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.
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 542 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 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 premiums in the consolidated statements of 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 the cost of insurance to cover 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 income and liability to unit-linked policyholders in the statement of financial position.
Funds received from customers for sharia unit-linked products is recognized as liabilities to unit- linked policyholders in the statement of financial position for the amount received net of the
portion reprensenting the Company’s fees in managing the unit-linked product revenue.
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.
