PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2013 AND 2012
Expressed in millions of Rupiah, unless otherwise stated
Appendix 538 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
z. Insurance Contract continued
Liability adequacy tests continued For loss insurance, Subsidiary performs liability adequacy testing on the reporting date by using
present value of future cash flow based on insurance contracts. If the testing shows deficiency between insurance liabilities deducted withdeffered acquisition lost
for loss insurance and estimation of future cash flow, the deficiency will be recorded to the consolidated statement of comprehensive income.
Reinsurance The Subsidiary reinsures a portion of its risk with reinsurance companies. The amount of premium
paid or portion of premium from prospective reinsurance transactions is recognised over the reinsurance contract in proportion with the protection received.
Reinsurance assets include balances expected to be recovered from reinsurance companies for ceded liability for future policy benefits, ceded estimated claim liabilities and ceded unearned
premiums. Amounts recoverable from reinsurers are estimated in a manner consistent with the liability associated with the reinsured policy.
Subsidiary presents separately reinsurance asset as asset of the insurance liability. If a reinsurance asset is impaired, the Subsidiary reduces the carrying amount accordingly and
recognises that impairment loss in the statement of income. A reinsurance asset is impaired if there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance
asset, that the Subsidiary may not receive all amounts due to it under the terms of the contract, and the impact on the amounts that the Subsidiary will receive from the reinsurer can be reliably
measured. Liability for future policy benefit
The liabilities for future policy benefits represent the present value of estimated future policy benefits to be paid to policyholders or their heirs less present value of estimated future premiums to be
received from the policyholders and recognised consistently with the recognition of premium income. The liabilities for future policy benefits are determined and computed based on certain formula by
the Subsidiary’s actuary or registered independent actuary. Starting 1 January 2013, the Subsidiary calculates the liability for future policy benefits using Gross
Premium Reserve method that reflect the present value of estimated payments throughout the guaranteed benefits including all the embedded options available, the estimated present value of all
handling costs incurred and also considering the future premium receipt. Prior to 1 January 2013, the Subsidiary used Net Level Premium to calculate liabilities for future policy benefits. This change
is deemed as a change in accounting estimates, therefor applied prospectively. Increase decrease in
future policy benefits is recognised in the current year’s statement of comprehensive income.
Liability to unit-linked policyholders classified as insurance liability. The liability to unit-linked policyholders is recognised at the time the funds received are converted
into units, net of related expenses and will increase or decrease in accordance with effective net asset value.
