Directors’ report

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 2021. 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

During the year, the Group continued to undertake restructuring and transformation activity to align the business operations with the Board’s approved strategy and to strengthen its capital based. This was achieved by implementing a holistic strategic plan, designed to permanently resolve various legacy issues that continue to negatively impact the wider LifeStar Group and to support the consolidation and future growth of the Company as well as the enitre LifeStar Group. As a result, on 4 May 2021 the Malta Financial Services Authority approved an offer for sale of 18,518,519 ordinary shares in the Company at an offer price of €0.54 per share (‘the Share Offer’) and the offer of 6,570,000 ordinary shares in the Company to its shareholders in exchange for their ordinary shares in LifeStar Holding p.l.c. at an exchange ratio of 1 LifeStar Holding p.l.c. share to 1 share in the Company (‘the Exchange Offer). From the Share Offer, 10,854,000 shares (for a total value of €5,861,160) were received by the Company, whilst 5,897,951 shares from the Exchange Offer (for a total value of €3,184,894) were received by the Company. Furthermore, on 6 May 2021, the Malta Financial Services Authority approved the issue of €10,000,000 4% Subordinated Bonds due 2026-2031 issued by the Company (the “Subordinated Bonds”). A total of 24,313 Subordinated Bonds (for a total value of €2,431,300) were received by the Company.

2021 proved to be another uncertain year as the Covid-19 pandemic has continued to impact businesses globally. While many hoped that this pandemic would come to an end, the development of new variants has continued to impact all sectors globally. Like many businesses, the Group has learnt to operate within this reality and the circumstances obtained satisfactory results. In fact, at a consolidated level, the Insurance Group registered a profit after tax amounting of €0.54 million (2020: €0.9 million) and total comprehensive income of €1.9 million (2020: €1.2 million).

LifeStar Insurance p.l.c.

LifeStar Insurance p.l.c.’s profit before tax amounted to €1.4 million (2020: loss €0.4 million) and generated a total comprehensive income for the year of €2.6 million (2020: €0.6 million). The profit is due to the benefits and claims remaining fairly flat on the previous year despite suffering some severe adverse unrealised losses on local equities and sovereign bonds resulting in a fall in net investment income and fair value movements of €1.4 million.  Gross written premium decreased on the previous year mainly due to a number of maturities and cancellations that did not result in re-investments.  On the other hand we did experience a very encouraging increase in our Index Linked and Unit Linked insurance of 36.6%.  During the year, the Company received a gross dividend of €1.37 million from its subsidiary LifeStar Health which is still subject to a regulatory no objection.

An important part of the Company’s business involves managing the treasury function, investing policyholder and shareholder funds across a wide range of financial investments, including equities, fixed income securities and to a lesser extent properties. The Company’s results are sensitive to the volatility in the market value of these investments, either directly because the Company bears the investment risk, or indirectly because the Company earns management fees for investments managed on behalf of policyholders.

Operating expenses increased on the prior year by €0.3 million, due mainly to professional fees and salary costs to retain and protect our talent loss. The balance on the long-term technical account closed off with a small loss of €0.3 million compared to a much larger loss in 2020 of €1.3 million.

Another important measure for a Life Company would be the Value of in Force Business.  2021 produced an excellent increase of €1.4 million (2020: €0.07 million).  This led to a total comprehensive income for the year of €2.6 million compared to €0.6 million in 2020. 

As the impact of the pandemic has lingered and continues to impact business in the foreseeable future, the Directors continue to monitor the situation closely and have assessed the Company’s financial position and performance for 2022, to mitigate the impact brought about by the pandemic as well as its impact on capital. Such analysis was also extended to analyse the effect on the Solvency Capital Requirements (the “SCR”) of the Company by reference to the stressed test scenarios in latest ORSA (Own Risk and Solvency Assessment) reports prepared by the entity.

Total assets of the Group increased by 6.5% (2020: 6.2%) from €161.9 million to €171.9 million as at the end of the current reporting period. Technical provisions increased by 4.5% (2020: 10.6%) from € 124.4 million to €130.1 million. The Company’s Solvency II ratio was a healthy one and, as at 31 December 2021 amounting to 165%.

The Company's value of in-force business for 2021 registered an increase of €1.4 million (2020: €0.1 million) and, in aggregate, amounted to €11.9 million (2020: €10.5 million) at end of the current year - representing the discounted projected future shareholder profits expected from the insurance policies in force as at year end, adjusted for taxation.

The Board of directors approved a 2021 bonus declaration of 3.5% for Money Plus policies (2020: 3.5%) and 1% (2020: 1.5%) for all other interest sensitive products. The Company also announced a bonus rate of 0.5% (2020: 0.5%) for paid up policies.

LifeStar Health Limited

The COVID-19 pandemic has directly impacted the business of LifeStar Health Limited, in view of the reduction in travel insurance as well as a decrease in clients operating in the hospitality industry. Whilst 2020 saw clients postponing interventions and treatments to a more suitable time. The company saw an increase in claims in 2021 due to customer feeling more confident to undertake these procedures.  As a result, LifeStar Health Limited generated higher revenue and earnings during 2020; however, revenues and earnings generated during 2021 were in line with previous years. Consequently, LifeStar Health Limited, registered a profit before tax of €0.6 million (FY2020: €1.0 million), as revenue decreased from €2.1 million in FY2020 to €1.8 million in FY2021.

Net assets decreased from €2.1 million to €1.4 million, principally due to €1 million net dividends which were declared, subject to regulatory no objection, during the year (2020: Nil).

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.

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, Note 10 – Intangible assets covering details on the Group ’s value of in-force business, Note 13 – Investment property and assets held for sale disclosing the significant observable inputs, and Note 16 – Technical provisions for insurance and investment contracts which include the valuation assumptions.

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. After considering the net movement of value-in-force business and available-for-sale investments, the Group’s total comprehensive profit amounted to €1.9 million (2020: €1.2 million). The profit for the year after taxation was €0.5 million (2020: €0.9 million). No dividends were declared during the year under review (2020: Nil) at the Company level, however a gross dividend of €1.37 million was declared by LifeStar Health Limited subject to regulatory no objection.

Events after the reporting date

Towards the end of February 2022, the armed conflict between the Russian Federation and Ukraine set in motion a chain of diplomatic efforts and other major geopolitical events which led a number of western nations, including the EU institution and the United States government, to impose a number of sanctions on Russia and Belarus. These current sanctions in place include several restrictive measures of a direct financial nature that are having a significant direct impact on the broad economy of the invading nations, as well as resulting in a downgrading of their sovereign and private debt by international credit rating agencies.

The consequences of these restrictive measures are however also expected to have a significant impact on the economies of the countries implementing such trade restrictions, with a spill-over on the world economy, as uncertainty and market volatility remain high across all industries with increasing tensions and rhetoric on both sides. The cost of doing business is undoubtedly set to rise further, following the initial COVID-19 shocks on the global economy seen in the last couple of years, as the ongoing conflict in Ukraine and COVID-related measures continue to rock global supply chains. The economic magnitude of this will depend on how the conflict unfolds. Different scenarios present different economic outcomes in terms of impact magnitude and on the eventual recovery.

The Company is not expected to be negatively impacted by the ongoing conflict in Ukraine because the Group’s business is predominantly in Malta. However, should individuals continue to refrain from travelling due to the ongoing conflicts as well as the continuous spikes in COVID-19 numbers, travel insurance may decrease which would ultimately impact revenue generated from LifeStar Health Limited. The Directors continue to actively monitor the situation, as well as all developments taking place internationally in order to take any action that might be necessary in the eventuality that developments in the conflict start to impact the Group’s turnover and business activity.

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. Nicolas Hornby Taylor (deceased on 27 April 2021)

Ms. Cristina Casingena

Mr. Mark J. Bamber (appointed on 23 April 2021)

Mr. Joseph M. Rizzo (appointed on 7 December 2021)

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 2021 (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 Remuneration Report provides a comprehensive overview of the nature and quantum of remuneration paid to the individual Directors and the Chief Executive Officer during the Reporting Period and details how this complies with the Company’s Remuneration Policy. The Remuneration Report is intended to provide increased corporate transparency, increased accountability and a better shareholder oversight of the remuneration paid to Directors and the Chief Executive Officer. The contents of the Remuneration Report have been reviewed by the Company’s Auditors to ensure that the information required in terms of Appendix 12.1 of the Capital Market Rules has been included.

The Group’s arrangements for corporate governance are reported in the ‘Corporate Governance - Statement of compliance’ section.

Statement of Directors’ responsibilities

Corporate Governance – Statement of Compliance

Remuneration Report

Accounting policies

The principal 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 2021.

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

The company 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.

On 9 November 2020, Global Capital Life Insurance Limited was renamed and rebranded as LifeStar Insurance Limited, and on 27 April 2021 it converted its status from a private limited liability company to a public limited liability company.

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, financial assets and financial liabilities at fair value through profit or loss, and the value of in-force business.

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 Group’s accounting policies. 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 29) 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 Group 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:

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.

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 2021, 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 2021. 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, the Group does not expect that the effects of COVID-19 will impact its ability to satisfy the regulatory solvency requirement. However, the Company continues to explore any and all ways possible to strengthen its capital base.

At a subsidiary level, the pandemic also impacted the business of the Group, due to a decrease in clients operating in the hospitality industry. Customers started undertaking certain medical interventions that were postponed from 2020. This resulted in lower revenues. Consequently, the Directors do not anticipate a material impact on the going concern status of the Group stemming from the COVID-19 pandemic.

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.

Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year

The following accounting pronouncements became effective from 1 January 2021 and have therefore been adopted:

·           Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16)

·           COVID-19 Rent Related Concessions (Amendments to IFRS 16)

The adoption of these pronouncements did not result in substantial changes to the Group’s accounting policies and did not have a significant impact on the Group’s financial results or position and therefore no additional disclosures have not been made.

Standards, interpretations and amendments to published standards as endorsed by the EU that were effective before 2020 for which the Group elected for the temporary exemption

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling.

The new expected credit losses model replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 is generally effective for years beginning on or after 1 January 2018. However in September 2016, the IASB issued amendments to IFRS 4 which provide optional relief to eligible insurers in respect of IFRS 9. The options permit entities whose predominant activity is issuing insurance contracts within the scope of IFRS 4, a temporary exemption to defer the implementation of IFRS 9.

Entities that apply the optional temporary relief were initially required to adopt IFRS 9 on annual periods beginning on or after 1 January 2021. However on 14 November 2018, the IASB deferred both the effective date of IFRS 17 Insurance Contracts and the expiry date for the optional relief in respect of IFRS 9 by one year.  On 17 March 2020, the IASB deferred again both the effective date of IFRS 17 Insurance Contracts and the expiry date for the optional relief in respect of IFRS 9 by a further 1 year. Therefore, entities that apply the optional temporary relief will be required to adopt IFRS 9 on 1 January 2023 which aligns with the new effective date of IFRS 17.

The Group evaluated its liabilities at 31 December 2015, the prescribed date of assessment under the optional temporary relief provisions and concluded that all of the liabilities are predominantly connected with insurance. More than 90% of the Group’s liabilities at 31 December 2015 are liabilities arising from contracts within the scope of IFRS 4. As at the same date the Group’s predominant activities were also established to be insurance related as evidenced through revenues reported in the Annual Report of that year.

Further to the above, the Group has not previously applied any version of IFRS 9. Therefore the Group is an eligible insurer that qualifies for optional relief from the application of IFRS 9. As at 1 January 2018, the Group has elected to apply the optional temporary relief under IFRS 4 that permits the deferral of the adoption of IFRS 9 for eligible insurers. The Group will continue to apply IAS 39 until 1 January 2023.

Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group

Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements but are mandatory for the Group’s accounting periods beginning on or after 1 January 2021. The Group has not early adopted these revisions to the requirements of IFRSs and the Group’s Directors are of the opinion that, with the exception of the below pronouncements, there are no requirements that will have a possible significant impact on the Group’s financial statements in the period of initial application.

IFRS 17 – Insurance Contracts

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2023.

The Group’s Directors are assessing the potential impact, if any, of the above IFRSs on the financial statements of the Group in the period of initial application.

2. 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.

3. 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.

4.  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.

5. Intangible assets

(a)       Value of in-force business

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.

(b)       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.

(c)       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.

6. 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 depreciation, 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 as follows:

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each report period. Gains and losses on disposals of plant and equipment are determined by comparing proceeds with the carrying amount, and are taken into account in determining operating profit. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

7. Investment property

Freehold and leasehold properties treated as investments principally comprise buildings that are held for long term rental yields or capital appreciation or both, and that are not occupied by the Group. Investment property is initially measured at cost including related transaction costs.  Investment property is subsequently carried at fair value, representing open market value determined annually by external valuers or by virtue of a directors’ valuation. It is the Group’s policy to engage the services of an external expert valuer every two years at a minimum.  Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. 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.

Unrealised gains and losses arising from changes in fair value (net of deferred taxation) are initially recognised in profit or loss.

8. Other financial instruments

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.

(d)       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.

(e)        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. Amoritsed 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.

(f)        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.

(g)       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.

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.

(iv)                 Shares issued by the Group

Ordinary shares issued by the Group are classified as equity instruments.

9. 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.

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:

In addition to the above loss events, objective evidence of impairment for an investment in an equity instrument includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered and/or a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. For financial assets at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment loss.  Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred on loans and receivables carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.  The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of comprehensive income.   

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as improved credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account.  The amount of the reversal is recognised in the profit and loss account.

When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative impairment loss that had been recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment and is measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

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. Insurance contracts and investment contracts with DPF

(a)  Classification

Insurance contracts are those contracts that transfer significant insurance risk.  Such contracts may also transfer financial risk.  As a general guideline, the Group defines as significant insurance risk the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur. Investment contracts are those contracts that transfer financial risk with no significant insurance risk.

A number of insurance and investment contracts contain a DPF (“Discretionary participation feature”).  This feature entitles the holder to receive, as a supplement to guaranteed benefits, additional benefits or bonuses:

-          that are likely to be a significant portion of the total contractual benefits;

-          whose amount or timing is contractually at the discretion of the Group; and

-            that are based on realised and/or unrealised investment returns on underlying assets held by the Group.

Local statutory regulations and the terms and conditions of these contracts set out the bases for the determination of the amounts on which the additional discretionary benefits are based (the DPF eligible surplus), and within which the Group may exercise its discretion as to the quantum and timing of their payment to contract holders, also considering the advice of the approved actuary.

(b)  Recognition and measurement

Insurance contracts and investment contracts with DPF are categorised depending on the duration of risk and whether or not the terms and conditions are fixed.

(i)        Short-term insurance contracts

These contracts are short duration life insurance contracts.  They protect the Group’s customers from the consequences of events (such as death or disability) that would affect the ability of the customer or his/her dependants to maintain their current level of income.  Guaranteed benefits paid on occurrence of the specified insured event are either fixed or linked to the extent of the economic loss suffered by the policyholder. There are no maturity or surrender benefits under these insurance contracts.

(ii)       Long-term contracts

Insurance contracts without DPF

These contracts insure events associated with human life (mainly for death) over a long and fixed duration.  The guaranteed and fixed element for these contracts relates to the sum assured, i.e. the benefit payable on death.

Premiums are recognised as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission, and are inclusive of policy fees receivable.

Insurance contracts with DPF

In addition to the guaranteed amount payable on death, these products combine a savings element whereby a portion of the premium receivable, and declared returns, are accumulated for the benefit of the policyholder.  Annual returns may combine a guaranteed rate of return and a discretionary element. Premiums are recognised as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission, and are inclusive of policy fees receivable.

Investment contracts with DPF

These long-term contracts are substantially savings products since they do not transfer significant insurance risk.  Annual returns may combine a guaranteed rate of return and a discretionary element.

The Group does not recognise the guaranteed element separately from the DPF for any of the contracts that it issues.  As permitted by IFRS 4, it continues to apply accounting policies existing prior to this standard in respect of such contracts, further summarised as follows:

A liability for long term contractual benefits that are expected to be incurred in the future is recorded when premiums are recognised. This liability is determined by the approved actuary following his annual investigation of the financial condition of the Group’s long-term business as required under the Insurance Business Act (Cap. 403 of the Laws of Malta). It is calculated in accordance with the relevant legislation governing the determination of liabilities for the purposes of statutory solvency. The calculation uses a prospective valuation method, unless a retrospective calculation results in a higher liability, and makes explicit provision for vested reversionary bonuses. Provision is also made, explicitly or implicitly, for future reversionary bonuses. The prospective method is determined as the sum of the expected discounted value of the benefit payments and the future administration expenses that are directly related to the contract, less the expected discounted value of the theoretical premiums that would be required to meet the benefits and administration expenses based on the valuation assumptions used. The liability is based on assumptions as to mortality, maintenance expenses and investment income that are established at the time the contract is issued, subject to solvency restrictions set out in the Insurance Business Act (Cap. 403 of the Laws of Malta).  The retrospective method is based on the insurance premium credited to the policyholder’s account, together with explicit provision for vested bonuses accruing as at the end of the reporting period, and adjustment for mortality risk and other benefits.

At each reporting date, an assessment is made of whether the recognised life insurance liabilities, net of related DAC, are adequate by using an existing liability adequacy test performed in accordance with IFRS 4 requirements and the Insurance Business Act (Cap. 403 of the Laws of Malta). The liability value is adjusted to the extent that it is insufficient to meet expected future benefits and expenses performing the adequacy test, current best estimates of future contractual cash flows, including related cash flows such as claims handling and policy administration expenses, policyholder options and guarantees, as well as investment income from assets backing such liabilities, are used.

Aggregation levels and the level of prudence applied in the test are consistent with IFRS 4 requirements and the Insurance Business Act (Cap. 403 of the Laws of Malta). To the extent that the test involves discounting of cash flows, the interest rate applied may be prescribed regulations by the Insurance Business Act (Cap. 403 of the Laws of Malta) or may be based on management’s prudent expectation of current market interest rates. Any inadequacy is recorded in the statement of profit or loss, initially by impairing DAC and, subsequently, by establishing an additional insurance liability for the remaining loss. In subsequent periods, the liability for a block of business that has failed the adequacy test is based on the assumptions that are established at the time of the loss recognition. The assumptions do not include a margin for adverse deviation. Impairment losses resulting from liability adequacy testing are reversed in future years if the impairment no longer exists.

This long-term liability is recalculated at the end of each reporting period. The above method of calculation satisfies the minimum liability adequacy test required by IFRS 4. The liability in respect of short-term insurance contracts is based on statistical analysis for the claims incurred but not reported, estimates of the expected ultimate cost of more complex claims that may be effected by external factors (such as court decisions), and further includes the portion of premiums received on in-force contracts that relate to unexpired risks at the end of the reporting period.

(c)          Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts in accounting policy 10(a) are classified as reinsurance contracts held.  Contracts that do not meet the classification requirements are classified as financial assets.

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurers’ share of technical provisions or receivables from reinsurers (unless netted off against amounts payable to reinsurers).  These assets consist of short term balances due from reinsurers (classified within receivables), as well as longer term receivables (classified as reinsurers’ share of technical provisions) that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts.  Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as an expense when due.

The Group assesses its reinsurance assets for impairment on an annual basis.  If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the statement of comprehensive income.  The Group gathers objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is also calculated following the same method used for these financial assets. These processes are described in accounting policy 9(a).

(d)          Receivables and payables related to insurance contracts

Receivables and payables are recognised when due.  These include amounts due to and from agents, brokers and policyholders.  If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in profit or loss in a similar manner to the process described above for reinsurance contracts held (also see accounting policy 9(a).

11. Investment contracts without DPF

The Group issues investment contracts without DPF. Premium arising on these contracts is classified as a financial liability – investment contracts without DPF. Investment contracts without fixed terms are financial liabilities whose fair value is dependent on the fair value of underlying financial assets, and are designated at inception as at fair value through profit or loss. The fair value of a unit linked financial liability is determined using the current unit values that reflect the fair values of the financial assets linked to the financial liability multiplied by the number of units attributed to the contract holder at the end of the reporting period. If the investment contract is subject to a surrender option, the fair value of the financial liability is never less than the amount payable on surrender, where applicable. Other benefits payable are also accrued as appropriate.

12. Assets held for sale

The Group classifies assets as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense. 

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification. 

Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.

13. 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.

14. 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.

15. 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.

16. 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. 

17. 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.

The investment return is allocated between the insurance technical account and the non-technical account on the basis of the investment return as recommended by the approved actuary.

18. 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.

(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.

19. Leases

(i)                   Group as a lessor

Lessor accounting remains similar to treatment under IAS 17 meaning that lessors continue to classify leases as finance or operating leases.

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.

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:

-       fixed payments (including payments which are essentially fixed), minus any incentive to lease to be paid;

-       the price for exercising a purchase option which the lessee is reasonably certain to exercise; and     

-       payments for early cancellation.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

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. 

20. Employee benefits

The Group contributes towards the state pension in accordance with local legislation.  The only obligation is to make the required contributions.  Costs are expensed in the period in which they are incurred.

21. 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.

Deferred tax is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised only to the extent that future taxable profit will be available such that realisation of the related tax benefit is probable.

Notes to the financial statements