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KD Holding Group
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2007
to IFRS4, BC 116, the Group uses reduction in
insurance liabilities in terms of Zillmer method.
The Zillmer method is an actuarial method used in
traditional life business for deferral of acquisition
costs (reduction in mathematical provisions). The
of profits attributable to life insurance is within
the discretion of the management, which passes
a resolution each year setting the amount of
participation in the surplus. This amount is not
specified in the internal regulations.
Zillmer amount for an individual contract does
not exceed 3.5% of the insured sum. Negative
mathematical provisions are set to 0.
In the case of insurance contracts with a single
payment of the premium, or when the period of
premium payments is shorter than the period during
The premises for evaluation of liabilities also take into
account the risk adjustment.
which the entitlements from the insurance contract
are created, the surplus of premiums which have
fallen due is deferred and recognised as a revenue as
Liabilities also include liabilities connected with the
distribution of the surplus to holders of life insurance
policies. In accordance with the insurance terms, only
a valid contract of mixed insurance and insurance
in annuities which has been in place for at least 24
months at the end of the financial period is included
in the distribution of surplus.
The surplus in endowment life insurance is added
at the end of each year as an additional premium
and consequently the sum insured is increased. An
additional insured sum is paid out in the event of
death or maturity. For annuity insurance the addition
of the surplus during the time of postponement of
pension increases the agreed sum of the annuity.
The surplus can be distributed due to higher yield
of investments, under mortality (over mortality for
annuities) or lower expenses than anticipated and
provided for.
In accordance with insurance terms, the distribution
entitlements from the insurance contract fall due, i.e.
in accordance with anticipated future entitlements.
Deferred revenue on the balance sheet date is
recognised as a liability. For life insurance (with the
exception of extra accident insurance policies) this
part is recognised under liabilities from insurance
contracts. For extra accident insurance policies,
this part is disclosed as a liability for the unearned
premium. The liability is formed using the pro-rata
method for all insurance contracts which do not
involve monthly payments and is calculated for each
insurance contract individually.
As the Group has no reinsurance to partially cover its
liabilities from such contracts, the reinsurance part of
liabilities is zero as at 31 December 2007.
Liabilities are calculated on the balance sheet date on
the basis of the assumptions applicable at the time
of concluding such contracts, or in certain cases on
the assumptions which the Group adopted during the
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