good insurance 2010 gl ifrs

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Good Insurance (International) Limited i

Contents

Abbreviat ions and key ................ ................ ................. ................ ................. ................ ................. ............... ............ 1Introduction ............................................................................................................................................................. 2Independent audit ors report t o t he shareholders of Good Insurance (Int ernational) Limit ed .................................... 12Group consolidated income statement .................................................................................................................... 13 Group consolidated statement of comprehensive income ........................................................................................ 15Group consolidated statement of financial position ................................................................................................. 16Group consolidated statement of changes in equity ................................................................................................ 17 Group consolidated statement of cash flows ........................................................................................................... 19 Notes t o t he consolidated financial st atements ...................................................................................................... 20

1. Corporate information .................................................................................................................................... 20 2.1 Basis of preparation ............... ................ ................. ................ ................ ................. ................. ................. ... 20 2.2 Basis of consolidation ................................................................................................................................... 20 2.3 Summary of significant accounting policies ................ ................. ................. ................. ................ .................. 21 2.4 Changes in accounting policy and disclosures ............... .................. ................. ................. ................ ............... 4 62.5 Significant accounting judgments, estimates and assumptions ................. ................. ................. ................ ....... 482.6 Standards issued but not yet effective ................ ................. ................. ................ ................. ................ ......... 513. Business combinations and acquisition of non-controlling interests ........... ................. .................. ................ ....... 52 4. Segment information ...................................................................................................................................... 545. Net premiums ................................................................................................................................................ 586. Fees and commission income ............... ................. ................. ................. ................. ................. ................. ...... 59 7. Investment income ......................................................................................................................................... 59 8. Realised gains ................................................................................................................................................ 59 9. Fair value gains and losses ................ ................. ................ ................. ................. ................. ................. ......... 6010. Net benefits and claims ................................................................................................................................. 6011. Finance costs ............................................................................................................................................... 6112. Other operating and administrative expenses ................ ................. ................. ................. ................ ............... 6113. Employee benefits expense ........................... ................. ................. ................. ................. ................ ............ 6114. Income tax expense ...................................................................................................................................... 62 15. Dividends paid and proposed ........................ ................ ................. ................. ................. ............... ............... 63 16. Earnings per share........................................................................................................................................ 63 17. Income tax effects relating to other comprehensive income............................ .................. ................. ............... 64 18. Components of other comprehensive income ................. ................. ................ ................. ................ ............... 64 19. Share-based payment ................................................................................................................................... 6420. Goodwill ...................................................................................................................................................... 6621. Intangible assets .......................................................................................................................................... 68 22. Investment in an associate ............................................................................................................................ 6823. Property and equipment................................................................................................................................ 69

24. Investment properties ................................................................................................................................... 7025. Derivative financial instruments ................. .................. ................. ................. ................. ................ ............... 7026. Financial instruments other than derivative financial instruments and fair values of financial instruments ............ 7327. Reinsurance assets ................ ................ ................. ................. ................. ................ ................ ................ .... 8428. Taxation ...................................................................................................................................................... 8429. Insurance receivables ................................................................................................................................... 85 30. Deferred expenses ............... ................ ................. ................. ................. ................ .................. ................ .... 8631. Accrued income ........................................................................................................................................... 86 32. Cash and cash equivalents ................. .................. ................. ................. ................. ................ ................. ...... 86 33. Insurance contract liabilities .......................................................................................................................... 86 34. Investment contract liabilities ........................................................................................................................ 9035. Net asset value att ributable to unitholders ................... ................ ................. ................. ................ ............... 92 36. Pension benefit obligation ............................................................................................................................. 9237. Borrowings .................................................................................................................................................. 94


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ii Good Insurance (International) Limit ed

38. Other financial liabilities ................................................................................................................................ 9539. Insurance payables ....................................................................................................................................... 9640. Deferred revenue ......................................................................................................................................... 9641. Trade and other payables ............... ................ ................. ................ ................ ................. ................. ............ 9642. Issued share capital ...................................................................................................................................... 97 43. Other equity instruments .............................................................................................................................. 9744. Risk management framework ...................... ................ ................. ................. ................. ................ ............... 9745. Insurance and financial risk ......................................................................................................................... 10046. Cash generated from operating activit ies ............... ................ ................. ................. ................. ................ .... 134 47. Contingencies and commitments ............... ................. ................. ................ ................. ................ ................ 13548. Related party disclosures ............................................................................................................................ 136 49. Events after the reporting date .................................................................................................................... 137

Appendix 1 Firsttime adoption of IFRS ............................................................................................................. 138 Appendix 2 Shadow account ing ............... ................. ................. ................. ................. ............... ................. ....... 145 Appendix 3 Embedded value (EV) ............... ................. ................. ................. ................. ............... .................. ... 149 Appendix 4 Noncontrolling interests measured at fair value in business combination ........................................ 152Appendix 5 Consolidated cash flow statement direct method ........................................................................... 154Appendix 6 Glossary of insurance terms ............................................................................................................ 155Index ................................................................................................................................................................... 157


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Good Insurance (International) Limited 1

Abbreviat ions and key

The following styles of abbreviation are used in this set of International GAAP illustrative financial statements:

IFRS Internat ional Financial Report ing Standards

Interpretations

Committee

IFRS Interpretations Committee (formerly International Financial Reporting Interpretations

Committee, IFRIC)

IASB Internat ional Accounting Standards BoardGAAP Generally Accepted Accounting Principles/ Practice

Commentary The commentary explains how the requirements of IFRS have been implemented in arriving at the

illustrative disclosure

IAS 33.41 Internat ional Accounting Standard No.33, paragraph 41

IAS 1.BC13 Internat ional Accounting Standard No.1 (Revised), Basis for Conclusions, paragraph 13

IAS 39 .AG71 IAS 39 Finance Instruments: Recognit ion and Measurement Appendix A Applicat ion Guidance,

paragraph AG71

IAS 39 .IG.G2 IAS 39 Financial Instr uments: Recognit ion and Measurement Guidance on Implement ing IAS 39

Section G: Other, paragraph G.2

ISA 700.25 Internat ional Standard on Auditing No. 700, paragraph 25

IFRIC 4.6 International Financial Report ing Interpretat ions Commit tee Interpretat ion No.4, paragraph 6

IFRS 3.60 International Financial Report ing Standard No.3 (Revised), paragraph 60

IFRS 4.44 International Financial Report ing Standard No.4, paragraph 44

IFRS 7.27A International Financial Report ing Standard No.7, paragraph 27A (Amended as at 5 March 2009)

SIC 29.6 Standing Interpretat ions Committ ee Interpretat ion No.29, paragraph 6

SIC Standing Interpretat ions Committ ee

IFRS references are shown on the right hand side of each page of t he primary financial statements and the notes, indicating

the specific IFRS paragraph that outlines the accounting treatment or disclosure adopted for that particular line item or

block of narrative in the publication.

The IFRS references to IAS 1, IAS 27 and IFRS 3 are to the revised versions of these standards found in t he 2010 Bound

Volume of International Financial Reporting Standards, approved at 1 January 2010.


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Good Insurance (International) Limit ed 3

The IFRS Interpret at ions Commit t ee

The IFRS Interpretations Commit tee (Interpretations Commit tee) is appointed by the IASC Foundation Trustees to assist the

IASB in establishing and improving standards of f inancial accounting and report ing for the benefit of users, preparers and

auditors of financial statements.

The Interpretations Commit tee addresses issues of r easonably widespread importance, rather than issues of concern to

only a small set of entities. Its interpretations cover:

Newly ident if ied financial report ing issues not specifically addressed in IFRS

Issues where unsat isfactory or conflict ing interpretations have developed, or are likely to develop in the absence ofauthor itative guidance, with a view to reaching a consensus on the appropriate treatment

Basis of preparat ion and present at ionThe consolidated annual financial statements of the Group have been produced in accordance with IFRS and, whereapplicable, the interpretations issued by the Interpretations Committee. The financial statements do not include the standalone disclosures for t he parent. In cert ain jurisdict ions, IFRS may apply to t he parent enti ty and, hence, disclosures shouldalso be made for this report ing entity.

The Group is an existing preparer of IFRS consolidated f inancial statements and, t herefore, IFRS 1 First -time Adoption ofInternational Financial Reporting Standardsis not applicable. However, Appendix 1 of this publication illustrates the first-time adoption requirements had the Group been a first-time adopter for the period ending 31 December 2010.

IFRS as at 30 J une 2010The standards applied in these illustrative f inancial statements are the versions that were in issue as at 30 June 2010.Disclosures have not been illustrated for a number of IFRS which are either not r elevant to the insurance industry or notapplicable to the Groups cir cumstances.

IFRS comprises of standards and interpretations adopted by the Internat ional Accounting Standards Board (IASB) and is

illustrated across our various illustrative financial statements as follows:

Good

Group

Good

GroupInterim

Good

Bank

Good

Insurance

Good

Invest(Eq.)

Good

Invest(Liab.)

Good

RealEstate

Good

Mining

Good

Petroleum

International Financial Reporting Standards (IFRS)

IFRS 1 First -time Adoption of International Financial Report ing Standards

IFRS 2 Share-based Payment

IFRS 3Business Combinations (2005) f or acquisition completed before1 January 2010

IFRS 3 Business Combinations (Revised in 2008)

IFRS 4 Insurance Contracts

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IFRS 6 Exploration for and Evaluation of Mineral Resources

IFRS 7 Financial Instruments: Disclosures

IFRS 8 Operating Segments

IFRS 9 Financial Instruments: Classification and Measurement(1)


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4 Good Insurance (International) Limited

GoodGroup

GoodGroupInterim

GoodBank

GoodInsurance

GoodInvest(Eq.)

GoodInvest(Liab.)

GoodRealEstate

GoodMining

GoodPetroleum

Int ernational Account ing St andards (IAS)IAS 1 Presentation of Financial Stat ements

IAS 2 Inventories

IAS 7 Statement of Cash Flows

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10 Events after t he Reporting Period

IAS 11 Construction Contracts

IAS 12 Income Taxes

IAS 16 Propert y, Plant and Equipment

IAS 17 Leases

IAS 18 Revenue

IAS 19 Employee Benefits

IAS 20 Accounting for Government Grants and Disclosure of GovernmentAssistance

IAS 21 The Eff ects of Changes in Foreign Exchange Rates

IAS 23 Borrowing Costs

IAS 24 Related Party Disclosures

IAS 26 Accounting and Reporting by Reti rement Benefit Plans

IAS 27 Consolidated and Separate Financial Statements (Revised in 2008)

IAS 28 Investments in Associates

IAS 29 Financial Report ing in Hyperinf lationary Economies

IAS 31 Interests in Joint Ventures

IAS 32 Financial Instruments: Presentat ion

IAS 33 Earnings per Share

IAS 34 Interim Financial Reporting

IAS 36 Impairment of Assets

IAS 37 Provisions, Contingent Liabilit ies and Contingent Assets

IAS 38 Intangible Assets

IAS 39 Financial Instruments: Recognition and Measurement

IAS 40 Investment Property IAS 41 Agriculture


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All standards and interpretations listed above incorporate amendments effective on 1 January 2010, unless otherwise

stated. These amendments also include the amendments resulting fr om Improvements to IFRS issued in May 2008 and April

2009.

It is important to note that the IASB may issue new and revised standards and interpretations subsequent to 30 June 2010.

Therefore, users of t his publicat ion are advised to verify that t here has been no change in the IFRS requirements between

30 June 2010 and the date on which their financial statements are authorised for issue. Any standards issued, but not yet

effective, need to be considered in the disclosure requirements of a reporting entity.

Changes cont ained in 2010 edit ion of Good Insurance (Int ernat ional) Limit ed AnnualFinancial St atement s

The Good Insurance (International) Limited financial statements have been updated to ref lect all new standards and

interpretations issued or amended since 31 March 2009. The following standards and interpretations have been illustrated

in the 2010 edit ion, result ing in consequential changes to the accounting policies and other not e disclosures.

IFRS 3 Business Combinat ions

The IASB issued the revised BusinessCombinations standard in January 2008 which is effective for financial years

beginning on or after 1 July 2009. The standard introduces changes in the accounting for business combinations that will

impact the amount of goodwill recognised, the reported results in the period when an acquisit ion occurs and fut ure

report ed results. The revised standard has been adopted by the Group together wit h the revised IAS 27 Consolidated and

Separate Financial Statements(see Note 3), including consequential amendments to IFRS 7, IAS 21, IAS 28, IAS 31 and IAS

39 in the report ing period commencing 1 January 2010 .

IAS 27 Consolidated and Separat e Financial Stat ement s

In January 2008, t he IASB issued the revised IAS 27, affecting consolidated and separate financial statements. IAS 27

(as issued in 2008) requires that a change in the ownership interest of a subsidiary (without loss of cont rol) is accounted for

as an equity t ransaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or

loss. Furt hermore, t he amended standard changes the accounting for losses incurred by t he subsidiary as well as the loss

of control of a subsidiary. The amended standard has been adopted by t he Group t ogether wit h IFRS 3 (Revised) Business

Combinations(see Note 3), including consequential amendments to IAS 21, IAS 28, IAS 31 and IAS 39.

Improvement s t o IFRSs

In April 2009 and April 2010, the IASB issued it s annual amendments to Int ernational Financial Report ing Standards (IFRSs)

and the related Bases for Conclusions and guidance made. The amendments pr imarily remove inconsistencies and clarify

wording. These amendments, unless otherwise stated, are effective for financial years beginning on or aft er 1 J anuary

2010. The Group has adopted these revised standards as considered appropriate, however, there are no impacts on t hefinancial statements.

Comment ary

In some jurisdictions, t he adoption of IFRS for report ing purposes may be subject t o a specific legal process (e.g., in t he European Union or

Australia). In those jurisdictions the effective date may therefore be different from the IASB's.


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List ed below are st andards and int erpret at ions that have been issued and are effect ivefor f inancial years 2010 or lat er, but are not illust rat ed in t hese illust rat ive financialstatements

IFRS 1 First -t ime Adoption of Int ernat ional Financial Report ing Standards(Revised 2009)

In July 2009, t he IASB issued Additional Exemptions for First-time Adopters (Amendments to IFRS 1). The Group is not afir st-t ime IFRS adopter, t herefore, amendments to IFRS 1 have no impact on t he financial statements.

IFRS 2 Share-based PaymentThe IASB also issued an amendment to IFRS 2 in June 2009 on the accounting for group cash-settled share-based payment

transactions. This amendment is effective for financial years beginning on or after 1 January 2010. This amendment also

supersedes IFRIC 8 and IFRIC 11.The Group adopted all amendments that came into effect on 1 January 2010. However,

this did not have an impact on the financial posit ion or performance of the Group.

IAS 24 Relat ed Part y Disclosures(Amendment )The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarifies the definition of arelated party to simplify the identification of such relationships and to eliminate inconsistencies in its application. Therevised standard introduced a partial exemption of disclosure requirements for government-related entities. Early adoptionis permit ted for either the part ial exemption for government-related entit ies or f or t he entire standard. TheGroup does notexpect any impact on its financial position or performance although additional disclosure is required for commitments withrelated parties after the init ial application.

IAS 32 Financial Instr uments: Presentati onClassificat ion of Rights IssuesThe amendment t o IAS 32 is effect ive for annual periods beginning on or after 1 February 2010 and amended the defini tionof a financial liability in order to classify r ights issues (and certain opt ions or warrants) as equity inst ruments in cases wheresuch rights are given pro ratato all of the existing owners of the same class of an entitys non-derivative equity instruments,or to acquire a fixed number of the entitys own equity instruments for a fixed amount in any currency. This amendment willhave no impact on the Group aft er init ial application.

IAS 39 Financial Inst rument s: Recognit ion and Measurement Eligible Hedged It ems

This amendment was issued in July 2008 and is effective for financial years beginning on or after 1 July 2009. It addresses

the designation of a one-sided risk in a hedged item, and the designat ion of inflat ion as a hedged risk or port ion in part icular

situat ions. The Group has concluded that t he amendment will have no impact on the financial posit ion or performance of the

Group, as the Group has not entered into any such hedges.

IFRS 9 Financial Inst rument s: Classif icat ion and MeasurementIFRS 9 ref lects Phase 1 of t he Boards work on the replacement of IAS 39 and applies to classif ication and measurement offinancial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 J anuary 2013. Insubsequent phases, t he Board wil l address classification and measurement of financial l iabilit ies, hedge accounting andderecognition. The completion of t his project is expected in early 2011. The adoption of IFRS 9 will have an effect on theclassif ication and measurement of the Groups financial assets. However, the Group determined that the ef fect will bequantif ied in conjunction wit h the other phases when issued to present a comprehensive pictur e.

IFRIC 14 Prepayment s of a Minimum Funding Requirement (Amendment)The amendment to IFRIC 14 is effective for annual periods beginning on or after 1 January 2011 with retrospectiveapplication. The amendment provides guidance on assessing the recoverable amount of a net pension asset. Theamendment permit s an entit y to tr eat the prepayment of a minimum funding requirement as an asset. The amendment isdeemed to have no impact on the f inancial statements of the Group.

IFRIC 17 Distr ibuti on of Non-cash Asset s t o OwnersThis interpretation provides guidance on accounting for arrangements whereby an enti ty distr ibutes non-cash assets toshareholders either as a distribution of reserves or as dividends. An entity shall apply this Interpretation prospectively forannual periods beginning on or after 1 J uly 2009. The interpretat ion has no effect on either the financial position or on theperformance of t he Group.

IFRIC 19 Extinguishing Financial Liabilit ies wit h Equity Inst rumentsIFRIC 19 is effective for annual periods beginning on or after 1 July 2010 . The interpretation clarifies that equityinstruments issued to a creditor to extinguish a financial liability qualify as considerat ion paid. The equity inst ruments issuedare measured at t heir fair value. In case this cannot be reliably measured, they are measured at the fair value of t he liabilityextinguished. Any gain or loss is recognised immediately in profi t or loss. The adoption of this interpretat ion will have noeffect on the financial statements of the Group.


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Background facts

The following list highlights a series of important matters that have driven the presentation and disclosures illustrated in

this publication.

Business environment

Stable economic and business environments and product of fer ings were assumed for both the 2010 and 2009 f inancial

report ing periods. During t he year, the Group acquired 80%of the common stock of Good American Life Co, but did not

dispose of any businesses. The Group accounted for the 20%non-control ling int erests based on the share of t he tot al netassets (see Note 3). In addition, Appendix 4 illustrates the option to fair value the non-controlling interests.

Operations

Good Insurance (International) Limited is t he parent company which operates in t hree principal areas of business, according

to the nature of products and services off ered. It provides life insurance, non-life insurance (which comprises general

insurance and healthcare) and investment management services to i ts customers through it s four subsidiaries: Good Life

Insurance Limited, Good American Lif e Co Ltd (80%owned), Good Non-Life Insurance Limited and Good Investment

Management Services Limited. The parent and the four subsidiaries throughout this publicat ion are collectively referred to

as the Group.

The life insurance products offered include a wide range of whole life, term assurance, unit ised pensions, guaranteedannuity pensions, pure endowment pensions and mortgage endowments.

The non-life general insurance products of fered include motor, household, commercial and business interrupt ioninsurance.

The non-life healthcare products provide medical cover to policyholders.

Investment management services are provided solely to customers through an investmentmanagement services subsidiary.

The Group also has a 20%int erest in one non-life insurance entit y, Power Insurance Limited, which is involved in the

insurance of power stat ions in Euroland. The Group has no joint venture agreements with any other external par ties.

Operating segments

The Group has determined that the operating segments described above are those under IFRS 8 Operating Segments.

IFRS status

The Group is an existing preparer of IFRS consolidated financial statements, but t o enhance the usability of t his publication,additional disclosures have been illustrated if the Group is a fir st t ime adopter of IFRS in 2010. These disclosures, as set out

under IFRS 1 (Revised 2009) First-time Adopt ion of Int ernational Financial Reporting Standardscan be found in Appendix 1.

As permitted under IFRS 4 Insurance Contracts, an insurance company is allowed to grandfather it s existing local Generally

Accepted Accounting Policies (GAAP) adopted for its insurance contracts and investment contracts with discretionary

part icipation f eatures (DPF), within it s IFRS accounting f ramework. The requirement will cont inue unti l the IASBs Insurance

Contr acts Phase II project is completed, which will t hen determine the recognition and measurement of all insurance

contracts on a consistent basis. The Group, t herefore, continues with local GAAP for insurance contr acts and for

investment cont racts with a DPF.

Product account ing

Under local GAAP, t he same accounting t reatment is applied to insurance contracts with and without DPF and for

investment contracts with DPF. Deferred acquisition costs (DAC) and the present value of in-force business (PVIF), i.e.,intangible assets, relat ing to the above contracts are also accounted for under local GAAP.

Investment contracts without DPF and the related acquisition costs and intangible assets, are accounted for under IAS 39

Financial Instruments: Recognition and Measurement, IAS 18 Revenueand IAS 38 Intangible Assets, respectively.

DPF provide the policyholder with a contractual right to receive, as a supplement to guaranteed benefit s, addit ional benefit s

payable at the discret ion of the insurance company and which are contractually based on the performance of a specified

pool of contracts on the profi t or loss of t he insurance company or ot her entit y that issued the contracts. Under IFRS 4, DPF

can be either t reated as an element of equity or as a liabilit y, or can be split between the two elements. The Group policy is

to treat all DPF as a liability within insurance or investment contract liabilities as appropriate.

Risk management

As part of t he Groups investment strategy to reduce both insurance and financial risk, the Group matches its investments

to the liabilities arising from insurance and investment contracts, by reference to the type of benefits payable to contract

holders. For each distinct category of liabilities, a separate portfolio of investments is maintained for policyholders and

customers.


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Taxation

Income tax on profit and loss for t he year comprises current and deferred tax. Income tax is determined in accordance with

Euroland t ax law.

Financial statement presentation

The primary f inancial statements have been drawn up on a basis consistent with IAS 1 (Revised 2007) which was effective

for financial years beginning on or aft er 1 January 2009, and the following key presentat ion decisions have been made.

Consolidated income statement and consolidated statement of comprehensive incomeThe Group has elected to present comprehensive income in two separate statements, being the consolidated income

statement and the consolidated statement of comprehensive income. Information about t he individual components of

comprehensive income as well as the tax eff ects have been disclosed in t he notes to the financial stat ements.

The analysis of expenses uses a classification based on their nature rather than their funct ion.

Reinsurance premiums and claims on the face of the income stat ement have been presented as negative i tems within

premiums and net benefits and claims, respectively, because this is consistent wit h how the business is managed.

Statement of changes in equity

The Group presents a stat ement of changes in equity as part of its primary f inancial statements showing the fol lowing

items: (a) total comprehensive income for the period, showing separately the total amounts attributable to owners of the

parent and to minority interest; (b) the amounts of transactions with owners in their capacity as owners, showing separately

contributions by and distributions to owners; and (c) for each component of equity, a reconciliation between the carrying

amount at the beginning and the end of t he period, separately disclosing each change.

Statement of f inancial position

The statement of financial position represents the statement of financial position for the group following the revision to

IAS 1. It follows the presentation convention for previous balance sheet. It is presented in broad order of liquidity, with a

distinction based on expectations regarding recovery or settlement within 12 months after the reporting date (current) and

more than 12 months after the reporting date (non-current), presented in the notes. A permissible alternative is to present

the assets and liabilities in the statement of financial position in a current/non-current f ormat.

Deferred acquisition costs are disclosed as a separate line item on the face of the statement of f inancial posit ion by the

Group. Alt ernative disclosure opt ions would be to include these as part of intangible assets or as part of ot her assets.

As required by IFRS 4, reinsurance assets are disclosed as assets on t he face of t he statement of financial posit ion and arenot offset against the related insurance liabilities.

Statement of cash flows

The Group represents its cash flow based on the indirect method, rather than the direct method. For cash flow purposes,

the Group classifies the cash flows for the acquisition and disposal of f inancial assets as operating cash flows, as the

purchase of t hese investments is funded from the net cash flows associated with the origination of insurance and

investment contracts. The payment of benefits and claims in relation to insurance and investment contracts are treated as

operating activities. Appendix 5 has provided an illustration of the statement of cash flow based on the direct method.

Allowed alternative accounting treatments

In some cases, IFRS permit s alternat ive accounting t reatments for similar t ransactions and events. Preparers of f inancial

statements may choose the treatment that is most relevant to their business.

IAS 8 requires an entit y to select and apply its accounting policies consistently for similar t ransactions, and/or other events

and conditions, unless IFRS specifically requires or permits categorisation of items for which dif ferent policies may be

appropriate. Where IFRS requires or permits such categorisation, an appropr iate accounting policy is selected and applied

consistent ly to each category. Therefore, once a choice of one of t he alternat ive tr eatments has been made, it becomes

accounting policy and must be applied consistent ly. Changes in accounting policy should only be made if it is required by a

standard or interpretation, or if the change results in the financial statements providing reliable and more relevant

information.

In some accounting models, r ecognised realised gains or losses on an insurers assets have a direct ef fect on the

measurement of some or all of the insurance liabilit ies, related deferred acquisition costs and related intangible assets.

An insurer is permit ted, but not required, to change its accounting policies so that a recognised but unrealised gain or loss

on an asset affects those measurements in t he same way that a realised gain or loss does. The related adjustment to the

insurance liability (or deferred acquisition costs) shall be recognised in equity if , and only if, t he unrealised gains arerecognised in equity. This practice is of ten described as shadow accounting. The group does not apply shadow accounting

but addit ional disclosures have been provided in Appendix 2 in case users would like to refer to t he required treatment if

shadow accounting were applied.


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10 Good Insurance (International) Limit ed

IFRS 4 permits the use of alternative sensitivity analysis such as embedded value (EV) or economic capital (EC) instead of

IFRS basis for insurance and market risk sensit ivit y disclosures. This option is only allowed if insurance and market risk

sensit ivit ies are managed on that alternate basis. For illustrat ive purposes EV sensit ivit y disclosures have been provided in

Appendix 3 in accordance with embedded values (EV) principles.

In this publication, where a choice is permit ted by IFRS, the Group has adopted one of t he alternat ive tr eatments as

appropriate to t he circumstances of t he Group. The commentary gives fur ther details of which policy has been selected,

and why, and summarises the difference in the disclosure requirements.

Financial review by managementMany ent it ies present a financial review by management that is outside the scope of t he financial statements. IFRS does not

require the presentation of such information, although paragraph 13 of IAS 1 gives a brief outline of what may be included

in such a report . The IASB issued an Exposure Draf t (ED) Management Commentaryin June 2009 with a proposal for a non-

binding, broad framework for t he preparation and presentat ion of a Management Commentary.

The content of a financial review by management is oft en determined by local market r equirements or issues specific to a

part icular jur isdiction. Therefore, no f inancial review by management has been included for Good Insurance

(International) Limited.


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Independent auditors repor t t o t he shareholders of GoodInsurance (Internat ional) Limit ed

We have audited the accompanying consolidated f inancial statements of Good Insurance (International) Limited and it s

subsidiaries (the Group), which comprise the consolidated statement of f inancial posit ion as at 31 December 2010, t he

consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in

equity and consolidated statement of cash flows for the year then ended, together with a summary of significant accounting

policies and other explanatory information.

Management s r esponsibilit y for t he consolidat ed financial st atement s

Management is responsible for the preparat ion and fair presentat ion of t hese consolidated financial statements in

accordance with IFRS, and for such internal cont rol as management determines is necessary t o enable the preparation of

consolidated f inancial statements t hat are f ree from material misstatement, whether due to f raud or err or.

Auditors responsibilit y

Our r esponsibility is to express an opinion on these consolidated f inancial statements based on our audit. We have

conducted our audit in accordance with Internat ional Standards on Auditing. Those standards require that we comply with

ethical requirements and plan and perform the audit t o obtain reasonable assurance about whether t he financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

financial statements. The procedures selected depend on the auditors judgment, including t he assessment of the r isks of

material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk

assessments, the auditors consider internal control relevant to the entitys preparation and fair presentation of the

consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for

the purpose of expressing an opinion on the effectiveness of t he entitys internal control. An audit also includes evaluat ing

the appropriateness of account ing policies used and the reasonableness of account ing estimates made by management, as

well as evaluating the overall presentat ion of t he consolidated financial statements.

We believe that the audit evidence we have obtained is suff icient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair v iew of the financial posit ion of t he Group asat 31 December 2010, and of it s financial performance and cash flows for t he year t hen ended in accordance with

International Financial Report ing Standards.

Professional Accountants & Co.

29 J anuary 2011

17 Euroville High Str eet

Euroville

Comment ary

The auditors report has been prepared in accordance with ISA 700 (Redraf ted) Forming an Opinion and Report ing onFinancial Statements

which is applicable for audits of fi nancial statements for periods beginning on or after 15 December 2009 . The auditor s report may dif fer

depending on the requirements of different jurisdictions.


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Group consolidated income statement

for t he year ended 31 December 2010

IAS 1.10(b)

IAS 1.51 (b), (c)

2010 2009Notes 000 000 IAS 1.51(d), (e)

Gross premiums 5(a) 74,146 73,451 IFRS 4.IG24

Premiums ceded to reinsurers 5(b) (18,756) (19,112) IFRS 4.IG24

Net premiums 55,390 54,339 IAS 1.85

Fees and commission income 6 5,364 2,231 IFRS 7.20 (c)(i)

Investment income 7 8,22 1 7,682

Realised gains 8 213 93

Fair value gains and losses 9 1,044 992

Other operating revenue 91 85

Other revenue 14,933 11,083 IAS 1.85

Total revenue 70,323 65,422 IAS 1.82(a)

Gross benefits and claims paid 10(a) (38,418) (39,410) IFRS 4.IG24

Claims ceded to reinsurers 10(b) 10,273 10,546 IFRS 4.IG24

Gross change in contract liabilities 10(c) (7,837 ) (7,172 ) IFRS 4.IG24

Change in contract liabilit ies ceded to reinsurers 10(d) 1,592 1,691 IFRS 4.IG24

Net benefit s and claims (34,390) (34,345) IAS 1.85

Finance costs 11 (1,066 ) (954) IAS 1.82(b), IFRS 7.20

Profit att ributable to unit-holders 35 (267) (111)

Other operating and administrat ive expenses 12 (22,242) (20,378) IAS 1.99

Ot her expenses (23,575) (21,443) IAS 1.85

Total benefits, claims and other expenses (57,965) (55,788) IAS 1.85

Profit before share of profit of an associat e 12,358 9,634

Share of prof it of an associate 22 129 230 IAS 1.82(c), IAS 28.38

Profit before t ax 12,487 9,864 IAS 1.85

Income tax expense 14 (1,569) (1,973) IAS 1.82(d), IAS 12.77

Profit for t he year 10,918 7,891 IAS 1.82(f )

Profit attributable to:

Equity holders of the parent 10,063 7,891 IAS 1.83(a) (ii)

Non-controlling interests 855 IAS 1.83(a) (i)

10,918 7,891

Earnings per share

Basic, profit for t he year att ributable to ordinary equityholders of the parent () 16 1.26 1.07 IAS 33.66

Diluted, profit for t he year att ributable to ordinary equityholders of the parent () 16 1.25 1.06 IAS 33.66


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Group consolidated income statement

Commentar y

Paragraph 82(a) of IAS 1 requires disclosure of tot al revenue as a line item on the face of the income statement. In addition t o this, The

Group has presented the various t ypes of revenues on the face of t he income statement. Note that this information could also be given in the

notes (per IAS 1.97).

Paragraph 99 of IAS 1 requires expenses to be analysed by either t heir nature or their f unction wit hin the entit y, whichever provides

information t hat is r eliable and more relevant. The Group has presented the analysis of expenses by nature.

Premiums and claims on the face of the income statement have been presented on a gross basis, wit h premiums ceded to reinsurers shown

as negative r evenue and claims ceded to reinsurers shown as negative net benefit s and claims. An alternative disclosure option is t o present

premiums ceded to reinsurers as expenses and claims ceded to reinsurers as revenue.

The comparative numbers do not necessarily corr espond to t he 2009 Good Insurance financial statements as they are purely for ill ustrat ive

purposes. The Group has no discontinued operations and all pr ofit has been generated from continuing operations.


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19/164


Group consolidated statement of f inancial posit ion

as at 31 December 2010

IAS 1.51 (b) (c)

IAS 1.10 (a)

2010 2009Notes 000 000 IAS 1.51(d), (e)

Assets IAS 1.60Goodwill 20 9,445 2,924 IAS 1.54(c)Intangible assets 21 39,138 444 IAS 1.54(c)Deferred expenses 30 13,446 11,477 IFRS 4.37(b)Property and equipment 23 4,066 3,750 IAS 1.54(a)Investment propert ies 24 4,199 3,943 IAS 1.54(b)Investment in an associate 22 2,120 1,991 IAS 1.54(e), IAS 28.38Financial instruments IAS 1.54 (d), IFRS 7.8

Derivative financial instruments 25 2,182 1,240Held to maturity financial assets 26(a) 2,104 1,677Loans and receivables 26(b) 7,264 6,137Available-for-sale financial assets 26(c) 109,677 79,417Financial assets at fair value through profit or loss 26(d) 35,249 21,189

Reinsurance assets 27 36,521 34,711 IFRS 4.37(b)Income tax receivable 28(a) 2,995 2,812 IAS 1.54(n)

Insurance receivables 29 35,272 19,914 IFRS 4.37(b)Accrued income 31 1,698 1,557 IAS 1.77Cash and cash equivalent s 32 22,723 27,798 IAS 1.54(i)

Total asset s 328,099 220,981

Equit y and liabilit iesEquit y at t ribut able to equit y holders of parent IAS 1.54(r )Issued share capital 42 8,638 7,385 IAS 1.54(r )Additional paid-in capital 42 27,415 1,045 IAS 1.54(r )Retained earnings 20,297 13,457 IAS 1.54(r )Revaluation reserves 8,060 4,002 IAS 1.54(r )Total ordinary shareholders equity 64,410 25,889 IAS 1.54(r )Other equity instruments 43 52 IAS 1.54(r )

64,462 25,889

Non-controlling interests 8,368 IAS 1.54(q)

Total equity 72,830 25,889

LiabilitiesInsurance contract liabilities 33 176,712 126 ,260 IFRS 4.37(b)Investment contract liabilities 34 15,220 11,558 IAS 1.54(m), IFRS 4.37(b)Pension benefit obligation 36 4,449 4,152 IAS 1.55, IAS 1.78(d)Deferred revenue 40 4,365 4,334 IAS 1.55Borrowings 37 16,562 21,064 IAS 1.54(m), IFRS 7.8 (e), (f)Derivative financial instruments 25 1,782 1,758 IAS 1.54(m), IFRS 7.8 (e), (f)Other financial liabilities 38 7,743 7,272 IAS 1.54(m), IFRS 7.8 (e), (f)Deferred tax liability 28(b) 5,452 1,848 IAS 1.54(o),Net asset value att ributable to unit-holders 35 520 367 IAS 1.54(o)Insurance payables 39 5,157 4,841 IFRS 4.37(b)

Trade and other payables 41 17,307 11,638 IAS 1.54(k)Total liabilities 255,269 195,092

Total equit y and liabilit ies 328,099 220,981

Comment ary

Paragraph 60 of IAS 1 requires companies to present assets and liabilit ies either in order of t heir liquidit y or by a separate classification onthe face of the statement of financial position for current and non-current assets, and current and non-current liabilities, whichever providesinformation t hat is most reliable and relevant. The Group has presented its assets and liabilit ies in order of l iquidity . Deferr ed acquisitioncosts are included within deferred expenses rather t han within int angible assets or ot her assets, which are alternat ive classification optionsin insurance practice.

The previous version of IAS 1 used the tit les balance sheet and cash flow statement t o refer to t wo of t he financial statements consideredto be part of the complete set. The current standard refers to these statements as the statement of financial position and statement ofcash flows. However, the revised standard does not r equire the use of these terms (IAS 1.10).

The Group has not presented three statements of financial position in these financial statements because it has not applied an accountingpolicy retrospectively, made a retrospective restatement of items in its financial statements, or reclassified items in its financial statementsthat affected the statement of f inancial position at t he beginning of the earliest comparative period (IAS 1.10(f )). Good Group (Internat ional)Limited contains an illustrative disclosure of a statement of financial position at t he beginning of the comparative period and related noteswhere the changes affect t he beginning of t he earliest comparat ive period.


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Group consolidated st atement of changes in equit y


IAS 1.10(c)

At tr ibutable to equit y holders of the parent IAS 1.51 (b), (c)

Other reserves

Notes

Issuedshare

capital(Note

42 )

Additionalpaid-incapital

(Note 42)Retainedearnings

Available-for-sale

financialassets

Cash flowhedging

Foreigncurrency

translationreserve

Totalordinary

share-holders

equity

Otherequity

instruments

Non-controlling

interestsTotal

equity IAS 1.10 6

000 000 000 000 000 000 000 000 000 000 IAS 1.51(d), (e)

At 1 J anuary2010 7,385 1,045 13,457 4,024 (22) 25,889 25,889 IAS 1.106(d)

Profit for theyear 10,063 10,063 855 10,918 IAS 1.10 6(d) (i)

Othercomprehensiveincome 18 4,121 (25) (38) 4,058 199 4,257 IAS 1.106(d) (ii)

Totalcomprehensiveincome 10,063 4,121 (25) (38) 14,121 1,054 15,175 IAS 1.106(a)

Issue of sharecapital 42 1,253 26,672 27,925 27,925 IAS 1.106(d)(iii)

Transaction costsfor equity issue 42 (302) (302) (302) IAS 32.3 9

Issue of otherequityinstruments 43 52 52

Coupon on ot herequityinstruments paidduring the year 43 (1) (1) (1)

Share-basedpaymenttransactions 19 14 14 14 IFRS 2.50

Dividends paidduring the year 15 (3,236) (3,236) (3,236) IAS 1.10 7

Non-controllinginterests arisingon businesscombination 3 7,314 7,314

At 31 December2010 8,638 27,415 20,297 8,145 (47) (38) 64,410 52 8,368 72,830 IAS 1.106(d)

Commentar y

The Group has elected to pr esent all t he informat ion required for t he statement of changes in equity on the face of t he statement. However,

tr ansactions with equity holders acting in their capacity as equity holders and the reconciliation of retained earnings, contribut ed equity and

other r eserves could alternatively be presented in the notes to the financial statements.

Paragraph 7 of IFRS 2 requires enti ties t o recognise an increase in equity when goods or services are received in an equity-settled share-

based payment transaction. However, IFRS 2 does not specify where in equity this should be recognised. The Group has elected to recognise

the credit in retained earnings.


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22/164


Group consolidated st atement of cash flows


IAS 1.10(d)

IAS 1.51(b), (c)

2010 2009 IAS 7.10

Notes 000 000 IAS 1.51(d), (e)

Operating activities IAS 7.10, IAS 7.18(b)

Cash generated from operating activit ies 46 4,518 6,31 0 IAS 7.18(b)

Dividend income received 3,157 3,015 IAS 7.31

Interest income received 3,709 4,43 5 IAS 7.31

Finance costs paid (422) (312) IAS 7.31

Rental income on investment propert ies 178 170

Purchase of investment properties 24 (203) (219) IAS 7.14

Income tax paid 28(a) (1,564) (1,444) IAS 7.35

Net cash flows from operating acti vit ies 9,373 11,955 IAS 7.10

Invest ing acti vit ies IAS 7.21

Acquisition of subsidiaries, net of cash acquired 3 (6,219) IAS 7.39

Interest income received on loans to related part ies 21 18 IAS 7.31

Proceeds from sale of property and equipment 1,964 1,09 5 IAS 7.16(b)

Purchase of intangible assets 21 (116) (318) IAS 7.16(a)

Increase in loans to related part ies (65) (50) IAS 7.16(c)

Purchase of propert y and equipment 23 (1,414) (1,683) IAS 7.16(a)

Net cash flows from investing activities (5,829) (938) IAS 7.10

Financing activities IAS 7.10, IAS 7.21

Proceeds from exercise of share options 42 66 50 IAS 7.17(a)

Transaction costs for equity issue 42 (302) (2)

Issue of other equity instruments 43 51 IAS 7.17(a)

Proceeds from bank loans 5,500 IAS 7.17(c)

Repayment of bank loans (3,500) IAS 7.17(d)

Finance costs paid on bank loan and bond borrowings (642) (450) IAS 7.31

Dividends paid to equity holders of the parent 15 (3,236) (2,087) IAS 7.31

Net cash flows from financing acti vit ies (7,563) 3,011 IAS 7.10

Net (decrease)/ increase in cash and cash equivalents (4,019) 14,028

Cash and cash equivalents at 1 January 20,876 6,848

Effects of exchange rate changes on cash and cash equivalents (52) IAS 7.28

Cash and cash equivalent s at 31 December 32 16,805 20,876 IAS 7.45

Commentar y

Paragraph 18 of IAS 7 permit s a company to report its cash flows from operating activi ties using either the direct method or the indirect

method. The Group presents its cash flows using the indirect method. The direct method is illustr ated in Appendix 5.

The Group reconciled from profit before tax to net cash flow from operating activities. However, a reconcilliation from profit after tax is also

acceptable under IAS 7.

Cash flows representing the assets backing equity holders are classified as investment act ivit ies. The cash flows in t he operating activit ies

are all attributable to policyholders.

Paragraph 33 of IAS 7 permit s interest paid t o be shown as operating or financing activit ies, and interest received to be shown as operating

or investing activit ies, as deemed relevant for the entit y. For cash flow purposes, t he Group classifies the cash flows for the acquisition and

disposal of financial assets as operating cash flows, as the purchase of t hese investments is funded fr om the net cash flows associated wit h

the origination of insurance and investment contr acts and the payment of benefit s and claims incurred for such insurance and investment

contracts, which are respectively treated under operating activities.

For cash flow purposes, cash and cash equivalents consist of cash and cash equivalents as defined in paragraph 6 of IAS 7, net of

outstanding bank overdrafts, as permit ted by paragraph 8 of IAS 7.


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Notes t o t he consolidated financial st at ements

1. Corporate informat ion IAS 1.138

Good Insurance (Internat ional) Limited (the Company) is a limited liabilit y company incorporated and

domiciled in Euroland, whose shares are publicly tr aded on the Euroland stock market. The principal activ it ies

of the Company and it s subsidiaries (the Group) are described in Note 4.

The Group has a 20%interest in it s only associate, Power Insurance Limited, which is involved in t he insurance

of power stations in Euroland.On 30 April 2010, t he Group acquired 80%of the common stock of Good American Life Co. Further details of

the acquisition are provided in Note 3.

The registered off ice of t he Group is Homefire House, 18 Ashdown Square, Eurovil le, Euroland. The

consolidated f inancial statements of Good Insurance (Internat ional) Limited for the year ended 31 December

2010 were authorised for issue in accordance with a resolution of the directors on 29 January 2011.

IAS 10.17

2.1 Basis of preparat ion

The consolidated f inancial statements of the Group have been prepared in accordance with Internat ional

Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

IAS 1.16

The consolidated f inancial statements have been prepared on an historic cost basis except for investment

propert ies and those financial assets and financial liabilit ies that have been measured at fair value. The

carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges

and that are otherwise carried at amortised cost, are adjusted to record changes in the fair values attributable

to the risks that are being hedged in effective hedge relationships.

As permitted by IFRS 4 Insurance Contracts, the Group has applied Euroland Generally Accepted Accounting

Practice (GAAP) for its insurance contracts and investment contracts with a discretionary participation

feature (DPF).

IAS 1.112(a)

IAS 1.117

The consolidated f inancial statements values are presented in Euros () rounded to the nearest thousand

(000), unless otherwise indicated.

IAS 1.51(d), (e)

Commentar y

Paragraph 13 of IFRS 4 permit s an insurance company to grandfather it s previous Generally Accepted Accounting Principles (Local GAAP).

Local GAAP can be used for any insurance contracts and investment contract s with aDiscretionary Part icipation Feature DPF that it issues(including related acquisition costs and intangible assets). The requirement will cont inue until the IFRS Phase 2 project is completed by t he

IASB, which will t hen regulate the r ecogniti on and measurement of all insurance contracts on a consistent basis.

The Group presents its statement of f inancial posit ion broadly in order of liquidity . An analysis regarding

recovery or sett lement within twelve months after t he report ing date (current) and more than 12 months

after the reporting date (non-current) is presented in the notes.

IAS 1.60, 61

2.2 Basis of consolidat ion IAS 27.12

Basis of consolidation fr om 1 January 2010

The consolidated f inancial statements comprise the financial statements of the Group as at 31 December each

year.

IAS 27.12

IAS 27.26

Subsidiaries are fully consolidated fr om the date of acquisition, being the date on which the Group obtainscontrol, and continue to be consolidated unt il t he date when such control ceases. The financial statements of

the subsidiaries are prepared for t he same report ing year as the parent company, using consistent account ing

policies.

IAS 27.22

IAS 27.23

IAS 27.24

All int ra-group balances, tr ansactions, income and expenses and prof its and losses resulting fr om intra-group

transact ions and dividends, are eliminated in ful l.

IAS 27.20


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2.2 Basis of consolidat ion (cont d)

Losses within a subsidiary are attributed to the non-controlling interest even if this results in a deficit balance. IAS 27.28

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity

transaction. If t he Group loses control over a subsidiary, i t:

Derecognises the assets (including goodwill) and liabilities of t he subsidiary

Derecognises the carrying amount of any non-controlling interest

Derecognises the cumulative translat ion dif ferences recorded in equity

Recognises the fair value of the consideration received

Recognises the fair value of any investment retained

Recognises any surplus or deficit in prof it or loss

Reclassifies the parent s share of components previously recognised in other comprehensive income toprofit or loss or retained earnings, as appropriate.

IAS 27.30

IAS 27.34

The Group has invested in a number of specialised investment vehicles such as open-ended investment

companies (OEICs) and unit t rusts. The Groups percentage ownership in t hese vehicles can fluctuate f rom

day to day according to the Groups part icipation in them. Where the Group controls such vehicles, they are

consolidated with the interest of third parties shown as net asset value attributable to unit-holders in the

statement of financial posit ion. Where t he Group does not control such vehicles, t hese are designated as

financial investments held at fair value through profit or loss.

Basis of consolidation prior t o 1 January 2010

Certain of the above-mentioned requirements were applied on a prospective basis. The following diff erences,

however, are carried forward in certain instances from the previous basis of consolidation:

Acquisitions of non-controlling interests, prior to 1 January 2010, were accounted for using the parententity extension method, whereby the difference between the consideration and the book value of theshare of the net assets acquired were recognised in goodwill.

Losses incurred by the Group were attributed to the non-controlling interest until the balance wasreduced to nil. Any further excess losses were attributed to the parent, unless the non-controllinginterest had a binding obligation to cover these. Losses prior to 1 January 2010 were not reallocatedbetween non-controlling interest and the parent shareholders.

Upon loss of control, the Group accounted for the investment retained at its proportionate share of netasset value at the date control was lost. The carrying value of such investments at 1 January 2010 hasnot been restated.

IAS 27.33

(2003)

2.3 Summary of significant account ing policies

(a) Productclassification

IAS 1.112 ,

IAS 1.117(a),(b)

IFRS 4.3 7(a)

Insurance contracts are those contracts when the Group (the insurer) has accepted signif icant insurance risk

from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain

fut ure event (the insured event) adversely affects the policyholders. As a general guideline, the Group

determines whether it has significant insurance risk, by comparing benefits paid with benefi ts payable if the

insured event did not occur. Insurance contracts can also transfer financial risk.

IFRS 4 Appendix

A

Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of apossible future change in one or more of a specified interest rate, financial instrument price, commodity price,

foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the

case of a non-financial variable that the variable is not specific to a party to the contract.

IFRS 4 Appendix

A

Once a contr act has been classified as an insurance contract, it remains an insurance contract for t he

remainder of its lifetime, even if the insurance risk reduces significantly during this period, unless all rights

and obligations are extinguished or expire. Investment cont racts can, however, be reclassified as insurance

contracts after inception if insurance risk becomes significant.

IFRS 4.B29, B30


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2.3 Summary of significant account ing policies (cont d) IAS 1.10,

(b) Business combinations and goodwill (cont d)

Business combinations from 1 J anuary 2010 (cont d)

Aft er init ial recognition, goodwill is measured at cost less any accumulated impairment losses. For t he

purposes of impairment t esting, goodwill acquired in a business combinat ion is allocated to an appropriate

cash-generating unit that is expected to benefit from the combination, irrespective of whether other assets orliabilit ies of the acquiree are assigned to t hose units.

IAS 36.80

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of,

the goodwill associated with t he operat ion disposed of is included in the carr ying amount of the operat ion

when determining the gain or loss on disposal of the operat ion. Goodwill disposed of in t his circumstance is

measured based on the relative values of the operat ion disposed of and the portion of t he cash-generat ing

unit r etained.

IAS 36.86

Business combinations prior t o 1 January 2010

In comparison with the above-mentioned requirements, the following diff erences applied:

Business combinations were accounted for using the purchase method. Transaction costs directly att ribut able

to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as

minority interest) was measured at the proportionate share of the acquirees identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Any addit ional acquired

share of interest did not affect previously recognised goodwill.

When the Group acquired a business, embedded derivatives separated f rom t he host contract by the acquiree

were not reassessed on acquisition unless the business combination resulted in a change in the terms of t he

contract that significantly modified the cash flows that otherwise would have been required under the

contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economicoutf low was more likely t han not and a reliable estimate was determinable. Subsequent adjustments to thecontingent consideration affected goodwill.

Commentar y

The previous version of IFRS 3 was silent on whether t he classification of insurance contr acts needs to be revisited on an acquisition.

Paragraph 17(b) of the revised standard (effective for annual periods beginning or after 1 July 2009) explicitly exempts insurance

contracts fr om having to be reclassified on acquisition. This exemption, however, only applies to insurance contracts classified as such

under IFRS.

(c) Int angible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets

acquired in a business combination is their f air value as at t he date of acquisition. Following initial r ecognition,

intangible assets are carried at cost less any accumulated amort isation and any accumulated impairment

losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and

expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either fini te or indefinite.

IAS 38.24

IAS 38.83

IAS 38.74

IAS 38.57

IAS 38.88

Intangible assets with finite lives are amort ised over t he useful economic lif e and assessed for impairmentwhenever there is an indicat ion that the intangible asset may be impaired. The amort isation period and the

amort isation method for an intangible asset with a finit e useful lif e are reviewed at least at each financial year

end. Changes in the expected useful life or the expected pattern of consumption of fut ure economic benefit s

embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and

are t reated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives

is recognised in the income statement in the expense category consistent with the function of the intangible

asset.

IAS 38.97

IAS 38.9

IAS 38.10 4

IAS 38.118(d)

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the

cash generating unit level. Such intangibles are not amort ised. The useful li fe of an intangible asset wit h an

indefinit e life is reviewed annually to determine whether indefini te life assessment cont inues to be

supportable. If not , the change in the useful life assessment f rom indefinite to f init e is made on a prospective

basis.

Gains or losses arising fr om derecognition of an intangible asset are measured as the dif ference between the

net disposal proceeds and the carr ying amount of the asset and are recognised in the income statement when

the asset is derecognised.

IAS 38.10 7

IAS 38.10 8

IAS 38.10 9

IAS 38.11 3


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(c) Int angible assets (cont d)

Present value of acquired in-force business (PVIF)

When a port folio of insurance contracts and/or investment contracts with a DPF is acquired, whether directly

from another insurance company or as part of a business combination, t he difference between the fair value

and the value of the insurance liabilities measured using the Groups existing accounting policies is recognisedas the value of t he acquired in-force business.

Subsequent to init ial recognition, the intangible asset is carr ied at cost less accumulated amort isation and

accumulated impairment losses. The intangible asset is amort ised over t he useful life of t he acquired in-for ce

policy during which fut ure premiums are expected, which typically var ies between five and 50 years.

Amort isation is recognised in the income statement as an expense.

Changes in the expected useful life or the expected pattern of consumption of f uture economic benefi ts

embodied in the asset are accounted for by changing the amort isation period and they are tr eated as a change

in an account ing estimate.

An impairment review is performed whenever there is an indication of impairment. When the recoverable

amount is less than the carrying value, an impairment loss is recognised in the income statement. PVIF is also

considered in the liability adequacy test for each reporting period.

PVIF is derecognised when the related contracts are sett led or disposed of.

IFRS 4.31(b)

Future servicing rights

When a port folio of investment contracts without DPF, under which the Group will r ender investment

management services, is acquired, whether direct ly f rom another insurance company or as part of a business

combination, t he present value of f uture servicing rights is recognised as an intangible asset.

IAS 18 Appendix

14(b)(iii)

Subsequent to init ial recognition, the intangible asset is carr ied at cost less accumulated amort isation and

accumulated impairment losses. The intangible asset is amort ised on a str aight l ine basis over t he useful

servicing period of t he acquired in-force policy during which fees from services will emerge, which typically

varies between 10 and 20 years. Amortisation is recorded in the income statement.

An impairment review is performed whenever there is an indication of impairment. When the recoverable

amount is less than the carrying value, an impairment loss is recognised in the income statement. Future

servicing rights are also considered in establishing an onerous contr act provision for each report ing period.

Future servicing rights are derecognised when the related contracts are set tled or disposed of.

Other int angibles

Other intangibles consist primari ly of contractual relat ionships such as access to distr ibution networks and

non-restricted customer lists. The economic lives of these assets are determined by considerat ion of relevant

factors such as usage of t he asset, typical product life cycles, potential obsolescence, maintenance costs, the

stability of the industry, competitive position, and period of control over the assets. These intangibles are

amort ised over t heir useful economic lives, which range up to nine years, using the str aight line method and

recognised in the income statement.

A summary of the policies applied to the Groups intangible assets is as follows:

PVIF Future servicingright s Ot her int angibles

Useful lives Finite Finite Finite

Amort isation method used Amort ised over the

period of t he policy

Amortised over t he

servicing period

Amortised over its useful

economic life


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(d) Impairment of non-financial assets IAS 1.117(a), (b)

The Group assesses at each report ing date whether there is an indication t hat an asset may be impaired. If any

such indication exists, or when annual impairment testing for an asset is required, the Group estimates the

assets recoverable amount. An assets recoverable amount is the higher of an asset s or cash-generating

unit s (CGU) fair value less costs t o sell and its value in use. The recoverable amount is determined for anindividual asset, unless the asset does not generate cash inflows that are largely independent of t hose from

other assets or groups of assets. Where t he carrying amount of an asset or CGU exceeds its recoverable

amount, t he asset is considered impaired and is writt en down to i ts recoverable amount. In assessing value in

use, the est imated fut ure cash flows are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of t he time value of money and the risks specific to the asset. In

determining f air value less costs to sell, recent market t ransact ions are taken into account, if available. If no

such transactions can be identif ied, an appropriate valuation model is used. These calculations are

corroborated by valuation mult iples, quoted share prices for publicly t raded subsidiaries or other available fair

value indicators.

IAS 36.6

IAS 36.9

IAS 36.66

IAS 36.59

IAS 36.30

IAS 36.55

IAS 36.25

IAS 36.33

Impairment losses of cont inuing operations are recognised in the income statement in those expense

categories consistent with the function of the impaired asset .

IAS 36.60

For assets excluding goodwill, an assessment is made at each reporting date as to whether t here is any

indication t hat previously recognised impairment losses may no longer exist or may have decreased. If such

indication exists, the Group makes an est imate of the assets or CGU recoverable amount. A previously

recognised impairment loss is reversed only if there has been a change in the estimates used to determine the

assets recoverable amount since the last impairment loss was recognised. If t hat is the case, the carrying

amount of the asset is increased to it s recoverable amount. That increased amount cannot exceed the

carrying amount that would have been determined, net of depreciation, had no impairment loss been

recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is

carried at revalued amount, in which case the reversal is treated as a revaluation increase.

IAS 36.11 0

IAS 36.11 4

IAS 36.11 7

IAS 36.11 9

The following cr iteria are also applied in assessing impairment of specific assets:

Goodwill

Goodwill is tested for impairment, annually and when circumstances indicate that the carrying value may be

impaired.

IAS 36.10(b)

IAS 36.90

Impairment is determined for goodwill by assessing the recoverable amount of t he cash-generating unit s, to

which the goodwill relates. Where the recoverable amount of t he cash-generating units is less than their

carrying amount an impairment loss is recognised. The Group performs it s annual impairment test of goodwill

as at 31 December.

IAS 36.90

The recoverable amount f or t he life insurance business cash generating unit has been determined based on a

value in use calculation. This calculation is derived from embedded value (EV) principles together wit h the

present value of expected prof its from futur e new business. The EV represents the shareholder int erests in the

life business and is the total of the net worth of t he life business and the value of the in-force business. The

details of t he assumptions are in Note 20.

The recoverable amount of the non-life insurance cash generating unit and investment management services

businesses cash generating unit have been determined based on a valuein-use calculation. The calculation

requires the Group to make an estimate of the expected fut ure cash flows from each of t he cash-generating

units and discount t hese amounts using a suitable rate which reflects the risk of those cash flows in order t o

calculate the present value of t hose cash flows.

Previously recorded impairment losses for goodwill are not reversed in future periods. IAS 36.12 4

When goodwill forms part of a cash-generat ing unit (or group of cash generating units) and part of t he

operations within that unit is disposed of, t he goodwill associated with t he operat ion disposed of is included in

the carrying amount of the operat ion to determine the gain or loss on disposal of t he operat ion. Goodwill

disposed of in this circumstance is measured based on the relative values of the operation disposed of and the

portion of the cash-generating unit retained.

IAS 36.86


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2.3 Summary of significant account ing policies (cont d) IAS 1.10

(d) Impairment of non-financial assets (cont d) IAS 1.117(a), (b)

Intangible assets

Intangible assets with indefinit e useful lives are tested for impairment annually as at 31 December either

individually or at the cash generating unit level, as appropr iate and when circumstances indicate that the

carrying value may be impaired.

IAS 36.10(a)

Comment ary

Paragraph 9 of IAS 366 permi ts the annual impairment test f or goodwill and intangible assets with indefinit e useful lives to be performed at

any time during t he year pr ovided it is undertaken at t he same time each year. Different goodwill and intangible assets may be tested at

different times.

(e) Deferred expenses

Deferred acquisition costs (DAC) IFRS 4.37(a)

Those direct and indirect costs incurred during the financial period arising from the writing or renewing of

insurance contracts and/or investment contracts with DPF, are deferred to the extent that these costs are

recoverable out of fut ure premiums. All ot her acquisition costs are recognised as an expense when incurred.

Subsequent to init ial recognit ion, DAC for life insurance and investment contracts with DPF are amort isedover the expected lif e of t he contracts as a constant percentage of expected premiums. DAC for general

insurance and health products are amort ised over t he period in which the related revenues are earned. The

reinsurers share of deferred acquisition costs is amort ised in the same manner as the underlying asset

amortisation is recorded in the income statement.

Changes in the expected useful l ife or the expected patt ern of consumption of fut ure economic benefit s

embodied in the asset are accounted for by changing the amort isation period and are t reated as a change in

an accounting estimate.

An impairment review is performed at each reporting date or more frequently when an indication of

impairment arises. When the recoverable amount is less than the carrying value an impairment loss is

recognised in the income statement. DAC are also considered in the liabilit y adequacy test for each report ing

period.DAC are derecognised when the related contracts are either sett led or disposed of.

Defer red expenses-Reinsurance commissions

Commissions receivable on outwards reinsurance contracts are deferr ed and amort ised on a straight line basis

over the term of the expected premiums payable.

Deferred expenses-Investment management services

Those incremental costs incurred during the financial period directly attributable to securing investment

contracts without DPF, under which the Group will r ender investment management services, are deferr ed and

recognised as an asset, t o the extent t hat t hese costs can be identif ied separately, measured reliably and it is

probable that t hese costs will be recovered out of fut ure revenue margins. Incremental cost is a cost that

would not have been incurred if t he Group had not secured the investment cont ract wit hout DPF. All other

originat ion costs are r ecognised as an expense when incurred.

IAS 18 Appendix

14(b)(iii)

For contracts involving both the origination of a financial liability and the provision of investment management

services, only the transaction costs allocated to the servicing component are deferred. The other transaction

costs are included in the financial liability.

Subsequent to init ial recognition, these costs are amort ised in line with fee income, which typically varies

between 10 and 20 years. Amortisation is recorded in the income statement.

An impairment review is performed at each reporting date, or more frequently, when an indication of

impairment arises. When the recoverable amount is less than the carrying value, an impairment loss is

recognised in the income statement. Future servicing r ights are also considered in establishing an onerous

contract provision for each reporting period.

Investment management services are derecognised when the related contracts are sett led or disposed of.


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2.3 Summary of significant account ing policies (cont d) IAS 1.10

(f) Propert y and equipment IAS 1.117(a), (b)

Property and equipment, including owner-occupied propert y, is stated at cost, excluding the costs of day-to-

day servicing, less accumulated depreciation and accumulated impairment losses. Replacement or major

inspection costs are capitalised when incurred and if it is probable that fut ure economic benefit s associated

with t he item will flow t o the entit y and the cost of t he item can be measured reliably.

IAS 16.12 , 73(a)

IAS 16.1 , 30

IAS 16.14

Depreciation is provided on a straight l ine basis over t he useful lives of t he following classes of assets: IAS 16.73(b), (c)

Property: over 20 years

Equipment: 5 to 15 years

The assets residual values, and useful l ives and method of depreciation are reviewed and adjusted i f

appropriate at each financial year end and adjusted prospectively, if appropriate.

IAS 16.51

Impairment reviews are performed when there are indicators that the carrying value may not be recoverable.

Impairment losses are recognised in t he income statement as an expense.

An item of propert y and equipment is derecognised upon disposal or when no furt her fut ure economic benefit s

are expected from it s use or disposal. Any gain or loss arising on derecognition of t he asset (calculated as the

diff erence between the net disposal proceeds and the carrying amount of the asset) is included in the incomestatement in the year the asset is derecognised.

IAS 16.67

IAS 16.71

IAS 16.68

Comment ary

The Group has elected to carry property and equipment at historical cost less accumulated depreciation and impairment. IAS 16 also

permits propert y and equipment t o be carr ied at a revalued amount, being it s fair value at the date of the revaluation less any subsequent

accumulated depreciation and impairment .

(g) Invest ment propert ies

Investment properties are measured initially at cost, including transaction costs. The carr ying amount includes

the cost of replacing part of an existing investment propert y at t he time that cost is incurred if t he recognition

crit eria are met; and excludes the costs of day-to-day servicing of an investment propert y. Subsequent t o

initial r ecognition, investment propert ies are stated at fair value, which reflects market conditions at t he

report ing date. Gains or losses arising from changes in the fair values of investment propert ies are included in

the income statement in the year in which they arise.

Fair values are evaluated annually by an accredited external, independent valuer, applying a valuat ion model

recommended by the Internat ional Valuation Standards Committ ee.

IAS 40.20

IAS 40.33

IAS 40.75(a)

IAS 40.35

IAS 40.75(e)

Investment propert ies are derecognised either when t

good insurance 2010 gl ifrs

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