Life Insurance (prudential standard) determination No. 2 of 2012
Reductions in capital baseReductions in capital base
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Reductions in capital base
49. A life company must obtain APRA’s written approval prior to making any planned reduction in the capital base of the company.
50. A reduction in a life company’s capital base includes[\[5\]](#_ftn5):
(a) a share buyback or the redemption, repurchase or repayment of any qualifying Common Equity Tier 1 Capital, Additional Tier 1 Capital and Tier 2 Capital instruments issued by the company;
(b) trading in the life company’s own shares or capital instruments outside of any arrangement agreed upon with APRA in accordance with LPS 112; and
(c) the aggregate amount of dividend payments on ordinary shares that exceeds a life company’s after-tax earnings (as reported to APRA in the life company’s statutory accounts) after taking into account any payments on more senior capital instruments, in the financial year[6] to which they relate.
51. A life company proposing a capital reduction must provide APRA with a forecast showing the projected future capital position (including PCR) after the proposed capital reductions. The forecast should extend for at least two years.
52. A life company must satisfy APRA that its capital base will remain adequate for its future needs after a proposed reduction.