This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in the Reporting Requirements table.
Basis of preparation
In completing this form unless otherwise specifically stated below, general insurers are recommended to follow the Australian accounting standards where possible, regarding the interpretation, recognition and measurement of investments notably AASB 1023 ‘Financial Reporting of General Insurance Activities’.
The aggregate value of investments disclosed in the forms listed below must agree to the total of amounts reported as both current and non-current assets in items 3 and 8 of GRF 300.0 Statement of Financial Position.
GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge
GRF 140.1 Investments – Direct Equity Holdings and Risk Charge
GRF 140.2 Investments – Direct Property Holdings and Risk Charge
GRF 140.3 Investments – Loans and Advances and Risk Charge
GRF 140.4 Investments – Assets Indirectly Held by the Insurer and Risk Charge
The value of these investments reported in this form (and all the above forms) may or may not equate to the value of investments deemed ‘integral to insurance operations’ as defined in AASB 1023. However APRA does not follow this classification basis. AASB 1023 defines Investments integral to the entity's general insurance activities means[1]:
(a) in relation to an entity - investments that are controlled by the entity in the conduct of its general insurance activities; and
(b) in relation to a consolidated group - investments controlled by the entities in the economic entity in the conduct of general insurance activities and investments controlled by subsidiaries of those entities.
Investments reported in this forms (and other forms listed above) can be valued at market value which is different from AASB 1023, which requires that investments integral to the entity's general insurance activities must be measured at net market values. However the investments must not be valued at cost. Either market value or net market value is to be adopted. Market value or fair value has the same meaning as defined in the Australian Accounting standards. Market value is defined for accounting purposes as a subset of fair value, where fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction, and is determined as follows:
The quoted market price in an active and liquid market (i.e. market value); or
Part Reporting lag - Financial Sector (Collection of Data) determination No. 11 of 2005 - Reporting lag | Zoe
when there is infrequent activity in a market, the market is not well established, small volumes are traded relative to the asset or liability to be valued, or a quoted market price is not available – an estimate of a price for the asset or liability in an active and liquid market.
Derivative instruments that are used to hedge investments that are included in the above forms are not to be reported in these forms, they are to be reported in GRF 160.0 Derivative Activity and Risk Charge.
For investments reported in this form, changes in the values at which such investments are measured must be recognised as revenues (or losses) in GRF 310.0 Statement of Financial Performance and GRF 310.3 Investment and Operating Income and Expense in the reporting period in which the changes occur.
Accounting Standards AASB 1021 ‘Depreciation of Non-Current Assets’ and AASB 1010 ‘Accounting for the Revaluation of Non-Current Assets’ do not apply to such investments.
Licensed Entity – Investment Capital Factor %
This column for each form discloses the appropriate investment capital factor for the asset type in accordance with GGN 110.4 Investment Risk Capital Charge Attachment 1.
Licensed Entity – Investment Risk Charge
This column for each form will calculate the appropriate investment risk charge in accordance with GGN 110.4 Investment Risk Capital Charge Attachment 1.
Holding of Units in Unit Trusts
Where the insurer’s investments are represented by holdings of units in unlisted or listed managed investment vehicles/entities, the following reporting is required:
Units are to be reported in this form. This form requires amongst other things, disclosure of the value of the unit holding according to the nature of the underlying market exposure (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosure in accordance with the funds advised asset allocation.
Holding must be disclosed as unlisted or listed units.
Exception
If the units are held in a related/controlled entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GGN 110.4 Investment Risk Capital Charge paragraphs 6 – 9. Once approved by APRA this will allow the insurer to look through the legal structures involved and to consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.
Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing
Where the transferee of the security effectively receives a lenders rate of return or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.
Under this method of accounting for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical Investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.
Securities Transacted not Settled (i.e. trade date accounting)
For the purposes the APRA forms include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business –Credit Substitutes Provided and Risk Charge.
Related parties
Where this term is used or referenced in these forms, related parties is to be interpreted consistently with its definition and meaning as contained in AASB 1017 ‘Related Party Disclosures’.
In accordance with AASB 1017 related party means, in relation to a reporting entity any:
(a) other entity that at any time during the financial year, has control or significant influence over the reporting entity; or
(b) other entity that at any time during the financial year, is subject to control or significant influence by the reporting entity; or
(c) other entity that, at any time during the financial year, is controlled by the same entity that controls the reporting entity. Referred to as a situation in which entities are subject to common control; or
(d) other entity that, at any time during the financial year, is controlled by the same entity that significantly influences the reporting entity; or
(e) other entity that, at any time during the financial year, is significantly influenced by the same entity that controls the reporting entity; or
(f) director of the reporting entity or any of their director-related entities; or
(g) director of any other entity identified as a related party under any of paragraphs (a) to (e), or any of their director-related entities;
but excludes any other entity (except those identified as a related party under paragraph (f)) where the related party relationship results solely from normal dealings of:
AASB 1017 defines director-related entities as meaning “the spouses of such directors, relatives of such directors or spouses and any other entity under the joint or several control or significant influence of such directors, spouses or relatives”.
Relative in relation to a person is defined in the Corporations Law to mean the spouse, partner, son, daughter, or brother or sister of the person.