annual report - Liberty Seguros

Transcription

13’
ANNUAL
REPORT
Ten years
celebrating life
\ Contents \
Message from the CEO \ 06
Governance Institutions \ 13
Board of Directors’ Report \ 16
01\ Introduction \ 16
02\ Mission \ 17
03\ Objectives \ 17
04\ Strategic initiatives \ 18
05\ Ethics and compliance \ 19
06\ Risk management control system
and internal control \ 21
07\ Human resources \ 21
08\ Social responsibility \ 24
09\ Environmental protection \ 26
10\ Road safety \ 27
11\ Sports sponsorship \ 32
12\ Institutional projects \ 40
13\ Macroeconomic background \ 43
14\ Insurance market \ 49
15\ Liberty Seguros - Business activity \ 50
16\ Corporate governance structure and practice \ 61
17\ Remuneration policy for the board of directors
and the audit committee \ 63
18\ Outlook \ 66
19\ Proposed appropriation of profits
and distribution of dividends \ 67
20\ Closing remarks \ 67
Financial Statments \ 70
Notes to the Balance Sheet and Profit
and Loss Account as at 31 December 2013 \ 84
01\ General informaiton \ 84
02\ Information by segment \ 85
03\ Basis of preparation of the financial
statements and accounting policies \ 90
04\ Nature and extent of items and risks
resulting from insurance contracts
and reinsurance assets \ 111
05\ Investment contract liabilities \ 139
06\ Financial instruments \ 140
08\ Cash and cash equivalents
and demand deposits \ 150
09\ Land and buildings \ 150
10\ Other tangible fixed assets \ 152
11\ Allocation of investments
and other assets \ 154
12\ Intangible assets \ 156
13\ Other provisions and adjustments
to asset accounts \ 159
14\ Insurance contract premiums \ 161
15\ Fees received on insurance contracts \ 162
16\ Investments returns / income \ 163
17\ Realised gains and losses on investments \ 164
18\ Gains and losses from adjustments
to the fair value of investments \ 165
19\ Gains and losses
on exchange rate differences \ 166
21\ Sundry costs by function and nature \ 166
22\ Staff costs \ 171
23\ Employee benefit obligation \ 172
24\ Income tax \ 188
25\ Share capital \ 193
26\ Reserves \ 194
27\ Result per share \ 195
28\ Dividends per share \ 196
29\ Transactions between related parties \ 196
30\ Cash flow statement \ 199
31\ Commitments \ 200
32\ Contingent liabilities \ 200
34\ Off-balance sheet items\ 200
36\ Events after the balance sheet date
not described in previous points \ 200
37\ Other information \ 201
Annexes to the Notes \ 210
Annexe 1\ Inventory of Shareholdings
and Financial Instruments \ 210
Annexe 2\ Breakdown of the provision
for claims in relation to claims that
ocurred in previous years and adjustments
(corrections) to the same \ 224
Annexe 3\ Breakdown of costs of claims \ 225
Annexe 4\ Breakdown of some figures
by area of insurance \ 226
Official reports \ 230
Ten years beating
our targets
Message from the CEO
01
\ Message from the CEO \
Portugal has been living in an almost permanent state
of subsidy and dependence that has largely destroyed
its production base in agriculture, industry and fisheries.
Relying on easy credit, cheap money from the EU and
an almost complete absence of prudent risk analysis,
designed to determine whether or not the borrower can
repay what they owe, our country has also spent the
past few years immersed in a “euphoria” of irrational and
near suicidal consumerism. Our irresponsible economic
model, based on families taking on debts that are way
beyond their wealth-generating capacities, collapsed
like a house of cards in the wake of the 2008 financial
crisis.
Family budgets have once again been buffeted by the
wave of dramatic austerity measures that have been
implemented. As a result, 2013 was, unhappily, yet
another year of harsh repercussions for the “real
economy”. These included a sharp fall in consumption,
a significant loss of family purchasing power, a drop in
savings levels, an exponential rise in indebtedness, an
increase in emigration (particularly of young people), a
worsening of the income distribution asymmetry for
Portuguese families and the widespread destruction of
an enfeebled middle class that the newly accessible
credit had originally brought into being.
Invoking the famous and ill-fated mantra of “debt is not
paid off, it is managed”, successive governments and
generations in Portugal have been responsible for
committing far-reaching grievous errors of both a social
and economic nature. Although this same generation is
now paying for these blunders, even if only to a marginal
extent, they are set to dramatically alter the lives of the
generations who will inherit them, that is, our children
and grandchildren (and theirs too).
We have already lived this crisis for seven years, three
of them in grim austerity, under measures, of the utmost
severity, that have been principally designed to bring order to our public accounts. There is more of the same
to come, with new twists, developments and scenarios
expected over the coming years. We can expect (even)
tougher times, but my sincere hope is that the collective
6
Liberty Seguros \ 13’ Report and Accounts
effort that we are all making will prove to be worthwhile.
Today, no one can gainsay the fact that foreign lenders
are no longer interested in loaning us money to finance our (many) vices. The process of deleveraging
our economy will go on. Whether we like it or not, this
will leave us considerably poorer than we were just a few
years ago and with even greater inequalities between
the various social classes (the wealth gap is still growing).
We continue, and we shall continue, to be subject to
a harsh regime of austerity. Firstly, because of our own
political incompetence when it comes to solving the
problems we face. Secondly, because of our manifest
(and tragic) inability to communicate with each other and
seek consensus on issues that are not the purview of
this or that political party, but which, rather, reflect underlying problems in our economy. Thirdly, because no one
is going to lend to us again if they see that we cannot
stick to our budgetary discipline (and, for this to happen,
austerity will have to go on, as we are not generating
enough wealth to pay off the structural costs of the
state). Fourthly, and just as important as all the other
points, or perhaps even more so, because we seem to
be incapable of deciding exactly what it is that we want
for our country. What is our “Business Plan for Portugal”,
not just for the next five years but also for the next generation? How are we going to generate the wealth for the
country that we want to have?
We must think responsibly when designing our future. We
need a plan for the whole country. We need to encourage
growth and sustainable development and implement the
structural reforms that will allow the Portuguese economy
to regain its competitiveness. A plan that focuses on the
sectors in which we have natural competitive advantages,
drives exports, strengthens Portugal’s image and credibility abroad, generates jobs and increases productivity. A
plan that invests in products / services of high added value, that invests in innovation centres and in entrepreneurship. Only with such a focus, and with such pragmatism,
do we stand a chance of breaking the cycle of endless
years of average growth rates of 1% or lower, truly unimpressive figures, which have left our economy stuttering in
its race to catch up with the rest of Europe.
José António de Sousa
Chairman and CEO
[email protected]
Today, in Portugal, we must all be obliged to give the
best of ourselves, in our effort to build a better country.
We have to accept this need for urgency if we want to
rejuvenate our country and give fresh hope to Portuguese families. The same is true if we want to motivate
our young students, who, thanks to a complete lack of
direction or any overall strategy, are completing their degrees, their master’s courses, in areas that of little practical use or have no real application in Portugal. This is
why they are emigrating and leaving behind their country
of birth. Most of those who are leaving, emigrating, are
young people with no further education or they are entire
families, in which the parents are in their forties. Just like
in the past, those who leave us seem to do so well in the
wider world, whether they are business people, managers or working in construction, restaurants or some
other business. As they do so, we, back here in Portugal, face great difficulties and dilapidated resources. If
the sacrifices made by all these people are to be meaningful, then, in my view, two things have to happen.
Firstly, that all those who have left find themselves able
to build the dignified and stable lives, for both themselves and their families, which their county was not able
to offer. Secondly, that they, or their descendants, come
back to Portugal one day. When they do so, I hope they
bring with them a different mentality, one that will allow
them to implement the structural changes that the current generation, lost in its sterile, useless discussions
that often only serve to prop up individual egos, has proved itself incapable of.
Finally, I hope that everything we have lost in terms of
financial wealth in recent years will be amply compensated for by a restoration of the ethical standards that
have been so buffeted by the growth in our financial and
material values. We should be able to take advantage of
the turbulent times we are collectively living through to
bolster and strengthen the family as the truly sustainable mainstay of our society. As we are now seeing, our
drama as a country would be infinitely more tragic if it
were not for the generational solidarity provided by the
family structure.
Following on the heels of the downturn seen in both the
life and non-life businesses in the two previous years,
2013 saw turnover growth in the insurance sector that
was largely driven by growth in the life business, in a repeat of what happened in 2010. According to data from
the Portuguese Association of Insurers in Portugal, the
provisional consolidated profit for the entire insurance
sector was 692 million euros, a significant increase over
the 539 million euros earned in 2012. The lion’s share of
this profit comes from the life business, with the non-life
business for the whole market bringing in profits of just
25 million euros. This amount is obviously insufficient for
consolidation of the sector or for the setting aside of reserves against extraordinary occurrences.
These numbers, especially the minimal profits of the
non-life business, are, quite naturally, a straightforward
reflection of what is happening in the real economy,
particularly the feeble, zero or even negative growth of
the gross domestic product, the lack of productive investment, growing family indebtedness, current levels
of unemployment and, no less important, the predatory
competition generated by some operators in the insurance market.
According to APS data, non-life business fell by 3.5%
in 2013, while life business grew by 26.3%. The total
volume of direct insurance premiums (life and non-life)
increased by 15.5% to some 12 billion euros, again according to APS data. This growth in business volumes
in the insurance sector helped ensure that the sector’s
overall weighting in terms of GDP rose from 6.3% in
2012 to 7.3% in 2013. The growth in the life business
(the 26.3% mentioned above) can be largely attributed
to families reinvesting their savings in PPR retirement
plans and capitalisation products, which managed year-on-year increases of 39.9% and 32.5%, respectively.
However, non-life business fell by 3.5% in 2013. One
major contributor to this decrease was workers’ compensation (-8%), in a reflection of the current condition of
the business world, with its growing number of bankruptcies and increasing unemployment, which presently
stands at 17%. There was also a fall off in auto insurance
(-5.5%). This can be explained by the aggressively com-
7
\ Message from the CEO \
petitive prices offered by both the direct insurers operating in the market and a number of insurers operating
through traditional channels.
Despite the difficult, unstable and challenging times we
find ourselves living through, Liberty Seguros closed out
its tenth full business year in Portugal with numbers that
rightfully fill us with pride, satisfaction and motivation.
Our entry into the Portuguese market has not only led to
improved management indicators, but also, and consequently, better results.
We closed out the year with a consolidated turnover of
262.8 million euros, 1.7% higher than in 2012. Net profits came in at 8 million euros, of which 6.5 million euros
were earned through our non-life business. This accounts for some 26% of all profits generated by the non-life market in Portugal. The loss ratio was 64.9%, 0.1%
higher than it had been in 2012. Our share of the non-life
market has continued to grow since we very first entered
it, rising from 6.1% in 2012 to 6.4% in 2013. This is,
quite naturally, explained by our growth rate being higher
than that of the market as a whole. Of particular note is
our 9.4% share of the auto insurance market, almost
double what we had back in 2003.
Our solvency margin in 2013 was 264.1% and
shareholder’s return on investment was 5.4%, on the
basis on total capital in Portugal (which is far higher than
that required to operate).
For Liberty Seguros, 2013 was also a year in which we
engaged in dozens of social responsibility initiatives. Our
commitment in this area reflects our true and positive
competitive differentiation in terms of the way in which
we are present and operate in the market. Once again,
all of these initiatives fill us with pride and satisfaction,
but there are some that I feel are worthy of special
mention here.
a) In a year that marked our tenth anniversary in
Portugal, Liberty Seguros published its first
Sustainability Report, entitled We Protect the
Future. This report reflects on our decade-long
8
work and engagement in building a more sustainable society.
b)For the fifth consecutive year, Liberty Seguros
has provided humanitarian aid to children who
were victims of the terrible nuclear disaster at
Chernobyl. Thirteen of these children came to
Portugal to spend the summer with the families
of Liberty staff, business partners and clients.
c) Liberty Seguros was official sponsor of the solidarity concert for the Porto IPO (oncology
hospital). All revenue from the concert is ploughed into cancer research.
d)For the second year in a row, the business
units in the Liberty Mutual Group ran our global
Serve With Liberty project. In Portugal, this
project took the form of three different initiatives:
a collection of foodstuffs that were then donated to the Legião da Boa Vontade (Goodwill
Legion), in Porto, and the Associação de Solidariedade Social – Próximo Presente (Social
Solidarity Association “Near Present”), in
Lisbon; the restoration of the gardens in the
institution run by the Dominican Sisters in Oeiras
and a training course designed to help the
unemployed with job interviews.
e)The Porquinhos Solidários (Little Pigs for Solidarity) project was also set up in 2013, with the
aim of supporting Portugal’s fire-fighting service.
This project involved the sale of little piggy banks
and brought in a total of 5,000 € for the Miranda
do Corvo town Fire Service.
f) We continued to run the Liberty Seguros road
safety project, which is designed to show staff
and their families how they can be safer on the
road and to change mindsets and behaviours
in a way that improves road safety. Liberty Seguros is also a member of Live Road – League
against Trauma, which supports the victims and
families of those involved in road accidents.
g) Liberty Seguros maintained its partnership with
the Automobile Club of Portugal (ACP) in the
National Road Education Programme – ACP
Kids. This initiative raises awareness amongst
young people and encourages safe behaviours
whilst out on the road.
h)Liberty Seguros also supported the Youth
Foundation in its “Safety on Wheels” campaign,
a road safety and education programme that
raises awareness of safety issues amongst
young drivers, and future drivers, of two-wheeled vehicles.
i) Under the leitmotif of “ABC of the Road”, Liberty Seguros engages with younger children to
address road prevention issues. Early learning
methods are used to help these children to
grasp the fundamentals of good road behaviour
and road safety.
j) Liberty Seguros is a partner in the “Bike to
Work” initiative, which aims to encourage staff to
use their bicycles to get to work and of the need
to reduce the environmental impact of urban
journeys.
k) Liberty Seguros has set up a mobile support unit
for natural disasters. This unit can guide clients
through the whole claims process, including the
assessment and quantification of damage and
the processing of on-the-spot settlements.
l) In partnership with Associação Perdas & Afectos (Losses & Affects Association), Liberty Seguros launched the “Guardian Angels” project.
This aims to help people in mourning and those
who have been traumatised or who are suffering
from post-traumatic stress disorder (PTSD) or
acute stress disorder (ASD), following the death
of a family member or severe injury in a road or
work-related accident and where the company
has accepted responsibility for the damages.
m)Liberty Seguros was the official insurer of the
Leadership Grand Conference 2013, an unparalleled event in Portugal, at which the latest
ideas and trends in leadership were discussed.
We also sponsored the QSP Summit 2013, one
of Europe’s leading marketing conferences.
n) In addition to these initiatives, we have been
engaged in a considerable number of other
activities, support programmes and initiatives
designed to share some of our significant
success with the society that we are a part of,
as a small measure of our thanks.
Before closing, it is no more than fitting that I should
extend my affection, consideration, respect and gratitude to our Business Partners, our Professional
Insurance Intermediaries, our Service Providers and
Suppliers and, of course, to the amazing Team that
we have here at Liberty Seguros.
The fact that we are bound together in pursuit of a
simple strategy, one that is based on strong ethical
principles, in which we may all take pride, and one
that we all strive to execute with efficiency allowed
us to close out 2013 with a satisfied feeling of a job
well done. It was a memorable year, rich in positive
and uplifting experiences and fruitful in terms of our
excellent results.
9
Ten years
giving our best
Governance Institutions
02
\ Governance Institutions
For the four-year period 2013-2016 \
\ BOARD OF THE SHAREHOLDERS’ MEETING \
Chairman Dr. Frederico José de Melo Pereira Coutinho
Secretary Dra. Ana Marta Henriques Pimenta Pereira da Silva de Carvalho Marques
\ BOARD OF DIRECTORS \
Chairman and Chief Executive Officer Dr. José António da Graça Duarte de Sousa
Member Dr. Roberto Luis Salas Romero
Member Dr. Russell Elmer Carlson
Member Dra. Marta Sobreira Reis Alarcão Troni
Member Dr. Rogério Paulo Carretero Bicho
\ AUDIT COMMITTEE \
Chairman Dr. José Milheiro de Oliveira Barbosa, Certified Accountant no. 474
Member Dr. Inês Maria Vaz Ramos da Silva da Cunha Leão, Certified Accountant no. 1096
Member Dr. Carlos Afonso Dias Leite Freitas dos Santos, Certified Accountant no. 1314
Alternate Member Dr. Arlindo Dias Duarte Silva, Certified Accountant no. 393
\ STATUTORY AUDITOR \
Ernst & Young Audit & Associados – Independent Audit Company no. 178
Represented by Dr. Ricardo Filipe de Frias Pinheiro, Certified Accountant no. 739
\ COMPANY SECRETARY \
Effective Dra. Ana Marta Henriques Pimenta Pereira da Silva de Carvalho Marques
Alternate Dr. João André Bernardes Barreiros Antunes
13
Ten years dealing
with challenges
Board of Directors’
Report
03
\ Board Of Directors’
Report \
Dear Shareholders,
In keeping with our legal and statutory duty, the Board of Directors of Liberty
Seguros, S.A., is pleased to submit the 2013 Management Report and Accounts for
your appraisal.
01\ INTRODUCTION
Liberty Seguros
Liberty Seguros, S.A. has been operating in
Portugal since 23 May 2003, when it took over
the former Companhia Europeia de Seguros, S.A.
from the Swiss group Credit Suisse. Companhia
Europeia de Seguros changed its name to Liberty
Seguros, S.A. by decision of the General Meeting
of 2 February 2004.
In 2010, the portfolio of Génesis Seguros
Generales, Sociedad Anónima de Seguros y
Reaseguros, Sociedad Unipersonal em Portugal
was incorporated into Liberty Seguros, through an
increase in capital paid for by a contribution in kind.
Liberty Seguros, with its eight decades of experience, relies on the dedication of each one of its
481 employees to find the best protection solutions
for Portuguese households, individuals and for micro,
small and medium-sized companies.
Nationwide, the company has 30 points of sale,
known as Espaços Liberty Seguros, and 7 offices
16
that support insurance agents. These strategic allies
of the company provide a wide range of products
and services to customers to ensure they enjoy
safer and better protected lives.
The Liberty Mutual Group
The Liberty Mutual Group, founded in 1912, has
its head office in Boston, in the USA. The group
comprises a number of international companies
providing a variety of financial services. It is one of
the largest insurance groups in the United States of
America.
The Liberty Mutual Group has more than 45,000
employees distributed among 900 offices worldwide.
The company offers a wide range of high quality
products and services to individuals and companies.
02\ MISSION
In Portugal, as in the rest of the world, the
Liberty Seguros values are Solidarity, Team Spirit,
Dedication, Work Commitment and Responsability
to the Community. All of these values chime perfectly with our mission: “Helping People Live Safer,
More Secure Lives”, through which we seek to
\\ Understand and meet customer expectations,
serving them through innovative insurance solutions that help them achieve their objectives. \
\\ Be the leader in the markets in which we operate,
creating value for shareholders. \
\\ Maintain the motivation and well-being of employees while providing them with fair opportunities
for growth. \\
03\ OBJECTIVES
At Liberty Seguros, we provide cover for private
individuals, households, and small and medium-sized companies. We have a strong focus on
non-life solutions, particularly in the areas of auto,
workers’ compensation and Property.
Liberty Seguros’ main goal is to place the company
in the top 5 insurers in Portugal for all the main
non-life business areas. We aim to do this by
concentrating on our agent distribution channel.
17
Report \
\\ Liberty Seguros Branch Offices
VIANA DO
CASTELO
VILA REAL
BRAGA
BRAGANÇA
CORVO
MADEIRA
PORTO SANTO
GRACIOSA
PORTO
FLORES
SÃO JORGE
TERCEIRA
AVEIRO
VISEU
GUARDA
SÃO MIGUEL
FAIAL
PICO
MADEIRA
COIMBRA
AÇORES
SANTA MARIA
CASTELO
BRANCO
LEIRIA
04\ STRATEGIC
INITIATIVES
The company lives by its mission statement
“Helping People Live Safer, More Secure Lives”.
We work to provide quality services and adapt our
solutions to changing market needs. We guarantee
customer satisfaction and the sustained economic
growth of the group by:
SANTARÉM
PORTALEGRE
LISBOA
ÉVORA
SETÚBAL
BEJA
\\Developing products that are best suited to each
customer’s protection needs. \
\\Increasing our geographic presence in the major
markets, to bring us closer to our customers. \
\\Strengthening the position of Liberty Seguros, by
applying our values and understanding those of
the Portuguese market. \
\\Promoting the use of new technologies that
will help our distribution channels to provide
an innovative, more effective and more efficient
service. \
18
FARO
\\ Achieving market recognition as a socially
responsible company. \
\\ Alerting society to the issue of road accident
prevention. \\
05\ ETHICS AND COMPLIANCE
Liberty Seguros has had a Code of Ethics and
Professional Conduct for its employees since 1
May, 2005. The code was revised and extended
in October 2008. This code is an adaptation for
Portugal of the Liberty Mutual Group’s Code of
Ethics and Professional Conduct. It is now one of
the most important components, not only of the
in-house rules of Liberty Seguros but also of the
organisation’s culture itself.
It must be remembered that Liberty Seguros was
the first insurer operating in Portugal to have a code
of conduct of this scope. We have published the
code on our website, in compliance with our legal
duty, as an insurance company, to establish and
monitor such codes.
The code establishes important guidelines for
professional conduct. It clarifies which conducts
are permitted and which are prohibited. It also
details the recommended conducts that Liberty
Seguros takes as its yardstick standards.
1\ Conflicts of interest: definition of what is understood by conflict of interest, with examples of
proscribed conduct. \
2\ Use of information: the rules governing the
use of professional information, industrial property
rights, professional secrets, copyright and personal
data. \
3\ Human Resources Policy, including the responsibility of treating staff with dignity and respect. \
4\ Use of Means and Resources belonging to
Liberty Seguros. \
5\ Compliance: this is the pivotal chapter. It deals
with the importance of complying with the law,
rules and regulations, the integrity of financial
controls and public reports, prohibited commercial practices, compliance with anti-competition
laws and prevention of crimes such as money
laundering. \
6\ Report on Violations of the Code of Ethics
and Professional Conduct, which explains the
procedure to be implemented in the event of any
infringement of the code. \\
There is a Declaration and Statement of Responsibility
appended to the code, in accordance with the
provisions therein. This statement is distributed
every year to directors, managers, senior staff and
other key employees. It reminds them of the rules of
the code and provides employees with an opportunity
to identify potential conflicts of interest.
As in 2012, the procedure described above was
applied to all Liberty Seguros employees in 2013,
a total of 484 people.
Compliance at Liberty Seguros is the responsibility of
the Legal & Compliance Office, whose duties include
covering the main aspects relevant to ensuring that
the entire organisation is in a position of legal
conformity, namely:
\\ providing support and responding to all information and legal support needs stemming from the
pursuit of Liberty Seguros objectives; creating
the conditions for observance and compliance
with all legal obligations impacting on the development of the business. \
\\ dispensing legal advice to the board and divi-
19
Report \
sions, providing full information on, clarifying and
resolving all legal issues; ensuring the dissemination and awareness of the legal framework applicable to our business activity. \
\\ ensuring the technical correctness of all contracts to which Liberty Seguros is a party and
ensuring these are in the company’s best interests, reviewing and rewriting clauses as
necessary and supporting negotiations on the
same. \
\\ supervising and controlling the legal coherence
of the clauses in all insurance contracts marketed by Liberty Seguros; wording the general,
special and particular conditions based on
texts proposed by the technical areas, and
reviewing the respective forms and supporting
documents. \
\\ ensuring the technical and legal correctness,
legal conformity and conformity with the rules
and directives of the Liberty Mutual Group of all
in-house standards and regulations. \
\\ performing all the tasks allotted to the post of
Business Ethics Administrator, in accordance
with the definition provided by the Liberty Mutual
Group. \
\\ being a member of the Risk Management
Committee, with the duties set out in the respective definition. \
\\ being a member of the Liberty Seguros Employee
Pension Fund Monitoring Committee. \
\\ designing and running training courses on compliance and insurance law matters for Liberty
20
Seguros employees and also for our network of
agents. \\
In 2013, the exercise of these functions led to a
specific focus on the following risk areas: data
protection and prevention and combating corruption. The risk areas involved in preventing and
combating money laundering, anti-trust practices
and competition are also continuously tracked and
monitored.
All programmes and compliance activities developed by the Legal & Compliance Office are monitored
to ensure that Liberty Seguros has the appropriate
measures in place to effectively manage the risks
inherent in our business operations. Additionally,
supervision of compliance in all Liberty Mutual
Group companies, including Liberty Seguros,
is monitored by the Department of Corporate
Compliance (OCC), from our headquarters in Boston.
06\ RISK MANAGMENT
CONTROL SYSTEM AND
INTERNATIONAL CONTROL
Our risk management policy applies across all company areas. It formally defines the targets for managing Liberty Seguros risk exposure and sets out
the duties, responsibilities and authorisations that
underpin the processes adopted by the company in
meeting our goals. Additionally, it includes warning
and prevention mechanisms designed to protect the
company from potential risks. It also offers an overview and clear understanding of the management of
risk at Liberty Seguros, by the various internal and
external parties involved and the regulatory authority.
The Risk Management Committee analyses and
discuses matters pertaining to risk management
and internal control that are common to the whole
company. This body is charged with defining our
risk management policy and drafting proposals for
the annual review of the same.
The risk management policy is subject to the approval
of the chair of the board of directors and is reviewed
and updated at least once a year. The chairman of
the board of directors has final responsibility for the
decision as to the sufficiency of the risk management
policy, based on the recommendations of the risk
management committee.
We have analysed the specific insurance, market,
liquidity, credit and operational risks and these are
detailed in the Notes to the Accounts in Notes 4.2,
4.3 and 6.16.
The Internal Control - SOX area is responsible
for implementing a system of internal control
over our financial reporting, the effectiveness
and efficiency of our operations and our level of
compliance. In 2013, the area updated the support documentation for a set of operational,
financial and compliance processes whose information processing loops were altered. It also
conducted tests on significant controls, drew
up recommendations for improvement and monitored and tested the implementation of these.
The list of updated processes, controls tested,
inefficiencies encountered and improvements
implemented is included in the annual report
on the “Current Status of the Risk Management
System”, a document that forms part of the
company’s risk management policy.
07\ HUMAN RESOURCES
Human Resources Policy
The Liberty Seguros Human Resources Policy is defined in line with the company’s strategy. It covers
the planning, organisation, coordination and control
of the techniques that support and foster employee
performance. We believe in investing in the ongoing
development and professional growth of our human
capital.
This focus is of significant importance in this troubled
period of economic destabilisation of financial
markets around the world. It is particularly important for us that we develop and consolidate skills,
so we can contribute in a structured and cohesive
manner to a culture governed by values of honesty,
excellence, meticulousness, commitment, team
spirit, customer-centredness and the provision of
quality services.
21
Report \
The primary aim of the policy and strategy of the
Human Resources Division is to provide employees
with the requisite skills; to develop and consolidate
specific customer-oriented skills, so that we may
surpass their expectations and anticipate their
needs.
and by promoting their personal and professional
well-being and life balance. It is this proactive and
customer-oriented attitude and way of being, supported by strong leadership, that makes us so
different in the insurance market.
At Liberty Seguros, we know that our potential
lies in our human capital. HR’s main task is to
retain and develop this potential, by helping employees to manage their expectations and careers
AGE STRUCTURE
< 21
21 - 30
31 - 40
41 - 50
51 - 60
> 60
TOTAL
Training
\\ scholarships partly-funded by Liberty Seguros. \
At Liberty Seguros, we focus on the development
of our employees through internal and external
training courses or other activities. These initiatives
drive us forward and help us meet the challenging
targets that we demand of ourselves.
\\ courses imported from the Liberty Mutual
Group \
\\ partnerships with institutes of higher education
and international business schools that are
directed at the development of specific skills,
through made-to-measure courses for specific
groups of employees. \
22
\\ Liberty Academy: of the various Liberty
Academy activities, it is particularly worth highlighting the willingness of a number of members
of staff to organise and run training modules
and share their knowledge and experience with
others. \
\\ ”Ser Liberty” is a new internal training course,
on which employees reinforce Liberty values
and principles and make joint commitments to
change that will strengthen the team spirit at
Liberty Seguros. \
\\“Na Rota para o Sucesso” is a training course
for employees on management teams. It aims to
develop and strengthen management skills and
encourage the launch and implementation of innovative projects that will benefit the company. \
\\ Team-building initiatives that align actions and
conduct strengthen our teams, bringing them
face-to-face with problems with which they will
have to deal and solve. Individual skills are honed in a scenario that gets everyone involved.
At heart, everything that is experienced in day-to-day life in business surroundings. \\
Liberty Seguros believes that training is both an investment made by the company in our employees,
but also a recognition of their work, for we believe in
their development potential.
Performance Assessment
System
Since 2004, Liberty Seguros has implemented a
performance evaluation system for all employees.
This breaks down into three phases: planning, coaching and evaluation. Within these, managers and
staff are guided by two parameters - objectives
(quantitative) and skills (qualitative). In 2008, Liberty
Seguros complemented this scheme with the
introduction of a 360º assessment system for skills.
There is now more than one assessor (the person,
who self-assesses, their superior, their peers doing
identical jobs, and the team).
The assessment system aims to be a business-focused support tool for objective management.
For this reason, the 360º scheme has strengthened
the assessment of critical skills as well developing all
those who contribute to this goal.
Workplace Excellence
In 2013, Liberty Seguros once again took part in
the Excellence at Work study run by Heidrick &
Struggles and Exame Magazine. In 2010, 2011 and
2012 we came overall first and won first place for
financial institutions. This prize is yet another cause for pride and an incentive for the Liberty family,
and the commitment we have always shown, given
that the evaluation criteria used in this study include
such factors as credibility, respect, impartiality, pride
and comradeship, and that the institution has over
20 years experience of performing studies of this
kind.
Participation in the study has provided Liberty with
a challenging experience, for it has allowed us to
effectively assess our staff’s opinions on the issues
addressed in the study. The result is a resounding
approval of our efforts to provide excellent working
conditions for our employees.
23
Report \
08\ SOCIAL
RESPONSABILITY
Social responsibility is extremely important to
Liberty Seguros as it generates value both for its
employees and for society in as a whole. We feel
that the inclusion of social responsibility in our
business strategy allows us to benefit from the
links we build with the community in our role as a
citizen company.
2013 was particularly marked by the following
initiatives:
\\ Publication of the 1st Sustainability Report \
In the year we celebrated our 10th anniversary
in Portugal, Liberty Seguros published its first
Sustainability Report – “Protecting the Future”.
This provided a concrete insight into a decade of
activity and active participation in the construction of a more sustainable society. \
24
\\ “The 1st Baby of 2013” project \ in line with
our social responsability policy and as mentor of the
Liberty Seguros – “The 1st Baby of the Year“ project,
for the ninth consecutive year, Liberty was proud to
give prizes to the first three babies born after midnight
on January 2013
to celebrate the
miracle of life,
each child was
given a Liberty
Savings insurance policy and an
additional prize of
€500,00. \
\\ “Children of Chernobyl” project \ In partnership with ACLIS (our cultural, recreational and solidarity association), Liberty Seguros continued its
sponsorship of the programme for children who
have been victims of Chernobyl. In 2013, this programme brought 13 more children to Portugal.
They were welcomed by families of Liberty Seguros
employees, business partners and customers.
For five weeks, these children were able to live in
a purer environment, in comfort and with obvious
benefits for their health. The impact of this project
on the lives of these children, and of the families
who generously received them, was extraordinary. \
\\ IPO Solidarity Concert \ On 4 October 2013,
Liberty Seguros was the official sponsor of the
Porto IPO (Portuguese Cancer Institute) Solidarity
Concert. Well-known Portuguese artists, including Pedro Abrunhosa, GNR, Expensive Soul and
Sérgio Godinho, performed at the concert. The
money raised went towards cancer research. \
\\ Liberty Seguros supports pilgrims \ In 2013,
Liberty Seguros once more supported Portuguese
pilgrims, by providing reflective jackets, thus helping
them to make their pilgrimage safer. \
\\ Liberty Seguros donates computer material \
In 2013, Liberty Seguros once again gave its employees the opportunity to buy its end-of-life computer equipment at a symbolic price. Under this
measure, 210 pieces of equipment were bought
and the total value raised was put into a social action account held by Liberty Seguros. This account
has funded several social campaigns over the year.
Several items of equipment were also donated to
care institutions. \
\\ Support for Associação Salvador \ In 2013,
Liberty Seguros continued to support Associação
Salvador, as a patron. This monetary support
allowed Associação Salvador to implement a number of initiatives and awareness campaigns throughout the year, all aimed at helping people with
physical disabilities integrate into society. Liberty
Seguros first started working with this association
in September 2013, providing volunteers for the
“Waves for All” project at Carcavelos beach. The
idea was to offer people with physical disabilities the
opportunity to try out adapted surfing. \
25
Report \
\\ Serve with Liberty \ For the second year in
a row, the Liberty Mutual Group organised the
Serve with Liberty project in all of its business
units. This project was organised into three separate initiatives in Portugal. The first consisted
of collecting an impressive amount of foodstuffs,
which were given to the Legião da Boa Vontade
in Porto and to the Próximo Presente social care
association in Lisbon. The second was the restoration of the garden at the Dominican Sisters’
Institute in Oeiras. Here, a group of volunteers
planted new species of flowers and rebuilt the
wooden surrounds to the flowerbeds, which had
been in a poor condition. This work helped create
a pleasanter and safer place for the children living
at this institution. The third, and last, initiative
was a training course for families and friends of
the insurer’s employees and business partners who
are currently unemployed. The course aimed to
prepare the participants for future job interviews. \
\\ Employee Health \ Liberty Seguros organised
several activities relating to employee health and
well-being, including blood donor drives and flu
vaccinations. \\
26
09\ ENVIRONMENTAL
PROTECTION
\\ Porquinhos Solidários \ In 2013, the
Porquinhos Solidários project was created in
order to pay tribute to Portuguese fire fighters.
For one month, all Liberty Seguros departments
and branch offices were given 2,150 small piggy
banks to sell. A total of €5,000 was raised for
the Miranda do Corvo Fire Service. This donation
will be used to buy protective suits for their fire
fighters. A challenge was also issued to the children of employees, as they were asked to take
part in this tribute by sending drawings and stories about the heroic work of the fire fighters. \\
10\ ROAD SAFETY
\\ Liberty Segura Project \ At Liberty Seguros, we
have always publicly associated ourselves with
the fight against road accidents which, as we all
know, are both a global scourge and also still
occurring on a very worrying scale in our country.
The values of life have always been of great concern to
Liberty Seguros. As a result, we thought it would
make perfect sense to implement, in-house, the ideas
and behaviours we are already encouraging among
the general public. This gave rise to Liberty
Segura Project, a road safety programme aimed
at Liberty Seguros employees and their families.
Through this initiative, we want to encourage a real
culture of safety and to foster, where necessary, the
changing of attitudes and behaviours that can have
an impact on road safety. The project first began in
2012 but grew apace in 2013, with the training of
20 more safety ambassadors. We currently have 52
employee-ambassadors, who set an example with
regard to road safety and whose behaviour influences
all those around them. In addition to training ambassadors, the engagement with employees through
the Liberty Segura Project includes the creation of
communication and information sharing platforms
focused on the theme of road safety as well as quizzes
and events. \
27
Report \
\\ Liberty Seguros paid tribute to road victims \
As part of Liberty Seguros’ social responsibility policy,
we commemorated World Day of Remembrance
for Road Traffic Victims on 17 November, by
implementing a number of initiatives aimed at
making everyone more aware of road safety and
encouraging safe driving on the roads.
As a means of raising awareness of this issue
amongst our employees, business partners, customers and the public in general, we organised an
awareness campaign in all Liberty Seguros branch
offices. Through the slogan “STOP, give the right
of way to life”, we invited everybody to stop, think
and act. The best way of paying tribute to the victims of road accidents is to understand that road
safety depends on each and every one of us and it
is therefore important to remember the thousands
of lives affected by this scourge and to fight for a
change in behaviour that could save many more.
In addition to this initiative, Liberty Seguros once
again joined with Estrada Viva – Liga Contra o
Trauma to pay tribute to all the victims who died
or were injured in road accidents around the world.
28
The main ceremony on “Remembrance Day” this
year took place in Viseu, at Praça do Município.
The programme of activities for the day included,
among many other activities, a trip around the city,
in tribute to the people who have died or been
injured in road accidents. The Bishop of Viseu,
D. Ilídio Pinto Leandro, also said a mass, in honour
of the victims, which included a performance by
the Mozart Choir, in Viseu Cathedral. \
\\ National Road Safety Project \ In line with
our social responsibility policy and our work
in the area of road safety, Liberty Seguros established a partnership with “Automóvel Clube
de Portugal” (ACP) for its National Road Safety
Education Programme – ACP Kids. This pilot road safety education project is intended to
make young children more aware and to encourage
safe behaviour on the road. The campaign was
developed in two phases. The first phase was
implemented during the 2012/2013 academic
year, as a pilot project, and focused solely on
pre-school and first and second year primary
school children in Lisbon and Porto. The second
phase will be implemented in the coming years
and will involve a total of around 50,000 students and 3,000 teachers. The aim is to educate
and instil safe behaviour in younger children so
that, when they are adults, their behaviour on the
roads will not be what can be seen today, which
is completely unacceptable. The National Road
Education Programme – ACP Kids was supported
by the National Reading Plan and the School
Library Network, the Ministry of Education, the
Ministry of Internal Affairs and the International
Automobile Federation. As a complement to this
programme, ACP and Liberty Seguros organised
various road shows involving a simulated road
environment that helped children and adults
understand the care that needs to be taken on
the road. Several roadshow visits were made to
school groups in Lisbon and Porto during April,
May and June. There was also a specific roadshow
for the general public in Lisbon, Porto and
Coimbra. Liberty Seguros was present at these
roadshows, with a campaign called “The Road
ABC”. We created a specific space for playing
games and organised several initiatives that
addressed road safety. One of these initiatives was
a board game that, through play and the use of
road signs and rules, taught children everything
that they need to know about safe behaviour on
the roads. Road safety postcards and stickers
were given out and there was even time for some
musical entertainment. \
\\ Liberty Seguros supports the Road Safety
on 2 Wheels campaign \ In 2013, the Youth
Foundation launched its “Safety on Wheels”
campaign, with support from Liberty Seguros.
This road safety and education campaign was
aimed at making young riders and potential
riders of motorbikes more aware. The Youth
Foundation produced a film with a positive message
for this campaign. The film focused on safety,
complying with the rules and not overdoing things. A
part of the “Safety on Wheels” campaign a number of information sessions and debates were
held at secondary schools in the 12 districts with
the highest youth road accident rates. Liberty
Seguros was present in these sessions through its
“I Respect the Road” ambassadors Aurora Cunha
and Salvador Mendes de Almeida. The general
aims of this campaign included civic education,
29
Report \
the prevention of risk behaviour and the creation
of a culture of prevention and promotion of road
safety. The target audience was young people
aged between 14 and 18 years, mainly secondary
school students. \
30
\\ Liberty Seguros campaigns against using
mobile phones while driving \ In 2013, Liberty
Seguros launched an awareness campaign for
the prevention of road accidents caused by the
use of mobile phones while driving. This social
responsibility and road safety initiative was implemented through the “I Respect the Road” movement. “Better to miss a call than lose your life”
is the motto of the Liberty Seguros campaign,
which aims to encourage drivers not to use mobile phones while driving. The message of the
campaign is transmitted through a single image
– the screen of a mobile phone – and tells the
story of a father who answers a call while driving
and speaks to his wife. He ends up having an accident. Liberty Seguros wanted this campaign to
attract the attention of drivers without using any
shocking images and alert them to the dangers
of using mobile phones while driving. In the film,
the seriousness of the accident is transmitted by
the background sounds and the destruction of
the mobile phone. The simplicity of the film leaves
room for each person to project their own experience and mentally construct their own film, adding
further drama. \
\\ The Road ABC \ When
we want to connect with children, you have to talk about fun.
The best way to teach is precisely
the method that uses the fun side of
things. And for learning, the best thing is
to start at the beginning - with the ABC. In
2013, Liberty Seguros developed a new way of
communicating with younger children, as part of
our social responsibility policy and road safety
work and following on from the concept created for the “I Respect the Road” movement. We
aim to communicate with younger children on
road safety themes through our “The Road ABC”
scheme. The intention is to use early learning codes
to help them understand respect on the road
and road safety. One of the mechanisms we use
for transmitting these codes is the “Let’s play
in the garden” board game, a fun way to learn.
In this game, the participants show what they
know about road safety through the questions
asked at each space they land on. Children
learn, in a fun way, to follow the road carefully,
complying with the rules of the road. Everybody
is a winner and the aim is to reach the last space and show you know the rules. Our desire is
that the generation that is learning the Road
ABC today will be the one that respects the road
tomorrow. \\
31
Report \
11\ SPORTS
SPONSORSHIP
\\ 75th Liberty Seguros Volta a Portugal tour \
The Liberty Seguros “Volta a Portugal” cycling
tour hit the road from the 7 to 18 August. The tour
was accompanied at every stage by the enthusiasm,
energy and unity of the renowned “Onda Azul”
(blue wave), made up of employees, business
partners, friends and fans of the sport who did not
miss the chance to support the “asphalt champions”. The tour celebrated its diamond anniversary
in 2013, with Liberty Seguros as the main sponsor.
The yellow jersey, worn by the leader and the iconic
symbol of the competition, once again carried the
company’s logo. Rejuvenated by every year that
32
passes and proud of its history, the Volta a Portugal
tour celebrated its 75th year as a major symbol of
Portuguese identity. This important and symbolic
event was filled with much joy and was bedecked
in the colours of the “Onda Azul” who, impervious
to the heat of the August sun, made their presence felt at the side of the roads to support the
pedalling “asphalt warriors”. In total, 1,607.2 km
were covered over 11 days of racing. This year,
after three consecutive years of welcoming the final
stage, Lisbon hosted the start, from the heart of
the city, while Viseu, in the midst of its São Mateus
Festival, hosted the finish. In the 2013 event, the
“Onda Azul” and the ambassadors, Aurora Cunha
and Cândido Barbosa, travelled throughout
Portugal, displaying, once more, their enormous
passion for cycling, in the year that Liberty Seguros
celebrated our 10th anniversary in Portugal. \
\\ Race for Charity \ As part of its social responsibility policy, this year Liberty Seguros chose
Europacolon Portugal, an intestinal cancer association, as the beneficiary charity for the 75th
Liberty Seguros Volta a Portugal tour. In addition
to a spot at each day’s tour fair, right next to the
Liberty Seguros stand, our support resulted in a
donation of €3,000. For each registration in the
tour stage, we donated €5. The final amount was
presented on 13 August, a rest day for the professional cyclists, in Oliveira do Bairro. The donation
will allow the association to carry on its work of
raising awareness among the general public about
a disease for which prevention methods are still
relatively unpublicised and which causes the death
of more than 10 people every day in Portugal.
It could be controlled and treated if there was
screening of the whole population. Before the
10th and final stage of the 75th Volta a Portugal
tour, Europacolon and Liberty Seguros, along
with the ambassadors, Cândido Barbosa and
Aurora Cunha, released blue and white balloons
and there was a minute’s silence for the victims of
intestinal cancer. \
\\ Portuguese Cycling Federation - Fight for
Clean Cycling \ For the 4th year in a row, Liberty
Seguros sponsored the National Cycling teams.
Through this support, the company shows its appreciation to cycling for the brand awareness it
has in Portugal, seeking to use this partnership to
develop its anti-doping campaign as well as to
support the training of new generations of cyclists.
In addition to sponsoring the national cycling teams, the protocol also supports the organisation
of the Junior Volta a Portugal tour, the Volta a
Portugal tour for cadets and the National Meeting
of Cycling Schools. Ethics and the fight against doping underpin this agreement, so all of the cyclists
invited by the national team/Liberty Seguros are
subject to testing and controls. Each athlete
builds up a health file that provides a historical
record and helps prevent the use of drugs. This
year, cycling was a double winner in the national
sports gala, winning two of the most coveted prizes. The national road coach, José Poeira, was
considered the best coach of the year and the
cyclist, Rui Costa, won, for the second year in a
row, the prize for best Portuguese athlete of the
year. This was the result of a brilliant season, with
his triumph in the World Road Championship
adding a finishing touch to a season in which
he won such important victories as the Tour de
Suisse and two stages of the Tour de France.
In 2013, José Poeira and Rui Costa were also
honoured by the Portuguese Cycling Federation,
which awarded both of them Member of Merit
diplomas. In 2013, the UVP-Portuguese Cycling
Federation was honoured by the Portuguese
Anti-doping Authority (ADoP) with the Partner
of the Year diploma for its fight against doping. This was in honour of its implementation
of the National Anti-doping Programme, in the
form of the Athlete Localization System and the
Biological Passport strategy. It was the first time
that ADoP has awarded this prize. \
The award came in a historic year for Portuguese
cycling. Rui Costa won the gold medal in the elite
world road race, Rui Oliveira took home the silver medal at the junior European track event and
the bronze medal went to Ivo Oliveira in the junior world track event. In 2013, the FPC brought
one of the most iconic events back to Lisbon, by
commemorating the centenary of the “Subida à
Glória” (Rise to Glory) cycling event. More than just
a competition, the centenary race of the “Subida
à Glória” uphill climb, near the Glória funicular,
a national monument, closed the International
Conference on the History of Cycling. It proved
to be an enormous hit, completely fulfilling the
objective of bringing bicycles and cycling into
everyday Lisbon life and enlivening the Bairro Alto
neighbourhood even more than normal. \
33
Report \
\\ Sport Ciclismo São João de Ver Teams \
Liberty Seguros/Santa Maria da Feira/KTM is the
name given to the cycling training teams at Sport
Ciclismo São João de Ver club, in Santa Maria
da Feira. This part of the country has produced
many winners of the Volta a Portugal tour, which
was once again sponsored by Liberty Seguros
in 2013. Through this support, we hope to encourage the development of “clean” cyclists and
respect for the principles of sporting ethics. To
this end, we offer training courses on doping
and its consequences. Our aim is also to strengthen
cycling in the training schools preparing the
cyclists of the future. This team has helped form
a new set of values for Portuguese cycling and
is supported by Liberty Seguros for the work
that it has done in raising awareness amongst
future cyclists of the importance of practising
their sport in an ethical, correct, hard-working
and group-oriented spirit. The results are plain
to see, with cyclists from this club finding the
kind of future with top-flight international teams
that would never be open to them in Portugal.
The club also organised the 3rd, and best-ever
attended, Memorial to São João de Ver cyclists.
This popular event closes the season’s sporting
calendar and the club’s activities programme.
This year, it included a new social aspect,
associated with Grupo Sócio-Caritativo de São
João de Ver (a group which supports the needy).
On the recommendation of the UVP-Portuguese
Cycling Federation (FPC), Sport Ciclismo de São
João de Ver was named the Personality of the
Year 2013, at the 18th Sports Gala, organised
by the Portuguese Sports Confederation. This is
an award at the highest level, for the work done
in cycling training. \
34
\\ 5th Liberty Seguros Grand Prix \ In 2013, the
5th Liberty Seguros Grand Prix – “Tour of the Lands of
Santa Maria” took to the road for the first time under
the organisation of Sport Ciclismo de São João de
Ver. The 4th Sports Medicine in Cycling Conference
was held at the same time as the race. This year, the
main speaker was the chairman of the Portuguese
Anti-doping Authority (ADoP), Luís Horta. The race
ended with the traditional and demanding stage to
Feira Castle, won by Galician Delio Fernández, who
received a warm and enthusiastic welcome from
Onda Azul. Alves Barbosa and Joaquim Andrade,
the cyclist from Feira who won the Volta a Portugal
tour, Onofre Tavares and Mário Silva, the only cyclist
from Santa Maria da Feira to compete in the Olympic
Games and former winner of the tour, were all honoured during the four days of the event. \
\\ Support fo Olympic
athlete David Rosa \
In 2013, Liberty Seguros
began a partnership and
sponsorship
agreement
with the young athlete, David
Rosa, the first Portuguese
athlete to make a mark in
the cross-country cycling
event at the 2012 Olympic
Games. He achieved 23rd
place in the race held at
Hadleigh Farm (Essex United Kingdom). David
Rosa is a talented young
cyclist and has already won seven National
MTB Championships, five
Olympic Cross Country
titles and two uphill championships. He is now one
of the faces of the Portuguese Cycling Federation’s
campaign – “Pedalling Safely is a Right”. The
company’s support is designed to acknowledge and reward David Rosa’s sporting success
in recent years. We hope it will be the incentive
he needs to achieve his sporting objectives and
to succeed in his world-class athletic mission of
taking part in the Olympic Games for the second
time. \
\\ ABC de Braga \ In 2013, we strengthened our
connection with, and support for, competitive
sports, with the establishment of a new partnership, this time with handball. We are sponsoring the ABC de Braga/UMinho team in the
2013/2014 season. Our support for the team is
aimed at developing handball at ABC and increasing the interest in this sport in the academic environment of Minho University. Liberty Seguros is
the official sponsor of ABC Braga/UMinho for all
games on the national championship calendar.
This partnership marks the company’s return to
handball, a sport it has supported in the past.
ABC de Braga is one of the best training schools
for handball in Portugal and is well-known at the
European level. \
\\ Water Polo \ During the 2013/14 sports season,
Liberty Seguros will be continuing to support the
Porto University Sports Centre Water Polo Team –
CDUP/Liberty Seguros. \
\\ MTB Downhill \ Young Emanuel Pombo and
his MTB Downhill team were once again supported by Liberty Seguros in 2013. The team, called
Liberty Seguros/Specialized-Cetelem consists of
Emanuel Pombo, Daniel Pombo, Patrick Talas
and Pedro Silva. These are young, charismatic
athletes whose winning attitude and competition
experience have led the team to the podium over
100 times. In addition to the excellent results this
season, Emanuel Pombo is the team spokesman
and one of the ambassadors of the Liberty Seguros
“I Respect the Road” movement. The Madeira
team CicloMadeira won the fourth consecutive
team title in the National Championship this year. \
35
Report \
\\ 2013 International Pairs Golf Circuit \ In 2013,
Liberty Seguros continued to support the major
golf tournaments organised by VIQ Golf. Thus,
for the seventh consecutive year, Liberty Seguros
maintained its support for golf in Portugal and
its willingness to promote golf tournaments. We
were the main sponsor of the 2013 International
Pairs Golf Circuit. Widely accepted as the most
important golf tournament for pairs in the world,
and organised by VIQ Golf, this circuit involved
events at a number of clubs and courses around
the country. The winning pair will go on to represent Portugal in the world final at Loch Lomond
(Scotland). \
\\ VIII Liberty Seguros Pro-Am Golf Trophy \ For
the eighth consecutive year, Liberty Seguros held
the Liberty Seguros Golf Trophy. In 2013, the
event took place at the Oceânico Victoria Golf
Course in Vilamoura. It brought together around
100 golfers in an event which, over the years, has
earned a growing reputation on the Portuguese
golf scene. This year, the event had a new twist,
as it was a Pro-Am tournament that included
professional golfers who had taken part in the
PGA Open in the days before the tournament. \
36
\\ Liberty Seguros ADSL School \ In 2013, Liberty
Seguros, along with Matosinhos Municipal Council,
supported the Liberty Seguros ADSL – Associação
Desportiva Sentido Livre MTB School, a cycling
school concentrating on MTB and providing free-time activities for children aged 6 to 14 and young
people from 15 to 18. The programme focuses on
training and supporting the athletes. “Ciclas” is the
project mascot. \
\\ Partnership with the Portuguese Golf
Federation \ In 2013, Liberty Seguros established
a partnership with the Portuguese Golf Federation,
as its official insurer. The deal includes sponsorship
of the FPG’s principal circuit and circuit drive for
young people. This sponsorship encourages
young people to take up golf, while also supporting
the more preponderant age group playing golf in
Portugal. Through this initiative, the company supports
future golfing talent in Portugal and helps Portugal
maintain its leading role in the sport. \
\\ Runs & Walks \ In 2013, we maintained our firm
partnership with RunPorto.com. The objective is
to promote and publicise healthy outdoor lifestyles and practices by holding runs and walks
in the Greater Porto Area. In this scheme, Liberty
Seguros has the important role of official insurer
for most of the events organised by Runporto. In
2013, over 150 thousand people ran or walked
in these events, thus fulfilling our clear commitment
to healthy outdoor sports events, whether family
or competition based, in which part of the revenue
is donated to charitable causes.
37
Report \
This year, Póvoa de Varzim played host to one of
the biggest health events, the 4th Liberty
Seguros Charity Run & Walk. A total of 3,218
participants, of various generations, took part
to help us achieve a common objective: running
and walking to help two institutions, Fundação
Filos – “Casa da Ritinha” and Casa “O Regaço”,
both social causes that are important to the participants. The event was organised by Runporto
and this year two big names in sport, Aurora
Cunha and Cândido Barbosa, were also present.
Apart from being Liberty Seguros “ambassadors”, they were also the event’s “godparents”.
As an official sponsor, this event is yet one more
proof of our care about social care. The money
raised from entry fees, which came to a grand
total of €9,654, went to Fundação Filos – “Casa
da Ritinha” and Casa “O Regaço”, with €4,827
going to each institution. This closed out a year
filled with sporting events that set records for
participation and celebrated important events,
as was the case with the 10th Porto Marathon
and the 20th anniversary of the prestigious race,
“Liberty Seguros São Silvestre Cidade do Porto”.
Almost 16 thousand people filled the main city
centre streets in Porto for the competitive race
and the mini-walk. \
38
\\ Liberty Classics Team \ Liberty Seguros has
two classics teams on the road to publicise Liberty
Auto Clássicos, private motor vehicle insurance
that covers compensation for own damage to light
vehicles certified as classic vehicles. The classic
teams are comprised of the Liberty Classic Team
(driver: Eugénio Costa and ELS Viseu Manager)
and the duo Rui Osório (driver) and Armando Jorge
(navigator) who participate in races and drives organised by classic car clubs all over the country. \
\\ TrialPortugal.net Team \ In 2013, Liberty
Seguros once again supported the TrialPortugal.
net team in promoting trial biking in Portugal. João
Sousa still dominates the Portuguese trial biking
scene, winning his fourth consecutive national trial
biking title this year. The four-time champion from
Minho is the only Portuguese to hold the elite national champion title, having won the four National
Championships held so far. The team’s trial bike
exhibitions are one of the high points of the various
stages of the Liberty Seguros Round Portugal tour,
as they allow the riders to show off their expertise
and dedication to this type of cycling, which captivates all those who get the chance to see it. \
\\ 2nd Liberty Seguros Peace Walk \ The 2nd
Liberty Seguros Peace Walk was held in Fátima
on the 10 March. The event was organised by
the Fátima Athletics Group, with support from
Liberty Seguros. The objective was to encourage
people to do sports and to bring athletes and
local community institutions together, promoting cooperation and solidarity between all. This
2nd event had 3,500 participants and the event’s
“godfather” was the singer Marco Paulo. It began
near the Santíssima Trindade Church, where the
Portuguese representative at the Indoor European
Championships in Gothenburg, Tiago Marto, an
athlete from the Fátima Athletics Group and recent
National Heptathlon Champion, was presented
with a merit plaque for his performance in Sweden.
Aurora Cunha, “godmother” of the 1st Liberty
Seguros Peace Walk, handed the torch of peace
over to Marco Paulo, thus marking the beginning
of the event. The walk stopped off the Chapel of
the Apparitions in Fátima, where a peace ceremony
was held. It then carried on to complete all 8 kilometres of the route. The money raised at the event
was donated to the Fátima Athletics Group and
social welfare institutions. \
\\ Liberty Seguros – Mythical Moutains Trophy \
In 2013, the Liberty Seguros Mythical Mountains
of Portugal Trophy took to the road again. Various
national cycle tourism events were held amidst
some of the most beautiful mountains in the
country. \\
39
Report \
12\ INSTITUTIONAL
PROJECTS
\\ Liberty Seguros associates itself with the
“Bike to Work“ initiative \ Liberty Seguros took
part in the 3rd “Bike to Work Day”, a campaign for
companies/institutions based in Lisbon. The objective
was to encourage employees to cycle to work on
20 September 2013, raising awareness to the need
to reduce the environmental impact of urban mobility. This initiative was part of the programme for
European Mobility Week (16 to 22 September).
It was promoted by Lisboa E-Nova – Municipal
Environment Energy Agency, with the support
of Lisbon Municipal Council and the Portuguese
Cycle Tourism and Cyclists Federation, among
others. The idea was to encourage employees,
plus students from the various Lisbon universities, to use less harmful means of transport. The
“Bike to Work” initiative was part of the Lisbon
Municipal Council’s official programme of events.
This year, the city is going to be a candidate for
the European Mobility Week Award, organised by
the European Commission. This award recognises those cities that, through their municipal councils, are most committed to what is considered
to be the biggest ever awareness campaign for
sustainable mobility. The Liberty Seguros Award
(Level A) was presented to the European Blue
Flag Association. \
40
\\ Liberty Seguros provides mobile support
unit for natural disasters \ Liberty Seguros has
now launched yet another innovative concept in
Portugal. This one is aimed at providing fast and
committed support to our customers and business partners. We have created a mobile unit
that is specially equipped for assisting customers
in emergency situations, such as natural disasters, something that is becoming increasingly common these days. This mobile unit allows Liberty
Seguros to operate in the field in a manner quite
unlike any other insurer. The unit allows us to
respond faster and more fully in the highly delicate situations that often arise following a natural
disaster. The main objective of this new mobile
unit is to provide prompt protection for Liberty
Seguros customers and partners, with the aim
of allowing customers to rebuild their lives as
soon as possible. This unit will make it possible
to carry out full claims settlement, assessing
and quantifying damage, as well as activating
the processing of the corresponding compensation on the spot. The mobile unit, which can
be deployed promptly anywhere on mainland
Portugal, means Liberty Seguros can provide an
on-the-spot service in particularly difficult
situations, allowing us to adhere to our com-
pany motto: for the protection of the values of
life. \
\\ Liberty Seguros launches “Guardian Angel”
project \ In 2013, Liberty Seguros launched an
innovative project in partnership with “Associação
Perdas & Afectos”, called “Guardian Angel”. This
is aimed at helping people who are grieving or
suffering from trauma and post-traumatic stress
disorder (PTSD) or acute stress disorder (ASD),
due to the death of a family member or if they
themselves have been disabled as a result of car
or work accidents and where damage liability has
been accepted by the company. The new project
consists of support and psychological intervention,
with the objective of helping those grieving deal
with this traumatic experience. The overall aim is
to help people return to the physical, emotional
and occupational balance they had enjoyed before
the incident, thus giving injured parties greater
functional independence. This intervention consists of a therapy plan that may be implemented
in hospital, at the injured party’s home or at the
Liberty Seguros Clinical Centre in Hospital de
Santa Maria, Porto. \
41
Report \
\\ Liberty Seguros was the Official Insurer for the
2013 Leadership Grand Conference \ The Porto
Business School Leadership Grand Conference
is a one of a kind conference in Portugal. Each
year since 2010, it has brought 1,000 leaders to
the iconic Casa da Música, in Porto. This is an
innovative half-day programme where the latest
leadership ideas and trends are presented. “GREAT
LEADERS ON LEADERSHIP” was the theme of
the 2013 Porto Business School Leadership
Grand Conference. The line-up for this year included
three charismatic leaders, with experience in
very different areas: Linda Rottenberg, Sir Terry
Leahy and François Pienaar. An inspiring and
unique training programme that explored the
concept of leader, focusing on the different
characteristics that make leaders exceptional
and unique. This was a memorable conference,
with Liberty Seguros once again acting as the
Official Insurance Provider for the 2013 event. \
42
\\ Liberty Seguros sponsors the 2013 QSP
Summit \ The QSP Summit is one of the most
prestigious marketing conferences in Europe. The
first QSP Summit was in 2007. Each year, it debates the key current questions in management,
marketing and branding. Leading experts and
companies from around the world are invited. This
unique event brought together around 1,000 participants to listen to major thinkers and experts.
It is one of the most reputable marketing events
in Europe, in part thanks to the sponsorship of
Liberty Seguros. \\
13\ MACROECONOMIC
BACKGROUND
uncertainty and increase confidence, which, in
turn, has made way for an improvement in financial
conditions.
Global Economy
The role played by the central banks was also
critical. Their swift cutting of interest rates and the
unconventional steps taken to inject liquidity and
sustain credit all helped.
Despite the profound global crisis resulting from
the turmoil in financial markets, the world economy
performed quite positively in 2013. State intervention, begun in 2009 in many advanced and emerging economies, contributed to this performance
by helping to support demand, launching major
fiscal stimulus programmes, supporting bank
guarantees and implementing quantitative easing.
Together, these measures have helped to reduce
However, the strong performance of the Asian
markets was absolutely critical. This is particularly
true of China and India, who both contributed
significantly to overall global growth of around
2.9%.
REAL GDP GROWTH
15%
10%
5%
0%
-5%
-10%
2009
World
Advanced
Economies
2010
Euro Area
2011
USA
UK
2012
Japan
Portugal
Emerging and
Developing
Economies
2013
China
2014
India
Russia
Brazil
Source: IMF 2013
43
Report \
In 2014, global growth is expected to stand at about
3.6%. The strong momentum will continue to be
supported by the emerging economies, and there
will continue to be some financial and sustained
economic growth uncertainties among the advanced
economies. In the specific case of Europe, those
economies that have experienced sovereign debt
crises since November 2010 will continue to require
periodic reassessments of their growth prospects.
EURIBOR (3 MONTHS)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
dec
jun
2013
dec
jun
2012
dec
jun
2011
dec
jun
2010
dec
jun
2009
dec
jun
2008
dec
jun
2007
dec
jun
2006
dec
2005
dec
jun
dec
2004
jun
0.0%
Source: Banco de Portugal
44
EURO / DÓLAR
1.7
1.5
1.3
1.1
0.9
0.7
dec
jun
jun
2013
dec
2012
dec
jun
2011
dec
jun
2010
dec
jun
jun
2009
dec
2008
dec
jun
2007
dec
jun
2006
dec
jun
2005
dec
jun
dec
2004
PORTUGUESE ECONOMY
Macroeconomic Indicators
2009
2010
2011
2012
2013
Gross Domestic Product
-2.9%
1.9%
-1.3%
-3.2%
-1.7%
Real Private Consumption
-2.3%
2.5%
-3.3%
-5.4%
-2.3%
Real Public Consumption
4.7%
0.1%
-5.0%
-4.7%
-2.6%
-10.9%
10.2%
6.9%
3.2%
5.9%
-8.6%
-3.1%
-10.5%
-14.3%
-8.9%
9.5%
10.8%
12.7%
15.6%
16.7%
-0.9%
1.4%
3.6%
2.8%
0.5%
Exports
Investiment
Unemployment Rate
Consumer Price Index
Source: OECD
45
Report \
Portuguese Economy
The Portuguese economy continues to suffer the
effects of the global economic and financial crisis,
but also from an absence of structural reform and
sustained development and any putative increase
in the competitiveness of the economy.
The bailout plan negotiated between the Government
and the Troika provided a loan of €78 billion over the
period 2011 to 2014 and imposed a set of austerity measures aimed at consolidating the country’s
public accounts. There has been some growth in
revenue due to tax increases and some cost reductions achieved through cuts in various areas of public
spending. Implementation of these measures has
had a negative impact in terms of unemployment,
disposable income, consumption, savings, debt and
emigration.
Meanwhile, the world’s main rating agencies have
successively downgraded the credit rating of the
Portuguese Republic, exacerbating financial instability.
Over the past ten years the Portuguese economy
has grown around 0%. The Bank of Portugal has
forecast GDP growth for 2014 and 2015 of around
0.3% and 0.7%, respectively. As regards other
indicators, a decrease of 2.3% is expected for
public consumption and an increase of 0.3% for
private consumption. Domestic demand, exports
and imports are expected to rise by around 0.1%,
5.5% and 3.9%, respectively.
REAL GDP GROWTH
7.5%
5.0%
2.5%
0.0%
-2.5%
-5.0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: OECD
46
CONSUMER PRICE INDEX
18%
15%
12%
9%
6%
3%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: OECD
UNEMPLOYMENT RATE
5%
4%
3%
2%
1%
0%
-1%
-2%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: OECD
47
Report \
Following the volatility seen in recent years, with
long periods of decline and some of recovery, there
was a significant growth in the major world indices
in 2013. The NIKKEI 225, Nasdaq, S&P 500, Dow
Jones, Dax Xetra, IBEX 35 and Euro-Stoxx rose
56.7%, 38.3%, 29.6%, 26.5%, 25.5%, 21.4%,
17.90% respectively. The PSI 20 increased 16%
compared to 2012.
PSI 20
16,000
14,000
12,000
10,000
8,000
6,000
dec
jun
2013
dec
jun
2012
dec
jun
2011
dec
jun
2010
dec
jun
2009
dec
jun
2008
dec
jun
2007
dec
jun
2006
dec
2005
dec
jun
dec
2004
jun
4,000
48
14\ INSURANCE MARKET
6.3% in 2012 to 7.3 % in 2013.
Given that the insurance industry is a reflection
of what happens in the economy, this sector,
too, has experienced a slowdown, one that worsened during 2013. In 2013, and in line with the
shrinking Portuguese economy, business in the
insurance sector also decreased. According to the
Portuguese Insurers Association (provisional data)
non-life business decreased by 3.5%, whereas life
business increased by 26.3%.
The main contributors to the (26.3%) growth in the
life business were the reinvestment of family savings in
PPR pension schemes and savings products. For
these two areas, year-on-year turnover rose by
39.9% and 32.5%, respectively.
The volume of total direct premiums increased,
according to the APS, by 15.5%, to stand at €12
billion and therefore the proportion of GDP accounted for by the insurance industry rose from
Non-life insurance declined by 3.5% in 2013. This reduction can be largely explained by falls in workers’
compensation (8%), reflecting the current situation
in the business world, with the growing number of
bankruptcies, and also mirroring the growing unemployment rate of around 17%. Another area to see a
fall was Auto insurance (5.5%).
NON-LIFE DWP GROWTH
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
2009
Liberty
2010
2011
2012
2013
Market
Note: For the purposes of comparison, the Liberty Seguros numbers from 2009 to 2013 include premiums at Génesis Seguros Generales,
Sociedad Anónima de Seguros y Reaseguros, Sociedad Unipersonal Sucursal em Portugal.
49
Report \
Growth performance at Liberty Seguros has
outstripped the rest of market, not just in 2013,
but ever since we moved into Portugal. This performance is largely due to the relationship that
Liberty Seguros establishes with its partners and
customers.
Liberty Seguros Indicators
The year under review, the tenth full year of business in Portugal for Liberty Seguros, was marked by real consolidation of the previous year’s
results. Liberty’s move into Portugal has been a
success not only in terms of the improvement of
the various management indicators but also, and
consequently, of results. The year in question
was quite a productive one, with net profits of
8 million, 4 million less than the amount earned
in 2012.
2011
2012
2013
DWP *
240,199
258,456
262,824
Non-Life
216,686
236,138
241,143
23,513
22,318
21,681
240,199
258,457
262,824
27,677
27,864
30,605
5.4%
6.1%
6.4%
GWP Growth Rate (Life + Non-Life)
10.0%
7.6%
1.7%
GWP Growth Rate (Non-Life)
12.2%
9.0%
2.1%
Loss Ratio (Non-Life) **
64.7%
64.8%
64.9%
Net Income *
14,131
12,167
7,988
6.2%
4.9%
3.1%
Life
GWP *
Outward Reinsurance Premiums *
Market Share (Non-Life)
Net Income * / GWP *
50
15\ LIBERTY SEGUROS BUSINESS ACTIVITY
Liberty Seguros Indicators (cont.)
2011
2012
2013
Headcount
485
481
493
DWP by Headcount *
498
535
540
980,654
1 082,608
1,147,575
2,032
2,241
2,356
Net Assets *
678,792
709,909
684,294
Total Investments *
633,147
664,886
632,532
Equity *
116,954
145,278
151,989
Technical Provisions *
515,640
510,331
493,410
Life Reserves *
235,362
217,006
209,357
Non-Life Reserves *
211,870
210,231
199,218
Gross Claims *
159,530
183,225
178,509
Net Claims *
152,435
173,717
167,843
Net Expenses *
73,001
79,657
79,974
ROE
12.3%
9.3%
5.4%
218.1%
297.8%
264.1%
Policies in Force
Policies in Force by Headcount
Solvency Margin
* Figures in thousands of euros
** Rate calculated based on cost of claims net of reinsurance and net premiums earned.
51
Report \
Production and Policies
Overall, Liberty Seguros achieved a volume of gross
written premiums of 262.8 million euros, which
represents a 1.7% increase over the previous year.
The non-life business earned 241.1 million euros
in gross written premiums and the life business
earned 21.7 million euros, a year-on-year increase
of 2.1% and a decrease of 2.9%, respectively.
Thousands of Euros
LIBERTY SEGUROS (LIFE + NON-LIFE)
Policies
285,000
1,250,000
265,000
1,100,000
245,000
950,000
225,000
800,000
205,000
650,000
185,000
500,000
165,000
2009
DWP
2010
2011
2012
2013
Policies
in Force
52
LIBERTY SEGUROS - DWP GROWTH RATE
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
2009
WC
2010
Property
& Homeowners
Motor
2011
Other
2012
2013
Life
LIBERTY SEGUROS - BUSINESS MIX
100%
90%
12.8%
11.7%
9.8%
8.6%
8.2%
51.6%
52.2%
54.3%
55.5%
55.2%
18.3%
18.5%
18.7%
19.5%
20.3%
12.4%
12.4%
12.1%
11.6%
11.3%
2009
2010
2011
2012
2013
80%
70%
60%
50%
40%
30%
20%
10%
0%
WC
Property & Homeowners
Motor
Other
Life
53
Report \
POLICIES IN FORCE BY HEADCOUNT
2,500
2,356
2,250
2,241
2,000
1,750
1,500
2012
Operating Costs
Total operating costs at Liberty Seguros amounted to
80 million euros. This was 0.4% higher than the 79.6
million euros spent the previous year. Acquisition
costs decreased by 1.1 million euros.
2013
Non-life operating costs amounted to 73.7 million
euros, up €2.2 million from the 2012 figure.
The operating ratio for the life business stood at
29.2% of direct written premiums, roughly the
same as it had been in in 2012.
The Company’s administrative costs amounted to
17.3 million euros, an increase of 6.3% (or 1 million
euros) over the previous year.
% of premiums
Costs
2011
2013
Net Operating Costs
30.4%
30.8%
30.4%
Acquisition Costs
26.0%
26.3%
25.5%
6.8%
6.3%
6.6%
Administrative Costs
54
2012
Reinsurance
LIBERTY SEGUROS - OUTWARD REINSURANCE RATE
13%
12%
11%
10%
9%
8%
7%
6%
5%
4%
2009
2010
2011
2012
2013
Change in Outward Reinsurance Rate
Investments
Figures in thousands of euros
Investments
Bonds
2011
2012
2013
631,381
663,267
630,280
466
621
1,327
Funds
1,203
999
925
Deposits
3,342
2,860
4,428
97
0
0
Total Investments
636,489
667,746
636,960
Non-Life Portfolio
297,374
323,003
319,425
Life Portfolio
305,233
295,358
271,960
30,540
46,525
41,147
Common Stock
Other
Free Portfolio
55
Report \
Investments
2011
Common Stock
2012
2013
466
621
1,327
Government Bonds
183,182
186,810
202,633
Corporate Bonds
448,199
476,457
427,646
Funds
1,203
999
925
Other
97
0
0
633,147
664,886
632,532
TOTAL INVESTMENTS
Investments
2011
2012
2013
Activity Sector
Government
183,182
186,810
202,633
Financial
155,103
167,750
170,484
Utilities
95,253
96,314
92,872
Communications
60,650
66,627
66,144
Consumer - Cyclical
28,860
28,445
15,501
Energy
21,338
21,614
12,248
Consumer - Non Cyclical
23,046
25,229
22,906
Industry
22,642
29,752
18,566
Basic Materials
29,535
26,534
23,605
Other
13,540
15,811
7,573
633,147
664,886
632,532
TOTAL INVESTMENTS
56
Investments
2011
2012
2013
Rating
AAA to AA
165,310
152,347
144,486
AA- to A-
256,083
237,767
168,220
BBB+ to B
209,673
273,153
317,573
2,081
1,619
2,252
633,147
664,886
632,532
Other
TOTAL INVESTMENTS
Given the economic conditions experienced in
2013, Liberty Seguros focused on short-term liquidity
management that prevented significant losses
arising from increased levels of redemptions.
Investments
2011
2012
2013
Maturities
< 1 year
63,471
86,675
71,087
1 to 3 years
121,196
134,689
128,477
3 to 5 years
109,042
104,195
111,039
5 t 10 years
203,919
184,575
195,122
> 10 years
134,196
153,133
124,555
1,323
1,619
2,252
633,147
664,886
632,532
w/o maturity
TOTAL INVESTMENTS
57
Report \
The majority of Liberty Seguros’s financial assets
are classified as available-for-sale. In 2013, as in
the previous year, no securities were valued using
the mark-to-model method. However, we continue
to periodically perform an analysis of the liquidity of
securities held in portfolio.
INVESTMENTS YIELDS
4.5%
4.2%
4.0%
3.9%
3.5%
3.0%
2012
Life
58
Non-Life
Total
2013
Income from Investments = Income for the Year/ Average Investment Portfolio
Technical Reserves
TECHNICAL PROVISIONS OVER PREMIUMS RATE
1126.9%
113.6%
107.7%
2012
Non-Life
1117.6%
2013
Life
Solvency Margin
SOLVENCY MARGIN
297.81%
264.1%
2012
2013
As at 31 December 2013 unrealised gains/losses amounted to 43,448,717 euros, down 3,858,433 euros
compared to 2012.
59
Report \
Results
\\ Results on the Non-Life and Life Technical
Account
The profits of Liberty Seguros’s non-life and life
technical accounts amounted to €9,766.7 thousand
euros and €1,771.3 thousand euros, respectively.
This represents an overall year-on-year decrease of
€7,822.7 thousand euros.
\\ Net Income
Net profits at Liberty Seguros were €7,988 thousand
euros. This profit was 34.4% lower than the €12,167
thousand euros earned in the previous year.
PROFITABILITY
10%
9.3%
8%
6%
5.4%
4%
4.9%
3.1%
2%
1.8%
1.1%
0%
2012
Net Income / Equity (ROE)
Net Income / Net Assets (ROA)
Net Income / GWP (ROP)
60
2013
16\CORPORATE GOVERNANCE
STRUCTURE AND PRACTICE
The Company adopts the principles and recommendations on transparency and corporate governance stipulated by the appropriate legislative
and regulatory instruments. These include the
Portuguese Companies Code, with the recent alterations introduced by Decree Law no. 185/2009,
of 12 August, Regulation no. 5/2010, of 1 April,
and Circular no. 5/2009, of 19 February, both issued by the Insurance Regulatory Body (Instituto
de Seguros de Portugal).
Capital Structure
The share capital of Liberty Seguros is represented
by 506,937 non-negotiable shares, with a nominal
value of €52.37 each. There are no different categories of shares and all have the same rights and
duties. There are no restrictions on the transmission
of shares or clauses of consent for the disposal of
the same. There are also no restrictions on ownership.
The shares may be issued in the form of certificates
for a specific number of shares.
100% of the share capital of Liberty Seguros is
owned by the single shareholder, Compañia de
Seguros y Reaseguros, S.A. This is deemed a qualified holding. There are no special rights holders, the
employees do not own capital stock and there are
no voting restrictions on the shares.
There are no shareholder agreements, that the
company knows of, that could lead to restrictions
on the transfer of financial holdings or voting rights.
Governance Model
The following bodies form the management and
supervisory structure:
\\ General Meeting \ includes a chair and a secretary, elected for a renewable four-year mandate. 50% of share capital must be present for
a quorum. \
\\ Board of Directors \ composed of five members
elected by the general meeting for a mandate of
four years. A chair is appointed from amongst
the board’s members. Management powers may
be delegated to two directors, to one CEO, to
one director and a proxy or to one or more proxies,
according to their assigned powers. \
\\ Audit Comittee \ composed of three permanent
members, of which one is the chair and one an
alternate. At least one of the permanent members
has to have a university degree appropriate to
the duties involved, knowledge of auditing or accounting, and be independent, as stipulated in
the Portuguese Companies Code. \
\\ External Auditors \ a company of external auditors, elected by the general meeting, based on a
proposal from the audit committee. \\
The general meeting is the highest decision-making
body of Liberty Seguros. Its powers, being defined
in the company’s articles, are to:
\\ Approve the annual reports of the board of
directors and the audit committee, the financial
statements and proposed appropriation of results
and reserves; \
61
Report \
\\ Elect the members of the board of directors, the
audit committee and the external auditors; \
\\ Modify the company’s articles of association; \
\\ Decide on the merger, meeting or dissolution of
the company. \\
The powers of the board of directors are also
described in the company’s articles. They include
the necessary powers, for the management and
administration of the company, to:
\\ Manage all corporate business, sign contracts
of any type required to pursue the company’s
objectives and conduct all operations related to
the corporate object, observing the standards
of caution, the guidelines issued by supervisory
bodies and the rules of conduct for insurance
companies; \
\\ Produce internal rules of procedure for the
company’s different services; \
\\ Monitor and look after the company’s assets and
values, taking all measures deemed necessary for
the purposes; \
\\ Decide on the placement of available capital and
on the use of reserves; \
\\ Discuss and approve, with the competent bodies,
anything regarding the preparation, execution or
modification of contracts; \
\\ Decide, in or out of court, on the rights and interests of the company, including reaching agreements and entering arbitration; \
62
\\ Organise the balance sheets and accounts to be
submitted to the general meeting and prepare the
respective report on the economic position of the
company, making a proposal on the appropriation
of any profit/loss; \
\\ Propose projects for the merging, meeting or
dissolution of the company, and any changes to the
articles, to the general meeting; \
\\ Decide on all that is of interest to the company,
where this is not expressly the purview of the general
meeting. \\
The board of directors meets when convened by
its chair, whenever the interests of the company so
demand.
The board of directors delegates the management
of the company’s daily business to a CEO, with any
delegated powers, including the powers of daily
management, being written into the minutes.
17\ REMUNERATION
POLICY FOR THE BOARD
OF DIRECTORS AND
AUDIT COMITTEE
The remuneration policy at Liberty Seguros conforms to the ruling in Regulation no. 5/2010, of 1
April, with regard to the duty to disclosure information, and that in Circular no. 6/2010, of 1 April,
with regard to the governance and content of the
policy.
The Liberty Seguros remuneration policy applies
to:
\\ The board of directors and the audit comittee \
\\ Employees receiving a variable remuneration and
who perform
\ key professional functions, that is, functions relating to risk management systems and internal
control. These positions include those of risk
management & security officer, SOX auditing &
internal control, legal & compliance and internal
auditing. \
\ or any other professional activity that could have
a material impact on the Liberty Seguros risk
profile. This includes employees who have regular access to privileged information and who
take part in decisions on the management and
business strategy of the company, namely first-line managers. \\
The policy aims to align the mechanisms for
compensatory remunerations with cautious, ap-
propriate management and risk control. Liberty
Seguros aims, in this way, to avoid excessive
exposure to risk, and potential conflict of interest.
The company will act in accordance with the
long-term objectives, values and interests of
policyholders, insured parties, participants, beneficiaries and taxpayers, particularly as regards
sustainable growth and returns.
\\ Remuneration policy for the board of
directors and the audit comittee
a\ Approval and annual evaluation
The remuneration policy for members of the board
of directors and the audit committee should be
approved by the ordinary general meeting. The
policy is reviewed at least once a year by the control
bodies of Liberty Seguros, that is compliance, risk
management, internal control and internal auditing.
These bodies coordinate to this end and their report
is submitted to the board of directors and to the
ordinary general meeting. The report includes the
results of the analysis in the light of the recommendations in Circular no. 6/2010, of 1 April, in particular with regard to the respective effect on the risk
management and capital of Liberty Seguros.
b\ Disclosure
The remuneration policy will be published on the
official website, to the extent required by law, and
will also appear in the annual report and accounts.
In compliance with Regulation no. 5/2010-R, of 1
April, the board of directors will also send an annual
statement on the conformity of the Liberty Seguros
remuneration policy, as part of the risk management and internal control report, to the Insurance
Regulatory Authority (Instituto de Seguros de Portugal).
63
Report \
The entire document will be subject to annual
revisions and will be published on the official internet
site (www.libertyseguros.pt).
c\ Remuneration policy
Executive members of the management structures
will earn variable remuneration as well as a fixed
salary. Members of the audit committee, the external auditors and the general meeting do not benefit
from such remuneration.
The remuneration of executive directors is based on
the following:
\\ the fixed salary for executive directors is set by the
ordinary general meeting; \
\\ a balance between the variable and fixed components of the remuneration, so that a fully flexible
policy may be applied to the variable component of
the remuneration; \
\\ the relationship established between the amount
of the variable remuneration and the pre-tax profits
at Liberty Seguros; \
\\ the fact that the variable remuneration is the
result of a performance assessment system that
includes individual and corporate objectives, with
quantitative and qualitative aspects present in
both; \
\\ the fact that the Liberty Seguros structure with
the power to approve the performance assessment of executive directors is the ordinary general
meeting; \
\\ part of the variable remuneration of executive
64
directors is deferred for three years, from the date
of attribution; \
\\ payment of the deferred variable component is
subject to an access condition. Should there be a
significant decline in the performance of the company, this payment will not take place; \
\\ the fact that complementary pension schemes
only exist for the chair of the board of directors and
that these will be approved by the Department of
Human Resources of Liberty Mutual, in Boston, at
the time of hiring; \
\\ any changes to this complementary scheme are
subject to the approval of the same body that authorised it in the first place. \\
The ordinary general meeting, in its annual assessment
of the board of directors, will consider fulfilment of
the objectives, the quantitative and qualitative
results achieved as well as their origin and nature,
the sustainability or occasional nature of the same,
the risk associated in obtaining them, compliance
with regulations, the added value for shareholders
and the way in which Liberty Seguros has related to
other stakeholders.
The achievement percentage used in calculating
variable remuneration may not exceed a given
percentage of the pre-tax profit for the financial
year. This percentage is set by the ordinary general
meeting.
No person shall earn variable remuneration, for a
completed financial year, that is higher than a specific number of months of their fixed monthly remuneration at the close of that financial year. This
number will be set by the ordinary general meeting.
The executive directors of Liberty Seguros enjoy
other non-monetary benefits, namely complementary pension schemes, health insurance, life
insurance and survivor insurance for spouses and
children.
Should any executive director be dismissed, it is
Liberty Seguros policy to pay the compensation
stipulated by law. In any given case, a different
amount, considered suitable by both parties, may
be negotiated. The members of the board of directors do not receive any additional compensation
due to their status. The same criteria are applied to
them as are applied to other employees.
Liberty Seguros has four directors who enjoy no
monetary remuneration as part of their mandates,
nor do they have any other non-monetary benefits.
The members of the audit committee, the external
auditors and the members of the general meeting
enjoy only a fixed remuneration.
The remunerations paid in aggregate and individually to each member of the board of directors
and audit committee are described in the notes
to the Balance Sheet and Profit & Loss Account,
in note 29.
\\ Remuneration policy for employees
a\ Approval and annual evaluation
The remuneration policy for employees should be
approved by the board of directors. The policy is
reviewed at least once a year by the control
bodies of Liberty Seguros, that is compliance,
risk management, internal control and internal auditing. These bodies coordinate to this end and
their report is submitted to the board of directors
and to the ordinary general meeting.
The report includes the results of the analysis in
the light of the recommendations in Circular no.
6/2010, of 1 April, in particular with regard to the
respective effect on the risk management and capital of Liberty Seguros.
b\ Disclosure
The remuneration policy will be published on the
official website, to the extent required by law,
and will also appear in the annual report and
accounts. In compliance with Regulation no.
5/2010-R, of 1 April, the board of directors will
also send an annual statement on the conformity
of the Liberty Seguros remuneration policy, as
part of the risk management and internal control report, to the Insurance Regulatory Authority
(Instituto de Seguros de Portugal). The entire
document will be subject to annual revisions
and will be published on the official internet site
(www.libertyseguros.pt).
c\ Remuneration policy
Employees of Liberty Seguros who have a variable
component to their remuneration and who work in
key positions or conduct other professional activities that may have a material impact on the Liberty
Seguros risk profile, may benefit from this variable
remuneration, in addition to their fixed remuneration, on the basis of the following:
\\ a balance between the variable and fixed components of the remuneration, so that a fully flexible
policy may be applied to the variable component of
the remuneration; \
65
Report \
\\ the relationship established between the amount
of the variable remuneration and the pre-tax profits
at Liberty Seguros; \
\\ the fact that the variable remuneration is the
result of a performance assessment system that
includes individual and corporate objectives, with
quantitative and qualitative aspects present in
both; \
\\ the fact that the performance assessment of
these employees will be approved by their line
manager and later reviewed by the board of
directors; \
\\ payment of part of the variable remuneration of
employees who engage in professional activities
that may have a material impact on the Liberty
Seguros risk profile is deferred for 3 years, from
the date of attribution; \
\\ payment of the deferred variable component
is subject to an access condition, so that should
there be a decline in the performance of Liberty
Seguros this payment will not take place;
\\ the fact that the complementary pension scheme
and the early retirement scheme are both defined
in the collective labour contract in force for the
insurance sector. \\
The achievement percentage used in calculating
66
variable remuneration may not exceed a given
percentage of the pre-tax profit for the financial
year. This percentage is set by the ordinary general meeting.
No person shall earn variable remuneration for
a completed financial year, that is higher than a
specific number of months of their fixed monthly
remuneration at the close of that financial year.
This number will be set by the ordinary general
meeting.
In addition to the annual performance assessment, the process of attributing a variable salary
to employees who are in key jobs will take into
consideration compliance with legislation and
other regulations, the control of different risks
inherent in the respective job and the relationship
with customers (external or internal). In this way,
the individual objectives for these employees will
be associated with their duties and depend on the
relevance of the same, regardless of the performance in the areas under their control.
18\ OUTLOOK
In this tenth full year in business, the consistency
of Liberty’s results has been in line with the good
performance achieved in recent years. Moreover,
\ Board Of Directors’ Report \
notwithstanding the national and international economic situation, the expectations for 2014 and
for the coming years are fairly positive. Liberty
Seguros is set to continue to achieve profit and
portfolio growth performances that outperform the
market.
19\ PROPOSED
APPROPRIATION OF PROFITS
AND DISTRIBUTION OF
DIVIDENDS
Net profits at Liberty Seguros, S.A. came to
7,987,627.41 euros in 2013. We propose this
amount be distributed as follows: 798,762.74 euros
to legal reserves and 7,188,864.67 euros to dividends. Additionally, Liberty Seguros, S.A. proposes
to distribute dividends of 12,815,000.00 euros from
retained earnings.
20\ CLOSING REMARKS
The board of directors would like to express its
thanks to all the entities that have supported the
company in its business endeavour, especially the
Portuguese Insurers Association, our shareholders
and all other corporate bodies.
We would like also to express our thanks to our
customers for their preference and we promise to
make every effort to continue to meet their needs
and expectations.
Lastly, we would like to thank all our employees and
distribution networks for all their hard work.
Lisbon, 27 January 2014.
The Board of Directors
José António da Graça Duarte de Sousa
Chair of the Board and Chief Executive Officer
Roberto Salas Romero
Member of the Board
Russell Elmer Carlson
Member of the Board
Marta Sobreira Reis Alarcão Troni
Member of the Board
Rogério Paulo Carretero Bicho
Member of the Board
67
Ten years
building
experience
Financial Statements
04
\ Financial Statements \
Amounts in euros
Notes
Balance sheet
Year
Previous
year
Gross
Impairment,
Net
depreciation,
amortisation
and adjustments
ASSETS
3.1 a), 8 e 11
3.1 b.1) e 11
4,427,979
0
4,427,979
2,860,211
Investments in subsidiaries, associated
companies and joint ventures
0
0
0
0
Financial assets held for trading
0
0
0
0
Financial assets classified
at initial recognition at fair value
through profit and loss
9,007,684
0
9,007,684
9,806,874
0
0
Cash and cash equivalents and demand
deposits
Hedge derivatives
3.1 b.1), 6 e 11
3.1 b.1)
Assets available for sale
0
586,834
725,857
0
0
0
Other deposits
142,412
0
142,412
142,412
Loans granted
444,421
0
444,421
583,444
Accounts receivable
0
0
0
0
Other
0
0
0
0
0
0
0
0
Land and buildings
712,928
43,893
669,036
680,101
Land and buildings for own use
712,928
43,893
669,036
680,101
0
0
0
0
14,122,536
10,450,639
3,671,897
3,948,100
607,388
0
607,388
614,342
Land and buildings for income
3.1 c) e 10
Other tangible assets
Stock
Goodwill
3.1 d) e 12
70
0
655,079,194
0
Investments to be held to maturity
3.1 c) e 9
0
0 623,524,195
586,834
Loans and accounts receivable
Deposits with ceding companies
11
623,524,195
Other intangible assets
0
0
0
0
11,842,195
6,253,360
5,588,834
1,861,242
Amounts in euros
Notes
Balance sheet
Year
Previous
year
Gross
Impairment,
Net
depreciation,
amortisation
and adjustments
ASSETS (cont.)
3.1 e) e 4.1 e)
Technical provisions on outward reinsurance
9,712,547
1,355,742
8,356,805
8,602,160
Provision for unearned premiums
2,708,644
0
2,708,644
2,482,915
0
0
0
0
7,003,903
1,355,742
5,648,162
6,119,245
Provision for bonuses (with-profits products)
0
0
0
0
Provision for rate commitments
0
0
0
0
Portfolio stabilisation provision
0
0
0
0
Other technical provisions
0
0
0
0
1,724,622
0
1,724,622
1,020,062
Other debtors - insurance operations
and other operations
25,836,282
1,934,321
23,901,961
22,391,704
Accounts receivable - direct insurance
operations
21,145,746
1,575,698
19,570,047
18,444,669
Accounts receivable - other reinsurance
operations
1,249,223
0
1,249,223
415,585
Accounts receivable - other operations
3,441,313
358,622
3,082,690
3,531,450
Tax assets
2,286,361
0
2,286,361
2,409,691
Current tax assets
2,286,361
0
2,286,361
0
0
0
0
2,409,691
Life insurance mathematical provision
Provision for claims
3.1 f) e 23
3.1 g) e 13
3.1 h) e 24
Post-employment benefits and
other long-term benefits - assets
Deferred tax assets
3.1 i)
-59,398
0
-59,398
-90,690
Other assets
0
0
0
0
Non-current assets held for sale
and discontinued operational units
0
0
0
0
704,332,153
20,037,954
684,294,199
709,908,847
Accruals and deferrals
TOTAL ASSETS
71
Amounts in euros
Notes
Balance sheet
Exercício
Year
Previous
year
EQUITY AND LIABILITIES
LIABILITIES
3.1 i) - l) e 3.3 e 4.1 e)
Technical provisions
Provision for unacquired premiums
Life insurance mathematical provision
\ Life
\ Workers’ compensation
\ Other classes
Provision for bonuses (with-profits products)
Provision for rate commitments
Portfolio stabilisation provision
199,217,737
210,231,495
9,845,226
9,673,461
83,682,840
91,142,521
105,689,672
109,415,514
14,489,973
15,350,396
0
0
0
5,393,303
Provision for risks in progress
6,284,410
4,243,943
0
0
8,605,514
9,473,039
352,693
544,608
0
0
Financial liabilities for the deposit component of insurance
contracts and insurance contracts and operations classified
for accounting purposes as investment contracts
Subordinated liabilities
Deposits received from reinsurers
Other
Post-employment benefits and other long-term benefits
- liabilities
Other creditors - insurance operations and other operations
0
0
352,693
544,608
0
0
1,108,905
998,015
11,656,768
12,871,267
Accounts payable - direct insurance operations
9,530,751
9,653,889
Accounts payable - other reinsurance operations
1,289,845
1,392,065
Accounts payable - other operations
Tax liabilities
Current tax liabilities
Deferred tax liabilities
72
58,105,868
217,006,463
0
Hedge derivatives
24
57,803,127
209,357,378
6,257,217
Other financial liabilities
23
510,331,468
Provision for claims rate deviations
Other technical provisions
5
493,409,842
836,173
1,825,313
4,758,245
16,472,958
0
10,511,200
4,758,245
5,961,758
Amounts in euros
Notes
Balance sheet
Exercício
Year
Previous
year
EQUITY AND LIABILITIES
LIABILITIES (cont.)
3.1 i)
13
Accruals and deferrals
Other provisions
10,692,823
11,977,705
1,720,460
1,961,416
Other liabilities
0
0
Liabilities of a group for disposal classified as
held for sale
0
0
532,305,250
564,630,475
Share capital
26,548,291
26,548,291
(Own shares)
0
0
TOTAL LIABILITIES
EQUITY
25
Other capital instruments
26
24 e 26
26
0
0
Revaluation reserves
32,122,803
35,193,693
Through adjustments to the fair value of financial assets
32,122,803
35,193,693
Through revaluation of land and buildings for own use
0
0
Through revaluation of intangible assets
0
0
Through revaluation of other tangible assets
0
0
Through adjustments to the fair value of hedge instruments
in cash flow hedges
0
0
Through adjustments to the fair value of hedges of liquid investments
in foreign currency
0
0
From exchange rate differences
0
0
Deferred tax reserve
-9,222,442
-10,582,658
Other reserves
32,294,012
30,643,668
Results carried forward
62,258,657
51,308,167
Result for the year
7,987,627
12,167,212
TOTAL EQUITY
151,988,948
145,278,372
TOTAL EQUITY AND LIABILITIES
684,294,199
709,908,847
73
Amounts in euros
Notes
Balance sheet
Year
Previous
year
Technical
life
Technical
non-life
Nontechnical
Total
PROFIT AND LOSS ACCOUNT
14
Earned premiums net of reinsurance
21,039,742 211,982,176
0 233,021,919 226,673,355
Gross premiums issued
21,681,079 241,142,877
262,823,956 258,456,406
-641,337 -29,964,123
-30,605,459 -27,863,531
Outward reinsurance premiums
15.2
4.1 e) and i)
(variation)
0
577,693
577,693
-4,108,844
Provision for unearned premiums,
reinsurers’ portion (variation)
0
225,729
225,729
189,323
55,477
0
55,477
70,356
Fees on insurance contracts and operations
classified for accounting purposes
as investment contracts or service
provision contracts
Cost of claims, net of reinsurance
30,172,698 137,669,880
167,842,577 173,716,902
Amounts paid
29,809,018 149,767,541
179,576,559 175,712,875
Gross amount
30,158,518 160,555,504
190,714,022 183,720,367
Reinsurers’ portion
-349,500 -10,787,963
-11,137,463
-8,007,492
Provision for claims (variation)
363,680 -12,097,661
-11,733,981
-1,995,973
Gross amount
171,765 -12,376,830
-12,205,065
-495,563
191,915
279,169
471,084
-1,500,410
0
2,904,381
2,904,381
-384,469
Life insurance mathematical provision,
net of reinsurance
-7,981,004
0
-7,981,004 -18,868,412
Gross amount
-7,981,004
0
-7,981,004 -18,868,412
Other technical provisions,
net of reinsurance
0
0
0
0
274,460
0
274,460
379,060
Net operating costs and losses
6,322,631
73,651,813
79,974,445
79,657,184
Acquisition costs
3,225,465
63,772,285
66,997,749
68,049,876
397
274,953
275,350
-765,090
3,357,779
13,900,063
17,257,841
16,229,899
-261,009
-4,295,486
-4,556,496
-3,857,501
Bonuses on with-profits products, net of
reinsurance
21.1.1
Deferred acquisition costs (variation)
Administrative costs
Reinsurance commissions
and profit-sharing
74
Amounts in euros
Notes
Balance sheet
Year
Previous
year
Technical
life
Technical
non-life
Nontechnical
Total
PROFIT AND LOSS ACCOUNT (cont.)
16.2
Income
12,862,800
13,419,510
2,081,127
28,363,436
29,959,589
Interest on financial assets not valued
at fair value through profit or loss
11,883,583
12,675,424
1,946,359
26,505,366
28,012,598
57,500
0
0
57,500
57,507
921,717
744,085
134,768
1,800,570
1,889,484
1,508,923
1,641,024
1,438,799
4,588,745
4,208,970
919,782
959,170
1334,088
3,213,040
2,807,723
501
0
0
501
474
Interest on financial liabilities not valued
at fair value through profit and loss
Other
16.2
Financial costs
Interest on financial assets not valued
Interest on financial liabilities not valued
21.1
17
18
Other
588,641
681,853
104,711
1,375,205
1,400,773
Net gains on financial assets
and liabilities not valued at fair value
through profit or loss
-1,736,741
27,216
-962,482
-2,672,006
421,704
On assets available for sale
-1,736,741
27,216
-962,482
-2,672,006
421,703
On loans and accounts receivable
0
0
0
0
0
On investments to be held to maturity
0
0
0
0
0
On financial liabilities valued
at amortised cost
0
0
0
0
0
Other
0
0
0
0
0
-160,885
0
86,377
-74,507
-101,460
0
0
0
0
0
-160,885
0
86,377
-74,507
-101,460
0
0
-38,910
-38,910
0
and liabilities valued at fair value
and liabilities held for trading
Net gains on financial assets and liabilities
classified at initial recognition at fair value
Exchange rate differences
75
Amounts in euros
Notes
Balance sheet
Year
Previous
year
Technical
life
Technical
non-life
Nontechnical
Total
PROFIT AND LOSS ACCOUNT (cont.)
Net gains from sale of non-financial
assets not classified as non-current
assets held for sale and discontinued
operational units
0
0
0
0
0
Impairment losses (net of reversals)
0
0
0
0
0
On assets available for sale
0
0
0
0
0
On loans and accounts receivable
valued at amortised cost
0
0
0
0
0
On investments to be held to maturity
0
0
0
0
0
Other
0
0
0
0
0
8,579
204,902
0
213,481
440,667
Other provisions (variation)
0
0
-57,984
-57,984
-180,966
Other income/costs
0
0
-155,241
-155,241
-360,552
Negative goodwill recognised
immediately in gains and losses
0
0
0
0
0
Gains and losses in associated companies
and joint ventures accounted for using the
equity method
0
0
0
0
0
Gains and losses on non-current assets
(or groups for disposal) classified as held
for safe
0
0
0
0
0
1,771,265
9,766,706
Other technical income/costs,
net of reinsurance
PRE-TAX RESULT
76
-485,911 11,052,060
18,213,456
Tax on earnings in the year
- current tax
-498,038
-498,038
-5,525,245
Tax on earnings in the year
- deferred tax
-2,566,395
-2,566,395
-521,000
NET RESULT FOR THE YEAR
-3,550,344
7,987,627
12,167,212
Amounts in euros
Statement
of changes
in equity
OPENING BALANCE
AS AT 31 DECEMBER 2012
Increases/decreases in share capital
Share
capital
Revaluation
reserves
Deferred
tax reserve
Legal
reserve
Through
adjustments to
the fair value of
financial assets
available for sale
26,548,291
35,193,693
Other reserves
-10,582,658
8,839,062
Issue
premiums
Other
reservs
9,594,097
12,210,509
Results
carried
forward
Result for
the year
51,308,167
12,167,212
Total
145,278,372
0
0
0
Trading of own shares
0
Net gains through adjustments to the
fair value of subsidiaries, associated
0
-3,070,890
Net gains through adjustments
to the fair value of financial assets
available for sale
-3,070,890
by way of revaluation of land
and buildings for own use
0
by way of revaluation of intangible
assets
0
by way of revaluation of other
tangible assets
0
to cash flow hedges
0
to instruments to hedge liquid
investments in foreign currency
0
Net gains through exchange rate
differences
0
Adjustments by way of recognition
of deferred tax
1,360,216
1,360,216
Increases in reserves through
distribution of results
0
Distribution of reserves
0
Distribution of profits/losses
10,950,490
1,216,721
-12,167,212
0
Changes to accounting
estimates
0
Other gains/losses
directly recognised
in equity
433,623
433,623
Transfers between equity
items not included in
other lines
TOTAL CHANGES
IN EQUITY
0
0
-3,070,890
1,360,216
1,216,721
0
433,623
10,950,490
Net result for the year
-12,167,212
-1,277,051
7,987,627
7,987,627
7,987,627
151,988,949
Early distribution of profits
BALANCE AS AT
31 DECEMBER 2013
0
26,548,291
32,122,803
-9,222,442
10,055,783
9,594,097
12,644,132
62,258,658
77
Amounts in euros
Statement
of changes
in equity
Share
capital
Revaluation
reserves
Deferred
tax reserve
Legal
reserve
Through
adjustments to
the fair value of
financial assets
available for sale
OPENING BALANCE
Increases/decreases in share capital
26,548,291
-6,515,388
Other reserves
1,939,473
7,425,959
Issue
premiums
Other
reserves
9,594,097
12,522,831
Results
carried
forward
Result for
the year
51,308,167
14,131,025
0
0
Total
116,954,456
0
Trading of own shares
0
Net gains through adjustments to the
fair value of subsidiaries, associated
0
41,709,080
to the fair value of financial assets
available for sale
41,709,080
by way of revaluation of land
and buildings for own use
0
by way of revaluation of intangible
assets
0
by way of revaluation of other
tangible assets
0
to cash flow hedges
0
to instruments to hedge liquid
investments in foreign currency
0
Net gains through exchange rate
differences
0
Adjustments by way of recognition
of deferred tax
-12,522,132
-12,522,132
Increases in reserves through
distribution of results
0
Distribution of reserves
-12,717,922
-12,717,922
Distribution of profits/losses
1,413,102
12,717,922
-14,131,025
Changes to accounting
estimates
0
Other gains/losses
directly recognised
in equity
312,322
-312,322
Transfers between equity
items not included in
other lines
TOTAL CHANGES
IN EQUITY
0
0
41,709,080
-12,522,132
1,413,102
0
-312,322
0
-14,131,025
16,156,704
12,167,212
12,167,212
12,167,212
145,278,372
Early distribution of profits
BALANCE AS AT
31 DECEMBER 2012
78
0
0
26,548,291
35,193,693
-10,582,658
8,839,062
9,594,097
12,210,509
51,308,167
Amounts in euros
Comprehensive Income Statement
2013
a) Financial assets available for sale - net gains
b) Reclassification of gains and losses to results for the year on disposal
c) Deferred tax and current tax
d) Other gains and losses recognised directly in equity
TOTAL COMPREHENSIVE INCOME
2012
7,987,627
12,167,212
35,193,692
41,788,087
0
-79,008
1,360,216
-12,522,132
433,623
-312,322
44,975,158
41,041,837
2013
2012
a) Corresponds to the variation in revaluation
reserves resulting from the net adjustment
(potential gains and losses) to the fair value of
the portfolio of financial assets classified as
available for sale
a) Corresponds to the variation in revaluation
reserves resulting from the net adjustment
(potential gains and losses) to the fair value of
the portfolio of financial assets classified as
available for sale
b) Corresponds to the amount of revaluation
reserves that are transferred to results for the
year resulting from sales of financial assets
classified as available for sale during the year
b) Corresponds to the amount of revaluation
reserves that are transferred to results for the
year resulting from sales of financial assets
classified as available for sale during the year
c) Current tax 2013:
e1,496,085 Potential gains and losses on withprofits life securities
c) Current tax 2012:
e-9,1324,469 Potential gains and losses on
with-profits life securities
Deferred tax pension fund 2013: e-135,869
Deferred tax pension fund 2012: €95,263
Deferred tax 2013:
€0 Potential gains and losses on securities
except with-profits life
Deferred tax 2012:
e-3,4849,926 Potential gains and losses on
securities except with-profits life
d) Free reserves
d) Free reserves
79
Ten years
discovering
new ways
Notes to the Balance Sheet
and Profit and Loss Account
05
\ Contents \
01\ General information \ 84
05\ Investment contract liabilities \ 139
02\ Information by segment \ 85
02.1\ Types of product and service by
geographical segment and business
segment \ 85
02.2\ Report by geographical segment
and by business segment \ 85
06\ Financial Instruments \ 140
06.1\ Shareholdings and Financial
Instruments \ 140
06.4\ Portfolio reclassifications
and transfers \ 140
06.11\ Fair value \ 140
06.16 and 06.17\ Nature and extent
of risks resulting from financial
instruments \ 143
03\ Basis of preparation of the Financial
Statments and Accounting Policies \ 90
03.1\ Bases of measurement and Accounting
Policies used in preparing the Financial
Statments \ 90
03.2\ Nature, impact and justification of
changes to accounting policies \ 106
03.3\ Principal accounting estimates and
relevant judgments used in drawing up
the Financial Statments \ 106
04\ Nature and extent of items and risks
and reinsurance assets \ 111
04.1\ Information regarding insurance
contracts \ 111
04.2\ Information regarding the nature
and extent of specific insurance
risks \ 117
04.3\ Market risk, credit risk, liquidity risk
and operational risk \ 126
04.4\ Amount of impairment losses
recognised and reversed in
the period in relation to
reinsurance assets \ 136
04.5\ Adequacy of premiums
and provisions \ 136
04.6\ Information on the main ratios
without deduction of outward
reinsurance \ 137
04.7\ Reimbursements and salvage \ 138
82
08\ Cash and cash equivalents
and demand deposits \ 150
09\ Land and Buildings \ 150
09.1\ Valuation Model \ 150
09.2\ Criteria used to distinguish
land and buildings for income
from those for own use \ 151
09.6\ Measurement Criteria,
Methods and Rates of Depreciation
used \ 151
09.7. e 09.8\ Gross Book Value
and Accumulated Depreciation at the
beginning and end of the year \ 151
09.20\ Indication and qualification
of the existence of the restrictions
on ownership and any assets given
as surety for liabilities \ 152
10\ Other tangible assets
(except lands and buildings) \ 152
10.1\ Measurement criteria for tangible
assets \ 152
10.2\ Acquisitions, Transfers, Write-offs,
Disposals and Amortisation \ 152
10.3\ Reconciliation of tangible assets
at the beginning and the end
of the period \ 154
11\ Allocation of Investments
and Other Assets \ 154
12\ Intangible Assets \ 156
13\ Other Provisions and Adjustments
to Assets Accounts \ 159
13.1\ Breakdown of adjustment
accounts and other provisions into their
respective subaccounts \ 159
13.2\ Description of the nature
of the obligation \ 159
14\ Insurance contract premiums \ 161
14.1\ Recognised premiums resulting
from insurance contracts \ 161
14.2\ Premiums on life insurance
contracts \ 161
14.3\ Premiums on non-life insurance
contracts \ 162
15\ Fees received on insurance contracts \ 162
15.1\ Accounting policies adopted for
recognition of fees \ 162
15.2\ Fees received
by type of contract \ 162
16\ Investment returns / Income \ 163
16.1\ Accounting policies adopted
for the recognition of income \ 163
16.2\ Breakdown of income
by category of investment \ 163
17\ Realised gains and losses
on investments \ 164
18\ Gains and losses from adjustments
to the fair value of investments \ 165
19\ Gains and losses on exchange
rate differences \ 166
21\ Sundry costs by function and nature \ 166
21.1\ Costs by function \ 166
21.2\ Costs using a classification
based on their nature \ 170
22\ Staff costs \ 171
22.1\ Average number of employees
in the company’s service \ 171
22.2\ Staff costs in the year \ 171
23.2.1\ Liability for retirement pensions of
employees and retired employees \ 174
23.2.3\ Additional retirement supplement \ 185
24\ Income tax \ 188
24.1\ Estimated tax \ 188
24.2\ Components of tax cost / income \ 189
24.3\ Income tax carried forward
to reserves \ 191
24.4\ Details of changes in deferred tax
(assets and liabilities) recognised
on the balance sheet \ 192
24.5\ Reconciliation of nominal rate
and effective rate \ 193
25\ Share Capital \ 193
26\ Reserves \ 194
26.1\ Nature and Purpose of reserves
within equity \ 194
26.2\ Chages in reserves das results \ 195
27\ Results per share \ 195
28\ Dividends per share \ 196
29\ Transactions between related parties \ 196
30\ Cash flow statement \ 199
31\ Commitments \ 200
32\Contingent liabilities \ 200
34\ Off-balance sheet items \ 200
36\ Events after the balance sheet date
not described in previous points \ 200
37\ Other information \ 201
37.1\ Revisions, alterations and improvments
in the standards and interpretations
endorsed by the EU that have an effect
on the company / group’s accounting
policies and disclosures \ 201
37.2\ Revisions, alterations and improvments
in the standards and interpretations
endorsed by the EU that have no effect
on the company / group’s financial
statements \ 201
37.3\ Standards and interpretations that have
been issued but which are not yet
mandatory \ 203
23\ Employee benefit obligations \ 172
23.1\ Defined contribution plan Individual retirement plan \ 172
23.2\ Defined benefit plans \ 174
83
\ Notes to the Balance Sheet
as at 31 December 2013 \
01\ GENERAL INFORMATION
outlets and seven offices located in various parts
of the country.
The company changed its name to Liberty Seguros,
S.A., by resolution of the shareholders’ meeting of
2 February 2004, and as subsequently authorised
by the Portuguese Insurance Institute (Instituto de
Seguros de Portugal). The articles of association
were also altered accordingly.
In points 13 to 15 of its management report, Liberty
Seguros gives a brief account of the macroeconomic
environment in which the company is operating,
along with recent market trends
On 28 December 2005, the 464,937 shares representing 100% of the share capital of Liberty Seguros,
S.A., were transferred from the company Liberty
International Iberia, S.L., Sociedad Comanditaria
Simple, to the company Liberty Insurance Group,
Compañia de Seguros y Reaseguros, S.A.
This operation was examined in advance by the
Portuguese Insurance Institute.
In addition, on 29 December 2010, an increase
in share capital in kind was carried out, in a total
amount of €11,793,637.39, by way of incorporation of all the assets and liabilities of the Portuguese
branch of Genesis Seguros Generales S.A. de
Seguros y Reaseguros. All the assets and liabilities
of that branch were transferred to the company.
The company’s registered address is Av. Fontes
Pereira de Melo nº 6-11º Dto, 1069-001 Lisboa,
Portugal.
The company operates in the insurance and
reinsurance business, in all technical classes for
which it has obtained the necessary authorisations
from the Portuguese Insurance Institute. In terms
of direct premium volume, the most significant
technical classes are motor, accident and health
insurance.
At present the company operates through 30
84
The notes below follow the numbering system
defined in the Chart of Accounts for Insurance
Companies approved by Portuguese Insurance
Institute Regulatory Standard no. 4/2007, with
the changes introduced by Regulatory Standard
no. 20/2007, although Standard 22/2010 of 16
December makes reference to the non-existence
of pre-defined templates. Some notes are not
included because they are not applicable, the
amounts are immaterial or there are no relevant
situations to report.
The financial statements for Liberty Seguros with
reference to 31 December 2013 were approved by
the board of directors on 28 January 2014.
The management report and financial statements
will be submitted for approval by the shareholders’
meeting on 27 March 2013.
02\ INFORMATION BY
SEGMENT
02.1\ Types of product and service
by geographical segment and
business segment
According to “IFRS 8 - Operating Segments”, an
entity must disclose information that enables users
of its financial statements to assess the nature and
financial effects of the business activities in which it
is involved and the economic environments in which
it operates.
The company is structured around the following
business areas:
\\ Life insurance and pensions
\ Endowment products
\ Savings products
\\ Non-life insurance
\ Accidents and health
\ Fire and other damage
\ Motor
\ Other
An operating segment is a component of an entity on
which segregated financial information is available for
regular evaluation by managers in deciding how to
allocate resources and measure performance.
02.2\ Report by geographical
segment and by business
segment
A geographical segment is a set of assets and
operations located in a specific economic environment
that is subject to risks and ad vantages that are
different from other segments, operating in other
economic environments.
All contracts are concluded in Portugal. There is
therefore only one geographical segment.
\\ GEOGRAPHICAL SEGMENT
As stated in note 2.1, there is only one segment.
Analysis by geographical segment is therefore
redundant.
A business segment is a set of assets and operations
that are subject to specific risks and advantages
different from those faced by other segments
\\ BUSINESS SEGMENT
The tables below show profit/loss by segment for
the years 2013 and 2012.
The company uses the technical provisions the
criterion for the allocation of items on the balance
sheet and income statement that are not specifically
allocated to a business area.
85
RESULT BY SEGMENTAS AT
31 DECEMBER 2013
Amounts in euros
2013
Life
Outward reinsurance premium
Variation in provision for
unearned premiums
Earnings on investments
Other income
Non-Life
Accidents
and
Health
21,681,079 241,142,877 37,419,307
Fire and
Other
Damage
Motor
803,422
- 183,929
- 31,468
Not
Allocated
Total
24,198,070
0 262,823,956
- 573,721 - 11,381,364
0 - 30,605,459
1,868,137
0
52,031,953 127,493,547
- 641,337 - 29,964,123 - 3,736,811 - 14,272,227
0
Other
- 849,318
803,422
0
0
0
0
0
0
0
0
325,066
4,500,490
376,665
3,856,638
205,004
62,184
222,977
5,048,533
Total Gains
21,364,808 216,482,666 33,875,232
41,584,896 128,992,967
12,029,572
222,977 238,070,451
Cost of claims net
of reinsurance
30,172,698 137,669,880 19,382,637
21,725,308 93,142,610
3,419,324
0 167,842,577
24,332,881 39,328,819
4,847,542
0
84,530,940
- 237,198
- 177,865
436,202
- 4,365,859
49,542,166 132,234,232
8,089,001
436,202 248,007,658
Operating costs net
of reinsurance
6,583,640
77,947,300
9,438,057
Other costs
- 7,706,544
2,904,483
- 164,431
Total Costs
29,049,794 218,521,663 28,656,264
Investment contracts
- 15,196
Operating profit/loss
0
0
- 7,700,182 - 2,038,996
5,218,968
Investment
profit/loss
9,471,447
Pre-tax profit/loss
1,771,265
Tax
0
TECHNICAL PROFIT/LOSS
86
1,771,265
3,483,977
0
0
0
- 15,196
- 7,957,270 - 3,241,265
3,940,570
- 213,225
- 9,952,403
0
4,925,460
889,086
5,058,335
932,821
- 272,686
21,004,463
9,766,706 10,144,428
- 7,068,184
1,817,070
4,873,392
- 485,911
11,052,060
0
0
0
0 - 3,064,433
- 3,064,433
9,766,706 10,144,428
- 7,068,184
1,817,070
4,873,392 - 3,550,344
7,987,627
11,805,702
0
RESULT BY SEGMENTAS AT
31 DECEMBER 2012
Amounts in euros
2012
Outward reinsurance premium
Variation in provision for
unearned premiums
Earnings on investments
Other income
Life
Non-Life
Accidents
and
Health
22,318,007 236,138,399 37,190,675
Fire and
Other
Damage
Motor
- 3,919,520
- 41,993
Not
Allocated
Total
21,002,556
0 258,456,406
- 603,418 - 10,239,457
0 - 27,863,531
49,558,448 128,386,720
- 683,123 - 27,180,408 - 3,434,007 - 12,903,527
0
Other
- 1,145,529 - 2,187,652
- 544,346
0
- 3,919,520
0
0
0
0
0
0
0
0
248,492
4,120,033
336,793
3,495,115
262,531
25,594
573,343
4,941,867
Total Gains
21,883,376 209,158,503 34,051,468
39,004,507 125,858,181
10,244,347
573,343 231,615,222
Cost of claims net
of reinsurance
40,889,896 132,827,007 24,520,594
15,587,871 88,890,163
3,828,379
0 173,716,902
22,775,694 38,512,067
4,525,827
0
Operating costs net
of reinsurance
Other costs
Total Costs
8,159,308
75,355,378
9,541,789
- 18,489,352
- 384,469
- 611,115
30,559,852 207,797,916 33,451,268
- 374,462
333,529
1,114,861 - 17,758,959
38,631,144 127,027,768
8,687,735
1,114,861 239,472,629
267,580
0
0
0
- 244,160
373,363 - 1,169,588
1,556,613
- 541,518
- 8,101,566
594,162
- 605,709
26,315,022
4,491,827
2,150,775 - 1,147,227
18,213,456
0
0
0 - 6,046,244
- 6,046,244
1,678,801
4,491,827
2,150,775 - 7,193,471
12,167,212
- 244,160
0
0
Operating profit/loss
- 8,920,636
1,360,587
600,200
Investment
profit/loss
14,396,624
12,524,107
4,963,091
1,305,439
5,661,415
5,475,988
13,884,695
5,563,291
1,678,801
0
0
0
5,475,988
13,884,695
5,563,291
Pre-tax profit/loss
Tax
TECHNICAL PROFIT/LOSS
83,514,685
0
87
ASSETS AND LIABILITIES BY SEGMENT
Amounts in euros
2013
Life
Financial instruments
Land and buildings
Non-Life
Accidents
and
Health
271,959,902 319,425,181 105,151,450
Fire and
Other
Damage
Motor
Total
Other
Not
Allocated
47,816,748 151,134,034
15,322,949
41,146,796 632,531,879
316,874
352,162
120,365
41,256
173,001
17,540
0
669,036
1,739 ,112
1,932,785
660,606
226,426
949,488
96,265
0
3,671,897
2,647,027
2,941,808
1,005,479
344,633
1,445,174
146,521
0
5,588,834
Technical provisions,
outward reinsurance
352,693
8,004,113
1,438,761
6,011,930
484,287
69,135
0
8,356,805
Post-employment benefits
and other long-term
benefits - assets
816,829
907,793
310,274
106,348
445,957
45,214
0
1,724,622
Other debtors - insurance
operations and other
operations
11,320,631
12,581,330
4,300,169
1,473,903
6,180,626
626,632
0
23,901,961
Tax assets
1,082,884
1,203,477
411,336
140,987
591,213
59,941
0
2,286,361
Other assets
2,634,698
2,928,106
1,000,796
343,028
1,438,443
145,839
0
5,562,803
TOTAL ASSETS
292,870,650 350,276,754 114,399,237
56,505,258 162,842,223
16,530,036
41,146,796 684,294,199
233,692,577 259,717,266
30,425,882 127,587,098
12,935,608
0 493,409,842
0
0
0
Financial liabilities
for the deposit component
of insurance contracts and
insurance contracts and
operations regarded as
investment contracts for
accounting purposes
0
0
185,648
63,452
21,749
91,200
9,246
0
352,693
583,697
199,502
68,380
286,743
29,072
0
1,108,905
5,520,969
6,135,800
2,097,153
718,809
3,014,235
305,603
0
11,656,768
2,253,637
2,504,608
856,049
293,415
1,230,398
124,746
0
4,758,245
5,879,275
6,534,008
2,233,256
765,459
3,209,856
325,436
0
12,413,283
256,644,224 275,661,027
94,218,090
32,293,694 135,419,532
13,729,711
8,605,514
0
167,045
other long-term
benefits - liabilities
525,208
Other creditors, insurance
operations
Tax liabilities
Other liabilities
TOTAL LIABILITIES
88
88,768,678
8,605,514
0 532,305,250
ASSETS AND LIABILITIES BY SEGMENT
Amounts in euros
2012
Land and buildings
Life
Non-Life
Accidents
and
Health
295,358,023 323,002,731 111,183,288
Fire and
Other
Damage
Motor
Total
Other
Not
Allocated
41,169,318 155,784,211
14,865,914
46,525,314 664,886,068
322,545
357,556
128,218
32,543
179,652
17,143
0
680,101
1,872,430
2,075,670
744,324
188,917
1,042,908
99,521
0
3,948,100
882,715
978,528
350,895
89,061
491,655
46,917
0
1,861,242
Technical provisions,
outward reinsurance
544,608
8,057,552
1,837,696
5,524,413
167,166
528,277
0
8,602,160
and other long-term
benefits - assets
483,775
536,286
192,309
48,810
269,454
25,713
0
1,020,062
Other debtors - insurance
operations
10,619,512
11,772,192
4,221,445
1,071,445
5,914,868
564,434
0
22,391,704
Tax assets
1,142,823
1,266,869
454,292
115,304
636,531
60,742
0
2,409,691
Other assets
1,949,080
2,160,640
774,794
196,650
1,085,601
103,595
0
4,109,719
TOTAL ASSETS
313,175,510 350,208,022 119,887,260
48,436,462 165,572,044
16,312,256
46,525,314 709,908,847
242,030,320 268,301,148
24,419,413 134,806,315
12,864,070
0 510,331,468
Financial liabilities
for the deposit component
of insurance contracts and
insurance contracts and
operations regarded as
investment contracts for
accounting purposes
96,211,350
9,473,039
0
0
0
0
0
0
9,473,039
258,286
286,321
102,673
26,060
143,860
13,728
0
544,608
other long-term
benefits - liabilities
473,319
524,695
188,153
47,755
263,630
25,157
0
998,015
Other creditors, insurance
operations
6,104,340
6,766,927
2,426,584
615,891
3,400,002
324,450
0
12,871,267
Tax liabilities
7,812,482
8,660,476
3,105,600
788,233
4,351,405
415,239
0
16,472,958
6,610,782
7,328,339
2,627,903
666,988
3,682,081
351,367
0
13,939,121
26,564,340 146,647,293
13,994,011
Other liabilities
TOTAL LIABILITIES
272,762,568 291,867,907 104,662,263
0 564,630,475
89
03\ BASIS OF PREPARATION
OF THE FINANCIAL
STATEMENTS
AND ACCOUNTING
POLICIES
03.1\ Bases of measurement
and accounting policies used
in preparing the financial
statements
\\ BASES OF MEASUREMENT
The company’s financial statements presented
here refer to the years ending 31 December
2013 and 2012. They have been prepared in
accordance with the accounting system applicable
to insurance companies subject to the supervision of
the Portuguese Insurance Institute (the Chart of
Accounts for Insurance Companies), as established in Regulatory Standard no. 4/2007-R, of 27
April, with the changes made by Standards no.
20/2007-R, of 31 December and no. 22/2010-R,
of 16 December. These standards generally follow
the International Financial Reporting Standards
(IAS/IFRS), as adopted by the European Union in
the context of Regulation (EC) no. 1606/2002 of
the European Parliament and Council, of 19 July.
These were transposed into Portuguese legislation by Decree-Law no. 35/2005, with the exception of IFRS 4, of which only the principles of
classification of the types of contract agreed by
insurance companies have been adopted. The
principles established in the specific prudential
legislation and regulations in force continue to
apply to the recognition and measurement of lia-
90
bilities associated with insurance contracts.
The financial statements are expressed in euros.
They have been prepared in accordance with the
principle of historical cost, with the exception of
financial assets and liabilities recorded at fair
value, specifically financial assets and liabilities
at fair value through profit or loss and financial
assets available for sale. Other financial assets
and liabilities, and non-financial assets and liabilities,
are recorded at depreciated cost or historical
cost.
Preparing the financial statements requires that the
company make judgments and estimates and use
assumptions that affect the application of accounting
policies and the amounts of assets, liabilities,
income and costs. The estimates and assumptions
used are based on the most recent available information and serve as support for judgments regarding
the value of assets and liabilities valued solely by
way of these sources of information. Changes in
assumptions or differences between these assumptions and reality could have impacts on the current
estimates and judgments.
Areas that involve a higher level of judgment or complexity or where significant assumptions and estimates
are used in preparing the financial statements are
analysed in note 3.3 of these notes.
The accounting policies described below were
applied consistently for all the periods presented in
the financial statements.
\\ ACCOUNTING POLICIES
The main accounting policies used in preparing the
financial statements are the following:
a\ Cash and cash equivalents
and demand deposits
For the purposes of the cash flow statement, cash
and cash equivalents comprise amounts recorded
on the balance sheet with a maturity of less than
three months from the date of acquisition, which
are readily convertible into cash and have a low risk
of change in value. They include cash and bank
deposits.
b\ Financial instruments
b.1\ Classification
At the time of acquisition, the company classifies
its financial assets, on the basis of the underlying
intention, into the following categories:
\ Financial assets
available for sale
Assets available for sale are non-derivative financial
assets that:
(i) Liberty Seguros intends to keep for an indeterminate period of time;
(ii)are designated as available for sale at the time
of their initial recognition;
(iii)do not fall into any of the categories set out
below.
\ Financial assets at fair value
This category includes:
(i) financial assets held for trading, which are
those that the company acquires with the main
purpose of trading them in the short term;
(ii) financial assets designated, at the time of their
initial recognition, at fair value with variations
recognised in the income statement.
The company, in its initial recognition, designates
certain financial assets at fair value through profit or
loss when:
(i) those financial assets are managed, evaluated
and analysed internally on the basis of their fair
value (unit-linked portfolios).
\ Loans granted
and accounts receivable
These are non-derivative financial assets with
fixed or determinable payments that are not listed
on an active market and that are not classified as
held for trading or available for sale. This category
includes, specifically, other bank deposits allocated to insurance contracts and mortgage loans
granted.
b.2\ Recognition, initial measurement and
derecognition
\ Financial assets
Acquisitions and disposals of financial assets are
recognised on the trade date, i.e. on the date
on which the company undertakes to acquire or
91
dispose of the asset. Financial assets are initially
recognised at their fair value plus transaction
costs, except where classified as financial assets
at fair value through profit or loss, in which case
those costs are recognised in the earnings for
the year.
Financial assets are derecognised when:
(i) the company’s contractual rights to receipt of
their cash flows expire;
(ii) the company has substantially transferred all
the risks and benefits associated with holding
them, or;
(iii) despite retaining part, but not substantially all,
of the risks and benefits associated with holding
them, the company has transferred control over
the assets.
Results in respect of interest on financial instruments classified as available for sale and on financial
instruments classified at fair value through profit or
loss are recognised in the annual income statement
using the effective interest rate method.
To calculate the effective interest rate, future cash
flows are estimated in light of all the contractual
terms of the financial instrument (for example
early payment options), without, however,
considering any future credit losses. The calculation
includes fees that are an integral part of the
effective interest rate, transaction costs and all
premiums and discounts directly related to the
transaction.
In the case of financial assets or groups of similar
financial assets for which impairment losses have
been recognised, the interest recognised in earnings
is determined on the basis of the interest rate used
92
to measure the impairment loss.
The effective interest rate is the rate that updates
estimated future payments or receipts during the
expected lifetime of the financial instrument or,
where appropriate, a shorter period, to the current
net balance sheet value of the financial asset or
liability.
As regards returns on capital instruments (dividends),
these are recognised when awarded.
\ Loans granted and accounts receivable
Loans granted and accounts receivable were initially
recognised at their fair value, which normally corresponds to their nominal value.
Derecognition of loans granted or accounts receivable occurs when the contractual rights to the
cash flows resulting from the financial asset expire
or when the financial asset is transferred and the
transfer falls within the scope of the derecognition
criteria applicable to assets of this type, in conformity with the criteria defined in IAS 39.
b.3\ Subsequent measurement
\ Financial assets
After their initial recognition, financial assets at fair
value recognised in the income statement are valued
at fair value. Variations in these are recognised in the
income statement.
Financial assets available for sale are likewise
recorded at fair value. However, the portion of
the corresponding variations that belongs to the
shareholder is recognised in reserves, until the
investments are derecognised, i.e. an impairment loss is identified, at which point the accumulate value of the potential gains and losses
recorded in reserves is transferred to gains and
losses. In the case of products with profit-sharing (with-profits products), variations in fair value are initially recognised in reserves and, in the
event that they are positive, the portion that is
the policyholder’s is transferred to the deferred
participation account
Also in relation to financial assets available for sale,
the adjustment of the balance sheet value involves
the separation between:
(i) depreciation at the effective interest rate –
against earnings for the year;
(ii) exchange rate variations (where the asset is
denominated in a foreign currency and is a
monetary item) – against earnings;
(iii) Variations in fair value (except exchange rate
risk) – as described in the previous paragraph –
against reserves.
The fair value of listed financial assets is their current
bid price. In the absence of a listing, the company
estimates their fair value using evaluation methodologies (see note 6.11).
\ Loans granted and accounts receivable
Loans granted and accounts receivable are measured at cost or depreciated cost depending on their
nature.
b.4\ Reclassifiction
In accordance with the requirements of IAS 39,
Liberty Seguros does not reclassify financial instruments from and to the category of financial assets
at fair value through profit and loss.
b.5\ Transfer between portfolios
The company transfers portfolios in compliance
with all the requirements of circular no. 3/2008,
of 15 May, to ensure that policyholders and other
contract beneficiaries are treated fairly:
(i)assets are transferred between portfolios at
market value;
(ii) transfers of assets between portfolios do not
involve the reclassification of financial instruments;
(iii)adjustments to the value of the asset transferred prior to the transfer date remain in the
portfolio of origin;
(iv)adjustments to the value of the asset transferred after the transfer date are allocated to the
destination portfolio;
(v) at the time of disposal of financial assets
available for sale that have been the object of
transfers to with-profits portfolios, the corresponding gain or loss must be shared between
those portfolios in accordance with the amount
of the adjustments to fair value recognised prior
to disposal.
b.6\ Provison for deferred profit-sharing
(Shadow Accounting)
In accordance with the criteria and rules defined
in ISP Circular no. 3/2008, of 15 May, the provision
for deferred profit-sharing takes into account,
each year, the estimated portion to be attributed
to the policyholder or contract beneficiary, calculated
within the terms of the participation plan defined
by the insurance company. It comprises a charge
to costs or, in the proportion applicable, to the
93
appropriate revaluation reserves for fair value
adjustments.
The provision for attributed profit-sharing (bonuses)
comprises a charge to the appropriate revaluation
reserves through adjustments to fair value.
The estimate of the amounts to be attributed in
the form of bonuses in each product type, or set
of product types, is calculated on the basis of a
consistently applied and appropriate plan that
takes into consideration the participation plan and
the assets allocated.
At the time of disposal of an investment classified
as available for sale and allocated to with-profits
products, the corresponding direct transfers to
the provision for deferred participation are cancelled.
Throughout the duration of contracts of each
type or set of types, the corresponding balance
on the provision for deferred participation is fully
used to offset negative adjustments to the fair
value of investments and to transfer them to the
provision for attributed profit-sharing, in such a
way that the profit-sharing is attributed to the
contracts as a function of their contribution to
profits.
b.7\ Impairment
Liberty Seguros regularly assesses the existence
of any objective evidence that a financial asset or
group of financial assets is impaired. In the light of
such evidence, the corresponding recoverable value is determined. Impairment losses are recorded
against gains and losses.
94
In accordance with IAS 39 the company considers
that a financial asset or group of financial assets is
impaired whenever, after initial recognition, there is
objective evidence of the following situations:
(i) Debt instruments - a financial asset or group
of financial assets is impaired and impairment
losses are incurred if, and only if, there is
objective evidence of impairment, i.e. there
exist observable data that come to the asset
holder’s attention about the following loss
events:
1) significant financial difficulty of the issuer or
obligor;
2)a breach of contract, such as default or
delinquency in interest or principal payments;
3)the lender, for economic or legal reasons
related to the borrower’s financial difficulties, granting the borrower a concession
that the lender would not otherwise consider;
4)it becoming probable that the borrower will
enter bankruptcy or other financial reorganisation;
5)the disappearance of an active market for
that financial asset because of financial difficulties; or
6)observable data indicating that there is a
measurable decrease in the estimated future
cash flows from a group of financial assets
since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual financial assets in the
group, including:
a)adverse changes in the payment status of
borrowers in the group;
b)national or local economic conditions
that correlate with defaults on the assets
in the group.
(ii) Capital instruments – in addition to the events
referred to in connection with fixed-yield
securities, we take into account the following
situations:
1)significant changes with an adverse impact
that that have occurred in the technological,
market, economic or legal environment in
which the issuer operates;
2)a significant or prolonged decline in fair value
below its cost.
Thus the company values listed variable-yield
securities by the following quantitative criteria:
impairment is recorded in the event of continuous
devaluation over at least six months or a significant
fall in quoted price of at least 20% of acquisition
cost.
Where there is evidence of impairment of financial assets available for sale, the accumulated
potential loss in reserves, minus any impairment
loss on the asset previously recognised in the
income statement, is transferred to gains and
losses.
In the case of debt instruments, if, in a period subsequent to recognition of the impairment loss, the
fair value of the asset increases, and this increase is objectively related to an event that occurred
after recognition of the impairment loss, then the
latter must be reversed and recognised against
annual earnings.
Impairment losses on capital instruments are
not reversed by way of profits or losses. In the
event of recognition of impairment, subsequent
devaluations are recognised directly in the income
statement. In the event of increases in value
subsequent to carrying of impairment, the corresponding potential values are recognised in
reserves.
Where an impairment loss occurs, in accordance
with the events referred to in (i) and applicable
to the item loans granted and accounts receivable, which are measured at amortised cost, the
amount of the loss is determined by the difference
between the recorded value of the asset and the
current value of estimated future cash flows
discounted at the original effective interest rate
of the financial asset; the value of the asset is
reduced and the loss recognised in the income
statement. If, during a subsequent period, there is
objective evidence of a decrease in the calculated
impairment value, the impairment loss previously
recognised will be reversed, by increasing the
value of the asset and carrying a gain on the income
statement. Reversal cannot lead to an asset value
higher than the value that the asset in question
would have on the basis of amortised cost if there
were no impairment.
c\ Land and buildings
and other tangible assets
\ Land and buildings
The buildings that the company uses for its premises
are classified as for own use.
The cost of a building for own use is recognised in
accordance with the criteria defined in IAS 16. It is
considered an asset, in so far as there are economic benefits to the company associated with this
item of property and the cost can be adequately
measured.
95
Buildings for own use are initially measured at their
acquisition value, including non-refundable purchase
taxes and costs directly allocated in order to get the
asset into working condition.
value of the land and building; the remaining 25%
correspond to the estimated value of the land. The
cost of depreciation in each period is recognised in
the income statement.
The amount for which a building for own use is
recognised after deduction of accumulated depreciation and impairment losses is derecognised at
the time of its disposal or when no future economic
benefits are expected from its use or disposal. The
gain or loss arising from derecognition is calculated
as the difference between net income from disposal, if there is any, and the book value of the building. This gain or loss is recognised in the income
statement.
\ Other tangible assets
Buildings for own use are valued using the cost
model; the asset value therefore corresponds to
acquisition value minus accumulated depreciation
and any impairment losses.
Impairment is calculated for each building, by comparing book value with market value as estimated
by certified independent surveyors every three
years. The existence or not of signs of impairment is
assessed annually.
Maintenance, repair and other costs incurred after
acquisition are recognised as costs in the year in
which they occur; they are recognised as an increase
in the asset only where it is likely that there is an
economic benefit associated with them.
Depreciation of buildings begins when the asset
is available for use. The straight-line method has
been chosen as the method of depreciation to be
applied systematically to the estimated useful life
of 50 years. The value of the asset subject to depreciation corresponds to 75% of the acquisition
96
In initially recognising the value of other tangible assets, the company capitalises acquisition value plus
any charges necessary for the proper functioning
of a given asset, in accordance with the provisions
of IAS 16. As regards subsequent measurement,
Liberty opts to establish a useful life that reflects
the estimated period over which economic benefits
will be obtained and depreciates the asset over that
period.
The company derecognises tangible fixed assets at
the time of their disposal or when no future economic benefits are expected from their use or disposal. The gain or loss arising from derecognition
is calculated as the difference between net income
from disposal, if there is any, and the book value
of the asset. This gain or loss is recognised in the
income statement.
As regards method of depreciation, the company
uses the linear method, as this reflects the expected
pattern of consumption of the economic benefits of
the asset. This method is applied consistently to
assets of all classes.
The estimated number of years of useful life for each
category of tangible assets is as follows:
Categories of tangible assets
Years
Office equipment
4-8
Machinery and tools
5-8
Computer equipment
Interior fittings
3
5-8
Transport equipment
4
Hospital equipment
7
Other equipment
4-8
Whenever there is objective evidence that the
book value of tangible fixed assets exceeds their
realisable value, an impairment loss is recognised
for the difference, in accordance with the methodology proposed by IAS 36 in combination with
IAS 16.
economic benefits are expected from their use or
disposal. The gain or loss arising from derecognition is calculated as the difference between net
income from disposal, if there is any, and the book
value of the asset. This gain or loss is recognised
in the income statement.
The company conducts analyses of impairment
losses on its intangible assets in accordance with
the methodology proposed in IAS 36 in conjunction with IAS 38. Impairment losses are recognised
in the income statement for assets recorded at
cost.
e\ Outward reinsurance technical provisions
Realisable value is calculated as the higher of net
sale price and use value, the latter being calculated
on the basis of the current value of the estimated
future cash flows that are expected to be obtained
from continued use of the asset and disposal of it at
the end of its useful life.
The provision for unearned premiums and the provision for claims, on outward reinsurance, correspond
to the share reinsurers have in the total liabilities of
the company. These provisions are calculated in
accordance with the contracts in force, as regards
the percentages reinsured and other clauses, and
in accordance with direct insurance specialization
percentages.
d\ Other intangible assets
f\ Employees benefits
Costs incurred in the acquisition of software are
capitalised, along with additional expenses borne
by the company necessary to its implementation.
These costs are amortised in a linear manner over
the expected useful life of these assets (three
years).
With the entry into force of the new Collective
Labour Contract for the Insurance Sector
(Portuguese abbreviation: CCT), employees in
active service with permanent employment contracts now benefit from personal retirement plans.
Contributions are made annually by the company.
The distinction between employees taken on before and after 1995 has ceased to exist.
The costs of maintenance of computer programmes
are recognised as costs when they are incurred.
The company derecognises intangible fixed assets
at the time of their disposal or when no future
The initial contribution to personal retirement
plans of employees taken on before 22 June
1995 corresponded to the value of liabilities for
97
past service calculated as at 31 December 2011.
For employees in retirement or pre-retirement prior
to 1 January 2012 the previous arrangements are
maintained: the defined benefit plan continues to be
applied.
The company has set up a pension fund which is
intended to cover the liabilities inherent in the plans
mentioned (retired and pre-retired employees active
prior to 1995).
Contributions to the fund and premium updates
are determined in accordance with the corresponding
actuarial plan, which is reviewed annually and
adjusted according to the updating of the pensions
and how the participants and any change to the
participants and the liabilities to be covered.
Active employees on permanent contracts taken on
since 1995 are now included in the personal retirement plans; individual policies have been set up as
funding vehicles.
In addition, at the end of 2008 the company
set up an endowment policy to pay a contractually foreseen retirement supplement. This supplement constitutes a defined benefits plan, as
there is a constructive, legal obligation on the
company to settle the liability at the time of the
employee’s retirement, and to make additional
contributions to make up for changes in criteria underlying calculation of the valuation of the
liability. As is the case with annuity policies, this
policy is not eligible within the terms of IAS 19
either; assets and liabilities are treated in the
same manner.
As regards the pension fund, the balance sheet
98
shows the net difference between the assets and
liabilities that make it up.
Gains and losses arising from differences between
the actuarial and financial assumptions used and
actual values as regards the liabilities and expected income from the policies, along with those
resulting from changes in actuarial assumptions,
are recognised annually in a specific item under
equity, using the SORIE method. The cost of retirement pensions in the year, including current
service cost and interest cost, minus expected
income, is reflected in the item gains and losses
in the year.
g\ Claim reimbursments
Claim reimbursements are generated whenever
the company has a formal position on its right of
recovery and where the costs of claims that are
reimbursable have already been paid. All claims
managed under Claim Settlement Conventions
fall within this perimeter and the value of the
reimbursement is estimated on the basis of the
number of claims under management multiplied
by the average reimbursable cost.
h\ Tax on earnings
Taxes on earnings consist of current tax and deferred tax. Taxes on earnings are recognised in
gains and losses, except where they are related
to items that are recognised directly in equity, in
which case they are also recognised against tax
reserves. Deferred tax recognised in reserves
arising from revaluation of investments available
for sale and the SORIE reserve is subsequently
recognised in the income statement when the
gains and losses that gave rise to it are recognised
in the income statement.
Current tax is tax that it is expected will be paid on
the basis of the taxable profit/loss calculated in
accordance with the prevailing tax rules and using
the tax rate approved or substantially approved in
each jurisdiction.
Deferred tax is calculated on temporary differences
between the book values of assets and liabilities
and their fiscal basis, using the tax rates approved
or substantially approved, as at the balance sheet
date, that are expected to be applied when the
temporary differences are reversed.
Other costs and income are recorded in accounts in
the year to which they refer, irrespective of the date
of their payment or receipt.
The provision for holidays and holiday bonus,
corresponding to approximately two months of
salary and corresponding charges, based on the
figures for the year in question, is recorded in the
item accruals and deferrals on the liabilities side.
This is intended to recognise legal obligations to
employees at the end of each year, for services
provided prior to that date but which are to be
met subsequently.
j\ Direct insurance technical provisions
Deferred tax liabilities are recognised for all taxable temporary differences, with the exception
of differences resulting from initial recognition
of assets and liabilities that do not affect either
book or fiscal profit and differences related to
investments in subsidiaries, in so far as they will
probably not be reversed in the future (permanent
differences).
Deferred tax assets are recognised for all deductible
temporary differences, only in so far as it is expectable that there will be taxable profits in the future
capable of absorbing those differences.
i\ Accurals and deferrals
Direct insurance premiums are recognised as
income on the date of issue or renewal of the corresponding policy and claims are recorded when they
are reported.
Income from portfolio shares is carried only when
the dividends are received.
j.1\ Provision for unearned premiums
The provision for unearned direct insurance
premiums is based on the calculation of premiums
issued before the end of the year but valid after
that date.
This provision is intended to cover risks assumed
and charges arising from them during the period
between the end of the year and the expiry date of
each insurance contract.
The company, in accordance with ISP standards
nos. 19/94-R, 3/96-R and 4/98-R, has calculated
the amount of premiums to be deferred by
applying the pro rata temporis method contract by contract. The provision shown on the
balance sheet is the amount after deduction of
deferred acquisition costs in the same proportion as accrued premiums and up to 20% of the
value of deferred premiums, for each class of
insurance.
99
j.2\ Acquisition costs
Acquisition costs that are directly or indirectly
related to the sale of insurance contracts are
capitalised and deferred for the period of the life
of the contracts, taking into account the limits
imposed by the regulations of the Portuguese
Insurance Institute (ISP).
j.3\ Provision for claims
Where there are claims by or against policyholders
that fall within the scope of the clauses of the
contract, any amount the company has paid or
that it anticipates it will pay is recognised as a loss
on the income statement, by way of the constitution
of provisions for payment of claims arising from
insurance contracts.
The provision for claims corresponds to the total estimated cost that the company will bear to
settle all covered losses that occur prior to 31
December 2013, whether reported or not, after
deduction of amounts already paid in respect of
those losses.
Provisions for claims in all areas of insurance in
which Liberty Seguros, S.A. operates are evaluated
actuarially using internationally accepted statistical methods on a “best estimate” basis and
duly separating types of claim into homogenous
groups.
not yet reported on that date (Incurred But Not
Reported - IBNR), for all classes of insurance, on
the basis of actuarial projections based on the
chain ladder method.
In addition a provision is set up for future expenditure on management of covered losses prior to 31
December 2012, in an amount estimated on the
basis of the actual historical costs allocated to the
claims function.
The company includes the following estimates in
the amount recorded as provision for worker’s
compensation claims:
\ Lifelong care
In the particular case of the provision for lifelong
care indemnifications in the context of worker’s
compensation insurance, Liberty Seguros
calculates:
(i) for each known case, the current value of
future medical costs, taking into account future
medical inflation;
(ii) an IBNR lifelong care provision based on the
expected number of cases multiplied by the
average cost.
This study also includes cases of permanent disability and death in the area of accidents of work.
The value of this provision is adjusted on a monthly
basis according to the increase or decrease in the
portfolio.
Provisions are reviewed regularly by way of a
continuous process, as additional information is
received and liabilities are settled.
\ Mathematical provision
for worker’s compensation
The company sets up a provision for covered
losses incurred before 31 December 2013 but
The mathematical provision for worker’s compensation insurance records the company’s
100
liabilities for claims that involve payment of pensions or compensation already decided by the
labour court or with a conciliation agreement
already concluded, and also the estimate of liabilities for pensions in relation to permanent disability, for losses that have already occurred but
await final agreement.
The assumptions that serve as the basis for calculation of mathematical reserves for worker’s
compensation, for cases of mandatory compensation, within the terms of paragraph no. 1 of article 56 of Decree-Law no. 143/99, and for other
cases, are described in point a.2 of note 3.3 of
these notes.
This provision also serves to meet liabilities for
pensions in relation to potential disabilities of accident victims.
\ Provision for AWF
Responsibility in relation to the annual increase in
life pensions due to the effect of inflation lies with
the AWF – Accidents at Work Fund (Portuguese
abbreviation: FAT), a fund managed by the ISP
whose revenues come from the contributions
made by insurance companies and by worker’s
compensation policyholders themselves. The
company pays pensions in full, and is subsequently reimbursed for the portion for which the AWF
is responsible.
To meet the cost of future annual contributions to
the AWF in relation to current beneficiaries, Liberty
Seguros, S.A. has set up a provision, on the basis
of a percentage of approximately 7.4% of the total
mathematical reserve.
j.4\ Mathematical provision for life insurance
The mathematical provision for life insurance
corresponds to the estimated actuarial value of
the company’s future liabilities in relation to the
policies issued. This provision is calculated on
the basis of actuarial methods fully framed by
the rules of the Portuguese Insurance Institute.
Mathematical provisions for life insurance were
calculated contract by contract in accordance
with the prospective actuarial method, taking into
account both guaranteed benefits and bonuses
already distributed on the basis of results.
Mathematical provisions in relation to the savings
component of “Universal Life” products were
calculated policy by policy, by daily capitalisation
of movements on each savings account, taking
into account both technical interest and profitsharing.
j.5\ Provisons for unexpired risk
The provision for unexpired risk corresponds to
the amount necessary to meet likely indemnifications and charges to be paid after the end of
the year that exceed the value of unearned premiums and premiums due in relation to contracts
in force.
The provision was calculated by application of the
requirements defined in Standard 24/2002-R of
13 November. In accordance with ISP stipulations,
the provision for unexpired risk is set up/increased
whenever the sum of the claims ratio, costs ratio
and cession ratio, weighted by the rate of return, is
greater than 1. The amount of this provision is equal
to the product of the sum of processed premiums
101
imputable to subsequent years and of premiums
due but not yet processed in relation to contracts
in force multiplied by the sum of the ratios minus 1.
j.6\ Provision for profit-sharing of life insurance
products
The provision for profit-sharing includes amounts
intended for policyholders or contract beneficiaries,
in the name of profit-sharing (bonuses on with-profits
products), provided that said amounts have not
already been distributed.
The provision for profit-sharing is funded,
annually, on the basis of the results shown in the
accounts of the types of insurance that foresee
constitution of such a provision. It is calculated
in accordance with the participation plan of each
type of insurance.
For policies that benefit from profit-sharing, as established in the general policy conditions, a share
of profits is allocated at the end of each civil year in
relation to contracts that are in force.
The bonus is distributed on 31 December each year
or on the anniversary date of the policy, depending
on the type of product. Note 4.1 subparagraph e)
ii. shows the change in the year in relation to some
types of product.
The accounting policy applicable to the provision
for deferred participation (Shadow Accounting) is
described in subparagraph b.6) of this note.
where, by their nature, greater oscillations in the
claims rate are foreseen.
The provision was calculated by applying the
requirements defined in Standard 3/1996 of 18
January. It is calculated on the basis of the
specific rates established by the ISP and applied
to the positive technical result in the areas of surety
and nuclear risk insurance (inward reinsurance).
It is also calculated for seismic phenomena risk,
by applying a risk factor defined by the ISP for
each seismic zone to the capital retained by the
company.
k\ Financial liabilities
An instrument is classified as a financial liability
where there exists a contractual obligation to settle
it by handing over money or some other financial
asset, irrespective of its legal form.
Non-derivative financial liabilities include liabilities arising from investment contracts and
loans, creditors for direct insurance and reinsurance operations and other liabilities. These
financial liabilities are initially carried at their fair
value minus transaction costs incurred and subsequently at amortised cost, on the basis of the
effective rate method, with the exception of liabilities arising from investment contracts in which
the investment risk is borne by the policyholder,
which are recorded at fair value (unit-linked
portfolio).
l\ Non-technical provisions
j.7\ Equalisation provision
Provisions are recognised where::
The equalisation provision is intended to meet exceptionally high claim rates in areas of insurance
102
(i) the company has a current, legal or constructive
obligation arising from past events;
(ii)it is likely that payment of the obligation will be
required;
(iii)the value of that obligation can be reliably estimated. This provision is set up and cancelled
against results.
Where a future outflow of resources is not likely, it
is classified as a contingent liability, in accordance with IAS 37. Contingent liabilities are subject to
disclosure unless the possibility of their realisation
is remote.
The item “Other Provisions” includes provisions for
possible tax contingencies and works on leased
buildings. The size of the provision corresponds to
the best estimate of the amount to be disbursed to
meet the liability on the balance sheet date.
m\ Adjustments to accounts receivable and
ajustments to doubtful debts
In relation to adjustments to accounts receivable,
it is necessary to foresee a specific treatment that
takes into consideration the legal framework governing contractual relationships between insurance
companies and those insured.
The insurance premium payment regime currently
foreseen in the legal regime applicable to insurance contracts approved by Decree-Law no.
72/2008, of 16 April (which essentially maintains
the previous regime provided in Decree-Law no.
142/2000, of 15 July) establishes, with some exceptions, that non-payment of the initial premium,
or the first fraction thereof, on the due date, results in automatic termination of the contract from
the date on which it was agreed, and that nonpayment of the premium for subsequent annual
periods, or the first fraction thereof, on the due
date, blocks extension of the contract.
This legislation also establishes that non-payment
on the due date of:
(i)a premium installment in the course of an annual
period;
(ii) an adjustment premium or part of a variable
premium;
(iii)an additional premium resulting from a change in
the contract based on a supervening aggravation
of the risk;
In accounting terms, a specific consequence of
this legal regime is the cancellation of recognised
non-life insurance premiums on the date on which
the insurance company finds that the premium
has not been collected. This is the policy applied
by the company; consequently, evaluation of
impairment, which could lead to a possible need
for adjustments to accounts receivable, does not
arise.
According to Circular no. 9/2008 it is the understanding of the Portuguese Insurance Institute (ISP)
that:
1\ Insurance companies must assess, on the date of
each balance sheet, whether there is any objective
evidence that accounts receivable are impaired, and
must recognize impairment losses within the terms
of IAS 39;
2\ That decrease in value may be recognised directly
or indirectly, in the latter case by using the allowance
accounts designated in the Chart of Accounts for
Insurance Companies as “Adjustments to doubtful
debts” and “Adjustments to accounts receivable”;
103
3\ In the case of adjustments to accounts receivable, insurance companies must assess whether
there is objective evidence of impairment on an
individual basis for bills issued that are individually significant, and on an individual or collective basis for bills issued that are not individually
significant.
As regards accounts receivable in the area of life
insurance and other direct insurance operations,
the company conducts a case-by-case analysis
of accounts receivable arising from direct insurance operations, reinsurance operations and
other operations, in order to assess the existence
of impairment or not. For situations identified as
being impaired, the totality of the amount receivable
is reduced, through adjustments to doubtful debts,
against results.
n\ Insurance contracts
and investment contracts
\ Classification
The company issues contracts that include insurance
risk, financial risk and a combination of insurance
and financial risk. A contract in which the company
accepts a significant insurance risk from another
party, agreeing to compensate the insured in the
event that a specific uncertain future event adversely affects the insured, is classified as an insurance
contract.
A contract issued by the company in which the
transferred insurance risk is not significant, but
in which a discretionary participation component
is defined, is regarded as an investment contract
and recognised and measured in accordance
with the accounting policies applicable to insurance
104
contracts. A contract issued by the company
in which only financial risk is transferred, without
discretionary profit-sharing, is recognised as a financial instrument.
\ Recognition and measurement
For contracts classified as insurance contracts,
premiums are recognised as income when owed
by policyholders. Benefits and other costs are
recognised simultaneously with recognition of income over the lifetime of the contracts. This is
achieved through the mathematical provision (in
the area of life insurance) and the provision for
unearned premiums (in the area of non-life insurance).
\ Life insurance contracts
The liabilities expressed in the mathematical provision for life insurance correspond to the current
value of future benefits payable, net of administrative costs directly associated with the contracts,
minus the theoretical premiums that would be necessary in order to deliver the established benefits and meet the corresponding costs. Liabilities
are calculated on the basis of assumptions about
mortality, management or investment costs on
the date of evaluation.
As regards contracts with a payment period significantly shorter than the period of the benefit,
premiums are deferred and recognised in the income statement proportionally to the duration of
cover of the risk.
\ Non-life Insurance contracts
As regards contracts with a short duration, name-
ly non-life contracts, premiums are recognised
when they are issued. The premium is recognised
as earned income on a pro rata basis over the
period of validity of the contract. The provision
for unearned premiums represents the amount
of premiums issued, minus associated costs,
in relation to risks in periods that have not
elapsed.
\ Investment contracts
Life contracts in which the investment risk is borne
by the policyholder (unit-linked contracts) were
classified as investment contracts and recognised
as financial instruments.
Liabilities correspond to the value of the unit, minus
management fees, redemption fees and any penalties, and are classified as financial liabilities shown at
fair value through profit or loss.
The fair value of liabilities depends on the fair
value of the financial assets that make up the
unit-linked collective investment fund. The fair
value of the financial liability is determined by
way of the units, which reflect the fair value of
the assets that make up each investment fund,
multiplied by the number of units attributable to
each policyholder on the balance sheet date.
The company has a pure endowment product
without transfer of risk and without discretionary
profit-sharing that was reclassified as an investment contract in the transition to the new Chart of
Accounts for Insurance Companies.
o\ Recognition of gains and losses
on insurance contracts
Premiums and fees on insurance contracts are
recognised when issued, as are premiums and
fees on outward reinsurance. The initial recognition criterion is adjusted by way of the provision
for unearned premiums, so that it is reflected
throughout the risk period of the contracts.
Costs of direct insurance and outward reinsurance
claims are recognised, in the income statement, on
the date of occurrence of the covered losses, of
calculation of provisions and of financial settlement
of claims or issue of reimbursements.
p\ Cost allocation by function
and segment
The company allocates costs by function (acquisition, administrative, investment and claims
costs) and segment (life, non-life and non-technical),
using a matrix with cost allocation keys according
to the number of employees in each area, financial
ratios and economic indicators, in order to reflect
a real distribution of costs across the various
segments.
q\ Foreign currency operations
In conformity with IAS 21, on the date of preparation of the financial statements, monetary
items in foreign currency are transposed using
the closing exchange rate. Non-monetary items that are measured in terms of historical cost
in a foreign currency are transposed using the
exchange rate on the date of the transaction.
Non-monetary items that are measured at fair
value in a foreign currency are transposed using
exchange rates on the date on which fair value
was determined.
105
Exchange rate differences resulting from liquidation
of monetary items or transposition of monetary
items at rates different from those at which they
were transposed in the initial recognition during the
period or in previous financial statements must be
recognised in the income statement for the period
in which they occur.
03.2\ Nature, impact and
justification of changes to
accounting policies
r\ Mediation commissions
During the year, there were no voluntary changes to
accounting policies relative to those used in preparing
the financial information for the previous year shown
in the comparative figures.
The mediation commission is the remuneration
paid to the intermediary for selling insurance contracts. The commissions contracted with agents
and brokers are recorded as costs at the time of issue of the corresponding premium receipts. These
commissions are capitalised and deferred for the
lifetime of the contracts.
s\ Inventory
Inventory is valued at acquisition cost; average cost
is the costing method applied.
Whenever realisable value is lower than acquisition
or production cost, the value of inventory is reduced
by recognising an impairment loss, which is
reversed when the factors that gave rise to it cease
to exist.
\\ VOLUNTARY CHANGES TO ACCOUNTING
POLICIES
\\ NEW STANDARDS AND INTERPRETATIONS
ALREADY ISSUED BUT NOT YET
MANDATORY
Standards and interpretations recently issued by the
IASB that are relevant to the company’s business,
application of which is mandatory only in periods
starting after 1 January 2012 and that the company
has not adopted early, are shown in note 37. These
standards will be adopted from the date of EU endorsement.
03.3\ Principal accounting
estimates and relevant judgments
used in drawing up the financial
statements
The International Financial Reporting Standards
(IAS/IFRS), transposed by standards no. 4/2007R, no. 20/2007 and no. 22/2010, establish a
series of accounting treatments and require that
management make the necessary estimates and
judgments in order to decide which accounting
treatment is most appropriate. The main accounting estimates and judgments used in appli-
106
cation of accounting principles by the company
are summarised in this note with the objective of
improving understanding of how their application
affects the results reported by the company and
disclosure thereof. A more detailed description of
the main accounting policies used by the company is presented in note 3.1.
Given that in many situations there are alternatives to
the accounting treatment adopted by the board of
directors, the results reported by the company could
be different if a different treatment were chosen.
The board of directors considers that the choices
made are appropriate and that the financial
statements adequately present the company’s
position and the result of its operations in all
material respects.
a.\ Technical provisions
Technical provisions correspond to future liabilities
arising from insurance contracts and consist of:
8\ Provision for unexpired risks; and
9\ Equalisation provision.
Provisions are reviewed periodically by qualified
actuaries. Provisions for claims do not represent
an exact calculation of the amount of the liability,
but rather an estimate resulting from application of
actuarial evaluation techniques. These estimated
provisions correspond to the company’s expectation of what the total cost of settling claims will be,
based on an assessment of the facts and circumstances known on that date, a review of historical
patterns of settlement, an estimate of trends in terms of frequency of losses, theories of liability and
other factors.
Variables in calculating the estimate of provisions may be affected by internal and/or external
events, such as changes in claims management
procedures, inflation and legal changes. Many of
those events are not directly quantifiable, particularly on a prospective basis.
1\ Mathematical provision - life contracts;
2\ Mathematical provision - worker’s compensation;
3\ Provision for non-life claims;
4\ Provision for losses incurred but not reported
(IBNR);
a.1\ Mathematical provision
for life contracts
Mathematical provisions in the area of life insurance
were calculated contract by contract in accordance
with the prospective actuarial method, taking into
account both guaranteed benefits and resultsbased bonuses already distributed.
5\ Provison for claims settlement costs;
6\ Provision for profit-sharing (bonuses) on life
products;
7\ Provision for unearned premiums;
In the case of policies of the “universal life” type,
mathematical provisions in relation to saving were
calculated policy by policy, by daily capitalisation of
transactions on each savings account, taking into
account both the technical interest rate and profitsharing (bonus).
107
The calculation was made in conformity with the
technical bases, legislation and ISP standards in
force.
For the products currently marketed, the tables applied are the most recent ones and the technical interest rate is defined annually.
Mathematical provisions in the area of life insurance
are calculated with the actuarial assumptions defined
for each type of insurance, as summarised in the
table below:
a.2\ Mathematical provision
for workers’ compensation
Insurance in the event of death
The mathematical provision for worker’s compensation
Mortality
Technical interest
AF, PM 60/64, (70 a 100%) GKM 80
2.75%, 3.5%, 4.0%
PF 60/64, TV 73/77, GRM/GRF 95
2.75%, 4.0%, 6.0%
RF, PF 60/64, GKF 80, GRM/GRF 95
2.75%, 3.0%, 3.25%, 3.5%, 4.0%, 70%
12-month euribor rate, rate announce
annually with a minimum of 1%
Insurance in the event of Life
Rendas vitalícias
Other
insurance records the company’s liabilities for losses
that involve payment of pensions or compensation,
already decided by the labour court or in respect
of which a conciliation agreement has already been
reached, along with the estimate of liabilities for
pensions for permanent disability due to losses that
have already occurred but in relation to which final
agreement is pending.
It is also the purpose of this provision to meet liabilities for pensions in relation to potential disabilities of
accident victims, calculated as follows:
(i) For cases of mandatory compensation, within the
terms of paragraph no. 1 of article 56 of DecreeLaw no. 143/99
Mortality table
Interest rate
Managment rate
108
TD 88/90
5.25%
0%
(ii) Non-redeemable pensions through disability:
Mortality table
Interest rate
Managment rate
155% GRM/F (95)
3.5%
4%
(iii) Family pensions payable on the death of the
claimant:
Mortality table
Interest rate
Managment rate
GRM/F (95)
3.5%
4%
Responsibility for the annual increase in life pensions
due to the effect of inflation lies with the Accidents at
Work Fund (AWF), a fund managed by the ISP and
funded by contributions from insurance companies
and from worker’s compensation insurance takers
themselves. The company pays the pensions in full
and is subsequently reimbursed for the portion for
which the AWF is liable.
To meet the cost of future annual contributions to
the AWF in relation to current beneficiaries, in accordance with circular 8/2010, Liberty Seguros,
S.A., has set up a provision that corresponds to
approximately 7.4% of total mathematical provisions.
Liberty calculates an IBNR provision of mathematical
provisions, estimating the number of losses
incurred but not yet reported involving permanent
disability or death, and the average cost thereof.
The IBNR provision is obtained by multiplying the
expected number of IBNR claims by the average
cost.
a.3\ Life and accidents and health
technical provisions
Technical provisions in relation to traditional life,
annuity and accidents and health products were
calculated on the basis of various assumptions,
namely mortality, longevity and interest rate, applicable to each of the covers, including a margin
of risk and uncertainty. The assumptions used
were based on the company’s past experience
and that of the market. These assumptions could
be revised if future experience shows that they
are inappropriate.
a.4\ Provision for claims in other classes
of non-life insurance
Provisions for losses in classes of non-life insurance are calculated using the chain ladder method applied to the amount paid or to the total
cost, depending on what is best suited to each
class.
genous groups (third party material, third party
injuries under €100,000, third party injuries over
€100,000, own damage, passengers, legal protection). For each of these groups a best estimate
is made.
Worker’s compensation are treated in a similar
way: Liberty Seguros separates medical costs
without lifelong care, wages lost due to temporary
disability, other indemnifications for losses and
lifelong care. In the particular case of the provision
for lifelong care indemnifications in the context of
worker’s compensation insurance, Liberty Seguros
calculates:
(i) for each known case, the current value of
future medical costs, taking into account future
medical inflation;
(ii) a lifelong care IBNR provision, based on expected number of cases multiplied by average
cost.
In addition, the company calculates:
a.4.1\ Provision for IBNR
This is estimated on a monthly basis, according to
the reality of claims management and the evolution
of the company’s portfolio.
In relation to claims in 2013 for non-life insurance as a whole, the IBNR provision as at 31
December 2013 corresponds to 8.6% of the
cost of claims in the year. The total value of the
IBNR provision on the balance sheet of Liberty
Seguros represents 12.1% of earned non-life
premiums in 2013 and 13.5% of total provisions
for claims.
For motor insurance, losses are sorted into homo-
109
a.4.2\ Provision for future cost claims
managment
Liberty Seguros calculates this provision on the
basis of the real costs allocated to the claims function,
excluding only those considered investments. The
ratio of claims management costs to claims payments
is calculated and that ratio is applied to the provision
for claims to give the provision for future costs of
claims management.
Alternative methodologies and use of different
assumptions and estimates could result in a
different level of recognised impairment losses,
with a consequent impact on the company’s results.
In addition, values different from those recognised could be seen as a result of the methodology
applied.
c\ Pensions and other employee benefits
The provision for future costs of managing claims
that occurred before 31 December 2013 for non-life insurance as a whole corresponds to 4.1% of
the cost of claims in the year. The total provision for
future management costs on the balance sheet of
Liberty Seguros represents 2.7% of earned non-life
premiums in 2013 and 3.0% of the total provision
for claims.
Given their nature, calculating provisions for claims
and other liabilities for insurance contracts involves
a degree of subjectivity. Nevertheless, the company
considers that the liabilities calculated on the
basis of the methodologies defined suitably reflect
the best estimate of the responsibilities to which it
is bound.
b\ Impairment of financial assets
available for sale
The company deems its assets available for
sale to be impaired when there is a continuous
or significant decrease in their fair value.
Determination of a continuous or significant
decrease requires a judgment. In its judgment,
the company assesses the factors referred to in
note 3.1.b.7.
110
Calculating liabilities for retirement pensions requires use of assumptions and estimates, including
actuarial projections, the estimated profitability of
investments and other factors that could have an
impact on costs and on the liabilities of the pension
plan.
Changes in these assumptions could have a significant impact on the values calculated.
The assumptions and methodology for calculating
liabilities for pensions and other employee benefits
are disclosed in note 23.2 subparagraph q).
d\ Tax on profits
Calculating tax on profits requires certain interpretations and estimates.
Other interpretations and estimates could result
in a different level of tax on profits, current and
deferred, recognised in the year.
In accordance with the tax legislation in force, the
tax authorities can review the company’s calculation of taxable amount within a period of four
years. It is therefore possible, that there may be
corrections to the taxable amount for the years
2010, 2011, 2012 and 2013, chiefly as a result
of differences in the interpretation of tax legislation. Nevertheless, it is the belief of the company’s
board of directors that there will be no significant
corrections to the tax on profits recorded in the financial statements.
04\ NATURE AND EXTENT
OF ITEMS AND RISKS
RESULTING FROM
INSURANCE CONTRACTS
AND REINSURANCE ASSETS
04.1\ Information regarding
insurance contracts
a\ Accounting policies adopted in relation to
insurance contracts corresponding to related assets, liabilities, income and costs or
expenses
The accounting policies are described in note 3.1
of these notes.
b\ Assumptions used in measurement and methodologies for calculation of estimates
b.1\ Claims pending settlement
Claims reported are valued case-by-case on the
basis of the information obtained and past experience with similar claims.
In the case of claims for material damage in the
motor business, there are independent processes
for direct indemnification of the insured party at
fault and for direct indemnification of the insured
party not at fault.
Reimbursement values, deriving from liabilities
assumed by the company but ascribable to third
parties, are recognised only where there is concrete evidence that the amounts in question are
recoverable.
b.2\ Losses Incurred But Not Enough
Reported (IBNER) and Incurred But Not
Reported (IBNR)
See description included in note 3.3 of these notes.
b.3\ Liabilities for lifelong care
See description included in note 3.3 of these notes.
c\ Methodologies for calculating amounts to
be attributed to policyholders and amounts
actually attributed as profit-sharing (bonuses
on with-profits products)
The criteria used in calculating bonuses, in relation to those products that foresee them, are based on technical and financial results accounts,
drawn up by product or group of products in
conformity with what is established in the plan
for profit-sharing.
The value of the bonus is estimated on a monthly
basis according to the growth of the various
products. The definitive value is calculated at the
end of each year and credited to the provision for
profit-sharing.
111
The criteria for distribution of profits (bonuses) follow
what is established in the contractual conditions
and the plan for profit-sharing.
d\ Effect of changes in the assumptions used
to measure insurance contract assets and
liabilities
In 2013 and 2012, the company did not make any
changes to the methodologies and assumptions
used in measuring its technical provisions. No
112
changes of assumptions were made in relation to
assets.
e\ Reconciliations of liabilities
of insurance contracts and assets
of reinsurance contracts
The following tables show the reconciliation of
technical provisions (direct insurance, inward
reinsurance and outward reinsurance) for the
years 2013 and 2012:
RECONCILIATION OF DIRECT INSURANCE
AND INWARD REINSURANCE
Amounts in euros
2013
Opening balance
Variation
Balance
Technical provisions - direct insurance
Mathematical life provision
58,105,868
-302,740
57,803,127
217,006,463
-7,649,085
209,357,378
9,673,461
171,765
9,845,226
Life
Workers’ compensation
91,142,521
-7,459,680
83,682,840
Other insurance
109,415,514
-3,725,843
105,689,672
\ Direct insurance
109,389,494
-3,725,785
105,663,709
26,020
-58
25,962
\ Inward reinsurance
Subtotal provision for claims
210,231,495
-22,691,426
199,217,737
Provision for profit-sharing
15,350,396
-860,423
14,489,973
Provision for unexpired risk
4,243,943
2,040,467
6,284,410
Equalisation provision
5,393,303
863,914
6,257,217
Direct insurance
5,388,222
863,914
6,252,136
5,081
0
5,081
510,331,468
-23,509,397
493,409,842
Inward reinsurance
TOTAL
113
RECONCILIATION OF DIRECT INSURANCE
AND INWARD REINSURANCE
Amounts in euros
2012
Opening balance
Variation
Balance
Technical provisions - direct insurance
54,765,063
3,340,804
58,105,868
235,362,376
-18,355,913
217,006,463
8,615,585
1,057,876
9,673,461
91,382,330
-239,810
91,142,521
Life
Other insurance
111,871,667
-2,456,153
109,415,514
\ Direct insurance
111,845,686
-2,456,192
109,389,494
\ Inward reinsurance
25,981
40
26,020
211,869,582
-19,109,347
210,231,495
3,621,390
11,729,006
15,350,396
Provision for unexpired risk
5,408,537
-1,164,594
4,243,943
Equalisation provision
4,613,178
780,126
5,393,303
Direct insurance
4,608,096
780,126
5,388,222
Inward reinsurance
TOTAL
114
5,081
0
5,081
515,640,125
-9,440,837
510,331,468
RECONCILIATION OF OUTWARD REINSURANCE
Amounts in euros
2013
Opening balance
Variation
Balance
- outward reinsurance
2,482,915
225,729
2,708,644
0
0
0
Life
544,608
- 191,915
352,693
1,737,983
- 225,385
1,512,598
Other insurance
5,192,396
- 53,784
5,138,612
Provision for irrecoverability
(see note 4.4)
-1,355,742
-1,355,742
6,119,245
- 471,084
5,648,162
TOTAL
8,602,160
- 245,355
8,356,805
2012
Opening balance
Variation
Balance
- outward reinsurance
2,293,592
189,323
2,482,915
0
0
0
347,534
197,073
544,608
Life
1,684,641
53,342
1,737,983
Other insurance
3,942,402
1,249,994
5,192,396
Provision for irrecoverability
(see note 4.4)
-1,355,742
-1,355,742
4,618,835
1,500,410
6,119,245
TOTAL
6,912,426
1,689,733
8,602,160
115
(i) Adjustments and breakdown
of costs of claims
Information regarding adjustments to claims
that occurred in years prior to 2013 is shown in
Annex 2 to these notes to the balance sheet and
income statement. In addition, the breakdown
of the cost of claims is given in Annex 3. All
changes arise from current management of claims and are not significant in light of the value of
provisions set up.
The breakdown of cost of claims, net of reinsurance, for 2013 and 2012 is shown below:
Amounts in euros
Adjustments and breakdown of cost of claims
2013
2012
Direct Insurance
Amounts paid
Costs attributable to the claims function
182,360,352
175,426,878
8,363,876
8,304,907
Variation in provision for claims
-12,205,065
-495,563
Subtotal
178,519,163
183,236,222
-11,137,463
-8,007,492
471,084
-1,500,410
Outward reinsurance
Amounts paid
Variation in provision for claims
Subtotal
-10,666,380
-9,507,902
TOTAL
167,852,783
173,728,320
(ii) Changes in the provision for profit-sharing
Changes in the year are shown below:
Amounts in euros
Changes in provision for deferred participation
Provision for profit-sharing attributed
at beginning of year
2012
3,236,938
3,372,980
Profits distributed without PR on 31.12
-105,724
-112,498
Profits distributed on 31.12
-241,687
-402,605
274,531
379,060
3,164,058
3,236,938
Provision for deferred profit-sharing
11,325,915
12,113,458
CLOSING BALANCE
14,489,973
15,350,396
Attributed profit-sharing
attributed at end of year
116
2013
04.2\ Information regarding
the nature and extent of specific
insurance risks
A\\ OBJECTIVES, POLICIES AND PROCESSES
FOR THE MANAGEMENT OF RISKS ARISING
FROM INSURANCE CONTRACTS AND
METHODS USED TO MANAGE THOSE RISKS
The risk inherent in each insurance contract is the
possibility of the insured event occurring and the
uncertainty underlying the amount of the indemnification payable (insurance risk). Thus, the main risk
that an insurer faces is that the liabilities created
will be insufficient to pay the indemnifications due.
Risk factors:
a\ Frequency and severity of claims
The frequency and severity of actual claims compared with estimated claims is a factor that can
compromise the stability of an insurer. Insured
events are random and the level of such events
varies from year to year compared with the levels
estimated using statistical techniques. Ways of
mitigating this risk:
\ Underwritting policy on the non-life segment
Liberty Seguros has underwriting policies for all
products. Those policies set out, in addition to
risks that are excluded, risks that are only accepted subject to conditions, risks that are normally
accepted and target risks, the conditions on
which the best risks are accepted and the limits
of acceptance of non-target risks, along with the
general level of commercial discounts. The poli-
cies sold are monitored on a monthly basis, by
risk segment and sales manager. That oversight
permits analysis of segments sold and discount
level. Portfolio profiles are drawn up at quarterly
intervals for the main classes of insurance (motor, accidents at work, home, commercial, industrial, personal accident and condominium).
These show premiums earned, exposure to risk,
average premiums, expected number of claims,
frequency, average cost of claims and claims
rate, among other details;
\ Underwritting policy on the life segment
In the context of risk life insurance, and for the covers
most frequently underwritten (death and disability)
there are grids of medical formalities for policies with
a mortgage lender and without a mortgage lender.
In the first case, underwriting is a little more flexible,
as there is less risk of adverse selection.
These grids, which are discussed and revised periodically in coordination with our reinsurers, are structured with two axes (age and insured amount) and
are more demanding as age and insured amount
increase.
For certain more specific supplementary covers
where our portfolio is small and/or where we do not
as yet have so much experience (e.g. diagnosis of
serious diseases, acute myocardial infarction) there
are also grids of specific additional medical formalities
that can be required when clients wish to take out
covers of this type.
\ Pricing in the non-life segment
Liberty Seguros’ tariffs are selective, in the sense
that they offer good prices for less risky segments
117
and prices for the worst risks that are normally higher
than the market rate. The tariffs are approved jointly
by the technical director, sales director and actuarial
director;
\ Pricing in the life segment
In the context of death cover, mortality tables considered appropriate by the actuarial department
have been used. In the context of supplementary covers, where no internal or national statistics
exist, it is customary practice to turn to reinsurers
and their experience and statistics on the subject.
There is some flexibility from the commercial point
of view, with adjustment at the level of commissions
(and underwriting charges), depending on what the
agent and/or distribution channel chooses. This can
have some influence on the price of the contracts
in question.
non-proportional excess of loss (XL) treaties.
\ Life reinsurance treaties
The reinsurance treaty used by Liberty for its life
business is of the proportional type. This treaty has
two retained lines for different covers. They are:
\ Main policy cover, namely death and disability, with a retained line of e100,000 per person
insured;
\ Supplementary policy covers with a more cautious retained line of €12,500.
There is also a non-proportional (XL) treaty for catastrophic risks, which has a priority of €300,000 and
an annual limit of €4,000,000, with a limit per event
of €2,000,000.
\ Claims managment in the non-life segment
\ Commercial incentives on the life
and non-life segment
Commercial incentives are closely linked to the
profitability of the agent’s portfolio, a factor that
encourages the building of healthy portfolios.
Claims management is centralised, with teams that
specialize in each class of insurance and in prevention and detection of fraud. Claim processes are reviewed in line with specific rules in such a way that
no process goes more than 45 days without review.
\ Non-life reinsurance treaties
\ Claims managment in the life segment
For multi-risks, Liberty Seguros has a (proportional)
surplus reinsurance treaty and a treaty for the surplus of claims for catastrophes (CAT XL) over the
retention. The maximum capacity of the treaty by
risk (surplus) is 9 million euros for home insurance,
15 million euros for commercial and industrial risks
and 30 million euros for condominiums. Protection
in the event of natural disaster is 113 million euros.
Life risk claims are managed by specialist employees with experience in this area. In addition,
in the context of management of a claim, the dossier is always analysed and approved by a line
manager competent to take the relevant decision.
Issue of the corresponding payment orders is always subject to double validation / electronic signature, specifically by the person who creates /
manages the claim and the person who authorises
settlement of the claim.
For other areas of insurance, Liberty Seguros has
118
There is also quarterly quality control (by sampling) to check on various aspects of the claims
settlement process, namely covers underwritten,
insured amount, clinical opinion, covered loss,
settlement period.
point of view. The solvency margin is calculated in
accordance with Portuguese Insurance Institute
(ISP) Regulatory Standard no. 6/2007-R of 27
April and Regulatory Standard no. 12/2008-R of
30 October, on the basis of statutory financial information.
\ Solvency policy
The company monitors solvency from a monthly
As at 31 December 2013 and 2012, the solvency
margin had the following components:
Amounts in euros
Solvency
2013
2012
Share capital
26,548,291
26,548,291
Reserves
55,194,373
55,254,703
Retained earnings
62,258,657
51,308,167
7,987,627
12,167,212
Net profit/loss
Distribution of annual profits *
- 20,003,865
0
TOTAL NET POSITION ( I )
131,985,084
145,278,372
- 5,588,834
- 1,861,242
0
0
Intangible assets
Subordinate loans with no fixed maturity
Adjustment retirement pensions and obligations
TOTAL (2)
Available solvency margin ( 1 ) + ( 2 )
0
0
- 5,588,834
- 1,861,242
126,396,249
143,417,129
Required solvency margin
47,851,063
48,157,088
Surplus / Shortfall
78,545,186
95,260,041
264%
298%
Solvency ratio
* Provisional figure taking into account the allocation proposed by the board of directors.
The fall in the solvency ratio from 298%, in 2012,
to 264%, in 2013, is explained by the 2013 pro-
posal for the distribution of dividends, payable in
2014.
119
b\ Sources of uncertainty in the creation of
provisions
c\ Alteration of assumptions in the calculation
of provisions
The creation of provisions for claims is a process
that involves some uncertainty. Each month, Liberty
Seguros uses statistical methods to calculate the
amounts of the provision for losses incurred but
not reported, the provision for excess/insufficiency
of case-by-case reserves, the provision for future
claim management costs and the provision for meeting future liabilities to the Accidents at Work Fund.
At quarterly intervals, full actuarial evaluations are
carried out, duly segmented by class of insurance
and type of claim within each class. In this way, the
provisions recognised keep pace with the evolution
of the portfolio and of claims. Because these analyses are carried out monthly, abnormal situations can
be identified quickly. According to the report of the
actuary responsible, Liberty Seguros has appropriate
and robust provisions.
For worker’s compensation insurance, Liberty
adjusted the following assumptions in July 2013:
In the domain of life insurance, the provision for
claims is calculated by policy and corresponds to
the value of the capital sum payable in the event of
loss, maturity or redemption. There is, therefore, no
uncertainty associated with this provision.
c.1\ The mortality table used to calculate the
mathematical provisions for pensioners with disabilities and the provisions for compensations for
Lifelong Care now uses 155% of the current tables (GRM/F 95), which is equivalent to an implicit
mortality of 130%, given the experience of the last
20 years;
c.2\ Discount rate: this changed from 3% to 3.5%
for calculating pensions that are not mandatorily
redeemable and the provisions for compensations
for lifelong care
Other adjustments to assumptions were also made.
This is quite normal in actuarial work and has the
aim of improving the estimate for each segment.
These adjustments have not affected the overall
amounts of provisions, which have, therefore,
remained stable.
d\ Impacts due to regulatory changes
Making provision for life claims incurred but not
reported is a process that, as in non-life insurance, involves some uncertainty. Liberty Seguros
calculates this provision annually using statistical
methods and monitors its appropriateness on a
monthly basis.
The assumptions used by the company are described in note 3.3.
120
The main regulatory change facing the Portuguese
market is the new table of indemnifications for
bodily injury in the motor segment. The company, in common with the rest of the insurance
market, has not yet been able fully to estimate
the impact of this.
B\\ SENSITIVITY ANALYSES CONDUCTED,
CONCENTRATIONS OF RISK AND ACTUAL
LOSSES
b.1\ Concentrations of risk
\ Concentration of risk in non-life insurance
In 2013 and 2012 Liberty Seguros had the following
concentration of provisions for claims, by class of
insurance:
Amounts in euros
Area
as at 2013
%
as at 2012
%
Non-life
Accidents and health
85,177,112
45.0
92,603,093
46.2
Worker’s compensation
83,682,840
44.2
91,142,521
45.4
1,354,764
0.7
1,292,769
0.6
Personal accident
and passengers
Health
139,507
0.1
167,803
0.1
Fire and other damag
11,372,882
6.0
9,049,272
4.5
Motor
86,838,709
45.9
92,430,717
46.1
Third party liability
79,227,870
41.8
86,057,566
42.9
Other coverages
7,610,839
4.0
6,373,152
3.2
Marine and transport
2,684,089
1.4
2,739,542
1.4
Air
0
0.0
0
0.0
Freight
1,247,705
0.7
1,484,726
0.7
General third party liability
1,810,726
1.0
1,954,209
1.0
27,001
0.0
51,574
0.0
Credit and surety
Legal protection
33,355
0.0
47,077
0.0
180,932
0.1
197,825
0.1
Sundry
0
0.0
0
0.0
TOTAL
189,372,512
Assistance
200,558,035
121
As the table shows, 90% (2012: 91.5%) of provisions for claims are concentrated in the areas of
motor insurance and accidents at work insurance.
The table below details the relationship in terms
of Frequency, Average Cost and Risk Premium
(Frequency x Average Cost) for the claims made
in 2013 and as compared to those that occurred
and were estimated for the main business areas
in 2012.
Amounts in euros
Frequency
Area
Average cost
Freq. x average cost
dec/jan 2013
dec/jan 2012
dec/jan 2013
dec/jan 2012
dec/jan 2013
dec/jan 2012
Third party liability - material damage
0,889
0,976
0,973
0,958
0,865
0,935
Third party liability - personal injury
0,915
1,018
0,942
0,878
0,862
0,894
Own damage
1,004
0,984
1,028
0,956
1,033
0,941
Medical costs
1,148
0,971
0,993
0,946
1,140
0,919
Temporary disability
1,077
0,924
1,000
1,087
1,077
1,004
Permanent partial disability
< 30%
1,241
0,980
1,000
1,196
1,241
1,172
Permanent partial disability
>= 30%
1,119
1,154
0,834
1,261
0,933
1,455
Permanent absolute disability
for usual work
1,093
1,093
0,901
0,994
0,985
1,087
Death
1,409
0,743
0,920
1,019
1,295
0,756
Lifelong care
0,926
0,878
1,030
0,537
0,953
0,471
Motor
122
In the Motor Business, there was a fall in claim frequency and average cost for material and personal
third-party liability. Frequency and average cost
both rose for own damage claims.
The map below shows Liberty Seguros’ exposure to seismic phenomena on the basis of insured
amounts net of surplus reinsurance:
For the worker’s compensation business, there were
rises in medical expenses, permanent disabilities
and deaths. These were all caused by an increased
frequency of claims.
The other business areas did not present any significant year-on-year changes.
Liberty’s reinsurance program is analysed annually
by reinsurance intermediaries and is placed with
Liberty Mutual and on the market.
Although it does not account for a significant proportion of the company’s provisions, fire and other
damage insurance has an optional cover that involves one of the biggest risks that the Portuguese
insurance market faces, namely the risk of earthquakes. Exposure to earthquake risk is normally
analysed in terms of its dispersion across the country (both in terms of number of risks and insured
amounts), as there is a greater likelihood of an event
of this nature occurring in certain regions, such as
Lisbon and the Algarve.
TSI millions #
<5
5-25
25-50
50-100
100-170
123
\ Concentration of risk in life insurance
As far as life insurance is concerned, the company’s
risk, in terms of product type, is concentrated as
shown below:
Amounts in euros
Type
2013
Personal
205,150,615
212,564,383
Annuities
Whole life
Endowments
Mixed
Term
Universal Life
Retirement Savings Plan, Rtrmnt./Education SP
Other
Complementary
1,251,633
37,434
11,152,652
2,522,983
1,081,671
117,419,335
71,470,017
0
214,891
1,342,158
38,598
9,792,413
3,744,618
1,183,094
121,319,981
74,906,243
0
237,277
Group
4,206,834
4,442,080
Annuities
Deferred capital
ART
Supplementary
0
1,738,871
2,465,890
2,073
0
1,800,463
2,639,899
1,718
209,357,449
217,006,463
0
0
209,357,449
217,006,463
TOTAL
Reclassification to post-employment benefits
and other long-term benefits - liabilities
FINAL VALUE
In accordance with the data shown, the life portfolio
is concentrated at the level of endowment products.
124
2012
b.2\ Sensitivity analyses
The company carried out sensitivity analyses for the
life and non-life sectors.
\ Sensitivity analysis - life insurance
The following table shows the sensitivity analysis of
the current value of future life profits.
It represents the impact of various risk factors (mortality, costs, total redemptions, cancellations and
interest rates) on the baseline scenario.
Amounts in millions of euros
Assumptions
2013
2012
Increase in rate of return
on life portfolio (+0.5 pp)
4,1
4,2
Decrease in rate of return
on life portfolio (-0.5 pp)
-4,5
-4,3
10% increase in costs (without commissions)
-1,2
-1,1
10% increase in mortality rate
-1,1
-1,2
10% increase in total redemptions and cancellations
-1
-1,1
10% decrease in total redemptions and cancellations
1,2
1,3
The baseline scenario was calculated for a set of
products that account for 95% of mathematical provisions for life insurance in 2013.
In this scenario, the working hypotheses for mortality, redemption rates, cancellations and increase in
costs were as follows:
Mortality
45% of table GKM 80
Redemption and
cancellation rates
Experience
with each product
Increase in costs
2%
125
(i) variations in the cost of claims arising from
legislative changes or for any other reason;
(ii) variation in medical rates;
(iii) variation in discount rates of mathematical
provisions and provisions for lifelong care in the
area of accidents at work.
\ Sensitivity analysis - non-life insurance
For non-life insurance classes, the risks that can
mean that the real cost of claims is different from
actuarial best estimates are:
Amounts in euros
Assumptions
Motor
Impact
on claims
provisions
balance
sheet
Impact
on
claims
2013
Impact
on
claims
2013
Impact
on claims
provisions
balance
sheet
Impact
on
claims
2013
Average cost +10%
8,705,300
3,782,738
8,368,284
1,167,482
1,861,071
866,836
Average cost -10%
- 8,705,300
- 3,782,738
- 8,368,284
- 1,167,482
- 1,861,071
- 866,836
Medical inflation +1 pp
0
0
3,535,098
103,351
0
0
Medical inflation -1pp
0
0
- 2,795,616
- 86,460
0
0
Discount rate +1pp
0
0
- 7,502,319
- 479,330
0
0
Discount rate -1pp
0
0
9,511,494
608,907
0
0
04.3\ Market risk, credit risk,
liquidity risk and operational
risk
\\ MARKET RISK
Risk of adverse movements in the value of the
insurance company’s assets, related to variations
in capital markets, foreign exchange markets, interest rates, real estate markets and spread risk.
Market risk also includes risks associated with the
126
Impact
on claims
provisions
balance
sheet
Other Areas
use of financial instruments with embedded derivatives and products structured with characteristics
similar to derivatives. In the context of the management of market risk, the risk of mismatching
between assets and liabilities must also be taken
into consideration.
Management of market risk at Liberty Seguros
essentially falls within the scope of the investment
management policy in place, which has the
following objectives:
\ to maximise the return on the investment portfolio,
complying with restrictions imposed by the supervisory authority and maturity structures that reflect the
company’s organisational behaviour;
The following table shows the distribution of financial assets allocated to insurance contracts and to
insurance contracts and operations regarded as investment contracts for accounting purposes:
\ to optimise the ratio of reward adjusted for fiscal
effects to risk, in order to obtain long term income
and profit growth and strengthen the company’s
competitive position, financial ratings and growth
potential.
Amounts in euros
2013
Life
Unit-Linked
Non-life
Total
Financial Instruments
263,700,434
0
Variable-yield securities
583,125,615
319,425,181
790,601
0
2,016,125
2,806,726
262,909,833
0
317,409,057
580,318,889
Financial assets initially recognised
at fair value through profit and loss
0
8,259,468
0
8,259,468
Fixed-yield securities
0
7,334,464
0
7,334,464
Funds
TOTAL
2012
0
925,004
0
925,004
263,700,434
8,259,468
319,425,181
591,385,084
Life
Unit-Linked
Non-life
Total
Financial Instruments
Variable-yield securities
285,551,149
0
323,002,731
608,553,880
22,500
0
0
22,500
285,528,649
0
323,002,731
608,531,380
Financial assets initially recognised
0
9,806,874
0
9,806,874
0
8,808,320
0
8,808,320
Funds
TOTAL
0
998,554
0
998,554
285,551,149
9,806,874
323,002,731
618,360,754
127
The allocated investment portfolio as at 31
December 2013 is made up almost entirely of bonds
(99.37%). There were no changes from the previous
year, when securities of this nature also represented
99.83% of the total allocated portfolio.
As at 31 December 2013 Liberty Seguros had the
following structure of financial assets allocated to
insurance contracts and to insurance contracts
and operations regarded as investment contracts
for accounting purposes by industrial sector:
14%
With reference to 31 December 2012, the breakdown
was:
0.1% 1%
15%
0.2% 2%
10%
10%
2%
6%
8%
4%
4%
4%
2%
2013
2012
4%
26%
26%
29%
31%
Government
Financial
Energy
Technology and
Communications
Sundry
Funds
In 2013, as in previous years, operations to buy
and sell securities were monitored with a view
to achieving the least impact on earnings and
maintaining the company’s risk/reward policy. As
a consequence of this strategy, there were no
significant changes in structure by sector. The financial, government and utilities sectors were the
128
Utilities
Cyclical and Noncyclical comsuptions
Basic Materials
Industrial
most significant, accounting for 71% of total
assets in 2013 and 68% in 2012.
The distribution of risk on the financial assets
referred to above, by country of issue, and as at
31 December 2013 and 2012 was as follows:
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
BEL
2013
CAN
DE
ES
FR
GB
IT
LU
MX
NL
PT
SN
USA
Other < 2%
2012
The breakdown by issuer country shows that, as
in the previous year, there are significant differences between issuer countries. Spain, France,
the Netherlands and the United States account
for a significant proportion of the asset total, 47%
in 2013 and 48% in 2012. From 2012 to 2013,
Spanish and Dutch assets both increased by 2
p.p. while German, French and North American
assets all fell slightly as a proportion of the overall
total.
All the assets reflected here are traded in euros;
there is, therefore, no exposure to exchange rate
risk.
The analysis of sensitivity to interest rates using
modified duration, which measures the sensitivity
of the portfolio’s market value to changes in interest rates, was 5.27% in 2013. This means that if
interest rates were to rise by 1%, the value of the
above portfolio would fall by 5.27%. In 2012 modified duration was 5.50%. This means there was a
slight increase in the company’s exposure to variations in interest rates.
Value at risk (VaR) is a measure of market risk
that considers historical variations in the prices
of securities and assumes that their distribution
over the coming year will be the same, in order
to estimate the impact on current market value
at a given time horizon. Considering a time horizon of one year and a confidence level of 99%,
we obtain a VaR of 5.81%, as at 31 December
2013 and for the above portfolio. This means
that there is a 1% probability that we will have
losses on our portfolio in excess of 5.81% of its
current value. The same analysis with reference
to 31 December 2012 gave a VaR of 5.50 % (this
amount was corrected in relation to the figure
given for 2012 – 5.20%, due to the incorrect inclusion of free amounts). There was a slight increase
in this indicator, caused by a greater price volatility
that resulted in a less than significant rise in the
company’s exposure to market risk.
129
managed essentially on the basis of the investment
management policy in place at the company.
\\ CREDIT RISK
Risk of default or impairment of the credit quality of
issuers of negotiable securities to which the insurance company is exposed, and of debtors, providers,
intermediaries, policyholders, co-insurers and reinsurers with which it has dealings.
a\ Financial assets
As at 31 December 2013 and 2012, Liberty
Seguros had the following structure, by credit
risk sector, of financial assets allocated to insurance contracts and to insurance contracts and
operations regarded as investment contracts for
accounting purposes, in accordance with ratings
obtained from Bloomberg:
The credit risk associated with financial assets is
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
AAA
2013
AA
A
BB
No rating
Unit-Linked
2012
The credit risk on Liberty Seguros’ asset portfolio is
adequately controlled: 11% of the portfolio consists
of assets with the highest credit rating (AAA), as opposed to 17% in 2012. This fall is explained by the
downgrading of the ratings of the securities held in
the portfolio.
The asset portfolio as at 31 December 2013 was
not significantly changed from 31 December 2012.
Assets with a rating of “A” or better represented 49%
130
BBB
of the portfolio, compared with 57% in the previous
year. Assets in the portfolio in 2013 with a rating of
“BB” or lower are considered high-risk, as they have
more speculative characteristics. Their share of the
portfolio is insignificant however, at around 7%, a
proportion similar to the previous year, when they
made up 5% of the portfolio. This change in ratings
is accounted for by the changes in the ratings of the
assets in the portfolio, as mentioned in the previous
paragraph.
b\ Insurance takers and intermediaries
c\ Reinsurers
Liberty Seguros has software controls in accordance with the insurance premium payment regime in
force in 2013 that enable it to mitigate the credit risk
resulting from non-payment of insurance premiums
by policyholders.
As regards the risk of reinsurance default, the
company has a list of reinsurers pre-approved by
the group. Exceptions to this list require the prior
approval of the Liberty Mutual Group corporate
reinsurance credit committee.
The company minimises the impact of intermediary-related credit risk through a series of analytical
procedures and software controls. These include
blockage of access to the financial reporting system
in the event of missed payment deadlines, along
with an automatic policy cancellation mechanism.
Exposure to credit risk associated with reinsurers in
the years 2013 and 2012 arises from the following
items:
Amounts in euros
Reinssurance
2013
2012
Outward Reinsurance
2,708,644
2,482,915
Provision for non-life claims
5,295,469
5,574,637
352,693
544,608
Accounts receivable for other
outward reinsurance operations
1,249,223
415,585
Accounts payable for other
outward reinsurance operations
- 1,289,845
- 1,392,065
- 352,693
- 544,608
7,963,492
7,081,071
Accounts receivable for other
inward reinsurance operations
224
147
Accounts payable for other
inward reinsurance operations
0
0
224
147
7,963,268
7,081,218
Provision for life claims
Deposits received from reinsurers
TOTAL NET OUTWARD REINSURANCE
Inward Reinsurance
TOTAL NET INWARD REINSURANCE
TOTAL NET REINSURANCE
131
The credit rating of reinsurers with which Liberty
Seguros did business in the years in question is as
follows:
Amounts in euros
Outward
Reinsurance
AA+
AA
AAA+
A
2013
2012
- 6,498
527,649
0
0
743,961
950,859
1,314,983
560,751
- 7,999
160,755
4,302,717
4,135,446
BBB+
0
1,324,463
BBB-
0
0
A-
BBNo rating
TOTAL
0
- 14,367
1,616,105
- 564,631
7,963,268
7,080,924
quent weeks, thus making it possible to draw up
plans of action in order to meet cash requirements
or take investment decisions.
Management of liquidity risk on the investment
portfolio is based on quantitative and qualitative
analysis of the match between assets and liabilities. In the sphere of life insurance, quarterly
projections are produced of the value of coupons,
maturities and premiums receivable, along with
redemptions, claims and maturities payable, for
each of the portfolios. Having determined these
amounts, the difference between assets and
liabilities is calculated for each of the years in
question. By analysing these results, situations
that require portfolio restructuring or additional
credit lines to meet liquidity needs can be identified
without realising capital losses, while taking into account appropriate hedging of liabilities. Projected
amounts are compared with actual amounts at
monthly intervals and divergences are identified,
in order to adjust future projections to real experience.
\\ LIQUIDITY RISK
This is the risk that the insurance company will
not have assets of sufficient liquidity to meet the
cash flow requirements inherent in meeting its
obligations to policyholders and other creditors
as they fall due.
Liberty Seguros’ liquidity management policy
takes in two main areas: treasury management
policy and investment portfolio liquidity management.
The control mechanisms implemented for treasury
management have a weekly periodicity and enable
identification of funds required or surplus in subse-
132
Periodical assets liability management (ALM) analyses include analysis of interest rates, modified duration, industrial sector and country of issue, diversification by type of security and ratings, which are
linked to the market risks and credit risks mentioned
in previous points.
In 2013, Liberty Seguros monitored the set of securities in its portfolios monthly, to ensure there were
no securities requiring application of the market-to-model valuation criterion. These are securities
traded on inactive or illiquid markets, or in a distress sale situation. The criteria adopted in gauging
the market conditions in which financial assets are
traded and the methodology and assumptions
The tables below show, with reference to 31
December 2013 and 2012, the segmentation by
maturity of financial assets and other assets allocated to insurance contracts and to insurance
contracts and operations regarded as investment
contracts for accounting purposes:
used in determining market-to-model fair value are
stated in note 6.11.
The results obtained from the analysis of future
cash flows as at 31 December 2013, show, in
overall terms, the existence of positive cover for
the life portfolios.
Amounts in euros
2013
< 1 year
1 to 3
years
3 to 5
years
5 to 15
years
> 15 years No
maturity
Total
Life
22,500 263,700,434
22,692,430
56,591,378
39,568,079
96,526,547
48,299,499
Non-life
24,573,428
57,560,449
69,422,987 146,617,410
21,250,908
0 319,425,181
Subtotal
47,265,858 114,151,827 108,991,067 243,143,957 69,550,407
22,500 583,125,615
Financial assets initially
recognised at fair value
Unit-Linked
Subtotal
1,967,634
3,815,410
1,059,410
492,010
0
49,233,491 117,967,237 110,050,476 243,635,968 69,550,407
925,004
8,259,468
947,504 591,385,084
Other Assets
Life
Unit-Linked
Non-life
Subtotal
TOTAL
282
0
0
0
0
121,358
121,640
0
0
0
0
0
25,448
25,448
23,614,630
29,164
5,517
374,546
0
5,684,588
29,708,444
282
0
0
0
0 29,855,250 29,855,532
49,233,773 117,967,237 110,050,476 243,635,968 69,550,407 30,802,755 621,240,616
133
Amounts in euros
2012
< 1 year
1 to 3
years
3 to 5
years
5 to 15
years
> 15 years No
maturity
Total
Life
Non-life
Subtotal
51,622,310
22,500 285,551,149
36,000,729
62,089,246
25,524,969 110,291,394
19,855,026
56,766,922
76,635,211 143,566,517
26,179,056
0 323,002,731
55,855,656 118,856,168 102,160,180 253,857,911
77,801,365
22,500 608,553,780
recognised at fair value
Unit-Linked
300,074
0
58,124,509 123,061,126 104,194,615 254,157,985
77,801,365
2,268,853
Subtotal
4,204,958
2,034,435
998,554
9,806,874
1,021,054 618,360,654
Other Assets
Life
1,159,712
1,160,391
679
0
0
0
0
Unit-Linked
0
0
0
0
0
20,920
20,920
Non-life
0
0
0
0
0
20,940,045
20,940,045
679
0
0
0
0
22,120,677
22,121,356
58,125,188 123,061,126 104,194,615 254,157,985
77,801,365
Subtotal
TOTAL
A comparison of both years reveals that the difference
between them is not significant.
23,141,730 640,482,010
\\ OPERACIONAL RISK
Risk of losses resulting from inadequacy or failure of internal procedures, persons or systems or
external events. In accordance with the technical
guidance on operational risk in Circular no. 7/2009
published by the Portuguese Insurance Institute
(ISP), the following aspects of this risk must be
analysed:
COMPARISON OF THE MATURITIES
OF FINANCIL ASSETS
40%
35%
30%
25%
20%
15%
10%
5%
0%
< 1 YEAR
1 TO 3
YEARS
2013
134
3 TO 5
YEARS
5 TO15
YEARS
> 15 YEARS
NO
MATURITY
2012
\ deliberate professional misconduct (internal fraud);
\ illegal activities of third parties (external fraud);
\ practices related to human resources and safety
at work;
\ clients, products and commercial practices;
of claims. Within the Customer Service Department,
the company has a Special Supplier Management and
Investigation Unit.
\ external events that cause damage to physical
assets;
\ business disruption and systems failures;
\ risks related to business processes.
The biggest year-on-year increase in detected
fraud was in the Assets business. The 103%
increase in such frauds is largely explained by
the improved control processes that are in place
and the changes made to the internal team, who
were given increased fraud detection training.
Although these changes took place in 2012, it
was in 2013 that they produced their full effect.
The company has taken steps to mitigate internal
fraud, including training on the topics of fraud and
the code of conduct, along with control of physical access. Additionally, in the context of claims
management, there is a claims settlement service
order in force, payment manuals, and a defined
system of thresholds.
As regards external fraud, there are training plans on
the subject, along with a fraud regulation in the context
Amounts in euros
Area
Dec. 2013
No. of
Frauds
**
Accidents ****
Motor
Assets
TOTAL
Dec. 2012
Gross
savings
Net
Savings*
No. of
Frauds
**
Variation % - 2013/2012
Gross
savings
Net
Savings*
No. of
Frauds
**
Gross
savings
Net
Savings*
405
1,876,454
1,914,333
305
1,389,059
1,358,096
33
35
41
2,028
4,774,051
4,837,300
1,354
3,719,561
3,640,381
50
28
33
1,599
5,017,630
4,719,780
787
2,299,628
2,161,377
103
118
118
2,446 7,408,248
7,159,854
65
58
60
4,032 11,668,135 11,471,413
* Net savings = Gross savings – Investigation Costs
** Confirmed Frauds + Pseudo-Frauds + For Reimbursement
At the level of human resources risk, Liberty Seguros
has a formal performance management policy and
annual training plans, along with rules designed to
ensure compliance with labour legislation.
*** Personal Accidents + Accidents at Work
*** Personal Accidents + Accidents at Work + Life
Seguros has in place a business continuity policy and
a disaster recovery plan, which is updated and tested
on a yearly basis.
In terms of commercial practices, namely the risk
of money laundering, the company has rules in
place with procedures to prevent money laundering.
As regards outsourcing risk, the company has contracts with the various service providers in which the
service levels to be delivered and the penalties for
failure to do so are defined. The contracts include
confidentiality clauses.
In order to mitigate the risk from disasters, Liberty
In 2013 there were no significant changes at the
135
level of internal procedures and the changes that
were made at the level of reorganisation of some
departments did not affect the risk assessment.
Thus, as in 2012, a fresh assessment was carried out of risk and control matrices, in relation
to inherent risk, mitigating controls and residual
risk, for the different types of risk, analysed in the
context of risk management, which includes operational risk.
of claims, comparing that estimate with the
company’s balance sheet provisions. The actuarial techniques used were based on chain ladder models, with the due separation of claims into
homogenous groups and the incorporation of the
necessary failsafes in cases of greater volatility.
In view of the methodology used to assess its
estimates, the company considers its provisions
adequate and robust.
Risk matrices are analysed by the risk management committee and are included in the annual
“Risk Management System Report” produced in
accordance with Liberty Seguros’ risk management policy.
Adequacy of non-life premiums is assessed on
the basis of the annual results account and the
projection of future results, taking into account
cancellations, evolution of frequency, average
cost and average premium in each class of insurance and each cover. This assessment does not
consider the foreseeable impact of competitors’
actions on global price levels.
04.4\ Amount of impairment losses
recognised and reversed in the
period in relation to the reinsurance
assets
The outward reinsurance provision for claims is
influenced in the amount of €1,355,742 by the
provision set up to meet the eventuality of nonrecovery of the share of a reinsurer, Suisse Ré, in a
claim process pending settlement.
04.5\ Adequacy of premiums and
provisions
\\ NON-LIFE SEGMENT
The adequacy of technical provisions is checked
by way of the actuarial estimate of the final cost
136
\\ LIFE SEGMENT
The adequacy and sufficiency of premiums and
provisions in the life segment is assessed on the
basis of an “embedded value” model that generates future profits and cash flows, starting from the
portfolio held at the end of each civil year.
The working assumptions are based on a best
estimate, taking into account the evolution of inflation and other economic variables, along with
experience of mortality, portfolio departures due
to redemption and cancellation in the various
products.
From the analysis undertaken, we conclude that for
the baseline scenario, which corresponds to our
best estimate, the current value of future profits is
positive.
04.6\ Information on the main
ratios without deduction of outward
reinsurance
\\ NON-LIFE SEGMENT
Ratios
2013
Non-life
Claims ratio DI + IR
Accidents
and health
61%
57%
Fire and
other
damage
Motor
59%
Other
13%
72%
Costs ratio
32%
25%
47%
30%
21%
Combined ratio DI + IR
94%
82%
106%
103%
33%
Operating ratio
122%
19%
26%
65%
12%
Outward reinsurance ratio
12%
10%
27%
0%
47%
Claims ratio OR
35%
45%
63%
50%
-4%
Ratios
2012
Non-life
Accidents
and health
Fire and
other
damage
Motor
Other
Claims ratio DI + IR
61%
71%
46%
71%
21%
Costs ratio
32%
26%
47%
31%
22%
93%
96%
93%
101%
43%
114%
18%
24%
62%
10%
Combined ratio DI + IR
Operating ratio
12%
9%
26%
0%
49%
Claims ratio OR
32%
52%
50%
16%
4%
The claims ratio for the motor business was 1%
higher in 2013 than in 2012.
The operating ratio was higher than in the previous
year, largely due to the poorer performance across
all business areas.
The total costs ratio was the same as in the previous
year.
137
\\ LIFE SEGMENT
2013
Ratios
2012
Insurance
contracts
Claims ratio DI
Insurance
contracts
Investment
contracts
Maturing
39%
0%
31%
0%
Redemptions
78%
4%
128%
15%
Claims
20%
0%
23%
0%
137%
5%
183%
15%
25%
-
113%
-
4%
-
15%
-
TOTAL
Claims ratio OR
Claims ratio OR vs DI
Operating ratio
The direct insurance claims costs ratio fell by 46
p.p. in 2013, essentially the result of a reduction
in the surrender rate compared to the previous
year.
The claims costs ratio for outward reinsurance versus
direct insurance was 11% in 2013, compared to
15% in 2012, with the claims ratio for outward reinsurance standing at 25% in 2013, against 113% in
2012. This fall resulted from a significant decrease
in risk product claims in 2013 and the release of the
reserve amounts for a number of claims.
04.7\ Reimbursments and salvage
Any recoverable amounts relating to instalments
paid against claims, arising from the acquisition
of rights or property, are recognized under the
following items:
Amounts in euros
2013
2012
Other policyholders
- claim repayments
7,404,856
6,212,960
TOTAL
7,404,856
6,212,960
138
Investment
contracts
3%
-
3%
-
43%
2%
38%
7%
The amount recognised under the reimbursements
item is always the result of express and solvent acceptance by third parties as regards the reimbursement in question. Reimbursements relate to:
\ Insured party reimbursements in the amount of
€6,489,638 (€5,111,503 in 2012);
\ Other reimbursements arising from claims in the
amount of €915,140 (€1,101,378 in 2012).
The company considers that there is no likelihood
of non-recovery of the amounts relating to insured
party reimbursements, and so no impairment loss
was recorded in the terms of IAS 39.
In relation to other claim reimbursements, the company conducted a recoverability analysis, in line with
the accounting policy described in subparagraph m.
of note 3.1., and concluded that there was no impairment. Consequently, no loss was recognised in
the income statement, in accordance with the criteria defined in the aforementioned IAS.
05\ INVESTMENT
CONTRACT LIABILITIES
contracts for operations regarded as investment
contracts for accounting purposes in 2013 and
2012 is as follows:
In accordance with the requirements of IFRS 4, insurance contracts issued by Liberty Seguros that
do not expose the insurer to significant insurance
risk and do not have discretionary profit-sharing are
classified as investment contracts.
Financial liabilities correspond to the net value of
deposits received, plus defined technical interest
rates or credits from returns generated by the investments allocated to the investment contracts,
minus the corresponding acquisition, management
and collection fees and benefits paid out.
Amounts in euros
Investment
contracts - total
Balance at start of year
9,473,039
2013
2012
12,479,302
259,817
268,166
Commissions
- 55,477
- 70,356
Subscription and redemption
- 6,778
- 9,812
Management
- 48,699
- 60,545
Benefits paid
- 1,152,407
- 3,542,642
80,424
336,732
Other changes
BALANCE AT END OF YEAR
119
1,838
8,605,514
9,473,039
Amounts in euros
Contracts linked
to investment funds
2012
Deposits received
Interest credited
The breakdown of financial liabilities in respect of
the deposit component of insurance contracts and
2013
Amounts in euros
for fixed-yield products
2013
2012
8,819,943
11,776,821
653,097
702,481
Deposits received
259,817
268,166
Deposits received
0
0
Commissions
- 55,477
- 70,356
Commissions
0
0
- 6,778
- 9,812
0
0
- 48,699
60,545
Management
0
0
- 1,071,501 - 3,493,258
Benefits paid
- 80,906
- 49,384
Interest credited
0
0
Other changes
0
0
572,191
653,097
Management
Benefits paid
Interest credited
Other changes
80,424
336,732
119
1,838
8,033,323
8,819,943
139
06\ FINANCIAL
INSTRUMENTS
06.1\ Shareholdings and financial
instruments
The valuation methods applied to investments are
specified in subparagraphs b.1. to b.3. of note 3.1
of these notes.
List of shareholdings and financial instruments that
are not investment contracts in accordance with
the distinction contained in IFRS 4 by remission to
IAS 39, in accordance with the model presented in
Annex 1.
The company’s financial instruments are made up
of:
\ debt securities classified as “available for sale“;
\ investment fund units, classified “at fair value
through profit and loss”;
\ short-term deposits at banks, loans on policies
and sureties, classified as “loans granted and
accounts receivable”.
06.4\ Portfolio reclassification
and transfers
In accordance with subparagraph b.4. of note 3.1,
the company did not carry out any reclassifications
of the investment portfolio.
However, in accordance with the criteria defined
in the Portuguese Insurance Institute’s circular no.
3 /2008, the following transfers of financial assets
between portfolios were carried out, while maintaining the original classification of the financial
140
instruments:
(i) Date of transfer: 01/01/2013
\ portfolio of origin: Life Insurance without
profit-sharing
\ destination portfolio: Liberty Poupança Mais
(Saving Plus)
\ fair value: e1,293,700
\ book value: e1,207,480
\ potential gains: e82,962
The transfers of financial assets between investment portfolios carried out in 2013 were carried out
to hedge liabilities.
06.11\ Fair value
a\ Methods and assumptions applied
in determinig fair value
\ Financial assets
The criteria and bases of measurement applied
to financial instruments held by the company are
described in subparagraph b.2. of note 3.1.
The following paragraphs describe the procedures adopted to determine the fair value of portfolio
securities.
The company determines the fair value of securities on the basis of quoted prices obtained from
Bloomberg, where available. In the absence of a
price or in light of evidence of the non-existence of
an active market, fair value is determined on the basis
of the prices of recent similar trades under market
conditions or on the basis of valuation methodologies provided by specialist entities, based on
discounted future cash flow techniques considering
market conditions, the effect of time, the yield curve
and volatility factors.
Thus, and in accordance with IAS 39, paragraphs
AG74 to AG79, for securities for which there is
no active market, the company will apply the
mark-to-model evaluation methodology developed internally, which is based on the discounted
cash flows method, as a means of calculating
fair value.
This model will be applied only to portfolios classified as “available for sale” and to securities
characterised as being traded in illiquid markets.
This model will be reviewed and calibrated monthly.
In line with the International Accounting Standards
and circular no. 11/2008, of 16 December, the
company will adopt this process where the current
functioning of the market implies excessive volatility
in some securities.
For the classification of securities, the company has
defined a set of non-cumulative criteria (i.e. not all
criteria need be met) that served as the basis for
evaluation of the portfolio, namely:
(i) non-existence of trades in securities issued by
a given issuer;
(ii) increase in difference between bid and ask
prices (widening of spread) on each financial
assets;
(iii) volatility of the price of the securities measured
over 12 months; wheres volatility was over short
intervals, the series of events in te previous year
was added;
(iv) Number of days without a price.
Securities that fall within the criteria identified above
will then be valued on the basis of a model developed internally, the methodology of which was
developed on the basis of use of:
(i) discounted cash flows method;
(ii) as discounts spreads:
1) yield associated with public debt financial
assets to determine the country risk associated with the benchmark of the security
in question;
2) yield of the associated swap curve or country of the benchmark to determine market
liquidity;
3) CDS of the financial asset to measure the
credit risk of the issuer company.
In accordance with the classification given in IFRS
13, Appendix A, the company organises its financial
instruments according to a hierarchy of fair value in
which three levels are identified.
\ Level 1 corresponds to all financial investments
whose fair value is obtained by way of prices quoted
on active markets.
\ Level 2 corresponds to financial investments
valued using the mark-to-model method.
Although the prices of these are not observable
on the market, the assumptions used to calculate
them, namely discount spreads, are observable.
In 2013 and 2012 no securities were valued using
this method.
\ Level 3 corresponds to financial assets valued on
the basis of valuation models supported by data not
backed up by market evidence. The shareholding
in Audatex valued at cost and loans on policies are
put at level 3.
141
Thus the company’s financial assets break down as
follows:
Amounts in euros
2013
Level 1
Level 2
Level 3
Total
fair value
623,501,696
0
22,500
623,524,196
Debt instruments
622,945,115
0
0
622,945,115
556,581
0
22,500
579,081
0
0
0
0
recognised at fair value through
profit or loss
8,259,468
0
748,215
9,007,684
Debt instruments
7,334,464
0
0
7,334,464
925,004
0
748,215
1,673,220
0
0
0
0
631,761,164
0
770,715
632,531,879
Equity instruments
Loans on policies
Equity instruments
Loans on policies
TOTAL
2012
Level 1
Level 2
Level 3
Total
fair value
655,056,595
0
Debt instruments
654,458,391
598,203
Equity instruments
Loans on policies
655,079,194
0
0
654,458,391
0
22,500
620,703
0
0
100
100
recognis ed at fair value through
profit or loss
9,806,874
0
0
9,806,874
Debt instruments
8,808,320
0
998,554
0
0
0
0
0
664,863,469
0
22,600
664,886,068
0
Equity instruments
Loans on policies
TOTAL
142
22,600
0
8,808,320
998,554
The company also conducted an impairment test
on assets; it was not necessary to recognise any
impairment loss.
It was not considered relevant to present a statement of changes at level 3. There were no transfers
between levels in the year.
a\ Exposure and origin risks
The financial instruments held by the company as
at the report date are exposed to a set of financial
risks, namely market risk, credit risk and liquidity
risk.
\ Market risk
\ Financial liabilities
Other than unit-linked products the company has no
financial liabilities valued at fair value.
The assumptions used for valuation are described in
subparagraph k of note 3.1.
06.16\ and 06.17\ Nature and
extent of risks resulting from
financial instruments
2013
Market risk reflects, among other things, movements that may have an impact on the fair value
of the company’s assets due to interest rate and
exchange rate fluctuations. Concentration risk by
business sector and country is also included under
this heading.
The following table provides a breakdown of our
financial assets.
Amounts in euros
Other
Unit-Linked
Total
623,524,196
0
623,524,196
748,215
8,259,468
9,007,684
624,272,411
8,259,468
632,531,879
Financial assets initially recognised at fair value
TOTAL
2012
Other
Unit-Linked
Total
Financial assets initially recognised at fair value
TOTAL
655,079,194
0
655,079,194
0
9,806,874
9,806,874
655,079,194
9,806,874
664,886,068
143
In 2013 and 2012, fixed-yield securities represented
99.20% and 99.76% respectively.
In terms of concentration by sector of industry, the
company’s asset structure was as follows:
Amounts in euros
Other
2013
Industry sector
Government
Financial
Industrial
Energy
Utilities
Technology and communications
Basic materials
Cyclical consumption
Non-cyclical consumption
Sundry
TOTAL
Other
2012
Industry sector
Government
Financial
Industrial
Energy
Utilities
Technology and communications
Basic materials
Cyclical consumption
Non-cyclical consumption
Sundry
TOTAL
144
201,644,843
168,575,327
17,754,492
11,852,303
91,771,294
65,763,795
23,210,614
15,040,468
22,618,749
6,040,525
624,272,411
185,365,010
165,838,286
28,918,271
21,203,306
95,528,514
66,236,156
25,500,207
27,969,343
24,332,665
14,187,436
655,079,194
Unit-Linked
988,549
1,908,533
811,315
396,121
1,100,652
380,454
394,277
460,150
287,314
1,532,103
8,259,468
Unit-Linked
1,444,806
1,911,959
833,388
410,563
785,272
390,802
1,034,050
475,506
896,562
1,623,968
9,806,874
Total
202,633,393
170,483,860
18,565,808
12,248,424
92,871,946
66,144,249
23,604,890
15,500,619
22,906,063
7,572,628
632,531,879
Total
186,809,816
167,750,245
29,751,659
21,613,869
96,313,786
66,626,958
26,534,257
28,444,848
25,229,227
15,811,404
664,886,068
%
32%
27%
3%
2%
15%
10%
4%
2%
4%
1%
100%
%
28%
25%
4%
3%
14%
10%
4%
4%
4%
2%
100%
Lastly, the concentration of Liberty Seguros’ investment portfolio by country of issue was as follows:
Amounts in euros
2013
Country
Germany
Spain
France
Great Britain
Italy
Netherlands
Portugal
United States
Belgium
Canada
Mexico
Luxembourg
Other
TOTAL
2012
Country
Germany
Spain
France
Great Britain
Italy
Netherlands
Portugal
United States
Belgium
Canada
Mexico
Luxembourg
Other
TOTAL
Other
60,869,163
65,668,556
99,021,952
52,111,066
68,978,333
81,702,974
10,963,873
68,222,736
18,922,874
5,133,507
19,731,510
11,448,694
61,497,173
624,272,411
Other
61,433,236
51,633,037
115,470,227
49,274,446
60,835,301
98,881,305
6,342,966
79,364,956
19,230,653
5,281,402
20,375,748
17,604,455
69,351,463
655,079,194
Unit-Linked
0
439,421
894,512
627,272
597,458
1,135,719
0
353,960
0
198,853
286,029
1,837,438
1,888,806
8,259,468
Unit-Linked
600,858
0
1,326,625
1,266,710
602,983
821,724
0
577,898
0
0
292,486
1,943,880
2,373,712
9,806,874
Total
60,869,163
66,107,977
99,916,464
52,738,338
69,575,791
82,838,693
10,963,873
68,576,696
18,922,874
5,332,360
20,017,539
13,286,132
63,385,979
632,531,879
Total
62,034,094
51,633,037
116,796,851
50,541,156
61,438,283
99,703,029
6,342,966
79,942,854
19,230,653
5,281,402
20,668,234
19,548,335
71,725,174
664,886,068
%
10%
10%
16%
8%
11%
13%
2%
11%
3%
1%
3%
2%
10%
100%
%
9%
8%
18%
8%
9%
15%
1%
12%
3%
1%
3%
3%
11%
100%
145
\ Credit risk
Credit risk is the risk of a participant in a financial
instrument not meeting their obligations and so causing
a financial loss.
The change in the company’s credit structure is
shown in the tables below.
Amounts in euros
2013
AAA
AA
A
BBB
BB
B
CCC
CC C
No
Rating
Unit-Liked
Total
Financial
instruments
Assets available
for sale
69,174,584 96,150,663 143 042 487 270,116,910 44,460,471
0 623,524,196
556,581
0
0
0
22,500
0
0
0
0
0
748,215
8,259,468
TOTAL
69,174,584 96,150,663 143,042,487 270,116,910 44,460,471
556,581
0
0
0
770,715
8,259,468 632,531,879
2012
AAA
Financial
assets initially
recognised
at fair value
through profit
or loss
0
0
AA
0
0
A
BBB
BB
B
CCC
CC C
No
Rating
Unit-Liked
9,007,684
Total
Financial
instruments
Assets available
for sale
Financial
assets initially
recognised
at fair value
through profit
or loss
TOTAL
146
109,570,723
56,810,743 218,629,451 231,532,438
37,915,037
598,203
0
0
22,600
0
0
0
0
0
109,570,723 56,810,743 218,629,451 231,532,438 37 915 037
598,203
0
0
22,600
0
0
0
0
0 655,079,194
9,806,874
9,806,874
9,806,874 664,886,068
The portfolio held by Liberty Seguros remained
virtually unchanged in 2011 and 2012. The changes
in rating shown derive largely from cuts made by
the ratings agencies.
As at 31 December 2013, and considering only the
credit risk of financial assets that were neither past
due nor impaired, Liberty Seguros had the following
credit risk structure:
(i) 10.94% of the portfolio was made up of assets
of the highest credit quality (AAA);
(ii) assets with a rating of A- or higher represented
48.75% of the portfolio;
(iii) portfolio assets with a rating of BB or lower
represented 7.12%.
The securities that make up the company’s portfolio include preferential shares (issued in USD) of
GMAC in the amount of €556,581, which are allocated to the non-allocated portfolio. These shares
are held following the renegotiation of bonds held
by the company in 2008.
The market value of Portuguese, Spanish and Italian
public debt securities as at 31 December 2013, and
the proportion of the company’s total investment
portfolio they make up, are as shown below:
The company’s credit risk is suitably controlled by
way of its investment management policy.
Amounts in euros
Public debt
instruments
Portugal
2013
% of total
investments
2012
% of total
investments
10,941,373
1.73%
6,320,366
Spain
20,647,099
3.26%
16,560,440
2.49%
Italy
35,223,398
5.57%
22,801,714
3.43%
TOTAL
66,811,870
10.56%
45,682,520
6.87%
0.95%
As regards the public debt securities of the above
countries, there is no objective default, as no suspension of payments has occurred.
147
\ Liquidity risk
Liquidity risk stems from the possibility of the
company not holding assets with sufficient liquidity
to meet its liabilities.
The tables below show the segmentation of our
financial assets by maturity at the end of the last
two years.
Amounts in euros
2013
< 1 year
1 to 3
years
3 to 5
years
5 to 15
years
69,119,415 124,661,466 109,979,763 249,195,535
1,967,634
3,815,410
1,059,410
492,010
> 15 anos
No
maturity
69,988,936
0
Total
579,081 623,524,196
1,673,220
9,007,684
Financial assets
initially recognised
at fair value through
profit and loss
TOTAL
71,087,049 128,476,876 111,039,173 249,687,545 69,988,936
2012
< 1 year
1 to 3
years
3 to 5
years
5 to 15
years
84,406,429 130,484,177 102,160,180 257,576,524
2,268,853
4,204,958
2,034,435
300,074
2,252,300 632,531,879
> 15 years No
maturity
79,831,081
0
Total
620,803 655,079,194
998,554
9,806,874
Financial assets
initially recognised
profit or loss
TOTAL
148
86,675,282 134,689,135 104,194,615 257,876,598 79,831,081
1,619,357 664,886,068
Comparing the two years, it can be seen that a
prudent policy of liquidity management has been
implemented, in light of market conditions. This
has involved reducing the amounts invested over
the long term and giving preference to short-term
investments.
In comparison with the table in note 4.2 (in the
section on liquidity risk) the table above includes
unallocated investments.
b\ Risk managment objectives, policies
and procedures
In the context of internal management and control of
the portfolio of investments held by Liberty Seguros,
a periodical study has been developed that is designed to analyse and monitor the various risks that
affect our portfolio.
In this way, the analysis conducted focuses to a
greater degree on market risk issues, namely interest
rate changes measured by modified duration and
concentration by industry sector and issuer. In the
context of credit risk, changes in the credit ratings
awarded by the ratings agencies and concentration
are also monitored.
Lastly, an analysis of liquidity risk is also carried out
that presupposes a study of mismatching between
assets and liabilities in order to ensure that such risk
is duly controlled.
Note 4.3. sets out internal risk management
policy and the corresponding risk management
procedures.
f\ Sensitivity analysis by type
of market risk
Market risk is understood to be the risk of the fair
value or future cash flow of a financial investment
fluctuating due to changes in market prices. In this
regard, the financial instruments held by the
company on the report date of 31 December 2013
are subject to interest rate changes and exchange
rate risk.
Management of these risks is essentially integrated in the context of the investment management
policy, in place, which aims to maximise the return
on the investment portfolio while complying with
the strict restrictions imposed by the supervisory
body. The aim is also to optimise the reward-torisk ratio in order to obtain long-term growth in
income and profits.
The analysis of sensitivity to interest rates was
conducted in two distinct parts. On the one
hand, we used modified duration, which reflects
the sensitivity of the portfolio’s market value to
percentage changes in interest rate and, on the
other, VaR (value at risk), which for a given time
horizon and a given probability gives us the maximum
loss that we can expect.
The investment portfolio available on the report date
has a modified duration of 5.056%, which means
that in the event that interest rates rise 1% it is to
be expected that the value of our portfolio will fall
by 5.056%. Compared with the previous year, this
is a slight increase, which means that our exposure
to interest rate changes increased in the year in
question. At 31 December 2012 the portfolio had a
modified duration of 5.034%.
Using VaR (value at risk) as an alternative measure
of exposure to market risk, we find that, at a time
horizon of one year, there is a 1% probability that
149
we will have a loss on the investment portfolio as a
whole of more than 5.45% of its current value, as at
31 December 2013. The same analysis conducted
with reference to 31 December 2012 showed a VaR
of 5.20% of the total portfolio. In absolute terms, the
amount at risk has fallen, despite still being rather
high.
Within market risk, the investment portfolio is also
affected by exchange rate risk. The company holds
four assets issued in USD, preferential shares
in GMAC with a fair value on the report date of
€556,581 and the Marlin Equity, Stepstone and
Adam Street risk capital funds. At the reporting
date, these totaled €748,215. These assets are
held in the non-allocated portfolio and, thus, do
not require technical provisions.
In order to measure the sensitivity of this security
to exchange rate variations, its evolution over the
course of 2013 was analysed and, under “ceteris
paribus” conditions, a maximum exchange rate loss
of €23,991 is observed.
08\ CASH AND CASH
EQUIVALENTS AND
DEMAND DEPOSITS
The breakdown of this item, as at 31 December
2013 and 2012, is as follows:
Amounts in euros
Balance sheet
Immediately accessible
bank deposits
Cash and cash equivalents
Liquid assets shown
on the balance sheet
2013
2012
4,361,331
2,720,548
66,649
139,662
4,427,979
2,860,211
09\ LAND AND BUILDINGS
09.1\ Valuation model
The building acquired by the company in the year in
question has been classified as a building for own
use that does not affect technical provisions. It is
valued using the cost model.
It corresponds to the autonomous unit designated by the letter “J” of the urban building divided
into horizontal property described under number
nine hundred and seventy-five in the First Almada
Property Registry Office.
150
09.2\ Criteria used to distinguish
land and buildings for income from
those for own use
rates of depreciation or amortisation fixed in table 1
annexed to the decree are applied.
The shortest useful life was adopted as this was
considered the correct period; the asset is therefore
entirely depreciable.
The only building acquired by the company is used
as its premises; it is therefore classified as being for
own use.
In order to comply with article 10, paragraph no. 2,
subparagraph a) of Regulatory Decree no. 25/2009,
of 14 September, in the absence of any express indication of the value of the site, the content of paragraph no. 3, subparagraph a) of the same article
was applied, fixing the value to be ascribed to the
site at 25% of the overall value.
09.6\ Measurement criteria,
methods and rates of
depreciation used
The measurement criterion used to determine
the value of the asset was the acquisition value
recorded in a notary’s office, plus the corresponding taxes, municipal transaction tax and stamp
duty.
09.7\ and 09.8\ Gross book value
and accumulated depreciation at
the beginning and end of the year
The straight-line method of depreciation was applied. The useful life of the asset for tax purposes is
the period over which its value is amortised in full,
in this case 50 years, in conformity with Regulatory
Decree no. 25/2009, of 14 September. The specific
The real estate asset was accounted for, as shown
below, at 31 December 2013 and 31 December
2012:
Amounts in euros
Gross value
2013
2012
Land
Opening balance
Buildings
0
Additions resulting from
improvements
Land
Total
712,928
712,928
0
0
Buildings
0
Total
712,928
712,928
0
0
Additions resulting from
acquisitions
Transfers
Closing balance
0
0
712,928
712,928
0
0
712,928
712,928
151
Amounts in euros
Accumulated
depreciation
2013
2012
Land
Opening balance
Buildings
0
Depreciation in the year
Land
Total
- 32,827
- 32,827
11,065
11,065
Transfers
Buildings
0
Total
- 21,762
- 21,762
11,065
11,065
0
CLOSING BALANCE
0
- 43,893
09.20\ Indication and qualification
of the existence of restrictions on
ownership and any assets given
surety for liabilities
There are no restrictions on ownership in relation to
the acquired asset.
- 43,893
0
0
- 32,827
- 32,827
10\ OTHER TANGIBLE FIXED
ASSETS (EXCEPT LAND AND
BUILDINGS)
10.1\ Measurement criteria for
tangible assets
The measurement criteria are described in subparagraph c) of note 3.1.
10.2\ Acquisitions, transfers,
write-offs, disposals and
amortisation
Changes in tangible assets over the year are shown
in the following table:
152
Amounts in euros
Items
2013
Opening balance
Increases
Gross
value
Acqui.
Amortiz.
Transfers Disposals
and writedowns
Reval.
Amortisations
in the year
Closing
Balance
Increase
Net
value
Adjustm.
Tangible Assets
Office
equipment
Machinery and tools
Computer equipment
Interior fittings
Transport equipment
649,777
Artworks
Fixed assets in progress
Items
2012
0
0
52,888
0
46,147
296,840
239,727
83,959
0
0
32,022
0
109,051
6,260,269
345,246
195,449
0
993,215
194,428
353,717
8,235
8,235
0
0
0
0
0
0
3,951,877
1,175,889
1,462,740
0
69,461
1,141,176
49,516
3,077,607
0
0
0
0
0
0
0
53,822
7,366
6,083
160,954
160,954
20,466
0
Payments on account
TOTAL
53,666
7,262,977
Hospital equipment
Other tangible
fixed assets
604,408
0
0
12,627
0
5,806
0
0
5,806
0
0
24,998
0
0
0
0
45,464
195,449
69,461
2,237,735
243,944
3,671,897
0
0
0
12,404,948
8,456,848
1,982,498
Opening balance
Increases
Gross
value
Acqui.
Amortiz.
0
39,912
0
0
Transfers Disposals
and writedowns
Reval.
Amortisations
in the year
Closing
Balance
Increase
Net
value
Adjustm.
Tangible Assets
Office
equipment
614,959
552,977
34,817
0
0
51,431
0
45,369
Machinery and tools
276,617
215,871
20,223
0
0
23,856
0
57,113
6,457,766
5,434,380
954,384
149,173
0
973,362
147,473
1,002,707
8,235
8,235
0
0
0
0
0
0
2,019,882
525,136
2,057,086
0
125,091
726,782
76,029
2,775,988
0
0
0
0
0
0
0
0
35,560
2,534
18,262
0
0
4,832
0
46,456
143,953
143,953
17,001
0
0
17,001
0
0
20,466
0
0
0
0
0
0
20,466
0
0
0
9,577,438
6,883,085
3,101,773
Computer equipment
Interior fittings
Transport equipment
Hospital equipment
Other tangible
fixed assets
Artworks
Payments on account
TOTAL
0
0
149,173
125,091
1,797,265
223,502
3,948,100
153
10.3\ Reconciliation of tangible
assets at the beginning and end
of the period
The reconciliation of tangible assets is shown in
note 10.2 of these notes
11\ ALLOCATION OF
INVESTMENTS AND OTHER
ASSETS
At 31 December 2013 the composition of investment items in terms of their respective allocation
was as follows:
Amounts in euros
Life
insurance
with profitsharing
2013
Cash and cash
equivalents
Land and buildings
Investments
in subsidiaries,
associated companies
and joint ventures
Financial
assets held
for trading
Financial
assets initially
recognised
profit or loss
Hedge
derivatives
Financial assets
available for sale
Loans
granted and
receivables
Investments to be
held to maturity
Other assets
TOTAL
154
Life
insurance
without
profitsharing
39,931
Life insurance and
operations
classified as
investment
contracts
25,448
Non-life
insurance
Unallocated
(account 23)
Total
4,362,600
4,427,979
669,036
669,036
0
0
8,259,468
748,215
9,007,684
0
248,814,430
13,882,573
1,003,432
319,425,181
40,398,580
623,524,196
444,421
142,412
586,834
0
81,427
282
248,936,070
13,882,573
9,288,348
652,952
23,579,435
349,133,626
41,289,208
734,379
23,579,717
662,529,824
Information in relation to 2012:
Amounts in euros
2012
Cash and cash
equivalents
Land and buildings
Investments
in subsidiaries,
associated companies
and joint ventures
Financial
assets held
for trading
Financial
assets initially
recognised
profit or loss
Hedge
derivatives
Financial assets
available for sale
Loans
granted and
receivables
Investments to be
held to maturity
Other assets
TOTAL
Life
insurance
with profitsharing
Life
insurance
without
profitsharing
1,067,811
Life insurance and
operations
classified as
investment
contracts
20,920
Non-life
insurance
Unallocated
(account 23)
Total
1,771,480
2,860,211
680,101
680,101
0
0
9,806,874
9,806,874
0
266,013,722
18,652,906
884,521
323,002,731
46,525,314
655,079,194
583,444
142,412
725,857
0
91,901
679
267,174,113
18,652,906
10,712,314
697,719
17,207,301
343,942,776
46,667,727
789,620
17,207,980
687,149,836
155
12\ INTANGIBLE ASSETS
12.3\ The accounting policies applicable to this
12.1\ The measurement criterion used by the
company is the cost model, in which intangible
assets, after initial recognition, are recorded at
cost, minus accumulated amortisations and any
impairment losses.
item of the balance sheet are described in subparagraph d) of note 3.1.
The company’s intangible assets refer only to expenditure on computer software. Acquisitions,
transfers, write-offs, disposals and amortisation in
the year are shown in the following table:
Amounts in euros
Items
2013
Opening balance
Increases
Gross
value
Amortis.
Acqui.
6,487,106
5,771,207
Transfers Disposals
and write-downs
Reval.
Amortisations
in the year
Closing
Balance
Increase
Net
value
Adjustm.
Intangible assets
Software costs
803,274
0
0
482,153
0
1,037,020
Setup and
installation costs
Research and
development costs
Expenditure
on rented buildings
Leases
Other intangible
fixed assets
1,145,343
3,944,314
537,843
4,551,814
Payments on account
TOTAL
156
7,632,449
5,771,207
4,747,588
0
537,843
0
482,153
0
5,588,834
Amounts in euros
Items
2012
Opening balance
Increases
Gross
value
Amortiz.
Acqui.
5,755,729
5,537,468
Transfers Disposals
and write-downs
Reval.
Amortisations
in the year
Closing
Balance
Increase
Net
value
Adjustm.
Intangible assets
Software costs
731,377
0
0
0
233,739
0
715,900
Setup and
installation costs
Research and
development costs
Expenditure
on rented buildings
Leases
Other intangible
fixed assets
1,855,300
635,439
1,345,397
1,145,343
Payments on account
TOTAL
7,611,030
5,537,468
1,366,816
0
1,345,397
0
233,739
0
1,861,242
Information with reference to 2013 is shown below,
in relation to amortisation periods still to come:
Amounts in euros
Intangible assets
Future amortizations
2014
2015
524,248
1,906,340
2016
2017
1,640,130
1,517,271
157
In 2010 the company began the reformulation of its
entire core computer system. The total estimated
cost of this new application was in the region of
€6.5 million and the implementation deadline was
to be 2013. The project was structured in three
distinct phases in accordance with the technical
classes being developed. Consequently, upon
completion of each phase all the external costs
incurred in its development were to be transferred
from the item intangible fixed assets in progress to
the item intangible fixed assets. This new software
was estimated to have a useful life of six years.
As at 31 December 2011 the total costs incurred in
developing this system and recognised in intangible
fixed assets in progress came to €1,252,151.
In September 2012 development costs that had
been recognised as intangible fixed assets in progress amounted to €1,482,106. However, in the
same period the contract was terminated without
the software having been deemed suitable for
use.
Being of the view that the software developed was
not fit to enter operation, the company terminated
the contractual relationship with the company hired
to develop it. Analysis of the software write-off
found €943,820 of costs that are not reusable.
On the basis of the contractual guarantees established, an amount of €464,447 was recovered,
while €479,373 was recognised under extraordinary costs.
The remaining €538,286 of intangible assets in
progress remained in fixed assets in progress because it is reusable in the new project to replace
the core system, the process and contract for
which were signed in 2012. Work on this project
158
began in January 2013.
The anticipated duration of the new project to replace the core computer system is three years and
two months, with an estimated total new investment
cost of 10,9 million euros.
As at December 2013, intangible fixed assets
in progress stood at €3,765,822. This amount
relates to the development of the new core IT
system.
13\ OTHER PROVISIONS
AND ADJUSTMENTS TO
ASSET ACCOUNTS
13.1\ Breakdown of adjustments
accounts and other provisions into
their respective subaccounts
The breakdown of adjustment accounts and other
provisions is shown below:
Amounts in euros
2013
Increase
Opening
balance
490 - Provision for uncollected receipts
Decrease
0
0
491 - Provisions for doubtful debts
3,172,517
492 - Provisions for risks and liabilities
1,961,416
TOTAL
5,133,933
2012
490 - Provision for uncollected receipts
0
0
123,459
5,914
3,290,063
37,500
278,456
1,720,460
160,959
284,370
5,010,522
Increase
Saldo
Inicial
Closing
balance
Closing
balance
Decrease
0
0
0
0
491 - Provisions for doubtful debts
3,259,088
148,096
234,667
3,172,517
492 - Provisions for risks and liabilities
2,023,916
0
62,500
1,961,416
TOTAL
5,283,003
148,096
297,167
5,133,933
13.2\ Description of the nature of
the obligation
13.2.1\\ OTHER PROVISIONS
This item in the amount of €1,720,460 includes:
a\ Provision for works on a leased building
A provision in the amount of €750,000 has been
set up for works on a leased building. This was the maximum amount of contribution agreed between the
company and the new owner at the time of disposal
of the building in 2005. In the course of this year, the
tenant carried out works and we reduced the value
of the provision by €150,000, leaving €500,000 in
the provision.
b\ Provision for tax in the amount of €532,460, which
corresponds to:
(i) corporate tax (IRS) in the amount of e42,909;
(ii) income tax (IRC) in the amount of e222,325;
(iii) stamp duty of e267,225.
c\ In August 2009 we learned of injurious acts
performed by a tied insurance intermediary (and
persons directly involved in the business of insurance
159
mediation), who abusively and improperly made
use of the powers and documents we gave him to
persuade clients to entrust him with their savings,
the fate of which is unknown to us.
In light of this situation, we immediately ended the
contractual relationship with the intermediary, from
whom we withdrew all our documentation. We sent
warning letters to all clients potentially affected or
who might be victims of these individuals, about
whom we have already submitted a complaint to
the competent authorities.
To minimise the risk of repetition of these events
and to warn the general public, we published advertisements in the press drawing attention to the
situation.
In 2009, we recognised a provision in the amount
of €300,000 to meet possible extrajudicial claims
by wronged policyholders. In 2010, we waited
while the judicial and administrative proceedings
progressed in their normal fashion. We received no
indications or news of new developments and, so,
at the end of that year, we cancelled the value of the
provision.
In the course of 2011, faced with a judicial complaint by wronged policyholders in the context of
this proceeding, we set up a provision in the amount
of €487,280.
d\ Provision in the amount of e50,220 for Portuguese
Insurance Institute (ISP) fines for missing claim
settlement deadlines.
e\ Provision in the amount of e100,000 for employment law proceedings.
160
f\ Other entities in dispute in the amount of
e50,500.
13.2.2\\ PROVISION FOR
DOUBTFUL DEBTS
The breakdown of the provision for doubtful debts
is as follows:
Amounts in euros
Item
2013
2012
Other debtors direct insurance
operations
1,575,698
1,479,956
Other debtors reinsurance
operations
1,355,742
1,355,742
358,622
336,819
3,290,063
3,172,517
Other debtors other operations
TOTAL
The provision for amounts receivable in the context of reinsurance operations is influenced in the
amount of €1,355,742 by a provision set up against
the possible non-recovery of the share of a reinsurer, Suisse Ré, in a claim process that is pending
settlement because it is still the subject of litigation.
The balance receivable that is at the origin of this
amount of provision is shown, on the assets side, in
the item outward reinsurance claims provision, which
means that the item on the assets side, accounts
receivable - other reinsurance operations, shows a
negative balance.
14\ INSURANCE CONTRACT
PREMIUMS
14.1\ Recognised premiums
Liberty Seguros, S.A. ended 2012 recognising an
amount of €258,456,406 in the gains and losses
item “gross direct insurance premiums issued”. Of
this, €236,138,399 came from non-life insurance
and €22,318,007 from life insurance.
14.2\ Premiums on life insurance
contracts
The distribution of premiums associated with life
insurance contracts is shown below:
Amounts in euros
2013
2012
Gross direct insurance premiums issued
21,681,079
22,318,007
In relation to individual contracts
18,143,826
17,580,026
In relation to group contracts
Periodic
Non-periodic
On contracts without profit-sharing
On contracts with profit-sharing
On contracts in which the investment risk is borne by the policyholder
3,537,253
4,737,981
21,681,079
22,318,007
15,049,619
16,296,351
6,631,460
6,021,656
21,681,079
22,318,007
4,824,151
4,735,748
16,856,928
17,582,259
0
0
21,681,079
22,318,007
In accordance with the requirements of IFRS 4,
insurance contracts issued by Liberty Seguros in
relation to which there is only transfer of a financial risk without discretionary profit-sharing are
classified as investment contracts and recognised
as a liability. Contracts in which the investment
risk is borne by the policyholder and fixed-rate
contracts without profit-sharing fall within this
classification.
161
14.3\ Premiums on non-life
insurance contracts
Details of premiums on insurance contracts are
given in Annex 4 to the notes.
15\ FEES RECEIVED ON
INSURANCE CONTRACTS
15.1\ Accounting policies
adopted for recognition of
fees
In accordance with IAS 18, fees are recognised in
accordance with the accrual principle.
Fees and similar income relate to subscription
and management fees on endowment products
without discretionary profit-sharing, particularly
fixed-return endowment products and products
in which the investment risk is borne by the policyholder
insurance contracts issued by the company in
relation to which there is only transfer of a financial
risk without discretionary profit-sharing are classified as investment contracts and recognised as
a liability.
Thus contracts in which the investment risk is
borne by the policyholder and fixed-rate contracts
without profit-sharing cease to be recognised in
the form of premiums. Instead, only the subscription and management fees on such contracts are
162
recorded as income.
The accounting policies adopted for the treatment
of fees are described in subparagraphs n) and r) of
note 3.1.
15.2\ Fees received by type of
contract
Fees received consist of subscription, management and redemption fees on the various types of
contract.
insurance contracts and operations classified
for accounting purposes as investment contracts are now regarded as deposits of a financial liability without carrying of premiums. Only
subscription, management and redemption fees
are regarded as income, in accordance with the
analysis below:
Amounts in euros
Items
2013
2012
Underwriting
fees
8,739
9,119
Management
fees
44,069
55,913
Subtotal
52,808
65,032
Redemption
fees
2,670
5,324
Subtotal
2,670
5,324
55,479
70,356
TOTAL FEES
16\ INVESTMENTS
RETURNS / INCOME
The policies adopted in recognising income are
described in subparagraphs b2) and b3) of note
3.1.
16.1\ Accounting policies
adopted for the recognition
of income
16.2\ Breakdown of income by
category of investment
In 2013 and 2012, the breakdown of income items
net of financial costs (without allocated costs) was
as follows:
Amounts in euros
2013
2012
Dividends
Interest
Dividends
Total
Interest
Total
Life insurance
and demand deposits
0
0
profit or loss
0
Financial assets available for sale
18,229
0
and demand deposits
0
0
0
0
0
0
0
0
327,460
327,460
0
418,960
418,960
11,596,822
11,615,052
19,087
13,170,221
13,189,309
6
6
0
136
136
0
0
0
0
0
0
0
0
0
0
0
0
profit or loss
0
0
0
0
0
0
0
12,442,987
12,442,987
0
12,790,325
12,790,325
Loans and receivables
0
17,353
17,353
0
23,413
23,413
0
1,246
1,246
0
5,453
5,453
0
0
Non-life insurance
Unallocated
and demand deposits
0
0
0
0
0
0
profit or loss
9,090
0
9,090
0
0
0
40,814
695,889
736,703
43,849
679,948
723,797
0
0
0
0
0
0
68,133
25,081,763
25,149,896
62,937
27,088,456
27,151,392
163
Financial returns recorded in gains and losses
consist of interest on debt and bank deposits
recognised, in accordance with the accrual concept.
17\ REALISED GAINS
AND LOSSES ON
INVESTMENTS
Gains resulting from the process of amortisation
using the effective interest method are also recorded in this item.
In 2013 and 2012, the breakdown of realised gains
and losses on investments was as follows:
Amounts in euros
2013
2012
Capital
gains
Capital
losses
Net
Capital
gains
Capital
losses
Net
Life insurance
Financial assets
available for sale
Financial assets
initially recognised at fair value
0
0
0
0
0
0
323,827
2,060,567
-1,736,741
1,313,723
18,820
1,294,904
7,017
47,953
-40,936
83,086
44,499
38,587
169,687
142,470
27,216
412,943
33,432
379,511
305,062
1,181,166
-876,104
105,225
1,357,936
-1,252,711
805,592
3,432,157
-2,626,565
1,914,978
1,454,687
460,290
Non-life insurance
Financial assets
available for sale
Unallocated
Financial assets
164
18\ GAINS AND LOSSES
FROM ADJUSTMENTS
TO THE FAIR VALUE
OF INVESTMENTS
In 2013 and 2012, the breakdown of gains and
losses from adjustment of fair value was as follows:
Amounts in euros
2013
2012
Gains through Losses through
fair value
fair value
increases
decreases
Net
Gains through Losses through
fair value
fair value
increases
decreases
Net
Life insurance
0
0
0
0
0
0
Financial assets
available for sale
0
0
0
0
0
0
1,074,336
1,225,015
-150,679
3,325,182
3,488,248
-163,067
0
0
0
0
0
0
1,074 336
1,225,015
-150,679
3,325,182
3,488,248
-163,067
Financial assets
Non-life insurance
Unallocated
This variation includes changes in the fair value of
financial liabilities.
165
19\ GAINS AND LOSSES
ON EXCHANGE RATE
DIFFERENCES
Amounts giving rise to exchange rate differences are
invoices from suppliers and reinsurers, in particular
Liberty Mutual, that are not expressed in euros.
In relation to assets, the company has no balances
expressed in foreign currency, with the exception
of preferential shares in GMAC in the amount of
€598,203 and a holding in risk capital funds, in the
amount of €748,215, which was acquired in 2013.
Foreign currency transactions are converted into
euros at the exchange rate prevailing on the date on
which they occur.
The values of assets expressed in currency of
countries not belonging to the euro zone have
been converted into euros using the last reference
exchange rate indicated by the Bank of Portugal.
Exchange rate differences between the rates prevailing on the transaction dates and those prevailing
on the balance sheet date were recognised in the
account gains and losses in the year.
With the exception of exchange rate differences resulting from variations in the value of financial instruments valued at fair value through profit or loss, a
net loss on exchange rate differences in the amount
of €12,564 was recorded in 2013. This compares
with €26,097 in 2012.
166
21\ SUNDRY COSTS BY
FUNCTION AND NATURE
21.1\ Costs by function
Costs are initially recorded by nature and are allocated to the claims, acquisition, administrative or
investment functions in accordance with the chart
of accounts.
The criteria used to allocate costs and expenditure
among the various functional areas are described in
subparagraph p. of note 3.1.
In 2013 and 2012, the breakdown of costs and
losses incurred by the company according to function
was as follows:
Amounts in euros
2013
Life
Acquisition
Administration Claims
Total
Investments
1,303,834
3,355,122
367,844
588,641
5,615,441
680-Staff costs
577,965
1,258,948
174,002
32,300
2,043,215
681-External supplies and services
666,161
1,825,277
144,417
11,730
2,647,585
682-Tax
13,148
418
280
53
13,898
683-Amortisations in the year
46,560
270,479
49,146
11,940
378,126
684-Provisions for risks and charges
0
0
0
0
0
685-Interest paid
0
0
0
3,001
3,001
686-Commissions
0
0
0
529,616
529,616
Non-life
24,728,110
11,518,659
7,996,032
681,853
44,924,654
680-Staff costs
10,289,473
4,877,634
4,323,763
45,931
19,536,802
12,286,707
5,838,495
2,821,244
13,591
20,960,037
1,229,147
1,592
237,678
60
1,468,477
682-Tax
922,783
800,938
613,347
13,674
2,350,741
0
0
0
0
0
685-Interest paid
0
0
0
0
0
686-Commissions
0
0
0
608,598
608,598
Free
0
0
0
104,711
104,711
680-Staff costs
0
0
0
7,993
7,993
0
0
0
2,092
2,092
682-Tax
0
0
0
9
9
0
0
0
2,087
2,087
0
0
0
0
0
685-Interest paid
0
0
0
0
0
686-Commissions
0
0
0
92,530
92,530
Total attributable costs
26,031,944
14,873,781
8,363,876
1,375,205
50,644,806
680-Staff costs
10,867,438
6,136,582
4,497,765
86,225
21,588,010
12,952,868
7,663,772
2,965,661
27,413
23,609,714
1,242,295
2,011
237,957
122
1,482,385
969,343
1,071,417
662,493
27,701
2,730,954
0
0
0
0
0
685-Interest paid
0
0
0
3,001
3,001
686-Commissions
0
0
0
1,230,744
1,230,744
682-Tax
167
Amounts in euros
2012
Aquisition
Life
Total
Investments
1,620,325
3,181,075
397,452
649,384
5,848,236
680-Staff costs
737,348
1,237,320
201,585
37,709
2,213,962
826,708
1,731,659
153,983
9,750
2,722,100
682-Tax
13,602
488
274
48
14,412
42,667
211,609
41,610
8,410
304,295
0
0
0
0
0
685-Interest paid
0
0
0
8,492
8,492
686-Commissions
0
0
0
584,975
584,975
Non-life
25,010,596
10,739,590
7,907,455
669,142
44,326,783
680-Staff costs
10,663,087
4,847,902
4,482,432
46,444
20,039,865
12,490,178
5,285,554
2,732,663
10,807
20,519,202
1,178,926
1,813
247,054
50
1,427,844
682-Tax
678,405
604,320
445,306
8,697
1,736,728
0
0
0
0
0
685-Interest paid
0
0
0
0
0
686-Commissions
0
0
0
603,143
603,143
Free
0
0
0
82,248
82,248
680-Staff costs
0
0
0
6,609
6,609
0
0
0
1,405
1,405
682-Tax
0
0
0
6
6
0
0
0
1,045
1,045
0
0
0
0
0
685-Interest paid
0
0
0
0
0
686-Commissions
0
0
0
73,182
73,182
Total attributable costs
26,630,921
13,920,665
8,304,907
1,400,773
50,257,267
680-Staff costs
11,400,435
6,085,222
4,684,017
90,762
22,260,436
13,316,886
7,017,213
2,886,646
21,962
23,242,707
1,192,529
2,301
247,328
105
1,442,263
721,072
815,929
486,916
18,152
2,042,069
0
0
0
0
0
685-Interest paid
0
0
0
8,492
8,492
686-Commissions
0
0
0
1,261,300
1,261,300
682-Tax
168
Administration Claims
21.1.1\\ NET OPERATING COSTS
AND EXPEDITURE
Details of net operating costs and expenditure are
shown in the table below:
Amounts in euros
2013
2012
Acquisition costs
Brokerage commissions on direct insurance products
34,460,882
33,555,354
Costs allocated to the acquisition function
26,031,944
26,630,921
Other
Subtotal
6,504,923
7,863,600
66,997,749
68,049,876
Deferred acquisition costs
275,350
-765,090
Administrative costs
17,257,841
16,229,899
Costs allocated to the administrative function
14,873,781
13,920,665
2,384,060
2,309,235
Reinsurance - commissions and profit-sharing
-4,556,496
-3,857,501
Subtotal
-4,556,496
-3,857,501
TOTAL
79,974,445
79,657,184
Broker remuneration
The increase in direct insurance commissions from
2012 to 2013 was due to strong growth in non-life
production and also to growth in multi-risk home
insurance, with higher commission rates.
The independent audit company and related bodies
earn the contractually established remuneration
disclosed below within the terms required by law.
Amounts in euros
2013
Independent audit
2012
113,590
113,590
10,150
10,150
4,800
4,800
Other surety guarantee services
Statistical charts
Risk management and control
Tax consultancy
TOTAL
15,000
15,000
143,540
143,540
169
21.1.2\\ FINANCIAL COSTS
The item “other financial costs” relates to costs
allocated to the investment function.
21.2\ Costs using a classification
based on their nature
In 2013 and 2012, the breakdown of costs and
expenses incurred by the company by nature was
as follows:
Amounts in euros
2013
Staff costs
21,588,010
22,251,393
External supplies and services
23,609,714
23,242,707
Tax
1,482,385
1,442,263
Amortisation and depreciation
2,730,954
2,042,069
482,153
233,739
2,248,800
1,808,330
0
0
3,001
8,492
0
0
Tangible fixed assets
Intangible fixed assets
Other provisions
Interest paid
Interest on loans
Interest on reinsurers’ deposits
Fees for administration of assets
TOTAL
170
2012
3,001
8,492
1,230,744
1,261,300
50,644,806
50,248,224
22\ STAFF COSTS
Professional
categories
2013
22.1\ Average number
of employees in the
company’s service
Senior managers
The average number of employees working for the
company in the period, by professional category,
was as follows:
Semi-qualified professionals
2012
48
Middle managers
Highly qualified /
/ qualified professionals
Directors
TOTAL
49
75
77
343
334
1
2
8
9
475
471
22.2\ Staff costs in the year
In 2013 and 2012, the breakdown of staff cost
items was as follows:
Amounts in euros
2013
Remuneration
Charges on remuneration
2012
16,361,536
16,858,942
3,776,822
3,998,389
77,043
33,848
-50,894
96,711
-7,354
-6,462
Defined contribution plans
Defined benefit plans
Other long-term employee benefits
Termination benefits
Compulsory insurance
Other employee costs
TOTAL
0
0
407,473
479,210
1,023,385
790,755
21,588,010
22,251,393
Clarification of the amount recorded under post
employment benefits is provided in note 23 point 4.
171
23\ EMPLOYEE BENEFIT
OBLIGATION
or age, bearing in mind the following:
The balances shown on the assets and liabilities
sides in respect of employee benefit obligations
are made up as follows:
Amounts in euros
2013
Pension funds
2012
615,629
22,046
Individual policy
1,108,905
998,015
TOTAL ASSETS
1,724,534
1,020,061
INDIVIDUAL POLICY
1,108,905
998,015
TOTAL
LIABILITIES
1,108,905
998,015
23.1\ Defined Contribution Plan - Individual Retirement Plan
A\\ GENERAL DESCRIPTION OF THE PLAN,
GROUP OF PERSONS COVERED AND
BENEFITS GUARANTEED
General description of the plan
The defined contribution pension plan is designed to pay out the supplementary retirement or
disability pensions resulting from the individual retirement plan (hereinafter, PIR) detailed in chapter
IX and Annex V of the new CCT, signed on 23
December 2011.
The PIR guarantees the capital amount. The capitalised value of the contributions is redeemable by
the employee, under the legal terms, as from the
date that the social security system determines
that he/she may retire on the grounds of disability
172
a\ The redemption is subject to the conditions
set out in the corporate tax code, specifically as
regards the conversion of at least two thirds of
the capitalised amount into immediate lifelong
monthly income in favor, and in the name, of the
employee.
b\ If the employee terminates his/her employment
contract with the company before retiring, he/she shall
have the right, at the termination date, to transfer no
less than 90% of the capitalised employer contributions to another insurer or pension fund.
c\ The transfers referred to in the previous point will
only take place if the new pension funding vehicle
meets the requirements of the CCT. The destination
funding vehicle must comply with the conditions,
and have the same characteristics, as the origin
vehicle.
d\ If the employer fairly dismisses the employee,
for having caused actual harm to the company’s
interests, the employee shall lose his/her right to
the amounts detailed in point six, up to the limit of
the losses caused to the company. The company
needs no express authorisation to totally or partially recoup such losses in such a manner, unless
the employee has brought a legal case against
the dismissal itself. In such cases, there will be
no redemption of the capitalised amount and no
compensation to the company until the court has
ruled on the dismissal.
e\ If the employee dies, the capitalised contributions
shall pass to the beneficiaries named by the employee or, where no such beneficiaries have been
named, to his/her legal heirs.
Group of persons covered
B\\ FUNDING VEHICLE USED
All those Liberty Seguros employees who are actively employed, hold open-ended employment contracts and have signed up to the new CCT.
The financial liabilities for past service, calculated
as at 31 December 2011, in the defined benefit
plan, regarding age-related retirement pensions
owed to those currently employed, were converted into individual accounts and transferred to the
defined contribution plan, and thus covered by a
pension fund. The fund can accept transfers from
other pension funds, provided these transfers relate
to contributions made by entities subscribed to the
previous or new CCT for the PIR.
Guaranteed benefits
1\ Retirement on the grounds of age
Where the social security system determines that
an employee has reached retirement age, the participant in the plan shall be entitled to receive a
lifelong monthly income from an insurer. The right
to receive such a lifelong income holds true, whether the social security system determines that
the employee retires at the normal retirement age,
before the normal retirement age, under the flexible retirement age scheme, or after the normal
retirement age.
2\ Retirement on the grounds of disability
Where the social security subsystem determines
that an employee should retire because of a disability, the participant in the plan shall be entitled to
receive a lifelong monthly income from an insurer.
3\ Surviving Partner Pension
If the participant in the plan dies, his/her beneficiaries shall be entitled to receive a lifelong or
temporary (where orphans) monthly income from
an insurer.
4\ Reimbursment Participant Account
Participants in the plan are entitled to a reimbursement of the value of the participation units in the
participant account for the pension fund, or to receive the balance of the savings account, where the
funding vehicle is a life insurance policy that complies with the prevailing legislation
Contributions for PIR by employees who are not
covered by the current pension fund and any new
contributions for PIR by employees covered by
the former CCT will be financed by means of life
insurance policies.
C\\ VALUE OF ASSETS IN THE PLAN AND
EFFECTIVE RATE OF RETURN ON THE
ASSETS IN THE PLAN
(i) Pension fund
Amounts in euros
2013
Value
Pension funds
461,717
Total assets
461,717
2012
Rate
1.5%
Value
457,899
Rate
16.12%
457,899
(ii) Policies
The 2013 rate of return for the Liberty Poupança
Mais product, which is currently being used as
the funding vehicle for the PIR, was 3.00%, or
€33,369.
173
D\\ AMOUNT RECOGNISED AS A COST
The value of the premium paid in 2013 was €33,454
(2010: €0.00).
23.2. Defined Benefit Plans
23.2.1\\ LIABILITY FOR RETIREMNET
PENSIONS OF EMPLOYEES AND RETIRED
EMPLOYEES (COLLECTIVE LABOUR
AGREEMENT)
On 23 December 2011 a new collective labour
contract (Portuguese abbreviation: CCT) for the
insurance industry was agreed, the text of which
was published in Labour and Employment Bulletin
no. 2, of 15 January 2012 (referred to below as
the new CCT).
Chapter IX of the new CCT - “Savings and pre-retirement plan” – introduced a personal retirement
plan that replaces the retirement pensions system
foreseen in the collective labour contract for the
insurance industry, the consolidated text of which
was published in Labour and Employment Bulletin
no. 32, of 29 August 2008 (referred to below as
the old CCT).
Under the new CCT, the fully funded value of
liabilities for past service, calculated as at 31
December 2011, in relation to old-age pensions
payable to participants who are active employees,
will be converted into individual accounts for
those employees, thus constituting the personal
retirement plan. To this end, Liberty Seguros intends
to implement a defined contribution plan, the
member’s only contribution to which derives from
transformation of the defined benefit plan into a
defined contribution plan. The process of changing
174
the fund’s deed of constitution is in progress at
the Portuguese Insurance Institute.
The defined benefit plan continues to apply to
employees who retired prior to 31 December
2011 and to employees in pre-retirement whose pre-retirement contracts were agreed prior to
31.12.2011, as defined in Chapter X of the new
CCT – “Transitional and final provisions”, clause 52
“Employees in pre-retirement or retirement before
31.12.2011”. The defined benefit plan also guarantees payment of pre-retirement pensions agreed
after 1 January 2012, as described in clause 50
“Pre-retirement” of the new CCT.
The defined benefit plan continues to apply to fund
participants who have not signed up to the new CCT.
For these participants the pension plan to be funded is
what was foreseen in the old CCT.
a\ Accounting policy for recognition of actuarial
gains and losses, and of the corrected cost of
past service
In line with the requirements defined in IAS 19
– Employee benefits, the cost associated with
employee benefit plans is recognised when the
respective benefit is earned, i.e., as the employee
provides his or her service. The difference between the value of the liabilities assumed and the
assets acquired to cover that liability is shown on
the company’s balance sheet.
The cost recorded corresponds to the sum of the
cost of current service, interest costs and the result
expected from the assets.
The actuarial gains/losses in each year are recognised in the specific equity item identified
as SORIE method, in which actuarial gains and
losses in each year are recognised in a specific
equity item.
b\ General description of the defined
benefit plan
On the date of their retirement, the regime set out
in clauses 51 to 57, 59 and 60 of the CCT, the consolidated text of which was published in Labour and
Employment Bulletin no. 32, of 29 August 2008,
will apply to employees in pre-retirement prior to 1
January 2012.
Employees who retired prior to 1 January 2012 will
continue to benefit from the regime for updating their
pensions or supplementary pensions in accordance
with the rules of the collective labour agreement that
applied when they retired.
Pension fund participants who did not sign up to
the new CCT continue to be covered by the pension
plan set out in the old collective labour agreement
for the insurance industry, the text of which is given
in chapter V “Pre-retirement and retirement pensions”:
clauses 51 to 60, without prejudice to the provisions
of the following paragraph.
\ Indication of guaranteed benefits
a\ Old-age pension (fund participants who did
not sign up to the new CCT)
The retirement pension payable to employees who
retire on grounds of old age is calculated in accordance with the following formula:
P = (0.8 * 14/12 * R) - (0.022 * n * S/60)
Where:
P = monthly pension;
R = final monthly wage at time of retirement;
n = number of years of payment of contributions to social
security or equivalent systems;
S = sum of annual salaries in the 5 best of the last 10
years in which social security contributions were
payable.
In the event that the product of the factor 0.022
multiplied by n is less than 0.3 or greater than 0.8,
these shall be the figures used, respectively.
b\ Retirement on grounds of disability (fund participants who did not sign up to the new CCT)
The monthly pension payable to employees who are
retired by social security on grounds of disability is
calculated in accordance with the following formula:
P = (0.022 * t * 14/12 * R) - (0.022 * n * S/60)
The pension plan to be funded also includes pre-retirement pensions awarded to employees who
took pre-retirement after 1 January 2012, in accordance with the legal regime applicable to pre-retirement.
All eligible active employees of Liberty are covered
by the pension plan in accordance with the collective labor contract for the industry.
Where:
P = monthly pension;
R = final monthly wage at time of retirement;
n = number of years of payment of contributions to social
security or equivalent systems;
S = sum of annual salaries in the 5 best of the last 10
years in which social security contributions were
payable.
t = length of service in years in the insurance business
(any fraction of a year counts as a full year)
If the result of the operation 0.022 x t is less than 0.5
or greater than 0.8, these shall be the figures used,
respectively.
175
In the event that the product of the factor 0.022
multiplied by n is less than 0.3 or greater than 0.8,
these shall be the figures used, respectively.
c\ Pre-retirement (Fund participants who did
not sign up to the new CCT)
Eligible employees, on reaching the age of 60 and
completing 35 years of service in the insurance industry, can reach an agreement with the employer
to take pre-retirement status.
The agreement will be in writing and will determine start date, along with the rights and obligations
of each of the parties, and in particular the value
of the annual pre-retirement allowance, how it is
updated, the number of monthly installments in
which it will be paid and salary composition for the
purpose of calculation of future retirement or disability pensions.
the social security system on grounds of old age,
or retire on grounds of disability, their retirement
pension will be calculated from that date by applying the formulae for the old-age or disability
pension according the situation on the date they
retire
\ Acquired rights
In accordance with clause 55 of the CCT, the entity responsible for payment of old-age and disability
retirement pensions is the company the employee
was working for at the time of retirement.
Where the employee had previous employers covered by the CCT, these are jointly responsible for
the payment of retirement pensions.
\ Updating of pre-retirement and retirement
pensions
Employees in pre-retirement will be guaranteed a
total annual pecuniary pre-retirement allowance
calculated using the following formula:
Retired employees covered by the CCT published in
Labour and Employment Bulletin no. 23, 1st series,
of 22/6/1995.
P = 0.8 * 14
Old-age and disability pensions are updated annually by applying a factor equal to the official
consumer price index, excluding housing, for the
previous year.
Where:
P = annual allowance;
R = final monthly wage on pre-retirement
date.
The right to pre-retirement payments ceases on the
date the pre-retired employee meets the minimum
legal conditions for requesting retirement from the
social security system or retiring on grounds of
disability.
On the date that pre-retired employees reach the
minimum legal age for requesting retirement from
176
Pre-retirement payments are updated as established in each employee’s personal pre-retirement
agreement or, where the agreement is tacit, within
the terms of the applicable law.
The annual retirement pension resulting from updating old-age and disability pensions plus the annual
pension received from the social security system
may not exceed the net annual minimum salary that
the worker would receive if they were still working,
with the seniority bonus that they had when they
retired, and may not exceed 30% of the base salary
at level X.
The retirement pension cannot be reduced by virtue
of the provisions of the previous paragraphs, but it
may remain unchanged without any updating.
An exception is made in the case of three retired
employees who are guaranteed an annual increase
in their respective pensions equal to the consumer
price index without the upper limit referred to above.
\ Employees who retired between January 1984
and July 1995
All retired employees benefit from increases in their
supplementary retirement pensions whenever the
wage scale is changed.
The increases will be equal to those applied to the
category of the wage scale the employee was in
when he or she retired.
For purposes of updating the following formula is
applied:
A * 14 / 12 * P
where “A” corresponds to the value of the increase
in the minimum of the wage band of the category
the retired employee would be in if they were still
working, in accordance with the table of equivalence between categories foreseen in Annex VI of
the new CCT. The value for factor “A” shown in
Annex VII is valid only in the year expressly stated
therein, for application of the retirement pension
updating formula. The value of the pension thus
updated is maintained until there is a further revision
of the wage bands.
Under no circumstances may the total annual pension exceed the net annual minimum wage that employees would receive if they were still working with
the length of service they had when they retired.
Employees already in retirement when the CCTs published in Labour and Employment Bulletin 1st series, nos. 1 and 10, of 8 January 1984 and 15 March
1984, came into force. The retirement pensions will
be updated in accordance with the formula:
A * 14 / 12 * P
minus any amount by which the social security system increases them.
\ Expected period over which the commitments
assumed will be discharged
The duration of the plan’s liabilities is 9.4 years
for pensioners and 29 for the population of participants. The modified duration is 9.1 and 28 respectively.
c\ Value and effective rate of return
of plan assets
Amounts in euros
2013
Value of defined
benefit plan
assets
Effective rate
of return for
defined benefit
plan assets
2012
8,580,297
8,648,288
7.24%
10.34%
177
d\ Funding vehicle used
The liabilities arising from the defined benefit plan
are covered by a pension fund. The fund may accept transfers from other pension funds, provided
these relate to contributions made by subscribers
to the previous one.
e\ Past liability for post-employment
benefits
The following table shows liability for past service,
broken down into the current value of liability for
past service and the current value of benefits already being paid.
Amounts in euros
2013
2012
Current value of liability for past service
3,110
3,831
Current value of benefits in payment
7,954,469
8,622,411
Past liability for post-employment benefits
7,957,579
8,626,242
The past service liabilities pertaining to one pensioner were mistakenly left out of the figures sent
to accounts. The past service liabilities for this
pensioner amounted to €71,718. However, the
pension fund is able to finance this liability.
We also include here the sensitivity analysis for past
liabilities for post-employment benefits.
Amounts in euros
Current value of liability for past service
2013
2012
Pension growth:
D -0.5 pp.
Technical rate/ Income:
D: -0.5 pp.
2,949
3,420
Current value of benefits in payment
7,653,838
8,292,680
7,656,786
8,296,099
-300,792
338,521
Variations on base scenario
A decrease of 0.5 p.p. in the pension growth rate
reduces liability for past services by 301 thousand
euros (-3.8%). The same reduction in discount and
technical interest rates has a positive impact of 339
thousand euros (4.3%).
178
f\ Reconciliation of opening and closing balances of the current value of the defined benefit
obligation
The table below shows the reconciliation of opening
balances and closing values:
Amounts in euros
2013
Liabilities as at 1 January
Cost of current service
Interest costs
2012
8,626,242
8,798,416
185
9,809
185,788
287,054
Actuarial (gains) and losses on liabilities
-156,427
878,334
Benefits paid by the company
-691,118
-720,162
Corrected cost of past service
0
-232,863
0
-394,347
7,964,669
8,626,242
Transfer of liabilities
for past service policies
Reductions and settlements
Liabilities as at 31 December
In calculating the liabilities as at 31 December 2013,
a provisional version was carried for paid pensions
that cost €7,091 more than the amount actually
carried. Thus, the actuarial lost was increased by
€7,091, to give total liabilities at 31 December 2013
of €7,957,579.
g\ Coverage of liabilities
represents a level of funding of 107.82%. Taking
into account the €71,718 liability mentioned in e)
the level of financing stands at 106.86% and the
company thus has no unfunded liabilities.
h\ Reconciliation of opening and closing
balances of the fair value of plan assets
and opening and closing balances of any
reimbursment right recognised as an asset
The defined benefit obligation, which at 31
December 2013 stood at €7,957,579, is funded by
a pension fund in the amount of €8,580,297, which
179
The table below shows the reconciliation of
opening and closing balances:
Amounts in euros
2013
2012
8,648,288
8,858,230
Expected return on plan assets
345,932
338,555
Actuarial (gains) and losses
277,196
566,012
0
0
Balance of the defined benefit plan as at 1 January
Employer contributions
0
0
-691,118
-720,162
0
0
-394,347
8,580,297
8,648,288
Contributions from plan participants
Balance of the defined benefit plan as at 31 December
i\ Reconciliation of the current value of the
defined benefit in subparagraph g) and the fair
value of plan assets in subparagraph i) with the
assets and liabilities recognised on the balance
sheet
Amounts in euros
2013
2012
7,957,579
8,626,242
Balance of the defined benefit plan as at 31 December
8,580,297
8,648,288
-622,719
-22,046
Other amounts recognised on the balance sheet (*)
-622,719
-22,046
(Asset) / liability recognised on the balance sheet
-622,719
-22,046
Fund (surplus) / shortfall
Net actuarial gains or losses not recognised on the balance sheet
Corrected cost of past service not recognised on the balance sheet
Amount not recognised as an asset (due to IAS 19 limit)
180
j\ Total cost recognised in the gains and losses
account for the current year
Amounts in euros
2013
Interest costs
Expected return on plan assets and on any reimbursement rights
2012
185
9,809
0
-232,863
185,788
287,054
-345,932
-338,555
-159,959
-274,555
Actuarial gains and losses (*)
Gains or losses resulting from plan reductions or settlements
Effect of the IAS 19 limit
TOTAL IMPACT ON GAINS AND LOSSES
l\ Cumulative amount of actuarial gains
and losses
The accumulated value of actuarial losses, as at
31 December 2013, in the specific equity item was
€192,743 (2012: accumulated gain of €626,366).
m\ Percentage and amount of each principal
category of plan investments and other assets
which constitute the fair value of the plan’s
total assets
The pension funds asset portfolio is made up as
follows (by class of asset):
Amounts in euros
2013
2012
Value
%
Value
%
Floating-rate securities
Fixed-rate securities
8,580,297
100%
8,648,288
100%
8,580,297
100%
8,648,288
100%
Land and buildings
Ohers
Total
181
n\ Amounts included in the fair value of plan
assets in relation to financial instruments of the
entity and any land or building occupied by the
insurance company
The company does not use pension fund assets.
The fund does not hold securities issued by company entities.
o\ Basis used to determine the expected global
return on assets
On the basis of the investment policy deriving
from the pension fund, the expected global rate
of return on assets was determined on the basis
of the gains that can be expected on the assets
held.
(iii) Expected rate of return on plan assets:
4.0%;
(iv) Expected rate of increase in remuneration:
3.0%;
(v) Trend rate of increase in medical costs:
not applicable;
(vi) Tables of mortality, disability and employee
turnover and rates of pre-retirment/early retirmenent.
\ Mortality table: TV 88/90 – The fund is not sufficient to be able to conduct analyses and extract
credible conclusions on the actual mortality of these
populations.
\ Disability table: S.O.A. Trans Male
\ Staff turnover: 0.0%
Yield rates in relation to interest on fixed-yield
securities were determined by way of the gross
payout of yield rates on the date the balance sheet
was closed.
p\ Real return on plan assets and on
reimbursement rights recognised as an asset
The real return on plan assets was €623,127
(€904,567 in 2012).
\ Decrements used in calculating the probability of
participants being active employees at the age of
retirement on grounds of old age: in the mortality
table decrements by disability were used.
\ Increase in pensions after normal retirement age:
2.0%
\ Increase in pension being paid: 0.5% / 2.1% (1)
The information shown was taken from the annual
actuarial report on the value of the pension fund.
(1) Pensions of pre-retired employees: 2.1% increase.
Retirement pensions being paid (2.1% increase for
beneficiaries who had an increase greater than or
equal to the price index in any of the years from
2005 to 2013; 0.5% increase for other beneficiaries).
(i) Discount rate for pensioners: 2.594%
(ii) Discount rate for participants and ex-participants: 4.019%
The methods, assumptions and hypotheses used in
the actuarial evaluation were maintained from 2012
to 2013 with the exception of the following:
q\ Description of the main actuarial
assumptions (in absolute terms) used
by the company
182
r\ Information regarding amortisation plans
foreseen by regulation
\ Pensions increase
The 2012 evaluation envisaged an increase equal to
the average of the CPI rates in the last three years
for pensions that had had an increase greater than
or equal to the CPI and 0.5% for the rest.
In conformity with what is set out in article 5 of
ISP Regulatory Standard no. 4/2007, of 27 April,
“insurance companies may recognise in results
carried forward, on the basis of an amortisation
plan of uniform annual installments over a maximum period of five years, the impact of applying
the new accounting regime applicable to commitments to their employees in relation to pension plans”. This provision was not used by the
company because all the costs were recognised
in 2013.
In the 2013 evaluation, the average of CPI rates in
the last four years was used. The resulting rate rose
from 2.0% to 2.1%.
\ Discount rate
In the 2012 evaluation discount rates were defined
taking into consideration the Eur Composite A yield
curve for 31 December 2012, taking into account the
durations of the corresponding liabilities.
t\ Amounts in the current annual period and the
four previous annual periods
In the 2013 evaluation the same methodology
was used to calculate the discount rates applicable.
Amounts in euros
2013
2012
2011
2010
2009
2008
Present value of the defined
benefits obligation
7,957,579
8,454,067
8,798,416
8,542,050
6,707,241
6,784,835
Fair value of the defined
benefit plan’s assets
8,580,297
8,438,346
8,858,230
8,851,034
Shortfall / (surplus)
in the defined benefit plan
-622,719
15,721
-59,813
-308,983
7,033,751
6,882,613
Experience adjustments
resulting from the plan’s liabilities
-156,427
878,334
594,355
-449,727
-21,546
167,473
resulting from the plan’s assets
-277,196
-566,012
229,985
467,396
-385,538
1,535
v\ Estimate of next year’s contributions
The contribution foreseen for 2014 is €16,762.
183
23.2.2\\ SURVIVING SPOUSE AND ORPHAN
INCOME PLANS (LONG-TERM EMPLOYEE
BENEFITS)
a\ General description of the plan, persons
covered and assured benefits
The costs are recognised annually, as a function of
the insured amount.
\ Persons covered
All permanent Liberty Seguros staff under the age of
65 are covered by the plan.
In case of death of an employee, the surviving
spouse will be paid a survivor’s income, as from
the 1st day of the month following the month in
which the employee died.
This income is based on the percentages of the
annual insured income given below. These percentages depend on the employee’s age at the time
of death.
%
Under 35
35%
36 to 55
25%
56 to 65
15%
The survivor’s pension will be paid to the surviving
spouse until his/her own death. If the surviving spouse
remarries, the annual income will cease.
184
No. of children
%
1 child
7.5%, or 15% if orphan of both parents
2 children
15.0%, or 30% if orphan of both parents
3 or more children 22.5% or 45% if orphan of both parents
\ Assured benefits
Age
If the deceased employee has children, either of
his/her own or adopted, the surviving spouse will
receive an orphan’s income as from the 1st day of
the month following the month in which the employee died. This will be paid to the spouse until
the children are of age or to the children themselves once they are of age. This income is calculated
using the percentages of the annual insured income detailed below:
Orphan income payments terminate at the end of
the month in which the orphan reaches 20 years
of age, or on their death. Orphans who successfully follow a course of studies are entitled to receive
the income until they complete their studies. In any
case, the income payments shall cease once the
orphans have reached 25 years of age.
Annual insured income is taken to mean the actual gross salary received by the employee in the
twelve months preceding the date of death. It
does not include overtime, cashier’s allowances,
variable remuneration or lunch subsidies.
Expected term for the payment of the commitments
undertaken: not applicable.
b\ Funding vehicle used
Life insurance policy in a temporary annual renewable form.
c\ Asset amount in the plan and actual rate of
return for plan assets
The life insurance policy is renewed on 1 January
each year, meaning that there are no assets as at
31 December.
\ Amount recognised as a cost
The expected period over which the commitments
will be discharged is 10 years.
This supplement was created in 2008.
c\ Funding vehicle used
The liability has been covered on the basis of a life
insurance policy set up within the company itself
and, as such, not eligible for the purposes of IAS
19.
d\ Value and effective rate of return
of plan assets
The premium paid in 2013 was €197,833 (2012:
€250,445).
Amounts in euros
2013
23.2.3\\ ADDITIONAL RETIREMENT
SUPPLEMENT
a\ Entity’s accounting policy for recognising
actuarial gains and losses, and the corrected
cost of past service
Value
of plan assets
1,108,905
998,015
Effective
rate of return
46%
46%
e\ Past liability for post-employment benefits
Costs are recognised when the corresponding
benefit is received. Actuarial gains and losses in
each year are recognised in a specific equity item.
b\ General description of the plan
The plan guarantees payment of a retirement pension at age 65, the value of which is established by
negotiation in a personal employment contract.
The plan foresees an option for payment of the pension as a lump sum on retirement and confers rights
acquired according to the number of years of past
service.
2012
Amounts in euros
2013
Current value
of liability
for past service
Current value
of benefits
being paid
Liability for
post-employment
benefits
2012
1,108,905
998,015
0
0
1,108,905
1,108,905
185
f\ Reconciliation of opening and closing
balances of the current value of the defined
benefit obligation
Amounts in euros
2013
2012
998,015
887,124
89,832
80,373
Cost of interest
21,058
30,517
Actuarial (gains) and losses on liabilities
0
0
0
0
Initial cost of past service
0
0
0
0
1,108,905
998,015
Liabilities as at 1 January
g\ Coverage of liabilities
The liability for defined benefits, which, as at 31
December 2013, stood at €1,108,905 is 100% funded by an insurance policy. The company has no
unfunded plans.
h\ Reconciliation of opening and closing
balances of fair value of plan assets and of
opening and closing balances of any
reimbursement right recognised as an asset
Amounts in euros
2013
Balance of fund as at 1 January
Expected return on plan assets
998,015
887,124
39,921
35,485
Actuarial (gains) and losses
-2,596
-5,815
Employer contributions
68,374
69,590
Contributions from plan participants
0
0
Management charges
0
0
0
0
0
0
Balance of fund as at 31 December
186
2012
0
0
1,108,905
998,015
i\ Real return on plan assets and reimbursement rights recognised as assets
The real return on plan assets was €42,516.
j\ Description of the main actuarial
assumptions (in absolute terms)
used by the company
i) Discount rate
2.24%
ii) Expected rate of return
on plan assets
4.0%
iii) Expected rate of increase
in remuneration
not applicable
iv) Trend rate of increase
in medical costs
not applicable
v) Mortality table
GRF 95
t\ Amounts in the current annual period
and three previous annual periods
Amounts in euros
2013
2012
2011
2010
2009
Current value of defined
benefit obligation
1,108,905
998,014
887,124
776,234
665,343
Fair value of plan assets
1,108,905
998,014
887,124
776,234
665,343
0
0
0
Plan shortfall / (surplus)
resulting from the plan’s liabilities
0
0
0
0
0
resulting from the plan’s assets
0
0
0
0
0
v\ Estimate of next year’s contributions
The premium is expected to rise by €92,991.
187
24\ INCOME TAX
The company calculated current tax in the year
2013 on the basis of a nominal rate of tax and
surtax of 29.74% (2012: 30.62%), which corresponds to the approved nominal rate, as at the balance sheet date.
The company’s self-assessment returns are
subject to inspection and possible adjustment
by the tax authorities for a period of four years
which, until 2010, was extended to six years if
there were tax losses that could be carried forward. Thus additional tax payments may arise
due essentially to different interpretations of tax
legislation.
However, it is the belief of the company’s board of
directors that there will be no additional payments
of significant value in the context of the financial
statements.
There were no tax inspections by the tax and
customs authority in 2013. The years 2010,
2011 and 2012 therefore remain open, for these
purposes.
A dispute remains in relation to tax losses not accepted by the tax authorities in the Winterthur Seguros
Generales, Sociedade Anónima de Seguros e
Resseguros and Winterthur Vida, Sociedade
Anónima de Seguros sobre La Vida branches in the
amount of:
188
2000:
e13,252,791
2001:
e17,147,752
In February 2005, by a decision of the Southern
Region Central Administrative Court, absorption of these tax losses was granted. The tax
authorities lodged an appeal with the Supreme
Administrative Court (Portuguese abbreviation:
STA), which on 12 July 2006 decided against
Liberty Seguros S.A. On 1 August 2006, Liberty
Seguros S.A. submitted an application for annulment that was rejected by the STA. On 30
November 2006, Liberty Seguros S.A. submitted an appeal to the Constitutional Court. The
appeal was allowed and the case went before the
Constitutional Court for consideration.
On 5 February 2009 the Supreme Administrative
Court, through the rapporteur’s report, agreed to
hear the appeal for standardisation of jurisprudence,
resigning itself to reform of the judgment (it revoked
previous negative decisions by the rapporteur and
the conference of judges), and finding no reasons to
reject the appeal.
In 2013 there were no significant changes in the
case, only procedural developments.
Thus, for the sake of prudence, amounts associated
with the tax losses not accepted by the tax authorities are not recognised as assets.
24.1\ Estimated tax
The basis for the calculation of estimated tax recognised in the year is shown below:
Amounts in euros
2013
Pre-tax result
2012
11,052,060
Tax rate
Tax calculated on the basis of the tax rate
Permanent differences
29.74 %
30.62 %
3,286,399
5,576,960
-74,523
4,166,533
0
0
-73,488
4,281,658
-225,122
-156,958
Variation in potential capital gains/losses (initial recognition ) life w/bonus (1/5)
Annual variation in potential capital gains/losses life with bonus
Tax benefits
18,213,456
Over-estimate
-46,641
-85,395
Other permanent differences
270,728
127,228
-3,332,230
-1,232,261
0
-796,576
Temporary differences
Variation in potential capital gains/losses (initial recognition ) life w/bonus (1/5)
Accrual of costs
-1,098,067
312,465
Provisions
-2,064,404
-212,394
Extraordinary amortisations
-296
-175
Other temporary differences
-169,463
-535,581
Tax losses generated
-120,354
0
0
8,511,232
Amount paid
Autonomous taxation
498,038
498,938
Total current tax
498,038
9,010,170
Current tax on estimated profits, in the amount of
€498,038, refers only to the autonomous taxation
for the reporting period.
Amounts in euros
24.2\ Components of tax cost /
/ income
The breakdown of income tax shown in the income
statement is as follows:
2013
Current tax
2012
498,038
5,525,245
Deferred tax
2,566,395
521,000
Tax recorded
on the P/L account
3,064,433
6,046,244
189
The amount recognised as deferred tax, with an
impact on deferred tax gains and losses, calculated on temporary differences, for the years 2013
and 2012 can be summarised as follows:
Amounts in euros
Recognised in results
2013
Commercial provisions
-2,064,404
-192,603
Accrual in the year
-1,098,067
316,026
-296
-136
-137,484
-217,926
Life insurance/operations
-31,979
-26,272
Tax credit for investments
673,176
0
Provisions beyond the legal limits or non-deductible
Tax loss
Deferred tax assets
Pension fund
Investment differences - FM Impairments Camra n/life
120,354
0
-2,538,701
-120,911
-27,694
-84,037
0
-359,486
Future endowments fund
0
43,435
-27,694
-400,088
-2,566,395
-521,000
Deferred tax recognised in results
In applying Law no. 49/2013, of 16 July, which
brought into effect the Extraordinary Tax Credit for
Investments (CFEI) scheme, the company calculated a tax credit of €673,176. This corresponds
to 20% of the eligible expenses regarding investment in operating assets, for the period between
1 June 2013 and 31 December 2013.
190
2012
As the company calculated a zero tax liability for
2013, this tax credit may be used over the next
5 financial years. In the financial statements as at
31 December 2013, this asset was recognised as
deferred taxes.
24.3\ Income tax carried forward
to reserves
Tax carried forward to reserves for 2013 and 2012 is
explained as follows:
Amounts in euros
2013
2012
Current tax
-2,300,330
-2,300,330
Opening balance
-2,300,330
1,184,596
Potential gains on life with bonus securities
0
-3,484,926
Corrections to current tax in relation to previous years
0
0
Deferred tax
-6,922,113
-8,282,329
Opening balance
-8,282,329
754,877
Pension fund with impact on reserves
Potential gains on securities except life with bonus
Correction to opening balance - change in tax rate
Tax carried forward in reserves
-119,897
94,321
780,777
-9,139,101
699,336
7,574
-9,222,442
-10,582,659
The amounts shown in the item tax reserves derive
from:
1\ estimated tax in the year;
2\ calculated deferred tax in the year in relation to
the pension fund;
3\ deferred tax in relation to potential gains on
assets held for sale and associated with the
without-profits life and non-life portfolio.
191
24.4\ Details of changes in
deferred tax (assets and liabilities)
recognised on the balance sheet
Amounts in euros
Recognised in results
2013
2012
Commercial provisions
-2,064,404
-192,603
Accrual in the year
-1,098,067
316,026
-296
-136
-137,484
-217,926
Life insurance/operations
-31,979
-26,272
Tax credit for investments
673,176
0
Provisions beyond the legal limits or non-deductible
Tax loss
Deferred tax assets
120,354
0
-2,538,701
-120,911
Pension fund
Investment differences - FM Impairments Camra n/life
-27,694
-84,037
0
-359,486
Future endowments fund
0
43,435
-27,694
-400,088
-2,566,395
-521,000
Deferred tax recognised in results
Amounts in euros
Recognised in equity
2013
Unrealised Gains/Losses
780,777
-9,139,101
715,308
6,632
Deferred tax assets
1,496,085
-9,132,469
Pension fund equity
-119,897
94,321
-15,972
942
Deferred tax recognised in equity
192
2012
-135,869
95,263
1,360,216
-9,037,206
24.5\ Reconciliation of nominal rate
and effective rate
The reconciliation of nominal and effective tax rates
in 2013 and 2012 can be stated as follows:
Amounts in euros
2013
Pre-tax result
2012
11,052,060
Tax rate
Tax calculated on the basis of the tax rate
Tax benefits
18,213,456
29.74 %
30.62 %
3,286,399
5,576,960
-225,122
-156,958
Over-estimate
-46,641
-85,395
Other permanent differences
197,240
127,228
0
85,471
3,211,876
5,547,306
498,038
498,938
3,709,914
6,046,245
Adjustment to nominal rate (surtax)
Tax on PTR and permanent differences
Autonomous taxation
Tax on PTR and permanent differences w/ auton. tax.
25\ SHARE CAPITAL
The company’s total share capital of €26,548,291
is represented by 506,937 nominative shares
with a nominal unit value of €52.37. All shares issued are fully paid up. The shares belong to the
company Liberty Insurance Group, Compania de
Seguros e Reaseguros, S.A., with registered office in Madrid (464,937 shares) and to Genesis
Seguros Generales S.A. de Seguros y Reaseguros
(42,000 shares). Both entities belong to the Liberty
Group, whose ultimate parent company is Liberty
Mutual Holding Company with registered office in
Boston, USA.
As at 31 December 2013, the nominal value of each
share was €52.37.
Amounts in euros
2013
Number of shares
as at 1 January
2012
506,937
506,937
506,937
506,937
Increase in
share capital
in the year
Number of shares
as at 31 December
193
With reference to 29 December 2010, the share
capital was increased in kind by the transfer of all
the assets and liabilities of the Portuguese branch
of Genesis Seguros Generales S.A. de Seguros
e Reaseguros. A total of 42,000 ordinary shares
with a nominal unit value of €52.37 were issued,
which corresponds to an increase in share capital in the amount of €2,199,540 and an issue
premium per share of €222.78 in a total amount
of €9,594,097. The total increase in share capital
came to €11,793,637.
26\ RESERVES
26.1\ Nature and purpose of
reserves within equity
LEGAL RESERVE
The legal reserve may be used only to cover accumulated losses or to increase share capital. In accordance
with Portuguese legislation, the legal reserve must be
credited annually with at least 10% of annual net profit,
up to the value of issued share capital.
REVALUATION RESERVES
Revaluation reserves through adjustments to the
fair value of financial assets represent potential capital gains and losses on the investment portfolio
available for sale, net of impairment recognised in
the income statement for the year and/or previous
years.
DEFERRED TAX RESERVES
Deferred tax, calculated on temporary differences
between the book value of assets and liabilities
and their fiscal basis, are recognised in the income statement, except where they are related
to items that are directly recognised in equity, in
which case they are also recorded against equity, in this item. Deferred tax recognised in equity
arising from revaluation of investments available
for sale is subsequently recognised in the income
statement at the moment when the gains and losses
that gave rise to them are recognised in the income statement.
194
OTHER RESERVES
In this item the company records free reserves that
are the consequence of positive results not required
to fund the legal reserve, or to cover losses carried
forward, and not distributed to shareholders.
26.2\ Changes in reserves
and profit (loss)
As at 31 December 2013 and 2012, the breakdown
of the items reserves and retained earnings was as
follows:
Amounts in euros
2013
2012
Revaluation reserves
32,122,803
35,193,693
Adjustment of fair value of financial assets
32,122,803
35,193,693
0
0
Deferred tax reserves
-9,222,442
-10,582,658
Adjustment of fair value of financial assets
-9,275,735
-10,771,821
53,293
189,162
Revaluation of land and buildings for own use
Changes in pension fund
Other reserves
10,055,783
8,839,062
Legal reserve
22,238,229
21,804,606
Retained earnings
62,258,657
51,308,167
7,987,627
12,167,212
Earnings for the year
Details of changes in the item reserves are shown in
the statement of changes in equity.
As at 31 December 2013 and 2012, the calculation
of result per share can be presented as follows:
Amounts in euros
27\ RESULT PER SHARE
Basic result per share is calculated by dividing
the profit attributable to holders of ordinary
equity (net result for the year, after deduction of
preferential dividends) by the weighted average
number of ordinary shares in circulation, excluding the average number of own shares held by
the company.
2013
Profit attributable
to ordinary equity
holders
(numerator)
Weighted average number
of ordinary shares in
circulation (denominator)
Basic result per share
2012
7,987,627
12,167,212
506,937
506,937
15.8
24.0
195
28\ DIVIDENDS PER SHARE
Liberty Seguros has no branch offices. Relationships
with parent and subsidiary companies are as follows:
No dividends were distributed by the company in
2013.
Liberty Mutual Insurance
Company
Outward Reinsurance
Liberty Mutual Group Asset
Managment INC
29\ TRANSACTIONS
BETWEEN RELATED PARTIES
Investiment
Managment
Outward Reinsurance
Europe Limited
Liberty-Lloyds Syndicate 4472 Outward Reinsurance
IT Licences
Liberty International Europe IT
The company’s accounts are consolidated within
Liberty Insurance Group, Compañia de Seguros
y Reaseguros, S.A., in Spain. As at 31 December
2013, this company is the direct holder of 100% of
Liberty Seguros.
The table below shows a summary of operations in
2013 and 2012 with these related entities (including
outward reinsurance technical provisions):
The ultimate parent company is Liberty Mutual Holding
Company Inc. with registered office in Boston, State of
Massachusetts, United States of America.
Amounts in euros
Related parties
2013
2012
Assets
Company
Liberty Mutual Group
Asset Managment INC
4,286,543
Costs
Income
Assets
Liabilit.
Costs
Income
0 7,161,440 6,201,277 5,118,007 1,613,131 6,369,875 5,391,401
0
146,923
872,688
0
0
220,549
220,549
0
63,818
0
189,230
62,184
45,769
0
203,596
26,610
Liberty-Lloyds Syndicate 4472
0
0
567
0
0
0
0
0
Liberty International Europe IT
40,255
0
0
0
157,929
0
0
157,929
Europe Limited
196
Liabilit.
In compliance with the provisions of article 3 of Law
no. 28/2009, of 19 June, and Portuguese Insurance
Institute Regulatory Standard no. 5/2010-R and
Circular no. 6/2010, both of 1 April, the remuneration policy for members of the management and
governance bodies is described in point 16 of the
management report.
In compliance with Law 28/2009, of 19 June, the
remuneration paid in aggregate and individually
to members of the company’s management and
governance bodies in 2013 was as follows:
Board of Directors
in aggregate:
e609,610
individually:
Amounts in euros
Remunerações
Members of the Board of Directors
Dr. José António da Graça Duarte de Sousa Chair of the Board of Directors
Salary
211,173
Short-term bonus
95,614
Long-term bonus
96,487
Dra. Marta Sobreira Reis Alarcão Troni Board member / CFO
Salary
65,667
Short-term bonus
17,514
Long-term bonus
17,377
Dr. Rogério Paulo Carretero Bicho Board member / CFO
Salary
69,768
Short-term bonus
18,010
Long-term bonus
18,000
Sr. Roberto Salas Romero Honorary member
Sr. Russell Elmer Carlson Honorary member
197
The short-term bonus refers to compensation awarded for performance achieved in the year, in light of
qualitative and quantitative objectives.
The long-term bonus is awarded solely to chairpersons
of companies in the Liberty Mutual Group and their
direct reports and refers to compensation awarded
for performance achieved in the three-year period
2010 to 2012, in global and local terms. Payment of
the bonus is dependent on meeting profit objectives
in each of the years.
Audit committee
in aggregate:
e10,827
individually:
Amounts in euros
198
Members of the Audit Committee
Remuneration
Dr. José Milheiro Oliveira Barbosa Chairman
3,775
Dra. Inês Maria Vaz Ramos da Silva da Cunha Leão Member
3,574
Dr. Carlos Afonso Dias Leite Freitas dos Santos Member
3,478
Dr. Arlindo Dias Duarte Silva Member (alternate)
-
30\ CASH FLOW
STATEMENT
Amounts in euros
2013
2012
Cash flows from operational activities
Premiums received
263,997,927
256,952,964
Premiums outward reinsurance
-31,080,181
-23,977,335
Cash flows from operational activities
Claims paid
232,917,746
232,975,629
-189,448,677
-184,770,366
Claims received outward reinsurance
10,303,346
4,355,955
Net commissions
39,924,293
-41,313,304
-39,988,934
-37,327,877
-1,655,267
827,217
General costs paid
Other tax paid
Other costs paid
-1,329,035
1,843,515
-262,042,860
-258,039,294
Income from investments received
27,817,846
29,232,831
OPERATIONAL CASH FLOW BEFORE TAX
-1,307,268
4,169,166
Cash flow from insurance activities
Tax paid
-12,825,102
-5,318,231
NET CASH FLOW GENERATED (USED) BY OPERATIONS
-14,132,370
-1,149,065
Purchases of investments
-86,054,041
-83,894,342
Sales and maturity of investments
108,776,439
104,021,863
Goods and equipment purchases
-6,192,243
-3,602,566
42,500
99,288
0
0
Cash flows from investment activities
Goods and equipment sales
Loans to policyholders
Other acquisitions
Cash flow from investments
0
0
16,572,655
16,624,243
-872,516
-3,239,006
0
0
Cash flows from financing activities
Policyholders net activity
Subordinated loans
Dividends to shareholders
Cash flow from financing activities
0
-12,717,922
-872,516
-15,956,928
15,700,139
667,315
Net variation in cash, cash equivalents and demand deposits
1,567,769
-481,750
Cash and cash equivalents at beginning of period
2,860,211
3,341,961
Cash and cash equivalents at end of period
4,427,980
2,860,211
CASH FLOW FROM OPERATIONS
199
31\ COMMITMENTS
The company has various operational leasing contracts for vehicles and office furniture. Payments
made in the context of those leasing contracts are
recognised in the income statement over the useful
life of the contract. Minimum future payments under
non-revocable operational leasing contracts are as
follows:
Amounts in euros
2014
Instalments falling due on leasing contracts 2,814,326
The leasing contracts do not include any obligation
to buy the goods at the end of the contract.
32\ CONTINGENT
LIABILITIES
The company is involved in court cases in Portugal
in connection with actions brought by the company
and against it. These relate to the normal course of
its business as an insurance company, employer
and taxpayer. It is not feasible to estimate or
foresee the final outcome of the legal proceedings in progress. However it is the conviction of
the company’s board of directors that in light of the
level of provisions set up, the possibility that the
outcome of the legal proceedings in progress will
have a material adverse effect on the company’s
financial statements is remote.
The company’s tax contingencies are described in
note 13 of these notes.
200
2015
2,762,665
2016
2,758,710
2017
2,769,366
2018
2,801,126
2019
1,868,243
34\ OFF-BALANCE
SHEET ITEMS
At 31 December 2013 and 2012, total bank guarantees came to €169,000. These guarantees are
related to claim processes.
36\ EVENTS AFTER THE
BALANCE SHEET DATE
NOT DESCRIBED IN
PREVIOUS POINTS
No events that affect the value of assets and liabilities in the financial statements for the year have
come to light since the balance sheet date.
37\ OTHER INFORMATION
As a result of endorsement by the European Union
(EU), the following issues, revisions, alterations and
improvements in the standards and interpretations
took effect as from 1 January 2013.
37.1\ Revisions, alterations
and improvements in the standards
and interpretations endorsed by
the EU that have an effect on the
company/group’s accounting
policies and disclosures
\ IFRS 13 \ Measurement of fair value
(new)
IFRS 13 establishes a single guideline source for
the measurement of fair value under IFRS. IFRS
13 does not indicate when an entity should use
fair value, but it does set out the guidelines of how
fair value should be measured, wherever this is
allowed or required.
Fair value is defined as “the price that would be
received for selling an asset or paid for transferring
a liability in a transaction between two market participants, at the measurement date”.
The standard should be applied prospectively.
The application of this standard had an effect on
the company’s financial statements as regards
disclosures.
37.2 \ Revisions, alterations
and improvements in the standards
and interpretations endorsed
by the EU that have no effect on
the company/group’s financial
statements
\ IFRS 7 \ Offsetting financial assets and financial liabilities (amendment)
This amendment stipulates that entities should
disclose information on set-off rights and related
agreements (such as collateral guarantees). These
disclosures provide information that is useful in the
evaluation of the net effect that these agreements
might have on the statement of the entity’s financial
position. The new disclosures are mandatory for all
financial instruments that might be offset, as stipulated in IAS 32 Financial Instruments: Presentation.
The new disclosures are also applicable to financial
instruments that are subject to master netting arrangements, or other similar arrangements, irrespective
of whether or not these are set off in accordance
with IAS 32.
The amendment should be applied retrospectively.
The application of this amendment to the standard has no effect on the company’s financial statements.
\ IAS 1 \ Presentation of financial statements
(amendment)
The amendment to IAS 1 alters the aggregation of
items presented in the statement of comprehensive income. Items liable to be reclassified (or “re-
201
cycled”) to profits or losses in future (for example:
on the date of derecognition or settlement), must
be shown separately from items that are not liable
to be recycled to profits or losses (for example,
revaluation reserves foreseen in IAS 16 and IAS
38).
This amendment does not alter the nature of the
items that must be recognised in the statement of
comprehensive income, nor whether those items
must or must not be liable to be reclassified under
profits or losses in the future.
The amendment should be applied retrospectively.
\ IAS 12 \ Income taxes
(revised)
The amendment to IAS 12 clarifies that deferred
tax on investment property measured using the fair
value model in IAS 40 should be calculated taking
into account its recovery through its future sale.
This presumption may however be rebuttable if the
entity has a business plan that shows that that tax
will be recovered through use of the investment
properties.
In addition, the amendment states that deferred tax recognised on non-depreciable tangible
fixed assets measured in accordance with the
revaluation model must be calculated on the assumption that it will be recovered through sale of
those assets.
\ IAS 19 \ Employee benefits
(revised)
IAS 19 Employee benefits (revised), the main changes
being the following:
\ Elimination of the option to defer recognition of
actuarial gains and losses, known as the corridor
method; actuarial gains and losses are recognised
in the statement of comprehensive income when
they occur. The amounts recognised in profits
or losses are limited: to current cost and cost
of past service (which includes gains and losses
on curtailments), gains and losses on liquidation,
and costs (income) in relation to net interest. All
other changes in the net value of the asset (liability) deriving from the defined benefit plan must
be recognised in the statement of comprehensive income, without subsequent reclassification to
profits or losses.
\ The objectives for disclosures in relation to defined benefit plans are explicitly stated in the revision of the standard, as well as new disclosures
or revised disclosures. These new disclosures include quantitative information about analyses of
the sensitivity of the liability for defined benefits
to possible changes in each of the main actuarial
assumptions;
\ Employment termination benefits must be recognised immediately prior:
(i) to the moment when the commitment to awarding them cannot be withdrawn;
(ii) to setting up a provision for restructuring in
accordance with IAS 37.
\ The distinction between short-term and longterm benefits will be based on the timeliness of
202
payment of the benefit irrespective of whether the
employee’s right to the benefit has already been
granted
The standard should be applied retrospectively.
\\ ANNUAL IMPROVEMENTS FOR THE
2009-2011 CYCLE
\ IAS 1 \ (Amendment) Presentation
of financial statements
This clarifies the difference between additional
comparative information and minimal comparative
information.
An entity must include comparative information in
the related notes to the financial statements when
it voluntarily provides comparative information
additional to the minimum required information.
The additional information relating to the comparative period does not need to contain a complete
set of financial statements.
Additionally, the opening statement of financial
position (third balance sheet) must be presented
in the following circumstances:
(i) When an entity applies an accounting policy
retrospectively, or makes retrospective
restatements of the items in the financial
statements;
(ii) When it reclassifies items in the financial
statements and these changes have a material
effect on the statement of financial position.
The opening balance sheet should be from the
beginning of the comparative period. However,
unlike the voluntary comparative information,
notes are not required to accompany the
statement of financial position.
\ IAS 16 \ Fixed tangible assets
This clarifies that spare parts and service equipment that meet the definition of tangible fixed
assets should be classified as such and not as
inventory.
\ IAS 32 \ Financial instruments
This clarifies that income taxes arising from distributions to shareholders are accounted for in
accordance with IAS 12 Income Taxes.
37.3\ New standards and
interpretations that have been
issued but which are not yet
mandatory
The following standards and interpretations, recently issued by ISAB and only mandatorily applicable for periods beginning after 1 January 2013,
have not been adopted in advance by the company/group:
\\ ALREADY ENDORSED BY THE EU:
\ IAS 32 \ Financial instruments
(Offsetting financial assets and
financial liabilities)
The amendment clarifies the meaning of “legally
enforceable right of set-off” and application of IAS
203
32 to the offsetting criteria of settlement systems (such as central clearing house systems) that
apply gross settlement mechanisms that are not
simultaneous.
Paragraph 42 a) of IAS 32 requires that “a financial asset and a financial liability shall be offset
and the net amount shown on the balance sheet
when, and only when, an entity currently has a
legally enforceable right to set off the recognised
amounts”. This amendment clarifies that rights of
set-off must not only be legally enforceable in the
normal course of business but must also be enforceable in the event of default and the event of
bankruptcy or insolvency of all of the counterparties of the contract, including the reporting entity itself. The amendment also clarifies that rights
of set-off must not be contingent upon a future
event.
The criterion defined in IAS 32 for offsetting financial instruments requires that the reporting entity
intend either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
The amendment clarifies that only gross settlement mechanisms with features that eliminate or
result in insignificant credit and liquidity risk and
that will process receivables and payables in a
single settlement process or cycle can, in effect,
be equivalent to net settlement and effectively
meet the net settlement criterion foreseen in the
standard.
In accordance with the endorsement, the amendments to this standard are applicable to reporting periods beginning on or after 1 January
2014.
The amendment to IFRS 7 will be retrospectively
204
applicable in accordance with IAS 8.
Early application is permitted, in which case this
fact must be disclosed and disclosures must
be made as foreseen in IFRS 7 Disclosures
(Amendment) – Offsetting of financial assets and
financial liabilities.
\\ NOT YET ENDORSED BY THE EU:
IFRS 9 - Financial instruments
(introduces new requirements for classification
and measurement of financial assets
and liabilities)
The first phase of IFRS 9 Financial instruments
deals with classification and measurement of financial assets and liabilities. The IASB continues
to work and to discuss the themes of impairment
and hedge accounting with a view to revision and
complete replacement of IAS 39. IFRS 9 applies to
all financial instruments that fall within the scope of
application of IAS 39.
The main changes are the following:
\ Financial assets
All financial assets are measured at fair value at
initial recognition.
Debt instruments can subsequently be measured at
amortised cost if:
\ the fair value option has not been exercised;
\ the objective of holding the asset, in accordance
with the business model, is to receive the contracted
cash flows;
\ in the terms of the contract the financial assets
will, on specific dates, generate cash flows that are
evidenced only in payments of principal and interest
on the capital owed.
Other debt instruments are subsequently measured
at fair value.
All equity financial investments are measured at
fair value through the statement of comprehensive income or through income and losses. Each
of the equity financial instruments must be measured
at fair value through:
(i) statement of comprehensive income; or,
(ii) income and losses (equity financial instruments
held for trading must be measured at fair value
with the corresponding variations always recognised through income and losses).
\ Financial liabilities
Differences in the fair value of financial liabilities
at fair value through profits or losses that are the
result of changes in the entity’s credit risk must
be shown on the statement of comprehensive
income. All other changes must be recorded on
the income statement unless presentation of the
differences in fair value resulting from the credit
risk of the financial liability is liable to create or
increase a significant decompensation in results
for the period.
All other classification and measurement rules
in relation to financial liabilities present in IAS 39
remain unchanged in IFRS 9 including the rules
on separation of embedded derivatives and the
criterion for being recognised at fair value through
income and losses.
This standard is applicable to accounting periods
that begin on or after 1 January 2015. Early
application is permitted provided it is duly disclosed. Provisions in relation to financial liabilities
may also be applied early as long as provisions
in relation to financial assets are applied simultaneously.
The company believes that this standard will have
relevant impacts that have not yet been reasonably
estimated.
\ IAS 19 R \ Employee Benefits
(Amendment): Employee contributions
This amendment applies to employee or thirdparty contributions to defined benefit plans. It
simplifies the accounting of contributions that
are independent of the number of years of employee service. This would include, for example,
contributions made by the employee that are
calculated on the basis of a fixed percentage
of his/her salary or those which are of a fixed
amount along the service period, or those that
depend on the employee’s age. Such contributions can now be recognised as a reduction in
the cost of service for the period in which the
service is provided.
These changes are applicable to reporting periods
beginning on or after 1 July 2014. The application
may be brought forward, provided this is disclosed.
The application is retrospective.
The application of these standards and interpretations is not expected to have any material effect on
the company’s financial statements.
205
\\ ANNUAL IMPROVEMENTS TO THE
2010-2012 CYCLE
This clarifies that receivables and payables with no
set interest rate may be measured at the nominal
amount when the effect of the discount is immaterial. Thus, the removal of paragraphs from IAS 9
and IAS 39 had nothing to do with changes in fair
measurement, but was related to the fact that the
situation per se was immaterial. As a result, such
items do not have to be treated in accordance with
IAS 8.
\ IAS 16 \ Tangible fixed assets
In the case of revaluations, the standard now
allows the entity the possibility of choosing between adjusting the gross value on the basis of
market observable data, or of proportionally allocating the variation to the change seen in the accounting value. In either case, the amortisations
accumulated in counterpart to the asset’s gross
value must be eliminated. These alterations only
apply to revaluations made in the year in which
the alteration is applied for the first time and the
immediately preceding reporting period. Entities
may restate values for all preceding periods but
are not obliged to do so. However, if they opt not
to do so, they should disclose the criteria used in
these periods.
\ IAS 24 \ Related Party Disclosures
This clarifies the definition of key management
personnel and changes the associated disclosure
requirements.
206
\ IAS 38 \ Intangible assets
In the case of revaluations, the standard now
allows the entity the possibility of choosing between adjusting the gross value on the basis of
market observable data, or of proportionally allocating the variation to the change seen in the accounting value. In either case, the amortisations
accumulated in counterpart to the asset’s gross
value must be eliminated. These alterations only
apply to revaluations made in the year in which
the alteration is applied for the first time and the
immediately preceding reporting period. Entities
may restate values for all preceding periods, but
are not obliged to do so. However, if they opt not
to do so, they should disclose the criteria used in
these periods.
The 2010-2012 improvements are applicable to
reporting periods beginning on or after 1 July
2014.
The application may be brought forward, provided this is disclosed. The application is generally
prospective.
\\ ANNUAL IMPROVEMENTS FOR THE
2011-2013 CYCLE
Paragraph 52 has been updated to state that the
exception to the portfolio now also includes other
contracts that fall within the scope or are accounted
in accordance with IAS 39 or IFRS 9, regardless of
whether or not they meet the definition of financial
assets or financial liabilities under IAS 32.
\ IAS 40 \ Investment properties
This clarifies the interrelationship that exists between IFRS 3 and IAS 40 when classifying property as investment property or as owner-occupied
property.
The External Auditor
Maria da Conceição Clemente
The Chair of the Board of Directors
José António de Sousa
The 2011-2013 improvements are applicable to
reporting periods beginning on or after 1 June
2014.
The application may be brought forward, provided this
is disclosed.
Financial Director
Marta Sobreira Reis Alarcão Troni
The application is generally prospective.
Lisbon, 28 February 2014
207
Ten years taking
decisive steps
Annexes to the Notes
06
\ Annexes to the Notes \ 1
INVENTORY OF SHAREHOLDINGS
AND FINANCIAL INSTRUMENTS
Amounts in euros
Code
Designation
Quantity
1 - SUBSIDIARIES, ASSOCIATED
COMPANIES, JOINT VENTURES AND
OTHER COMPANIES HOLDING SHARES
AND IN WHICH SHARES ARE HELD
1.1 - Portuguese securities
1.1.1 - Shareholdings in subsidiaries
1.1.2 - Shareholdings in associated
companies
1.1.3 - Shareholdings in joint ventures
1.1.4 - Shareholdings in other cos.
holding shares/in which shares are held
SUB-TOTAL
1.1.5 - Debt securities of subsidiaries
1.1.6 - Debt securities of associated
companies
1.1.7 - Debt securities of joint ventures
1.1.8 - Debt securities of other cos.
SUB-TOTAL
1.1.9 - Other securities - subsidiaries
1.1.10 - Other securities - associated
companies
1.1.11 - Other securities - joint ventures
1.1.12 - Other securities - other cos.
SUB-TOTAL
SUB-TOTAL
1.2 - Foreign securities
1.2.1 - Shareholdings in subsidiaries
1.2.2 - Shareholdings in associated
companies
1.2.3 - Shareholdings in joint ventures
1.2.4 - Shareholdings in other cos.
SUB-TOTAL
210
Nominal
value
%
nominal
value
Avg.
Total
acquisition acquisition
price
value
Balance sheet value
Unit
Total*
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
1.2.5 - Debt securities of subsidiaries
1.2.6 - Debt securities of associated
companies
1.2.7 - Debt securities of joint ventures
1.2.8 - Debt securities of other cos.
SUB-TOTAL
1.2.9 - Other securities - subsidiaries
1.2.10 - Other securities - associated
companies
1.2.11 - Other securities - joint ventures
1.2.12 - Other securities - other cos.
SUB-TOTAL
SUB-TOTAL
TOTAL
2 - OTHER
2.1 - Portuguese securities
2.1.1 - Equity instruments and units
2.1.1.1 - Shares
AUDATEX COMM
90
250
22,500
250
22,500
SUB-TOTAL
90
250
22,500
250
22,500
90
250
22,500
250
22,500
2.1.1.2 - Equity securities
SUB-TOTAL
2.1.1.3 - Investment fund units
SUB-TOTAL
2.1.1.4 - Other
SUB-TOTAL
SUB-TOTAL
211
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
2.1.2 - Debt securities
2.1.2.1 - Public debt
OBRIG DO TES MEDIO PRAZO
1,380,000
98.76
1,362,913
101
1,403,702
PTOTEAOE0021 OBRIG DO TES MEDIO PRAZO
1,000,000
108.34
1,083,400
92
930,738
PTOTELOE0010
OBRIG DO TES MEDIO PRAZO
3,300,000
97.28
3,210,255
99
3,311,539
PTOTE1OE0019
OBRIGACOES DO TESOURO
2,000,000
100.35
2,006,960
101
2,072,097
PTOTEYOE0007
OBRIGACOES DO TESOURO
PTOTE6OE0006
2,925,000
85.78
2,509,110
88
2,661,253
PTCON1OE0008 PORTUGAL (REPUBLIC OF)
3,038
52.52
1,595
57
1,747
6,095
43.13
2,629
50
3,060
1,696
33.39
566
46
781
5,796
59.00
3,420
45
2,724
PTOTENOE0018 PORTUGAL (REPUBLIC OF)
550,000
92.43
508,354
98
553,731
11,171,625
SUB-TOTAL
10,941,373
10,689,202
2.1.2.2 - Other public issuers
SUB-TOTAL
2.1.2.3 - Other issuers
SUB-TOTAL
90
TOTAL
11,171,625
250
10,711,702
250
10,963,873
2.2 - Foreign securities
2.2.1 - Equity instruments and units
US02005N6058
2.2.2.1 - Shares
ALLY FINANCIAL INC
803
218
175,353
693
556,581
SUB-TOTAL
803
218
175,353
693
556,581
2.2.2.2 - Equity securities
SUB-TOTAL
2.2.2.3 - Investment fund units
SUB-TOTAL
212
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
2.2.2.4 - Other
STEPSTONE
362,980
100.00
362,980
ADAMS STREET GLOBAL
234,045
100.00
MARLIN EQUITY
115,287
100.00
712,312
SUB-TOTAL
SUB-TOTAL
803
218
114
414,871
234,045
94
220,605
115,287
98
112,739
712,312
105
748,215
887,665
798
1,304,796
2.2.2 - Debt securities
2.2.2.1 - Public debt
AT0000386115
AUSTRIA (REPUBLIC OF)
850,000
98.25
835,125
114
986,658
AT0000A04967
1,500,000
93.25
1,398,750
120
1,846,424
AT0000A105W3
1,000,000
97.54
975,360
95
967,213
BE0000304130
BELGIUM (KINGDOM OF)
1,500,000
104.86
1,572,900
125
1,933,308
BE0000307166
2,125,000
99.21
2,108,158
107
2,299,732
BE0000309188
1,000,000
105.40
1,053,950
110
1,134,892
BE0000318270
1,501,500
100.14
1,503,588
112
1,700,275
BE0000312216
500,000
108.09
540,470
112
575,733
BE0000327362
500,000
108.86
544,310
108
542,377
BE0000328378
500,000
97.79
488,930
97
493,294
BE0312706758
1,900,000
99.84
1,896,972
100
1,898,367
DE0001141588
BUNDESOBLIGATION
1,000,000
100.34
1,003,400
103
1,029,636
DE0001135085
BUNDESREPUB DEUTSCHLAND
1,200,000
110.78
1,329,300
128
1,563,107
DE0001134922
BUNDESREPUB. DEUTSCHLAND
1,450,000
119.63
1,734,635
139
2,107,213
IT0003256820
BUONI POLIENNALI DEL TESORO
2,600,000
115.08
2,992,100
114
3,019,682
IT0003493258
2,000,000
94.49
1,889,800
107
2,176,138
IT0003719918
1,095,000
103.93
1,138,084
103
1,152,424
IT0004634132
1,900,000
93.57
1,777,864
102
1,971,003
IT0004356843
650,000
98.56
640,627
107
707,242
IT0003618383
750,000
103.90
779,250
102
777,727
XS0215153296
CZECH (REPUBLIC OF)
1,000,000
97.29
972,900
115
1,182,261
FR0000187635
FRANCE (REPUBLIC OF)
1,200,000
116.14
1,393,680
137
1,658,349
FR0000571150
2,500,000
121.82
3,045,375
133
3,360,463
213
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
FR0000571218
1,500,000
116.75
1,751,250
131
2,014,324
FR0010112052
1,000,000
98.84
988,380
103
1,038,088
FR0010163543
1,350,000
99.60
1,344,598
104
1,439,971
FR0010192997
1,800,000
98.74
1,777,400
113
2,080,533
FR0010216481
2,300,000
96.53
2,220,190
105
2,426,746
FR0010288357
4,000,000
96.52
3,860,900
107
4,353,793
FR0010371401
1,050,000
94.32
990,360
111
1,177,058
FR0010415331
4,700,000
93.86
4,411,225
110
5,294,398
FR0010466938
970,000
100.86
978,381
116
1,129,761
FR0010517417
1,800,000
102.11
1,837,998
113
2,044,440
FR0010854182
1,600,000
105.77
1,692,256
112
1,823,041
FR0010916924
2,000,000
97.50
1,950,040
107
2,196,589
DE0001135275
GERMANY (FEDERAL REPUBLIC OF)
1,000,000
97.79
977,900
121
1,250,677
DE0001135283
410,000
95.85
392,985
105
435,292
DE0001135309
4,475,000
100.64
4,503,799
109
4 969 669
DE0001135325
2,775,000
96.02
2,664,585
127
3,589,630
DE0001135333
5,000,000
99.15
4,957,546
113
5,745,352
DE0001135424
3,450,000
96.76
3,338,183
107
3,789,592
DE0001135390
3,500,000
103.64
3,627,505
112
4,032,619
IE00B4V6D496
IRELAND (REPUBLIC OF)
950,000
105.44
1,001,699
105
1,031,945
IE0006857530
20,000
107.54
21,508
108
22,304
IE00B6089D15
450,000
113.07
508,815
117
533,355
IE00B2QTFG59
1,000,000
106.45
1,064,450
110
1,120,440
IT0004164775
ITALY (REPUBLIC OF)
2,000,000
97.38
1,947,500
106
2,155,329
IT0004489610
ITALY (REPUBLIC OF)
3,850,000
102.84
3,959,331
107
4,165,851
XS0133144898
ITALY (REPUBLIC OF)
1,280,000
111.43
1,426,256
109
1,433,261
IT0004361041
ITALY (REPUBLIC OF)
1,000,000
102.40
1,024,040
108
1,101,712
IT0004820426
ITALY (REPUBLIC OF)
1,850,000
104.77
1,938,190
108
2,013,052
IT0004019581
ITALY (REPUBLIC OF)
550,000
101.75
559,603
105
587,754
IT0004898034
ITALY (REPUBLIC OF)
2,925,000
103.00
3,012,892
105
3,081,467
IT0004907843
ITALY (REPUBLIC OF)
1,000,000
102.08
1,020,800
104
1,043,849
214
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
IT0004954712
ITALY (REPUBLIC OF)
1,600,000
99.10
1,585,579
99
1,591 ,506
IT0004848831
ITALY BUONI POLIENNALI DEL TESORO
7,270,000
109.09
7,931,199
112
8,245,401
XS0206170390
MEXICO (UNITED MEXICAN STATES)
8,050,000
104.76
8,433,125
117
9,814,703
NL0000102242
NETHERLANDS (KINGDOM OF)
1,470,000
100.92
1,483,524
105
1,559,907
NL0000102275
2,725,000
95.32
2,597,400
113
3,190,811
NL0000102283
600,000
110.20
661,182
109
665,426
XS0282701514
POLAND (REPUBLIC OF)
2,500,000
97.10
2,427,590
115
2,971,803
AT0000A06P24
REP OF AUSTRIA
400,000
117.53
470,104
113
456,400
ES0000011868
SPAIN (KINGDOM OF)
2,000,000
114.82
2,296,400
114
2,398,251
ES0000012098
SPAIN (KINGDOM OF)
500,000
101.77
508,865
102
520,841
ES00000120J8
SPAIN (KINGDOM OF)
1,000,000
96.63
966,300
105
1,086,417
ES00000120N0
SPAIN (KINGDOM OF)
1,500,000
103.81
1,557,150
99
1,522,122
ES00000121L2
SPAIN (KINGDOM OF)
3,400,000
106.59
3,623,922
108
3,743,496
ES00000121O6
SPAIN (KINGDOM OF)
540,000
99.84
539,158
106
578,443
ES0000012411
SPAIN (KINGDOM OF)
2,225,000
114.41
2,545,515
113
2,560,559
ES0000012916
SPAIN (KINGDOM OF)
600,000
99.98
599,907
103
645,098
ES0000012932
SPAIN (KINGDOM OF)
675,000
93.92
633,960
90
636,827
ES00000121P3
SPAIN (KINGDOM OF)
2,100,000
102.03
2,142,525
101
2,141,865
ES00000121G2
SPAIN (KINGDOM OF)
475,000
105.16
499,510
105
520,121
ES00000123J2
SPAIN (KINGDOM OF)
30,000
102.29
30,686
106
32,077
ES00000123U9
SPAIN (KINGDOM OF)
450,000
103.91
467,595
110
517,283
XS0222076449
UNITED MEXICAN STATES
8,925,000
96.00
8,567,715
104
9,528,966
SUB-TOTAL
140,811,500
159,133,732
143,935,004
2.2.2.2 - Other public issuers
700,000
90.17
631,190
105
738,856
2,000,000
107.61
2,152,180
113
2,276,210
BANQUE EUROPEENNE D INVESTISSEMENT
1,750,000
96.04
1,680,650
115
2,072,778
CORPORACION ANDINA DE FOMENTO SA
1,000,000
98.51
985,050
110
1,135,226
XS0231636753
ASFINAG
XS0325876661
AUTOBAHNEN-UND SCHNELLSTRASSEN FIN
XS0290050524
XS0563498632
EU000A1G0AG3 EUROPEAN FINANCIAL STABILITY FACIL
112,500
99.93
112,426
100
113,575
EU000A1G0BH9 EUROPEAN FINANCIAL STABILITY FACIL
1,475,000
100.19
1,477,729
100
1,487,049
XS0093667334
7,688,000
100.00
7,688,003
131
10,455,335
EUROPEAN INVESTMENT BANK
215
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
XS0230228933
4,800,000
101.11
4,853,100
105
5,073,461
XS0272359489
700,000
99.42
695,947
109
770,403
ES0302761012
FONDO DE REESTRUCTURACION ORDENADA
1,000,000
100.05
1,000,500
100
1,043,369
ES0302761004
FUND FOR ORDERED BANK RESTRUCTURIN
750,000
100.85
756,375
101
763,791
XS0528912214
INSTITUTO DE CREDITO OFICIAL
XS0428962921
INSTITUTO DE CREDITO OFICIAL - (LT)
XS0493444060
IRISH LIFE & PERMANENT PLC - (LT)
DE000A1MBCB3 KFW
20,000
101.83
20,365
104
21,023
1,760,000
104.24
1,834,704
106
1,915,517
1,500,000
100.40
1,506,000
102
1,581,477
3,000,000
100.24
3,007,260
100
3,010,205
DE0002760980
KFW BANKENGRUPPE
2,550,000
92.25
2,352,375
112
2,904,603
DE000A0MFJX5
KFW BANKENGRUPPE
3,500,000
97.72
3,420,313
112
3,984,461
DE000A0PM5F0
KFW BANKENGRUPPE
1,100,000
101.63
1,117,930
122
1,386,971
DE000A0SLD89
KFW BANKENGRUPPE
425,000
100.67
427,848
115
496,339
XS0232778083
OEBB-INFRASTRUKTUR BAU
1,000,000
91.09
910,850
111
SUB-TOTAL
36,830,500
1,120,319
42,350,969
36,630,794
2.2.2.3 - Other issuers
100,000
99.96
99,963
102
103,319
FR0010801761
ALSTOM SA
XS0699618863
AMERICA MOVIL SAB DE CV
350,000
114.91
402,185
110
387,841
XS0358158052
ANGLO AMERICAN CAPITAL
1,100,000
102.45
1,126,928
106
1,213,647
XS0470632646
ANGLO AMERICAN CAPITAL PLC
300,000
101.97
305,910
108
325,448
BE0934985020
ANHEUSER-BUSCH INBEV SA
1,000,000
99.17
991,670
122
1,303,632
XS0356044643
AT&T INC
2,000,000
104.29
2,085,820
107
2,225,411
XS0866310088
AT&T INC
700,000
104.69
732,844
96
670,046
ES0312298021
AYT CEDULAS CAJAS GLOBAL
1,200,000
89.06
1,068,720
95
1,144,733
ES0312298054
2,500,000
94.95
2,373,750
99
2,564,689
ES0312298104
6,200,000
89.72
5,562,402
105
6,493,942
XS0383001640
BAA FUNDING LTD
750,000
106.61
799,560
103
779,690
XS0185905147
BAC_04
ES0413211071
BANCO BILBAO VIZCAYA ARG
ES0413211782
BANCO BILBAO VIZCAYA ARGENTARIA SA
ES0413211105
BANCO BILBAO VIZCAYA SA
XS0190174861
BANCO BRADESCO SA
4,870,000
216
700,000
104.43
731,010
100
731,194
2,000,000
84.04
1,680,840
107
2,198,747
500,000
104.73
523,650
107
535,012
1,000,000
90.21
902,100
106
1,070,919
110.48
5,380,563
102
5,035,526
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
1,400,000
92.28
1,291,920
103
1,461,297
500,000
100.50
502,500
104
540,397
7,400,000
85.00
6,290,000
105
8,061,287
1,200,000
102.86
1,234,320
108
1,340,801
98.98
940,310
102
979,522
97.31
778,480
96
768,101
1,400,000
102.76
1,438,640
110
1,572,153
2,500,000
99.89
2,497,250
100
2,535,362
3,150,000
99.51
3,134,624
118
3,792,447
300,000
110.52
331,560
108
334,221
ES0413860026
BANCO DE SABADELL SA
XS0580519931
BANCO DO BRASIL (GRAND CAYMAN BRAN)
ES0413900129
BANCO SANTANDER SA
ES0413900145
BANCO SANTANDER SA
XS0789996245
BANK NEDERLANDSE GEMEENTEN NV
950,000
XS0249443879
BANK OF AMERICA CORP
800,000
XS0530879658
XS0954946926
XS0193640629
BANK OF SCOTLAND PLC
ES0414950560
BANKIA SAU
ES0414950644
BANKIA SAU
1,300,000
89.82
1 167,660
84
1,133,700
FR0010015982
BANQUE FED CRED MUTUEL
3,200,000
104.76
3,352,220
106
3,441,442
XS0578317587
BANQUE PSA FINANCE SA
DE0005934426
BAYER HYPO- VEREINSBANK
XS0408528833
XS0872702112
XS0282510170
BMW FINANCE NV
500,000
XS0451689565
BMW FINANCE NV
1,230,000
XS0478931354
BMW FINANCE NV
XS0173501379
BMW FINANCE NV CORPORATE
XS0364671346
BMW US CAPITAL LLC
FR0011223205
BNP PARIBAS HOME LOAN COVERED BOND
XS0562852375
BNP PARIBAS SA
XS0547937408
BP CAPITAL MARKETS PLC
XS0633025977
BP CAPITAL MARKETS PLC
XS0275937471
BRISTOL-MYERS SQUIBB CO
XS0275939683
XS0306773234
875,000
99.34
869,243
102
924,019
2,150,000
112.05
2,409,075
100
2,276,441
BBVA SENIOR FINANCE SA UNIPERSONAL
100,000
104.93
104,931
100
104,781
BBVA SENIOR FINANCE SA UNIPERSONAL
1,600,000
105.78
1 692,400
106
1,757,683
97.20
486,000
100
520,887
104.89
1,290,146
102
1,274,463
400,000
102.98
411,932
108
448,400
3,950,000
99.06
3,912,825
115
4,634,559
500,000
107.24
536,195
106
544,554
1,000,000
99.92
999,200
108
1,102,894
1,000,000
97.73
977,300
110
1,099,369
230,000
100.95
232,185
102
236,152
400,000
112.52
450,060
111
455,646
500,000
100.57
502,840
110
551,000
BRISTOL-MYERS SQUIBB CO
4,225,000
98.86
4,177,040
117
4,949,687
BRITISH TELECOMMUNICATIONS PLC
4,050,000
95.15
3,853,508
102
4,249,148
XS0372358902
935,000
111.74
1,044,788
108
1,043,988
XS0433216339
140,000
109.20
152,886
103
148,100
FR0010120410
CAISSE D’AMORT DETTE SOC
1,300,000
99.20
1,289,600
103
1,348,545
217
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
FR0010163329
1,950,000
102.25
1,993,875
104
2,084,468
FR0010347989
2,000,000
99.61
1,992,200
117
2,348,341
FR0000473217
CAISSE NATIONALE DES AUTOROUTES
800,000
105.70
845,584
114
936,857
FR0010134379
CAISSE REFINANCEMENT DE LHABITAT
2,500,000
94.68
2,366,900
107
2,685,126
XS0405876599
CELLCO PARTNERSHIP/VERIZON WIRELES
1,500,000
107.58
1,613,700
115
1,730,922
XS0791007734
CIE DE SAINT-GOBAIN
1,000,000
97.55
975,500
105
1,073,277
FR0010489831
CIE FINANCEMENT FONCIER
500,000
103.80
519,000
106
543,6521
XS0207766170
CIR SPA
3,800,000
96.82
3,679,125
100
3,813,040
XS0185490934
CITIGROUP INC
750,000
101.24
759,300
99
773,658
XS0197646218
CITIGROUP INC
3,808,103
130.05
4,952,603
115
4,466,824
XS0213026197
CITIGROUP INC
2,400,000
93.42
2,242,080
98
2,441,174
XS0284710257
CITIGROUP INC
575,000
109.46
629,372
109
652,159
XS0294547285
COMPAGNIE DE SAINT GOBAIN SA
1,215,000
105.74
1,284,741
111
1,387,553
XS0480903466
CREDIT SUISSE (LONDON BRANCH)
1,000,000
98.70
987,020
108
1,120,059
XS0405872762
CREDIT SUISSE (LONDON BRANCH)
900,000
107.24
965,151
102
952,762
DE000A1A55G9 DAIMLER AG
325,000
106.13
344,915
103
338,831
DE000A1C9VQ4 DAIMLER AG
600,000
101.78
610,650
109
677,220
DE000A1MLXN3 DAIMLER AG
585,000
101.15
591,728
104
621,927
XS0431725901
DANSKE BANK A/S
1,000,000
105.84
1,058,400
102
1,044,861
XS0166179381
DEUTSCHE TELEKOM INT FIN
2,000,000
116.07
2,321,398
121
2,513,864
750,000
108.84
816,330
104
790,701
XS0161488498
DEUTSCHE TELEKOM INT FIN CORPORATE
3,325,000
134.72
4,479,395
145
5,064,846
FR0010369306
DEXIA MUNICIPAL AGENCY
1,500,000
98.73
1,480,950
101
1,556,278
XS0732513972
DNB BANK ASA
750,000
99.10
743,250
112
868,508
XS0148579153
E. ON INTERNATIONAL FIN CORPORATE
2,850,000
115.05
3,279,034
117
3,440,214
XS0367884375
E. ON INTL FINANCE BV
1,000,000
107.22
1,072,200
102
1,049,714
XS0445463887
EADS FINANCE BV
2,250,000
106.00
2,384,922
109
2,503,674
XS0176914579
EADS FINANCE BV
350,000
113.76
398,143
118
417,795
XS0495010133
EDP FINANCE BV
1,500,000
99.39
1,490,850
102
1,563,616
XS0831842645
EDP FINANCE BV
500,000
105.50
527,500
110
556,814
FR0000487258
ELECTRICITE DE FRANCE
2,300,000
110.21
2,534,750
113
2,614,883
DE000A0T1GC4 DEUTSCHE TELEKOM INT FIN
218
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
XS0342783692
ELECTRICITE DE FRANCE SA
350,000
110.44
386,540
114
415,869
XS0367001574
ELECTRICITE DE FRANCE SA
450,000
107.12
482,054
102
471,216
BE0119549450
ELIA SYSTEM OP SA/NV
1,000,000
109.50
1,095,000
101
1,045,182
BE0119550466
ELIA SYSTEM OPERATOR SA/NV
4,975,000
107.59
5,352,805
117
5,996,082
XS0695403765
ENEL FINANCE INTERNATIONAL NV
1,300,000
105.75
1,374,750
105
1,395,337
XS0452187759
ENEL FINANCE INTERNATIONAL SA
775,000
105.01
813,828
106
833,646
XS0452187916
ENEL FINANCE INTERNATIONAL SA
1,750,000
107.86
1,887,550
111
1,959,982
IT0004794142
ENEL SPA
1,100,000
108.53
1,193,856
109
1,249,951
XS0170343247
ENEL SOCIETA PER AZIONI
3,500,000
96.97
3,393,870
110
3,951,485
XS0306646042
ENEL SOCIETA PER AZIONI
1,200,000
100.68
1,208,152
113
1,388,034
XS0177089298
ENEL-INVESTMENT HOLDING BV
2,750,000
106.54
2,929,950
112
3,111,016
XS0306644344
ENEL - SOCIETA PER AZIONI
1,000,000
99.58
995,820
111
1,138,458
XS0400780887
ENI SPA
100,000
109.35
109,349
100
105,777
XS0563739696
ENI SPA
500,000
97.48
487,390
107
553,017
XS0411044653
ENI SPA - ENTE NAZIONALE IDROCARBU
1,000,000
104.40
1,044,000
108
1,127,141
XS0856023493
ESB FINANCE LTD
900,000
108.73
978,588
109
987,056
XS0992646918
ESB FINANCE LTD
500,000
100.59
502,950
99
498,913
XS0827573766
ESB FINANCE LTD
400,000
115.37
461,460
115
469,107
DE000A0DLU69
EWE AG
500,000
101.88
509,400
114
577,205
XS0365092872
FRANCE TELECOM
1,000,000
99.73
997,300
102
1,049,911
FR0000471930
FRANCE TELECOM CORPORATE
6,550,000
129.25
8,465,745
147
10,148,797
XS0409370219
FRANCE TELECOM SA
2,500,000
102.40
2,559,878
100
2,622,918
XS0479542580
GAS NATURAL CAPITAL MARKETS SA
2,350,000
99.00
2,326,500
110
2,690,166
XS0458749826
GAS NATURAL CAPITAL MARKETS SA
650,000
114.77
746,005
114
748,273
XS0875343757
GAS NATURAL FENOSA FINANCE BV
1,900,000
100.83
1,915,778
104
2,053,450
XS0914400246
GAS NATURAL FENOSA FINANCE BV
1,200,000
101.71
1,220,526
105
1,296,163
FR0010678151
GDF SUEZ
XS0288429532
GE CAPITAL EUROPEAN FUNDING
XS0553035840
GE CAPITAL EUROPEAN FUNDING
XS0229567440
GENERAL ELEC CAP CORP
FR0000475741
GIE SUEZ ALLIANCE
3,100,000
100,000
106.81
106,805
100
106,144
3,950,000
101.31
4,001,584
114
4,653,447
500,000
103.75
518,760
102
511,998
4,100,000
88.24
3,617,840
101
4,176,778
100.13
3,104,030
106
3,370,067
219
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
FR0000475758
GIE SUEZ ALLIANCE
4,800,000
107.03
5,137,575
124
6,073,488
XS0222383027
GLAXOSMITHKLINE CAPITAL PLC
2,600,000
93.82
2,439,330
110
2,906,369
XS0359781191
GLENCORE FINANCE (EUROPE) SA
1,700,000
109.59
1,863,092
108
1,915,058
XS0767815599
GLENCORE INTERNATIONAL PLC
1,000,000
101.62
1,016,240
109
1,125,286
XS0963375232
GOLDMAN SACHS GROUP INC/THE
1,500,000
99.72
1,495,800
100
1,513,132
XS0187043079
HANNOVER FINANCE SA
1,000,000
102.00
1,020,000
101
1,053,678
XS0221011454
HANNOVER FINANCE SA
1,500,000
100.56
1,508,400
103
1,584,042
XS0214965534
HBOS PLC
5,075,000
96.00
4,872,048
94
4,974,566
XS0421464719
HEINEKEN NV
1,375,000
10.11
1,500,288
102
1,469,807
XS0207037507
HOLCIM FINANCE LUX SA
970,000
106.42
1,032,294
103
1,005,225
XS0526606537
HSBC BANK PLC
1,000,000
98.42
984,170
113
1,164,761
XS0222053315
HSBC HOLDING PLC
675,000
94.47
637,690
102
703,600
XS0353643744
HSBC HOLDINGS PLC
1,000,000
112.70
1,127,000
116
1,210,082
XS0223429084
HUTCHISON WHAMPOA FINANCE 05 LTD
1,000,000
90.50
905,000
105
1,070,434
XS0268587127
HUTCHISON WHAMPOA FINANCE 06 LTD
350,000
111.80
391,283
109
386,336
DE0003338075
HYPO REAL ESTATE BANK AG
5,197,320
48.10
2,500,000
60
3,117,631
XS0222372178
IBERDROLA FINANZAS SAU
1,000,000
97.46
974,598
104
1,055,497
XS0494868630
1,000,000
100.22
1,002,200
109
1,125,102
XS0548801207
1,600,000
105.88
1,694,080
106
1,708,610
XS0829209195
IBERDROLA INTERNATIONAL BV
600,000
109.21
655,230
110
667,921
XS0629960302
ING BANK NV
550,000
108.31
595,689
107
598,773
XS0995102695
ING BANK NV
475,000
100.11
475,523
100
478,144
XS0258143477
INTESA SANPAOLO SPA
50,000
97.48
48,738
92
46,051
XS0852993285
INTESA SANPAOLO SPA
187,000
99.08
185,280
105
198,016
XS0842828120
INTESA SANPAOLO SPA
1,900,000
102.42
1,945,984
106
2,039,406
XS0971213201
INTESA SANPAOLO SPA
2,761,000
99.12
2,736,676
108
3,029,813
XS0410058746
JOHN DEERE CAPITAL CORP
1,200,000
100.65
1,207,764
100
1,289,129
XS0205436040
JPMORGAN CHASE & CO
1,000,000
101.80
1,018,000
101
1,020,923
XS0246862485
JPMORGAN CHASE & CO
2,000,000
89.40
1,787,900
99
1,970,074
XS0275164084
KONINKLIJKE KPN NV
500,000
99.15
495,765
110
570,465
XS0543354236
KONINKLIJKE KPN NV
150,000
94.21
141,312
105
159,616
220
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
XS0411863722
KONINKLIJKE KPN NV
750,000
106.04
795,270
100
795,914
XS0196630270
LAFARGE SA
1,600,000
83.14
1,330,208
102
1,665,233
XS0215159731
LAFARGE SA
4,000,000
82.41
3,296,300
107
4,435,836
XS0790015548
LINDE FINANCE BV
1,000,000
99.95
999,538
100
1,013,024
XS0497187640
LLOYDS TSB BANK PLC
XS0298899534
MORGAN STANLEY
XS0832446230
MORGAN STANLEY
XS0485326085
NATIONAL AUSTRALIA BANK LIMITED
XS0372174689
NATIONAL AUSTRALIA BANK LTD
XS0440279338
NATIONAL AUSTRALIA BANK LTD
XS0403509341
XS0213972614
XS0170798325
NATIONAL GRID TRANSCO PLC
XS0527239221
NATIONWIDE BUILDING SOCIETY
XS0282588952
NEW YORK LIFE GLOBAL FDG
XS0489825223
NORDEA BANK AB
XS0208469923
NUON FINANCE BV
XS0197620411
PEMEX PROJ FDG MASTER TR
XS0716979249
PETROBRAS INTERNATIONAL FINANCE CO
500,000
XS0237323943
PROCTER & GAMBLE CO
7,325,000
XS0240383603
RABOBANK NEDERLAND
XS0503734872
RABOBANK NEDERLAND NV
XS0954910146
RABOBANK NEDERLAND NV
1,400,000
XS0876289652
RED ELECTRICA FINANCIACIONES SAU
1,600,000
XS0419352199
REPSOL INTERNATIONAL FINANCE
1,000,000
XS0933604943
REPSOL INTERNATIONAL FINANCE BV
100,000
XS0202649934
REPSOL INTL FINANCE
1,325,000
XS0177618039
RESEAU FERRE DE FRANCE
2,000,000
XS0332106805
RESEAU FERRE DE FRANCE
XS0340256147
ROYAL BANK OF CANADA
XS0454984765
ROYAL BANK OF SCOTLAND GROUP PLC
425,000
118.24
502,533
116
513,679
4,800,000
94.41
4,531,776
114
5,655,243
25,000
106.96
26,739
107
27,019
750,000
101.83
763,703
110
852,516
500,000
116.04
580,200
117
602,631
500,000
105.45
527,225
110
558,612
NATIONAL GRID ELECTRICITY TRANSMIS
100,000
112.18
112,180
100
106,507
NATIONAL GRID PLC
550,000
81.26
446,925
113
640,349
6,280,000
101.26
6,359,139
114
7,346,265
4,350,000
108.29
4,710,770
118
5,246,282
2,000,000
96.81
1,936,180
110
2,282,667
600,000
98.08
588,456
108
667,453
1,750,000
99.48
1,740,900
115
2,012,387
5,460,000
105.88
5,781,195
112
6,277,100
99.02
495,105
108
559,389
95.15
6,969,990
115
8,423,188
2,370,000
93.02
2,204,642
105
2,568,329
150,000
97.82
146,730
107
164,095
99.11
1,387,498
100
1,425,919
102.55
1,640,800
106
1,748,784
105.48
1,054,800
101
1,062,143
95.15
95,150
99
100,113
101.26
1,341,659
103
1,375,825
110.05
2,201,029
123
2,486,360
500,000
99.66
498,300
113
566,734
1,100,000
106.83
1,175,152
114
1,303,077
425,000
117.09
497,633
115
496,086
221
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
XS0430052869
ROYAL BANK OF SCOTLAND PLC
1,000,000
106.96
1,069,610
102
1,054,519
XS0167127447
ROYAL BANK OF SCOTLAND PLC (THE)
2,700,000
101.60
2,743,250
104
2,898,052
XS0196302425
RWE FINANCE BV
200,000
108.03
216,060
102
208,592
XS0412842428
RWE FINANCE BV
300,000
106.95
320,850
105
327,377
XS0172851650
RWE FINANCE BV CORPORATE
3,570,000
103.92
3,709,865
115
4,172,757
FR0010094623
SAINT-GOBAIN NEDERLAND BV
200,000
105.27
210,542
101
209,476
XS0531257193
SANTANDER INTERNATIONAL DEBT SA
XS0877984459
SANTANDER INTERNATIONAL DEBT SA UN
XS0201169439
XS0730498143
FR0000487886
SOCIETE GENERALE
XS0323411016
STANDARD CHARTERED BANK
XS0693854605
STANDARD CHARTERED PLC
XS0426682570
STANDARD CHARTERED PLC
XS0418783477
SVENSKA HANDELSBANKEN AB
XS0217939494
SYNGENTA FINANCE NV
XS0184373925
TELECOM ITALIA SPA
XS0693940511
TELECOM ITALIA SPA
XS0486101024
TELECOM ITALIA SPA
XS0241946630
TELEFONICA EMISIONES SAU
XS0284891297
XS0540187894
XS0874864860
XS0162869076
TELEFONICA EUROPE BV CORPORATE
XS0203714802
TERNA SPA
XS0214238239
THYSSENKRUPP AG
XS0207065110
XS0408165008
350,000
97.64
341,744
101
359,946
1,200,000
107.25
1,287,000
107
1,328,509
SANTANDER ISSUANCES SA UNIPERSO
1,100,000
85.50
940,500
95
1,056,512
SKANDINAVISKA ENSKILDA BANKEN AB
1,000,000
99.91
999,080
108
1,110,569
350,000
111.33
389,655
113
395,195
1,900,000
108.48
2,061,137
113
2,174,252
625,000
110.00
687,525
107
675,937
750,000
106.36
797,700
102
791,409
500,000
104.79
523,940
101
523,464
2,000,000
94.55
1,891,005
104
2,146,873
3,900,000
95.46
3,722,762
107
4,349,041
1,425,000
104.64
1,491,177
112
1,688,426
650,000
106.83
694,415
102
693,249
2,500,000
92.63
2,315,700
106
2,755,793
1,500,000
100.00
1,500,000
100
1,568,247
450,000
95.07
427,815
107
484,244
1,800,000
99.49
1,790,820
104
1,938,745
8,510,000
107.23
9,125,170
117
10,366,336
3,450,000
103.88
3,583,800
103
3,571,538
10,275,000
100.82
10,358,764
103
10,940,084
UNICREDIT SPA
500,000
105.39
526,970
108
557,722
UNICREDIT SPA
1,350,000
107.09
1,445,675
100
1,419,905
XS0200676160
UNICREDITO ITALIANO SPA
2,800,000
100.90
2,825,256
100
2,834,866
XS0210237011
UNITED UTILITIES WATER PLC
1,875,000
96.72
1,813,508
111
2,164,166
XS0497362748
VALE SA
625,000
101.50
634,375
109
700,763
222
Amounts in euros
Code
Designation
Quantity
Nominal
value
%
nominal
value
Avg.
acquisition
price
Total
acquisition
value
Balance sheet value
Unit
Total*
XS0170239692
VATTENFALL TREASURY AB
875,000
111.62
976,631
115
1,027,994
XS0428149545
VATTENFALL TREASURY AB
100,000
105.71
105,705
101
104,015
FR0000474983
VEOLIA ENVIRONNEMENT
2,750,000
100.57
2,765,590
117
3,297,450
FR0010033381
6,300,000
108.03
6,805,770
122
7,739,342
FR0010261396
1,500,000
94.55
1,418,250
113
1,695,107
FR0011076462
VIVENDI SA
500,000
100.03
500,170
111
564,773
XS0169888558
VODAFONE GROUP PLC
2,600,000
99.58
2,589,198
115
3,059,267
XS0257807957
VODAFONE GROUP PLC
400,000
107.55
430,204
109
447,521
XS0482656005
VOLKSWAGEN FIN SERV AG
200,000
103.35
206,700
102
206,077
XS0408223138
VOLKSWAGEN FINANCIAL SERVICES AG
750,000
106.74
800,520
100
800,785
XS0470518605
VOLKSWAGEN INTERNATIONAL FINANCE N
350,000
101.45
355,089
103
371,667
XS0168881760
VOLKSWAGEN INTL FIN NV
3,000,000
109.50
3,285,000
116
3,583,504
XS0702340505
VOLKSWAGEN LEASING GMBH
1,000,000
102.58
1,025,820
101
1,017,595
XS0925599556
WELLS FARGO & CO
1,820,000
96.20
1,750,840
96
1,783,012
XS0817639924
WELLS FARGO & COMPANY
1,750,000
100.34
1,755,950
100
1,767,204
XS0181273342
WOLTERS KLUWER NV
3,500,000
106.55
3,729,116
100
3,675,663
XS0366202694
XSTRATA CANADA FINANCIAL CORP
260,000
111.30
289,380
107
288,303
XS0305188533
XSTRATA FINANCE (CANADA) LTD
3,100,000
99.03
3,069,880
111
3,542,128
XS0201168894
ZURICH FINANCE (USA) INC
5,700,000
100.83
5,747,285
103
5,933,520
XS0221705204
ZURICH FINANCE (USA) INC
175,000
100.65
176,138
104
186,704
798
613,308,538
369,623,423
SUB-TOTAL
SUB-TOTAL
803
547,265,423
410,519,040
374,209,747
218
555,663,209
2.3 - Trading derivatives
SUB-TOTAL
2.4 - Hedge derivatives
SUB-TOTAL
TOTAL
3 - GRAND TOTAL
558,437,048
566,374,911
624,272,411
* Includes the value of accrued interest.
223
\ Annexes to the Notes \ 2 and 3
BREAKDOWN OF THE PROVISION FOR CLAIMS IN RELATION
TO CLAIMS THAT OCCURRED IN PREVIOUS YEARS
AND ADJUSTMENTS (CORRECTIONS) TO THE SAME
Amounts in euros
Class/Group of Classes
LIFE
Provision
Exercício
for claims
at 31/12/N-1
Cost of claims *
amounts paid out
in the year
Provision
Exercício
for claims *
at 31/12/N
Adjustments
(1)
(2)
(3)
(3)+(2)-(1)
9,673,461
4,209,846
3,618,056
-1,845,559
92,603,093
16,159,768
72,509,509
-3,933,815
9,049,272
4,836,659
3,352,273
-860,340
86,057,566
31,118,459
50,179,292
-4,759,815
Other Covers
6,373,152
7,650,590
-376,259
901,179
Marine, Air and Transport
4,224,268
651,693
2,911,670
-660,905
General Third Party Liability
1,954,209
275,397
1,620,852
-57,961
51,574
764
25,962
-24,847
47,077
27,646
33,355
13,925
197,825
217,505
11,095
30,774
NON-LIFE
Accidents and Health Fire and Other Damage
Motor
Third Party Liability
Credit and Surety
Legal Protection
Assistance
Sundry
0
0
0
0
TOTAL
200,558,035
60,938,481
130,267,748
-9,351,806
GRAND TOTAL
210,231,495
65,148,327
133,885,804
-11,197,364
* Claims for losses that occurred in year N-1 and previous years
224
BREAKDOWN OF COST
OF CLAIMS
Amounts in euros
Amounts paid
Exercício
out - payments
Amounts paid
out - allocated
claim
management
costs (2)
(1)
Variation in
Exercício
provision for
claims
Cost of claims
(3)
(4)=(1)+(2)+(3)
DIRECT INSURANCE
Accidents and Health 26,075,952
2,278,978
-7,281,725
21,073,205
Fire and Other Damage
27,345,741
1,058,652
2,336,020
30,740,413
59,283,864
3,253,064
-8,067,273
54,469,655
Other Covers
36,663,244
1,193,187
1,102,578
38,959,009
1,349,496
26,553
-274,786
1,101,262
613,457
35,410
-140,226
508,642
Motor
Credit and Surety
10,382
481
-22,802
-11,939
Legal Protection
25,462
8,176
-13,412
20,227
1,191,805
141,531
-15,147
1,318,189
Sundry
0
0
0
0
TOTAL
152,559,403
7,996,032
-12,376,772
148,178,663
69
0
-58
11
152,559,472
7,996,032
-12,376,830
148,178,674
Assistance
INWARD REINSURANCE
GRAND TOTAL
225
BREAKDOWN OF SOME FIGURES
BY AREA OF INSURANCE
Amounts in euros
Gross
Exercício
premiums
issued
Gross
premiums
earned
Gross
cost
Exercício
of claims*
Gross
operating
costs*
Reinsurance
balance
DIRECT INSURANCE
Accidents and Health
37,419,307
21,073,205
9,438,057
-1,669,579
52,031,953
51,796,622
30,740,413
24,332,881
-1,196,621
127,493,547
129,361,684
93,428,664
39,328,819
-287,667
76,008,852
77,874,952
54,469,655
31,493,634
-63,175
Other Covers
51,484,695
51,486,732
38,959,009
7,835,185
-224,492
2,139,251
2,150,581
1,101,262
829,696
-410,463
2,991,575
2,994,969
508,642
1,518,621
-482,541
Fire and Other Damage
Motor
Credit and Surety
Legal Protection
13,715
18,088
-11,939
9,595
0
3,553,547
2,941,378
20,227
390,539
-560,597
15,494,703
15,216,591
1,318,189
2,096,896
-10,326,618
Sundry
5,066
5,066
0
2,130
-26
TOTAL
241,142,665
241720,358
148,178,663
77,947,234
-14,934,112
212
212
11
66
0
241,142,877
241,720,570
148,178,674
77,947,300
-14,934,112
Assistance
INWARD REINSURANCE
GRAND TOTAL
*Before deduction of reinsurers’ portion.
226
37,235,378
Ten years looking
to the future
Official Reports
07
\ Official Reports \
230
Av. Fontes Pereira de Melo, n.º 6, 11.º
1069-001 Lisboa
Tel. 808 243 000 - Fax. 213 553 300
www.libertyseguros.pt
This translation of the original Portuguese documents is provided for the convenience of
English-speaking readers
Report and Opinion of the Audit Committee
To the Shareholders of
LIBERTY SEGUROS, S.A.
Introduction
In compliance with the applicable legal and statutory provisions and the mandate with which we have been
entrusted, the Audit Committee has prepared its report and opinion on the management report and other
financial statements for LIBERTY SEGUROS, S.A. (“Company”) for the year ended 31 December 2013.
The report and documents in question were issued by, and are the responsibility of, the Board of Directors.
Supervision
The Audit Committee oversaw the management of the Company and the course of its business activities
and held meetings of a frequency and duration that we deemed appropriate. Such meetings were
attended by those with operational responsibility for financial matters, in particular the CFO and Controller,
for internal control-SOX and for compliance. We also liaised closely with the Statutory Auditor, who kept
us informed of the schedule of their work and the scope, nature and conclusions of the audits conducted.
This Audit Committee was also informed of the progress of the process of the preparation and disclosure
of financial information and the review of the financial statements.
231
As part of our responsibilities, the Audit Committee examined the balance sheet as at 31 December 2013,
together with the profit and loss account, the comprehensive income statement, the statement of changes
in equity, the cash flow statement and the corresponding notes to the accounts for the period ended on
that date. We give our approval to these documents.
We also assessed the management report issued by the Board of Directors and the Legal Certification of
Accounts, issued without reservations or emphases of matter by the statutory auditor. We also give our
approval to these documents.
In performing our duties, the Audit Committee was, at all times, able to obtain the information and clarifications we requested, whether from the board, the various departments at the company or from the
statutory auditor. This information pertained to our due understanding and assessment of the course and
development of the company’s business activities, performance and financial position, as well as of the risk
management and internal control systems.
Opinion
Taking into consideration the above, we are of the opinion that the following should be approved:
1.The annual management report and accounts presented by the Board of Directors for 2013;
2.The proposal for the appropriation of profits contained in the aforementioned management report.
232
Final Remarks
The Audit Committee would like to express its appreciation for the cooperation received from the Board of
Directors, the heads of the relevant company departments and the statutory auditor.
Declaration of Responsibility
In accordance with the provisions of paragraph no. 6 of article 420 of the Commercial Companies Code,
the members of the Audit Committee declare that, to the best of their knowledge, the information contained in the management report and other financial statements was drawn up in conformity with the applicable accounting standards and gives a true and fair picture of the company’s assets, liabilities, financial
situation and results.
They further declare that the management report faithfully describes the course of the company’s business activities and its performance and position and also contains a description of the main risks and
uncertainties it faces.
Lisbon, 19 March 2014
The Audit Committee
233
Legal Certification of Accounts
Introduction
1. We have examined the accompanying financial statements for Liberty Seguros, S.A. (“Company”). These consist of the balance sheet as at 31 December 2013 (which shows a total of 684,294,199 euros and
total equity of 151,988,948 euros, including a net profit of 7,987,627 euros), the profit and loss account, the
comprehensive income statement, the statement of changes in equity and the cash flow statement for the
year ended on that date and the corresponding notes to the accounts.
Responsibilities
2. It is the responsibility of the Board of Directors to prepare financial statements that present a true and
fair picture of the company’s financial position, the result of its operations, its comprehensive income and
its cash flows. The board must also adopt appropriate accounting policies and criteria and maintain an
appropriate internal control system.
3. Our responsibility consists of expressing an independent professional opinion based on our examination
of those financial statements.
Scope
4. Our audit was conducted in accordance with the technical standards and audit guidelines prepared
by the association of statutory auditors. These require that our audit be planned and executed with the
objective of obtaining an acceptable degree of certainty as to whether the financial statements are free of
material distortions. To this end the audit in question includes:
−checking, on a sample basis, the evidence for the amounts and disclosures shown in the financial statements and assessing the estimates based on the judgments and criteria defined by the Board of Directors for preparing the same;
−assessing whether the accounting policies, and the disclosure thereof, are appropriate, taking into account the circumstances;
−checking whether or not the going concern principle is applicable; and
−assessing whether, in overall terms, the presentation of the financial statements is appropriate.
234
5. Our audit also included checking that the financial information contained in the management report
concurred with the financial statements.
6. We believe that the audit as conducted provides an acceptable basis on which to express our opinion.
Opinion
7. In our opinion, the aforementioned financial statements present a true and fair picture, in all materially
relevant respects, of the financial position of Liberty Seguros, S.A., as at 31 December 2013, the result of
its operations, its comprehensive income and its cash flows in the year ended on that date, as determined under the accounting principles generally accepted for the insurance sector in Portugal, established
by the chart of accounts approved by Regulatory Standard no. 4/2007 of 27 April and the subsequent
amendments to this.
Report on other legal requirements
8. It is also our opinion that the financial information contained in the management report concurs with the
financial statements for the year.
Lisbon, 19 March 2014
Ernst & Young Audit & Associados – SROC, S.A.
Statutory Audit Company (no. 178)
Represented by:
235
13’

annual report - Liberty Seguros

Transcription

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