annual report 2011

IOOF | annual report 2011
Notes to the financial statements (cont’d)
For the year ended 30 June 2011
Solvency requirements
Solvency reserves are required to meet the prudential standards determined in accordance with Prudential Standard LPS 2.04
“Solvency Standard” issued by the Australian Prudential Regulatory Authority under Section 65 of the Life Insurance Act 1995. Solvency
reserves provide additional protection to policy holders against the impact of fluctuations and unexpected adverse circumstances on
the Company.
(g) Disclosures on asset restrictions, managed assets and trustee activities
(i)
Restrictions on assets
Investments held in life statutory funds can only be used in accordance with the relevant regulatory restrictions imposed under the
Life Act and associated rules and regulations. The main restrictions are that the assets in a life statutory fund can only be used to meet
the liabilities and expenses of that life statutory fund, to acquire investments to further the business of the life statutory fund or as
distributions when solvency, capital adequacy and other regulatory requirements are met.
(ii)
Managed Funds and other fiduciary duties
Entities in the IOOF Holdings Ltd Group, including the IOOF Ltd Benefit Funds, hold controlling investments in managed funds. A
subsidiary of the company is the Responsible Entity for these managed funds and has a fiduciary responsibility for managing these
trusts. Arrangements are in place to ensure that such activities are managed separately from the other activities of the IOOF Holdings
Ltd Group.
(h) Solvency requirements
Solvency reserves are required to meet the prudential standards determined in accordance with Prudential Standard LPS 2.04
“Solvency Standard” issued by the Australian Prudential Regulatory Authority under Section 65 of the Life Insurance Act 1995. Solvency
reserves provide additional protection to policy holders against the impact of fluctuations and unexpected adverse circumstances on
the Company.
The figures in the table below represent the number of times coverage of the aggregate of all benefit funds and statutory funds in the
Life Group over the solvency reserve.
2011 2010
$’000 $’000
Solvency requirement A 851,622 857,861
Represented by:
Minimum Termination Value (1) 837,194 848,130
Other Liabilities 12,338 7,692
Solvency Reserve B 2,090 2,039
851,622 857,861
Assets Available for Solvency C 9,023 10,237
Comprised of:
Excess of Net Policy Liability over Minimum Termination Value 1,870 2,333
Net Assets 7,153 7,904
9,023 10,237
Solvency Reserve % ( B / ( A - B )) x 100 0.25% 0.24%
Coverage of Solvency Reserve C/ B 4.32 5.02
For detailed solvency information on a statutory fund basis, users of this annual report should refer to the financial statements
prepared by the life insurer.
(1) The Minimum Termination Value is determined in accordance with the Solvency Standard and is the base figure upon which reserves against liability and asset risks
are layered in determining the Solvency Requirement. The Minimum Termination Value represents the minimum obligation of the company to policy owners at the
reporting date.
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