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PR No. 35 Rules/Other as made
Determination under subsection 252(1) of the Life Insurance Act 1995 and subsection 33(3) of the Acts Interpretation Act 1901 revoking Prudential Rules No. 35 (as varied) and making Prudential Rules No. 35 for the purposes of subsection 82(5) of the Life Insurance Act 1995.
Administered by: Treasury
General Comments: This Determination revokes Prudential Rules No. 35 (31/03/1999) as varied with effect from 21/12/2005. Prudential Rules No. 35 - Financial Statements (16/12/2005) was revoked by Life Insurance (Prudential Rules) determination No. 2 of 2007 - Prudential Rules No. 12 - Restricted Investments Returns; Prudential Rules No. 26 - Collection of Statistics; Prudential Rules No. 35 - Financial Statements; Prudential Rules No. 47 - Friendly Society Financial Statements; Prudential Rules No. 48 - Collection of Statistics - Friendly Societies; Prudential Rules No. 49 - Contract Classification for the purpose of regulatory reporting to APRA with effect from 01/01/2008.
Registered 21 Dec 2005
Tabling HistoryDate
Tabled HR07-Feb-2006
Tabled Senate07-Feb-2006
Date of repeal 09 Aug 2013
Repealed by Treasury (Spent and Redundant Instruments) Repeal Regulation 2013

Life Insurance (Prudential Rules) Determination No. 5 of 2005

Prudential Rules No 35 - Financial Statements

Life Insurance Act 1995

I, John Francis Laker, Chair of APRA, under subsection 252(1) of the Life Insurance Act 1995 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:

·        REVOKE the Prudential Rules No. 35 (made on 31 March 1999 under subsection 252(1) of the Act for the purposes of subsection 82(5) of the Act, and varied on 20 April 1999, on or about June 2002, and on 15 December 2004 by Life Insurance (prudential rules) determination No 3 of 2004); and

·        MAKE the Prudential Rules No. 35 set out in the Schedule for the purposes of subsection 82(5) of the Act.

This Determination shall take effect upon registration on the Federal Register of Legislative Instruments.

 

 

Dated     16 December 2005

 

 

 

[Signed]

 

 

 

John Francis Laker

Chair


 

Interpretation

In this Determination

APRA means the Australian Prudential Regulation Authority.

 

Schedule   

Prudential Rules No. 35 comprises the 41 pages commencing on the following page.

 


 

Prudential Rules No. 35

Financial Statements

Life Insurance Act 1995 (s 82(5))

These Prudential Rules are made under subsection 252(1) of the Life Insurance Act 1995 (the Act) for the purposes of subsection 82(5) of the Act and apply to life companies registered under the Act (other than friendly societies).

 

Part 1 – Basic requirement

Financial statements must comply with these rules

1.             The financial statements mentioned in subsections 82(1) and (2) of the Act must comply with these rules.

 

Part 2 – Commencement, application and interpretation

Commencement and application

2.             These rules:

(a)           take effect on 31 December 2005; and

(b)          apply in relation to a financial year of a life company ending on or after 31 December 2005.

 

Interpretation

3.             In these rules:

(a)           “AASB”, accompanied by a number, means the Accounting Standard made by the Australian Accounting Standards Board, which is designated by that number, as in force from time to time;

(b)          accounting standards” means the Accounting Standards made by the Australian Accounting Standards Board, as in force from time to time; and those Australian Accounting Standards issued by the Australian Accounting Research Foundation for which there is no corresponding applicable Accounting Standard made by the Australian Accounting Standards Board, as in force on 31 December 2005;

(c)           actuarial standards” means the actuarial standards made by the Life Insurance Actuarial Standards Board under the Act, as in force from time to time;

(d)          Corporations Act” means the Corporations Act 2001 as amended from time to time;

(e)           economic entity” has the same meaning as in accounting standards and the Corporations Act;

(f)            entity” has the same meaning as in accounting standards and the Corporations Act;

(g)           fair value” means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction;

(h)           general purpose financial statements” means the financial statements as required under the Corporations Act;

(i)             regulatory financial statements” means the financial statements as required under subsections 82(1) and 82(2) of the Act and in the forms submitted to APRA in accordance with the Schedules to these rules;

(j)            parent company” has the same meaning as in accounting standards and the Corporations Act;

(k)          policy conversion” means:

(i)            a policy ceasing to be referable to one statutory fund of a life company and becoming referable to another statutory fund of the life company; or

(ii)           a policy referable to one or more statutory funds of a life company becoming referable to a further statutory fund or funds of the life company, as a consequence of a change in the terms and conditions of the policy.

4.             In these rules, whether one entity controls another is to be determined in accordance with the accounting standards and the Corporations Act.

5.             In its application to a company other than a company limited only by shares, a provision of these rules that includes the expression “shareholders” is to be read as if “members” were substituted for “shareholders”.

6.             Where these rules are applied to regulatory financial statements, a reference in these rules to a financial year includes a reference to a period other than a financial year.

7.             A reference in these rules to the interest of shareholders in, or in relation to, a statutory fund is a reference to the interest of those shareholders in, or in relation to:

(a)           shareholders’ retained profits (Australian participating); and

(b)          shareholders’ retained profits (overseas and non-participating); and

(c)           shareholders’ capital;

          relating to the statutory fund.

8.             A reference in these rules to a thing being in accordance with, or required by, the accounting standards or the Corporations Act is a reference to that thing being in accordance with, or required by, the accounting standards or the Corporations Act as they are applied to regulatory financial statements by rule 10 of these rules.

9.             Where the context permits, a reference in these rules to a profit and loss statement or balance sheet includes a reference to a consolidated profit and loss statement or consolidated balance sheet , respectively.

 


Part 3 – Application of accounting standards, actuarial standards and Corporations Act

Regulatory financial statements must comply with accounting standards and the Corporations Act

10.         Regulatory financial statements must comply with the following, to the extent that they are not inconsistent with these rules:

(a)           the accounting standards; and

(b)          the provisions of the Corporations Act which specify requirements relating to the form and content of a financial report (within the meaning of the Corporations Act).

[NOTE: Accounting standards AASB 1038 – Life Insurance Contracts, AASB 139 – Financial Instruments, AASB 118 – Revenue, AASB 138 – Intangible Assets and AASB 136 – Impairment of Assets will apply in relation to financial periods ending on or after 31 December 2005.]

Actuarial valuations and calculations must be in accordance with actuarial standards

11.         Actuarial valuations and calculations included in regulatory financial statements must be in accordance with the actuarial standards, except where specifically allowed under transitional arrangements agreed in writing between APRA and the life company.

How are assets to be valued?

12.         All assets of a statutory fund must be measured at fair value, with movement in fair value recognised in profit and loss.

How are contracts to be classified?

13.         All policies are to be categorised as either life insurance contracts or life investment contracts in accordance with accounting standards, but subject to the further constraints imposed by Prudential Rules No. 49 – Contract Classification, and treated accordingly for the purposes of the accounting standards, the actuarial standards and these rules. 


Part 4 – What regulatory financial statements must comprise

14.         Regulatory financial statements of a life company must comprise a financial report that contains:

(a)           a profit and loss statement in the form specified in Form A in Schedule 1 of these rules that truly represents the profit or loss of the life company determined in accordance with the requirements of the Act and these rules, for the financial year; and

(b)          a balance sheet in the form specified in Form B in Schedule 1 of these rules that truly represents the financial position of the life company consistent with the requirements of the Act and these rules, as at the end of the financial year; and

(c)           the notes mentioned in Part 5; and

(d)          statements and reports (other than a directors’ report, an appointed actuary’s statement mentioned in Part 6 or an auditor’s report mentioned in Part 6) attached to, or intended to be read with, that profit and loss statement or balance sheet.

15.         Where the life company is a parent company in an economic entity:

(a)           the profit and loss statement must include a consolidated profit and loss statement that truly represents the profit or loss determined in accordance with the requirements of the Act and these rules, for the financial year to which the regulatory financial statements relate, of the economic entity constituted by the life company and the entities that it controlled from time to time during the financial year; and

(b)          the balance sheet must include a consolidated balance sheet that truly represents the financial position consistent with the requirements of the Act and these rules, as at the end of the financial year, of the economic entity constituted by the life company and the entities that it controlled at the end of the financial year; and

(c)           the notes mentioned in Part 5 must include consolidated figures in respect of the economic entity constituted by the life company and the entities that it controlled from time to time during the financial year where required; and

(d)          statements and reports attached to, or intended to be read with, the financial report must encompass the consolidated statements in rules 15(a), (b) and (c).


Regulatory financial statements must be in English and in Australian currency

16.         Regulatory financial statements must be in English with all amounts in Australian currency.

Amounts may be rounded off

17.         Amounts in regulatory financial statements may be rounded off in accordance with the Corporations Act.

 

Part 5 – Notes to be included in regulatory financial statements

18.         Regulatory financial statements must contain the notes specified in Forms A to K in Schedule 2 of these rules.

19.         The notes mentioned in rule 18 must:

(a)           deal separately with:

(i)            shareholders’ funds; and

(ii)           statutory funds, in aggregate; and

(b)          provide consolidated information in accordance with these rules.

20.         The notes relating to the items mentioned in rule 18 must, when dealing with the statutory funds of the life company, deal separately with:

(a)           life insurance business that consists of life insurance contracts;

(b)          life insurance business that consists of the issuing of investment-linked contracts; and

(c)           life insurance business that consists of other life investment contracts.

 


Part 6 – Declaration, statement and report to be attached to regulatory financial statements

Directors’ declaration must be attached to regulatory financial statements

21.         There must be attached to the regulatory financial statements of a life company a declaration by its directors stating whether or not, in their opinion:

(a)           the regulatory financial statements are properly drawn up in accordance with the requirements of the Act and these rules; and

(b)          the profit and loss statement truly represents the profit or loss determined in accordance with the requirements of the Act and these rules, for the financial year to which the regulatory financial statements relate, of:

(i)            the life company; or

(ii)           the economic entity constituted by the life company and the entities that it controlled from time to time during the financial year; and

(c)           the balance sheet truly represents the financial position consistent with the requirements of the Act and these rules, as at the end of the financial year, of:

(i)            the life company; or

(ii)           the economic entity constituted by the life company and the entities that it controlled at the end of the financial year; and

(d)          the allocation and distribution of the Life Act Operating Profit of the statutory funds of the life company have been made in accordance with Divisions 5 and 6 of Part 4 of the Act and the Constitution of the life company; and

(e)           any assets of the statutory funds of the life company have been applied or invested in contravention of the Act; and

(f)            there are reasonable grounds to believe that, as at the time the statement is made, the shareholders’ fund of the life company and each of the statutory funds of the life company will be able to pay all debts or claims that are referable to it.

22.         The directors’ declaration must:

(a)           be made in accordance with a resolution of the directors; and

(b)          specify the day on which it was made; and

(c)           be signed by at least 2 directors.

Appointed actuary’s statement must be attached to regulatory financial statements

23.         There must be attached to the regulatory financial statements of a life company a statement by its appointed actuary stating whether or not, in his or her opinion:

(a)           the value of the policy liabilities of the life company and the solvency of the life company have been determined using methods and assumptions consistent with the actuarial standards; and

(b)          the allocation and distribution of the Life Act Operating Profit of the statutory funds of the life company have been made in accordance with Divisions 5 and 6 of Part 4 of the Act and the Constitution of the life company; and

(c)           proper records have been kept by the life company from which its policy liabilities and solvency have been properly determined.

24.         If, in the appointed actuary’s opinion, the regulatory financial statements contain information based on actuarial valuations or calculations which do not comply with the actuarial standards, the actuary’s statement must:

(a)           be appropriately qualified; and

(b)          give particulars of the non-compliance; and

(c)           to the extent practicable, quantify the financial effects of the non-compliance.

Auditor’s report must be attached to regulatory financial statements

25.         There must be attached to the regulatory financial statements of a life company a report by its auditor in a form which complies with:

(a)           the Australian Auditing Standards issued by the AASB, as in force at the time the audit was carried out; and

(b)          the Corporations Act; and

(c)           rule 26 of these rules,

to the extent that they apply for the purposes of these rules.

26.         The auditor’s report must include a statement by the auditor of the life company as to whether or not, in his or her opinion:

(a)           the apportionment of the expenses of the life company has been made in accordance with Division 2 of Part 6 of the Act; and

(b)          any part of the assets of the statutory fund has been applied directly or indirectly in contravention of Division 1 of Part 4 of the Act.

[NOTE: An auditor’s report complying with rules 25 and 26 will satisfy the requirements of subsection 83(3) of the Act.]

 

Part 7 – General Purpose Financial Statements to be submitted to APRA

27.         When a life company submits to APRA its regulatory financial statements prepared in accordance with these rules, the life company must also submit to APRA a copy of its general purpose financial statements in respect of the same financial year.

 


 

 

 

Schedule 1 – Form A

 

Profit and Loss Account


 

Profit and Loss Account


 

 

 

Schedule 1 – Form B

 

Balance Sheet


 

Balance Sheet


 

 

 

Schedule 2 – Form A

 

Summary of Shareholders’ Interests


 

Summary of Shareholders’ Interests


 

 

 

Schedule 2 – Form B

 

Operating Profit and Retained Profit of Statutory Funds


Operating Profit and Retained Profit of Statutory Funds



 

 

 

Schedule 2 – Form C

 

Solvency Requirements


 

Solvency Requirement


 

 

 

Schedule 2 – Form D

 

Insurance Premium Revenue


 

Insurance Premium Revenue


 

 

 

Schedule 2 – Form E

 

Investment Revenue


 

Investment Revenue


 

 

 

Schedule 2 – Form F

 

Claims Expense


 

Claims Expense


 

 

 

Schedule 2 – Form G

 

Operating Expenses


 

Operating Expenses


 

 

 

Schedule 2 – Form H

 

Policy Liabilities


 

Policy Liabilities



 

 

 

Schedule 2 – Form I

 

Statement of Sources of Operating Profit


 

Statement of Sources of Operating Profit


 

 

 

Schedule 2 – Form J

 

Subordinated Debt


 

Subordinated Debt


 

 

 

Schedule 2 – Form K

 

Segmented Information


 

Segmented Information – Abbreviated Profit and Loss Account at Fund Level


 

Segmented Information – Abbreviated Profit and Loss Account at Category Level


Segmented Information – Abbreviated Balance Sheet at Fund Level


 

Segmented Information – Abbreviated Balance Sheet at Category Level


 

Segmented Information – Life Insurance Act Operating Profit and Retained Profits