Other Assets Consolidated FS with Indep Auditors

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013 Expressed in millions of Rupiah, unless otherwise stated Appendix 541 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 manner 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 deffered acquisition cost for loss insurance and estimation of future cash flows, the deficiency will be charged in the consolidated statement of 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 comprehensive the carrying amount accordingly and recognises that impairment loss in the consolidated 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.