PA - Banco Security

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- Fair value option As indicated in the Compendium of Accounting Standards of the SBIF, banks are not allowed to measure certain assets and liabilities at fair value instead of at their amortized cost. - Classification of instruments held for trading and investment The Company classifies its financial instruments acquired for trading and investing in three categories and applies a uniform accounting treatment for each one of these categories considering the following: - The instruments available for sale shall not be adjusted to fair value with changes recorded in profit or loss. - For presentation purposes in the consolidated statement of financial position, the investments in mutual funds are grouped with trading securities adjusting changes in their fair value through profit or loss. - Instruments having a derivative component that should be separated, but cannot be valued separately, are included in the category of trading securities and received the accounting treatment attributable to that portfolio of investments. - In the extraordinary case that an equity instrument included in the trading securities portfolio stops being traded, and it is not possible to obtain a reliable estimate of its fair value, will be included in the category of available for sale instruments. - Recognition in the Statement of Financial Position according to trade date The purchase and sale of financial instruments, including foreign currency adjustments, are recognized in the consolidated statement of financial position at the trade date, that is, the date when the Company assumes the reciprocal obligations that must be fulfilled within the period established by regulation or market conventions in the market in which the Company operates. - Embedded derivatives The Company will not treat as embedded derivatives Chilean currency indexation adjustments (e.g. those adjustments based foreign currency fluctuations o fluctuation of the Chilean consumer-price index such as the IPC, UF, IVP or UTM) approved by the Chilean Central Bank. - Hedges accounting The financial instruments recorded at fair value with changes in fair value recorded through profit or loss are not subject to hedges accounting, unless they are embedded derivatives that cannot be separated from the host contract. The options issued by the bank can only be designated as a hedge instruments to compensate for purchased options incorporated into a host contract that cannot be separated. 2. Notes to the Consolidated Financial Statements The SBIF does not request the preparation of explanatory notes for the quarterly interim financial statements. Consequently, inclusion of such notes is voluntarily and has been gradually implemented during 2010. Considering the volume and complexity of the banking operations of the Banco Security Subsidiary, Management has adopted SVS Circular No. 506 issued on February 13, 2009, which establishes that the differences between the IFRS-SBIF and IFRS standards should only be calculated and disclosed to the extent that such calculation is possible. The insurance subsidiary, Vida Security, is regulated by the standards of the SVS which has established a convergence plan from local standards (Chile GAAP) to IFRS for insurance companies for the year ending 2012. Consequently, the financial statements
111 PAGE of this subsidiary included in the consolidated financial statements of Grupo Security have been prepared using Chile GAAP and specific standards issued by the SVS. The accompanying consolidated financial statements have been prepared from the accounting records maintained by the Group and by the other subsidiary entities that are part of Grupo Security. Each entity prepares its financial statements following the applicable accounting principles and criteria. Therefore, in the consolidation process we have incorporated the necessary adjustments and reclassifications to uniform the accounting principles and policies used in our subsidiaries financial statements to adapt these to IFRS, except for the bank and insurance subsidiaries, which due to specific instruction of the SVS have been consolidated based on the accounting criteria applicable to both entities. These consolidated financial statements reflect faithfully the financial position of Grupo Security as of December 31, 2010 and 2009 and January 1, 2009, and the results of its operations, changes in equity and cash flows for the periods then ended. The transition date for the application of these new standards corresponds to January 1, 2009. The adoption of the new standards generated significant changes in policies and accounting principles such as: - Measurement criteria - New criteria for the determination of provision for credit risk and effective interest method accruals. - Incorporation of a new financial statement filled statement of changes in equity. - A significant increase in the information provided in the notes to the consolidated financial statements. In Note 3, First time adoption of International Financial Reporting Standards, Grupo Security presents a reconciliation between the consolidated statement of financial position at the beginning and at the end of the annual period ended at December 31, 2009 under previous accounting standards (i.e. Chile GAAP) and IFRS. The notes to the consolidated financial statements contain additional information to the information presented in the consolidated statement of financial position, statements of comprehensive income, statements of changes in net equity and statement of cash flows included herein. The notes provide narrative descriptions or details of these statements in a clear, relevant, reliable and comparable manner. 3. New IFRS and interpretations issued by the IFRS Interpretation Committee (IFRIC) As at the issuance date of these consolidated financial statements, the following IFRS and IFRIC interpretations have been issued: New IFRS and Amendments to IFRS Date of Mandatory Application Amendment to IFRS 2, Share Based Payments Annual periods beginning on or after January 1, 2010 IAS 24, Related Party Disclosures Annual periods beginning on or after January 1, 2011 IAS 32, Classification of Rights Issues Annual periods beginning on or after February 1, 2010 Amendment to IAS 39, Financial Instruments: Recognition and Measurement- Eligible hedged items Retrospective application for annual periods beginning on or after July 1, 2009 Improvements to IFRS - Collection of amendments to twelve International Financial Reporting Standards Annual periods beginning on or after January 1, 2010 IFRS 9 Financial Instruments Annual periods beginning on or after January 1, 2013 New Interpretations Date of Mandatory Application IFRIC 19, Extinguishing financial liabilities with equity instruments Annual periods beginning on or after July 1, 2010 Amendments to Interpretations IFRIC 14, The limit on a defined benefit asset, minimum funding requirements and their interaction Date of Mandatory Application Annual periods beginning on or after July 1, 2010
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A N N U A L R E P O R T 2 0 1 0
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PAGE PAGE PAGE financial summary 14
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Grupo Security Summarized Unconsoli
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02 principal financial indicators n
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DEAR SHAREHOLDERS I have the pleasu
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oard and management 04
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04board and management SENIOR MANAG
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05 recognitions 17 COMPANIES WITH B
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06 activities 19 ENCUENTRO JUVENTUD
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06 activities 21 A SCHOOL FOR VILLA
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2003 Inversiones Seguros Security i
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ECONOMIC CONTEXT EXTERNAL ENVIRONME
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CHILE: GDP GROWTH (%) 7 6 5 4 3 2 1
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09strategic pillars
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09strategic pillars security, where
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09 strategic pillars RISK MANAGEMEN
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10business areas
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10 business areas 39 PAGE
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FINANCING BANKING INDUSTRY Banking
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The following graph shows the evolu
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EARNINGS AND ROE OF BANCO SECURITY
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RISK Banco Security has been charac
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10business areas I N V E S T M E N
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10 business areas 53 Administradora
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10 business areas 55 SECURITIZADORA
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INSURANCE INSURANCE INDUSTRY The Ch
Page 62 and 63: Compañía de Seguros Generales Pen
Page 65 and 66: 10business areas S E R V I C E S
Page 67: It is important to recall that the
Page 70 and 71: INVESTMENT POLICY The bylaws of Gru
Page 72 and 73: The individual financial liabilitie
Page 74 and 75: BANK CREDITORS As of December 31, 2
Page 76 and 77: ASSOCIATED RISKS Local Financial Ri
Page 79 and 80: company information 12
Page 81 and 82: 12company information In accordance
Page 83 and 84: 12 company information 81 • Revis
Page 85 and 86: 12 company information 83 In Seguro
Page 87 and 88: 12 company information 85 STOCK MAR
Page 89 and 90: 12 company information 87 SOCIEDAD
Page 91 and 92: 12 company information 89 INMOBILIA
Page 93 and 94: Regulatory Framework Grupo Security
Page 95 and 96: financial statements 13
Page 97: financial statements 13 C o n s o l
Page 100 and 101: Consolidated Statement of Financial
Page 102 and 103: Consolidated statement of comprehen
Page 104 and 105: CONSOLIDATED STATEMENTS OF CASH FLO
Page 106 and 107: CONSOLIDATED STATEMENT OF CHANGES I
Page 108 and 109: The following companies are include
Page 110 and 111: ) Description of Grupo Security’s
Page 114 and 115: Disclosure of the Adoption of new a
Page 116 and 117: For financial assets, the amortized
Page 118 and 119: The recoverable amount is the highe
Page 120 and 121: Vida Security maintains current der
Page 122 and 123: f) Structured fixed income notes Vi
Page 124 and 125: CategorY Estimated range of loss Lo
Page 126 and 127: The main components of the cost of
Page 128 and 129: 2.30 Foreign currency and indexatio
Page 130 and 131: The most significant areas of estim
Page 132 and 133: i. Pension insurances reserves This
Page 134 and 135: 3.1 Main changes in the accounting
Page 136 and 137: Suspension of revenue recognition o
Page 138 and 139: ) Summary of Consolidated Equity as
Page 140 and 141: 3.3 Main adjustments made a) Invest
Page 142 and 143: NotE 5 - Income taxes Deferred tax
Page 144 and 145: Inmobiliaria Security S.A. measures
Page 146 and 147: NotE 8 - Investments in Associates
Page 148 and 149: NotE 9 - Property, Plant and Equipm
Page 150 and 151: ) The amortization of intangible as
Page 152 and 153: NotE 13 - Other Financial Assets, C
Page 154 and 155: NotE 16 - Other Non-Financial Asset
Page 156 and 157: Detail of bank obligations as of De
Page 158 and 159: Detail of bank obligations as of Ja
Page 160 and 161: Detail of the bonds at December 31,
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NotE 19 - Other Non-Financial Liabi
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NotE 23 - Other Financial Liabiliti
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Note 24 - Non-Current Liabilities A
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) Cost of Sales The items includes
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NotE 26 - Administrative expenses T
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BALANCE 31.12.2010 31.12.2009 01.01
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Up to 1 year From 1 to 3 years From
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The management of Grupo Security S.
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c) Statement of Financial Position
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e) Statement of Financial Position
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2) Risk Management Structure Banco
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4º Credit Management Basically, th
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In the case of the Bank’s impaire
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These are the details of guarantees
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Loans that are classified individua
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Such limitations allow the Bank to
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Banco Security and its Subsidiaries
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Market risk trading ledger 31.12.20
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Regulatory Liquidity Mismatching as
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Regulatory Liquidity Mismatching as
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currency swaps). These derivatives
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Participants in the Credit Risk Com
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7) Regulatory Capital Requirement I
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6) Summary of the Policy for Invest
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d) Dividends The policy agreed by t
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The following table shows financial
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Valores Security S.A. Corredores de
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• The Board of Directors agreed t
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Note 37 - Subsequent Events On Janu
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MANAGEMENT’S ANALYSIS OF CONSOLID
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2.2 Factoring Industry Factoring ha
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5. Risk Factors 5.1 Dependence on d
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6 PERFORMANCE INDECATORS OF THE CON
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$ Pesos Chilenos MM$ Millones de Pe
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BANCO SECURITY AND SUBSIDIARIES Typ
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Banco Security and Subsidiaries Con
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Banco Security and Subsidiaries Con
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Valores Security S.A. Corredores de
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Administradora General de Fondos Se
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Factoring Security S.A. Type of ent
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Asesorias Security S.A. AND SUBSIDI
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Securitizadora Security S.A. Type o
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Global Asset Advisors Type of entit
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Inversiones Seguros Security Ltda A
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Seguros Vida Security Previsión S.
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Compañía de Seguros Generales Pen
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Servicios Security S.A. AND SUBSIDI
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Corredores de Seguros Security Ltda
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Europ Assistance Chile s.A. Type of
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Cooper Gay Chile S.A. Corredores de
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Inmobiliaria Security S.A. AND SUBS
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INVERSIONES INVEST SECURITY LTDA. A
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Travel Security S.A. AND SUBSIDIARI
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Global Security Gestión y Servicio
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Mandatos Security Ltda. Type of ent
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GROUP OWNERSHIP STRUCTURE The follo
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D E C L A R A T I O N O F R E S P O
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ADDRESSES OF COMPANIES OF GRUPO SEC
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Santa Elena Branch Santa Elena 2400
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Santiago Nueva York 33, Office 1402
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“THIS PAPER COMES FROM FORESTS MA
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PA - Banco Security

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