ASSURANCEFORENINGEN GARD -gjensidig-
Annual report and accounts for the year to 20 February 2014
TABLE OF CONTENTS
The Board of Directors, the Supervisory Committee and the Audit Committee 1
Report of the Supervisory Committee 2
Report of the Board of Directors 3
Income statement 11
Balance sheet 12
Cash flow analysis 14
Comments and notes to the accounts 15
Auditor’s report 56
The Board of Directors, the Supervisory Committee and the Audit Committee
The Board of Directors
Trond Eilertsen, Chairman, Oslo Tadeusz Niszczota, Deputy Chairman, Polish Steamship Co., Szczecin Morten W. Høegh, Leif Höegh (UK) Ltd., London Jane Sy, Stolt Tankers B.V., Rotterdam Rolf Thore Roppestad, Managing Director, Arendal
The Supervisory Committee
Stephen Knudtzon, Chairman, Oslo Helge Aamodt, Bergshav Management AS, Grimstad Claus Mørch, Anders Wilhelmsen & Co AS, Oslo Arne Falkanger Thorsen, Wärtsilä Oil & Gas Systems AS, Asker
The Audit Committee
Trond Eilertsen, Chairman, Oslo Tadeusz Niszczota, Deputy Chairman, Polish Steamship Co., Szczecin
REPORT OF THE SUPERVISORY COMMITTEE
To the Annual General Meeting of ASSURANCEFORENINGEN GARD - GJENSIDIG -
Report of the Supervisory Committee to the Annual General Meeting 5 September 2014
The Supervisory Committee has met on two occasions since the Annual General Meeting held on 16 August 2013. The Auditor of the Association was present at both meetings.
The Supervisory Committee has carried out the supervision of the Association in accordance with Article 5-6 of the Norwegian Insurance Activity Act and the Instructions adopted by the General Meeting on 15 August 2008. The Supervisory Committee finds no basis for criticism of the activities of the Association.
The Supervisory Committee recommends that the Annual General Meeting approve the Financial Statements and the Annual Report as recommended by the Board of Directors.
Copenhagen, 25 April 2014
Stephen Knudtzon IS! Chairman of the Supervisory Committee REPORT OF THE BOARD OF DIRECTORS
INTRODUCTION
The Board of Directors hereby submits the report and accounts of Assuranceforeningen Gard - gjensidig - (the “Association” or the “Club”) for the 2013 financial year, covering the 12 month period to 20 February 2014. This is the Association’s 106th year of business.
In the opinion of the Board of Directors this report and accounts for the year to 20 February 2014 gives a fair and correct view of the Association’s assets, liabilities, financial position and result.
Statutory minimum requirements with regard to technical reserves and solvency margins, are complied with.
Further, the Association has at the last years’ renewals achieved the budgeted general premium increases. Beyond what has been dealt with in this report, and the risks and uncertainties the marine insurance industry in general are faced with, the Board of Directors does not consider there to be any special risks or uncertainties connected to the business activities of the Club.
THE ASSOCIATION - MEMBERSHIP RIGHTS
The Association is a Norwegian mutual insurance association founded in Arendal in 1907. The Association provides Protection and Indemnity (“P&I”) insurance and related insurance products to its Members being owners, operators, charterers or other direct insurers of ships entered in the Association. As a mutual insurance association, the Club is owned by its members. There are no external capital owners.
The Members of the Club are also members of Gard P. & I. (Bermuda) Ltd and vice versa. Reinsurance agreements have been entered into whereby the two associations are reinsuring each other. As to the tonnage entered in Gard P. & I. (Bermuda) Ltd and reinsured in the Association, the former in its capacity as the reinsured has been given the right to exercise membership rights in the Association on the basis of the reinsured entries full tonnage. This means that Gard P. & I. (Bermuda) Ltd controls the vast majority of all Member votes at the general meeting of the Club giving the Bermuda Association the power to control and govern the business of the Association. Against this background the Club is treated as a subsidiary of Gard P. & I. (Bermuda) Ltd for accounting purposes.
CHANGES IN MANAGEMENT
The Managing Director of the Association, Claes Isacson, passed away 13 July, 2013. During his 12 years of service as Managing Director, Mr. Isacson made invaluable contributions to the development of the Association and the Gard Group in general.
At the Board meeting held on 4 July 2013 a working group consisting of; Bengt Hermelin (Chairman of the Board of the parent company, Gard P. & I. (Bermuda) Ltd); Kenneth Hvid (Deputy Chairman of the Board of the parent company); and the Chairman of the Board of the Association, Trond Eilertsen, was established with a mandate to co-ordinate and conduct the search for, and to make a recommendation to the Board as to the appointment of, the new Managing Director of the Association. The working group sought the assistance of a professional recruitment firm.
It was understood and agreed that the new Managing Director of the Association would be nominated to become the new President of the parent company, the Managing Director of Gard AS and the President of Gard Marine & Energy Limited.
At the Board meeting held on 28 October, 2013 Rolf Thore Roppestad was appointed new Managing Director of the Association with effect from 1 January 2014. In accordance with the recommendation of the working group Mr. Roppestad was also with effect from the same date appointed the President and Chief Executive Officer of the parent company, Gard P. & I. (Bermuda) Ltd, Gard Marine & Energy Limited and Gard AS, respectively.
In his capacity as the Managing Director of the Association, Rolf Thore Roppestad became ex officio a member of the Board of Directors of the Association pursuant to the Statutes, Article 6.1.
In the period from 11 July, 2013 to 31 December, 2013 Svein Buvik, currently Senior Vice President and Head of Administration in Gard AS, was appointed Acting Managing Director of the Association.
THE OPERATION IN GENERAL
P&I insurance
Protection and Indemnity (“P&I”) insurance is the name of the insurance covering the shipowner’s liability towards a third party. The insurance covers both liability for property damage and personal injuries arisen in connection with the operation of the insured ships.
Traditional P&I insurance is currently offered by 13 global insurers covering about 90 percent of the world’s merchant fleet.
These 13 clubs, or mutual insurance associations, have formed an organisation called the International Group of P&I Clubs (the “Group”). One of the most important functions of the Group is to co-ordinate the clubs collective purchase of market reinsurances. This is done within the framework of the so-called Pooling Agreement. The latter contains three main elements. The first is the claims sharing between the parties to the agreement. The second is the provisions dealing with collective purchase of market reinsurances covering liabilities in excess of the upper limit of the Pool. The third is the provisions governing a claim exceeding the limit of the Group clubs collective market reinsurance contract, a so-called overspill claim.
The Association’s branch office in Tokyo
The Association has a branch office in Tokyo. The branch office has one employee and was established several years ago as a consequence of the Association being granted a licence from the Japanese Ministry of Finance to insure vessels flying Japanese flag.
The Association’s branch office in Hong Kong
The Association has a branch office in Hong Kong. The branch office has been authorized by the Office of Commissioner of Insurance to carry on business in or from Hong Kong.
Gard AS - the Association’s insurance agent
The Association has entered into an agency agreement with Gard AS being a Norwegian registered insurance intermediary. Gard AS is registered with the Norwegian Financial Supervisory Authority as the agent of the Association. All underwriting and claims handling service offered by the Association are performed by Gard AS or its subsidiaries abroad as insurance intermediaries on the basis of the agency agreement.
Personnel and organisation
As a result of the appointment of Gard AS as the agent of the Association there are at the end of the year only 11 persons employed by the Association. These persons include, inter alia, the Managing Director, the Legal Director (Company Secretary) and the Accounting Manager.
In the period from 21 February 2013 to 20 February 2014 the level of absence due to sickness has been slightly below the corresponding average in the insurance industry. The organisation is focusing on preventing occupational injuries as a result of long time use of PCs and other office equipment. There have been no injuries or accidents in connection with the operations.
The Association’s objective is to promote gender equality, ensure equal opportunities and rights, and to prevent discrimination due to ethnicity, national origin, descent, skin colour, language, religion and faith.
The working environment in the Association has in the period to 20 February 2014 been good.
Internal control
Pursuant to regulations determined by the Norwegian Financial Supervisory Authority (Finanstilsynet) the Association has established an internal control system. In accordance with the said regulations a report about the internal auditor's findings is submitted to the Board of Directors once a year.
Safety at sea
The Association is participating in the activities organised under the umbrella of the International Group with a view to review possible measures to be taken by insurers for the purpose of improving safety at sea. The Norwegian Act on Ship Safety, which entered into force on 1 July 2007 allows exchange of information between insurers regarding the technical condition of vessels. The Association believes that this is an important step for the purpose of improving the safety at sea.
Research and development
The Association does not carry out research and development activities.
Environmental damage
The operations do not pollute the environment.
FUND MANAGEMENT
Since 1 August 2006, a major part of the Association’s investment portfolio has been invested through a “Common Contractual Fund” structure. The investment structure represents a common legal framework for the management of the funds belonging to Assuranceforeningen Gard - gjensidig -, Gard P. & .I (Bermuda) Ltd, Gard Marine & Energy Limited, Gard Reinsurance Co Ltd and Safeguard Guarantee Company Ltd. The objective of the investment structure is saving of management costs and optimizing the total returns within the investment guidelines. The portfolio managers in the Common Contractual Fund structure are all specialists within the class of assets the individual manager has been given a mandate to manage.
The general investment guidelines for the management of the funds of the Association are determined by the Board of Directors. The general guidelines determined by the Board of Directors contain, inter alia, provisions as to the currency composition of the investments and the types of financial instruments that can be used. According to the guidelines the investments in equities shall not exceed 15 per cent of the total fund. The percentage of the investment held in US dollar must be in the range between 30 per cent and 75 per cent. Each portfolio manager employed shall not manage more than 30 per cent of the total fund. The guidelines permit also investments in real estate funds, futures, options and other derivatives for the purpose of improving risk management, efficiency and liquidity of the portfolio. The individual portfolio manager’s mandate is composed on the basis of an index enabling the Association to measure the individual manager’s performance against a benchmark.
The Administration reports on the performance and composition of the portfolio at each Board of Directors meeting. For each meeting, a compliance report is produced showing whether there are non-conformities in relation to the investment guidelines.
In the view of the Board of Directors the Association’s investments can be described as having a medium risk profile.
INSURANCE BUSINESS
Entered tonnage
At the end of the financial year commencing on 20 February 2013, the number of entered vessels and other units was 1,876. The total tonnage of the direct business amounted to 33.0 million GT of which owner’s entries amounted to 26.2 million GT. The full tonnage of the portfolio reinsured on behalf of Gard P. & I. (Bermuda) Ltd amounts to 194.3 million GT.
Reinsurance
In 2013 the Association’s retention level for insurance liabilities arising out of any one event was USD 9 million, net of reinsurance, for mutual entries reinsured under the Pooling Agreement and USD 20 million, net of reinsurance, any one event for liabilities arising under fixed premium entries reinsured outside the Pool-structure. The Association’s reinsurance program was structured as outlined below.
According to the P&I Clubs’ Pooling Agreement the Association’s retention for all claims arising out of any one event was USD 9 million. The reinsurance protection through the Pool was USD 2,000 million per event in excess of the USD 70 million upper limit of the Pool.
Fixed premium entries covering risks falling outside the scope of the Pooling Agreement was reinsured by the Association in the commercial reinsurance market. The level of retained risk for each claim was USD 20 million.
In addition the Association has entered into a separate reinsurance treaty with its parent company, Gard P. & I. (Bermuda) Ltd., covering a proportion of the risks retained under the above reinsurance arrangements based on the Pooling Agreement and the market reinsurance contract for fixed premium business. Pursuant to this separate reinsurance treaty 25 per cent of the insurance liabilities not covered by the Pooling Agreement or the market contracts was ceded to Gard P. & I. (Bermuda) Ltd, as reinsurance in 2013.
The Association has also entered into a stop loss reinsurance agreement with Gard Reinsurance Co. Ltd, a subsidiary of Gard P. & I. (Bermuda) Ltd, protecting the Association’s balance sheet against insurance liabilities in excess of a loss ratio corresponding to 90 per cent for each policy year, subject to a limit of USD 25 million.
Reinsurance of Gard P. & I. (Bermuda) Ltd
The Association has entered into a separate reinsurance treaty with Gard P. & I. (Bermuda) Ltd, where the Association, as the reinsurer, covers a proportion of the risks retained by Gard P. & I. (Bermuda) Ltd under the reinsurance arrangements based on the Pooling Agreement and the market reinsurance contracts for fixed premium business of the latter. Pursuant to this separate reinsurance treaty 2 per cent of the insurance liabilities not covered by the Pooling Agreement or the market contracts of Gard P. & I. (Bermuda) Ltd was ceded from Gard P. & I. (Bermuda) Ltd to the Association, as reinsurance in 2013.
Open policy years
The 2011 policy year
Over the last 12 months the value of reported claims for the policy year 2011 has shown an improvement. The year is expected to produce a surplus.
The year can at the earliest be closed in October 2014. Further calls are not expected.
The 2012 policy year
Over the last 12 months the value of reported claims for the policy year 2012 has shown an improvement. The year is expected to produce a deficit.
The year can at the earliest be closed in October 2015. Further calls are not expected.
The 2013 policy year
The 2013 policy year shows a surplus. The Board of Directors have decided that a deferred call of 15 per cent shall be levied instead of the budgeted 25 per cent. The decision takes into account that the Association wishes to maintain a sound financial position.
Closed policy years
All closed years up to and including the 2011 policy year have developed as anticipated and show an overall surplus.
FINANCIAL RISK
Market risk
The currency composition of the Association’s portfolio of assets covering the technical reserves matches the currency exposure with regard to payments of claims to the extent possible. Thus, the exposure as to changes in the currency exchange rates is minimized. Otherwise the assets of the Association are managed in accordance with governing rules and regulations determined by Norwegian authorities with regard to management of assets covering the technical provisions.
Credit risk
The Association’s credit risk is first and foremost connected to a possible shortfall on the part of market re-insurers. Historically only minor amounts have been written off as lost. This is, among other things, due to the fact that only re-insurers with a financial strength rating of “A” or better from Standard & Poor’s or other rating agencies are chosen. Further, any losses as a result of a shortfall on the market reinsurance cover arranged through the Pool, as described above, will be distributed among the parties to the Pooling Agreement.
Outstanding and overdue premiums from members and customers will be set off in payments of claims compensations.
Liquidity risk
The Board of Directors considers the liquidity of the Association to be good.
ACCOUNTS FOR 2013
The Association has been granted dispensation by the Norwegian Financial Supervisory Authority of the requirement to present the annual accounts in Norwegian currency and in the Norwegian language. In accordance with this the annual accounts are presented in United States dollar (USD) and in the English language.
Premiums
The gross written premium in 2013 was USD 116.5 million (USD 87.3 million in 2012).
Investment income
The net income derived from financial assets was USD 17.1 million in 2013 (USD 12.5 million in 2012).
Claims compensations
Gross claims cost incurred during the period amounted to USD 137.9 million (USD 49.9 million in 2012). Net claims cost amounted to USD 61.8 million (USD 53.8 million in 2012).
Technical provisions
As at 20 February 2014 the Association’s technical provisions to cover reported and unreported claims for own account amounted to USD 143.9 million (USD 135.7 million as at 20 February 2013). In addition, the contingency reserve amounted to USD 129.0 million (USD 111.9 million as at 20 February 2013). The contingency reserve is retained to meet unforeseen fluctuations in claims exposure, possible catastrophes, and extraordinary claims patterns that fall within the Association’s liabilities.
The Board of Directors is of the opinion that the technical provisions are sufficient to cover all technical liabilities for the 2013 policy year and earlier years.
Cash Flow Analysis
The Association’s bank deposit as of 20 February, 2014 amounted to USD 42.7 million (USD 6.6 million).
Continued operation and the future development
Pursuant to the Norwegian Accounting Act of 1998, section 3-3a, the Board of Directors is of the opinion that it is basis for continued operation. The year-end accounts are based on these premises.
The premium income and the financial position is expected to be stable in 2014.
GOVERNING CORPORATE BODIES
The Board of Directors and committees of the Association are composed as shown on page 1.
Board of Directors
During the year Mr. Michael Say resigned as board member. Thus, the Board needs to be supplemented with one new member.
ASSURANCEFORENINGEN GARD -gjensidig- Income statement
Amounts in USD 000's
21.02.13 21.02.12 Notes to 20.02.14 to 20.02.13 Technical account Gross written premium 4 116,515 87,283 Estimated deferred call 4 11,845 8,998 Ceded reinsurance (55,860) (41,874) Earned premium for own account 3 72,500 54,406
Other insurance related income 40 0
Gross settled claims 151,735 189,174 Reinsurers' share of gross settled claims (98,184) (133,301) Change in gross claims reserve (13,817) (139,299) Reinsurers' share of change in claims reserve 22,052 137,251 Claims incurred for own account 3, 5 61,786 53,826
Acquisition costs 4,897 8,589 Agent commission 7,156 5,908 Commission earned (5,841) (4,155) Insurance related expenses for own account 7 6,212 10,342
Other insurance related expenses 7 4,541 3,402
Technical result before change in contingency reserve 6 1 (13,163)
Change in contingency reserve (17,011) 742
Technical result (17,010) (12,421)
Non-technical account Interests and similar income 9,155 4,764 Change in unrealized gain of investments 178 4,468 Gain/(loss) on realization of investments 8,826 3,626 Investment management expenses (1,015) (316)
Non-technical result 8 17,144 12,543
Profit before tax 134 122
Taxation 9 (134) (122)
Net result 0 0 ASSURANCEFORENINGEN GARD -gjensidig- Balance sheet
Amounts in USD 000's As at As at ASSETS Notes 20.02.14 20.02.13
Investments Financial investments at fair value through profit and loss Equities and shares in funds 11, 13, 14 33,144 33,778 Bonds 152,685 160,341 Financial derivatives assets 13 264 627 Other financial investments 11 11,714 12,025 Total investments 197,807 206,771
Reinsurers' share of technical provisions Reinsurers' share of gross claims reserve 3, 5, 15 230,221 252,278 Total reinsurers' share of technical provisions 230,221 252,278
Receivables Receivables from direct insurance operations Policyholders 17 12,720 10,352
Receivables from reinsurance operations Receivables from reinsurance operations 3,724 4,316 Receivables from intra-group reinsurance operations 31,748 32,126
Other receivables 18 0 3,771 Total receivables 48,192 50,565
Other assets Equipment 20 2,946 2,967 Cash and cash equivalents 19 42,743 6,569 Other financial assets 11 2,086 2,123 Total other assets 47,774 11,659
Prepayments and accrued income Accrued interest 1,581 933 Accrued income and other prepayments 552 295 Total prepayments and accrued income 2,133 1,229
TOTAL ASSETS 12 526,126 522,502 ASSURANCEFORENINGEN GARD -gjensidig- Balance sheet
Amounts in USD 000's As at As at LIABILITIES 20.02.14 20.02.13
Technical provisions Gross claims reserve 374,125 387,937 Total technical provisions 3, 5, 15 374,125 387,937
Contingency reserve Contingency reserve 16 128,961 111,949 Total contingency reserve 128,961 111,949
Provision for other liabilities Pension obligations 10 2,606 3,324 Total provisions for other liabilities 2,606 3,324
Payables Payables arising out of direct insurance operations 1,187 256 Payables arising out of reinsurance operations 2,981 3,261 Payables araising out of intra-group reinsurance operations 226 2,441 Financial derivatives liabilities 13 349 611 Other payables 18 14,683 11,751 Total payables 19,426 18,321
Accruals and deferred income Accruals and deferred income 1,008 970 Total accruals and deferred income 1,008 970
TOTAL LIABILITIES 526,126 522,502 ASSURANCEFORENINGEN GARD -gjensidig- Cash flow analysis
Amounts in USD 000's
21.02.13 21.02.12 to 20.02.14 to 20.02.13 Cash flow from operating activities
Profit from ordinary operations before tax 134 122 Income tax expense (134) (122) Change in unrealised gain/loss of investments (178) (4,468) Change in pension obligation (718) (1,062) Change in receivables and payables 3,872 (4,487) Change in technical provisions and other accruals 24,390 (2,164) Purchase/sale of other investment 8,786 (16,985) Net cash flow from operating activities A 36,153 (29,166)
Cash flow from investment activities
Purchase of fixed assets 22 (5) Net cash flow from investment activities B 22 (5)
Net change in cash and cash equivalents A+B 36,174 (29,171)
Cash and cash equivalents at opening balance 6,569 35,740 Cash and cash equivalents at closing balance 42,743 6,569 ASSURANCEFORENINGEN GARD –gjensidig- Notes to the accounts
Note 1 - Corporate information
Assuranceforeningen Gard –gjensidig- (the “Association”) is a mutual insurance association registered with the Norwegian Companies Register (organisation number 939 717 609). The registered office of the Association is Kittelsbuktveien 31, 4836 Arendal. The Association is licensed by the Norwegian Ministry of Finance to carry out marine liability and legal costs insurances. As a mutual insurance association the Association is owned by its Members being the owners and charterers of the ships from time to time insured by the Association for Protection and Indemnity (P&I) risks. There are no external capital owners.
The principal activities of the Association are; the insurance of marine Protection and Indemnity risk on behalf of its Members, including the reinsurance of a proportion of the Protection and Indemnity risk underwritten by Gard P.&I. (Bermuda) Ltd as a direct insurer; and management of assets covering the technical provisions.
The Members of the Association are also Members of Gard P. &I. (Bermuda) Ltd and vice versa. The major part of the two associations’ combined portfolio of direct business (currently about 80 per cent) is underwritten by Gard P. &I. (Bermuda) Ltd. The Association is primarily used as a vehicle for a smaller proportion of the combined P&I portfolio being primarily direct P&I business in certain countries within the EU/EEA area where an EU/EEA based insurer is required in order to comply with the governing EU regulations with regard to cross border activities.
In as much as Gard P. &I. (Bermuda) Ltd has got the right to exercise membership rights in the reinsured portfolio, the Association controls more than two thirds of the voting rights in the Association being the legal basis for consolidating the two associations accounts pursuant to the International Accounting Standard 27 Consolidated and Separate Financial Statements.
Assuranceforeningen Gard –gjensidig- is consolidated into the accounts of Gard P.&I. (Bermuda) Ltd, and the consolidated accounts are available at the office of Gard P.&I. (Bermuda) Ltd`s management company, Lingard Ltd in Bermuda. Note 2 - Accounting Policies
Basis of preparation of the Accounts The financial statements have been prepared in accordance with “Regulations for annual accounts for insurance companies” approved by the Norwegian Ministry of Finance, except for the departure from these regulations listed below. The Association fulfils the exemption criteria in paragraphs 1-5 and 1-6 of “Regulations for annual accounts for insurance companies” which require limited use of International Financial Reporting Standards (IFRS). Paragraph 7-3 of the Regulations for annual accounts for insurance companies which allows late adoption of IFRS 13 and certain paragraphs in IFRS 7 have been applied.
Departure from Regulations for annual accounts for insurance companies: 1. A part of the financial income is not allocated to the technical result.
The financial statements of insurance companies with operation in Norway are subject to regulations established by the Norwegian Ministry of Finance. According to a resolution from the Financial Supervisory Authority of Norway the Association has been given dispensation to present the financial statements in the English language and in USD currency.
Changes to presentation and classification The Company has changed its presentation and classification of certain items in the income statement and Balance sheet. The changes have been made primarily to provide more detailed information on investments on the face of the balance sheet. Further, some reclassifications have been made between categories of investments as well as to levelling of investments disclosed in the notes. Finally, all reserves other than paid in capital are considered by the Company to be liabilities. As a result, the net result for the year is presented as Change in contingency reserve in the Income statement. Comparative information has been changed accordingly.
Use of accounting estimates when preparing the accounts The preparation of the accounts requires the Management to make estimates and assumptions that affect assets, liabilities, revenues, expenses and contingent liabilities. Due to circumstances in the future these estimates can change. Estimates and their assumptions are considered continuously, and accounts adjusted accordingly.
Insurance contract liabilities Insurance contract liabilities are the main items in the balance sheet based upon judgments and estimates. Estimates have to be made both for the expected total cost of claims reported and for the expected total cost of claims incurred but not reported at the balance sheet date. Standard actuarial methods are used in estimating the total cost of outstanding claims. The actuarial method uses historical data as one of the elements in the model to estimate the future claims costs. It can take a significant period of time before the ultimate claims cost can be established with certainty.
Pension liabilities The cost of defined benefit pension plans and the present value of the pension obligation are determined using actuarial valuations according to NRS 6. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future public pension increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Details of the key assumptions used in the estimates are contained in note 10.
Foreign currency Functional currency and presentation currency The accounts are prepared in USD, which is both the functional currency and presentation currency of the Association.
Transactions in foreign currency Transactions in foreign currencies are translated at the rate applicable on the transaction date. Monetary items in a foreign currency are retranslated into USD using the exchange rate applicable on the balance sheet date. The currency exposure of the provision for claims is assessed to be equivalent to the same currency exposure as claims paid. The opening and closing balances of the provision for claims in foreign currency are translated into USD based on the same method as for monetary items. Non-monetary items that are measured at fair value expressed in foreign currency are translated into USD using the exchange rate applicable on the transaction date. Translation differences are recognised in the Income statement as they occur during the accounting period. The foreign translation effects are presented within ‘Interest and similar income’ in the Income statement.
Note 2 - Accounting Policies (cont’d)
The assets and liabilities of foreign operations that have a functional currency different from USD are translated to USD at the rate of exchange at the closing date. Income and expenses are translated at an average rate of exchange. All resulting exchange differences are recognised in other comprehensive income.
Revenue and expense recognition Premiums Premiums are based on the insurance contracts where one part (the insurer) has accepted a significant risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event adversely affects the policyholders. Premiums are recognised over the insurance policy period. A deferred call for P&I business for the accounting year is subject to approval from the Board of Directors in the following year but is included as revenue in the accounts for the current year. Supplementary calls for P&I business may be charged to members for previous policy years.
Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. Unearned premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as gross premium reserve.
Reinsurance premiums Reinsurance premiums are recognised as an expense over the underlying policy period.
Claims expenses Expenses regarding incurred claims and other administrative expenses are recognised in the period in which they are incurred. Paid claims include an allocated portion of both direct and indirect claims handling cost.
Other Other income and expenses are accounted for in the period they are incurred.
Income tax The tax expense consists of tax payable and changes in deferred tax.
Deferred tax/tax asset is calculated on all differences between the book value and the tax value of assets and liabilities. Deferred tax is calculated at the nominal tax rate of temporary differences and the tax effect of tax losses carried forward at the tax rate at the end of the accounting year. Changes in tax rates are accounted for when the new rate has been approved and changes are presented as part of the tax expense in the period the change has been made.. A deferred tax asset is recorded in the balance sheet when it is more likely than not that the tax asset will be utilised.
Financial instruments Classification The Association classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and held to maturity investments. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
(a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivative financial instrument are also categorised as held for trading.
(b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as receivables and payables in the balance sheet.
(c) Held-to-maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the company’s management has the positive intention and ability to hold to maturity, other than: (a) those that the company upon initial recognition designates as at fair value through profit or loss; (b) those that meet the definition of loans and receivables.
Note 2 - Accounting Policies (cont’d)
Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Association has transferred substantially all risks and rewards of ownership. Loans and receivables and held to maturity investments are initially recognised at fair value including direct and incremental transaction costs and measured subsequently at amortised cost, using the effective interest method.
Unrealised gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within Changes in unrealised gain/loss on investments in the period in which they arise. Realised gains or losses are presented within Gain on realisation of investments.
Dividends and interest income from financial assets at fair value through profit or loss is recognised in the income statement as part of Interest and similar income when the group’s right to receive payments is established.
Interest on held-to-maturity investments is included in the consolidated income statement and reported as ‘Interest and similar income’. In the case of an impairment, the impairment loss is been reported as a deduction from the carrying value of the investment and recognised in the consolidated income statement
Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets The Association assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Association may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the Income statement.
Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The Association does not practice hedge accounting.
Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held at call with banks, brokers and fund managers. In the balance sheet, cash and cash equivalents that relate to investment management is presented as Other financial investments. All other cash is presented as Cash and cash equivalents. In the cash flow statement, cash and cash equivalents do not include cash and cash equivalents presented as Other financial investments.
Note 2 - Accounting Policies (cont’d)
Equipment Fixed assets are comprised of assets intended for long term ownership and use. If the carrying value of a non- current asset exceeds the estimated recoverable amount, the asset is written down to the recoverable amount. The recoverable amount is the greater of the net selling price and value in use. Impairments losses recognised are reversed when the basis for the impairment loss is no longer evident.
Technical provisions Technical provisions are calculated in accordance with the “Regulations for annual accounts for insurance companies”.
Gross claims reserve The Gross claims reserve comprises estimates of the expected remaining exposure from claims that have been reported to the Association (RBNS), and from claims incurred but which have not yet been reported (IBNR).
Provisions for reported claims are made by assessing the liability of each claim. Actuarial methods are used in estimating the total cost of outstanding claims. The claim provisions have not been discounted.
The Financial Supervisory Authority of Norway (FSA) has designated minimum requirements for the gross claims reserve based on claims and premium developments. To comply, Assuranceforeningen Gard has developed these minimum requirements from 1995 to the current year. In accordance with the Norwegian regulations for insurance companies a provision for Internal Claims Handling Expenses (unallocated loss adjustment expenses, or ULAE) has been calculated on the basis of the minimum requirements for gross claims provisions and is included in the Gross claims reserve.
Contingency reserve The contingency reserve is retained to meet unforeseen fluctuations in claims exposure, possible catastrophes and extraordinary claims patterns that fall within the Association`s liabilities.
The minimum requirement set by the FSA for the contingency reserve is 15 per cent of the FSA`s minimum requirement for the net claims reserve. The contingency reserve as set by the FSA includes, in addition minimum requirements for Reinsurance reserves. The Reinsurance reserve is retained to meet possible losses if the Association`s reinsurers fail to meet their obligations under a reinsurance contract.
Designated reserves Given the level of Pool retentions and the participation of the International Group in the General excess loss reinsurance contract, all parties to the Pooling Agreement have entered into arrangements, under an agreement dated 20 February 1996, to provide security by way of letters of credit or security bonds to other Pooling members to cover a significant proportion of their potential liabilities under the Pooling Agreement. Such letters of credit/security bonds can only be drawn upon in the event that an association fails to meet a call upon it in relation to its obligations under the Pooling Agreement. At end of the year, the company had a contingent liability under a bank guarantee in the amount of USD 40.2 million relating to its participation in this arrangement. The bank guarantee does not constitute a formal charge on the assets of the Company as no counter security has been required. All parties to the Pooling Agreement have agreed to terminate this agreement. The bank guarantee was terminated 21 February 2014.
Pensions The Association operates various pension schemes and employees are covered by pension plans which comply with local laws and regulations. The schemes are generally funded through payments to insurance companies, determined by periodic actuarial calculations. The Association has both defined benefit and defined contribution plans.
The liability recognised in the Balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using a straight-line earnings method.
Actuarial gains and losses arising from new information or changes to actuarial assumptions in excess of the higher of 10% of the value of the pension assets or 10% of the pension obligations are recognised in the income statement over the lower of 5 years and the average expected time to retirement for each defined benefit plan.
Note 2 - Accounting Policies (cont’d)
Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past- service costs are amortised on a straight-line basis over the vesting period.
For defined contribution plans, the Association pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Association has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.
Provisions, contingent liabilities and assets Provisions are recognised when the Association has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. For potential obligations whose likelihood is neither remote nor not probable (i.e. not `more likely than not`), a contingent liability is disclosed.
There is no provision for contingent liabilities recognised in the balance sheet.
Contingent assets are not recognised in the financial statements but are disclosed if it is likely that benefit will flow to the company.
Changes to accounting principles Changes in accounting principles and corrections of errors in previous year accounts are presented in accordance with IAS 8.
Events after the reporting period New information on the Association’s financial position at the end of the reporting period, which becomes known after the end of the reporting period, is recorded in the annual accounts. Events after the reporting period that do not affect the Association’s financial position at the end of the reporting period but which will affect the financial position in the future are disclosed if significant.
Note 3 – Group transactions
Reinsurance agreements Assuranceforeningen Gard – gjensidig (The Association) and Gard P. & I. (Bermuda) Ltd have entered into mutual reinsurance agreements. The Association reinsures a proportion amounting to 2 per cent of Gard P. & I. (Bermuda) Ltd’s Protection and Indemnity risk underwritten that is not reinsured elsewhere. The Association cedes to Gard P. & I. (Bermuda) Ltd by way of reinsurance 25 per cent of the Association’s retained Protection and Indemnity risk underwritten that is not reinsured elsewhere.
Ceded premium from the Association to Gard P. & I. (Bermuda) Ltd amounts to USD 20.2 million (2012 USD 15.1 million). Premium received from Gard P. & I. (Bermuda) Ltd amounts to USD 6.5 million (2012 USD 6.1 million).
The Association has received from Gard P. & I. (Bermuda) Ltd USD 63.4 million (2012 USD 83.5) as reinsurers' share of gross settled claims, and reinsurers' share of gross claims reserve amounts to USD 168.4 mill (20.02.13 USD 201.7 million).
The Association has as reinsurers of Gard P. & I. (Bermuda) Ltd paid a share of gross settled claims amounting to USD 4.0 million (2012 USD 4.5 million) and share of gross claims reserve amounts to USD 21.4 million (20.02.13 USD 17.7 million). Net commission earned under the reinsurance agreements with Gard P. & I. (Bermuda) Ltd amounts to USD 3.8 million (2012 USD 2.3 million).
The Association has entered into a stop loss reinsurance agreement protecting the former against an adverse claims development with Gard Reinsurance Co Ltd (a company owned by Gard P. & I. (Bermuda) Ltd). Reinsurance premium is included with USD 1.2 million (2012 1.4 million). Reinsurers' share of claims paid from Gard Reinsurance Co Ltd USD amounts to USD 11.1 million (2012 USD 10.9 million).
The Association has entered into a reinsurance agreement with the Gard Cell of Hydra Insurance Company Ltd (the Gard Cell is owned by Gard P. & I. (Bermuda) Ltd), Hydra Insurance Company Limited is a reinsurance company established by the parties to the International Group of P&I Clubs’ Pooling Agreement pursuant to the Bermuda Segregated Accounts Companies Act 2000 as amended for the purpose of reinsuring certain layers of risks retained by the insurers being parties to the said Pooling Agreement. Ceded reinsurance premium is USD 9.4 million (20.02.12 USD 5.1 million). Reinsurers' share of gross settled claims amounts to USD 1.7 million (20.02.13 USD 4.2 million). Reinsurers' share of gross claims reserve amounts to USD 14.9 mill (20.02.13 USD 15.4 million).
Insurance agency agreements The Association has entered into an insurance agency agreement with Gard AS (a company owned by Gard P. & I. (Bermuda) Ltd), being the general agent, whereby Gard AS is delegated authority as an agent and insurance intermediary to perform claims handling and underwriting functions on behalf of the Association. The Association has also entered into agreements with the subsidiaries of Gard AS for services rendered to the Association. Insurance intermediary services have been invoiced with USD 18.3 million (2012 USD 21.7 million). Note 4 - Gross written premium by geographical areas Amounts in USD 000's
21.02.13 21.02.12 to 20.02.14 to 20.02.13 Norway 1,089 4,209 EEA 62,643 49,017 Other areas 64,628 43,055 Total 128,360 96,281
The geographical split is made based on the location of the individual client.
Note 4 - Estimated deferred call These accounts are prepared on the basis of a Board of Directors' resolution of a 15 per cent deferred call in respect to the 2013 policy year, payable in 2014. The original estimated deferred call was 25 per cent. The deferred call for the 2012 year was also reduced to 15 per cent from 25 per cent.
The reduction in deferred call amounts to USD 7.8 million (2012: 5.7 million).
On ETC basis the gross premium for the year to 20.02.2014 was USD 124.3 million (2012: USD 93.0 million).
Note 5 - Claims incurred gross and net of reinsurance Amounts in USD 000's 21.02.13 21.02.12 to 20.02.14 to 20.02.13 Gross claims Provisions, opening balance (387,937) (527,236) Claims paid, gross 151,735 189,174 Claims incurred, gross (137,923) (49,876) Provisions gross, at the end of the period (374,125) (387,937)
Claims net of reinsurance Provisions, opening balance (135,660) (137,707) Claims paid, net 53,541 55,873 Claims incurred, net (61,785) (53,826) Provisions net, at the end of the period (143,904) (135,660)
Reinsurers' share of Technical Provisions As at As at 20.02.2014 20.02.2013 Claim Provisions, opening balance 252,278 389,529 Change in reinsurers' provision (22,057) (137,251) Provision, closing balance 230,221 252,278
No changes has been made during the year as to how the reinsurers' share of technical provisions has been measured or calculated. There is no information with regards to the reinsurers taking part in the Company's reinsurance programme that could lead to a potential shortfall in the reinsurers' share of technical provisions.
The association is a member of the international group of P&I clubs. Technical provision regarding the Pooling agreement: Amounts in USD 000's As at As at 20.02.2014 20.02.2013 Gross provision for other clubs' pool claims 56,028 69,365 Net provision for other clubs' pool claims 53,527 53,935 Note 6 - The technical results for gross operations and ceded reinsurance operations divided into business areas Amounts in USD 000's
21.02.13 21.02.12 P&I Business to 20.02.14 to 20.02.13 Gross Premiums earned 128,360 96,281 Claims incurred (137,923) (49,876) Operating costs (16,549) (17,899) Total result - gross (26,112) 28,506
Ceded reinsurance Reinsurance premiums (55,860) (41,874) Reinsurers' share of claims incurred 76,132 (3,950) Reinsurance commission 5,841 4,155 Total result - ceded reinsurance 26,113 (41,669)
Technical result 1 (13,163)
Claims incurred gross Current policy year 96,750 109,895 Earlier year 41,173 (60,019) Claims incurred gross 137,923 49,876
21.02.13 21.02.12 Received reinsurance to 20.02.14 to 20.02.13 Premiums earned 6,435 6,085 Claims incurred current policy year (5,344) (7,112) Claims incurred earlier policy year 2,578 4,741 Acquisition cost (1,721) (2,311) Net result of received reinsurance 1,948 1,403 Note 7 - Acquisition costs, remuneration and number of staff Amounts in USD 000's
21.02.13 21.02.12 to 20.02.14 to 20.02.13 Acquisition costs and commissions Acquisition costs and agent commission 12,053 14,497 Commissions earned (5,841) (4,155) Total net acquisition cost 6,212 10,342
Number of part time staff 11 11
Total remuneration to the Committees, Managing Director and Auditor amounts to: Other Salary Pension benefits The Executive Committee 68 0 0 The Supervisory Committee 45 0 0 CEO, salary and other benefits * 315 0 0
* The CEO is partly paid by Gard AS, Lingard Ltd and Assuranceforeningen Gard. The CEO has a remuneration guarantee that comes into force if the Board of Directors should ask him to leave his position. The remuneration guarantee gives him 12 months of salary in addition to a contractual 6 months' notice period.
The majority of the Top Management Group and certain key personnel have a pension scheme that gives them the right to retire at 60 years of age and covers income above 12 base amount. The pension requires a thirty years accrual period in Gard, or will be reduced accordingly.
A Bonus Scheme has been established which includes all employees and the CEO. A bonus will be paid if predefined targets are met. The total bonus is maximised to 20 per cent of gross salary. The total bonus expected to be paid for accounting year 2013 is 19.5 per cent of gross salary.
Auditors' fee 21.02.13 21.02.12 to 20.02.14 to 20.02.13 Auditors' fee 64 108 Tax advising 29 30 Non audit services 8 12 Net auditors' fee 101 150
Net operating expenses 21.02.13 21.02.12 to 20.02.14 to 20.02.13 Salaries and wages 1,307 1,952 Bad debts 508 203 Service cost 20,363 22,165 Allocated to Claims handling and Acquisition cost (18,345) (21,739) Other operating expenses 708 821 Net operating expenses 4,541 3,402 Note 8 - Financial income and expenses Amounts in USD 000's
21.02.13 21.02.12 to 20.02.14 to 20.02.13 Investment income Interest income 57 138 Interest from bonds 5,572 5,872 Foreign exchange gains/losses 3,526 (1,245) Total investment income 9,155 4,764
Change in unrealised gain/loss of investments Change in unrealised gain/loss of investments 178 4,468 Total change in unrealised gain/(loss) of investment 178 4,468
Gain/(loss) on realisation of investments Gain/(loss) on realisation of instruments 8,837 3,626 Total gain/(loss) on realisation of investments 8,837 3,626
Investment management expenses (1,015) (316)
Non-technical result 17,155 12,543
Net profits on realisation of investments reflect the difference between cost and sales price in the local currency of the investment. Note 9 - Tax Amounts in USD 000's 21.02.13 21.02.12 to 20.02.14 to 20.02.13 Income tax expenses Paid foreign withheld tax 134 122 Tax expenses ordinary result 134 122
As at As at 20.02.2014 20.02.2013 Specification of tax effect resulting from temporary differences Pension obligations 2,606 3,324 Portfolio investments (5,549) (1,987) Other temporary differences 1,032 463 Tax loss carried forward 89,960 104,363 Total temporary differences 88,050 106,163
Deferred tax asset, 27 per cent of total temporary differences 24,654 29,726
A deferred tax asset is not recorded in the balance sheet as it is not likely that the tax asset will be utilised in the future. Tax loss carried forward as per 20.02.2013 has been restated, which has resulted in a reduction in Deferred tax asset from USD 31.3 million to USD 29.7 million. Note 10 - Pension costs and liabilities Amounts in USD 000's
The Association has defined benefit plans covering 3 retired employees. These contracts are financed through the company's operations. Part time employees are included in the pension scheme in Gard AS. This pension scheme covers the required occupational pension in according to the Norwegian Pension Act.
Defined benefit plans entitle the employees to a defined level of future pension payments. Such future pension payments are mainly dependent on number of contributory years and the salary level on retirement.
For defined benefit plans actuarial calculations are made with regard to pension liabilities at the end of the year, and resulting changes in pension liabilities are charged to the Income statements.
Actuarial calculations of pension liabilities have been prepared as at 20 February 2014. These calculations show that the Association had pension liabilities amounting to USD 3.2 million. Estimated deviations at year-end were USD 0.6 million resulting in total pension liabilities of USD 2.6 million which are stated as liability in the Balance sheet.
Pension cost 21.02.13 21.02.12 to 20.02.14 to 20.02.13 Earning related pension plans Interest expense on earned pension 90 65 Effect of estimation deviation (632) (821) Total pension cost (542) (756)
As at As at 20.02.2014 20.02.2013 Liabilities according to the actuarial calculations Pension obligation gross 3,187 2,604 Effects of estimation deviations (581) 720 Net pension obligation at year end 2,606 3,324
Financial assumptions Discount rate 3.60 % 3.40 % Assumed pension regulation 2.00 % 1.75 % Assumed regulation of public pension 3.50 % 3.00 % Note 11 - Financial instruments and fair values of financial instruments Amounts in USD 000's
As at As at Investments at amortised costs 20.02.2014 20.02.2013 Carrying Fair Carrying Fair value value value value Bonds held to maturity 2,086 2,296 2,123 5,198 Total 2,086 2,296 2,123 5,198
Determination of fair value The following describes the methodologies and assumptions used to determine fair values:
Financial instruments at fair value through profit and loss The fair value of financial assets classified as financial instruments at fair value through profit and loss and the fair value of bonds included above are determined by reference to published price quotations in an active market. For unquoted financial assets the fair value has been estimated using a valuation technique based on assumptions that are supported by observable market prices.
Assets for which fair value approximates carrying value For financial assets and liabilities that have a short-term maturity, it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, and savings accounts without a specific maturity.
Fair value hierarchy The association uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Financial instruments in Level 1 The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occuring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Association is the last trade price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily listed equity common stocks, futures, US, UK and Germany listed government bonds.
Financial instruments in Level 2 The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Specific valuation techniques used to value financial instruments include: * Quoted market prices or dealer quotes for similar instruments; * The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves; * The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value; * Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.
Note that all of the resulting fair value estimates are included in Level 2 except for financial investments explained below.
Financial instruments in Level 3 Level 3 includes securitised debt instruments and investments in less liquid fund structures. Note 11 - Financial instruments and fair values of financial instruments continued Amounts in USD 000's
Non-market observable inputs means that fair values are determined as a whole or in part using a valuation technique (model) based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. As of 20 February there are no such instruments in the balance sheet.
Financial instruments As at 20.02.14 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit and loss Equities 33,134 10 0 33,144 Bonds 45,734 94,559 12,392 152,685 Financial derivative assets 0 264 0 264 Cash 5,741 0 0 5,741 Pending transactions for settlement 5,973 0 0 5,973 Total financial instruments 90,582 94,833 12,392 197,807
Financial liabilities Financial derivative liabilities 0 349 0 0 Total financial liabilities 0 349 0 0
Financial instruments As at 20.02.13 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit and loss Equities 32,464 1,314 0 33,778 Bonds 56,906 79,780 23,655 160,341 Financial derivative assets 0 627 0 627 Cash 2,689 0 0 2,689 Pending transactions for settlement 9,335 0 0 9,335 Total financial instruments 101,394 81,721 23,655 206,770
Financial liabilities Financial derivative liabilities 0 611 0 0 Total financial liabilities 0 611 0 0 Note 12 - Financial risk Amounts in USD 000's
Risk management framework The purpose of risk management is to enable the Associaton to meet its obligations to policyholders and members. Risk management must ensure that risk-taking is consistent with the Association’s risk appetite and that there is an appropriate risk-reward balance in all risk-taking activities. This risk management framework has been approved by the CEO. The Risk and Capital Committee is responsible for proposing changes to this framework to the CEO. The Risk and Capital Committee meets regularly to discuss any commercial, regulatory and organisational requirements. The mission is to improve the understanding of current and prospective risk exposures, as well as ensure sound, holistic and transparent decision-making processes in relation to risk management.
Credit Risk Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation.
The credit exposure on the Association’s reinsurance programme is in line with the guidelines of only accepting reinsurers with an A- or higher rating. The Association is however faced with BBB rating exposure through the IG Pooling agreement. Among the thirteen clubs, five have ratings of BBB or lower. This is mitigated by a designated reserve scheme, whereby high quality bank guarantees are provided as security for liabilities between the pooling participants.
The Association also has counterparty risk towards counterparties through the financial derivative overlay programme used to manage market risk exposures. Common risk mitigation techniques are exercised in order to minimise the counterparty risk in relation of holding derivative contracts.
The credit risk in respect of receivables is handled by group policies and by close follow up. Outstanding receivables can be netted off against outstanding claims payment to reduce the risk of doubtful debts.
The tables below provide information regarding credit risk exposure as at 20 February 2014, by classifying assets according to the median rating amongst the three market leading providers, Standard & Poor`s, Moody`s and Fitch. This principle is also in line with new Solvency II requirements. AAA is the highest possible rating. The US long term sovereign credit rating is considered to be AAA due to an applied median rating approach. Last year the corresponding rating used was according to Standard & Poor rating, which was AA+
As at 20.02.14 AAA AA A BBB BB B CCC/lower Not rated Total Financial instruments Financial assets at fair value through profit and loss Equities 0 0 0 0 0 0 0 33,144 33,144 Bonds 51,355 14,206 32,681 43,880 7,021 3,140 398 4 152,685 Financial derivative assets 0 0 264 0 0 0 0 0 264 Other financial investments 0 0 11,714 0 0 0 0 0 11,714
Reinsurers' share of technical provisions 0 0 227,283 2,678 260 0 0 0 230,221 Receivables 0 0 9,619 0 0 0 0 38,573 48,192 Cash and cash equivalents 0 14,878 27,770 95 0 0 0 0 42,743 Total 53,441 29,084 309,331 46,653 7,281 3,140 398 71,722 521,049
As at 20.02.13 AAA AA A BBB BB B CCC/lower Not rated Total Financial instruments Financial assets at fair value through profit and loss Equities 0 0 0 0 0 0 0 33,778 33,778 Bonds 70,087 8,522 33,494 37,179 6,744 3,793 492 31 160,341 Financial derivative assets 0 0 627 0 0 0 0 0 627 Other financial investments 0 0 12,026 0 0 0 0 0 12,026
Reinsurers' share of technical provisions 0 0 250,424 1,690 164 0 0 0 252,278 Receivables 0 0 21,251 0 0 0 0 29,314 50,565 Cash and cash equivalents 0 4,241 2,299 29 0 0 0 0 6,569 Total 72,210 12,762 320,120 38,898 6,908 3,793 492 63,123 518,307 Note 12 - Financial risk continued Amounts in USD 000's
Age analysis of receivables after provision for bad debt:
As at 20.02.14 Not due 0-60 days 61-90 days Above 90 days Total Receivables 47,412 277 61 442 48,192 Total 47,412 277 61 442 48,192
As at 20.02.13 Not due 0-60 days 61-90 days Above 90 days Total Receivables 48,343 698 131 1,393 50,565 Total 48,343 698 131 1,393 50,565
Impaired receivables As at 20.02.2014 there are impaired receivables in the Association with USD 1.7 million (20.02.2013: 1.4 million). No collateral is held as security for the impaired receivables, but they can be deducted in future claim payments if any. Impairment allowance is included in net operating expenses.
Analysis of provision for bad debt Amounts in USD 000's 21.02.13 21.02.12 to 20.02.14 to 20.02.13 Balance as per the beginning of the period 1,411 1,438 Provision for receivables impairment 756 303 Receivables written off during the year as uncollectable (288) (280) Unused amounts reversed (158) (50) Exchange adjustments 2 0 Balance as per the end of the period 1,723 1,411
The creation and release of provision for impaired receivables have been included in Other insurance related expenses in the Income statement. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.
Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial instruments. In respect of catastrophic events there is also a liquidity risk associated with the timing differences between gross cash out-flows and expected reinsurance recoveries. Liquidity risk arises primarily due to the unpredictability of the timing of payment of insurance liabilities and the illiquidity of the assets held or when market depth is insufficient to absorb the required volumes of assets to be sold, resulting in asset sale at a discount. The risk is mitigated through a credit facility with Nordea Bank Norge ASA and a cash pool between the direct insurance entities in the group improve access to liquidity across the legal entities.
Maturity profile The tables below set out the maturity profile of assets and liabilities combining amounts expected to be recovered within 1 year, above 1 year and later than 5 years. Assets and liabilities not covered by IFRS 7 is classified as non financial assets and non financial liabilities in the table below.
The Association maintains highly marketable financial instruments and diverse assets that can be easily liquidated even of an unforeseen interruption of cash flow. This combined with the credit facility and cash pool to meet liquidity needs gives an understanding on how assets and liabilities have been matched. As at 20.02.14 Carrying Within 1 More than No maturity value year 1 - 5 year 5 years date Total Financial assets Investment at amortised cost 2,086 0 0 2,086 0 2,086 Equities 33,143 0 0 0 33,143 33,143 Bonds 152,685 48,410 70,723 33,553 0 152,685 Financial derivative assets 264 264 0 0 0 264 Cash 5,741 5,741 0 0 0 5,741 Pending transactions for settlement 5,973 5,973 0 0 0 5,973 Reinsurers' share of technical provisions 230,221 71,530 138,547 20,144 0 230,221 Receivables 48,192 48,192 0 0 0 48,192 Cash and cash equivalents 42,743 42,743 0 0 0 42,743 Total financial assets 521,047 222,852 209,269 55,783 33,143 521,047 Non financial assets 5,078 2,133 0 0 2,946 5,078 Total Assets 526,125 224,985 209,269 55,783 36,088 526,125
Financial liabilities Financial derivative liabilities 349 349 0 0 0 349 Technical provisions 503,086 116,241 225,148 32,736 128,961 503,086 Provision for other liabilities 2,606 255 1,071 1,280 0 2,606 Payables and accruals 18,775 18,775 0 0 0 18,775 Total financial liabilities 524,816 135,620 226,219 34,016 128,961 524,816 Non financial liabilities 0 0 0 0 0 0 Total liabilities 524,816 135,620 226,219 34,016 128,961 524,816 Note 12 - Financial risk continued Amounts in USD 000's As at 20.02.13 Carrying Within 1 More than No maturity value year 1 - 5 year 5 years date Total Assets Investment at amortised cost 2,123 0 0 2,123 0 2,123 Equities 33,778 0 0 0 33,778 33,778 Bonds 160,341 51,579 67,146 30,657 10,959 160,341 Financial derivative assets 627 627 0 0 0 627 Cash 2,690 2,690 0 0 0 2,690 Pending transactions for settlement 9,335 9,335 0 0 0 9,335 Reinsurers' share of technical provisions 252,278 76,036 151,695 24,547 0 252,278 Receivables 50,565 50,565 0 0 0 50,565 Cash and cash equivalents 6,569 6,569 0 0 0 6,569 Total financial assets 518,306 197,401 218,841 57,327 44,737 518,306 Non financial assets 4,196 1,229 0 0 2,967 4,196 Total Assets 522,502 198,630 218,841 57,327 47,704 522,502
Financial liabilities Financial derivative liabilities 611 611 0 0 0 611 Technical provisions 499,886 116,924 233,267 37,746 111,949 499,886 Provision for other liabilities 3,324 405 1,701 1,218 0 3,324 Payables and accruals 18,680 18,680 0 0 0 18,680 Total financial liabilities 522,502 136,620 234,968 38,964 111,949 522,502
Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk arises from the investment activities and the sensitivity of liabilities to market prices. The most significant market risk types are: foreign exchange rates (currency risk), market interest rates (interest rate risk), and quoted price rates (price risk).
Currency risk. Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The currency exposure on the asset side of the Association is matched to the assumed currency exposure of liabilities. A significant share of the actual claims exposure is related to other currencies than the accounting currency. Based on accounting figures, there is a mismatch between assets and liabilities. The currency exposure is managed through a rolling forward programme.
The table below summarises the association's assets and liabilities by major currencies
As at 20.02.14 ASSETS USD EUR GBP Other Total Investments 105,689 38,979 20,174 32,965 197,807 Reinsurers' share of technical provisions 123,718 43,246 25,665 37,592 230,221 Receivables 45,660 1,847 0 685 48,192 Other assets 33,454 1,379 468 12,473 47,774 Prepayments and accrued income 2,078 0 0 55 2,133 TOTAL ASSETS 310,599 85,451 46,307 83,769 526,126
LIABILITIES Technical provisions 205,286 71,759 42,586 54,494 374,125 Contingency reserve 128,961 0 0 0 128,961 Provision for other liabilities 0 0 2,331 275 2,606 Payables 13,161 3,369 1,234 1,662 19,426 Accruals and deferred income 926 0 0 82 1,008 TOTAL LIABILITIES 348,334 75,128 46,151 56,514 526,126 Note 12 - Financial risk continued Amounts in USD 000's As at 20.02.13 ASSETS USD EUR GBP Other Total Investments 116,161 49,818 29,020 11,772 206,771 Reinsurers' share of technical provisions 135,571 47,390 28,124 41,193 252,278 Receivables 50,372 8 0 185 50,565 Other assets 1,997 752 0 8,910 11,659 Prepayments and accrued income 1,127 63 0 39 1,229 TOTAL ASSETS 305,228 98,031 57,144 62,098 522,502
LIABILITIES Technical provisions 208,473 72,873 43,247 63,344 387,937 Contingency reserve 111,949 0 0 0 111,949 Provision for other liabilities 0 0 2,134 1,190 3,324 Payables 13,613 764 1,190 2,754 18,321 Accruals and deferred income 838 0 0 132 970 TOTAL LIABILITIES 334,873 73,637 46,571 67,421 522,502
Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. The term structure of interest bearing assets in the Association is matched to the expected duration of the liabilities. The sensitivity analysis of the bond assets of the Association has been modelled by reference to a reasonable approximation of the average interest rate sensitivity of the investments held.
Equity price risk Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors effecting all similar financial instruments traded in the market.
The Association's equity price risk exposure relates to financial instruments whose values will fluctuate as a result of changes in market prices.
The equity portfolio is broadly diversified. However, compared to a global benchmark portfolio based on market capitalisation, the equity portfolio is skewed towards emerging markets and small caps, which is expected to have a higher volatility than the global market as a whole.
The analysis below is performed for reasonably possible movements in key market variables with all other variables held constant.
As at As at 20.02.2014 20.02.2013
Impact on fixed income portfolio investments given an increase of 50 basis points (2,422) (2,543) Impact on equity portfolio given a 10% drop in quoted market prices (3,314) (3,378) Impact on total investment portifolio given a change of 10 per cent in foreign exchange rates against USD (8,962) (8,815)
The sensitivity analysis assumes no correlation between equity price, interest rate, property market and foreign currency rate risk. It also assumes that all other receivables and payables remain unchanged and that no management action is taken. The Association has no significant risk concentrations which is in line with the overall investment guidelines set by the Association's Board of Directors.
Any impact from risks tested in the table above is not, due to tax regulations, assumed to have any taxable impact.
The methods used above for deriving sensitivity information and significant variables did not change from the previous period. Note 13 - Financial derivatives at fair value through profit and loss Amounts in USD 000's
Financial Derivatives Financial derivatives are integrated components in the investment philosophies and processes of the Association's fund management. They are used for risk management, liquidity improvement, cost reduction and to optimise return within the guidelines set for the associations fund managements. These uses contribute to reducing the risk of the assets not being able to cover Gard’s liabilities.
Investment Guidelines The key features of the Association's derivative guidelines are as follows: All options must be covered. The aggregate economic exposure of the fund may not exceed one hundred per cent of the total fund’s market value, i.e. there must be no leverage or gearing of any nature whatsoever of the fund. Derivatives must not be used to effect economic exposures beyond the limits set out in the fund guidelines. Any transactions in derivative instruments or of a partly paid nature, which might lead to a contingent liability undertaken for Gard will be subject to the restriction that sufficient cash or relevant securities must be retained to cover the full net exposure. In addition, there are minimum criteria for counter parties in derivative transactions.
Compliance Monitoring Compliance with the guidelines is monitored on an ongoing basis through the use of both internal and external resources. Even though the investment managers have internal risk analysis and compliance monitoring processes it is necessary to have independent verification based on alternative sources of data. The global custodian is therefore responsible for detailed compliance monitoring and reporting both at the overall fund level and the individual portfolio level. The investment managers are also subject to a semi-annual independent assessment of investment processes and skills to ensure that, inter alia, risk management and compliance monitoring routines are satisfactory.
Valuation and Reporting All derivative instruments are carried at independently sourced market values in accordance with principles described under note 2. Underlying contract value represents the value of the underlying gross commitments of all open contracts.
Types of Financial Derivatives used during the financial year: Forwards exchange contracts A Forward Exchange Contract is a contract between two parties whereby one party contracts to sell and the other party contracts to buy, one currency for another, at an agreed future date, at a rate of exchange which is fixed at the time the contract is entered into.
Interest rate options An option is a contract in which the writer of the option grants the buyer of the option the right to purchase from or sell to the writer a designated instrument at a specific price within a specified period of time. An interest rate option can be written on cash instruments or futures, and is used to manage interest rate and volatility exposure of the portfolio. Written options generate gains in stable rate environments, but may create obligations to buy or sell underlying securities under greater rate movements. Purchased options are used to generate gains based on interest rate forecasts.
Interest rate futures An interest rate futures contract is a standardised agreement between a buyer (seller) and an established exchange or its clearinghouse in which the buyer (seller) agrees to take (make) delivery of a financial rate instrument at a specified price at the end of a designated period of time.
Interest rate swaps An interest rate swap is an agreement between two parties to exchange periodic interest payments. In the most common type of swap, one party agrees to pay the other party fixed-interest payments at designated dates for the life of the contract. This instrument is used to change interest rate risk by changing the cash flow of fixed rate bonds to adjustable rate bonds or vice versa. Note 13 Financial derivatives at fair value through profit and loss continued Amounts in USD 000's
Notional Notional Fair Value Fair Value 20.02.14 20.02.13 20.02.14 20.02.13
Type of derivatives Interest rate related: Futures 2,388 6,082 0 0 Options 14,069 19,452 (24) (69) Swaps 9,006 14,507 33 152 Total interest rate related 25,463 40,041 9 83 Futures offset 0 0 0 0 Net interest rate related 0 0 9 83
Equity related contracts: Futures 0 186 0 0 Futures offset 0 0 0 0 Net equity related 0 186 0 0
Foreign currency related Forward foreign exchange contracts 11,130 17,522 (94) (67) USD receivables related to foreign currency contracts 0 0 0 0 Net foreign currency related 11,130 17,522 (94) (67)
Net financial derivative assets (85) 16
Financial derivative assets 0 0 264 627 Financial derivative liabilities 0 0 (349) (611) Net financial liabilities 0 0 (85) 16
Note 14 Portfolio of equities at fair value through profit and loss Amounts in USD
The Association possesses only minority interests in quoted companies. The Association mainly owns European equities, and had an equity exposure of 16% of it's total investments which is an increase of 3% from the year before. Expected standard deviation (risk) in European equities is estimated to be 25%. As at 20.02.14 Fair value Australia AGL Energy Limited 1,058 Amcor Ltd. 1,125 AMP Limited 844 Australia and New Zealand Banking Group 4,995 BHP Billiton Limited 7,195 BlueScope Steel Limited 575 Brambles Limited 831 Commonwealth Bank of Australia 6,566 CSL Limited 1,010 Insurance Australia Group Limited 1,031 Lend Lease Corporation Ltd 599 Macquarie Group Limited 1,836 Metcash Limited 318 National Australia Bank Limited 6,316 Newcrest Mining Limited 528 Orica Limited 694 Origin Energy Limited 758 Qantas Airways Limited 228 QBE Insurance Group Limited 1,423 Rio Tinto Limited 1,438 Santos Limited 551 Stockland Corporation Ltd. 801 Suncorp Group Limited 2,316 Tabcorp Holdings Limited 501 Telstra Corporation Limited 2,220 Toll Holdings Limited 964 Wesfarmers Limited 3,132 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Australia continued Westfield Group 1,454 Westpac Banking Corporation 5,619 Woodside Petroleum Ltd. 797 Woolworths Ltd. 3,153 60,876
Austria Erste Group Bank AG 2,630 OMV Aktiengesellschaft 1,213 voestalpine AG 1,015 Wienerberger AG 579,014 583,873
Belgium ageas N.V. 1,354 Anheuser-Busch InBev 2,944 Delhaize Group 1,944 Etat Belge 705 Groupe Bruxelles Lambert S.A. 759 KBC Groep 2,151 Solvay 924 Umicore 472 11,252
Canada Canadian Tire Corporation, Limited 1,151 Agrium Inc. 802 ARC Resources Ltd. 538 Bank of Montreal 3,076 Barrick Gold Corporation 1,725 BCE Inc. 1,031 BlackBerry Limited 1,279 Bombardier Inc. 609 Brookfield Asset Management Inc. 2,133 Canadian Imperial Bank of Commerce 2,361 Canadian National Railway Company 1,956 Canadian Natural Resources Limited 3,473 Canadian Oil Sands Limited 885 Canadian Pacific Railway Limited 1,412 Cenovus Energy Inc. 1,874 Crescent Point Energy Corp. 386 Enbridge Inc. 1,333 Encana Corporation 3,584 Enerplus Corporation 438 Exxon Mobil Corporation 571 Fairfax Financial Holdings Limited 799 Fortis Inc. 443 George Weston Limited 520 Goldcorp Inc. 1,609 Husky Energy Inc. 726 Kinross Gold Corporation 296 Magna International Inc. 2,084 Manulife Financial Corporation 4,729 Metro Inc. 396 National Bank of Canada 713 Pengrowth Energy Corporation 1,347 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Canada continued Penn West Petroleum Ltd. 1,321 Potash Corporation of Saskatchewan Inc. 438 Power Corporation of Canada 3,408 Rogers Communications Inc. 930 Royal Bank of Canada 5,985 Shaw Communications Inc. 367 Shoppers Drug Mart Corporation 590 Sun Life Financial Inc. 3,102 Suncor Energy Inc. 4,082 Talisman Energy Inc. 902 Teck Resources Ltd. 937 TELUS Corporation 446 The Bank of Nova Scotia 3,871 The Toronto-Dominion Bank 5,809 The Woodbridge Company Limited 1,136 TransAlta Corporation 161 TransCanada Corporation 2,162 79,926
Denmark Carlsberg A/S 1,186 Danske Bank A/S 2,876 Novo Nordisk A/S 1,985 Vestas Wind Systems A/S 2,620 8,667
Finland Metso Corporation 410 Nokia Oyj 10,676 Sampo Oyj 2,567 Stora Enso Oyj 1,460 Suomen Valtio/Alv 982 UPM-Kymmene OYJ 1,872 Wartsila Oyj Abp 982 18,950
France ACCOR 1,102 Air France - KLM 349 Alcatel Lucent 451,052 ALSTOM 886 AXA 10,133 BNP Paribas 439,826 Bouygues 2,730 BPCE 1,296 Cap Gemini 1,158 Carrefour 5,543 Casino Guichard-Perrachon 1,020 Compagnie de Saint-Gobain 365,013 Compagnie Generale de Geophysique - Veri 422 Compagnie Generale des Etablissements Mi 2,520 Danone 2,339 Eiffage 1,494 Essilor International (Compagnie General 843 European Aeronautic Defence and Space Co 737,662 Federation Nationale Du Credit Agricole 579,666 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value France continued Financiere Pinault 1,700 GDF SUEZ 8,927 Groupe Arnault SAS 1,377 Havas 341,486 L'Air Liquide societe anonyme pour l'Etu 2,163 L'Oreal 840 La Farge 1,777 Lagardere SCA 831 Legrand SA 652 LVMH Moet Hennessy Louis Vuitton 2,821 Orange 10,101 Pernod Ricard 1,408 Peugeot SA 5,069 Publicis Groupe SA 598,159 Renault 2,716 Republique Francaise Presidence 3,382 Safran 1,007 Sanofi 9,685 Schneider Electric SA 3,587 SCOR SE 765 SES S.A. 688 Societe Generale 782,359 Sodexo 801,944 STMicroelectronics N.V. 756 SUEZ Environnement Company 1,479 Technip 768 Thales 1,895 Total SA 24,191 Unibail-Rodamco SE 1,310 Valeo 446,035 Vallourec 715 Veolia Environnement-VE 2,541 VINCI 4,788 VIVENDI 7,105 5,680,083
Germany Twenty-First Century Fox, Inc. 554,996 adidas AG 1,278 Allianz SE 14,056 Aurubis AG 516 BASF SE 10,262 Bayer Aktiengesellschaft 8,049 Bayerische Motoren Werke Aktiengesellsch 4,747 Brenntag AG 737 COMMERZBANK Aktiengesellschaft 3,387 Continental Aktiengesellschaft 1,615 Daimler AG 14,449 Deutsche Bank Aktiengesellschaft 8,507 Deutsche Borse Aktiengesellschaft 797 Deutsche Lufthansa Aktiengesellschaft 2,190 Deutsche Post AG 4,266 Deutsche Telekom AG 13,528 E.ON SE 10,901 Fresenius Medical Care AG & Co. KGaA 1,024 Fresenius SE & Co. KGaA 1,146 HDI Haftpflichtverband der Deutschen Ind 758 HeidelbergCement AG 2,121 Henkel AG & Co. KGaA 1,327 HOCHTIEF Aktiengesellschaft 1,211 Infineon Technologies AG 1,457 K+S Aktiengesellschaft 227 LANXESS Aktiengesellschaft 147 Linde Aktiengesellschaft 2,430 METRO AG 2,679 Munchener Ruckversicherungs-Gesellschaft 5,404 OSRAM Licht AG 525 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Germany continued Porsche Automobil Holding SE 1,186 RWE Aktiengesellschaft 6,592 Salzgitter Aktiengesellschaft 347 SAP AG 2,382 Siemens Aktiengesellschaft 10,947 ThyssenKrupp AG 3,618 TUI AG 482 Volkswagen Aktiengesellschaft 5,404 705,695
Greece Greek Organisation of Football Prognosti 1,211 Hellenic Telecommunications Organization 861 National Bank of Greece S.A. 197 2,268
Hong Kong AIA Group Limited 2,427 Cheung Kong (Holdings) Limited 1,332 CLP Holdings Limited 1,113 Esprit Holdings Limited 1,124 Henderson Land Development Company Limit 416 HSBC Holdings plc 838 Hutchison Whampoa Limited 3,203 John Swire & Sons Limited 724 Li & Fung Limited 819 New World Development Company Limited 788 Power Assets Holdings Limited 804 Sun Hung Kai Properties Limited 1,481 The Central People's Government of the P 311 The Link Real Estate Investment Trust 650 The Wharf (Holdings) Limited 641 16,672
Ireland Ryanair Holdings Public Limited Company 1,328,108 1,328,108
Israel Bezeq The Israel Telecommunication Corp, 333 Bank Leumi le-Israel B.M. 918 Teva Pharmaceutical Industries Limited 3,668 4,920
Italy Assicurazioni Generali S.p.A. 5,339 Atlantia S.p.A. 915 Banca Monte dei Paschi di Siena S.p.A. 1,031 Banca Popolare dell'Emilia Romagna Socie 499 Banca Popolare di Milano Societa Coopera 326 Banco Popolare Societa Cooperativa 1,000 CNH Industrial N.V. 1,265 ENEL - SPA 11,402 Eni S.p.A. 12,303 FIAT S.p.A. 4,550 Finmeccanica S.p.A. 2,050 Giovanni Agnelli E C. SAPA 985 Holmo SpA 1,631 Intesa Sanpaolo S.p.A. 532,194 Mediaset S.p.A. 1,826 Mediobanca Banca di Credito Finanziario 759 Rocca & Partners Stichting Administratie 395 Saipem S.p.A. 810 Snam S.p.A. 775 Telecom Italia S.p.a. 8,425 Terna - Rete Elettrica Nazionale S.p.A. 805.6 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Italy continued UniCredit S.p.A. 10,673 Unione di Banche Italiane S.C.P.A 2,180 YOOX S.p.A. 1,342,048 1,944,185
Japan AEON Co., Ltd. 1,675 Aisin Seiki Co., Ltd. 620 Ajinomoto Co., Inc. 663 Asahi Glass Co., Ltd. 715 Asahi Group Holdings, Ltd. 821 Chubu Electric Power Co., Inc. 2,393 Dai Nippon Printing Co., Ltd. 1,508 Daikin Industries, Ltd. 881 Daito Trust Construction Co., Ltd. 646 Daiwa House Industry Co., Ltd. 815 Eisai Co., Ltd. 679 Electric Power Development Co., Ltd. 608 Fuji Heavy Industries, Ltd. 1,766 Fukuoka Financial Group, Inc. 261 Hankyu Hanshin Holdings, Inc. 701 Hitachi, Ltd. 7,200 Hokkaido Electric Power Co., Inc. 349 Honda Motor Co., Ltd. 7,246 Idemitsu Kosan Co., Ltd. 569 JFE Holdings, Inc. 1,791 JX Holdings, Inc. 2,705 Kawasaki Heavy Industries, Ltd. 450 Kirin Holdings Company, Limited 1,452 Kobe Steel, Ltd. 860 Konica Minolta Holdings, Inc. 797 Kyushu Electric Power Co., Inc. 2,054 Meiji Holdings Co., Ltd. 545 Mitsubishi Estate Co., Ltd 1,088 Mitsubishi Heavy Industries, Ltd. 1,860 Mitsubishi UFJ Financial Group, Inc. 10,373 Mitsui & Co., Ltd. 4,775 Mitsui Chemicals, Inc. 404 Mitsui Fudosan Co., Ltd. 2,066 Mitsui O.S.K. Lines, Ltd. 984 Mizuho Financial Group, Inc. 5,251 MS&AD Insurance Group Holdings, Inc. 1,831 Murata Manufacturing Co., Ltd. 1,007 Nintendo Co., Ltd. 2,394 Nissan Motor Co., Ltd. 3,705 NKSJ Holdings, Inc. 1,672 Nomura Holdings, Inc. 2,036 Osaka Gas Co., Ltd. 780 Otsuka Holdings Co.,Ltd. 869 Resona Holdings, Inc. 906 Ricoh Company, Ltd. 1,619 Rohm Co., Ltd. 452 SECOM Co., Ltd. 599 Sekisui House, Ltd. 865 Seven & I Holdings Co., Ltd. 4,457 Shin-Etsu Chemical Co., Ltd. 1,186 Shiseido Company, Limited 1,522 Sumitomo Chemical Co., Ltd. 2,377 Sumitomo Metal Mining Co., Ltd. 603 Sumitomo Mitsui Financial Group, Inc. 6,846 Sumitomo Realty & Development Co., Ltd. 917 T&D Holdings, Inc. 619 The Bank of Yokohama, Ltd. 432 The Chugoku Electric Power Company,Incor 608 The Dai-Ichi Life Insurance Company, Lim 1,982 The Kansai Electric Power Company, Incor 3,045 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Japan continued The Shizuoka Bank, Ltd. 1,048 Tohoku Electric Power Co., Inc. 1,898 Tokio Marine Holdings, Inc. 2,739 Tokyo Gas Co., Ltd. 940 Toppan Printing Co., Ltd. 636 Toray Industries, Inc. 1,225 Yamada Denki Co., Ltd. 696 Yamaha Motor Co., Ltd. 420 Yamato Holdings Co., Ltd. 686 Asahi Kasei Corp. 1,884 Astellas Pharma Inc. 1,743 Bridgestone Corporation 2,485 Canon Inc. 4,043 Central Japan Railway Company 1,792 Daiichi Sankyo Co. Ltd. 1,036 Daiwa Securities Group Inc. 1,618 DENSO Corporation 1,738 Dentsu Inc. 1,491 East Japan Railway Company 3,472 East Nippon Expressway Company Limited 617 FANUC Corporation 650 FUJIFILM Holdings Corporation 3,510 Fujitsu Limited 2,063 Hokuriku Electric Power Company 587 Hoya Corporation 805 IHI Corporation 1,775 INPEX Corporation 901 Isetan Mitsukoshi Holdings Ltd. 691 Isuzu Motors Limited 681 ITOCHU Corporation 2,991 Japan Tobacco Inc. 1,285 Kajima Corporation 700 Kao Corporation 1,305 KDDI Corporation 4,235 Kintetsu Corporation 468 Komatsu Ltd. 2,011 Kubota Corporation 1,221 KYOCERA Corporation 1,186 LIXIL Group Corporation 566 Marubeni Corporation 2,477 Mazda Motor Corporation 1,564 Mitsubishi Chemical Holdings Corporation 1,034 Mitsubishi Corporation 4,992 Mitsubishi Electric Corporation 3,790 Mitsubishi Materials Corporation 422 Mitsubishi Motors Corporation 597 NEC Corp. 2,725 Nidec Corporation 816 Nikon Corporation 547 Nippon Steel & Sumitomo Metal Corporatio 3,562 Nippon Telegraph and Telephone Corporati 9,042 Nippon Yusen Kabushiki Kaisha 1,242 Nitto Denko Corporation 480 Obayashi Corporation 1,398 Oji Holdings Corporation 643 Olympus Corporation 693 ORIX Corporation 1,643 Panasonic Corporation 6,053 Sharp Corporation 1,817 Shimizu Corporation 569 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Japan continued Showa Denko K.K. 1,168 Showa Shell Sekiyu K.K. 441 SMC Corporation 1,684 SoftBank Corp. 4,781 Sojitz Corporation 1,188 Sony Corporation 4,782 Sumitomo Corporation 3,311 Sumitomo Electric Industries Ltd. 2,486 Sumitomo Mitsui Trust HoldingsInc. 1,915 Suzuki Motor Corporation 1,239 Taisei Corporation 858 Takeda Pharmaceutical Co Ltd 2,710 TDK Corporation 377 Teijin Limited 1,285 The Tokyo Electric Power Company Incorpo 7,342 Tokyo Electron Limited 390 Tokyu Corporation 684 TonenGeneral Sekiyu K.K. 584 Toshiba Corporation 3,111 Toyota Industries Corporation 597 Toyota Motor Corporation 14,233 Toyota Tsusho Corp 1,018 West Japan Railway Company 813 266,950
Korea, republic of Hyundai Heavy Industries Co., Ltd. 1,014 Hyundai Mobis Co., Ltd. 860 LG Chem, Ltd. 465 LG Display Co., Ltd. 740 Samsung Electronics Co., Ltd. 5,997 Samsung Fire & Marine Insurance Co., Ltd 644 Samsung Heavy Industries Co., Ltd. 472 Samsung Life Insurance Co., Ltd. 565 Shinhan Financial Group Co., Ltd. 1,970 SK Holdings Co., Ltd. 940 SK Innovation Co., Ltd. 753 SK Telecom Co., Ltd. 1,361 GS Holdings Corp. 419 Hana Financial Group Inc. 1,111 Hyundai Motor Company 2,899 Hyundai Steel Company 1,164 KB Financial Group Inc. 1,426 KIA Motors Corp. 683 Korea Deposit Insurance Corporation 711 Korea Electric Power Corporation 2,082 KT Corporation 798 KT&G Corporation 1,259 LG Corp. 1,022 LG Electronics Inc. 1,302 POSCO 3,528 S-Oil Corporation 615 Samsung C&T Corporation 853 SK Hynix Inc. 1,122 36,776
Netherlands Aegon N.V. 3,653 Akzo Nobel N.V. 2,203 ArcelorMittal 5,453 ASML Holding 709 Delta Lloyd N.V. 1,086 Koninklijke Ahold N.V. 2,816 Koninklijke DSM N.V. 1,053 Koninklijke KPN N.V. 574,127 Koninklijke Philips N.V. 3,547 L'Arche Green N.V. 1,236 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Netherlands continued PostNL N.V. 1,880 Randstad Holding N.V 603 Stichting Administratiekantoor Unilever 3,827 Stichting ING Aandelen 155,091 Wolters Kluwer N.V. 715 757,999
Norway DNB ASA 2,042 Norsk Hydro ASA 572 Orkla ASA 916 Seadrill Limited 1,377 Stortinget 5,146 Yara International ASA 202 10,255
Portugal EDP- Energias de Portugal, S.A. 1,858 Portugal Telecom, SGPS, S.A. 1,324 3,182
Singapore Singapore, Government of 1,704 CapitaLand Limited 504 DBS Group Holdings Ltd 1,761 Jardine Matheson Holdings Limited 989 Keppel Corporation Ltd 719 Noble Group Limited 360 Oversea-Chinese Banking Corporation Limi 1,015 United Overseas Bank Limited 1,457 Wilmar International Limited 298 8,806
Spain Abertis Infraestructuras, S.A. 959 ACS, Actividades de Construccion y Servi 1,953 Amadeus IT Holding, S.A. 1,165 Banco Bilbao Vizcaya Argentaria, S.A. 10,777 Banco de Sabadell, S.A. 1,414 Banco Popular Espanol, S.A. 2,076 Banco Santander, S.A. 21,935 Ferrovial, S.A. 889 Gas Natural SDG, S.A. 1,324 Iberdrola, S.A. 3,865 Repsol, S.A. 4,587 Telefonica, S.A. 16,592 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value Spain continued ENEL - SPA 551 Gartler S.L. 1,449 69,536
Sweden AB SKF 873 AB Volvo 1,763 Aktiebolaget Electrolux 681 ASSA ABLOY AB 606 Atlas Copco Aktiebolag 1,196 Boliden AB 482 Eniro AB 546,309 Ericsson 3,223 H & M Hennes & Mauritz Ab 2,547 Nordea Bank AB (publ) 2,474 Sandvik AB 702 Scania AB 763 Skandinaviska Enskilda Banken AB (publ) 923 Skanska AB 1,299 SSAB Swedish Steel SA/NV 405 Svenska Cellulosa Aktiebolaget SCA 1,782 Svenska Handelsbanken AB (publ) 1,495 Swedbank AB 1,685 Tele2 AB 440 TeliaSonera AB 1,381 571,028
Switzerland ABB Ltd. 4,244 Adecco S.A. 965 Baloise-Holding AG 752 Clariant AG 561 Compagnie Financiere Richemont SA 1,683 Credit Suisse Group AG 6,188 Holcim Ltd 1,156 Nestle S.A. 12,750 Novartis AG 10,915 Roche Holding AG 9,527 Schweizerische Eidgenossenschaft 1,161 Swiss Life Holding AG 2,014 Swiss Re AG 3,085 Syngenta AG 1,099 The Swatch Group SA 653 Transocean Ltd. 1,685 UBS AG 4,450 Zurich Insurance Group AG 6,837 69,724 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United Kingdom Adnams BBPM Group Limited 405,049 Anglo American PLC 4,298 ASOS PLC 490,070 AstraZeneca PLC 10,518 Aviva PLC 6,062 BAE Systems PLC 2,808 Balfour Beatty PLC 458 Bank of Ireland 2,863 Barclays PLC 10,303 Barratt Developments P L C 1,173,725 BG Group PLC 3,871 BHP Billiton PLC 4,319 Bovis Homes Group PLC 598,869 BP P.L.C. 31,491 British American Tobacco p.l.c. 6,039 British Sky Broadcasting Group PLC 947 BT Group PLC 6,476 Carnival PLC 1,307 CARPETRIGHT PLC 190,378 Centrica PLC 2,906 Compass Group PLC 1,742 CRH public limited company 2,547 Diageo plc 3,393 easyJet PLC 1,232,771 Enterprise Inns PLC 218,643 Experian plc 729 G4S PLC 525 Garfield Weston Foundation 301,070 GKN PLC 816 GlaxoSmithKline PLC 12,151 Glencore Xstrata PLC 2,881 H M Government Cabinet Office 2,601 Howden Joinery Group PLC 1,271,628 HSBC Holdings plc 22,271 Imperial Tobacco Group PLC 3,578 International Consolidated Airlines Grou 1,815,260 J D Wetherspoon PLC 437,750 J Sainsbury PLC 2,285 Johnson Matthey PLC 1,096 Jupiter Fund Management PLC 573,480 Kingfisher plc 1,251,838 Land Securities Group PLC 1,672 Legal & General Group PLC 3,319 Lloyds Banking Group PLC 6,976 Man Group PLC 470 Marks and Spencer Group P.L.C. 2,122 MASH Holdings Limited 2,005,977 Mondi plc 836 National Grid PLC 5,362 NEXT PLC 545 Ocado Group PLC 1,708,657 Old Mutual Public Limited Company 1,929 Pearson PLC 1,110 Pendragon PLC 47,679 Prudential Public Limited Company 5,305 Reckitt Benckiser Group PLC 2,735 Reed Elsevier PLC 913 Regus PLC 322,114 Resolution Capital Limited 1,882 Rexam PLC 901 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United Kingdom continued Rio Tinto PLC 5,807 Rolls-Royce Holdings plc 155,002 ROYAL DUTCH SHELL plc 38,470 RSA Insurance Group PLC 947 SABMiller plc 1,726 Severn Trent PLC 779 SIG plc 886,998 Smith & Nephew PLC 814 Smiths Group plc 602 SSE PLC 2,957 Standard Chartered PLC 3,409 Standard Life PLC 1,373 Talktalk Telecom Group PLC 1,194,766 Tate & Lyle Public Limited Company 542 Taylor Wimpey PLC 805,034 Tesco PLC 6,163 The Berkeley Group Holdings PLC 303,187 The British Land Company Public Limited 893 Thomas Cook Group plc 756,269 Travis Perkins PLC 790,516 TUI AG 1,141 UDG Healthcare Public Limited Company 382,926 UNILEVER PLC 2,802 United Utilities Group PLC 1,442 Vodafone Group Public Limited Company 28,952 WM Morrison Supermarkets P L C 1,254 Wolseley Limited 1,271 WPP PLC 1,967 19,610,325
United States Air Products and Chemicals, Inc. 1,295 Allergan, Inc. 891 Alpha Natural Resources, Inc. 741 Altria Group, Inc. 5,720 Amazon.com, Inc. 1,399 American Electric Power Company, Inc. 2,920 American International Group, Inc. 9,746 Ameriprise Financial, Inc. 1,274 Analog Devices, Inc. 822 Annaly Capital Management, Inc. 1,552 Applied Materials, Inc. 1,196 Arrow Electronics, Inc. 1,133 Assurant, Inc. 1,022 Autoliv, Inc. 670 Automatic Data Processing, Inc. 1,836 AutoZone, Inc. 1,077 AvalonBay Communities, Inc. 902 Avis Budget Group, Inc. 1,657 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United States continued Avnet, Inc. 873 Avon Products, Inc. 572 Becton, Dickinson and Company 1,502 Best Buy Co., Inc. 2,534 BlackRock, Inc. 1,202 Boston Properties, Inc. 996 C.H. Robinson Worldwide, Inc. 379 CA, Inc. 588 Cardinal Health, Inc. 5,149 CarMax, Inc. 757 CenterPoint Energy, Inc. 1,287 CenturyLink, Inc. 1,961 CF Industries Holdings, Inc. 482 Cisco Systems, Inc. 4,549 CNO Financial Group, Inc. 1,250 Coca-Cola Enterprises, Inc. 1,125 Community Health Systems, Inc. 588 ConAgra Foods, Inc. 771 Consolidated Edison, Inc. 1,936 CST Brands, Inc. 308 Darden Restaurants, Inc. 455 Dominion Resources, Inc. 3,218 Dr Pepper Snapple Group, Inc. 206 EOG Resources, Inc. 1,620 Everest Re Group, Ltd. 1,045 Fidelity National Financial, Inc. 1,013 Fidelity National Information Services, 1,031 Fiserv, Inc. 1,029 Forest Laboratories, Inc. 1,751 Franklin Resources, Inc. 683 Gannett Co., Inc. 1,409 General Mills, Inc. 1,643 Genworth Financial, Inc. 1,355 Gilead Sciences, Inc. 2,898 Harley-Davidson, Inc. 836 HCA Holdings, Inc. 3,164 HCP, Inc. 492 Health Net, Inc. 285 Hertz Global Holdings, Inc. 1,815 Host Hotels & Resorts, Inc. 603 Hudson City Bancorp, Inc. 1,023 Integrys Energy Group, Inc. 619 J. C. Penney Company, Inc. 113 Jabil Circuit, Inc. 449 Johnson Controls, Inc. 3,640 Juniper Networks, Inc. 1,645 Keysight Technologies, Inc. 401 Kinder Morgan, Inc. 1,097 Kraft Foods Group, Inc. 2,263 L Brands, Inc. 693 L-3 Communications Holdings, Inc. 1,503 Leidos Holdings, Inc. 470 Lorillard, Inc. 1,254 Lowe's Companies, Inc. 3,406 Macy's, Inc. 2,031 Marsh & McLennan Companies, Inc. 1,299 Mattel, Inc. 711 McGraw Hill Financial, Inc. 1,048 Medtronic, Inc. 3,192 Merck & Co., Inc. 11,385 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United States continued MetLife, Inc. 6,085 Micron Technology, Inc. 3,033 Mondelez International, Inc. 6,689 Motorola Solutions, Inc. 848 National Amusements, Inc. 5,388 National Oilwell Varco, Inc. 2,368 New York Community Bancorp, Inc. 483 NextEra Energy, Inc. 3,051 NII Holdings, Inc. 372 NIKE, Inc. 1,814 Noble Energy, Inc. 1,208 Nordstrom, Inc. 535 NRG Energy, Inc. 1,982 One Gas, Inc. 199 ONEOK, Inc. 1,342 Owens-Illinois, Inc. 442 Paychex, Inc. 660 Pepco Holdings, Inc. 864 PepsiCo, Inc. 6,631 PPG Industries, Inc. 1,888 Praxair, Inc. 1,409 Principal Financial Group, Inc. 1,543 Prologis, Inc. 808 Prudential Financial, Inc. 5,661 Reinsurance Group of America, Incorporat 669 Republic Services, Inc. 607 Rockwell Automation, Inc. 833 Simon Property Group, Inc. 1,119 St. Jude Medical, Inc. 1,087 Stanley Black & Decker, Inc. 570 Staples, Inc. 1,231 Starwood Hotels & Resorts Worldwide, Inc 708 SunTrust Banks, Inc. 3,374 T. Rowe Price Group, Inc. 320 The Gap, Inc. 1,228 The Goldman Sachs Group, Inc. 7,074 The Hartford Financial Services Group, I 3,846 The Home Depot, Inc. 5,734 The PNC Financial Services Group, Inc. 3,599 The TJX Companies, Inc. 1,861 The Travelers Companies, Inc. 3,771 The Williams Companies, Inc. 1,806 Twenty-First Century Fox, Inc. 3,830 Tyson Foods, Inc. 1,959 United Parcel Service, Inc. 3,348 Ventas, Inc. 1,101 W. W. Grainger, Inc. 496 Wal-Mart Stores, Inc. 11,984 Waste Management, Inc. 1,721 WellPoint, Inc. 4,824 Windstream Holdings, Inc. 405 WPX Energy, Inc. 595 Wynn Resorts, Limited 2,459 YUM! Brands, Inc. 803 3M Company 5,262 Abbott Laboratories 6,427 AbbVie Inc. 4,149 Accenture Public Limited Company 1,834 ACE Limited 2,807 Adobe Systems Incorporated 616 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United States continued ADT Corp. 555 Aetna Inc. 2,726 AFLAC Incorporated 2,202 AGCO Corporation 470 Alcoa Inc. 2,097 Alliant Energy Corporation 591 Ameren Corporation 1,203 American Airlines Group Inc. 1,355 American Express Company 4,985 AmerisourceBergen Corporation 3,830 Amgen Inc. 2,717 Anadarko Petroleum Corporation 1,997 AON PLC 1,537 Apache Corporation 3,290 Apple Inc. 11,685 Archer-Daniels-Midland Company 4,534 AT&T Inc. 21,434 Baker Hughes Incorporated 2,878 Bank of America Corporation 31,769 Baxter International Inc. 1,526 BB&T Corporation 2,342 Beam Inc. 915 Bed Bath & Beyond Inc. 847 Berkshire Hathaway Inc. 7,578 Biogen Idec Inc. 2,346 Boston Scientific Corporation 2,567 Bristol-Myers Squibb Company 6,300 Broadcom Corporation 1,083 Bunge Limited 1,741 Calpine Corporation 802 Cameron International Corporation 808 Campbell Soup Company 568 Capital One Financial Corporation 3,755 CareFusion Corporation 833 Carnival Corporation 704 Caterpillar Inc. 4,071 Celgene Corporation 654 Chesapeake Energy Corporation 3,038 Chevron Corporation 20,743 Cigna Corporation 1,696 Cincinnati Financial Corporation 936 CIT Group Inc. 621 Citigroup Inc. 18,867 Cliffs Natural Resources Inc. 472 CME Group Inc. 1,623 CMS Energy Corporation 687 Cognizant Technology Solutions Corporati 705 Colgate-Palmolive Company 2,165 Comcast Corporation 7,908 Comerica Incorporated 1,261 Computer Sciences Corporation 1,746 Conocophillips 16,360 CONSOL Energy Inc. 639 Corning Incorporated 2,128 Costco Wholesale Corporation 3,567 Covidien Public Limited Company 1,711 CSX Corporation 1,641 Cummins Inc. 567 CVS Caremark Corporation 7,060 Danaher Corporation 1,674 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United States continued DaVita HealthCare Partners Inc. 855 Dean Foods Company 466 Deere & Company 1,873 Delphi Automotive PLC 1,906 Devon Energy Corporation 3,293 DirecTV 2,478 Discover Financial Services 1,655 DISH Network Corporation 1,256 Dollar General Corporation 1,370 Dover Corporation 797 DTE Energy Company 1,085 Duke Energy Corporation 3,300 E. I. du Pont de Nemours and Company 4,509 Eastman Chemical Company 1,077 Eaton Corporation Public Limited Company 1,824 eBay Inc. 2,198 Ecolab Inc. 1,121 Edison International 1,690 Eli Lilly and Company 3,947 EMC Corporation 3,005 Emerson Electric Co. 2,987 Enceladus Holding Limited 464 Ensco PLC 1,091 Entergy Corporation 1,431 Equity Residential 940 Exelon Corporation 3,597 Express Scripts Holding Company 3,008 Exxon Mobil Corporation 36,336 FedEx Corporation 3,192 Fifth Third Bancorp 1,857 FirstEnergy Corp. 2,226 Flextronics International Ltd. 1,267 Fluor Corporation 720 Ford Motor Company 9,177 Freeport-McMoRan Copper & Gold Inc. 3,341 Frontier Communications Corporation 752 GameStop Corp. 855 General Dynamics Corporation 3,340 General Electric Company 22,809 General Motors Company 5,513 Genuine Parts Company 1,132 Google Inc. 7,225 Government of the United States 0 Halliburton Company 2,492 Hess Corporation 3,101 Hewlett-Packard Company 11,502 Honeywell International Inc. 3,742 Humana Inc. 1,636 Huntington Bancshares Incorporated 761 Illinois Tool Works Inc. 1,938 Ingersoll-Rand Public Limited Company 1,612 Ingram Micro Inc. 2,683 Intel Corporation 10,539 International Business Machines Corporat 9,029 International Paper Company 2,074 Invesco Ltd. 1,415 ITT Corporation 1,211 Jacobs Engineering Group Inc. 671 Johnson & Johnson 14,781 JPMorgan Chase & Co. 22,917 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United States continued Kellogg Company 783 KeyCorp 1,569 Kimberly-Clark Corporation 2,969 Kimco Realty Corporation 629 Kohl's Corporation 934 Laboratory Corporation of America Holdin 371 Lear Corporation 707 Liberty Global PLC 1,918 Liberty Interactive Corporation 1,231 Lincoln National Corporation 1,743 Lockheed Martin Corporation 4,764 Loews Corporation 1,983 LyondellBasell Industries N.V. 3,003 M&T Bank Corporation 1,237 Mallinckrodt Public Limited Company 218 Manpowergroup Inc. 1,411 Marathon Oil Corporation 3,884 Marathon Petroleum Corporation 2,375 Masco Corporation 45 MasterCard Incorporated 1,669 McDonald's Corporation 4,883 McKesson Corporation 5,505 MeadWestvaco Corporation 717 MGM Resorts International 1,207 Microsoft Corporation 15,100 Molson Coors Brewing Company 505 Monsanto Company 2,214 Morgan Stanley 4,106 Murphy Oil Corporation 988 Murphy USA Inc. 157 Nabors Industries Ltd 593 Navistar International Corporation 880 Newell Rubbermaid Inc. 954 Newfield Exploration Company 454 Newmont Mining Corporation 1,370 News Corporation 505 NiSource Inc. 1,024 Noble Corporation PLC 407 Norfolk Southern Corporation 2,184 Northeast Utilities 804 Northern Trust Corporation 1,231 Northrop Grumman Corporation 4,221 Nucor Corporation 1,482 Occidental Petroleum Corporation 5,724 Omnicom Group Inc. 1,199 Oracle Corporation 4,018 PACCAR Inc 1,674 Parker-Hannifin Corporation 1,060 Peabody Energy Corporation 222 Pfizer Inc. 17,605 PG&E Corporation 1,746 Philip Morris International Inc. 5,181 Phillips 66 7,755 Pinnacle West Capital Corporation 716 Pitney Bowes Inc. 1,343 PPL Corporation 1,494 Precision Castparts Corp. 1,034 Public Service Enterprise Group Incorpor 2,046 Public Storage 667 QUALCOMM Incorporated 3,722 Quest Diagnostics Incorporated 583 R. R. Donnelley & Sons Company 1,050 Raytheon Company 3,661 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value United States continued Regions Financial Corporation 1,523 Reynolds American Inc. 1,310 Rite Aid Corporation 2,632 Royal Caribbean Cruises Ltd. 668 Safeway Inc. 2,896 SanDisk Corporation 979 SCANA Corporation 785 Schlumberger N.V. 5,280 Seagate Technology Public Limited Compan 1,200 Sears Holdings Corporation 658 Sempra Energy 1,673 Signet Jewelers Limited 160,299 SLM Corporation 983 SoftBank Corp. 4,383 Spectra Energy Corp. 2,113 Starbucks Corporation 515 State Street Corporation 2,577 Stryker Corporation 1,322 SUPERVALU Inc. 2,931 Symantec Corporation 779 Sysco Corporation 2,617 Target Corporation 3,341 TE Connectivity Ltd. 1,380 Tech Data Corporation 1,058 Tenet Healthcare Corporation 1,199 Tesoro Corporation 805 Texas Instruments Incorporated 1,989 Textron Inc. 771 The AES Corporation 1,815 The Allstate Corporation 2,727 The Bank of New York Mellon Corporation 3,742 The Boeing Company 6,089 The Charles Schwab Corporation 2,142 The Chubb Corporation 2,076 The Clorox Company 609 The Coca-Cola Company 6,826 The Dow Chemical Company 5,280 The Goodyear Tire & Rubber Company 1,786 The Hillshire Brands Company 1,576 The J. M. Smucker Company 688 The Kroger Co. 3,771 The Mosaic Company 580 The Procter & Gamble Company 12,935 The Progressive Corporation 1,390 The Southern Company 3,392 The Walt Disney Company 6,018 Thermo Fisher Scientific Inc. 2,494 Time Warner Cable Inc. 3,400 Time Warner Inc. 4,938 TRW Automotive Holdings Corp. 1,068 Tyco International Ltd. 3,084 U.S. Bancorp 5,927 Union Pacific Corporation 3,557 United States Steel Corporation 728 United Technologies Corporation 5,637 Note 14 - Portfolio of equities at fair value through profit and loss continued Amounts in USD As at 20.02.14 Fair value UnitedHealth Group Incorporated 6,834 Unum Group 1,410 URS Corporation 502 V.F. Corporation 1,045 Valero Energy Corporation 4,414 Verizon Communications Inc. 15,447 Visa Inc. 2,458 Vornado Realty Trust 855 Vulcan Materials Company 457 Walgreen Co. 5,790 Weatherford International Ltd. 1,045 Wells Fargo & Company 19,073 Western Digital Corporation 1,552 Weyerhaeuser Company 2,314 Whirlpool Corporation 1,518 Wisconsin Energy Corporation 790 World Fuel Services Corporation 983 Xcel Energy Inc. 1,581 Xerox Corporation 1,364 Xl Group Public Limited Company 850 Yahoo! Inc. 2,381 Zions Bancorporation 716 1,286,738
Total Equities 33,136,793
Note 15 - Technical provisions and solvency margin Amounts in USD 000's
As at 20.02.14 As at 20.02.13 Actual FSA's minimum Actual FSA's minimum provisions requirements provisions requirements
Provision for claims net of reinsurance 143,904 148,551 135,660 124,411 General contingency reserves etc. 128,961 33,047 111,949 30,855 Total technical provisions own account 272,865 181,598 247,609 155,266
Solvency margin 20.02.2014 20.02.2013
Required Solvency margin 27,681 32,848 Solvency margin capital 111,892 105,909
Solvency margin capital in per cent of required Solvency margin 404.2 % 322.4 %
The Association fulfils the total minimum requirements for technical provisions. The Association has a dispensation from the capital requirement rule. Note 16 Change in contingency reserve Amounts in USD 000's As at As at 20.02.2014 20.02.2013 Contingency reserve carried forward 111,949 112,691 Transfer from contingency reserve 17,012 (742) Contingency reserve brought forward 128,961 111,949
Note 17 Receivables from direct insurance operations Amounts in USD 000's
As at As at 20.02.2014 20.02.2013 Premium policy holders 3,198 3,229 Accrued deferred call policyholders 11,245 8,534 Provision for bad debts policy holders (1,723) (1,411) Receivables from direct insurance operations 12,720 10,351
Note 18 Other receivables and other payables Amounts in USD 000's As at As at Other receivables 20.02.2014 20.02.2013 Other receivables 0 3,771 Net other receivables 0 3,771
As at As at Other payables 20.02.2014 20.02.2013 Other payables 698 1,456 Investments transactions in progress 12,675 10,295 Net other payables 13,373 11,751
"Investment transactions in progress" refers to sales and purchases of investments at the Balance sheet date, where settlements were executed after the Balance sheet date.
Note 19 Cash and cash equivalents
Bank balances includes restricted cash with USD 61,585 (20.02.2013: 88,086).
The Association has a group account agreement and participates in a cash pool agreement. Both agreements are made with the Association's main bank connection Nordea Bank Norge ASA. The group account agreement implies that the Association can make overdrafts on individual bank accounts as long as the Association's total bank deposit is positive.
Gard P. & I. (Bermuda) Ltd. has an overdraft facility with Nordea Bank Norge ASA for an amount of USD 40 million. Through the cash pool agreement all the participating companies can make use of this overdraft facility. The cash pool agreement secures efficient use of the operating bank deposits through the companies' opportunity to make use of the overdraft facility on individual bank accounts accumulated up to USD 40 million in aggregate for the companies participating in the agreement. Each company participating in the cash pool agreement is jointly liable for the overdraft facility through unsecured guarantees.