NOTES TO FINANCIAL STATEMENTS NOTES TO F I NANC I AL STATEMENTS A loss-recovery component is subsequently reduced to zero in line with reductions in the onerous group of underlying insurance contracts in order to reflect that the loss-recovery component shall not exceed the portion of the carrying amount of the loss component of the onerous group of underlying insurance contracts that the entity expects to recover from the group of reinsurance contracts held. 4.2.6.4. Net income or expense from reinsurance contracts held The Company presents separately on the face of the statement of profit or loss and other comprehensive income, the amounts expected to be recovered from reinsurers, and an allocation of the reinsurance premiums paid. 4.3. Cash and cash equivalents The Company considers all time deposits and highly liquid instruments with an original maturity of ninety days or less as cash equivalents (note 9). 4.4. Financial instruments Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Company becomes a party to the contractual provisions of the financial instruments. All financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods is dependent upon the classification of the financial instrument as amortised cost, fair value through Other Comprehensive Income, fair value through profit or loss, loans and receivables, or other financial liabilities. The Class C Members’ contributions, which are recognised in financial liabilities, have been initially recognised at fair value. This financial commitment to the Class C Members has been subsequently measured at the amount initially recognised plus any cumulative amortization in accordance with IFRS 9. As disclosed in note 10, the fair value of the Class C contributions has been calculated using discounted cash flow analysis. All of the Company’s investments in fixed maturities and investments in funds are classified as fair value through profit or loss and are carried at fair value as at the Statement of Financial Position date. The fair value of investments in fixed maturities is based on quoted market prices, either of the security itself where it is actively traded, or of similar instruments traded in active markets. For the investments in funds, the units of account that are valued by the Company are its interest in these funds and not the underlying holdings of such funds. Fair value of investments in funds is based on their reported net asset value. Unrealized gains and losses on investments are reflected within the Statement of Income and Comprehensive income. Investment income is stated net of investment management, custody and portfolio reporting fees. Interest income is recognized on the accrual basis and includes the amortization of premium or discount on fixed interest securities purchased at amounts different from their par value. Gains and losses on investments are included in income when realized. Investments are recorded on a trade date basis and the cost of securities sold is determined on the first-in, first-out basis. IFRS 13, “Fair Value Measurement”, require or permit fair value measurements or disclosures and provide a single IFRS framework and requires disclosure about fair value measurement. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: • Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); • Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); • Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The cash and cash equivalents andmarketable investments consist of a combination of level 1 and 2 assets. There are no level 3 assets. The Class C Members’ returnable capital is a level 2 liability and there are no level 1 or level 3 liabilities. 102
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