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KD Holding Group
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2007
New estimates are made for each subsequent financial
year with the purpose of checking the adequacy of
liabilities determined in this manner. If it is determined
that established liabilities are adequate, assumptions
remain unchanged. If the established liabilities prove
to be inadequate, assumptions are revised to reflect
new expectations. Consequently the provisions are
measured according to the appropriate level.
The Group established assumptions for returns on
investments by taking into account present returns
on government-issued securities and other financial
instruments on the market. In addition to this, the
structure of assets which are used to cover liabilities
stemming from life insurance contracts (longterm
business fund) is taken into consideration by
determining weighted average returns.
The assumptions used for insurance contracts
described hereunder are as follows:
Future costs are determined on the basis of current
costs. The future inflation assumption was also applied.
Depending on the type of contract the appropriate
mortality table is chosen and adjusted to reflect
(b) Changes in assumptions
actual mortality of the insurance portfolio in past
years and the current period.
An analysis of the Group's experience of the past
3 years is carried out by application of statistical
methods, and the appropriate cancellation percentage
is determined. Cancellation percentages vary by type
of product and term of the insurance period. The
analysis is carried out in order to determine the best
estimate of the policyholders' behavior.
In 2007 the Group made no changes to the assumptions
used in the calculation of insurance contracts.
5.1.5. Sensitivity analysis
The Group made a sensitivity analysis of net profits
before taxes on the last day of the financial year,
with consideration of various parameters.
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Sensitivity test – parameters
Sensitivity factor
Factor description
Technical interest rate (insurance contracts only) Effect of the change of the technical interest rate by ±1%
Costs and Expenses
Mortality (life insurance only)
Mortality in annuity insurance (pension and annuity insurance)
Claims ratio (property and health insurance only)
Effect on the increase/decrease of all costs except the costs of
acquisition by ±5%
Effect of the 5% increase in mortality
Effect of the 5% decrease in mortality
Effect of the 5% increase in the claims ratio
The above factors were used in actuarial and
statistical models for calculating the changes of net
effect of changes of key factors on the net earnings
of the Group before taxes.
profits of the Group. The table below shows the