EXAMPLE PAGE - ANNUAL REPORT - THE SWEDISH CLUB - Flipbook - Sida 56
FINANCIAL STATEMENTS - NOTES
insurance risk from the policyholder to
the Club. They must also obligate the
Club to compensate the policyholder, or
another beneficiary, if a predetermined
insured event were to occur.
Income tax
Income taxes comprise current tax and
deferred tax. Income taxes are reported in
the income statement.
Current tax is tax that is payable or
refunded for the current year, applying tax
rates that have been decided or
effectively adopted as of the reporting
date. This also includes adjustments of
current tax related to prior periods.
Deferred tax is measured according to the
balance sheet method. The starting point
is thus temporary differences between
the carrying amount of an asset or
liability and its tax base. The valuation of
deferred tax is based on the extent to
which the underlying assets and liabilities
are expected to be realised or settled.
Deferred tax is calculated by applying the
tax rates and tax rules that have been
decided or effectively adopted as of the
reporting date. Untaxed reserves are
reported including deferred tax liability.
Premiums written, net of
reinsurance
Gross premium written is normally
reported according to the maturity
principle. This means that the gross
premium written is reported in the
income statement when the annual
premium fall due for payment, or, when
the first partial premium falls due for
payment (this happens in cases where
the contractual insurance period’s
premiums have been divided into several
partial premiums). Furthermore, in order
for the gross premium written to be
included, the term of the underlying
insurance contract must start during the
current accounting period. The method
described above is also used for
reinsurers’ share of premiums written.
Premiums earned, net of
reinsurance
Premiums earned reflect the proportion
of the gross premium written that is
attributable to the accounting period. The
share of the premium income from
insurance contracts pertaining to periods
after the closing date is allocated to the
premium reserve in the balance sheet.
56
Calculation of the provision to the
premium reserve is done by allocating the
premium income to the proper period
based on the underlying duration of the
insurance contract. The method
described above is also used for
reinsurers’ share of earned premiums.
The provision for unearned premiums for
own account is revalued using the closing
day rate of exchange. The result of this
revaluation is shown under the heading
‘Investment income’ or ‘Investment costs’.
A provision for remaining risks is made
when future revenue and expenses during
the remaining term of the insurance
contract yield a deficit.
Investment income transferred from
the non-technical account
Investment income is reported gross in
the non-technical result. The Club uses a
model for the calculation of investment
income transferred to the technical
account. It is based on the interest rate
that corresponds to the United States
1-year bond yield at the beginning of the
year in relation to average provisions for
claims outstanding net of reinsurance
The model compensates the insurance
business with interest for the float
generated during the period between
premium payment and claim payment. In
cases where the calculation yields an
amount that is lower than the equivalent
of USD 1 million, no transfer is made.
Net claims incurred
The total net claims incurred for the
accounting period includes claims paid
during the period and changes in the
provision for claims outstanding. Besides
claims, net claims incurred also includes
claims handling costs. The provision for
claims outstanding is calculated using
expected nominal cash flows.
The reporting of the provision for
outstanding claims has been adjusted
such that the assessed net exposure has
been divided up into gross provision and
gross recourse. The reason for this is that
it has been possible to identify distinct
counterparties as regards the expected
recourse.
The provision for claims outstanding net
of reinsurance is revalued using the
closing day rate of exchange. Historical
data on claims payments provides the
THE SWEDISH CLUB ANNUAL REPORT 2021
basis for allocation of the provision to
each relevant currency. Based on these
statistics, the Club has chosen to make
the assessment that the reserves fully
comprise of USD.
Net operating expenses
The proportion of the total operating
expenses related to claims handling is
reported under the heading ‘Net claims
incurred’. A portion of net operating
expenses is also related to investment
administration and this portion is
reported as ‘Internal asset management
costs’. These costs include both direct
costs and indirect allocated costs.
Operating expenses in the insurance
business include, besides administrative
costs, also acquisition costs. Internal
acquisition costs and internal investment
administration costs are allocated in
accordance with a model (see Note 7 and
Note 11).
Investment income - realised and
unrealised profit on investments
Realised profit/loss on sale of
investments is equivalent to the
difference between the sales price and
acquisition cost. The Club’s investments
are reported at fair value. Unrealised
changes in values are reported in the
income statement and can be defined as
the annual change in the difference
between fair value and acquisition cost.
Financial instruments
Financial instruments reported in the
balance sheet as assets:
• Accounts receivable (reported under the
heading 'Receivables')
• Shares and participating interests
• Bonds and other interest-bearing
securities
• Forward exchange agreements
Items reported as liabilities or equity
include:
• Trade creditors (reported under the
heading ‘Liabilities’)
Reporting of financial assets and
removal from the balance sheet
A financial asset or financial liability is
reported in the balance sheet when the
Club becomes a party to the instrument's
contractual terms (economic approach),
except for instances when the Club
acquires or disposes listed securities (for