Insurance facts and figures 2007 - PwC

Financial reporting
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4.4 Annual accounts
In general, a public company must file its annual shareholder accounts with ASIC within
four months of year-end. Small proprietary companies are generally not required to
lodge the shareholder accounts with ASIC. The shareholders’ accounts prepared under
the Corporations Act must be independently audited by an Australian registered auditor.
GENERAL INSURANCE
The Financial Sector (Collection of Data) Act 2001 made APRA the single government
collection agency for financial sector data. Therefore, all of APRA’s industry supervision
acts, including the Insurance Act, were amended to remove their data collection
provisions. The yearly statutory accounts, which must be audited, are required to be
prepared on a different basis than the financial statements which must comply with the
Corporations Act and Australian accounting standards. The key differences are outlined
in the following table:
Table 4.5 – Key differences in treatment between financial and
prudential reporting
Item AASB 1023 treatment APRA treatment Adjustment required
Premiums (including
unclosed business)
Acquisition costs
(including fire brigade
charges)
Reinsurance expense
Claims
Recoveries (reinsurance
and other)
Earned over the life of
the policy based on the
pattern of risk and LAT,
providing for premium
deficiency
Costs are deferred and
amortised over the period
of benefit (i.e. premium
earning)
Recognised on a basis
consistent with the pattern
of reinsurance
Includes estimating
expected claims (IBNR) on
earned premiums
Includes estimating
expected recoveries
on outstanding claims
Recognised as income at
policy attachment date
Recognised on an
as-incurred basis
Recognised as an
expense at policy
attachment date
Includes estimating
expected claims on
written premiums
Includes estimating
expected recoveries
on outstanding claims and
premium liabilities
Write back movement in
unearned premiums
Write back movement
in DAC
Write back movement in
deferred reinsurance
Increase liability for
outstanding claims
by expected losses
on unexpired period
of policies (premium
liabilities). Adjust for
differences in assumptions
on discount rate and level
of risk margins
Increase asset for
expected recoveries
consistent with change
in liability for outstanding
claims and premium
liabilities
Tax Liability method Liability method The adjustments above
must be tax effected
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