.0 1,085.2 1,296.3 Expenses

Net claims MB 674.4 713.7 705.8 546.5 594.1 Commissions and brokerages MB 334.7 306.0 334.8 243.4 274.8

Other underwriting expenses MB 170.5 190.9 329.9 192.9 280.0 Operating expense MB 250.4 308.5 372.6 271.8 313.8


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Total underwriting expenses MB 1,429.9 1,519.0 1,743.2 1,254.6 1,462.6 Net investment income MB 61.4 58.5 45.2 34.1 27.4

Gains (losses) on investment MB (0.1) 0.2 (2.6) (2.6) 0.0 Other income MB 11.7 16.8 31.1 19.7 35.8 Other expenses MB (0.1) (0.2) (6.4) (4.9) (5.1)

Profit (loss) before income tax expense MB 182.3 20.8 (199.8) (123.1) (108.1) Income tax expense MB (35.8) (1.1) 41.0 24.3 22.0 Net profit (loss) MB 146.5 19.7 (158.9) (98.8) (86.1) Cash flows statement Net cash provided for (used in) operating activities MB (319.3) (63.2) 19.8 (226.0) (287.4) Net cash used in investing activities MB (14.9) (6.9) (40.7) (17.9) (16.1) Net cash used in financing activities MB - (74.8) - - - Net increase (decrease) in cash and cash equivalents MB (334.2) (144.9) (20.9) (244.0) (303.5)


Financial ratios Premium receivable turnover Days 29 32 33 52

Profitability ratio Retention rate % 43.10 43.55 45.84 50.73 Loss ratio % 54.43 59.87 58.66 54.56

Investment yield % 2.45 2.44 1.81 1.80 Net Retention Premium to Capital Fund Times 1.32 1.17 1.47 2.22 Net Profit Margin % 9.09 1.28 (10.25) (6.34) Return on equity % 15.67 1.99 (17.84) (20.12) Efficiency ratio

Return on Total Asset % 2.15 0.38 (3.36) (3.02) Financial ratio

Debt to Equity Times 4.21 4.12 4.53 5.7 Policy Reserve to Capital Fund Times 1.31 1.28 1.76 2.3 Policy Reserve to Total Asset % 25.07 24.93 31.82 35.00 Dividend Payout Ratio % - 379.42 - -

Remark: The financial statement for year end 2014, 2015 and 2016 were audited by KPMG Phoomchai Audit Ltd. The financial statement for nine-month periods ended 30 September 2017 was reviewed by KPMG Phoomchai Audit Ltd.

1.2.1.5.2. Analysis of Operating Results

AZTH’s mainly incomes were underwriting revenue, which comprised of net earned premium and fee and commission income, totaled THB 1,539.4 million, THB 1,464.5 million and THB 1,476.0 million in 2014-2016 respectively, represented (4.86)% and 0.78% growth.


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AZTH's total revenue for 2014-2016 was THB 1,612.4 million, THB 1,540.0 million and THB 1,549.8 million respectively. The average proportion of underwriting revenue was 95% of total revenues.

For nine-month periods ended 30 September 2017, total revenue was THB 1,359.6 million, increased by THB 223.2 million or 19.64% compared to the same period of the previous year. Underwriting revenue was THB 1,296.3 million, increased by THB 211.1 million or 19.44% compared to the same period of the previous year

Net earned premium

Net earned premium were THB 1,239.0 million, THB 1,191.9 million and THB 1,203.2 million in 2014-2016 respectively that comprised of motor insurance premium (81.75% of net earned premium), contractors all risks premium (7.96% of net earned premium), personal accident insurance premium (3.05% of net earned premium) and marine premium (1.65% of net earned premium). Net earned premium for 2015 decreased by THB 47.1 million, or 3.80% from the previous year due to reduction in contractors all risks premium, marine premium and voluntary car insurance premium by THB 21.2 million, THB 11.2 million and THB 8.9 million respectively, resulting from a price competitive.

Net earn premium for 2016 increased by THB 11.3 million, or 0.94% versus last year due to an increase in compulsory motor insurance premium by THB 39.5 million since higher sales of compulsory motor insurance policies from new broker. For marine and personal accident insurance segments, premiums increased from last year by THB 13.4 million and THB 5.3 million. While voluntary car insurance premium dropped by THB 49.8 million versus last year from agents and brokers distribution channel.

10% 8% 8% 8% 6%

80% 82% 80%

81% 85%

1,239 1,192 1,203

879

1,089

-

200

400

600

800

1,000

1,200

1,400

2014 2015 2016 Jan - Sep 2016 Jan - Sep 2017

Contractors All Risks Marine and transportation Personal Accident Insurance

Motor Insurance Other insurances

Million Baht


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For nine-month periods ended 30 September 2017, net earn premium was THB 1,089.0 million, increased by THB 209.8 million or 23.86% compared to the same period of the previous year due to higher compulsory and voluntary car insurance premiums.

Fee and commission incomes

Fee and commission incomes are commission income from reinsurance and commission rates are calculated by sliding scale method that depend on claim expenses recognized in each year. Fee and commission incomes were THB 300.4 million, THB 272.6 million and THB 272.8 million in 2014-2016 respectively. For 2015, Fee and commission incomes were down by THB 27.8 million, or 9.26% from the previous year that mainly due to reduction of contractors all risks commission income. For nine-month periods ended 30 September 2017, Fee and commission incomes was THB 207.3 million, increased by THB 1.3 million or 0.66% compared to the same period of the previous year.

AZTHs’ mainly expense comprised of underwriting expenses and operating expense

Underwriting expenses

Underwriting expenses comprised of net claims, commissions and brokerages and other underwriting expenses

Net claims are the actual claim cost and the costs are associated in handling and adjusting claims, after deducting reinsurance recoveries. Net claims were THB 674.4 million, THB 713.7 million and THB 705.8 million in 2014-2016 respectively. For 2015, net claims increased by THB 39.3 million, or 5.83% from the previous year that mainly due to higher contractors all risks claim expense. For nine-month periods ended 30 September 2017, Fee and commission incomes was THB 594.1 million, increased by THB 47.6 million or 8.71% compared to the same period of the previous year due to higher compulsory car insurance claim expense. Moreover, loss ratio in 2014-2016 and nine-month periods ended 30 September 2017 equaled 54.43%, 59.87%, 58.66% and 54.56% respectively.

Commissions and brokerages are fee paid to agents or brokers as a percentage of net earned premiums, were THB 334.7 million, THB 306.0 million and THB 334.8 million in 2014-2016 respectively. For 2015, commissions and brokerages dropped by THB 28.7 million, or 8.59% from the previous year due to reduction of contractors all risks commissions and brokerages, resulting from a decrease of contractors all risks premium. For nine-month periods ended 30 September 2017, commissions and brokerages was THB 274.8 million, increased by THB 31.4 million or 12.88% compared to the same period of the previous year that mainly due to higher of motor insurance commissions and brokerages,


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resulting from an increase of motor insurance premium. Moreover, the average proportion of commissions and brokerages were 27.01%, 25.67%, 27.83% and 25.23% of net earn premium in 2014-2016 and nine-month periods ended 30 September 2017 respectively.

Other underwriting expenses comprised of underwriting employee expenses, marketing expenses, contribution to Office of Insurance Commission, contribution to Non-life Insurance Fund and contribution to Road Victims Protection Fund. Other underwriting expenses were THB 170.5 million, THB 190.9 million and THB 329.9 million in 2014-2016 respectively, growth by 12.02% and 72.78% in 2015 and 2016. For nine-month periods ended 30 September 2017, other underwriting expenses were THB 280.0 million, increased by 45.16% compared to the same period of the previous year. The significant growth of other underwriting expenses in 2016 and nine-month periods ended 30 September 2017 were due to higher contribution to Road Victims Protection Fund that resulted from the higher of compulsory car insurance premium. An increase in marketing expenses was also the reason of significant growth in these periods.

Operating expense

Operating expenses comprised of employee benefit expenses, utility expenses, premises and equipment expenses, and sales and marketing expenses. Operating expenses were THB 250.4 million, THB 308.5 million and THB 372.6 million in 2014-2016 respectively, growth by 23.18% and 20.80% in 2015 and 2016 due to higher employee benefit expenses. For nine-month periods ended 30 September 2017, operating expenses was THB 313.8 million, increased by THB 42.0 million, or 15.44% compared to the same period of the previous year due to higher employee benefit expenses and premises and equipment expenses.

Net profit (loss)

In 2015, net profit was THB 19.7 million versus THB 146.5 million last year; decreased by 86.55% due to the reduction of underwriting revenues THB 74.9 million and an increase of net claim THB 39.3 million. Net loss for 2016 was THB (158.9) million, decreased by THB 178.6 million due to an increase of other underwriting expenses THB 139.0 million and operating expenses THB 64.2 million as mentioned before, while underwriting revenue increased only THB 11.5 million.

For nine-month periods ended 30 September 2017, net loss was THB (86.1) million versus THB (98.8) million in the same period of the previous year, a profit increase of THB 12.7 million, or 12.78% due to an increase of underwriting revenue was more than an increase of underwriting expenses.


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1.2.1.5.3. Analysis of Financial position

Assets

As of 31 December 2014, 31 December 2015, 31 December 2016, and 30 September 2017, total assets of AZTH amounted to THB 5,286.5 million, THB 4,964.9 million, THB 4,485.4 million, and THB 4,847.8 million respectively. The mainly assets comprised of cash and cash equivalents, reinsurance assets and investments assets.

Reinsurance assets are insurance reserve refundable from reinsurers comprising loss reserves and unearned premium reserve. As of 31 December 2014, 31 December 2015, 31 December 2016, and 30 September 2017, reinsurance assets of AZTH amounted to THB 2,230.4 million, THB 1,844.2 million, THB 1,404.6 million, and THB 1,558.5 million, representing 42.19%, 37.14%, 31.32% and 32.15% of total assets respectively that were continually decreasing due to the reduction of reinsurance and agree to retain more losses, resulting in retention rate of 43.10%, 43.55%, 45.84%, and 50.73% respectively.

Investments assets as of 31 December 2014, 31 December 2015, 31 December 2016, and 30 September 2017 amounted to THB 1,702.9 million, THB 1,757.3 million, THB 1,722.7 million, and THB 1,815.4 million, representing 32.21%, 35.39%, 38.41% and 37.45% of total assets respectively. AZTH mainly invested in deposits at financial institutions and debt securities, representing 95.25%, 93.69%, 93.94% and 94.38% of investment assets respectively while invested in equity securities and unit trusts in limited amounts.

Liabilities

As of 31 December 2014, 31 December 2015 and 31 December 2016, total liabilities of AZTH amounted to THB 4,271.5 million, THB 3,995.3 million and THB 3,674.6 million respectively, decreased by THB 276.3 million and THB 320.7 million from the previous year that mainly due to the reduction of insurance liabilities, comprising loss reserves and unearned premium reserves. A decrease of insurance liabilities was mainly due to a drop of loss reserves that resulted from claim payment during a year. As of 30 September 2017, total liabilities amounted to THB 4,120.9 million, an increase of THB 446.3 million from the end of previous period due to an increase in insurance liabilities.

Shareholders’ Equity As of 31 December 2014, 31 December 2015, 31 December 2016, and 30

September 2017, total shareholders’ equity of AZTH amounted to THB 1,015.0 million, THB 969.7 million, THB 810.8 million, and THB 726.8 million respectively. As of 31 December


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2015, a decrease of THB 45.3 million, or 4.46% from the end of previous year was due to dividend payment THB 74.8 million, while net profit for 2015 amounted to THB 29.7 million and surplus on remeasuring available-for-sale investments amounted to THB 9.8 million. As of 31 December 2016, a decrease of THB 158.9 million, or 16.38% from the end of previous year was resulted from net loss for 2016.

As of 30 September 2017, a decrease of THB 84.0 million, or 10.36% from the end of previous year was due to net loss for nine-month periods ended 30 September 2017 amounted to THB 86.1 million, while surplus on remeasuring available-for-sale investments amounted to THB 1.6 million.

Cash flows

Net cash provided for (used in) operating activities were THB (319.3) million, THB (63.2) million and THB 19.8 million in 2014-2016 respectively. For 2015 and 2016, net cash increased by THB 256.1 million and THB 83.0 million from last year respectively due to a decrease of claim payment. For nine-month periods ended 30 September 2017, net cash provided for (used in) operating activities was THB (287.4) million, an increase of cash used THB 61.4 million compared with the same period of the previous year due to reinsurance payment.

Net cash used in investing activity were THB 14.9 million, THB 6.9 million and THB 40.7 million in 2014-2016 respectively. For 2016, net cash increased by THB 33.8 million that mainly due to payment of leasehold improvements, equipment and computer software. For nine-month periods ended 30 September 2017, net cash amounted to THB 16.1 million, decreased by THB 1.8 million the same period of the previous year.

Net cash used in financing activities for 2015 was THB 74.8 million resulting from dividend payment, while there is no net cash used in financing activities in 2014, 2016 and nine-month periods ended 30 September 2017.

Financial ratios

Liquidity ratios

As of 31 December 2014, 31 December 2015, 31 December 2016, and 30 September 2017, AZTH’s premium receivable turnovers were 29 days, 32 days, 33 days and 52 days respectively, complying with AZTH’s policy that allowed credit term for 15-60 days.


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Profitability ratio

Net profit margins were 9.09%, 1.28% and (10.25)% for 2014-2016 respectively that showed as downward trend due to an increase of other underwriting expenses and operating expenses. For nine-month periods ended 30 September 2017, net profit margin was (6.34)% versus (8.69)% same period of last year, representing higher profit efficiency that resulted from an increase of underwriting revenue and a drop of loss ratio.

1.2.2. Allianz Ayudhya Assurance Public Company Limited (“AZAY”)

1.2.2.1. Nature of Business Operations

AZAY was founded on April 20, 1951 and has been operating life insurance business that provides excellent products and services to customers through all of life's most important moment. The mainly type of products are life protection insurance and saving money insurance.

1) Life protection insurance : individual life insurance, personal accident insurance, and riders and endorsements

2) Saving money insurance : insurance for education and insurance for retirement

Moreover, AZAY has various distribution channels as below:

1) Agency channel 2) Bancassurance channel : cooperated with Bank of Ayudhya Public Company Limited 3) Direct channel: such as call center

1.2.2.2. List of Shareholders

AZAY has the total issued and paid-up capital of THB 2,950 million comprised of 295 million ordinary shares at the par value of THB 10 per share. AZAY had the first largest shareholders before doing the transactions as follow:

No. Shareholder Names

Before transaction* After transaction

No. of shares

% ownership

No. of shares

% ownership

1 CPRNT 111,097,214 37.66 **please see at remark

2 Allianz SE 73,711,193 24.99 **please see at remark

Total 184,808,407 62.65 149,998,407 50.85

3 Sri Ayudhya Capital Plc. 59,500,280 20.17 94,310,280 31.97


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No. of shares

% ownership

No. of shares

% ownership

4 Great Luck Equity Co., Ltd.**** 30,960,728 10.50 30,960,728 10.50

5 Great Fortune Equity Co., Ltd.**** 8,320,180 2.82 8,320,180 2.82

6 Bangkok Broadcasting & TV Co., Ltd.**** 8,218,212 2.79 8,218,212 2.79

7 Super Assets Co., Ltd.**** 2,418,436 0.82 2,418,436 0.82

8 Mr. Pisit Pruekphiboon 96,583 0.03 96,583 0.03

9 Mr. Somsak Panichsiri 80,572 0.03 80,572 0.03

10 Mr. Chai Tongtai 60,000 0.02 60,000 0.02

11 Other minor shareholders 536,602 0.18 536,602 0.18

Total 100.00 295,000,000 100.00

Remark * With referencing to the list of major shareholders as of 30 September 2017. ** According to Draft Form 24-7, Allianz SE and CPRNT shall determine the proportion of

the AZAY share that each party will sell to the Company with respect to the foreign availability of the Company in order to ensure that the total shareholding of non-Thais in the Company shall not exceed 49% of its total issued and paid-up capital after the capital increase.

*** The ultimate shareholder of CPRNT is Allianz SE **** The ultimate shareholder of Great Luck Equity Co., Ltd., Great Fortune Equity Co., Ltd.,

Bangkok Broadcasting & TV Co., Ltd., and Super Assets Co., Ltd. is Ratanarak family.

1.2.2.3. Board of Directors

As of October 4, 2017 the board of AZAY consists of the following 11 directors:

No. Name Position

1 Mr. Pongpinit Tejagupta Director

2 Mrs. Napaporn Landy Director

3 Mr. Narong Chulajata Director

4 Miss Orawan Tejapaibul Director

5 Mr. Punchai Satayaporn Director

6 Mr. Ayuth Charnsethikul Director

7 Mr. Apichati Sivayathorn Director

8 Mr. Titiwut Soukpornchaikul Director

9 Mr. Bryan James Smith Director, President and Chief Executive Officer

10 Mr. Virojn Srethapramotaya Director

11 Mr. Rowan D’Arcy Director


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1.2.2.4. Revenue Breakdown

Unit: THB Million 2014 % 2015 % 2016 % Jan – Sep

2017 %

Net earned premium 26,126.8 81.93 28,009.1 81.61 30,031.0 81.97 22,114.0 81.21 Fees and commission income 156.7 0.49 184.2 0.54 115.0 0.31 114.9 0.42 Net investment income 5,452.0 17.10 5,999.5 17.48 6,350.9 17.33 4,751.9 17.45 Gain (losses) on investment 102.1 0.32 76.4 0.22 91.1 0.25 208.5 0.77 Other income 51.3 0.16 52.2 0.15 49.9 0.14 41.2 0.15 Total revenues 31,888.9 100.00 34,321.5 100.00 36,637.8 100.00 27,230.6 100.00

1.2.2.5. Operating Results and Financial Position

1.2.2.5.1. Summary of financial statement


Financial information Unit 31 Dec 31 Dec 31 Dec 30 Sep 2014 2015 2016 2017 Statement of Financial Position Assets

Cash and cash equivalents MB 1,677.0 6,890.1 11,174.0 2,926.7 Accrued investment income MB 4,229.5 4,990.0 2,516.9 2,901.1 Premium receivable, net MB 1,645.5 1,714.2 1,703.6 1,907.1 Reinsurance assets MB 257.8 234.9 380.8 450.4 Investment receivables MB - - 144.1 - Derivative assets MB 76.2 289.4 5.8 103.0 Investments assets MB 120,769.9 130,067.4 144,196.8 164,073.0 Premises and equipment, net MB 632.4 602.7 590.7 556.2 Intangible assets, net MB 74.1 93.8 174.8 232.9 Other assets MB 213.1 271.4 208.1 206.0 Total assets MB 129,575.5 145,153.9 161,095.5 173,356.4

Liability and Equity Liability

Insurance and investment contract liabilities MB 113,386.9 127,195.1 142,590.0 152,491.3 Reinsurance payables MB 532.1 377.4 640.1 720.9 Derivative liabilities MB - 1.8 - 2.8 Investment payables MB - 179.6 1,296.7 472.2 Income tax payable MB 191.7 203.1 128.8 100.5 Accrued expenses MB 1,520.0 1,694.7 1,726.3 1,861.8 Employee benefit obligations MB 121.2 160.2 194.6 211.8


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Provisions MB 270.4 266.0 173.7 200.4 Deferred tax liabilities MB 321.6 716.0 551.9 1,266.3 Total Liabilities MB 116,343.9 130,793.8 147,302.1 157,327.9

Shareholder’s equity Authorized share capital MB 40,000.0 40,000.0 4,000.0 4,000.0

Issued and paid-up share capital MB 2,950.0 2,950.0 2,950.0 2,950.0 Retained earnings MB 7,500.0 6,882.3 6,938.8 6,396.1 Other component of equity MB 2,781.6 4,527.8 3,904.6 6,682.4 Total shareholder’s equity MB 13,231.6 14,360.1 13,793.4 16,028.5

Liabilities and total shareholder’s equity MB 129,575.5 145,153.9 161,095.5 173,356.4


Revenues Gross written premiums MB 26,898.5 28,715.7 30,915.9 22,217.7 22,930.8 Less premiums ceded to reinsurers MB (630.5) (585.1) (709.7) (526.4) (540.8) Net premiums written MB 26,267.9 28,130.6 30,206.2 21,691.3 22,390.0 Add (less) Change and Reinsurers’ share of change in

unearned premium reserve MB (141.1) (121.5) (175.2) (271.0) (276.0)

Net earned premium MB 26,126.8 28,009.1 30,031.0 21,420.3 22,114.0 Fee and commission income MB 156.7 184.2 115.0 106.4 114.9 Total underwriting revenues MB 26,283.5 28,193.3 30,146.0 21,526.7 22,228.9 Expenses

Long-term technical reserve increased from last year MB 11,413.0 12,931.4 14,556.0 10,363.5 9,290.8 Net benefits payments and insurance claims expenses MB 11,500.9 12,177.0 12,347.6 8,758.9 10,590.1 Commissions and brokerages MB 3,282.0 3,497.0 3,595.5 2,602.2 2,565.1

Other underwriting expenses MB 782.6 712.0 759.1 533.9 724.3 Operating expense MB 2,531.4 2,624.1 2,969.1 2,183.3 2,341.7 Total underwriting expenses MB 29,509.9 31,941.5 34,227.4 24,441.7 25,512.0

Net investment income MB 5,452.0 5,999.5 6,350.9 4,836.5 4,751.9 Gains (losses) on investment MB 102.1 76.4 91.1 103.8 208.5 Other income MB 51.3 52.2 49.9 38.6 41.2

Other expenses MB - (0.3) (54.7) (54.6) (13.0) Profit (loss) before income tax expense MB 2,379.0 2,379.6 2,355.8 2,009.2 1,705.6 Income tax expense MB (458.7) (432.4) (429.8) (361.9) (324.7) Net profit (loss) MB 1,920.3 1,947.2 1,926.0 1,647.2 1,380.7 Cash flows statement

Net cash provided for (used in) operating activities MB (993.9) 7,859.2 6,303.2 4,896.1 (6,222.0) Net cash used in investing activities MB (50.6) (76.6) (163.8) (64.0) (101.9) Net cash used in financing activities MB - (2,569.5) (1,855.6) 1,312.0 (1,923.4)


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Net increase (decrease) in cash and cash equivalents MB (1,044.5) 5,213.1 4,283.8 6,144.2 (8,247.3)

Financial information Unit 31 Dec 31 Dec 31 Dec 30 Sep

2014 2015 2016 2017 Financial ratios

Premium receivable turnover Days 22 21 20 21 Profitability ratio Gross Profit Margin % 12.30 10.36 10.41 10.10 Net Profit Margin % 6.02 5.67 5.26 5.07 Investment yield % 4.45 4.37 4.09 3.75 Net Premium Written Per Equity Times 1.99 2.04 2.15 1.93 Return on equity % 14.51 14.11 13.68 10.35 Underwriting Expense Per Earned Premium % 25.25 24.40 24.39 25.46 Efficiency ratio

Return on Total Asset % 1.48 1.42 1.26 0.96 Assets Turnover Times 0.25 0.25 0.24 0.22

Financial ratio Debt to Equity Times 8.79 9.11 10.68 9.82 Policy Reserve to Capital Fund Times 9.28 8.26 9.66 8.75 Policy Reserve to Total Asset % 94.75 81.73 82.70 80.86 Dividend Payout Ratio % n/a 131.95 96.34 134.37

Remark The financial statement for year end 2014, 2015 and 2016 were audited by KPMG Phoomchai Audit Ltd. The financial statement for the nine-month periods ending 30 September 2017 was reviewed by KPMG Phoomchai Audit Ltd

1.2.2.5.2. Analysis of Operating Results

AZAY’s mainly incomes comprised of net earned premium and net investment income, totaled THB 31,888.9 million, Baht 34,321.5 million and THB 36,637.8 million in 2014-2016 respectively, represented 7.63% and 6.75% growth. The average proportion of net earned premium was 82% of total revenues.

For nine-month periods ending 30 September 2017, total revenue was THB 27,230.6 million, increased by THB 725.0 million or 2.74% compared to the same period of the previous year.

AZAY’s mainly incomes comprised of net earned premium and net investment income as follow:


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Net earned premium

Net earned premium is gross premiums written after deducting premiums ceded to reinsurers and an increase of unearned premium reserved. Net earned premium were THB 26,126.8 million, THB 28,009.1 million and THB 30,031.0 million in 2014, 2015, and 2016 respectively, increased by 7.20% and 7.22% from previous year since AZAY continue focusing on True Customer Centricity (TCC) as its core strategy for sustainable growth with attention to products and services to meet the needs of the customers, especially life and health protection products, and selling through bancassurrance. In addition, digital tools have been integrated in marketing, as well as, platforms have been developed to serve the customers, employee, and business partners for faster and more effective process.

For the nine-month periods ending 30 September 2017, AZAY has net earned premium of THB 22,114.0 million, 3.24% increase from the previous year due to the increase in yearly premiums from the employee benefits group.

Net investment income

Apart from net earned premium, AZAY has investment income, which is comprised of investment in government bonds, debt securities, equities, and loans consisting of interest income, dividend income, and such. AZAY has net investment income of THB 5,452 million, THB 5,999.5 million, and THB 6,350.9 million in 2014, 2015, and 2016, respectively; representing 10.04% and 5.86% increase in 2015 and 2016, respectively. The increase of net investment was attributable to the expansion of investment assets over the past 3 years, consistent with the business expansion. The investment assets grew by 7.70% and 10.86% in 2015 and 2016, respectively.

Graph depicts the proportion of investment assets and return on investment

The returns on investment were 4.45%, 4.37%, 4.09%, and 3.75% in 2014, 2015, 2016, and the nine-month periods of 2017, respectively. The decreasing return on

4.45%

4.37%

4.09%

3.75% 3.50%

4.00%

4.50%

5.00%

-

40,000

80,000

120,000

160,000

2014 2015 2016 Jan -Sep 2017

Government debt securities Private debt securities

Equity securities Loans

Others Return on investments

120,770 130,067

144,197

164,073


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investment was due to the more focusing on the fixed-income and lower risk securities, which is government securities, representing 55.06%, 64.08%, 75.45%, and 75.16% of its total investment assets in 2014, 2015, 2016, and the nine-month periods of 2017, respectively.

AZAY has 2 core expenses, which are underwriting expense and operating expenses.


Underwriting expenses consisted of 3 core expenses, which are long-term technical reserve increased (decreased) from previous year, net benefits payments and insurance claims expenses (net of benefits payments and insurance claims expenses recovered from reinsurers), and commissions and brokerages.

Long-term technical reserve increased (decreased) from previous year is the difference between the insurance technical reserves in the previous year and the insurance technical reserves in the current year. The insurance technical reserve is the accumulated reserve from the beginning of the policy to the end of reporting period for the claims and benefits which are expected to be incurred in the future according to the total in-force policies. AZAY had the expenses related to the insurance technical reserve of THB 11,413.0 million, THB 12,931.4 million, and THB 14,556.0 million, and THB 9,290.8 million in 2014, 2015, 2016, and the nine-month periods of 2017, respectively, representing the increase in the reserve resulting from the new insurance policy each year. In addition, the ratio of such expenses to the net premium earned were 43.68%, 46.17%, 48.47%, and 42.01%, respectively.

Net benefits payments and insurance claims expenses increased from THB 11,500.9 million in 2014 to THB 12,177.0 million and THB 12,347.6 million in 2015 and 2016 respectively, representing the growth rate of 5.88% and 1.40% in 2015 and 2016 respectively because of the increase in claims paid to the beneficiaries in the event of injury or death of the insured and the increase of money paid to the insured due to the policy surrender. In addition, the ratio of such expenses to the net premium earned in 2014, 2015, and 2016 were 44.02%, 43.48%, 41.12%, respectively.

For the nine-month periods ending 30 September 2017, net benefits payments and insurance claims expenses was THB 10,590.1 million, THB 1,831.2 million or 20.91% increase from the previous year mainly due to the increase of the payment at the end of the determined policy payment period.


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Commissions and brokerages include commissions and brokerages payable to agents and call center officers, and brokerages paid to the bank in case of bancassurance. AZAY had total commissions and brokerages of THB 3,282.0 million, THB 3,497.0 million, and THB 3,595.5 million in 2014, 2015, and 2016, respectively. The main increase is from bancassurance over the past 3 years. For the nine-month periods ending 30 September 2017, commissions and brokerages were THB 2,565.1 million, THB 37.1 million or 1.42% decrease from the previous year due to the reduction of the brokerages through bancassurance.

In addition, the ratio of such expenses to the net premium earned in 2014, 2015, 2016, and the nine-month periods ending 30 September 2017 were 12.56%, 12.49%, 11.97%, and 11.60% respectively. The continuing decrease of the ratio was due to the lower brokerages of bancassurance than other channels.

Operating expenses

Operating expenses consists of personnel expense, selling expense, equipment expense, and such. The total operating expenses were THB 2,531.4 million, THB 2,624.1 million, and THB 2,969.1 million in 2014, 2015, and 2016 respectively, representing the growth rate of 3.66% and 13.15% in 2015 and 2016 respectively. In 2016, the operating expenses increased from expenses related to business development and specific business tax of interest income from investment. For the nine-month periods ending 30 September 2017, the operating expenses were THB 2,341.7 million, THB 158.4 million or 7.25% increase from the previous year mainly from the personnel expense.

Net profit

AZAY’s net profit increased from THB 1,920.3 million in 2014 to THB 1,947.2 million in 2015, representing the growth rate of 1.40% because the underwriting revenues increased THB 1,909.8 million and the investment income increased THB 547.6 million while the underwriting expenses increased only THB 2,431.6 million.

In 2016, AZAY’s net profit was THB 1,926.0 million, THB 21.2 million or 1.09% decrease because the underwriting expenses increased THB 2,285.9 million, incurred loss from foreign exchange of THB 26.7 million, and interest expense from secured short-term loan of THB 28.0 million while the underwriting revenues increased THB 1,952.6 million and the investment income increased THB 351.3 million.

For the nine-month periods ending 30 September 2017, AZAY’s net profit was THB 1,380.9 million, THB 266.3 million or 16.17% decrease from the previous year because the underwriting expenses increased THB 1,070.2 million while the underwriting revenues


34

increased THB 702.2 million. The net profit margin were 6.02%, 5.67%, 5.26%, 5.07% in 2014, 2015, 2016, and the nine-month periods ending 30 September 2017, respectively.

1.2.2.5.3. Analysis of Financial position

Assets

Total assets at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 129,575.5 million, THB 145,153.9 million, THB 161,095.5 million, THB 173,356.4 million, respectively. The core assets were comprised of cash and cash equivalents, investment assets, accrued investment income, and net premium receivable.

Investment assets at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 120,769.9 million, THB 130,067.4 million, THB 144,196.8 million, and THB 164,073.0 million respectively, representing 93.20%, 89.61%, 89.51%, 94.64% of total assets respectively. AZAY allocated a large portion of its investment in debt securities, of which were mostly long-term government bonds to be consistent with the liabilities to the policyholders. Private debts instruments were invested to increase the return on investment with an acceptable level of risk. The portion of investment in debt securities to investment assets were 80.03%, 84.29%, 83.33%, and 84.04%, respectively while there were small portion of investment in equity and loan.

Accrued investment income at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 4,229.5 million, THB 4,990.0 million, THB 2,516.9 million, and THB 2,901.1 million respectively, representing 3.26%3.44%, 1.56%, and 1.67% of total assets respectively. In 2016, the accrued investment income decreased THB 2,473.1 million, equivalent to 49.56%, because of the decrease of accrued interest income from investment in short-term debt securities.

Net premium receivable at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 1,645.5 million, THB 1,714.2 million, THB 1,703.6 million, and THB 1,907.1 million respectively, representing 1.27%, 1.18%, 1.06%, and 1.10% of total assets respectively. Net premium receivable was comprised of unpaid premiums from the insured or agents or brokers. The large portion of receivable was within credit terms of 30 days for individual insurance and 90 days for group insurance, of which the receivable within credit terms account for 91.04%, 91.25%, 95.97%, and 96.67% of net premium receivable, respectively.


35

Liabilities

Total liabilities at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 116,343.9 million, THB 130,793.8 million, THB 147,302.1 million, and THB 157,327.9 million, respectively. The increase of total liabilities were mainly from the increase of Insurance and investment contract liabilities consisting of long-term technical reserves, loss reserves and outstanding claims, unearned premium reserves, unpaid policy benefits, due to insured. The increase of such items was the result of the growth of business operation of AZAY over the past 3 years.

Equity

Equity at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 13,231.6 million, THB 14,360.1 million, THB 13,793.4 million, THB 16,028.5 million ,respectively. In 2015, the equity increased THB 1,128.5 million, representing 8.53% mainly from the increase of net profit in 2015 of THB 1,947.2 million, net gain from change in fair value of available-for-sale securities and derivatives investments of THB 1,746.2 million, and the defined benefit plan actuarial gain of THB 5.6 million, while there was interim dividend payment of THB 2,569.5 million.

In 2016, the equity decreased THB 566.7 million, or 3.95% from the interim dividend payment of THB 1,855.6 million, net loss from change in fair value of available-for-sale securities and derivatives investments of THB 623.2 million, and the defined benefit plan actuarial loss of THB 17.4 million, while net profit in 2016 was THB 1,926.0 million.

For the nine-month periods ending 30 September 2017, equity increased THB 2,235.1 million, or 16.20% mainly from the accumulated 9-month periods of net profit ending 30 September 2017 of THB 1,380.9 million, and net gain from change in fair value of available-for-sale securities and derivatives investments of THB 2,777.8 million, while there was interim dividend payment of THB 1,923.4 million.

Cash flows

Net cash provided for (used in) operating activities in 2014, 2015, and 2016 were THB (993.9) million, THB 7,859.2 million, and THB 6,303.2 million respectively. The increase of THB 8,853.1 million in 2015, and decrease of THB 1,556.0 million in 2016 were because of deposits at financial institution of THB 5,735.0 million in 2015. Net cash provided for (used in) operating activities for the nine-month periods ending 30 September 2017 were (6,222.0) million due to the increase in investment in securities of THB 10,080.0 million.


36

Net cash used in investing activities in 2014, 2015, 2016, and the nine-month periods ending 30 September 2017 were THB 50.6 million, THB 76.6 million, THB 163.8 million and THB 101.9 million respectively, of which mainly were cash paid for equipment and computer software.

For financing activities, AZAY have no cash used in financing activities in 2014; however, in 2015, 2016, and the nine-month periods ending 30 September 2017, there were dividend payment of THB 2,569.5 million, THB 1,855.6 million, and THB 1,923.4 million, respectively.

Financial ratio

Liquidity ratio

AZAY has premium receivable turnover in 2014 – 2016 of 22 days, 21 days, and 20 days, respectively. However, the premium receivable turnover was still lower than the policy of AZAY which grants the credit term of 30 days. In addition, the premium receivable turnover was decreasing in each year reflecting that AZAY can collect premiums faster and more efficient. For the nine-month periods ending 30 September 2017, the premium receivable turnover was 21 days.

Profitability ratio

Gross profit margins in 2014 – 2016 were 12.30%, 10.36%, 10.41%, respectively. In 2015, gross profit margin decreased from the previous year because the underwriting revenues increased 7.27%; while the underwriting expenses consisting of long-term technical reserve increased (decreased), net benefits payments and insurance claims expenses increased 9.58%, higher than the increase of the underwriting revenues.

Net profit margins in 2014 – 2016 were 6.02%, 5.67%, and 5.26% respectively. The decreasing of net profit margin each year was in line with the decreasing of gross profit margin and the lower return on investment because AZAY focused on the investment in government bonds, which yield fixed income, and had lower level of risk.

For the nine-month periods ending 30 September 2017, AZAY has gross profit margin and net profit margin of 10.10%, and 5.07%, respectively.


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1.3. Profile of the Company

1.3.1. Nature of Business Operation

Sri Ayudhaya Capital Public Company Limited (‚The Company‛) formally known as Sri Ayudhaya Insurance Public Company Limited (‚Ayudhya Insurance‛) which is the leading insurance company in Thailand. The Ayudhya Insurance was founded on 7 October 1950 with the registered capital of THB 2 million to operate non-life insurance business, including fire, marine, motor insurance and other non-life insurance products. In 1994, the Company transformed to a public company and became publicly listed company in the SET.

The major transformation of the Company started on 15 March 2010 when the Ayudhya Insurance and CIMB Thai Bank Public Company Limited (‚CIMB‛) have entered into an agreement for the Ayudhya Insurance to acquire a 99.99% stake in BT Insurance Company Limited (‚BTI‛) from CIMB Thai at an initial reference price of THB 392 million.

The purchase became final after the approval by the Office of Insurance Commission (OIC) in November of the same year. AYUD then changed BT Insurance name to Sri Ayudhya General Insurance Public Company Limited (SAGI) to be in alignment with AYUD brand and the capital of SAGI was increased to THB 1.2 billion to gear up for expansion as well as to be in line with the OIC's Risk-Based Capital (RBC) criteria. With the insurance business transfer from AYUD to SAGI completed, the company then moved ahead with its plan to finally transform itself into an investment holding company. The company has nearly THB 6 billion for investment in the insurance sector. Its financial strength is attributable to the long term strategic conservatism and sound financial management. SAGI maintains one of the highest solvency ratios in the insurance industry.

November 2010, the Ayudhya Insurance received the approval from the OIC for the purchase of BTI, and also obtain the approval of the business merging plan to transfer and receive the non-life insurance business of the Company

February 2011, AYUD changed BTI name to Sri Ayudhya General Insurance Company Limited (‚Ayudhya General Insurance‛) to be in alignment with AYUD brand and the capital of Ayudhya General Insurance was increased to THB 1,200 million and then THB 1,800 million to gear up for expansion as well as to be in line with the OIC's Risk-Based Capital (RBC) criteria.

June 2011, the Company transformed SAGI into Public Company and changed its name to Sri Ayudhya General Insurance Public Company Limited (‚SAGI‛)

November 2011, with the insurance business transfer from AYUD to SAGI completed, the Company then returned its insurance license to the OIC and move its non-life insurance


38

business to be operated under SAGI and changed its company status to ‘investment holding company’ with the purpose of investing in other businesses under the new name of ‚Sri Ayudhya Capital Public Company Limited‛ and continued to maintain the listed status under ticker ‚AYUD‛

The Company has a subsidiary and core company which is SAGI. SAGI engages in all classes of non-life insurance business since 24 September 1982 as follows:

1. Fire Insurance Coverage is available throughout Thailand for buildings, houses, residences, commercial buildings and factories, goods held in storage, as well as machinery and raw materials at industrial plants within Thailand territory limit.

2. Marine Insurance The Company offers coverage on goods transported by sea and by river both internationally and within Thailand. Coverage is also provided on good transported overland by truck or by train, as well as by air and parcel post.

3. Motor Insurance Cover the risk of losses due to automotive and motorcycle accidents divided into Compulsory insurance and Voluntary insurance.

4. Miscellaneous Insurance Numerous types of insurance coverage are available, including Personal and group accident insurance, Travel insurance, Money insurance, Burglary insurance, Machinery insurance, Erection all risks insurance, Contractor’s all risks insurance, Workmen’s compensation insurance, Electronic equipment insurance, Public liability insurance, All risks insurance, Credit card insurance, Plate glass insurance, Contractor’s plant and machinery insurance and Leasehold insurance.

Apart from direct acceptance of risks, the Company accepts reinsurance from domestic and overseas insurance companies, balancing the risks to increase financial security.

In addition, the Company also has an associated company, AZAY, which has its core business in life insurance and the Company currently holds 20.17% of the total issued shares in AZAY.

1.3.2. List of Shareholders

As of the book closing date, 29 August 2017, the Company has the top 10 major shareholders as follows:



No. of shares

% ownership

No. of shares

% owners

hip

1 Deutsche Bank AG, Frankfurt A/C Clients

Account-DCS* 42,104,000 16.84 **please see at remark

CPRNT*** - - **please see at remark


39



No. of shares

% ownership

No. of shares

% owners

hip

Total 42,104,000 16.84 138,604,000 40.00

2 Bangkok Broadcasting & Television Company

Limited 28,802,500 11.52 28,802,500 8.31

3 Triple Prime Team Holdings Company Limited 25,238,750 10.10 25,238,750 7.28

4 BBTV Equity Company Limited 21,946,000 8.78 21,946,000 6.33

5 Bank of Ayudhya Public Company Limited 21,250,800 8.50 21,250,800 6.13

6 Thongthai (1965) Company Limited 9,610,000 3.84 9,610,000 2.77

7 Miss Sudthida Ratanarak 7,454,870 2.98 7,454,870 2.15

8 Citibank Nominees Singapore Pte Ltd-UBS

AG London Branch-NRBS 7,380,500 2.95 7,380,500 2.13

9 Great Fortune Equity Company Limited 7,045,250 2.82 7,045,250 2.03

10 Krungthai Panich Insurance Public Company

Limited 3,938,400 1.58 3,938,400 1.14

11 Other minorities 75,228,930 30.09 28,802,500 8.31

รวม 250,000,000 100.00 346,500,000 100.00

Remark * Deutsche Bank AG, Frankfurt A/C Clients Account-DCS is the custodian for Allianz SE ** According to Draft Form 24-7, Allianz SE and CPRNT shall determine the proportion of the

AZAY share that each party will sell to the Company with respect to the foreign availability of the Company in order to ensure that the total shareholding of non-Thais in the Company shall not exceed 49% of its total issued and paid-up capital after the capital increase.

*** The ultimate shareholder of CPRNT is Allianz SE

1.3.3. Board of Directors

As of 21 November 2017, the board of directors of the Company consists of the following 11 directors:

No. Name Position

1 Mr. Veraphan Teepsuwan Chairman

2 Mr. Arnon Opaspimoltum Director / President and CEO

3 Mr. Chusak Salee Director

4 Mr. Laksna Thongthai Director

5 Mr. Virojn Srethapramotaya Director

6 Miss Nopporn Tirawattanagool Director

7 Mr. Bryan James Smith Director


40

No. Name Position

8 Mr. Suwat Suksongkroh Independent Director

9 Mr. Surachai Prukbamroong Chairman of Audit Committees / Independent Director

10 Mr. Metha Suvanasarn Member of Audit Committees / Independent Director

11 Mr. Vichit Kornvityakoon Member of Audit Committees / Independent Director

1.3.4. Revenue Breakdown

The revenue structure of the Company consists of 2 core items which are income from premium and income from investment. Details are as follows:

Unit : THB million 2014 % 2015 % 2016 % Jan – Sep

2017 %

Net premium earned 1,821.7 44.36 1,872.7 65.98 1,892.5 66.12 1,246.4 65.65 Fee and commission income 370.2 9.02 388.3 13.68 323.3 11.30 267.2 14.07 Net investment income 128.1 3.12 120.7 4.25 104.8 3.66 71.3 3.76 Gain on investment in securities 1,396.2 34.00 58.9 2.07 48.7 1.70 32.7 1.72 Share of profit of investment in an associated company

387.3 9.43 392.7 13.84 388.5 13.57 278.5 14.67

Other income 2.7 0.07 5.1 0.18 104.3 3.64 2.4 0.13 Total revenue 4,106.3 100.00 2,838.4 100.00 2,862.1 100.00 1,898.4 100.00

1.3.5. Operating Results and Financial Position

1.3.5.1. Summary of financial statement



Statements of Financial Position Assets

Cash and cash equivalents MB 1,369.0 1,065.2 1,417.05 1,437.8 Premium due and uncollected - net MB 293.0 287.0 217.4 219.2 Accrued investment income MB 15.1 13.6 10.0 3.4 Reinsurance assets MB 1,089.4 992.2 1,050.3 948.6 Due from reinsurers MB 394.6 193.1 58.6 54.4 Investment in securities MB 4,693.1 4,656.6 4,594.3 4,705.6 Investment in an associate MB 2,717.2 2,944.8 2,830.5 3,281.3 Premises and equipment MB 55.1 75.3 60.5 56.6


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Intangible assets MB 88.2 83.7 75.2 68.2 Deferred tax assets MB 211.2 225.9 186.0 159.2 Deferred commissions expenses MB 59.8 55.6 63.4 62.8 Other assets MB 46.2 68.3 53.4 52.8

Total assets MB 11,031.9 10,661.3 10,616.7 11,049.8 Liabilities and Equity

Liabilities Insurance contract liabilities MB 2,586.9 2,401.1 2,249.9 2,094.1 Due to reinsurers MB 795.5 633.4 705.7 740.5 Income tax payable MB 268.9 20.1 0.7 - Employee benefit obligations MB 61.0 72.8 79.1 83.4 Premium written received in advance MB 334.9 305.3 338.0 352.8 Commissions and brokerages payables MB 62.7 61.6 51.0 43.6 Accrued expenses MB 85.4 66.4 62.1 41.8 Other liabilities MB 60.0 71.0 87.9 86.9

Total liabilities MB 4,255.2 3,631.6 3,574.3 3,443.1 Equity

Authorized share capital MB 500.0 500.0 500.0 500.0 Issued and paid-up share capital MB 250.0 250.0 250.0 250.0 Premium on share capital MB 3,512.2 3,512.2 3,512.2 3,512.2 Retained earnings MB 2,516.3 2,569.2 2,680.2 2,634.1 Other components of equity MB 498.2 698.3 599.9 1,210.4

Total equity MB 6,776.7 7,029.7 7,042.3 7,606.7 Total liabilities and equity MB 11,031.9 10,661.3 10,616.7 11,049.8


Statements of Comprehensive Income Revenues Gross written premium MB 3,087.2 3,137.8 3,082.4 2,362.5 2,167.5 Less Premium ceded MB (1,270.0) (1,239.5) (1,286.5) (929.4) (922.4) Net premium written MB 1,817.2 1,898.3 1,795.9 1,433.2 1,245.2 Less Unearned premium reserve increase (decrease) MB 4.5 (25.7) 96.6 12.5 1.2 Net premium earned MB 1,821.7 1,872.7 1,892.5 1,445.6 1,246.4 Fee and commission income MB 370.2 388.3 323.3 264.6 267.2 Total underwriting revenues MB 2,191.9 2,261.0 2,215.8 1,710.2 1,513.5 Expenses

Net loss incurred MB 689.1 852.8 915.1 731.0 586.2 Commissions and brokerages expenses MB 454.6 466.3 455.7 348.6 310.3

Other underwriting expenses MB 378.6 424.4 473.3 352.6 340.2 Operating expenses MB 367.4 357.0 357.7 257.5 248.5


42


Total underwriting expenses MB 1,889.7 2,100.5 2,201.8 1,689.7 1,485.2 Net investment income MB 128.1 120.7 104.8 86.6 71.3

Gain on investment in securities MB 1,396.2 58.9 48.7 11.2 32.7 Share of profit of investment in an associate MB 387.3 392.7 388.5 332.2 278.5 Other income MB 2.7 5.1 104.3 104.3 2.4

Income before tax expense MB 2,216.5 738.0 660.3 554.9 413.2 Income tax expense MB (354.7) (61.0) (45.2) (38.9) (21.8) Net income MB 1,861.9 676.9 615.2 516.0 391.4 Cash flows statement Net cash provided by (used in) operating activities MB 234.1 371.3 862.0 1,024.1 471.4 Net cash used in investing activities MB (27.4) (50.0) (10.2) (6.9) (13.2) Net cash used in financing activities MB (525.0) (625.0) (500.0) (500.0) (437.5) Reconcile payable from purchase of government security MB - - - 1,244.3 - Net increase (decrease) in cash and cash equivalents MB (318.3) (303.7) 351.8 1,761.6 20.7


Financial ratios Premium receivable turnover Days 33 34 30 28

Profitability ratio Retention rate % 58.86 60.50 58.26 57.45 Loss incurred per earned premium % 37.83 45.54 48.35 47.03

Investment yield % 24.09 6.78 6.05 5.68 Net premium written per equity Times 0.31 0.27 0.26 0.23 Net profit margin % 45.34 23.85 21.49 20.62 Return on equity % 31.68 9.81 8.74 7.13 Efficiency ratio

Return on total assets % 17.89 6.24 5.78 4.89 Financial policy ratio

Debt to Equity ratio Times 0.62 0.52 0.51 0.45 Unearned premium reserve to equity ratio Times 0.21 0.21 0.20 0.18 Unearned premium reserve to total assets ratio % 13.20 13.81 13.48 12.66 Dividend payout ratio % 33.56 73.80 81.30 63.69

Remark The financial statement for year end 2014, 2015 and 2016 were audited by Deloitte Touche Tohmatsu Jaiyos Audit Company Limited. The financial statement for nine-month periods ended 30 September 2017 was reviewed by Deloitte Touche Tohmatsu Jaiyos Audit Company Limited.


43

1.3.5.2. Analysis of Operating Results

The Company’s core revenues comprised of net premium earned and gain on investment in securities. In 2014, 2015 and 2016, total revenues of the Company were THB 4,106.3 million, THB 2,838.4 million, and THB 2,862.1 million respectively. In 2015, total revenues decreased by 30.88% from 2014. In contrast, in 2016, revenues slightly rose 0.83% from prior year. Net premium earned were 44.36%, 65.98% and 66.12% of total revenues in 2014-2016 respectively.

For the nine-month periods ending 30 September 2017, The Company’s total revenues were THB 1,898.4 million, THB 346.1 million or 15.42% decrease from the previous year. Net premium earned was 65.65% of total revenues.

Net premium earned

The Company’s net premium earned (net of premium ceded and unearned premium reserve increase (decrease)) were THB 1,821.7 million, THB 1,872.7 million, and THB 1,892.5 million, respectively. Net premium earned comprised of motor insurance representing 37.12% of net premium earned, fire insurance representing 21.62% of net premium earned, marine and transportation insurance representing 5.95% of net premium earned, and other insurance representing 35.30% of net premium earned.

In 2015, the net premium earned increased THB 51.0 million or 2.80% from the previous year because of the increase in premium of fire insurance and others insurance due to the market expansion through agents and brokers. In 2016, the net premium earned slightly increased THB 19.8 million due to the decrease of unearned premium reserve causing the THB 122.3 million increase of the revenue recognition, while net premium

20% 23% 22% 23% 25%

43% 33% 36%

36% 40%

31% 39% 36%

35%

29%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2014 2015 2016 Jan - Sep 2016 Jan - Sep 2017

Fire insurance Marine and transportation insurance Motor insurance Others

THB million

1,822 1,873 1,893

1,446

1,246


44

earned dropped THB 102.4 million resulting from the decrease in premium of fire insurance, marine and transportation insurance and others insurance.

For the nine-month periods ending 30 September 2017, the Company had the net premium earned of THB 1,246.4 million decreasing THB 199.2 million, or 13.78%, from the same period because of the reduction in proportion of insurance premium of the product with high claim rate.

Gain from investment in securities

The Company had gain from investment in securities of THB 1,396.2 million, THB 58.9 million, and THB 48.7 million in 2014, 2015, and 2016, respectively. In 2015, the gain from investment in securities decreased THB 1,337.3 million, or 95.78%, from the previous year since, in the third quarter of 2014, the Company had sold 54,613,666 ordinary shares of Sunrise Equity Company Limited at the price of THB 34.70 per share, totaling THB 1,895.1 million. The Company recognized gain from the selling of ordinary shares of Sunrise Equity Company Limited of THB 1,348.0 million. In 2016, the Company’s gain from investment in securities deceased THB 10.2 million, or 17.28%, due to the volatility of the SET Index throughout the year.

For the nine-month periods ending 30 September 2017, the Company had gain from investment in securities of THB 32.7 million, THB 21.5 million, or 191.26%, increase from the same period of the previous year due to the increasing of SET Index from the previous year resulting from the investment of foreign investors.

The Company had 2 major expenses comprised of underwriting expenses, and operating expenses.


Underwriting expenses comprised of 3 main expenses which are net loss incurred, commissions and brokerages expenses, and other underwriting expenses. Commissions and brokerages expenses and other underwriting expenses were variable costs in relation to underwriting revenues, while net loss incurred was in relation to the loss incurred to the insured during the year.

Net loss incurred were THB 689.1 million, THB 825.8 million, and THB 915.1 million in 2014, 2015 and 2016, respectively. In addition, loss incurred per net premium earned in 2014, 2015 and 2016 were 37.83%, 45.54% and 48.35% respectively. Net loss incurred in 2015 increase THB 163.7 million, or 23.75%, from the prior year because, in 2014, the subsidiary had additional loss refundable from reinsurers from the flood event and


45

recognize the amount of THB 147.0 million and THB 20.0 million in 2014 and 2015, respectively. In 2016, net loss incurred rose THB 62.3 million, or 7.30%, from the prior year due to the increase of loss incurred in motor insurance and other insurance. For the nine-month periods ending 30 September 2017, the Company had net loss incurred of THB 586.2 million, dropping THB 144.8 million, 19.81%, from the same period of the previous year.

Commissions and brokerages expense were expenses payable to agents or insurance brokers for soliciting a person to enter into the insurance policy with the Company. The Company’s commissions and brokerages expense were THB 454.6 million, THB 466.3 million, and THB 455.7 million in 2014, 2015, and 2016, respectively. They increased THB 11.7 million, or 2.57% in 2015; and decreased THB 10.6 million, or 2.27% in 2016 in relation to the change of gross written premium in each year. For the nine-month periods ending 30 September 2017, the Company had commissions and brokerages expenses of THB 310.3 million, THB 38.3 million or 11.00% decrease from the same period of the prior year of THB 348.6 million.

Other underwriting expenses comprised of personnel expenses related to underwriting activities, expenses related to underwriting activities, contribution to the OIC, contribution to non-life guarantee fund, and contribution to road victims protection fund. The Company had other underwriting expenses of THB 378.6 million, THB 424.4 million, and THB 473.3 million in 2014, 2015, and 2016 respectively, representing the growth rate of 12.09% and 11.53% in 2015 and 2016 respectively. The growth was due to the rising of expenses involving with fire insurance and motor insurance. For the nine-month periods ending 30 September 2017, the Company had other underwriting expenses of THB 340.2 million, decreasing THB 12.4 million, or 3.5% from the same period of the previous year due to the decrease of expense involving with other insurance.

Operating expenses

The operating expenses were THB 367.4 million, THB 357.0 million, and THB 357.7 million in 2014, 2015, and 2016 respectively. In 2015, the expense decreased THB 10.4 million, or 2.83, from the prior year due to the decrease of personnel expenses of THB 27 million. For the nine-month periods ending 30 September 2017, the operating expenses were THB 248.5 million, THB 9.0 million or 3.49% decrease from the prior year.

Net profit

The Company had net profit of THB 1,861.9 million in 2014 and decreased to THB 676.9 million in 2015, equivalent to THB 63.64% decrease due to the selling of shares of Sunrise Equity Company Limited of THB 1,348 million. In 2016, the Company had net profit


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of THB 615.2 million, decrease THB 61.7 million from the prior year, resulting from the increase of underwriting expenses of THB 101.3 million, and the decrease of fee and commission income of THB 65.0 million. In contrast, the other income increased THB 99.2 million because the Company recognized the reversal of insurance contract liability of THB 98.0 million resulting from the lawsuit filed against the Company from the insured since 24 September 1997. On 15 March 2016, the Supreme Court dismissed the case causing the Company to reverse the liability to other income in 2016.

For the nine-month periods ending 30 September 2017, the Company had net profit of THB 391.4 million, comparing to THB 516.0 million of net profit from the same period of the prior year, representing THB 124.6 million or 24.15% decrease because, as aforementioned, the Company recognized income from the reversal of liability of THB 98.0 million in the same period of the previous year, while there were no item occurred in 2017.

1.3.5.3 Analysis of Financial position

Assets

Total assets at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 11,031.9 million, THB 10,661.3 million, THB 10,616.7 million, and 11,049.8 million, respectively. The core assets were comprised of cash and cash equivalents, investment in securities, and investment in associate.

Investment in securities at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 4,693.1 million, THB 4,656.6 million, THB 4,594.3 million, and THB 4,705.6 million, respectively. They represent 42.54%, 43.68%, 43.27%, and 42.59% of total assets respectively. The key items are investment in government bonds, Bank of Thailand bonds, treasury bills, shares, debentures, and units in mutual funds.

Investment in associate at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 2,717.2 million, THB 2,944.8 million, THB 2,830.5 million, and THB 3,281.3 million, respectively; representing 24.63%, 27.62%, 26.66%, and 29.70% of total assets respectively. The Company had investment in 59,500,280 ordinary shares of AZAY, accounting for 20.17% shareholding; therefore, the Company had classified such investment as investment in associate and represented using the equity method, of which the value of investment will change based on the net asset value of the associated company.

Liabilities

Liabilities of the Company were the liabilities resulting from the business operation. They were insurance contract liabilities consisting of loss reserve and unearned premium


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reserve, due to reinsurers, premium written received in advance, commissions and brokerages payables, employee benefit obligations. Total liabilities at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 4,255.2 million, THB 3,631.6 million, THB 3,574.3 million, and THB 3,443.1 million, respectively. At the end of 2015, total liabilities decrease THB 623.6 million due to the decrease of loss reserve, outstanding claims, and payable to reinsurer of THB 347.9 million, and the decrease of income tax payable of THB 248.8 million. At the end of 2016 and as at 30 September 2017, total liabilities decreased THB 57.3 million and THB 131.2 million, respectively due to the decrease of loss reserve and unearned premium reserve.

Equity

Equity as at the end of 2014, 2015, 2016, and as at 30 September 2017 were THB 6,776.7 million, THB 7,029.7 million, THB 7,042.3 million, and THB 7,606.7 million, respectively. In 2015, total equity increased THB 253.0 million resulting from the net profit of THB 676.9 million, and the increase of share of profit from associate of THB 352.2 million, while there were increase of unrealized loss from the investment in the available-for-sale securities THB 152.1 million, and dividend payment of THB 625.0 million. In 2016, total equity increased THB 12.6 million resulting from the net profit of THB 615.2 million, the decrease of loss from investment in available-for-sale securities of THB 27.3 million, while there was dividend payment of THB 500.0 million, and the decrease of share of profit from associate of THB 125.7 million.

For the nine-month periods ending 30 September 2017, total equity increased THB 564.4 million resulting from the nine-month periods net profit ending 30 September 2017 of THB 391.4 million, the decrease of loss from investment in available-for-sale securities of THB 50.2 million, and the increase of share of profit from associate of THB 560.3 million, while there was dividend payment of THB 437.5 million.

Cash flows

Net cash provided by operating activities in 2014, 2015, and 2016 were THB 234.1 million, THB 371.3 million, and THB 862.0 million, respectively. The THB 137.2 million increase of net cash provided by operating activities in 2015 was due to the increase of direct premium received of THB 81.4 million, the decrease of loss incurred from direct insurance of THB 209.0 million, and dividend received from associate of THB 518.2 million, while there were the increase of cash paid to reinsurance of THB 343.6 million, income tax paid of THB 286.5 million. In 2016, net cash provided by operating activities increased THB 490.7 million because of the decrease of cash paid to reinsurance of THB 120.9 million, the decrease of income tax paid of THB 244.0 million, and cash received from investment in


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securities of THB 265.5 million, while there were the decrease of dividend received from the associate of THB 144.0 million. For the nine-month periods ending 30 September 2017, net cash provided by operating activities was THB 471.4 million, decreasing THB 552.7 million from the prior year which was THB 1,024.1 million, due to the decrease of direct premium received of THB 268.2 million, the increase of loss incurred from direct insurance of THB 163.0 million, and the decrease of cash received from investment in securities of THB 186.7 million.

Net cash used in investing activities in 2014, 2015, and 2016 were THB 27.4 million, THB 50.0 million, and THB 10.2 million, respectively. For the nine-month periods ending 30 September 2017, it was THB 13.2 million. They are due to cash paid for equipment, fixtures, computer software, and vehicles.

For net cash used in financing activities, the Company paid dividend of THB 525.0 million, THB 625.0 million, and THB 500.0 million in 2014, 2015, and 2016, respectively. For the nine-month periods ending 30 September 2017, the dividend payment was THB 437.5 million.

Financial ratios

Liquidity ratio

The Company had premium receivable turnover in 2014 to 2016 and the nine-month periods ending 30 September 2017 of 33 days, 34 days, 30 days, and 27 days, respectively. The Company had credit term policy for individual insurance of about 30 days. For other type of insurance apart from motor insurance, customers have to follow the principle of ‚Cash before cover‛, that is, the insured will have to pay premium before the beginning of insurance policy.

Profitability ratio

Net profit margins in 2014 to 2016 and the nine-month periods ending 30 September 2017 were 45.34%, 23.85%, 21.49%, and 20.62%, respectively. The net profit margin in 2014 was crucially higher than other years because the Company recognized the gain from sale of shares of Sunrise Equity Company Limited of THB 1,348 million.

1.3.6. Industry Overview

The Office of Insurance Commission (‚OIC‛) announced the overall performance of the Insurance business in 2016 (January – December) with total direct insurance premiums being THB 777,717 million, increased 4.76% year-on-year in consistent with the domestic economy expansion


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in 2016 at 3.20%. Life Insurance gained total premiums net at THB 567,974 million, increased 6.52% year-on-year. The key growth in the Life Insurance sector was from the investment-linked annuity with total insurance premiums THB 7,831 million, increased by 1.61% year-on-year, the unit linked with total insurance premiums THB 7,051 million, increased by 1.45% year-on-year, and the universal life with total insurance premiums THB 2,168 million, increased by 0.45% year-on-year. Of the total life insurance premiums, Ordinary life garnered the most premiums of THB 415,484 million, down 10.17% year-on-year. Following the Ordinary life is the Group life that garnered THB 40,621 million in premiums, down 29.67% year-on-year. The Industrial insurance garnered THB 6,716 million in premiums, up 7.30%, and The Personal Accident Insurance (PA) with THB 5,331 million, down 6.03% year-on-year.

Similarly, Non-life Insurance had total direct premiums net at THB 209,743 million, increased 0.26% year-on-year. Of the total non-life insurance premiums, the Motor insurance garnered the most premiums of THB 120,950 million, increased 0.45%. It can be divided into the Compulsory Motor Insurance (CMI) with THB 16,407 million in premiums, up 0.70%, and the Voluntary Motor Insurance with THB 105,543 million in premiums, up 0.41%. Following the Motor insurance is the Fire insurance with THB 10,077 million in premiums and the Marine & Transportation insurance with THB 5,240 million. The latter two’s total premiums decreased 3.88% and 1.85% year-on-year respectively.

As of 31 December 2016, the total assets of the Insurance business amounted to THB 3,357,939 million, increased 10.43% year-on-year. Out of which, the assets from the Life Insurance sector amounted to THB 2,895,816 million, increased 12.22% year-on-year, while in the Non-life Insurance sector, the total assets was at THB 462.123 million, increased 0.35%. In terms of assets under investment, the total amount was THB 3,073,921 million, increased 11.21% year-on-year, which can be divided into the Life Insurance sector amounted THB 2,769,139 million, up 12.56%, and the Non-life Insurance sector amounted THB 304,782 million, up 0.29%.

By the end of 2017, OIC expected the total insurance premiums of the overall Insurance business will be at THB 824,475 million, or increasing at 6.01%. The Life Insurance premiums will be at THB 611,324 million, increasing 7.63%, and The Non-life Insurance premiums will be at THB 213,151 million, increasing 1.63%. The continuation of growth in insurance premiums is supported by the 2017 growth of Thai economy which is expected to be at the same rate as 2016 mainly driven by recovery of domestic consumptions, consistent growth of the tourism sector, and on-going government investment including planned infrastructure investment.

With regards to the Life Insurance sector, OIC expected to see the investment-linked annuity, the unit linked, and the universal life will continue its growth in 2017. On the Non-life Insurance side, the Motor Insurance and the Miscellaneous Insurance was expected to exhibit its consistent growth in 2017 as well.


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Not only the Insurance Business overview and analysis by OIC, but The Thai Life Assurance Association (‚TLAA‛) also expected the same that the Life Insurance sector will resume its growth in 2017 at 6%. It is equivalent to the total insurance premiums amounted THB 597,000 million. The growth will be driven by the expansion of Thai economy mainly from investment of both public and private sectors. Moreover, the life insurance penetration rate in Thailand was at 38% in 2016, still plenty of areas of growth in this market condition. Thai General Insurance Association (“TGIA”) also projected the 2017 outlook of the Non-life Insurance section as same as OIC. The Non-life Insurance sector was expected to grow at 2.0% to 3.2% supported by the government policy to boost the domestic economy through investment from public and private sectors, and the government policy to support non-life insurance business directly. OIC expected the total non-life insurance premiums to reach THB 220,000 – 223,000 million in 2017.


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1.4. Reasonableness of the Transaction

1.4.1. Objectives and Rationale of Entering into the Transaction

Refer to Board of Directors Meeting of AYUD No.7/2017 held on 21 November 2017 which approved for the proposal to Extraordinary Meeting of Shareholders for approval of entire business transfer of AZTH, acquisition of AZAY’s shares and issuing new shares for the purpose of enhancing business co-operation between AYUD and Allianz Group including improving operational efficiency and minimizing repetitive costs and expenses.

1.4.2. Advantages and Disadvantages of Entering and not Entering into the Transaction

1.4.2.1. Advantages of Entering into the Transaction

1. Increase selling channels and expand customer base

Refer to the Company’s 2016 disclosure report (Form 56-1), SAGI is AYUD’s subsidiary operating business through main selling channels, financial institution and related company, which are Bank of Ayudhya Public Company Limited and selling agent representing 53.63% and 39.80% respectively and main target customers of SAGI are in medium business sector and SME. SAGI’s selling channels and target customers are different from AZTH’s which main channel is broker and main customers are in large business sector.

After the Transaction execution, the Company will gain more selling channels through brokers of AZTH which will be able to access more customers more efficiently. Those brokers are professionals and familiar with their customers so they can introduce products matched their customers’ needs. Refer to information from Office of Insurance Commission (‚OIC‛)’s report, in 2016 the brokerage channel is the most popular for insurance business operators and then using selling agents and banks which was the second and third popularity. Moreover, the entire business transfer of AZTH will enhance the customer base expansion of the Company covering each business sector thoroughly.

2. Create integration benefits to main business operation of the Company

Since both AZTH and SAGI have extensive experiences in Thai insurance business and have the same main products such as Fire, Marine, Miscellaneous and Motor insurance, there will be advantage for the Company’s business operation in aspect of synergies after the entire business transfer from AZTH to SAGI. Subsequently, there will be improvement of operation, services to satisfy customers’ needs, development of various products, relating technology and potential personnel combining from the two companies. Such


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synergies are in line with current business strategies of SAGI. Nonetheless, after the Transaction, business size will be enlarged so there will be economy of scale and more efficient resources utilization for the Company.

3. Increase non-life insurance market share including revenues and financial strength of SAGI

From latest information during January – June 2017 published by OIC, shows that SAGI’s received insurance premium market share is about 1.31% (ranking 22nd from 61 non-life insurance companies in Thailand), AZTH’s market share is about the 1.25% (ranking 24th from 61 non-life insurance companies in Thailand). Therefore, after the entire business transfer of AZTH to SAGI, SAGI will be able to increase its market share with gaining more core revenue from insurance premium by expanding customer base from AZTH and decrease rely on existing major customers of SAGI (such as Bank of Ayudhya Plc. and its customers) for insurance premium of fire and miscellaneous insurance.

The Company’s 2016 Form 56-1 described competitiveness of insurance industry that insurance customers concerned their own financial stability along with operators’ service quality. After the Transaction, SAGI will take benefits from increase in revenue which then be used for potential investment earned more returns and then improves its financial liquidity management. SAGI will take AZTH’s 14 branches which will enhance service quality to its customers.

4. Increase return on investment by increase shareholding in AZAY

The increase of investment in AZAY by AYUD is the investment in the potential and good performance insurance business. AZAY’s total revenue of 2014 – 2016 and 9 months of 2017 are THB 31,889 million, THB 34,322 million, THB 36,638 million and THB 27,231 million respectively. AZAY’s net profit of 2014 – 2016 and 9 months of 2017 are THB 1,920 million, THB 1,947 million, THB 1,926 million and THB 1,381 million respectively. AZAY has a strong financial position and can maintain key financial ratios relating to relevant rules and regulations such as Capital Adequacy Ratio (CAR), which is not less than 140%, whereby AZAY’s CAR of 2014-2016 and 9 month of 2017 are 392%, 423%, 385% and 340% respectively, which are much higher than regulated. AZAY’s investment assets to insurance reserve ratio of 2014 – 2016 are 126%, 123%, and 122% respectively, which higher than standard at 100%. Thus, this additional investment in AZAY is a good opportunity for the Company to gain good return from AZAY’s performance which is in line with the Company’s investment strategies to invest in insurance business and make more benefits to shareholders.


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1.4.2.2. Disadvantages of Entering into the Transaction

1. AZTH had net loss in 2016 and 9 months of 2017

AZTH had net loss in 2016 and 9 months of 2017 due to its continuing increase in underwriting expenses since 2014 which contrasts with sustainable net premium earned for the same period affected from price competition of insurance industry. After the Transaction, if AZTH’s performance still loss, this may directly affect the performance of the Company shown in consolidated financial statements. However, the Company expects to gain benefits from synergies of entire business transfer of AZTH to SAGI which will support overall operation performance and financial status of the Company.

2. Dilution effect on the existing shareholders

If the EGM No. 1/2018 resolves to approve the Transaction, dilution effect on existing shareholders other than Allianz Group can be summarized as follows:

Control Dilution

Control Dilution = Qnew / (Qold+ Qnew)

whereas

Qnew = 96,500,000 newly issued shares

Qold = 250,000,000 paid-up shares

Control Dilution = 27.85%

Earnings Dilution

Earnings Dilution = (EPSO– EPSN) / EPSO

whereas

EPSO = THB 1.96 per share, which is calculated from THB 490.57

million of basic net profit from the last four quarters (the 4th

quarter of 2016 to the 3rd quarter of 2017) divided by

250,000,000 paid-up shares.

EPSN = THB 1.42 per share, which is calculated from THB 490.57

million of basic net profit from the last four quarters (the 4th

quarter of 2016 to the 3rd quarter of 2017) divided by

346,500,000 shares (250,000,000 paid-up shares and

96,500,000 newly issued shares)


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Earnings Dilution = 27.85%

Price Dilution

Price Dilution = (PO– PN) / PO

PN = [(POx QO) + (PNewx QNew)] / (QO + QNew)

whereas

QO = 250,000,000 paid-up shares

QNew = 96,500,000 newly issued shares

PO = THB 29.98 per share, which is the weighted average market price of the Company’s shares over the period of seven working days prior to 21 November 2017, which is the date the Board of Directors Meeting approved to propose to the EGM for consideration and approval of the capital increase.

PNew = THB 53.43 per share, which is the offering price of the newly issued shares.

Price Dilution = - 21.80%

Since the offer price of newly issued shares is higher than the market price, there is no price dilution.

3. Potential risk of checks & balances and control over the Business by minority shareholders

As of 29 August 2017 (the latest book closing date) Allianz SE holds AYUD’s shares of 42,104,000 shares representing 16.84% of total voting rights. After issuing new shares and Allianz SE and CPRNT subscribe those shares, Allianz SE and CPRNT will hold 138,604,000 shares representing 40.00% of total voting rights. Such shareholding of higher than one-fourths of the total voting rights will enable Allianz Group control the voting in the Company’s shareholder meetings for significant matters especially the matters needs voting of not less than three-fourths of total shares of the Company such as capital increase, and capital decrease. However, Allianz Group still cannot control the outcome of voting the matters which needs more than half or three-fourths of total shares for approval. In addition, minority shareholders still are able to gather votes to exercise checks and balances and exercise veto rights for important matter which allow veto from minority shareholders according to SEC’s rules and regulations.


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1.4.2.3. Advantages of Not Entering into the Transaction

1. No effect from net loss performance of AZTH

In case of not entering into the Transaction, the Company will not have to consolidate AZTH’s performance, which may continue to be net loss, into consolidated financial statements. Therefore, the Company will still maintain its good performance and profitability from current structure.

2. No dilution effect on the existing shareholders

If the Company does not enter into the Transaction, there will not be dilution effects on the existing shareholders.

3. Retention of checks and balances and control over the business by minority shareholders

If the EGM does not approve the Transaction, Allianz Group will not acquire the Company’s newly issued shares. As such, Allianz Group’s shareholding in the Company is still the same as current. Then, Allianz Group will not be able to object any matters which need not less than three-fourths of total shares of the Company for approval.

1.4.2.4. Disadvantages of Not Entering into the Transaction

1. Lose business opportunity to expand selling channels and customer base

If the Company does not enter into the Transaction, the Company still has to rely on the based customers of Bank of Ayudhya Plc.. The Company will lose opportunities to gain benefit from using broker as selling channel which is the most popular and effective channel for insurance industry in Thailand (refer to OIC’s information). Moreover, the Company will lose opportunity to expand its customer bases to big-sized business sector which is AZTH’s target customer group. Then the Company will not be able to diversify its risk on income, due to its existing customers are almost SME which have more risk than such big-sized business sector.

2. Lose main business synergies of the Company

If the Company does not enter into the Transaction, it will not gain benefits from expected business synergies by entire business transfer of AZTH to SAGI. This will effect on slow down the Company’s business development plan.


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3. Lose opportunity to increase SAGI’s market share and revenues

If the Company does not enter into the Transaction, SAGI will lose opportunity to increase its market share and to increase its revenues from insurance premium and gain on investment which AZTH’s business can boost both SAGI’s market share and revenue and will be able to enhance SAGI’s financial status and liquidity.

4. Lose opportunity of more returns on investment in AZAY

If the Company does not enter into the Transaction, the Company will lose opportunity to have additional shareholding in good performance and strong financial status business as AZAY.

1.4.3. Risks from Entering into the Transactions

1. Risk from the actual performance would not be as expected

In case of AZTH’s and AZAY’s performance are not good as expected which caused by several factors such as competitiveness in the business, economic factors, change of customers’ behaviors including risks from severe natural disaster due to environmental and earth’s temperature change, etc. Nevertheless, revenues from investments of the Company may be affected by the fluctuation of interest rates, stock exchange index which may be caused by political status, country’s economy, world’s economy. Those risk factors have direct effect to the Company’s revenues, both insurance premium and from investments, and to the Company’s cash flow, liquidity, and any other obligations.

However, the Company also has risk management guideline in strategically and practically. The Company’s Risk Management Committee and high-level management are responsible for monitoring and analyzing risk factors which may affect the Business regularly. Then set up appropriated action plan for each situation change. For operation aspect, the Company has setup policies and guideline of operation risk management for the Company’s staffs. The management and directors of the Company are responsible for any actions are implemented along with such policies and guidelines. In addition, Allianz Group, world-leading non-life and life insurance company, is one of major shareholders of the Company will co-operate and help the Company in planning and setting strategies, managing, operating including related technology developing to support the Company’s growing business stably with strong financial position.

2. Risk from managing policy change after transferring business

After the entire business transfer of AZTH to SAGI, then the Company may take time for organization managing adjustment internally due to the difference of managing concepts


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and company culture. This may include the adjustment in human resources management such as titles, levels, salary packages, etc. This adjustment may cause additional expenses for the early period after business transfer.

3. Potential Risk of Maintaining Listing Status

SPA and the draft Form 247-7 stated the conditions precedent relating to change of management structure as follows:

- The resignation of 3 AYUD’s directors and 4 SAGI’s directors; - The increase of the total number of AYUD’s directors from 11 to 15 directors and the

appointment of persons nominated by Allianz SE and CPRNT as AYUD’s directors, with effect on the closing date.

- The appointment of nominated persons of the Applicants to be AYUD’s directors and MergedCo’s directors.

The resignation of 3 AYUD’s directors has no final list of such directors yet. If Allianz Group nominates 3 substitute directors from Allianz Group, the addition number of directors representing Allianz Group will be 7 directors after the Transaction. From the increase number of directors to 15 directors, AYUD needs to have independent directors not less than one-thirds of total directors to maintain its qualification of listing status. Therefore, AYUD has to appoint at least 5 independent directors.

However, from interviewing the Company’s management, the Company knows the maintaining listing status and is aware of this issue. Thus the Company has plan to seek for and appoint more independent director to make 5 independent directors totally (4 independent directors currently), which is one-thirds of total directors after the Transaction.

1.4.4. Advantages and Disadvantages of Entering into the Transaction with a Connected Persons

1.4.4.1. Advantages of Entering into the Transaction with a Connected Persons

1. Increase the Company’s insurance business efficiency

Allianz Group is one of the leading financial service groups with long time experiences more than 120 years in insurance business (non-life and life insurance). Allianz Group has various self-developed products covering all customer groups’ needs (retails and corporates) in more than 70 countries around the world. Allianz Group has strong financial status, granted credit rating in outstanding level by accredited credit rating agency. The expertise in insurance business of Allianz Group will hand-on to the Company as the Company’s major shareholder. This will enhance the Company’s


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efficiency in business operation, asset management to be stronger and more stable, elevate the Company’s image to be leading corporate with creditability and trust by customers.

2. Can be the Investment in Line with the Company’s plan along within short period of time

Since AZAY is the life-insurance company with good performance continuingly, strong financial status. Therefore, the more shareholding in AZAY will accomplish the Company’s investment plan and will gain good return on such investment. AYUD and Allianz Group are AZAY shareholders before the Transaction, such relationship makes the discussion, and negotiation among parties easier and faster, can be finalized and agreed within short period of time. Currently AYUD holds AZAY at 20.17%. AYUD also has participate in business management and has good understanding and familiar with AZAY’s business.

1.4.4.2. Disadvantages of Entering into the Transaction with a Connected Persons

1. Duty Regarding Information Disclosure and the Compliance to Regulations Governing Connected Transaction

Allianz SE and CPRNT are considered as connected persons of the Company as major shareholders. The Transaction is deemed a connected transaction of a listed company. To enter into the Transaction, the Company has to submit the Information Memorandum regarding the Transaction to SET and to convene a meeting of shareholders to approve the Transaction. The invitation letter to the shareholders meeting must be sent out not less than 14 days prior to the shareholders meeting. The Company is also required to arrange for an Independent Financial Advisor to provide the opinion on the reasonableness of the Transaction and fairness of the Transaction price for the Audit Committee and shareholders. And send the IFA’s opinion report to SET and shareholders.

2. May be Suspected on the Reasonableness of the Transaction and the Fairness of the Transaction Price

The entering into the connected transaction may be questioned on the transparency, the fairness of the transaction price and the reasonableness of the transaction conditions that the connected transaction whether will make the optimum benefit to the Company as transacted with non-connected persons. However, for connected transactions, the Company has connected transaction policy complying with rules, practices and disclosure of information guideline regarding relevant rules and regulations of SET including disclosure of information and other acts concerning the acquisition and disposition of assets. Nonetheless, the Company arrange for an Independent Financial Advisor to


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provide opinion on the reasonableness of the transaction, the fairness of the transaction price for the Company shareholders’ consideration for approval such transaction.

1.4.5. Necessity of Entering into the Transaction with a Connected Persons and Reason the Company Does not Enter into the Transaction with an Unrelated Party

The entire business transfer of AZTH to SAGI and the additional investment in AZAY are in line with the Company’s vision to be one of the leading companies in insurance business investment. Both AZTH and AZAY, including the Company, have Allianz Group as major shareholder. Therefore, there is convenient in coordinating, information request and exchanging, price negotiating including other agreement which can process within short period of time. The issuing new share to Allianz Group will make benefit to both parties. The Company does not have to use cash for entire business transfer execution and Allianz Group can accomplish its objective of investing in insurance business in Thailand without complicated holding structure and make more flexibility in management due to reducing number of company held by Allianz Group. Moreover, after the Transaction, Allianz Group will use its potential and long experiences in insurance business with customers over 70 countries over the world for helping, supporting and enhancing the Company’s image, creditability, trust from customers. The above mentioned advantages support the reason that the Company enter into the Transaction with Allianz Group as connected person.

1.5. The Fairness of the Transaction Price

This part of the report explains how the IFA derives the opinion regarding the fairness of the price in this Transaction. For the valuation of AZTH and AZAY, the IFA used several valuation approaches, which are Market Comparable approach, Book Value approach, and Actuarial Valuation approach. For the valuation of AYUD, the IFA used several valuation approaches, which are Market Comparable approach, Book Value approach, Historical Traded Price Approach, and Actuarial Valuation approach as AYUD is the listed company in the SET, of which its core business is to invest in other companies and its major investment are the investment in SAGI, AZAY and other securities. The details of the valuation are as follows:

1.5.1. The Valuation of AZTH and AZAY

1.5.1.1. Market Comparable Approach

Market Comparable approach compares key trading multiples of the company with those of its listed comparable peers in the SET operating in the same business of AZTH and AZAY.

For AZTH, the IFA selected the following 11 listed companies operating in direct non-life insurance business as comparable peers:


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Company Ticker Sri Ayudhya Capital Public Company Limited AYUD Bangkok Insurance Public Company Limited BKI Charan Insurance Public Company Limited CHARAN Muang Thai Insurance Public Company Limited MTI The Navakij Insurance Public Company Limited NKI Nam Seng Insurance Public Company Limited NSI Syn Mun Kong Insurance Public Company Limited SMK The Thai Insurance Public Company Limited TIC Dhipaya Insurance Public Company Limited TIP The Thai Setakij Insurance Public Company Limited TSI Thaivivat Insurance Public Company Limited TVI

For AZAY, the IFA selected the following 1 listed company operating in life insurance business as comparable peers:

Company Ticker Bangkok Life Assurance Public Company Limited BLA

The IFA has chosen 2 valuation methodologies strongly supported by financial theories as follows

1.5.1.1.1. Price to Earnings Ratio Methodology (P/E)

This methodology reflects the profitability of company without taking the assets value into consideration. The valuation by this methodology was calculated by multiplying the trailing 12-month net profit of the company (October 2016 to September 2017) to the average price to earnings (P/E) multiples of its peers over the periods of 30 days, 60 days, 90 days, and 120 days prior to 21 November 2017. Details are as follows:

Historical P/E Multiples

Company 30 days prior 60 days prior 90 days prior 120 days prior AZTH’s peers AYUD 14.87 14.65 14.62 14.76 BKI 15.94 15.68 15.51 15.47 CHARAN 26.12* 24.14* 23.26* 23.04* MTI 13.46 13.28 13.28 13.27 NKI 13.44 13.45 19.12 23.79 NSI 8.35 8.34 9.27 10.03


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Company 30 days prior 60 days prior 90 days prior 120 days prior SMK 10.25 10.20 10.12 10.19 TIC 8.22 7.70 7.86 8.06 TIP 9.18 8.91 8.68 8.60 TSI N/A* N/A* N/A* N/A* TVI 48.45* 54.10* 47.65* 43.04* Average 11.71 11.53 12.31 13.02 AZAY’s peers BLA 14.39 15.28 13.09 11.32 Average 14.39 15.28 13.09 11.32

Remark: *The outliers were not included in the calculation of the average. Source: SETSMART

From the average P/E multiples of the peers above, the IFA estimates the value as follows:

Company Trailing 12-month net profit

(THB million) Average P/E

(times) Estimated value (THB million)

AZTH (146.2) 11.53 – 13.02 N/A* AZAY 1,659.7 11.32 – 15.28 18,782.6 – 25,358.1

Remark: *N/A since the AZTH realized net loss.

1.5.1.1.2. Price to Book Value Ratio Methodology (P/BV)

Although reflecting the book value, the methodology ignores the profitability. The valuation by this methodology was calculated by multiplying its book value (as of 30 September 2017) by the average closing price to book value (P/BV) multiples of its peers over the periods of 30 days, 60 days, 90 days, and 120 days prior to 21 November 2017. Details are as follows:

Historical P/BV Multiples

Company 30 days prior 60 days prior 90 days prior 120 days prior AZTH’s peers AYUD 1.03 1.03 1.03 1.05 BKI 1.12 1.13 1.11 1.11 CHARAN 0.86 0.81 0.77 0.76 MTI 1.58 1.58 1.57 1.55 NKI 0.88 0.88 0.88 0.88 NSI 0.86 0.87 0.87 0.87 SMK 1.62 1.62 1.61 1.61


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Company 30 days prior 60 days prior 90 days prior 120 days prior TIC 1.12 1.07 1.02 1.00 TIP 2.10 2.04 1.98 1.96 TSI 3.94* 3.66* 3.08* 2.74* TVI 1.04 1.08 1.06 1.06 Average 1.22 1.21 1.19 1.18 AZAY’s peers BLA 1.84 2.01 2.05 2.09 Average 1.84 2.01 2.05 2.09


From the average P/BV multiples of the peers above, the IFA estimates the value as follows:

Company Book Value

(THB million) Average P/BV

(times) Estimated value (THB million)

AZTH 726.8 1.18 – 1.22 861.0 – 888.0 AZAY 16,028.5 1.84 – 2.09 29,428.4 – 33,526.4

1.5.1.2. Book Value Approach

Book Value Methodology takes in to account neither the future profitability nor market value of assets. It only reflects the book value of the net asset at a point in time. Using this methodology, each company was valued at its net asset values (total assets minus total liabilities), equivalent to its shareholders’ equity, from the financial statements for the year ending 30 September 2017. Details are as follows:

Items as of 30 September 2017 Amount (THB million) AZTH

Total Assets 4,847.76 Less Total Liabilities 4,120.93 Net Asset Value 726.83

AZAY Total Assets 173,356.42 Less Total Liabilities 157,327.88 Net Asset Value 16,028.54

From the table above, the net asset value can be summarized as follows:


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Company Book Value AZTH 726.83 AZAY 16,028.54

1.5.1.3. Actuarial Valuation Approach

By using Actuarial Valuation Approach, the IFA refers to the appraisal value report prepared by Milliman Limited (‚Independent Actuarial Consultant‛ or ‚IAC‛) which was appointed by AYUD for the purpose of a potential transaction and IAC allows the IFA to refer their report in the IFA report which was distributed to public. IAC is among the world’s largest providers of actuarial related products and services with its office located in major cities in various regions over the world including North America, Latin America, Asia Pacific, Europe, Africa, and Middle East. IAC principals have served in leadership roles in several actuarial related institutions including the American Academy of Actuaries, the Casualty Actuarial Society, the Institute of Actuaries, the Society of Actuaries, and such. In addition, they are also board members of various foundations institutions including The Actuarial Foundation, the Actuarial Standards Board, and such. Detailed valuation of AZTH and AZAY can be summarized as follows:

The Valuation of AZTH

The IFA has referred to the appraisal value of AZTH as at 30 June 2017 dated 28 September 2017 prepared by IAC which was appointed by AYUD for the purpose of a potential transaction and the IAC allows the IFA to refer their report in the IFA report which was distributed to public. The IAC has appraised the value of AZTH by calculating the sum of following items:

1. Net asset value 2. Value of in-force business 3. Value of future business less the cost of capital 4. Terminal value

Although the appraisal value report are the appraised value as of 30 June 2017, the IFA has asked the IAC for the key assumptions that have material impact to the valuation, and compared them with the actual data occurred during the third quarter of 2017. Those key assumptions were not significantly difference from the actual outcome; therefore, the IFA uses the appraisal value report as the reference for this valuation. For the appraisal value of AZTH, the IAC has set out several key assumptions which can be summarized as follows:

Net asset value

The IAC has conducted the reserve review and estimated the claim liabilities which are lower than that booked by AZTH of approximately THB 28 million (after adjusting for tax). In


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addition, there is an adjustment for deferred tax in relation to losses carried forward of THB 4.4 million. As a result, the IAC adjusted the net asset value of AZTH to be increased as follows:

Items as at 30 June 2017 Amount (THB million) Total Assets 4,177.2 Less Total Liabilities 3,422.3 Net Asset Value 754.9 Adjustment to the claim liabilities and deferred tax 23.7 Adjusted Net Asset Value 778.5

Key assumptions regarding the business operation

1. Gross Written Premium (GWP)

The IAC projected the growth rate of GWP for each line of business of AZTH such as motor voluntary, motor compulsory, industrial all risk, engineering, personal accident, etc. The growth rate of GWP for each line of business can be summarized as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 GWP growth (p.a.)

(4.2%) (6.9%) 7.5% 24.0% 22.6% 16.4% 11.8% 9.8% 8.4% 7.4% 6.7% 6.2% 6.0%

In the past 3 years, the average growth rate was (1.2%). The forecasted growth rate during the first few years referred from the business plan of AZTH. AZTH’s managements has set business strategies to focus growth for retail lines of business, especially motor which is the largest line of business within AZTH’s portfolio. AZTH will focus on increasing the sales of non-Type 1 business. In addition, due to AZTH’s previous affiliation with CP, AZTH will increase the market to CP employees and CP affinities. AZTH will also expand the line of business to Direct to Customer channel (DTC) during 2017 - 2019 which result to high growth rate in that period. In the long run, the IAC refer to the industry growth rate of approximately 6% p.a.

2. Ceded Ratio

The IAC projected the ceded ratio for each line of business of AZTH by referring to the AZTH’s business plan which was set by AZTH’s managements. The plan contains the changing of business mix, especially motor; of which AZTH mostly retain this line of business. Therefore, the overall projected ceded ratio slightly decreased from the average ratio during 2014 – 2016 as equal 55.8%. The ratio can be summarized as follows:


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2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Ceded ratio (%GWP)

56.9% 56.5% 54.2% 42.5% 38.6% 35.2% 32.7% 31.2% 30.2% 29.6% 29.3% 29.2% 29.2%

3. Loss Ratio

The IAC projected the loss ratio for each line of business of AZTH based on IAC’s actuarial analysis of the past claim experience with reference to AZTH’s business plan and market expectations. For motor voluntary, the loss ratio is expected to decrease on average from the introduction of more granular pricing by AZTH, which expect to lead to the more caution about loss. For motor compulsory, the loss ratio is expected to increase in anticipation of increases in statutory benefit limits. For personal accident, the loss ratio is expected to decrease because the historical high loss ratios are due to anti-selection and outdated pricing. For the new CP-related line of business, the long term loss ratio of around 63.5% is selected by taking into account the historical CP Employees experience that showed the average of past 3 years as 56.9% and taking into account the underlying mix of products. The IAC has projected the loss to Net Earned Premium (NEP) ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Loss ratio (%NEP)

59.9% 58.7% 52.0% 61.6% 61.9% 62.6% 61.4% 60.6% 60.4% 60.5% 60.5% 60.6% 60.6%

4. Direct Commission

The IAC projected the direct commission for each line of business in consistent with AZTH’s business plan as well as the historical experience of each line of business, which has generally been stable on the past 3 years as average as 22.1% excepting higher commission of motor insurance in 2015. For the new line of business, it was expected to focus on DTC and Omni channel to be less reliance on brokers and agents who command higher commissions, driving the gradually decreasing trend in the overall commission since 2018. The IAC projected the direct commission ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Direct Commission ratio (%GWP)

18.7% 23.3% 24.3% 23.8% 21.4% 19.8% 19.0% 18.6% 18.3% 18.1% 18.0% 17.9% 17.9%


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5. Reinsurance Commission

The IAC projected the reinsurance commission for each line of business based on the past experience which has an average of the past 3 years as 19.3%. For the new line of business focusing on DTC, there will be no reinsurance commission as it is assumed to be fully retained. For the CP Affinities line that AZTH plans to extend in the future, the IAC projected the reinsurance commission as 23.4% based on the past experience. The IAC projected the reinsurance commission to ceded premium ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Reinsurance commission ratio (%Ceded Premium)

18.2% 17.6% 22.1% 23.7% 23.8% 23.9% 24.0% 24.0% 24.0% 24.1% 24.1% 24.1% 24.1%

6. Operating Expense

The IAC projected the operating expense by referencing to AZTH’s business plan but allowed for higher expense ratios due to the lower economies of scale during the early year for operating the new line of business to the aforementioned CP group and DTC channel. The average operating expense ratio of the past 3 years was around 11.8%. During year 2017 – 2020, AZTH has initiatives to reduce expenses by branch transformation, lower HR spending and outsourcing of some functions; therefore, it was expected for THB 17 million total expense savings. For the projection of long term operating expenses, the IAC has assumed that the operating expenses will increase at 4.5% p.a., i.e. 1.5% points lower than the long term GWP growth rate resulting from improving economies of scale over time. The IAC projected the operating expense ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Operating expense ratio (%GWP)

11.0% 12.2% 12.2% 13.5% 12.2% 11.4% 11.0% 11.1% 11.1% 11.0% 10.9% 10.7% 10.6%

7. Investment Return

The IAC projected the investment return assumption of 2.0% p.a. by taking into consideration AZTH’s historical investment performance and expected investment yields on different asset classes going forward. The investment return of 2014-2016 were 2.8%, 2.6% and 2.0% respectively, average as 2.5%.


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8. Other Assumptions

The IAC has assumed the capital required for AZTH to achieve a 175% target capital adequacy ratio (CAR), which is higher than the minimum solvency CAR of 140%, of which the management has advised that the ratio is sufficient for AZTH to manage the business. The average CAR of 2014-2016 was around 357%

The IAC has assumed AZTH’s terminal value growth rate of 2.0% p.a., which, based on the interview with IAC, the IAC explained that such growth rate is equivalent to P/E ratio of 10.7 – 13.6 times, which the IAC deemed appropriate. In addition, the IFA considered that the growth rate is in line with the average 10-year inflation rate.

Probability of Success of the New Initiatives In relation to the new line of business according to AZTH’s strategy, there is an uncertainty of implementing this strategy, which may in turn affect the value of future business. As a result, the IAC applied the probability of success to the DTC channel of 30%. However, for the probability of success for CP Employees-new lines, the IAC applied 100% probability as this is an existing source of business. Nonetheless, for the probability of success for CP affinities- new line, the IAC applied 30% probability.

The IAC used the risk discount rate (RDR) at 9.5% 10.5% and 11.5% p.a.. Based on the interview with IAC, the IAC explained that the RDR is in line with market benchmarks for life insurance company in Thailand by taking into account the of the business and risk profile resulting in the central RDR of 9.5% and the IAC show the illustrative results at an RDR of increase/decrease 1% of the central rate, which is the typical market practice. Therefore, the appropriate RDR for life insurance business are at 8.5% 9.5% and 10.5% p.a. For non-life insurance, the IAC deemed the RDR should be higher; therefore, the IAC set the RDR to be 1% higher.

However, the IFA has calculated the discount rate based on the Capital Asset Pricing Model (CAPM) as follows:

Ke = Rf + * Market Premium

whereas Assumption Rf1 Risk-free rate 2.80% Market Premium2

Excess return over the risk-free rate for investing in the market

12.18%


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3 The sensitivity of stock price to

market returns 0.67

Remark: 1. 15-year government bond yield as of 21 November 2017 (Source: www.thaibma.or.th)

2. 15-year market return of the SET (Source: SETSMART) 3. The average of non-life insurance companies (Source: Bloomberg as of

21 November 2017)

Based on the assumptions above, the discount rate (Ke) was calculated to be approximately 11%; therefore, the IFA is of the opinion that the discount rate of AZTH should be at 10.5% and 11.5%.

The appraisal value of AZTH can be summarized as follows:

Unit : THB million 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Net earned premium

1,802 2,080 2,437 2,750 3,016 3,260 3,499 3,736 3,973 4,214

Net claim incurred 1,081 1,234 1,461 1,633 1,781 1,921 2,064 2,205 2,345 2,488 Net commissions 454 481 521 565 607 648 689 731 774 819 Operating expenses

458 463 472 487 520 551 581 610 638 667

Underwriting profit (loss)

(192) (97) (17) 65 108 140 165 190 215 241

Tax (38) (19) (3) 13 22 28 33 38 43 48 Investment income

22 28 32 37 40 42 45 48 51 54

Net profit (loss) (131) (50) 19 89 126 154 177 200 224 247

The summary value of AZTH at the following discounted rates:

Unit : THB million

Items RDR

9.5% 10.5% 11.5% 1. Net asset value 779 779 779 2. Value of in-force business 224 222 220 3. Value of future business (net of cost of capital) including terminal value

841 566 354

Appraisal value of AZTH from IAC’s report 1,843 1,567 1,352

Nonetheless, the IFA deemed the discount rate of AZTH should be at 10.5% and 11.5% as aforementioned, the IFA is of the opinion that the value of SAGI should be THB 1,352 – 1,567 million.


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The Valuation of AZAY

The IFA has referred to the appraisal value of AZAY as at 30 June 2017 dated 3 October 2017 prepared by IAC which was appointed by AYUD for the purpose of a potential transaction and the IAC allows the IFA to refer their report in the IFA report which was distributed to public. The IAC has appraised the value of AZAY by calculating the summary of following items:

Embedded value (EV) calculating from the sum of

1.1. Adjusted net worth (ANW) 1.2. Value of in-force business (VIF)

2. Value of new business (VNB) calculated from the product of 2.1. Value of one year’s new business (VONB) 2.2. New business multiplier

3. Value of expense overrun

Although the appraisal value report are the appraised value as of 30 June 2017, the IFA has asked the IAC for the key assumptions that have material impact to the valuation, and compared them with the actual data occurred during the third quarter of 2017. Those key assumptions were not significantly difference from the actual outcome; therefore, the IFA uses the appraisal value report as the reference for this valuation. For the appraisal value of AZAY, the IAC has set out several key assumptions which can be summarized as follows:

1. Embedded value (EV)

1.1 Adjusted Net Worth (ANW)

The IAC adjusted the value of assets and liabilities, of which the adjusted items are comprised of

(1) Net premium valuation reserving basis (NPV) to Gross premium valuation reserving basis (GPV) adjustment The IAC calculated the difference between NPV reserving basis that representing in AZAY’s financial statement and GPV reserving basis to adjust the value.

(2) Revaluation of available-for-sale bonds and bills of exchange to book value The IAC calculated the difference between book value and market value and adjust the difference value to available-for-sale bonds and bills of exchange.

(3) Mark-to-market adjustment on policy loan The IAC calculated the difference between book value and market value and adjust the difference value to policy loan


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(4) Adjustment for unrealized gain (loss) on equities and real estate investment trust (REIT) The IAC calculated unrealized gain (loss) on equities and REIT as of 30 June 2017 and use as adjustment.

(5) Adjustment for corporate tax applied on the aforementioned revaluation adjustment (except NPV to GPV adjustment) and

(6) Elimination of net intangible assets which mostly are computer software. Details are as follows:

Items as at 30 June 2017 Amount (THB million) Shareholder’s equity on statutory basis 13,735.0 NPV-to-GPV reserve adjustment 3,806.8 Revaluation of available-for-sale bonds and bills of exchange to book value

(3,974.4)

Mark-to-market adjustment on policy loan 859.2 Adjustment for unrealized gain (loss) on equities and REIT (358.7) Adjustment for corporate tax applied on the revaluation adjustment

694.8

Elimination of net intangible assets (215.6) Adjusted Net Worth 14,547.2

1.2. Value of in-force business (VIF)

VIF is the present value of expected future net profit on its in-force business as of 30 June 2017 less the cost of capital. The IAC has set out the following assumptions for VIF.

1. Mortality

The IAC has set out the mortality assumptions by referencing the past 3 year mortality experience studied by AZAY in 2016, and the trend of the past year experience. The experience study of mortality of AZAY is based on Thailand mortality table for ordinary life 2008 and Thailand mortality table for industrial life 2008 which is the latest available mortality table announced by the OIC as of the appraisal date. The mortality rates is affected from the various factors such as type of policy, gender, age of the insured, term of the policy, etc.

2. Loss ratio

The IAC has set out the loss ratio by referencing the 5-year loss ratio statistics studied by AZAY in 2016. The loss ratio is determined by the type of the policy.


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3. Lapse ratio

The IAC has set out the lapse ratio by referencing to the 15-year lapse ratio statistics studied by AZAY in 2016. The lapse ratio is determined from the various factors such as type of policy, term of the policy, distribution channel etc.

4. Charges payable to the Office of Insurance Commission (OIC) and Policyholder Protection Fund (PPF)

The IAC has set out the OIC charges by referencing to the related regulations as follows:

Single premium plans – 0.15% of the first year premium Personal accident – 0.30% of the premium in each year Unit-linked - 0.10% of the premium in each year Others - 0.30% of the first year premium and 0.15% of the premium in the

following year

For the PPF, the IAC has set out by referencing the related regulations of life insurance company to contribute to PPF at 0.1% of the premium received in each year.

5. Investment return

The IAC has set out the investment return for the assets held at 30 June 2017 at 4.06% p.a. and set out the new money yield for the future investment at 3.21% with the assumption to maintain the strategic asset allocation along the projected period, of which the fixed-income securities are about 90% of the total investment assets. For the existing fixed interest assets at 30 June 2017, the cash flow from the assets is projected. The new investment fixed-income securities, it is assumed to earn the new money yields set with reference to Thai government bonds and Thai corporate bonds, of which their term to maturity is close to those invested by AZAY as at 30 June 2017.

6. Inflation rate

The IAC has set out the inflation rate of 3%. Based on the interview with the IAC, the IAC explained that the rate is the expected long-term inflation of per policy expenses of AZAY which has been set by reference to external forecasts of long term inflation rate in Thailand from sources such as Asian Development Bank, Bank of Thailand, and such. However, such rate is in the range of target inflation rate set by the Bank of Thailand.


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7. Risk Discount Rate (RDR)

The IAC used the risk discount rate (RDR) at 9.5% 10.5% and 11.5% p.a.. Based on the interview with IAC, the IAC explained that the RDR is in line with market benchmarks for life insurance company in Thailand by taking into account the of the business and risk profile; therefore, the appropriate RDR for life insurance business are at 8.5% 9.5% and 10.5% p.a.

However, the IFA has calculated the discount rate based on the Capital Asset Pricing Model (CAPM). However, there is only 1 listed companies in the SET operating in the life insurance business; therefore, the IFA uses the listed companies in the SET operating in the non-life insurance business as comparable peers. Details are as follows:


whereas Assumption Rf1 Risk-free rate 2.83% Market Premium2 Excess return over the risk-free rate

for investing in the market 12.14%


market returns 0.67

Remark: 1. 15-year government bond yield as of 21 November 2017 (Source: www.thaibma.or.th) 2. 15-year market return of the SET (Source: SETSMART) 3. The average of Insurance sector peers (Source: Bloomberg as of 21 November

2017)

Based on the assumptions above, the discount rate (Ke) was calculated to be approximately 11%. Based on the interview with the IAC, the IAC deemed the RDR should be higher for general insurance; therefore, the IAC set the RDR to be 1% higher for general insurance. As a result, the IFA is of the opinion that the discount rate of AZAY should be at 9.5% and 10.5%.

8. Required capital

The IAC has assumed the capital required for AZAY to achieve a 230% target capital adequacy ratio (CAR), which is higher than the minimum solvency CAR of 140%, of which the management has advised that the ratio is sufficient for AZAY to manage the business.


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Based on the assumptions above, the value of in-force business as at 30 June 2017 can be summarized as follows:

Unit : THB million

RDR 8.5% 9.5% 10.5% VIF before cost of capital 14,944.7 14,104.5 13,353.5 Less Cost of capital 5,598.0 6,258.1 6,850.3 VIF after cost of capital 9,346.7 7,846.3 6,503.2

2. Value of new business (VNB)

2.1 Value of one year’s new business (VONB)

VONB is the present value of expected future net profits obtained from expected policies within a year. The IAC appraised VONB based on the same set of assumptions set out for VIF. The VONB can be summarized as follows:

Unit : THB million

RDR 8.5% 9.5% 10.5% VONB before cost of capital 2,253.0 2,146.0 2,051.1 Less Cost of capital 424.6 461.8 492.2 VONB after cost of capital 1,828.4 1,684.3 1,559.0

2.2 New business multiplier (NBM)

New business multiplier is used for multiplying with VONB to find the value of new business. The IAC has set out the key following assumptions:

1. Number of years of new business

The IAC has assumed the 15 year of future new business. Based on the interview with the IAC, the IAC explained that such number of years is typical for recent transactions in Thailand and in other markets in Asia.

2. New business growth rate

The IAC has set out the growth rate for new business as follows:

Year 1 - 2 3 – 5 6 - 15 Growth rate 10% 8% 5%


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Based on the interview with the IAC, the IAC explained that such new business growth rates are based on the historical and expected future growth of the Thai life insurance industry and on the historical and future growth of AZAY given its distribution access, product strategy and business plans which the IAC received.

3. Risk Discount Rate (RDR)

The RDR used for the valuation of new business may be different from those used for the valuation of VIF to reflect the higher uncertainty and risk regarding than the value of in-force business. It is common market practice in appraisals to use a higher RDR for the calculation of new business; therefore, the IAC uses the higher RDR to determine the new business multiplier of 0.5% - 1%. As a result, the RDR are set out at 9.0%, 9.5%, 10%, 10.5%, 11.0%, 11.5% p.a.

4. Reduction factor

The IAC has obtained the high-level analysis showing the VNB margin by product type. Based on the difference in VONB margins between using a blended yield basis and a market yield basis across the product groups, the 5% and 15% multiplicative reduction factor is determined to reflect the average reduction in VONB margins by using different yield basis

Based on the assumptions above, the new business multiplier of AZAY are in the range of 9.5 to 12.5.

Nonetheless, as aforementioned, the IFA is of the opinion that the appropriate discount rates for AZAY operating in life insurance business are 9.5% and 10.5%. If the new business multiplier is recalculated using the higher RDR of 0.5% - 1% in the same way as the IAC did, the IFA will arrive at the new business multiplier of AZAY of 9.5 – 11.7.

3. Value of expense overrun

The VIF and VONB have been determined based on projected long-term expense assumptions. However, in the early period of the operation, there may be higher expenses than anticipated which may not yet reflect the long term expense; the IAC has estimated the value as the present value of the expense overrun based on the business plan provided by AZAY. The expense overrun is projected to clear by year 2020. The estimations in each period are as follows:


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Unit : THB million Jul - Dec 2017 2018 2019 2020 Estimated expense overrun

453.8 341.6 164.9 -

Value of expense overrun of each RDR can be summarized as follows:

Unit : THB million RDR 8.5% 9.5% 10.5%

Value of expense overrun (719.7) (714.6) (709.5)

From the aforementioned information, the valuation of AZAY can be summarized as follows:

Unit : THB million

RDR 8.5% 9.5% 10.5% NBM 9.5 12.5 9.5 12.5 9.5 12.5

(1) ANW 14,547.2 14,547.2 14,547.2 14,547.2 14,547.2 14,547.2 (2) VIF 9,346.7 9,346.7 7,846.3 7,846.3 6,503.2 6,503.2

(3)=(1)+(2) EV 23,893.9 23,893.9 22,393.5 22,393.5 21,050.4 21,050.4 (4) VONB 1,828.4 1,828.4 1,684.3 1,684.3 1,559.0 1,559.0

(5)=(4) x NBM VNB 17,369.7 22,854.9 16,000.8 21,053.6 14,810.3 19,487.2

(6) Value of expense overrun

(719.7) (719.7) (714.6) (714.6) (709.5) (709.5)

(3)+(5)+(6)

Appraisal Value of AZAY from IAC’s report

40,543.8 46,029.0 37,679.7 42,732.6 35,151.2 39,828.1

Nonetheless, the IFA deemed the discount rate of AZTH should be at 9.5% and 10.5% and the new business multiplier should be at 9.5 and 11.7, as aforementioned. Therefore, the valuation can be summarized as follows:

Unit : THB million

RDR 9.5% 10.5% NBM 9.5 11.7 9.5 11.7

(1) ANW 14,547.2 14,547.2 14,547.2 14,547.2 (2) VIF 7,846.3 7,846.3 6,503.2 6,503.2

(3)=(1)+(2) EV 22,393.5 22,393.5 21,050.4 21,050.4 (4) VONB 1,684.3 1,684.3 1,559.0 1,559.0

(5)=(4) x NBM VNB 16,000.8 19,658.1 14,810.3 18,195.6


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Unit : THB million

RDR 9.5% 10.5% NBM 9.5 11.7 9.5 11.7

(6) Value of expense overrun

(714.6) (714.6) (709.5) (709.5)

(3)+(5)+(6) Estimated Value of AZAY

37,679.7 41,337.0 35,151.2 38,536.5

As a result, the IFA is of an opinion that the value of AZAY should be THB 35,151.2 – 41,337.0 million.

Summary of Valuation of AZTH and AZAY

AZTH

The IFA considers the suitable valuation approach and regards that market comparable approach by P/E methodology unsuitable since the historical earnings of AZTH does not reflect the profit-generating capacities in the future. The IFA also regards P/BV methodology and book value approach unsuitable since it does not reflect the profit-generating capacities and cash-generating capacities of AZTH.

The IFA is of an opinion that actuarial valuation approach is the appropriate valuation approach since it reflect the fundamental value and it is also the generally accepted approach

AZAY

The IFA considers the suitable valuation approach and regards that market comparable approach unsuitable since there is only 1 comparable peer operating in life insurance business. The IFA also regards book value approach unsuitable since it does not reflect the profit-generating capacities and cash-generating capacities of AZAY.

The IFA is of an opinion that actuarial valuation approach is the appropriate valuation approach since it reflect the fundamental value and it is also the generally accepted approach

As a result, the estimated value of AZTH and AZAY can be summarized as follows:

AZTH AZAY Estimated Value (THB million) 1,352 – 1,567 35,151 – 41,337


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1.5.2. The Valuation of AYUD

1.5.2.1. Market Comparable Approach

Market Comparable approach compares key trading multiples of the Company with those of its listed comparable peers in the SET operating in the same business of AYUD. In this regard, the IFA selected the following 10 listed companies operating in non-life insurance business as comparable peers:

Company Ticker Bangkok Insurance Public Company Limited BKI Charan Insurance Public Company Limited CHARAN Muang Thai Insurance Public Company Limited MTI The Navakij Insurance Public Company Limited NKI Nam Seng Insurance Public Company Limited NSI Syn Mun Kong Insurance Public Company Limited SMK The Thai Insurance Public Company Limited TIC Dhipaya Insurance Public Company Limited TIP The Thai Setakij Insurance Public Company Limited TSI Thaivivat Insurance Public Company Limited TVI

The IFA has chosen 2 valuation methodologies strongly supported by financial theories as follows:

1.5.2.1.1. Price to Earnings Ratio Methodology (P/E)

This methodology reflects the profitability of the company without taking the assets value into consideration. The valuation by this methodology was calculated by multiplying the trailing 12-month net profit of the company (October 2016 to September 2017) to the average price to earnings (P/E) multiples of its peers over the periods of 30 days, 60 days, 90 days, and 120 days prior to 21 November 2017. Details are as follows:


Company 30 days prior 60 days prior 90 days prior 120 days prior BKI 15.94 15.68 15.51 15.47 CHARAN 26.12* 24.14* 23.26* 23.04* MTI 13.46 13.28 13.28 13.27 NKI 13.44 13.45 19.12 23.79 NSI 8.35 8.34 9.27 10.03


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Company 30 days prior 60 days prior 90 days prior 120 days prior SMK 10.25 10.20 10.12 10.19 TIC 8.22 7.70 7.86 8.06 TIP 9.18 8.91 8.68 8.60 TSI N/A* N/A* N/A* N/A* TVI 48.45* 54.10* 47.65* 43.04* Average 11.26 11.08 11.98 12.77


From the average P/E multiples of the peers above, the IFA estimates the value of AYUD to arrive at THB 5,435.5 – 6,265.8 million.

1.5.2.1.2. Price to Book Value Ratio Methodology (P/BV)



Company 30 days prior 60 days prior 90 days prior 120 days prior BKI 1.12 1.13 1.11 1.11 CHARAN 0.86 0.81 0.77 0.76 MTI 1.58 1.58 1.57 1.55 NKI 0.88 0.88 0.88 0.88 NSI 0.86 0.87 0.87 0.87 SMK 1.62 1.62 1.61 1.61 TIC 1.12 1.07 1.02 1.00 TIP 2.10 2.04 1.98 1.96 TSI 3.94* 3.66* 3.08* 2.74* TVI 1.04 1.08 1.06 1.06 Average 1.24 1.23 1.21 1.20


From the average P/BV multiples of the peers above, the IFA estimates the value of AYUD to arrive at THB 9,125.8 – 9,453.4 million.


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1.5.2.2. Book Value Approach


Items as of 30 September 2017 Amount (THB million) Total Assets 11,049.76 Less Total Liabilities 3,443.07 Net Asset Value 7,606.69

From the table above, the net asset value of AYUD is THB 7,606.69 million

1.5.2.3. Historical Traded Price Approach

Historical Traded Price Approach reflects the value of the Company according to the demand of general investors on the potential and growth of the Company in a particular period. The value is determined by demand and supply of investors. By this approach, the value was calculated based on the Volume Weighted Average Price (VWAP) of AYUD over the periods of 30 days, 60 days, 90 days, and 120 days prior to 21 November 2017, the date which the board of directors of the Company approved to propose to shareholders’ meeting for consideration and approval of the Transaction. Details are as follows:

Unit : THB per share

Period Lowest Closing

Price Highest Closing

Price Average Closing

Price VWAP

30 days 29.75 30.50 30.15 30.15 60 days 29.00 30.50 29.83 29.69 90 days 29.00 30.50 29.87 29.79 120 days 29.00 31.75 30.25 30.06

From the details above, the value of AYUD’s share is THB 29.69 – 30.15 per share or THB 7,423.7 – 7,537.1 million

1.5.2.4. Sum of the Parts (SOTP)

By this approach, IFA finds the value of AYUD by calculating the sum of the following items:


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1. Net asset value of AYUD (excluding the investment in SAGI and AZAY) based on the company’s only financial statement of AYUD as of 30 September 2017

2. Value of investment in SAGI (100% investment proportion) 3. Value of investment in AZAY (20.17% investment proportion) with referencing to the

appraisal value of AZAY stipulated above 4. Net present value of on-going operational income and expense of AYUD as an

investment company

The Valuation of SAGI

For valuation of fair value of SAGI, IFA uses various valuation methods such as Market Comparable Approach, Book Value Approach and Actuarial Valuation Approach. Details are follows:

1) Market Comparable Approach

For SAGI, the IFA selected the following 10 listed companies operating in direct non-life insurance business as comparable peers:

Company Ticker Bangkok Insurance Public Company Limited BKI Charan Insurance Public Company Limited CHARAN Muang Thai Insurance Public Company Limited MTI The Navakij Insurance Public Company Limited NKI Nam Seng Insurance Public Company Limited NSI Syn Mun Kong Insurance Public Company Limited SMK The Thai Insurance Public Company Limited TIC Dhipaya Insurance Public Company Limited TIP The Thai Setakij Insurance Public Company Limited TSI Thaivivat Insurance Public Company Limited TVI

1.1) Price to Earnings Ratio Methodology : P/E

This methodology reflects the profitability of company without taking the assets value into consideration. The valuation by this methodology was calculated by multiplying the trailing 12-month net profit of the company (October 2016 to September 2017) to the average price to earnings (P/E) multiples of its peers over the periods of 30 days, 60 days, 90 days, and 120 days prior to 21 November 2017. Details are as follows:


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Company 30 days prior 60 days prior 90 days prior 120 days prior BKI 15.94 15.68 15.51 15.47 CHARAN 26.12* 24.14* 23.26* 23.04* MTI 13.46 13.28 13.28 13.27 NKI 13.44 13.45 19.12 23.79 NSI 8.35 8.34 9.27 10.03 SMK 10.25 10.20 10.12 10.19 TIC 8.22 7.70 7.86 8.06 TIP 9.18 8.91 8.68 8.60 TSI N/A* N/A* N/A* N/A* TVI 48.45* 54.10* 47.65* 43.04* Average 11.26 11.08 11.98 12.77


From the average P/E multiples of the peers above, the IFA calculates SAGI’s value is Baht 1,169.5 – 1,348.2 million.

1.2) Price to Book Value Ratio Methodology : P/BV



Company 30 days prior 60 days prior 90 days prior 120 days prior BKI 1.12 1.13 1.11 1.11 CHARAN 0.86 0.81 0.77 0.76 MTI 1.58 1.58 1.57 1.55 NKI 0.88 0.88 0.88 0.88 NSI 0.86 0.87 0.87 0.87 SMK 1.62 1.62 1.61 1.61 TIC 1.12 1.07 1.02 1.00 TIP 2.10 2.04 1.98 1.96 TSI 3.94* 3.66* 3.08* 2.74* TVI 1.04 1.08 1.06 1.06


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Company 30 days prior 60 days prior 90 days prior 120 days prior Average 1.24 1.23 1.21 1.20


From the average P/BV multiples of the peers above, the IFA calculates SAGI’s value is Baht 2,306.6 – 2,389.2 million.

2) Book Value Approach


Items as of 30 September 2017 Amount (THB million) Total Assets 5,330.64 Less Total Liabilities 3,408.01 Net Asset Value 1,922.63

From the table above, the net asset value of SAGI is THB 1,922.63 million.

3) Actuarial Valuation Approach

By using Actuarial Valuation Approach, the IFA refers to the appraisal value report prepared by the IAC who is the same party valuing AZTH and AZAY. Detailed valuation of SAGI can be summarized as follows:

The IFA has referred to the appraisal value of SAGI as at 30 June 2017 dated 28 September 2017 prepared by IAC which was appointed by AYUD for the purpose of a potential transaction. The IAC has appraised the value of SAGI by considering the following items:

1. Net asset value 2. Value of in-force business 3. Value of future business less the cost of capital 4. Terminal value

Although the appraisal value report are the appraised value as of 30 June 2017, the IFA has asked the IAC for the key assumptions that have material impact to the valuation, and compared them with the actual data occurred during the third quarter of 2017. Those key


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assumptions were not significantly difference from the actual outcome; therefore, the IFA uses the appraisal value report as the reference for this valuation. For the appraisal value of SAGI, the IAC has set out several key assumptions which can be summarized as follows:

Net asset value

The IAC has conducted the reserve review and estimated the claim liabilities which are lower than that booked by SAGI of approximately THB 14 million (after adjusting for tax); therefore, the IAC adjusted the net asset value of SAGI to be increased as follows:

Items as at 30 June 2017 Amount (THB million) Total Assets 5,304.6 Less Total Liabilities 3,430.8 Net Asset Value 1,873.8 Adjustment to the claim liabilities 13.9 Adjusted Net Asset Value 1,887.7

Key assumptions regarding the business operation

1. Gross Written Premium (GWP)

The IAC projected the growth rate of GWP for each line of business of SAGI such as motor voluntary, motor compulsory, fire, personal accident, industrial all risk, etc. The growth rate of GWP for each line of business can be summarized as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 GWP growth (p.a.)

3.3% 1.6% (1.8%) 4.5% 12.2% 4.8% (5.0%) 5.4% 5.8% 5.8% 5.5% 5.1% 5.4%

From the past three years, the average growth rate was 1.1%. For the projection, the growth rate during the first few years referred from the business plan of SAGI are mainly because there were no major projects release by Thailand government in the past 2 years, which caused the reduction in new business to general insurance industry. However, for the projection period of 2017 – 2019, there are many large government projects, mostly infrastructure project, where the government spending is expected to trickle down in other areas of the economy, including boosting the general insurance industry which also boost SAGI’s growth rate. The negative growth rate in 2020 is caused by expected withdrawal from the bancassurance channel of CIMB. In the long run, the IAC refer to the industry growth rate of approximately 6% p.a.


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2. Ceded Ratio

The IAC projected the ceded ratio for each line of business of SAGI by referring to the average ceded premium to GWP ratio during 2014 – 2016 (with average of 40.8%) except the ceded ratio for personal accident (PA) which is referred to the average ratio during 2014 – 2015 because the loss ratio for one PA product in 2016 is high. Therefore, SAGI ceded 100% of such product to another insurer. For motor, it was assumed that the ceded ratio will gradually reduce and cease from 2020 onwards. The ratio can be summarized as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Ceded ratio (%GWP)

41.1% 39.5% 41.7% 40.5% 40.1% 34.3% 29.6% 29.5% 29.5% 29.5% 29.4% 29.4% 29.3%

3. Loss Ratio

The IAC projected the loss ratio for each line of business of SAGI by referencing to the historical loss ratio from the financial accounts as well as IAC’s actuarial analysis of the past claim experience (average at 45.3% for the past three years) and also the projected loss ratio in SAGI’s business plan. For motor voluntary, the proportion of type 1 risk, which has the higher loss ratio than other type, will continuously decrease. For motor compulsory, the loss ratio is expected to increase in anticipation of the increasing trend in statutory benefit limits. For fire, the fire tariffs are expected to be reduced, which will increase the overall fire loss ratio. For other line of business, the projected losses are slightly higher because of the inclusion of rice scheme. The IAC has projected the loss to Net Earned Premium (NEP) ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Loss ratio (%NEP)

42.6% 45.4% 48.3% 44.9% 44.7% 45.3% 46.0% 46.3% 46.3% 46.4% 46.4% 46.6% 46.7%

4. Direct Commission

The IAC projected the direct commission for each line of business by referencing to the historical commission ratio (average at 26.4% for the past three years), which has been stable for the past 3 years. For year 2020, the direct commission will slightly increase due to the expectation of the expiration of bancassurance contract of CIMB, of which the commission ratios are lower than other channels in general. The IAC projected the direct commission ratio as follows:


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2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Direct Commission ratio (%GWP)

25.4% 27.0% 26.9% 25.3% 25.0% 25.0% 25.2% 25.2% 25.2% 25.2% 25.3% 25.3% 25.3%

5. Reinsurance Commission

The IAC projected the reinsurance commission for each line of business based on the past experience (average at 28.5% for the past three years). For year 2021 onwards, the reinsurance commission decreased because SAGI assume that the ceded ratio for motor will gradually reduce and cease as aforementioned. The IAC projected the reinsurance commission to ceded premium ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Reinsurance commission ratio (%Ceded Premium)

29.2% 31.3% 25.1% 28.2% 28.5% 28.5% 27.4% 25.8% 25.8% 25.8% 25.8% 25.8% 25.9%

6. Operating Expense

The IAC projected the operating expense during 2017 – 2019 by referencing to SAGI’s business plan, which the management expects direct commission will have quiet high growth rate as described above. Consequently, ratio of operating expenses to commission will be reduced. For the past three years, the average ratio was 14.4%. For the projection of long term operating expenses, the IAC has assumed that the operating expenses will increase at 4.5% p.a., i.e. 1.5% points lower than the long term GWP growth rate resulting from improving economies of scale over time for most line of business. The IAC projected the operating expense ratio as follows:

2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Operating expense ratio (%GWP)

14.0% 14.3% 14.9% 13.6% 13.0% 12.8% 12.7% 12.5% 12.4% 12.2% 12.0% 11.9% 11.7%

7. Investment Return

The IAC projected the investment return assumption of 2.0% p.a. by taking into consideration SAGI’s historical investment performance and expected investment yields on different asset classes going forward.


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8. Other Assumptions

The IAC has assumed the capital required for SAGI to achieve a 175% target capital adequacy ratio (CAR), which is higher than the minimum solvency CAR of 140%, of which the management has advised that the ratio is sufficient for SAGI to manage the business. For 2014 – 2016, SAGI’s average CAR was 661%.

The IAC has assumed SAGI’s terminal value growth rate of 2.0% p.a., which, based on the interview with IAC, the IAC explained that such growth rate is equivalent to P/E ratio of 10.7 – 13.6 times, which the IAC deemed appropriate. In addition, the IFA considered that the growth rate is in line with the average 10-year inflation rate

Bancassurance Contract Renewal Probability SAGI has 2 major bancassurance contracts. The first contract with Bank of Ayudhya will expire in 2018, of which the management expects to be renewed for another 3 years as usual; therefore, the IAC select 80% as the renewal probability. Another contract with CIMB will expire in 2020, of which the management expects not to be renewed; therefore, the IAC select 0% as the renewal probability resulting in the expected negative growth in such year as aforementioned.

The IAC used the risk discount rate (RDR) at 9.5% 10.5% and 11.5% p.a.. Based on the interview with IAC, the IAC explained that the RDR is in line with market benchmarks for life insurance company in Thailand by taking into account the of the business and risk profile resulting in the central RDR of 9.5% and the IAC show the illustrative results at an RDR of increase/decrease 1% of the central rate, which is the typical market practice. Therefore, the appropriate RDR for life insurance business are at 8.5% 9.5% and 10.5% p.a. For non-life insurance, the IAC deemed the RDR should be higher; therefore, the IAC set the RDR to be 1% higher.

However, the IFA has calculated the discount rate based on the Capital Asset Pricing Model (CAPM) as follows:


whereas Assumption Rf1 Risk-free rate 2.80% Market Premium2

Excess return over the risk-free rate for investing in the market

12.18%


market returns 0.67

Remark: 1. 15-year government bond yield as of 21 November 2017 (Source: www.thaibma.or.th) 2. 15-year market return of the SET (Source: SETSMART)


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3. The average of non-life insurance business group (Source: Bloomberg as of 21 November 2017)

Based on the assumptions above, the discount rate (Ke) was calculated to be approximately 11%; therefore, the IFA is of the opinion that the discount rate of SAGI should be at 10.5% and 11.5%.

The valuation of SAGI can be summarized as follows:

THB million 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Net earned premium

1,825 2,042 2,345 2,525 2,627 2,776 2,939 3,107 3,275 3,450

Net claim incurred

812 935 1,079 1,170 1,219 1,293 1,370 1,450 1,533 1,620

Net commissions

428 477 575 634 664 703 745 787 830 875

Operating expenses

442 476 489 462 480 501 523 544 564 587

Underwriting profit (loss)

144 154 202 260 263 280 302 326 348 368

Tax 29 31 40 52 53 56 60 65 70 74 Investment income

18 20 24 27 28 28 29 30 32 34

Net profit 133 143 185 235 238 252 271 291 310 328

The appraisal value of SAGI can be summarized by discount factors as follows:

Unit : THB million

Items RDR

9.5% 10.5% 11.5% 1. Net asset value 1,888 1,888 1,888 2. Value of in-force business 320 317 314 3. Value of future business (net of cost of capital) including terminal value

2,155 1,783 1,493

Appraisal value of SAGI from IAC’s report 4,363 3,988 3,694

Nonetheless, the IFA deemed the discount rate of SAGI should be at 10.5% and 11.5% as aforementioned, the IFA is of the opinion that the value of SAGI should be THB 3,694 – 3,988 million.

The IFA considers the suitable valuation approach and regards that market comparable approach by P/E methodology unsuitable since the historical earnings of SAGI does not


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reflect the profit-generating capacities in the future. The IFA also regards P/BV methodology and book value approach unsuitable since it does not reflect the profit-generating capacities and cash-generating capacities of SAGI. The IFA is of an opinion that actuarial valuation approach is the appropriate valuation approach since it reflect the fundamental value and it is also the generally accepted approach

Therefore, the appraised value of SAGI is THB 3,694 – 3,988 million.

The Valuation of net present value of on-going operational income and expenses of AYUD

To find the net present value of on-going operational income and expense of AYUD as an investment company, the IFA assumed that the Company would operate on a going concern basis. The IFA prepared a 10-year financial forecast, and then estimated terminal values, assuming annual growth from 2026 at approximately 2.0%, which is the average headline inflation rate for the past 10 years.

Key assumptions in the financial model were set based on the historical financial statements and the business plan of the management of the Company, and then were adjusted as the IFA deemed appropriate and reasonable taking into account historical data. Other assumptions were set based on historical and current data, and also from interviews with the management.

Details of crucial assumptions for AYUD are as follows:

1. The growth rate of gain on investment in securities was set at 1.7% based on the average level of historical return on investment portfolio. The IFA has calculated the historical 3-year average gain on investment in securities excluding the extraordinary items occurred in each year. The gains on investment of the past three years are (2.1%), 2.5% and 4.7% respectively or average of 1.7%.

2. The growth rate of personnel expense was set at 5.0% p.a.. Such personnel expense was the net of charges to SAGI and also adjusted to reflect the change of management. The growth rate was based on the interview with the management of AYUD. The growth rate of personnel expenses of 2015 and 2016 were (68%), (12%) respectively. For 2014, there was special item and some employee transferred to SAGI, therefore the personnel expenses in 2015 was significant decreased.

3. The growth rate of audit expense was set at 5.0% p.a., based on the interview with the management of AYUD. The rate was also close to the historical 3-year average growth rate. For 2015 and 2016, the growth rate was 2.8% and 4.2% respectively with average at 3.5%.


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4. The growth rate of other expenses was set at 2.0% with referencing to the average headline inflation rate for the past 10 years. In 2017, there are an extraordinary item, which is the fee for the appraiser engaged for the valuation of the company for this Transaction

In order to calculate present value, the IFA utilized the Capital Asset Pricing Model (CAPM) as a discount rate through the following formula:


whereas Assumption Rf1 Risk-free rate 2.80% Market Premium2 Excess return over the risk-free rate for

investing in the market 12.18%

3 The sensitivity of stock price to market

returns 0.67

Remark: 1. 15-year government bond yield as of 21 November 2017 (Source: www.thaibma.or.th) 2. 15-year market return of the SET (Source: SETSMART) 3. The average of the Company (Source: Bloomberg as of 21 November 2017)

Based on the assumptions above, the discount rate (Ke) was calculated to be approximately 10.3%; therefore, the net present value of on-going operational income and expense of AYUD is as follows:

THB million 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Gain on investment in securities

49.81 50.65 51.51 52.38 53.26 54.16 55.07 56.00 56.95 57.91

Personnel expense

(7.68) (6.84) (7.13) (7.49) (7.86) (8.26) (8.67) (9.10) (9.56) (10.04)

Audit expense (2.75) (2.88) (3.03) (3.18) (3.34) (3.50) (3.68) (3.86) (4.06) (4.26) Other expenses (58.46) (23.74) (23.83) (23.91) (24.00) (24.09) (24.18) (24.27) (24.36) (24.46) Income taxes - (3.44) (3.50) (3.56) (3.61) (3.66) (3.71) (3.75) (3.79) (3.83) Net profit (19.08) 13.75 14.01 14.24 14.45 14.65 14.84 15.01 15.18 15.33

Table summarizing the NPV of on-going operational income and expense of AYUD

Unit : THB million Items Amount

Present value 61.7 Plus Terminal Value* 75.9 NPV of on-going operational income and expense of AYUD 137.6


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Remark : * Terminal value was calculated from net profit in year 2026 (NI2026) , which is the last year of the projection period, through the following formula:

Terminal Value = NI2026*(1+g)/(Ke-g) whereas g is a long term annual growth after 2026. The rate was set at 2.0%, which is

the average headline inflation rate for the past 10 years. Ke is the discount rate

Summary of Valuation of AYUD by SOTP approach

Unit : THB million Items Amount

Net asset value of AYUD (excluding the investment in SAGI and AZAY)

2,422.1

Value of investment in SAGI 3,694.5 – 3,988.2 Value of investment in AZAY (20.17% investment proportion) 7,089.9 – 8,337.5 Net present value of on-going operational income and expense of AYUD as an investment company

137.6

Estimated value of AYUD 13,343.6 – 14,885.2 Total issued and paid-up shares (million share) 250.00 Value per share of AYUD (THB per share) 53.37 – 59.54

Summary of Valuation of AYUD

The IFA considers the suitable valuation approach and regards that market comparable approach by P/E methodology unsuitable since the historical earnings of AYUD does not reflect the profit-generating capacities in the future. The IFA also regards P/BV methodology and book value approach unsuitable since it does not reflect the profit-generating capacities and cash-generating capacities of AYUD. In addition, the IFA regards historical traded price approach unsuitable since AYUD has a relatively low turnover ratio during the period of the valuation. It, therefore, would not reflect the appropriate value of AYUD

The IFA is of an opinion that the sum of the parts approach is the appropriate valuation approach for AYUD because the core business of AYUD is to invest in other companies, of which its crucial investment are investment in SAGI, AZAY, and other securities. Such approach, therefore, would reflect the appropriate value of its investment.

As a result, the estimated value of AYUD is THB 13,343.6 – 14,885.2 million or THB 53.37 – 59.54 per share.


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1.5.3. Conclusion of the IFA’s opinion on the price of the Transaction

From the aforementioned valuation of SAGI, AZTH, AZAY, AYUD, the IFA concludes the value of the Transaction as follows:

1. Acceptance of the EBT from AZTH

The IFA is of an opinion that the appropriate price range of the transaction, by Actuarial Valuation Approach, is the estimated value of AZAY above of THB 1,352 – 1,567 million.

For the acceptance of the EBT from AZTH, the transaction price is approximately THB 1,253.8 million which is less than the appraised price by THB 98.2 – 312.7 million. The IFA is of an opinion that the transaction price of EBT from AZTH is reasonable.

2. Purchase of AZAY Shares

The IFA is of an opinion that the appropriate price of the transaction is as follows:

Amount (THB million) AZAY (11.80% investment proportion) Estimated Total Value of AZAY 35,151.2 – 41,337.0 Estimated Value of AZAY (11.80%) 4,148 – 4,878 Less Discount for Lack of Marketability* 1,037 – 1,219 Net Estimated Value of AZAY 3,111 – 3,658 Remark * Since AZAY is not listed company in the SET, the IFA applied Discount for Lack of

Marketability at the rate of 25%, regarding the IFA’s guideline, based on the average of generally applied Discount for Lack of Marketability at 20 - 30% in the 2nd edition of Investment Valuation by Aswath Damodaran

From the table above, the IFA is of the opinion that the appropriate price range of the transaction is THB 3,111 – 3,658 million.

The transaction price is approximately THB 3,902.2 million which is THB 243.9 – 791.3 million higher than the aforementioned appropriate transaction price estimated by the IFA. However, the IFA applied the discount for lack of marketability for the valuation of AZAY since AZAY is not a listed company in the SET.

Due to the acquisition of assets agenda, connected transaction agenda, and the whitewash agenda are related to, and conditional upon, each other.; therefore, if any of these items is not approved the EGM, the other related items will not be proposed to the EGM for its consideration, and the items that have already been approved shall be


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deemed to be cancelled. Therefore, IFA considers the aggregate transaction by combining the estimated value of the Acceptance of the EBT from AZTH and the Purchase of AZAY Shares, the combined value is THB 4,462.9 – 5,224.8 million. The transaction price of THB 5,155.995 million is, therefore, in the appropriate transaction price range, which is THB 693 million, or 15.53% higher than the lower end of the appropriate prince range and THB 68.8 million or 1.32% higher than the higher end of the appropriate prince range. The IFA is of an opinion that the combined transaction price of the Transaction is reasonable.

3. Share Allocations

The IFA is of an opinion that the appropriate price range of the transaction is the estimated value of AYUD, by SOTP method, above of THB 53.37 – 59.54 per share.

For the Share Allocations, the transaction price of THB 53.43 per share is in the appropriate transaction price range estimated by the IFA, which is THB 0.06 per share, or 0.10% higher than the lower end of the appropriate prince range and THB 6.11 per share or 10.26% higher than the higher end of the appropriate prince range. The IFA is of an opinion that the transaction price for the Share Allocations is reasonable.

1.6. Reasonableness of the Conditions of the Transactions

1.6.1. Conditions of the Transactions

Key conditions of the Transactions according to the Share Subscription and Purchase Agreement (SPA), Entire Business Transfer Agreement (EBTA), and IMs are summarized as follows

1. The resignation of the 3 Company’s directors and 4 SAGI’s directors. The names of such resigned directors are not agreed yet. Currently, the Company has 11 directors and SAGI has 8 directors. For the nominated directors to replace the resigned directors, the Company and Allianz Group are negotiating the appointment which has not been finalized.

2. The approval from shareholders’ meeting of the Company for the following agenda: 2.1 The purchase and acceptance of the transfer of the entire business of AZTH by

SAGI, and the purchase of additional ordinary shares in AZAY from Allianz SE and CPRNT;

2.2 The amendment to Article 3 of the Company’s articles of association to enable the Company to accept payment for newly issued ordinary shares in kind, in addition to the payment in cash or otherwise;


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2.3 The decrease of the Company’s registered capital from THB 500,000,000 to THB 250,000,000, by canceling 250,000,000 authorized but unissued ordinary shares, and the amendment to the Company’s memorandum of association to be consistent with the decrease of the capital

2.4 The increase of the Company’s registered capital from THB 250,000,000 to THB 346,500,000 by issuing 96,500,000 new ordinary shares, and the amendment to the Company’s memorandum of association to be consistent with the increase of the capital;

2.5 The allocation of newly issued ordinary shares to Allianz SE and CPRNT by way of private placement;

2.6 A waiver for Allianz SE and CPRNT to acquire newly issued ordinary shares without being required to make a tender offer for all securities of the Company which need the Company’s EGM No. 1/2018 approval;

2.7 The change of the Company’s name to ‚Allianz Ayudhya Capital Public Company Limited‛, and an amendment of the Company’s memorandum of association and articles of association as well as corporate seal to reflect the change of its name, with effect on the date on which the subscription of the newly issued ordinary shares of the Company and the payment therefor, and the sale and purchase of the ordinary shares in AZAY and the payment therefor, have been completed (the “Closing Date”); and

2.8 The increase of the total number of the Company’s directors from 11 to 15 directors and the appointment of persons nominated by the Allianz SE and CPRNT as the Company’s directors, with effect on the Closing Date. From the 4 additional directors, current 1 director and 3 substitute directors of resigned directors who may be nominated by Allianz Group there will be directors representing Allianz Group of 8 directors of total 15 directors. Such number of directors is more than half of Board of Directors members, therefore Allianz SE and CPRNT may take control on voting by majority in Board of Directors meeting. However, there is no agreement on appointing directors to replace the resigned directors, it is on negotiating currently.

3. The approval from the shareholders’ meeting of SAGI for the following agenda: 3.1 The acquisition of the entire business of AZTH, which is transferring of all assets

and liabilities of AZTH to SAGI; 3.2 The decrease of the SAGI’s registered capital from THB 2,400,000,000 to THB

1,800,000,000, by canceling 60,000,000 authorized but unissued ordinary shares, and the amendment to the SAGI’s memorandum of association to be consistent with the decrease of the capital;

3.3 The increase of the SAGI’s registered capital from THB 1,800,000,000 to THB 3,053,794,000 by issuing 125,379,400 new ordinary shares, and the amendment to


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the SAGI’s memorandum of association to be consistent with the increase of the capital;

3.4 The allocation of newly issued ordinary shares to the existing shareholders of SAGI; and

3.5 The change of SAGI’s name to ‚Allianz Ayudhya General Insurance Public Company Limited‛, and an amendment of the SAGI’s memorandum of association and articles of association as well as corporate seal to reflect the change of its name, with effect on the Closing Date.

4. The receipt of the approval from the OIC with regard to the acceptance of the transfer of the entire business of AZTH by SAGI, and relevant matters.

5. The receipt of the approval from the SEC with respect to the following matters: 5.1 The offering for sale of the newly issued ordinary shares of the Company by way of

private placement and the extension of the offering period; and 5.2 The waiver for Allianz SE and CPRNT to acquire newly issued shares without being

required to make a tender offer for all securities of the Company. 6. All conditions as stipulated above have to be fulfilled within 30 June 2018 or the date all

parties agreed in written, and 7. Condition no. 2.1 to 2.6 as stipulated above have to be approved by the Company’s

shareholders meeting within 31 January 2018 or the date all parties agreed in written.

1.6.2. Opinion of the Independent Financial Advisor on the Reasonableness of the Conditions of the Transactions

After reviewing the aforementioned conditions, the IFA is of the opinion that they are regular conditions for proceeding and completing the Transactions. In case that number of directors representing Allianz SE and CPRNT are more than half of total number of directors, Allianz SE and CPRNT may take control on voting by majority in Board of Directors meeting. However, there is no agreement on appointment of directors to replace the resigned directors, it is on negotiating currently. Nonetheless, the appointment of persons nominated by Allianz SE and CPRNT as the Company’s directors is appropriate because both of them will be major shareholders of the Company after the Transactions. The change of the Company’s name and SAGI’s name reflect the signification shares acquisition of Allianz Group after the Transactions. All conditions as stated above have to be fulfilled as initially agreed within 30 June 2018.

Consequently, as at the Closing Date, Allianz Group will have its shareholding in the non-life insurance business held only through AYUD since its existing non-life insurance business (AZTH) will have been entirely transferred to SAGI which is AYUD’s subsidiary. Additionally, as at the Closing Date, AYUD will have additional shareholding in life-insurance business (AZAY) of 11.80% which makes its shareholding in AZAY increase from 20.17% to 31.97%.


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1.7. Other Information

After the Purchase of AZAY Shares transaction, the Company’s shareholding in AZAY will increase from 59,500,280 shares to 94,310,280 shares or from approximately 20.17% to approximately 31.97% of the total shares sold in AZAY. However, both Allianz Group (i.e. Allianz SE and CPRNT) and the Ratanarak Group will continue to be major shareholders in both AYUD and AZAY. Their shareholding in AZAY after the Purchase of AZAY Shares transaction will be approximately 50.85% and approximately 16.93% respectively. With this shareholding structure of AZAY after the completion of transactions, it will not be in accordance with the Notification of the Capital Market Supervisory Board No. TorJor. 39/2559 re: Application for and Approval of the Offering for Sale of Newly Issued Shares, dated 30 September 2016 (as amended) per detail provided in IM. This may affect the Company when filing an application to the SEC in order to issue newly issued shares for public offering in the future.

Based on the interview with the Company’s management on the above requirement, they are aware of the issue and considering a proper plan to rectify it. Nonetheless, both Allianz Group and the Ratanarak Group had been existing shareholders of AZAY before the Company purchased AZAY shares from Bank of Ayudhya Public Company Limited in 2012. At present, AZAY is the only life insurance company in Thailand that both of them had an investment in shares.


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2. Opinion of the IFA on the request for Shareholders’ meeting resolution to approve acquisition of new securities without requirement to make a tender offer for all securities of the Business (Whitewash)

2.1. Details of Transaction

Refer to Board of Directors Meeting of Sri Ayudhya Capital Public Company Limited (‚the Company‛ or ‚AYUD‛) No.7/2017 held on 21 November 2017 which approved for the proposal to Extraordinary Meeting of Shareholders for approval of issuing 96,500,000 new shares of AYUD with Par THB 1.00 per share (‚Waived Securities‛) to be allotted to Allianz SE and CPRNT (collectively ‚Applicants‛) at THB 53.43 per share. After allotment, the Applicants and its related persons under Section 258 (‚Applicants Group‛) will hold AYUD’s shares totally of 139,763,000 shares equals to 40.34% of total voting right of AYUD. The shareholding after allotment will trigger at 25% of total voting right of AYUD, the Applicants will have obligation to make a tender offer for all the equity securities of AYUD under the Notification of the Capital Market Supervisory Board No. TorJor 12/2554 entitled Rules, Conditions and Procedures for the Acquisition of Securities for Business Takeover dated 13 May 2011 (as amended). However, the Applicants wish to obtain a waiver for them not to make a tender offer for all equity securities of AYUD by virtue of the resolution of the Shareholders’ meeting (whitewash) under the SEC Notification No. SorChor.36/2546 entitled Rules for request for a waiver of tender offer for all equity securities by the shareholders’ resolution dated 17 November 2003 (as amended).

2.2. Conditions of the Transaction

Key conditions of the Transaction are the same as conditions of the Transaction stated in Clause 1.6.1 of this report.

For the approval of a waiver of tender offer for all equity securities of AYUD by the shareholders’ resolution, the Transaction needs to be approved with a vote of not less than three-fourths of the total number of votes of shareholders attending the meeting and having the right to vote, excluding shareholders who have interest, for the entry into the transaction.

2.3. Opinion of the IFA on Policies and Business Operation Plan proposed by the Applicants

From the draft Request Form for Shareholders’ Meeting Resolution to Approve Acquisition of New Securities without Requirement to Make a Tender Offer for All Securities of the Business (‚Draft Form 247-7‛), the IFA is of an opinion on policy and operation plan as follow:


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2.3.1. Policies and Business Operation Plans

The Applicants stated in the draft Form 247-7 that within the next 12 months after the acquisition of equity securities, the Applicants do not intend to significantly change the business policy or plan of AYUD and the integrated insurance business following the entire business transfer from AZTH to SAGI (the ‚MergedCo‛) other than:

- a change of their name and logo; - in respect of the MergedCo, implementation of the relevant steps and plans in

accordance with the business integration plan in relation to the proposed acquisition of the entire business of AZTH by SAGI as approved by the OIC.

The IFA is of an opinion that the no significant policy and business plan change of AYUD and MergedCo is possible. Because the Applicants are in Allianz Group which operate in insurance business same as AYUD’s and subsidiaries’ business. Moreover, the objective of the Transaction is to enhance business co-operation between AYUD and Allianz Group with a view of improving operational efficiency and minimizing repetitive costs and expenses. Therefore, the Applicants will let AYUD and MergedCo remain their insurance business.

Regarding dividend policy, the Applicants did not state in the draft Form 247-7. Therefore, the IFA has asked the Applicants’ management and was informed that the Applicants have no intention to change the dividend policy within 12 months after the acquisition of the securities under whitewash resolution of EGM approval. Thus, the shareholders shall not be affected in this matter.

Although the Applicants did not declare the plan regarding the maintaining listed status of AYUD in the draft Form 247-7, the IFA has asked the Applicants’ management about this policy. The IFA was informed that the Applicants have no intention to delist AYUD within 12 months after the acquisition of the securities under whitewash resolution of EGM approval. Thus, the shareholders shall not be affected in this matter.

2.3.2. Management Structure

SPA and the draft Form 247-7 stated the conditions precedent relating to change of management structure as follow:

- The resignation of 3 AYUD’s directors and 4 SAGI’s directors; - The increase of the total number of AYUD’s directors from 11 to 15 directors and the

appointment of persons nominated by Allianz SE and CPRNT as AYUD’s directors, with effect on the closing date.


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- The appointment of nominated persons of the Applicants to be AYUD’s directors and MergedCo’s directors.

The IFA is of an opinion that the change of number of directors and the nomination of directors by the Applicants is a condition that relating to the status of AYUD’s major shareholders after Transaction execution. In case that number of directors representing Allianz SE and CPRNT are more than half of total number of directors, Allianz SE and CPRNT may take control on voting by majority in Board of Directors meeting. However, there is no agreement on appointment of directors to replace the resigning directors, but it will be discussed between the parties.

2.3.3. Policy on Related Party Transactions

The Applicants have declared in the draft Form 247-7 that after the acquisition of the securities, they have no intention to materially change AYUD’s policy regarding the related party transactions. The Applicants intend to enhance business co-operation between AZAY and MergedCo with a view of improving operational efficiency and minimizing repetitive costs and expenses by way of, amongst others, sharing of certain resources and centralized functions as well as cross-selling of insurance products to their respective customer base.

In any event, any current and future related party transaction will be carefully considered and approved by the board of directors or the shareholders in accordance with applicable laws and regulations to ensure that transaction price and conditions are executed on an arm’s length basis.

The IFA regards the related party transactions as appropriate as the policy stipulate that related party transactions must be on an arm’s length basis and in compliance with the rules and regulations of relevant authorities.

2.4. Total Voting Rights that the Applicants would be entitled to after the Acquisition of Securities and to be entitled to in the Future without Tender Offer Requirement

In case the EGM No. 1/2018 approves the Whitewash and the other relevant agenda. The Applicants Group will hold the Company’s shares total of 139,763,000 shares or 40.34% of total voting rights approximately.

The shareholding of 40.34% of total voting rights is the significant % holding. Then, the Applicants Group shall exercise their rights to counter-balance on some laws or the Company’s rules which need to be approved by not less than three-fourth of shareholders meeting such as Increase of capital, Decrease of capital, Waiver to tender offer all securities of the Business, Acquisition or disposal of assets, Connected transactions, etc.


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The Applicants Group will be able to acquire additional AYUD’s shares of 9.65% of total voting rights approximately (or be able to hold AYUD’s shares not exceed 50% of total voting rights) without tender offer requirement. However, additional share subscription by the Applicants has to be considered the limitation of foreign shareholding limit by ensuring that the subscription would not result in total shareholding of non-Thais in AYUD exceeding 49% of total registered paid-up capital.

2.5. Potential Impact to Shareholders

2.5.1. Dilution effect on the existing shareholders

If the EGM No.1/2018 resolves to approve the Whitewash and other relevant agendas, control dilution and earnings dilution to existing shareholders shall be 27.85%. Details of the calculations are shown in Item 2 of Section 1.4.2.2 ‚Disadvantages of Entering into the Transactions‛ of this report.

2.5.2. Potential risk of checks and balances and control over the Company by minority shareholders

If the EGM No.1/2018 resolves to approve the Whitewash and other relevant agendas, the Applicants Group will hold total of 139,763,000 shares or 40.34% of total voting rights approximately. Then, the Applicants Group shall exercise their rights to counter-balance on some laws or the Company’s rules which need to be approved by not less than three-fourth of shareholders meeting such as Increase of capital, Decrease of capital, Waiver to tender offer all securities of the Business, Acquisition or disposal of assets, Connected transactions, etc. Except on the transactions that the Applicants Group have conflict of interest or on the transactions which minority shareholders can gather sufficient voting rights to exercise veto rights to check and balance against the Applicants.

2.6. Advantages and Disadvantages of Entering and not Entering into the Transaction

Advantages and disadvantages of entering and not entering into the Transaction are the same as those stated in Section 1.4.2 ‚Advantages and Disadvantages of Entering and not Entering into the Transaction‛ of this report. Since the assets acquisition or disposal transaction agenda, connected transaction agenda and whitewash agenda are related and conditional upon each other. If any of the related agendas is not approved by the EGM, the other related agenda will not be proposed to the EGM for consideration and the previously approved agendas will be deemed to be cancelled.

2.7. The Fairness of the price of the newly issued shares offered to the Applicants

The IFA’s opinion on the fairness of the price of the newly issued shares offered to the Applicants is detailed in Section 1.5 ‚The Fairness of the Price‛ of this report.


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2.8. Completeness and accuracy of the list of names and number of shares held by related persons under Section 258 of the Applicant

The Applicants disclosed in the draft Form 247-7 that AZAY who is the related person under Section 258 of the Applicants holding AYUD’s shares. The IFA checked AYUD’s share register book as of 29 August 2017 and asked the management of the Applicants and found no any other related persons under Section 258 of the Applicants.

3. Conclusion of the Independent Financial Advisor’s Opinion

After reviewing the relevant information the IFA was able to obtain and analyze the conditions of the Transactions, advantages and disadvantages from entering into the Transactions, and potential risks from the Transactions, the IFA opinion can be summarized as follows:

Entering into the Transactions is reasonable since the advantages are the increase of selling channels and expansion of customer base, the integration benefits to the business of the Company, increase non-life insurance market share including revenues and financial strength, Increase return on investment by increase shareholding in AZAY. Even though entering into the Transactions has some disadvantages such as the net loss of AZTH, dilution effect on the existing shareholders, and potential risk of checks & balances and control over the business by minority shareholders. The IFA is of an opinion that the advantages from the Transactions outweigh the disadvantages when considering the co-operation and synergy obtained from Allianz Group. Therefore, the IFA deems the Transaction as reasonable. Regarding the key conditions of the Transactions, the IFA is of an opinion that the conditions are reasonable as they were set in relevant to the related rules and regulations and to meet the objectives of entering into the Transactions.

For the fairness of transaction price, the IFA estimated the appropriate price for the Transaction as follows:

1. Acceptance of the EBT from AZTH: The estimated value range of AZTH based on the actuarial valuation approach is THB 1,352 – 1,567 million. The transaction price is THB 1,253,794,000, which is THB 98.2 – 312.7 million lower than the aforementioned appropriate transaction price estimated by the IFA. The IFA is of an opinion that the transaction price for the Acceptance of the EBT is reasonable.

2. Purchase of AZAY Shares: The estimated value range of the Transaction based on the actuarial valuation approach is THB 3,111 – 3,658 million. The transaction price is THB 3,902,201,000 which is THB 243.9 – 791.3 million higher than the aforementioned appropriate transaction price estimated by the IFA. However, the IFA applied the discount for lack of marketability for the valuation of AZAY since AZAY is not a listed company in the SET.


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Due to the acquisition of assets agenda, connected transaction agenda, and the whitewash agenda are related to, and conditional upon, each other.; therefore, if any of these items is not approved the EGM, the other related items will not be proposed to the EGM for its consideration, and the items that have already been approved shall be deemed to be cancelled. Therefore, IFA considers the aggregate transaction by combining the estimated value of the Acceptance of the EBT from AZTH and the Purchase of AZAY Shares, the combined value is THB 4,462.9 – 5,224.8 million. The transaction price of THB 5,155.995 million is, therefore, in the appropriate transaction price range, which is THB 693 million, or 15.53% higher than the lower end of the appropriate prince range and THB 68.8 million or 1.32% lower than the higher end of the appropriate prince range. The IFA is of an opinion that the combined transaction price of the Transaction is reasonable.

3. Share Allocations: The estimated value range of AYUD’s share based on the sum of the parts approach is THB 53.37 – 59.54 per share. The transaction price of THB 53.43 per share is in such price range, which is THB 0.06 per share, or 0.10% higher than the lower end of the appropriate prince range and THB 6.11 per share or 10.26% lower than the higher end of the appropriate prince range. The IFA is of an opinion that the transaction price for the Share Allocations is reasonable.

In addition, Applicants Group has stipulated in the Draft Form 247-7 that they do not intend to significantly change the business policy or plan of AYUD and MergedCo. Moreover, they do not intend to change the dividend policy, the listed status of AYUD, and policy on related party transactions. The IFA is of an opinion that they are possible because Allianz Group operates in insurance business same as AYUD’s and subsidiaries’ business. Moreover, the objective of the Transaction is to enhance business co-operation between AYUD and Allianz Group with a view of improving operational efficiency and minimizing repetitive costs and expenses. Therefore, it is very likely that Allianz Group will let AYUD and MergedCo remain their insurance business and will not change their key policies. The key changes which will occur is the change of the management structure as there will be the appointment of persons nominated by Allianz SE and CPRNT as directors to reflect their major shareholder status after the Transaction. In case that number of directors representing Allianz SE and CPRNT are more than half of total number of directors, Allianz SE and CPRNT may take control on voting by majority in Board of Directors meeting. However, there is no agreement on appointment of directors to replace the resigning directors, which will be discussed between the parties.


The IFA is of an opinion that the shareholders should vote in favor of approving the Transactions. Nevertheless, the final decision rests primarily with the individual shareholders. The shareholders should study the information contained in this report along with other related information provided and use his/her own judgment in making the final decision.

We hereby certify that we have given our opinions regarding the Transactions prudently and in line with professional practice and with due regard to the interest of the shareholders

Yours sincerely,

-Wit Suthipongchaweekul- (Wit Suthipongchaweekul)

Supervisor Asia Plus Advisory Company Limited

-Kongkiat Opaswongkarn- (Kongkiat Opaswongkarn)

Director Asia Plus Advisory Company Limited

-Lec Sicoravit- (Lec Sicoravit)

Director Asia Plus Advisory Company Limited

Opinion of Independent Financial Advisor On the Acquisition of Assets from Connected Persons

Documents

Transcript of Opinion of Independent Financial Advisor On the Acquisition of Assets from Connected Persons