These consolidated financial statements are originally issued in Bahasa.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2015 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
z. Insurance contract continued
Liability adequacy test Liability adequacy testing is performed at reporting date for contract individually or group of
products determined in accordance with the Subsidiary’s method of acquiring, servicing and measuring the profitability of its insurance contracts.
For life insurance, the liabilities to policyholder in particular the liabilities for future claim is tested to determine whether they are sufficient to cover all related future cash out flow include all
guaranteed benefit and guaranteed additional benefit, non-guaranteed participation benefit feature if any, all expenses for policies issuance and maintainance, as well as reflecting the future cash
inflow, i.e. future premium receipt. The liabilities are calculated based on discounted cash flow basis for all related cash flows i.e. both of cash outflows and cash inflows as mentioned above
using a set of most recent best estimate assumptions set by the Subsidiary’s appointed actuary, included discount rate assumptions, mortalitymorbidity assumptions, lapse assumptions, expense
assumptions and inflation assumptions as well as margin for adverse deviation assumptions. Subsidiary operates in life insurance use Gross Premium Reserve with best estimate and margin
for adverse deviation therefore liability adequacy test is not required.
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 a deficiency between insurance liabilities carrying amount deducted with deferred acquisition cost for loss insurance and estimation of future cash flows, the deficiency will
be charged in the consolidated statement of profit or loss and other comprehensive income.
Reinsurance The Subsidiaries reinsure 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. Recovery amount from reinsurers are estimated in a manner consistent with the liability associated with the reinsured policy.
Subsidiaries present separately reinsurance asset as asset of the insurance liability. If a reinsurance asset is impaired, the Subsidiaries deducted the carrying amount accordingly and
recognises that impairment loss in the consolidated statement of profit or loss and other comprehensive 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.
These consolidated financial statements are originally issued in Bahasa.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2015 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
z. Insurance contract continued
Liability for future policy benefits 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.
The Subsidiaries calculate 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.
Increase decrease in liabilities for future policy benefits is recognised in the current year’s consolidated statement of profit or loss and other 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.
Funds received from customers for non-sharia unit-linked products are reported as gross premium income in the consolidated statements of profit or loss and other comprehensive income. Liabilities
to unit-linked policyholders are recognised in the consolidated statement of financial position computed based on unearned premium reserves using daily method from insurance cost of
mortality risk plus reserves for the accumulated invested fund of unit-linked policyholders.
Any interest, gain or loss due to increases or decreases in market value of investments are recorded as income or expense, with a corresponding recognition of increase or decrease in
liability to unit-linked policyholders in the statements of profit or loss and other comprehensive income and liability to unit-linked policyholders in the consolidated statement of financial position.
Funds received from customers for sharia unit-linked products is recognized as liabilities to unit- linked policyholders in the consolidated statement of financial position for the amount received net
of the portion representing the Subsidiary fees in managing the unit-linked product income.
Unexpired Risk Reserve URR A liability for contractual benefits that are expected to be incurred in the future is recorded when
the premiums are recognised. The liability is determined as the sum of the expected discounted value of the benefit payments and the future administration expenses that are directly related to
the insurance contract, less the expected discounted value of the theoretical premiums that would be required to meet the benefits and administration expenses based on the valuation assumptions
used the valuation premiums. The liability is based on assumptions as to mortality, persistency, maintenance expense and investment income that are established at the time the contract is
issued. A margin for adverse deviations is included in the assumptions.
