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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Pages
Chairman and CEO statement3 - 5
Managing Director’s Report - LifeStar Insurance Limited6
Directors’ report7 - 9
Statement of directors’ responsibilities10 - 11
Corporate Governance – Statement of compliance12 - 20
Remuneration report21 - 24
Statement of comprehensive income25 - 26
Statement of financial position27 - 29
Statement of changes in equity30 - 33
Statement of cash flows34 - 36
Material accounting policies37 - 86
Notes to the financial statements87 - 164
Independent auditor’s report165 - 174
Chairman and CEO Statement - LifeStar Insurance plc
3
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Dear Shareholders, Policyholders and Stakeholders,
Year 2023 has been both a successful and a challenging year for our company.
LifeStar Insurance plc registered a profit before tax of €1.8 million compared to a restated loss before tax of €3.9 million. The Insurance Group registered a profit before tax for 2023 of €1.6 million as against a loss in 2022 of €4.0 million.
The total group assets increased by Euro 10 million to Euro 145 million at the end of 2023.
The mandated changes in reporting standard from IFRS 4 to IFRS 17 proved to be a challenge during the year. IFRS 17 “Insurance Contracts” became effective for the period starting on 1 January 2023, with having to re-state 2022 under this new standard. The company planned the move well in advance and, in 2021 it purchased the best-in-class software system: the IFRS 17 Analyser from Oracle. Unfortunately, we suffered a vendor failure after one year and we had to engage another Oracle Partner to proceed with the implementation. Because of the provider change and because of technical challenges due to the volume of data to be reconfigured in a new and untested actuarial environment, a series of delays were cumulated, resulting in the late publication of the financial statements. The management is now confident that such delays will not be experienced in the future.
What changes to our financial statements has this standard brought about? To simplify some highly technical insurance parameters we saw the elimination of the Value of in-force Business, the technical Provisions and the Re-Insurance’ share of Technical Provisions. Such posts were replaced by Reinsurance Contracts Assets, Insurance Contract Liabilities and Investment Contract Liabilities. The net change of all these new calculations resulted in our retained earnings to be restated from €5.8 million under IFRS 4 at the end of 2022 to €14.5 million in 2023 under IFRS 17.
Beside the technical challenges, our company also had to face the very complex geopolitical scenarios present across the globe. During 2023, Supply chains were disrupted predominately due the continued Ukraine Russia conflict coupled with the middle-east flair up. The world followed with caution the different monetary policies applied across Europe to curb the rising inflation. Our investment strategy also had to be entirely redefined, following the decision of the main Central Banks across the world to increase interest rates.
The European Central Bank (ECB) raised interest rates six times during 2023 with indications that high rates will stay in place in the foreseeable future.
Figure 1: Main refinancing operations - fixed rate tenders (fixed rate)
Acknowledging the economic headwinds LifeStar continued to overcome the challenges and fostered growth in the different areas of the business. The company also confirms that it has met its solvency capital requirements throughout the year under review.
Our company has also embarked in a long-term effort to positively contributing to the climate change. Our group companies are determined to implement the highest Environmental, Social and Governance (ESG) standards. An ESG committee has been appointed to overview the implementation of measures such as an overall strategic initiative to become carbon neutral by looking at measures to reduce energy consumption through the introduction of energy efficient measures in our Head Office, reduce our dependency on paper through more digital sustainable technologies and invest in ESG friendly instruments.
Good governance and compliance is also at the core of our activity and of our values and the company is determined to continuously improve its standards. From a governance perspective, we have appointed another Independent Director Mr. Jean Paul Fabri as Executive Director to have an independent look at our structures and procedures with the aim to strengthen our overall governance.
LifeStar is also committed to help our clients, employees and stakeholders to live a healthy lifestyle. Our marketing and communication campaigns in 2023 and 2024 conveyed that message. LifeStar Insurance plc was the main sponsor of the anticipated Malta Marathon held on 25 February 2024. The Marathon has grown to be a major annual event which attracted over 3,000 participants, including athletes from 70 different countries. It was particularly exciting to see how the community joined together for this race which ultimately benefited Inspire Foundation Malta, a local charity that aims to assist anyone with a disability. A hearty congratulations to the winners and record-breaking participants. Quite a few of our employees took part in the walkathon.
The new image of LifeStar was launched in late 2020 and during 2023 we continued to solidify the brand both through local campaigns and also through international sponsorships. We once again participated in a very prestigious event held in America by The National Italian American Foundation (www.niaf.org), besides a number of local NGOs.
2024 will be another very promising year., which will see the company’ expansion to other markets and a substantial growth in revenue.
The positive results of this year and our future initiatives are primarily due to the dedication and loyalty of our 60 strong employees and of our dedicated tied-insurance intermediaries). They are the lifeblood of this group that has continued to increase its local market presence and it is now looking at further growth.
LifeStar Insurance remains an attractive and reliable investment – even in times of great uncertainty and change.
Profs Paolo CatalfamoRoberto Apap Bologna
Chairman LifeStar Insurance GroupActing CEO LifeStar Insurance Group
08 July 2024
2023 has been another good year for LifeStar Health Ltd. The following tiles or high-level numbers are self-explanatory, and I am very proud of this performance!
This is the first year whereby total commissions earned from normal operations have exceeded the EUR1 million mark whereas total commissions receivable, including profit commission, amounts to EUR2 million.
Earnings before interest, tax and amortisation (EBITA) for the year increased by 33% on last year from EUR370K in 2022 to EUR491K in 2023.
LifeStar Health Ltd once again declared an interim dividend of EUR500 thousand. This is the third year in succession that a dividend has been paid to LifeStar Insurance plc. The excess in own funds closed off the year with an overall surplus of EUR258K over and above the required own funds (schedule to chapter 4 of the Insurance Distribution Rules).
We look at 2024 with cautious optimism. The current sentiment is that inflation has been brought under control and it is expected that within 2024 we will start seeing reduction in the various reference interest rates. This could be an opportunity to further increases in business. The Bupa brand has been in Malta for over 50 years which is something we are very proud of and treasure. We were the pioneers of the health insurance in Malta.
It is our primary vision and creed to provide both individuals and companies with a healthcare insurance service that is second to none. I would like to express my sincere thanks to all the team, who have given their all in 2023.
Adriana Zarb Adami
Managing Director of LifeStar Health Limited
8 July 2024
The Directors present the annual report and the consolidated audited financial statements of LifeStar Insurance p.l.c. (the “Company”) and its subsidiary LifeStar Health Limited (“LifeStar Health”) for the year ended 31 December 2023. The Company and LifeStar Health shall hereinafter jointly be referred to as the “Group” or “Insurance Group”.
Principal activities
The Company and LifeStar Health are licensed by the Malta Financial Services Authority (“MFSA”) to carry out long term business of insurance under the Insurance Business Act and the Insurance Distribution Act respectively.
Review of business
The Insurance Group – Consolidated results
2023 was another challenging year for the insurance group due to the introduction of the new accounting standards. We registered some very good results with a profit before tax for the insurance group of €1.6 million compared to a restated loss in 2022 of €4.0 million.
LifeStar Insurance p.l.c.
The financial statements being presented are under IFRS 17.
LifeStar Insurance plc (LSI) registered a profit before tax of €1.8 million compared to a loss of €3.9 million. This is mainly due to the improved investment performance and to the major changes that IFRS 17 has brought about. In 2023 we have continued to see a strong demand for the pension related products with funds under management increasing from €32.0 million in 2022 to €46.7 million in 2023 or a 45.9% increase. Protection related premium has remained flat on the previous year at €6.1 million.
Insurance revenues have also increased by 2.5% when compared to 2022 to close off at €5.6 million (2022 restated: €5.5 million). Insurance service results closed off 2023 at €2.3 million compared to €1.4 million in restated 2022. Net insurance financial results also saw a good improvement over the previous year to close at €3.0 million when compared to 2022 restated of a loss of €2.8 million.
Administrative expenses increased by €1.2M over the same period last year to close at €4.2 million when compared to restated 2022 of €3 million. This increase is mainly due to higher administrative and shared service fees.
As explained under the Chairman’s and CEO’s joint statement one of the main impact of IFRS 17 on LSI was the impact on retained earnings that has increased to €14.5 million in 2023 from an IFRS 4 position in 2022 of €5.8 million. The significance of this change is that most of the retained earnings are distributable reserves as these are mainly due to releases from the technical provisions that existed under the IFRS 4 standard.
In 2023 LifeStar Health Limited declared a net interim dividend of €500K (2022: net dividend €500K).
Total assets of LSI increased by €10 million when compared to the restated previous year to close off at €144 million. Total liabilities increased by €7.9 million when compared to restated 2022 mainly due to the increase in Insurance contract liabilities which increased by €8 million. Total equity also increased over the prior period by €1.4 million being mainly the profit after tax for the year.
The Board of directors approved a 2022 bonus declaration of 3.5% for Money Plus policies (2022: 3.5%) and 1.0% (2022: 0.5%) for all other interest sensitive products. The Company also announced a bonus rate of 0.5% (2022: 0.5%) for paid up policies.
Review of business (continued)
LifeStar Health Limited
The Company registered a profit before tax of €0.5 million (2022: €0.4 million), revenue increased by €137K in 2023 to €1.9 million (2022: €1.8 million) or a 7.5% increase. Total direct costs increased by €26K in 2023 whereas administrative and other expenses decreased by €11K leading to an overall increase in total costs of €15K.
Total assets increased by €326K to close off at €2.3 million when compared to €2.0 million in 2022. Total equity reduced by €186K to close off at just under €1 million compared to 2022 of €1.2 million, mainly due to the distribution of the dividend. Total liabilities increased by €512K to close off at €1.4 million. This increase is mainly due to the declared dividend that had not been paid by 31 December 2023.
LifeStar Health Limited is required to comply with the own funds requirement as set by the Malta Financial Services Authority. The minimum capital requirements (defined as “the capital resource requirements”) must be maintained at all times throughout the year. LifeStar Health Limited monitors its capital level through detailed reports compiled with management accounts. Any transactions that may potentially affect LifeStar Health Limited’s regulatory position are immediately reported to the directors for resolution prior to notifying the Malta Financial Services Authority. The Company exceeded the required minimum capital requirements during the year under review at all times.
Future outlook
The Directors intend to continue to operate in line with the Group’s current business plan.
Principal risks and uncertainties
The Group’s principal risks and uncertainties are further disclosed in Note 1 – Critical accounting estimates and judgements, Note 2 – Management of insurance and financial risk, and Note 14 – Investment property and assets held for sale disclosing the significant observable inputs.
Financial risk management
Note 2 to the financial statements provides details in connection with the Group’s use of financial instruments, its financial risk management objectives and policies and the financial risks to which it is exposed.
Results and dividends
The statement of comprehensive income sets out the results of the Group and the Company. The profit for the year after taxation was €1.01 million (2022 restated: loss €2.33 million). No dividends were declared during the year under review (2022: Nil) at the Company level, however a net dividend of €0.5 million was declared by LifeStar Health Limited.
Events after the reporting date
As we progress through 2024, certain events which might have the potential of impacting the results of the holding company and the group are possible repercussions from the war in Ukraine on the European and, more generally, on the world economy as well as rising inflation and stock market uncertainty. Other concerns could arise from another possible pandemic flareup although the latter is considered unlikely in the short term as vaccinations have been administered on a large scale globally.
Post the end of the reporting date however, as aforementioned, the potential risks to the performance of any company is from high inflation witnessed in the last few months which has forced many major central banks to increased interest rates as a counter-measure for inflation we have started seeing signs of interest reductions though inflation still remains volatile.
Events after the reporting date (continued)
So far, Malta has been well shielded from increases in fuel and utility prices, though the Government has hinted that this may not be sustainable in the longer term. We have also seen increased pressure from the EU on a possible removal of these subsidies. Should the government halt its subsidies on energy and other assistance to industry in general, this could lead to further price increases and possibly a reduction in disposable income, which would adversely influence the propensity to save.
To date we have not seen any impact on the level of business being written with us. Our next challenge is now to increase efficiency even further to mitigate as much as possible the effect of rising prices but also with a view to help in protecting the environment in line with national targets and efforts done by industry as well as our peers.
We are not otherwise aware of any further events that could possibly have an effect on the operations of the LifeStar Insurance Group.
Going concern
The Directors, as required by Capital Markets Rule 5.62, have considered the Group’s operating performance, the statement of financial position at year end, as well as the business plan for the coming year, and they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Directors
The Directors of the Company who held office during the period were:
Prof. Paolo Catalfamo
Mr. Joseph C. Schembri
Mr. Mark J. Bamber
Mr. Jean Paul Fabri (appointed on 2 August 2023)
Mr. Andreas Shakallis (appointed on 14 July 2023)
Ms. Cristina Casingena (resigned on 25 August 2023)
Mr. Joseph M. Rizzo (resigned on 19 June 2023)
In terms of Article 117 of the Articles of Association, the term of appointment of the Directors still in office expires at the end of the forthcoming Annual General Meeting.
The Directors are required in terms of the Company’s Articles of Association to retire at the forthcoming Annual General Meeting and shall be automatically eligible for re-election by the Company in general meeting, without the need for nomination.
Remuneration Committee and corporate governance
The Board of Directors has set up an Audit and Risk Committee, as well as a Remuneration and Nominations Committee. The Board of the Company will be submitting to the Shareholders at the next Annual General Meeting the Remuneration Report for the financial year ending 31 December 2023 (the “Reporting Period”). The Remuneration Report is drawn up in accordance with, and in fulfilment of the provisions of Chapter 12 of the Capital Markets Rules issued by the Malta Financial Services Authority (“Capital Markets Rules”) relating to the Remuneration Report and Section 8A of the Code of Principles of Good Corporate Governance (Appendix 5.1 of the Capital Market Rules) regarding the Remuneration Statement.
The Directors are required by the Insurance Business Act (Cap. 403 of the Laws of Malta) and the Companies Act (Cap. 386 of the Laws of Malta) to prepare financial statements which give a true and fair view of the state of affairs of the Group as at the end of each financial year and of the profit or loss for that year.
In preparing the financial statements, the Directors are responsible for:
•ensuring that the financial statements have been drawn up in accordance with International Financial Reporting Standards (IFRS’s) as adopted by the EU;
•selecting and applying appropriate accounting policies;
•making accounting estimates that are reasonable in the circumstances; and
•ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Group will continue in business as a going concern.
The Directors are also responsible for designing, implementing and maintaining internal controls relevant to the preparation and the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Insurance Business Act (Cap. 403 of the Laws of Malta) and the Companies Act (Cap. 386 of the Laws of Malta). They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In addition, the Directors are required to ensure that the Company has, at all times, complied with and observed the various requirements of the Insurance Business Act (Cap. 403 of the Laws of Malta) and that LifeStar Health Limited has, at all times, complied with and observed the various requirements of the Insurance Distribution Act (Cap. 487 of the Law of Malta).
Information provided in accordance with Capital Markets Rule 5.70.1
There were no material contracts to which the Company, or its subsidiary was a party, and in which anyone of the Company’s Directors was directly or indirectly interested.
Auditors
Grant Thornton have intimated their willingness to continue in office.
A resolution to reappoint Grant Thornton as auditor of the Company will be proposed at the forthcoming annual general meeting.
Information provided in accordance with Capital Markets Rule 5.64
The authorised share capital of the Company is fifty million Euro (€50,000,000) divided into three hundred and fifty three million, four hundred and eleven thousand, nine hundred and forty two (353,411,942) ordinary shares of fourteen Euro cents (€0.141478) each share.
The issued share capital of the Company is nine million, one hundred and sixty nine thousand, eight hundred and seventy Euro and sixty eight cents (€9,169,870) divided into sixty four million, eight hundred and fourteen thousand, eight hundred and seventeen (64,814,817) ordinary shares of fourteen Euro cents (€0.141478) each share, which have been subscribed for and allotted fully paid-up.
The issued shares of the Company consist of one (1) class of ordinary shares with equal voting rights attached. The shares carry equal rights to participate in any distribution of dividends declared by the Company. Each share shall be entitled to one (1) vote at the meetings of the shareholders. The shares are freely transferable in accordance with the rules and regulations of the Malta Stock Exchange, as applicable from time to time, and in terms of the provisions of the Articles of Association of the Company.
The Directors confirm that as at 31 December 2023, LifeStar Holding p.l.c., and GlobalCapital Financial Management Limited (as nominee for client accounts), held a shareholding in excess of 5% of the total issued share capital.
Information provided in accordance with Capital Markets Rule 5.64 (continued)
The Nominations and Remuneration Committee of the Board of Directors currently consists solely of Non-Executive Directors. It has the responsibility to assist and advise the Board of Directors on matters relating to the remuneration of the Board of Directors and senior management, in order to motivate and retain executives and ensure that the Company is able to attract the best talents in the market in order to maximise shareholder value.
The rules governing the appointment and replacement of the Company’s Directors are contained in Articles 107 to 124 of the Company’s Articles of Association. Directors of the Company are elected on an individual basis by ordinary resolution of the Company in general meeting. The order of priority of the said ordinary resolutions shall be determined and decided by lot. The Company may, in accordance with article 140 of the Companies Act (Cap. 386 of the Laws of Malta) remove a Director by ordinary resolution taken at a general meeting at any time prior to the expiration of his term of office, if any.
The Directors can only issue shares following an extraordinary resolution passed in the Annual General Meeting. This and other powers vested in the Company’s Directors are confirmed in Articles 132 to 142 of the Company’s Articles of Association.
It is hereby declared that as at 31 December 2023, the information required under Capital Markets Rules 5.64.4, 5.64.5, 5.64.6, 5.64.7, 5.64.10 and 5.64.11 is not applicable to the Company.
Information pursuant to Capital Markets Rule 5.70.2
The Company Secretary is Dr Clinton Calleja and the registered office is LifeStar Insurance p.l.c., Testaferrata Street, Ta’ Xbiex, Malta.
Statement by the Directors pursuant to Capital Markets Rule 5.68
We, the undersigned, declare that to the best of our knowledge, the financial statements prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its subsidiaries included in the consolidation taken as a whole, and that this Director’s report includes a fair review of the performance of the business and the position of the Company and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Signed on behalf of the Board of Directors on 08 July 2024 by Prof Paolo Catalfamo (Chairman) and Mr. Joseph C Schembri (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Introduction
Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority, the Company whose equity securities are listed on a regulated market should endeavour to adopt the Code of Principles of Good Corporate Governance (“the Code”) as contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules. In terms of the Capital Markets Rules, the Company is hereby reporting on the extent of its adoption of the Code.
The Company acknowledges that the Code does not prescribe mandatory rules but recommends principles so as to provide proper incentives for the Board of Directors (“the Board”) and the Company’s management to pursue objectives that are in the interests of the Company and its shareholders. Good corporate governance is the responsibility of the Board, and in this regard the Board has carried out a review of the Company’s compliance with the Code during the period under review, and hereby provides its report thereon.
As demonstrated by the information set out in this statement, the Company believes that during the reporting period, it has been in full compliance with the Code.
Compliance with the Code (continued)
Principles One and Four: The Board (continued)
All directors are required to:
•Exercise prudent and effective controls which enable risk to be assessed and managed in order to achieve continued prosperity to the Company;
•Be accountable for all actions or non-actions arising from discussion and actions taken by them or their delegates;
•Determine the Company’s strategic aims and the organisational structure;
•Regularly review management performance and ensure that the Company has the appropriate mix of financial and human resources to meet its objectives and improve the economic and commercial prosperity of the Company;
•Acquire a broad knowledge of the business of the Company;
•Be aware of and be conversant with the statutory and regulatory requirements connected to the business of the Company;
•Allocate sufficient time to perform their responsibilities; and
•Regularly attend meetings of the board
In terms of the Capital Markets Rules 5.117 – 5.134 the Board has established an Audit committee to monitor the Company’s present and future operations, threats and risks in the external environment and current and future strengths and weaknesses. The Audit committee ensures that the Company has the appropriate policies and procedures in place to ensure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical standards. The Audit committee has a direct link to the board and is represented by the Chairman of the Audit committee in all Board meetings.
Compliance with the Code (continued)
Principle Three: Composition of the Board (continued)
The Board has the overall responsibility for the activities carried out within the Company and the Group and thus decides on the nature, direction, strategy and framework of the activities and sets the objectives for the activities.
The Board is composed of five (5) Directors (one (1) of whom is the Chairman), with four (4) being non-executive Directors and one being an executive Director. The present mix of executive and non-executive directors is considered to create a healthy balance and serves to unite all stakeholders’ interests, whilst providing direction to the Company’s management to help maintain a sustainable organisation.
The non-executive directors constitute a majority on the Board and their main functions are to monitor the operations of the Chief Executive Officer and the performance of the occupier of the role. For the purpose of Capital Markets Rules 5.118 and 5.119, Mr Mark J Bamber, Mr Joseph C Schembri, Mr Andreas Shakallis and Mr Jean Paul Fabri are the non-executive directors which are deemed independent. Each director is mindful of maintaining independence, professionalism and integrity in carrying out his duties, responsibilities and providing judgement as a director of the Company.
The Board considers that none of the independent directors of the Company:
Prof. Paolo CatalfamoExecutive Director
Mr. Joseph C. SchembriIndependent, Non-executive Director
Mr. Mark J. Bamber Independent, Non-executive Director
Mr. Andreas ShakallisIndependent, Non-executive Director
Mr. Jean Paul FabriIndependent Non-Executive Director
Compliance with the Code (continued)
Principle Five: Board Meetings
The Directors meet regularly to dispatch the business of the Board. The Directors are notified of forthcoming meetings by the Company Secretary with the issue of an agenda and supporting Board papers, which are circulated in advance of the meeting. Board Meeting are also convened at short notice, from time-to-time, depending on the urgency, with which the items of the agenda would require Board discussion. Minutes are prepared during the Board meetings recording inter alia attendance, and resolutions taken at the meeting. The Chairman ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all Directors every opportunity to contribute to relevant issues on the agenda. The agenda for the meeting seeks to achieve a balance between long-term strategic and short-term performance issues.
The Board of Directors meets in accordance with a regular schedule of meetings and reviews and evaluates the Group’s strategy, major operational and financial plans, as well as new material initiatives to be undertaken by the Group. The Board of Directors meets formally at least once every quarter and at other times on an ‘as and when’ required basis.
During the period under review, the Board of Directors met sixteen (16) times. The following Directors attended Board meetings as follows:
Compliance with the Code (continued)
Principle Seven: Evaluation of the Board’s Performance
The Chairman of the Board informally evaluates the performance of the Board members, which assessment is followed by discussions within the Board. Through this process, the activities and working methods of the Board and each committee member are evaluated. Amongst the things examined by the Chairman through his assessment are the following: how to improve the work of the Board further, whether or not each individual member takes an active part in the discussions of the Board and the committees; whether they contribute independent opinions and whether the meeting atmosphere facilitates open discussions. Under the present circumstances the Board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role as the Board’s performance is furthermore also under the scrutiny of the shareholders. On the other hand, the performance of the Chairman is evaluated by the Board of Directors of the ultimate controlling party, taking into account the manner in which the Chairman is appointed. The self-evaluation of the Board has not led to any material changes in the Company’s governance structures and organisations.
MembersCommittee meetings attended
Joseph Schembri10
Mark J. Bamber9
Joseph M. Rizzo [retired from office 19th June 2023]5
Andreas Shakallis [appointed 14th July 2023]5
Compliance with the Code (continued)
Principle Eight: Committees (continued)
Audit and Risk Committee (continued)
The Audit Committee is chaired by Joseph C. Schembri, who is an auditor by profession, and is considered to be an independent non-executive member possessing the necessary competence in auditing and accounting as required in terms of the Capital Markets Rules. All the members that served on the Audit Committee were deemed by the Board of Directors to be Independent Non-Executive Directors, and the Board of Directors felt that as a whole the Audit Committee had the necessary skills, qualifications and experience in satisfaction of the Capital Markets Rules.
The terms of reference of the Audit Committee include, inter alia, its support to the Board of the Company in its responsibilities in dealing with issues of risk management, control and governance and associated assurance. The Board has set formal terms that establish the composition, role , function, the parameters of the Audit Committee’s remit as well as the basis for the processes that it is required to comply with. The Terms of Reference of the Audit Committee, which were approved by the Malta Financial Services Authority, are modelled on the principles set out in the Capital Markets Rules themselves.
Principally, the Audit Committee deals with and advises the Board on the following matters:
Compliance with the Code (continued)
Principle Eight: Committees (continued)
Nominations and Remuneration Committee (continued)
Remuneration Function
The Remuneration and Nomination Committee monitors, reviews, and advises on the Company’s remuneration policy as well as approves the remuneration packages of senior executives and management. The main activities of the Remuneration and Nomination Committee include devising appropriate policies and remuneration packages to attract, retain, and motivate Directors and senior management of a high calibre in order to well position the Group within the insurance market and its areas of business.
In the fulfilment of its remuneration matters oversight, the Committee monitors, reviews and advises on the Group’s Remuneration Policy, as well as approves the remuneration packages of senior executives and Management.
Nominations Function
The Remuneration and Nominations Committee is also responsible for making recommendations for appointment to the Board and for reviewing in order to ensure that appointments to the Boards are conducted in a systematic, objective and consistent manner. It is also responsible for the review of performance of the Company’s Board members and committees, the appointment of senior executives and management and the development of a succession plan for senior executives and management. Additionally, this committee monitors, reviews and advises on the Company’s remuneration policy as well as approves the remuneration packages of senior executives and management.
MembersRole
Roberto Apap BolognaChief Executive Officer LifeStar Holding p.l.c. and Acting Chief Executive Officer LifeStar Insurance plc
Adriana Zarb AdamiManaging Director LifeStar Health Limited
Konrad CamilleriManaging Director GlobalCapital Financial Management Limited
Amanda MifsudActing Chief Financial Officer
Adrian MizziChief Information Officer
Jonathan CamilleriChief Operations Officer
Michael SchembriHead Legal and Compliance
Compliance with the Code (continued)
Principle Eight: Committees (continued)
Internal controls
The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The Company has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve its objectives.
The Group encompasses different licensed activities regulated by the MFSA. These activities include the carrying on of long-term business of insurance under the Insurance Business Act (Cap. 403 of the Laws of Malta); acting as an agent for sickness and accident insurance in terms of the Insurance Distribution Act (Cap. 487 of the Laws of Malta); and the provision of investment services and advice in terms of the Investment Services Act (Cap. 370 of the Laws of Malta). The Board of Directors has continued to ensure that effective internal controls and processes are maintained to support sound operations. The regulated subsidiaries have also set up Committees to further enhance internal controls and processes. These include the setting up of an Executive Committee, Asset and Liability Committee and the Risk Management Committee at life company level. Policies such as Risk Compliance Monitoring Programmes, Risk Management, Complaints, Data Protection, Internal Audit and Anti-Money Laundering Policies and Procedures as well as a Conflict of Interest Policy have been adopted.
The Directors are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against normal business risks. During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Company.
The Company has implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include physical controls, segregation of duties and reviews by management, internal audit and the external auditors. The Internal Audit Department monitors and reviews the Group’s compliance with policies, standards and best practice in accordance with an Internal Audit Plan approved by the Audit Committee. KPMG fulfil the functions of internal auditors of the Company.
Principle Nine and Ten: Relations with Shareholders and with the Market, and Institutional Shareholders
The Company recognises the importance of maintaining a dialogue with its shareholders and of keeping the market informed to ensure that its strategies and performance are well understood. During the period under review, the Company has maintained an effective communication with the market through a number of channels, including Company announcements and Circulars.
 
The Company shall also communicate with its shareholders through the Company’s Annual General Meeting (“AGM”) to be held later in 2024, which will include resolutions such as the approval of the Annual Report and Audited Financial Statements for the year ended 31 December 2023, the election/re-election of Directors, the determination of the maximum aggregate emoluments that may be paid to Directors, the appointment of auditors and the authorisation of the Directors to set the auditors’ remuneration, as well as any other resolution as may necessary in terms of law, the Capital Markets Rules, or as required by the Company. In terms of Rule 12.26L of the Capital Markets Rules, an annual general meeting shall have the right to hold an advisory vote on the remuneration report of the most recent financial year. Both the Chairman of the Board and the Chairman of the Audit Committee will be available to answer shareholder questions, which may be put forward in terms of Rule 12.24 of the Capital Markets Rules.
 
Apart from the AGM, the Group communicates and shall communicate with its shareholders through the publication of its Annual Report and Financial Statements, the publication of interim results, updates and articles on the Group’s website, the publication of Group announcements and press releases.
Principle Nine and Ten: Relations with Shareholders and with the Market, and Institutional Shareholders (continued)
The Office of the Company Secretary is also available to act as a liaison of communication between the Company and its investors. Individual shareholders can raise matters relating to their shareholdings and the business of the Company at any time throughout the year, and are given the opportunity to ask questions at the AGM or to submit written questions in advance.
 
As provided by the Companies Act (Cap. 386), minority shareholders may convene Extraordinary General Meetings.
Remuneration Committee
The remuneration functions of the Remuneration and Nominations Committee were performed by Mark Bamber as Chairman, and Joseph C. Schembri and Jean-Paul Fabri as members.
Remuneration policy
The Company’s remuneration of its Directors and senior executives is based on the remuneration policy adopted and approved by the shareholders of the Company at the annual general meeting. The Remuneration Policy of the Company is available for inspection on the Company’s website. During the latest general meeting held on 19 June 2023 the meeting approved the Remuneration Statement published as part of the annual report of the Company for the financial year ended 31 December 2023.
The Remuneration Policy of the Company is intended to provide an over-arching framework that establishes the principles and parameters to be applied in determining the remuneration to be paid to any member of the Board of Directors, and the senior executives. The policy describes the components of such remuneration and how this contributes to the Company’s business strategy, in the context of its long term sustainable value creation. This remuneration policy is divided into five (5) parts distinguishing between directors, senior management, employees, intermediaries and service providers.
Remuneration payable to Directors
Remuneration payable to executives
•Chief Executive Officer: The remuneration of the Chief Executive Officer will consist of a salary, and any performance related bonuses and any fringe benefits will be at the sole discretion of the Chairman and submitted for approval of the Remuneration and Nominations Committee. The Chairman (directly or through the Chief Finance Officer) will forward any recommendations for any changes to the remuneration of the Chief Executive Officers for the consideration of the Remuneration and Nominations Committee which will in turn review any such request and forward any request to the Board for the Board’s final approval. Ms Cristina Casingena occupied the roles of Managing Director and Chief Executive Officer up till her resignation.
•Head/Senior Manager: The remuneration of the Head / Senior Managers will be at the sole discretion of the Chairman and/or the Chief Executive Officer without the need to refer to the Remuneration and Nominations Committee or the Board of Directors subject that the remuneration does not exceed a yearly remuneration of Fifty Thousand Euros (€50,000). Any amount over this threshold will require the endorsement of the Remuneration Committee.
Senior executive service contracts
All senior executive contracts are of an indefinite duration and subject to the termination notice periods prescribed by law.
Remuneration Report
In terms of Rule 12.26K of the Capital Markets Rules, the Company is also required to draw up an annual remuneration report (the “Remuneration Report”), which report is to:
i.provide an overview of the remuneration, including benefits in whatever form, awarded or due to members of the Board of Directors and the CEO during the financial year under review; and
ii.explain whether any deviations have been made from the Remuneration Policy of the Company.
In this respect, the Company is hereby producing its remuneration report following the approval and entry into effectiveness, in October 2020, of the Remuneration Policy described in the preceding sections.
Remuneration paid to Directors (including the CEO)
All remuneration for directors was in conformity with this policy. The remuneration paid to individual Directors during the year under review was as follows:
NamePosition20232022
€€
Paolo Catalfamo:Executive Director and Chairman158,68342,825
Joseph C Schembri:Independent Non-Executive Director28,8008,993
Joseph M Rizzo:Independent Non-Executive Director13,00018,000
Mark J Bamber:Independent Non-Executive Director23,00015,000
Jean-Paul FabriIndependent Non-Executive Director9,500-
Andreas ShakallisIndependent Non-Executive Director10,688-
Remuneration report (continued)
23
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Senior executive service contracts
Remuneration paid to Directors (including the CEO) (continued)
The total emoluments received by the Chief Executive Officer, who is also an Executive Director for the financial years 2023 and 2022 were as follows:
20232022
FixedVariableFixedVariable
€€€€
Ms. Cristina Casingena69,083-100,512-
The remuneration paid to the Directors covers both their role as directors of Company and their role as members of chairpersons or members of any sub-committees of the Company, as well as their position as directors of subsidiaries forming part of the Group.
It is the shareholders, in terms of the memorandum and articles of association of the company, who determine the maximum annual aggregate emoluments of the directors by resolution at the annual general meeting of the company. Remuneration payable to directors (in their capacity as directors) is reviewed as and when necessary and is not linked to the share price or the company’s performance. These are benchmarked against market practice for major local companies of similar size and complexity.
The aggregate amount fixed for this purpose during the last annual general meeting of LifeStar Insurance plc was €390,000. A maximum annual aggregate emoluments of the Directors of the Company shall be fixed at the upcoming Annual General Meeting.
The aggregate emoluments of the Directors (including the CEO) in respect of their role as directors of the Company and, where applicable, as members of sub-committees of the Board of Directors of the Company and non-executive directors of LifeStar Health Limited, amounted to €330,954. No variable remuneration is paid to Directors in their capacity as Directors of the Company. The Directors do not expect the abovementioned maximum aggregate remuneration limit of €390,000 to be exceeded during the financial year ending 31 December 2024.
The Remuneration Committee is satisfied that the fixed remuneration for the year under review is in line with the core principles of the Remuneration Policy applicable during the year under review, including giving due regard to market conditions and remuneration rates offered by comparable organisations for comparable roles.
Remuneration paid to Senior Management
Remuneration paid to Senior Management amounts to €622,689 and excludes the fringe benefit for health insurance and life cover as described above.
Decision-making with respect to the Remuneration Policy
Whereas the Board of Directors is responsible for determining the Remuneration Policy of the Company, the Remuneration and Nominations Committee, acting in its function as the Remuneration Committee, is, in turn, responsible for overseeing and monitoring its implementation and ongoing review thereof. This policy is to be reviewed annually by the Remuneration and Nominations Committee of the Company. The annual review will ensure that the policy remains relevant for the Company and that any improvements by way of amendments are indeed affected.
Remuneration report (continued)
24
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Decision-making with respect to the Remuneration Policy (continued)
In evaluating whether it is necessary or beneficial to supplement or otherwise alter the Remuneration Policy of the Company, the Remuneration Committee have regard to, inter alia, best industry and market practice on remuneration, the remuneration policies adopted by companies operating in the same industry sectors, as well as legal and, or statutory rules, recommendations or guidelines on remuneration, including but not limited to the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of the Capital Markets Rules of the Malta Financial Services Authority.
Whilst members of the Remuneration Committee may be present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed at a meeting of such Committee, any decision taken by the Committee in this respect shall be subject to the approval of the Board of Directors. At a meeting of the Board of Directors, no Director may be present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed.
Other information on remuneration in terms of Appendix 12.1 of the Capital Markets Rules
In terms of the requirements within Appendix 12.1 of the Capital Market Rules, the following table presents the annual change of remuneration, of the company’s performance, and of average remuneration on a full-time equivalent basis of the company’s employees (other than directors) over the two most recent financial years. The Company’s non-executive Directors, have been excluded from the table below since they have a fixed fee as described above.
Position20232022Change
€€%
Annual aggregate employee remuneration1,766,200972,144+82
Employee remuneration (excluding CEO)1,677,434861,277+94
CEO remuneration88,766100,512-12
Company performance, profit after tax (restated balance)1,371,271(2,064,443)+166
Average employee remuneration (excluding CEO) – full-time equivalent
38,12323,924+59
The contents of the Remuneration Report have been reviewed by the external auditor to ensure that the information required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets rules have been included.
Profit / (loss) per share (cents)1.6(3.6)2.1(3.2)
ConsolidatedHolding Company
Notes20232022 (restated)1 January 2022 (restated)20232022 (restated)1 January 2022 (restated)
€ € €€ € €
ASSETS
Intangible assets113,568,1932,649,7382,243,0253,216,5342,297,4121,911,391
Right-of-use asset129,9251,5307,6509,9251,5307,650
Property, plant and equipment133,590,7443,616,2563,585,9003,588,2013,614,5083,584,779
Investment property1415,851,43915,835,73116,208,89515,851,43915,835,73116,208,895
Investment in group undertakings15---1,048,2181,048,2181,048,218
Other investments 1696,977,45687,429,20491,219,72696,977,45687,429,20491,219,726
Taxation receivable338,568611,245346,110321,899595,285346,110
Deferred tax asset211,236,9861,645,016-1,236,9861,645,016-
Reinsurance contract assets3.52,565,6012,610,9114,360,5362,565,6012,610,9114,360,536
Receivables:
-Trade and other receivables1712,609,33512,471,99113,159,73312,847,43112,728,79913,006,471
-Prepayments and accrued income173,529,2242,682,7681,596,5142,939,6992,087,4081,596,514
Cash and cash equivalents 254,921,3025,962,29411,494,8993,497,0794,851,1359,886,689
Asset held-for-sale14--190,002--190,002
Total assets145,198,773135,516,684144,412,990144,100,468134,745,157143,366,981
ConsolidatedHolding Company
Notes20232022 (restated)1 January 2022 (restated)20232022 (restated)1 January 2022 (restated)
€ € €€ € €
Liabilities
Insurance contract liabilities3.5105,163,29197,188,780103,686,727105,163,29197,188,780103,686,727
Investment contract liabilities5,419,5025,337,0194,919,9485,419,5025,337,0194,919,948
Lease liability129,4571,78013,3919,4571,78013,391
Taxation payable3,635,4903,626,8983,665,5323,528,0063,527,9973,527,997
Deferred tax liability211,496,2121,494,2661,669,7031,487,1901,488,5291,668,480
Debt securities in issue222,182,9452,144,9492,105,2572,182,9452,144,9492,105,257
Payables:
-Payables due to immediate parent undertaking2333,13433,91970,674---
-Other payables23582,902101,878153,16954,413101,878153,169
Accruals and deferred income23849,823815,957947,334336,919451,043648,790
Total liabilities119,372,756110,745,446117,231,735118,181,723110,241,975116,723,759
ConsolidatedHolding Company
Notes20232022 (restated)1 January 2022 (restated)20232022 (restated)1 January 2022 (restated)
€ € €€ € €
Capital and reserves
Share capital189,169,8709,169,8709,169,8709,169,8709,169,8709,169,870
Other reserves201,572,9881,528,6961,604,2931,409,8071,365,5151,441,112
Capital redemption reserve800,000800,000800,000800,000800,000800,000
Retained earnings 14,283,15913,272,67215,607,09214,539,06813,167,79715,232,240
Total equity25,826,01724,771,23827,181,25525,918,74524,503,18226,643,222
Total equity and liabilities145,198,773135,516,684144,412,990144,100,468134,745,157143,366,981
Share capitalOther reservesCapital redemption reserveRetained earningsTotal
€€€€€
Restated balance as at 1 January 20239,169,8701,528,696800,00013,272,67224,771,238
Profit for the year---1,010,4871,010,487
Other comprehensive gain for the year -44,292--44,292
Total comprehensive gain/(loss) for the year
-44,292-1,010,4871,054,779
Dividend declared-----
Balance as at 31 December 20239,169,8701,572,988800,00014,283,15925,826,017
Share capitalOther reservesCapital redemption reserveRetained earningsTotal
€€€€€
Balance as at 1 January 20229,169,87013,138,946800,0009,055,09932,163,915
Impact of initial application of IFRS 17-(11,534,653)-6,551,993(4,982,660)
Restated balance as at 1 January 20229,169,8701,604,293800,00015,607,09227,181,255
Loss for the year---(2,334,420)(2,334,420)
Other comprehensive gain for the year -(75,597)--(75,597)
Total comprehensive gain/(loss) for the year
-(75,597)-(2,334,420)(2,410,017)
Dividend declared-----
Balance as at 31 December 20229,169,8701,528,696800,00013,272,67224,771,238
Share capitalOther reservesCapital redemption reserveRetained earningsTotal
€€€€€
Restated balance as at 1 January 20239,169,8701,365,515800,00013,167,79724,503,182
Profit for the year---1,371,271 1,371,271
Other comprehensive gain for the year -44,292--44,292
Total comprehensive gain/(loss) for the year-44,292-1,371,2711,415,563
Dividend declared-----
Balance as at 31 December 20239,169,8701,409,807800,00014,539,06825,918,745
Share capitalOther reservesCapital redemption reserveRetained earningsTotal
€€€€€
Balance as at 1 January 20229,169,87012,975,765800,0008,680,24731,625,882
Impact of initial application of IFRS 17-(11,534,653)-6,551,993(4,982,660)
Restated balance as at 1 January 20229,169,8701,441,112800,00015,232,24026,643,222
Loss for the year---(2,064,443)(2,064,443)
Other comprehensive gain for the year -(75,597)--(75,597)
Total comprehensive gain/(loss) for the year-(75,597)-(2,064,443)(2,140,040)
Dividend declared-----
Balance as at 31 December 20229,169,8701,365,515800,00013,167,79724,503,182
Notes20232022 Restated20232022 Restated
€€€€
Cash flows (used in)/ generated from operations246,884,116 (6,227,168) 5,910,150 (7,615,317)
Dividends received589,706697,214589,706697,214
Interest received844,406950,480844,406950,480
Interest paid----
Tax refund on tax at source----
Tax refund/ (paid)325,692 (257,648)387,904 (122,636)
Net cash flows generated from operating activities
8,643,920 (4,837,122) 7,732,166 (6,090,259)
Notes20232022 (restated)20232022 (restated)
€€€€
Cash flows (used in)/ generated from investing activities
Dividends received from subsidiary--596,368 500,000
Purchase of intangible assets11(1,158,332)(645,551)(1,158,332)(627,748)
Purchase of property, plant and equipment 13(61,832)(156,270)(60,295)(155,012)
Purchase of investments at fair value through profit or loss
16(18,096,418)(8,927,610)(18,096,418)(9,360,923)
Purchase of available-for-sale investments16-(433,313)--
Purchase of investments in equity measured at cost-(1,194,372)--
Proceeds on disposal of investments at fair value through profit or loss168,197,009 9,478,885 8,197,009 9,478,885
Proceeds on disposal of available-for-sale investments16-482,447 -482,447
Proceeds from disposal of other investments16- -- -
Net proceeds from other investments - loans and receivables16-10,766 -10,766
Proceeds on disposal of assets held for sale-190,002 -190,002
Proceeds on disposal of term deposits161,500,000 600,000 1,500,000 600,000
Net cash flows used in generated from investing activities(9,619,573)(595,016)(9,021,668)1,118,417
ConsolidatedHolding Company
Notes20232022 (restated)20232022 (restated)
€€€€
Cash flows (used in)/ generated from financing activities
Interest paid on bonds(97,250)(96,962)(97,250)(96,962)
Payment of lease liability(5,300)(6,442)(5,300)(6,442)
Proceeds from borrowings37,996 39,692 37,996 39,692
Payables to immediate parent(785)(36,755)--
Net cash flows (used in)/ generated from financing activities(65,339)(100,467)(64,554)(63,712)
Net movement in cash and cash equivalents(1,040,992)(5,532,605)(1,354,056)(5,035,554)
Cash and cash equivalents as at the beginning of the year 5,962,294 11,494,899 4,851,1359,886,689
Cash and cash equivalents as at the end of the year254,921,302 5,962,294 3,497,0794,851,135
The material accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, except for those adopted for the first time during 2023.
The consolidated financial statements have been prepared from the financial statements of the companies comprising the group as detailed in notes to the consolidated financial statements.
1.Basis of preparation
LifeStar Insurance p.l.c. was incorporated on 21 December 2001 as an insurance company. The registered address and principal place of business of the company is LifeStar, Testaferrata Street, Ta’ Xbiex.
These financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU (EU IFRS’s), the Insurance Business Act (Cap. 403 of the Laws of Malta) and the Companies Act (Cap. 386). The financial statements are prepared under the historical cost convention, as modified by the fair valuation of investment property and financial assets and financial liabilities at fair value through profit or loss.
The preparation of financial statements in conformity with EU IFRS’s requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies of the company and the subsidiary (the Group). The areas involving a higher degree of judgement or complexity are disclosed in Note 1 to these financial statements.
The Group’s statement of financial position is presented in increasing order of liquidity, with additional disclosures on the current or non-current nature of the Group’s assets and liabilities provided within the notes to the financial statements.
LifeStar Insurance p.l.c.’s intermediate parent company (Note 30) prepares consolidated financial statements in accordance with the Companies Act (Cap. 386 of the Laws of Malta). LifeStar Insurance p.l.c. also prepares consolidated financial statements which include the results of the Group, which comprises the Company and its subsidiary as disclosed in Note 14.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
-Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
-Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
-Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.
1.Basis of preparation (continued)
Appropriateness of going concern assumption in the preparation of the financial statements
The volatility in the financial markets had a significant impact on the Group’s financial performance for the financial year ending 31 December 2023, and will continue to impact its performance going forward. Furthermore, an analysis was carried out on the credit rating of the main counterparties and no significant downgrades were noted since 31 December 2023. Such analysis was also extended to analyse the effect on the Solvency Capital Requirements (the “SCR”) of the Group by reference to stressed scenarios in the latest ORSA report prepared by the Group. Taking into consideration the current laws and regulations and the result from the aforementioned stressed scenarios. However, the Company continues to explore any and all ways possible to strengthen its capital base.
Having concluded this assessment the Directors expect that the Group will be able to sustain its operations over the next twelve months and in the foreseeable future and consider the going concern assumption in the preparation of the Group’s financial statements as appropriate as at the date of authorisation for issue of these financial statements.
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Changes to Classification and Measurement (continued)
The key principles of IFRS 17 are that a company:
•Identifies insurance contracts as those under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder;
•Separates specified embedded derivatives, distinct investment components and distinct goods or services other than insurance contract services from insurance contracts and accounts for them in accordance with other standards;
•Divides the insurance and reinsurance contracts into groups it will recognise and measure;
•Recognises and measures groups of insurance contracts at:
For all groups of insurance contracts measured under the general measurement model
(“GMM”) and the variable fee approach (“VFA”):
-A risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment cash flows in a way that is consistent with observable market information plus;
-An amount representing the unearned profit in the group of contracts (the contractual service margin or CSM).
For all groups of insurance contracts measured under the premium allocation approach
(“PAA”):
-The liability for remaining coverage reflects premiums received less deferred insurance acquisition cash flows and less amounts recognised in revenue for insurance services provided;
-Measurement of the liability for remaining coverage includes an adjustment for the time value of money and the effect of financial risk where the premium due date and the related period of services are more than 12 months apart;
-Measurement of the liability for remaining coverage involves an explicit evaluation of risk adjustment for non-financial risk when a group of contracts is onerous in order to calculate a loss component (previously these may have formed part of the unexpired risk reserve provision).
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Changes to Classification and Measurement (continued)
For all groups of insurance contracts:
-Measurement of the liability for incurred claims (previously claims outstanding and incurred-but-not reported (IBNR) claims) is determined on a discounted probability-weighted expected value basis and includes an explicit risk adjustment for non-financial risk. The liability includes the Company’s obligation to pay other incurred insurance expenses;
-Recognises profit from a group of insurance contracts over each period the Company provides insurance contract services, as the Company is released from risk. If a group of contracts is expected to be onerous (i.e., loss-making) over the remaining coverage period, the Company recognises the loss immediately;
-Recognises an asset for insurance acquisition cash flows in respect of acquisition cash flows paid, or incurred, before the related group of insurance contracts is recognised. Such an asset is derecognised when the insurance acquisition cash flows are included in the measurement of the related group of insurance contracts.
The Company’s classification and measurement of insurance and reinsurance contracts and investment contracts with discretionary participation features is explained in Note 2.
Changes to Presentation and Disclosure
For presentation in the statement of financial position, the Company aggregates portfolios of insurance contracts issued (including investment contracts with discretionary participation features), and reinsurance contracts held and presents separately:
•Portfolios of insurance contracts issued that are assets;
•Portfolios of reinsurance contracts held that are assets;
•Portfolios of insurance contracts issued that are liabilities;
•Portfolios of reinsurance contracts held that are liabilities.
The portfolios referred to above are those established at initial recognition in accordance with the IFRS 17 requirements.
The line-item descriptions in the statement of profit or loss and other comprehensive income have been changed significantly compared with last year. Previously the Company reported the following line items:
•Gross premiums written;
•Outward reinsurance premiums;
•Benefits and claims incurred;
•Change in other technical provisions.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Changes to Presentation and Disclosure (continued)
Instead, IFRS 17 requires separate presentation of:
•Insurance revenue.
•Insurance service expense.
•Allocation of reinsurance premiums.
•Amounts recoverable from reinsurers for incurred claims.
•Insurance finance income or expenses.
•Reinsurance finance income or expenses.
The Company provides disaggregated qualitative and quantitative information in the notes to the financial statements about:
•Amounts recognised in its financial statements from insurance contracts.
•Significant judgements, and changes in those judgements, when applying the standard.
Transition
Full Retrospective Approach
Contracts measured under the PAA
On transition to IFRS 17, the Company has applied the full retrospective approach for contracts measured under the PAA.
The Company has applied the full retrospective approach on transition for all groups of insurance and reinsurance contracts containing contracts with short-term coverage period not extending beyond one year. For these short-term contracts it was concluded that reasonable and supportable information that is necessary to apply the full retrospective approach is available.
Applying the full retrospective approach, the Company:
•has identified, recognised, and measured each group of insurance contracts as if IFRS 17 had always applied;
•has identified, recognised, and measured any assets for insurance acquisition cash flows as if IFRS 17 had always applied;
•derecognised previously reported balances that would not have existed if IFRS 17 had always been applied. These include deferred acquisition costs for insurance contracts and insurance receivables and payables. Under IFRS 17, they are included in the measurement of the insurance contracts;
•and recognised any resulting net difference in equity.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Transition (continued)
Fair Value Approach
Contracts not measured under the PAA
Changes in accounting policies resulting from the adoption of IFRS 17 for all groups of insurance and reinsurance contracts containing contracts with long-term coverage period extending beyond one year have been applied using the fair value transition approach as it was impracticable to apply the full retrospective approach.
Under this method these groups of insurance and reinsurance contracts on transition date, 1 January 2022, have been measured at fair value, any existing balances that would not exist had IFRS 17 applied have been derecognised and the resulting net difference recognised in equity.
The Company considered that the full retrospective approach was impracticable for long-term insurance and reinsurance contract groups. Specifically, the effects of retrospective application were not determinable because the information required has not been collected (or has not been collected with sufficient granularity) or was unavailable because of system limitations, data retention requirements or other reasons. Such information includes:
•expectations about a contract's profitability and risks of becoming onerous required for identifying groups of contracts;
•information about historical cash flows (including insurance acquisition cash flows and other cash flows incurred before the recognition of the related contracts) and discount rates required for determining the estimates of cash flows on initial recognition and subsequent changes on a retrospective basis;
•information required to allocate fixed and variable overheads to groups of contracts, because the Company's current accounting policies do not require such information; and
•information about certain changes in assumptions and estimates because they were not documented on an ongoing basis.
Under the fair value approach, the CSM (or the loss component) at 1 January 2022 was determined as the difference between the fair value of a group of contracts at that date and the fulfilment cash flows at that date. In determining fair value, the Company applied the requirements of IFRS 13 Fair Value Measurement, except for the demand deposit floor requirement, as is prescribed by IFRS 17.
Specifically, the fair value of the insurance contracts was measured as the sum of (a) the present value of the net cash flows expected to be generated by the contracts, determined using a discounted cash flow technique; and (b) an additional margin, determined using a cost of capital technique.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Transition (continued)
Fair Value Approach (continued)
Contracts not measured under the PAA (continued)
Differences in the Company's approach to measuring fair value from the IFRS 17 requirements for measuring fulfilment cash flows gave rise to a CSM at 1 January 2022. In particular, in measuring fair value the Company included a margin comprising a risk premium to reflect what market participants would demand as compensation for the uncertainty inherent in the cash flows and a profit margin to reflect what market participants would require in order to assume the obligations to service the insurance contracts. In determining this margin, the Company considered certain costs that are not directly attributable to fulfilling the contracts (e.g., general overheads) and certain risks that were not reflected in the fulfilment cash flows, among other factors that a market participant would consider.
When applying the fair value transition approach the Company aggregated contracts issued more than one year apart as it did not have reasonable and supportable information to aggregate groups into those including only contracts issued within one year.
For the application of the fair value approach, the Company used reasonable and supportable information available at the transition date in order to:
•Identify groups of insurance contracts;
•Determine whether any contracts are direct participating insurance contracts.
The discount rate when applying the fair value approach was determined at the transition date. The Company has applied the transition provisions of IFRS 17 and has not disclosed the impact of adoption of IFRS 17 on each financial statement line item. The effects of adopting IFRS 17 on the financial statements at 1 January 2022 are presented in the statement of changes in equity.
IFRS 9, Financial instruments
In the current year, the Group has applied IFRS 9 Financial instruments (as revised in 2014) and the related consequential amendments to other IFRSs, including IFRS 7 Financial Instruments: Disclosures. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement.
Based on the transitional provisions of the Standard, the Group has applied IFRS 9 retrospectively. The Group has elected not to restate its comparative information for the effects of IFRS 9 and such information continues to be reported under IAS 39. In terms of this approach, any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application is recognised in equity at the date of initial application.
The date of initial application is 1 January 2023. Additionally, the additional disclosures in IFRS 7 have not generally been applied to comparative information. Both the accounting policies under IAS 39 and the accounting policies under IFRS 9 are disclosed in the material accounting policies.
In accordance with the transitional provisions of the Standard, the Company has not applied the requirements of IFRS 9 to instruments that have already been derecognised as at 1 January 2023.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
The Company’s accounting policies for its financial instruments are disclosed in detail in the material accounting policies section.
The relevant changes in the estimation techniques or significant assumptions made during the reporting period as a result of the adoption of IFRS 9 are described in the material accounting policies and in the remaining notes to the financial statements.
IFRS 9 introduces new requirements for a) the classification and measurement of financial assets and financial liabilities, b) impairment for financial assets and c) general hedge accounting.
 
Original measurement category under IAS 39 New measurement category under IFRS 9 Group Original carrying amount under IAS 39 as of 31 December 2022 / New carrying amount under IFRS 9 as of 1 January 2023CompanyOriginal carrying amount under IAS 39 as of 31 December 2022 / New carrying amount under IFRS 9 as of 1 January 2023
Trade and other payables Financial liabilities at amortised cost Financial liabilities measured at amortised cost 917,835552,921
Intercompany LoansFinancial liabilities at amortised cost Financial liabilities measured at amortised cost 33,919-
Total951,754552,921
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
b.Classification and measurement of financial assets and impairment losses (continued)
The table below illustrates the classification and measurement of financial assets under IFRS 9 and IAS 39 at the date of initial application, 1 January 2023.
Original measurement category under IAS 39 New measurement category under IFRS 9Original carrying amount under IAS 39 as of 31 December 2022New carrying amount under IFRS 9 as of 1 January 2023
Available for sale (Foreign and Local Equity)
Available-for-sale investmentsFinancial assets measured at FVTPL2,759,1312,759,131
Investments in equity measured at cost
Cost less impairment losses Financial assets measured at FVTPL 2,076,5982,076,598
Financial assets at FVTPL - designated debt
Financial assets measured at FVTPL Financial assets measured at FVTPL 21,662,79521,662,795
Financial assets at FVTPL - designated equity
Financial assets measured at FVTPL Financial assets measured at FVTPL 24,275,66024,275,660
Financial assets at FVTPL - designated asset
Financial assets measured at FVTPL Financial assets measured at FVTPL 32,042,44332,042,443
Trade and other receivables (excluding prepayments)Loans and receivablesFinancial assets measured at amortised cost20,899,19920,899,199
Cash and cash equivalents Loans and receivablesFinancial assets measured at amortised cost5,962,2945,962,294
Total109,678,120109,678,120
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
b.Classification and measurement of financial assets and impairment losses (continued)
Company
Original measurement category under IAS 39 New measurement category under IFRS 9Original carrying amount under IAS 39 as of 31 December 2022New carrying amount under IFRS 9 as of 1 January 2023
Available for sale (Foreign and Local Equity)
Available-for-sale investmentsFinancial assets measured at FVTPL2,759,1312,759,131
Investments in equity measured at cost
Cost less impairment losses Financial assets measured at FVTPL 2,076,5982,076,598
Financial assets at FVTPL - designated debt
Financial assets measured at FVTPL Financial assets measured at FVTPL 21,662,79521,662,795
Financial assets at FVTPL - designated equity
Financial assets measured at FVTPL Financial assets measured at FVTPL 24,275,66024,275,660
Financial assets at FVTPL - designated asset
Financial assets measured at FVTPL Financial assets measured at FVTPL 32,042,44332,042,443
Trade and other receivables (excluding prepayments)Loans and receivablesFinancial assets measured at amortised cost19,223,05919,223,059
Cash and cash equivalents Loans and receivablesFinancial assets measured at amortised cost4,851,1354,851,135
Total106,890,821106,890,821
The cumulative effect of initially applying the Standard on 1 January 2023 to the financial assets did not result in any impact on the Company’s Retained earnings.
In terms of IFRS 9, for financial assets measured at amortised cost, the Company applies an Expected Credit Loss (ECL) model as opposed to an incurred credit loss model under IAS 39. There was no change to the loss allowance at 1 January 2023 as a result of the new impairment model in terms of IFRS 9.
Financial assets that were previously classified as loans and receivables are classified in terms of IFRS 9 as financial assets measured at amortised cost if they meet the conditions for such classification. There was no change in the carrying amount of these instruments at 1 January 2023 as a result of the new classification in terms of IFRS 9.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
b.Classification and measurement of financial assets and impairment losses (continued)
In accordance with the transitional provisions of IFRS 9, the Company assessed the business model in which the financial assets are held on the basis of the facts and circumstances at 1 January 2023 and the resulting classification is being applied retrospectively irrespective of the Company’s business model in prior reporting periods. There was no change in the carrying amount of these instruments at 1 January 2023 as a result of the new classification in terms of IFRS 9.
Debt and equity financial assets that were previously measured at FVTPL continue to be measured at FVTPL in terms of IFRS 9. As a result, there was no change in the carrying amount of these instruments at 1 January 2023 as a result of the new classification in terms of IFRS 9.
Financial assets that were previously classified as available for sale under IAS 39, are classified in terms of IFRS 9 as financial assets measured at FVTPL. The provision for changes in fair value of these assets were included within OCI, contrary to FVTPL as per in IFRS 9 requirements. The reclassification of this reserve from OCI to FVTPL amounted to €512,473 which is included in the Statement of Changes in Equity.
Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group
At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts
2.1Insurance contracts – Product lines
The following table summarises the characteristics of the Company’s insurance contracts that are measured under IFRS 17 and the measurement methods.
IFRS 17 Product lineContracts issuedMeasurement MethodInsurance finance income and expense
ParticipatingDirect participating insurance contracts and investment contracts with discretionary participation features where the Company shares the performance of underlying items with policyholders. Guaranteed returns may also be offered.Variable Fee ApproachProfit or loss
SavingsInvestment-linked insurance policies which have a life insurance coverage and an investment account balance. These contracts also include individual and group pension plans which are based on life insurance unit-linked policies.Variable Fee Approach Profit or loss
Other lifeGroup life and non-participating individual life insurance contracts. Individual insurance contracts include Term, Endowment and Whole of Life insurance contracts.Premium Allocation ApproachGeneral Measurement ModelProfit or loss
Sickness & Accident Individual insurance contracts providing coverage for health and personal accidents.General Measurement ModelProfit or loss
In addition to issuing insurance contracts, the Company holds reinsurance contracts to mitigate certain risk exposures.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.1Aggregation basis (continued)
The following table summarises the characteristics of the Company’s reinsurance contracts held and the measurement methods.
IFRS 17 Product lineReinsurance contracts held (underlying risk covered)Measurement MethodInsurance finance income and expense
LifeLife risk reinsurance contracts with underlying Unit Linked, Term, Endowment and Whole life insurance contracts.General Measurement ModelProfit or loss
Reinsurance treaties with underlying group life insurance contracts. Premium Allocation ApproachProfit or loss
Catastrophe cover reinsurance contract covering the aggregate risk of the underlying contracts arising from catastrophic events.Premium Allocation ApproachProfit or loss
2.2Definition and classification of insurance and reinsurance contracts
Insurance contracts are contracts under which the Company accepts significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder.
In making this assessment, all substantive rights and obligations, including those arising from law or regulation, are considered on a contract-by-contract basis at the contract issue date. The Company uses judgement to assess whether a contract transfers insurance risk (that is, if there is a scenario with commercial substance in which the Company has the possibility of a loss on a present value basis) and whether the accepted insurance risk is significant.
The Company determines whether it has significant insurance risk, by comparing benefits payable after an insured event with benefits payable if the insured event had not occurred.
The Company issues contracts under which it accepts significant insurance risk from its policyholders, which are classified as insurance contracts.
Some investment contracts contain discretionary participation features (“DPF”), whereby the investor has the right and is expected to receive, as a supplement to the amount not subject to the Company’s discretion, potentially significant additional benefits based on the return of specified pools of investment assets.
The Company issues investment contracts with DPF which are linked to the same pool of assets as insurance contracts and have economic characteristics similar to those of insurance contracts. The Company shall account for these contracts applying IFRS 17.
Contracts are classified as direct participating contracts or contracts without direct participation features.
A Contract with direct participation features is defined as one which, at inception, meets the following criteria:
•the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
•the Company expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying items; and
•the Company expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value of the underlying items.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.2Definition and classification of insurance and reinsurance contracts (continued)
These criteria are assessed at the individual contract level based on the Company’s expectations at the contract’s inception, and they are not reassessed in subsequent periods, unless the contract is modified. The variability in the cash flows is assessed over the expected duration of a contract. The duration of a contract takes into account all cash flows within the boundary.
The savings and pensions (unit linked) contracts as well as the profit sharing contracts held within the run-off portfolio of the Company will be classified as direct participating contracts.
Such contracts allow policyholders to participate in investment returns with the Company, in addition to compensation for losses from insured risk. These contracts are substantially investment service-related contracts where the return on the underlying items is shared with policyholders. Underlying items comprise specified portfolios of investment assets that determine amounts payable to policyholders.
In addition to issuing insurance contracts, the Company holds reinsurance contracts to mitigate certain risk exposures. A reinsurance contract is an insurance contract issued by a reinsurer to compensate the Company for claims arising from one or more insurance contracts issued by the Company. These are quota share and excess of loss reinsurance contracts. For reinsurance contracts held by the Company, even if they do not expose the issuer (the reinsurer) to the possibility of a significant loss they would still be deemed to transfer significant insurance risk if they transfer substantially all of the insurance risk relating to the reinsured portions of the underlying insurance contracts to the reinsurer.
2.Insurance contracts (continued)
2.3Separating components from insurance contracts (continued)
After separating any embedded derivatives or distinct investment components, the Company separates any promises to transfer to policyholders distinct goods or services other than insurance coverage and investment services and accounts for them as separate contracts with customers (i.e. not as insurance contracts). A good or service is distinct if the policyholder can benefit from it either on its own or with other resources that are readily available to the policyholder. A good or service is not distinct and is accounted for together with the insurance component if the cash flows and risks associated with the good or service are highly inter-related with the cash flows and risks associated with the insurance component, and the Company provides a significant service of integrating the good or service with the insurance component.
The Company issues some contracts which include an embedded derivative (surrender option) and/or investment component (account balance) under which the surrender value is paid to the policyholder on maturity or earlier lapse of the contract. These components have been assessed to meet the definition of a highly related and/or non-distinct component. The surrender option is interrelated with the value of the insurance contract and as such, is not separated. Concerning the account balance, the Company is unable to measure the investment component separately from the contract and the policyholder is unable to benefit from the investment component unless the insurance component is also present and as such they are not separated.
Once the embedded derivatives and investment components and the goods and services components are separated, the Company assesses whether the contract should be separated into several insurance components that, in substance, should be treated as separate contracts.
To determine whether a single legal contract does not reflect the substance of the transaction and its insurance components recognised and measured separately instead, the Company considers whether there is an interdependency between the different risks covered, whether components can lapse independently of each other and whether the components can be priced and sold separately.
When the Company enters into one legal contract with different insurance components operating independently of each other, insurance components are recognised and measured separately applying IFRS 17.
Concerning the contracts with supplementary benefits (riders) the Company has determined that the legal contract reflects the substance of the transaction and as such the insurance components are not separated.
The reinsurance contracts held by the Company, despite the fact that they may cover more than one types of risk exposures, reflect single contracts in substance and are treated as one single accounting contract for IFRS 17.
2.Insurance contracts (continued)
2.4Aggregation level (continued)
Each annual cohort is then further disaggregated into three groups of contracts:
•any contracts that are onerous on initial recognition;
•any contracts that, on initial recognition, have no significant possibility of becoming onerous subsequently; and
•any remaining contracts in the portfolio.
Portfolios of reinsurance contracts held are assessed for aggregation separately from portfolios of insurance contracts issued. Applying the grouping requirements to reinsurance contracts held, the Company aggregates reinsurance contracts held into groups of:
•contracts for which there is a net gain at initial recognition, if any;
•contracts for which, at initial recognition, there is no significant possibility of a net gain arising subsequently; and
•remaining contracts in the portfolio, if any.
The Company makes an evaluation of whether a set of contracts can be treated together in making the profitability assessment based on reasonable and supportable information. In the absence of such information the Company assesses each contract individually.
If insurance contracts within a portfolio would fall into different groups only because law or regulation specifically constrains the Company’s practical ability to set a different price or level of benefits for policyholders with different characteristics, the Company may include those contracts in the same group.
The determination of whether a contract or a group of insurance contracts issued is onerous is based on the expectations as at the date of initial recognition, with fulfilment cash flow expectations determined on a probability-weighted basis. The Company determines the appropriate level at which reasonable and supportable information is available to assess whether the contracts are onerous at initial recognition and whether the contracts not onerous at initial recognition have a significant possibility of becoming onerous subsequently.
A similar assessment is done for reinsurance contracts held to determine the contracts for which there is a net gain at initial recognition or whether contracts for which there is not a net gain at initial recognition have a significant possibility of a net gain subsequently.
For contracts applying the Premium Allocation Approach (“PAA”) the Company assumes that contracts are not onerous (for reinsurance contracts there is not a net gain) on initial recognition unless there are facts and circumstances indicating otherwise. The Company assesses the likelihood of changes in applicable facts and circumstances to determine whether contracts not onerous (for reinsurance contracts there is not a net gain) at initial recognition belong to a group with no significant possibility of becoming onerous (for reinsurance contracts no significant possibility of a net gain) in the future.
The composition of groups established at initial recognition is not subsequently reassessed.
2.Insurance contracts (continued)
2.5Initial recognition (continued)
Concerning onerous contracts such contracts expected on initial recognition to be loss-making are grouped together and such groups are measured and presented separately. Once contracts are allocated to a group, they are not re-allocated to another group, unless they are substantively modified.
The Company recognises a group of reinsurance contracts held:
•If the reinsurance contracts provide proportionate coverage, at the later of the beginning of the coverage period of the group, or the initial recognition of any underlying contract;
•In all other cases, from the beginning of the coverage period of the first contract in the group.
If the Company entered into the reinsurance contract held at or before the date when an onerous group of underlying contracts is recognised prior to the beginning of the coverage period of the group of reinsurance contracts held, the reinsurance contract held is recognised at the same time as the group of underlying insurance contracts is recognised.
The Company adds new contracts to the group when they meet the recognition criteria.
Insurance contracts
The Company includes in the measurement of a group of insurance contracts all the future cash flows within the boundary of each contract in the group.
Cash flows are within the boundary of an insurance contract if they arise from substantive rights and obligations that exist during the reporting period in which the Company can compel the policyholder to pay the premiums, or in which the Company has a substantive obligation to provide the policyholder with services.
Cash flows within the boundary of an insurance contract are those that relate directly to the fulfilment of the contract, including cash flows for which the Company has discretion over the amount or timing.
A substantive obligation to provide services ends when:
•The Company has the practical ability to reassess the risks of the particular policyholder and, as a result, can set a price or level of benefits that fully reflects those risks; or
•Both of the following criteria are satisfied:
-The Company has the practical ability to reassess the risks of the portfolio of insurance contracts that contain the contract and, as a result, can set a price or level of benefits that fully reflects the risk of that portfolio;
-The pricing of the premiums for coverage up to the date when the risks are reassessed does not take into account the risks that relate to periods after the reassessment date.
In determining whether all the risks have been reflected either in the premium or in the level of benefits, the Company considers all risks that policyholders would transfer had it issued the contracts (or portfolio of contracts) at the reassessment date. Similarly, the Company concludes on its practical ability to set a price that fully reflects the risks in the contract or portfolio at a renewal date by considering all the risks that it would assess when underwriting equivalent contracts on the renewal date for the remaining service.
2.Insurance contracts (continued)
2.6Contract boundaries (continued)
Insurance contracts (continued)
The assessment on the Company’s practical ability to reprice existing contracts takes into account all contractual, legal and regulatory restrictions. In doing so, the Company disregards restrictions that have no commercial substance. The Company also considers the impact of market competitiveness and commercial considerations on its practical ability to price new contracts and repricing existing contracts. Judgement is required to decide whether such commercial considerations are relevant in concluding as to whether the practical ability exists at the reporting date.
The Company issues contracts that include an option to add insurance coverage at a future date so that the Company is obligated to provide additional coverage if the policyholder exercises the option. The Company has no right to compel the policyholder to pay premiums and the option to add insurance coverage at a future date is an insurance component that is not measured separately from the insurance contract.
When the insurance option is not in substance a separate contract and the terms are guaranteed by the Company, the cash flows arising from the option are within the boundary of the contract. If the option is not a separate contract and the terms are not guaranteed by the Company, the cash flows arising from the option might be either within or outside the contract boundary, depending on whether the Company has the practical ability to set a price that fully reflects the reassessed risks of the whole contract. In case where the Company does not have the practical ability to reprice the whole contract when the policyholder exercises the option to add coverage, the expected cash flows arising from the additional premiums after the option exercise date would be within the original contract boundary.
In estimating expected future cash flows of the group of contracts the Company applies its judgement in assessing future policyholder behaviour surrounding the exercise of options available to them such as surrenders options, and other options falling within the contract boundary.
The Company assesses the contract boundary at initial recognition and at each subsequent reporting date to include the effect of changes in circumstances on the Company’s substantive rights and obligations.
Reinsurance contracts
For groups of reinsurance contracts held, cash flows are within the contract boundary if they arise from substantive rights and obligations of the cedant that exist during the reporting period in which the Company is compelled to pay amounts to the reinsurer or has a substantive right to receive insurance contract services from the reinsurer.
A substantive right to receive services from the reinsurer ends when the reinsurer:
•has the practical ability to reassess the risks transfer to it and can set a price or level of benefits that fully reflects those reassessed risks; or
•has a substantive right to terminate the coverage.
The boundary of a reinsurance contract held includes cash flows resulting from the underlying contracts covered by the reinsurance contract. This includes cash flows from insurance contracts that are expected to be issued by the Company in the future if these contracts are expected to be issued within the boundary of the reinsurance contract held.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.6Contract boundaries (continued)
Reinsurance contracts (continued)
The Company holds proportional life reinsurance contracts which have an unlimited duration but which allow both the reinsurer and the Company to terminate the contract at three months’ notice for new business ceded. The Company includes within the contracts boundary only cash flows arising from such three months’ notice period because it does not have substantive rights or obligations beyond that point. Therefore, on initial recognition, the cash flows within the reinsurance contract boundary are determined to be those arising from underlying contracts that the Company expects to issue and cede under the reinsurance contract within the next three months. Subsequently, expected cash flows beyond the end of this initial notice period are considered cash flows of new reinsurance contracts and are recognised, separately from the initial contract, as they fall within the rolling three-month notice period. Other life reinsurance agreements have a cancellability clause for new business with three months’ notice but this being effective at the next annual renewal of the agreement and hence, in this case, on initial recognition the cash flows within the reinsurance contract boundary are determined to be those arising from underlying contracts that the Company expects to issue and cede under the reinsurance contract within the year. The Company treats all the above mentioned reinsurance contracts as a series of contracts that form an annual group and cover underlying business issued within a year.
The Company holds proportional group life reinsurance contracts that have a short-term boundary and cover short-term underlying contracts issued within the term on a risk-attaching basis. All cash flows arising from claims incurred and expected to be incurred during the life of the underlying contracts are included in the measurement.
Finally, the Company’s non-proportional, excess of loss reinsurance contracts held, have an annual term and provide coverage for claims incurred during an accident year (i.e. loss occurring). Thus, all cash flows arising from claims incurred and expected to be incurred in the accident year are included in the measurement of the reinsurance contracts held.
2.Insurance contracts (continued)
2.7Insurance acquisition cashflows (continued)
At each reporting date, the Company revises the amounts allocated to groups to reflect any changes in assumptions that determine the inputs to the allocation method used. Amounts allocated to a group are not revised once all contracts have been added to the group.
The Company reverses any impairment losses in profit or loss and increases the carrying amount of the asset to the extent that the impairment conditions have improved.
2.Insurance contracts (continued)
2.8Measurement of insurance contracts issued (continued)
2.8.1Measurement on initial recognition of contracts not measured under the PAA
(continued)
Fulfilment Cashflows (“FCF”) (continued)
When estimating future cash flows, the Company includes all cash flows that are within the contract boundary including:
•Premiums and related cash flows;
•Claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims;
•Payments to policyholders resulting from embedded surrender value options;
•An allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs;
•Claims handling costs;
•Policy administration and maintenance costs;
•An allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts;
•Transaction-based taxes;
•Costs incurred for performing investment activities that enhance insurance coverage benefits for the policyholder;
•Costs incurred for providing investment-related service to policyholders.
The cash flow estimates include both market variables, which are consistent with observable market prices, and non-market variables, which are not contradictory with market information and based on internally and externally derived data.
The Company updates its estimates at the end of each reporting period using all newly available, as well as historic evidence and information about trends. The Company determines its current expectations of probabilities of future events occurring at the end of the reporting period. In developing new estimates, the Company considers the most recent experience and earlier experience, as well as other information.
Risk of the Company’s non-performance is not included in the measurement of groups of insurance contracts issued.
Risk Adjustment (“RA”)
The risk adjustment for non-financial risk for a group of insurance contracts, determined separately from the other estimates, is the compensation required for bearing uncertainty about the amount and timing of the cash flows that arises from non-financial risk to fulfill insurance contracts.
The risk adjustment also reflects the degree of diversification benefit the Company includes when determining the compensation it requires for bearing that risk; and both favourable and unfavourable outcomes, in a way that reflects the Company’s degree of risk aversion.
The Company uses a Risk-based capital approach based on which the risk adjustment can be determined at the chosen level of confidence.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8Measurement of insurance contracts issued (continued)
2.8.1Measurement on initial recognition of contracts not measured under the PAA
(continued)
Time value of money and financial risks
The Company adjusts the estimates of future cash flows to reflect the time value of money and the financial risks related to those cash flows, to the extent that the financial risks are not included in the estimates of cash flows. The discount rates applied to the estimates of the future cash flows:
•reflect the time value of money, the characteristics of the cash flows and the liquidity characteristics of the insurance contracts;
•are consistent with observable current market prices (if any) for financial instruments with cash flows whose characteristics are consistent with those of the insurance contracts, in terms of, for example, timing, currency and liquidity; and
•exclude the effect of factors that influence such observable market prices but do not affect the future cash flows of the insurance contracts.
Contractual Service Margin (“CSM”)
The CSM is a component of the overall carrying amount of a group of insurance contracts representing unearned profit the Company will recognise as it provides insurance contract services over the coverage period.
On initial recognition of a group of insurance contracts, if the total of (a) the fulfilment cash flows, (b) any cash flows arising at that date and (c) any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group (including assets for insurance acquisition cash flows) is a net inflow, the CSM is measured as the equal and opposite amount of the net inflow, which results in no gain no loss, arising on initial recognition.
If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognised as a loss in profit or loss. A loss component is created to depict the amount of the net cash outflow, which determines the amounts that are subsequently presented in profit or loss as reversals of losses on onerous contracts and are excluded from insurance revenue.
2.Insurance contracts (continued)
2.8Measurement of insurance contracts issued (continued)
2.8.2Subsequent measurement of contracts not measured under the PAA (continued)
Changes in fulfilment cash flows (continued)
Experience adjustments would be the difference between:
•The expected cash flow estimate at the beginning of the period and the actual cash flows for premiums received in the period (and any related cash flows paid such as insurance acquisition cash flows);
•The expected cash flow estimate at the beginning of the period and the actual incurred amounts of insurance service expenses in the period (excluding insurance acquisition expenses).
Experience adjustments relating to current or past service will be recognized in profit or loss. For incurred claims (including incurred but not reported) and other incurred insurance service expenses, experience adjustments would always relate to current or past service. They would be included in profit or loss as part of insurance service expenses. Experience adjustments relating to future service will be included in the LRC by adjusting the CSM.
Adjustments to the CSM - Insurance contracts without direct participation features
For a group of insurance contracts, the carrying amount of the CSM of the group at the end of the reporting period equals the carrying amount at the beginning of the reporting period adjusted, as follows:
•The effect of any new contracts added to the group in the reporting period;
•Interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at initial recognition;
•The changes in fulfilment cash flows relating to future service, except to the extent that:
-Such increases in the fulfilment cash flows exceed the carrying amount of the CSM, giving rise to a loss; or
-Such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage;
•The effect of any currency exchange differences on the CSM;
•The amount recognised as insurance revenue because of the transfer of services in the period, determined by the allocation of the CSM remaining at the end of the reporting period (before any allocation) over the current and remaining coverage period.
The locked-in discount rate is the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over a 12-month period.
The changes in fulfilment cash flows relating to future service that adjust the CSM comprise of:
•Experience adjustments that arise from the difference between the premium receipts (and any related cash flows such as insurance acquisition cash flows) and the estimate, at the beginning of the period, of the amounts expected.
•Changes in estimates of the present value of future cash flows in the liability for remaining coverage, except those relating to the time value of money and changes in financial risk (recognised in the statement of profit or loss and other comprehensive income rather than adjusting the CSM)
•Differences between:
-any investment component expected to become payable in the year, determined as the payment expected at the start of the year plus any insurance finance income or expenses related to that expected payment before it becomes payable; and
-the actual amount that becomes payable in the year
•Changes in the risk adjustment for non-financial risk that relate to future service
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8Measurement of insurance contracts issued (continued)
2.8.2Subsequent measurement of contracts not measured under the PAA (continued)
Adjustments to the CSM - Insurance contracts without direct participation features (continued)
Except for changes in the risk adjustment, adjustments to the CSM noted above are measured at discount rates that reflect the characteristics of the cash flows of the group of insurance contracts at initial recognition.
The CSM at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss, because it relates to future service.
An amount of the CSM is released to profit or loss in each period during which the insurance contract services are provided.
In determining the amount of the CSM to be released in each period, the Company follows three steps:
•determines the total number of coverage units in the group. The amount of coverage units in the group is determined by considering for each contract the quantity of benefits provided under the contract and the expected coverage period;
•allocates the CSM at the end of the period (before any of it is released to profit or loss to reflect the insurance contract services provided in the period) equally to each of the coverage units provided in the current period and expected to be provided in the future;
•recognises in profit or loss the amount of CSM allocated to the coverage units provided during the period.
The number of coverage units changes as insurance contract services are provided, contracts expire, lapse or surrender and new contracts are added into the group. The total number of coverage units depends on the expected duration of the obligations that the Company has from its contracts, which can differ from the legal contract maturity because of the impact of policyholder behaviour and the uncertainty surrounding future insured events. In determining a number of coverage units, the Company exercises judgement in estimating the likelihood of insured events occurring and policyholder behaviours to the extent that they affect expected period of coverage in the group, the different levels of service offered across periods and the ‘quantity of benefits’ provided under a contract.
The Company does not issue insurance contracts generating cash flows in a foreign currency that is different from the functional currency of the Company.
Adjustments to the CSM - Insurance contracts with direct participation features
Direct participating contracts are contracts under which the Company’s obligation to the policyholder is the net of:
•the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and
•a variable fee in exchange for future services provided by the contracts, being the amount of the Company’s share of the fair value of the underlying items less fulfilment cash flows that do not vary based on the returns on underlying items.
When measuring a group of direct participating contracts, the Company adjusts the fulfilment cash flows for the whole of the changes in the obligation to pay policyholders an amount equal to the fair value of the underlying items. These changes do not relate to future services and are recognised in profit or loss. The Company then adjusts any CSM for changes in the amount of the Company’s share of the fair value of the underlying items which relate to future services.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8Measurement of insurance contracts issued (continued)
2.8.2Subsequent measurement of contracts not measured under the PAA (continued)
Adjustments to the CSM - Insurance contracts with direct participation features (continued)
Hence, the carrying amount of the CSM at each reporting date is the carrying amount at the start of the year, adjusted for:
•the CSM of any new contracts that are added to the group in the year;
•the change in the amount of the Company’s share of the fair value of the underlying items and changes in fulfilment cash flows that relate to future services, except to the extent that:
-a decrease in the amount of the Company’s share of the fair value of the underlying items, or an increase in the fulfilment cash flows that relate to future services, exceeds the carrying amount of the CSM, giving rise to a loss in profit or loss (included in insurance service expenses) and creating a loss component; or
-an increase in the amount of the Company’s share of the fair value of the underlying items, or a decrease in the fulfilment cash flows that relate to future services, is allocated to the loss component, reversing losses previously recognised in profit or loss (included in insurance service expenses);
•the effect of any currency exchange differences on the CSM; and
•the amount recognised as insurance revenue because of the services provided in the year.
Changes in fulfilment cash flows that relate to future services include the changes relating to future services specified above for contracts without direct participation features (measured at current discount rates) and changes in the effect of the time value of money and financial risks that do not arise from underlying items – e.g. the effect of financial guarantees.
2.Insurance contracts (continued)
2.8Measurement of insurance contracts issued (continued)
2.8.2Subsequent measurement of contracts not measured under the PAA (continued)
Measurement of contracts under the PAA
On initial recognition the Company applies the PAA:
•When the coverage period of each insurance contract in the group is one year or less;
•For groups of insurance contracts including contracts with a coverage period extending beyond one year the Company reasonably expects that such simplification would produce a measurement of the LRC for the group that would not differ materially from the one that would be produced applying the requirements of the general measurement model.
On initial recognition, the Company measures the LRC at the amount of premiums received in cash. As all the issued insurance contracts to which the PAA is applied have coverage of a year or less, the Company has elected the policy of expensing insurance acquisition cash flows as they are incurred.
On initial recognition of each group of contracts, the Company expects that the time between providing each part of the services and the related premium due date is no more than a year. Accordingly, the Company has chosen not to adjust the liability for remaining coverage to reflect the time value of money and the effect of financial risk.
There are no investment components within insurance contracts issued that are measured under the PAA.
The carrying amount of a group of insurance contracts issued at the end of each reporting period is the sum of (a) the LRC and (b) the LIC, comprising the FCF related to past service allocated to the group at the reporting date.
The carrying amount of the LRC for subsequent measurement purposes is increased by any premiums received and decreased by the amount recognised as insurance revenue for services provided.
The LIC is measured similarly to the LIC’s measurement under the GMM. The liability equals the amount of the fulfilment cash flows relating to incurred claims. For claims that the Company expects to be paid within one year or less from the date of incurring the Company does not adjust future cash flows for the time value of money and the effect of financial risk. However, claims expected to take more than one year to settle are discounted.
If facts and circumstances indicate that a group of insurance contracts measured under the PAA is onerous on initial recognition or becomes onerous subsequently, the Company increases the carrying amount of the LRC to the amount of the FCF determined under the GMM with the amount of such an increase recognised in insurance service expenses, and a loss component is established for the amount of the loss recognised. The fulfilment cash flows are discounted at current rates, as the liability for incurred claims is also discounted.
2.Insurance contracts (continued)
2.9Measurement of reinsurance contracts held (continued)
2.9.1Measurement of the asset for remaining coverage (“ARC”)
Reinsurance contracts measured under the general model
The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following:
•Measurement of the cash flows include an allowance on a probability-weighted basis for the effect of any non-performance by the reinsurers, including the effects of collateral and losses from disputes;
•The Company determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer;
•The Company recognises both day 1 gains and day 1 losses at initial recognition in the statement of financial position as a CSM and releases this to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition as described below;
•Changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts have been recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM.
The Company measures the estimates of the present value of future cash flows using assumptions that are consistent with those used to measure the estimates of the present value of future cash flows for the underlying insurance contracts.
On initial recognition, the CSM of a group of reinsurance contracts represents a net cost or net gain on purchasing reinsurance. It is measured as the equal and opposite amount of the total of (a) the fulfilment cash flows, (b) any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group, (c) any cash flows arising at that date and (d) any income recognised in profit or loss because of onerous underlying contracts recognised at that date.
However, if any net cost on purchasing reinsurance coverage relates to insured events that occurred before the purchase of the group, then the Company recognises the cost immediately in profit or loss as an expense.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the year, adjusted for:
•the CSM of any new contracts that are added to the group in the year;
•interest accreted on the carrying amount of the CSM during the year, measured at the discount rates determined on initial recognition;
•income recognised in profit or loss in the year on initial recognition of onerous underlying contracts;
•reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group of reinsurance contracts;
•changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition, unless they result from changes in fulfilment cash flows of onerous underlying contracts, in which case they are recognised in profit or loss and create or adjust a loss-recovery component;
•the effect of any currency exchange differences on the CSM; and
•the amount recognised in profit or loss because of the services received in the year.
2.Insurance contracts (continued)
2.9Measurement of reinsurance contracts held (continued)
2.9.1Measurement of the asset for remaining coverage (“ARC”) (continued)
Reinsurance contracts measured under the general model (continued)
For a group of reinsurance contracts covering onerous underlying contracts, the Company establishes a loss-recovery component of the asset for remaining coverage, adjusts the CSM and as a result recognises income when it recognises a loss on initial recognition of onerous underlying contracts, if the reinsurance contract is entered into before or at the same time as the onerous underlying contracts are recognised. The adjustment to the CSM is determined by multiplying:
•the amount of the loss that relates to the underlying contracts; and
•the percentage of claims on the underlying contracts that the Company expects to recover from the reinsurance contracts.
The loss-recovery component is adjusted for changes in FCFs of the group of reinsurance contracts relating to future services that result from changes in FCFs of the onerous underlying contracts. If the reinsurance contract covers only some of the insurance contracts included in an onerous group of contracts, then the Company uses a systematic and rational method to determine the portion of losses recognised on the onerous group of contracts that relates to underlying contracts covered by the reinsurance contract.
The loss-recovery component determines the amounts that are subsequently presented in profit or loss as reversals of recoveries of losses from the reinsurance contracts and are excluded from the allocation of reinsurance premiums paid. It is adjusted to reflect changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss component of the onerous group of underlying contracts that the Company expects to recover from the reinsurance contracts.
Reinsurance contracts measured under the Premium Allocation Approach
The Company applies the PAA to measure a group of reinsurance contracts using the same accounting policies to the insurance contracts, as adapted where necessary to reflect the features of reinsurance contracts.
The Company applies the PAA to reinsurance contracts that it holds, as follows:
•to groups of reinsurance contracts that it holds which at the inception of the group the effective coverage period of each contract in the group of reinsurance contracts held is one year or less;
•to groups of reinsurance contracts that it holds including contracts with a coverage period extending beyond one year when the Company reasonably expects that such simplification would produce a measurement of the asset for remaining coverage for the group that would not differ materially from the one that would be produced applying the requirements of the general measurement model.
Under the PAA, the initial measurement of the asset equals the reinsurance premium paid. The Company measures the amount relating to remaining service by allocating the amount of expected reinsurance premium payments over the coverage period of receiving services for the group. For all reinsurance contracts held the allocation is based on the passage of time.
On initial recognition of each group of reinsurance contracts held, the Company expects that the time between receiving each part of the services and the related reinsurance premium due date is no more than a year. Accordingly, the Company has chosen not to adjust the asset for remaining coverage to reflect the time value of money and the effect of financial risk.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.9Measurement of reinsurance contracts held (continued)
2.9.1Measurement of the asset for remaining coverage (“ARC”) (continued)
Reinsurance contracts measured under the Premium Allocation Approach (continued)
Where the reinsurance contracts held cover a group of onerous underlying insurance contracts, the Company adjusts the carrying amount of the asset for remaining coverage and recognises a gain when, in the same period, it reports a loss on initial recognition of an onerous group of underlying insurance contracts or on additional loss from an already onerous group of underlying insurance contracts. The recognition of this gain results in the accounting for the loss recovery component of the asset for the remaining coverage of a group of reinsurance contracts held. The loss-recovery component is adjusted to reflect changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss component of the onerous group of underlying contracts that the Company expects to recover from the reinsurance contracts.
2.9.2Measurement of the asset for incurred claims (“AIC”)
The Company uses consistent assumptions to measure the estimates of the present value of future cash flows for the group of reinsurance contracts held and the estimates of the present value of future cash flows for the group(s) of underlying insurance contracts. The Company includes in the estimates of the present value of the future cash flows for the group of reinsurance contracts held the effect of any risk of non-performance by the issuer of the reinsurance contract, including the effects of collateral and losses from disputes.
The risk adjustment for non-financial risk for reinsurance contracts held represents the amount of risk being transferred by the Company to the reinsurer.
2.Insurance contracts (continued)
2.10Insurance contracts – modification and derecognition (continued)
If a contract is derecognised because its terms are modified, then the CSM is also adjusted for the premium that would have been charged had the Company entered into a contract with the new contract’s terms at the date of modification, less any additional premium charged for the modification. The new contract recognised is measured assuming that, at the date of modification, the Company received the premium that it would have charged less any additional premium charged for the modification.
If the contract modification does not meet the above conditions the Company treats the effect of the modification as changes in the estimates of fulfilment cash flows.
For insurance contracts accounted for applying the PAA the Company adjusts insurance revenue prospectively from the time of the contract modification.
2.Insurance contracts (continued)
2.12Presentation (continued)
Any assets or liabilities for insurance acquisition cash flows recognised before the corresponding insurance contracts are included in the carrying amount of the related portfolio of contracts.
The Company disaggregates the total amount recognised in the statement of profit or loss and other comprehensive income into an insurance service result, comprising insurance revenue and insurance service expense, and insurance finance income or expenses.
The Company does not disaggregate the change in risk adjustment for non-financial risk between a financial and non-financial portion and includes the entire change as part of the insurance service result.
The Company separately presents income or expenses from reinsurance contracts held from the expenses or income from insurance contracts and investments contracts with DPF issued.
2.12.1Insurance Service Revenue
Contracts not measured under the PAA
The Company’s insurance revenue depicts the provision of coverage and other services arising from a group of insurance contracts and investment contracts with DPF at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Insurance revenue from a group of insurance contracts and a group of investment contracts with DPF is therefore the relevant portion for the period of the total consideration for the contracts, (i.e., the amount of premiums paid to the Company adjusted for financing effect (the time value of money) and excluding any investment components).
The total consideration for a group of contracts covers amounts related to the provision of services and is comprised of:
•Insurance service expenses, excluding any amounts allocated to the loss component of the liability for remaining coverage;
•The risk adjustment for non-financial risk related to current service, excluding any amounts allocated to the loss component of the liability for remaining coverage;
•The CSM release measured based on coverage units provided.
In addition, the Company allocates a portion of premiums that relate to recovering insurance acquisition cash flows to each period in a systematic way based on the passage of time. The Company recognises the allocated amount, as insurance service revenue and an equal amount as insurance service expenses.
2.Insurance contracts (continued)
2.12Presentation (continued)
2.12.1Insurance Service Revenue (continued)
Contracts not measured under the PAA (continued)
Services provided by insurance contracts include insurance coverage and, for all direct participating contracts, investment services for managing underlying items on behalf of policyholders. In addition, some contracts without direct participating features may also provide investment services for generating an investment return for the policyholder, if and only if:
•an investment component exists or the policyholder has a right to withdraw an amount (e.g. the policyholder’s right to receive a surrender value on cancellation of a contract);
•the investment component or withdrawal amount is expected to include an investment return; and
•the Company expects to perform investment activities to generate that investment return.
The expected coverage period reflects expectations of lapses and cancellations of contracts, as well as the likelihood of insured events occurring to the extent that they would affect the expected coverage period. The period of investment services ends no later than the date on which all amounts due to current policyholders relating to those services have been paid.
Contracts measured under the PAA
For contracts measured under the PAA, the insurance revenue for each period is the amount of expected premium receipts for providing services in the period. The Company recognises such insurance revenue based on the passage of time by allocating premium receipts including premium experience adjustments to each period of service.
2.Insurance contracts (continued)
2.12Presentation (continued)
2.12.4Insurance finance income and expense
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts and investment contracts with DPF arising from:
•The effect of the time value of money and changes in the time value of money;
•The effect of financial risk and changes in financial risk.
For contracts without direct participation features, insurance finance income or expenses reflect interest accreted on the future cash flows and the CSM and the effect of changes in interest rates and other financial assumptions.
2.Insurance contracts (continued)
2.13Transition (continued)
Contracts measured under the PAA (continued)
Applying the full retrospective approach, the Company has:
-identified, recognised and measured each group of insurance contracts as if IFRS 17 had always applied;
-identified, recognised and measured any assets for insurance acquisition cash flows as if IFRS 17 had always applied;
-derecognised previously reported balances that would not have existed if IFRS 17 had always been applied;
-and recognised any resulting net difference in equity.
Contracts not measured under the PAA
Changes in accounting policies resulting from the adoption of IFRS 17 for all groups of insurance contracts, investment contracts with DPF and reinsurance contracts containing contracts with long-term coverage period extending beyond one year are applied using the fair value transition approach. Obtaining reasonable and supportable information to apply the full retrospective approach, for these contracts, was impracticable without undue cost or effort. Under this method these groups of contracts on transition date, 1 January 2022, are measured at fair value, any existing balances that would not exist had IFRS 17 applied are derecognised and the resulting net difference is recognised in equity.
Under the fair value approach, the CSM (or the loss component) at 1 January 2022 was determined as the difference between the fair value of a group of contracts at that date and the fulfilment cash flows at that date. In determining fair value, the Company has applied the requirements of IFRS 13 Fair Value Measurement, except for the demand deposit floor requirement, as is prescribed by IFRS 17. Specifically, the fair value of the insurance contracts was measured as the sum of (a) the present value of the net cash flows expected to be generated by the contracts, determined using a discounted cash flow technique; and (b) an additional margin, determined using a cost of capital technique.
Differences in the Company's approach to measuring fair value from the IFRS 17 requirements for measuring fulfilment cash flows gave rise to a CSM at 1 January 2022. In particular, in measuring fair value the Company includes a margin comprising a risk premium to reflect what market participants demanded as compensation for the uncertainty inherent in the cash flows and a profit margin to reflect what market participants would require assuming the obligations to service the insurance contracts. In determining this margin, the Company has considered certain costs that are not directly attributable to fulfilling the contracts (e.g. general overheads) and certain risks that were not reflected in the fulfilment cash flows, among other factors that a market participant would consider.
When applying the fair value transition approach the Company aggregated contracts issued more than one year apart.
For the application of the fair value approach, the Company has not used the permitted modification to use reasonable and supportable information available at the transition date and instead used information available at the date of inception or initial recognition in order to determine whether any contracts are direct participating contracts. Despite this, the Company used the permitted modification to use reasonable and supportable information available at the transition date to identify groups of contracts.
The discount rate when applying the fair value approach was determined at the transition date.
Material accounting policies (continued)
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3.Basis of consolidation
On acquisition of a portfolio of long-term contracts, the net present value of the shareholders’ interest in the expected after-tax cash flows of the in-force business is capitalised in the statement of financial position as an asset. The value of in-force business is subsequently determined by the Directors on an annual basis, based on the advice of the approved actuary. The valuation represents the discounted value of projected future transfers to shareholders from policies in force at the year end, after making provision for taxation. In determining this valuation, assumptions relating to future mortality, persistence and levels of expenses are based on experience of the type of business concerned. Gross investment returns are assumed to vary depending on the mix of investments held and expected market conditions. All movements in the in-force business valuation are credited or debited to other reserves.
4.Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.
5.Acquisition of subsidiaries
The acquisition of subsidiaries that are not under common control is accounted for by applying the acquisition method. The consideration is measured as the aggregate of the fair values, at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred, except for costs to issue debt or equity securities.
The acquiree’s identifiable assets and liabilities that meet the conditions for recognition are recognised at their fair values at the acquisition date, except as specifically required by other International Financial Reporting Standards as adopted by the EU. A contingent liability assumed in a business combination is recognised at the acquisition date if there is a present obligation that arises from past events and its fair value can be measured reliably.
The results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where necessary, in preparing these consolidated financial statements, appropriate adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by group entities. Intra-group balances, transactions, income and expenses are eliminated on consolidation.
6.Intangible assets
(a)Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised using the straight-line method over their estimated useful lives (between five and thirteen years). Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.
Material accounting policies (continued)
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6.Intangible assets (continued)
(b)Goodwill
Goodwill arising in a business combination that is accounted for using the acquisition method is recognised as an asset at the date that control is acquired. Goodwill is measured as the excess of (a) the aggregate of: (i) the consideration transferred; (ii) the amount of any non-controlling interests in the acquiree; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; and (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Any gain on a bargain purchase, after reassessment, is recognised immediately in profit or loss.
(c)Passporting assets
Separately acquired passporting assets are shown at historical cost, which represent their acquisition price. Passporting assets have an indefinite useful life because management assesses that there is no foreseeable limit to the period over which the domain assets are expected to generate net cash inflows for the group.
7.Property, plant and equipment
Property, plant and equipment comprising land and buildings and office furniture, fittings and equipment are initially recorded at cost, and are subsequently shown at cost less accumulated depreciation and impairment losses, with the exception of land which is shown at cost. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful lives using the following depreciation rates:
8.Investment property (continued)
If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.
Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the profit and loss account during the financial period in which they are incurred.
Financial assets and financial liabilities are off-set and the net amount presented in the statement of financial position when the Group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.
Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial assets
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Classification of financial assets (continued)
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
Debt instruments measured at amortised cost
The following financial assets are classified within this category – trade receivables, cash at bank, intercompany balances.
Appropriate allowances for expected credit losses (‘ECLs’) are recognised in profit or loss in accordance with the Group’s accounting policy on ECLs.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Debt instruments measured at amortised cost (continued)
Changes in the carrying amount as a result of foreign exchange gains or losses, impairment gains or losses and interest income are recognised in profit or loss. On derecognition, any difference between the carrying amount and the consideration received is recognised in profit or loss and is presented separately in the line item ‘Gains and losses arising from the derecognition of financial assets measured at amortised cost’.
Interest income is recognised using the effective interest method and is included in the line item ‘Investment income’.
Trade receivables which do not have a significant financing component are initially measured at their transaction price and are subsequently stated at their nominal value less any loss allowance for ECLs.
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL, specifically:
Where applicable, dividend income is recognised with other dividend income, if any, arising on other financial assets within the line item ‘Investment income’. Where applicable, interest income is disclosed within the line item ‘Investment income’. Fair value gains and losses are recognised within the line items ‘Investment income’ and ‘Investment losses’ respectively.
Interest income using the effective interest method
Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. For financial instruments other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding ECLs, through the expected life of the debt instrument, or where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Expected Credit Losses
The Group recognises a loss allowance for ECLs on, debt instruments measured at amortised cost, intercompany receivables, trade receivables and cash at bank.
The amount of ECL is updated at each reporting date to reflect changes in credit risk since the initial recognition.
For trade receivables that do not contain a significant financing component (or for which the IFRS 15 practical expedient for contracts that are one year or less is applied), the Group applies the simplified approach and recognises lifetime ECL.
Where a collective basis is applied (see the Accounting Policy entitled ‘Collective basis’ below), the ECLs on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience based on the past due status of the debtors, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
For all other financial instruments, the Group uses the general approach and recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL (‘12m ECL’). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset being credit-impaired at the reporting date or an actual default occurring.
Lifetime ECL represents the ECLs that will result from all possible default events over the expected life of a financial instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period, but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to 12m ECL at the current reporting date.
The Group recognises an impairment gain or loss in profit or loss for all financial assets with a corresponding adjustment to their carrying amount.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group and Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group and Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort and, where applicable, the financial position of the counterparties.
The Group and Company regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Significant increase in credit risk (continued)
Forward-looking information considered includes the future prospects of the industries in which the Group and Company’s debtors operate as obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Company’s core operations.
Irrespective of the outcome of the above assessment, the Group and Company presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group and Company has reasonable and supportable information, that is available without undue cost or effort, that demonstrates otherwise.
The Group and Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that receivables that meet either of the following criteria are generally not recoverable:
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Measurement and recognition of ECLs
For financial assets, the credit loss is the difference between all contractual cash flows that are due to the Group and Company in accordance with the contract and all the cash flows that the Group and Company expects to receive, discounted at the original effective interest rate. ECLs represent the weighted average of credit losses with the respective risks of a default occurring as the weights.
The measurement of ECLs is a function of:
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Collective basis (continued)
The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.
Financial liabilities and equity
Trade payables are classified with current liabilities and are stated at their amortised cost using the EIR method.
Ordinary shares issued by the Group are classified as equity instruments.
Policy applicable before 1 January 2023
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially recognised at their fair value plus directly attributable transaction costs for all financial assets or financial liabilities not classified at fair value through profit or loss.
Financial assets and financial liabilities are off-set and the net amount presented in the statement of financial position when the Group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.
Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
(i)Trade receivables
Trade receivables are classified with current assets and are stated at their nominal value.
(ii)Investments
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. The directors determine the appropriate classification of the Group’s financial assets at initial recognition, and re-evaluate such designation at every reporting date.
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(ii)Investments (continued)
(a)Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A non-derivative financial asset is classified into this category at inception if acquired principally for the purpose of selling in the near-term, if it forms part of a portfolio of financial assets that are managed together and for which there is evidence of short term profit-taking, if the financial asset is part of a group of financial assets that is managed on a portfolio basis and whose performance is evaluated and reported internally to the Group’s key management personnel on a fair value basis in accordance with a documented financial assets strategy or if this designation eliminates an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
(b) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity other than those that upon initial recognition are designated as at fair value through profit or loss, those that are designated as available-for-sale financial assets and those that meet the definition of loans and receivables are classified as held-to-maturity investments. After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (“EIR”) method, less impairment. Amortised costs are calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income.
(c)Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those that the Group intends to sell in the short term or that it has designated as fair value through profit or loss or as available-for-sale financial assets. They include, inter alia, debtors and interest-bearing deposits and advances.
(d)Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are either designated in this category by the Group or not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
All purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets. All financial assets are initially recognised at fair value, plus in the case of financial assets not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where they have been transferred and the transfer qualifies for derecognition.
Financial assets at fair value through profit or loss are subsequently re-measured at fair value. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are recognized in the profit and loss.
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(ii)Investments (continued)
(d)Available-for-sale financial assets (continued)
Available-for-sale financial assets are measured at their fair value. Gains and losses arising from a change in fair value are recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary assets, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. Interest calculated using the effective interest method is recognised in profit or loss.
Loans and receivables are carried at amortised cost using the EIR method, less any provision for impairment.
The fair value of quoted financial assets is based on quoted market prices at the end of the reporting period. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis.
Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are not designated as at fair value through profit or loss. The fair value of investments in equity instruments that do not have a quoted price in an active market for an identical instrument is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that instrument; or (b) the probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. Investments in equity instruments that do not have a quoted price in an active market and whose fair value cannot be reliably measured are measured at cost.
(iii)Trade payables
Trade payables are classified with current liabilities and are stated at their amortised cost using the EIR method.
(iii)Shares issued by the Group
Ordinary shares issued by the Group are classified as equity instruments.
Impairment of assets
a)Impairment of financial assets at amortised cost and available-for-sale investments
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (“a loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(iii)Shares issued by the Group (continued)
Impairment of assets (continued)
a)Impairment of financial assets at amortised cost and available-for-sale investments (continued)
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Group about the following events:
9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(iii)Shares issued by the Group (continued)
Impairment of assets (continued)
a)Impairment of financial assets at amortised cost and available-for-sale investments (continued)
Impairment losses recognised in profit or loss for an available-for-sale investment in an equity instrument are not reversed through profit or loss. Impairment losses recognised in profit or loss for an available-for-sale investment in a debt instrument are reversed through profit or loss if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.
b)Impairment of other financial assets
At the end of each reporting period, the carrying amount of other financial assets is reviewed to determine whether there is an indication of impairment and if any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is the amount by which the amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. Impairment losses and reversals are recognised in profit or loss.
c)Impairment of non-financial assets
Assets that are subject to amortisation or depreciation, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, principally comprise property, plant and equipment and computer software. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). An impairment loss recognised in a prior year is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Impairment losses and reversals are recognised in profit or loss.
10.Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, demand deposits and time deposits maturing within three months from the end of the reporting period.
11.Dividend distribution
Dividend distribution to the Group’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are declared by the directors in the case of interim dividends or are approved by the shareholders in the case of final dividends.
12.Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
13.Revenue recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.
Revenue also includes interest, dividend and rental income and is recognised as follows:
a)Rendering of services
Premium recognition, dealing with insurance contracts and investments contracts with DPF is described in accounting policy 10. Revenue arising from the issue of investment contracts without DPF is recognised in the accounting period in which the services are rendered.
b)Insurance agency commissions
Insurance agency commissions earned on policies sold are taken to the income statement in full, irrespective of the period covered by the policy.
c)Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
d)Interest income
Interest income from financial assets not classified as fair value through profit or loss is recognised using the effective interest method.
e)Rental income
Rental income from the leasing of immovable property is recognised on a straight-line basis over the lease term.
14.Investment return
Investment return includes dividend income, net fair value movements on financial assets at fair value through profit or loss (including interest income from financial assets classified as fair value through profit or loss), interest income from financial assets not classified as fair value through profit or loss, rental receivable, net fair value movements on investment property and is net of investment expenses, charges, and interest.
15.Foreign currencies
a)Functional and presentation currency
Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Euro, which is the Group’s functional and presentation currency.
15.Foreign currencies (continued)
b)Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. Non-monetary assets and liabilities denominated in currencies other than the functional currency that are measured at fair value are re-translated using the exchange rate ruling on the date the fair value was measured. Non-monetary assets and liabilities denominated in currencies other than the functional currency that are measured in terms of historical cost are not re-translated. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period, except for differences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.
16.Leases
(i)Group as a lessor
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘rental income’ – Note 5.
(ii)Group as a lessee
A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.
Right-of-use asset
The Group recognises a right-of-use asset at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset of the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The Group presents right-of-use asset that do not meet the definition of investment property as ‘Right-of-use assets’.
Lease liability
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
16.Leases (continued)
(ii)Group as a lessee (continued)
Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate ("IBR") to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.
Lease payments included in the measurement of the lease liability comprise the following:
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
17.Taxation
Current tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the current tax is also dealt with in other comprehensive income or in equity, as appropriate. Current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit or loss because it excludes items which are non-assessable or disallowed and it further excludes items which are taxable or deductible in other periods. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
1.Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.
In the opinion of the Directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1 (revised), unless further described below.
(a)Insurance contracts
Definition and classification
The Company has applied judgment to determine whether contracts are within the scope of IFRS 17 and, for contracts determined to be within the scope of IFRS 17, what measurement model is applicable, as explained below.
1.Critical accounting estimates and judgements (continued)
(a)Insurance contracts (continued)
Measurement of future cash flows
The measurement of a group of insurance contracts includes all the future cash flows arising within the contract boundary. In determining which cash flows fall within a contract boundary, the Company considers its substantive rights and obligations arising from the terms of the contract, and also from applicable law and regulation. Cash flows are considered to be outside of the contract boundary if the Company has the practical ability to reprice existing contracts to reflect their reassessed risks and if the contract’s pricing for coverage up to the date of reassessment considers only the risks till that next reassessment date.
The following assumptions were used when estimating future cash flows:
•Mortality and morbidity rates
1.Critical accounting estimates and judgements (continued)
(a)Insurance contracts (continued)
Discount rates (continued)
The discount rates that were used to discount the estimates of future cash flows of the life insurance contracts issued and reinsurance contracts held are based on the EUR risk-free rate with volatility adjustment, as these are published by EIOPA. EIOPA annual spot rates are presented in the below table:
1 year3 years5 years10 years20 years
2022202320222023202220232022202320222023
3.366%3.557%3.393%2.639%3.321%2.523%3.282%2.593%2.955%2.606%
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is determined to reflect the compensation that the Company requires for bearing non-financial risk and its degree of risk aversion. The risk adjustment is determined using a confidence level technique and specifically a Risk-based capital approach with its target confidence level set at 80 percent, over a one year period, which represents the Company’s degree of risk aversion.
CSM amortisation
The CSM of a group of contracts is recognised in profit or loss to reflect services provided in each year, by identifying the coverage units in the group, allocating the CSM remaining at the end of the year (before any allocation) equally to each coverage unit provided in the year and expected to be provided in future years, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the year. The number of coverage units is the quantity of services provided by the contracts in the Company, determined by considering for each contract the quantity of the benefits provided and its expected coverage period. The coverage units will be reviewed and updated at each reporting date. The Company determined the coverage units for its insurance contracts and investment contracts with DPF on the basis of their quantity of benefits (sum insured), including any investment components, and the respective expected durations of each contract.
For reinsurance contracts held, the CSM amortisation reflects the level of service received and depends on the number of underlying contracts in-force.
(b)Fair valuation of investment property
The determination of the fair value of investment property at the year-end requires the use of significant management estimates. Details of key assumptions are disclosed in Note 13 to the financial statements.
Insurance risk
The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.
For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical techniques.
2.Management of insurance and financial risk (continued)
Insurance risk (continued)
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risk accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.
Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk and geographical location.
(a)Frequency and severity of claims
For contracts where death is the insured risk, the most significant factors that could increase the overall frequency of claims are epidemics or widespread changes in lifestyle, resulting in earlier or more claims than expected.
At present, these risks do not vary significantly in relation to the location of the risk insured by the Group. However, undue concentration by amounts could have an impact on the severity of benefit payments on a portfolio basis.
For contracts with fixed and guaranteed benefits and fixed future premiums, there are no mitigating terms and conditions that reduce the insurance risk accepted. Investment contracts with DPF (“Discretionary participation feature”) carry negligible insurance risk.
The Group manages these risks through its underwriting strategy and reinsurance agreements. The underwriting strategy is intended to ensure that the risks underwritten are well diversified in terms of type of risk and the level of insured benefits. Medical selection is also included in the Group’s underwriting procedures with premiums varied to reflect the health condition and lifestyle of the applicants.
The Group has retention limits on any single life assured for term business or risk premium business. The Group reinsures the excess of the insured benefits over approved retention limits under a treaty reinsurance arrangement. Short term insurance contracts are also protected through a combination of selective quota share and surplus reinsurance. Further, the Group has a “CAT XL” reinsurance arrangement to cover its exposure in the case of an event affecting more than three lives.
In general, all large sums assured are facultatively reinsured on terms that substantially limit the Group’s maximum net exposure. The Directors consider that all other business is adequately protected through treaty reinsurance with a reasonable spread of benefits payable according to the age of the insured, and the size of the sum assured. The Group is largely exposed to insurance risk in one geographical area, Malta. Single event exposure is capped through the “CAT XL” reinsurance arrangement as referred above.
(b)Lapse and surrender rates
Lapses relate to the termination of policies due to non–payment of premiums. Surrenders relate to the voluntary termination of policies by policyholders. Policy termination assumptions are determined using statistical measures based on the Group’s experience and vary by product type, policy duration and sales trends.
An increase in lapse rates early in the life of the policy would tend to reduce profits for shareholders, but later increases are broadly neutral in effect.
2.Management of insurance and financial risk (continued)
Insurance risk (continued)
(c)Policy maintenance expenses
Operating expenses assumptions reflect the projected costs of maintaining and servicing in–force policies and associated overhead expenses. The current level of expenses is taken as an appropriate expense base, adjusted for expected expense inflation if appropriate.
An increase in the level of expenses would result in an increase in expenditure, thereby reducing profits for the shareholders.
(d)Discount rates and investment return
Life insurance liabilities are determined as the sum of the discounted value of the expected benefits and future administration expenses directly related to the contract, less the discounted value of the expected theoretical premiums that would be required to meet these future cash outflows. Discount rates are based on current industry risk rates as these are published by EIOPA.
Consistent rates are used also as investment return assumptions to ensure a risk neutral valuation basis.
A change in interest rates will impact the value of the insurance liability and therefore affect the profits for the shareholders.
(e)Sources of uncertainty in the estimation of future benefit payments and premium receipts
Uncertainty in the estimation of future benefit payments and premium receipts for long term insurance contracts arises from the unpredictability of long-term changes in overall levels of mortality and the variability in contract holder behaviour. The Group uses appropriate base tables of standard mortality according to the type of contract being written.
2.Management of insurance and financial risk (continued)
Insurance risk (continued)
(e)Sources of uncertainty in the estimation of future benefit payments and premium receipts (continued)
Sensitivity analysis
Life business
The table below analyses how the CSM, profit or loss and equity would have increased (decreased) if changes in underwriting risk variables that were reasonably possible at the reporting date had occurred. This analysis presents the sensitivities both gross and net of reinsurance held and is based on a change in one risk variable with all other variables held constant. Sensitivity analysis assumes that changes to variables can be made independently, which is very unlikely to occur in practice.
 
Key assumptionChange in assumptionImpact on CSM€Impact on profit€Impact on equity€
Year ended 2023
Insurance contract liabilities
Mortality rates+10%(1,855,572) (207,564) (134,917)
Mortality rates-10% 2,018,567 57,019 37,062
Expenses+10%(925,504) (353,064)(229,492)
Expenses-10% 1,252,679 25,889 16,828
Lapse rates+10%(688,726) (76,775) (49,904)
Lapse rates-10% 862,726 19,965 12,977
Reinsurance contract assets
Mortality rates+10%1,429,44474,856 48,656
Mortality rates-10%(1,436,332)(75,136)(48,838)
Lapse rates+10%(305,859)(13,647)(8,871)
Lapse rates-10%363,72215,796 10,268
Financial risk
The Group is exposed to financial risk through its financial assets and liabilities, reinsurance assets, and insurance liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance and investment contracts with DPF. The most important components of financial risk are market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
These risks partly arise from open positions in interest rate, currency, debt and equity products, all of which are exposed to general and specific market movements. The Group manages these positions through adherence to an investment policy. The policy adopted is modelled to take into account actuarial recommendations and is developed to achieve long term investment returns in excess of its obligations under insurance and investment contracts with DPF. The principal technique underlying the Group’s framework is to broadly match assets to the liabilities arising from insurance and investment contracts with DPF by reference to the type of benefits payable to contract holders, and the recommended portfolio mix as advised by the approved actuary.
2.Management of insurance and financial risk (continued)
Financial risk (continued)
The Group’s investment policy is formally approved by the Board of Directors. Portfolio review processes and investment decisions are generally delegated to a dedicated Sub-Investment Committee or the Chief Executive Officer. Transactions in excess of pre-established parameters are subject to Board approval. The procedures consider, inter alia, a recommended portfolio structure, authorisation parameters, asset and counterparty limits and currency restrictions. Management reports to the Investment Committee on a regular basis. The Committee meets regularly to consider, inter alia, investment prospects, liquidity, the performance of the portfolio and the overall framework of the Group’s investment strategy. Solvency considerations as regulated by the relevant Authority are also taken into account as appropriate.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument, insurance contract issued or reinsurance contract held will fluctuate because of changes in market prices.
Market risk comprises three types of risk:
(a)Foreign exchange rates currency risk;
(b)Market interest rates risk; and
(c)Market prices risk.
(a)Foreign exchange rates currency risk
The Company's and Group’s exposure to foreign exchange risk arises primarily from investments that are denominated in currencies other than the Euro. As at 31 December 2023, the Company’s and Group’s exposure to foreign currency investments (principally comprising a mix of US Dollar and UK pound) represented 4.4% (2022: 5.4%) of the Group’s total investments excluding the term deposits.
7.6% (2022: 5.1%) of the Group’s cash and cash equivalents and term deposits, at 31 December 2023, are denominated in foreign currency (principally comprising a mix of US Dollar and UK pound). The Group’s corresponding proportion of cash and cash equivalents and term deposits which are denominated in foreign currency is 5.4% (2022: 5.2%).
The risk arising from foreign currency transactions is managed by regular monitoring of the relevant exchange rates and management’s reaction to material movements thereto.
For financial instruments held or issued, a sensitivity analysis technique that measures the change in the fair value and the cash flows of the Group’s financial instruments at the reporting date for hypothetical changes in exchange rates has been used. The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain market conditions. Actual results in the future may differ materially from those projected results due to the inherent uncertainty of global financial markets. The sensitivity analysis is for illustrative purposes only, as in practice market rates rarely change in isolation and are likely to be interdependent.
Should exchange rates at the end of the reporting period differ by +/-10% (2022: +/-10%), with all other variables held constant, the impact on the Company’s and the Group’s pre-tax profit would be +/- €455,742 (2022: +/- €498,329).
(b)Market interest rates risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument or insurance contract or reinsurance contract will fluctuate because of changes in market interest rates.
Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Market risk (continued)
(c)Price risk
The Group is exposed to market price risk arising from the uncertainty about the future prices of investments held that are classified in the statement of financial position as at fair value through profit or loss and as available-for-sale. This risk is mitigated through the adherence to an investment policy geared towards diversification as described earlier.
The total assets subject to equity price risk are the following:
Consolidated and separate
20232022
€€
Other investments (Note 16)25,811,41320,297,067
The sensitivity analysis for price risk illustrates how changes in the fair value of equity securities will fluctuate because of changes in market prices, whether these changes are caused by factors specific to the individual equity issuer, or factors affecting all similar equity securities traded in the market. The Group is principally exposed to price risk in respect of equity investments. Approximately 29% (2022: 27%) of equity securities held at fair value through profit or loss in Note 16 relate to holdings in five local banks. The remaining equity securities held at fair value through profit or loss are mainly held in equities in the Telecommunication Services, Property and Information Technology sectors.
The sensitivity analysis measures the change in the fair value of the instruments for a hypothetical change of 10% in the market price. The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain market conditions. Actual results in the future may differ materially from those projected results due to the inherent uncertainty of global financial markets. Should market prices at the end of the reporting period increase/decrease by 10%, with all other variables held constant, the impact on the Group’s pre-tax profit would be +/- €2,702,863 (2022: +/- €2,551,826). This sensitivity analysis is based on a change in an assumption while holding all other assumptions constant and does not consider, for example, the mitigating impact of the DPF element on policyholder liabilities for contracts with a DPF.
20232022
ChangeIImpact on profit before taxImpact on equityImpact on profit before taxImpact on equity
€€€€
Insurance contract liabilities+10%-12,279,049-40,581,592-5,830,919-37,967,816
Insurance contract liabilities-10%-(8,753,609)-19,548,934-(13,606,837)-18,530,060
Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk
The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Financial assets that potentially subject the Group to concentrations of credit risk consist principally of:
-other investments;
-reinsurers’ contract assets;
-amounts due from insurance policy holders and intermediaries associated with future premium inflows from insurance contracts issued;
-cash and cash equivalents; and
-amounts due from group undertakings.
The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or group of counterparties. Limits on the level of credit risk by category are defined within the Group’s investment policy as described earlier. This policy also considers regulatory restrictions on asset and counterparty exposures. Further detail on the content of the Group’s investment portfolio is provided in Note 15 to these financial statements.
The Group is exposed to credit risk in respect of receivables from group undertakings. Management assesses the respective group undertaking’s ability to repay balances due to the Group periodically and makes provisions for balances which it believes may not be recoverable.
Credit risk in respect of other receivables is not deemed to be significant after considering the range of underlying receivables, and their creditworthiness. Receivables are stated net of impairment. Further detail in this regard is provided in Note 17 to the financial statements.
Reinsurance is used to manage insurance risk. This does not, however, discharge the Company’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Company remains liable for payment to the policyholder. The creditworthiness of reinsurers is considered on an ongoing basis and by reviewing their financial strength prior to finalisation of any contract. The Company’s reinsurer retained its Standard & Poor’s rating of AAA to AA+ bracket as at 31 December 2023.
The following table illustrates the assets that expose the Group to credit risk as at the end of the reporting period and includes the Standard & Poor’s, Moody’s and ARC composite rating for debt securities at fair value through profit or loss, when available, and the default rating for deposits with banks and cash and cash equivalents, when available.
Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk (continued)
Assets bearing credit risk at the end of the reporting period are analysed as follows:
Consolidated
As at 31 December 2023
AAA to AAABBB to BBelow B to unratedTotal
€€€€€
Investments
Debt securities at fair value through profit or loss2,041,746-5,110,614-6,113,307-4,153,954-17,419,621
2,041,746-5,110,614-6,113,307-4,153,954-17,419,621
Loans and receivables
Loans secured on policies------8,451-8,451
Other loans and receivables--3,125,720-----3,125,720
Trade and other receivables------876,553-876,553
Amounts due from group undertakings------12,248,744-12,248,744
Term Deposits---------
Cash and cash equivalents--266,082-4,655,220---4,921,302
3,391,8024,655,22013,133,74821,180,770
Reinsurance Contract Assets2,565,601-------2,565,601
Total assets bearing credit risk4,607,347-8,502,416-10,768,527-17,287,702-41,165,992
Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk (continued)
Consolidated
As at 31 December 2022
AAA to AA
A
BBB to B
Below B to unrated
Total
€
€
€
€
€
Investments
Debt securities at fair value through profit or loss
1,784,640
6,100,953
9,162,373
4,614,829
21,662,795
1,784,640
6,100,953
9,162,373
4,614,829
21,662,795
Loans and receivables
Loans secured on policies
-
-
-
25,530
25,530
Other loans and receivables
-