Audit requirementsAudit requirements

Audit requirements

The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.

The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Standards Board Guidance Statement issued by the Auditing and Assurance Standards Board.

Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973 (the Act). This means that:

• the completed form for the financial year must be audited by the Appointed Auditor of the insurer (see paragraph 49J(1)(a) of the Act);

• the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));

• the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3)); and

• the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.

Reporting entity

Forms are to be completed for the following reporting entities where appropriate:

1. Authorised insurance entities including mutual entities (refer to form ‘Licensed Insurer’ (GRF 310.0 Statement of Financial Performance (L)); a reference to licensed insurer in the form means total operations of the licensed entity);
2. Authorised reinsurance entities (refer to form ‘Licensed Insurer’ (GRF 310.0 Statement of Financial Performance (L)); a reference to licensed insurer in the form means total operations of the licensed entity); and
3. Australian branch insurers of foreign insurers; a reference to licensed insurer in the form means total operations of the branch. Do not include the operations of the foreign parent entity. Branch insurers should complete the ‘Branch’ form GRF 310.0 Statement of Financial Performance (B).

Definitions

Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.

Unit of measurement

This form is to be presented in Australian currency, rounded to thousands of dollars, with no decimal place. Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ (AASB 121).

The general requirements of AASB 121 for translation are:

1. Foreign currency monetary items[1] outstanding at the reporting date must be translated at the spot rate[2] at the reporting date.
2. Foreign currency non-monetary items[3] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
3. Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.

4. Translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

• Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
• Translation of financial reports should otherwise follow the requirements in AASB 121.

Reporting period

Insurers are required to report the information in the reporting form on a quarterly and annual basis.

• The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
• The annual information is to be completed in respect of the financial year of the insurer.
• The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer.

Reporting lag

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 Standard GRS 310.0 Statement of Financial Performance.

Basis of preparation

Unless specified otherwise, general insurers are requested to follow the Australian accounting standards regarding the recognition and measurement of items of income and expense (profit or loss) in completing this form, notably AASB 1023 ‘General Insurance Contracts’ (AASB 1023).

Fair value measurement of assets

APRA applies the notion of assets backing general insurance liabilities for its regulatory reporting which is consistent with the classification basis in AASB 1023. The value of investment income and expense reported in this form should be equal to the value of investment income and expense relating to assets backing insurance liabilities for statutory reporting.

Investment income and expense reported in this form that relates to assets backing insurance liabilities must be measured at fair value. The investments must not be valued at cost. Fair value has the same meaning as defined in AASB 139, that is, 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:

1. The quoted market price (i.e. bid or ask price) in an active and liquid market; or
2. When there is infrequent activity in a market, and 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs[4].

Fair value of charged/encumbered assets

If an asset is in any way subject to a charge, covenant, encumbrance, option to purchase or any other arrangement by way of agreement or statute, that restricts the fair value of the asset, the value attached to the assets needs to reflect the existence of these arrangements. For example, if the insurer has agreed to deliver an asset to a purchaser at a price below the arms length value, the fair value cannot exceed the agreed price. This may also have relevance to this form.

Netting

Unless otherwise specifically stated, institutions are allowed to take advantage of netting agreements in relation to disclosure of data items in this form. Institutions are to comply with the prerequisite for netting outlined in Australian accounting standards AASB 7 ‘Financial Instruments: Disclosures’, AASB 139 and AASB 132 ‘Financial Instruments: Presentation’ (AASB 132).

Related party disclosure

Amounts due from, loans to, debentures of, shares in, or units in a trust or body corporate that is related to the insurer are to be disclosed for items of assets and liabilities where indicated in the form. For the purposes of this form, related bodies corporate are to be interpreted consistently with the meaning as in AASB 124 ‘Related Party Disclosures’ (AASB 124).

In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:

(a) controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);

(b) has significant influence over the entity or has joint control over the entity; or

(c) is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or

(d) is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or

(e) is a member of the key management personnel of the entity or its parent; or

(f) is a close member of the family of any individual referred to in (a), (b) or (e); or

(g) is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or

(h) is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.

Specific instructions

Premium revenue – Direct business and Inwards reinsurance

Report total premium revenue for direct business and inwards reinsurance business. These items should equal the amounts for ‘Total Direct Business’ and ‘Total Reinsurance Business’ in column 5 ‘AASB 1023 Gross earned premium (excluding FSL)’ reported in Part 3: Total in GRF 310.1 Premium Revenue and Reinsurance Expense.

Fire service levy (and other levies imposed by state and territory governments), which is part of total premium revenue should be reported separately below.

Fire service levy (and other levies imposed by state and territory governments)

Report at this item total fire service levy (and other levies imposed by state and territory governments). This item should equal the total of column 6 ‘Fire service levy and other levies imposed by state and territory governments’ reported in Part 3: Total in GRF 310.1 Premium Revenue and Reinsurance Expense.

Total Premium Revenue

This is automatically calculated by the form and represents the total of premium revenue for direct business and inwards reinsurance plus fire service levy (and other levies imposed by state and territory governments).

Outwards reinsurance expense relating to current and prior years cover

Report at this item total outwards reinsurance expense relating to current and prior years cover in accordance with AASB 1023. This should equal the total of column 11 ‘Total Reinsurance expense’ reported in Part 3: Total in GRF 310.1 Premium Revenue and Reinsurance Expense.

Net Premium Revenue

This is automatically calculated by the form and represents the difference between total premium revenue and outwards reinsurance expense.

Claims expense

Claims expense for both direct business and inwards reinsurance business should be split between Paid claims and the Movement Outstanding Claims Liability (OCL).

The movement in OCL is calculated in the following way:

• OCL at the end the reporting period

Less:

• OCL at beginning of financial year.

Gross Claims Expense

Gross claims expense is automatically calculated by the form and represents the total of the ‘Claims expense’ items.

Non-reinsurance recoveries revenue

This is revenue from recoveries other than reinsurance recoveries, in respect of claims. This amount should equal the total of the column titled‘Other recoveries revenue relating to current and prior years’ in Part 3: Total from GRF 310.2 Claims Expense and Reinsurance Recoveries.

Reinsurance recoveries revenue relating to current and prior years

Report total reinsurance recoveries for the reporting period. This should equal the total of the column titled ‘Reinsurance recoveries revenue relating to current and prior years’ in Part 3: Total from GRF 310.2 Claims Expense and Reinsurance Recoveries.

Total Recoveries

This is automatically calculated by the form and represents the sum of the values reported for ‘Non-reinsurance recoveries revenue’ and ‘Reinsurance recoveries revenue relating to current and prior years’.

Net claims expense

This is automatically calculated by the form and represents the difference between ‘Gross Claims Expense’ and ‘Total Recoveries’.

Net claims expense which is: Current period net claims expense

This item should be equal to the total of the column titled “Current period net claims expense” in Part 3: Total from GRF 310.2 Claims Expense and Reinsurance Recoveries.

Report at this item:

• current period claims payments;
• current period reported outstanding case estimates (that is, case estimates created in the current period); and
• current period incurred but not reported (and incurred but not enough reported) claims expenses.

Current period net claims expense should be defined and reported according to the following:

• the current period is defined as the current financial year to date;
• net of all recoverables (including input tax credits reinsurance, salvage, subrogation and other recovery types);
• inclusive of claims handling expense, assuming that industry generally includes claims handling costs with the claim paid component of the incurred claims expense;
• the outstanding claims component be inflated only i.e. undiscounted; and
• the outstanding claims component be on a central estimate basis i.e. without risk margins.

Net claims expense which is: Non-recurring items that are part of total net claims expense

Report the amount of ‘Net claims expense’ that has not been reported at ‘Current period net claims expense’ above.

Quarterly actuarial reviews are not required to be conducted specifically for the purposes of completing the above two items.

Acquisition costs (excluding the results of liability adequacy tests)

Report acquisition costs as recognised under AASB 1023. Acquisition costs are incurred in obtaining and recording general insurance contracts. They usually include commission or brokerage paid to agent or brokers for obtaining business for the insurer, selling and underwriting costs such as advertising and risk assessment, the administrative costs of recording policy information and premium collection costs. However for the purposes of reporting on this form, commission expenses should be excluded and reported separately.

Acquisition costs recognised in this line item should exclude the results of the liability adequacy test (LAT).

Results of liability adequacy tests (current year)

Report any adjustments to deferred acquisition costs or the unexpired risk liability as a result of performing the LAT in accordance with AASB 1023. Report at this item only the results of the LAT performed in the current financial year. Results of LAT failures should be reported as a positive value.

Results of liability adequacy tests (prior years)

Report any adjustments to deferred acquisition costs or the unexpired risk liability as a result of performing the LAT in accordance with AASB 1023. Report at this item the results of liability adequacy tests performed in prior years which have a profit and loss impact in the current financial year. Results of LAT failures should be reported as a positive value.

Other underwriting expenses

This item will include all other underwriting expenses which are not included in ‘Acquisition costs (excluding the results of the liability adequacy tests)’ and subject to deferral.

Levies and charges

This item will include levies and charges payable by the insurer. It excludes the amounts collected on behalf of third parties.

Commission Revenue

This item includes commission revenue received in relation to the insurance business. Commission revenue should be reported in accordance with the pattern in which it is earned. Do not include ‘premium rebates’ received from reinsurers in this line item.

Commission expense

Report at this item commission or brokerage paid to agents or brokers for obtaining business for the insurer.

Total Underwriting Expenses

Total underwriting expenses are calculated automatically and are derived from:

• Acquisition costs (excluding the results of the liability adequacy test)

Add:

• Results of liability adequacy tests (current and prior years)

• Other underwriting expenses

• Levies and charges

• Commission expense

Less:

• Commission revenue

Underwriting result

The underwriting result is calculated automatically and is derived from:

• Net Premium Revenue

Less:

• Net claims expense

Less:

• Total underwriting expenses

Investment Income on assets backing insurance liabilities

Report investment income on assets backing insurance liabilities at this item.

Investment expenses on assets backing insurance liabilities

Report investment expenses relating to assets backing insurance liabilities at this item.

Insurance result

The insurance result is calculated automatically and is derived from the

• Underwriting result

Add

• Investment income on assets backing insurance liabilities

Less

• Investment expenses on assets backing insurance liabilities.

Investment income on shareholders’ funds

Report investment income on shareholders’ / equity holders’ funds at this item. This item must correspond to the memo item ‘Total Investment Income which is attributable to shareholders’ funds’ reported in GRF 310.3 Investment and Operating Income and Expense.

Other Operating Income

Report all other income not reported above in this item. This item must correspond to the ‘Total Other Operating Income’ reported in GRF 310.3 Investment and Operating Income and Expense.

Other Operating Expenses

Report operating expenses in this item. This item must correspond to the ‘Total Operating Expenses’ reported in GRF 310.3 Investment and Operating Income and Expense.

Bargain purchase immediately recognised in profit or loss

This item must be completed in accordance with the requirements of AASB 3 ‘Business Combinations’.

The acquirer shall recognise goodwill as of the acquisition date measured as the excess of (a) over (b) below:

(a) the aggregate of:

(i) the consideration transferred which generally requires acquisition-date fair value;

(ii) the amount of any non-controlling interest in the acquiree measured in accordance with this Standard; and

(iii) in a business combination achieved in stages (see paragraphs 41 and 42), the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree.

(b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Profit (loss) from non-current assets and disposal groups classified as held for sale and discontinued operations

Report any gain or loss on the measurement of a non-current asset (or disposal group) classified as held for sale which meets the definition of a discontinued operation.

This item must be completed in accordance with the requirements of AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’.

Profit (loss) from continuing operations before income tax expense (benefit)

The profit (loss) from continuing operations is calculated automatically and is derived from:

• Insurance result

Plus:

• Investment income on shareholders’ funds

• Other operating income

Less:

• Other operating expenses
• Bargain purchase immediately recognised in profit or loss

Plus:

• Profit (loss) from non-current assets and disposal groups classified as held for sale and discontinued operations

Income tax expense (benefit) from continuing operations

This item represents the income tax expense or benefit attributable to the profit or loss from continuing operations.

This item must be completed in accordance with the requirements of AASB 112 ‘Income Taxes’.

Profit (loss) from continuing operations after income tax

This item is calculated automatically and is derived from:

• Profit or loss from continuing operations before income tax expense (benefit)

Less:

• Income tax expense (benefit) from continuing operations

Profit (loss) from discontinued operations after income tax

Profit (loss) after income tax from discontinued operations is to be presented in accordance with the Australian accounting standards.

Net profit (loss) after income tax attributable to members of the company / Net profit (loss) after income tax (Branches)

This is calculated automatically and is derived from:

• Profit (loss) from continuing operations after income tax

Add:

• Profit (loss) from discontinued operations after income tax

Retained profits / (losses) at beginning of the financial year

Report here the relevant retained profit (loss) amount at the beginning of the current financial year. For the first year of reporting the APRA forms, use the retained profits figure as per the insurer’s statutory accounts prepared in accordance with Australian accounting standards.

Adjustments to retained profits due to change in accounting policies/standards

Include the value of aggregate adjustments to retained earnings due to changes in accounting policies or accounting treatment as required by a revised accounting standard.

Reduction in retained profits on share buy back (Non-branch insurers only)

Disclose that portion of the consideration used for share buy backs during the reporting period that is allocated to retained earnings. Report any reduction in retained earnings as a negative figure.

Amounts transferred to / from reserves

Disclose the amount of funds transferred to / (from) other reserves to retained earnings during the reporting period.

Total available for appropriation

This amount is calculated automatically and is derived from:

• Net profit (loss) after income tax attributable to members of the company

Plus:

• Retained profits / (losses) at the beginning of the financial year

Plus/:

• Adjustments to retained profits due to change in accounting policies/standards

Plus:

• Reduction in retained profits on share buy back
• Amounts transferred from reserves

Dividends / head office transfers declared or paid

A dividend is the amount paid out of a company’s profits to its shareholders (interim and final dividend). The annual dividend equals the final dividend plus the interim dividend if declared. Accordingly, report dividends which are declared or paid by the insurer.

Branches should report any head office transfers declared or paid at this item that are not reported in ‘Aggregate of amounts transferred from / to parent entity (Branches)’ below.

Aggregate of amounts transferred (from) / to parent entity (Branches only)

Disclose the amount of dividends or funds transferred (from)/to the parent entity during the reporting period. This should be split between contributions of capital and dividends.

Note: If capital is provided by the parent entity, which is not required to be repaid by the branch, this contribution of capital is to be disclosed in this form as funds transferred from the parent entity.

If the capital provided by the parent is in the form of debt and must be repaid, the amount should be disclosed in the liability section of GRF 300.0 Statement of Financial Position under item 23.1 ‘Loan capital’.

Aggregate of other amounts

Report the aggregate of any other amounts that are transferred to or from reserves or retained earnings.

Retained profits / (losses) at the end of the reporting period

This is calculated automatically and for non-branch insurers is derived from:

• Total available for appropriation

Less:

• Dividends / head office transfers declared or paid

For branches, it is derived from:

• Net profit (loss) after income tax

Plus

• Retained profits / (losses) at the beginning of the financial year
• Adjustments to retained profits due to change in accounting policies / standards
• Aggregate of amounts transferred from / to reserves
• Aggregate of amounts transferred from parent entity (i.e. contributions of capital) (Branches only)
• Aggregate of amounts transferred to parent entity (i.e. dividends) (Branches only).
• Aggregate of other amounts

Less

• Head office transfers declared or paid.