Starting amount for Australian policy owStarting amount for Australian policy owners’ retained profits

Starting amount for Australian policy owners’ retained profits

39. For the purposes of the definition of “Australian policy owners’ retained profits” in subsection 61(1) of the Act, the starting amount is the initial starting amount under Part 1 plus the IFRS starting amount adjustment under Part 2.

Part 1

The initial starting amount is the lower of the following amounts:

(a) the sum of:

(i) such part of the aggregate retained profits of the category of business of the statutory fund representing Australian participating business as:

(A) the life company determines; and

(B) is at least 80%, or such higher percentage as is specified in the life company’s constitution, of those aggregate retained profits; and

(ii) such part of the aggregate retained profits of the category of business of the statutory fund representing non-participating business as the life company determines;

(b) an amount that:

(i) in the appointed actuary’s reasonable opinion:

(A) is consistent with the history and structure of the business of the statutory fund; and

(B) secures the reasonable benefit expectations of the policy owners in relation to the Australian participating business of the statutory fund; and

(C) is to be taken as the initial starting amount; and

(ii) is approved in writing by APRA for the purposes of this Prudential Standard.

Part 2

The IFRS starting amount adjustment is the greater of:

(a) Such part of the IFRS change in net assets of the category of business of the statutory fund representing Australian participating business as

(i) the life company determines; and

(ii) is at least 80%, or such higher percentage as is specified in the life company’s constitution, of the IFRS change in net assets of that category of business; and

(b) An amount that:

(i) in the appointed actuary’s reasonable opinion:

(A) is consistent with the substance of the changes in accounting standards made as at the start of the reporting period commencing on or after 1 January 2005; and

(B) is consistent with the basis on which the starting amount for Australian policy owners’ retained profits, as used for reporting in respect of the reporting period commencing on or after 1 January 1996, was determined by the appointed actuary at the time; and

(C) secures the reasonable benefit expectations of the policy owners in relation to the Australian participating business of the statutory fund in light of those accounting changes; and

(D) should be taken to be the amount by which the starting amount is changed; and

(ii) is approved in writing by APRA for the purpose of this Prudential Standard.