RESULTADOS Y DISCUSIÓN
4. Resultados y discusión
4.2. Determinación de las coordenadas adimensionales z* y l* para la red de Palos de la Frontera
accounting judgements and
estimates continued
IAS 36 (amended), ‘Impairment of assets – Recoverable amount disclosures for non-financial assets’
The amendments remove the requirement to disclose recoverable amount when a cash generating unit contains goodwill or indefinite life intangible assets but there has been no impairment. However, the amendments will require additional information about fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. The amendments are effective for annual periods beginning on or after 1 January 2014 and are not expected to have a material impact on the financial statements of the Group.
IAS 39 (amended), ‘Financial instruments: recognition and measurement – Novation of derivatives and continuation of hedge accounting’
The amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The amendments are effective for annual periods beginning on or after 1 January 20141 and are not expected to have a material impact on the financial statements of the Group.
IAS 19 (amended), ‘Employee benefits – Defined benefit plans: employee contributions’
The amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendments are effective from 1 July 20141
and are not expected to have a material impact on the financial statements of the Group.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates.
Insurance contract liabilities The most significant estimate made in the financial statements relates to unpaid insurance claim reserves and related loss adjustment expenses of the Group. The estimated provision for the total level of claims incurred changes as more information becomes known about the actual losses for which the initial provisions were set up. The change in claims costs for prior period insurance claims represents the claims development of earlier reported years incurred in the current accounting period. The carrying value of the Group’s net outstanding claims reserves at 31 December 2013 is £2,554.0 million (2012: £2,604.9 million). In 2013, there has been a net positive development of £133.5 million (2012: £94.2 million positive) for the Group. Note 3.1 provides further details of the method the Group applies in estimating insurance contract liabilities. Insurance contract premium
Gross written premium is recognised on insurance contracts incepting during the financial year and includes an estimate of the total premium expected to be received under each contract. Revenue recognised on policies written through contracts with third parties, such as binding authorities and line slips, is deemed to be written in full at the inception of such contracts and therefore this estimate is particularly judgemental. Adjustments to estimates from previous years are included in the reported premium.
The premium estimation processes use expert judgement, the quality of the estimate being influenced by the nature and maturity of the portfolio, availability of timely data, relevant underwriting input to the estimating process and management review. Therefore, gross written premium estimates are reviewed on a quarterly basis using underwriter estimates and actuarial projections. Financial assets and financial liabilities The Group uses pricing vendor sources in determining the fair value of financial assets and financial liabilities. Depending on the methods and assumptions used (for example, in the fair valuation of Level 2 and Level 3 financial assets), the fair valuation of financial assets and financial liabilities can be subject to estimation uncertainty. Details of these methods and assumptions are described in note 3.3. The carrying values of the Group’s financial assets and financial liabilities at
31 December 2013 are £4,368.8 million (2012: £4,205.0 million) and £4.7 million (2012: £5.7 million) respectively. Intangible assets
Intangible assets are recognised on the acquisition of a subsidiary, on the purchase of specific rights to renew a particular underwriting portfolio, on the acquisition of syndicate capacity and on internally developed computer software.
The value of intangible assets arising from the acquisition of a subsidiary, syndicate capacity or on the purchase of renewal rights is largely based on the expected cash flows of the business acquired and contractual rights on that business. The internally developed computer software principally relates to cost directly attributable to the development of a new IT platform for Amlin Europe N.V. The assumptions made by management in performing impairment tests of intangible assets are subject to estimation uncertainty. The results of the impairment test may result in the value of the intangible being impaired in the current period. Note 23 provides further details on these assumptions. The carrying value of the Group’s intangible assets (excluding goodwill) at 31 December 2013 is £150.0 million (2012: £136.3 million). Goodwill impairment
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating unit to which goodwill is allocated. Details of the key assumptions used in the estimation of the recoverable amounts are contained in note 23.
The Group has allocated goodwill to cash generating units based on a number of factors, which include how the entity’s operations are monitored. Note 23 provides further details. The carrying value at the reporting date of goodwill is £89.1 million (2012: £75.1 million).
Tax
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. The wide range of international business relationships and the long-term nature and complexity of existing contractual agreements could necessitate future adjustments to tax income and expense already recorded. The Group establishes
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in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the country of the respective Group company’s domicile.
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profits will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.
The carrying value at the reporting date of the deferred tax asset is £6.1 million (2012 restated: £15.8 million), and of the deferred tax liability is £63.7 million (2012: £27.9 million).
Staff incentive plans
The Group recognises a liability and expense for certain staff incentive plans based on a formula that takes into consideration the underwriting profit after certain adjustments. Underwriting profit is estimated based on current expectation of premiums and claims and will change as more information is known or future events occur. Where estimates change, related staff incentive plan liabilities may also change. The carrying value at the reporting date of the liability for the staff incentive plans is £53.0 million (2012: £39.8 million). Retirement benefit obligations The Group participates in the Lloyd’s Superannuation Fund defined benefit scheme and also operates defined benefit schemes in the Netherlands, Belgium and Switzerland.
The amounts included in these financial statements are sensitive to changes in the assumptions used to derive the value of the scheme assets and liabilities. A gain of £9.4 million (2012 restated: loss of £9.5 million) has been recognised in other comprehensive income and an expense of £7.2 million (2012: £6.4 million) has been recognised in the statement of profit or loss. Note 32 provides further details on the Group’s retirement benefit obligations. At
£40.9 million) in respect of its defined benefit plans.
Determining control of entities
The significant judgements and assumptions made by the Group in reaching its control and consolidation conclusions for certain investments held by the Group are outlined in note 4(b).
Significant accounting policies Foreign currency translation
The Group and Company present their accounts in sterling since they are subject to regulation in the United Kingdom and the net assets, liabilities and income of both are currently weighted towards sterling. US dollar and euro revenues are significant but the sterling revenue stream is currently material. Group entities conduct business in a range of economic environments, although these are primarily the UK, USA and Continental Europe. Transactions denominated in foreign currencies are translated using the exchange rates prevailing at the dates of the
transactions. Monetary assets and liabilities are translated at the rates of exchange at the reporting date. Non-monetary assets and liabilities are translated at the rate prevailing in the period in which the asset or liability first arose or, where such items are revalued, at the latest valuation date. Exchange differences are recognised within other operating expenses.
The results and financial position of those Group entities whose functional currency is not sterling (‘foreign operations’) are translated into sterling as follows:
•Assets and liabilities for each statement of financial position presented are translated at the closing exchange rate at the reporting date;
•Income and expenses for each statement of profit or loss are translated at the exchange rates at the date of each transaction, or a practical approximation to these rates; and
•On consolidation, all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Where contracts to sell currency have been entered into prior to the year end, the contracted rates have been used.
are included in other operating expenses. Details of the principal exchange rates used are included in note 33.
Product classification
Insurance contracts are defined as those containing significant insurance risk if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, excluding scenarios that lack commercial substance, at the inception of the contract.
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Insurance contracts underwritten by the Group under which the contract holder is another insurer (inwards reinsurance) are included within insurance contracts. The significance of insurance risk is dependent on both the probability of an insured event and the magnitude of its potential effect. Any contracts not considered to be insurance contracts under IFRS 4 are classified as financial instruments.
Based on the current assessment, all of the products underwritten by the Group’s insurance entities are insurance contracts within the scope of IFRS 4. Certain risk transfer contracts held by the Group, for example catastrophe linked instruments, do not meet the definition of an insurance contract and are therefore accounted for as financial instruments in accordance with IAS 39.
Insurance contracts premium
Gross written premium comprise premium on insurance contracts incepting during the financial year together with adjustments to premium written in previous accounting periods. The estimated premium income in respect of facility contracts, for example binding authorities and lineslips, is deemed to be written in full at the inception of the contract.
Premium is disclosed before the deduction of brokerage and taxes or duties levied on them.
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TA
Notes to the accounts continued
For the year ended 31 December 2013
1. Summary of significant
accounting policies and critical
accounting judgements and
estimates continued
The proportion of gross written premium, gross of commission payable, attributable to periods after the reporting date is deferred as a provision for unearned premium. The change in this provision is taken to the statement of profit or loss in order that revenue is recognised over the period of the risk. Premium is recognised as earned over the policy contract period. The earned element is calculated separately for each contract on a basis where the premium is apportioned over the period of risk. For premium written under facilities, the earned element is calculated based on the estimated inception date and coverage period of the underlying contracts.Acquisition costs
Acquisition costs comprise brokerage incurred on insurance contracts written during the financial year. They are incurred on the same basis as the earned proportions of the premium they relate to. Deferred acquisition costs are amortised over the period in which the related revenues are earned. Deferred acquisition costs are reviewed at the end of each reporting period and are impaired where they are no longer considered to be recoverable.
Reinsurance premium ceded
Reinsurance premium ceded comprise premium on reinsurance arrangements bought which incept during the financial year, together with adjustments to premium ceded in previous accounting periods. The proportion of reinsurance premium ceded attributable to periods after the reporting date is deferred as reinsurers’ share of unearned premium. Reinsurance premium ceded is earned over the policy contract period in accordance with the terms of the reinsurance contract.
Insurance contracts liabilities
Claims paid are defined as those claims transactions settled up to the reporting date including internal and external claims settlement expenses allocated to those transactions.
Unpaid claims reserves are made for known or anticipated liabilities under insurance contracts which have not been settled up to the reporting date. Included within the provision is an allowance for the future costs of settling those claims. This is estimated based on past experience and current expectations of future cost levels.
Unpaid claims reserves are estimated on an undiscounted basis. Unpaid claims reserves acquired through a business combination are measured at fair value, using an applicable risk-free discount rate and having regard to the expected settlement dates of the claims. Provisions are subject to a detailed quarterly review where forecast future cash flows and existing amounts provided are reviewed and reassessed. Any changes to the amounts held are adjusted through profit or loss. Provisions are established above an actuarial best estimate, reflecting a risk premium relating to the uncertainty of the actual level of claims incurred. Although it is possible that claims could develop and exceed the reserves carried, there is therefore a reasonable chance of release of reserves from one year to the next.
The unpaid claims reserves also include, where necessary, a reserve for unexpired risks where, at the reporting date, the estimated costs of future claims and related deferred acquisition costs are expected to exceed the unearned premium provision.
Reinsurance recoveries
The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers, as well as longer-term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Where there is objective evidence that a reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the statement of profit or loss.
Salvage and subrogation reimbursements
Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Group may also have the right to pursue third parties for payment of some or all costs (for example, subrogation).
Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims, and salvage property is recognised in insurance and reinsurance receivables when the liability
that can reasonably be recovered from the disposal of the property.
Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognised in other loans and receivables when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.
Investment return
Dividends and any related tax credits are recognised as income on the date that the related listed investments are marked ex- dividend. Other investment income and interest receivable are recognised on an accruals basis.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, which is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Group Management Committee.
Business combinations
i. Business combinations before 1 January 2010
The acquisitions of subsidiaries are accounted for using the purchase method. The cost of acquisition is measured as the fair value of assets given, liabilities incurred or assumed, and equity instruments issued by the Group at the date of exchange, plus any costs directly attributable to the business combination. Identifiable assets acquired and liabilities and contingent liabilities assumed, meeting the conditions for recognition under IFRS 3, ‘Business combinations’, are recognised at their fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. ii. Business combinations after
1 January 2010
The Group policy is to apply IFRS 3 (revised) to all acquisitions taking place on or after 1 January 2010. Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the fair value of assets given, liabilities incurred or assumed, and equity instruments issued by the Group at the date of exchange. Under IFRS 3 (revised), with the exception of the
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proceeds), all other acquisition related costs are to be expensed as incurred.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed, meeting the conditions for recognition under IFRS 3, are recognised at their fair value at the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the fair value of consideration transferred over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.
For each business combination, the Group measures any non-controlling interests in the acquiree at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.
Investments in associates