Reporting Form GRF 450.0_G

Interest in Controlled Entities, Associates and Joint Ventures (Level 2 Insurance Group)

Instruction Guide

Introduction

This form collects information on the Level 2 insurance group’s interest in:

 consolidated entities of Level 2 insurance group;

 controlled entities that are non-consolidated subsidiaries of Level 2 insurance group; and

 associates and joint ventures.

Audit requirements

The annual return of GRF 450.0_G Interest in Controlled Entities, Associates and Joint Ventures (Level 2 Insurance Group) required under paragraphs 3 and 5(c) of Reporting Standard GRS 450.0_G must be subject to a limited assurance[2] review by the Group Auditor (see Prudential Standard GPS 311 Audit and Actuarial Reporting and Valuation: Level 2 Insurance Groups (GPS 311)).

The Group Auditor must prepare a review report on the basis of a limited assurance engagement in accordance with the requirements of GPS 311. Assurance in the review report will be provided in the form of negative assurance. To express negative assurance in the review report, the auditor will use limited procedures to obtain sufficient appropriate evidence. Enquiries of the Level 2 insurance group’s staff and analytical procedures will be the primary tools used to obtain evidence. These procedures will not provide all the evidence that would be required in an audit.

The scope and nature of audit testing required is outlined in the Standard on Assurance Engagement ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information issued by the Auditing and Assurance Standards Board.

Reporting entities

GRF 450.0_G Interest in Controlled Entities, Associates and Joint Ventures (Level 2 Insurance Group) is to be completed by the parent entity of a Level 2 insurance group as defined under Prudential Standard GPS 001 Definitions (GPS 001).

Consolidation at Level 2 should cover the Level 2 insurance group as defined under GPS 001.

Unit of measurement

This form is to be presented in Australian dollars (AUD), rounded to thousands of dollars, with no decimal place.

Amounts denominated in foreign currency are to be converted to AUD in accordance with Australian accounting standards.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with Australian accounting standards.

Basis of preparation

In completing this form, Level 2 insurance groups are requested to follow the recognition and measurement requirements specified in this instruction guide.

Materiality

Level 2 insurance groups are required to report only material interests in controlled entities, associates and joint ventures. Threshold levels for materiality are to be agreed with APRA. Matters that APRA may take into account in determining whether a non-consolidated subsidiary, associate or joint venture is material include, but are not limited to:

• the net assets;
• the total liabilities; and
• the total revenue

of the non-consolidated subsidiary in comparison to those of the Level 2 insurance group.

Reporting period

Level 2 insurance groups are required to report the information in the reporting form. This information is to be reported on three occasions in a Level 2 insurance group’s financial year. A Level 2 insurance group is required to submit:

• semi-annual return which is to be completed in respect of each half year from the start of the financial year of the Level 2 insurance group; and
• an audited annual return which will be based on a limited assurance review by the Group Auditor (see Audit requirements).

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 Level 2 insurance group.

Reporting lag

Submission times for Level 2 reporting forms are as follows (in accordance with GRS 450.0_G Interest in Controlled Entities, Associates and Joint Ventures):

• The semi-annual return is to be lodged within three months after the end of the reporting period.
• The audited annual return is to be lodged within four months after the end of the reporting period.

Adjustments

The parent entity of a Level 2 insurance group may apply in writing to APRA to vary the reporting requirements of GRF 450.0_G Interest in Controlled Entities (Level 2 Insurance Group), Associates and Joint Ventures in relation to that Level 2 insurance group. APRA may, at its discretion, approve such an application in writing.

Specific instructions

This form is separated into the following parts:

1. Part A: Interest in consolidated entities of the Level 2 insurance group
2. Part B: Interest in controlled entities that are non-consolidated subsidiaries of the Level 2 insurance group
3. Part C: Interest in Associates and Joint Ventures

The requirements for each of these are detailed below:

Part A: Interest in consolidated entities of the Level 2 insurance group

For the purposes of this form, ‘Entity’ means any legal, administrative, or fiduciary arrangement, organisational structure or other party (including a person) having the capacity to deploy scarce resources in order to achieve objectives.

For the purposes of this form, ‘consolidated entities’ includes reporting entities included in Level 2 insurance group.

A.1: Interest in consolidated entities - Australian

For the purposes of this form, “consolidated entities - Australian” includes only the Australian reporting entities included in Level 2 insurance group. Do not include International reporting entities here.

For prudential reporting purposes ‘Australian business’ is as defined in GPS 001.

Consolidated entities which are not insurers within the Level 2 insurance group but are incorporated in Australia should also be reported here.

(1) Name of consolidated entity

Report the full name of each consolidated entity.

(2) APRA regulated general insurer

If the consolidated entity is an APRA regulated general insurance entity input ‘yes’, otherwise input ‘no’.

(3) Ownership percentage %

Disclose the percentage of the Level 2 insurance group’s ownership of shares or units of the consolidated entity. Report the ownership percentage without any “%” symbol.

(4) Goodwill and identifiable intangible assets

Report the carrying value of goodwill and identifiable intangible assets of each entity within the Level 2 insurance group (as held on the group’s balance sheet) in accordance with Australian accounting standards.

Where goodwill is assigned to cash generating units and these units do not align with legal entities, an approach to completing this form needs to be agreed with APRA.

(5) Gross assets

Report the gross value of assets in each consolidated entity of the Level 2 insurance group. Gross assets are to be reported as positive values.

(6) Gross liabilities

Report the gross value of liabilities in each consolidated entity of the Level 2 insurance group. Gross liabilities are to be reported as positive values.

A.2: Interest in consolidated entities - International

For the purposes of this form, “consolidated entities - International” includes only the international reporting entities included in Level 2 insurance group. Do not include Australian reporting entities here.

Consolidated entities which are not insurers within the Level 2 insurance group but are incorporated outside of Australia should also be reported here.

(1) Name of consolidated entity

Report the full name of each consolidated entity.

(2) Ownership percentage %

Disclose the percentage of the Level 2 insurance group’s ownership of shares or units of the consolidated entity. Report the ownership percentage without any “%” symbol.

(3) Goodwill and identifiable intangible assets

Report the carrying value of goodwill and identifiable intangible assets of each entity (as held on the group’s balance sheet) in accordance with Australian accounting standards.

Where goodwill is assigned to cash generating units and these units do not align with legal entities, an approach to completing this form needs to be agreed with APRA.

(4) Region (for which Gross Assets and Gross Liabilities are reported)

Report the region which most appropriately reflects the location of the gross assets and gross liabilities of the entity.

International business, as defined in GPS 001, is to be reported according to the following geographical regions[3]:

• New Zealand;
• South East Asia;
• Asia Pacific;
• USA
• Americas;
• UK/Europe; and
• Other.

Once regions are defined, they should generally be maintained thereafter for consistency. However, this does not prevent the Level 2 insurance group from altering its reporting regions where necessary, provided APRA is notified of any changes.

(5) Gross assets

Report the gross value of assets in each entity of the Level 2 insurance group. Gross assets are to be reported as positive values.

(6) Gross liabilities

Report the gross value of liabilities in each entity of the Level 2 insurance group. Gross liabilities are to be reported as positive values.

Part B: Interest in controlled entities that are non-consolidated subsidiaries[4] of the Level 2 insurance group

For the purposes of this form, ‘controlled entities’ is to be interpreted as defined in AASB 127 ‘Consolidated and Separate Financial Statements’. Report controlled entities that are consolidated under Australian accounting standards but are treated, for prudential reporting purposes, as non-consolidated subsidiaries of the Level 2 insurance group under GPS 001.

(1) Name of controlled entity

Report the full name of each controlled entity.

(2) Description/Nature of business

In the space provided, detail a brief description of the main business conducted by the entity.

(3) APRA regulated

If the controlled entity is an APRA regulated entity input ‘yes’, otherwise input ‘no’.

(4) Country of incorporation

Report the country in which the entity is incorporated.

(5) Ownership percentage %

Disclose the percentage of the Level 2 insurance group’s ownership of shares or units of the controlled entity. Report the ownership percentage without any “%” symbol.

(6) Value of investment in controlled entity

Disclose the value of the investment of the Level 2 insurance group in the controlled entity as represented by the value of the non-consolidated subsidiary per the group’s financial statements prepared in accordance with Australian accounting standards.

(7) Net tangible assets of the controlled entity

Report the net tangible assets of the controlled entity. Net tangible assets are to be determined in accordance with the Australian accounting standards or the relevant local equivalents of International Financial Reporting Standards and are to be reported at 100 per cent of the value rather than the group’s share of ownership.

(8) Region (for which Gross Assets and Gross Liabilities are reported)

Report the region which most appropriately reflects the location of the gross assets and gross liabilities of the non-consolidated entity.

For prudential reporting purposes ‘Australian business’ is as defined in GPS 001.

International business, as defined in GPS 001, is to be reported according to the following geographical regions:

• New Zealand;
• South East Asia;
• Asia Pacific;
• USA
• Americas;
• UK/Europe; and
• Other.

Once regions are defined, they should generally be maintained thereafter for consistency. However, this does not prevent the Level 2 insurance group from altering its reporting regions where necessary, provided APRA is notified of any changes.

(9) Gross assets

Report the gross value of assets of the non-consolidated subsidiaries of the Level 2 insurance group. Gross assets are to be reported as positive values.

(10) Gross liabilities

Report the gross value of liabilities of the non-consolidated subsidiaries of the Level 2 insurance group. Gross liabilities are to be reported as positive values.

(11) Adequate capital

APRA may, under paragraph 59 of Prudential Standard GPS 111 Capital Adequacy: Level 2 Insurance Groups (GPS 111), require a Level 2 insurance group to deduct from capital an amount to cover the undercapitalisation of a non-consolidated subsidiary of the group. Consequently, Level 2 insurance groups are required to undertake an assessment of the capital levels of non-consolidated subsidiaries. Details of any assessment undertaken must be included in the Level 2 insurance group’s business plan.

If the non-consolidated subsidiary is adequately capitalised on a standalone basis input ‘yes’, otherwise input ‘no’.

Part C: Interest in associates and joint ventures

For the purposes of this form, the reference to “associates” is to be interpreted as defined in AASB 128 ‘Investments in Associates’.

Reference to joint ventures in this form includes joint venture entities and joint venture operations. Joint venture entities and joint venture operations are to be interpreted as defined in AASB 131 ‘Interests in Joint Ventures’.

(1) Name of associate/Joint venture

Report the full name of each associate or joint venture.

(2) Description/Nature of business

Provide a brief description of the main business conducted by the associate or joint venture.

(3) APRA regulated general insurer

If the associate or joint venture is an APRA regulated general insurance entity input ‘yes’, otherwise input ‘no’.

(4) Country of incorporation

Report the country in which the associate or the joint venture is incorporated.

(5) Percentage (%) ownership or Interest in associate or joint venture

Disclose the percentage of the Level 2 insurance group’s ownership or interest in the associate or the joint venture. Report the ownership percentage without any “%” symbol.

(6) Value of interest in associate or joint venture

Report the value of the investment in the associate or joint venture using the accounting method adopted in the financial statements of the Level 2 insurance group in accordance with Australian accounting standards.

(7) Net tangible assets of associate or joint venture

Report the net tangible assets of the associate or joint venture. Net tangible assets are to be determined in accordance with International Financial Reporting Standards (IFRS). Any other recognised accounting framework (e.g. US GAAP) may be used only when approved by APRA. Net tangible assets are to be reported at 100 per cent of the value rather than the group’s share of ownership.

(8) Net income recognised from interest in associate or joint venture

Disclose the net income recognised from the Level 2 insurance group’s interest in the associate or joint venture.

(9) Region (for which Gross Assets and Gross Liabilities are reported)

Report the region which most appropriately reflects the location of the gross assets and gross liabilities of the associate or joint venture.

For prudential reporting purposes ‘Australian business’ is as defined in GPS 001.

International business, as defined in GPS 001, is to be reported according to the following geographical regions:

• New Zealand;
• South East Asia;
• Asia Pacific;
• USA
• Americas;
• UK/Europe; and
• Other.

Once regions are defined, they should generally be maintained thereafter for consistency. However, this does not prevent the Level 2 insurance group from altering its reporting regions where necessary, provided APRA is notified of any change.

(10) Gross assets

Report the gross value of assets of the associates and joint venture operations of the Level 2 insurance group. Gross assets are to be reported as positive values.

(11) Gross liabilities

Report the gross value of liabilities of the associates and joint venture operations of the Level 2 insurance group. Gross liabilities are to be reported as positive values.