Financial Sector (Collection of Data) determination No. 18 of 2005 (Cth)
Financial Sector (Collection of Data) determination No. 18 of 2005
Reporting Standard GRS 310.0 (2005)
Financial Sector (Collection of Data) Act 2001
I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (‘the Act’) MAKE the reporting standard set out in the Schedule, which applies to financial sector entities of the kind specified in paragraph 2 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments.
Dated 21 June 2005
[signed]
……………………............
Charles Littrell
Executive General Manager
Policy, Research and Statistics Division
APRA
Interpretation
In this Notice
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard GRS 310.0 (2005)
Statement of Financial Performance
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, information on their financial and operational performance.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
·the versions of Form GRF 310.0 Statement of Financial Performance (Form GRF 310.0) designated for a ‘Licensed Insurer’, ‘Branch Total Operations’ and ‘Consolidated Insurance Group’ and the instructions to those versions of the form (which are attached and all form part of this reporting standard).
Purpose
Data collected in Form GRF 310.0 is used by APRA for the purpose of prudential supervision of insurers.
Application and commencement
This reporting standard applies to all insurers and shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments.
Information required
A locally-incorporated insurer must provide APRA with the information required by the version of Form GRF 310.0 designated for a ‘Licensed Insurer’ for each reporting period.
A foreign insurer must provide APRA with the information required by the version of Form GRF 310.0 designated for ‘Branch Total Operations’ for each reporting period.
An insurer that is a highest parent entity in relation to a consolidated insurance group must also provide APRA with the information required by the version of Form GRF 310.0 designated for a ‘Consolidated Insurance Group’ for each reporting period.
Forms and method of submission
The information required by this reporting standard must be given to APRA either:
(a)in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application; or
(b)manually completed on paper, which must be faxed or mailed to APRA’s head office.
Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 8, an insurer must provide the information required by this reporting standard:
(a) in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and
(b) in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.
Note: The annual information required by paragraphs 3 and 4 read with subparagraph 7(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards. (The annual information required from a highest parent entity under paragraph 5 read with subparagraph 7(b) is not required to be audited. APRA proposes to determine an exemption, under section 7 of the Insurance Act, in relation to the obligations under Part IV Division 4 of the Act in respect of the auditing of this information.)
APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:
(a) more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or
(b) less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 7(a) or (b)).
The information required by paragraphs 3 and 4 of this reporting standard from a locally-incorporated insurer or a foreign insurer must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 7(a) – 20 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 7(b) – 4 months after the end of the reporting period to which the information relates.
Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate relating to the annual information required by paragraphs 3 and 4 read with subparagraph 7(b) must be provided to APRA by the time specified in subparagraph 9(b) of this reporting standard (unless an extension is granted under paragraph 11).
The information required by paragraph 5 of this reporting standard from an insurer that is a highest parent entity must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 7(a) – 30 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 7(b) – 4 months after the end of the reporting period to which the information relates.
APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
The information provided by an insurer under this reporting standard (other than the information required from a highest parent entity under paragraph 5) must be the product of processes and controls that have been reviewed and tested by the approved auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the approved auditor to form an opinion on the accuracy and reliability of the data.
The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
If an insurer submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the insurer to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the insurer who have authority from the insurer to transmit the data to APRA.
If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:
(a) the Principal Executive Officer of the insurer; or
(b) the Chief Financial Officer of the insurer (whatever his or her official title may be).
Minor alterations to forms and instructions
APRA may make minor variations to:
(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b) the instructions to a form, to clarify their application to the form
without changing any substantive requirement in the form or instructions.
If APRA makes such a variation it must notify insurers in writing.
Transitional
If a reporting period of an insurer ended on 30 June 2005, or ends after that date, the insurer must report under this reporting standard in respect of that reporting period.
Interpretation
In this reporting standard:
Accounting Standard AASB 1024 means the accounting standard so designated made by the Australian Accounting Standards Board, being the accounting standard that applied in respect of reporting periods (within the meaning of the accounting standard) commencing immediately before 1 January 2005;
approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
consolidated insurance group means a group comprising:
(a) an insurer that is a highest parent entity; and
(b) each subsidiary under the control (within the meaning of Accounting Standard AASB 1024) of that insurer, whether the subsidiary is incorporated in Australia or not;
foreign insurer means a foreign general insurer within the meaning of the Insurance Act;
Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.
highest parent entity means an insurer that satisfies all of the following conditions:
(a) it is a locally-incorporated insurer;
(b) it has at least one subsidiary under its control (within the meaning of Accounting Standard AASB 1024); and
(c) it is not itself a subsidiary of a locally-incorporated insurer;
Insurance Act means the Insurance Act 1973;
insurer means a general insurer within the meaning of the Insurance Act;
Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.
locally-incorporated insurer means a general insurer incorporated in Australia;
Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;
reporting period means a period mentioned in subparagraph 7(a) or (b) or, if applicable, paragraph 8.
A reference to a prudential standard or guidance note means the prudential standard or guidance note, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard or guidance note has been revoked and replaced, the reference shall be taken to be to the prudential standard or guidance note that has replaced it.
Reporting Form GRF 310.0
Statement of Financial Performance
Instruction Guide
Introduction
This form collects information on the operating performance of the licensed general insurer as outlined in the instructions below.
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing. The forms relating to the consolidated insurance group reporting unit is not subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Audit Guidance Statement issued by the Auditing and Assurance Board of the Australian Accounting Research Foundation.
Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973. This means that:
the completed form for the financial year must be audited by the approved auditor of the insurer (see paragraph 49J(1)(a) of the Act);
the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));
the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));
the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entities
This form is to be completed by Australian branch insurers of foreign insurer based on the branch total operations, however do not include the operations of the foreign parent entity.
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’. In addition, the ‘Glossary of Terms’ also contains a list of definitions of common data reporting items.
Unit of measurement
This form is to be presented in Australian currency, rounded to thousands of dollars, with no decimal place.
As a general rule, amounts denominated in foreign currency are to be converted to AUD in accordance with the requirements of the Australian accounting standards, notably AASB 1012 ‘Foreign Currency Translation’.
The general requirements of AASB 1012 for translation are:
Foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date; and
Other items outstanding at the reporting date must not be retranslated subsequent to initial recognition of the transaction.
Monetary items are defined to mean money held and assets and liabilities that are to be received or paid in fixed or determinable amounts of money (e.g. claims payments, reinsurance recoveries).
Monetary items arising under foreign currency derivative contracts at the reporting date must be translated as follows:
Where the exchange rate is fixed in the contract, at that fixed exchange rate; and
Where the exchange rate varies, at the spot rate at the reporting date.
The general requirements of AASB 1012 for accounting treatment of exchange differences arising on translation are:
Exchange differences must be recognised as either revenues or expenses in the calculation of net profit or loss on GRF 310.3 Investment and Other Operating Income and Expense, in the reporting period in which the exchange rates change; and
Exchange differences arise in respect of foreign currency monetary items which is directly attributable to the acquisition, construction or production of an asset that takes a long period of time to get ready for its intended use or sale, must be capitalised (net of any effects of a hedge) as part of the cost of that asset.
Reporting period
Insurers are required to report the information in the reporting form on a quarterly and annual basis.
The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
The annual information is to be completed in respect of the financial year of the insurer.
The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer. See the Reporting Requirements table for details.
Reporting lag
This form must be lodged for each of the reporting units, within the number of business days after the end of the quarter as set out in the Reporting Requirements table.
Basis of preparation
With the exception of the recognition and measurement requirements of the items listed below, general insurers are requested to follow the Australian accounting standards regarding the recognition and measurement of items of income and expense (profit or loss) in completing this form, notably AASB 1023 ‘Financial Reporting of General Insurance Activities’.
Premium revenue;
Claims expense (associated with Premium Liabilities and Outstanding Claims Provision);
Reinsurance recoveries revenue (associated with Premium Liabilities and Outstanding Claims Provision);
Expected reinsurance recoveries;
Reinsurance expense (i.e. no deferral of reinsurance expense under prudential reporting);
Acquisition costs (i.e. no deferral of acquisition costs under prudential reporting); and
Commission revenue.
The interpretation and required measurement and recognition basis for these items listed are specified in these instructions below and under the appropriate item heading and also outlined in the introduction to the reporting package.
Regulatory reporting items with different measurement basis to AASB 1023:
Premium revenue
For regulatory reporting recognise fully from date of acceptance of risk. Do not defer and amortise in accordance with AASB 1023.
Reinsurance expense
For regulatory reporting recognise fully as expense. Do not defer and amortise in accordance with AASB 1023.
Deferred acquisition costs
For regulatory reporting recognised fully as an expense. Do not defer and amortise in accordance with AASB 1023.
Commission revenue
For regulatory reporting recognise fully from date of acceptance of risk. Do not defer and amortise in accordance with AASB 1023.
Recognition of items for regulatory reporting purposes not recognised under AASB 1023:
Expected reinsurance recoveries (associate with Premium Liabilities).
For regulatory reporting this is a new asset item and a new component of reinsurance recoveries disclosed in the statement of financial performance. This item is measured on a prospective basis similar to Premium Liabilities.
The non-recognition of items for regulatory reporting purposes that are recognised under AASB 1023:
Unearned premiums provision.
This item is not recognised for prudential reporting as premium revenue is recognised fully from date of acceptance of risk.
Deferred reinsurance expense.
This item is not recognised for prudential reporting purposes as reinsurance premiums paid are recognised as an expense fully from date of acceptance.
Deferred acquisition costs are expensed fully when paid/payable as a component of underwriting expenses for the purposes of prudential reporting.
The reason for the changes to the accounting treatment for the areas outline above are provided below:
Premium Liabilities and Expected Reinsurance Recoveries
AASB 1023 requirements
AASB 1023 does not have a requirement for the recognition and measurement of Premium Liabilities and Expected Reinsurance Recoveries.
APRA requirements
GPS 210 Liability Valuation for General Insurers requires a prospective basis to the recognition and measurement of claims liabilities likely to arise from premium business written. For the purposes of the APRA prudential forms, Premium Liabilities are to be recognised as a liability in GRF 300.0 Statement of Financial Position. In addition the creation of (and movement in) Premium Liabilities is to be recognised and disclosed as a component of claims expense in GRF 310.0 Statement of Financial Performance (i.e. “claims expense attributable to future years”). Under this approach claims expense will have 2 separately identifiable components, one relating to the OCP (current year and prior year claims) and the other relating to the premium liabilities (i.e. relating to future years).
APRA considers that the concept of Premium Liabilities is a more effective means of recognising potential risk over the term of the policy written, compared to the accounting concept of premium ‘earned/unearned’.
Given the prospective basis required by GPS 210 Liability Valuation for General Insurers to measure and recognise Premium Liabilities, it is appropriate to recognise an asset that reflects the level of reinsurance cover associated with the Premium Liabilities recognised. This form of reinsurance recovery is deducted from the Premium Liabilities for the purposes of calculating the insurance capital charge and will be addressed in the actuary’s report. For the APRA prudential forms, this introduces a new asset in GRF 300.0 Statement of Financial Position (i.e. “Expected Reinsurance Recoveries”) and another reinsurance recovery item in GRF 310.0 Statement of Financial Performance (i.e. “Expected Reinsurance Recoveries”). Under this approach reinsurance recoveries will have 2 separately identifiable components, one relating to the OCP (current year and prior year claims) and the other relating to the Premium Liabilities (i.e. relating to future years).
Premium Revenue and Unearned Premium Provision
AASB 1023 requirements
Under AASB 1023 premium written is recognised as premium revenue on an earned/unearned basis. That component that is unearned is recognised as a liability – “Unearned Premium Provision”. While the APRA prudential standards have changed the accounting recognition requirements for Outstanding Claims Liabilities and Premium Liabilities, it is silent on the accounting treatment for the recognition of premium revenue.
APRA requirements
It is important to consider the accounting treatment underlying the recognition of Premium Liabilities comparative to that for unearned premium provision, specifically the profit and loss treatment. The earned/unearned basis for recognition of premium revenue prescribed by AASB 1023 is not appropriate for the APRA prudential forms as it is not consistent with the APRA framework for measuring insurance liabilities under GPS 210 Liability Valuation for General Insurers. The objective of the measurement of Premium Liabilities is to recognise potential future claim liabilities arising out of new insurance business written (on a prospective basis). Accordingly to be consistent, it is more appropriate to recognise premiums written up front as premium revenue.
Deferred Acquisition Costs (DAC) and Acquisition Costs
AASB 1023 requirements
DAC is recognised as an asset under AASB 1023 and is amortised as an underwriting expense to the profit and loss over the period to which the costs relate or the benefits from the expenses are to be derived.
APRA requirements
DAC is not permitted to be recognised as an asset under the APRA prudential capital framework. From a prudential accounting perspective it is more appropriate to require DAC to be fully written off as an acquisition expense in GRF 310.0 Statement of Financial Performance. This treatment of DAC is consistent with the proposed treatment for the recognition of premium revenue.
GGN 210.1 Actuarial Opinions and Reports on General Insurance Liabilities provides that an insurer may use its unearned premium provision (UPP) less its DAC as approximate method for determining the central estimate of its total Premiums Liabilities after adjusting for the profit margin in the UPP. This is allowed where this is a reasonable approximation of its Premiums Liabilities and does not in itself replace the role of the approved actuary to value Premium Liabilities.
Reinsurance Expense and Deferred Reinsurance Expense
AASB 1023 requirements
Under AASB 1023, expenses/premiums paid for reinsurance cover is required to be recognised as an expense on a basis that is consistent with the pattern of reinsurance. As a result under AASB 1023 this gives rise to the recognition of an asset – “Deferred Reinsurance Expense”, which is amortised (over a specified term/basis) to the Statement of Financial Performance as a reinsurance expense. Under AASB 1023 reinsurance expense is disclosed as an offset from premium revenue in the Statement of Financial Performance.
APRA requirements
Due to the change in the recognition of premium income for prudential reporting purposes (refer above), it is appropriate to recognise reinsurance expense on a consistent basis i.e. recognised fully upfront in the Statement of Financial Performance. As a result, for APRA prudential reporting (and Investment risk charge calculation), there will be no asset titled “Deferred Reinsurance Expense”.
Tax Effect Accounting/Adjustments
It is likely that the recognition of the Premium Liabilities and Outstanding Claims Provisions in accordance with GPS 210 Liability Valuation for General Insurers will give rise to tax effect accounting considerations. The measurement and recognition in GRF 300.0 Statement of Financial Position of tax effect accounting items (e.g. future income tax benefits) is to be determined in accordance with the requirements of AASB 1020 ‘Tax Effect Accounting’.
If the technical insurance provisions reported in GRF 300.0 Statement of Financial Position are determined to representing timing differences between recognition as an expense for accounting purposes and as a deductible expense for taxation purposes, then the associated measurement and recognition of taxation expense and deferred tax assets and liabilities is to be determined in accordance with AASB 1020.
Market value measurement of assets
AASB 1023 requires net market value to be used in measuring assets that are deemed to be ‘integral to the general insurance activities’. However for the purposes of regulatory reporting market value can be used (i.e. ignore transactions costs).
Market value or fair value has the same meaning as defined in the Australian Accounting standards. Market value is defined for accounting purposes as a subset of fair value, where fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction, and is determined as follows:
The quoted market price in an active and liquid market (i.e. market value); or
When there is infrequent activity in a market, the market is not well established, small volumes are traded relative to the asset or liability to be valued, or a quoted market price is not available – an estimate of a price for the asset or liability in an active and liquid market.
AASB 1023 provides that assets that are deemed not to be ‘integral to the general insurance activities’ of the insurer are able to be valued using historical cost rather than net market value. This basis can be applied for the purposes of this form.
Market value of charged/encumbered assets
If an asset is in any way subject to a charge, covenant, encumbrance, option to purchase or any other arrangement by way of agreement or statute, that restricts the market value of the asset, the market value needs to reflect the existence of these arrangements. For example, if the insurer has agreed to deliver an asset to a purchaser at a price below the arms length market value, the market value cannot exceed the agreed price. This may also have relevance to this form.
Netting
Unless otherwise specifically stated, institutions are allowed to take advantage of netting agreements in relation to disclosure of data items in this form. Institutions are to comply with the prerequisite for netting outlined in Australian accounting standards notably AASB 1014 ‘Set-off and Extinguishment of Debt’.
Related party disclosure
Amounts due from, loans to, debentures of, shares in, or units in a trust or body corporate that is related to the insurer are to be disclosed for items of assets and liabilities where indicated in the form. For the purposes of this form, related bodies corporate are to be interpreted consistently with the meaning as in AASB 1017. AASB 1017 provides that related party means, in relation to a reporting entity any:
(a) other entity that at any time during the financial year, has control or significant influence over the reporting entity; or
(b) other entity that at any time during the financial year, is subject to control or significant influence by the reporting entity; or
(c) other entity that, at any time during the financial year, is controlled by the same entity that controls the reporting entity. Referred to as a situation in which entities are subject to common control; or
(d) other entity that, at any time during the financial year, is controlled by the same entity that significantly influences the reporting entity; or
(e) other entity that, at any time during the financial year, is significantly influenced by the same entity that controls the reporting entity; or
(f) director of the reporting entity or any of their director-related entities; or
(g) director of any other entity identified as a related party under any of paragraphs (a) to (e), or any of their director-related entities;
but excludes any other entity (except those identified as a related party under paragraph (f)) where the related party relationship results solely from normal dealings of:
(h) financial institutions; or
authorised trustee corporations; or
(j) fund managers; or
(k) trade unions; or
(l) statutory authorities; or
(m) government departments; or
(n) local governments.[1]
AASB 1017 defines director-related entities as meaning “the spouses of such directors, relatives of such directors or spouses and any other entity under the joint or several control or significant influence of such directors, spouses or relatives”. Relative in relation to a person is defined in the Corporations Law to mean the spouse, partner, son, daughter, or brother or sister of the person.
[1] Extracted from ICAA Members' Handbook December 2001 issue, AASB 1017.
instructionsSpecific
Premium revenue is to be recognised upfront when the business is written. Premium revenue will need to be discounted where premium revenue under an insurance contract is to be received beyond the current year of cover. In these instances, use discount rates as are required in measuring insurance liabilities in accordance with GPS 210 Liability Valuation for General Insurers.
Premium revenue is to be reported separately for:
Direct business; and
Inward reinsurance business.
Premium revenue is not to be recognised in accordance with AASB 1023 ‘Financial Reporting of General Insurance Activities’ (that is on an earned and unearned basis).
Outwards Reinsurance Expense
Premium ceded to reinsurers is recognised as an expense fully when incurred or contracted. Where payments under a reinsurance contract extend beyond the current year of cover, reinsurance expense is to be discounted using similar discount rates as are required in measuring insurance liabilities in accordance with GPS 210 Liability Valuation for General Insurers.
Reinsurance expense is to be split into the following:
Relating to future years cover.
Disclose in this data item, the reinsurance expense that relates to cover that will be applicable for future years.
Relating to current and prior years.
Disclose in this data item, the reinsurance expense that relates to cover applicable for the current year and past years.
Reinsurance expense recognised fully upfront is to be discounted where applicable (e.g. where reinsurance contract payment extend beyond current year of cover), Use similar discount rates as are required in measuring insurance liabilities in accordance with GPS 210 Liability Valuation for General Insurers.
Reinsurance expense is not to be recognised in accordance with the pattern of reinsurance service received as required by AASB 1023 ‘Financial Reporting of General Insurance Activities’.
Net Premium Revenue
Represents the difference between Premium revenue and Outwards reinsurance expense.
Claims Expense
The claims expense for the reporting period is to be reported in relation to the following:
Direct business written and assumed by the insurer/consolidated insurance group, and
Inward reinsurance business.
For both of these items the following is to be further provided:
In relation to future years
This will reflect any movement in the value of Premium Liabilities reported in GRF 300.0 Statement of Financial Position. The value of Premium Liabilities reported in GRF 300.0 Statement of Financial Position does not have to be equal to, but must not be less than the respective amounts required by GPS 210 Liability Valuation for General Insurers.
In relation to current and prior years
This reflects the claims expense relating to claims that occur during a financial period and are paid in that same period and where a claims liability (and corresponding claims expense) has been recognised for those claims which are yet to be settled in that same period (i.e. movements in the Outstanding Claims Provision).
The OCP reported in the Statement of Financial Position does not have to be equal to, but must not be less than the amounts required by GPS 210 Liability Valuation for General Insurers.
Note:
Claims expense that relates to movements in the outstanding claims provision (OCP) and Premium Liabilities is to be based on the OCP and Premium Liabilities that are reported in GRF 300.0 Statement of Financial Position. The OCP and premium liabilities reported in the Statement of Financial Position does not have to be equal to, but must not be less than the respective amounts required by GPS 210 Liability Valuation for General Insurers and hence the amounts reported in forms titled “Outstanding Claims Provision and Insurance Risk Charge” (i.e. OCP) and Statement of Premium Liabilities and Insurance Risk Charge (i.e. Premium Liabilities).
Further, where the insurer only has insurance liabilities and claims within Australia, the claims expense reported in this form relating to current and prior years will equate to the total claims expense reported in GRF 430.0 Claims Expense by State and Territory of Australia.
Gross Claims Expense which is Attributable to Changes in Valuation Assumptions i.e. Discount Rate
Disclose in this field that component of gross claims expense which is due to changes in modeling assumptions applied to outstanding claims provision. This is a memo item of total gross claims expense and is not added into the calculation of Net Incurred Claims or Underwriting Result.
Reinsurance Recoveries Revenue
Reinsurance recoveries revenue for the reporting period is to be reported in relation to the following:
In relation to future years
This will reflect any movement in the value of Expected Reinsurance Recoveries that are associated with insurance liabilities recognised in the measurement of Premium Liabilities. This is in relation to:
direct business written and assumed by the insurer/insurance group, and
inward reinsurance business.
In relation to current and prior years.
This will reflect recoveries received or receivable associated with claims expense recognised for the following:
direct business written and assumed by the insurer/insurance group, and
inward reinsurance business.
Include amounts that the insurer has recovered or is entitled to recover from reinsurers on claim expense during the reporting period. Some estimates previously made in the context of reinsurance recoverables will have been revised in the course of the year’s business. Such adjustments are to be reflected in the next reporting period as appropriate when.
Total Reinsurance Recoveries Revenue
This represents the sum of reinsurance recoveries revenue disclosed for:
Relating to future years
Relating to current and prior years.
Other Recoveries Revenue
This is the revenue from claims recoveries other than reinsurance recoveries, in respect of claims. Where appropriate it is to be reported after deducting the reinsurer’s share of the ‘other recoveries revenue’.
Total Recoveries
Represents the sum of the values reported for “Total reinsurance recoveries revenue” and “Other recoveries revenue”.
Net Incurred Claims
This represents the difference between “Gross claims expense” and “Total recoveries”.
Acquisition Costs
This item will include the fully expensed component of the DAC (as recognised under AASB 1023).
Total Underwriting Expenses
Underwriting expenses are derived from:
Acquisition costs
Plus:
Other underwriting expenses (including commission expenses)
Levies and charges (collected on behalf of and payable to other agencies i.e. government)
Less:
Commission revenue (this should be recognised fully up front). The commission revenue should only relate to insurance business. Do not include ‘premium rebates’ received from reinsurers in this line item.
Underwriting Result
The underwriting result is derived from:
Net Premium Revenue
Less:
Net Incurred Claims
Less:
Total underwriting expenses
Investment Income
The total will agree to the totals disclosed in GRF 310.3 Investment & Operating Income and Expense.
Other Operating Income
Include income earned, which does not ordinarily come within the specific terms used above.
The total will agree to the totals disclosed in GRF 310.3 Investment & Operating Income and Expense.
Other Operating Expenses
Report the operating expenses of the business in accordance with AASB 1023 and other applicable accounting standards. The total will agree to the totals disclosed in GRF 310.3 Investment & Operating Income and Expense.
Profit or Loss from Ordinary Activities before Goodwill Amortisation and Income Tax
The profit (loss) from general insurance business is derived from:
Underwriting result
Plus:
Investment income
Other operating income
Less:
Other operating expenses
Plus:
Share of net profits (or losses) of associates and joint ventures accounted for using the equity method.
Goodwill Amortisation
The total will agree to the value disclosed in GRF 310.3 Investment & Operating Income and Expense.
Goodwill must be recorded and amortised in accordance with AASB 1013 Accounting for Goodwill. Goodwill is to be amortised over its estimated useful life but not exceeding 20 years. The total will reconcile to the value disclosed as “Goodwill Amortisation” in GRF 300.0 Statement of Financial Performance.
Profit or Loss from Ordinary Activities before Income Tax Expense (Benefit)
Derived from:
Profit or loss from ordinary activities before goodwill amortisation and income tax
Less:
Goodwill amortisation.
Income Tax Expense (or Benefit)
Represents the income tax expense or benefit attributable to the operating profit or loss.
This item must be completed in accordance with the requirements of AASB 1020 ‘Accounting for Income Tax’.
Profit or Loss from Ordinary Activities after Income Tax
Derived from:
Profit or loss from ordinary activities before income tax expense (benefit)
Less:
Income tax expense (or benefit)
Profit or Loss on Extraordinary Items after Income Tax
Extraordinary items are to be classified in accordance with the Australian accounting standards.
Items are extraordinary in that they have their origin outside the ordinary operations and are not of a recurring nature. An event or transaction that would be outside the ordinary operations of one company or group of companies may well be part of the ordinary operations of another. For an item to be classified as extraordinary it is necessary for it to be both outside the ordinary operations of the company and for the underlying event or transaction to be of a type that is not of a recurring nature.
It is expected that only on rare occasions will items fall within the definition of extraordinary items. The fact that an item relates to one or more prior financial periods in no way contributes to its classification as an extraordinary item.
Net Profit or Loss after Income Tax
Derived from:
Profit or loss from ordinary activities after income tax
Plus:
Profit or loss on extraordinary items after income tax
Retained Profits or Accumulated Losses at Beginning of Financial Year
Report here the relevant net assets amount as at the start of the financial year concerned.
Amounts Transferred from/to Parent Entity
Disclose the amount of dividends or funds transferred from/to the parent entity during the reporting period.
Retained Profits or Accumulated Losses at end of Reporting Period
This is derived from:
·Net Profit or Loss after income tax
Adjusted for the following:
Retained profits or losses at beginning of financial year;
Adjustment (positive or negative) to retained profits due to change in accounting policies/standards;
Aggregate of amounts transferred from/to reserves;
·Aggregate of amounts transferred from the parent entity;
·Aggregate of amounts transferred to the parent entity; and
·Aggregate of other amounts (positive or negative).
Note: If capital is provided by the parent entity, which is not required to be repaid by the branch, this contribution of capital is to be disclosed in this form as funds transferred from the parent entity.
If the capital provided by the parent is in the form of debt and must be repaid, the amount should be disclosed in the liability section of GRF 300.0 Statement of Financial Position under “Loan Capital”.
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