directors’ report and darta saving life assurance limited ......dec 31, 2015 · addvision wealth...

Darta Saving Life Assurance Limited

Directors’ report andfinancial statements

For the financial year ended31 December 2015

Registered number 365015


Contents Page

Directors and other information 2-3

Directors’ Report 4-6

Statement of Directors’ responsibilities in respect of the Directors’ Reportand financial statements 7

Independent Auditor’s report 8-9

Statement of Comprehensive Income 10

Statement of other comprehensive income 11

Statement of financial Position 12-13

Statement of changes in eqtlity 14

Statement of cash flows 15

Notes to the financial statements 16-45


Directors and other information

DirectorsMauro Re Chairman, ItalianJames Ruane (Independent Non — Executive)Philip ClarkeJohn FinneganDavid Kingston (Independent Non - Executive)John Lyons (Non - Executive)Davide Moia ItalianGiampaolo Viseri ItalianGino fassina Italian (Non-Executive)

Registered office Allianz HouseElmparkMerrion RoadDublin 4

Secretary Philip Clarke2 St Catherine’s RoadGlenagearyCounty Dublin

Head of Actuarial Function Michael CulliganMilliman Limited28/30 Lower Mount StreetDublin 2

Independent Auditor KPMGI Harbourmaster PlaceIFSCDublin I

Main Bankers AlE7/12 Dame StreetDublin 2

Allianz Bank Financial Advisors S.p.A.Piazzale Lodi n.320137 MilanItaly

Deutsche Bank AGTaunusanlage 1260325 Frankfurt am MainGermany

BNP Paribas Securities ServicesVia Ansperto 520123 MilanoItaly

Solicitors Dillon Eustace33 Sir John Rogerson’s QuayDublin 2

2


Directors and other information (continued)

Service Provider Irish Progressive Services International LimitedBlock C, Irish Life Centre, Lower Abbey StreetDublin I

Investment Managers

Addvision Wealth Management SAAgora Investments SGR S.p.A.Allianz Bank Financial Advisors S.p.A.Allianz Global Investors Europe GmbHAzimutBanca Albertini SYZ & C. S.p.ABanca del Ceresio SABanca Leonardo S.p.A.Banque Pictet & Cie SA GeneveBanque Morval SA

BlackRock Investment Management LtdBSI EvolutionCarmignac Gestion LuxembourgCGM Italia Sim SpaCompass Asset Manager SACrossinvest SA

Finpartners LuganoFranklin Templeton Investment Management LimitedGAM SGR S.p.A.

Intesa San Paolo Private Banking S.p.A.Invesco Asset ManagersInvestitori SGR S.p.A.

JP Morgan Asset ManagementJulius Baer

Kairos AM SA

Kairos Julius Baer Sim S.p.A.Kairos Partners SGRLetnanik Lugano

Morgan Stanley Investment ManagementPairstech Capital Management LLPPharus

Pictet & CIE (Europe) S.A.PIMCO Europe Ltd

Pioneer Investment Management SGRRothschild MilanoSchroder Investment Management LuxembourgSymphonia

Theorema

Valeur

3


Directors’ Report

The Directors present their report and the audited financial statements for the financial year ended 31December 2015.

Principal activity, review of key performance indicators and future developments

The Company is authorised in Ireland to transact life assurance btisiness in the European Union (“EU”) underthe Solvency II Directive (2009113$/EC) as introduced into domestic Irish Legislation by the EU (Insuranceand Reinsurance) Regulations 2015, effective 1st January 2016 (previously authorised under the EuropeanCommunities (Life Assurance) Framework Regulations, 1994 effective until 31 December 2015).

The Company’s main business is the sale of single premium policies in Italy, under which the risk related tothe underlying investments is carried by the policyholders.

The Company had record sales for 2015 of €3,309m, 19% over the previous year (2014: €2,780m). The largestcontributing prodticts were Challenge and Challenge Plus 75% (204: 76%), Private Insurance contracts 11%(2014: 11%), Progetto Reddito 7% (2014: 10%) and Personal Target 7% (2014: 3%). These sales relate toinvestment contracts and are not included in “Net premiums written and earned” in the Statement ofComprehensive Income, in accordance with 1A539 (see Note 16 “Financial liabilities”). The amount of netinsurance premiums reported in the Statement of Comprehensive Income is €0.6m (2014:€nil) due to theunbundling of contracts in line with the Company’s accounting policy under IFRS 4.

During the year gross fee income of €248m (2014: €174rn) was earned, with the main drivers being a largernet asset value and stronger performances on individual funds. Total policyholder funds stood at €1 1,952m(2014: €9,$l0m) at the financial year end, driven by net inflows of €2,l95m (2014: €1,990rn) and net income,expenses and capital losses of €53m (2014: gains €372m).

We incurred claims of €1,114m (2014: €789m) during the financial year. The increase in claims in 2015 wasexpected as the book of business increases and matures and this trend is expected to continue into the fttture.

It is the Company’s objective to achieve a satisfactory level of profitability for its shareholder, whilst takinginto account statutory, financial and regulatory requirements and the reasonable expectations of itspolicyholders. In these circumstances, the Directors are very satisfied with the Company’s performance during2015 and consider that it is well placed to continue its development.

The Company launched a new version of the Challenge product called “Challenge Plus” in December 2014.This is similar to the previous Challenge product but with an enhanced death benefit. Instead of paying anadditional death benefit of 1% of the fund value to lives assured under 66 years old, the death benefit offeredis 10% of the net investment (difference between the premiums paid and any partial surrenders paid until thenotification of death) capped at €50,000. 90% of any additional mortality risk underwritten by the Companyunder this new product is reinsured to the Reinsurance Group of America (“RGA”). This additional death riderbenefit is unbundled and treated as insurance under IFRS 4, with the investment element accounted for asinvestment under 1AS39.

In line with the Company strategy to diversify its distribution channel and product range, during the year theCompany carried out some new developments. The Company commenced sale of versions of its unit linkedproducts by a new distributor in Italy. In line with Allianz Group strategy to increase Protection business sales,the Company has launched two risk products in Italy. These comprise a whole-of-life product and a long-termcare product. Towards the end of the year, a new distribution network was launched in Lithuania. These newdevelopments are expected to grow over the coming years.

4


Directors’ Report (continued)

Result for the financial year and the state of affairs at the financial year end

The result for the Company for 2015 is set out in the Statement of Comprehensive Income on page 10, andthis shows a net profit from total operations of €72.9m, after taxation, compared with a net profit of €42.5rnfor 2014.

The Company’s Statement of Financial Position is set out on pages 12 and 13, and this shows thatshareholders equity at the financial year end was €232.lm, compared with €160.5m at the end of 2014.

Note 15 to the financial statements on page 40 shows that the Company had a satisfactory surplus overregulatory capital requirements at year end.

Dividends

The Directors are not proposing the payment of a dividend for the financial year ended 31 December 2015.

There were no dividends paid in respect of the financial year ended 31 December 2014.

Risk management objectives and policies

Ultimate responsibility for the Company’s internal controls, including risk management, rests with theDirectors of the Company. Management are responsible for monitoring, measuring, controlling and reportingon the risks connected with the Company’s activities on a day to day basis.

The Directors acknowledge the importance of effective corporate governance and risk management processes,to ensure the Company’s continuing compliance with all applicable laws and regulations and to safeguard theCompany’s value and reputation. These processes are kept under review so improvements can be made thattake account of best practice, increasing regulatory requirements and the requirements of its parent group.

The Company is subject to and complies with the Corporate Governance Requirements for InsuranceUndertakings (previously the Corporate Governance Code for Credit Institutions and Insurance Undertakings)(the “Code”) as issued by the Central Bank of [retand. The Directors note the Company is not scibject to therequirements of Appendix Ito the Code applying to high impact designated Insurance undertakings.

As part of the Corporate Governance structure there are three committees in place namely the RiskCommittee, Audit Committee and the Investment Committee. The principal role of each committee is asfollows:

• Risk Committee — to provide oversight and advice to the Board on the risk exposures, future riskstrategy, regulatory policies and procedtires — including those relating to risk identification,assessment, management and monitoring.

• Audit Committee — to support the Board in considering activities that expose or may expose theCompany to material audit or financial risk.

• Investment Committee — to regularly monitor the performance of the funds that results from theInvestment Managers choices.

The above committees meet at least once per quarter. Both the Risk and Audit Committees are chaired byIndependent Non — Executive Directors.

Information on the main financial risks and uncertainties that the Company faces and how these are managedis outlined in note 2 to the financial statements.


James RuaneDirector

Directors’ Report (continued)

Composition of Group

The Company is a wholly owned subsidiary of Allianz S.p.A., a company incorporated in Italy. TheCompany’s ultimate parent company is Allianz SE, a company incorporated in Germany.

Directors

The names of persons who were Directors at any time during the financial year 201 5 are set out on page 2.Gino fassina became a non-executive Director on transfer of employment to a sister company.

Directors and secretary and their interests

The Directors and secretary who held office at 31 December 2015 had no interests in the shares or indebentures or loan stock of the Company or of group companies at the beginning or end of the financial year.

Accounting records

The Directors believe that they have complied with the requirements of Section 281 of the Companies Act,2014 with regard to adequate accounting records by employing a service provider and personnel withappropriate expertise and by providing adequate resotirces to the financial function. The accounting records ofthe Company are maintained at the premises of its service provider, Irish Progressive Services InternationalLimited, at Block C, Irish Life Centre, Lower Abbey Street, Dublin I.

Events since the financial year end

There have been no material events since the reporting date requiring amendment to the financial statements.

Independent Auditor

In accordance with Section 383, (2) of the Companies Act 2014 the auditor, KPMG, Chartered Accountants,have indicated their willingness to continue in office.

Appreciation

The Directors wish to thank everyone who has contributed to the Company’s continuing development, inparticular our policyholders, our employees, our distribcitors, our service providers and our advisors.

The financial statements were approved by the Board of Directors on 24 March 2016, and signed on its behalfby:

JohnDirector

Date: 24 March 2016

6


Statement of Directors’ responsibilities in respect of the Directors’ Report andfinancial statements

The Directors are responsible for preparing the Directors’ Report and financial statements in accordance withapplicable law and regulations.

Company Law requires the Directors to prepare financial statements for each financial year. Under that law,the Directors have elected to prepare the financial statements in accordance with International FinancialReporting Standards (IFRS) adopted by the EU.

Under company law, the Directors must not approve the financial statements unless they are satisfied that theygive a true and fair view of the assets, liabilities and financial Position of the Company and of its profit or lossfor that financial year. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether they have been prepared in accordance with IFRS as adopted by the EU; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Company will continue in business.

The Directors are responsible for keeping adequate accounting records which disclose with reasonableaccuracy at any time the assets, liabilities, Financial Position and profit or loss of the Company and enablethem to ensure that the financial statements comply with the Companies Act 2014. They have generalresponsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company andto prevent and detect fraud and other irregularities. The Directors are also responsible for preparing aDirectors’ Report that complies with the requirements of the Companies Act 2014.

On behalf of the board

John innegan James RuaneDirector Director

Date: 24 March 2016

7

KPMGAudit1 Harbourmaster PlaceI FSCDublin 1Ireland

Independent Auditor’s Report to the Members of Darta Saving Life AssuranceLimited

We have audited the financial statements (“financial statements”) of Darta Saving Life AssuranceLimited (“the Company”) for the year ended 31 December 2015 which comprise the Statement ofComprehensive Income, Statement of other comprehensive income, Statement of Financial Position,Statement of changes in equity, Statement of cash flows and the related notes. The financial reportingframework that has been applied in their preparation is Irish law and International Financial ReportingStandards (IFRS) as adopted by the European Union.

Opinions and conclusions arising from our audit

1 Our opinion on the financial statements is unmodified

In our opinion the financial statements:

• give a true and fair view of the assets, liabilities and Financial Position of the Company as at3 1 December 2015 and of its profit for the year then ended;

• have been properly prepared in accordance with IFRS as adopted by the European Union; and

• have been properly prepared in accordance with the requirements of the Companies Act 2014.

2 Our conclusions oit other matters on which we are reqttired to report by the Coi;tpamzies Act 2014are set ottt below

We have obtained all the information and explanations which we consider necessary for the purposesof our audit.

In our opinion the accounting records of the Company were sufficient to permit the financial statementsto be readily and properly audited and the financial statements are in agreement with the accountingrecords.

In our opinion the information given in the Directors’ Report is consistent with the financial statements.

3 We have nothing to report in respect of uzatters on which we are required to report by exceptiolt

International Standards on Auditing (UK & Ireland) (“ISAs”) require that we report to you if, based onthe knowledge we acquired during our audit, we have identified information in the annual report thatcontains a material inconsistency with either that knowledge or the financial statements, a materialmisstatement of fact, or that is otherwise misleading.

In addition, the Companies Act 2014 requires us to report to you if, in our opinion, the disclosures ofDirectors’ remuneration and transactions required by sections 305 to 3 12 of the Act are not made.

Basis of our report, responsibilities and restrictions on use

As explained more fully in the Statement of Directors’ Responsibilities set out on page 7, the Directorsare responsible for the preparation of the financial statements and for being satisfied that they give atrue and fair view and otherwise comply with the Companies Act 2014. Our responsibility is to auditand express an opinion on the financial statements in accordance with Irish law and ISAs (UK andIreland). Those standards require us to comply with the Financial Reporting Council’s EthicalStandards for Auditors.

8

KPMG, an Irish partnership and a member firm of the KPMG networkof independent member firms affiliated with KPMG lntnrnationalcooperative IKPMG Internationall, a Swiss entity

Independent Auditor’s Report to the Members of Darta Saving Life AssuranceLimited (continued)

Basis of our report, responsibilities and restrictions on use (continued)

An audit undertaken in accordance with ISAs (UK & Ireland) involves obtaining evidence about theamounts and disclosures in the financial statements sufficient to give reasonable assurance that thefinancial statements are free from material misstatement, whether caused by fraud or error. Thisincludes an assessment of: whether the accounting policies are appropriate to the Company’scircumstances and have been consistently applied and adequately disclosed; the reasonableness ofsignificant accounting estimates made by the Directors; and the overall presentation of the financialstatements.

In addition, we read all the financial and non-financial information in the Annual Report to identifymaterial inconsistencies with the audited financial statements and to identify any information that isapparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by usin the course of performing the audit. If we become aware of any apparent material misstatements orinconsistencies we consider the implications for our report.

Whilst an audit conducted in accordance with ISAs (UK & Ireland) is designed to provide reasonableassurance of identifying material misstatements or omissions it is not guaranteed to do so. Rather theauditor plans the audit to determine the extent of testing needed to reduce to an appropriately low levelthe probability that the aggregate of uncorrected and undetected misstatements does not exceedmateriality for the financial statements as a whole. This testing requires us to conduct significant auditwork on a broad range of assets, liabilities, income and expense as well as devoting significant time ofthe most experienced members of the audit team, in particular the engagement partner responsible forthe audit, to stibjective areas of the accounting and reporting.

Our report is made solely to the Company’s members, as a body, in accordance with section 391 of theCompanies Act 2014. Our audit work has been undertaken so that we might state to the Company’smembers those matters we are required to state to them in an auditor’s report and for no other purpose.To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other thanthe Company and the Company’s members as a body, for our audit work, for this report, or for theopinions we have formed.

MIHubert Crehanfor and on behalf ofKPMGChartered Accountants, Statutory Audit FirmI Harbourmaster PlaceIFSCDt,bli,z I

Date: 24 March 2016

9


Statement of Comprehensive Incomefor the financialyear ended 31 December 2015

2015 2014Note €‘OOO €‘OOO

Gross premiums written $08 -

Outward reinsurance premiums (190) -

Net premiums written and earned 3 618 -

Investment return 4 215,257 564,599

Fees and other income/(expense) 5 259,055 1$5,109

Total income 474,930 749,708

Change in investment contract liabilities 16 (209,193) (560,499)

Total change in investment contract liabilities (209,193) (560,499)

Acquisition and administration expenses 6 (182,459) (140,589)

Profit before taxation 83,278 48,620

Taxation 7 (10,410) (6,081)

Profit for the financial year attributable to equity holders 72,868 42,539

The accounting policies and the notes on pages 16 to 45 form an integral part of these financial statements.

10


Statement of other comprehensive incomefor the financialyear ended 31 December 2015

2015 2014

€‘OOO €‘OOOItems that may be reclassUied subsequently to the Statement ofCoinpreh ensive Income

Movements in financial assets available for sale:

- fair value movement (1,393) (336)- deferred tax effect of fair value movement 174 42

Net losses recognised in equity (1,219) (294)

Profit for the financial year 72,868 42,539

Total comprehensive income 71,649 42,245


11


Statement of Financial Positionas at 31 December 2015


2015 2014Note €‘OOO €‘OOO

Assets

Cash and cash equivalents 87,225 64,515

Other receivables 1] 20,851 19,743

Deferred tax asset 7 165 -

Shareholder financial assets

Investments available for sale 10 79,084 82,488

Advance payment of Italian Policyholders’ Tax 8 169,788 135,457

Deferred acquisition costs 9 44,035 42,363

Policyholder financial assets

Investments at fair value through profit or loss 10 11,951,635 9,810,183

Total assets 12,352,783 10,154,749

12


Statement of Financial Position (continued)as at 31 December 2015

2015 2014

Note €‘OOO €‘OOO

Shareholder’s equity

Called up share capital 13 5,000 5,000Capital contributions 14 51,000 51,000Available for sale reserve (1,159) 60Profit and loss reserve 177,276 104,408

Total Shareholder’s equity interests 15 232,117 160,468

Liabilities

Creditors and other payables 18 133,711 152,433

Deferred tax liability 7 9

Deferred income 17 35,211 31,138

Corporation tax payable 109 518

Financial liabilities - investment contracts 16 11,951,635 9,810,183

Total liabilities 12,120,666 9,994,281

Total liabilities and shareholder’s equity 12,352,783 10,154,749


On behalf of the board

John Finnega James RuaneDirector Director

Date: 24 March 2016

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Statement of changes in equityas at 31 December 2015

ProfitShare Capital AFS and loss Total

Capital Contributions reserve reserve€‘OOO cooo €‘OOO €‘oOO €‘OOO

Balance at 1 January 2015 5,000 51,000 60 104,408 160,468

Profit for the financial year- 72,868 72,868

Items that may be rectassfied subseqrteutleto the Statement of comprehensive IncomeMovement in investments available for sale- fair value movement

- (1,393) - (1,393)- deferred tax effect of fairvalue movement 174 - 174

Total recognised (losses)/gains for thefinancial year - - (1,219) 72,868 71,649

Capital contributions (Note 14) - - - - -

Balance at3l December2015 5,000 51,000 (1,159) 177,276 232,117

Balance at 1 January 2014 5,000 28,500 354 61,869 95,723

Profit for the financial year - - - 42,539 42,539Items that may be rectassfled subsequentlyto the Statement of comprehensive ImacomneMovement in investments available for sale- fair value movement - - (336) - (336)- deferred tax effect of fairvalue movement - - 42 - 42

Total recognised (losses)/gains for thefinancial year - - (294) 42,539 42,245

Capital contributions (Note 14) - 22,500 - - 22,500

Balance at 31 December 2014 5,000 51,000 60 104,408 160,468


14


Statement of cash flowsfor thefinancial j’ear ended 31 December 2015

2015 2014

€‘OOO €‘OOO

Profit before taxation $3,278 48,620Net change in fair value of investments (212,763) (563,567)Net change in investment contract liabilities 209,193 560,499Fund expenses borne by policyholder 3,570 3,068Net change in deferred acquisition cost (1,672) 3,835Net change in provision for deferred income 4,073 3,570Interest income and expense 112 (233)

85,791 55,792

(Increase) in trade and other receivables (35,595) (32,630)(Decrease) in trade and other payables (19,131) (6,297)

(54,726) (38,927)

Interest paid and received (112) 233Corporation tax paid and received (10,819) (6,081)

(10,931) (5,848)

Net cash flow from operating activities 20,134 11,017

Net cash flows from investments available for sale 2,576 (78,911)

Net cash flows from investing activities 2,576 (78,911)

Capital contributions- 22,500

Net cash flows from financing activities - 22,500

Net cash flow from total operations 22,710 (45,394)

Cash and cash equivalents at I January 64,515 109,909

Cash and cash equivalents at3l December 87,225 64,515

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Notes to the financial statements

1. Accounting Policies

Darta Saving Life Assurance Limited is a company domiciled in the Republic of Ireland and the principalaccounting policies adopted by the Company are set out in this note.

Statement of complianceAs permitted under Irish company law, the Company has chosen to prepare the financial statements inaccordance with If RS as adopted by the EU.

The IFRS adopted by the EU and applied by the Company are those that were effective at 3 1 December 2015.These have been consistently applied for the preparation of these financial statements.

Basis of preparationThe financial statements have been prepared in accordance with the Companies Act 2014, and on thehistorical cost basis except that the financial assets and liabilities are classified as at fair value through profitor loss.

The financial statements are expressed in Euro (€), which is the functional and presentation currency of theCompany.

The preparation of financial statements in conformity with IFRS requires management to make judgements,estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities,income and expenses. The estimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable tinder the circumstances, the results of which form thebasis of making the judgements about carrying values of assets and liabilities that are not readily apparentfrom other sottrces. Actual results may’ differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accotintingestimates are recognised in the period in which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.

The Company applies the accruals concept for the recognition of expenses in the Statement of ComprehensiveIncome in order to reflect the effect of the transactions as they occur and not as cash or its equivalent is paid.

Adoption of new and revised StandardsA number of new standards, amendments to standards and interpretations are effective for annual periodsbeginning after 1 January 2015, and have not been applied in preparing these financial statements. Those thatmay be relevant to the Company are set out below. The Company does not plan to adopt these standards early.

IFRS 9: financial instruments (effective periods beginning on or after 1 January 2018)

IFRS 7: Amendment: Financial Instruments: Disclostires — Amendments requiring disclostires about the initialapplication of IFRS 9 (effective periods beginning on or after 1 January 2015)

IFRS 15: Revenue from contracts with customers (effective periods beginning on or after I January 2017)

None of these are expected to have a significant effect on the financial statements of the Company, except forIf RS 9 Financial Instruments.

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Notes to the financial statements (continued)

1. Accounting Policies (continued)

Adoption of new and revised Standards (continued)If RS 9, published in July 2014, will replace existing guidance in lAS 39. It includes revised guidance on theclassification and measurement of financial instruments, whereby the standard now contains two primarymeasurement categories for financial assets: amortised cost and fair value. IFRS 9 also includes a newexpected credit loss model for calculating impairment on financial assets, and the new general hedgeaccounting requirements. It also carries forward the guidance on recognition and derecognition of financialinstruments from lAS 39.

If RS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoptionpermitted. The Company does not currently plan to early adopt the new standard and is assessing the impact ofthe new standard on the Company.

Product classification — investment and insurance contractsContracts under which the Company accepts significant insurance risk from another party by agreeing tocompensate the policyholder if a specified uncertain future event adversely affects the policyholder areclassified as insurance contracts.

Insurance risk is significant if, and only if, an insured event could cause an insurer to pay significantadditional benefits in any scenario. An insurer shall assess the significance of insurance risk contract bycontract. Contracts that qualify as insurance contracts remain an insurance contract until all risks andobligations are extinguished or expired.

Where the risk is primarily borne by the policyholder, the contract is deemed to be an investment contract.

Where a direct contract contains both an investment and an insurance element (rider benefit) the Company“unbundles’ this contract into its constituent parts. The insurance element of the contract is accounted for asan insurance contract under IFRS 4 and the investment element of the contract is accounted for as aninvestment contract under IAS3 9.

A contract that qualifies as an insurance contract remains an insurance contract until all rights and obligationsare extingLlished or expire. However, an investment contract classified as such on inception, couldsubsequently be reclassified as an insurance contract, if it meets the insurance definition as described above.

Revenue - premiums earned in respect of insurance contracts (unbundling) are accounted for in the Statementof Comprehensive Income in the same period in which they are earned. Reinsurance premiums are accountedfor in accordance with the terms of the reinsurance contracts and the original contracts for which thereinsurance was concluded. Premiums ceded for reinsurance are deducted from premiums earned.

Investment contracts - recognition and measurementInvestment contract contributions received from policyholders are not recognised in the Statement ofComprehensive Income as premiums but are accounted for as deposits in the Statement of financial Position.Financial liabilities in respect of such contracts are presented in the Statement of Financial Position asfinancial liabilities - investment contracts”.

All investment contracts issued by the Company are designated on initial recognition as at fair value throughprofit or loss. The basis of this designation is that the financial assets and liabilities are managed and evaluatedon a fair value basis. The designation also eliminates or significantly reduces a measurement inconsistencythat would otherwise arise if these financial liabilities were not measured at fair value since the assets held toback the investment contract liabilities are also measured at fair value.

17




Investment contracts - recognition and measurement (contin tied)The fair value of the Company’s unit-linked investment contract liabilities is based on the fair value of thefinancial assets held within the appropriate unit-linked funds.

Changes in the fair value of investment contracts are included in the Statement of Comprehensive Income inthe period in which they arise.

Investment contract receivables and payables - Amounts due to and from policyholders, agents and others inrespect of investment contracts are included in other receivables and creditors and other payables.

Deferred acgttisition costs - Acquisition costs on investment contracts include sales commissions.Also included within acquisition costs are the value of additional units credited to policyholder accountbalances upon initial investment in relation to certain products. These sales inducement costs are recoverablethrough penalties payable on stirrender, which are calculated such that penalties receivable will be at leastequal to unamortised Defetied Acquisition Cost at any point.

Acquisition costs are deferred as an explicit deferred acquisition cost asset, gross of tax, to the extent that theyare recoverable out of future revenue margins to which they relate. Stich costs are amortised through theStatement of Comprehensive Income over the period in which the future revenue margins on the relatedcontracts are expected to be earned. The rate of amortisation is based on a prudent assessment of the expectedpattern of receipt of future revenue margins, taking accoLint of persistency, from the related contracts. Allother costs are recognised as expenses when incurred.

Investment management services - Investment contracts issued by the Company involve the provision ofinvestment management services. Fees charged for such services are recognised as revenue based upon thestage of completion of the contracts and are included under “fees and other income” in the Statement ofComprehensive Income. Recurring fees are recognised as earned on an accruals basis. Front-end fees receivedat the inception of a contract are deferred and amortised over the anticipated period for which the services willbe provided, over the expected term of the contract.

Claims and surrenders - For investment contracts, benefits paid are not included in the Statement ofComprehensive Income but instead are deducted from investment contract liabilities in the Statement ofFinancial Position. The additional payment paid to policyholders in the event of a death claim is deductedfrom ‘fees and other income’ in the Statement of Comprehensive Income.

Investment returnIncome from financial assets comprises interest and dividend income, net gains on financial assets classifiedas fair value through profit or loss, and realised gains/losses on financial assets classified as available for sale.

Net changes in the fair value of financial assets at fair value through profit or loss are included in theStatement of Comprehensive Income in the period in which they arise, as well as dividend and interest incomeearned from these assets. Net changes in the fair value of available for sale financial assets are included in theStatement of other comprehensive income in the period in which they arise.

Dividend income is recorded on the ex-dividend date. Bond income is recorded on the accrual basis anddeposit interest is recorded on a receipts basis, calculated using an effective interest methodology.

Realised gains and losses are calculated as the difference between the net sale proceeds and original cost.

18



1. Accounting Policies (contintted)

Investment return (coutintted)Unrealised gains and losses are calculated as the difference between the fair value of financial assets at the endof the accounting period and the fair value at the beginning of the period or the purchase price for assetsacquired during the period.

Financial assetsFinancial assets held to back investment contract liabilities are designated upon initial recognition as at fairvalue through profit or loss and are measured at fair value. The basis of this designation is that the financialassets and liabilities are managed and evaluated together on a fair value basis. This designation also eliminatesor significantly reduces a measurement inconsistency that would otherwise occur if these financial assets werenot measured at fair value and the changes in fair value were not recognised in the Statement ofComprehensive Income.

Financial assets that are investments which are not held to back investment contract liabilities are eitherdesignated as available for sale and unrealised gains/losses are recognised separately within the Statement ofother comprehensive income or are categorised at fair value through profit or loss.

Financial assets are initially measured at fair value, plus, in the case of assets not designated at fair valuethrough profit or loss, transaction costs that are directly attributable to their acquisition. Transaction costs inrelation to financial assets designated at fair value through profit or loss are expensed immediately. Afterinitial recognition, the Company measures financial assets at fair value through profit or loss and available forsale financial assets at fair value without any deduction for transaction costs it may incur on disposal. The fairvalues of investments are based on quoted bid prices where available or amounts derived from cash flowmodels. Fair values for unlisted equity securities are estimated using applicable price/earnings or price/cashflow ratios refined to reflect the specific circumstances of the issuer. Cash and cash equivalents, loans andreceivables are measured at amortised cost.

OffsettingFinancial assets and financial liabilities are offset and the net amount presented in the Statement of FinancialPosition when, and only when, the Company has a legal right to offset the amounts and it intends either tosettle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis for gains and losses from financial instruments at fair valuethrough profit or loss and foreign exchange gains and losses. There were no offset trading positions in 2015(2014: €nil).

ImpairmentThe carrying amounts of the Company’s assets, which are not at fair value through profit or loss, are reviewedat each Statement of Financial Position date to determine whether there is any indication of impairment. If anysuch indication exists, the carrying value is reduced to the estimated recoverable amount by means of a chargeto the Statement of Comprehensive Income. The amount of the cumulative loss that is recognised in profit orloss is the difference between the acquisition cost and the recoverable amount, less any impairment loss onthat financial asset previously recognised in the Statement of Comprehensive Income.

Calculation ofrecoverable amountThe recoverable amount of receivables carried at amortised cost is calculated as the present value of estimatedfuture cash flows, discounted at the original effective interest rate. Receivables with short term duration arenot discounted.

19


Notes to the financial statements (contintied)


Impairment (continued)

Calculation ofrecoverable arno tint t’contimted)The recoverable amount of available for sale securities and other marketable investments is current fair valtie.The recoverable amount of other assets is the greater of their net selling price and value in use. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to the asset. For anasset that does not generate largely independent cash inflows, the recoverable amount is determined for thecash generating unit to which the asset belongs.

The advance payment of the Italian Policyholders’ Tax asset is held at face value without the application ofdiscounting and the recoverability thereof is reviewed at each year end.

Reversals ofImpairmentIn respect of other assets, an impairment loss is reversed if there has been a change in the estimates used todetermine the recoverable amount.

An impairment loss is reversed only to the extent that an asset’s carrying amount does not exceed the carryingamount that would have been determined, net of depreciation or amortisation, if no impairment loss had beenrecognised.

Cash and cash equivalentsCash and cash equivalents comprise cash and bank balances and deposits with a maturity of less than 90 days.These assets are measured at amortised cost. Net bank overdrafts are included as a component of cash andcash equivalents.

Recognition of financial assets and liabilitiesFinancial assets and financial liabilities at fair value through profit or loss are initially recognised on the tradedate, which is the date on which the Company becomes a party to the contractual provisions of the instrument.Other financial assets and financial liabilities are recognised on the date on which they are originated.

De-recognition of financial assets and liabilitiesThe Company derecognises a financial asset when the contractual rights to the cash flows from the assetexpire or when it transfers the financial asset and the asset qualifies for de-recognition in accordance with lAS39.

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled orexpires.

TaxationTaxation comprises current and deferred taxation and is recognised in the Statement of ComprehensiveIncome except to the extent that it relates to items recognised directly in equity, in which case it is recognisedin equity.

Current tax, including Irish corporation tax and foreign tax, is provided on the Company’s taxable profits, atamounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantiallyenacted by the Statement of Financial Position date.

20




Taxation (‘continued)Except where otherwise required by accotinting standards, full provision without discounting is made for alltemporary differences which have arisen but not reversed at the Statement of financial Position date. Deferredtax balances are provided at rates of taxation expected to prevail at the time of reversal.

A deferred tax asset is recognised where it is probable that taxable profit will be available against which thedeductible temporary difference can be utilised.

Deferred incomeThe income that is deferred is in respect of investment contracts on which a front-end fee applied in relation toservices to be provided in future periods. The deferred income reserve is amortised over the anticipated life ofthe contracts.

Advance Payment of Italian Policyholders’ TaxPayments to the Italian authorities as a result of the Company being a withholding tax agent are recognised asassets. Those assets are presented within the Statement of Financial Position in their nominal amounts (nodiscounting is applied). The payments are recoverable from dedtictions made from capital gains made bypolicyholders, by offset against taxes payable to Italian revenue within a period of five years or, after fiveyears they may be transferred to a company in the same group. The exit tax liability (“ETL”) at year end isnetted firstly against the previous sixth year recoverable asset. Any excess ETL is netted against the remainingrecoverable asset, whereas any excess sixth year recoverable asset is netted against the year end liability. Therecoverable amount of the asset is reviewed at each year end.

Foreign currenciesThe reporting and functional currency of the Company is the Euro. Monetary assets and liabilitiesdenominated in foreign currencies are translated into Euro at the exchange rates ruling at the Statement ofFinancial Position date and revenues, costs and non monetary assets at the exchange rates ruling at the dates ofthe transactions. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rate at the date of the transaction. Non-monetary assets andliabilities denominated in foreign currencies that are stated at fair value are translated to Euros at foreignexchange rates ruling at the dates the fair value is determined. Profits and losses arising from foreign ccirrencytranslations and on settlement of amounts receivable and payable in foreign currency are included in theStatement of Comprehensive Income.

PensionsPension costs for the Company’s defined contribution pension arrangements are incitided in administrationexpenses in the Statement of Comprehensive Income as incurred. The assets represented by the Company’scontributions, and those of employees, if any, are vested in independent trustees for the benefit of employeesand their dependents.

ProvisionA provision is recognised in the Statement of Financial Position when the Company has a present legal orconstructive obligation as a result of past events, tinder which it is more likely than not that an outflow ofeconomic resources will be required to settle the obligation and the amount of the provision can be reliablyestimated.

Accounting estimates and judgmentsThe Company’s critical accounting policies and estimates and the application of these policies and estimatesare considered by management for each reporting period.

21



1. Accounting Policies (continued]

Deferred acquisition costsIn determining the amount of front-end fees and acquisition costs to defer in relation to the Company’scontracts, judgments must be made in relation to the lives of the contracts and therefore the time period overwhich these balances are amortised to the Statement of Comprehensive Income. For fixed-term structuredprodctcts, the Company amortises the amounts over the period of the policy. For open ended unit-linkedproducts, the expected life of the policy is subject to a high degree ofjudgement and can change significantlyover time with changes in investor sentiment and market or product development. In making an appropriateestimate for each reporting period, account is taken of actual past experience and future expectations and ofpractice, where appropriate, within the Allianz Group.

Prodttct classificationA key judgement relates to the classification of the insurance policies written by the Company as investmentcontracts. Contracts with an insurance risk of I O% or greater are classified as instirance contracts by theCompany. Contracts tinder which the transfer of insurance risk to the Company from the policyholder is notsignificant are classified as investment contracts. In cases where an investment contract contains both aninsurance and deposit component, the Company tinbundles these components if the insurance component canbe measured reliably.

Italian tax assetThe asset arising from the advance payment of Italian policyholder Italian tax obligations is expected to berecoverable either by deduction from tax withheld on behalf of policyholders, by offset against taxes payableto Italian revenue within a period of five years or by surrender to group companies after five years. A keyjudgement exercised by Directors is that it is appropriate to carry this asset at its full future recoverable valuewithout reducing it for the time value of money by discounting.

Deferred incomeDeferred income typically refers to where a policyholder has paid commission on the commencement of apolicy, but which is not recognised immediately in the Statement of Comprehensive Income. Such income isamortised over the expected life of the policy, which is based on historical experience, and any unamortisedamount is recognised when the policy is stirrendered.

Valuation of financial instrumentsThe Company classifies fair values tising the following fair value hierarchy that reflects the significance of theinputs used in making the fair value measurements.

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e.derived from prices).This category includes instruments valued using: quoted market prices in active markets for similarinstruments; quoted prices for identical or similar instruments in markets that are considered less than active;or other valuation techniques where all significant inputs are directly or indirectly observable from marketdata.Level 3: Valuation techniques using significant unobservable inputs.This category includes all instruments where the valuation technique includes inputs not based on observabledata and the unobservable inputs have a significant effect on the instruments valuation. This category includesinstruments that are valued based on quoted prices for similar instruments where significant unobservableadjustments or assumptions are required to reflect differences between the instruments.




Valuation of financial instruments (continued)F air values of financial assets and financial liabilities that are traded in active markets are based on quotedmarket prices or dealer price quotations. F or all other financial instruments the Company determines fairvalues using valuation techniques.

Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, creditspreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchangerates, equity and equity index prices and expected price volatilities and correlations. The objective of valuationtechniques is to arrive at a fair value determination that reflects the price of the financial instrument at thereporting date that would have been determined by market participants acting at arm’s length.

Observable prices and model inputs are usually available in the market for listed Equity and Fixed incomesecurities, Collective Investment Schemes and exchange traded derivatives. Availability of observable marketprices and model inputs redttces the need for management judgement and estimation and also reduces theuncertainty associated with determination of fair values. Availability of observable market prices and inputsvaries depending on the products and markets and is prone to changes based on specific events and generalconditions in the financial markets. These investments are therefore classified as Level I investments.

The Portfolio Bonds which are classified in the Collective Investment Schemes category are priced from firstprinciples when individual holdings are known. Where the Portfolio Bonds are managed under a discretionaryasset management agreement the valuations are provided directly by the investment managers.

Actuarial reservesThe Company’s Progetto Reddito product allows policyholders to add an additional death benefit to theirpolicies. Where the life assured is under 66 years old, the Company’s Challenge Plus product automaticallyprovides an additional death benefit (10% of premiums paid less partial withdrawals taken, capped at€50,000). All Progetto Reddito contracts and those Challenge Plus contracts which provided the additionaldeath benefit at inception are classified as insurance contracts. Calculations were performed at 31 December2015 to assess the level of additional technical provisions which might be required for these contracts. Havingcarried out those calculations, which involved the projection of expected future income and outgo on thecontracts in qttestion, no additional technical provisions were held for the additional death benefits on thesecontracts on materiality grounds.

2. Financial risks and risk management

The Company is exposed to a range of risks through its financial assets and its financial liabilities and also inrelation to the accounting estimates and judgernents it needs to make in the preparation of its financialstatements and its regulatory returns.

These risks are described below together with the risk management approaches adopted by the Company.

Ultimate responsibility for the Company’s risk management rests with the Directors and the Board issupported by the operation of a number of committees that meet on a regular basis to review and monitor theCompany’s risk exposures. A number of policy statements have been prepared and approved by the Directorswhich set out parameters and limitations to manage and limit financial risks.

The Company has not substantially changed the approaches adopted to manage its financial risks from theprevious accounting period.

23



2. Financial risks and risk management (continued)

Risks associated with investment and insurance contractsThe Company matches all the liabilities under investment contracts with assets in the funds for which the unitprices for the contracts are based, and the Company aims to ensure that the investment policy adopted forthese funds is consistent with that communicated to policyholders in their contract documentation. The marketand credit risk relating to policyholder financial assets is borne by policyholders as any change in the value oftheir assets results in an equivalent change in the amount of the Company’s obligation to them. However, theCompany does have exposure to persistency and an indirect exposure to market risk in respect of thecontracts.

Traditionally The Company’s unit-linked products have offered a minimal death benefit equivalent to a smallmultiple of the underlying fund value, generally in the range of 100% to 101%. Only the “Progetto Reddito”product offering included the option of additional death benefits with an extra charge levied to pay for theadditional benefit.

The Company launched a new version of the Challenge product called Challenge Plus in December 2014. TheChallenge Pitis product offers policyholders, who are under 66 years old, additional death benefit coverequivalent to a multiple of 110% of the premium paid less partial surrenders (capped at €50k). This additionaldeath cover is provided at a cost to the policyholder equivalent to 25bps of the policy’s NAy. 90% of anyadditional mortality risk underwritten by the Company under this new product is reinsured to RGA.

PersLtencp risk is the risk that the policyholder cancels the contracts, thereby exposing the Company to lowerannual management fees than that projected in the product pricing. The Company manages this risk byensuring that its distribtitors only sell such policies to customers with a medium to long term investmenthorizon and through maintaining high levels of customer care. Early redemptions are reviewed and analysedto determine potential trends requiring attention.

Market risk arises for the Company on the value of the fees earned, from the consequent impact of a loss offair value resulting from adverse fluctuations in equity prices, interest rates and foreign currencies.

A number of financial risks also arise within the investment contracts and these are carried by the holders ofthese contracts. These risks are:

• Market risk in respect of fluctuation in interest rates, equity prices and foreign currency rates.• Credit risk in respect of expostire to counterparties.

The Company manages these risks taking into account the objectives of the investment funds in which thepolicyholders invest, as set otit in the documentation given to the policyholders.

Market risk is managed on a daily basis by the investment managers who are responsible for monitoring theeffect of changes in the fair value of assets in each fund. The investment managers execute purchases andsales of securities in accordance with its expectations of future market movements. The performance of thefunds that results from the investment managers choices is monitored on a regular basis by the InvestmentCommittee.

24



2. Financial risks and risk management (contintied)

Risks associated with other financial assetsThe Company holds other financial assets that are not attributable to investment contracts, as backing for itsgeneral solvency requirements and to maintain an effective working capital level whilst complying withcompany law and with the regulations and guidelines issued by the Central Bank of Ireland (see Note 10“Shareholder financial assets’).

An investment policy, which is considered by the Company to be prudent, is adopted with regard to theseassets and this is set out in policy statements which have been approved by the Board and are monitored bythe Investment Committee.

The asset allocation is determined in order to optimise the risk return within a specific risk tolerance and theassets are predominately euro-denominated short to medium term EU government bonds and bank deposits. Aproportion of the assets, within specified limits, may be invested in short term corporate bonds and equitiesand in derivatives that are associated with the Company’s structured products.

The main risks that the Company is exposed to for these assets are ‘credit risk’, ‘market risk’ and ‘liquidityrisk’.

Credit risk occurs for these assets if the counterparty is unable to pay amounts in full when due and the keyareas where the Company may be exposed are in respect of:

• Amounts due from bond issuers.• Cash balances and deposits held with credit instittitions.• Receivables due from debtors and reinsurers.

Recovery of the advance payment of the Italian Policyholders’ Tax.• Policyholder financial assets.

Substantially all of the retail assets of the Company are held with two counterparties. In relation to the privateinsurance business, these are held with a number of individual counterparties. Bankruptcy or insolvency ofthese counterparties may cause the Company’s rights with respect to the investments held by thesecounterparties to be delayed or limited. The Company monitors its risk by monitoring the credit quality ofeach counterparty.

The Company does not invest in unlisted investments for the retail unit linked funds. As the Company doesnot appoint the individual custodians to the Collective Investment Schemes in which they invest, the Boardhas agreed to allow investment in such instruments only where they are regulated by a recognised regulator.

For Private Insurance policies, the investment policy allows investment in a universe of assets, some of whichmay not be regularly traded. However, the policy conditions for Private Insurance allows for the settlement ofa claim by way of an in-specie transfer, thereby allowing for the settlement of claims, even where the asset isilliquid.

Bond issuer risk is reduced by investing in bonds that are backed by an EU Government or if corporate bondsare held, these are limited to a specified limit and are restricted to those of a short term duration.

Risk exposure to credit institutions is managed by only using approved institutions and by limiting depositswith one institution to 20% of the Company’s technical reserves.

Amounts receivable from debtors are subject to a credit control process.

25



2. Financial risks and risk management (continued]

Risks associated with other financial assets (continued)

Credit risk (continued)The balance remaining on the Italian Policyholders’ Tax is recoverable from deductions made from gainsmade by policyholders when they surrender their policies, and in the event that any balance remainsunrecovered after five years, an agreement has been made to transfer that balance to the parent company atface value.

Policyholder assets are the assets backing the unit-linked investment contracts and the holders of thesecontracts bear the credit risk arising from these assets.

The credit risk exposure and ratings of financial and other assets which are most susceptible to credit risk areset out in tables below.

Advance payment of ItalianPolicyholders’ Tax

Investments available for sale

Investments at fair value throughprofit or loss:

Equities

Fixed income securities

Investments in Collective InvestmentSchemes **

Derivatives

Deposits, Cash & Cash equivalentsand other

Financial assets others

Other receivables

Table 1 - Credit risk exposure and ratings offinancial and other assets which are most susceptible to creditrisk as at 31 December 2015.

Not Assets Totalrated held for

policyholders

From From From fromAAA AA A BBB

To AA+ To To EBB To BA+

€000’s €000’s €000’s €000’s €000’s €000’s €000’s

- - -- 169,788 - 169,788

30,998 16,209 26,368 5,509 - - 79,084

- - - -- 36,682 36.682

- - - -- 1,053,188 1,053,188

- - - -- 10,543,695 10,543,695

- - - -- (3,009) (3,009)

- - - -- 321,079 321,079

- - -- 20,851 - 20,851

- 9,967 48,502 19,905 8,851 - $7,225

30,998 26,176 74,870 25,414 199,490 11,951,635 12,308,583

Cash and cash equivalents

Total assets bearing credit risk

26





Credit risk (continued)

Table 2 - Credit risk exposure and ratings of Fixed income securities within policyholder assets (see table 1above) which are most susceptible to credit risk as at 3] December 2015.

From AAA fromAAToAA+ To

Investments at fair value through profit or loss:


Total Fixed income securities bearing credit risk

From From TotalA To BBB- ToBBB B

€000’s €000’s €000’s €000’s €000’s

49,453- 691.232 312,503 1.053.188

49,453 - 691,232 312,503

Table 3 - Credit risk exposure and ratings of Fixed income securities within policyholder assetsbelow) which are most susceptible to credit risk as at 3] December 2014.

From AAATo AA+

Investments at fair value through profit or loss:


Total Fixed income securities bearing credit risk

1,053,188

(see table 4

From AA From TotalTo AToA+ BBB+

€000’s €000’s f000’s f000’s

91,883 154,015 441,708 687,606

91,883 154,015 441,708 687,606

A+

27





Credit risk (continued)

Table 4 - Credit risk expositre and ratings offinancial and other assets which are most sttsceptibte to creditrisk as at 3] December 2014.

Advance payment of Italianpolicyholders’ tax

Investments available for sale

Investments at fair value throughprofit or loss:

Equities

fixed income securities

Investments in Collective InvestmentSchemes* *

Derivatives

Deposits, Cash & Cash equivalentsand other

Other receivables

Cash and cash equivalents

Total assets bearing credit risk

Not Assets Totalrated held for

policyholders

From From from FromAAA AA A

To AA+ To To BBB To BBB+A+

f000’s €000’s €000’s (000’s (000’s (000’s (000’s

- - -- 135.457 - 135.457

40,408 9,550 32,530 - - - $2,488

- - - -- 54.591 54.591

- - - -- 687,606 687.606

- - - -- 8,703,942 8,703,942

- - - -- 8,850 8,850

- - - -- 355,194 355.194

- - -- 19.713 - 19,743

- -- 55,512 9,003 - 64,515

40,408 9,550 32.530 55,512 164.203 9,810,183 10,112,386

** The Investments in Collective Investment Schemes are various Unit Linked SICAV funds which are allUCITS compliant and as a consequence are required to have an independent custodian taking custody of theassets of the SICAV. Therefore, counterparty credit risk exists to the extent of the ability of the custodian toreturn assets held. These CIS are chosen by the various asset managers, responsible for the investmentportfolio of each fund. These SICAVs are mainly domiciled in Ireland, Germany, Italy, Luxembourg andFrance.

28


Notes to the financial statements (continued]

2. Financial risks and risk management (continued]


Market risk is the risk of change in fair value of a financial instrument due mainly to fluctuations in interestrates, equity prices, and foreign currency rates.

a) Interest rate risk arises primarily from the Company’s investments in fixed income securities. Thechange in interest yields is reviewed on a regular basis when the Company prepares projections of itssolvency position.The following assets are exposed to interest rate risk:

• Deposits• Fixed income securities

The sensitivity of interest rate movements on the Company’s profits can be seen in the followingtable, by reference to an increase or decrease of 1.00% in the overall yield curve for the assets exposedto the interest rate risk at the end of the financial year.

2015 2014€000’s €000’s

Increase of 1% in overall yield:

_______________

Impact on profit before tax4,082 4,461

Decrease of 1% in overall yield:Impact on profit before tax

(2,660) (3,707)

b,) The Company’s net exposure to equiti’ price risk is limited to the equity securities content of itsholdings in unit-linked funds. At 31 December 2015 and 31 December 2014 there was no suchexposure.

There is exposure to direct equity price risk through equities held by policyholders of €37m in 2015(2014: €55m). A 1% price increase would lead to equities increasing by €367k in 2015 (2014: €546k).Such a movement would be offset by the financial liabilities - investment contracts.

There is indirect exposure to equity and other market price risk through investments in collectiveinvestment schemes of€10,544m (2014: €8,704m) held by policyholders. A 1% price increase wouldlead to CIS increasing by €105rn in 2015 (2014: €$7m). Such a movement would be offset by thefinancial liabilities — investment contracts.

c) foreign currencj’ risk can arise due to fluctuations in foreign exchange rates. The Company does nothave any significant exposure to such movements as its investments are mainly denominated in Euro.For investment contracts, no direct market risk arises for the Company, as changes in the value of andincome arising from the assets and liabilities underlying these contracts are matched with the changesin the Company’s obligations to the policyholders.

29





Liquidity riskThe liquidity risk is defined as risk that an entity will encounter difficulty in meeting obligations associatedwith financial liabilities that are settled by delivering cash or another financial asset.

In managing the Company’s assets and liabilities, the Company seeks to ensure that cash is at all timesavailable to settle liabilities as they fall due. Available funds are mainly invested in call or deposit accounts ofup to six months duration and in short/medium Euro-denominated Government bonds. The Company’streasury position is reviewed on a regular basis and cash balances are maintained to meet due liabilities. TheCompany can avail of a line of credit arranged by its parent company for short term liquidity requirements thatarise from timing factors. The Company also participates in a cash-pool arrangement with Deutsche Bank AG.

for investment contract redemptions, cash paid out is funded by the redemption of the linked assets supportingthe contract liability.

An analysis of the contractual maturity of the Company’s financial liabilities at 31 December 2015 is set outin the following table:

BePveen 12015 No stated Within 1 year and Over 5 Total

maturity year 2 years years

___________

€000’s €000’s €000’s €000’s €000’sLiabilities - investmentcontracts 10,898,447 1,038,988 10,216 3,984 11,951,635Creditors and otherpayables

- 133,711 - 133,711Corporation taxpayable - 109 - 109

Total 10,898,447 1,172,808 10,216 3,984 12,085,455

The table below sets otit comparative contractual maturity data as at 31 December 2014:

Between I2014 No stated Within 1 year and 2 Over 5 Total

maturity year years years

____________

€000’s €000’s €000’s €000’s €000’sLiabilities - investmentcontracts 9,122,577 687,606 - - 9,810,183Creditors and otherpayables

- 152,433 - - 152,433Corporation tax payable 518 - - 51 8

Total 9,122,577 840,557 - - 9,963,134

30





Liquidity risk (continued)Where the liabilities - investment contracts are classified as having “no stated maturity”, the policies are wholeof life contracts, which can be surrendered at any time, subject to penalty charges and notice periods as set outin the policy documentation. Outwith the first three months, policyholders can request disinvestment of theirfunds with five working days’ notice.

3. Net premiums written and earned

2015 2014

€‘OOO €‘OOO

Insurance premium income

Gross premium written and earned $08 -

Less premiums ceded to reinsurers (190)Net premium written and earned 618

At the start of 2015, the Company commenced sales of a new version of the Challenge product, ChallengePlus. This is similar to the previous Challenge product but with an enhanced death benefit. Instead of payingan additional death benefit of 1% of the fund value to lives assured under 66 years old, the death benefitoffered is 10% of the net investment (difference between the premiums paid and any partial surrenders paiduntil the notification of death), capped at €50,000. This additional death rider benefit is unbundled and treatedas insurance under IFRS 4, with the investment element accounted for as investment under 1AS39.

As permitted per the Company’s accounting policy for certain products under IFRS 4, premiums relating tothe death benefit are unbundled from total premiums collected and presented in the Statement ofComprehensive Income as insurance premium income. For the financial year ended 31 December 2015premium income of €3,309m (2014: €2,780rn) relates to investment contracts and are not included in “Netpremiums written and earned” in the Statement of Comprehensive Income, in accordance with 1AS39 (seeNote 16 “Financial liabilities”). No comparative figures are available as sales of Challenge Plus commenced in2015.

31



4. Investment return

2015 2014

E’OOO €‘OOO

Policyholder investment returnInvestment income from equities 1,530 35Interest income from fixed income securities 264 1 82Investment income from collective investment funds 24,496 28,331Income from other financial assets 9,718 8,744Interest income from deposits 18 55Net realised gains on financial assets 366,811 431,868Net unrealised (losses)/gains on financial assets (190,075) 94,352

212,762 563,567

Shareholder investment returnInterest income from financial assets 1,621 179Interest income from cash 196 499Net realised gains on financial assets 678 354

2,495 1,032

215,257 564,599

5. Fees and other income/(expense)

Note 2015 2014

E’OOO €‘OOO

Fees from investment contracts 263,499 188,794Other expense (371) (115)Movement in deferred income reserve 17 (4,073) (3,570)

259,055 185,109

32



6. Acquisition and administration expenses

2015 2014

€‘OOO €‘OOO

Acquisition costs 18,659 13,603Change in deferred acquisition costs (1,672) 3,835Administration expenses 165,472 123,151

182,459 140,589

All of the acquisition costs are in respect of commissions paid on new business.

Administration expenses 2015 2014

E’OOO €‘OOO

Commission expenses - ongoing 134,573 100,914Operating expenses.

Wages and salaries 2,302 1,932Social welfare costs 211 172Pension costs 147 114Fund expenses borne by policyholders 3,570 3,068Third party administration expenses 9,238 6,550Investment management fees and expenses 15,431 10,401

165,472 123,151

33



6. Acquisition and administration expenses (continued)

Included in the administration expenses are the following:

Auditor’s remuneration (excluding VAT) 2015 2014

€‘OOO €‘OOO

Audit of statutory accounts 65 50Other assurance services 5 37Tax advisory services 14 8

84 95

Directors’ emolumentsSalaries and related benefits 468 453Fees as directors 124 85Fees for other services 48 48Compensation for loss of office paid to a Director - 15

The Company has a constiltancy arrangement with the firm of one Director (€48k) (2014: €48k), to whom feesare paid for non-Director services.

The average monthly number of employees during the year was as follows: 2015 2014

Administration 25 21Finance 5 5

30 26

7. Taxation 2015 2014

€‘OOO €‘OOO

Current tax expense 10,410 6,081

Total income tax expense 10,410 6,081

Deferred tax recorded in other comprehensive income (174) (42)

34



7. Taxation (continued) 2015 2014€‘OOO €‘OOO

Reconciliation of effective tax charge:

Profit before taxation 83,278 48,620

Corporation tax at the standard rate of 12.5% 10,410 6,078Effects of

Capital allowance in excess of depreciation (1) (4)Disallowed expenses 1 7

Corporation tax charge 10,410 6,081

Deferred Tax balance 2015 2014€‘OOO €‘OOO

Balance at 1 January (9) (51)Movement during the financial year recognised in othercomprehensive income 174 42

Balance at 31 December 165 (9)

8. Advance payment of Italian Policyholders’ TaxThe Company operates in Italy on a “freedom of services” basis and in 2005 opted to implement the sostittttod’irnposta tax regime. The sostituto d’irnposta tax regime entails an annual “advance payment” to the Italianfiscal authorities of an amount currently equal to 0.45 % (2014: 0.45 %) of the Company’s financial liabilities- investment contracts, as at the year end. Each annual advance payment can be recovered from any exit taxstibsequently deducted from policyholders or by offset against taxes payable to Italian revenue within a periodof five years. To the extent that an unrecovered balance remains after five years have elapsed, the balance ofthe advance payment made five years earlier can be sold to the parent company at face value for recoveryagainst their Italian tax liabilities €169,788k (2014: €135,457k).

2015 2014Asset Note €‘OOO €‘OOO

Balance at 1 January 135,457 109,917

Net payable in respect of the financial year 18 53,783 40,447

Recoveries in respect of the financial year (19,452) (14,907)

Balance at 31 December 169,788 135,457

35



8. Advance payment of Italian Policyholders’ Tax (continued)

2015 2014Liability Note €‘OOO €‘OOO


Net payable in respect of the financial year 18 53,783 40,447

Paid during the financial year (40,447) (32,498)


9. Deferred acquisition costs 2015 2014

€‘OOO €‘OOO


Acquisition costs incurred in the financial year 16,459 13,603

Amount charged to Statement of Comprehensive Income (14,787) (17,438)


10. Financial assets Market MarketValue Value

Shareholder financial assets 2015 2014

€‘OOO €‘OOO

Investments available for sale 79,084 82,488

79,084 82,488

See note 2 Financial risks and risk management, Risks associated with other financial assets on page 25.

Policyholder financial assets 2015 2014

€‘OOO €‘OOOInvestment contracts designated at fair value through profit or lossEquities 36,682 54,591Fixed income securities 1,053,188 687,606Collective Investment Schemes 10,543,695 8,703,942Derivative Instruments (3,009) 8,850Deposits, Cash & Cash Equivalents and Others 321,079 355,194

11,951,635 9,810,183

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Notes to the financial statements (continited)

11. Other receivables 2015 2014

€‘OOO €‘OOOAmountsfatling due within one yearManagement fees receivable from the funds 18,021 17,428Accrued interest receivable 858 911Other 1,972 1,404

20,851 19,74312. Fair value disclosuresThe Company classifies fair values using the following fair value hierarchy that reflects the significance of theinputs used in making the fair value measurements:

Level 1: Quoted market price (ttnadjusted) in an active market for an identical instrument.Level 2: Valuation techniques based on observable inputs, either directly or indirectly.Level 3: Valuation techniques using significant unobservable inputs.

There were no Level 3 assets at 31 December 2015 (2014: €nil).

The table below analyses financial instruments, measured at fair value at the end of 2015, by the level in thefair value hierarchy into which the fair value measurements is categorised:

Total fairFinancial assets as at 31 December 2015 value Level 1 Level 2

€‘OOO €‘OOO €‘OOOShareholder financial assets

— Available-for-sale investments 79,084 79,084

Government and governmentagency bonds 22,864 22,864Corporate bonds 56,220 56,220

Policyholder financial assets 11,951,635 11,572,072 379,563Equities 36,682 36,682 -

Fixed income securities 1,053,188 1,053,188 -

Collective Investment Schemes 10,543,695 10,164,132 379,563Derivative Instruments (3,009) (3,009) -

Deposits, Cash & CashEquivalents and Others 321,079 321,079 -

Total Financial Assets 12,030,719 11,651,156 379,563

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12. Fair value disclosures (continued)

Financial liabilities Total fairas at 31 December 2015 value Level 1 Level 2

€‘OOO €‘OOO €‘OOO

Financial liabilities - investment contracts 11,951,635 1,951,635

Total Financial Liabilities 11,951,635 11,951,635

Total fairFinancial assets as at 31 December 2014 value Level 1 Level 2


Shareholder financial assets

— Available-for-sale investments 82,488 82,488 -

Government and governmentagency bonds 29,17] 29,171 -

Corporate bonds 53,317 53,317 -

Policyholder financial assets 9,810,183 9,509,026 301,157Equities 54,591 54,591 -

Fixed income securities 687,606 687,606 -

Collective Investment Schemes 8,703,942 8,402,785 301,157Derivative Instruments 8,850 8,850 -

Deposits, Cash & CashEquivalents and Others 355,194 355,194 -

Total Financial Assets 9,892,671 9,591,514 301,157

financial liabilities Total fairas at 31 December 2014 value Level 1 Level 2


Financial liabilities - investment contracts 9,810,183 - 9,810,183

Total Financial Liabilities 9,810,183 - 9,810,183

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12. Fair value disclosures (continued)

There were no transfers between levels in 2015 and 2014.

The table below shows reconciliation from the opening balance to the closing balance for Level 3 financialassets.

2015 2014

€‘OOO €‘OOO

Balance at 1 January 450Total gains or losses:

in comprehensive income- 354

in other comprehensive income- (371)

Settlements- (433)

Balance at 31 December - -

With the exception of Advanced Payment of Italian Policyholders’ Tax, there are no differences between fairvalues and carrying amounts of other financial assets at the Statement of financial Position date. The fairvalue of the Advanced Payment of Italian Policyholders’ Tax is €166,779k (carrying value: €169,7$$k) (2014:€132,815k (carrying value: €135,457k).

13. Share capital — equity

2015 2014

€‘OOO €‘OOOA uthorised:

5,000,000 ordinary shares of€1 each 5,000 5,000

Issued

5,000,000 ordinary shares of€1 each 5,000 5,000

14. Capital contributions received and dividend paid

The Company received no capital contributions during the year (2014: €22.5m). These contributions do notconstitute a loan from the parent company, the Company has no obligation to repay these amounts.

The Board of Directors is not proposing a dividend for 2015.

There were no dividends paid in respect of the financial year ended 31 December 2014.

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15. Capital position statement

The determination of available assets to meet minimum solvency requirements is based on shareholders’ fundsunder Irish Generally Accepted Accounting Practice (“GAAP”), as modified by prudential filters advised bythe Central Bank of Ireland. This differs from the IFRS basis used to prepare these financial statements. Thefollowing note reconciles from the shareholders’ funds, on an If RS basis, through to the regulatory solvencyrequirements and demonstrates the financial strength of the Company. Effective from 1st January 2016Solvency II Directive replaced the Solvency I regulatory solvency requirements.

2015 2014

€‘OOO €‘OOO

Total Shareholder’s equity 232,117 160,468

Adjustment to regulatory bases:

Adjustments to asset values (3,009) (2,642)Adjustments to reserves value 35,215 30,883Adjustment for deferred tax asset (165) $Deferred acquisition costs (44,035) (42,363)

Total available capital resources 220,123 146,354

Minimum solvency level required by the Central Bank of Ireland 8,290 7,040

The Company maintains a capital structure with a combination of share capital, capital contributions andretained profits, consistent with the Company’s risk profile and the regulatory and market requirements of itsbusiness.

The Company is regulated in Ireland by the Central Bank of Ireland and is required to observe the rules for theamount and structure of the solvency capital for the business that it carries on.

The Company carries out regular projections of its capital adequacy and these are reviewed by the Board toensure that satisfactory levels of cover are maintained. Capital adequacy and solvency cover are reported tothe Central Bank of Ireland on a quarterly and annual basis.

No instances of non-compliance with solvency capital requirements were reported by the Company to theCentral Bank of Ireland during the year.

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16. Financial liabilities 2015 2014

f’OOO €‘OOOInvestment contracts:

Balance at 1 January 9,810,183 7,447,659Premiums collected 3,309,350 2,779,853Change in investment contract liabilities 209,193 560,499Claims paid (1,114,477) (789,393)Fees paid by the unit funds (264,308) (188,794)Sales inducements 1,694 359

Balance at3l December 11,951,635 9,810,183

17. Deferred income 2015 2014

€‘OOO €‘OOO

Balance at 1 January 31,138 27,568Movement during the financial year 4,073 3,570


The income that is deferred is in respect of investment contracts on which a front-end fee applied in relation toservices to be provided in future periods. The deferred income reserve is amortised over the anticipated life ofthe contracts.

The amount of deferred income that is expected to be earned more than 12 months after the Statement offinancial Position date is €26,951,467 (2014: €24,160,857).

18. Creditors and other payables 2015 2014

Note €‘OOO €‘OOOAinountsfatlbig dtie vithin oize yearAmounts due to group companies 13,354 68,807Advance payment of Italian Policyholders’ Tax 8 53,783 40,447Premium deposits 23,950 23,795Claims payable 37,364 15,930Value Added Tax 51 24Social welfare / PAYE 81 83Other creditors and accruals 5,128 3,347

133,711 152,433

Amounts due to group companies are principally in respect of initial and ongoing commissions and investmentmanagement fees.

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19. Ultimate parent undertaking and parent undertaking of larger group

The Company’s ultimate parent undertaking is Allianz SE, a company incorporated in Germany. TheCompany’s immediate parent undertaking is Allianz S.p.A., a company incorporated in Italy.

The largest group in which the results of the Company are consolidated is that headed by Allianz SE,incorporated in Germany. The consolidated accounts of this group are available to the public and may beobtained from Allianz SE, Konigstrasse 28, 80802 Munich, Germany.

The smallest group in which the results of the Company are consolidated is that headed by Allianz S.p.A., acompany incorporated in Italy. The consolidated accounts of this group are available to the public and may beobtained from Allianz S.p.A., Largo Ugo [men 1, Trieste, Italy.

20. Related part)’ transactions

The Company received/provided a number of services from related parties. The related party activities whichthe Company now has are as follow:

— The Company has agreements with Allianz S.p.A., Allianz Global Investors Europe S.p.A., InvestitoriSGR S.p.A. and PIMCO Europe Ltd for the provision of fund management services;

— The Company has an agreement with Allianz S.p.A. for the provision of fiscal and legal services;— The Company has an agreement with Allianz Managed Operations & Services SE for IT services;— The Company has agreements with Allianz Bank Financial Advisors S.p.A. for the provision of banking

and custodian services and for product distribution;— The Company has agreements with Allianz Ireland PLC for renting the office space;— The Company has an agreement with Allianz Global Life Limited for the provision of compliance, office

space and other infrastructural services.

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20. Related party transactions (continued)

Transactions with Directors

The Directors’ compensations are as follows:2015 2014

€‘OOO €‘OOO

Salaries and related benefits 468 453Fees as directors 124 85Fees for other services 48 48Compensation for loss of office paid to a Director - 15

The above figures reflect the remuneration paid by the Company to all Board members.

Transactions with other related parties:

Name of the Company Relationship Payable Receivable!at I Expense Income (payable) at

January payable by receivable Payments 31 December2015 Darta by Darta If Receipts) 20t5

€‘OOO €‘OOO €‘OOO €‘OOO f’OOOAllianz SpA. parent 1,806 (304) - (1,668) (166)Allianz Managed Operations & Services SE group (94) (257) - 107 (244)Allianz Bank financial Advisors SpA. group (65.093) (156.615) - 211,157 (10,551)Allianz Ireland PLC group (57) (317) - 326 (48)Allianz Global Life Limited group - - 737 (699) 38Allianz Global Investors Europe GmbH group (1,824) (3,457) - 3,847 (1,434)PIMCO Europe Ltd group (361) (1,227) - 1,317 (271)lnvestitori SGR SpA. group (3.184) (6.346) - 8,852 (678)

€8,369m (2014: €6,974m) of the €11,952 (2014: €9,$lOm) policyholder assets at year end were managed byrelated Allianz SE companies. Total realised and unrealised gains on policyholder assets managed by relatedAllianz SE companies are €67m (2014: €312rn). €9m (2014: €6m) of the shareholder cash and cashequivalents at year end were managed by Allianz Bank Financial Advisors S.p.A. and a further €39rn (2014:€21m) was managed by Allianz SE, through a cash-pool agreement.

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21. Disclosure of interests in unconsolidated structured entities

Included in policyholder financial assets are investments in CIS which may be considered to be interests inunconsolidated structured entities under IFRS 12 (see Note I Accounting Policies — “IfRS 12 - Disclosure ofinterests in unconsolidated structured entities”). The table below sets out the interest held by the policyholdersin these CIS.

2015 Investments at fair value through Totalprofit or loss

€‘OOO €‘OOO

Collective Investment Schemes 10,543,695 10,543,69510,543,695 10,543,695

2014 Investments at fair value through Totalprofit or loss

€‘OOO €‘OOO

Collective Investment Schemes 8,703,942 8,703,9428,703,942 8,703,942

The CIS are predominantly regulated SICAV funds, all UCITS compliant. These CIS are chosen by thevarious asset managers, responsible for the investment portfolio of each fund. These SICAVs are mainlydomiciled in Ireland, Germany, Italy, Luxembourg and France.

The CIS are of varying sizes and are all financed by investor equity, having been established for the purposeof collective investment activity.

The maximum gross exposure to loss is the carrying value of €10,544m (2014: €$,704rn) but the net exposureto loss borne by the shareholder of the Company is €nil as the investments are held on behalf of thepolicyholder.

The majority of the units in the CIS can be redeemed daily.

The policyholder financial assets as at 31 December 2015 were €ll,952m of which €10,544m were made upof CIS. At 31 December 2015 €$,369m of the policyholder financial assets were managed by other entities inthe Allianz Group.

During the financial year, the Company or policyholders did not provide financial support to unconsolidatedstructured entities and has no current intention of providing financial or other support.

22. Contingencies

There were no contingent liabilities at 31 December 2015 (2014: €nil).

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23. Subsequent events

There were no events subsequent to the year end which require disclosure in or amendment to these financialstatements.

24. Approval of financial statements

The Board of Directors approved these financial statements on 24 March 2016.

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directors’ report and darta saving life assurance limited ......dec 31, 2015 · addvision wealth...

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